<PAGE> 1
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
Ailene Miller
Wendell L. Shauman
Robert L. Phelps
OFFICERS
Ronald R. Warfield, President
Bruce D. Finks, Vice President
Robert W. Rush Jr., Vice President
Duane L. Miller, Vice President
Richard M. Miller, Vice President
Rollie D. Moore, Vice President
Philip T. Nelson, Vice President
Paul M. Harmon, Secretary
David A. Magers, Treasurer
Richard F. Day, Controller
INVESTMENT ADVISOR
Country Trust Bank
Bloomington, Illinois
DISTRIBUTOR
Provident Distributors, Inc.
King of Prussia, Pennsylvania
TRANSFER AGENT
PFPC Inc.
King of Prussia, Pennsylvania
CUSTODIAN
Country Trust Bank
808 IAA Drive, P.O. Box 2901
Bloomington, Illinois 61702-2901
www.countryinvestment.com
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
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.
[LOGO COUNTRY TRUST BANK] F30-113-04 (6/00)
Investment Management
[PHOTOGRAPH]
ANNUAL REPORT
IAA TRUST
MUTUAL FUNDS
JUNE 30, 2000
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
[PHOTOGRAPH]
High-caliber asset management
[LOGO COUNTRY TRUST BANK]
Investment Management
<PAGE> 2
PRESIDENT'S LETTER
DEAR SHAREHOLDER:
Over the past year, the most important events affecting both the stock and
bond markets have probably been the actions of the Federal Reserve Board. Since
June 1999, the Fed has raised interest rates six times in an effort to slow
excessive economic growth and ward off budding inflation. Their efforts may now
be paying off. While the stock market, as measured by the S&P 500 Index*, was up
7.2% for the year ended June 30, 2000, for the past six months the Index is
virtually unchanged. Long-term Treasury bonds had a total return of 4.5% for the
year and have been improving over more recent time periods.
Technology stocks were the clear market leaders over the past year, although
they have recently been giving back some of their incredible gains. Other
sectors such as energy, financial, and healthcare performed well for short
periods of time, but rallies eventually tailed off. The challenge now is to
adapt to a changing investment climate. Interest rate increases will slow the
economy, hopefully, to a sustainable level, and not choke off economic growth.
However, this will lead to slowing earnings growth and disruptions in earnings
patterns as companies adjust to the different environment. Given the extended
valuation levels of the market, any negative deviations from investor
expectations will increase the volatility for both individual stocks and the
overall market.
While slowing growth may result in disruptions for the equity markets, it is
a good sign for the fixed income markets by ameliorating the need for further
short-term interest rate increases. Long-term Treasury bond rates have begun to
drop, reflecting optimism that the Fed has been successful in its campaign to
control inflation. If it proves correct that the Fed is near the end of its rate
increase cycle, the bond markets should continue to perform well.
The key question for the remainder of the year will be whether the Fed has
managed to engineer a soft landing for the economy. In this scenario, equity
markets may experience some turmoil as expectations are adjusted and bonds could
show continued solid results. If more rate increases are needed, or if the Fed
has gone too far, both stock and bond markets could suffer lower-than-expected
performance.
IAA TRUST GROWTH FUND, INC.
INCEPTION DATE 4/21/66
The annualized total returns for the Fund for the period ending June 30, 2000,
are as follows:
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
<S> <C> <C>
10.29% 19.24% 13.84%
</TABLE>
These returns assume all dividends and capital gains distributions were
reinvested in the Fund.
The 10.29% return of the IAA Trust Growth Fund compares favorably to the
7.2% return of the S&P 500 Index and ranks in the top half of its peer group.
Lipper, Inc., the major provider of mutual fund analysis, has made several
classification changes for the Fund over the past year and now compares it to
Large-Cap Core Funds. The Growth Fund has no control over such adjustments. This
peer group consists of funds that are principally invested in stocks of large
capitalization companies that have valuation and growth metrics in line with a
universe of all large-cap funds. This classification is consistent with the
investment practices and growth-oriented strategy of the IAA Trust Growth Fund.
The Fund remains committed to investing in stocks of companies that are
reasonably priced in relation to their future prospects. Over the past year, the
Growth Fund has pursued a more cautious, defensive strategy as concerns about
market valuation levels have increased. In spite of the market's increasing
volatility and the significant price erosion that has been seen in certain
market sectors, this course of action has generated positive returns in excess
of the market. We will continue to be patient and selective in our investment
approach as we seek to identify attractive opportunities for our shareholders.
<PAGE> 3
IAA TRUST ASSET ALLOCATION FUND, INC.
INCEPTION DATE 12/7/78
The annualized total returns for the Fund for the period ending June 30, 2000,
are as follows:
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
<S> <C> <C>
8.14% 14.02% 11.72%
</TABLE>
These returns assume all dividends and capital gains distributions were
re-invested in the Fund.
The IAA Trust Asset Allocation Fund rose by 8.14% during the last twelve
months. This performance was better than both the average flexible and balanced
funds, which returned 7.60% and 4.40%, respectively.
Although we chose to increase our stock exposure in late 1998, we have
recently positioned the Fund to be slightly more defensive. We have done this
because we maintain our view that the overall stock market is still quite
expensive. Many of our existing holdings are still hot growth companies with
exorbitant valuations, but our new purchases have emphasized stocks with less
downside risk. There are many industries and individual securities that have
been abandoned by investors as they search for the latest dot-com or
biotechnology company. Specifically, we have increased our holdings in the
capital goods and basic materials sectors. At some point, we think that
investors will recognize the value in these other areas and push those stock
prices higher.
On the bond side, higher interest rates have led us to increase our average
maturity. We believe that inflation is under control and bond prices may have
some significant upside potential over the next few years.
The asset allocation as of June 30, 2000, was 61% stocks, 32% bonds, and 7%
cash equivalents.
IAA TRUST TAX EXEMPT BOND FUND, INC.
INCEPTION DATE 12/7/78
The annualized total returns for the Fund for the period ending June 30, 2000,
are as follows:
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
<S> <C> <C>
3.16% 5.21% 5.85%
</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.
This time last year, inflation worries began to creep into the market. The
Federal Reserve responded, increasing rates three times during the second half
of the year. Near year-end, the rising Treasury yields coupled with decreasing
demand and illiquidity in municipal bonds combined to push municipal yields to a
three-year high.
The year 2000 so far has been a different story. New issuance of municipal
bonds has been paltry and when municipal yields rose to nearly 6% in January,
investors stepped back in and began to buy bonds. As a consequence, the
municipal market performed fairly well relative to other sectors. The Fund's
one-year total return was 3.16%. This compares to the Lipper Intermediate
Municipal Bond Index return of 1.22% and the Lehman Seven-Year Municipal Bond
Index return of 3.99%.
Our outlook for the municipal bond market remains favorable. Improving
credit fundamentals will continue to dominate the market and help attract
investors looking for value. Additionally, our optimism relates to the
individual investor reallocating assets. The recent tone of the stock market has
motivated investors to realize their gains in equities. They have diversified
their portfolios by allocating a higher percentage to fixed income securities.
In many cases, they are turning to municipal bonds as an alternative. The
continued lack of supply, down roughly 30% from 1999 levels, coupled with this
increased demand, should bode well for municipal bonds.
<PAGE> 4
IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.
MONEY MARKET SERIES**
INCEPTION DATE 10/26/81
During the fiscal year, the Federal Reserve increased the Fed Funds Target
Rate from 5.00% to 6.50%. As a result of these higher short-term interest rates,
the IAA Trust Money Market Series seven-day yield increased from 4.21% on June
30,1999, to 5.75% on June 30, 2000. In addition, the 12-month total return
increased from 4.54% to 5.13% over the same period. This compares to the Lipper
average of 4.52%. Although recent economic indicators have begun to show the
economy is slowing, we believe the Fed will continue to keep a close eye on
inflationary pressures.
SHORT-TERM GOVERNMENT BOND SERIES***
INCEPTION DATE 1/2/97
The annualized total returns for the Fund for the period ending June 30, 2000,
are as follows:
<TABLE>
<CAPTION>
1 YEAR SINCE INCEPTION
------ ---------------
<S> <C>
4.43% 4.96%
</TABLE>
These returns assume all dividends and capital gains distributions were
reinvested in the Fund.
U. S. Treasury prices have risen recently, driving yields to their lowest
levels since April. Signs of slower growth and inflation boosted optimism that
the Federal Reserve is near the end of its cycle of interest rate increases. The
yield on the two-year Treasury note is down to 6.0% after peaking at 6.9%
earlier in the year.
We continue to overweight agencies in the Fund as they offer a handsome
yield pick-up over Treasuries with little additional credit risk.
For the year, our 4.43% return compares to the Merrill Lynch Short
Government Bond Index return of 4.90%.
LONG-TERM BOND SERIES***
INCEPTION DATE 1/2/97
The annualized total returns for the Fund for the period ending June 30, 2000,
are as follows:
<TABLE>
<CAPTION>
1 YEAR SINCE INCEPTION
------ ---------------
<S> <C>
4.21% 5.75%
</TABLE>
These returns assume all dividends and capital gains distributions were
reinvested in the Fund.
Stocks may still be center stage, but bonds at long last are getting the
notice they deserve. The renewed interest in bonds reflects optimism that the
Federal Reserve is winning the war against above-trend growth and budding
inflation. High-quality corporate bonds are offering attractive yields that are
competitive with alternative investments.
<PAGE> 5
During the year we extended the duration of the Fund to take advantage of
attractive long-term interest rates. We have overweighted spread sectors such as
corporate and mortgage-backed securities as yield spreads are quite wide by
historical standards. The average maturity of the Fund now stands at
approximately 13 years and has an average quality of AA.
For the year, the Fund had a 4.21% return which compares to the Lipper
Corporate Debt, A-Rated Index 3.01% return.
Sincerely,
[Ronald Warfield Photo]
/s/ Ronald R. Warfield
Ronald R. Warfield
President
---------------
* All indices mentioned are unmanaged indices not available for investment.
** Although a money market seeks to maintain a stable net asset value of $1.00
per share, there is no assurance it will be able to do so. An investment in
the Fund is neither insured nor guaranteed by the U.S. Government; it is
possible to lose money.
*** U.S. Treasury bonds unlike mutual funds are direct obligations of the U.S.
Government that offer a fixed rate of return.
Past performance is no guarantee of future results. Share prices will
fluctuate and when redeemed, shares may be worth more or less than their
original investment. Funds are distributed by Provident Distributors, Inc., 3200
Horizon Drive, King of Prussia, PA 19406. Must be preceded or accompanied by a
prospectus. DFU 8/00.
<PAGE> 6
IAA TRUST MUTUAL FUNDS -- PORTFOLIO HIGHLIGHTS (UNAUDITED)
IAA TRUST GROWTH FUND, INC.
PORTFOLIO CHANGES For the Year Ended June 30, 2000
<TABLE>
<CAPTION>
MAJOR PURCHASES MAJOR SALES
<S> <C>
Worldcom, Inc. (1) Analog Devices, Inc.
Emerson Electric Co. (1) Sun Microsystems, Inc.
Allstate Corp. (1) Oracle Corp.
Xerox Corp. Reuters Group PLC, ADS (2)
Masco Corp. (1) Pharmacia Corp. (2)
Lucent Technologies, Inc. (1) Smithkline Beecham PLC, ADR (2)
Biogen, Inc. (1) MBNA Corp. (2)
Newell Rubbermaid, Inc. BP Amoco PLC (2)
Abbott Laboratories (1) General Electric Co.
Nucor Corp. (1) American Express Co.
(1) New Holdings (2) Deletions
</TABLE>
TEN LARGEST HOLDINGS June 30, 2000
<TABLE>
<CAPTION>
PERCENT
VALUE OF FUND
----------- -------
<S> <C> <C>
Intel Corp.................................................. $ 6,590,794 3.39%
General Electric Co......................................... 6,519,000 3.35
Cisco Systems, Inc.......................................... 6,102,000 3.14
Microsoft Corp.............................................. 6,000,000 3.08
Tellabs, Inc................................................ 5,475,000 2.81
Oracle Corp................................................. 4,791,562 2.46
Sun Microsystems, Inc....................................... 4,183,125 2.15
Merck & Co., Inc............................................ 4,137,750 2.13
Newell Rubbermaid, Inc...................................... 3,671,950 1.89
Wal-Mart Stores, Inc........................................ 3,457,500 1.78
----------- -----
$50,928,681 26.18%
=========== =====
</TABLE>
IAA TRUST ASSET ALLOCATION FUND, INC.
PORTFOLIO CHANGES For the Year Ended June 30, 2000
<TABLE>
<CAPTION>
MAJOR PURCHASES MAJOR SALES
<S> <C>
U.S. Treasury Bond, 6.500%, 02/15/10 (1) Oracle Corp.
Biogen, Inc. (1) Analog Devices, Inc.
Government National Mortgage Association, 6.500%, Sun Microsystems, Inc.
07/15/29 (1) U.S. Treasury Inflation Index Bond,
Federal National Mortgage Association, 6.375%, 06/15/09 3.625%, 04/15/28 (2)
(1) Pharmacia Corp. (2)
Worldcom, Inc. (1) American Express Co.
Bank One Corp. (1) Dayton Hudson Corp., 5.895%, 06/15/37 (2)
Federal Home Loan Mortgage Corp., 6.625%, 09/15/09 (1) Merck & Co., Inc., 5.760%, 05/03/37 (2)
Xerox Corp. (1) Discover Credit Card Trust, 6.750%,
BMC Software, Inc. (1) 02/16/02 (2)
Nucor Corp. (1) Xerox Corp., 5.545%, 07/22/37 (2)
(1) New Holdings (2) Deletions
</TABLE>
TEN LARGEST HOLDINGS June 30, 2000
<TABLE>
<CAPTION>
PERCENT
VALUE OF FUND
---------- -------
<S> <C> <C>
General Electric Co......................................... $ 636,000 2.57%
Cisco Systems, Inc.......................................... 572,062 2.31
U.S. Treasury Notes, 6.500%, 02/15/10....................... 516,550 2.09
Microsoft Corp.............................................. 512,000 2.07
Sun Microsystems, Inc....................................... 500,156 2.02
Tellabs, Inc................................................ 479,062 1.94
Oracle Corp................................................. 470,750 1.90
Intel Corp.................................................. 467,906 1.89
U.S. Treasury Notes, 5.250%, 11/15/28....................... 398,390 1.61
Analog Devices, Inc......................................... 380,000 1.54
---------- -----
$4,932,876 19.94%
========== =====
</TABLE>
<PAGE> 7
IAA TRUST MUTUAL FUNDS -- PORTFOLIO HIGHLIGHTS (UNAUDITED)
IAA TRUST TAX EXEMPT BOND FUND, INC.
PORTFOLIO CHANGES For the Year Ended June 30, 2000
<TABLE>
<CAPTION>
MAJOR PURCHASES MAJOR SALES
<S> <C>
New Jersey State Unlimited General Obligation, 6.000%, Wisconsin State Clean Water Revenue Bond, 5.300%, 06/01/12 (2)
02/15/11 (1) Shelby County, Tennessee School General Obligation, Series B,
Cleveland, Ohio Waterworks Revenue Bond, Series G, 5.875%, 06/01/18 (2)
5.500%, 01/01/13 (1) Bexar County, Texas Detention Facilities Limited Tax General
Michigan State Hospital Financing Authority Revenue Obligation, 5.750%, 06/15/10 (2)
Ascension Health Credit, Series A, 5.500%, Pennsylvania Intergovernmental Corp. Authority, Special Tax Revenue,
11/15/06 (1) 5.450%, 06/15/08 (2)
Missouri State Health and Educational Facilities Revenue St Paul, Minnesota Independent School District #625 General
Bond, 6.000%, 05/15/07 (1) Obligation, Series C, 5.250%, 02/01/13 (2)
Washington State Public Power Supply Revenue, Long Island, New York Power Authority Revenue, 4.000%,
Series A, 5.750%, 07/01/09 (1) 04/01/04 (2)
Atlanta, Georgia Airport Revenue Bonds, Series A, Garland, Texas Limited Tax General Obligation, 5.800%, 08/15/12 (2)
5.750%, 01/01/11 (1) Pike Township, Indiana Revenue Bond, 5.700%, 02/01/01 (2)
Regional Transportation Authority Illinois Unlimited Tax New York State Highway & Bridge Authority Revenue, Series B,
General Obligation, 5.750%, 06/01/11 (1) 5.000%, 04/01/08 (2)
(1) New Holdings (2) Deletions
</TABLE>
TEN LARGEST HOLDINGS June 30, 2000
<TABLE>
<CAPTION>
PERCENT
VALUE OF FUND
---------- -------
<S> <C> <C>
Illinois Health Facilities Authority Revenue, 6.800%,
10/01/24................................................... $ 836,024 5.33%
Massachusetts State Grant Anticipation Revenue Bond, 5.000%,
12/15/08................................................... 803,544 5.13
University of Kentucky, University Building Revenue, 4.150%,
05/01/01................................................... 697,753 4.45
Texas A&M University Revenue Financing System, 5.375%,
05/15/14................................................... 598,800 3.82
Pennsylvania State Higher Education Revenue Bonds, 5.600%,
09/01/10................................................... 588,271 3.75
Peru, Indiana Community School Corp. Revenue, 6.750%,
01/01/09................................................... 578,413 3.69
Indiana University Trustee Revenue Bonds, Student Fees,
5.700%, 08/01/10........................................... 565,603 3.61
Connecticut State Unlimited Tax General Obligation, 5.400%,
03/15/08................................................... 563,920 3.60
Illinois State Sales Tax Revenue, 5.400%, 06/15/13.......... 552,041 3.52
Cape Girardeau, Missouri Waterworks System Revenue, 7.450%,
03/01/05................................................... 543,130 3.46
---------- -----
$6,327,499 40.36%
========== =====
</TABLE>
IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.
MONEY MARKET SERIES
TEN LARGEST HOLDINGS June 30, 2000
<TABLE>
<CAPTION>
PERCENT
VALUE OF FUND
----------- -------
<S> <C> <C>
Texaco, Inc., 6.56%, 07/14/00............................... $ 3,309,000 4.82%
Bell Atlantic Network Funding, 6.54%, 07/31/00.............. 2,188,010 3.19
DaimlerChrysler Corp., 6.62%, 08/14/00...................... 2,060,000 3.00
Quebec Province, 8.71%, 02/15/01............................ 2,023,710 2.95
American General Finance Corp., 6.32%, 08/22/00............. 2,000,000 2.91
AT&T Corp., 6.53%, 08/01/00................................. 1,988,754 2.90
USAA Capital Corp., 6.53%, 08/16/00......................... 1,983,312 2.89
Anheuser-Busch Companies, Inc., 6.20%, 10/04/00............. 1,967,278 2.86
Coca-Cola Co., 6.50%, 07/17/00.............................. 1,794,800 2.61
General Electric Capital Corp., 6.56%, 07/13/00............. 1,700,000 2.47
----------- -----
$21,014,864 30.60%
=========== =====
</TABLE>
PORTFOLIO CHARACTERISTICS June 30, 2000
CURRENT YIELD: 5.78%
30-DAY AVERAGE YIELD: 5.65%
7-DAY AVERAGE YIELD: 5.75%
AVERAGE DAYS TO MATURITY: 46.0
<PAGE> 8
IAA TRUST MUTUAL FUNDS -- PORTFOLIO HIGHLIGHTS (UNAUDITED)
IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.
SHORT-TERM GOVERNMENT BOND SERIES
PORTFOLIO CHANGES For the Year Ended June 30, 2000
<TABLE>
<CAPTION>
MAJOR PURCHASES MAJOR SALES
<S> <C>
Private Export Funding, 7.650%, 05/15/06 (1) Federal Home Loan Bank, 8.000%, 09/20/04 (2)
Private Export Funding, 6.450%, 09/30/04 (1) Merck & Co., Inc., 5.760%, 05/03/37 (2)
Federal Home Loan Mortgage Corp., 6.250%, 07/15/04 (1) Federal Home Loan Bank, 8.340%, 01/26/05 (2)
Federal Farm Credit Bank, 6.625%, 02/01/02 (1)
Federal National Mortgage Association, 6.500%, 09/25/19 (1)
Ford Credit Auto Owner Trust, 6.080%, 09/16/02 (1)
Federal National Mortgage Association, 5.750%, 04/15/03 (1)
Federal National Mortgage Association, 5.000%, 09/25/06 (1)
(1) New Holdings (2) Deletions
</TABLE>
TEN LARGEST HOLDINGS June 30, 2000
<TABLE>
<CAPTION>
PERCENT
VALUE OF FUND
----------- -------
<S> <C> <C>
U.S. Treasury Notes, 6.500%, 08/31/01....................... $ 3,000,930 11.12%
U.S. Treasury Notes, 6.250%, 02/28/02....................... 1,994,180 7.39
Private Export Funding, 7.650%, 05/15/06.................... 1,541,400 5.71
Federal National Mortgage Association, 6.500%, 08/01/04..... 1,497,306 5.55
Federal National Mortgage Association, 5.100%, 09/25/00..... 996,630 3.69
Federal Farm Credit Bank, 6.625%, 02/01/02.................. 996,250 3.69
Federal Home Loan Bank, 6.140%, 12/17/01.................... 988,840 3.66
Federal National Mortgage Association, 5.400%, 05/07/01..... 988,750 3.66
Federal Home Loan Bank, 5.500%, 08/13/01.................... 985,500 3.65
Federal Home Loan Bank, 5.945%, 04/01/02.................... 983,750 3.65
----------- -----
$13,973,536 51.77%
=========== =====
</TABLE>
IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.
LONG-TERM BOND SERIES
PORTFOLIO CHANGES For the Year Ended June 30, 2000
<TABLE>
<CAPTION>
MAJOR PURCHASES MAJOR SALES
<S> <C>
Government National Mortgage Association, 6.500%, Merck & Co., Inc., 5.760%, 05/03/37 (2)
07/15/29 (1) Xerox Corp., 5.545%, 07/22/37 (2)
Federal Home Loan Bank, 5.800%, 09/02/08 (1) Associates Corp. of North America, 5.960%,
Government National Mortgage Association, 7.500%, 05/15/37 (2)
11/15/29 (1) Dayton Hudson Corp., 5.895%, 06/15/37 (2)
U.S. Treasury Bond, 5.250%, 11/15/28 Sherwin-Williams Co., 5.500%, 10/15/27 (2)
Federal National Mortgage Association, 6.375%, 06/15/09 Federal Home Loan Mortgage Corp., 7.000%,
(1) 03/01/12
Northwest Airlines Corp., 7.935%, 04/01/19 (1) Mattel, Inc., 6.000%, 07/15/03 (2)
Allstate Corp., 7.200%, 12/01/09 (1) Raytheon Co., 6.300%, 03/15/05
Federal National Mortgage Association, 7.604%, 12/25/19
(1)
CSX Transportation, Inc., 6.500%, 04/15/04 (1)
Federal Farm Credit Bank, 6.690%, 09/08/10 (1)
(1) New Holdings (2) Deletions
</TABLE>
TEN LARGEST HOLDINGS June 30, 2000
<TABLE>
<CAPTION>
PERCENT
VALUE OF FUND
----------- -------
<S> <C> <C>
Federal Home Loan Mortgage Corp., 7.000%, 03/01/12.......... $ 2,402,601 6.01%
Government National Mortgage Association, 6.500%,
07/15/29................................................... 1,552,862 3.88
U.S. Treasury Bonds, 5.250%, 11/15/28....................... 1,460,762 3.65
Government National Mortgage Association, 8.000%,
07/15/26................................................... 1,146,192 2.86
Federal Home Loan Bank, 5.800%, 09/02/08.................... 1,100,280 2.75
Government National Mortgage Association, 6.500%,
04/15/26................................................... 1,035,528 2.59
Government National Mortgage Association, 7.500%,
11/15/29................................................... 991,778 2.48
U.S. Treasury Bonds, 6.000%, 02/15/26....................... 977,810 2.44
California Infrastructure PG & E, 6.420%, 09/25/08.......... 971,410 2.43
Federal Home Loan Mortgage Corp., 6.000%, 03/15/09.......... 758,059 1.90
----------- -----
$12,397,282 30.99%
=========== =====
</TABLE>
<PAGE> 9
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS June 30, 2000
--------------------------------------------------------------------------------
IAA TRUST GROWTH FUND, INC.
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
COMMON STOCK -- 93.31%
BASIC INDUSTRY -- 0.83%
Nucor Corp. ......................... 48,700 $ 1,616,231
------------
CAPITAL GOODS -- 7.65%
Boeing Co. .......................... 40,050 1,674,591
Caterpillar, Inc. ................... 48,300 1,636,162
Emerson Electric Co. ................ 54,000 3,260,250
General Electric Co. ................ 123,000 6,519,000
Honeywell International, Inc. ....... 53,000 1,785,437
------------
14,875,440
------------
COMMUNICATION SERVICES -- 6.47%
AT&T Corp. .......................... 78,000 2,466,750
GTE Corp. ........................... 36,000 2,241,000
SBC Communications, Inc. ............ 46,500 2,011,125
U.S. West, Inc. ..................... 33,900 2,906,925
WorldCom, Inc.* ..................... 64,280 2,948,845
------------
12,574,645
------------
CONSUMER CYCLICAL -- 7.39%
Gentex Corp.* ....................... 124,000 3,115,500
Intimate Brands, Inc. ............... 104,000 2,054,000
Jones Apparel Group, Inc.* .......... 72,900 1,713,150
Masco Corp. ......................... 115,000 2,077,187
Tribune Company ..................... 56,000 1,960,000
Wal-Mart Stores, Inc. ............... 60,000 3,457,500
------------
14,377,337
------------
CONSUMER STAPLES -- 9.13%
Coca-Cola Co. ....................... 20,000 1,148,750
Dean Foods Co. ...................... 54,100 1,714,294
Fox Entertainment Group, Inc.* ...... 55,000 1,670,625
Gillette Co. ........................ 56,620 1,978,161
Kimberly-Clark Corp. ................ 39,000 2,237,625
Newell Rubbermaid, Inc. ............. 142,600 3,671,950
Philip Morris Companies, Inc. ....... 50,000 1,328,125
Procter & Gamble Co. ................ 50,000 2,862,500
Unilever N.V ........................ 26,785 1,151,755
------------
17,763,785
------------
ENERGY -- 8.52%
Chevron Corp. ....................... 22,800 1,933,725
Diamond Offshore Drilling, Inc. ..... 58,000 2,037,250
Exxon Mobil Corp. ................... 35,000 2,747,500
Halliburton Co. ..................... 48,000 2,265,000
Phillips Petroleum Co. .............. 28,000 1,419,250
Royal Dutch Petroleum Co., ADR ...... 45,000 2,770,313
Schlumberger, Ltd. .................. 30,000 2,238,750
Unocal Corp. ........................ 35,000 1,159,375
------------
16,571,163
------------
FINANCE -- 12.04%
Allstate Corp. ...................... 94,000 2,091,500
American Express Co. ................ 36,000 1,876,500
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
American International Group,
Inc. ............................... 20,000 $ 2,350,000
Associates First Capital Corp. ...... 75,000 1,673,438
Bank Of New York .................... 51,000 2,371,500
Bank One Corp. ...................... 49,500 1,314,844
Citigroup, Inc. ..................... 55,000 3,313,750
Fannie Mae .......................... 45,000 2,348,438
MGIC Investment Corp. ............... 48,000 2,184,000
Washington Mutual, Inc. ............. 63,500 1,833,563
Wells Fargo Co. ..................... 53,000 2,053,750
------------
23,411,282
------------
HEALTH -- 11.21%
Abbott Laboratories ................. 53,150 2,368,497
Becton, Dickinson & Co. ............. 45,000 1,290,938
Biogen, Inc. * ...................... 37,000 2,386,500
Bristol-Myers Squibb Co. ............ 45,000 2,621,250
Elan Corp., PLC, ADR ................ 59,000 2,857,813
Johnson & Johnson ................... 30,000 3,056,250
Merck & Co., Inc. ................... 54,000 4,137,750
Pfizer, Inc. ........................ 64,425 3,092,400
------------
21,811,398
------------
TECHNOLOGY -- 26.20%
Agilent Technologies, Inc.* ......... 7,628 562,565
America Online, Inc.* ............... 34,000 1,793,500
Analog Devices, Inc. ................ 33,425 2,540,300
BMC Software, Inc. .................. 50,000 1,824,219
Cisco Systems, Inc.* ................ 96,000 6,102,000
W.W. Grainger, Inc. ................. 43,000 1,324,937
Hewlett-Packard Co. ................. 20,000 2,497,500
Intel Corp. ......................... 49,300 6,590,794
International Business Machines
Corp. .............................. 25,500 2,793,844
Lucent Technologies, Inc. ........... 47,450 2,811,412
Microsoft Corp.* .................... 75,000 6,000,000
Oracle Corp.* ....................... 57,000 4,791,562
Sun Microsystems, Inc.* ............. 46,000 4,183,125
Tellabs, Inc.* ...................... 80,000 5,475,000
Xerox Corp. ......................... 80,000 1,660,000
------------
50,950,758
------------
TRANSPORTATION -- 1.31%
Burlington Northern Corp. ........... 45,000 1,032,187
FedEx Corp.* ........................ 40,000 1,520,000
------------
2,552,187
------------
UTILITIES -- 2.56%
DPL, Inc. ........................... 100,000 2,193,750
NICOR, Inc. ......................... 49,150 1,603,519
Wisconsin Energy Corp. .............. 60,000 1,188,750
------------
4,986,019
------------
TOTAL COMMON STOCK
(cost $122,171,132) ................ 181,490,245
------------
</TABLE>
<PAGE> 10
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS June 30, 2000
--------------------------------------------------------------------------------
IAA TRUST GROWTH FUND, INC. (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------ ------------
<S> <C> <C>
COMMERCIAL PAPER -- 4.10%
American Express Credit Corp
6.79%, 07/05/00 .................. $ 1,000,000 $ 1,000,000
Ford Motor Credit Corp.
6.60%, 07/07/00 ................... 1,500,000 1,500,000
General Motors Acceptance Corp.
6.23%, 07/10/00 ................... 500,000 500,000
General Electric Co.
6.24%, 07/25/00 ................... 764,000 764,000
DaimlerChrysler
6.62%, 08/14/00 ................... 3,205,000 3,205,000
Prudential Funding Corp.
6.71%, 09/12/00 ................... 1,000,000 1,000,180
------------
TOTAL COMMERCIAL PAPER
(cost $7,969,000).................. 7,969,180
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------
<S> <C> <C>
OTHER SHORT TERM INVESTMENTS -- 2.38%
MONEY MARKET FUNDS
Harris Insight Money Market Fund ...... 352,336 $ 352,336
Federated Prime Obligation Fund ....... 4,285,913 4,285,913
------------
TOTAL MONEY MARKET FUNDS
(cost $4,638,249)..................... 4,638,249
------------
TOTAL INVESTMENTS -- 99.79%
(cost $134,778,381)................... 194,097,674
------------
CASH AND OTHER ASSETS NET OF
LIABILITIES -- 0.21%.................. 406,835
------------
NET ASSETS -- 100.00%.................. $194,504,509
============
* Non-income producing.
</TABLE>
See notes to financial statements.
<PAGE> 11
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS June 30, 2000
--------------------------------------------------------------------------------
IAA TRUST ASSET ALLOCATION FUND, INC.
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
COMMON STOCK -- 60.92%
BASIC INDUSTRIES -- 0.60%
Nucor Corp. ......................... 4,500 $ 149,344
------------
CAPITAL GOODS -- 4.38%
Boeing Co. .......................... 3,500 146,344
Caterpillar, Inc. ................... 4,500 152,437
General Electric Co. ................ 12,000 636,000
Honeywell International, Inc. ....... 4,400 148,225
------------
1,083,006
------------
COMMUNICATION SERVICES -- 4.49%
AT&T Corp. .......................... 4,500 142,312
BellSouth Corp. ..................... 3,000 127,875
GTE Corp. ........................... 3,000 186,750
SBC Communications, Inc. ............ 4,694 203,016
U.S. West, Inc. ..................... 1,500 128,625
WorldCom, Inc.*...................... 7,000 321,125
------------
1,109,703
------------
CONSUMER CYCLICAL -- 4.55%
Gentex Corp. ........................ 9,500 238,688
Intimate Brands, Inc. ............... 10,450 206,388
Jones Apparel Group, Inc.*........... 7,000 164,500
Masco Corp. ......................... 7,100 128,244
Tribune Co. ......................... 4,000 140,000
Wal-Mart Stores, Inc. ............... 4,300 247,788
------------
1,125,608
------------
CONSUMER STAPLES -- 5.37%
Albertson's Inc. .................... 2,900 96,425
Dean Foods Co. ...................... 4,900 155,269
Fox Entertainment Group, Inc.*....... 6,000 182,250
Gillette Co. ........................ 3,600 125,775
Kimberly-Clark Corp. ................ 4,200 240,975
Newell Rubbermaid, Inc. ............. 8,800 226,600
Philip Morris Companies, Inc. ....... 4,000 106,250
Procter & Gamble Co. ................ 3,400 194,650
------------
1,328,194
------------
ENERGY -- 4.78%
Diamond Offshore Drilling, Inc. ..... 4,800 168,600
Exxon Mobil Corp. ................... 3,400 266,900
Halliburton Co. ..................... 4,500 212,344
Phillips Petroleum Co. .............. 3,000 152,063
Royal Dutch Petroleum Co., ADR....... 4,000 246,250
Unocal Corp. ........................ 4,100 135,813
------------
1,181,970
------------
FINANCE -- 8.37%
Allstate Corp. ...................... 5,200 115,700
American Express Co. ................ 2,400 125,100
American International Group,
Inc. ............................... 1,600 188,000
Associates First Capital Corp. ...... 6,000 133,875
Bank of America Corp. ............... 3,055 131,365
Bank of New York..................... 4,500 209,250
Bank One Corp. ...................... 5,500 146,094
Citigroup, Inc. ..................... 4,012 241,723
Fannie Mae........................... 3,800 198,312
MGIC Investment Corp. ............... 4,200 191,100
Washington Mutual, Inc. ............. 4,800 138,600
Wells Fargo Co. ..................... 6,500 251,875
------------
2,070,994
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
HEALTH -- 7.23%
Becton, Dickinson & Co. ............. 4,600 $ 131,962
Biogen, Inc.*........................ 4,100 264,450
Bristol-Myers Squibb Co. ............ 5,500 320,375
Elan Corp., PLC, ADR................. 6,100 295,469
Johnson & Johnson.................... 2,500 254,687
Merck & Co., Inc. ................... 4,000 306,500
Pfizer, Inc. ........................ 4,500 216,000
------------
1,789,443
------------
TECHNOLOGY -- 18.15%
Agilent Technologies, Inc.*.......... 381 28,099
America Online, Inc.*................ 2,600 137,150
Analog Devices, Inc. ................ 5,000 380,000
BMC Software, Inc. .................. 5,000 182,422
Cisco Systems, Inc.*................. 9,000 572,062
W.W. Grainger, Inc. ................. 3,500 107,844
Hewlett-Packard Co. ................. 1,000 124,875
Intel Corp. ......................... 3,500 467,906
International Business Machines
Corp. .............................. 2,400 262,950
Lucent Technologies, Inc. ........... 2,500 148,125
Microsoft Corp.*..................... 6,400 512,000
Oracle Corp.*........................ 5,600 470,750
Sun Microsystems, Inc.*.............. 5,500 500,156
Tellabs, Inc.*....................... 7,000 479,062
Xerox Corp. ......................... 5,700 118,275
------------
4,491,676
------------
TRANSPORTATION -- 0.92%
Burlington Northern Corp. ........... 4,600 105,512
FedEx Corp.*......................... 3,200 121,600
------------
227,112
------------
UTILITIES/TELEPHONE -- 2.08%
Florida Progress Corp. .............. 2,200 103,125
NICOR, Inc. ......................... 4,500 146,812
Williams Companies, Inc. ............ 4,000 166,750
Wisconsin Energy Corp. .............. 5,000 99,062
------------
515,749
------------
TOTAL COMMON STOCK
(cost $9,939,351)................... 15,072,799
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
-----------
<S> <C> <C>
BONDS AND NOTES -- 31.55%
ASSET BACKED -- 3.33%
Amresco Residential Securities
Mortgage Loan Trust
6.925%, 06/25/25.................... $ 100,000 98,385
Chemical Master Credit Card Trust
5.980%, 09/15/08.................... 200,000 189,506
Discover Credit Card Trust
5.600%, 05/15/06.................... 250,000 237,478
Green Tree Financial Corp.
6.870%, 01/15/29.................... 100,000 96,103
The Money Store Home Equity Trust
8.140%, 10/15/27.................... 200,000 201,098
------------
822,570
------------
</TABLE>
<PAGE> 12
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS June 30, 2000
--------------------------------------------------------------------------------
IAA TRUST ASSET ALLOCATION FUND, INC. (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<S> <C> <C>
AUTO -- 0.59%
Ford Credit Auto Owner Trust
5.650%, 10/15/01.................... $ 40,440 $ 40,386
General Motors Acceptance Corp.
8.875%, 06/01/10.................... 100,000 106,625
------------
147,011
------------
BANKING -- 2.04%
ABN AMRO N.V. (Chicago) Global Bond
7.125%, 06/18/07.................... 100,000 97,000
Citicorp
7.200%, 06/15/07.................... 100,000 97,750
International American Development
Bank 8.875%, 06/01/09............... 100,000 110,875
NationsBank Corp.
5.750%, 03/15/01.................... 200,000 198,250
------------
503,875
------------
CHEMICALS -- 0.40%
Dupont (E.I.) De Nemours & Co.
6.750%, 10/15/02.................... 100,000 99,375
------------
FINANCE -- 1.53%
Household Finance Corp.
6.400%, 06/17/08.................... 200,000 181,250
Merrill Lynch & Co., Inc.
6.020%, 05/11/01.................... 200,000 198,000
------------
379,250
------------
FOOD & BEVERAGE -- 2.14%
Campbell Soup Co.
4.750%, 10/01/03.................... 200,000 186,750
Coca-Cola Co.
6.625%, 10/01/02.................... 100,000 99,375
Coca-Cola Enterprises
7.000%, 10/01/26.................... 250,000 244,375
------------
530,500
------------
INDUSTRIAL -- 0.81%
Amoco Canada Petroleum Co.
7.950%, 10/01/22.................... 100,000 101,875
Raytheon Co.
5.950%, 03/15/01.................... 100,000 99,000
------------
200,875
------------
MUNICIPAL -- 1.00%
New York State Power Authority
Revenue 6.050%, 02/15/15............ 250,000 246,705
------------
RETAILING -- 1.54%
Sears Roebuck Acceptance Corp.
6.000%, 03/20/03.................... 200,000 191,750
Sears Roebuck Credit Account Master
Trust 5.650%, 03/15/09.............. 200,000 190,199
------------
381,949
------------
TECHNOLOGY -- 0.61%
Sun Microsystems, Inc.
7.500%, 08/15/06.................... 150,000 149,812
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<S> <C> <C>
TELEPHONE UTILITY -- 2.66%
Bell Telephone Co. of PA Putable
Debentures 8.350%, 12/15/30......... $ 200,000 $ 209,500
BellSouth Capital Funding Corp.
6.040%, 11/15/26.................... 200,000 196,500
Chesapeake & Potomac Telephone Co. of
Virginia Debentures 8.375%, 10/01/29 100,000 104,000
New Jersey Bell Telephone Co.
7.850%, 11/15/29.................... 150,000 147,938
------------
657,938
------------
TRANSPORTATION -- 0.79%
Norfolk Southern Corp.
7.050%, 05/01/37.................... 200,000 195,750
------------
U.S. GOVERNMENT AGENCIES -- 7.54%
Federal Home Loan Mortgage Corp.
10.750%, 07/01/00................... 57 57
8.750%, 04/01/01.................... 3,810 3,859
10.150%, 04/15/06................... 1,891 1,893
6.500%, 06/15/06.................... 121,624 120,897
6.000%, 12/15/08.................... 200,000 189,439
6.625%, 09/15/09.................... 200,000 193,250
6.400%, 09/25/28.................... 250,000 231,681
Federal National Mortgage Association
6.375%, 06/15/09.................... 250,000 237,310
6.000%, 02/18/21.................... 300,000 288,193
6.247%, 03/17/21.................... 285,420 273,403
Government National Mortgage
Association
Pool #030111
9.000%, 05/15/09.................... 12,011 12,417
Government National Mortgage
Association
Pool #23653
9.500%, 06/15/09.................... 5,491 5,712
Government National Mortgage
Association
Pool #32147
9.500%, 08/15/09.................... 1,230 1,279
Government National Mortgage
Association
Pool #161621
9.000%, 07/15/16.................... 32,188 33,274
Government National Mortgage
Association
Pool #434441
6.5000%, 07/15/29................... 288,374 273,863
------------
1,866,527
------------
U.S. GOVERNMENT OBLIGATIONS -- 6.57%
U.S. Treasury Bonds
11.625%, 11/15/04................... 100,000 120,062
6.500%, 02/15/10.................... 500,000 516,550
5.250%, 11/15/28.................... 450,000 398,390
U.S. Treasury Notes
6.625%, 04/30/02.................... 100,000 100,281
6.875%, 05/15/06.................... 150,000 154,406
6.500%, 10/15/06.................... 200,000 202,230
Tennessee Valley Authority
5.375%, 11/13/08.................... 150,000 133,433
------------
1,625,352
------------
TOTAL BONDS AND NOTES
(cost $7,937,327)................... 7,807,489
------------
</TABLE>
<PAGE> 13
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS June 30, 2000
--------------------------------------------------------------------------------
IAA TRUST ASSET ALLOCATION FUND, INC. (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------- -----------
<S> <C> <C>
COMMERCIAL PAPER -- 0.97%
(cost $240,000)
CIT Group Holdings
6.769%, 10/25/00....................... $ 240,000 $ 240,106
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
--------- -----------
<S> <C> <C>
OTHER SHORT TERM INVESTMENTS -- 6.23%
MONEY MARKET FUNDS
Harris Insight Money Market Fund........ 391,267 $ 391,267
Federated Prime Obligation Fund......... 1,150,676 1,150,676
-----------
TOTAL MONEY MARKET FUNDS
(cost $1,541,943)...................... 1,541,943
-----------
TOTAL INVESTMENTS -- 99.67%
(cost $19,658,621)..................... 24,662,337
-----------
CASH AND OTHER ASSETS NET OF
LIABILITIES -- 0.33%................... 80,495
-----------
NET ASSETS -- 100.00%................... $24,742,832
===========
* Non-income producing.
</TABLE>
See notes to financial statements.
<PAGE> 14
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS June 30, 2000
--------------------------------------------------------------------------------
IAA TRUST TAX EXEMPT BOND FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- -----------
<S> <C> <C>
MUNICIPAL BONDS
(TAX EXEMPT) -- 97.68%
ARIZONA -- 3.45%
Maricopa County, School District #93
Arizona Unlimited Tax General
Obligation
6.400%, 07/01/06..................... $ 500,000 $ 541,000
-----------
CALIFORNIA -- 1.79%
City of Fresno, California Sewer
System Revenue
6.250%, 09/01/14..................... 250,000 280,755
-----------
CONNECTICUT -- 3.60%
Connecticut State Unlimited Tax
General Obligation
5.400%, 03/15/08..................... 550,000 563,920
-----------
GEORGIA -- 1.67%
Atlanta, Georgia Airport Revenue
Bonds, Series A
5.750%, 01/01/11..................... 250,000 262,155
-----------
ILLINOIS -- 16.37%
Illinois Health Facilities Authority
Revenue
6.800%, 10/01/24..................... 800,000 836,024
Illinois State Sales Tax Revenue
5.400%, 06/15/13..................... 550,000 552,041
Northwest Suburban Municipal Joint
Action Water Agency Illinois Contract
Revenue
6.450%, 05/01/07..................... 400,000 434,332
Northwest Water Commission Illinois,
Cook & Lake Revenue
5.000%, 05/01/13..................... 500,000 480,945
Regional Transportation Authority
Illinois Unlimited Tax General
Obligation
5.750%, 06/01/11..................... 250,000 262,505
-----------
2,565,847
-----------
INDIANA -- 7.30%
Indiana University Trustee Revenue
Bonds, Student Fees
5.700%, 08/01/10..................... 550,000 565,603
Peru, Indiana Community School Corp.
Revenue
6.750%, 01/01/09..................... 550,000 578,413
-----------
1,144,016
-----------
KENTUCKY -- 7.59%
Jefferson County, Kentucky School
District Financing Corp. School
Building Revenue, Series A
5.300%, 07/01/15..................... 500,000 491,525
University of Kentucky, University
Building Revenue, Third Series
4.150%, 05/01/01..................... 700,000 697,753
-----------
1,189,278
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- -----------
<S> <C> <C>
MASSACHUSETTS -- 8.44%
Massachusetts State Grant Anticipation
Notes Revenue Bond
5.000%, 12/15/08..................... $ 800,000 $ 803,544
Massachusetts State Water Resource
Authority Revenue
6.000%, 11/01/08..................... 500,000 519,730
-----------
1,323,274
-----------
MICHIGAN -- 2.61%
Michigan State Hospital Financing
Authority Revenue Ascension Health
Credit, Series A
5.500%, 11/15/06..................... 400,000 409,572
-----------
MISSOURI -- 7.43%
Cape Girardeau, Missouri Waterworks
System Revenue
7.450%, 03/01/05..................... 500,000 543,130
Missouri State Environmental
Improvement & Energy Resource
Authority Pollution Control Revenue
5.250%, 12/01/09..................... 250,000 253,985
Missouri State Health and Educational
Facilities Revenue Bond
6.000%, 05/15/07..................... 350,000 367,742
-----------
1,164,857
-----------
NEVADA -- 5.83%
Clark County, Nevada School District
General Obligation
5.250%, 06/01/07..................... 500,000 506,785
Henderson, Nevada Water & Sewer
Unlimited Tax General Obligation
5.375%, 06/01/07..................... 400,000 407,588
-----------
914,373
-----------
NEW JERSEY -- 5.04%
Essex County, New Jersey Unlimited
General Obligation
5.000%, 08/01/07..................... 250,000 251,992
New Jersey State Unlimited General
Obligation
6.000%, 02/15/11..................... 500,000 537,165
-----------
789,157
-----------
NEW YORK -- 3.19%
New York State Dormitory Authority
Revenue
5.500%, 07/01/12..................... 500,000 500,105
-----------
NORTH CAROLINA -- 1.71%
North Carolina Eastern Municipal Power
Agency System Revenue
7.000%, 01/01/08..................... 250,000 268,670
-----------
OHIO -- 6.61%
Cleveland Ohio Waterworks Revenue
Bond, Series G
5.500%, 01/01/13..................... 515,000 527,880
Montgomery County, Ohio,
Moraine-Beaver Creek Sewer Revenue
5.6000%, 09/01/11.................... 500,000 508,365
-----------
1,036,245
-----------
</TABLE>
<PAGE> 15
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS June 30, 2000
--------------------------------------------------------------------------------
IAA TRUST TAX EXEMPT BOND FUND, INC. (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- -----------
<S> <C> <C>
PENNSYLVANIA -- 3.75%
Pennsylvania State Higher Education
Revenue Bonds, Series A
5.600%, 09/01/10..................... $ 575,000 $ 588,271
-----------
TEXAS -- 7.12%
Texas A&M University Revenue Financing
System
5.375%, 05/15/14..................... 600,000 598,800
United Independent School District,
Texas
6.700%, 08/15/08..................... 465,000 517,122
-----------
1,115,922
-----------
UTAH -- 1.96%
Utah State Board Regents Revenue
5.500%, 08/01/05..................... 300,000 307,773
-----------
WASHINGTON -- 2.22%
Washington State Public Power Supply
Revenue, Series A
5.750%, 07/01/09..................... 335,000 348,477
-----------
TOTAL MUNICIPAL BONDS
(cost $15,167,657)................... 15,313,667
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
--------- -----------
<S> <C> <C>
TAX EXEMPT MONEY MARKET FUNDS -- 0.84%
(cost $132,060)
Nuveen Tax Exempt Money Fund.......... 132,060 $ 132,060
-----------
TOTAL INVESTMENTS -- 98.52%
(cost $15,299,717)..................... 15,445,727
-----------
CASH AND OTHER ASSETS NET OF
LIABILITIES -- 1.48%................... 231,966
-----------
NET ASSETS -- 100.00%................... $15,677,693
===========
</TABLE>
See notes to financial statements.
<PAGE> 16
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS June 30, 2000
--------------------------------------------------------------------------------
IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.
MONEY MARKET SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<S> <C> <C>
COMMERCIAL PAPER -- 92.80%
AUTO & TRUCK -- 12.65%
DaimlerChrysler Corp.
6.52%, 07/11/00..................... $ 1,125,000 $ 1,125,000
6.62%, 08/14/00..................... 2,060,000 2,060,000
Ford Motor Credit Co.
6.47%, 07/06/00..................... 1,300,000 1,300,000
6.57%, 07/07/00..................... 1,000,000 1,000,000
General Motors Acceptance Corp.
6.23%, 07/10/00..................... 1,500,000 1,500,000
6.27%, 07/27/00..................... 1,700,000 1,700,000
------------
8,685,000
------------
COMMERCIAL FINANCE -- 13.88%
International Lease Finance Co.
6.17%,09/06/00...................... 1,500,000 1,482,775
6.57%,09/11/00...................... 1,700,000 1,677,662
Prudential Funding Corp.
6.11%,07/24/00...................... 1,194,000 1,194,000
6.67%,07/24/00...................... 900,000 900,000
6.71%,09/12/00...................... 1,100,000 1,100,000
Wells Fargo & Co.
6.60%, 07/07/00..................... 1,587,000 1,585,254
6.55%,08/08/00...................... 1,600,000 1,588,938
------------
9,528,629
------------
CONSUMER FINANCE -- 25.38%
American Express Credit Corp.
6.76%, 07/05/00..................... 1,000,000 1,000,000
6.59%, 07/19/00..................... 837,000 837,000
6.59%, 08/10/00..................... 1,275,000 1,275,000
American General Finance Corp.
6.32%, 08/22/00..................... 2,000,000 2,000,000
6.52%, 07/12/00..................... 1,019,000 1,019,000
Associates Corp. of North America
6.76%, 11/29/00..................... 1,000,000 1,000,000
6.60%, 08/15/00..................... 1,000,000 1,000,000
6.62%, 08/17/00..................... 1,300,000 1,300,000
CIT Group Holdings
6.73%, 10/24/00..................... 2,300,000 2,300,000
6.77%, 10/25/00..................... 1,000,000 1,000,000
Citicorp
6.59%, 07/28/00..................... 1,500,000 1,500,000
Household Finance Corp.
6.62%, 07/18/00..................... 1,396,000 1,396,000
6.58%, 07/21/00..................... 800,000 800,000
5.58%, 07/26/00..................... 1,000,000 1,000,000
------------
17,427,000
------------
ELECTRONICS -- 4.66%
General Electric Capital Corp.
6.56%, 07/13/00..................... 1,700,000 1,700,000
6.24%, 07/25/00..................... 1,500,000 1,500,000
------------
3,200,000
------------
FARM MACHINERY & EQUIPMENT -- 4.87%
John Deere Capital Corp.
6.61%, 07/20/00..................... 1,147,000 1,147,000
6.60%, 08/09/00..................... 1,150,000 1,150,000
6.82%, 09/07/00..................... 1,050,000 1,050,000
------------
3,347,000
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<S> <C> <C>
FOOD & BEVERAGE -- 7.66%
Anheuser-Busch Companies, Inc.
6.20%, 10/04/00..................... $ 2,000,000 $ 1,967,278
Coca-Cola Co.
6.11%, 07/05/00..................... 1,500,000 1,498,982
6.50%, 07/17/00..................... 1,800,000 1,794,800
------------
5,261,060
------------
FOREIGN GOVERNMENTS -- 1.44%
Province Of Quebec
6.17%, 09/01/00..................... 1,000,000 989,374
------------
INSURANCE/MULTI-LINE -- 5.98%
Transamerica Financial Corp.
5.91%, 07/06/00..................... 730,000 729,401
6.03%, 08/03/00..................... 400,000 397,789
USAA Capital Corp.
6.58%, 08/02/00..................... 1,000,000 994,151
6.53%, 08/16/00..................... 2,000,000 1,983,312
------------
4,104,653
------------
PETROLEUM REFINING -- 4.82%
Texaco, Inc.
6.56%, 07/14/00..................... 3,309,000 3,309,000
------------
TELEPHONE/UTILITY -- 11.46%
AT&T Corp.
6.53%, 08/01/00..................... 2,000,000 1,988,754
6.67%, 09/06/00..................... 1,200,000 1,185,104
Bell Atlantic Network Funding
6.54%, 07/31/00..................... 2,200,000 2,188,010
BellSouth Telecommunications, Inc.
6.63%, 07/11/00..................... 1,500,000 1,497,237
GTE Funding, Inc.
9.38%,12/01/00...................... 1,000,000 1,009,555
------------
7,868,660
------------
TOTAL COMMERCIAL PAPER
(cost $63,720,376).................. 63,720,376
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 1.43%
(cost $984,746)
Federal National Mortgage Association
6.17%, 09/28/00..................... 1,000,000 984,746
------------
FOREIGN GOVERNMENTS -- 2.95%
(cost $2,023,710)
Quebec Province
8.71%, 02/15/01..................... 2,000,000 2,023,710
------------
</TABLE>
<PAGE> 17
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS June 30, 2000
--------------------------------------------------------------------------------
IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.
MONEY MARKET SERIES (CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE
--------- -----------
<S> <C> <C>
OTHER SHORT-TERM
INVESTMENTS -- 2.26%
MONEY MARKET FUNDS
Harris Insight Money Market Fund........ 870,445 $ 870,445
Federated Prime Obligation Fund......... 682,288 682,288
-----------
TOTAL MONEY MARKET FUNDS
(cost $1,552,733)...................... 1,552,733
-----------
TOTAL INVESTMENTS -- 99.44%
(cost $68,281,565)..................... 68,281,565
-----------
CASH AND OTHER ASSETS NET OF
LIABILITIES -- 0.56%................... 386,759
-----------
NET ASSETS -- 100.00%................... $68,668,324
===========
</TABLE>
See notes to financial statements.
<PAGE> 18
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS June 30, 2000
--------------------------------------------------------------------------------
IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.
SHORT-TERM GOVERNMENT BOND SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -----------
<S> <C> <C>
BONDS AND NOTES -- 91.87%
U.S. GOVERNMENT AGENCIES -- 64.24%
Federal Farm Credit Bank
5.125%, 04/02/01...................... $ 500,000 $ 493,785
4.630%, 11/05/01...................... 1,000,000 972,390
6.625%, 02/01/02...................... 1,000,000 996,250
Federal Home Loan Bank
5.500%, 08/13/01...................... 1,000,000 985,500
6.140%, 12/17/01...................... 1,000,000 988,840
5.945%, 04/01/02...................... 1,000,000 983,750
Federal Home Loan Mortgage Corp.
6.250%, 07/15/04...................... 1,000,000 973,750
5.500%, 11/25/05...................... 909,215 872,765
Federal National Mortgage Association
5.100%, 09/25/00...................... 1,000,000 996,630
5.400%, 05/07/01...................... 1,000,000 988,750
5.375%, 03/15/02...................... 500,000 487,950
5.750%, 04/15/03...................... 500,000 484,800
6.500%, 08/01/04...................... 1,544,617 1,497,306
5.000%, 09/25/06...................... 439,306 431,588
6.147%, 05/25/14...................... 722,357 696,467
6.500%, 09/25/19...................... 862,994 852,387
6.500%, 07/25/23...................... 140,527 134,585
Private Export Funding
6.450%, 09/30/04...................... 1,000,000 978,750
7.650%, 05/15/06...................... 1,500,000 1,541,400
Tennessee Valley Authority
5.280%, 09/14/01...................... 1,000,000 980,000
-----------
17,337,643
-----------
U.S. GOVERNMENT OBLIGATIONS -- 18.88%
U.S. Treasury Notes
6.500%, 08/31/01...................... 3,000,000 3,000,930
6.250%, 02/28/02...................... 2,000,000 1,994,180
6.625%, 04/30/02...................... 100,000 100,281
-----------
5,095,391
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -----------
<S> <C> <C>
ASSET BACKED -- 7.30%
Banc One Auto Grantor Trust
6.270%, 11/20/03...................... $ 231,504 $ 230,286
Discover Credit Card Master Trust
5.600%, 05/15/06...................... 300,000 285,068
First USA Credit Card Master Trust
6.420%, 03/17/05...................... 250,000 246,800
Ford Credit Auto Owner Trust
5.650%, 10/15/01...................... 72,792 72,696
6.080%, 09/16/02...................... 500,000 494,910
J.P. Morgan Commercial Mortgage
Finance Corp.
6.952%, 09/15/29...................... 234,398 233,249
Morgan Stanley Capital Corp.
6.850%, 02/15/20...................... 280,718 280,449
The Money Store Home Equity Trust
7.800%, 10/15/21...................... 125,496 125,525
-----------
1,968,983
-----------
CORPORATE BONDS -- 1.45%
BellSouth Telecommunications, Inc.
6.000%, 06/15/02...................... 400,000 391,000
-----------
TOTAL BONDS AND NOTES
(Cost $25,054,509).................... 24,793,017
-----------
COMMERCIAL PAPER -- 1.85%
(Cost $499,660)
Coca-Cola Co.
6.110%, 07/05/00...................... 500,000 499,660
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
---------
<S> <C> <C>
OTHER SHORT TERM INVESTMENTS -- 5.03%
MONEY MARKET FUNDS
Federated Government Obligation Fund.... 946,974 946,974
Harris Insight Money Market Fund........ 411,934 411,934
-----------
TOTAL MONEY MARKET FUNDS
(Cost $1,358,908)...................... 1,358,908
-----------
TOTAL INVESTMENTS -- 98.75%
(Cost $26,913,077)..................... 26,651,585
-----------
CASH AND OTHER ASSETS NET OF
LIABILITIES -- 1.25%................... 336,898
-----------
NET ASSETS -- 100.00%................... $26,988,483
===========
</TABLE>
See notes to financial statements.
<PAGE> 19
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS June 30, 2000
--------------------------------------------------------------------------------
IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.
LONG-TERM BOND SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -----------
<S> <C> <C>
BONDS AND NOTES -- 96.45%
U.S. GOVERNMENT AGENCIES -- 36.62%
Federal Farm Credit Bank
6.690%, 09/08/10...................... $ 500,000 $ 484,800
Federal Home Loan Bank
5.800%, 09/02/08...................... 1,200,000 1,100,280
0.000%, 08/04/17...................... 1,000,000 237,944
Federal Home Loan Mortgage Corp.
6.000%, 03/15/09...................... 773,483 758,059
6.625%, 09/15/09...................... 400,000 386,500
7.000%, 03/01/12...................... 2,444,624 2,402,601
6.500%, 02/15/21...................... 466,401 458,402
5.000%, 05/15/21...................... 625,000 569,394
6.400%, 09/25/28...................... 500,000 463,363
Federal National Mortgage Association
6.375%, 06/15/09...................... 750,000 711,930
7.604%, 12/25/19...................... 600,000 593,906
6.000%, 02/18/21...................... 300,000 288,006
6.247%, 03/17/21...................... 585,111 560,477
6.997%, 12/25/21...................... 400,000 400,000
6.500%, 09/25/22...................... 200,000 192,791
Government National Mortgage
Association
6.500%, 04/15/26...................... 1,090,397 1,035,528
8.000%, 07/15/26...................... 1,133,441 1,146,192
6.500%, 07/15/29...................... 1,635,142 1,552,862
7.500%, 11/15/29...................... 998,337 991,778
Tennessee Valley Authority
5.375%, 11/13/08...................... 350,000 311,343
-----------
14,646,156
-----------
U.S. GOVERNMENT OBLIGATIONS -- 6.10%
U.S. Treasury Bonds
6.000%, 02/15/26...................... 1,000,000 977,810
5.250%, 11/15/28...................... 1,650,000 1,460,762
-----------
2,438,572
-----------
CORPORATE BONDS -- 44.96%
ABN AMRO N.V. (Chicago) Global Bond
7.125%, 06/18/07...................... 300,000 291,000
AT&T Corp.
5.625%, 03/15/04...................... 400,000 376,659
Abbott Laboratories Corp.
5.400%, 09/15/08...................... 500,000 457,488
Allstate Corp.
7.200%, 12/01/09...................... 600,000 572,250
Ameritech Capital Funding
5.950%, 01/15/38...................... 700,000 664,125
Amoco Canada Petroleum Co.
7.950%, 10/01/22...................... 500,000 509,375
Asian Development Bank
5.593%, 07/16/18...................... 500,000 480,000
Associates Corp. of North America
6.375%, 10/15/02...................... 250,000 245,000
Burlington Northern Santa Fe
6.530%, 07/15/37...................... 400,000 389,224
California Infrastructure PG & E
6.420%, 09/25/08...................... 1,000,000 971,410
Canadian National Railway Co.
6.450%, 07/15/36...................... 400,000 372,500
Central Illinois Public Service Co.
7.610%, 06/01/17...................... 300,000 291,750
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Citicorp
7.200%, 06/15/07...................... $ 250,000 $ 244,375
Coca-Cola Enterprises
7.000%, 10/01/26...................... 500,000 488,750
Conagra, Inc.
6.700%, 08/01/27...................... 200,000 184,750
CSX Corp.
6.420%, 06/15/10...................... 250,000 226,575
CSX Transportation, Inc.
6.500%, 04/15/04...................... 600,000 531,840
Delphi Auto Systems Corp.
6.125%, 05/01/04...................... 500,000 471,875
Federal Express Corp.
6.720%, 01/15/22...................... 392,172 357,790
Florida Power Corp.
6.000%, 07/01/03...................... 400,000 387,000
Ford Motor Credit Co.
5.125%, 10/15/01...................... 300,000 292,500
7.200%, 06/15/07...................... 600,000 583,500
General Electric Credit Co.
6.500%, 11/01/06...................... 300,000 288,000
GTE Corp.
6.360%, 04/15/06...................... 400,000 377,500
GTE South, Inc.
6.125%, 06/15/07...................... 200,000 183,750
Halliburton Co.
6.750%, 02/01/27...................... 250,000 241,250
Heller Financial Co.
7.750%, 11/15/09...................... 400,000 406,306
Household Finance Corp.
6.400%, 06/17/08...................... 500,000 453,125
Ingersoll-Rand Co.
6.015%, 02/15/28...................... 500,000 497,046
J.P. Morgan & Co.
6.700%, 11/01/07...................... 250,000 234,655
Madison Gas and Electric Co.
6.020%, 09/15/08...................... 300,000 270,735
Merrill Lynch & Co., Inc.
7.150%, 07/30/12...................... 350,000 326,375
Morgan Stanley Dean Witter Discover
6.375%, 08/01/02...................... 250,000 245,937
NationsBank Corp.
5.750%, 03/15/01...................... 300,000 297,375
Norfolk Southern Corp.
7.050%, 05/01/37...................... 350,000 342,562
Northwest Airlines Corp.
7.935%, 04/01/19...................... 695,642 694,818
Oklahoma Gas & Electric Co.
6.650%, 07/15/27...................... 250,000 239,062
Province of Ontario
5.500%, 10/01/08...................... 400,000 359,000
Procter & Gamble Co.
5.250%, 09/15/03...................... 500,000 478,125
Raytheon Co.
5.95%, 03/15/01....................... 200,000 198,000
Salomon Smith Barney Holding
6.250%, 05/15/03...................... 250,000 242,500
Sears Roebuck Acceptance Corp.
6.000%, 03/20/03...................... 200,000 191,750
Sun Microsystems, Inc.
7.50%, 08/15/06....................... 350,000 349,562
</TABLE>
<PAGE> 20
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS June 30, 2000
--------------------------------------------------------------------------------
IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.
LONG-TERM BOND SERIES (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Suntrust Capital II
7.900%, 06/15/27...................... $ 200,000 $ 179,250
Transamerica Financial Corp.
6.125%, 11/01/01...................... 350,000 344,313
US West Capital Funding, Inc.
6.250%, 07/15/05...................... 300,000 283,500
Wachovia Corp.
6.605%, 10/01/25...................... 600,000 587,250
Wisconsin Bell Telephone Co.
6.350%, 12/01/26...................... 300,000 283,500
-----------
17,984,982
-----------
ASSET BACKED -- 8.32%
Discover Credit Card Master Trust
5.850%, 01/17/06...................... 500,000 481,763
First USA Credit Card Master Trust
6.420%, 03/17/05...................... 250,000 246,800
Goldman Sachs Mortgage Securities
Corp.-II
6.620%, 10/18/30...................... 300,000 285,085
Green Tree Financial Corp.
6.870%, 01/15/29...................... 200,000 192,206
J.P. Morgan Commercial Mortgage Co.
Finance Corp.
7.088%, 09/15/29...................... 556,000 530,268
Merrill Lynch Mortgage Investors, Inc.
7.370%, 06/15/08...................... 388,066 388,394
Morgan Stanley Capital I
6.760%, 11/15/08...................... 383,824 374,884
Sears Credit Account Master Trust
5.650%, 03/15/09...................... 350,000 332,848
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -----------
<S> <C> <C>
The Money Store Home Equity Trust
5.675%, 02/15/09...................... $ 147,778 $ 142,715
8.140%, 10/15/27...................... 350,000 352,028
-----------
3,326,991
-----------
MUNICIPAL -- 0.45%
Wisconsin State Unlimited General
Obligation
6.550%, 11/01/05...................... 190,000 182,961
-----------
TOTAL BONDS AND NOTES
(cost $39,674,488).................... 38,579,662
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
---------
<S> <C> <C>
OTHER SHORT TERM INVESTMENTS -- 2.36%
MONEY MARKET FUNDS
Harris Insight Money Market Fund........ 516,690 516,690
Federated Prime Obligation Fund......... 427,915 427,915
-----------
TOTAL MONEY MARKET FUNDS
(cost $944,605)........................ 944,605
-----------
TOTAL INVESTMENTS -- 98.81%
(cost $40,619,093)..................... 39,524,267
-----------
CASH AND OTHER ASSETS NET OF
LIABILITIES -- 1.19%................... 475,999
-----------
NET ASSETS -- 100.00%................... $40,000,266
===========
</TABLE>
See notes to financial statements.
<PAGE> 21
STATEMENTS OF ASSETS AND LIABILITIES June 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IAA TRUST
TAXABLE FIXED INCOME SERIES FUND, INC.
IAA TRUST IAA TRUST ------------------------------------------
IAA TRUST ASSET TAX EXEMPT SHORT-TERM LONG-TERM
GROWTH ALLOCATION BOND MONEY MARKET GOVERNMENT BOND
FUND, INC. FUND, INC. FUND, INC. SERIES BOND SERIES SERIES
------------ ----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in securities:
At cost............................. $134,778,381 $19,658,621 $15,299,717 $68,281,565 $26,913,077 $40,619,093
============ =========== =========== =========== =========== ===========
At value............................ $194,097,674 $24,662,337 $15,445,727 $68,281,565 $26,651,585 $39,524,267
Cash.................................. 119 -- 10,223 125,488 -- --
Receivable for securities sold........ 479,384 38,351 -- -- -- --
Receivable for capital stock sold..... 104,715 7,311 -- -- 24,963 27,470
Dividends receivable.................. 191,247 14,471 -- -- -- --
Interest receivable................... 59,948 88,642 234,862 300,815 335,055 477,645
Due from Advisor (Note E)............. -- -- 2,395 -- 92 6,666
Prepaid expenses and other assets..... 17,014 1,206 1,118 71 564 609
------------ ----------- ----------- ----------- ----------- -----------
Total assets........................ 194,950,101 24,812,318 15,694,325 68,707,939 27,012,259 40,036,657
------------ ----------- ----------- ----------- ----------- -----------
LIABILITIES:
Cash overdraft........................ -- 42 -- -- 36 43
Payable for securities purchased...... 270,466 48,746 -- -- -- --
Payable for capital stock redeemed.... 8,969 -- -- -- 6,451 3,792
Distributions Payable................. -- -- -- 14 -- --
Accrued expenses and other
liabilities......................... 166,157 20,698 16,632 39,601 17,289 32,556
------------ ----------- ----------- ----------- ----------- -----------
Total liabilities................... 445,592 69,486 16,632 39,615 23,776 36,391
------------ ----------- ----------- ----------- ----------- -----------
NET ASSETS............................. $194,504,509 $24,742,832 $15,677,693 $68,668,324 $26,988,483 $40,000,266
============ =========== =========== =========== =========== ===========
NET ASSETS CONSIST OF:
Capital paid-in....................... $111,275,109 $18,231,319 $15,459,283 $68,668,492 $27,293,303 $41,236,438
Undistributed net investment income... 26,792 -- 1,231 -- 18,291 7,750
Accumulated net realized gain (loss)
on investments...................... 23,883,315 1,507,797 71,169 (168) (61,619) (149,096)
Net unrealized appreciation
(depreciation) of investments....... 59,319,293 5,003,716 146,010 -- (261,492) (1,094,826)
============ =========== =========== =========== =========== ===========
$194,504,509 $24,742,832 $15,677,693 $68,668,324 $26,988,483 $40,000,266
============ =========== =========== =========== =========== ===========
Shares outstanding.................... 7,097,130 1,459,524 1,837,184 68,668,591 2,722,968 4,104,318
============ =========== =========== =========== =========== ===========
NET ASSET VALUE, PURCHASE AND
REDEMPTION PRICE PER SHARE............ $27.41 $16.95 $8.53 $1.00 $9.91 $9.75
====== ====== ===== ===== ===== =====
</TABLE>
See notes to financial statements.
<PAGE> 22
STATEMENTS OF OPERATIONS for the Year Ended June 30, 2000
--------------------------------------------------------------------------------
<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................................ $ 2,283,775 $ 182,025 $ -- $ -- $ -- $ --
Interest................................. 587,702 617,010 861,999 3,686,970 1,735,150 2,643,094
----------- ---------- -------- ---------- ---------- ----------
Total investment income................ 2,871,477 799,035 861,999 3,686,970 1,735,150 2,643,094
----------- ---------- -------- ---------- ---------- ----------
EXPENSES:
Investment advisory fees (Note E)........ 1,378,720 177,156 82,863 318,928 146,094 302,858
Distribution expenses (Note F)........... 257,379 33,176 24,502 -- 12,340 17,394
Transfer agent fees...................... 115,602 11,553 15,126 49,307 24,867 24,781
Audit fees............................... 37,972 4,329 3,605 4,722 6,807 10,570
Printing................................. 22,339 2,478 2,533 7,837 2,284 3,013
Custody fees............................. 55,012 5,702 7,911 9,583 7,139 8,803
Directors' fees.......................... 5,418 1,256 1,226 682 513 562
Administration fees...................... 139,643 17,369 13,817 49,218 20,976 28,833
Accounting fees.......................... 71,908 31,132 32,901 47,662 32,744 37,206
Insurance................................ 15,771 2,802 2,149 5,560 2,258 2,367
Registration fees........................ 3,142 3,532 2,985 5,224 2,506 3,197
Legal fees............................... 1,934 2,894 2,573 234 707 707
Miscellaneous............................ 13,822 2,732 1,569 2,931 2,719 3,597
----------- ---------- -------- ---------- ---------- ----------
Total expenses......................... 2,118,662 296,111 193,760 501,888 261,954 443,888
----------- ---------- -------- ---------- ---------- ----------
Less: Advisory fees waived (Note E)...... -- -- (7,420) -- (11,327) (91,610)
Less: Custody expenses waived (Note E)... (55,012) (5,702) (7,911) (9,583) (7,139) (8,803)
----------- ---------- -------- ---------- ---------- ----------
Net expenses........................... 2,063,650 290,409 178,429 492,305 243,488 343,475
----------- ---------- -------- ---------- ---------- ----------
NET INVESTMENT INCOME..................... 807,827 508,626 683,570 3,194,665 1,491,662 2,299,619
----------- ---------- -------- ---------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS -- NOTE (D):
Net realized gain (loss) on
investments............................ 28,803,103 1,821,361 84,831 -- (48,342) (138,481)
Net change in unrealized depreciation on
investments............................ (11,385,986) (447,971) (271,453) -- (195,180) (562,476)
----------- ---------- -------- ---------- ---------- ----------
Net realized and unrealized gain (loss)
on investments......................... 17,417,117 1,373,390 (186,622) -- (243,522) (700,957)
----------- ---------- -------- ---------- ---------- ----------
INCREASE IN NET ASSETS FROM OPERATIONS.... $18,224,944 $1,882,016 $496,948 $3,194,665 $1,248,140 $1,598,662
=========== ========== ======== ========== ========== ==========
</TABLE>
See notes to financial statements.
<PAGE> 23
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IAA TRUST IAA TRUST ASSET
GROWTH FUND, INC. ALLOCATION FUND, INC.
--------------------------- -------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
6/30/00 06/30/99 6/30/00 06/30/99
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income...................................... $ 807,827 $ 929,103 $ 508,626 $ 491,886
Net realized gain on investments........................... 28,803,103 12,717,971 1,821,361 1,177,178
Net change in unrealized appreciation (depreciation) of
investments.............................................. (11,385,986) 23,916,026 (447,971) 1,674,115
------------ ------------ ----------- -----------
Net increase in net assets from operations................. 18,224,944 37,563,100 1,882,016 3,343,179
------------ ------------ ----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: NOTE (B)
Investment income.......................................... (1,067,761) (1,018,527) (513,193) (494,039)
Realized gains on investments.............................. (15,233,892) (8,886,026) (1,539,187) (164,915)
------------ ------------ ----------- -----------
Total distributions........................................ (16,301,653) (9,904,553) (2,052,380) (658,954)
------------ ------------ ----------- -----------
CAPITAL STOCK TRANSACTIONS -- (NET) NOTE (C)................ 10,510,955 (5,902,832) 1,628,457 1,950,772
------------ ------------ ----------- -----------
Total increase in net assets............................... 12,434,246 21,755,715 1,458,093 4,634,997
NET ASSETS:
Beginning of year.......................................... 182,070,263 160,314,548 23,284,739 18,649,742
------------ ------------ ----------- -----------
End of year................................................ $194,504,509 $182,070,263 $24,742,832 $23,284,739
============ ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
IAA TRUST
TAXABLE FIXED INCOME
IAA TRUST SERIES FUND, INC.
TAX EXEMPT BOND FUND, INC. MONEY MARKET SERIES
--------------------------- -------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
6/30/00 06/30/99 6/30/00 06/30/99
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income...................................... $ 683,570 $ 687,381 $ 3,194,665 $ 2,721,949
Net realized gain on investments........................... 84,831 310,798 -- --
Net change in unrealized depreciation of investments....... (271,453) (624,536) -- --
----------- ----------- ----------- -----------
Net increase in net assets from operations................. 496,948 373,643 3,194,665 2,721,949
----------- ----------- ----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: NOTE (B)
Investment income.......................................... (682,986) (697,162) (3,194,665) (2,721,949)
Realized gains on investments.............................. (55,062) (273,899) -- --
----------- ----------- ----------- -----------
Total distributions........................................ (738,048) (971,061) (3,194,665) (2,721,949)
----------- ----------- ----------- -----------
CAPITAL STOCK TRANSACTIONS -- (NET) NOTE (C)................ (1,588,648) 435,516 5,646,552 9,999,569
----------- ----------- ----------- -----------
Total increase (decrease) in net assets.................... (1,829,748) (161,902) 5,646,552 9,999,569
NET ASSETS:
Beginning of year.......................................... 17,507,441 17,669,343 63,021,772 53,022,203
----------- ----------- ----------- -----------
End of year................................................ $15,677,693 $17,507,441 $68,668,324 $63,021,772
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
<PAGE> 24
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
--------------------------------- -------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
6/30/00 06/30/99 6/30/00 06/30/99
--------------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income...................................... $ 1,491,662 $ 1,437,974 $ 2,299,619 $ 2,080,890
Net realized gain (loss) on investments.................... (48,342) 87,430 (138,481) 909,033
Net change in unrealized depreciation of investments....... (195,180) (310,809) (562,476) (1,718,979)
----------- ----------- ----------- -----------
Net increase in net assets from operations................. 1,248,140 1,214,595 1,598,662 1,270,944
----------- ----------- ----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: NOTE (B)
Investment income.......................................... (1,487,039) (1,460,510) (2,291,508) (2,116,730)
Realized gains on investments.............................. -- (89,405) (422,149) (937,981)
----------- ----------- ----------- -----------
Total distributions........................................ (1,487,039) (1,549,915) (2,713,657) (3,054,711)
----------- ----------- ----------- -----------
CAPITAL STOCK TRANSACTIONS -- (NET) NOTE (C)................ (2,510,236) 1,763,522 381,048 3,717,509
----------- ----------- ----------- -----------
Total increase (decrease) in net assets.................... (2,749,135) 1,428,202 (733,947) 1,933,742
NET ASSETS:
Beginning of year.......................................... 29,737,618 28,309,416 40,734,213 38,800,471
----------- ----------- ----------- -----------
End of year................................................ $26,988,483 $29,737,618 $40,000,266 $40,734,213
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
<PAGE> 25
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
The tables below set forth financial data for a share of capital stock
outstanding throughout each year presented.
<TABLE>
<CAPTION>
IAA TRUST
GROWTH FUND, INC.
---------------------------------------------------
YEARS ENDED JUNE 30,
---------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.......................... $ 27.24 $ 23.04 $ 22.51 $ 18.88 $ 17.23
-------- -------- -------- -------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income..................................... 0.12 0.15 0.17 0.15 0.23
Net gains on securities (both realized and unrealized).... 2.46 5.50 2.19 4.81 3.23
-------- -------- -------- -------- -------
Total from investment operations........................ 2.58 5.65 2.36 4.96 3.46
-------- -------- -------- -------- -------
LESS DISTRIBUTIONS
Dividends from net investment income...................... (0.16) (0.15) (0.15) (0.20) (0.25)
Distributions from capital gains.......................... (2.25) (1.30) (1.68) (1.13) (1.56)
-------- -------- -------- -------- -------
Total distributions..................................... (2.41) (1.45) (1.83) (1.33) (1.81)
-------- -------- -------- -------- -------
Net asset value, end of year................................ $ 27.41 $ 27.24 $ 23.04 $ 22.51 $ 18.88
======== ======== ======== ======== =======
TOTAL RETURN................................................ 10.29% 26.10% 10.98% 28.54% 21.51%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in 000's)........................ $194,505 $182,070 $160,315 $140,786 $84,800
Ratio of expenses to average net assets:
Before expense waiver................................... 1.16% 1.08% 1.02% -- --
After expense waiver.................................... 1.13% 1.04% 1.00% 1.16% 1.12%
Ratio of net investment income to average net assets:
Before expense waiver................................... 0.41% 0.55% 0.73% -- --
After expense waiver.................................... 0.44% 0.59% 0.75% 0.84% 1.30%
Portfolio turnover........................................ 30.82% 31.88% 33.06% 30.74% 32.95%
</TABLE>
<TABLE>
<CAPTION>
IAA TRUST
ASSET ALLOCATION FUND, INC.
-----------------------------------------------
YEARS ENDED JUNE 30,
-----------------------------------------------
2000 1999 1998 1997 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.......................... $ 17.12 $ 15.20 $ 14.64 $ 13.39 $ 12.29
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income..................................... 0.36 0.37 0.39 0.35 0.37
Net gains on securities (both realized and unrealized).... 0.96 2.04 1.22 2.11 1.41
------- ------- ------- ------- -------
Total from investment operations........................ 1.32 2.41 1.61 2.46 1.78
------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net investment income...................... (0.36) (0.37) (0.39) (0.34) (0.37)
Distributions from capital gains.......................... (1.13) (0.12) (0.66) (0.87) (0.31)
Distributions from return of capital...................... -- -- -- -- --
------- ------- ------- ------- -------
Total distributions..................................... (1.49) (0.49) (1.05) (1.21) (0.68)
------- ------- ------- ------- -------
Net asset value, end of year................................ $ 16.95 $ 17.12 $ 15.20 $ 14.64 $ 13.39
======= ======= ======= ======= =======
TOTAL RETURN................................................ 8.14% 16.22% 11.41% 19.95% 14.74%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in 000's) $24,743 $23,285 $18,650 $14,272 $10,083
Ratio of expenses to average net assets:
Before expense waiver................................... 1.26% 1.22% 1.25% -- --
After expense waiver.................................... 1.23% 1.16% 1.21% 1.46% 1.44%
Ratio of net investment income to average net assets:
Before expense waiver................................... 2.13% 2.30% 2.57% -- --
After expense waiver.................................... 2.16% 2.36% 2.61% 2.57% 2.81%
Portfolio turnover........................................ 25.85% 33.91% 20.07% 19.25% 33.77%
</TABLE>
See notes to financial statements.
<PAGE> 26
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
The tables below set forth financial data for a share of capital stock
outstanding throughout each year presented.
<TABLE>
<CAPTION>
IAA TRUST
TAX EXEMPT BOND FUND, INC.
-----------------------------------------------
YEARS ENDED JUNE 30,
-----------------------------------------------
2000 1999 1998 1997 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.......................... $ 8.65 $ 8.95 $ 8.70 $ 8.41 $ 8.36
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income..................................... 0.36 0.36 0.37 0.36 0.37
Net gains (losses) on securities (both realized and
unrealized)............................................. (0.09) (0.16) 0.27 0.31 0.07
------- ------- ------- ------- -------
Total from investment operations........................ 0.27 0.20 0.64 0.67 0.44
------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net investment income...................... (0.36) (0.36) (0.37) (0.36) (0.37)
Distributions from capital gains.......................... (0.03) (0.14) (0.02) (0.02) (0.02)
------- ------- ------- ------- -------
Total distributions..................................... (0.39) (0.50) (0.39) (0.38) (0.39)
------- ------- ------- ------- -------
Net asset value, end of year................................ $ 8.53 $ 8.65 $ 8.95 $ 8.70 $ 8.41
======= ======= ======= ======= =======
TOTAL RETURN................................................ 3.16% 2.14% 7.45% 8.15% 5.30%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in 000's)........................ $15,678 $17,507 $17,669 $18,008 $17,744
Ratio of expenses to average net assets:
Before expense waiver................................... 1.17% 1.07% 1.01% -- --
After expense waiver.................................... 1.08% 1.00% 0.97% 1.14% 1.08%
Ratio of net investment income to average net assets:
Before expense waiver................................... 4.05% 3.83% 4.13% -- --
After expense waiver.................................... 4.14% 3.90% 4.17% 4.23% 4.30%
Portfolio turnover........................................ 16.76% 39.85% 24.83% 11.35% 14.75%
</TABLE>
<TABLE>
<CAPTION>
IAA TRUST
TAXABLE FIXED INCOME SERIES FUND, INC.
-----------------------------------------------
MONEY MARKET SERIES
YEARS ENDED JUNE 30,
-----------------------------------------------
2000 1999 1998 1997 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income..................................... 0.05 0.04 0.05 0.05 0.05
------- ------- ------- ------- -------
Total from investment operations........................ 0.05 0.04 0.05 0.05 0.05
------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net investment income...................... (0.05) (0.04) (0.05) (0.05) (0.05)
------- ------- ------- ------- -------
Total distributions..................................... (0.05) (0.04) (0.05) (0.05) (0.05)
------- ------- ------- ------- -------
Net asset value, end of year................................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
TOTAL RETURN................................................ 5.13% 4.54% 4.94% 4.63% 4.82%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in 000's)........................ $68,668 $63,022 $53,022 $60,674 $33,664
Ratio of expenses to average net assets:
Before expense waiver................................... 0.79% 0.82% 0.83% -- --
After expense waiver.................................... 0.77% 0.77% 0.81% 0.94% 0.90%
Ratio of net investment income to average net assets:
Before expense waiver................................... 5.00% 4.39% 4.81% -- --
After expense waiver.................................... 5.02% 4.44% 4.83% 4.55% 4.74%
</TABLE>
See notes to financial statements.
<PAGE> 27
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 BOND SERIES
----------------------------------------------
YEARS ENDED JUNE 30, FOR THE PERIOD
--------------------------- 01/02/97*
2000 1999 1998 THROUGH 06/30/97
------- ------- ------- ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 9.99 $ 10.11 $ 10.01 $ 10.00
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income..................................... 0.51 0.51 0.54 0.20
Net gains (losses) on securities (both realized and
unrealized)............................................. (0.08) (0.09) 0.10 0.01
------- ------- ------- -------
Total from investment operations........................ 0.43 0.42 0.64 0.21
------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net investment income...................... (0.51) (0.51) (0.54) (0.20)
Distributions from capital gains.......................... 0.00 (0.03) -- --
------- ------- ------- -------
Total distributions..................................... (0.51) (0.54) (0.54) (0.20)
------- ------- ------- -------
Net asset value, end of period.............................. $ 9.91 $ 9.99 $ 10.11 $ 10.01
======= ======= ======= =======
TOTAL RETURN................................................ 4.43% 4.27% 6.50% 2.10%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's)...................... $26,988 $29,738 $28,309 $24,285
Ratio of expenses to average net assets:
Before expense waiver and reimbursement................. 0.90% 0.90% 0.92% 3.88%**
After expense waiver and reimbursement.................. 0.84% 0.83% 0.86% 0.76%**
Ratio of net investment income to average net assets:
Before expense waiver and reimbursement................. 5.06% 4.93% 5.30% 1.78%**
After expense waiver and reimbursement.................. 5.12% 5.00% 5.36% 4.90%**
Portfolio turnover........................................ 7.95% 29.24% 1.54% 0.00%
</TABLE>
<TABLE>
<CAPTION>
IAA TRUST
TAXABLE FIXED INCOME SERIES FUND, INC
----------------------------------------------
LONG-TERM BOND SERIES
----------------------------------------------
YEARS ENDED JUNE 30, FOR THE PERIOD
--------------------------- 01/02/97*
2000 1999 1998 THROUGH 06/30/97
------- ------- ------- ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 10.01 $ 10.48 $ 10.04 $ 10.00
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income..................................... 0.56 0.56 0.56 0.20
Net gains (losses) on securities (both realized and
unrealized)............................................. (0.16) (0.21) 0.45 0.04
------- ------- ------- -------
Total from investment operations........................ 0.40 0.35 1.01 0.24
------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net investment income...................... (0.56) (0.56) (0.56) (0.20)
Distributions from capital gains.......................... (0.10) (0.26) (0.01) --
------- ------- ------- -------
Total distributions..................................... (0.66) (0.82) (0.57) (0.20)
------- ------- ------- -------
Net asset value, end of period.............................. $ 9.75 $ 10.01 $ 10.48 $ 10.04
======= ======= ======= =======
TOTAL RETURN................................................ 4.21% 3.29% 10.24% 2.44%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's)...................... $40,000 $40,734 $38,800 $32,932
Ratio of expenses to average net assets:
Before expense waiver and reimbursement................. 1.10% 1.09% 1.12% 3.82%**
After expense waiver and reimbursement.................. 0.85% 0.85% 0.89% 0.78%**
Ratio of net investment income to average net assets:
Before expense waiver and reimbursement................. 5.46% 5.08% 5.24% 2.11%**
After expense waiver and reimbursement.................. 5.71% 5.32% 5.47% 5.15%**
Portfolio turnover........................................ 42.62% 29.19% 25.11% 41.77%
</TABLE>
* Commencement of operations.
** Annualized.
See notes to financial statements.
<PAGE> 28
IAA TRUST MUTUAL FUNDS -- NOTES TO FINANCIAL STATEMENTS June 30, 2000
--------------------------------------------------------------------------------
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.
(5) EXPENSES: Expenses of the Funds which are not directly associated to a
specific fund are allocated on the basis of relative net asset value of the
funds.
NOTE (B) DIVIDENDS FROM NET INVESTMENT INCOME AND DISTRIBUTIONS OF CAPITAL
GAINS: In the Growth Fund, net investment income from investment transactions is
declared and 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, declare and 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.
<PAGE> 29
IAA TRUST MUTUAL FUNDS -- NOTES TO FINANCIAL STATEMENTS June 30, 2000
(continued)
--------------------------------------------------------------------------------
NOTE (C) CAPITAL STOCK: At June 30, 2000, 10,000,000 shares of capital stock
were authorized for each of the Growth Fund, Asset Allocation Fund, and Tax
Exempt Bond Fund, each Fund having a par value of $1.00 per share. The
authorized capitalization of the Taxable Fixed Income Series Fund consists of
250,000,000 shares with the par value of $0.10 per share. 100,000,000 of this
Fund's shares are designated as Money Market Series, 50,000,000 of its shares
are designated as Short-Term Government Bond Series, and 25,000,000 of its
shares are designated as Long-Term Bond Series. The remaining 75,000,000 shares
are undesignated.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
GROWTH FUND ASSET ALLOCATION FUND
----------- ---------------------
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 2000 JUNE 30, 1999 JUNE 30, 2000
----------------------- ------------------------ --------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
-------- ------------ ---------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold................................. 596,058 $ 15,420,891 346,692 $ 8,272,611 175,999 $ 2,938,126
Shares issued through reinvestment of
dividends.................................. 597,638 15,386,388 424,032 9,386,928 108,025 1,798,104
-------- ------------ ---------- ----------- ----------- ------------
1,193,696 30,807,279 770,724 17,659,539 283,024 4,736,230
-------- ------------ ---------- ----------- ----------- ------------
Shares Redeemed............................. (781,447) (20,296,324) (1,045,124) (23,562,371) (184,910) (3,107,773)
-------- ------------ ---------- ----------- ----------- ------------
Net increase (decrease)..................... 412,249 $ 10,510,955 (274,400) $(5,902,832) 99,114 $ 1,628,457
======== ============ ========== =========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND
------------------------
YEAR ENDED
JUNE 30, 1999
--------------------------
SHARES AMOUNT
----------- ------------
<S> <C> <C>
Shares sold................................. 259,768 $ 3,920,616
Shares issued through reinvestment of
dividends.................................. 36,834 576,698
----------- ------------
296,602 4,497,314
----------- ------------
Shares Redeemed............................. (163,521) (2,546,542)
----------- ------------
Net increase (decrease)..................... 133,081 $ 1,950,772
=========== ============
</TABLE>
<TABLE>
<CAPTION>
TAX EXEMPT BOND FUND
--------------------
YEAR ENDED YEAR ENDED
JUNE 30, 2000 JUNE 30, 1999
----------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
-------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Shares sold................................. 34,959 $ 299,284 141,601 $ 1,303,303
Shares issued through reinvestment of
dividends.................................. 59,017 501,481 73,436 656,860
-------- ------------ ---------- -----------
93,976 800,765 215,037 1,960,163
-------- ------------ ---------- -----------
Shares redeemed............................. (280,499) (2,389,413) (169,227) (1,524,647)
-------- ------------ ---------- -----------
Net increase (decrease)..................... (186,523) $ (1,588,648) 45,810 $ 435,516
======== ============ ========== ===========
<CAPTION>
TAXABLE FIXED INCOME SERIES FUND
--------------------------------
MONEY MARKET SERIES
-------------------
YEAR ENDED YEAR ENDED
JUNE 30, 2000 JUNE 30, 1999
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold................................. 76,590,294 $ 76,590,145 73,477,819 $ 73,477,819
Shares issued through reinvestment of
dividends.................................. 3,198,514 3,198,512 2,685,481 2,685,481
----------- ------------ ----------- ------------
79,788,808 79,788,657 76,163,300 76,163,300
----------- ------------ ----------- ------------
Shares redeemed............................. (74,142,256) (74,142,105) (66,163,731) (66,163,731)
----------- ------------ ----------- ------------
Net increase (decrease)..................... 5,646,552 $ 5,646,552 9,999,569 $ 9,999,569
=========== ============ =========== ============
</TABLE>
<TABLE>
<CAPTION>
TAXABLE FIXED INCOME SERIES FUND
--------------------------------
SHORT-TERM GOVERNMENT
---------------------
BOND SERIES
-----------
YEAR ENDED YEAR ENDED
JUNE 30, 2000 JUNE 30, 1999
---------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
-------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Shares sold.................................. 401,246 $ 3,986,251 511,782 $ 5,186,589
Shares issued through reinvestment of
dividends................................... 131,760 1,305,988 139,753 1,413,533
-------- ----------- ---------- -----------
533,006 5,292,239 651,535 6,600,122
-------- ----------- ---------- -----------
Shares redeemed.............................. (786,750) (7,802,475) (475,781) (4,836,600)
-------- ----------- ---------- -----------
Net increase (decrease)...................... (253,744) $(2,510,236) 175,754 $ 1,763,522
======== =========== ========== ===========
<CAPTION>
TAXABLE FIXED INCOME SERIES FUND
--------------------------------
LONG-TERM BOND SERIES
---------------------
YEAR ENDED YEAR ENDED
JUNE 30, 2000 JUNE 30, 1999
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold.................................. 619,412 $ 6,105,733 794,968 $ 8,300,725
Shares issued through reinvestment of
dividends................................... 244,530 2,437,007 276,431 2,875,782
----------- ------------ ----------- ------------
863,942 8,542,740 1,071,399 11,176,507
----------- ------------ ----------- ------------
Shares redeemed.............................. (827,812) (8,161,692) (705,688) (7,458,998)
----------- ------------ ----------- ------------
Net increase (decrease)...................... 36,130 $ 381,048 365,711 $ 3,717,509
=========== ============ =========== ============
</TABLE>
<PAGE> 30
IAA TRUST MUTUAL FUNDS -- NOTES TO FINANCIAL STATEMENTS June 30, 2000
(continued)
--------------------------------------------------------------------------------
NOTE (D) INVESTMENT TRANSACTIONS: Purchases and sales of investment securities,
other than U.S. Government obligations and short-term notes for the year ended
June 30, 2000 were:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
Growth Fund................................................. $53,293,034 $65,075,413
Asset Allocation Fund....................................... $ 4,375,835 $ 5,591,815
Tax Exempt Bond Fund........................................ $ 2,680,537 $ 4,043,654
Short-Term Government Bond Series........................... $ 542,115 $ 749,720
Long-Term Bond Series....................................... $ 9,888,403 $11,182,657
</TABLE>
For the year ended June 30, 2000, the aggregate cost of purchases and proceeds
from sales of U.S. Government Securities were:
<TABLE>
<S> <C> <C>
Asset Allocation Fund....................................... $ 1,382,670 $ 585,269
Short-Term Government Bond Series........................... $ 6,453,839 $ 1,250,000
Long-Term Bond Series....................................... $11,075,343 $ 5,131,244
</TABLE>
For Federal income tax purposes, the cost of investments at June 30, 2000 was
$134,778,381 for the Growth Fund, $19,658,621 for the Asset Allocation Fund,
$15,299,717 for the Tax Exempt Bond Fund, $68,281,565 for the Money Market
Series, $26,913,077 for the Short-Term Government Bond Series, and $40,632,069
for the Long-Term Bond Series.
The gross unrealized appreciation/depreciation for tax purposes at June 30, 2000
consisted of the following:
<TABLE>
<CAPTION>
APPRECIATION DEPRECIATION
------------ ------------
<S> <C> <C>
Growth Fund................................................. $69,777,417 $10,458,124
Asset Allocation Fund....................................... $ 6,052,571 $ 1,048,855
Tax Exempt Bond Fund........................................ $ 269,438 $ 123,428
Short-Term Government Bond Series........................... $ 44,832 $ 306,324
Long-Term Bond Series....................................... $ 115,818 $ 1,223,620
</TABLE>
NOTE (E) ADVISORY AND OTHER RELATED PARTY TRANSACTIONS: Under its Advisory
Agreements with the Funds, Country Trust Bank (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. Custody fees waived for Growth Fund, Asset
Allocation Fund, Tax Exempt Fund, Money Market Series, Short-Term Government
Bond Series and Long-Term Bond Series for the year ended June 30, 2000 were:
$55,012, $5,702, $7,911, $9,583, $7,139 and $8,803, respectively.
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 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 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. Effective April 1, 2000 the Advisor agreed to
reduce its fees and reimburse the Tax Exempt Fund to the extent expenses exceed
0.85% of average daily net assets. Investment advisory fees, for the year ended
June 30, 2000, are as follows:
<TABLE>
<CAPTION>
EXPENSES
ADVISORY ADVISORY WAIVED
FEE FEE BY ADVISOR
-------- -------- ----------
<S> <C> <C> <C>
Tax Exempt Bond Fund........................................ 0.50% $ 82,863 $ 7,420
Short-Term Government Bond Series........................... 0.50% $146,094 $11,327
Long-Term Bond Series....................................... 0.75% $302,858 $91,610
</TABLE>
<PAGE> 31
IAA TRUST MUTUAL FUNDS -- NOTES TO FINANCIAL STATEMENTS June 30, 2000
(continued)
--------------------------------------------------------------------------------
The legal counsel to the Fund also serves as in-house counsel to the Advisor and
as secretary to the Fund. Fees paid by the Growth Fund, Asset Allocation Fund,
Tax Exempt Bond Fund, Money Market Series, Short-Term Government Bond Series and
Long-Term Bond Series during the year ended June 30, 2000 were $1,934, $2,894,
$2,573, $234, $707, and $707, respectively.
NOTE (F) DISTRIBUTION SERVICES AGREEMENTS: Provident Distributors, 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 year ended June 30, 2000, the annualized Rule 12b-1
Plan expenses incurred 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 were 0.14%, 0.14%, 0.15%, 0.04%, and 0.04% of average net assets,
respectively.
NOTE (G) SHAREHOLDER CONCENTRATION: On June 30, 2000, three shareholders held
approximately 63.4% of the shares outstanding of the Growth Fund, two
shareholders held approximately 83.3% of the shares outstanding of the Asset
Allocation Fund, one shareholder held approximately 12.7% of the shares
outstanding of the Tax Exempt Bond Fund, two shareholders held approximately
90.0% of the shares outstanding of the Money Market Series, four shareholders
held approximately 98.8% of the shares outstanding of the Short-Term Government
Bond Series, and four shareholders held approximately 99.8% of the shares
outstanding of the Long-Term Bond Series.
NOTE (H) SUBSEQUENT EVENT: On July 17, 2000, Country Trust Bank agreed to change
the Funds' accounting services provider, administrator, and transfer agent from
PFPC Inc. to Firstar Mutual Fund Services, LLC. Additionally, the funds'
distributor will be changed from Provident Distributors, Inc. to Firstar Mutual
Fund Services, LLC. The transition is scheduled to occur on September 1, 2000.
Under the new agreements, Firstar Mutual Fund Services will provide accounting
services for an annual fee, which will be calculated daily and paid monthly at
$24,000 for the first $40 million of assets, 0.02% of the next $200 million and
0.01% of the remaining assets of each fund. Firstar will also provide
administration for an annual fee, accrued daily and paid monthly, at 0.08% of
the first $200 million, 0.07% of the next $500 million and 0.05% of the
remaining assets of each fund. The administration fees are subject to an annual
minimum of $30,000. In addition, Firstar will be compensated for transfer agent
services based on the number of shareholder accounts and subject to minimum
fees. Distribution fees will be paid at an annual rate of 0.01% of each Fund's
average daily net assets payable monthly in arrears and subject to a $15,000
minimum.
NOTE (I) CAPITAL LOSS CARRYFORWARD: As of June 30, 2000, the Short-Term
Government Bond Series Fund had capital loss carryforwards of $10,631, expiring
June 30, 2008.
NOTE (J) POST OCTOBER LOSS: Under the current tax law, capital losses realized
after October 31 may be deferred and treated as occurring on the first day of
the following fiscal year. For the fiscal year ended June 30, 2000 the
Short-Term Government Bond Series and Long-Term Bond Series elected to defer
capital losses occurring between November 1, 1999 and June 30, 2000 in the
amount of $50,987 and $146,208, respectively. Such losses will be treated as
arising on the first day of the year ending June 30, 2001.
<PAGE> 32
REPORT OF INDEPENDENT ACCOUNTANTS
--------------------------------------------------------------------------------
To the Shareholders and Board of Directors
of IAA Trust Company Mutual Funds:
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments, and the related statements of
operations, changes in net assets, and the financial highlights present fairly,
in all material respects, the financial position of IAA Trust Company Mutual
Funds (the "Funds") (comprising, respectively, the IAA Trust Growth Fund, Inc.,
the IAA Trust Asset Allocation Fund, Inc., the IAA Trust Exempt Bond Fund, Inc.
and the IAA Trust Taxable Fixed Income Series Fund, Inc., which includes the IAA
Trust Money Market Series (formerly known as the IAA Trust Money Market Fund,
Inc.), the IAA Trust Short-Term Government Bond Series and the IAA Trust
Long-Term Bond Series) at June 30, 2000, and the results of their operations,
changes in their net assets, and their financial highlights for each of the
periods presented, in conformity with generally accepted accounting principles
in the United States. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Funds' management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards in
the United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at June 30, 2000 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
2001 Market Street
Philadelphia, Pennsylvania
August 10, 2000
<PAGE> 33
ILLUSTRATION OF $10,000 INVESTMENT June 30, 2000 (unaudited)
--------------------------------------------------------------------------------
GROWTH FUND VS. STANDARD & POOR'S 500 INDEX
[LINE GRAPH]
Average Annual Returns*
1 Year 10,29%
5 Year 19.24%
10 Year 13.84%
Past performance is not indicative of future results.
<TABLE>
<CAPTION>
GROWTH S & P 500
------ ---------
<S> <C> <C>
1990 $10000 $10000
1991 $10537 $10739
1992 $10983 $12184
1993 $12269 $13801
1994 $11972 $13996
1995 $15166 $17645
1996 $18428 $22232
1997 $23688 $29947
1998 $26288 $38979
1999 $33150 $47851
2000 $36561 $51310
</TABLE>
ASSET ALLOCATION FUND VS. MERRILL LYNCH CORPORATE AND GOVERNMENT BOND MASTER
INDEX & LIPPER FLEXIBLE FUNDS INDEX
[LINE GRAPH]
Average Annual Returns*
1 Year 8.14%
5 Year 14.02%
10 Year 11.72%
Past performance is not indicative of future results.
<TABLE>
<CAPTION>
ASSET ALLOCATION MERRILL LYNCH LIPPER FLEXIBLE
---------------- ------------- ---------------
<S> <C> <C> <C>
1990 $10000 $10000 $10000
1991 $10947 $11035 $10989
1992 $12243 $12599 $12342
1993 $13416 $14250 $14054
1994 $13511 $14227 $14233
1995 $15712 $16024 $16545
1996 $18028 $16818 $19061
1997 $21625 $18193 $22584
1998 $24092 $20253 $26685
1999 $28000 $20723 $29477
2000 $30279 $21621 $31717
</TABLE>
* Fund returns are net of all fees and transaction costs, while the Index
returns are based solely on market returns without deduction for fees or
transaction costs for rebalancing. The Index is un-managed.
<PAGE> 34
ILLUSTRATION OF $10,000 INVESTMENT June 30, 2000 (unaudited)
--------------------------------------------------------------------------------
TAX EXEMPT BOND FUND VS. LIPPER INTERMEDIATE MUNI INDEX AND LEHMAN BROTHERS'
7 YEAR MUNICIPAL BOND INDEX**
[LINE GRAPH]
Average Annual Returns*
1 Year 3.16%
5 Year 5.21%
10 Year 5.85%
Past performance is not indicative of future results.
<TABLE>
<CAPTION>
TAX EXEMPT BOND LIPPER INTERMEDIATE MUNI LEHMAN 7 YEAR MUNI
--------------- ------------------------ ------------------
<S> <C> <C> <C>
1990 $10000 $10000 $
1991 $10805 $10828 $10000
1992 $11891 $11941 $11093
1993 $12984 $13122 $12284
1994 $12742 $13252 $12440
1995 $13699 $14148 $13464
1996 $14425 $14861 $14209
1997 $15601 $15873 $15208
1998 $16763 $16976 $16324
1999 $17122 $17350 $16801
2000 $17663 $17825 $17471
</TABLE>
SHORT-TERM GOVERNMENT BOND SERIES VS. MERRILL LYNCH U.S. DOMESTIC MASTER BOND
INDEX AND MERRILL LYNCH U.S. TREASURY/AGENCY 1-3 YEAR BOND INDEX
[LINE GRAPH]
Average Annual Returns*
1 Year 4.43%
Since Inception 1-2-97 4.96%
Past performance is not indicative of future results.
<TABLE>
<CAPTION>
MERRILL LYNCH U.S.
SHORT TERM MERRILL LYNCH DOMESTIC TREASURY/AGENCY
---------- ---------------------- ------------------
<S> <C> <C> <C>
1-2-97 $10000 $10000 $10000
1-31-97 $10037 $10028 $10047
2-28-97 $10057 $10046 $10070
3-31-97 $10054 $ 9945 $10067
4-30-97 $10113 $10096 $10149
5-31-97 $10156 $10186 $10219
6-30-97 $10210 $10308 $10289
6-30-98 $10874 $11407 $10989
6-30-99 $11338 $11759 $11550
6/30/00 $11840 $12296 $12115
</TABLE>
* Fund returns are net of all fees and transaction costs, while the Index
returns are based solely on market returns without deduction for fees or
transaction costs for rebalancing. The Index is un-managed.
** The Lehman 7 year Muni has inception of 1991.
<PAGE> 35
ILLUSTRATION OF $10,000 INVESTMENT June 30, 2000 (unaudited)
--------------------------------------------------------------------------------
LONG-TERM BOND SERIES VS. MERRILL LYNCH U.S. DOMESTIC MASTER BOND INDEX
Average Annual Returns*
1 Year 4.43%
Since Inception 1-2-97 5.57%
Past performance is not indicative of future results.
<TABLE>
<CAPTION>
LONG TERM MERRILL LYNCH
--------- -------------
<S> <C> <C>
1-2-97 $10000 $10000
1-31-97 $10036 $10028
2-28-97 $10046 $10046
3-31-97 $ 9971 $ 9945
4-30-97 $10081 $10096
5-31-97 $10147 $10186
6-30-97 $10244 $10308
6-30-98 $11293 $11407
6-30-99 $11664 $11759
6/30/00 $12155 $12296
</TABLE>
* Fund returns are net of all fees and transaction costs, while the Index
returns are based solely on market returns without deduction for fees or
transaction costs for rebalancing. The Index is un-managed.
