Annual Report
[GRAPHIC OMITTED]
IAA Trust Company
Mutual funds
June 30, 1997
A PLACE TO GROW
IAA Trust Growth Fund, Inc.
IAA Trust Asset Allocation Fund, Inc.
IAA Trust Tax Exempt Bond Fund, Inc.
IAA Trust Taxable Fixed Income Series Fund, Inc.
Money Market Series
Short-Term Government Bond Series
Long-Term Bond Series
<PAGE>
PRESIDENT'S LETTER
July 28, 1997
DEAR SHAREHOLDER:
Time marches on and so does the bull market in stocks. The Standard &
Poor's 500 Index was up a remarkable 34.7% for the twelve months ended June 30,
1997. Bonds, as measured by the Salomon Brothers Broad Index, had a respectable
8.1% return for the same period, but paled in comparison.
As has been the case for a few years now, the large companies that dominate
the S&P 500 were among the best performing U.S. stocks. The average stock mutual
fund holds a mix of large and small stocks, and their returns accordingly
trailed the Index. The market is being buoyed by record corporate profits and
cash flows. Large flows of funds into mutual funds by the investing public
continue. While this is the case, we are somewhat concerned by the high
valuation level that is being placed on the market. However, it appears that
this is a minority view at the moment.
The bond market has been a prime beneficiary of the Federal deficit's
extended decline. The deficit, which approached $300 billion as recently as five
years ago, looks like it will come in around $75 billion for fiscal 1997. This
diminishes the Treasury's profile in the financial markets and has paved the way
for lower interest rates.
Inflation is currently being held in check by heightened global
competition, which restrains U.S. wage growth and limits the ability of
companies to pass along higher costs. Also, workers continue to value job
security more than higher wages, and consumers seem to be holding the line on
spending. This all suggests that upward pressures on the inflation rate may not
occur anytime soon. In addition to these economic trends, the U.S. has
emphasized investment and technological innovation that has produced attractive
economic growth. In this environment, both equity and bond holders have
prospered.
IAA TRUST GROWTH FUND, INC.
The annualized total returns for the Fund for the period ended June 30, 1997,
are as follows:
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
28.54% 16.61% 11.91%
These returns assume all dividends and capital gains distributions were
reinvested.
The IAA Trust Growth Fund returned 28.6% over the past year. This was
significantly better than the 24% return of the average growth mutual fund, yet
well behind the S&P 500. The impressive performance of the S&P 500 Index masked
the lesser performance of most U.S. stocks. The great majority of stocks were
unable to keep up with the S&P 500's stellar returns due to the tremendous
performance by the Index's largest capitalization stocks. The 50 largest stocks
produced over half the gains for the entire Index. Stock pickers found this
environment discouraging, and few actively managed funds were able to beat the
passive Index.
Two themes that we have concentrated on are "The Graying of America" and
"Feed the World." "The Graying of America" refers to the aging population and
its profound influences on the economy. This has led us to focus on stocks in
the healthcare sector (the elderly use a disproportionate share of medical
products and services) and the financial sector (an aging population needs
financial products and services to prepare for retirement). This has been very
successful over the past year. Valuations have increased in both healthcare and
financial services, making it more difficult to find stocks that fit our GROWTH
AT A REASONABLE PRICE strategy. Nevertheless, we will continue to search for
attractively valued companies that can capitalize on the aging of the
population.
The second theme, "Feed the World," is an agricultural play. Rising
prosperity in heavily populated countries such as Brazil, China, and India is
resulting in burgeoning demand for grains and meats. Our results in this sector
have been mixed. The fertilizer companies have been unable to obtain much
pricing power, and the stocks have languished. Our investments in manufacturers
of agricultural machinery have been more successful, as these companies have
been able to capitalize on rising demand.
A new theme for the coming year is "Global Leadership." With the fall of
the Iron Curtain, the subsequent move towards global capitalism, and agreements
like NAFTA, which lower barriers to international trade, most businesses have
become subject to global competition. A company selling goods around the world
has tremendous economies of scale and scope, providing them with a sustainable
competitive advantage over strictly domestic producers as well as smaller
competitors. We intend to purchase companies with global leadership positions
where the value of their leadership has not been fully accounted for in the
price.
At the start of 1997, Michael Marks assumed the management of the Growth
Fund due to the previous manager, Bruce Finks, being promoted to Director of
Investments for the IAA Trust Company. Michael has worked for the IAA Trust
Company since 1993. For the past three years he has been co-managing the IAA
Trust Asset Allocation Fund, where he has been responsible for stock selection.
<PAGE>
IAA TRUST ASSET ALLOCATION FUND, INC.
The annualized total returns for the Fund for the period ended June 30, 1997 are
as follows:
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
19.95% 12.05% 10.48%
These returns assume all dividends and capital gains distributions were
reinvested.
The IAA Trust Asset Allocation Fund returned almost 20% over the past year.
This compared well with the 18.5% return of the average "flexible" mutual fund.
The Fund's performance benefited from above average stock performance despite an
equity composition underrepresented by the largest capitalization stocks.
The equity strategy for the Asset Allocation Fund is identical to that of
the Growth Fund. In the bond arena, the Fund took advantage of weak market
conditions and increased the duration of the portfolio. However, the market has
lately been trading within an extremely low volatility range, thus eliminating
the opportunity to extend the duration. With this lack of volatility and the
recent bond rally, we intend to hold bond positions at current levels.
IAA TRUST TAX EXEMPT BOND FUND, INC.
The annualized total returns for the Fund for the period ended June 30, 1997 are
as follows:
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
8.15% 5.58% 6.89%
These returns assume all dividends and capital gains distributions were
reinvested. Although the Fund's income is exempt from federal income tax, it may
be subject to state income taxation.
The IAA Trust Tax Exempt Bond Fund maintained a duration equal to or
slightly longer than the duration of the Lehman Index throughout the year. In
comparison to the Fund's one year total return of 8.15%, the Lehman Brothers
Municipal Bond Index had a total return of 8.25%. It is important to note that
the Lehman Index return does not reflect investments in cash, or the impact of
any servicing, investment management, or administrative expenses that a mutual
fund incurs.
Changes in the trend for the Treasury market will have some effect on
municipal yields, but we do not foresee the two markets making synchronized
movements. Municipal yields should continue to remain at low levels for the
year. Given the supply-and-demand factors inherent in the market, we expect to
see prices remain firmer than Treasuries. Consequently, we will continue our
strategy of preserving a duration slightly longer than the Index.
IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.
MONEY MARKET SERIES
Over the past fiscal year, the IAA Trust Taxable Fixed Income Fund -- Money
Market Series' 7-day average yield increased from 4.49% to 4.81%. The increase
in yield was attributed primarily to the Federal Reserve's decision, in March,
1997, to increase short-term interest rates in order to prevent upward pressure
on inflation. With inflation currently held in check, the outlook is for
short-term rates to remain flat. Fund assets have increased over the past year.
As Fund expenses are spread over a greater asset base, the expense ratio should
decline, which will have a positive effect on net yield.
<PAGE>
SHORT-TERM GOVERNMENT BOND SERIES
This is a new bond fund that commenced operations on January 2, 1997;
therefore, there is no 1 year, 5 year, or 10 year past performance history.
In our new Short-Term Government Bond Series, we are constructing a
portfolio of government, agency, and selected high-grade corporate securities.
We will use corporate and mortgage-backed securities for their yield advantage
over straight governments. The Fund had a return of 2.10% for the six months
ended June 30, 1997. This Fund will have a duration approximate to that of a
three-year Treasury note.
LONG-TERM BOND SERIES
This is a new bond fund that commenced operations on January 2, 1997;
therefore, there is no 1 year, 5 year, or 10 year past performance history.
The Long-Term Bond Series had a return of 2.44% for the six months ended
June 30, 1997. This compares to the Salomon Brothers Broad Market Index return
of 3.1% for the same period. The Long-Term Bond Series is being structured with
a minimum average maturity of ten years. Because we have flexibility in the
types of fixed income securities that we may use, the portfolio will be rather
diverse. To increase return, we will monitor sectors such as asset-backed bonds,
commercial mortgage securities, and Yankee bonds. We will have approximately 30%
of the Fund invested in government securities for the near term.
Sincerely,
[GRAPHIC OMITTED]
/s/RONALD R. WARFIELD
Ronald R. Warfield
President
<PAGE>
IAA TRUST MUTUAL FUNDS -- PORTFOLIO HIGHLIGHTS (UNAUDITED)
IAA TRUST GROWTH FUND, INC.
PORTFOLIO CHANGES FOR THE YEAR ENDED JUNE 30, 1997
MAJOR PURCHASES MAJOR SALES
Citicorp (1) MBNA Corp.
Columbia/HCA Healthcare Corp. Travelers, Inc.
Cisco Systems, Inc. (1) American International Group, Inc.
Kemet Corp. (1) Talbots, Inc. (2)
Warnaco Group, Inc., Cl. A (1) Mylan Laboratories, Inc. (2)
Wendy's International, Inc. (1) Verifone, Inc. (2)
Sun Microsystems, Inc. U.S. Healthcare, Inc. (2)
AGCO Corp. (1) Hewlett-Packard Co.
(1)New Holdings (2) Deletions
TEN LARGEST HOLDINGS JUNE 30, 1997
PERCENT
VALUE OF FUND
----------- -------
Intel Corp. ......................... $ 3,942,388 2.80%
General Electric Co. ................ 3,765,600 2.67
Sun Microsystems, Inc. .............. 3,349,683 2.38
Citicorp ............................ 3,194,906 2.27
Elan Corp., PLC, ADS ................ 2,850,750 2.03
Columbia/HCA Healthcare Corp. ....... 2,838,363 2.02
Microsoft Corp. ..................... 2,527,500 1.80
Johnson & Johnson ................... 2,510,625 1.78
Merck & Co. ......................... 2,484,000 1.76
GTE Corp. ........................... 2,369,250 1.68
----------- -----
$29,833,065 21.19%
=========== =====
IAA TRUST ASSET ALLOCATION FUND, INC.
PORTFOLIO CHANGES FOR THE YEAR ENDED JUNE 30, 1997
MAJOR PURCHASES MAJOR SALES
United States Treasury Notes, Travelers, Inc.
6.500%, 05/15/05 (1) Federal Express Corp.
BellSouth Capital Funding Corp., Illinois Tool Works, Inc. (2)
6.040%, 11/15/26 (1) Motorola, Inc. (2)
United States Treasury Notes, International American
6.500%, 10/15/06 (1) Development Bank
Norfolk Southern Corp., 8.875%, 06/01/09
7.050%, 05/01/37 (1) Wal-Mart Stores, Inc.
Standard Credit Card Master Trust, Williams Cos., Inc.
6.700%, 09/07/02 (1) U.S. Healthcare, Inc. (2)
Green Tree Financial Corp. (1)
Kimberly-Clark Corp. (1)
Wendy's International, Inc. (1)
(1)New Holdings (2) Deletions
TEN LARGEST HOLDINGS JUNE 30, 1997
PERCENT
VALUE OF FUND
---------- --------
Tennessee Valley Authority, 5.980%, 04/01/36 .... $ 501,250 3.51%
United States Treasury Notes, 6.500%, 05/15/05 .. 349,325 2.45
Bell of Pennsylvania, Putable Debentures,
8.350%, 12/15/30 .............................. 228,250 1.60
Elan Corp., PLC, ADS ............................ 226,250 1.59
Procter & Gamble Co. ............................ 211,875 1.48
United States Treasury Notes, 7.250%, 05/15/04 .. 208,628 1.46
Norfolk Southern Corp.,7.050%, 05/01/37 ......... 203,000 1.42
Integrated Health Services, Inc. ................ 200,200 1.40
United States Treasury Notes, 5.875%, 03/31/99 .. 199,536 1.40
United States Treasury Notes, 6.500%, 10/15/06 .. 199,148 1.40
---------- -----
$2,527,462 17.71%
========== =====
<PAGE>
IAA TRUST MUTUAL FUNDS -- PORTFOLIO HIGHLIGHTS (UNAUDITED)
IAA TRUST TAX EXEMPT BOND FUND, INC.
PORTFOLIO CHANGES FOR THE YEAR ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
MAJOR PURCHASES MAJOR SALES
<S> <C>
Shelby County, Tennessee School Louisville & Jefferson County Metropolitan
General Obligation, Series A, 5.875%, 06/01/18 (1) Sewer District Revenue, Series A, 5.250%, 05/15/10 (2)
Saint Paul, Minnesota Independent School District Los Angeles California Wastewater System Revenue
#625 General Obligation, Series C, 5.250%, 02/01/13 (1) 6.000%, 11/01/14 (2)
Jefferson County Kentucky School District Financing Corp. Public Utility District #1 of Chelan County,
School Building Revenue Series A, 5.300%, 07/01/15 (1) Washington Revenue, 5.250%, 06/01/13 (2)
Missouri State Environmental Improvement & Energy Resources Mississippi State Unlimited General Obligation
Authority Pollution Control Revenue, 5.250%, 12/01/09 (1) Series B, 5.900%, 11/15/11 (2)
Wisconsin State Health & Educational Facilities Authority Grand Island, Nebraska Sewer Project Revenue
Revenue Bond, 5.250%, 08/15/19 (1) 5.850%, 04/01/08 (2)
<FN>
(1)New Holdings (2) Deletions
</FN>
</TABLE>
TEN LARGEST HOLDINGS JUNE 30, 1997
PERCENT
VALUE OF FUND
------------ --------
Wisconsin State Clean Water Revenue,
5.300%, 06/01/12 .............................. $ 697,039 3.87%
Peru, Indiana Community School,
6.750%, 01/01/09 .............................. 602,140 3.34
Texas A&M University Revenues Fin. System,
5.375%, 05/15/14 .............................. 597,324 3.32
Pennsylvania State Higher Education Revenue,
5.600%, 09/01/10 .............................. 589,835 3.27
Cape Girardeau, Missouri Waterworks System,
7.450%, 03/01/05 .............................. 584,060 3.24
State of Rhode Island Ref. General Obligation,
7.000%, 06/15/05 .............................. 572,215 3.18
Chicago, Illinois Water Revenue,
6.500%, 11/01/15 .............................. 566,925 3.15
Connecticut State Unlimited Tax General Obligation,
5.400%, 03/15/08 .............................. 565,923 3.14
Maricopa County School Dist. Arizona Unlimited,
6.400%, 07/01/06 .............................. 559,280 3.11
Illinois State Sales Tax Revenue,
5.400%, 06/15/13 .............................. 545,688 3.03
---------- -----
$5,880,429 32.65%
========== =====
IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.
MONEY MARKET SERIES
TEN LARGEST HOLDINGS JUNE 30, 1997
PERCENT
VALUE OF FUND
----------- --------
AT & T Corp., 6.15%, 07/01/97 ................... $ 2,400,000 3.96%
Province of Quebec, 5.55%, 07/21/97 ............. 2,392,600 3.94
Xerox Corp., 5.54%, 08/06/97 .................... 2,267,369 3.74
USAA Capital Corp., 5.54%,10/07/97 .............. 2,117,576 3.49
American Express Credit Corp., 5.58%, 08/05/97 .. 2,015,000 3.32
CIT Group Holdings, Inc., 5.66%, 10/15/97 ....... 2,000,000 3.30
GTE Funding, Inc., 5.57%, 07/17/97 .............. 1,995,049 3.29
John Deere Capital Corp., 5.56%, 07/29/97 ....... 1,932,000 3.18
PHH Corp., 5.57%, 07/24/97 ...................... 1,913,167 3.15
Household Finance Corp., 5.60%, 07/14/97 ........ 1,900,000 3.13
----------- -----
$20,932,761 34.50%
=========== =====
PORTFOLIO CHARACTERISTICS JUNE 30, 1997
30 DAY AVERAGE YIELD: 4.76%
7 DAY AVERAGE YIELD: 4.81%
AVERAGE DAYS TO MATURITY: 42.00
<PAGE>
IAA TRUST MUTUAL FUNDS -- PORTFOLIO HIGHLIGHTS (UNAUDITED)
IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.
SHORT-TERM GOVERNMENT BOND SERIES
PORTFOLIO CHANGES FOR THE PERIOD ENDED JUNE 30, 1997
MAJOR PURCHASES MAJOR SALES
United States Treasury Notes, 6.250%, 05/31/99 (1) None
United States Treasury Notes, 6.500%, 08/31/01 (1)
United States Treasury Notes, 6.250%, 02/28/02 (1)
United States Treasury Notes, 6.250%, 02/28/02 (1)
Federal Home Loan Bank, 8.000%, 09/20/04 (1)
Federal Home Loan Bank, 6.830%, 06/07/01 (1)
Federal Home Loan Bank, 8.340%, 01/26/05 (1)
(1)New Holdings
TEN LARGEST HOLDINGS JUNE 30, 1997
PERCENT
VALUE OF FUND
----------- --------
United States Treasury Notes, 6.500%, 08/31/01 ...... $ 3,014,790 12.41%
United States Treasury Notes, 6.250%, 05/31/99 ...... 3,008,850 12.39
United States Treasury Notes, 6.250%, 02/28/02 ...... 1,990,000 8.19
United States Treasury Notes, 6.250%, 02/28/02 ...... 997,970 4.11
Federal Home Loan Bank, 8.000%, 09/20/04 ............ 765,938 3.15
Federal Home Loan Bank, 6.830%, 06/07/01 ............ 650,906 2.68
Federal Home Loan Bank, 8.340%, 01/26/05 ............ 520,938 2.15
Federal Home Loan Bank, 6.825%, 09/18/02 ............ 499,063 2.06
United States Treasury Notes, 5.875%, 11/15/99 ...... 496,860 2.05
Federal National Mortgage Assoc., 6.820%, 11/05/01 .. 199,688 0.82
----------- -----
$12,145,003 50.01%
=========== =====
IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.
LONG-TERM BOND SERIES
PORTFOLIO CHANGES FOR THE PERIOD ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
MAJOR PURCHASES MAJOR SALES
<S> <C>
United States Treasury Notes, 6.520%, 05/15/05 (1) Government National Mortgage Assoc., 6.500%, 05/15/26 (2)
United States Treasury Notes, 6.000%, 02/15/26 (1) Government National Mortgage Assoc., 6.500%, 01/15/29 (2)
United States Treasury Notes, 5.625%, 02/15/06 (1)
Tennessee Valley Authority, 5.980%, 04/01/36 (1)
Wachovia Corp., 6.605%, 10/01/25 (1)
Amoco Canada Petroleum Co., 7.950%, 10/01/22 (1)
United States Treasury Notes, 6.500%, 10/15/06 (1)
<FN>
(1)New Holdings (2) Deletions
</FN>
</TABLE>
TEN LARGEST HOLDINGS JUNE 30, 1997
PERCENT
VALUE OF FUND
---------- -------
United States Treasury Notes, 6.520%, 05/15/05 ........ $2,744,692 8.34%
United States Treasury Notes, 6.000%, 02/15/26 ........ 2,237,550 6.79
United States Treasury Notes, 5.625%, 02/15/06 ........ 939,110 2.85
Tennessee Valley Authority, 5.980%, 04/01/36 .......... 774,235 2.35
Wachovia Corp., 6.605%, 10/01/25 ...................... 589,500 1.79
Amoco Canada Petroleum Co., 7.950%, 10/01/22 .......... 511,875 1.55
United States Treasury Notes, 6.500%, 10/15/06 ........ 497,870 1.51
The Money Store Home Equity Trust, 5.675%, 02/15/09 ... 375,397 1.14
Norfolk Southern Corp., 7.050%, 05/01/37 .............. 304,500 0.93
Central Illinois Public Service Co., 7.610%, 06/01/17 . 302,625 0.92
---------- ----
$9,277,354 28.17%
========== =====
<PAGE>
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS JUNE 30, 1997
================================================================================
IAA TRUST GROWTH FUND, INC.
SHARES VALUE
-------- -----------
COMMON STOCKS -- 77.08%
BASIC INDUSTRY -- 4.08%
Engelhard Corp. ............... 63,000 $ 1,319,062
IMC Global, Inc. .............. 46,000 1,610,000
Newmont Mining Corp. .......... 15,000 585,000
Nucor Corp. ................... 22,500 1,288,125
Weyerhaeuser Co. .............. 18,000 936,000
----------
5,738,187
----------
CAPITAL GOODS -- 8.08%
AGCO Corp. .................... 59,100 2,123,906
Case Corp. .................... 8,050 554,444
Channell Commercial Corp.* .... 50,000 675,000
Deere & Co. ................... 27,900 1,531,012
General Electric Co. .......... 57,600 3,765,600
Hardinge, Inc. ................ 46,000 1,345,500
York International, Inc. ...... 30,000 1,380,000
----------
11,375,462
----------
CONSUMER CYCLICAL -- 5.12%
AutoZone, Inc.* ............... 63,600 1,498,575
Gentex Corp. .................. 65,000 1,283,750
Titan Wheel International, Inc. 55,000 969,375
Wal-Mart Stores, Inc. ......... 40,000 1,352,500
Warnaco Group, Inc., Cl. A .... 66,000 2,103,750
----------
7,207,950
----------
CONSUMER SERVICES -- 3.05%
American Greetings Corp. ...... 10,000 371,250
First Data Corp. .............. 39,000 1,713,563
Wendy's International, Inc. ... 84,900 2,202,094
----------
4,286,907
----------
CONSUMER STAPLES -- 6.65%
American Stores Co. ........... 43,000 2,123,125
Archer-Daniels-Midland Co. .... 50,000 1,175,000
Kimberly-Clark Corp. .......... 22,500 1,119,375
PepsiCo, Inc. ................. 39,000 1,464,937
Procter & Gamble Co. .......... 14,000 1,977,500
Unilever N.V .................. 7,000 1,498,438
----------
9,358,375
----------
ENERGY -- 6.95%
Chevron Corp. ................. 25,000 1,848,437
Exxon Corp. ................... 30,000 1,845,000
Petsec Energy, Ltd., ADR* ..... 30,000 682,500
Phillips Petroleum Co. ........ 40,000 1,750,000
Royal Dutch Petroleum Co., ADR 36,000 1,957,500
Seitel, Inc.* ................. 14,300 543,400
Unocal Corp. .................. 30,000 1,164,375
----------
9,791,212
----------
SHARES VALUE
-------- ---------
FINANCE -- 9.09%
American International Group, Inc. 2,400 $358,500
Citicorp ......................... 26,500 3,194,906
Federal National Mortgage Assoc .. 49,000 2,137,625
Green Tree Financial Corp. ....... 65,000 2,315,625
MBNA Corp. ....................... 37,500 1,373,438
Norwest Corp. .................... 34,700 1,951,875
Travelers, Inc. .................. 23,300 1,469,356
------------
12,801,325
------------
HEALTH -- 11.65%
Columbia/HCA Healthcare Corp. .... 72,200 2,838,363
Elan Corp., PLC, ADS* ............ 63,000 2,850,750
Integrated Health Services, Inc. . 46,000 1,771,000
Invacare Corp. ................... 79,900 1,867,663
Johnson & Johnson ................ 39,000 2,510,625
Merck & Co. ...................... 24,000 2,484,000
SmithKline Beecham, PLC, ADR ..... 22,700 2,079,887
------------
16,402,288
------------
TECHNOLOGY -- 15.12%
Adaptec, Inc.* ................... 48,000 1,668,000
Cisco Systems, Inc.* ............. 28,500 2,047,312
Diebold, Inc. .................... 31,000 1,209,000
Hewlett-Packard Co. .............. 22,900 1,282,400
Intel Corp. ...................... 27,800 3,942,388
Kemet Corp.* ..................... 86,500 2,151,688
Microsoft Corp.* ................. 20,000 2,527,500
Motorola, Inc. ................... 23,000 1,748,000
Oracle Corp.* .................... 27,000 1,360,125
Sun Microsystems, Inc.* .......... 90,000 3,349,683
------------
21,286,096
------------
TRANSPORTATION -- 1.77%
Burlington Northern Corp. ........ 10,000 898,750
Federal Express Corp. ............ 11,000 635,250
Illinois Central Corp. ........... 27,600 964,275
------------
2,498,275
------------
UTILITIES -- 5.52%
AT & T Corp. ..................... 23,000 806,437
DPL, Inc. ........................ 80,700 1,987,238
GTE Corp. ........................ 54,000 2,369,250
NICOR, Inc. ...................... 49,150 1,763,256
Wisconsin Energy Corp. ........... 34,000 841,500
------------
7,767,681
------------
TOTAL COMMON STOCKS
(cost $67,875,702) ............. 108,513,758
------------
<PAGE>
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS JUNE 30, 1997
================================================================================
IAA TRUST GROWTH FUND, INC. (CONTINUED)
PRINCIPAL
AMOUNT VALUE
--------- ---------
COMMERCIAL PAPER -- 6.04%
GTE Funding, Inc.
5.69%, 07/07/97 ......................... $ 2,050,000 $ 2,048,056
Household Finance Corp.
5.60%, 07/14/97 ......................... 1,395,000 1,395,000
John Deere Capital Corp.
5.64%, 07/29/97 ......................... 112,000 112,000
IBM Credit Corp.
5.58%, 08/06/97 ......................... 4,950,000 4,950,000
-----------
TOTAL COMMERCIAL PAPER
(cost $8,505,056) ....................... 8,505,056
-----------
SHARES VALUE
--------- ---------
OTHER SHORT TERM INVESTMENTS -- 6.35%
MONEY MARKET FUNDS
Dreyfus Money Market Fund ..... 5,784,000 $ 5,784,000
Federated Prime Obligation Fund 3,154,246 3,154,246
------------
TOTAL MONEY MARKET FUNDS
(cost $8,938,246) ........... 8,938,246
------------
TOTAL INVESTMENTS -- 89.47%
(cost $85,319,004) .......... 125,957,060
------------
CASH AND OTHER ASSETS
NET OF LIABILITIES -- 10.53% 14,829,289
------------
NET ASSETS -- 100.00% ......... $140,786,349
============
* Non-income producing security
See notes to financial statements.
<PAGE>
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS JUNE 30, 1997
===============================================================================
IAA TRUST ASSET ALLOCATION FUND, INC.
SHARES VALUE
--------- ---------
COMMON STOCKS -- 52.74%
BASIC INDUSTRY -- 1.26%
IMC Global, Inc. ........................... 3,000 $105,000
Mead Corp. ................................. 1,200 74,700
--------
179,700
--------
CAPITAL GOODS -- 4.95%
AGCO Corp. ................................. 4,000 143,750
Case Corp. ................................. 2,000 137,750
Fluor Corp. ................................ 700 38,631
General Electric Co. ....................... 1,800 117,675
Hardinge, Inc. ............................. 3,300 96,525
Philips Electronics N.V .................... 1,950 140,156
York International Corp. ................... 700 32,200
--------
706,687
--------
CONSUMER CYCLICAL -- 4.62%
AutoZone, Inc.* ............................ 4,400 103,675
Chrysler Corp. ............................. 2,000 65,625
Department 56, Inc.* ....................... 1,000 22,188
Fleetwood Enterprises, Inc. ................ 2,400 71,550
Harley-Davidson, Inc. ...................... 500 23,969
Magna International, Inc., Cl. A ........... 1,000 60,187
Planet Hollywood International, Inc., Cl. A* 1,000 23,000
Titan Wheel International, Inc. ............ 4,400 77,550
Wal-Mart Stores, Inc. ...................... 2,000 67,625
Warnaco Group, Inc., Cl. A ................. 4,500 143,438
--------
658,807
--------
CONSUMER SERVICES -- 2.38%
First Data Corp. ........................... 2,000 87,875
Tribune Co. ................................ 2,000 96,125
Wendy's International, Inc. ................ 6,000 155,625
--------
339,625
--------
CONSUMER STAPLES -- 5.51%
Albertson's, Inc. .......................... 2,900 105,850
Coca-Cola Co. .............................. 1,800 125,550
Gillette Co. ............................... 1,800 170,550
Kimberly-Clark Corp. ....................... 2,400 119,400
Procter & Gamble Co. ....................... 1,500 211,875
Walgreen Co. ............................... 1,000 53,625
--------
786,850
--------
ENERGY -- 4.57%
Atlantic Richfield Co. ..................... 1,400 98,700
Exxon Corp. ................................ 2,500 153,750
Repsol S.A., ADR ........................... 1,000 42,437
Schlumberger, Ltd. ......................... 600 75,000
Williams Cos., Inc. ........................ 4,000 175,000
YPF Sociedad Anonima, ADS .................. 3,500 107,625
--------
652,512
--------
FINANCE -- 6.87%
Bank of New York ........................... 3,000 130,500
BankAmerica Corp. .......................... 2,000 129,125
Citicorp ................................... 1,550 186,872
Echelon International Corp., Inc.* ......... 80 1,825
Green Tree Financial Corp. ................. 3,500 124,688
Meditrust, Inc. ............................ 2,700 107,494
SHARES VALUE
------- ----------
National Golf Properties, Inc. ......... 3,100 $ 107,725
Norwest Corp. .......................... 3,400 191,250
Travelers, Inc. ........................ 15 946
----------
980,425
----------
HEALTH -- 8.87%
Aetna, Inc. ............................ 561 57,432
Bristol-Myers Squibb Co. ............... 2,000 162,000
Columbia/HCA Healthcare Corp. .......... 4,450 174,941
Depuy, Inc.* ........................... 3,500 80,500
Elan Corp., PLC, ADS* .................. 5,000 226,250
ESC Medical Systems, Ltd.* ............. 450 11,475
Integrated Health Services, Inc. ....... 5,200 200,200
Invacare Corp. ......................... 5,500 128,563
Johnson & Johnson ...................... 1,900 122,313
OccuSystems, Inc.* ..................... 3,500 101,500
----------
1,265,174
----------
TECHNOLOGY -- 10.33%
Adaptec, Inc.* ......................... 2,100 72,975
AirTouch Communications, Inc.* ......... 1,500 41,063
Bell & Howell Co.* ..................... 2,000 61,625
Cisco Systems, Inc.* ................... 1,800 120,825
Diebold, Inc. .......................... 3,000 117,000
Doncasters PLC, ADR* ................... 500 11,562
Hewlett-Packard Co. .................... 750 42,000
Intel Corp. ............................ 975 138,267
Kemet Corp.* ........................... 5,000 124,375
Lam Research Corp.* .................... 500 18,531
Microsoft Corp.* ....................... 1,000 126,375
Oracle Corp.* .......................... 3,625 182,609
Raytheon Co. ........................... 2,000 102,000
Sun Microsystems, Inc.* ................ 3,300 122,822
Tektronix, Inc. ........................ 1,500 90,000
Ultratech Stepper, Inc.* ............... 4,500 102,938
----------
1,474,967
----------
TRANSPORTATION -- 0.61%
Federal Express Corp.* ................. 1,500 86,625
----------
UTILITIES -- 2.77%
BellSouth Corp. ........................ 1,500 69,562
CILCORP, Inc. .......................... 1,200 49,425
Florida Progress Corp. ................. 1,200 37,575
GTE Corp. .............................. 1,600 70,200
SBC Communications, Inc. ............... 1,097 67,877
Texas Utilities, Inc. .................. 1,000 34,437
Wisconsin Energy Corp. ................. 2,700 66,825
----------
395,901
----------
TOTAL COMMON STOCKS
(cost $4,698,518) .................... 7,527,273
----------
PREFERRED STOCKS -- 0.12%
(cost $12,214)
Aetna, Inc. Convertible Preferred 6.25% 187 17,531
----------
<PAGE>
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS JUNE 30, 1997
===============================================================================
IAA TRUST ASSET ALLOCATION FUND, INC. (CONTINUED)
PRINCIPAL
AMOUNT VALUE
--------- ---------
BONDS AND NOTES -- 41.60%
AUTO -- 0.81%
General Motors Acceptance Corp.
8.875%, 06/01/10 .................... $100,000 $115,500
--------
BANKING -- 2.94%
ABN AMRO Bank NV (Chicago) -
Global Bond
7.125%, 06/18/07 .................... 100,000 100,250
Citicorp
7.200%, 06/15/07 .................... 100,000 100,375
International American Development Bank
9.500%, 10/15/97 .................... 100,000 101,125
8.875%, 06/01/09 .................... 100,000 117,125
--------
418,875
--------
BEVERAGES -- 0.70%
Coca-Cola Co.
6.625%, 10/01/02 .................... 100,000 99,625
--------
CHEMICALS -- 0.70%
DuPont (E.I.) De Nemours & Co.
6.750%, 10/15/02 .................... 100,000 100,000
--------
FINANCE COMPANIES -- 3.77%
Chemical Master Credit Card Trust
5.980%, 09/15/08 .................... 200,000 188,848
Discover Credit Card Trust
6.750%, 02/16/02 .................... 200,000 197,844
Standard Credit Card Master Trust
6.700%, 09/07/02 .................... 150,000 150,855
--------
537,547
--------
INDUSTRIAL -- 0.72%
Amoco Canada Petroleum Co.
7.950%, 10/01/22 .................... 100,000 102,375
--------
TELEPHONE UTILITY -- 4.93%
Bell of Pennsylvania Putable Debentures
8.350%, 12/15/30 .................... 200,000 228,250
BellSouth Capital Funding Corp.
6.040%, 11/15/26 .................... 200,000 196,750
Chesapeake & Potomac Telephone Co.
of Virginia Debentures
8.375%, 10/01/29 .................... 100,000 113,250
New Jersey Bell Telephone Co.
7.850%, 11/15/29 .................... 150,000 165,375
--------
703,625
--------
TRANSPORTATION -- 1.42%
Norfolk Southern Corp.
7.050%, 05/01/37 .................... 200,000 203,000
--------
ASSET BACKED -- 0.69%
Amresco Residential Securities Mortgage
6.925%, 06/25/25 .................... 100,000 98,313
--------
U.S. GOVERNMENT AGENCIES -- 9.87%
Federal Farm Credit Bank
5.800%, 12/18/00 .................... 100,000 97,615
Federal Home Loan Bank
6.830%, 06/07/01 .................... 100,000 99,375
8.000%, 09/20/04 .................... 100,000 102,125
PRINCIPAL
AMOUNT VALUE
--------- ---------
Federal Home Loan Mortgage Corp.
10.750%, 07/01/00 ............................. $ 2,573 $ 2,596
8.750%, 04/01/01 .............................. 30,468 30,811
10.150%, 04/15/06 ............................. 17,598 18,170
6.500%, 06/15/06 .............................. 200,000 195,750
Federal National Mortgage Association
7.060%, 11/02/05 .............................. 200,000 195,750
Government National Mortgage Association
Pool #60721
9.750%, 04/15/98 .............................. 1,286 1,328
Government National Mortgage Association
Pool #30111
9.000%, 05/15/09 .............................. 17,809 18,832
Government National Mortgage Association
Pool #23653
9.500%, 06/15/09 .............................. 11,843 12,779
Government National Mortgage Association
Pool #32147
9.500%, 08/15/09 .............................. 11,751 12,680
Government National Mortgage Association
Pool #161621
9.000%, 07/15/16 .............................. 112,619 119,094
Tennessee Valley Authority
5.980%, 04/01/36 .............................. 500,000 501,250
----------
1,408,155
----------
U.S. GOVERNMENT OBLIGATIONS -- 15.07%
United States Treasury Notes
5.875%, 03/31/99 .............................. 200,000 199,536
6.750%, 06/30/99 .............................. 100,000 101,238
6.875%, 07/31/99 .............................. 100,000 101,464
5.875%, 02/15/00 .............................. 100,000 99,217
6.625%, 04/30/02 .............................. 100,000 100,950
6.375%, 08/15/02 .............................. 100,000 100,012
5.875%, 02/15/04 .............................. 100,000 96,984
7.250%, 05/15/04 .............................. 200,000 208,628
7.250%, 08/15/04 .............................. 100,000 104,209
7.875%, 11/15/04 .............................. 100,000 107,875
6.500%, 05/15/05 .............................. 350,000 349,325
6.875%, 05/15/06 .............................. 150,000 153,122
6.500%, 10/15/06 .............................. 200,000 199,148
United States Treasury Bonds
11.625%, 11/15/04 ............................. 100,000 129,472
6.750%, 08/15/26 .............................. 100,000 98,984
----------
2,150,164
----------
TOTAL BONDS AND NOTES
(cost $5,796,541) ............................. 5,937,179
----------
COMMERCIAL PAPER -- 2.16%
Household Finance Corp.
5.60%, 07/14/97 ............................... 99,000 99,000
Ford Motor Credit Corp.
5.68%, 07/28/97 ............................... 50,000 50,000
American Express Credit Corp.
5.58%, 08/05/97 ............................... 140,000 140,000
International Lease Finance Corp.
5.63%, 09/02/97 ............................... 20,000 19,803
----------
TOTAL COMMERCIAL PAPER
(cost $308,803) ............................... 308,803
----------
<PAGE>
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS JUNE 30, 1997
===============================================================================
IAA TRUST ASSET ALLOCATION FUND, INC. (CONTINUED)
SHARES VALUE
--------- ----------
OTHER SHORT-TERM INVESTMENTS -- 2.44%
MONEY MARKET FUNDS
(cost $347,599)
Federated Prime Obligation Fund ..... 347,599 $ 347,599
-----------
TOTAL INVESTMENTS -- 99.06%
(cost $11,163,675) ................ 14,138,385
-----------
CASH AND OTHER ASSETS
NET OF LIABILITIES -- 0.94% ....... 133,999
-----------
NET ASSETS -- 100.00% ............... $14,272,384
===========
* Non-income producing security
See notes to financial statements.
<PAGE>
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS JUNE 30, 1997
================================================================================
IAA TRUST TAX EXEMPT BOND FUND, INC.
PRINCIPAL
AMOUNT VALUE
---------- ----------
MUNICIPAL BONDS
(TAX EXEMPT) -- 97.55%
ARIZONA -- 6.04%
Bullhead City, Arizona Parkway Revenue
6.100%, 01/01/07 ........................... $ 250,000 $ 263,897
Maricopa County School Dististrict #93
Arizona Unlimited Tax General Obligation
6.400%, 07/01/06 ........................... 500,000 559,280
Salt River Project Arizona Agriculture
Improvement & Power District Electric
System Revenue
5.625%, 01/01/06 ........................... 250,000 264,707
----------
1,087,884
----------
CALIFORNIA -- 5.91%
California State Public Works Board Lease
Revenue
5.200%, 12/01/09 ........................... 500,000 502,615
City of Fresno, California Sewer System
Revenue
6.250%, 09/01/14 ........................... 250,000 278,490
Fresno, California Unified School District,
General Obligation
5.875%, 08/01/15 ........................... 275,000 283,473
----------
1,064,578
----------
COLORADO -- 2.73%
Denver, Colorado City & County General
Obligation
5.000%, 10/01/10 ........................... 500,000 491,645
----------
CONNECTICUT -- 3.14%
Connecticut State Unlimited Tax General
Obligation
5.400%, 03/15/08 ........................... 550,000 565,922
----------
FLORIDA -- 2.91%
Port St. Lucie, Florida Utility System
Revenue
5.900%, 09/01/09 ........................... 500,000 523,330
----------
ILLINOIS -- 16.83%
Chicago, Illionis O'Hare International Airport
Revenue
5.000%, 01/01/16 ........................... 500,000 464,890
Chicago, Illinois Water Revenue
6.500%, 11/01/15 ........................... 500,000 566,925
Illinois State Sales Tax Revenue
5.400%, 06/15/13 ........................... 550,000 545,688
Illinois State Toll Highway Authority
Revenue, Series A
6.300%, 01/01/12 ........................... 275,000 300,396
Northwest Suburban Municipal Joint Action
Water Agency Illinois Contract Revenue
6.450%, 05/01/07 ........................... 400,000 447,072
Northwest Water Commission Illinois,
Cook & Lake Revenue
5.000%, 05/01/13 ........................... 500,000 481,170
Sangamon County, Illinois Tax General
Obligation
6.500%, 03/01/08 ........................... 200,000 224,644
----------
3,030,785
----------
PRINCIPAL
AMOUNT VALUE
-------- --------
INDIANA -- 3.34%
Peru, Indiana Community School Corp.
Revenue
6.750%, 01/01/09 ......................... $550,000 $602,140
--------
KENTUCKY -- 2.74%
Jefferson County Kentucky School District
Financing Corp. School Building Revenue,
Series A
5.300%, 07/01/15 ......................... 500,000 494,120
--------
MASSACHUSETTS -- 2.94%
Massachusetts State Water Resource
Authority Revenue
6.000%, 11/01/08 ......................... 500,000 528,625
--------
MINNESOTA -- 2.76%
Saint Paul, Minnesota Independent School
District #625 General Obligation, Series C
5.250%, 02/01/13 ......................... 500,000 496,560
--------
MISSOURI -- 4.64%
Cape Girardeau, Missouri Waterworks
System Revenue
7.450%, 03/01/05 ......................... 500,000 584,060
Missouri State Environmental Improvement
& Energy Resources Authority Pollution
Control Revenue
5.250%, 12/01/09 ......................... 250,000 252,020
--------
836,080
--------
NEBRASKA -- 0.56%
Nebraska Public Power District Revenue
5.400%, 01/01/10 ......................... 100,000 100,428
--------
NEVADA -- 5.12%
Clark County, Nevada School District
General Obligation
5.250%, 06/01/07 ......................... 500,000 510,530
Henderson, Nevada Water and Sewer
Unlimited Tax General Obligation
5.375%, 06/01/07 ......................... 400,000 411,668
--------
922,198
--------
NEW YORK -- 2.75%
New York State Dormitory Authority
Revenue
5.500%, 07/01/12 ......................... 500,000 494,470
--------
NORTH CAROLINA -- 1.55%
North Carolina East Municipal Power
Agency System Revenue
7.000%, 01/01/08 ......................... 250,000 278,770
--------
OHIO -- 2.83%
Montgomery County, Ohio Sewer System
Revenue
5.600%, 09/01/11 ......................... 500,000 509,855
--------
<PAGE>
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS JUNE 30, 1997
================================================================================
IAA TRUST TAX EXEMPT BOND FUND, INC. (CONTINUED)
PRINCIPAL
AMOUNT VALUE
---------- ---------
PENNSYLVANIA -- 6.11%
Pennsylvania Intergovernmental Corp.
Authority, Special Tax Revenue
5.450%, 06/15/08 ......................... $ 500,000 $ 510,555
Pennsylvania State Higher Education
Revenue Bonds, Series A
5.600%, 09/01/10 ......................... 575,000 589,835
----------
1,100,390
----------
RHODE ISLAND -- 3.18%
State of Rhode Island Refunding General
Obligation
7.000%, 06/15/05 ......................... 500,000 572,215
----------
TENNESSEE -- 2.84%
Shelby County, Tennessee School General
Obligation, Series A
5.875%, 06/01/18 ......................... 500,000 512,165
----------
TEXAS -- 10.37%
Austin, Texas Limited Tax General Obligation
7.250%, 09/01/03 ......................... 350,000 391,906
Bexar County, Texas Detention Facilities
Limited Tax General Obligation
5.750%, 06/15/10 ......................... 500,000 516,315
Garland, Texas Limited Tax General
Obligation
5.800%, 08/15/12 ......................... 350,000 362,131
Texas A&M University Revenues Financing
System
5.375%, 05/15/14 ......................... 600,000 597,324
----------
1,867,676
----------
PRINCIPAL
AMOUNT VALUE
----------- ---------
WASHINGTON -- 1.54%
Washington Public Power Supply System,
Nuclear Project #1, Refunding Revenue,
1990-C
7.625%, 07/01/01 ....................... $ 250,000 $ 276,505
-----------
WISCONSIN -- 6.72%
Brookfield, Wisconsin Unlimited Tax Corp.
General Obligation
6.900%, 03/15/03 ....................... 250,000 279,288
Wisconsin State Clean Water Revenue Bond
5.300%, 06/01/12 ....................... 700,000 697,039
Wisconsin State Health & Educational
Facility Authority Revenue Bond
5.250%, 08/15/19 ....................... 250,000 234,298
-----------
1,210,625
-----------
TOTAL MUNICIPAL BONDS
(cost $17,007,707) ..................... 17,566,966
-----------
SHARES
----------
TAX EXEMPT
MONEY MARKET FUNDS -- 1.04%
(cost $186,502)
Nuveen Tax Exempt Fund ................... 186,502 186,502
-----------
TOTAL INVESTMENTS -- 98.59%
(cost $17,194,209) ..................... 17,753,468
-----------
CASH AND OTHER ASSETS
NET OF LIABILITIES -- 1.41% ............ 254,560
-----------
NET ASSETS -- 100.00% .................... $18,008,028
===========
See notes to financial statements.
<PAGE>
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS JUNE 30, 1997
===============================================================================
IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.
MONEY MARKET SERIES
PRINCIPAL
AMOUNT VALUE
---------- ---------
COMMERCIAL PAPER -- 94.47%
AUTO & TRUCK -- 5.68%
Ford Motor Credit Co.
5.69%, 07/22/97 .................... $ 600,000 $ 600,000
5.68%, 07/28/97 .................... 700,000 700,000
5.66%, 09/02/97 .................... 500,000 500,000
5.50%, 09/02/97 .................... 600,000 600,000
Toyota Motor Credit Co.
5.52%, 07/03/97 .................... 1,048,000 1,047,678
-----------
3,447,678
-----------
COMMERCIAL BANKING -- 6.99%
Norwest Corp.
5.61%, 07/21/97 .................... 1,363,000 1,363,000
5.64%, 07/23/97 .................... 600,000 600,000
SunTrust Banks, Inc.
5.58%, 09/03/97 .................... 1,300,000 1,287,104
U.S. Central Credit Union
5.60%, 08/11/97 .................... 1,000,000 993,622
-----------
4,243,726
-----------
COMMERCIAL FINANCE -- 4.76%
CIT Group Holdings, Inc.
5.59%, 08/18/97 .................... 887,000 887,000
5.66%, 10/15/97 .................... 2,000,000 2,000,000
-----------
2,887,000
-----------
COMMERCIAL SERVICES -- 3.15%
PHH Corp.
5.57%, 07/24/97 .................... 1,920,000 1,913,167
-----------
CONSUMER FINANCE -- 43.86%
American Express Credit Corp.
5.62%, 07/02/97 .................... 945,000 945,000
5.58%, 08/05/97 .................... 2,015,000 2,015,000
American General Finance Corp.
5.62%, 07/15/97 .................... 500,000 500,000
5.60%, 07/15/97 .................... 1,325,000 1,325,000
5.66%, 10/20/97 .................... 1,100,000 1,100,000
Associates Corp. of North America
5.67%, 07/01/97 .................... 550,000 550,000
5.58%, 07/08/97 .................... 1,850,000 1,850,000
AVCO Financial Services, Inc.
5.70%, 07/22/97 .................... 1,275,000 1,275,000
5.68%, 09/09/97 .................... 1,125,000 1,125,000
Beneficial Corp.
5.59%, 07/07/97 .................... 1,200,000 1,200,000
5.62%, 08/04/97 .................... 853,000 853,000
5.63%, 09/29/97 .................... 850,000 850,000
Commercial Credit Co.
5.61%, 08/04/97 .................... 1,000,000 1,000,000
GTE Funding, Inc.
5.69%, 07/07/97 .................... 950,000 949,099
5.57%, 07/17/97 .................... 2,000,000 1,995,049
Household Finance Corp.
5.60%, 07/14/97 .................... 1,900,000 1,900,000
5.53%, 07/31/97 .................... 800,000 800,000
International Lease Finance Corp.
5.59%, 07/30/97 .................... 500,000 497,749
5.63%, 09/02/97 .................... 650,000 643,596
5.54%, 10/22/97 .................... 1,500,000 1,473,916
Paccar Financial Corp.
5.50%, 07/08/97 .................... 1,710,000 1,708,171
Prudential Funding Corp.
5.59%, 08/12/97 .................... 972,000 972,000
5.72%, 09/25/97 .................... 1,083,000 1,083,000
-----------
26,610,580
-----------
PRINCIPAL
AMOUNT VALUE
---------- ---------
ELECTRONICS -- 4.45%
General Electric Capital Corp.
5.56%, 07/15/97 .............................. $ 637,000 $ 637,000
5.51%, 07/15/97 .............................. 900,000 900,000
5.67%, 09/16/97 .............................. 1,160,000 1,160,000
-----------
2,697,000
-----------
FARM MACHINERY & EQUIPMENT -- 4.45%
John Deere Capital Corp.
5.64%, 07/29/97 .............................. 768,000 768,000
5.56%, 07/29/97 .............................. 1,932,000 1,932,000
-----------
2,700,000
-----------
FOREIGN GOVERNMENTS -- 3.94%
Province of Quebec
5.55%, 07/21/97 .............................. 2,400,000 2,392,600
-----------
INSURANCE/MULTI-LINE -- 4.31%
USAA Capital Corp.
5.26%, 08/25/97 .............................. 500,000 495,982
5.54%, 10/07/97 .............................. 2,150,000 2,117,576
-----------
2,613,558
-----------
OFFICE EQUIPMENT -- 8.11%
IBM Credit Corp.
5.59%, 08/12/97 .............................. 1,000,000 1,000,000
5.61%, 08/20/97 .............................. 1,650,000 1,650,000
Xerox Corp.
5.54%, 08/06/97 .............................. 2,280,000 2,267,369
-----------
4,917,369
-----------
TELEPHONE/UTILITY -- 4.77%
AT & T Corp.
6.15%, 07/01/97 .............................. 2,400,000 2,400,000
5.38%, 08/14/97 .............................. 500,000 496,712
-----------
2,896,712
-----------
TOTAL COMMERCIAL PAPER
(cost $57,319,390) ........................... 57,319,390
-----------
BONDS & NOTES -- 1.65%
U.S. Government Agencies
(cost $1,000,000)
Student Loan Marketing Association
5.75%, 01/08/98 .............................. 1,000,000 1,000,000
-----------
SHARES
-----------
OTHER SHORT-TERM INVESTMENTS -- 3.73%
MONEY MARKET FUNDS
Dreyfus Money Market Fund ...................... 1,346,981 1,346,981
Federated Prime Obligation Fund ................ 913,944 913,944
-----------
TOTAL MONEY MARKET FUNDS
(cost $2,260,925) ............................ 2,260,925
-----------
TOTAL INVESTMENTS -- 99.85%
(cost $60,580,315) ........................... 60,580,315
-----------
CASH AND OTHER ASSETS
NET OF LIABILITIES -- 0.15% .................. 93,234
-----------
NET ASSETS -- 100.00% .......................... $60,673,549
===========
<PAGE>
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS JUNE 30, 1997
===============================================================================
IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.
SHORT-TERM GOVERNMENT BOND SERIES
PRINCIPAL
AMOUNT VALUE
--------- ---------
BONDS & NOTES -- 50.43%
U.S. GOVERNMENT AGENCIES -- 10.86%
Federal Home Loan Bank
6.830%, 06/07/01 .................. $ 655,000 $ 650,906
6.825%, 09/18/02 .................. 500,000 499,063
8.000%, 09/20/04 .................. 750,000 765,938
8.340%, 01/26/05 .................. 500,000 520,938
Federal National Mortgage Assoc.
6.820%, 11/05/01 .................. 200,000 199,688
-----------
2,636,533
-----------
U.S. GOVERNMENT OBLIGATIONS -- 39.57%
United States Treasury Notes
6.250%, 05/31/99 .................. 3,000,000 3,008,850
5.875%, 11/15/99 .................. 500,000 496,860
6.500%, 08/31/01 .................. 3,000,000 3,014,790
6.250%, 02/28/02 .................. 2,000,000 1,990,000
6.250%, 02/28/02 .................. 1,000,000 997,970
6.625%, 04/30/02 .................. 100,000 100,950
-----------
9,609,420
-----------
TOTAL BONDS & NOTES
(cost $12,234,385) ................ 12,245,953
-----------
PRINCIPAL
AMOUNT VALUE
--------- ---------
COMMERCIAL PAPER -- 5.01%
Prudential Funding Corp.
5.49%, 07/03/97 ................... $ 331,000 $ 331,000
GTE Funding, Inc.
5.57%, 07/17/97 ................... 500,000 498,762
American General Finance Corp.
5.55%, 07/21/97 ................... 337,000 337,000
Ford Motor Credit Corp.
5.68%, 07/22/97 ................... 50,000 50,000
-----------
TOTAL COMMERCIAL PAPER
(cost $1,216,762) ................. 1,216,762
-----------
OTHER SHORT-TERM INVESTMENTS -- 1.49%
(cost $361,908)
1U.S. Treasury Bills
4.710%, 07/24/97 .................. 363,000 361,908
-----------
TOTAL INVESTMENTS -- 56.93%
(Cost $13,813,055) ................ 13,824,623
-----------
CASH AND OTHER ASSETS
NET OF LIABILITIES -- 43.07% ...... 10,460,396
-----------
NET ASSETS -- 100.00% ............... $24,285,019
===========
See notes to financial statements.
<PAGE>
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS JUNE 30, 1997
================================================================================
IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.
LONG-TERM BOND SERIES
PRINCIPAL
AMOUNT VALUE
--------- -----------
BONDS AND NOTES -- 31.38%
U.S. GOVERNMENT AGENCIES -- 2.35%
Tennessee Valley Authority
5.980%, 04/01/36 ................... $ 770,000 $ 774,235
-----------
U.S. GOVERNMENT OBLIGATIONS -- 20.42%
U.S. Treasury Notes
6.625%, 04/30/02 ................... 100,000 100,950
5.875%, 02/15/04 ................... 100,000 96,984
7.875%, 11/15/04 ................... 100,000 107,875
6.520%, 05/15/05 ................... 2,750,000 2,744,692
5.625%, 02/15/06 ................... 1,000,000 939,110
6.500%, 10/15/06 ................... 500,000 497,870
6.000%, 02/15/26 ................... 2,500,000 2,237,550
-----------
6,725,031
-----------
CORPORATE BONDS -- 8.61%
ABN AMRO Bank NV (Chicago) Global Bond
7.125%, 06/18/07 ................... 300,000 300,750
Amoco Canada Petroleum Co.
7.950%, 10/01/22 ................... 500,000 511,875
Central Illinois Public Service Co.
7.610%, 06/01/17 ................... 300,000 302,625
Citicorp
7.200%, 06/15/07 ................... 250,000 250,938
The Money Store Home Equity Trust
5.675%, 02/15/09 ................... 386,208 375,397
Norfolk Southern Corp.
7.050%, 05/01/37 ................... 300,000 304,500
Suntrust Capital II
7.900%, 06/15/27 ................... 200,000 199,250
Wachovia Corp.
6.605%, 10/01/25 ................... 600,000 589,500
-----------
2,834,835
-----------
TOTAL BONDS & NOTES
(cost $10,273,606) ................. 10,334,101
===========
PRINCIPAL
AMOUNT VALUE
--------- -----------
COMMERCIAL PAPER -- 9.49%
Chevron Oil Finance Corp.
5.47%, 07/01/97 ................... $ 625,000 $ 625,000
General Electric Capital Corp.
5.51%, 07/07/97 ................... 625,000 625,000
Household Finance Corp.
5.55%, 07/09/97 ................... 625,000 625,000
American Express Credit Corp
5.51%, 07/14/97 ................... 625,000 625,000
Prudential Funding Corp.
5.59%, 07/23/97 ................... 625,000 625,000
-----------
TOTAL COMMERCIAL PAPER
(cost $3,125,000) ................. 3,125,000
-----------
OTHER SHORT-TERM INVESTMENTS -- 1.30%
(cost $429,703)
U.S. Treasury Bills
4.710%, 07/24/97 .................. 431,000 429,703
-----------
TOTAL INVESTMENTS -- 42.17%
(cost $13,828,309) ................ 13,888,804
-----------
CASH AND OTHER ASSETS
NET OF LIABILITIES -- 57.83% ...... 19,043,351
-----------
NET ASSETS -- 100.00% ............... $32,932,155
===========
See notes to financial statements.
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 1997
================================================================================
<TABLE>
<CAPTION>
IAA TRUST
TAXABLE FIXED INCOME SERIES FUND, INC.
IAA TRUST IAA TRUST -----------------------------------------
IAA TRUST ASSET TAX EXEMPT SHORT-TERM LONG-TERM
GROWTH ALLOCATION BOND MONEY MARKET GOVERNMENT BOND
FUND, INC. FUND, INC. FUND, INC. SERIES BOND SERIES SERIES
------------ ----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in securities:
At cost .............................. $ 85,319,004 $11,163,675 $17,194,209 $60,580,315 $13,813,055 $13,828,309
============ =========== =========== =========== =========== ===========
At value ............................. $125,957,060 $14,138,385 $17,753,468 $60,580,315 $13,824,623 $13,888,804
Cash ................................... 2,338 16,662 -- 55,112 -- 395,041
Receivable for securities sold ......... -- 51,533 -- -- -- 947,712
Receivable for capital stock sold ...... 14,778,076 500 3,281 -- 12,396,444 19,254,695
Dividends and interest receivable ...... 184,203 79,191 270,097 232,089 183,254 169,245
Due from Advisor ....................... 781 523 548 543 -- --
Other assets ........................... 5,148 637 1,175 2,265 9,120 9,277
------------ ----------- ----------- ----------- ----------- -----------
Total assets ......................... 140,927,606 14,287,431 18,028,569 60,870,324 26,413,441 34,664,774
------------ ----------- ----------- ----------- ----------- -----------
LIABILITIES:
Payable for securities purchased ....... -- -- -- -- 2,032,459 1,704,060
Payable for capital stock redeemed ..... 25,670 -- -- -- -- 13,332
Due to Advisor ......................... -- -- -- -- 6,988 7,469
Accrued expenses and other liabilities . 115,586 15,047 20,541 196,775 88,975 7,758
------------ ----------- ----------- ----------- ----------- -----------
Total liabilities .................... 141,256 15,047 20,541 196,775 2,128,422 1,732,619
------------ ----------- ----------- ----------- ----------- -----------
NET ASSETS ............................... $140,786,350 $14,272,384 $18,008,028 $60,673,549 $24,285,019 $32,932,155
============ =========== =========== =========== =========== ===========
NET ASSETS CONSIST OF:
Capital paid-in ........................ $ 91,413,018 $10,893,263 $17,469,341 $60,673,677 $24,264,126 $32,851,510
Undistributed net investment income .... 349,523 4,371 9,438 -- 9,325 11,498
Accumulated net realized gain (loss)
on investments ....................... 8,385,753 400,040 (30,010) (128) -- 8,652
Net unrealized appreciation of
investments .......................... 40,638,056 2,974,710 559,259 -- 11,568 60,495
------------ ----------- ----------- ----------- ----------- -----------
$140,786,350 $14,272,384 $18,008,028 $60,673,549 $24,285,019 $32,932,155
============ =========== =========== =========== =========== ===========
Shares outstanding ..................... 6,254,801 974,558 2,070,305 60,673,775 2,426,194 3,279,931
============ =========== =========== =========== =========== ===========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE ........................ $22.51 $14.64 $8.70 $1.00 $10.01 $10.04
====== ====== ===== ===== ====== ======
</TABLE>
See notes to financial statements.
<PAGE>
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1997
================================================================================
<TABLE>
<CAPTION>
IAA TRUST
TAXABLE FIXED INCOME SERIES FUND, INC.
IAA TRUST IAA TRUST -------------------------------------
IAA TRUST ASSET TAX EXEMPT SHORT-TERM LONG-TERM
GROWTH ALLOCATION BOND MONEY MARKET GOVERNMENT BOND
FUND, INC. FUND, INC. FUND, INC. SERIES BOND SERIES* SERIES*
----------- ---------- ---------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends .................................... $ 1,249,047 $ 95,846 $ -- $ -- $ -- $ --
Interest ..................................... 641,579 363,792 958,197 2,123,985 79,028 91,350
----------- ---------- ---------- ---------- -------- --------
Total investment income .................... 1,890,626 459,638 958,197 2,123,985 79,028 91,350
----------- ---------- ---------- ---------- -------- --------
EXPENSES:
Investment advisory fees (Note E) ............ 709,406 85,470 89,246 193,648 6,982 11,550
Distribution expenses (Note F) ............... 56,400 13,102 23,730 -- -- --
Transfer agent fees .......................... 74,484 9,043 13,220 42,866 12,056 12,058
Professional fees (Note E) ................... 48,314 7,368 10,640 24,900 8,020 8,226
Printing ..................................... 19,171 2,943 4,088 9,600 -- --
Directors' fees .............................. 6,093 1,409 1,476 1,678 -- --
Administration fees .......................... 96,959 11,307 18,383 39,154 10,951 10,951
Accounting fees .............................. 53,396 29,320 33,041 35,760 12,500 12,500
Insurance .................................... 20,739 2,634 4,939 9,678 2,631 2,631
Registration fees ............................ 4,846 1,487 1,591 1,441 556 516
Miscellaneous ................................ 6,831 2,080 2,665 4,406 452 452
----------- ---------- ---------- ---------- -------- --------
Total expenses ............................. 1,096,639 166,163 203,019 363,131 54,148 58,884
Less: Advisory fee waiver .................... -- -- -- -- (6,982) (11,550)
Less: Expenses reimbursed and waived ......... -- -- -- -- (36,502) (35,317)
----------- ---------- ---------- ---------- -------- --------
Net expenses ............................... 1,096,639 166,163 203,019 363,131 10,664 12,017
----------- ---------- ---------- ---------- -------- --------
NET INVESTMENT INCOME .......................... 793,987 293,475 755,178 1,760,854 68,364 79,333
----------- ---------- ---------- ---------- -------- --------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS -- Note (D):
Net realized gain (loss) on investments ...... 9,367,268 617,456 2,423 (128) -- 8,652
Net change in unrealized appreciation on
investments ................................ 14,742,307 1,274,062 645,334 -- 11,568 60,495
----------- ---------- ---------- ---------- -------- --------
Net realized and unrealized gain (loss)
on investments ............................. 24,109,575 1,891,518 647,757 (128) 11,568 69,147
----------- ---------- ---------- ---------- -------- --------
INCREASE IN NET ASSETS FROM OPERATIONS ......... $24,903,562 $2,184,993 $1,402,935 $1,760,726 $ 79,932 $148,480
=========== ========== ========== ========== ======== ========
<FN>
* For the period January 2, 1997 (commencement of operations) through June 30, 1997
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
<TABLE>
<CAPTION>
IAA TRUST IAA TRUST ASSET
GROWTH FUND, INC. ALLOCATION FUND, INC.
--------------------------- --------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
06/30/97 06/30/96 06/30/97 06/30/96
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ........................................ $ 793,987 $ 1,005,476 $ 293,475 $ 293,412
Net realized gain on investments ............................. 9,367,268 7,560,208 617,456 736,443
Net change in unrealized appreciation of investments ......... 14,742,307 6,380,518 1,274,062 385,622
------------ ----------- ----------- -----------
Net increase in net assets from operations ................... 24,903,562 14,946,202 2,184,993 1,415,477
------------ ----------- ----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income ............................................ (905,867) (1,047,434) (288,779) (293,737)
Realized gains on investments ................................ (5,135,058) (6,467,667) (670,310) (250,319)
------------ ----------- ----------- -----------
(6,040,925) (7,515,101) (959,089) (544,056)
------------ ----------- ----------- -----------
CAPITAL STOCK TRANSACTIONS -- (NET) Note (C) ................... 37,123,270 6,792,238 2,963,534 (328,304)
------------ ----------- ----------- -----------
Total increase in net assets ................................. 55,985,907 14,223,339 4,189,438 543,117
NET ASSETS:
Beginning of year ............................................ 84,800,443 70,577,104 10,082,946 9,539,829
------------ ----------- ----------- -----------
End of year .................................................. $140,786,350 $84,800,443 $14,272,384 $10,082,946
============ =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
IAA TRUST
TAXABLE FIXED INCOME
IAA TRUST SERIES FUND, INC.
TAX EXEMPT BOND FUND, INC. MONEY MARKET SERIES
--------------------------- --------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
06/30/97 06/30/96 06/30/97 06/30/96
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ........................................ $ 755,178 $ 806,636 $ 1,760,854 $ 1,907,720
Net realized gain (loss) on investments ...................... 2,423 27,534 (128) --
Net change in unrealized appreciation of investments ......... 645,334 141,343 -- --
------------ ----------- ----------- -----------
Net increase in net assets from operations ................... 1,402,935 975,513 1,760,726 1,907,720
------------ ----------- ----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income ............................................ (744,014) (808,361) (1,760,915) (1,907,605)
Realized gains on investments ................................ (48,659) (46,251) -- --
------------ ----------- ----------- -----------
(792,673) (854,612) (1,760,915) (1,907,605)
------------ ----------- ----------- -----------
CAPITAL STOCK TRANSACTIONS -- (NET) Note (C) ................... (345,953) (1,209,728) 27,009,548 (2,751,388)
------------ ----------- ----------- -----------
Total increase (decrease) in net assets ...................... 264,309 (1,088,827) 27,009,359 (2,751,273)
NET ASSETS:
Beginning of year ............................................ 17,743,719 18,832,546 33,664,190 36,415,463
------------ ----------- ----------- -----------
End of year .................................................. $ 18,008,028 $17,743,719 $60,673,549 $33,664,190
============ =========== =========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
<TABLE>
<CAPTION>
IAA TRUST IAA TRUST
TAXABLE FIXED INCOME TAXABLE FIXED INCOME
SERIES FUND, INC. SERIES FUND, INC.
SHORT-TERM GOVERNMENT BOND SERIES LONG-TERM BOND SERIES
--------------------------------- ------------------
FOR THE PERIOD FOR THE PERIOD
01/02/97* 01/02/97*
THROUGH 06/30/97 THROUGH 06/30/97
---------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income .......................................... $ 68,364 $ 79,333
Net realized gain on investments -- 8,652
Net change in unrealized appreciation of investments ........... 11,568 60,495
----------- -----------
Net increase in net assets from operations ..................... 79,932 148,480
----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income .............................................. (59,039) (67,835)
----------- -----------
CAPITAL STOCK TRANSACTIONS -- (NET) Note (C) ..................... 24,264,126 32,851,510
----------- -----------
Total increase in net assets ................................... 24,285,019 32,932,155
NET ASSETS:
Beginning of period ............................................ -- --
----------- -----------
End of period .................................................. $24,285,019 $32,932,155
=========== ===========
<FN>
*Commencement of operations.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS
================================================================================
The tables below set forth financial data for a share of capital stock
outstanding throughout each year presented.
<TABLE>
<CAPTION>
IAA TRUST
GROWTH FUND, INC.
YEARS ENDED JUNE 30,
--------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year .................................. $ 18.88 $ 17.23 $ 15.16 $ 17.55 $ 17.23
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ............................................. 0.15 0.23 0.22 0.27 0.25
Net gains or losses on securities (both realized and unrealized) .. 4.81 3.23 3.45 (0.63) 1.67
------- ------- ------- ------- -------
Total from investment operations ................................ 4.96 3.46 3.67 (0.36) 1.92
------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net investment income .............................. (0.20) (0.25) (0.17) (0.22) (0.29)
Distributions from capital gains .................................. (1.13) (1.56) (1.43) (1.81) (1.31)
------- ------- ------- ------- -------
Total distributions ............................................. (1.33) (1.81) (1.60) (2.03) (1.60)
------- ------- ------- ------- -------
Net asset value, end of year ........................................ $ 22.51 $ 18.88 $ 17.23 $ 15.16 $ 17.55
======= ======= ======= ======= =======
TOTAL RETURN ........................................................ 28.54% 21.51% 26.68% (2.42)% 11.71%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in 000's) ................................ $140,786 $84,800 $70,577 $59,448 $70,785
Ratio of expenses to average net assets ........................... 1.16% 1.12% 1.14% 1.24% 1.18%
Ratio of net investment income to average net assets .............. 0.84% 1.30% 1.41% 1.03% 1.36%
Portfolio turnover ................................................ 30.74% 32.95% 31.84% 49.12% 55.36%
Average Commission Rate Paid* ..................................... $0.0595 $0.0645 N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
IAA TRUST
ASSET ALLOCATION FUND, INC.
YEARS ENDED JUNE 30,
--------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year .................................. $ 13.39 $ 12.29 $ 11.08 $ 11.60 $ 11.20
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ............................................. 0.35 0.37 0.36 0.34 0.57
Net gains or losses on securities (both realized and unrealized) .. 2.11 1.41 1.38 (0.25) 0.47
------- ------- ------- ------- -------
Total from investment operations ................................ 2.46 1.78 1.74 0.09 1.04
------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net investment income .............................. (0.34) (0.37) (0.34) (0.34) (0.57)
Distributions from capital gains .................................. (0.87) (0.31) (0.18) (0.27) (0.07)
Distributions from return of capital .............................. -- -- (0.01) -- --
------- ------- ------- ------- -------
Total distributions ............................................. (1.21) (0.68) (0.53) (0.61) (0.64)
------- ------- ------- ------- -------
Net asset value, end of year ........................................ $ 14.64 $ 13.39 $ 12.29 $ 11.08 $ 11.60
======= ======= ======= ======= =======
TOTAL RETURN ........................................................ 19.95% 14.74% 16.29% 0.71% 9.58%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in 000's) ................................ $14,272 $10,083 $ 9,540 $ 8,653 $ 6,663
Ratio of expenses to average net assets ........................... 1.46% 1.44% 1.46% 1.78% 1.71%
Ratio of net investment income to average net assets .............. 2.57% 2.81% 3.18% 2.98% 4.97%
Portfolio turnover ................................................ 19.25% 33.77% 21.03% 17.39% 36.70%
Average Commission Rate Paid* ..................................... $0.0732 $0.0861 N/A N/A N/A
<FN>
* Computed by dividing the total amount of commission paid by the total number
of shares purchased and sold during the period. The disclosure is required by
the SEC beginning in 1996.
</FN>
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
================================================================================
The tables below set forth financial data for a share of capital stock
outstanding throughout each year presented.
<TABLE>
<CAPTION>
IAA TRUST
TAX EXEMPT BOND FUND, INC.
YEARS ENDED JUNE 30,
--------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ................................ $ 8.41 $ 8.36 $ 8.19 $ 9.11 $ 8.78
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ........................................... 0.36 0.37 0.39 0.39 0.46
Net gains or losses on securities (both realized and unrealized) 0.31 0.07 0.20 (0.54) 0.33
------- ------- ------- ------- -------
Total from investment operations .............................. 0.67 0.44 0.59 (0.15) 0.79
------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net investment income ............................ (0.36) (0.37) (0.39) (0.39) (0.46)
Distributions from capital gains ................................ (0.02) (0.02) (0.03) (0.38) 0.00
------- ------- ------- ------- -------
Total distributions ........................................... (0.38) (0.39) (0.42) (0.77) (0.46)
------- ------- ------- ------- -------
Net asset value, end of year ...................................... $8.70 $8.41 $8.36 $8.19 $9.11
======= ======= ======= ======= =======
TOTAL RETURN ...................................................... 8.15% 5.30% 7.51% (1.86)% 9.19%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in 000's) .............................. $18,008 $17,744 $18,833 $19,095 $20,026
Ratio of expenses to average net assets ......................... 1.14% 1.08% 1.06% 1.15% 1.03%
Ratio of net investment income to average net assets ............ 4.23% 4.30% 4.79% 4.47% 5.11%
Portfolio turnover .............................................. 11.35% 14.75% 24.89% 41.94% 39.60%
</TABLE>
<TABLE>
<CAPTION>
IAA TRUST
TAXABLE FIXED INCOME
SERIES FUND, INC.
MONEY MARKET SERIES
YEARS ENDED JUNE 30,
--------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ................................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ........................................... 0.05 0.05 0.05 0.03 0.02
------- ------- ------- ------- -------
Total from investment operations .............................. 0.05 0.05 0.05 0.03 0.02
------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net investment income ............................ (0.05) (0.05) (0.05) (0.03) (0.02)
------- ------- ------- ------- -------
Total distributions ........................................... (0.05) (0.05) (0.05) (0.03) (0.02)
------- ------- ------- ------- -------
Net asset value, end of year ...................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
TOTAL RETURN ...................................................... 4.63% 4.82% 4.85% 2.86% 2.41%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in 000's) .............................. $60,674 $33,664 $36,415 $38,699 $33,302
Ratio of expenses to average net assets(DAGGER) ................. 0.94% 0.90% 0.73% 0.56% 0.58%
Ratio of net investment income to average net assets ............ 4.55% 4.74% 4.80% 2.83% 2.67%
<FN>
(DAGGER) After voluntary waiver of advisory fees. Before voluntary waiver of
advisory fees, the ratio of expenses to average net assets was .97%, 1.06% and
1.02% for the years ended June 30, 1995, June 30, 1994 and June 30, 1993,
respectively.
</FN>
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
================================================================================
The tables below set forth financial data for a share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
IAA TRUST TAXABLE FIXED INCOME
SERIES FUND, INC.
-------------------------------------------
SHORT-TERM GOVERMENT LONG-TERM
BOND SERIES BOND SERIES
-------------------- ----------------
FOR THE PERIOD FOR THE PERIOD
01/02/97* 01/02/97*
THROUGH 06/30/97 THROUGH 06/30/97
-------------------- ----------------
<S> <C> <C>
Net asset value, beginning of period ................................ $ 10.00 $ 10.00
------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ............................................. 0.20 0.20
Net gains on securities (both realized and unrealized) ............ 0.01 0.04
------- -------
Total from investment operations ................................ 0.21 0.24
------- -------
LESS DISTRIBUTIONS
Dividends from net investment income .............................. (0.20) (0.20)
------- -------
Total distributions ............................................. (0.20) (0.20)
------- -------
Net asset value, end of period ...................................... $ 10.01 $ 10.04
======= =======
TOTAL RETURN ........................................................ 2.10% 2.44%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) .............................. $24,285 $32,932
Ratio of expenses to average net assets(DAGGER) ................... 0.76%** 0.78%**
Ratio of net investment income to average net assets(DAGGER) ...... 4.90%** 5.15%**
Portfolio turnover ................................................ 0.00% 41.77%
<FN>
* Commencement of operations.
** Annualized.
(DAGGER) After expense reimbursements and voluntary waivers. Before voluntary
waiver and reimbursement of expenses, the ratio of expenses to average net
assets was 3.88% and 3.82% for Short-Term Government Bond Series and Long-Term
Bond Series, respectively. The ratio of net investment income to average net
assets would have been 1.78% and 2.11% for Short-Term Government Bond Series
and Long-Term Bond Series, respectively.
</FN>
</TABLE>
<PAGE>
IAA TRUST MUTUAL FUNDS -- NOTES TO FINANCIAL STATEMENTS JUNE 30, 1997
================================================================================
NOTE (A) SIGNIFICANT ACCOUNTING POLICIES: The IAA Trust Mutual Funds represent
four separate funds, with one Fund containing three separate Series (referred to
herein as "Funds" or "Series"). Each of the Funds and Series has distinct
investment objectives and policies. The four Funds are as follows: IAA Trust
Growth Fund, Inc. ("Growth Fund"); IAA Trust Asset Allocation Fund, Inc. ("Asset
Allocation Fund"); IAA Trust Tax Exempt Bond Fund, Inc. ("Tax Exempt Bond
Fund"); and IAA Trust Taxable Fixed Income Series Fund, Inc. ("Taxable Fixed
Income Series Fund"), formerly known as IAA Trust Money Market Fund, Inc. The
Taxable Fixed Income Series Fund currently consists of the following three
separate investment Series: IAA Trust Money Market Series ("Money Market
Series"); IAA Trust Short-Term Government Bond Series ("Short-Term Government
Bond Series"); and IAA Trust Long-Term Bond Series ("Long-Term Bond Series").
The Short-Term Government Bond Series and the Long-Term Bond Series commenced
operations on January 2, 1997. The Funds are separately incorporated and
registered companies under the Investment Company Act of 1940 (the "Act"), as
amended, as diversified, open-ended management companies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies consistently followed
by each of the Funds in the preparation of its financial statements.
(1) SECURITY VALUATION: For the Growth Fund, the Asset Allocation Fund, the
Tax Exempt Bond Fund, the Short-Term Government Bond Series and the
Long-Term Bond Series, securities traded on national exchanges and
over-the-counter securities listed in the NASDAQ National Market System are
valued at the last reported sales price at the close of the New York Stock
Exchange. Securities for which there have been no sales on such day are
valued at the last reported bid price on such exchange. Over-the-counter
securities not listed on the NASDAQ National Market System are valued at
the mean of the current bid and asked prices. Fixed-income securities
except short-term securities may be valued on the basis of prices provided
by a pricing service when such prices are believed by the Advisor to
reflect the fair market value of such securities. Short-term investments,
such as those with a remaining maturity of 60 days or less, are valued at
amortized cost, which approximates market value. For the Money Market
Series, all securities are valued at amortized cost, which approximates
market value. Under the amortized cost method, discounts and premiums are
accreted and amortized ratably to maturity and are included in interest
income.
(2) INVESTMENT INCOME AND SECURITIES TRANSACTIONS: Dividend income is
recorded on the ex-dividend date. Interest income is accrued daily.
Securities transactions are accounted for on the trade date basis. Gains or
losses on the sale of securities are determined by use of the specific
identification method for both financial reporting and income tax purposes.
(3) FEDERAL INCOME TAXES: The Funds have elected to be treated as
"regulated investment companies" under Sub-chapter M of the Internal
Revenue Code and to distribute substantially all of their net taxable
income annually. Accordingly, no provisions for Federal income taxes have
been made in the accompanying financial statements.
(4) DIVIDENDS AND DISTRIBUTIONS: Dividends and distributions to
shareholders are recorded on the ex-dividend date. Income distributions and
capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
NOTE (B) DIVIDENDS FROM NET INVESTMENT INCOME AND DISTRIBUTIONS OF CAPITAL
GAINS: In the Growth Fund, net investment income from investment transactions
are distributed to shareholders twice a year. The Asset Allocation Fund, the Tax
Exempt Bond Fund, the Short-Term Government Bond Series and the Long-Term Bond
Series, distribute net investment income to shareholders monthly. The Money
Market Series declares dividends daily from its net investment income, which are
payable monthly. Dividends are automatically reinvested in additional Fund
shares, at the then current net asset value, for those shareholders that have
elected the reinvestment option. Net realized gains from investment
transactions, if any, of all Funds are generally distributed twice a year at the
end of the Funds' fiscal and calendar year.
NOTE (C) CAPITAL STOCK: At June 30, 1997, 10,000,000 shares of capital stock
were authorized for each of the Growth Fund, Asset Allocation Fund, and Tax
Exempt Bond Fund, each Fund having a par value of $1.00 per share. The
authorized capitalization of the Taxable Fixed Income Series Fund consists of
250,000,000 shares with the par value of $0.10 per share. 100,000,000 of this
Fund's shares are designated as Money Market Series, 50,000,000 of its shares
are designated as Short-Term Government Bond Series, and 25,000,000 of its
shares are designated as Long-Term Bond Series. The remaining 75,000,000 shares
are undesignated.
<PAGE>
IAA TRUST MUTUAL FUNDS -- NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997 (CONTINUED)
================================================================================
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
GROWTH FUND ASSET ALLOCATION FUND
----------- ---------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1997 JUNE 30, 1996
----------------------- ---------------------- ------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ----------- -------- ----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold ............... 1,905,852 $40,718,271 367,621 $ 6,620,827 274,886 $3,715,120 174,733 $ 2,278,506
Shares issued through
reinvestment of dividends 331,143 5,730,849 416,875 7,132,281 60,513 776,909 27,062 350,628
--------- ----------- -------- ----------- ---------- ----------- ---------- -----------
2,236,995 46,449,120 784,496 13,753,108 335,399 4,492,029 201,795 2,629,134
-------- ----------- -------- ----------- ---------- ----------- ---------- -----------
Shares redeemed ........... (474,420) (9,325,850) (388,989) (6,960,870) (113,903) (1,528,495) (224,935) (2,957,438)
--------- ----------- -------- ----------- ---------- ----------- ---------- -----------
Net increase (decrease) ... 1,762,575 $37,123,270 395,507 $ 6,792,238 221,49 $2,963,534 (23,140) $ (328,304)
========= =========== ======== =========== ========== =========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
TAXABLE FIXED INCOME SERIES FUND
--------------------------------
TAX EXEMPT BOND FUND MONEY MARKET SERIES
-------------------- -------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1997 JUNE 30, 1996
---------------------- ---------------------- ------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
-------- ----------- -------- ----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold ................ 275,666 $ 2,369,946 63,839 $ 550,009 74,925,622 $74,925,622 51,403,909 $51,403,909
Shares issued through
reinvestment of dividends 61,144 522,920 64,497 549,480 1,751,343 1,751,343 1,795,132 1,795,132
-------- ----------- -------- ----------- ---------- ----------- ---------- -----------
336,810 2,892,866 128,336 1,099,489 76,676,965 76,676,965 53,199,041 53,199,041
-------- ----------- -------- ----------- ---------- ----------- ---------- -----------
Shares redeemed ............ (377,076) (3,238,819) (271,157) (2,309,217) (49,667,417) (49,667,417) (55,950,429) (55,950,429)
-------- ----------- -------- ----------- ---------- ----------- ---------- -----------
Net increase (decrease) .... (40,266) $ (345,953) (142,821) $(1,209,728) 27,009,548 $27,009,548 (2,751,388) $(2,751,388)
======== =========== ======== =========== ========== =========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
TAXABLE FIXED INCOME SERIES FUND TAXABLE FIXED INCOME SERIES FUND
--------------------------------- --------------------------------
SHORT-TERM GOVERNMENT BOND SERIES LONG-TERM BOND SERIES
--------------------------------- --------------------------
PERIOD 1/2/97* PERIOD 1/2/97*
THROUGH 6/30/97 THROUGH 6/30/97
------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Shares sold ............................. 2,427,250 $24,274,746 3,317,112 $33,219,414
Shares issued through
reinvestment of dividends ............. 3,918 39,239 4,765 47,835
--------- ----------- --------- -----------
2,431,168 24,313,985 3,321,877 33,267,249
--------- ----------- --------- -----------
Shares redeemed ......................... (4,974) (49,859) (41,946) (415,739)
--------- ----------- --------- -----------
Net increase ............................ 2,426,194 $24,264,126 3,279,931 $32,851,510
========= =========== ========= ===========
<FN>
* Commencement of operations.
</FN>
</TABLE>
NOTE (D) INVESTMENT TRANSACTIONS: Purchases and sales of investment securities,
other than U.S. Government obligations and short-term notes for the year ended
June 30, 1997 were:
PURCHASES SALES
----------- -----------
Growth Fund .............................. $37,493,320 $25,597,917
Asset Allocation Fund .................... $ 3,253,623 $ 2,103,425
Tax Exempt Bond Fund ..................... $ 1,963,415 $ 2,018,141
Short-Term Gov't. Bond Series ............ $ 0 $ 0
Long-Term Bond Series .................... $ 2,812,852 $ 0
For the year ended June 30 1997, the aggregate cost of purchases and proceeds
from sales of U.S. Government Securities were:
Asset Allocation Fund .................... $ 1,045,129 $ 0
Short-Term Gov't. Bond Series ............ $12,234,087 $ 0
Long-Term Bond Series .................... $ 8,395,353 $ 944,154
<PAGE>
IAA TRUST MUTUAL FUNDS -- NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997 (CONTINUED)
================================================================================
For both Federal income tax and financial statement purposes, the cost of
investments at June 30, 1997 was $85,319,004 for the Growth Fund, $11,163,675
for the Asset Allocation Fund, $17,194,209 for the Tax Exempt Bond Fund,
$60,580,315 for the Money Market Series, $13,813,055 for the Short-Term
Government Bond Series, and $13,828,309 for the Long-Term Bond Series.
The gross unrealized appreciation/depreciation for book and tax purposes at
June 30, 1997 consisted of the following:
APPRECIATION DEPRECIATION
------------ ------------
Growth Fund ..................................... $40,815,157 $ 177,101
Asset Allocation Fund ........................... $ 3,049,364 $ 74,654
Tax Exempt Bond Fund ............................ $ 580,784 $ 21,525
Short-Term Government Bond Series ............... $ 20,084 $ 8,516
Long-Term Bond Series ........................... $ 66,578 $ 6,083
NOTE (E) ADVISORY AND OTHER RELATED PARTY TRANSACTIONS: Under its Advisory
Agreements with the Funds, IAA Trust Company (the "Advisor") provides investment
advisory services for the Funds. The Funds pay the Advisor at the following
annual percentage rates of the average daily net assets of each Fund: Growth
Fund 0.75%; Asset Allocation Fund 0.75%; Tax Exempt Bond Fund 0.50%; Money
Market Series 0.50%; Short-Term Government Bond Series 0.50%; and Long-Term Bond
Series 0.75%. These fees are accrued daily and paid to the Advisor monthly. IAA
Trust Company serves as the Funds' Custodian, without compensation after
voluntary waivers.
For the period January 2, 1997 (commencement of operations) through June 30,
1997, the Advisor voluntarily agreed to reduce its fees and reimburse the
Short-Term Government Bond Series and the Long-Term Bond Series to the extent
total annualized expenses exceeded 1.32% and 1.57% of the Funds' average daily
net assets. Effective July 1, 1997 the Advisor has agreed to continue to reduce
its fees and reimburse the Funds to the extent total annualized expenses exceed
0.98%. Investment advisory fees, for the year ended June 30, 1997, are as
follows:
EXPENSES WAIVED
ADVISORY ADVISORY AND REIMBURSED
FEE FEE BY ADVISER
------------ -------- --------------
Short-Term Government Bond Series ... 0.50% $ 6,982 $32,422
Long-Term Bond Series ............... 0.75% $11,550 $35,805
FPS Services, Inc., the Funds administrator waived fees of $11,062 for the
period ending June 30, 1997 for the Short-Term Government Bond Series and the
Long-Term Bond Series. These waivers expired June 30, 1997.
The legal counsel to the Fund also serves as in-house counsel to the Advisor and
as secretary to the Fund. Fees paid by the Growth Fund, Asset Allocation Fund,
Tax Exempt Bond Fund, Money Market Series, Short-Term Government Bond Series and
Long-Term Bond Series during the year or period ended June 30, 1997 were $2,000,
$2,132, $2,188, $5,836, $3,630 and $3,836, respectively.
NOTE (F) DISTRIBUTION SERVICES AGREEMENTS: FPS Broker Services, Inc. serves as
the Funds' Distributor. Pursuant to Rule 12b-1 adopted by the Securities and
Exchange Commission under the Act, the Growth Fund, the Asset Allocation Fund,
and the Tax Exempt Bond Fund have each adopted a Plan of Distribution (the
"Plans"), effective April 1, 1993. The Short-Term Government Bond Series and the
Long-Term Bond Series have each adapted a plan of distribution effective October
1, 1996. The Plans permit the participating Funds to pay certain expenses
associated with the distribution of their shares. The maximum annual contractual
fee under the Plans, is 0.25% of the average daily net assets of each Fund or
Series. For the year ended June 30, 1997, the Rule 12b-1 Plan expenses incurred
for the Growth Fund, the Asset Allocation Fund and the Tax Exempt Bond Fund,
were 0.06%, 0.11% and 0.13%, respectively.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
================================================================================
To the Shareholders and Boards of Directors of
IAA Trust Company Mutual Funds
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments of IAA Trust Company Mutual Funds (the
"Fund") (comprising, respectively, the IAA Trust Growth Fund, Inc., the IAA
Trust Asset Allocation Fund, Inc., the IAA Trust Tax Exempt Bond Fund, Inc. and
the IAA Trust Taxable Fixed Income Series Fund, Inc. which includes the IAA
Trust Money Market Series (formerly known as the IAA Trust Money Market Fund,
Inc.), the IAA Trust Short-Term Government Bond Series and the IAA Trust
Long-Term Bond Series) as of June 30, 1997, and the related statements of
operations for the year (or period) then ended, the statements of changes in net
assets for each of the two years (or periods) in the period then ended, and the
financial highlights for each of the periods presented. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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. Our procedures included confirmation of securities owned as of June
30, 1997, by correspondence with the custodians and brokers. 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 referred
to above present fairly, in all material respects, the financial position of
each of the aforementioned portfolios comprising the IAA Trust Company Mutual
Funds as of June 30, 1997, the results of their operations for the year (or
period) then ended, the changes in their net assets for each of the two years
(or periods) in the period then ended, and the financial highlights for each of
the periods presented, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
August 12, 1997
<PAGE>
IAA TRUST MUTUAL FUNDS
IAA Trust Growth Fund, Inc.
IAA Trust Asset Allocation Fund, Inc.
IAA Trust Tax Exempt Bond Fund, Inc.
IAA Trust Taxable Fixed Income Series Fund, Inc.
Money Market Series
Short-Term Government Bond Series
Long-Term Bond Series
BOARD OF DIRECTORS
Ronald R. Warfield
Herbert G. Allen
Charlot R. Cole
Nancy J. Erickson
William E. Klein, Sr.
Ailene Miller
Rollie D. Moore
OFFICERS
Ronald R. Warfield, President
Bruce D. Finks, Vice President
Gary E. Mede, Vice President
Richard M. Miller, Vice President
Rollie D. Moore, Vice President
Paul M. Harmon, Secretary
Robert W. Weldon, Treasurer
Richard F. Day, Controller
INVESTMENT ADVISOR
IAA Trust Company
Bloomington, Illinois
DISTRIBUTOR
FPS Broker Services, Inc.
King of Prussia, Pennsylvania
TRANSFER AGENT
FPS Services, Inc.
King of Prussia, Pennsylvania
CUSTODIAN
IAA Trust Company
Bloomington, Illinois
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
Philadelphia, Pennsylvania
GENERAL COUNSEL
Paul M. Harmon, Esq.
Office of the General Counsel
Bloomington, Illinois
This Report has been prepared for the general information of shareholders of the
Funds and is not authorized for distribution to prospective investors unless
preceded or accompanied by an effective Prospectus which contains details
concerning the sales charge and other pertinent information.
F30-113-08 (8/97)
