<PAGE> 1
PRESIDENT'S LETTER
January 26, 1998
DEAR SHAREHOLDER:
Nineteen hundred ninety-seven brought an unprecedented third consecutive
year of high returns for the stock market. According to Lipper Analytical
Services, Inc, the average diversified U.S. stock fund returned 24.36% for
calendar year 1997, bringing the cumulative return for the past three years to
95.3%. Investors in the average stock fund since the beginning of 1995 have
nearly doubled their money in three years. The Salomon Brothers Broad Index of
bond returns gained 9.64% as long-term interest rates declined during most of
the year. Short-term interest rates, however, changed little.
The inflation rate continued to decline during the year, helping the bond
markets attain better-than-average returns. Corporate earnings, although slowing
from the torrid pace of 1996, continued to show decent gains, while commodity
prices continued to decline. A major concern during the year was wage increases,
which seemed to rise at an alarming pace. However, much of these wage gains
appeared to be offset by higher productivity. Although the Federal Reserve
raised interest rates once in March, the above factors made it unnecessary to do
anything else.
New issues have arisen which bring the continuation of the upward trend of
equity prices into question. The currency crisis in Asia has developed into a
general economic malaise for that entire region. The stock markets in this
region of the world declined anywhere from 17% (Japan) to 56% (Thailand). For a
U.S. investor, the returns were worse because of the huge decline in these
countries' currencies versus the U.S. dollar.
The International Monetary Fund (IMF) is attempting to stem the decline of
the Asian economies and currencies. There is much debate as to whether the
austerity measures contained in the IMF plans will help or hurt the region or
whether Asian problems may affect America. There is good news in that the
Federal Reserve seems precluded from raising interest rates because such a move
would exacerbate the currency problems of Asia, which in turn might worsen their
economic problems and force the need for larger IMF loans. Bonds should continue
to perform well in this low inflation environment. On the other hand, the
slowdown that the Asian economies are experiencing may be headed our way.
Slowing sales growth and an inability to raise prices as Asian countries
liquidate excess inventories may result in lower corporate profits.
After three highly profitable years, we believe common stock returns may be
lackluster in 1998. Bonds, however, continue to be attractive as disinflation
caused by the problems in Asia should help keep interest rates near current low
levels.
IAA TRUST GROWTH FUND, INC.
The annualized total returns for the Fund for the period ended December 31,
1997, are as follows:
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
- ------- -------- --------
<S> <C> <C>
19.71% 15.34% 13.88%
</TABLE>
These returns assume all dividends and capital gains distributions were
reinvested.
During the past year, the stock market had an uncommon degree of volatility.
Indeed, on consecutive days in October we experienced the largest one-day
decline and largest one-day rise in the history of the stock market.
Nevertheless, common stocks had an excellent year, with the Dow Jones Industrial
Average up 25%, the S&P 500 rising 33%, and the NASDAQ, 22%.
Buoyed by a strong market environment, the IAA Trust Growth Fund had its
third consecutive year of high returns. We suffered two setbacks during the year
that kept the Fund from even better performance. First, the Fund received a
large influx of new funds during June and July. We did not invest this money
quickly, which resulted in foregone returns. We do not expect this situation to
recur. Second, technology stock prices fell due to reduced earnings
expectations, in part due to economic problems in Asia. We have lowered the
Fund's technology weighting.
During the year, uncertainties in the economies and financial systems of
various Asian countries escalated and spread. Many U.S. multinationals doing
business in Asia as well as purely domestic companies competing with Asian
imports have suffered earnings declines, and will probably continue to do so. We
are positioning the portfolio to minimize the Fund's exposure to this situation.
Further, we are adding positions in companies that are neither heavily reliant
on Asian demand nor heavily exposed to Asian imports.
In 1997, the IAA Trust Growth Fund had a return of 19.71% following returns
of 31.1% and 22.0% in 1995 and 1996 respectively. We will continue to follow a
strategy of investing in companies with above-average earnings growth.
<PAGE> 2
IAA TRUST ASSET ALLOCATION FUND, INC.
The annualized total returns for the Fund for the period ended December 31,
1997, are as follows:
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
- ------- -------- --------
<S> <C> <C>
17.94% 12.50% 11.01%
</TABLE>
These returns assume all dividends and capital gains distributions were
reinvested.
The lAA Trust Asset Allocation Fund benefited from the bull market in both
stocks and bonds during 1997. The Fund's return of 17.94% compared with a return
of 18.69% for the average flexible fund. The difference was attributable largely
to our lower weighting in equity securities.
Toward the end of the year, common stocks with international operations were
negatively affected by economic problems in Asia, which lowered earnings
expectations. Numerous stocks declined near year-end, most notably in the
technology sector. We have, therefore, lowered our technology weighting and are
tilting the portfolio toward companies with income earned primarily from U.S.
operations.
Bond returns were buoyed by an overweighting in U.S. Government and agency
bonds, two sectors that benefited most from the declining interest rate
environment.
The allocation of the Fund at year-end was 52% stocks, 40% bonds, and 8%
cash equivalents.
IAA TRUST TAX EXEMPT BOND FUND, INC.
The annualized total returns for the Fund for the period ended December 31,
1997, are as follows:
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
- ------- -------- --------
<S> <C> <C>
8.98% 5.85% 7.19%
</TABLE>
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 most of the
year, enabling the portfolio to benefit from 1997's general interest rate
decline. In comparison to the Fund's one-year total return of 8.98%, the Lehman
Brothers Municipal Bond Index, which does not reflect investments in cash, the
impact of any servicing, investment management, or administrative expenses, had
a total return of 9.19%.
Municipal bonds continue to be a safe haven, not only for their inherent tax
advantage, but also because their taxable equivalency exceeds other taxable
fixed income investments. Additionally, as a result of the recent turmoil in the
Asian markets, U.S. Treasuries are experiencing a rapid increase in price
(decrease in interest rates). Municipal yields have not declined at the same
rate, causing municipal yields to be "cheap" relative to U.S. Treasuries. The
30-year ratio ended the year at 85%, approximately three percentage points
higher than where it was at the beginning of the year.
IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.
MONEY MARKET SERIES
Over the past year, the IAA Trust Taxable Fixed Income Fund -- Money Market
Series' 7-day average yield increased from 4.52% to 5.00%. The increase in yield
was due in part to the Federal Reserve's March decision to increase short-term
interest rates in order to prevent upward pressure on inflation. While
short-term interest rates remained flat most of the year, the year ended with
corporations selling short-term securities to improve their balance sheets and
foreign central banks selling short-term U.S. Treasuries to defend their
currencies against the rising dollar. Although these activities caused
short-term interest rates to increase at year-end, slower global growth
prospects could cause interest rates to decline.
<PAGE> 3
SHORT-TERM GOVERNMENT BOND SERIES
The annualized total returns for the Fund for the period ended December 31,
1997, are as follows:
<TABLE>
<CAPTION>
1 YEAR
-------
<S> <C> <C>
5.70%
</TABLE>
These returns assume all dividends and capital gains distributions were
reinvested.
Short-term rates did not decline as much as long rates in 1997, but returns
were still quite satisfactory. On its first anniversary, the Fund had a 5.70%
return for 1997, which compares to the Merrill Lynch Short Treasury Index return
of 6.66%. The Fund has an average life of approximately three years and is
heavily weighted in U.S. Government and agency securities. The Fund is
positioned to perform well in 1998 if the Federal Reserve lowers short rates due
to a slowing economy and the Asian crisis.
LONG-TERM BOND SERIES
The annualized total returns for the Fund for the period ended December 31,
1997, are as follows:
<TABLE>
<CAPTION>
1 YEAR
-------
<S> <C> <C>
8.62%
</TABLE>
These returns assume all dividends and capital gains distributions were
reinvested.
Falling inflation and declining interest rates marked 1997, which proved
rewarding for bond investors. It was an opportune time to start a new bond fund.
For its first year, the IAA Trust Long Term Fund had a total return of 8.62%,
which compares to the Merrill Lynch Domestic Bond Index return of 9.65%. The
Fund currently has an average maturity of 14 years and is well diversified in
high-grade debt instruments. We are overweighted in Treasury securities because
they tend to outperform in a declining interest rate environment.
Sincerely,
[Ronald Warfield Photo]
[Ronald Warfield Signature]
Ronald R. Warfield
President
<PAGE> 4
IAA TRUST MUTUAL FUNDS -- PORTFOLIO HIGHLIGHTS (UNAUDITED)
IAA TRUST GROWTH FUND, INC.
PORTFOLIO CHANGES For the Six Months Ended December 31, 1997
<TABLE>
<CAPTION>
MAJOR PURCHASES MAJOR SALES
<S> <C>
YPF Sociedad Anonima, ADS (1) Travelers, Inc. (2)
Intimate Brands, Inc. (1) York International, Inc. (2)
Philips Electronics N.V. (1) AT & T Corp. (2)
Bank of New York (1) Cisco Systems, Inc.
Baker Hughes, Inc. (1) Citicorp
Xilinx, Inc. (1) Adaptec, Inc.
Aetna, Inc. (1) Sun Microsystems, Inc.
Norwest Corp. Motorola, Inc.
(1) New Holdings (2) Deletions
</TABLE>
TEN LARGEST HOLDINGS December 31, 1997
<TABLE>
<CAPTION>
PERCENT
VALUE OF FUND
----------- -------
<S> <C> <C>
General Electric Co.................................................................. $ 4,446,525 3.05%
Norwest Corp......................................................................... 4,109,700 2.82
Intel Corp........................................................................... 3,905,900 2.68
Federal National Mortgage Association................................................ 3,652,000 2.50
Sun Microsystems, Inc................................................................ 3,620,650 2.48
Elan Corp., PLC, ADS................................................................. 3,547,294 2.43
Warnaco Group, Inc., Cl. A........................................................... 3,106,125 2.13
GTE Corp............................................................................. 2,988,700 2.05
Citicorp............................................................................. 2,971,281 2.04
Merck & Co., Inc..................................................................... 2,868,750 1.97
----------- -----
$35,216,925 24.15%
=========== =====
</TABLE>
IAA TRUST ASSET ALLOCATION FUND, INC.
PORTFOLIO CHANGES For the Six Months Ended December 31, 1997
<TABLE>
<CAPTION>
MAJOR PURCHASES MAJOR SALES
<S> <C>
Intimate Brands, Inc. (1) Ultratech Stepper, Inc. (2)
Green Tree Financial Corp., 6.870%, 01/15/29 (1) Concentra Managed Care Corp. (2)
United States Treasury Notes, 5.625%, 02/15/06 (1) (formerly known as OccuSystems, Inc.)
Xilinx Corp. (1) Cisco Systems, Inc.
Tektronix, Inc. Williams Cos., Inc.
Trico Marine Services, Inc. (1) Walgreen Co. (2)
Diamond Offshore Drilling, Inc. (1) Oracle Corp.
Federal National Mortgage Association (1)
(1) New Holdings (2) Deletions
</TABLE>
TEN LARGEST HOLDINGS December 31, 1997
<TABLE>
<CAPTION>
PERCENT
VALUE OF FUND
---------- -------
<S> <C> <C>
Tennessee Valley Authority, 5.980%, 04/01/36......................................... $ 500,625 3.27%
United States Treasury Notes, 6.500%, 05/15/05....................................... 364,917 2.38
Norwest Corp......................................................................... 262,650 1.72
Elan Corp., PLC, ADS................................................................. 255,937 1.67
Bell Telephone Co. of Pa., Putable Debentures, 8.350%, 12/15/30...................... 247,750 1.62
United States Treasury Notes, 7.250%, 05/15/04....................................... 215,902 1.41
Norfolk Southern Corp., 7.050%, 05/01/37............................................. 212,250 1.39
United States Treasury Notes, 6.500%, 10/15/06....................................... 209,508 1.37
Federal Home Loan Mortgage Corp., 6.500%, 06/15/06................................... 202,353 1.32
BellSouth Capital Funding Corp., 6.040%, 11/15/26.................................... 202,250 1.32
---------- -----
$2,674,142 17.47%
========== =====
</TABLE>
<PAGE> 5
IAA TRUST MUTUAL FUNDS -- PORTFOLIO HIGHLIGHTS (UNAUDITED)
IAA TRUST TAX EXEMPT BOND FUND, INC.
PORTFOLIO CHANGES For the Six Months Ended December 31, 1997
<TABLE>
<CAPTION>
MAJOR PURCHASES MAJOR SALES
<S> <C>
None Port St. Lucie, Florida Utility System
Revenue, 5.900%, 09/01/09 (2)
(2) Deletion
</TABLE>
TEN LARGEST HOLDINGS December 31, 1997
<TABLE>
<CAPTION>
PERCENT
VALUE OF FUND
---------- -------
<S> <C> <C>
Wisconsin State Clean Water Revenue, 5.300%, 06/01/12................................. $ 715,533 3.97%
Texas A&M University Revenue Fin. System, 5.375%, 05/15/14............................ 618,762 3.43
Pennsylvania State Higher Education Revenue, 5.600%, 09/01/10......................... 611,260 3.39
Peru, Indiana Community School Corp., 6.750%, 01/01/09................................ 610,341 3.39
Cape Girardeau, Missouri Waterworks System, 7.450%, 03/01/05.......................... 595,805 3.31
Chicago, Illinois Water Revenue, 6.500%, 11/01/15..................................... 593,700 3.30
State of Rhode Island Ref. General Obligation, 7.000%, 06/15/05....................... 584,660 3.25
Connecticut State Unlimited Tax General Obligation, 5.400%, 03/15/08.................. 584,611 3.25
Maricopa County, School Dist. Arizona Unlimited, 6.400%, 07/01/06..................... 574,870 3.19
Illinois State Sales Tax Revenue, 5.400%, 06/15/13.................................... 571,065 3.17
---------- -----
$6,060,607 33.65%
========== =====
</TABLE>
IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.
MONEY MARKET SERIES
TEN LARGEST HOLDINGS December 31, 1997
<TABLE>
<CAPTION>
PERCENT
VALUE OF FUND
----------- -------
<S> <C> <C>
Bankers Trust New York Corp., 5.56%, 01/13/98........................................ $ 2,804,792 4.17%
AT & T Corp., 5.70%, 02/25/98........................................................ 2,775,617 4.12
American General Finance Corp., 5.81%, 02/17/98...................................... 2,709,000 4.02
American Express Credit Corp., 6.16%, 01/02/98....................................... 2,440,000 3.62
Transamerica Financial Corp., 5.68%, 01/15/98........................................ 1,995,582 2.96
BellSouth Telecommunications, Inc., 5.68%, 02/04/98.................................. 1,989,271 2.96
Daimler-Benz N.A Corp., 5.56%, 03/02/98.............................................. 1,981,467 2.94
Beneficial Corp. 5.81%, 03/18/98..................................................... 1,975,000 2.93
Ford Motor Credit Corp., 5.78%, 02/09/98............................................. 1,841,000 2.73
PHH Corp., 5.53%, 01/22/98........................................................... 1,794,194 2.67
----------- -----
$22,305,923 33.12%
=========== =====
</TABLE>
PORTFOLIO CHARACTERISTICS December 31, 1997
CURRENT YIELD: 5.01%
30 DAY AVERAGE YIELD: 4.94%
7 DAY AVERAGE YIELD: 5.00%
AVERAGE DAYS TO MATURITY: 34.95
<PAGE> 6
IAA TRUST MUTUAL FUNDS -- PORTFOLIO HIGHLIGHTS (UNAUDITED)
IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.
SHORT-TERM GOVERNMENT BOND SERIES
PORTFOLIO CHANGES For the Six Months Ended December 31,1997
<TABLE>
<CAPTION>
MAJOR PURCHASES MAJOR SALES
<S> <C>
Federal National Mortgage Assoc, 6.500%, 08/01/04 None
(1)
Federal Home Loan Mortgage Corp., 6.000%, 02/15/23
(1)
Banc One Auto Grantor Trust, 6.270%, 11/20/03 (1)
Federal Home Loan Bank, 6.477%, 08/26/02 (1)
Federal National Mortgage Assoc., 6.500%, 07/25/23
(1)
Federal National Mortgage Assoc., 8.500%, 06/25/01
(1)
(1) New Holdings
</TABLE>
TEN LARGEST HOLDINGS December 31, 1997
<TABLE>
<CAPTION>
PERCENT
VALUE OF FUND
----------- -------
<S> <C> <C>
United States Treasury Notes, 6.500%, 08/31/01....................................... $ 3,076,050 11.64%
United States Treasury Notes, 6.250%, 05/31/99....................................... 3,024,750 11.45
Federal National Mortgage Assoc., 6.500%, 08/01/04................................... 2,949,957 11.16
United States Treasury Notes, 6.250%, 02/28/02....................................... 2,037,040 7.71
Banc One Auto Grantor Trust, 6.270%, 11/20/03........................................ 1,158,438 4.38
Federal Home Loan Bank, 6.477%, 08/26/02............................................. 1,098,438 4.16
United States Treasury Notes, 6.250%, 06/30/02....................................... 1,020,340 3.86
Federal Home Loan Mortgage Corp., 6.200%, 11/15/16................................... 999,274 3.78
Federal Home Loan Mortgage Corp., 6.000%, 02/15/23................................... 912,063 3.45
Federal National Mortgage Assoc., 8.500%, 06/25/01................................... 853,850 3.23
----------- -----
$17,130,200 64.82%
=========== =====
</TABLE>
IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.
LONG-TERM BOND SERIES
PORTFOLIO CHANGES For the Six Months Ended December 31,1997
<TABLE>
<CAPTION>
MAJOR PURCHASES MAJOR SALES
<S> <C>
United States Treasury Notes, 6.500%, 08/15/05 (1) United States Treasury Notes, 6.000%, 02/15/26
Federal Home Loan Mortgage Corp., 7.000%, 03/01/12 United States Treasury Notes, 6.500%, 08/15/05
(1) United States Treasury Notes, 6.500%, 10/15/06 (2)
Government National Mortgage Assoc., 8.000%,
07/15/26 (1)
United States Treasury Notes, 6.000%, 02/15/26
Government National Mortgage Assoc., 6.500%,
04/15/26 (1)
Federal Home Loan Mortgage Corp., 6.000%, 03/15/09
(1)
Pacific Gas & Electric Co., 6.420%, 09/25/08 (1)
(1) New Holdings (2) Deletions
</TABLE>
TEN LARGEST HOLDINGS December 31, 1997
<TABLE>
<CAPTION>
PERCENT
VALUE OF FUND
----------- -------
<S> <C> <C>
United States Treasury Notes, 6.500%, 08/15/05....................................... $ 4,957,955 13.59%
Federal Home Loan Mortgage Corp., 7.000%, 03/01/12................................... 4,809,298 13.18
Government National Mortgage Assoc., 8.000%, 07/15/26................................ 2,984,021 8.18
United States Treasury Notes, 6.500%, 05/15/05....................................... 2,867,205 7.86
United States Treasury Notes, 6.000%, 02/15/26....................................... 2,746,067 7.53
Government National Mortgage Assoc., 6.500%, 04/15/26................................ 1,441,293 3.95
United States Treasury Notes, 5.625%, 02/15/06....................................... 1,434,557 3.93
Federal Home Loan Mortgage Corp., 6.000%, 03/15/09................................... 1,103,056 3.02
Pacific Gas & Electric Co., 6.420%, 09/25/08......................................... 1,005,000 2.75
J.C. Penney Master Credit Card Trust, 8.950%, 10/15/01............................... 844,449 2.31
----------- -----
$24,192,901 66.30%
=========== =====
</TABLE>
<PAGE> 7
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS December 31, 1997 (unaudited)
- --------------------------------------------------------------------------------
IAA TRUST GROWTH FUND, INC.
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
COMMON STOCKS -- 90.53%
BASIC INDUSTRY -- 4.32%
British Steel PLC, ADS............... 30,000 $ 643,125
Engelhard Corp....................... 80,000 1,390,000
IMC Global, Inc...................... 57,500 1,883,125
Monsanto Co.......................... 10,000 420,000
Nucor Corp........................... 22,500 1,087,031
Weyerhaeuser Co...................... 18,000 883,125
-----------
6,306,406
-----------
CAPITAL GOODS -- 8.64%
AGCO Corp............................ 69,600 2,035,800
Case Corp............................ 13,050 788,709
Channell Commercial Corp.*........... 50,000 625,000
Deere & Co........................... 30,700 1,790,194
General Electric Co.................. 60,600 4,446,525
Hardinge, Inc........................ 46,000 1,713,500
Philips Electronics N.V.............. 19,900 1,203,950
-----------
12,603,678
-----------
CONSUMER CYCLICAL -- 8.55%
AutoZone, Inc.*...................... 69,600 2,018,400
Chrysler Corp........................ 19,800 696,713
Gentex Corp.......................... 65,000 1,746,875
Intimate Brands, Inc................. 92,400 2,223,375
Titan International, Inc............. 55,000 1,103,437
Wal-Mart Stores, Inc................. 40,000 1,577,500
Warnaco Group, Inc., Cl. A........... 99,000 3,106,125
-----------
12,472,425
-----------
CONSUMER SERVICES -- 2.97%
American Greetings Corp.............. 10,000 391,250
First Data Corp...................... 58,800 1,719,900
Wendy's International, Inc........... 91,900 2,211,344
-----------
4,322,494
-----------
CONSUMER STAPLES -- 7.10%
American Stores Co................... 86,000 1,768,375
Archer-Daniels-Midland Co............ 52,500 1,138,594
Kimberly-Clark Corp.................. 36,500 1,799,906
PepsiCo, Inc......................... 39,000 1,421,062
Procter & Gamble Co.................. 31,000 2,474,187
Unilever N.V......................... 28,000 1,748,250
-----------
10,350,374
-----------
ENERGY -- 10.74%
Baker Hughes, Inc.................... 30,000 1,308,750
Chevron Corp......................... 22,800 1,755,600
Diamond Offshore Drilling, Inc....... 18,000 866,250
Exxon Corp........................... 30,000 1,835,625
Petsec Energy, Ltd., ADR*............ 30,000 412,500
Phillips Petroleum Co................ 38,000 1,847,750
Royal Dutch Petroleum Co., ADR....... 30,000 1,625,625
Schlumberger, Ltd.................... 10,000 805,000
Seitel, Inc.*........................ 28,600 489,775
Trico Marine Services, Inc.*......... 27,000 793,125
Unocal Corp.......................... 35,000 1,358,437
YPF Sociedad Anonima, ADS............ 75,000 2,564,062
-----------
15,662,499
-----------
FINANCE -- 11.23%
American International Group, Inc.... 3,600 $ 391,500
Bank of New York..................... 29,700 1,717,031
Citicorp............................. 23,500 2,971,281
Federal National Mortgage
Association......................... 64,000 3,652,000
Green Tree Financial Corp............ 70,000 1,833,125
MBNA Corp............................ 62,250 1,700,203
Norwest Corp......................... 106,400 4,109,700
-----------
16,374,840
-----------
HEALTH -- 13.38%
Aetna, Inc........................... 11,000 776,188
Alkermes, Inc.*...................... 19,500 387,563
Columbia HCA/Healthcare Corp......... 82,200 2,435,175
Elan Corp., PLC, ADS................. 69,300 3,547,294
Integrated Health Services, Inc...... 71,300 2,223,669
Invacare Corp........................ 97,800 2,127,150
Johnson & Johnson.................... 39,000 2,569,125
Merck & Co., Inc..................... 27,000 2,868,750
SmithKline Beecham PLC, ADS.......... 50,000 2,571,875
-----------
19,506,789
-----------
TECHNOLOGY -- 15.80%
Adaptec, Inc.*....................... 48,300 1,793,138
AVX Corp............................. 20,000 368,750
Cisco Systems, Inc.*................. 33,150 1,848,113
Diebold, Inc......................... 36,200 1,832,625
Hewlett-Packard Co................... 22,900 1,431,250
Intel Corp........................... 55,600 3,905,900
Kemet Corp.*......................... 109,700 2,125,437
Microsoft Corp.*..................... 19,200 2,481,600
Motorola, Inc........................ 21,800 1,243,963
Oracle Corp.*........................ 47,250 1,054,266
Sun Microsystems, Inc.*.............. 90,800 3,620,650
Xilinx, Inc.*........................ 38,000 1,332,375
-----------
23,038,067
-----------
TRANSPORTATION -- 2.07%
Burlington Northern Corp............. 10,000 929,375
Federal Express Corp.*............... 16,300 995,319
Illinois Central Corp................ 32,100 1,093,406
-----------
3,018,100
-----------
UTILITIES -- 5.73%
DPL, Inc............................. 80,700 2,320,125
GTE Corp............................. 57,200 2,988,700
NICOR, Inc........................... 49,150 2,073,516
Wisconsin Energy Corp................ 34,000 977,500
-----------
8,359,841
-----------
TOTAL COMMON STOCKS
(cost $93,241,259).................. 132,015,513
-----------
</TABLE>
<PAGE> 8
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS December 31, 1997 (unaudited)
- --------------------------------------------------------------------------------
IAA TRUST GROWTH FUND, INC. (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<S> <C> <C>
COMMERCIAL PAPER -- 5.62%
Ford Motor Credit Co.
5.88%, 01/09/98.................... $ 1,758,000 $ 1,758,000
Prudential Funding Corp.
5.63%, 01/20/98..................... 1,100,000 1,100,000
Ford Motor Credit Co.
5.61%, 01/21/98..................... 1,000,000 1,000,000
IBM Credit Corp.
5.77%, 01/21/98..................... 1,000,000 1,000,000
International Lease Finance Corp.
5.52%, 01/23/98..................... 150,000 149,494
CIT Group Holding Corp.
5.65%, 01/27/98..................... 100,000 100,000
Norwest Corp.
5.81%, 01/30/98..................... 1,293,000 1,293,000
IBM Credit Corp.
5.79%, 02/09/98..................... 100,000 100,000
American General Finance Corp.
5.81%, 02/17/98..................... 291,000 291,000
Prudential Funding Corp.
5.77%, 03/19/98..................... 400,000 400,000
Prudential Funding Corp.
5.78%, 03/23/98..................... 1,000,000 1,000,000
-----------
TOTAL COMMERCIAL PAPER
(cost $8,191,494)................... 8,191,494
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
OTHER SHORT TERM INVESTMENTS -- 3.37%
MONEY MARKET FUNDS
Dreyfus Money Market Fund............ 971,060 $ 971,060
Federated Prime Obligation Fund...... 3,941,306 3,941,306
-----------
TOTAL MONEY MARKET FUNDS
(cost $4,912,366)................... 4,912,366
-----------
TOTAL INVESTMENTS -- 99.52%
(cost $106,345,119) ................ 145,119,373
-----------
CASH AND OTHER ASSETS
NET OF LIABILITIES -- 0.48%......... 708,313
-----------
NET ASSETS -- 100.00%................ $145,827,686
===========
</TABLE>
* Non-income producing security.
See notes to financial statements.
<PAGE> 9
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS December 31, 1997 (unaudited)
- --------------------------------------------------------------------------------
IAA TRUST ASSET ALLOCATION FUND, INC.
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
COMMON STOCKS -- 52.04%
BASIC INDUSTRY -- 1.49%
British Steel PLC, ADS............... 2,000 $ 42,875
IMC Global, Inc...................... 3,600 117,900
Mead Corp............................ 2,400 67,200
-----------
227,975
-----------
CAPITAL GOODS -- 4.10%
AGCO Corp............................ 4,600 134,550
Case Corp............................ 2,000 120,875
General Electric Co.................. 1,800 132,075
Hardinge, Inc........................ 3,300 122,925
Philips Electronics N.V.............. 1,950 117,975
-----------
628,400
-----------
CONSUMER CYCLICAL -- 5.80%
AutoZone, Inc.*...................... 4,400 127,600
Chrysler Corp........................ 2,000 70,375
Fleetwood Enterprises, Inc........... 2,400 101,850
Harley-Davidson, Inc................. 1,000 27,375
Intimate Brands, Inc................. 7,000 168,437
Magna International, Inc., Cl. A..... 1,000 62,813
Titan International, Inc............. 4,400 88,275
Wal-Mart Stores, Inc................. 2,000 78,875
Warnaco Group, Inc., Cl. A........... 5,200 163,150
-----------
888,750
-----------
CONSUMER SERVICES -- 2.45%
First Data Corp...................... 3,000 87,750
Planet Hollywood International, Inc.,
Cl. A*.............................. 1,000 13,250
Tribune Co........................... 2,000 124,500
Wendy's International, Inc........... 6,200 149,188
-----------
374,688
-----------
CONSUMER STAPLES -- 4.54%
Albertson's, Inc..................... 2,900 137,387
Coca-Cola Co......................... 1,800 119,925
Gillette Co.......................... 1,200 120,525
Kimberly-Clark Corp.................. 2,400 118,350
Procter & Gamble Co.................. 2,500 199,531
-----------
695,718
-----------
ENERGY -- 5.49%
Atlantic Richfield Co................ 1,400 112,175
Diamond Offshore Drilling, Inc....... 1,800 86,625
Exxon Corp........................... 2,500 152,969
Repsol S.A., ADR..................... 1,000 42,563
Schlumberger, Ltd.................... 1,200 96,600
Trico Marine Services, Inc.*......... 3,000 88,125
Williams Cos., Inc................... 5,000 141,875
YFP Sociedad Anonima, ADS............ 3,500 119,656
-----------
840,588
-----------
FINANCE -- 7.56%
Bank Of New York..................... 3,000 173,437
BankAmerica Corp..................... 2,000 146,000
Citicorp............................. 1,250 158,047
Echelon International Corp., Inc.*... 80 1,795
Federal National Mortgage
Association......................... 1,800 102,712
Green Tree Financial Corp............ 3,500 91,656
Meditrust Corp.-Paired Stock......... 3,244 118,812
National Golf Properties, Inc........ 3,100 101,719
Norwest Corp......................... 6,800 262,650
-----------
1,156,828
-----------
HEALTH -- 7.67%
Aetna, Inc........................... 561 39,586
Alkermes, Inc.*...................... 2,000 39,750
Bristol-Myers Squibb Co.............. 2,000 189,250
Columbia HCA/Healthcare Corp......... 4,200 124,425
Depuy, Inc.*......................... 3,500 100,625
Elan Corp., PLC, ADS................. 5,000 255,937
ESC Medical Systems, Ltd.*........... 450 17,437
Integrated Health Services, Inc...... 5,200 162,175
Invacare Corp........................ 5,500 119,625
Johnson & Johnson.................... 1,900 125,162
-----------
1,173,972
-----------
TECHNOLOGY -- 8.84%
Adaptec, Inc.*....................... 2,100 77,962
Bell & Howell Co.*................... 2,000 48,375
Cisco Systems, Inc.*................. 1,875 104,531
Diebold, Inc......................... 2,400 121,500
Doncasters PLC, ADR*................. 500 10,562
Hewlett-Packard Co................... 750 46,875
Intel Corp........................... 1,950 136,988
Kemet Corp.*......................... 6,500 125,937
Microsoft Corp.*..................... 800 103,400
Oracle Corp.*........................ 4,087 91,191
Raytheon Co., Cl. B.................. 2,000 101,000
Sun Microsystems, Inc.*.............. 3,400 135,575
Tektronix, Inc....................... 4,500 178,594
Xilinx Corp.*........................ 2,000 70,125
-----------
1,352,615
-----------
TRANSPORTATION -- 0.60%
Federal Express Corp.*............... 1,500 91,594
-----------
UTILITIES/TELEPHONE -- 3.50%
AirTouch Communications, Inc.*....... 1,500 62,344
BellSouth Corp....................... 1,500 84,469
CILCORP, Inc......................... 1,200 58,650
Florida Progress Corp................ 1,200 47,100
GTE Corp............................. 1,600 83,600
SBC Communications, Inc.............. 1,097 80,355
Texas Utilities, Inc................. 1,000 41,563
Wisconsin Energy Corp................ 2,700 77,625
-----------
535,706
-----------
TOTAL COMMON STOCKS
(cost $5,044,137)................... 7,966,834
-----------
PREFERRED STOCK -- 0.09%
(cost $12,213)
Aetna, Inc. Convertible Preferred,
6.25%............................... 187 13,371
-----------
</TABLE>
<PAGE> 10
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS December 31, 1997 (unaudited)
- --------------------------------------------------------------------------------
IAA TRUST ASSET ALLOCATION FUND, INC. (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
-----------
<S> <C> <C>
BONDS AND NOTES -- 40.42%
AUTO -- 0.78%
General Motors Acceptance Corp.
8.875%, 06/01/10.................... $ 100,000 $ 119,375
-----------
BANKING -- 2.17%
ABN AMRO N.V. (Chicago) Global Bond
7.125%, 06/18/07.................... 100,000 104,875
Citicorp
7.200%, 06/15/07.................... 100,000 104,500
International American Development
Bank
8.875%, 06/01/09.................... 100,000 123,000
-----------
332,375
-----------
BEVERAGES -- 0.67%
Coca-Cola Co.
6.625%, 10/01/02.................... 100,000 102,000
-----------
CHEMICALS -- 0.67%
Dupont (E.I) De Nemours & Co.
6.750%, 10/15/02.................... 100,000 102,500
-----------
INDUSTRIAL -- 0.72%
Amoco Canada Petroleum Co.
7.950%, 10/01/22.................... 100,000 110,750
-----------
ASSET BACKED -- 4.93%
Amresco Residential Securities
Mortgage Loan Trust
6.925%, 06/25/25.................... 100,000 102,232
Chemical Master Credit Card Trust
5.980%, 09/15/08.................... 200,000 197,318
Discover Credit Card Trust
6.750%, 02/16/02.................... 200,000 200,687
Green Tree Financial Corp.
6.870%, 01/15/29.................... 100,000 102,584
Standard Credit Card Master Trust
6.700%, 09/07/02.................... 150,000 151,229
-----------
754,050
-----------
TELEPHONE UTILITY -- 4.90%
Bell Telephone Co. of Pa., Putable
Debentures
8.350%, 12/15/30.................... 200,000 247,750
BellSouth Capital Funding Corp.
6.040%, 11/15/26.................... 200,000 202,250
Chesapeake & Potomac Telephone Co. of
Virginia Debentures
8.375%, 10/01/29.................... 100,000 123,875
New Jersey Bell Telephone Co.
7.850%, 11/15/29.................... 150,000 176,625
-----------
750,500
-----------
TRANSPORTATION -- 1.39%
Norfolk Southern Corp.
7.050%, 05/01/37.................... 200,000 212,250
-----------
U.S. GOVERNMENT AGENCIES -- 9.01%
Federal Farm Credit Bank
5.800%, 12/18/00.................... 100,000 99,621
Federal Home Loan Bank
6.830%, 06/07/01.................... 100,000 101,422
8.000%, 09/20/04.................... 100,000 102,841
Federal Home Loan Mortgage Corp.
10.750%, 07/01/00................... 1,588 1,667
8.750%, 04/01/01.................... 22,036 22,621
10.150%, 04/15/06................... 13,027 13,026
6.500%, 06/15/06.................... 200,000 202,353
Federal National Mortgage Association
7.060%, 11/02/05.................... 200,000 200,068
Government National Mortgage
Association Pool #60721
9.750%, 04/15/98.................... 460 469
Government National Mortgage
Association Pool #30111
9.000%, 05/15/09.................... 17,386 18,604
Government National Mortgage
Association Pool #23653
9.500%, 06/15/09.................... 11,198 12,122
Government National Mortgage
Association Pool #32147
9.500%, 08/15/09.................... 7,380 7,988
Government National Mortgage
Association Pool #161621
9.000%, 07/15/16.................... 89,907 96,200
Tennessee Valley Authority
5.980%, 04/01/36.................... 500,000 500,625
-----------
1,379,627
-----------
U.S. GOVERNMENT OBLIGATIONS -- 15.18%
United States Treasury Bonds
6.750%, 08/15/26.................... 100,000 110,188
United States Treasury Notes
5.875%, 03/31/99.................... 200,000 200,584
6.750%, 06/30/99.................... 100,000 101,583
6.875%, 07/31/99.................... 100,000 101,821
5.875%, 02/15/00.................... 100,000 100,416
6.625%, 04/30/02.................... 100,000 103,300
6.375%, 08/15/02.................... 100,000 102,618
5.875%, 02/15/04.................... 100,000 100,937
7.250%, 05/15/04.................... 200,000 215,902
7.250%, 08/15/04.................... 100,000 108,152
7.875%, 11/15/04.................... 100,000 111,849
11.625%, 11/15/04................... 100,000 132,806
6.500%, 05/15/05.................... 350,000 364,917
5.625%, 02/15/06.................... 100,000 98,935
6.875%, 05/15/06.................... 150,000 160,558
6.500%, 10/15/06.................... 200,000 209,508
-----------
2,324,074
-----------
TOTAL BONDS AND NOTES
(cost $5,846,344)................... 6,187,501
-----------
</TABLE>
<PAGE> 11
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS December 31, 1997 (unaudited)
- --------------------------------------------------------------------------------
IAA TRUST ASSET ALLOCATION FUND, INC. (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<S> <C> <C>
COMMERCIAL PAPER -- 1.96%
IBM Credit Corp...................... $ 300,000 $ 300,000
------------
5.767%, 01/21/98
TOTAL COMMERCIAL PAPER
(cost $300,000)..................... 300,000
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
--------- -----------
<S> <C> <C>
OTHER SHORT TERM INVESTMENTS -- 4.24%
MONEY MARKET FUNDS
Dreyfus Money Market Fund............... 205,193 $ 205,193
Federated Prime Obligation Fund......... 444,437 444,437
-----------
TOTAL MONEY MARKET FUNDS
(cost $649,630)........................ 649,630
-----------
TOTAL INVESTMENTS -- 98.75%
(cost $11,852,324)..................... 15,117,336
-----------
CASH AND OTHER ASSETS
NET OF LIABILITIES -- 1.25%............ 191,732
-----------
NET ASSETS -- 100.00%................... $15,309,068
===========
* Non-income producing security
</TABLE>
See notes to financial statements.
<PAGE> 12
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS December 31, 1997 (unaudited)
- --------------------------------------------------------------------------------
IAA TRUST TAX EXEMPT BOND FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<S> <C> <C>
MUNICIPAL BONDS
(TAX EXEMPT) -- 97.63%
ARIZONA -- 6.21%
Bullhead City, Arizona Parkway
Revenue
6.100%, 01/01/07.................... $ 250,000 $ 271,675
Maricopa County School District #93
Arizona Unlimited Tax General
Obligation
6.400%, 07/01/06.................... 500,000 574,870
Salt River Project Arizona
Agriculture
Improvement & Power District
Electric System Revenue
5.625%, 01/01/06.................... 250,000 272,577
-----------
1,119,122
-----------
CALIFORNIA -- 6.18%
California State Public Works Board
Lease Revenue
5.200%, 12/01/09.................... 500,000 527,030
City of Fresno, California Sewer
System Revenue
6.250%, 09/01/14.................... 250,000 290,930
City of Fresno, California Unified
School District, General Obligation
5.875%, 08/01/15.................... 275,000 295,166
-----------
1,113,126
-----------
COLORADO -- 2.82%
Denver, Colorado City & County
General Obligation
5.000%, 10/01/10.................... 500,000 508,315
-----------
CONNECTICUT -- 3.25%
Connecticut State Unlimited Tax
General Obligation
5.400%, 03/15/08.................... 550,000 584,611
-----------
ILLINOIS -- 17.57%
Chicago, Illinois O'Hare
International Airport Revenue
5.000%, 01/01/16.................... 500,000 488,975
Chicago, Illinois Water Revenue
6.500%, 11/01/15.................... 500,000 593,700
Illinois State Sales Tax Revenue
5.400%, 06/15/13.................... 550,000 571,065
Illinois State Toll Highway Authority
Revenue, Series A
6.300%, 01/01/12.................... 275,000 315,183
Northwest Suburban Municipal Joint
Action Water Agency Illinois
Contract Revenue
6.450%, 05/01/07.................... 400,000 459,868
Northwest Water Commission Illinois,
Cook & Lake Revenue
5.000%, 05/01/13.................... 500,000 501,985
Sangamon County, Illinois Tax General
Obligation
6.500%, 03/01/08.................... 200,000 233,258
-----------
3,164,034
-----------
INDIANA -- 3.39%
Peru, Indiana Community School Corp.
Revenue
6.750%, 01/01/09.................... 550,000 610,341
-----------
KENTUCKY -- 2.84%
Jefferson County, Kentucky School
District Financing Corp. School
Building Revenue, Series A
5.300%, 07/01/15.................... 500,000 510,815
-----------
MASSACHUSETTS -- 2.99%
Massachusetts State Water Resource
Authority Revenue
6.000%, 11/01/08.................... 500,000 538,470
-----------
MINNESOTA -- 2.84%
Saint Paul, Minnesota Independent
School District #625 General
Obligation, Series C
5.250%, 02/01/13.................... 500,000 512,180
-----------
MISSOURI -- 4.77%
Cape Girardeau, Missouri Waterworks
System Revenue
7.450%, 03/01/05.................... 500,000 595,805
Missouri State Environmental
Improvement & Energy Resources
Authority Pollution Control Revenue
5.250%, 12/01/09.................... 250,000 263,453
-----------
859,258
-----------
NEBRASKA -- 0.58%
Nebraska Public Power District
Revenue
5.400%, 01/01/10.................... 100,000 103,772
-----------
NEVADA -- 5.23%
Clark County, Nevada School District
General Obligation
5.250%, 06/01/07.................... 500,000 522,005
Henderson, Nevada Water & Sewer
Unlimited Tax General Obligation
5.375%, 06/01/07.................... 400,000 419,984
-----------
941,989
-----------
NEW YORK -- 2.83%
New York State Dormitory Authority
Revenue
5.500%, 07/01/12.................... 500,000 510,460
-----------
NORTH CAROLINA -- 1.60%
North Carolina Eastern Municipal
Power Agency System Revenue
7.000%, 01/01/08.................... 250,000 288,547
-----------
OHIO -- 2.92%
Montgomery County, Ohio Sewer System
Revenue
5.600%, 09/01/11.................... 500,000 526,135
-----------
PENNSYLVANIA -- 6.29%
Pennsylvania Intergovernmental Corp.
Authority, Special Tax Revenue
5.450%, 06/15/08.................... 500,000 522,395
Pennsylvania State Higher Education
Revenue Bonds, Series A
5.600%, 09/01/10.................... 575,000 611,260
-----------
1,133,655
-----------
</TABLE>
<PAGE> 13
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS December 31, 1997 (unaudited)
- --------------------------------------------------------------------------------
IAA TRUST TAX EXEMPT BOND FUND, INC. (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<S> <C> <C>
RHODE ISLAND -- 3.25%
State of Rhode Island Refunding
General Obligation
7.000%, 06/15/05.................... $ 500,000 $ 584,660
-----------
TENNESSEE -- 2.95%
Shelby County, Tennessee School
General Obligation, Series B
5.875%, 06/01/18.................... 500,000 530,440
-----------
TEXAS -- 10.66%
Austin, Texas Limited Tax General
Obligation
7.250%, 09/01/03.................... 350,000 395,339
Bexar County, Texas Detention
Facilities Limited Tax General
Obligation
5.750%, 06/15/10.................... 500,000 533,945
Garland, Texas Limited Tax General
Obligation
5.800%, 08/15/12.................... 350,000 372,561
Texas A&M University Revenue
Financing System
5.375%, 05/15/14.................... 600,000 618,762
-----------
1,920,607
-----------
WASHINGTON -- 1.54%
Washington Public Power Supply
System, Nuclear Project #1,
Refunding Revenue, 1990-C
7.625%, 07/01/01.................... 250,000 277,257
-----------
WISCONSIN -- 6.92%
Brookfield, Wisconsin Unlimited Tax
Corp. General Obligation
6.900%, 03/15/03.................... 250,000 281,745
Wisconsin State Clean Water Revenue
Bond
5.300%, 06/01/12.................... 700,000 715,533
Wisconsin State Health & Educational
Facility Authority Revenue Bond
5.250%, 08/15/19.................... 250,000 249,025
-----------
1,246,303
-----------
TOTAL BONDS
(cost $16,493,110).................. 17,584,097
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
---------
<S> <C> <C>
TAX EXEMPT MONEY MARKET
FUNDS -- 0.99%
(cost $177,771)
Nuveen Tax Exempt Fund.................. 177,771 177,771
-----------
TOTAL INVESTMENTS -- 98.62%
(cost $16,670,881)..................... 17,761,869
-----------
CASH AND OTHER ASSETS
NET OF LIABILITIES -- 1.38%............ 248,336
-----------
NET ASSETS -- 100.00%................... $18,010,205
===========
</TABLE>
See notes to financial statements.
<PAGE> 14
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS December 31, 1997 (unaudited)
- --------------------------------------------------------------------------------
IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.
MONEY MARKET SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- -----------
<S> <C> <C>
COMMERCIAL PAPER -- 91.95%
AIRLINES -- 1.26%
International Lease Finance Corp.
5.52%, 01/23/98...................... $ 850,000 $ 847,133
-----------
AUTO & TRUCK -- 11.61%
Daimler-Benz N.A. Corp.
5.73%, 02/18/98...................... 1,150,000 1,141,214
5.56%, 03/02/98...................... 2,000,000 1,981,467
Ford Motor Credit Co.
5.88%, 01/09/98...................... 369,000 369,000
5.61%, 01/21/98...................... 1,000,000 1,000,000
5.78%, 02/09/98...................... 1,841,000 1,841,000
Toyota Motor Credit Co.
5.68%, 02/12/98...................... 1,500,000 1,490,060
-----------
7,822,741
-----------
COMMERCIAL BANKING -- 8.83%
Bankers Trust New York Corp.
5.56%, 01/13/98...................... 2,810,000 2,804,792
Norwest Corp.
5.81%, 01/30/98...................... 761,000 761,000
5.77%, 02/11/98...................... 973,000 973,000
5.70%, 02/26/98...................... 1,420,000 1,407,409
-----------
5,946,201
-----------
COMMERCIAL FINANCE -- 7.78%
CIT Group Holding Corp.
5.65%, 01/27/98...................... 900,000 900,000
5.76%, 02/19/98...................... 1,138,000 1,138,000
Prudential Funding Corp.
5.62%, 01/07/98...................... 1,000,000 1,000,000
5.63%, 01/20/98...................... 900,000 900,000
5.77%, 03/19/98...................... 1,300,000 1,300,000
-----------
5,238,000
-----------
COMMERCIAL SERVICES -- 3.15%
PHH Corp.
5.53%, 01/22/98...................... 1,800,000 1,794,194
5.70%, 03/26/98...................... 330,000 325,611
-----------
2,119,805
-----------
CONSUMER FINANCE -- 30.58%
American Express Credit Corp.
6.16%, 01/02/98...................... 2,440,000 2,440,000
6.25%, 01/02/98...................... 900,000 900,000
American General Finance Corp.
5.81%, 02/17/98...................... 2,709,000 2,709,000
Associates Corp. of North America
5.65%, 01/06/98...................... 1,700,000 1,700,000
5.63%, 01/28/98...................... 1,200,000 1,200,000
AVCO Financial Services, Inc.
5.78%, 01/30/98...................... 1,300,000 1,300,000
5.72%, 03/17/98...................... 735,000 735,000
5.82%, 03/25/98...................... 1,000,000 1,000,000
Beneficial Corp.
5.56%, 01/08/98...................... 1,338,000 1,338,000
5.81%, 03/18/98...................... 1,975,000 1,975,000
Commercial Credit Co.
5.61%, 01/05/98...................... 1,200,000 1,200,000
5.70%, 02/04/98...................... 760,000 760,000
Household Finance Corp.
6.10%, 01/02/98...................... 550,000 550,000
5.74%, 01/16/98...................... 1,000,000 1,000,000
5.65%, 02/10/98...................... 1,788,000 1,788,000
-----------
20,595,000
-----------
ELECTRONICS -- 4.30%
General Electric Capital Corp.
5.64%, 01/14/98...................... 1,500,000 1,500,000
5.67%, 02/02/98...................... 1,400,000 1,400,000
-----------
2,900,000
-----------
FOREIGN GOVERNMENTS -- 2.78%
Province of Quebec
5.57%, 03/05/98...................... 890,000 881,325
5.54%, 03/09/98...................... 1,000,000 989,689
-----------
1,871,014
-----------
INSURANCE/MULTI-LINE -- 7.57%
Transamerica Financial Corp.
5.68%, 01/15/98...................... 2,000,000 1,995,582
USAA Capital Corp.
5.66%, 01/26/98...................... 1,500,000 1,494,104
5.55%, 02/05/98...................... 1,200,000 1,193,525
5.71%, 02/13/98...................... 420,000 417,135
-----------
5,100,346
-----------
OFFICE EQUIPMENT -- 4.80%
IBM Credit Corp.
5.77%, 01/21/98...................... 500,000 500,000
5.79%, 02/09/98...................... 1,050,000 1,050,000
5.69%, 02/23/98...................... 1,686,000 1,686,000
-----------
3,236,000
-----------
PETROLEUM REFINING -- 2.22%
Atlantic Richfield Co.
5.54%, 01/29/98...................... 1,500,000 1,493,537
-----------
TELEPHONE/UTILITY -- 7.07%
AT&T Corp.
5.70%, 02/25/98...................... 2,800,000 2,775,617
BellSouth Telecommunications, Inc.
5.68%, 02/04/98...................... 2,000,000 1,989,271
-----------
4,764,888
-----------
TOTAL COMMERCIAL PAPER
(cost $61,934,665)................... 61,934,665
-----------
BONDS & NOTES -- 1.49%
U.S. Government Agencies
(cost $1,000,000)
Student Loan Marketing Association
5.75%, 01/08/98...................... 1,000,000 1,000,000
-----------
</TABLE>
<PAGE> 15
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS December 31, 1997 (unaudited)
- --------------------------------------------------------------------------------
IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.
MONEY MARKET SERIES (CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE
--------- -----------
<S> <C> <C>
OTHER SHORT TERM INVESTMENTS -- 6.54%
MONEY MARKET FUNDS
Dreyfus Money Market Fund............... 2,671,099 $ 2,671,099
Federated Prime Obligation Fund......... 1,736,300 1,736,300
-----------
TOTAL MONEY MARKET FUNDS
(cost $4,407,399)...................... 4,407,399
-----------
TOTAL INVESTMENTS -- 99.98%
(cost $67,342,064)..................... 67,342,064
-----------
CASH AND OTHER ASSETS NET OF
LIABILITIES -- 0.02%................... 13,408
-----------
NET ASSETS -- 100%...................... $67,355,472
===========
</TABLE>
See notes to financial statements.
<PAGE> 16
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS December 31, 1997 (unaudited)
- --------------------------------------------------------------------------------
IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.
SHORT-TERM GOVERNMENT BOND SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<S> <C> <C>
BONDS & NOTES -- 88.62%
U.S. GOVERNMENT AGENCIES -- 42.26%
Federal Home Loan Bank
6.830%, 06/07/01.................... $ 655,000 $ 664,314
6.477%, 08/26/02.................... 1,100,000 1,098,438
8.000%, 09/20/04.................... 750,000 771,307
8.340%, 01/26/05.................... 500,000 521,995
Federal Home Loan Mortgage Corp.
6.825%, 09/18/02.................... 500,000 501,765
5.500%, 11/15/04.................... 500,000 497,727
6.200%, 11/15/16.................... 1,000,000 999,274
6.000%, 02/15/23.................... 913,849 912,063
Federal National Mortgage Association
8.500%, 06/25/01.................... 853,959 853,850
6.820%, 11/05/01.................... 200,000 201,630
6.500%, 08/01/04.................... 2,941,684 2,949,957
6.950%, 01/25/20.................... 480,840 481,309
6.500%, 07/25/23.................... 713,764 716,126
------------
11,169,755
------------
U.S. GOVERNMENT OBLIGATIONS -- 36.95%
United States Treasury Notes
6.250%, 05/31/99.................... 3,000,000 3,024,750
5.875%, 11/15/99.................... 500,000 501,930
6.500%, 08/31/01.................... 3,000,000 3,076,050
6.250%, 02/28/02.................... 2,000,000 2,037,040
6.625%, 04/30/02.................... 100,000 103,300
6.250%, 06/30/02.................... 1,000,000 1,020,340
------------
9,763,410
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<S> <C> <C>
ASSET BACKED -- 9.41%
Banc One Auto Grantor Trust
6.270%, 11/20/03.................... $ 1,151,997 $ 1,158,438
First USA Credit Card Master Trust
6.420%, 03/17/05.................... 250,000 252,890
Chase Mortgage Finance Corp., Series
92-G
5.550%, 04/25/24.................... 579,405 574,207
J.P. Morgan Commercial Mortgage
Finance Corp.
6.952%, 09/15/29.................... 488,157 500,361
------------
2,485,896
------------
TOTAL BONDS & NOTES
(cost $23,186,356).................. 23,419,061
------------
COMMERCIAL PAPER -- 4.23%
IBM Credit Corp.
5.767%, 01/21/98.................... 700,000 700,000
Norwest Corp.
5.815%, 01/30/98.................... 217,000 217,000
5.772%, 02/11/98.................... 60,000 60,000
Commercial Credit Co.
5.698%, 02/04/98.................... 140,000 140,000
------------
TOTAL COMMERCIAL PAPER
(cost $1,117,000)................... 1,117,000
------------
OTHER SHORT TERM INVESTMENTS -- 5.97%
SHARES
-----------
MONEY MARKET FUNDS
Dreyfus Cash Management Fund......... 342,853 342,853
Federated Prime Obligation Fund...... 1,234,667 1,234,667
------------
TOTAL MONEY MARKET FUNDS
(cost $1,577,520)................... 1,577,520
------------
TOTAL INVESTMENTS -- 98.82%
(cost $25,880,876) 26,113,581
------------
CASH AND OTHER ASSETS NET OF
LIABILITIES -- 1.18%................ 311,837
------------
NET ASSETS -- 100.00%................ $ 26,425,418
============
</TABLE>
See notes to financial statements.
<PAGE> 17
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS December 31, 1997 (unaudited)
- --------------------------------------------------------------------------------
IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.
LONG-TERM BOND SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<S> <C> <C>
BONDS -- 92.31%
U.S. GOVERNMENT AGENCIES -- 35.06%
Federal Home Loan Mortgage Corp.
6.000%, 03/15/09.................... $ 1,133,000 $ 1,103,056
7.000%, 03/01/12.................... 4,733,852 4,809,298
6.500%, 02/15/21.................... 500,000 489,282
5.000%, 05/15/21.................... 625,000 579,662
Federal National Mortgage Association
7.000%, 12/25/21.................... 400,000 412,453
6.500%, 09/25/22.................... 200,000 201,628
Government National Mortgage
Association
6.500%, 04/15/26.................... 1,455,392 1,441,293
8.000%, 07/15/26.................... 2,876,165 2,984,021
Tennessee Valley Authority
5.980%, 04/01/36.................... 770,000 770,962
------------
12,791,655
------------
U.S. GOVERNMENT OBLIGATIONS -- 33.77%
United States Treasury Notes
6.625%, 04/30/02.................... 100,000 103,300
5.875%, 02/15/04.................... 100,000 100,937
7.875%, 11/15/04.................... 100,000 111,849
6.500%, 05/15/05.................... 2,750,000 2,867,205
6.500%, 08/15/05.................... 4,750,000 4,957,955
5.625%, 02/15/06.................... 1,450,000 1,434,557
6.000%, 02/15/26.................... 2,750,000 2,746,067
------------
12,321,870
------------
CORPORATE BONDS -- 14.10%
ABN AMRO NV (Chicago) Global Bond
7.125%, 06/18/07.................... 300,000 314,625
Amoco Canada Petroleum Co.
7.950%, 10/01/22.................... 500,000 553,750
Central Illinois Public Service Co.
7.610%, 06/01/17.................... 300,000 324,750
Citicorp
7.200%, 06/15/07.................... 250,000 261,250
Conagra, Inc.
6.700%, 08/01/27.................... 200,000 204,750
Ford Motor Credit Co.
7.200%, 06/15/07.................... 600,000 636,000
General Electric Credit Corp.
6.500%, 11/01/06.................... 300,000 305,625
Halliburton Co.
6.750%, 02/01/27.................... 250,000 266,700
J.P. Morgan & Co.
6.700%, 11/01/07.................... 250,000 254,062
Merrill Lynch & Co., Inc.
7.150%, 07/30/12.................... 350,000 364,875
Morgan Stanley Dean Witter Discover
6.375%, 08/01/02.................... 250,000 251,562
Norfolk Southern Corp.
7.050%, 05/01/37.................... 300,000 318,375
Oklahoma Gas & Electric Co.
6.650%, 07/15/27.................... 250,000 258,750
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<S> <C> <C>
Suntrust Capital II
7.900%, 06/15/27.................... $ 200,000 $ 214,500
Wachovia Corp.
6.605%, 10/01/25.................... 600,000 617,250
------------
5,146,824
------------
ASSET BACKED -- 8.82%
First USA Credit Corp Master Trust
6.420%, 03/17/05.................... 250,000 252,890
Green Tree Financial Corp.
6.870%, 01/15/29.................... 200,000 205,168
J.C. Penney Master Credit Card Trust,
Series B, Class A
8.950%, 10/15/01.................... 800,000 844,449
J.P. Morgan Commercial Mortgage
Finance Corp.
7.088%, 09/15/29.................... 556,000 575,460
Pacific Gas & Electric Co.
6.420%, 09/25/08.................... 1,000,000 1,005,000
The Money Store Home Equity Trust
5.675%, 02/15/09.................... 340,594 334,329
------------
3,217,296
------------
MUNICIPAL -- 0.56%
Wisconsin State Unlimited General
Obligation
6.550%, 11/01/05.................... 200,000 203,000
------------
TOTAL BONDS AND NOTES
(cost $32,705,812) 33,680,645
------------
COMMERCIAL PAPER -- 6.76%
IBM Credit Corp.
5.767%, 01/21/98.................... 500,000 500,000
Norwest Corp.
5.815%, 01/30/98.................... 1,266,000 1,266,000
Commercial Credit Co.
5.698%, 02/04/98.................... 700,000 700,000
------------
TOTAL COMMERCIAL PAPER
(cost $2,466,000) 2,466,000
------------
OTHER SHORT TERM INVESTMENTS -- 0.50%
SHARES
-----------
MONEY MARKET FUNDS
Dreyfus Money Market Fund............ 13,235 13,235
Federated Prime Obligation Fund...... 172,010 172,010
------------
TOTAL MONEY MARKET FUNDS 185,245
------------
(cost $185,245)
TOTAL INVESTMENTS -- 99.57%
(cost $35,357,057) 36,331,890
------------
CASH AND OTHER ASSETS
NET OF LIABILITIES -- 0.43% 155,520
------------
NET ASSETS -- 100.00% $ 36,487,410
============
</TABLE>
See notes to financial statements.
<PAGE> 18
STATEMENTS OF ASSETS AND LIABILITIES December 31, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IAA TRUST
TAXABLE FIXED INCOME SERIES FUND, INC.
IAA TRUST IAA TRUST --------------------------------------------
IAA TRUST ASSET TAX EXEMPT SHORT-TERM
GROWTH ALLOCATION BOND MONEY MARKET GOVERNMENT LONG-TERM
FUND, INC. FUND, INC. FUND, INC. SERIES BOND SERIES BOND SERIES
------------ ----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in securities:
At cost........................ $106,345,119 $11,852,324 $16,670,881 $67,342,064 $25,880,876 $35,357,057
============ =========== =========== =========== =========== ===========
At value....................... $145,119,373 $15,117,336 $17,761,869 $67,342,064 $26,113,581 $36,331,890
Cash............................. 312,814 -- -- -- 80,448 1,083
Receivable for securities sold... 631,247 81,146 36,456 -- 19,394 5,007
Receivable for capital stock
sold........................... 146,778 89,500 -- -- 37,000 4,270
Dividends and interest
receivable..................... 274,423 91,517 262,789 334,660 279,174 433,348
Due from Advisor................. -- -- -- -- 769 6,891
Prepaid Expenses................. 12,135 1,236 1,475 5,053 -- --
------------ ----------- ----------- ----------- ----------- -----------
Total assets................... 146,496,770 15,380,735 18,062,589 67,681,777 26,530,366 36,782,489
------------ ----------- ----------- ----------- ----------- -----------
LIABILITIES:
Payable for securities
purchased...................... 189,000 -- -- -- 37,189 --
Payable for capital stock
redeemed....................... 225,624 8,804 -- -- 39,221 255,367
Distributions Payable............ 140,216 50,006 36,456 271,737 9,344 8,423
Accrued expenses and other
liabilities.................... 114,244 12,857 15,928 54,568 19,194 31,289
------------ ----------- ----------- ----------- ----------- -----------
Total liabilities.............. 669,084 71,667 52,384 326,305 104,948 295,079
------------ ----------- ----------- ----------- ----------- -----------
NET ASSETS........................ $145,827,686 $15,309,068 $18,010,205 $67,355,472 $26,425,418 $36,487,410
============ =========== =========== =========== =========== ===========
NET ASSETS CONSIST OF:
Capital paid-in.................. $104,227,228 $11,973,977 $16,952,375 $67,355,640 $26,193,360 $35,277,425
Undistributed (Distributions in
excess of) net investment
income......................... (430) 301 (121) -- (647) 68
Accumulated net realized gain
(loss) on investments.......... 2,826,634 69,778 (33,037) (168) -- 235,084
Net unrealized appreciation of
investments.................... 38,774,254 3,265,012 1,090,988 -- 232,705 974,833
============ =========== =========== =========== =========== ===========
$145,827,686 $15,309,068 $18,010,205 $67,355,472 $26,425,418 $36,487,410
============ =========== =========== =========== =========== ===========
Shares outstanding............... 6,834,883 1,047,483 2,011,692 67,355,738 2,618,558 3,523,858
============ =========== =========== =========== =========== ===========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE.................. $21.34 $14.62 $8.95 $1.00 $10.09 $10.35
==== ==== === ==== ===== ====
</TABLE>
See notes to financial statements.
<PAGE> 19
STATEMENTS OF OPERATIONS for the Six Months Ended December 31, 1997 (unaudited)
- --------------------------------------------------------------------------------
<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........................... $ 843,961 $ 56,738 -- -- -- --
Interest............................ 510,611 233,341 $470,135 $1,733,473 $ 810,306 $1,165,762
---------- -------- -------- ---------- -------- ----------
Total investment income........... 1,354,572 290,079 470,135 1,733,473 810,306 1,165,762
---------- -------- -------- ---------- -------- ----------
EXPENSES:
Investment advisory fees (Note E)... 559,054 57,156 45,389 153,039 65,671 137,273
Distribution expenses (Note F)...... 16,280 2,100 6,300 -- 7,314 10,262
Transfer agent fees................. 36,719 4,537 6,996 20,868 12,850 12,850
Professional fees................... 16,523 2,513 1,464 8,872 3,040 3,075
Printing............................ 10,081 1,512 2,017 4,839 1,948 1,948
Custody fees........................ 17,014 4,734 4,081 5,480 12,221 15,809
Directors' fees..................... 3,025 707 756 857 555 555
Administration fees................. 64,299 6,125 7,659 26,160 14,687 18,690
Accounting fees..................... 30,643 15,849 16,708 22,524 15,839 17,907
Insurance........................... 9,238 1,054 1,672 3,969 1,391 1,328
Registration fees................... 7,713 1,325 802 5,719 5,417 6,584
Legal fees.......................... 2,328 2,439 2,203 2,437 2,798 2,981
Miscellaneous....................... 3,188 814 1,153 1,987 1,200 1,200
---------- -------- -------- ---------- -------- ----------
Total expenses.................... 776,105 100,865 97,200 256,751 144,931 230,462
---------- -------- -------- ---------- -------- ----------
Less: Advisory fee waiver (Note
E)................................ -- -- -- -- (10,437) (43,365)
Less: Expenses reimbursed and waived
(Note E).......................... (17,014) (4,734) (4,081) (5,480) (12,221) (15,809)
---------- -------- -------- ---------- -------- ----------
Net expenses...................... 759,091 96,131 93,119 251,271 122,273 171,288
---------- -------- -------- ---------- -------- ----------
NET INVESTMENT INCOME................ 595,481 193,948 377,016 1,482,202 688,033 994,474
---------- -------- -------- ---------- -------- ----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS -- NOTE (D):
Net realized gain (loss) on
investments....................... 5,219,658 340,603 28,267 (40) -- 250,764
Net change in unrealized
appreciation on investments....... (1,863,802) 290,302 531,729 -- 221,137 914,338
---------- -------- -------- ---------- -------- ----------
Net realized and unrealized gain
(loss) on investments............. 3,355,856 630,905 559,996 (40) 221,137 1,165,102
---------- -------- -------- ---------- -------- ----------
INCREASE IN NET ASSETS FROM
OPERATIONS.......................... $ 3,951,337 $ 824,853 $937,012 $1,482,162 $ 909,170 $2,159,576
========== ======== ======== ========== ======== ==========
</TABLE>
See notes to financial statements.
<PAGE> 20
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IAA TRUST IAA TRUST ASSET
GROWTH FUND, INC. ALLOCATION FUND, INC.
--------------------------------- --------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
12/31/97 YEAR ENDED 12/31/97 YEAR ENDED
(UNAUDITED) 06/30/97 (UNAUDITED) 06/30/97
---------------- ------------ ---------------- -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income.............................. $ 595,481 $ 793,987 $ 193,948 $ 293,475
Net realized gain on investments................... 5,219,658 9,367,268 340,603 617,456
Net change in unrealized appreciation of
investments...................................... (1,863,802) 14,742,307 290,302 1,274,062
------------ ------------ ----------- -----------
Net increase in net assets from operations......... 3,951,337 24,903,562 824,853 2,184,993
------------ ------------ ----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income.................................. (945,434) (905,867) (198,018) (288,779)
Realized gains on investments...................... (10,778,777) (5,135,058) (670,865) (670,310)
------------ ------------ ----------- -----------
(11,724,211) (6,040,925) (868,883) (959,089)
------------ ------------ ----------- -----------
CAPITAL STOCK TRANSACTIONS -- (NET) NOTE (C)........ 12,814,210 37,123,270 1,080,714 2,963,534
------------ ------------ ----------- -----------
Total increase in net assets....................... 5,041,336 55,985,907 1,036,684 4,189,438
NET ASSETS:
Beginning of period................................ 140,786,350 84,800,443 14,272,384 10,082,946
------------ ------------ ----------- -----------
End of period...................................... $145,827,686 $140,786,350 $ 15,309,068 $14,272,384
============ ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
IAA TRUST ASSET
TAXABLE FIXED INCOME
IAA TRUST SERIES FUND, INC.
TAX EXEMPT BOND FUND, INC. MONEY MARKET SERIES
-------------------------------- --------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
12/31/97 YEAR ENDED 12/31/97 YEAR ENDED
(UNAUDITED) 06/30/97 (UNAUDITED) 06/30/97
---------------- ----------- ---------------- -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income............................... $ 377,016 $ 755,178 $ 1,482,202 $ 1,760,854
Net realized gain (loss) on investments............. 28,267 2,423 (40) (128)
Net change in unrealized appreciation of
investments....................................... 531,729 645,334 -- --
----------- ----------- ----------- -----------
Net increase in net assets from operations.......... 937,012 1,402,935 1,482,162 1,760,726
----------- ----------- ----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income................................... (386,575) (744,014) (1,482,202) (1,760,915)
Realized gains on investments....................... (31,294) (48,659) -- --
----------- ----------- ----------- -----------
(417,869) (792,673) (1,482,202) (1,760,915)
----------- ----------- ----------- -----------
CAPITAL STOCK TRANSACTIONS -- (NET) NOTE (C)......... (516,966) (345,953) 6,681,963 27,009,548
----------- ----------- ----------- -----------
Total increase in net assets........................ 2,177 264,309 6,681,923 27,009,359
NET ASSETS:
Beginning of period................................. 18,008,028 17,743,719 60,673,549 33,664,190
----------- ----------- ----------- -----------
End of period....................................... $ 18,010,205 $18,008,028 $ 67,355,472 $60,673,549
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
<PAGE> 21
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
------------------------------------- -------------------------------------
SIX MONTHS ENDED FOR THE PERIOD SIX MONTHS ENDED FOR THE PERIOD
12/31/97 01/02/97* 12/31/97 01/02/97*
(UNAUDITED) THROUGH 06/30/97 (UNAUDITED) THROUGH 06/30/97
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income..................... $ 688,033 $ 68,364 $ 994,474 $ 79,333
Net realized gain on investments.......... -- -- 250,764 8,652
Net change in unrealized appreciation of
investments............................. 221,137 11,568 914,338 60,495
----------- ----------- ----------- -----------
Net increase in net assets from
operations.............................. 909,170 79,932 2,159,576 148,480
----------- ----------- ----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Investment income......................... (698,005) (59,039) (1,005,904) (67,835)
Realized gains on investments............. -- -- (24,332) --
----------- ----------- ----------- -----------
(698,005) (59,039) (1,030,236) (67,835)
----------- ----------- ----------- -----------
CAPITAL STOCK TRANSACTIONS -- (NET) NOTE
(C)....................................... 1,929,234 24,264,126 2,425,915 32,851,510
----------- ----------- ----------- -----------
Total increase in net assets.............. 2,140,399 24,285,019 3,555,255 32,932,155
NET ASSETS:
Beginning of period....................... 24,285,019 -- 32,932,155 --
----------- ----------- ----------- -----------
End of period............................. $ 26,425,418 $ 24,285,019 $ 36,487,410 $ 32,932,155
=========== =========== =========== ===========
</TABLE>
* Commencement of operations.
See notes to financial statements.
<PAGE> 22
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The tables below set forth financial data for a share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
IAA TRUST
GROWTH FUND. INC.
SIX MONTHS ENDED YEARS ENDED JUNE 30,
12/31/97 --------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
---------------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 22.51 $ 18.88 $ 17.23 $ 15.16 $ 17.55 $ 17.23
-------- -------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income............................ 0.09 0.15 0.23 0.22 0.27 0.25
Net gains or losses on securities (both realized
and unrealized)................................ 0.57 4.81 3.23 3.45 (0.63) 1.67
-------- -------- ------- ------- ------- -------
Total from investment operations............... 0.66 4.96 3.46 3.67 (0.36) 1.92
-------- -------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net investment income............. (0.15) (0.20) (0.25) (0.17) (0.22) (0.29)
Distributions from capital gains................. (1.68) (1.13) (1.56) (1.43) (1.81) (1.31)
-------- -------- ------- ------- ------- -------
Total distributions............................ (1.83) (1.33) (1.81) (1.60) (2.03) (1.60)
-------- -------- ------- ------- ------- -------
Net asset value, end of period.................... $ 21.34 $ 22.51 $ 18.88 $ 17.23 $ 15.16 $ 17.55
======== ======== ======= ======= ======= =======
TOTAL RETURN...................................... 5.54%** 28.54% 21.51% 26.68% (2.42)% 11.71%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's)............. $145,828 $140,786 $84,800 $70,577 $59,448 $70,785
Ratio of expenses to average net assets:
Before expense waiver.......................... 1.04%** -- -- -- -- --
After expense waiver........................... 1.02%** 1.16% 1.12% 1.14% 1.24% 1.18%
Ratio of net investment income to average net
assets:
Before expense waiver.......................... 0.78%** -- -- -- -- --
After expense waiver........................... 0.80%** 0.84% 1.30% 1.41% 1.03% 1.36%
Portfolio turnover............................... 10.34% 30.74% 32.95% 31.84% 49.12% 55.36%
Average Commission Rate Paid*.................... $ 0.0532 $ 0.0595 $0.0645 N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
IAA TRUST
ASSET ALLOCATION FUND, INC.
SIX MONTHS ENDED YEARS ENDED JUNE 30,
12/31/97 --------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
---------------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 14.64 $ 13.39 $ 12.29 $ 11.08 $ 11.60 $ 11.20
-------- -------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income............................ 0.19 0.35 0.37 0.36 0.34 0.57
Net gains or losses on securities (both realized
and unrealized)................................ 0.65 2.11 1.41 1.38 (0.25) 0.47
-------- -------- ------- ------- ------- -------
Total from investment operations............... 0.84 2.46 1.78 1.74 0.09 1.04
-------- -------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net investment income............. (0.19) (0.34) (0.37) (0.34) (0.34) (0.57)
Distributions from capital gains................. (0.67) (0.87) (0.31) (0.18) (0.27) (0.07)
Distributions from return of capital............. -- -- -- (0.01) -- --
-------- -------- ------- ------- ------- -------
Total distributions............................ (0.86) (1.21) (0.68) (0.53) (0.61) (0.64)
-------- -------- ------- ------- ------- -------
Net asset value, end of period.................... $ 14.62 $ 14.64 $ 13.39 $ 12.29 $ 11.08 $ 11.60
======== ======== ======= ======= ======= =======
TOTAL RETURN...................................... 11.52%** 19.95% 14.74% 16.29% 0.71% 9.58%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's)............. $ 15,309 $ 14,272 $10,083 $ 9,540 $ 8,653 $ 6,663
Ratio of expenses to average net assets:
Before expense waiver.......................... 1.32%** -- -- -- -- --
After expense waiver........................... 1.26%** 1.46% 1.44% 1.46% 1.78% 1.71%
Ratio of net investment income to average net
assets:
Before expense waiver.......................... 2.48%** -- -- -- -- --
After expense waiver........................... 2.54%** 2.57% 2.81% 3.18% 2.98% 4.97%
Portfolio turnover............................... 6.07% 19.25% 33.77% 21.03% 17.39% 36.70%
Average Commission Rate Paid*.................... $ 0.0626 $ 0.0732 $0.0861 N/A N/A N/A
</TABLE>
* 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.
** Annualized.
<PAGE> 23
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The tables below set forth financial data for a share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
IAA TRUST
TAX EXEMPT BOND FUND, INC.
SIX MONTHS ENDED YEARS ENDED JUNE 30,
12/31/97 --------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
---------------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 8.70 $ 8.41 $ 8.36 $ 8.19 $ 9.11 $ 8.78
-------- -------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income............................ 0.19 0.36 0.37 0.39 0.39 0.46
Net gains or losses on securities (both realized
and unrealized)................................ 0.27 0.31 0.07 0.20 (0.54) 0.33
-------- -------- ------- ------- ------- -------
Total from investment operations............... 0.46 0.67 0.44 0.59 (0.15) 0.79
-------- -------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net investment income............. (0.19) (0.36) (0.37) (0.39) (0.39) (0.46)
Distributions from capital gains................. (0.02) (0.02) (0.02) (0.03) (0.38) --
-------- -------- ------- ------- ------- -------
Total distributions............................ (0.21) (0.38) (0.39) (0.42) (0.77) (0.46)
-------- -------- ------- ------- ------- -------
Net asset value, end of period.................... $ 8.95 $ 8.70 $ 8.41 $ 8.36 $ 8.19 $ 9.11
======== ======== ======= ======= ======= =======
TOTAL RETURN...................................... 10.50%** 8.15% 5.30% 7.51% (1.86)% 9.19%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's)............. $ 18,010 $ 18,008 $17,744 $18,833 $19,095 $20,026
Ratio of expenses to average net assets:
Before expense waiver.......................... 1.07%** -- -- -- -- --
After expense waiver........................... 1.03%** 1.14% 1.08% 1.06% 1.15% 1.03%
Ratio of net investment income to average net
assets:
Before expense waiver.......................... 4.11%** -- -- -- -- --
After expense waiver........................... 4.15%** 4.23% 4.30% 4.79% 4.47% 5.11%
Portfolio turnover............................... 3.09% 11.35% 14.75% 24.89% 41.94% 39.60%
</TABLE>
<TABLE>
<CAPTION>
IAA TRUST
TAXABLE FIXED INCOME SERIES FUND, INC.
MONEY MARKET SERIES
SIX MONTHS ENDED YEARS ENDED JUNE 30,
12/31/97 --------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
---------------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income............................ 0.02 0.05 0.05 0.05 0.03 0.02
-------- -------- ------- ------- ------- -------
Total from investment operations............... 0.02 0.05 0.05 0.05 0.03 0.02
-------- -------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net investment income............. (0.02) (0.05) (0.05) (0.05) (0.03) (0.02)
-------- -------- ------- ------- ------- -------
Total distributions............................ (0.02) (0.05) (0.05) (0.05) (0.03) (0.02)
-------- -------- ------- ------- ------- -------
Net asset value, end of period.................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======= ======= ======= =======
TOTAL RETURN...................................... 4.89%** 4.63% 4.82% 4.85% 2.86% 2.41%
CURRENT YIELD..................................... 5.01%** N/A N/A N/A N/A N/A
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's)............. $ 67,355 $ 60,674 $33,664 $36,415 $38,699 $33,302
Ratio of expenses to average net assets:
Before expense waiver.......................... 0.84%** -- -- 0.97% 1.06% 1.02%
After expense waiver........................... 0.82%** 0.94% 0.90% 0.73% 0.56% 0.58%
Ratio of net investment income to average net
assets:
Before expense waiver.......................... 4.82%** -- -- 4.56% 2.33% 2.23%
After expense waiver........................... 4.84%** 4.55% 4.74% 4.80% 2.83% 2.67%
</TABLE>
** Annualized.
<PAGE> 24
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 GOVERNMENT LONG-TERM
BOND SERIES BOND SERIES
----------------------------------- -----------------------------------
FOR THE PERIOD FOR THE PERIOD
SIX MONTHS ENDED 01/02/97* SIX MONTHS ENDED 01/02/97*
12/31/97 THROUGH 12/31/97 THROUGH
(UNAUDITED) 06/30/97 (UNAUDITED) 06/30/97
---------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period................ $ 10.01 $ 10.00 $ 10.04 $ 10.00
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.............................. 0.27 0.20 0.28 0.20
Net gains on securities (both realized and
unrealized)...................................... 0.08 0.01 0.32 0.04
------- ------- ------- -------
Total from investment operations................. 0.35 0.21 0.60 0.24
------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net investment income............... (0.27) (0.20) (0.28) (0.20)
Distributions from capital gains................... -- -- (0.01) --
------- ------- ------- -------
Total distributions.............................. (0.27) (0.20) (0.29) (0.20)
------- ------- ------- -------
Net asset value, and of period...................... $ 10.09 $ 10.01 $ 10.35 $ 10.04
======= ======= ======= =======
TOTAL RETURN........................................ 6.99%** 2.10% 11.98%** 2.44%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's)............... $ 26,425 $ 24,285 $ 36,487 $ 32,932
Ratio of expenses to average net assets:
Before expense waiver and reimbursement.......... 1.10%** 3.88%** 1.26%** 3.82%**
After expense waiver and reimbursement........... 0.93%** 0.76%** 0.94%** 0.78%**
Ratio of net investment income to average net
assets:
Before expense waiver and reimbursement.......... 5.05%** 1.78%** 5.11%** 2.11%**
After expense waiver and reimbursement........... 5.22%** 4.90%** 5.43%** 5.15%**
Portfolio turnover................................. 0.00% 0.00% 12.49% 41.77%
</TABLE>
* Commencement of operations.
** Annualized.
<PAGE> 25
IAA TRUST MUTUAL FUNDS -- NOTES TO FINANCIAL STATEMENTS December 31, 1997
(unaudited)
- --------------------------------------------------------------------------------
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 Fund 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 December 31, 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
<PAGE> 26
IAA TRUST MUTUAL FUNDS -- NOTES TO FINANCIAL STATEMENTS December 31, 1997
(unaudited) (Continued)
- --------------------------------------------------------------------------------
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.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
GROWTH FUND ASSET ALLOCATION FUND
------------ ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 1997 JUNE 30, 1997 DECEMBER 31, 1997 JUNE 30, 1997
---------------------- ----------------------- ---------------------- ----------------------
<CAPTION>
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
-------- ----------- --------- ----------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold.................. 373,413 $ 8,329,539 1,905,852 $40,718,271 95,831 $ 1,431,772 274,886 $ 3,715,120
Shares issued through
reinvestment of dividends... 509,569 11,205,624 331,143 5,730,849 48,708 714,838 60,513 776,909
-------- ----------- -------- ----------- -------- ----------- -------- -----------
882,982 19,535,163 2,236,995 46,449,120 144,539 2,146,610 335,399 4,492,029
-------- ----------- -------- ----------- -------- ----------- -------- -----------
Shares redeemed.............. (302,900) (6,720,953) (474,420) (9,325,850) (71,614) (1,065,896) (113,903) (1,528,495)
-------- ----------- -------- ----------- -------- ----------- -------- -----------
Net increase................. 580,082 $12,814,210 1,762,575 $37,123,270 72,925 $ 1,080,714 221,496 $ 2,963,534
======== =========== ======== =========== ======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
TAXABLE FIXED INCOME SERIES FUND
--------------------------------
TAX EXEMPT BOND FUND MONEY MARKET SERIES
--------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 1997 JUNE 30, 1997 DECEMBER 31, 1997 JUNE 30, 1997
---------------------- ---------------------- -------------------------- --------------------------
<CAPTION>
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
-------- ----------- -------- ----------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold........... 15,469 $ 136,598 275,666 $ 2,369,946 26,968,935 $ 26,968,935 74,925,622 $ 74,925,622
Shares issued through
reinvestment of
dividends............ 31,252 277,020 61,144 522,920 1,207,020 1,207,020 1,751,343 1,751,343
-------- ----------- -------- ----------- -------- ----------- -------- -----------
46,721 413,618 336,810 2,892,866 28,175,955 28,175,955 76,676,965 76,676,965
-------- ----------- -------- ----------- -------- ----------- -------- -----------
Shares redeemed....... (105,334) (930,584) (377,076) (3,238,819) (21,493,992) (21,493,992) (49,667,417) (49,667,417)
-------- ----------- -------- ----------- -------- ----------- -------- -----------
Net increase
(decrease)........... (58,613) $ (516,966) (40,266) $ (345,953) 6,681,963 $ 6,681,963 27,009,548 $ 27,009,548
======== =========== ======== =========== ======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
TAXABLE FIXED INCOME SERIES FUND
--------------------------------
SHORT-TERM GOVERNMENT TAXABLE FIXED INCOME SERIES FUND
----------------------- --------------------------------
BOND SERIES LONG-TERM BOND SERIES
----------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SIX MONTHS ENDED PERIOD 1/2/97* SIX MONTHS ENDED PERIOD 1/2/97*
DECEMBER 31, 1997 THROUGH 6/30/97 DECEMBER 31, 1997 THROUGH 6/30/97
---------------------- ----------------------- ---------------------- -----------------------
<CAPTION>
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
-------- ----------- --------- ----------- -------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold................. 351,480 $ 3,537,264 2,427,250 $24,274,746 530,509 $ 5,361,709 3,317,112 $33,219,414
Shares issued through
reinvestment of
dividends.................. 65,655 661,579 3,918 39,239 97,255 995,316 4,765 47,835
-------- ----------- -------- ----------- -------- ----------- -------- -----------
417,135 4,198,843 2,431,168 24,313,985 627,764 6,357,025 3,321,877 33,267,249
-------- ----------- -------- ----------- -------- ----------- -------- -----------
Shares redeemed............. (224,771) (2,269,609) (4,974) (49,859) (383,837) (3,931,110) (41,946) (415,739)
-------- ----------- -------- ----------- -------- ----------- -------- -----------
Net increase................ 192,364 $ 1,929,234 2,426,194 $24,264,126 243,927 $ 2,425,915 3,279,931 $32,851,510
======== =========== ======== =========== ======== =========== ======== ===========
</TABLE>
* Commencement of operations.
NOTE (D) INVESTMENT TRANSACTIONS: Purchases and sales of investment securities,
other than U.S. Government obligations and short-term notes for the six months
ended December 31, 1997 were:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
Growth Fund................................................. $33,327,783 $13,181,885
Asset Allocation Fund....................................... $ 955,907 $ 852,570
Tax Exempt Bond Fund........................................ $ 540,438 $ 1,063,790
Short-Term Government Bond Series........................... $ 2,777,359 $ --
Long-Term Bond Series....................................... $ 5,529,565 $ --
</TABLE>
<PAGE> 27
IAA TRUST MUTUAL FUNDS -- NOTES TO FINANCIAL STATEMENTS December 31, 1997
(unaudited) (Continued)
- --------------------------------------------------------------------------------
For the six months ended December 31, 1997, the aggregate cost of purchases and
proceeds from sales of U.S. Government Securities were:
<TABLE>
<S> <C> <C>
Asset Allocation Fund....................................... $ 95,125 $ --
Short-Term Government Bond Series........................... $ 9,485,666 $ --
Long-Term Bond Series....................................... $21,512,647 $ 3,526,094
</TABLE>
For both Federal income tax and financial statement purposes, the cost of
investments at December 31, 1997 was $106,345,119 for the Growth Fund,
$11,852,324 for the Asset Allocation Fund, $16,670,881 for the Tax Exempt Bond
Fund, $67,342,064 for the Money Market Series, $25,880,876 the Short-Term
Government Bond Series, and $35,357,057 for the Long-Term Bond Series.
The gross unrealized appreciation/depreciation for book and tax purposes at
December 31, 1997 consisted of the following:
<TABLE>
<CAPTION>
APPRECIATION DEPRECIATION
------------ ------------
<S> <C> <C>
Growth Fund................................................. $ 42,040,846 $ 3,266,592
Asset Allocation Fund....................................... $ 3,394,134 $ 129,122
Tax Exempt Bond Fund........................................ $ 1,090,988 $ 0
Short-Term Government Bond Series........................... $ 256,629 $ 23,924
Long-Term Bond Series....................................... $ 978,106 $ 3,273
</TABLE>
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%. Effective November 1, 1997, the Advisor has agreed to continue to reduce
its fees and reimburse the Funds to the extent total annualized expenses exceed
0.85% of average daily net assets. Investment advisory fees, for the six months
ended December 31, 1997, are as follows:
<TABLE>
<CAPTION>
EXPENSES
WAIVED
ADVISORY ADVISORY AND REIMBURSED
FEE FEE BY ADVISOR
-------- -------- --------------
<S> <C> <C> <C>
Short-Term Government Bond Series........................... 0.50% $ 65,671 $ 22,658
Long-Term Bond Series....................................... 0.75% $137,273 $ 59,174
</TABLE>
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 for the six months ended December 31, 1997 were
$2,328, $2,439, $2,203, $2,437, $2,798 and $2,981, 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,
the Tax Exempt Bond Fund, the Short-Term Government Bond Series, and the
Long-Term Bond Series have each adopted a Plan of Distribution (the "Plans"),
effective April 1, 1993. 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 six months ended December 31, 1997, the annualized
Rule 12b-1 Plan expenses incurred for Growth Fund, the Asset Allocation Fund,
the Tax Exempt Fund, the Short-Term Government Bond Series and the Long-Term
Bond Series were 0.02%, 0.03%,0.07%,0.06% and 0.06% of average net assets,
respectively.
<PAGE> 28
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.
SEMI-ANNUAL REPORT
[PICTURE]
IAA Trust Company
Mutual funds
DECEMBER 31, 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
