THE IAA TRUST MUTUAL FUNDS
IAA TRUST GROWTH FUND, INC.
IAA TRUST ASSET ALLOCATION FUND, INC.
IAA TRUST TAX EXEMPT BOND FUND, INC.
IAA TRUST MONEY MARKET FUND, INC.
PROSPECTUS
OCTOBER 27, 1995
808 IAA Drive, Bloomington, Illinois 61702
(309) 557-3222
The IAA Trust Mutual Funds represent four separate funds (collectively, the
'FUNDS'). Each of the Funds has distinct investment objectives and policies.
Information concerning the Funds has been combined into this one Prospectus to
aid investors in understanding the similarities and differences among the Funds.
The four Funds are as follows:
IAA TRUST GROWTH FUND, INC. is a mutual fund with an investment objective of
capital growth. The Fund seeks to achieve its investment objective by investing
principally in common stocks or securities with equity characteristics.
IAA TRUST ASSET ALLOCATION FUND, INC. seeks growth of capital and current income
as near-equal objectives. The Fund seeks to achieve this objective by investing
in a mix of assets consisting of common stocks (both dividend and non-dividend
paying), preferred and convertible preferred stocks, fixed income securities
including bonds, bonds convertible into common stocks and short-term interest
bearing obligations.
IAA TRUST TAX EXEMPT BOND FUND, INC. is a mutual fund with an investment
objective of seeking as high a level of current interest income exempt from
Federal income taxes as is available from municipal bonds, consistent with the
conservation of capital. The Fund seeks to achieve its investment objective by
investing substantially all of its assets in a diversified portfolio of
municipal bonds, the interest from which is exempt from Federal income tax in
the opinion of bond counsel to the issuers.
IAA TRUST MONEY MARKET FUND, INC. is a mutual fund whose objective is to earn as
high a level of current income as possible, consistent with maintaining
liquidity and stability of principal. The Fund seeks to achieve its investment
objective by investing in high-quality money market instruments maturing in one
year or less, including securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities, certificates of deposit issued by domestic
banks, bankers acceptances, commercial paper and other corporate debt, and
repurchase agreements.
IAA TRUST MONEY MARKET FUND, INC. IS A MONEY MARKET FUND WHICH SEEKS TO MAINTAIN
A CONSTANT NET ASSET VALUE OF $1.00 PER SHARE. SHARES OF A MONEY MARKET FUND ARE
NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT AND THERE IS NO ASSURANCE
THAT THIS FUND WILL BE SUCCESSFUL IN MEETING ITS INVESTMENT OBJECTIVE OR IN
MAINTAINING A CONSTANT NET ASSET VALUE OF $1.00 PER SHARE.
The Funds' principal Underwriter is Fund/Plan Broker Services, Inc., #2 West Elm
Street, P.O. Box 874, Conshohocken, Pennsylvania 19428.
For information about how to invest in the IAA Trust Company Funds, contact
Fund/Plan Broker Services, Inc., or a local Country Capital Management Company
salesperson, or call toll-free 1 (800) 245-2100. In Bloomington/Normal, call
557-3222. Country Capital Management Company has a selling agreement with
Fund/Plan Broker Services, Inc. Shares of the Funds are sold only in states
where the Funds are registered.
<PAGE>
THIS PROSPECTUS SETS FORTH CONCISELY THE INFORMATION ABOUT THE FUNDS THAT A
PROSPECTIVE INVESTOR OUGHT TO KNOW BEFORE INVESTING. PLEASE READ AND RETAIN THIS
PROSPECTUS FOR FUTURE REFERENCE.
An investment in any of the Funds is neither insured nor guaranteed by the U.S.
Government. There can be no assurance that any Fund's investment objective will
be achieved. The investment objective of each Fund is fundamental and cannot be
changed without shareholder approval.
A Statement of Additional Information combining information about each of the
Funds has been filed with the Securities and Exchange Commission. This Statement
of Additional Information is incorporated by reference in its entirety in this
Prospectus. Copies of the Statement of Additional Information dated October 27,
1995 are available upon request and without charge by contacting Fund/Plan
Broker Services, Inc., at the address or telephone numbers listed above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SUBJECT PAGE
- ----------------------------------------------------------------------------------------------------------- -----
<S> <C>
Synopsis................................................................................................... 4
Transactions and Operating Expenses Tables................................................................. 6
Financial Highlights....................................................................................... 7
Performance Calculations................................................................................... 11
What are the Funds......................................................................................... 11
What are the Funds' Investment Objectives.................................................................. 12
Repurchase Agreements...................................................................................... 17
Who Manages the Funds...................................................................................... 18
Management's Discussion of the Funds' Performance.......................................................... 19
Who Distributes the Funds' Shares.......................................................................... 25
Distribution Plans......................................................................................... 25
Capital Stock.............................................................................................. 25
Income Dividends, Capital Gains Distributions, and Taxes................................................... 27
How to Buy Shares.......................................................................................... 29
Special Plans and Other Purchase Information............................................................... 31
How the Value of Your Shares is Determined................................................................. 32
How to Redeem Your Shares.................................................................................. 33
</TABLE>
<PAGE>
SYNOPSIS
THE FUNDS
The securities offered by this Prospectus consist of shares of four separate
funds (collectively the 'Funds'), each of which has distinct investment
objectives and policies. The Funds are open-end, diversified management
investment companies commonly referred to as mutual funds. The Funds are
incorporated under the laws of the State of Maryland. Investors should be aware
that by combining the Prospectus of each Fund into this one document, there is a
remote possibility that one Fund may become liable for any misstatements in the
Prospectus about another Fund. To the extent that a Fund incurs such liability,
a shareholder's investment in such Fund could be adversely affected.
The four Funds are identified herein as follows: IAA Trust Growth Fund, Inc.
(the 'GROWTH FUND'); IAA Trust Asset Allocation Fund, Inc. (the 'ASSET
ALLOCATION FUND'); IAA Trust Tax Exempt Bond Fund, Inc. (the 'TAX EXEMPT BOND
FUND'), and IAA Trust Money Market Fund, Inc (the 'MONEY MARKET FUND').
INVESTMENT OBJECTIVES
THE GROWTH FUND:
This Fund has an investment objective of capital growth. This Fund seeks to
achieve its investment objective by investing principally in common stocks or
securities with equity characteristics.
THE ASSET ALLOCATION FUND:
This Fund seeks growth of capital and current income as near-equal objectives,
primarily through equity securities. In general, this Fund may hold a mix of
assets consisting of common stocks (both dividend and non-dividend paying),
preferred and convertible preferred stocks, fixed income securities including
bonds, bonds convertible into common stocks, and short-term interest bearing
obligations.
THE TAX EXEMPT BOND FUND:
This Fund has an investment objective of seeking as high a level of current
interest income exempt from Federal income taxes as is available from municipal
bonds. This Fund seeks to achieve its objective by investing in a diversified
portfolio of municipal bonds, the interest from which is exempt from Federal
income tax in the opinion of bond counsel to the issuers.
THE MONEY MARKET FUND:
This Fund has an investment objective of earning a high level of current income,
consistent with maintaining liquidity and stability of principal. This Fund
attempts to maintain the value of its shares at a constant $1.00, although there
can be no assurance that the Fund will be able to maintain a stable net asset
value of $1.00 per share. This Fund seeks to achieve its investment objective by
investing in high-quality money market instruments maturing in one year or less,
including securities issued or guaranteed by the U.S. Government, its agencies
or instrumentalities, certificates of deposit issued by domestic banks, bankers
acceptances, commercial paper and other corporate debt, and repurchase
agreements. An investment in the Fund is neither insured nor guaranteed by the
U.S. Government.
HOW TO BUY SHARES
The minimum initial single purchase for the GROWTH FUND, the ASSET ALLOCATION
FUND, and the TAX EXEMPT BOND FUND is $100. The minimum initial single purchase
for the MONEY MARKET FUND is $1,000. The minimum additional investment for all
four Funds is $25. The public offering price of shares of a Fund is the net
asset value per share, plus the applicable sales load, next determined after
receipt and acceptance of the purchase order at the
4
<PAGE>
Transfer Agent in proper form with accompanying check or other bank wire
arrangements satisfactory to the Funds. There is no sales load associated with
shares of the MONEY MARKET FUND. See 'HOW TO BUY SHARES'.
HOW TO REDEEM SHARES
Shares may be redeemed at the net asset value per share of a Fund next
determined after receipt by the Transfer Agent of a redemption request in proper
form. Signature guarantees may be required in some cases. See 'HOW TO REDEEM
YOUR SHARES'.
DIVIDENDS AND REINVESTMENT
THE GROWTH FUND intends to pay semi-annual dividends from its net investment
income and may pay short-term capital gains, if earned and as declared by the
Board of Directors. Distributions of net capital gains, if any, will be paid
annually.
THE ASSET ALLOCATION FUND and THE TAX EXEMPT BOND FUND pay monthly dividends
from their respective net investment income on the last business day of the
month to shareholders of record on the preceding business day. Distributions of
net capital gains, if any, will be paid annually.
THE MONEY MARKET FUND declares and pays dividends of all its daily net
investment income on each day the Fund's net asset value per share is
determined. Each shareholder receives a monthly summary of such amounts.
Any dividend and distribution payments will be reinvested at net asset value, in
additional full and fractional shares of the particular Fund unless and until
the shareholder notifies the Transfer Agent in writing requesting payments in
cash. Provisions of the Tax Reform Act of 1986 may result in additional net
investment income and/or capital gain distributions at the end of the calendar
year. See 'INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS, AND TAXES'.
INVESTMENT MANAGEMENT, UNDERWRITER, AND SERVICING AGENTS
The IAA Trust Company, 808 IAA Drive, Bloomington, Illinois 61702 is the
Investment Adviser and Custodian for the Funds.
Fund/Plan Broker Services, Inc., #2 Elm Street, Conshohocken, Pennsylvania 19428
serves as the Funds' Underwriter. Fund/Plan Services, Inc., #2 Elm Street,
Conshohocken, Pennsylvania 19428 serves as the Funds' Administrator,
Accounting/Pricing Agent, and Transfer Agent.
5
<PAGE>
TRANSACTIONS AND OPERATING EXPENSES TABLE
<TABLE>
<CAPTION>
ASSET TAX MONEY
GROWTH ALLOCATION EXEMPT MARKET
FUND FUND BOND FUND FUND
--------- ----------- --------- ---------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)1................................................................... 3.00% 3.00% 3.00% none
Maximum Sales Load Imposed on Reinvested Dividends.......................... none none none none
Deferred Sales Load......................................................... none none none none
Redemption Fee.............................................................. none none none none
Exchange Fee................................................................ none none none none
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets)
Management Fees............................................................. 0.75% 0.75% 0.50% 0.50%
Waiver of Management Fees................................................... 0.00% 0.00% 0.00% (0.00%)*
12(b)1 Fees................................................................. 0.25% 0.25% 0.25% none
Other Expenses.............................................................. 0.14% 0.46% 0.31% 0.23%
--------- ----- --------- ---------
Total Fund Operating Expenses............................................... 1.14% 1.46% 1.06% 0.73%*
EXAMPLE:
You would pay the following expenses 1 YEAR $ 41 $ 44 $ 40 $ 7
on a $1,000 investment, assuming 3 YEARS $ 65 $ 75 $ 63 $ 23
(1) 5% annual return and (2) redemption 5 YEARS $ 91 $ 107 $ 87 $ 41
at the end of each time period.................................. 10 YEARS $ 164 $ 199 $ 156 $ 91
</TABLE>
(1) The maximum sales charge is 3%. For more information on waiver of sales
charge and reduced sales charges, see 'HOW TO BUY SHARES'.
The purpose of these tables are to assist the investor in understanding the
various costs and expenses that an investor in the Funds will bear directly and
indirectly. This information has been restated to reflect current fees as if
they had been in effect during the previous fiscal year. The information
contained in the tables should not be considered a representation of future
expenses. Actual expenses may be greater than or less than those stated.
* For the year ended June 30, 1995, the Advisor voluntarily agreed to waive fees
totalling $86,900 from the MONEY MARKET FUND. The Advisor is currently not
waiving any of its investment advisory fees.
6
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial highlights are a part of the Funds' financial statements
which have been audited by Coopers & Lybrand L.L.P., independent accountants,
for the most recent five years. The Funds' most recent annual audited financial
statements and the report of Coopers & Lybrand L.L.P. thereon appear in the
Funds' Statement of Additional Information. The following tables should be read
in conjunction with these financial statements and related notes also included
in such Statement of Additional Information.
The tables below set forth financial data for a share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
IAA TRUST GROWTH FUND, INC.
YEARS ENDED JUNE 30,
-------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
YEAR........................... $ 15.16 $ 17.55 $ 17.23 $ 17.35 $ 17.42 $ 16.83 $ 15.06 $ 19.43 $ 20.64
--------- --------- --------- --------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income.......... 0.22 0.27 0.25 0.35 0.41 0.61 0.52 0.43 0.31
Net gains or losses on
securities (both realized and
unrealized).................. 3.45 (0.63) 1.67 0.40 0.44 1.93 2.32 (1.62) 1.96
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total from investment
operations................ 3.67 (0.36) 1.92 0.75 0.85 2.54 2.84 (1.19) 2.27
--------- --------- --------- --------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment
income....................... (0.17) (0.22) (0.29) (0.38) (0.51) (0.65) (0.42) (0.54) (0.38)
Distributions from capital
gains........................ (1.43) (1.81) (1.31) (0.49) (0.41) (1.30) (0.65) (2.64) (3.10)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total distributions......... (1.60) (2.03) (1.60) (0.87) (0.92) (1.95) (1.07) (3.18) (3.48)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF YEAR.... $ 17.23 $ 15.16 $ 17.55 $ 17.23 $ 17.35 $ 17.42 $ 16.83 $ 15.06 $ 19.43
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN+................... 26.68% (2.42%) 11.71% 4.23% 5.37% 16.09% 20.06% (6.68%) 14.75%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
000's)....................... $ 70,577 $ 59,448 $ 70,785 $ 76,147 $ 81,974 $ 81,511 $ 74,327 $ 68,436 $ 79,194
Ratio of expenses to average
net assets*.................. 1.14% 1.24% 1.18% 0.85% 0.82% 0.84% 0.93% 0.96% 0.95%
Ratio of net investment income
to average net assets*....... 1.41% 1.03% 1.36% 1.91% 2.58% 3.58% 3.29% 2.69% 1.70%
Portfolio turnover............. 31.84% 49.12% 55.36% 45.50% 26.00% 18.10% 42.60% 51.20% 40.10%
<CAPTION>
1986
---------
<S> <C>
NET ASSET VALUE, BEGINNING OF
YEAR........................... $ 17.60
---------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income.......... 0.39
Net gains or losses on
securities (both realized and
unrealized).................. 4.25
---------
Total from investment
operations................ 4.64
---------
LESS DISTRIBUTIONS
Dividends from net investment
income....................... (0.40)
Distributions from capital
gains........................ (1.20)
---------
Total distributions......... (1.60)
---------
NET ASSET VALUE, END OF YEAR.... $ 20.64
---------
---------
TOTAL RETURN+................... 28.89%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
000's)....................... $ 75,062
Ratio of expenses to average
net assets*.................. 0.95%
Ratio of net investment income
to average net assets*....... 2.06%
Portfolio turnover............. 64.90%
</TABLE>
- ------------------
* Average net assets have been computed based on the aggregate value of the
fund's daily net assets.
+ Total return calculation does not reflect sales load.
7
<PAGE>
FINANCIAL HIGHLIGHTS
The tables below set forth financial data for a share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
IAA TRUST
ASSET ALLOCATION FUND, INC.
YEARS ENDED JUNE 30,
--------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
YEAR............................... $ 11.08 $ 11.60 $ 11.20 $ 10.74 $ 10.56 $ 10.80 $ 10.51 $ 10.84
--------- --------- --------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income............... 0.36 0.34 0.57 0.68 0.73 0.78 0.75 0.73
Net gains or losses on securities
(both realized and unrealized)..... 11.38 (0.25) 0.47 0.55 0.24 (0.11) 0.29 (0.08)
--------- --------- --------- --------- --------- --------- --------- ---------
Total from investment operations... 1.74 0.09 1.04 1.23 0.97 0.67 1.04 0.65
--------- --------- --------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment
income............................. (0.34) (0.34) (0.57) (0.68) (0.76) (0.77) (0.75) (0.72)
Distributions from capital gains.... (0.18) (0.27) (0.07) (0.09) (0.03) (0.14) (0.00) (0.26)
Distributions from return of
capital............................ (0.01) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
--------- --------- --------- --------- --------- --------- --------- ---------
Total distributions................ (0.53) (0.61) (0.64) (0.77) (0.79) (0.91) (0.75) (0.98)
--------- --------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF YEAR........ $ 12.29 $ 11.08 $ 11.60 $ 11.20 $ 10.74 $ 10.56 $ 10.80 $ 10.51
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN+....................... 16.29% 0.71% 9.58% 11.84% 9.47% 6.50% 10.40% 6.47%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
000's)........................... $ 9,540 $ 8,653 $ 6,663 $ 6,233 $ 5,768 $ 5,714 $ 5,812 $ 5,966
Ratio of expenses to average net
assets*.......................... 1.46% 1.78% 1.71% 1.51% 1.33% 1.39% 1.34% 1.17%
Ratio of net investment income to
average net assets*.............. 3.18% 2.98% 4.97% 6.20% 6.83% 7.31% 7.12% 6.92%
Portfolio turnover................. 21.03% 17.39% 36.70% 14.10% 20.60% 6.50% 45.20% 11.70%
<CAPTION>
1987 1986
--------- ---------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF
YEAR............................... $ 11.14 $ 10.03
--------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income............... 0.73 0.83
Net gains or losses on securities
(both realized and unrealized)..... (0.30) 1.10
--------- ---------
Total from investment operations... 0.43 1.93
--------- ---------
LESS DISTRIBUTIONS
Dividends from net investment
income............................. (0.73) (0.82)
Distributions from capital gains.... (0.00) (0.00)
Distributions from return of
capital............................ (0.00) (0.00)
--------- ---------
Total distributions................ (0.73) (0.82)
--------- ---------
NET ASSET VALUE, END OF YEAR........ $ 10.84 $ 11.14
--------- ---------
--------- ---------
TOTAL RETURN+....................... 3.91% 19.73%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
000's)........................... $ 6,003 $ 4,701
Ratio of expenses to average net
assets*.......................... 1.42% 1.38%
Ratio of net investment income to
average net assets*.............. 6.61% 7.83%
Portfolio turnover................. 51.40% 59.30%
</TABLE>
- ------------------
* Average net assets have been computed based on the aggregate value of the
fund's daily net assets.
+ Total return calculation does not reflect sales load.
8
<PAGE>
FINANCIAL HIGHLIGHTS
The tables below set forth financial data for a share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
IAA TRUST
TAX EXEMPT BOND FUND, INC.
YEARS ENDED JUNE 30,
-------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
YEAR........................... $ 8.19 $ 9.11 $ 8.78 $ 8.44 $ 8.32 $ 8.41 $ 8.15 $ 8.09 $ 8.10
--------- --------- --------- --------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income........... 0.39 0.39 0.46 0.49 0.52 0.52 0.54 0.54 0.51
Net gains or losses on
securities (both realized and
unrealized).................... 0.20 (0.54) 0.33 0.34 0.13 (0.09) 0.26 0.06 (0.01)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total from investment
operations................... 0.59 (0.15) 0.79 0.83 0.65 0.43 0.80 0.60 0.50
--------- --------- --------- --------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment
income......................... (0.39) (0.39) (0.46) (0.49) (0.53) (0.52) (0.54) (0.54) (0.51)
Distributions from capital
gains.......................... (0.03) (0.38) 0.00 0.00 0.00 0.00 0.00 0.00 0.00
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total distributions............ (0.42) (0.77) (0.46) (0.49) (0.53) (0.52) (0.54) (0.54) (0.51)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF YEAR.... $ 8.36 $ 8.19 $ 9.11 $ 8.78 $ 8.44 $ 8.32 $ 8.41 $ 8.15 $ 8.09
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN+................... 7.51% (1.86%) 9.19% 10.05% 8.05% 5.24% 10.15% 7.69% 6.18%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
000's)....................... $ 18,833 $ 19,095 $ 20,026 $ 17,872 $ 16,035 $ 14,957 $ 14,307 $ 12,906 $ 13,328
Ratio of expenses to average
net assets*.................. 1.06% 1.15% 1.03% 0.95% 0.83% 0.90% 0.91% 0.89% 1.02%
Ratio of net investment income
to average net assets*....... 4.79% 4.47% 5.11% 5.65% 6.17% 6.22% 6.51% 6.66% 6.27%
Portfolio turnover............. 24.89% 41.94% 39.60% 20.30% 6.30% 23.50% 12.70% 16.40% 13.90%
<CAPTION>
1986
---------
<S> <C>
NET ASSET VALUE, BEGINNING OF
YEAR........................... $ 7.56
---------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income........... 0.57
Net gains or losses on
securities (both realized and
unrealized).................... 0.54
---------
Total from investment
operations................... 1.11
---------
LESS DISTRIBUTIONS
Dividends from net investment
income......................... (0.57)
Distributions from capital
gains.......................... 0.00
---------
Total distributions............ (0.57)
---------
NET ASSET VALUE, END OF YEAR.... $ 8.10
---------
---------
TOTAL RETURN+................... 15.21%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
000's)....................... $ 6,617
Ratio of expenses to average
net assets*.................. 1.20%
Ratio of net investment income
to average net assets*....... 7.25%
Portfolio turnover............. 39.90%
</TABLE>
- ------------------
* Average net assets have been computed based on the aggregate value of the
fund's daily net assets.
+ Total return calculation does not reflect sales load.
10
<PAGE>
FINANCIAL HIGHLIGHTS
The tables below set forth financial data for a share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
IAA TRUST
MONEY MARKET FUND, INC.
YEARS ENDED JUNE 30,
-------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
YEAR........................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income........... 0.05 0.03 0.02 0.03 0.06 0.07 0.08 0.06 0.05
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total from investment
operations................... 0.05 0.03 0.02 0.03 0.06 0.07 0.08 0.06 0.05
--------- --------- --------- --------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment
income......................... (0.05) (0.03) (0.02) (0.03) (0.06) (0.07) (0.08) (0.06) (0.05)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total distributions............ (0.05) (0.03) (0.02) (0.03) (0.06) (0.07) (0.08) (0.06) (0.05)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF YEAR.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN.................... 4.85% 2.86% 2.41% 3.49% 6.40% 7.74% 7.90% 5.90% 5.12%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
000's)....................... $ 36,415 $ 38,699 $ 33,302 $ 10,191 $ 19,839 $ 21,920 $ 17,421 $ 14,211 $ 16,875
Ratio of expenses to average
net assets*+................. 0.73% 0.56% 0.58% 1.32% 1.03% 1.05% 1.28% 1.28% 1.24%
Ratio of net investment income
to average net assets*....... 4.80% 2.83% 2.67% 3.60% 6.26% 7.49% 7.58% 5.74% 5.01%
<CAPTION>
1986
---------
<S> <C>
NET ASSET VALUE, BEGINNING OF
YEAR........................... $ 1.00
---------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income........... 0.07
---------
Total from investment
operations................... 0.07
---------
LESS DISTRIBUTIONS
Dividends from net investment
income......................... (0.07)
---------
Total distributions............ (0.07)
---------
NET ASSET VALUE, END OF YEAR.... $ 1.00
---------
---------
TOTAL RETURN.................... 6.75%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
000's)....................... $ 21,485
Ratio of expenses to average
net assets*+................. 1.12%
Ratio of net investment income
to average net assets*....... 6.55%
</TABLE>
- ------------------
* Average net assets have been computed based on the aggregate value of the
fund's daily net assets.
+ After voluntary waiver of advisory fees. Before voluntary waiver of advisory
fees, the ratio of expenses to average net assets was .97%, 1.06% and 1.02%
for the years ended June 30, 1995, June 30, 1994 and June 30, 1993
respectively.
10
<PAGE>
PERFORMANCE CALCULATIONS
From time to time, the Funds may advertise performance measures such as total
percentage increase, total return, and yield. Whenever total percentage increase
or yield is advertised, total return will be advertised as well. The following
is a brief explanation of how these figures are obtained.
YIELDS
With respect to the ASSET ALLOCATION FUND and the TAX EXEMPT BOND FUND, yield is
a measure of the total current income for the 30-day period ended on the given
date, stated as a percentage of the original investment. With respect to the
MONEY MARKET FUND, yield is a measure of the total current income for the 7-day
period ended on the given date. This percent is annualized and compounded, which
means that the income is assumed to be earned and reinvested over a one-year
period. Effective yield is computed in the same manner, except that income is
assumed to have been reinvested over a one-year period. Yield differs from total
percentage increase and total return since it only considers current income and
does not take into account gains or losses on securities held by a Fund.
With respect to the TAX EXEMPT BOND FUND, tax-equivalent yield is the yield
which would be required from a fund whose income is subject to Federal income
tax in order to equal the amount of after-tax income received by a shareholder
based on the tax exempt yield of this Fund. The rate simplifies the comparison
of yields of tax exempt funds with yields of taxable funds.
TOTAL PERCENTAGE INCREASE
Total percentage increase is calculated for the specified periods of time by
assuming a hypothetical investment of $1,000 in a Fund's shares after deducting
the maximum sales charge of 3% (if applicable). Each dividend or other
distribution is treated as having been reinvested at net asset value on the
reinvestment date. The percentage increases stated are the percent that an
original investment would have increased during the applicable period.
TOTAL RETURN
Total return is calculated in the same way as the total percentage increase
except that it is stated in terms of a level one-year compound rate of return
(all earnings reinvested on an annual basis) over the investment period.
Advertisements of the Funds' performance may also include the ending value of
the illustrated investment for the period stated. This is the amount that would
be received by a shareholder who sold all shares at the end of the stated
period.
The inclusion of the maximum sales charge in the above computations results in
lower performance figures than would be obtained by excluding this sales charge.
The above performance measures are based on historical earnings and are not
intended to indicate future performance.
WHAT ARE THE FUNDS
The Funds are companies engaged in the business of investing the money of their
shareholders. Each Fund sells shares of its own stock to the public and invests
the proceeds in the securities of other companies. In other words, when you
purchase shares of a Fund, your money is pooled with that of others and is
invested in a professionally managed investment portfolio.
11
<PAGE>
The Funds are technically known as diversified, open-end management investment
companies, meaning that they are:
'Diversified' because each invests in securities of different companies and
industries in an attempt to spread and reduce the risks inherent in all
investing. Diversification, however, does not imply that an investor's
capital will increase or that the purchase of Fund shares involves a
preservation of original capital and a protection against loss in value.
'Open-end' in that a Fund continually offers new shares for sale to the
public and is legally obligated to buy back such shares held by an investor
and pay the investor the next determined net asset value of the shares. This
open-end type of investment company is commonly called a mutual fund.
'Management Investment Company' because upon the advice of professional
investment managers, a Fund continuously reviews, and from time to time
changes, its portfolio holdings in an effort to achieve its investment
objective.
The Funds are separate Maryland corporations. The GROWTH FUND (IAA Trust Growth
Fund, Inc.) was organized on August 5, 1965. The ASSET ALLOCATION FUND (IAA
Trust Asset Allocation Fund, Inc.; formerly IAA Trust Income Fund, Inc.) and the
TAX EXEMPT BOND FUND (IAA Trust Tax Exempt Bond Fund, Inc.) were organized on
March 20, 1978. The MONEY MARKET FUND (IAA Trust Money Market Fund, Inc.) was
organized on April 14, 1981.
Investment companies operate pursuant to their objectives and policies and such
objectives and policies may differ from fund to fund. The Funds' investment
objectives and policies are set forth below.
The value of each Fund's shares (with the exception of the MONEY MARKET FUND)
fluctuate because the value of the securities in which each Fund invests
fluctuate. When the Funds sell portfolio securities, they may realize a gain or
a loss depending on whether they sell them for more or less than their cost. The
Funds will earn dividend or interest income to the extent that they receive
dividends or interest from their investments.
WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES
THE GROWTH FUND:
The investment objective of the GROWTH FUND is capital growth. Current income
through the receipt of interest or dividends from investments will be secondary
to this Fund's goal of capital growth. Thus, the Fund is not intended for
investors whose principal objective is dividend income. Achievement of the
Fund's objective cannot be assured, but through professional management, the
Fund will seek to obtain results which are in keeping with its objective.
Although the portfolio of the Fund may be restructured at times for temporary
defensive purposes, it is the intention of the Board of Directors that no
material change of a permanent nature will be made in the Fund's investment
objective without the approval of the holders of at least a majority of the
Fund's outstanding capital stock.
The GROWTH FUND'S investment policy is to invest principally in common stocks
and securities with equity characteristics, such as convertible preferred stocks
and convertible bonds; however, it may invest fully in common stocks or
securities with equity characteristics. To a lesser extent, the Fund may also
invest in bonds and preferred stocks when deemed prudent. The Fund may adopt a
temporary defensive position when it deems advisable due to a change in economic
conditions. This may be done by establishing and maintaining a reserve in: cash;
short-term U.S. Government bonds, bills or notes; prime commercial paper of
major companies; and certificates of deposit issued by major banks, for the
purpose of providing working capital, funds for possible redemption of shares,
or to enable the Fund to take advantage of buying opportunities. The adoption of
any such temporary defensive position will be on a temporary basis and will not
be utilized to change the long-term
12
<PAGE>
investment objective and policies of the Fund. The word 'temporary' as used in
the preceding sentence should not be read as having a fixed meaning in the sense
that it designates any fixed period of time.
When investing in fixed income securities, the GROWTH FUND'S management intends
to invest in those securities which are rated at the time of purchase within the
four highest grades assigned by Moody's Investors Service, Inc. ('Moody's')
('Aaa', 'Aa', 'A', or 'Baa') or Standard & Poor's Corporation ('S&P') ('AAA',
'AA', 'A', or 'BBB'); or in those securities, although not rated as a matter of
policy by either of the above two ratings services, which are considered by
management to have investment quality comparable to securities that fall within
the four highest grades assigned by the above two rating services. While fixed
income securities rated 'Baa' or 'BBB' are regarded as having an adequate
capacity to pay principal and interest, such securities lack outstanding
investment characteristics and in fact have speculative characteristics as well
which may be more sensitive to economic change than higher rated bonds. In the
event a fixed income security held by the Fund is downgraded below a 'Baa' or
'BBB' rating, the Investment Adviser (IAA Trust Company) shall promptly reassess
the risks involved and take such actions as it determines are in the best
interests of the Fund and its shareholders. See the Appendix to the Statement of
Additional Information for explanations on applicable ratings.
In seeking capital growth, the GROWTH FUND will constantly search for the best
values and will make investment decisions based primarily upon fundamental
valuation of securities. The Fund will dispose of securities held whenever, in
the judgment of its management, such securities do not represent the best values
for the purpose of achieving the Fund's objective. This can occur for a variety
of reasons, such as an increase in the market value of a particular security to
what is believed to be an unreasonably high level, a change in trend of growth
which was used as a basis of purchase, what is believed to be a vulnerable
general level of security prices, and other such circumstances bearing on the
desirability of continuing a given investment. Under ordinary circumstances,
securities will be held for periods of time sufficient to qualify for long-term
capital gain treatment for Federal income tax purposes.
The GROWTH FUND may purchase or acquire securities of other investment companies
on the open market if immediately after such purchase or acquisition, the Fund
would not own in the aggregate: (1) more than 3% of the total outstanding voting
stock of such other investment company; (2) securities issued by such other
investment company having an aggregate value in excess of 5% of the value of the
Fund's total assets; or (3) securities issued by such other investment company
and all other investment companies having an aggregate value in excess of 10% of
the value of the Fund's total assets. By investing in another registered
investment company, there may be a duplication in fees and expenses. The Fund
will only invest in repurchase agreements of domestic banks maturing in seven
days or less and will not invest in repurchase agreements of broker-dealers. See
'REPURCHASE AGREEMENTS' for applicable risk disclosure statements and the
Appendix to the Funds' Statement of Additional Information. Repurchase
agreements create a risk for a Fund which invests in such instruments issued by
a party which subsequently initiates bankruptcy proceedings. While the Fund has
a right to dispose of the collateral securities and, therefore, views such risk
as minimal, there is a risk that the Fund may suffer a loss upon the disposition
of the collateral securities due to a delay in exercising such right. There is
an inverse relationship between interest rates and the price of debt securities
and therefore, the net asset value of the Fund will fluctuate accordingly to the
extent that it holds debt. The overall flexibility discussed in this paragraph
is of major importance to the Fund's investment policies. The investment
policies set forth in this paragraph are non-fundamental and therefore may be
changed by the Board of Directors.
THE ASSET ALLOCATION FUND:
The primary investment objective of the ASSET ALLOCATION FUND is growth of
capital with current income. The Fund seeks to achieve its objective by
following an asset allocation strategy utilizing a wide range of equity, debt,
and money market securities. Asset classes and securities strategies selected
will be those that the Investment Adviser believes offer the greatest potential
for maximizing total return.
13
<PAGE>
Income and capital appreciation will be derived from the ASSET ALLOCATION FUND'S
investment in common stocks and fixed income securities consisting of bonds,
preferred stocks, and short-term obligations. Short-term obligations are
instruments maturing in one year or less (measured from the time of investment)
and include: obligations of or guaranteed by the U.S. Government, its agencies
or instrumentalities; certificates of deposit of domestic banks; commercial
paper rated in the top two grades--'Prime-1' or 'Prime-2' by Moody's or 'A-1' or
'A-2' by S&P; non-convertible corporate debt securities such as bonds, notes and
debentures which are rated in the top two grades--'Aaa' or 'Aa' by Moody's or
'AAA' or 'AA' by S&P; negotiable certificates of deposit of savings and loan
associations; and repurchase agreements. Fixed income securities may have equity
conversion privileges or other equity features, including attached warrants or
rights.
When investing in fixed income securities, the ASSET ALLOCATION FUND'S
management intends to invest in those securities which are rated at the time of
purchase within the four highest grades assigned by Moody's ('Aaa', 'Aa', 'A',
or 'Baa') or S&P ('AAA', 'AA', 'A', or 'BBB'); or in those securities, although
not rated as a matter of policy by either of the above two rating services,
which are considered by management to have investment quality comparable to
securities that fall within the four highest grades assigned by the above two
rating services. While fixed income securities rated 'Baa' or 'BBB' are regarded
as having an adequate capacity to pay principal and interest, such securities
lack outstanding investment characteristics and in fact have speculative
characteristics as well which may be more sensitive to economic change than
higher rated bonds. In the event a fixed income security held by the Fund is
downgraded below a 'Baa' or 'BBB' rating, the Investment Adviser shall promptly
reassess the risks involved and take such actions as it determines to be in the
best interest of the Fund and its shareholders. See the Appendix to the
Statement of Additional Information for explanations on applicable ratings.
Although it is not the intent of the ASSET ALLOCATION FUND'S management to trade
for short-term profits, purchases and sales of securities will be made whenever
management deems it would contribute to the achievement of the Fund's objective.
The Fund will be invested in securities representing a number of different
industry classifications and does not intend to concentrate its investments in a
particular industry. In addition to domestic securities, the Fund may invest in
Canadian and other foreign securities, both corporate and government, which are
payable in United States dollars. To the extent that the Fund does invest in
foreign securities, such investments may be subject to special risks, such as
changes in the administration or economic and monetary policies of foreign
governments. However, the Fund will not invest as much as 5% of its total assets
in foreign securities.
The ASSET ALLOCATION FUND may purchase or acquire securities of other investment
companies on the open market if immediately after such purchase or acquisition,
the Fund would not own in the aggregate: (1) more than 3% of the total
outstanding voting stock of such other investment company; (2) securities issued
by such other investment company having an aggregate value in excess of 5% of
the value of the Fund's total assets; or (3) securities issued by such other
investment company and all other investment companies having an aggregate value
in excess of 10% of the value of the Fund's total assets. By investing in
another registered investment company, there may be a duplication in fees and
expenses. The Fund will only invest in repurchase agreements of domestic banks
maturing in seven days or less and will not invest in repurchase agreements of
broker-dealers. See 'REPURCHASE AGREEMENTS' for applicable risk disclosure
statements and the Appendix to the Funds' Statement of Additional Information.
Repurchase agreements create a risk for a Fund which invests in such instruments
issued by a party which subsequently initiates bankruptcy proceedings. While the
Fund has a right to dispose of the collateral securities and, therefore, views
such risk as minimal, there is a risk that the Fund may suffer a loss upon the
disposition of the collateral securities due to a delay in exercising such
right. There is an inverse relationship between interest rates and the price of
debt securities and therefore, the net asset value of the Fund will fluctuate
accordingly to the extent that it holds debt. The investment policies set forth
in this section are non-fundamental and, therefore, may be changed by the Board
of Directors.
14
<PAGE>
THE TAX EXEMPT BOND FUND:
The investment objective of the TAX EXEMPT BOND FUND is to seek as high a level
of current interest income exempt from Federal income taxes as is available from
municipal bonds, consistent with the conservation of capital. The Fund's
investments (and thus the value of shares held by shareholders) will be subject
to the market fluctuations and risks inherent in all securities, and there can
be no assurance that the Fund's stated objective will be realized. Although the
investment objective of the Fund may be changed by the Board of Directors, it is
the intention of the Board that no material change of a permanent nature will be
made in the Fund's investment objective without the approval of the holders of
at least a majority of the Fund's outstanding capital stock.
The TAX EXEMPT BOND FUND will seek to achieve its objective by investing
substantially all of its assets in a diversified portfolio of debt obligations
issued by or on behalf of states, territories or possessions of the United
States and the District of Columbia or their political subdivisions, agencies
and instrumentalities, or multi-state agencies or authorities, the interest from
which is exempt from Federal income taxes in the opinion of bond counsel to the
issuers. Under normal market conditions, the Fund will maintain at least 80% of
its net assets in tax exempt municipal bonds (not including assets invested in
temporary investments for defensive purposes see following paragraph). This 80%
limitation is considered a fundamental policy and may be changed only in the
manner by which other fundamental policies may be changed; by the approval of
the holders of at least a majority of the Fund's outstanding capital stock. The
Fund's assets will consist of: (1) municipal bonds which are rated at the time
of purchase within the four highest grades assigned by Moody's ('Aaa', 'Aa',
'A', or 'Baa') or S&P ('AAA', 'AA', 'A', or 'BBB'), or in those municipal bonds,
although not rated as a matter of policy by either of the above two rating
services, which are considered by management to have investment quality
comparable to municipal bonds that fall within the four highest grades assigned
by the above two rating services (municipal bonds rated 'Baa' or 'BBB' have
speculative characteristics); (2) temporary investments as described below; and
(3) cash. While ratings at the time of purchase will determine which securities
may be acquired, a subsequent reduction in rating will not require the Fund to
dispose of the securities. No limitations are imposed as to the percentage of
the Fund's assets which may be invested among Moody's or S&P's highest four
ratings; however, the Fund will not invest more than 20% of its net assets
(measured at the time of investment) in municipal bonds which are not rated, or
in taxable investments, or in investments subject to the alternative minimum
tax.
Pending investment of proceeds from the sale of the TAX EXEMPT BOND FUND'S
shares, the changing of portfolio composition, and from time to time when deemed
appropriate by the Investment Adviser for defensive purposes, the Fund may
invest in temporary investment securities. Temporary investment securities
consist of: (1) notes issued by or on behalf of municipal issuers backed by the
Federal Government; (2) notes of issuers having, at the time of purchase, an
outstanding issue of municipal bonds rated within the four highest grades of
Moody's or S&P; (3) municipal notes rated at the time of purchase within the two
highest grades assigned by Moody's ('MIG-1' and 'MIG-2'); (4) obligations of the
United States Government, its agencies or instrumentalities; (5) bonds, notes
and certificates rated within the four highest grades of Moody's or S&P; (6)
commercial paper rated within the two highest grades assigned by Moody's ('P- 1'
or 'P-2') or by S&P ('A-1' or 'A-2'); and (7) debt securities (including
repurchase agreements) issued or guaranteed by domestic banks having investment
quality, in management's opinion, comparable to debt securities of the type
described in category (5) above. The income from the securities described in
categories (4) through (7) above, is subject to Federal income taxes.
Consequently, interest income from temporary investments may be taxable to
shareholders as ordinary income. The investment policies set forth in this
paragraph are non-fundamental and therefore may be changed by the Board of
Directors.
The TAX EXEMPT BOND FUND may purchase or acquire securities of other investment
companies on the open market if immediately after such purchase or acquisition,
the Fund would not own in the aggregate: (1) more than 3% of the total
outstanding voting stock of such other investment company; (2) securities issued
by such other
15
<PAGE>
investment company having an aggregate value in excess of 5% of the value of the
Fund's total assets; or (3) securities issued by such other investment company
and all other investment companies having an aggregate value in excess of 10% of
the value of the Fund's total assets. By investing in another registered
investment company, there may be a duplication in fees and expenses. The Fund
will only invest in repurchase agreements of domestic banks maturing in seven
days or less and will not invest in repurchase agreements of broker-dealers. See
'REPURCHASE AGREEMENTS' for applicable risk disclosure statements and the
Appendix to the Funds' Statement of Additional Information. There is an inverse
relationship between interest rates and the price of debt securities and
therefore, the net asset value of the Fund will fluctuate accordingly.
In general, municipal bonds purchased by the TAX EXEMPT BOND FUND are debt
obligations issued by states, territories and possessions of the United States
and the District of Columbia and their political subdivisions, agencies and
instrumentalities. They are issued to obtain funds for various public purposes,
including the construction of a wide range of public facilities such as:
airports; bridges; highways; hospitals; housing; mass transportation; schools;
streets; and water and sewer works. Other public purposes for which municipal
bonds may be issued include obtaining funds for general operating expenses, and
obtaining funds to lend to other public institutions and facilities. In
addition, certain types of industrial development bonds are issued by or on
behalf of public authorities to obtain funds to provide: privately-operated
housing facilities; airports; mass transit; industrial, port or parking
facilities; air or water pollution control facilities; and certain facilities
for water supply, gas, electricity, or sewage or solid waste disposal. Other
types of facilities and certain industrial development bonds, the proceeds of
which are used for the acquisition, construction, reconstruction or improvement
of or to provide equipment for privately-operated industrial or commercial
facilities, may qualify as municipal bonds, although current Federal tax laws
place substantial limitations on the size of such funds. Moreover, when an
industrial development bond is backed only by the assets and revenue of the
non-governmental user, then such non-governmental user is deemed to be the
issuer.
The two principal classifications of municipal bonds are 'general obligation
bonds' and 'revenue bonds'. General obligation bonds are secured by the issuer's
pledge of its faith, credit and taxing power for the payment of principal and
interest. The taxes or special assessments that can be levied for the payment of
debt service may be limited or unlimited as to rate or amount. Revenue bonds are
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise or other
specific revenue source, but not from the general taxing power. Tax exempt
industrial development bonds are in most cases revenue bonds and do not
generally carry the pledge of the credit of the insurer of such bonds. There
are, of course, variations in the security of municipal bonds, both within a
particular classification and between classifications. The Fund's portfolio may
consist of any combination of general obligation bonds, revenue bonds, and
industrial revenue bonds, and it can be expected that the ratios of such bonds
will vary from time to time.
Yields on municipal bonds are dependent on, among other things, general money
market conditions, conditions of the municipal bond market, size of a particular
offering, maturity of the obligation, the financial condition of the issuer, and
the rating of the issue. Additionally, the imposition of the Fund's management
fee, as well as other operating expenses, will have the effect of reducing the
yield to investors. Proposals have been introduced periodically before Congress
to restrict or eliminate the Federal income tax exemption for interest on
municipal bonds. Similar proposals may be introduced in the future. If such a
proposal was enacted, the availability of municipal bonds for investment by the
Fund and the value of the Fund's portfolio would be affected. In such event, the
Fund would reevaluate its objective and policies and consider recommending to
its shareholders changes in the structure of the Fund.
THE MONEY MARKET FUND:
The investment objective of the MONEY MARKET FUND is to earn as high a level of
current income as possible, consistent with maintaining liquidity and stability
of principal. In pursuing its objective, the Fund may not always purchase
securities offering the highest yield. The Fund will only invest in high-quality
rated securities or unrated
16
<PAGE>
securities determined by the Board of Directors to be of high-quality and
present minimum credit risk. There can be no assurance that the Fund's stated
objective will be realized. Although the investment objective of the Fund may be
changed by the Board of Directors, it is the intention of the Board that no
material change of a permanent nature will be made in the Fund's investment
objective without the approval of the holders of at least a majority of the
Fund's outstanding capital stock.
The MONEY MARKET FUND seeks to achieve its objective by investing in the
following types of money market instruments, which are maturing in one year or
less, measured from the time of investment:
. Obligations of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities.
. Certificates of deposit of domestic banks in amounts (currently $100,000) that
are fully insured by The Federal Deposit Insurance Corporation ('The FDIC')
and, for larger amounts, bank certificates of deposit or bankers acceptances
of domestic banks having total assets in excess of $1 billion and which are
members of The FDIC. The Fund may purchase both negotiable and non-negotiable
certificates of deposit. Non-negotiable certificates of deposit are not
purchased or sold in a secondary trading market and must be held to maturity
unless, at the request of the Fund, the issuer agrees to redeem them earlier,
possibly at less than par. Accordingly, the Fund will not invest more than 10%
of its net assets in non-negotiable certificates of deposit or in other
illiquid, restricted securities so that this potential liquidity risk will be
minimal.
. Commercial paper rated in the top grade by two nationally recognized
statistical rating organizations (NRSRO's) one of which must be either Moody's
Investors Service, Inc., or Standard & Poor's Corporation.
. Non-convertible corporate debt securities such as bonds, notes and debentures
which are rated in the top grade--'Aaa' by Moody's or 'AAA' by S&P.
. Negotiable certificates of deposit of savings and loan associations in amounts
(currently $100,000) that are fully insured by The FDIC.
. Repurchase agreements of obligations which are suitable for investment under
the categories set forth above and issued by a member bank or certain
broker/dealers who have been approved by the Board of Directors and are
participating in the Federal Reserve System. The Fund will only invest in
repurchase agreements maturing in seven days or less. Repurchase agreements
create a risk for a Fund which invests in such instruments issued by a party
which subsequently initiates bankruptcy proceedings. While the Fund has a
right to dispose of the collateral securities and, therefore, views such risk
as minimal, there is a risk that the Fund may suffer a loss upon the
disposition of the collateral securities due to delay in exercising such
right.
. The Fund may purchase or acquire securities of other investment companies on
the open market if immediately after such purchase or acquisition, the Fund
would not own in the aggregate: (1) more than 3% of the total outstanding
voting stock of such other investment company; (2) securities issued by such
other investment company having an aggregate value in excess of 5% of the
value of the Fund's total assets; or (3) securities issued by such other
investment company and all other investment companies having an aggregate
value in excess of 10% of the value of the Fund's total assets. By investing
in another registered investment company, there may be a duplication in fees
and expenses.
The investment policies set forth in this section for the MONEY MARKET FUND are
non-fundamental and, therefore, may be changed by the Board of Directors.
REPURCHASE AGREEMENTS
Repurchase agreements are transactions in which the Funds purchase a security
(usually a U.S. Government obligation) and simultaneously obtain the commitment
of the seller to repurchase the security at an agreed upon price on an agreed
upon date, usually not more than seven days from the date of purchase. The
resale price
17
<PAGE>
reflects the purchase price plus an agreed upon market rate of interest which is
unrelated to the coupon rate or maturity of the purchased security. Such
transactions afford an opportunity for a Fund to earn a return on cash which is
only temporarily available. The Fund's risk is limited to the ability of the
seller to pay the agreed upon sum upon the delivery date, but the seller's
obligation is in effect secured by the value of the underlying security.
Still, there are certain risks involved with the use of certain repurchase
agreements. For example, if the seller should default on its obligation to
repurchase the securities, a Fund may experience delay or difficulties in
exercising its rights upon the securities held as collateral and might incur a
loss if the value of the securities should decline. A Fund also might incur
disposition costs in connection with liquidating the securities. While the Funds
acknowledge these risks, it is expected that they can be controlled through
careful monitoring procedures offered by the Funds' Investment Adviser.
WHO MANAGES THE FUNDS
The operations of each Fund are under the direction of a Board of Directors who
have been elected by the shareholders of each Fund. The Board meets regularly to
review the activities of the Officers, who are responsible for day to day
operations of the Funds. To assist the Directors and Officers in carrying out
their duties and responsibilities, the Funds have employed IAA Trust Company
('IAATC'), 808 IAA Drive, Bloomington, Illinois, as their Investment Adviser
under written Agreements which are renewable annually by the Funds' Board of
Directors or by votes of a majority of each Fund's outstanding voting
securities. Any such renewals must also be approved by the votes of a majority
of each Fund's Directors, who are not parties to the Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on such approvals. The Agreements may be terminated without penalty at
any time by the Board of Directors of a Fund, or by votes of the shareholders,
or by IAATC upon sixty days written notice, and they terminate automatically in
the event of their assignment. IAATC was organized on December 30, 1970 and has
no investment company clients other than the IAA Trust Mutual Funds discussed
herein. Illinois Agricultural Holding Co. owns all of the outstanding voting
securities of IAATC. Approximately 98% of the issued and outstanding voting
stock of the Illinois Agricultural Holding Co. is owned by the Illinois
Agricultural Association ('IAA'). IAA is an Illinois not-for-profit membership
corporation organized to promote the interest of agriculture.
IAATC, subject to the authority of the Board of the Funds, is generally
responsible for the overall management of the Funds' business. For these
services performed and expenses assumed, the GROWTH FUND and the ASSET
ALLOCATION FUND each pay IAATC an annual fee of approximately .75% of their
respective average daily net assets. These fees are considered higher than the
advisory fees paid by most other mutual funds; however, these fees are
comparable with those of other mutual funds with similar investment objectives.
The TAX EXEMPT BOND FUND and the MONEY MARKET FUND each pay IAATC an annual fee
of approximately .50% of their respective average daily net assets. Although All
of these fees are computed on a daily basis and are paid monthly. Neither IAATC
nor any company affiliated with it receives any brokerage commissions from the
Funds, as such business is transacted with non-affiliated broker-dealers.
The following persons who are Officers and/or Directors of the Funds also hold
positions with IAATC as indicated: Ronald R. Warfield, Director and President;
Wayne A. Brown, Senior Vice President--Investments; Gary E. Mede, Executive Vice
President; Richard M. Miller, Senior Vice President and Senior Trust Officer;
Rollie D. Moore, Director and Vice President; Paul M. Harmon, Assistant
Secretary; Jerome P. Weiss, Secretary and General Counsel; Robert W. Weldon,
Vice President--Finance and Treasurer; Richard F. Day, Controller.
18
<PAGE>
MANAGEMENT'S DISCUSSION OF FUNDS' PERFORMANCE
THE GROWTH FUND:
IAA TRUST GROWTH FUND VS. STANDARD & POOR'S INDEX
GRAPH TO COME
<TABLE>
<CAPTION>
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth......... $ 9,700 $ 12,450 $ 14,286 $ 13,331 $ 16,005 $ 18,579 $ 19,577 $ 20,405 $ 22,794 $ 22,242
S&P's 500...... 10,000 17,001 21,266 19,799 23,863 27,776 29,828 33,844 38,335 38,876
<CAPTION>
1995
---------
<S> <C>
Growth......... $ 28,176
S&P's 500...... 49,010
</TABLE>
The above graph does reflect the impact of sales charges (if applicable) on
purchases. The maximum sales charge is currently 3.00%.
The net asset value of the GROWTH FUND closed the fiscal year on June 30, 1995
at $17.23 per share. The figures below show historical compound annual returns
of Fund shares with dividends reinvested.
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
--------- --------- ---------
<S> <C> <C> <C>
Without Sales Charges 26.68% 8.68% 11.30%
Current Maximum Sales Charges Deducted 22.87% 8.01% 10.96%
</TABLE>
These annual returns are for prior years' performance. Returns in future periods
cannot be guaranteed, and the value of Fund shares can fluctuate either above or
below their original cost.
19
<PAGE>
Bruce Finks, Investment Officer for the GROWTH
FUND: Earned a B.S. in Business Administration from
Illinois State University in Normal in 1976, and is
also a Chartered Financial Analyst. Mr. Finks is
responsible for the management of common stock
portfolios for individual and institutional clients
and has been with IAA Trust Company since 1992,
following fifteen years of investment management
experience with banking organizations.
For the year ending June 30, 1995, the GROWTH FUND had a total return of 26.68%
versus 26.07% for the S&P 500. According to Lipper Analytical, the average
growth fund returned 21.80% over the same period of time. The Growth Fund
outperformed the index and its peer group due to overweighting of the Technology
and Finance sectors and underweighting Cyclicals and Staples.
20
<PAGE>
THE ASSET ALLOCATION FUND:
IAA ASSET ALLOCATION FUND VS. MERRILL LYNCH CORPORATE AND GOVERNMENT
BOND MASTER INDEX & LIPPER-BALANCED FUNDS INDEX
GRAPH TO COME
<TABLE>
<CAPTION>
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Asset
Allocation...... $ 9,700 $ 14,551 $ 15,121 $ 16,098 $ 17,770 $ 18,928 $ 20,720 $ 23,173 $ 25,394 $ 25,574
Merrill Lynch.... 10,000 15,842 16,585 17,794 20,032 21,413 23,629 26,978 30,514 30,463
Lipper-balanced... 10,000 17,120 19,561 18,447 21,205 23,356 25,299 28,794 32,858 33,116
<CAPTION>
1995
---------
<S> <C>
Asset
Allocation...... $ 29,740
Merrill Lynch.... 34,311
Lipper-balanced... 38,411
</TABLE>
The above graph does reflect the impact of sales charges (if applicable) on
purchases. The maximum sales charge is currently 3.00%.
The annualized total returns for the ASSET ALLOCATION Fund for the period ended
June 30, 1995 are as follows:
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
--------- --------- -----------
<S> <C> <C> <C>
Without Sales Charges.............................................. 16.29% 9.46% 9.39%
Current Maximum Sales Charges Deducted............................. 12.83% 8.79% 9.06%
</TABLE>
22
<PAGE>
John Jacobs, Investment Officer for the ASSET
ALLOCATION FUND: Earned a B.S. in Business and
Finance at Illinois Wesleyan University in
Bloomington. Mr. Jacobs is also a Chartered
Financial Analyst, and has served as a member of IAA
Trust Company's Investment Committee. Prior to
joining the Company in 1975, he was an account
executive for one of the leading national brokerage
firms.
Michael E. Marks: Earned his B.S. in Business
Administration from Washington University in St.
Louis, his M.B.A. from Indiana University in
Bloomington, and is currently pursuing the Chartered
Financial Analyst certification. Prior to graduate
school, he was a management consultant for Price
Waterhouse's Strategic Consulting Group. Mr. Marks
joined IAA Trust Company in 1993 and manages the
equity portion of the ASSET ALLOCATION FUND, and the
international Common Trust Funds and a number of
trust accounts.
Over the past year, the ASSET ALLOCATION FUND had a return of 16.29%, in line
with the Lipper Flexible Fund Index which returned 16.26%. The returns for both
bonds and stocks were quite good for this period. Performance was slightly
hindered by holding short-term reserves as the Fund awaited opportunites to
invest long-term. The Fund's performance over the past year also closely tracked
with the Lipper Balanced Fund Index which returned 15.99%.
22
<PAGE>
THE TAX EXEMPT BOND FUND:
IAA TAX EXEMPT BOND FUND VS. LEHMAN MUNI GENERAL BOND INDEX
GRAPH TO COME
<TABLE>
<CAPTION>
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tax Exempt....... $ 9,700 $ 13,422 $ 14,251 $ 15,347 $ 16,905 $ 17,791 $ 19,222 $ 21,155 $ 23,099 $ 22,669
Lehman Muni...... 10,000 14,687 15,953 17,137 19,089 20,389 22,226 24,842 27,813 27,860
<CAPTION>
1995
---------
<S> <C>
Tax Exempt....... $ 24,371
Lehman Muni...... 30,317
</TABLE>
Note: The IAA Trust Tax Exempt Bond Fund's portfolio does not mirror the
composition of the Lehman Index.
The above graph does reflect the impact of sales charges (if applicable) on
purchases. The maximum sales charge is currently 3.00%.
The annualized total returns for the TAX EXEMPT BOND FUND for the period ended
June 30, 1995 are as follows:
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
--------- --------- -----------
<S> <C> <C> <C>
Without Sales Charges 7.51% 6.50% 7.66%
Current Maximum Sales Charges Deducted 4.32% 5.84% 7.34%
</TABLE>
These returns assume all dividends and capital gains distributions were
reinvested and the maximum sales charge applied on initial investments. Although
the Fund's income is generally exempt from Federal income taxes, it
may, under certain circumstances, be subject to state income taxation. See
'INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS, AND TAXES'.
23
<PAGE>
Mary S. Guinane, Investment Officer for the TAX
EXEMPT BOND FUND: Earned a M.B.A. at Illinois State
University and a B.A. in Psychology and Sociology at
St. Ambrose College. Ms. Guinane has been with IAA
Trust Company since 1981.
For the year ended June 30, 1995, the TAX EXEMPT BOND FUND had a total return of
7.51%. Over the same period, the Lehman Municipal Bond Index had a total return
of 8.82%. The Lehman Index is an unmanaged list of long-term investment-grade
tax-exempt bonds. Though the Fund's duration is approximately identical, the
Index has a more barbelled structure, with a greater emphasis on longer-term
bonds. Those longer-term bonds had greater price appreciation since the first of
the year when municipal interest rates began their decline. Also, looking at
sector returns, the Index has a larger exposure than the Fund to some riskier
sectors that performed very well. The Index also does not take into account
brokerage commissions or other costs.
Note: The IAA Trust Tax Exempt Bond Fund's portfolio does not mirror the
composition of the Lehman Index.
THE MONEY MARKET FUND:
Robert L. Sammer, BS manages the IAA MONEY MARKET
FUND. Bob received his bachelor of science degree in
finance from Illinois State University in 1988 and
is currently pursuing his MBA from the same
institution. After working as a trust administrator
for Independent Trust Corporation in Lombard,
Illinois, he joined IAA Trust Company in 1991. Here,
he has served as client services coordinator,
corporate retirement and agency accounts coordinator
and, now investment analyst.
FUND/PLAN SERVICES, INC.
Fund/Plan Services, Inc. ('FPS'), #2 West Elm Street, Conshohocken, Pennsylvania
19428, is the Funds' Transfer and Dividend Disbursing Agent and as such performs
all shareholder services for the Funds. The Funds have also entered into
Agreements with FPS under which FPS provides accounting and administration
services.
Administration services include all administrative services except those
relating to the investment portfolios of the Funds, the distribution of the
Funds, and the maintenance of the Funds' financial records. The fees for
administrative services are based on a declining percentage of each Fund's
average net assets, beginning at .0015% of the first $50,000,000 of average net
assets, .0010% of the next $50,000,000 and .0005% of average net assets over
$100,000,000. However, each fund is required to pay a minimum annual fee of
$20,000 for such services.
The Funds each pay a minimum accounting fee of $25,000 and pay additional
accounting fees, based on declining percentages of their respective average net
assets in excess of $10,000,000. There are no direct or indirect relationships
between Fund/Plan Services, Inc. and the Funds or IAA Trust Company.
24
<PAGE>
WHO DISTRIBUTES THE FUNDS' SHARES
Fund/Plan Broker Services, Inc. ('FPBS') serves as the Distributor for the Funds
on a best efforts basis, pursuant to various Underwriting Agreements dated
August 1, 1995. The Distributor is an affiliated company of Fund/Plan Services,
Inc. ('FPS'), the Funds' servicing agent, inasmuch as both the Distributor and
FPS are under common ownership. The Distributor receives that portion of the
applicable sales charge which is not re-allowed to the dealers who sell shares
of the GROWTH FUND, the ASSET ALLOCATION FUND, and the TAX EXEMPT BOND
FUND. There is no sales charge associated with the sale of shares of the Money
Market Fund. See 'HOW TO BUY SHARES'. The Distributor retains the entire sales
charge on all initial and subsequent investments in accounts with no designated
dealer of record.
DISTRIBUTION PLANS
The shareholders of the GROWTH FUND, the ASSET ALLOCATION FUND, and the TAX
EXEMPT BOND FUND have each adopted a Plan of Distribution (the 'Plan') pursuant
to Rule 12b-1 under the Investment Company Act of 1940. The MONEY MARKET FUND
does not participate in any plan pursuant to this Rule. The Plan permits the
participating Funds to pay certain expenses associated with the distribution of
their shares. The Plan provides that the participating Funds will reimburse the
Distributor for actual distribution and shareholder servicing expenses incurred
by the Distributor not exceeding, on an annual basis, 0.25% of each
participating Fund's average daily net assets. Amounts expended by the
Distributor, but not reimbursed by each participating Fund's Plan, will not be a
continuing liability of such Fund in subsequent years. Because the Funds
reimburse the Distributor only for actual expenditures, the Distributor realizes
no profit from the 12b-1 Plan. The Plan may be terminated at any time and the
Funds shall have no liability for expenses that were not reimbursed as of the
date of termination.
All such payments made pursuant to the Plan shall be made for the purpose of
promoting the sale of shares or other such distribution-related expenses,
including any distribution or service fees paid to securities dealers,
investment advisers, financial planners, and others, who have executed a
distribution agreement with the Distributor. The maximum amount which will be
paid to such parties by the Distributor is 0.25% (on an annual basis) of a
participating Fund's average net assets, owned by client of that party.
Management may choose to pay a lesser amount.
CAPITAL STOCK
There are no conversion or preemptive rights in connection with any shares of
the Funds, nor are there cumulative voting rights with respect to the shares of
any of the Funds. Each of the Fund's shares has equal voting rights. Each issued
and outstanding share of each Fund is entitled to participate equally in
dividends and distributions declared by such Fund and in net assets of such Fund
upon liquidation or dissolution remaining after satisfaction of outstanding
liabilities.
All issued and outstanding shares of each Fund will be fully paid and
nonassessable and will be redeemable at the net asset value per share. The
interests of shareholders in the Funds will not, unless specifically requested
in writing by a shareholder, be evidenced by a certificate or certificates
representing shares of a Fund.
The authorized capitalizations of the GROWTH FUND, the ASSET ALLOCATION FUND,
and the TAX EXEMPT BOND FUND consist of 10,000,000 shares for each of these
Funds, each Fund having a par value of $1.00 per share.
The authorized capitalization of the MONEY MARKET FUND consists of 250,000,000
shares of the par value of $0.10 per share. 100,000,000 of this Fund's shares
are designated as Class 'A' common stock, 50,000,000 of its shares are
designated as Class 'B' common stock, and 100,000,000 in such class as the Board
of Directors may, from time to time, determine. Currently, the Fund has
registered and only issues Class 'A' common stock and
25
<PAGE>
the assets received by the Fund from the sale of such shares will be used to
establish its Class 'A' common stock portfolio.
COUNTRY LIFE INSURANCE COMPANY
As of October 2, 1995, 439,945 shares or 10.38% of the issued and outstanding
capital stock of the GROWTH FUND were owned by Country Life Insurance Company
('Country Life'), Bloomington, Illinois. Country Life's capital stock enables it
to influence the outcome of shareholder votes. Country Life is organized in
Illinois. Substantially all issued and outstanding stock of Country Life is
owned by Illinois Agricultural Holding Co.
As of October 2, 1995, 247,948 shares or 31.46% of the issued and outstanding
capital stock of the ASSET ALLOCATION FUND were owned by Country Life Insurance
Company ('Country Life'), Bloomington, Illinois. Country Life's capital stock
enables it to strongly influence the outcome of shareholder votes. Country Life
is organized in Illinois. Substantially all issued and outstanding stock of
Country Life is owned by Illinois Agricultural Holding Co.
As of October 2, 1995, 2,500,000 shares or 6.30% of the issued and outstanding
capital stock of the MONEY MARKET FUND were owned by Country Life Insurance
Company ('Country Life'), Bloomington, Illinois. Country Life's capital stock
enables it to influence the outcome of shareholder votes. Country Life is
organized in Illinois. Substantially all issued and outstanding stock of Country
Life is owned by Illinois Agricultural Holding Co.
COUNTRY MUTUAL INSURANCE COMPANY
As of October 2, 1995, 248,175 shares or 11.14% of the issued and outstanding
capital stock of the TAX EXEMPT BOND FUND were owned by Country Mutual Insurance
Company ('Country Mutual'), Bloomington, Illinois. Such shares were purchased at
net asset value for the purpose of providing the initial capital of the Fund.
Country Mutual's capital stock enables it to influence the outcome of
shareholder votes. Country Mutual is organized in Illinois and proxy control of
the company is in Illinois Agricultural Association.
IAA TRUST COMPANY
As of October 2, 1995, IAA Trust Company owned of record 1,571,091 shares or
37.08% of the issued and outstanding capital stock of the GROWTH FUND, 378,760
shares or 48.06% of the issued and outstanding capital stock of the ASSET
ALLOCATION FUND, and 32,572,553 shares or 82.03% of the issued and outstanding
capital stock of the MONEY MARKET FUND.
Illinois Agricultural Holding Co. owns 100% of the outstanding voting securities
of the Trust Company. For additional information on the ownership of Illinois
Agricultural Holding Co. See 'WHO MANAGES THE FUNDS'.
Shareholder inquiries should be directed to Fund/Plan Services, Inc., P.O. Box
874, Conshohocken, Pennsylvania 19428, or call toll-free 1 (800) 245-2100.
26
<PAGE>
INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS, AND TAXES
Dividends and capital gains distributions may be automatically reinvested in
additional shares of a particular Fund at net asset value without sales charge,
or paid in cash, at the choice of the investor. The cash option is not available
under the Systematic Withdrawal Plan or Retirement Plans.
Capital gains are taxed at the same rate as ordinary income. The dividends
received deduction for corporations is 70% and is applicable to the GROWTH FUND
and the ASSET ALLOCATION FUND. Each shareholder will receive a summary of the
dividends paid or reinvested as they are declared. If the entire amount in an
account is redeemed at any time during a month, dividends credited to that
account from the beginning of the month through the day of redemption will be
paid together with the proceeds of the redemption.
THE GROWTH FUND:
It is the policy of the GROWTH FUND to distribute semi-annually, all of its net
investment income and, if any, all of its net realized capital gains according
to tax regulations. Currently, these distributions are made at the end of the
Fund's fiscal year and at calendar year-end.
THE ASSET ALLOCATION FUND:
It is the policy of the ASSET ALLOCATION FUND to pay monthly dividends from its
net investment income and to distribute net capital gains, if any, according to
tax regulations at the end of its fiscal and calendar years.
THE TAX EXEMPT BOND FUND:
It is the policy of the TAX EXEMPT BOND FUND to pay monthly dividends from its
net investment income.
This Fund intends to qualify each fiscal year (under the Internal Revenue Code
of 1986 and any amendments thereto) to pay 'exempt-interest dividends' to its
shareholders. Exempt-interest dividends which are derived from net income earned
by the Fund on tax-exempt bonds will be excludable from gross income of the
shareholders for Federal income tax purposes. That part of monthly net
investment income which may be earned by the Fund from certain taxable temporary
investments, together with any annual distributions attributable to short-term
capital gains, are taxable as ordinary income to investors whether received in
cash or reinvested in shares. The percentage of each monthly dividend designated
by the Fund as tax exempt will be the same percentage as the actual tax exempt
income earned during the period covered by the distribution bears to total
income earned by the Fund during the period. Shareholders will be notified of
such designations monthly and information regarding the tax status of any other
distributions will be mailed annually. The percentage of the monthly dividend
which is tax exempt may vary from distribution to distribution. Long-term
capital gains distributions are taxable to shareholders as long-term capital
gain, regardless of how long a shareholder has held Fund shares.
Shareholders of the this Fund should recognize that should they redeem shares
between dividend dates, a portion of the per share redemption price may
represent interest accrued on municipal bonds and said portion may be taxed at
long- or short-term capital gains rates and not as a tax-exempt dividend
excludable from gross income.
Interest on indebtedness incurred by shareholders to purchase or carry shares of
this Fund will not be deductible for Federal income tax purposes. The exemption
of interest income for Federal income tax purposes does not necessarily result
in exemption under the income or other tax laws of any state or local authority.
Thus, shareholders may be subject to state and local taxes on distributions of
tax-exempt interest income from this Fund.
27
<PAGE>
THE MONEY MARKET FUND:
The MONEY MARKET FUND declares and pays dividends of all of its daily net
investment income on each day that its net asset value is determined.
Net investment income, for dividend purposes of this Fund, consists of: (1)
accrued interest income plus or minus amortized purchase discount or premium;
(2) plus or minus all short-term realized gains and losses and unrealized
appreciation and depreciation on portfolio assets; and (3) minus all accrued
expenses of such Fund, which are accrued each day. Net income will be calculated
immediately prior to the determination of the net asset value per share of the
Fund. Since the net income of the Fund (including realized gains and losses and
unrealized appreciation and depreciation on the portfolio securities) is
declared as a dividend each time the net income of the Fund is determined, the
net asset value per share of the Fund normally remains at $1.00 per share
immediately after each such determination and dividend declaration. Any increase
in the value of a shareholder's investment in the Fund representing the
reinvestment of dividend income is reflected by an increase in the number of
shares of the Fund in the account. Normally, the Fund will have a positive net
income at the time of each determination thereof. Net income may be negative if
an unexpected liability must be accrued, a loss realized, or unrealized
depreciation occurs. If the net income of the Fund determined at any time is a
negative amount, the net asset value per share will be reduced below $1.00. The
Fund may endeavor to restore the net asset value per share to $1.00 by not
declaring dividends from net income on subsequent days until restoration, with
the result that the net asset value per share will increase to the extent of
positive net income which is not declared.
ALL FUNDS:
The Board of Directors may revise the above dividend policies, or postpone the
payment of dividends, if a Fund should have or anticipate any large presently
unexpected expense, loss, or fluctuation in net assets which in the opinion of
the Board might have a significant adverse effect on shareholders.
All of the Funds comply with Subchapter M of the Internal Revenue Code available
to investment companies and therefore, maintain exemption from Federal income
tax.
Long-term capital gains distributions are taxable to shareholders as long-term
capital gain, regardless of how long a person has been a shareholder. Any
dividend or distribution received shortly after the purchase of shares reduces
the net asset value of the shares by the amount of the dividend or distribution
and, although in effect a return of capital, is subject to income taxes. The
Funds are required to withhold and remit to the U.S. Treasury a portion (31%) of
dividend income, capital gains distributions, and redemption proceeds for any
account which provides an incorrect taxpayer identification number, no number at
all, or no certified number for a new account.
In order to avoid an excise tax on undistributed amounts, the Funds must declare
by the end of the calendar year a dividend representing 98% of their ordinary
income for the calendar year and 98% of their net capital gains (both long-term
and short-term) for the period of November 1 of the previous year through
October 31 of the current year. Such dividends will be paid on the last business
day of the calendar year to shareholders of record at the close of business on
the preceding business day.
Statements as to the tax status of distributions to shareholders will be mailed
annually. If shareholders are not subject to Federal income taxes on their
income, then they are not required to pay Federal tax on amounts distributed to
them. This section is not intended to be a complete discussion of all aspects of
the Federal income tax law and its effect on shareholders. For other tax
information, you may wish to consult your tax adviser.
28
<PAGE>
HOW TO BUY SHARES
You may open an account by contacting Fund/Plan Broker Services, Inc. ('FPBS'),
P.O. Box 874, Conshohocken, Pennsylvania 19428, 1 (800) 245-2100 or your local
Country Capital Management Company sales representative. Purchases of Fund
shares may be made in two ways: by mail or by wire transfer, as discussed
further below. The minimum initial investments are $100 for the GROWTH FUND, the
ASSET ALLOCATION FUND and the TAX EXEMPT BOND FUND, and $1,000 for the MONEY
MARKET FUND. The minimum subsequent investment amount is $25 for all Funds.
After an account has been opened, you may purchase additional shares through a
sales representative or you may send your order directly to IAA Trust Company
c/o Fund/Plan Broker Services Inc. ('FPBS'), P.O. Box 874, Conshohocken,
Pennsylvania 19428. Each check should be made payable to a specific Fund.
Whether you go through a sales representative or order directly, any applicable
sales charge you pay is the same. If purchased through a sales representative,
he or she receives a portion of any applicable sales charge and may, at times,
receive additional compensation. All orders are subject to acceptance by FPBS
and without in any way limiting the foregoing, the Funds (through FPBS) reserve
the right to refuse any purchase which would result in ownership by any
shareholder of 5% or more of a Fund's outstanding shares at that time. The Funds
will automatically redeem shares if a purchase check is returned for
non-sufficient funds (NSF). This procedure places the risk for loss on the
shareholder. The Funds reserve the right to automatically redeem shares if the
share balance of an account falls below $250.
PURCHASE PRICES OF THE GROWTH FUND, THE ASSET ALLOCATION FUND, AND THE TAX
EXEMPT BOND FUND
Shares of the GROWTH FUND, the ASSET ALLOCATION FUND, and the TAX EXEMPT BOND
FUND are sold at the offering price next determined after receipt of the order
by FPBS. The offering price is normally determined once daily at 4:00 p.m.
Eastern Time on each day the New York Stock Exchange is open for trading, but
this time may be changed. Orders received by FPBS after this time will be held
over and confirmed at the offering price effective at closing time on the next
business day. The offering price is the net asset value per share plus a sales
charge, if applicable. See 'HOW THE VALUE OF YOUR SHARES IS DETERMINED'. The
sales charge applicable to the GROWTH FUND, the ASSET ALLOCATION FUND, and the
TAX EXEMPT BOND FUND varies with the amount of your purchase as follows:
<TABLE>
<CAPTION>
TOTAL SALES DEALER
CHARGE CONCESSION
AS A PERCENTAGE AS A
AS A PERCENTAGE OF PERCENTAGE
OF OFFERING NET AMOUNT OF OFFERING
AMOUNT OF INVESTMENT PRICE INVESTED PRICE
- ----------------------------------------------------------------- --------------- --------------- -------------
<S> <C> <C> <C>
Less than $ 10,000............................................... 3.00% 3.093% 2.700%
$ 10,000 but less than $ 25,000.................................. 2.00% 2.041% 1.700%
$ 25,000 but less than $ 50,000.................................. 1.00% 1.010% 0.700%
$ 50,000 but less than $100,000.................................. 0.70% 0.756% 0.500%
$100,000 but less than $250,000.................................. 0.50% 0.503% .375%
$250,000 or more................................................. 0.25% 0.251% 0.250%
</TABLE>
The sales charge is waived for Illinois Agricultural Association ('IAA')
members, employees of IAA and its affiliated companies, and IAA Trust Company
('IAATC') customers.
The scale of reduced sales charges is applicable to purchases made at one time
by 'persons' defined as: (1) an individual or company; (2) the combined
purchases of an individual, his spouse and their children under the age of
twenty-one, purchasing securities for his or their own accounts, including those
held under a tax sheltered plan; or (3) a trustee or other fiduciary purchasing
for a single trust estate or fiduciary account (including a pension,
profit-sharing or other employee trust qualified under Section 401 of the
Internal Revenue Code, further including self-employed individual's retirement
plans).
29
<PAGE>
PURCHASE PRICE OF THE MONEY MARKET FUND
Shares of the MONEY MARKET FUND are sold at the net asset value (without a sales
charge) next determined after receipt of the order by FPBS.
PURCHASES BY MAIL
To open an account and purchase shares by mail, complete an application and mail
it with your check payable to 'IAA Trust ___________________ Fund, Inc.', c/o
Fund/Plan Services, Inc., P.O. Box 874, Conshohocken, Pennsylvania 19428.
Applications may be obtained by calling toll-free, 1 (800) 245-2100.
The application need not be signed by a sales representative if you prefer to
purchase directly with Country Capital Management Company or FPBS. If you deal
with a sales representative, he or she will assist you in completing the
application, answer any of your questions, and mail the application for you.
Although no commission is paid, the sales representative may, at times, receive
additional compensation.
In order to maximize current income, all investments in the Funds must be made
in Federal Funds so that the Fund can put the money to work immediately. Checks
drawn on a member bank of the Federal Reserve System usually are converted into
Federal Funds within two business days of receipt by FPBS. Shares begin earning
income dividends on the day the purchase order is effective. A Fund will
automatically redeem shares if the purchase check is returned for non-sufficient
funds (NSF). This procedure places the risk for loss on the shareholder.
PURCHASES BY WIRE TRANSFER
To open an account and become a shareholder on the same day, first you (or our
sales representative) must telephone FPBS toll-free at 1 (800) 245-2100, by
12:00 Noon Eastern Time. An account number will be assigned to you for use in
identifying your wire transfer of money.
Second, you must request your bank to transmit immediately available funds
(Federal Funds) by wire to:
UNITED MISSOURI BANK, NA
ABA #10-10-00695
For: Fund/Plan Services, Inc.
Account #98-7037-071-9
IAA TRUST ________________ FUND
Account of (exact name(s) of Account Registration)
Shareholder Account #_______________
In order to obtain same-day investment, your wire must be received by the above
bank by 12:00 Noon Eastern Time. The bank that wires your money may charge a fee
for this service.
Third, you or our sales representative must mail a completed application to
FPBS, as noted above.
SUBSEQUENT INVESTMENTS
Once your account has been established, additional investments in any of the
Funds may be made at any time by mailing a check or by wiring money as described
above. When you wire money for either the initial or additional investments,
ALWAYS CALL FPBS on the same day to notify them of the investment. The minimum
subsequent investments are $25 by mail and $1,000 by wire transfer.
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SPECIAL PLANS AND OTHER PURCHASE INFORMATION
The Funds have available the following special Plans and purchase options.
Further information with respect to these plans is contained in the Funds'
Statement of Additional Information. Further information on these Plans may also
be obtained by contacting Fund/Plan Broker Services, Inc. ('FPBS') or Country
Capital Management Company.
RIGHTS OF ACCUMULATION
For those who already have an account with the GROWTH FUND, the ASSET ALLOCATION
FUND, the TAX EXEMPT BOND FUND or the MONEY MARKET FUND, reduced sales charges
for the first three Funds in accordance with each Fund's schedule of sales
charges are also applicable to subsequent purchases by 'persons' defined in the
section 'HOW TO BUY SHARES'. The sales charge, if not waived, on each additional
purchase is determined by adding to the amount of the new investment the
combined current redemption value of all shares the investor owns in the four
IAA Trust Mutual Funds.
AUTOMATIC INVESTING
A shareholder may authorize Systematic Investing through automatic withdrawals
from his/her bank account(s).
EXCHANGE PRIVILEGES
Shareholders in any of the Funds may exchange shares of their respective Fund
for shares of the other Funds on the basis of the relative net asset values per
share at the time of the exchange. Any such exchange of shares among the GROWTH
FUND, the ASSET ALLOCATION FUND, and the TAX EXEMPT BOND FUND will not result in
a sales charge. Shares of the MONEY MARKET FUND acquired through direct purchase
or in the form of dividends earned on such shares may be exchanged for shares of
the other three funds at net asset value plus the normal sales charge of such
Funds. If the exchange is made by telephone, the new shares will be registered
in the same manner as the shares for which they were exchanged. A capital gain
or loss for Federal income tax purposes will be realized upon the exchange
depending upon the cost or other basis of the shares redeemed. Sixty days
written notice will be given to shareholders before any modifications to this
privilege are implemented.
ONE-TIME REINVESTMENT PRIVILEGE WITHOUT SALES CHARGE
Within thirty calendar days after redemption, shareholders who redeem all or
part of their shares have a one-time privilege to reinvest in shares of the same
or another Fund without a sales charge up to the dollar amount received for the
redeemed shares.
RETIREMENT PLANS
IAA Trust Company ('IAATC') sponsors a prototype Defined Contribution Plan which
has been approved by the Internal Revenue Service and which meets the
requirements of the Tax Reform Act of 1986, as amended. This Plan can invest in
shares of the GROWTH FUND, the ASSET ALLOCATION FUND, and the MONEY MARKET FUND.
The minimum initial investment for each Fund is $100, with no minimum for
subsequent investments. For individuals eligible to establish an Individual
Retirement Account ('IRA'), IAATC sponsors a prototype IRA Plan which has been
approved by the Internal Revenue Service.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders who purchase or already own $5,000 or more of a Fund's shares,
valued at the current public offering price, and who wish to receive periodic
payments may establish a Systematic Withdrawal Plan. Such planholders will
receive monthly, quarterly or annual checks in the amount they designate.
31
<PAGE>
HOW THE VALUE OF YOUR SHARES IS DETERMINED
The Funds will be open for business and will price their respective shares on
each day the New York Stock Exchange is open for trading. The Funds' share
prices will be determined at the close of regular trading hours of the New York
Stock Exchange, normally 4:00 p.m. Eastern Time. The MONEY MARKET FUND reserves
the right to calculate its net asset value more frequently than once a day if
deemed desirable.
The net asset value per share is determined as follows. Securities listed or
admitted to trading privileges on any national securities exchange will be
valued at the last sales price on that day before the time for valuation, or, if
there is no sale before that time that day, the last bid price on such exchange
before that time that day. Equity securities which are traded in the
over-the-counter market only and which are included in the NASDAQ National
Market System will be valued at the last sales price preceding the time for
valuation. Equity securities which are traded in the over-the-counter market
only, but which are not included in the NASDAQ National Market System will be
valued at the mean between the last preceding bid and asked price. Valuations
may also be obtained from a pricing services when such prices are believed to
reflect the fair market value. Securities with a remaining maturity of sixty
days or less are valued at amortized cost, which approximates market value.
Short-term notes are valued at cost. Corporate bonds, municipal bonds,
receivables and portfolio securities not currently quoted as indicated above,
and other assets will be valued at fair value as determined in good faith by the
Board of Directors.
From the gross value of the assets so determined, there will be deducted all
liabilities, including accrued expenses and taxes, and any necessary reserves.
The remainder will be the net asset value of a Fund, which will be divided by
the number of shares of capital stock outstanding in order to determine the
Fund's net asset value per share. (The net asset value per share of the MONEY
MARKET FUND is ordinarily $1.00.) On any day when depreciation in the value of a
Fund's portfolio securities exceeds income after expenses, such Fund's net asset
value per share may decline.
The market values of debt securities usually reflect yields generally available
on securities of similar quality. When yields decline, the market value of a
portfolio holding higher-yielding securities increases; and when yields
increase, the market value of the portfolio invested at lower yields can be
expected to decline. In addition, if a Fund has net redemptions at a time when
interest rates have increased, such Fund may have to sell portfolio securities
prior to maturity at a price below the Fund's carrying value. Also, because at
least a portion of the portfolio may be valued at amortized cost rather than
market, any yield quoted may be different if the entire portfolio were valued at
market, since amortized cost does not take market fluctuation into
consideration.
With respect to the MONEY MARKET FUND, the value of all of its securities is
determined by using the amortized cost method of valuation, pursuant to Rule
2a-7 under the Investment Company Act. The amortized cost method of valuation
involves valuing a security at its cost at the time of purchase and thereafter
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
such security. While this method provides certainty in valuation, it may result
in periods during which value, as determined by amortized cost, is higher or
lower than the price the Fund would receive if it sold the instrument. The
purpose of this method of calculation is to attempt to maintain a constant net
asset value per share of $1.00, which may or may not result.
32
<PAGE>
HOW TO REDEEM YOUR SHARES
Each Fund will redeem any part or all of your shares whenever you request. The
price you receive will be the net asset value per share as next computed after
your request is received by Fund/Plan Services, Inc. ('FPS'), as Transfer Agent,
in proper form. Accounts in the MONEY MARKET FUND will earn daily dividends up
to the day before the date of redemption.
You can redeem shares from an account in three ways--by mail or by telephone,
and with respect to the MONEY MARKET FUND only, by writing a check.
REDEMPTIONS BY MAIL
To redeem by mail, simply send a letter to:
IAA Trust Funds
c/o Fund/Plan Services, Inc.
P.O. Box 874
Conshohocken, PA 19428
Your letter must specify the name of the Fund, your account number and either
the number of shares or the dollar amount to be redeemed. Your request must be
signed exactly as your account is registered. If your account is owned jointly,
both owners must sign. If a stock certificate has been issued, it must be
forwarded back (blank and unsigned) with your written request.
The Funds reserve the right to require additional documentation, or signature
guarantees on any redemptions in amounts over $25,000 in value or for the
redemption of corporate, partnership or fiduciary accounts, or for certain types
of transfer requests or account registration adjustments. Signatures must be
guaranteed by an 'eligible guarantor institution' as defined in Rule 17Ad-15
under the Securities Exchange Act of 1934. Eligible guarantor institutions
include banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies, and savings associations.
A broker-dealer guaranteeing signatures must be a member of a clearing
corporation or maintain net capital of at least $100,000. Credit unions must be
authorized to issue signature guarantees. Signature guarantees will be accepted
from any eligible guarantor institution which participates in a signature
guarantee program.
REDEMPTIONS BY TELEPHONE
If you completed the portion of the application so as to authorize redemptions
by telephone, you may redeem in this manner by calling toll-free 1 (800)
245-2100 before the close of business on any business day. Telephone redemptions
are not available if a joint owner is under age 14. When one of the joint
tenants is age 14 to 17, the adult tenant must authorize telephone redemptions.
All telephone conversations with FPS will be recorded. The proceeds will be sent
only to the financial institution you designate or to the address of record of
the account. The proceeds will normally be sent the next business day by mail
or, if you prefer and pay the expense, they will be wire transferred (minimum
$1,000). If wire transferred, the Fund(s) cannot be responsible for any delays
which may occur after a Fund has entered the proceeds in the Federal wire
systems. The financial institution you designate must be a bank, savings and
loan or credit union which is insured under The FDIC, as only these institutions
can send or receive Federal wire transfers. These instructions will remain in
effect until you cancel or change them by written request. No stock certificates
will be issued to or may be held by shareholders electing this privilege. The
Funds reserve the right to terminate or modify this privilege at any time upon
thirty days notice to shareholders. Shareholders recently purchasing shares by
check may not use the telephone redemption privilege under certain
circumstances.
33
<PAGE>
Neither the Funds nor any of their service contractors will be liable for any
loss or expense in acting upon telephone instructions that are reasonably
believed to be genuine. In attempting to confirm that telephone instructions are
genuine, the Funds will use such procedures that are considered reasonable,
including requesting a shareholder to correctly state his or her Fund account
number, the name in which his or her account is registered, his or her social
security number, banking institution, bank account number, and the name in which
his or her bank account is registered. To the extent that a Fund fails to use
reasonable procedures to verify the genuineness of telephone instructions, it
and/or its service contractors may be liable for any such instructions that
prove to be fraudulent or unauthorized.
REDEMPTIONS BY WRITING A CHECK
If you so request on the application, the MONEY MARKET FUND only will provide
you with an initial supply of checks, which you should receive within two or
three weeks. These checks may be written in any amount not less than $100 nor
more than $100,000, and can be made payable to you or anyone you desire.
Redemption procedures will enable you to continue to earn daily income dividends
until your redemption check has cleared. Payment of all redemption checks is
subject to approval by the Fund, and if there are not sufficient shares in your
account, the check will be returned marked 'Insufficient Funds'. The Fund
reserves the right to terminate or modify this privilege at any time upon thirty
days notice to shareholders. Shareholders purchasing shares by check may not use
the check redemption privilege under certain circumstances.
CHECK-WRITING PRIVILEGE TERMS: Persons electing check-writing automatically
authorize the bank to honor checks drawn by them on the bank and appoint FPS,
the Fund's Transfer Agent, as their agent to redeem a sufficient number of MONEY
MARKET FUND shares to pay such checks. They also automatically agree: (1) The
owner or owners who signs the check will sign their name exactly as it appears
in Item 1 on the application or the check will not be honored; (2) This
privilege is subject to the Fund's and the bank's rules and regulations and
applicable Government regulations as amended from time to time; (3) The bank may
refuse to honor checks and the Fund may refuse to effect redemptions to pay
checks whenever the right of redemption has been suspended or postponed; (4) To
examine confirmations and to notify the Fund, within thirty days after mailing
to the owner(s), of any error in the confirmations and that failure to do so
shall preclude any claim against the Fund, the Distributor, the bank, FPS, and
each of their representatives and agents by reason of such failure; (5) This
privilege may be modified or terminated by any owner by serving written notice
to the Fund, and the Fund may modify or terminate it by serving written notice
to the owner(s) thirty days in advance thereof. This feature is not available if
a part owner is under age 14. When one of its joint tenants is age 14 to 17,
both tenants must sign drafts.
REDEMPTION PAYMENTS TO SHAREHOLDERS
If a partial redemption is being made and the shareholder is using 'specific
identification' accounting in determining his/her gain or loss for tax purposes,
it is important that he/she indicate which shares are to be redeemed, giving the
date acquired and number of shares. If several purchases are involved and the
shareholder desires a check for a stated amount, the order in which shares are
to be redeemed should also be specified. If no such instructions are given, the
shareholder will be required to compute his/her tax on a 'first in - first out'
basis. No designation of purchase dates is necessary in connection with a
redemption of all shares. The sale date and proceeds of redemptions (unless
exempt) will be reported by the Funds to the Internal Revenue Service at the end
of each year, as required by law.
Redemption of shares may be made from any available assets of each Fund, and if
a Fund does not have sufficient cash on hand, such Fund will normally sell
portfolio securities to effect such redemption.
Payment to shareholders for shares surrendered for redemption is made in cash as
soon as practicable after surrender, within seven days, except: (1) for any
period (a) during which the New York Stock Exchange is closed
34
<PAGE>
other than customary weekend and holiday closing, or (b) during which trading on
the New York Stock Exchange is restricted; (2) for any period during which an
emergency exists as determined by the Securities and Exchange Commission as a
result of which (a) disposal by a Fund of securities owned by it is not
reasonably practicable, or (b) it is not reasonably practicable for a Fund to
determine the value of its net assets; or (3) for such other periods as the
Securities and Exchange Commission may by order permit for the protection of
security holders of the Funds. In such event, the day will not be regarded as a
business day, the Funds' share prices will not be calculated, and all orders
will be held for execution on the following business day. The Funds, however,
will not mail redemption proceeds until they have assured themselves that checks
received for the purchase of any shares being redeemed have, or will be,
cleared. Accordingly, redemption checks may not be mailed until the shares being
redeemed have been on a Fund's books for at least fifteen business days measured
from the date shown on the purchase confirmation, although the effective date of
the redemption will be the date the redemption request is received by the
particular Fund. Payment for redeemed shares may be made in whole or in part in
portfolio securities of a Fund, at the portfolio value on the day the proper
redemption request is received, if the Board of Directors determines that the
liquidation of securities is impracticable or that payment in cash would
prejudice the best interests of the remaining shareholders.
The Funds have elected to be governed by Rule 18f-1 under the Investment Company
Act of 1940, pursuant to which the Funds are obligated to redeem shares solely
in cash, up to the lesser of $250,000 or one percent of the net asset value of
the particular Fund during any 90-day period for any one shareholder. The one
percent net asset value of each Fund shall be computed at the beginning of such
90-day period. In the event of a redemption in kind, it should be noted that a
shareholder would incur brokerage costs if he sold the securities received.
The value of the shares on redemption may be more or less than the shareholder's
cost, depending upon the market value of the portfolio securities at the time of
redemption. Shares redeemed will be canceled. Each Fund has the right to
establish a withdrawal charge on redemption of its shares, but the Funds do not
make any such charge and have no present intention of making such a charge, and
in the event such a withdrawal charge is established, at least thirty days prior
notice will be given to shareholders.
35
<PAGE>
IAA TRUST MUTUAL FUNDS:
IAA Trust Growth Fund, Inc.
IAA Trust Asset Allocation Fund, Inc.
IAA Trust Tax Exempt Bond Fund, Inc.
IAA Trust Money Market Fund, Inc.
BOARD OF DIRECTORS:
Ronald R. Warfield
Herbert G. Allen
Nancy J. Erickson
Paul S. Ives
William E. Klein, Sr.
Ailene Miller
Joseph W. Sommer
OFFICERS:
Ronald R. Warfield, President
Wayne A. Brown, Vice President
Gary E. Mede, Vice President
Richard M. Miller, Vice President
Rollie D. Moore, Vice President
Paul M. Harmon, Secretary
Robert W. Weldon, Treasurer
Richard F. Day, Controller
INVESTMENT ADVISER:
IAA Trust Company
Bloomington, Illinois
DISTRIBUTOR:
Fund/Plan Broker Services, Inc.
Conshohocken, Pennsylvania
TRANSFER AGENT:
Fund/Plan Services, Inc.
Conshohocken, Pennsylvania
CUSTODIAN:
IAA Trust Company
Bloomington, Illinois
INDEPENDENT ACCOUNTANTS:
Coopers & Lybrand L.L.P.
Philadelphia, Pennsylvania
GENERAL COUNSEL
Jerome P. Weiss
Sonnenschein, Nath & Rosenthal
Washington, D.C.
F30-117-03
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
October 27, 1995
IAA TRUST GROWTH FUND, INC.
IAA TRUST ASSET ALLOCATION FUND, INC.
IAA TRUST TAX EXEMPT BOND FUND, INC.
IAA TRUST MONEY MARKET FUND, INC.
808 IAA Drive, Bloomington, Illinois 61702, Phone (309) 557-3222
The IAA Trust Mutual Funds consist of four separate funds (collectively, the
"Funds"): IAA Trust Growth Fund, Inc. (the "Growth Fund"); IAA Trust Asset
Allocation Fund, Inc.* (the "Asset Allocation Fund"); IAA Trust Tax Exempt Bond
Fund, Inc. (the "Tax Exempt Bond Fund"); and IAA Trust Money Market Fund, Inc.
(the "Money Market Fund"). This Statement of Additional Information is not a
prospectus, but should be read in conjunction with the Funds' Prospectus dated
October 27, 1995.
A copy of the Funds' Prospectus may be obtained from a local Country Capital
Management Company salesperson who is also a Country Companies agent, a licensed
salesperson at IAA Trust Company, 808 IAA Drive, Bloomington, Illinois 61702, by
writing the Funds' principal Underwriter, Fund/Plan Broker Services, Inc., #2
Elm Street, P.O. Box 874, Conshohocken, Pennsylvania 19428, or by calling
toll-free 1 (800) 245-2100.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
SUBJECT PAGE
------- ----
<S> <C>
Investment Objectives and Policies . . . .
Policies and Investment Restrictions Aimed at Protecting Investors
Directors and Officers of the Funds. . . . .
Control Persons and Principal Holders of Securities. . . . . . . . .
Investment Advisory and Other Services . .
Brokerage. . . . . . . . . . . . . . . . .
Purchases, Redemptions, and Pricing of Fund Securities . . . . . . .
Rights of Accumulation. . . . . . . .
Exchange Privileges . . . . . . . . .
One-Time Reinvestment Privilege Without Sales Charge. . . . . .
Retirement Plans. . . . . . . . . . . .
Automatic Investing . . . . . . . . . .
Systematic Withdrawal Plan. . . . . . .
Underwriter Compensation . . . . . . . . . .
Investment Performance Information . . . . .
Financial Statements -- Annual Reports to Shareholders . . . . . . .
Report of Independent Accountants. . . . . .
Appendix . . . . . . . . . . . . . . . . .
</TABLE>
* Name change from "IAA Trust Income Fund, Inc." was approved by such Fund's
shareholders on February 8, 1993.
INVESTMENT OBJECTIVES AND POLICIES
For information with respect to the Funds' individual investment objectives and
policies, see "What are the Funds' Investment Objectives" in the Funds'
Prospectus, and "Policies and Investment Restrictions Aimed at Protecting
Investors" in this Statement of Additional Information.
For the fiscal years ended June 30, 1994 and 1995, the Growth Fund's
portfolio turnover rate was 49.12% and 31.84%, respectively. This Fund does not
expect that its turnover rate as of June 30, 1996 will vary significantly from
that at June 30, 1995.
For the fiscal years ended June 30, 1994 and 1995, the Asset Allocation
Fund's portfolio turnover rate was 17.39% and 21.03%, respectively.
This Fund does not expect that its turnover rate as of June 30, 1996 will vary
significantly from that at June 30, 1995.
For the fiscal years ended June 30, 1994 and 1995, the Tax Exempt Bond
Fund's portfolio turnover rate was 41.94% and 24.89%, respectively.
This Fund does not expect that its turnover rate as of June 30, 19956 will vary
significantly from that at June 30, 1995.
POLICIES AND INVESTMENT RESTRICTIONS AIMED AT PROTECTING INVESTORS
Fundamental Investment Restrictions
The following investment restrictions are considered fundamental policies and
may be changed only by the vote of a majority of a Fund's outstanding shares,
which as used herein and in the Prospectus means the lesser of (1) 67% of such
Fund's outstanding shares present at a meeting if the holders of more than 50%
of the outstanding shares are present in person or by proxy, or (2) more than
50% of such Fund's outstanding shares.
Restrictions Applicable to All Funds:
All Funds will not authorize or issue any class of senior securities.
The Trust Growth Fund, the Asset Allocation Fund, and the Tax Exempt Bond
Fund will not borrow money, except as a temporary measure for extraordinary
or emergency purposes, and then only from a bank in an amount not to exceed
10% of the value of the Fund's total assets, nor 5% of the value of such
Fund's total assets if such debt matures more than sixty days after issuance.
The Money Market Fund will not borrow money, except as a temporary measure
for extraordinary or emergency purposes, and then only from a bank in an
amount not to exceed 10% of the value of the Fund's total assets and will not
purchase securities at any time a loan to such Fund is outstanding
(investments in repurchase agreements are not subject to these restrictions).
All Funds will not underwrite or participate in the underwriting of
securities of other issuers.
All Funds will not purchase or sell real estate, commodities, or commodity
contracts.
All Funds will not make loans, except through the purchase of publicly
distributed debt securities in accordance with each Fund's investment
policies. Investments in repurchase agreements shall not be considered a loan
for purposes of this restriction. (See the Appendix for risk disclosure
statement on repurchase agreements).
Restrictions Applicable to Certain Funds:
The Growth Fund will not:
Invest more than 5% of its assets in the securities of any one issuer.
Purchase or hold as much as 10% of any class of outstanding equity securities
or as much as 10% of the outstanding voting securities of any one issuer.
Concentrate the investments of more than 25% of the total value of its assets
in any single industry.
The Asset Allocation Fund will not:
With respect to 75% of its assets, invest more than 5% of its assets in the
securities of any one issuer.
Purchase or hold as much as 10% of any class of outstanding equity securities
or as much as 10% of the outstanding voting securities of any one issuer.
Concentrate the investments of more than 25% of the total value of its assets
in any single industry.
The Tax Exempt Bond Fund will not:
With respect to 75% of its assets, invest more than 5% of its assets in the
securities of any one issuer. The term "issuer" as used by this Fund will
mean any one state municipality, agency, authority, instrumentality or other
entity which is directly responsible for the payment of debt service on its
outstanding obligations.
With respect to non-municipal bond investments, will not concentrate
investments of more than 25% of the total value of its assets in any single
industry, except that there is no limitation with regard to investments in
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
The Money Market Fund will not:
Invest more than 10% of its total assets in repurchase agreements maturing in
more than seven days or in non-negotiable certificates of deposit (See the
Appendix for risk disclosure statement on repurchase agreements).
Invest more than 5% of its total assets in the securities of any one issuer.
Concentrate the investments of more than 25% of the total value of its assets
in any single industry, other than banks.
Non-fundamental Investment Restrictions
With respect to the Growth Fund, the following restrictions are imposed by
the management of the Funds, and may be modified by the Board of Directors of
the Funds without shareholder approval.
The Growth Fund will not:
Invest in companies for purposes of exercising control or management.
Buy from or sell portfolio securities to any of its Officers, Directors,
employees, Investment Advisers or Underwriters as principals.
Will not purchase securities on margin, effect a short sale of any security,
purchase or sell puts, calls, straddles or spreads, or participate in any
joint or joint and several trading accounts.
Will not purchase or retain securities of any company if persons affiliated
with such Fund or its Investment Adviser, as a group, beneficially own more
than 1% of the securities of such a company.
In any case, borrow money in an amount which exceeds 5% of the value of its
total assets and will not purchase securities at any time a loan to such Fund
is outstanding (investment in repurchase agreements will not be considered to
be loans for purposes of this restriction).
Investment Company Act Restrictions
The following restrictions are imposed by the Investment Company Act of 1940.
The Growth Fund, the Asset Allocation Fund, the Tax Exempt Bond Fund and the
Money Market Fund will not:
Purchase or acquire securities of another investment company except by
purchase on the open market at regular brokerage rates (other than when such
purchase or acquisition is part of a plan of merger or consolidation) if
immediately after such purchase or acquisition, such Fund would own in the
aggregate: (1) more than 3% of the total outstanding voting stock of such
other investment company; (2) securities issued by such other investment
company having an aggregate value in excess of 5% of the value of such Fund's
total assets; or (3) securities issued by such other investment company and
all other investment companies having an aggregate value in excess of 10% of
the value of such Fund's total assets.
Any investment policy or restriction which involves a maximum percentage of
securities or assets shall not be considered to be violated unless an excess
over the percentage occurs immediately after an acquisition of securities and
results therefrom.
DIRECTORS AND OFFICERS OF THE FUNDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Name, Age Position(s) Aggregate Total Principal Occupation(s) During Past Five Years
and Held with Compensation Compensation
Address Fund(s) From Funds From Funds
for Fiscal Year & Fund
Ended 6/30/95 Complex Paid
to Directors
Ronald R. Director 0 0 Director and President: Illinois Agricultural Association,
Warfield(2) since 1994 Agricultural Holding Co., CC Services, Inc.(4), Country Capital
(51) President Management Company, Country Casualty Insurance Company, Country
since 1994 Investors Life Assurance Company, Country Life Insurance Company,
Country Mutual Insurance Company, and Country Preferred Insurance
Company, 1993 to date; Director: AgriVisor Services, Inc., IAA
Communications Company, and IAA Trust Company, 1993 to date;
Coordinating Committee Member of GROWMARK, Inc. and Chairman, Board
of Trustees, Foundation(2), 1993 to date; Director and President:
IAA Trust Growth Fund Inc.(1), IAA Trust Asset Allocation Fund,
Inc.(1), IAA Trust Tax Exempt Bond Fund, Inc.(1), IAA Trust Money
Market Fund, Inc.(1), Illinois Agricultural Service Company,
AgriVisor Services, Inc., IAA Communications Company, and IAA
Trust Company, 1994 to date; Chairman of the Board: Country Capital
Management Company, 1994 to date; Director: Bank of Gibson City,
1989 to date. Farmer.
Herbert G. Director 1400 1400 Director: IAA Trust Growth Fund, Inc.(1), IAA Trust Asset Allocation
Allen (65) since 1987 Fund, Inc.(1), IAATrust Tax Exempt Bond Fund, Inc.(1), and IAA Trust
Money Market Fund, Inc.(1), 1987 to date. Farmer.
Nancy J. Director 1400 1400 President of McHatton Farm Management, Inc., 1981 to date; Director:
Erickson since 1995 IAA Growth Fund, Inc.(1), IAA Trust Asset Allocation Fund, Inc.(1),
(38) IAA Trust Money Market Fund, Inc.(1), and IAA Trust Tax Exempt Bond
Fund, Inc.(1), 1995 to date. Farmer.
Paul S. Ives Director 700 700 Director: IAA Trust Growth Fund, Inc.(1), 1971 to date; IAA Trust
(78) since 1971 Asset Allocation Fund, Inc.(1) and IAA Trust Tax Exempt Bond Fund,
Inc.(1), 1978 to date; and IAA Trust Money Market Fund, Inc.(1),
1981 to date. Farmer.
William E. Director 1400 1400 Director: Illinois Agricultural Association, Illinois Agricultural
Klein, Sr. (2) since 1993 Holding Co., CC Services, Inc.(4), Country Casualty Insurance
(67) Company, Country Investors Life Assurance Company, Country Life
Insurance Company, Country Mutual Insurance Company, and Country
Preferred Insurance Company, 1988 to date; Director: Country Capital
Management Company, 1992 to date; Director: IAA Trust Growth
Fund, Inc.(1), IAA Trust Asset Allocation Fund, Inc.(1), IAA Trust
Tax Exempt Bond Fund Inc.(1), and IAA Trust Money Market Fund,
Inc.(1), 1993 to date. Farmer.
Ailene Director 1400 1400 McLean County (Illinois) Board Member: 1986 to date; Member: IAA
Miller (69) since 1991 Foundation(2), Trustee-Emeritus, 1988 to date; Director: IAA Trust
Growth Fund, Inc.(1), IAA Trust Asset Allocation Fund, Inc.(1),
IAA Trust Tax Exempt Bond Fund, Inc.(1), and IAA Trust Money Market
Fund, Inc.(1), 1991 to date.
Joseph W. Director 1050 1050 Director: Illinois Agricultural Association, Illinois Agricultural
Sommer. (2) since 1993 Holding Co., CC Services, Inc.(4), Country Casualty Insurance
(69) Company, Country Investors Life Assurance Company, Country Life
Insurance Company, Country Mutual Insurance Company, and Country
Preferred Insurance Company, 1988 to date; Director: Country Capital
Management Company, IAA Trust Growth Fund, Inc.(1), IAA Trust
Asset Allocation Fund, Inc.(1), IAA Trust Tax Exempt Bond Fund,
Inc.(1), and IAA Trust Money Market Fund, Inc.(1), 1993 to date.
Farmer.
Wayne A. Vice- 0 0 Senior Vice President--Investments: IAA Trust Company, 1983 to date;
Brown (61) President Assistant Vice President--Fixed Income Securities: IAA Trust Company,
since 1994 1973 to 1983; Assistant Treasurer: Country Life Insurance Company,
1980 to date; Vice President: IAA Trust Growth Fund, Inc.(1), IAA
Trust Asset Allocation Fund, Inc.(1), IAA Trust Tax Exempt Bond
Fund, Inc.(1), and IAA Trust Money Market Fund, Inc.(1), 1994
to date.
Gary E. Vice 0 0 Executive Vice President: IAA Trust Company, 1977 to date; Vice
Mede (58) President President--Investments: Country Capital Management Company, 1977
since 1978 to date; Vice President: IAA Trust Growth Fund, Inc.(1), IAA Trust
Asset Allocation Fund, Inc.(1), and IAA Trust Tax Exempt Bond Fund,
Inc.(1), 1978 to date; IAA Trust Money Market Fund, Inc.(1),
1981 to date.
Richard M. Vice 0 0 Senior Vice President and Senior Trust Officer: IAA Trust Company,
Miller (67) President 1991 to date (prior thereto Senior Vice President and Trust Officer);
since 1992 Vice President: IAA Trust Growth Fund, Inc.(1), IAA Trust Asset
Allocation Fund, Inc.(1), IAA Trust Tax Exempt Bond Fund, Inc.(1),
and IAA Trust Money Market Fund, Inc.(1), 1992 to date.
Rollie D. Vice 0 0 Director and Vice President: Illinois Agricultural Association,
Moore (46) President Illinois Agricultural Holding Co., CC Services, Inc.(4), Country
since 1994 Capital Management Company, Country Casualty Insurance Company,
Country Investors Life Assurance Company, Country Life Insurance
Company, Country Mutual Insurance Company, and Country Preferred
Insurance Company, 1993 to date; Director: IAA Communications
Company and IAA Trust Company, 1993 to date; Vice Chairman, Board of
Trustees, IAA Foundation(2), 1993 to date; Vice President: IAA
Trust Growth Fund, Inc.(1), IAA Trust Asset Allocation Fund, Inc.
(1), IAA Trust Tax Exempt Bond Fund, Inc. (1), and IAA Trust Money
Market Fund, Inc.(1), 1994 to date; Vice President and
Director: IAA Communications Company and IAA Trust Company, 1994
to date; Director: AgriVisor Services, Inc. and Illinois
Agricultural Service Company, 1994 to date; Coordinating Committee
Member of GROWMARK, Inc., 1994 to date. Farmer. Previously served as
Director: Illinois Agricultural Association, Illinois Agricultural
Holding Co., CC Services, Inc.(4), Country Casualty Insurance
Company, Country Investors Life Assurance Company, Country Life
Insurance Company, Country Mutual Insurance Company, and Country
Preferred Insurance Company, 1984 to 1992; IAA Trust Company, 1988
to 1989; Country Capital Management Company, 1989 to 1992; IAA Trust
Growth Fund, Inc., IAA Trust Asset Allocation Fund, Inc., IAA Trust
Money Market Fund, Inc., and IAA Trust Tax Exempt Bond Fund, Inc.,
1989 to 1993; AgriVisor Services, Inc., 1991 to 1992.
Jerome P. General 0 0 General Counsel: Illinois Agricultural Association and affiliated
Weiss (61) Counsel companies, 977 to date; Secretary and General Counsel: Country
since 1977 Capital Management Company and IAA Trust Company, 1977 to date;
General Counsel IAA Trust Growth Fund, Inc.(1), 1977 to date; IAA
Trust Asset Allocation Fund, Inc.(1) and IAA Trust Tax Exempt Bond
Fund, Inc.(1), 1978 to date; IAA Trust Money Market Fund, Inc.
(1), 1981 to date; Partner: Sonnenschein, Nath and Rosenthal
(law firm), Washington, D.C., 1986 to date.
Robert W. Treasurer 0 0 Vice President--Finance and Treasurer: IAA Trust Company, Illinois
Weldon (61) since 1975 Agricultural Association, Country Life Insurance Company, Country
Mutual Insurance Company, Country Casualty Insurance Company,
Country Preferred Insurance Company, and Country Capital Management
Company, 1974 to date; Director and Treasurer: Illinois Agricultural
Service Company, 1974 to date; Vice President--Finance and
Treasurer: CC Services, Inc.(4), 1975 to date; Country Investors
Life Assurance Company, 1981 to date; Treasurer: Illinois
Agricultural Holding Co., 1974 to date; Illinois Agricultural
Auditing Association, 1975 to date; IAA Trust Growth Fund, Inc.(1),
1975 to date; IAA Trust Asset Allocation Fund, Inc.(1) and IAA
Trust Tax Exempt Bond Fund, Inc.(1), 1978 to date; IAA Trust
Money Market Fund, Inc.(1), 1981 to date.
Richard F. Controller 0 0 Controller: IAA Trust Company, 1974 to date; IAA Trust Growth Fund,
Day (55) since 1992 Inc.(1), IAA Trust Asset Allocation Fund, Inc.(1), IAA Trust Tax
Exempt Bond Fund, Inc. (1), and IAA Trust Money Market Fund, Inc.
(1), 1992 to date.
Paul M. Secretary 0 0 Deputy General Counsel: Illinois Agricultural Association and
Harmon since 1995 Affiliated Companies, 1991 to date. Secretary: IAA Trust Growth
(53) Fund(1), IAA Trust Asset Allocation Fund, Inc.(1), IAA Trust Money
Market Fund, Inc. (1) and IAA Trust Tax Exempt Bond Fund, Inc.(1),
1995 to date.
</TABLE>
<TABLE>
<S> <C>
(1) IAA Trust Growth Fund, Inc. was formerly Country Capital Growth Fund, Inc. IAA Trust Asset Allocation Fund,
Inc. was formerly IAA Trust Income Fund, Inc., formerly Country Capital Income Fund, Inc. IAA Trust Tax
Exempt Bond Fund, Inc. was formerly Country Capital Tax Exempt Bond Fund, Inc. IAA Trust Money Market
Fund, Inc. was formerly Country Capital Money Market Fund, Inc.
(2) Interested Directors: all Directors classified by the Funds as Interested Directors also serve as directors of Illinois
Agricultural Association, Illinois Agricultural Holding Co., Country Life Insurance Company, Country Mutual
Insurance Company, and Country Capital Management Company. Certain Directors also serve as directors of IAA
Trust Company. The purpose of the IAA Foundation is to carry out charitable, scientific, literary and educational
work in the field of agriculture. Country Life Insurance Company owns all of the outstanding stock of Country
Capital Management Company.
(3) The mailing address for all the Funds' Officers and Directors is in care of the IAA Trust Funds, 808 IAA
Drive, Bloomington, Illinois 61702.
(4) CC Services, Inc. was organized to provide insurance brokerage, administrative, marketing and other services
to the insurance companies affiliated with the Illinois Agricultural Association.
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Country Life Insurance Company
As of October 2, 1995, Country Life Insurance Company ("Country Life")
owned 439,945 shares or 10.38% of the outstanding shares of the Growth Fund,
247,948 shares or 31.46% of the outstanding shares of the Asset Allocation Fund,
and 2,500,000 shares or 6.30% of the outstanding shares of the Money Market
Fund.
Substantially all of the issued and outstanding voting securities of Country
Life are owned by Illinois Agricultural Holding Co. and approximately 98% of the
outstanding voting securities of this latter company are owned by Illinois
Agricultural Association. Each of these companies is incorporated in Illinois.
Country Life's home office is at 1711 G.E. Road, Bloomington, Illinois. The home
office address for both Illinois Agricultural Holding Company and Illinois
Agricultural Association is 1701 Towanda Avenue, Bloomington, Illinois. For the
effect of Country Life's stock ownership in the Funds on other Fund
shareholders, see the section titled "CAPITAL STOCK" in the Funds' Prospectus.
Country Mutual Insurance Company
As of October 2, 1995, Country Mutual Insurance Company ("Country Mutual")
owned 248,175 shares or 11.14% of the outstanding shares of the Tax-Exempt Bond
Fund.
Country Mutual has sole voting and investment power with respect to the common
stock which it owns in this Fund. Through proxies, voting control of Country
Mutual is in Illinois Agricultural Association. Each of these companies is
incorporated in Illinois with home office addresses at 1701 Towanda Avenue,
Bloomington, Illinois. For the effect of Country Mutual's stock ownership in the
Fund on other Fund shareholders, see the section titled "CAPITAL STOCK" in the
Funds' Prospectus.
IAA Trust Company
As of October 2, 1995, IAA Trust Company owned of record 1,571,091 shares
or 37.08% of the issued and outstanding capital stock of the Growth Fund,
378,760 shares or 48.06% of the issued and outstanding capital stock of the
Asset Allocation Fund, and 32,572,553 shares or 82.03% of the issued and
outstanding capital stock of the Money Market Fund.
IAA Trust Company's address is 808 IAA Drive, Bloomington, Illinois. Illinois
Agricultural Holding Co. owns 100% of the outstanding voting securities of the
Trust Company.
Officers and Directors
As of October 2, 1995, the Officers and Directors of the Funds as a group
beneficially owned, directly or indirectly, less than 1% of the issued and
outstanding capital stock of any Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
Controlling Shareholders
For the names of all controlling persons of IAA Trust Company, see section
titled "WHO MANAGES THE FUNDS" in the Funds' Prospectus.
Fund Officers Affiliated with Adviser
Fund Officers and Directors who are also Officers or Directors of IAA Trust
Company are set forth in the section titled "WHO MANAGES THE FUNDS" in the
Funds' Prospectus.
The Investment Adviser
IAA Trust Company, as Investment Adviser to the Funds, advises each Fund as to:
investing its capital; continually reviews its investment portfolio and
recommends changes that appear desirable; furnishes statistical and research
information, office space, facilities, and equipment required for each Fund; and
pays the compensation of Directors, Officers, and employees of the Funds who are
also Directors, Officers, and employees of IAA Trust Company. For these services
performed and expenses assumed, each Fund pays IAA Trust Company the annual fees
as shown below. Such fees are computed on a daily basis and are paid monthly.
The Growth Fund pays approximately .75% of 1% in any fiscal year of its
average net assets. For the fiscal years ended June 30, 1993, 1994 and 1995, IAA
Trust Company received $520,382, $497,296 and $476,164, respectively, for its
services as Investment Adviser to the Fund. Neither IAA Trust Company nor any
Company affiliated with it receives any brokerage commissions from the Fund, as
such business is transacted with non-affiliated broker-dealers.
The Asset Allocation Fund pays approximately .75% of 1% in any fiscal year
of its average net assets. For the fiscal years ended June 30, 1993, 1994 and
1995, IAA Trust Company received $37,307 and $58,895 and $67,275, respectively,
for its services as Investment Adviser to the Fund. Neither IAA Trust Company
nor any Company affiliated with it receives any brokerage commissions from the
Fund, as such business is transacted with non-affiliated broker-dealers.
The Tax Exempt Bond Fund pays approximately .50% of 1% in any fiscal year
of its average net assets. For the fiscal years ended June 30, 1993, 1994 and
1995, IAA Trust Company received $93,945, $100,624 and $93,589, respectively,
for its services as Investment Adviser to the Fund. Neither IAA Trust Company
nor any Company affiliated with it receives any brokerage commissions from the
Fund, as such business is transacted with non-affiliated broker-dealers.
The Money Market Fund pays approximately .50% of 1% in any fiscal year of
its average net assets. For the fiscal year ended June 30, 1993, IAA Trust
Company received $16,331 for investment advisory services. For the fiscal year
ended June 30, 1994, IAA Trust Company earned $182,832 for its services as
Investment Adviser to the Fund, all of which was voluntarily waived. For the
fiscal year ended June 30, 1995, IAA Trust Company earned $178,518 for
investment advisory services and voluntarily agreed to waive fees totalling
$86,900. The Advisor is currently not waiving any of its investment advisory
fees. Neither IAA Trust Company nor any Company affiliated with it receives any
brokerage commissions from the Fund, as such business is transacted with
non-affiliated broker-dealers.
The Distributor
Fund/Plan Broker Services, Inc. ("FPBS") is the primary and exclusive
Distributor of the Funds' shares, pursuant to Underwriting Agreements with each
Fund. As Distributor, FPBS will use its best efforts to effect such
distributions, but it is required to take and pay for only such securities as it
sells to the public. Commissions for the sale of shares received by FPBS do not
represent compensation paid by the Funds to FPBS and are not expenses of the
Funds.
12b-1 Plan
The shareholders of the Growth Fund, the Asset Allocation Fund, and the Tax
Exempt Bond Fund have adopted respective Plans of Distribution pursuant to Rule
12b-1 under the Investment Company Act of 1940. During the fiscal year ended
June 30, 1995, the Growth Fund paid $2,597 to FPBS from its Distribution
Plan. During the fiscal year ended June 30, 1995, the Asset Allocation Fund
paid $1,940 to FPBS from its Distribution Plan. During the fiscal year
ended June 30, 1995, the Tax Exempt Bond Fund paid $7,979 to FPBS from
its Distribution Plan. See "DISTRIBUTION PLANS" in the Funds' Prospectus.
The Transfer Agent
Fund/Plan Services, Inc. ("FPS") is the Funds' Transfer and Dividend Disbursing
Agent and as such performs all shareholder services for the Funds. As part of
these services, FPS will maintain records pertaining to the sale, redemption,
and transfer of Fund shares and will distribute each Fund's cash dividends to
shareholders. For such services, each Fund will pay FPS fees which management
believes are comparable to fees charged by others who perform such transfer
agency services.
The Growth Fund paid FPS for the fiscal years ended June 30, 1993, 1994 and
1995, $92,579, $83,386 and $68,022, respectively. These fees were for transfer
and dividend disbursing agent services.
The Asset Allocation Fund paid FPS for the fiscal years ended June 30,
1993, 1994 and 1995, $15,599, $15,771 and $11,101, respectively. These fees were
for transfer and dividend disbursing agent services.
The Tax Exempt Bond Fund paid FPS for the fiscal years ended June 30, 1993,
1994 and 1995, $18,785, $28,536 and $21,475, respectively. These fees were for
transfer and dividend disbursing agent services.
The Money Market Fund paid FPS for the fiscal years ended June 30, 1993,
1994 and 1995, $52,656, $71,526 and $41,216, respectively. These fees were for
transfer and dividend disbursing agent services.
Accounting Services
The Funds have entered into Accounting Services Agreements with FPS. These
Agreements require FPS to calculate each Fund's net asset value in accordance
with the provisions of the Funds' current Prospectus and to prepare for Fund
approval and use various government reports, tax returns, and proxy materials.
Each Fund will pay a minimum fee of $25,000 for these services and additional
fees based on declining percentages of their respective average net assets in
excess of $10,000,000. Management believes the fees for these services are
comparable to those charged by others who perform such accounting services.
The Growth Fund paid FPS for the fiscal years ended June 30, 1993, 1994 and
1995, $58,043, $45,128 and $44,673, respectively.
The Asset Allocation Fund paid FPS for the fiscal years ended June 30,
1993, 1994 and 1995, $25,785, $25,089 and $25,883, respectively.
The Tax Exempt Bond Fund paid FPS for the fiscal years ended June 30, 1993,
1994 and 1995, $30,627, $29,049 and $30,271, respectively.
The Money Market Fund paid FPS for the fiscal years ended June 30, 1993,
1994 and 1995, $28,713, $39,106 and $35,458, respectively.
Administrative Services
The Funds have entered into Administration Agreements with FPS. These Agreements
provide that the Administrator shall provide all administrative services to each
Fund other than those relating to the investment portfolio of the Funds, the
distribution of the Funds and the maintenance of each Fund's financial records.
The fees for these services are based on declining percentages of each Fund's
average net assets beginning at .0015% of the first $50,000,000 of average net
assets, .0007% on the next $50,000,000 of average net assets, and .0005% over
$100,000,000 of average net assets. The Funds are, however, required to pay
minimum annual administrative fees. The minimum annual fee for the Growth Fund
is $50,000. The minimum annual administrative fee for each of the Asset
Allocation Fund, the Tax Exempt Bond Fund, and the Money Market Fund is $10,000.
For the fiscal year ended June 30, 1995, the Growth Fund paid $61,289 to
FPS for administrative services.
For the fiscal year ended June 30, 1995, the Asset Allocation Fund paid
$10,009 to FPS for administrative services.
For the fiscal year ended June 30, 1995, the Tax Exempt Bond Fund paid
$18,089 to FPS for administrative services.
For the fiscal year ended June 30, 19945, the Money Market Fund paid
$334,763 to FPS for administrative services.
The Custodian
IAA Trust Company, 808 IAA Drive, Bloomington, Illinois 61702, serves as
Custodian for the Funds and all securities and cash of each Fund will be held by
it. None of the Directors, Officers or other employees of the Funds ever have
personal possession of any Fund's investments. The Custodian attends to the
collection of principal and income, pays and collects all monies for securities
bought and sold by each Fund, and performs certain other ministerial duties.
These services do not include any managerial or policy making functions of the
Funds. The Funds have agreed to pay the Custodian such compensation as may be
agreed upon from time to time, but currently the Custodian is voluntarily
waiving the receipt of any fees for custodial services.
Independent Accountants
The accounting firm of Coopers & Lybrand L.L.P., 2400 Eleven Penn Center,
Philadelphia, Pennsylvania, has been designated as Auditors for each Fund.
Coopers & Lybrand L.L.P. performs annual audits of each Fund and is periodically
called upon to provide accounting and tax advice.
BROKERAGE
THE GROWTH FUND and THE ASSET ALLOCATION FUND:
These Funds always seek to effect their respective transactions in buying and
selling portfolio securities, acting through a broker as agent or with a dealer
as principal so that they can obtain reasonable execution at the most favorable
prices. Accordingly, each Fund, through IAA Trust Company, the Investment
Adviser, negotiates commission rates in accordance with the reliability and
quality of a broker's or dealer's services, the financial condition of the firm
and the value and expected contribution of the broker-dealer to the performance
of the Fund on a continuing basis. Thus, what a Fund determines to be the most
favorable commission price may be higher than the lowest available price. In
evaluating the overall reasonableness of brokerage commissions paid, the Fund
through its Investment Adviser, maintains an awareness of general practices with
regard to commission levels and rates charged by reputable brokerage firms.
While there is no undertaking or agreement with any broker or dealer to do so,
either Fund may, subject to the primary brokerage allocation criterion that a
Fund obtain reasonable execution at the most favorable prices, place orders for
the purchase or sale of portfolio securities with brokers or dealers who have
provided research, statistical, or other financial information to the Fund or
its Investment Adviser. Brokerage house research generally provides economic and
financial market analysis as well as industry studies and investment analysis of
individual companies or entities.
The primary brokerage allocation criterion of the Funds is that each Fund obtain
reasonable execution at the most favorable prices. If two or more brokers or
dealers meet this criterion, a Fund may, although there is no undertaking or
agreement with any broker or dealer to do so or any specific internal allocation
procedure, place orders for the purchase or sale of portfolio securities with
brokers or dealers who have provided research, statistical or other financial
information to the Fund or its Investment Adviser. Research information obtained
from brokers and dealers while servicing the Fund may be used by IAA Trust
Company in servicing all of its accounts and, conversely, research information
obtained from brokers and dealers while servicing other accounts may be used by
IAA Trust Company in servicing the Fund. Further, all research information
obtained from brokers and dealers while serving the Fund may not be used by the
Fund.
Over-the-counter transactions are usually placed with a principal market maker
unless a better net security price is obtainable elsewhere.
During the fiscal years ended June 30, 1993, 1994 and 1995, brokerage
commissions paid by the Growth Fund totaled $178,097, $135,169 and $64,267,
respectively. No brokerage transactions were allocated to brokers or dealers for
the sale of the Fund's shares; such sales are made by Fund/Plan Broker Services,
Inc. and Country Capital Management Company through their own representatives.
During the fiscal years ended June 30, 1993, 1994 and 1995, brokerage
commissions paid by the Asset Allocation Fund totaled $3,364, $4,558 and $6,980,
respectively. No brokerage transactions were allocated to brokers or dealers for
the sale of the Fund's shares; such sales are made by Fund/Plan Broker Services,
Inc. and Country Capital Management Company through their own representatives.
There may be occasions when portfolio transactions for these Funds are executed
as part of concurrent authorizations to purchase or sell the same security for
other Funds served by IAA Trust Company. Although such concurrent authorizations
potentially could be either advantageous or disadvantageous to a Fund, they are
effected only when a Fund, acting on the advice of IAA Trust Company, believes
that to do so is in the interest of such Fund. When such concurrent
authorizations occur, the executions will be allocated in an equitable manner.
THE TAX EXEMPT BOND FUND:
This Fund always seeks to effect its transactions in buying and selling
portfolio securities, acting through a broker as agent or with a dealer as
principal so that it can obtain reasonable execution at the most favorable
prices. Accordingly, the Fund, through IAA Trust Company, its Investment
Adviser, negotiates commission rates in accordance with the reliability and
quality of a broker's or dealer's services, the financial condition of the firm
and the value and expected contribution of the broker-dealer to the performance
of the Fund on a continuing basis. Thus, what the Fund determines to be the most
favorable commission price may be higher than the lowest available price. In
evaluating the overall reasonableness of brokerage commissions paid, the Fund
through its Investment Adviser, maintains an awareness of general practices with
regard to commission levels and rates charged by reputable brokerage firms.
The primary brokerage allocation criterion of the Fund is that the Fund obtain
reasonable execution at the most favorable prices. If two or more brokers or
dealers meet this criterion, the Fund may, although there is no undertaking or
agreement with any broker or dealer to do so or any specific internal allocation
procedure, place orders for the purchase or sale of portfolio securities with
brokers or dealers who have provided research, statistical or other financial
information to the Fund or its Investment Adviser. Brokerage house research
generally provides economic and financial market analysis as well as industry
studies and investment analysis of individual companies or entities.
It is the opinion of the Investment Adviser that the furnishing of research,
statistical, and other financial information to either the Fund or the
Investment Adviser by brokers and dealers will not materially reduce the cost to
the Investment Adviser of fulfilling the terms of its advisory contract with the
Fund because the Investment Adviser must review and analyze such information
along with all other information available to it. Research information obtained
from brokers and dealers while servicing the Fund may be used by IAA Trust
Company in servicing all of its accounts and, conversely, research information
obtained from brokers and dealers while servicing other accounts may be used by
IAA Trust Company in servicing the Fund. Further, all research information
obtained from brokers and dealers while serving the Fund may not be used by the
Fund.
During the fiscal years ended June 30, 1993, 1994 and 1995, all
transactions for the Tax Exempt Bond Fund were placed with a principal market
dealer. No commissions as such are paid on transactions with the principal
market dealer as the asked price on such transactions usually includes an
allowance for such compensation.
No brokerage transactions are allocated to brokers or dealers for the sale of
the Fund's shares; such sales are made by Fund/Plan Broker Services, Inc. and
Country Capital Management Company through their own representatives.
There may be occasions when portfolio transactions for this Fund are executed as
part of concurrent authorizations to purchase or sell the same security for
other Funds served by IAA Trust Company. Although such concurrent authorizations
potentially could be either advantageous or disadvantageous to a Fund, they are
effected only when a Fund, acting on the advice of IAA Trust Company, believes
that to do so is in the interest of such Fund. When such concurrent
authorizations occur, the executions will be allocated in an equitable manner.
THE MONEY MARKET FUND:
This Fund, acting on recommendations received from its Investment Adviser, IAA
Trust Company, expects that purchases and sales of portfolio securities usually
will be principal transactions. Portfolio securities will normally be purchased
directly from the issuer or from an underwriter or a market maker for the
securities. Usually, no brokerage commissions will be paid on such purchases.
Purchases from underwriters of portfolio securities will include a concession
paid by the issuer to the underwriter and the purchase price paid to market
makers for money market instruments may include the spread between the bid and
asked price.
The primary consideration in the allocation of portfolio transactions will be
prompt and effective execution of orders at the most favorable price. If two or
more brokers or dealers meet this criterion, the Fund may, although there is no
undertaking or agreement with any broker or dealer to do so or any specific
internal allocation procedure, place orders for the purchase or sale of
portfolio securities with brokers or dealers who have provided research,
statistical, or other financial information to the Fund or its investment
adviser. Brokerage house research generally provides economic and financial
market analysis as well as industry studies and investment analysis of
individual companies or entities. Such information is of the kind generally
supplied by broker-dealers to their customers without obligation. This
information may be used by IAA Trust Company to supplement its own research and
analysis. Although it is not possible to place a dollar value on this
information, it is the opinion of IAA Trust Company that the receipt and study
of such information does not reduce its expenses. Research information obtained
from brokers and dealers while servicing the Fund may be used by IAA Trust
Company in servicing all of its accounts and, conversely, research information
obtained from brokers and dealers while servicing other accounts may be used by
IAA Trust Company in servicing the Fund. Further, not all research information
obtained from brokers and dealers while servicing the Fund may be used by the
Fund.
During the fiscal years ended June 30, 1993, 1994 and 1995, the Money
Market Fund incurred no brokerage commissions.
There may be occasions when portfolio transactions for this Fund are executed as
part of concurrent authorizations to purchase or sell the same security for
other Funds served by IAA Trust Company. Although such concurrent authorizations
potentially could be either advantageous or disadvantageous to a Fund, they are
effected only when a Fund, acting on the advice of IAA Trust Company, believes
that to do so is in the interest of such Fund. When such concurrent
authorizations occur, the executions will be allocated in an equitable manner.
PURCHASES, REDEMPTIONS, AND PRICING OF FUND SECURITIES
For the method followed by the Funds in determining the total offering price at
which each Fund's securities are offered to the public and the method used to
value each Fund's assets, see sections titled "HOW TO BUY SHARES", "SPECIAL
PLANS AND OTHER PURCHASE INFORMATION", "HOW THE VALUE OF YOUR SHARES IS
DETERMINED", and "HOW TO REDEEM YOUR SHARES" in the Funds' Prospectus. See the
following for additional information on various special Plans the Funds offer to
investors.
Rights of Accumulation
For those who already have an account with either the Growth Fund, the Asset
Allocation Fund, the Tax Exempt Bond Fund, or the Money Market Fund, and who are
not eligible for sales charge waivers on the first three Funds, reduced sales
charges in accordance with the scale in the Prospectus under "HOW TO BUY SHARES"
are also applicable to subsequent purchases by "persons" defined in that section
of the Prospectus. The sales charge, if not waived, on each additional purchase
is determined by adding to the amount of the new investment, the current
redemption value of shares already owned by the investor in another IAA Trust
Fund. The corresponding sales charge percentage is then applied to the entire
amount of the new investment -- not just the amount that exceeds the breakpoint.
For example, if you already own shares with a current redemption value of $2,500
and you make an additional investment of $7,500, the sales charge applicable to
the $7,500 investment would be reduced to 2%.
Exchange Privileges
A shareholder may exchange his/her shares of one IAA Trust Fund for shares of
another IAA Trust Fund on the basis of the relative net asset values per share
of each Fund at the time of the exchange. When shares of one Fund are exchanged
for shares of another Fund, the minimum investment requirement of such other
Fund must be met. An exchange of shares among the Growth Fund, the Asset
Allocation Fund, and the Tax Exempt Bond Fund will not result in a sales charge.
The two ways to exchange shares, by mail and by telephone, are discussed below.
By Mail: The exchange can be made by forwarding a written request signed by the
registered shareholder(s) and returning any outstanding certificates needed to
effect the exchange to Fund/Plan Broker Services, Inc. ("FPBS"), c/o Fund Plan
Services, Inc., #2 Elm Street, P.O. Box 874, Conshohocken, Pennsylvania 19428.
By Telephone: You may make the exchange by telephone provided that: (1) you have
elected the Telephone Exchange option on the initial application or have
authorized this option after your initial purchase; (2) the registration of the
accounts will be identical; and (3) the shares to be exchanged are not in
certificate form. You can call toll-free 1 (800) 245-2100 on any business day.
All telephone conversations with FPBS will be recorded. Neither the Funds,
Country Capital Management Company, or FPBS will be responsible for the
authenticity of the exchange instructions received by telephone.
An exchange is effected by redemption of shares of one Fund and the issuance of
shares of the other Fund selected, and only after delivery of the current
Prospectus. With respect to an exchange among the Growth Fund, the Asset
Allocation Fund, and the Tax Exempt Bond Fund, a capital gain or loss for
Federal income tax purposes will be realized upon the exchange, depending upon
the cost or other basis of the shares redeemed. With respect to the Money Market
Fund, assuming such Fund maintains its share value at $1.00 per share, an
exchange of this Fund's shares for shares of another IAA Trust Fund should not
create a Federal income tax incident, except for the establishment of a new
holding period.
One-Time Reinvestment Privilege Without Sales Charge
Within thirty calendar days after redemption, shareholders who redeem all or
part of their shares from an IAA Trust Fund have a one-time privilege of
reinvesting in shares of the Fund from which they redeemed, or investing in any
other IAA Trust Fund, without a sales charge and up to the dollar amount
received for the redeemed shares.
With respect to the Growth Fund, the Asset Allocation Fund, and the Tax Exempt
Bond Fund, the reinvestment or exchange will be made at the net asset value next
computed after the request is received by the selected Fund in proper form and
will be limited to the amount of the redemption proceeds. If a shareholder has
realized a capital gain on the redemption, the transaction is taxable and
reinvestment will not alter any capital gains tax payable. If there has been a
loss on redemption and a subsequent reinvestment is made in a Fund, some or all
of the loss will not be allowed as a tax deduction depending on the amount
reinvested.
With respect to the Money Market Fund, if any of this Fund's shares acquired by
an exchange of shares with the other IAA Trust Funds are redeemed, you have a
one-time privilege (within thirty calendar days after redeeming) to reinvest in
such Fund and re-exchange such shares for shares of any other IAA Trust Fund.
This would eliminate the sales charge, if not waived, that you would otherwise
pay on such reinvestment. Assuming that this Fund maintains its share value at
$1.00 per share, such a re-exchange would not create a Federal income tax
incident, except for the establishment of a new holding period.
Retirement Plans
IAA Trust Company sponsors a prototype Defined Contribution Plan which has been
approved by the Internal Revenue Service and which meets the requirement of the
Tax Reform Act of 1986, as amended. This Plan can invest in shares of the Growth
Fund, the Asset Allocation Fund, or the Money Market Fund. Contributions to the
Plan of up to $30,000 or 25% of earned income, whichever is the lesser, may be
made each year and subtracted from gross income at tax time.
For individuals eligible to establish an Individual Retirement Account (IRA),
IAA Trust Company sponsors a prototype individual retirement Plan which has been
approved by the Internal Revenue Service. An individual may be able to deduct
contributions made to such a Plan up to an annual amount of $2,000 or 100% of
compensation, whichever is less. The deductibility of contributions to an IRA by
taxpayers who are participants in an employer's retirement plan is determined by
the amount of taxpayer's adjusted gross income. If a joint tax return is filed,
a married person whose spouse is not employed may contribute up to $2,250
annually to be divided in any manner between the individual's IRA and the IRA
established for the nonworking spouse so long as no more than $2,000 is
contributed in any one year to either IRA. The deductibility of contributions to
an IRA by taxpayers who are active participants in an employer's retirement plan
is determined by the amount of the taxpayer's adjusted gross income. "Rollover
contributions" from certain other tax-qualified plans may also be made to this
Plan. The custodial fee for this Plan is currently $15.00 per year on any
portion thereof for all IAA Trust Company IRA accounts held by one participant
and his/her spouse (if any). Possible penalties may be imposed for excess IRA
contributions, premature withdrawals or insufficient distributions after age 70
1/2.
An investor considering either the Defined Contribution Plan or the IRA Plan
should consult with his or her attorney with respect to Plan requirements and
tax implications. Other information relating to eligibility and service fees may
be obtained by reading the prototype Plans and, in the case of the IRA, by
reading the disclosure statement which the IRA requires to be furnished to
individuals who are considering the adoption of an IRA.
For more information about these Plans, contact IAA Trust Company, 808 IAA
Drive, Bloomington, Illinois 61702 or call toll-free 1 (800) 422-8261.
Automatic Investing
A shareholder may authorize Systematic Investing through automatic withdrawals
from his/her bank accounts.
Systematic Withdrawal Plan
Shareholders who purchase or already own $5,000 or more of any Fund's shares,
valued at the current public offering price, and who wish to receive periodic
payments may establish a Systematic Withdrawal Plan by completing an application
provided by FPBS for this purpose. Such planholders will receive monthly,
quarterly or annual checks in the amount they designate. While no particular
withdrawal amount is necessarily recommended, the minimum is $25. The amount of
payment may be changed at any time. Dividends and capital gains distributions on
a Fund's shares in the Plan are automatically reinvested in additional shares at
net asset value, without a sales charge. All certificates for shares deposited
under this Plan must be surrendered and no certificates will be issued unless
the Plan is terminated. Payments are made from the proceeds derived from the
redemption of Fund shares owned by the planholder. With respect to the Growth
Fund, the Asset Allocation Fund, and the Tax Exempt Bond Fund, each redemption
of shares may result in a gain or loss which is reportable by the investor on
his income tax return.
The maintenance of a Systematic Withdrawal Plan, while making Systematic
Investments, is disadvantageous because the shareholder would unnecessarily be
paying a sales charge (with respect to the Growth Fund, the Asset Allocation
Fund, and the Tax Exempt Bond Fund) on the purchase of shares while redeeming
similar shares at net asset value. For this reason, an investor should not
ordinarily have a Systematic Withdrawal Plan in effect while making Systematic
Investments. Redemptions required for payments may reduce or use up the
planholder's investment, depending upon the size of payment and market
fluctuations, if applicable. Accordingly, Plan payments cannot be considered as
yield or income on the investment. Additional purchases may be made under the
Systematic Withdrawal Plan in amounts of $5,000 or more.
Fund/Plan Services, Inc., ("FPS") as agent for the shareholder, may make a
charge for services rendered beyond those normally assumed by the Funds. No such
charge is currently assessed, but such a charge may be instituted by FPS upon
notice in writing to shareholders. This Plan may be terminated at any time
without penalty upon written notice by the shareholder, by the Funds, or by FPS.
UNDERWRITER COMPENSATION
Shares of the Funds are continuously offered to the public through Fund/Plan
Broker Services, Inc. ("FPBS").
Currently, out of commissions to be received, FPBS has agreed to pay all
expenses incident to the distribution of shares. If commissions are not
sufficient to pay these expenses, FPBS will look to the Funds' Investment
Adviser for reimbursement. For the fiscal year ended June 30, 19945, FPBS
received no underwriting fees.
However, as Distributor, FPBS receives as compensation those portions of the
applicable sales charges which are not re-allowed to the dealers who sell shares
of the Growth Fund, the Asset Allocation Fund, and the Tax Exempt Bond Fund.
For additional information, see "WHO DISTRIBUTES THE FUNDS SHARES" in the Funds'
Prospectus.
INVESTMENT PERFORMANCE INFORMATION
From time to time, the Funds advertise their various respective performance
measures, such as: 7- or 30-day yield; tax- equivalent yield; total percentage
increase; and total return. Performance will vary and the results shown herein
and in the Funds' Prospectus are historical information and will not be
representative of future results. Factors affecting the Funds' performance
include general market conditions, operating expenses, and portfolio management.
No adjustment has been made for taxes payable on dividends and distributions.
Total Return Calculations
With respect to the Growth Fund, the Asset Allocation Fund, and the Tax Exempt
Bond Fund, these Funds that compute their average annual total returns do so by
determining the average annual compounded rates of return during specified
periods that equate the initial amount invested to the ending redeemable value
of such investment. This is done by dividing the ending redeemable value of a
hypothetical $1,000 initial payment by $1,000 and raising the quotient to a
power equal to one divided by the number of years (or fractional portion
thereof) covered by the computation and subtracting one from the result. This
calculation can be expressed as follows:
1/n
ERV
--- 1
Average Annual Total Return P
<TABLE>
<S> <C> <C>
Where: ERV = ending redeemable value at the end of the period covered by the computation of a
hypothetical $1,000 payment made at the beginning of the period.
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed in terms of years.
</TABLE>
The Funds that compute their aggregate total returns over a specified period do
so by determining the aggregate compounded rate of return during such specified
period that likewise equates over a specified period the initial amount invested
to the ending redeemable value of such investment. The formula for calculating
aggregate total return is as follows:
ERV
--- 1
Average Total Return P
<TABLE>
<S> <C> <C>
Where: ERV = ending redeemable value at the end of the period covered by the computation of a hypothetical
$1,000 payment made at the beginning of the period.
P = hypothetical initial payment of $1,000.
</TABLE>
The calculations of average annual total return and aggregate total return
assume the reinvestment of all dividends and capital gain distributions on the
reinvestment dates during the period. The ending redeemable value (variable
"ERV" in each formula) is determined by assuming complete redemption of the
hypothetical investment and the deduction of all nonrecurring charges at the end
of the period covered by the computations. Such calculations are not necessarily
indicative of future results and do not take into account Federal, state and
local taxes that shareholders must pay on a current basis.
Since performance will fluctuate, performance data for the Funds should not be
used to compare an investment in a Fund's shares with bank deposits, savings
accounts and similar investment alternatives which often provide an agreed or
guaranteed fixed yield for a stated period of time. Shareholders should remember
that performance is generally a function of the kind and quality of the
instruments held in a portfolio, portfolio maturity, operating expenses and
market conditions.
30-day Yield Calculations
With respect to the Asset Allocation Fund and the Tax Exempt Bond Fund, the
yield of each of these Funds is calculated by dividing the net investment income
per share (as described below) earned by the Fund during a 30-day (or one month)
period by the maximum offering price per share on the last day of the period and
annualizing the result on a semi-annual basis by adding one to the quotient,
raising the sum to the power of six, subtracting one from the result and then
doubling the difference. A Fund's net investment income per share earned during
the period is based on the average daily number of shares outstanding during the
period entitled to receive dividends and includes dividends and interest earned
during the period minus expenses accrued for the period, net of reimbursements.
This calculation can be expressed as follows:
6
YIELD = 2 [ ( a - b + 1) - 1 ]
cd
<TABLE>
<S> <C> <C>
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period that
were entitled to receive dividends.
d = maximum offering price per share on the last day of the period.
</TABLE>
For the purpose of determining net investment income earned during the period
(variable "a" in the formula), dividend income on equity securities held by a
Fund is recognized by accruing 1/360 of the stated dividend rate of the security
each day that the security is in the Fund. Except as noted below, interest
earned on any debt obligations held by a Fund is calculated by computing the
yield to maturity of each obligation held by that Fund based on the market value
of the obligation (including actual accrued interest) at the close of business
on the last business day of the month, the purchase price (plus actual accrued
interest) and dividing the result by 360 and multiplying the quotient by the
market value of the obligation (including actual accrued interest) in order to
determine the interest income on the obligation for each day of the subsequent
month that the obligation is held by that Fund. For purposes of this
calculation, it is assumed that each month contains thirty days. The date on
which the obligation reasonably may be expected to be called or, if none, the
maturity date. With respect to debt obligations purchased at a discount or
premium, the formula generally calls for amortization of the discount premium.
The amortization schedule will be adjusted monthly to reflect changes in the
market values of such debt obligations.
Expenses accrued for the period (variable "b" in the formula) include all
recurring fees charged by a Fund to all shareholder accounts in proportion to
the length of the base period and the Fund's mean (or median) account size.
Undeclared earned income will be subtracted from the offering price per capital
share (variable "d" in the formula).
With respect to the Tax Exempt Bond Fund, interest earned on tax-exempt
obligations that are issued without original issue discount and have a current
market discount is calculated by using the coupon rate of interest instead of
the yield to maturity. In the case of tax-exempt obligations that are issued
with original issue discount but which have discounts based on current market
value that exceed the then-remaining portion of the original discount (market
discount), the yield to maturity is the imputed rate based on the original issue
discount calculation. On the other hand, in the case of tax-exempt obligations
that are issued with original issue discount but which have discounts based on
current market value that are less than the then-remaining portion of the
original discount (market premium), the yield to maturity is based on the market
value.
With regard to mortgage or other receivables-backed obligations which are
expected to be subject to monthly payments of principal and interest
("pay-downs"): (i) gain or loss attributable to actual monthly pay-downs are
accounted for as an increase or decrease to interest income during the period;
and (ii) a Fund may elect either (a) to amortize the discount and premium on the
remaining security, based on the cost of the security, to the weighted average
maturity date, if such information is available, or to the remaining term of the
security, if any, if the weighted average date is not available or (b) not to
amortize discount or premium on the remaining security.
Tax-Equivalent Yield Calculations
With respect to the Tax Exempt Bond Fund, the "tax-equivalent yield" of this
Fund is computed by (a) dividing the portion of the yield (calculated as above)
that is exempt from Federal income tax by one minus a stated Federal income tax
rate and (b) adding to that figure to that portion, if any, of the yield that is
not exempt from Federal income tax.
The tax equivalent yield reflects the taxable yield that an investor at the
highest marginal Federal income tax rate would have to receive to equal the
primarily tax-exempt yield from the Fund. Before investing in a tax-exempt fund,
you may want to determine which investment -- tax-free or taxable -- will result
in a higher after-tax yield. To do this, divide the yield on the tax-free
investment by the decimal determined by subtracting from 1 the highest Federal
tax rate you pay. For example, if the tax-free yield is 5% and your maximum tax
bracket is 36%, the computation is:
5% Tax-Free Yield - (1/.36 Tax Rate) = 5%/.64% = 7.8125% Tax Equivalent Yield
In this example, your after-tax return would be higher from the 5% tax-free
investment if available taxable yields are below 7.8125%. Conversely, the
taxable investment would provide a higher yield when taxable yields exceed
7.8125%.
7-day Yield Calculations
The Money Market Fund's standard yield quotations as they appear in reports and
other material distributed by the Fund or by Country Capital Management Company
are calculated by a standard method prescribed by rules of the Securities and
Exchange Commission. The yield of this Fund for a 7-day period (the "base
period") will be computed by determining the net change in value (calculated as
set forth below) of a hypothetical account having a balance of one share at the
beginning of the period, dividing the net change in account value by the value
of the account at the beginning of the base period to obtain the base period
return, and multiplying the base period return by 365/7 with the resulting yield
figure carried to the nearest hundredth of one percent.
Net changes in value of a hypothetical account will include the value of
additional shares purchased with dividends from the original share and dividends
declared on both the original share and any such additional shares, but will not
include realized gains or losses or unrealized appreciation or depreciation on
portfolio investments.
The effective yield is computed by compounding the unannualized base period
return by adding 1 to the base period return, raising the sum to a power equal
to 365 divided by 7, and subtracting one from the result, according to the
following formula:
Effective Yield = [(base period return + 1) 365/7]-1
THE GROWTH FUND:
This Fund's net asset value and return will fluctuate. Please note the
differences and similarities between the investments which the Fund may purchase
for its portfolio and the investments measured by the index which is described
in the Prospectus. Where applicable, the Fund's return has been adjusted to
reflect the maximum sales charge of 3.00%, which results in lower performance
than would have been obtained if the sales charge wasn't considered. Please
refer to the Prospectus for specific information.
THE ASSET ALLOCATION FUND:
This Fund's net asset value, return, and yield will fluctuate. The Fund's yield
for the thirty days ended June 30, 1995 was 2.87 %. Yield differs from total
return in that it only considers current income and does not take into account
gains or losses on securities held by the Fund. Where applicable, the Fund's
return and yield have been adjusted to reflect the maximum sales charge of
3.00%, which results in lower performance than would have been obtained if the
sales charge wasn't considered.
Please refer to the Prospectus for specific information.
THE TAX EXEMPT BOND FUND:
This Fund's net asset value, return, and yield will fluctuate. The Fund's yield
for the thirty days ended June 30, 1995 was 4.35%. Yield differs from
total return in that it only considers current income and does not take into
account gains or losses on securities held by the Fund. Where applicable, the
Fund's return and yield have been adjusted to reflect the maximum sales charge
of 3.00%, which results in lower performance than would have been obtained if
the sales charge wasn't considered.
Please refer to the Prospectus for specific information.
The above yield results in a tax-equivalent yield of 6.80% for the thirty
days ended June 30, 1995.
THE MONEY MARKET FUND:
The yield and effective yield of this Fund will vary in response to fluctuations
in interest rates and in the expenses of the Fund. For the seven days ended June
30, 1995 the Fund's annualized standard (cash) yield was 5.19% and its
annualized effective (compound) yield was 5.33%. For comparative purposes,
the current and effective yields should be compared to current and effective
yields offered by competing financial institutions for the same base period and
calculated by the methods described above.
<PAGE>
APPENDIX
Commercial Paper Ratings
Moody's Investors Service, Inc.: "Prime-1" and "Prime-2" are Moody's two
highest commercial paper rating categories. Moody's evaluates the salient
features that affect a commercial paper issuer's financial and competitive
position. The appraisal includes, but is not limited to the review of such
factors as:
1. Quality of management.
2. Industry strengths and risks.
3. Vulnerability to business cycles.
4. Competitive position.
5. Liquidity measurements.
6. Debt structures.
7. Operating trends and access to capital markets.
Differing degrees of weight are applied to the above factors as deemed
appropriate for individual situations.
Standard & Poor's Corporation: "A-1" and "A-2" are S&P's two highest
commercial paper rating categories and issuers rated in these categories
have the following characteristics:
1. Liquidity ratios are adequate to meet cash requirements.
2. Long-term senior debt is rated "A" or better.
3. The issuer has access to at least two additional channels of borrowing.
4. Basic earnings and cash flow have an upward trend with allowance made
for unusual circumstances.
5. Typically, the issuer is in a strong position in a well-established
industry or industries.
6. The reliability and quality of management is unquestioned.
Relative strength or weakness of the above characteristics determine whether
an issuer's paper is rated "A-1" or "A-2". Additionally, within the "A-1"
designation, those issues determined to possess overwhelming safety
characteristics are denoted with a plus (+) rating category.
Bond Ratings
Standard and Poor's Corporation: An S&P bond rating is a current assessment
of the creditworthiness of an obligor with respect to a specific debt
obligation. This assessment may take into consideration obligors such as
guarantors, insurers or lessees.
The bond ratings are not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or suitability
for a particular investor.
The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable. S&P does not
perform any audit in connection with any ratings and may, on occasion, rely
on unaudited financial information. The ratings may be changed, suspended or
withdrawn as a result of changes in, or unavailability of, such information,
or for other circumstances.
The ratings are based, in varying degrees, on the following considerations:
I. Likelihood of default-capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in
accordance with the terms of the obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or other arrangement under the
laws of bankruptcy and other laws affecting creditor's rights.
The four highest bond ratings of S&P and their meanings are:
"AAA" Bonds rated "AAA" have the highest rating assigned by S&P to a debt
obligation. Capacity to pay interest and repay principal is extremely
strong.
"AA" Bonds rated "AA" have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in
small degree.
"A" Bonds rated "A" have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
bonds in higher rated categories.
"BBB" Bonds rated "BBB" are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than for
bonds in higher rated categories.
Plus (+) or Minus (-): The ratings from "AA" to "BB" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
Provisional Ratings The letter "p" indicates that the rating is provisional. A
provisional ratings assumes the successful completion of the project being
financed by the bonds being rated and indicate that payment of debt service
requirements is largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, while addressing credit
quality subsequent to completion of the project, makes no comment on the
likelihood of, or the risk of default upon failure of, such completion. The
investor should exercise his own judgement with respect to such likelihood and
risk.
Under present commercial bank regulations issued by the Comptroller of the
Currency, bonds rated in the top four categories ("AAA", "AA", "A", and "BBB",
commonly known as "Investment Grade" ratings) are generally regarded as
eligible for bank investment.
<PAGE>
Moody's Investors Service, Inc.: The four highest ratings of Moody's and their
meanings are:
"Aaa" Bonds which are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edge". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
"Aa" Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are
generally known as high grade bonds. They are rated lower then the best
bonds because margins of protection may not be as large as in "Aaa"
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long-
term risks appear somewhat larger than in "Aaa" securities.
"A" Bonds which are rated "A" possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
"Baa" Bonds which are rated "Baa" are considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
<PAGE>
Descriptions of Short-Term Instruments
Obligations of the U.S. Government, its Agencies and Instrumentalities:
Securities issued or guaranteed by the U.S. Government include a variety of
Treasury securities, which differ only in their interest rate, maturity and
date of issuance. Treasury bills have a maturity of one year or less.
Treasury notes have a maturity of one to ten years and Treasury bonds
generally have maturities of greater than ten years at the date of issuance.
Some obligations of U.S. Government agencies and instrumentalities such as
Treasury bills and Government National Mortgage Association pass-through
certificates, are supported by the full faith and credit of the U.S.
Treasury; others, such as securities of Federal Loan Banks, have the right
of the issuer to borrow from the Treasury; and still others, such as bonds
issued by Federal National Mortgage Association, a private corporation, are
supported only by the credit of the instrumentalities. No assurance can be
given that the U.S. Government would provide financial support to U.S.
Government instrumentalities as it is not obligated to do so by law.
Certificates of Deposit:
In essence, a certificate of deposit is a negotiable receipt issued by a
bank or savings and loan association in exchange for the deposit of funds.
The issuer agrees to pay the amount deposited plus interest to the bearer of
the receipt on the date specified on the certificate.
Bankers' Acceptances:
A bankers' acceptance generally arises from a short-term credit arrangement
designed to enable businesses to obtain funds to finance commercial
transactions. Generally, an acceptance is a time draft drawn on a bank by an
exporter or an importer to obtain a stated amount of funds to pay for
specific merchandise. The draft is then "accepted" by the bank that, in
effect, unconditionally guarantees to pay the face value of the instrument
on its maturity date.
Commercial Paper:
Commercial paper is generally defined as unsecured short-term notes issued
in bearer form by large, well-known corporations and finance companies.
Maturities on commercial paper range from a few days to nine months.
Repurchase Agreements:
Repurchase agreements are transactions in which a Fund purchases a security
(usually a U.S. Government obligation) and simultaneously obtains the
commitment of the seller (a member bank of the Federal Reserve System) to
repurchase the security at an agreed upon price on an agreed upon date
usually not more than seven days from the date of purchase. The resale price
reflects the purchase price plus an agreed upon market rate of interest
which is unrelated to the coupon rate or maturity of the purchased security.
Such transactions afford an opportunity for a Fund to earn a return on cash
which is only temporarily available. The Fund's risk is limited to the
ability of the seller to pay the agreed upon sum upon the delivery date, but
the seller's obligation is in effect secured by the value of the underlying
security. With respect to the Money Market Fund, repurchase agreements of
over seven day's duration will not be more than 10% of the assets of such
Fund.
Foreign Securities Risks
Foreign securities involve investment risk in addition to those of domestic
obligations of domestic issuers, including the possibility that: liquidity can
be impaired because of future political and economic developments; the
obligations may be less marketable than comparable domestic obligations of
domestic issuers; a foreign jurisdiction might impose withholding taxes or
interest income payable on these obligations; deposits may be seized or
nationalized; foreign governmental restrictions such as exchange controls may
be adopted which might adversely affect the payment of principal and interest
on those obligations; the selection of foreign bank obligations might be more
difficult because there may be less publicly available information concerning
foreign banks; there may be difficulties in obtaining or enforcing a judgement
against a foreign bank; or the accounting, auditing and financial reporting
standards, practices and requirements applicable to foreign banks may differ
from those applicable to U.S. banks. Foreign banks are not subject to
examination by any U.S. Government agency or instrumentality.
IAA Trust Mutual Funds - Portfolio Highlights
IAA Trust Growth Fund, Inc.
Portfolio Changes For the Year Ended June 30, 1995
<TABLE>
<CAPTION>
Major Purchases Major Sales
<S> <C>
American Stores Co. (1) Adaptec, Inc. (2)
Engelhard Corp. (1) Burlington Resources, Inc. (2)
Green Tree Financial Corp. (1) Intel Corp.
Mylan Labs Fleetwood Enterprises (2)
NICOR, Inc. (1) TNT Freightways, Inc. (2)
Royal Dutch Petroleum Co. ADR (1) VLSI Technology (2)
VeriFone, Inc. (1) YPF-Sociedad Anonima (2)
(1) New Holdings (2) Deletions
</TABLE>
<TABLE>
<CAPTION>
Ten Largest Holdings June 30, 1995
Percent
Value of Fund
----- -------
<S> <C> <C>
Motorola, Inc. . . . . . . . . . . . $ 2,685,000 3.80%
Intel Corp. . . . . . . . . . . . . 2,532,500 3.59
General Electric Co. . . . . . . . . 2,255,000 3.20
Green Tree Financial Corp. . . . . . 1,775,000 2.52
Hewlett-Packard Co. . . . . . . . 1,758,200 2.49
MBNA Corp. . . . . . . . . . . . . . 1,687,500 2.39
DPL, Inc. . . . . . . . . . . . . 1,659,375 2.35
Cisco Systems. . . . . . . . . . . . 1,618,000 2.29
Sun Microsystems . . . . . . . . . . 1,600,500 2.27
Exxon Corp. . . . . . . . . . . . . 1,589,062 2.25
----------- -----
$19,160,137 27.15%
=========== =====
</TABLE>
IAA Trust Asset Allocation Fund, Inc.
Portfolio Changes For the Year Ended June 30, 1995
<TABLE>
<CAPTION>
Major Purchases Major Sales
<S> <C>
Federal Home Loan Bank, 8.000%, 9/20/04 (1) New England Telephone Co. (2)
United States Treasury Notes, 6.875%, 7/31/99 (1) 7.875%, 11/15/29
United States Treasury Notes, 7.250%, 8/15/04 (1) United States Treasury Bonds.(2)
Federal Farm Credit Bank (1) 8.875%, 8/15/17
5.800%, 12/18/00 Medtronic, Inc. (2)
Invacare, Corp. (1) Pitney Bowes (2)
Xerox Corporation (1) General Motors Corp.(2)
Harley-Davidson, Inc. (1) Cott Corp. (2)
(1) New Holdings (2) Deletions
</TABLE>
Ten Largest Holdings June 30, 1995
<TABLE>
<CAPTION>
Percent
Value of Fund
----- -------
<S> <C> <C>
International American Devel. Bank, 8.875%, 06/01/09 . . . . . $ 242,000 2.54%
Bell of Pennsylvania, 8.350%, 12/15/30 . . . . . . . . . . . 238,000 2.50
Chesapeake & Potomac Telephone Co., 8.375%, 10/01/29 . . . . . 226,250 2.37
United States Treasury Notes, 7.250%, 05/15/04 . . . . . . . . 213,716 2.24
Discover Credit Card Trust, 6.750%, 02/16/02 . . . . . . . . . 200,625 2.10
United States Treasury Notes, 5.875%, 03/31/99 . . . . . . . . 199,546 2.09
United States Treasury Notes, 4.750%, 02/15/97 . . . . . . . . 196,700 2.06
Government National Mortgage Association, 9.000%, 07/15/16. . . 176,406 1.85
Citicorp . . . . . . . . . . . . . . . . . . . . . . . . . . . 170,731 1.79
New Jersey Bell Telephone Co., 7.850%, 11/15/29. . . . . . . . 163,125 1.71
---------- -----
$2,027,099 21.25%
========== =====
</TABLE>
<PAGE>
IAA Trust Mutual Funds - Portfolio Highlights
IAA Trust Tax Exempt Bond Fund, Inc.
Portfolio Changes For the Year Ended June 30, 1995
<TABLE>
<CAPTION>
Major Purchases Major Sales
<S> <C>
Penna. State Higher Education (1) State of Washington Unlimited (2)
5.600%, 09/01/10 6.375%, 02/01/14
Louisville & Jefferson Co. Met. Sewer (1) Plano Texas Water and Sewer (2)
5.250%, 05/15/10 6.950%, 05/01/01
Connecticut State Unlimited Tax (1) Brazos River Authority (2)
5.400%, 03/15/08 5.500%, 05/01/22
Massachusetts Bay Transit Authority (1) Weber County Utah Mun. Bldg. (2)
5.875%, 03/01/15 7.150%, 06/01/03
Joliet Illinois Refunding (2)
7.125%, 01/01/02
(1) New Holdings (2) Deletions
</TABLE>
Ten Largest Holdings June 30, 1995
<TABLE>
<CAPTION>
Percent
Value of Fund
----- -------
<S> <C> <C>
Peru Indiana Community School, 6.750%, 01/01/09 .............................................. $ 578,875 3.07%
Cape Girardeau Missouri Waterworks, 7.450%, 03/01/05 .......................................... 569,375 3.02
State of Rhode Island Ref. General Obligation, 7.000%, 06/15/05 .............................. 569,375 3.02
Pennsylvania State Higher Education, 5.600%, 09/01/10 ........................................ 563,500 2.99
Washington Public Power Supply, 7.625%, 07/01/01 .............................................. 559,375 2.97
Kaukauna Wisconsin Electric System, 7.250%, 12/15/08 .......................................... 548,750 2.91
Connecticut State Unlimited Tax General Obligation, 5.400%, 03/15/08 .......................... 543,125 2.89
Maricopa County School Dist.Arizona Unlimited , 6.400%, 07/01/06 .............................. 543,125 2.89
Louisville & Jefferson County, Met. Sewer Dist. Rev.,5.250% 05/15/10 .......................... 542,656 2.89
Chicago, Illinois Water Revenue, 6.500%, 11/01/15 ............................................ 533,125 2.83
------- ----
$5,551,281 29.48%
========== ======
</TABLE>
IAA Trust Money Market Fund, Inc.
Ten Largest Holdings June 30, 1995
<TABLE>
<CAPTION>
Percent
Value of Fund
----- -------
<S> <C> <C>
Commercial Credit Co., 5.96%, 08/07/95 ......................................................... $ 1,500,000 4.12%
Waste Management, Inc., 6.30%, 08/09/95 ....................................................... 1,489,763 4.09
Household Finance Corp., 6.11%, 07/06/95 ....................................................... 1,079,000 2.96
Norwest Corp., 5.85%, 08/29/95 ................................................................. 1,015,000 2.79
Chevron Oil Finance Co., 5.97%, 07/05/95 ....................................................... 950,000 2.61
American Express Credit Corp., 5.99%, 07/20/95 ................................................. 950,000 2.61
Transamerica Financial Corp., 6.02%, 07/18/95 ................................................. 942,314 2.59
Texaco, Inc., 5.89%, 07/27/95 ................................................................. 909,000 2.50
American General Finance Corp., 6.21%, 07/31/95 ............................................... 900,000 2.47
AVCO Financial Services, Inc., 6.07%, 08/21/95 ................................................. 900,000 2.47
------- ----
$10,635,077 29.21%
=========== ======
</TABLE>
Portfolio Characteristics June 30, 1995
30 Day Average Yield: 5.20%
7 Day Average Yield: 5.19%
Average Days to Maturity: 39.27
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Boards of Directors
IAA Trust Mutual Funds
We have audited the accompanying statements of assets and liabilities,
including the schedule of investments of the IAA Trust Mutual Funds (the
"Funds") (comprising, respectively, the IAA Trust Growth Fund, Inc., the IAA
Trust Asset Allocation Fund, Inc., the IAA Trust Tax Exempt Bond Fund, Inc.
and the IAA Trust Money Market Fund, Inc.) as of June 30, 1995, and the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods presented. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation and physical
inspection of securities held by the custodian as of June 30, 1995. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective Funds comprising the IAA Trust Mutual Funds as of June
30, 1995, the results of their operations for the year then ended, the changes
in their net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods presented, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, PA
July 28, 1995
<PAGE>
IAA Trust Mutual Funds - Schedule of Investments June 30, 1995
- ---------------------------------------------------------------
IAA Trust Growth Fund, Inc.
<TABLE>
<CAPTION>
Shares Value
------ -----------
<S> <C> <C>
COMMON STOCKS - 82.41%
Beverages - 1.62%
PepsiCo, Inc. ................ 25,000 $ 1,140,625
-----------
Chemicals/Basic - 3.24%
Engelhard Corp. .............. 32,000 1,372,000
Minnesota Mining &
Manufacturing ............... 16,000 916,000
-----------
2,288,000
-----------
Climate Control
Systems - 1.91%
York International, Inc. ..... 30,000 1,350,000
-----------
Computer Peripheral
Equipment - 6.17%
Cisco Systems*................ 32,000 1,618,000
Hewlett-Packard Co. .......... 23,600 1,758,200
VeriFone, Inc.* .............. 40,000 980,000
-----------
4,356,200
-----------
Computer Services - 4.36%
First Data Corp. ............. 26,000 1,478,750
Sun Microsystems*............. 33,000 1,600,500
-----------
3,079,250
-----------
Consumer Products - 1.26%
Rubbermaid, Inc. ............. 32,000 888,000
-----------
Electrical Equipment - 3.19%
General Electric Co. ......... 40,000 2,255,000
-----------
Electronics/
Instrumentation - 3.80%
Motorola, Inc. ............... 40,000 2,685,000
-----------
Electric Utility - 2.35%
DPL, Inc. .................... 75,000 1,659,375
-----------
Entertainment - 1.31%
Acclaim Entertainment, Inc.*.. 50,000 921,875
-----------
Food Products - 1.58%
Archer-Daniels-Midland Corp. . 60,000 1,117,500
-----------
Financial Services - 5.98%
Federal National Mortgage
Assoc. ...................... 8,000 755,000
Green Tree Financial Corp. ... 40,000 1,775,000
MBNA Corp. ................... 50,000 1,687,500
-----------
4,217,500
-----------
Hospital & Medical Service
Plans - 0.65%
US Healthcare, Inc. .......... 15,000 459,375
-----------
Household Products - 1.29%
Unilever N.V. ................ 7,000 910,875
-----------
Insurance - 3.47%
American International Group.. 10,000 1,140,000
Travelers Group, Inc. ........ 30,000 1,312,500
-----------
2,452,500
-----------
Machinery & Equipment - 0.60%
Hardinge, Inc. ............... 22,000 420,750
-----------
Medical Supplies - 1.92%
Johnson & Johnson............. 20,000 $ 1,352,500
-----------
Metals & Mining - 1.19%
Newmont Mining Corp. ......... 20,000 837,500
-----------
Miscellaneous Chemical
Products - 1.25%
Lubrizol Corp. ............... 25,000 884,375
-----------
Motor Vehicle Mfr. &
Parts - 1.26%
Ford Motor Co. ............... 30,000 892,500
-----------
Natural Gas Production
Transmission - 2.12%
NICOR, Inc. .................. 35,000 940,625
Unocal Corp. ................. 20,000 552,500
-----------
1,493,125
-----------
Paper & Allied
Products - 1.67%
Weyerhaeuser Co. ............. 25,000 1,178,125
-----------
Petroleum/Integrated - 7.87%
Chevron Corp. ................ 25,000 1,165,625
Exxon Corp. .................. 22,500 1,589,062
Phillips Petroleum............ 40,000 1,335,000
Royal Dutch Petroleum Co. ADR. 12,000 1,462,500
-----------
5,552,187
-----------
Pharmaceuticals - 5.56%
Elan Corp., PLC*.............. 30,000 1,222,500
Merck & Co. .................. 25,000 1,225,000
Mylan Labs.................... 48,000 1,476,000
-----------
3,923,500
-----------
Railroad - 1.35%
Burlington Northern Corp. .... 15,000 950,625
-----------
Retail - 6.85%
American Stores Co. ......... 30,000 843,750
Best Buy Co., Inc.* .......... 15,500 412,688
Pep Boys...................... 40,000 1,070,000
Toys-R-Us, Inc.*.............. 40,000 1,170,000
Wal-Mart Stores............... 50,000 1,337,500
-----------
4,833,938
-----------
Semiconductors & Related
Devices - 3.59%
Intel Corp. .................. 40,000 2,532,500
-----------
Steel Production - 0.76%
Nucor Corp. .................. 10,000 535,000
-----------
Telephone Utility - 4.24%
American Telephone and
Telegraph.................... 28,000 1,487,500
GTE Corp. .................... 44,000 1,501,500
-----------
2,989,000
-----------
TOTAL COMMON STOCKS
(cost $38,641,469).......... 58,156,700
-----------
</TABLE>
<PAGE>
IAA Trust Mutual Funds - Schedule of Investments June 30, 1995
- ---------------------------------------------------------------
IAA Trust Growth Fund, Inc. (continued)
<TABLE>
<CAPTION>
Principal
Amount Value
---------- -----------
<S> <C> <C>
COMMERCIAL PAPER - 15.12%
John Deere Capital Corp.
6.11%, 07/06/95............. $ 747,000 $ 747,000
Prudential Funding Corp.
5.99%, 07/10/95............. 752,000 752,000
IBM Credit Corp.
5.98%, 07/11/95............. 1,181,000 1,181,000
PHH Corp.
5.95%, 07/12/95............. 1,021,680 1,019,822
Associates Corp. of N. America
5.99%, 07/13/95............. 974,000 974,000
Heller Financial, Inc.
6.01%, 07/24/95............. 782,000 782,000
Province of Quebec
6.18%, 07/24/95............ 500,000 498,026
Heller Financial, Inc.
6.01%, 07/31/95............. 638,760 638,760
Commercial Credit Corp.
5.97%, 08/02/95............. 235,000 235,000
AVCO Financial Services, Inc.
6.01%, 08/07/95............ 359,798 357,576
Prudential Funding Corp.
5.99%, 08/08/95............. 1,413,000 1,413,000
AVCO Financial Services, Inc.
5.93%, 08/15/95............. $ 375,000 $ 375,000
Ford Motor Credit Co.
5.98%, 08/24/95............. 909,000 909,000
Associates Corp. of N. America
5.93%, 08/30/95............. 790,000 790,000
-----------
TOTAL COMMERCIAL PAPER
(cost $10,672,184).......... 10,672,184
-----------
OTHER SHORT-TERM
INVESTMENTS - 2.18%
Money Market Funds
(cost $1,538,242)
Federated Prime Obligation
Fund, 5.93% ................. 1,538,242 1,538,242
-----------
TOTAL INVESTMENTS - 99.71%
(cost $50,851,895).......... 70,367,126
-----------
CASH AND OTHER ASSETS
NET OF LIABILITIES - 0.29%.. 209,978
-----------
NET ASSETS - 100.00%.......... $70,577,104
===========
</TABLE>
* Non-income producing
See notes to financial statements
<PAGE>
IAA Trust Mutual Funds - Schedule of Investments June 30, 1995
- ----------------------------------------------------------------
IAA Trust Asset Allocation Fund, Inc.
<TABLE>
<CAPTION>
Principal
Amount Value
--------- --------
<S> <C> <C>
BONDS AND NOTES - 34.62%
Auto - 1.21%
General Motors Acceptance Corp.
8.875%, 06/01/10............ $100,000 $ 115,875
----------
Banking - 3.66%
International American Development Bank
9.500%, 10/15/97............ 100,000 106,750
International American Development Bank
8.875%, 06/01/09............ 200,000 242,000
----------
348,750
----------
Beverages - 1.07%
Coca-Cola Company
6.625%, 10/01/02............ 100,000 101,875
----------
Chemicals - 1.06%
E.I. DuPont DeNemours & Company
6.750%, 10/15/02............ 100,000 101,250
----------
Finance Companies - 2.92%
Discover Card Credit Trust
6.750%, 02/16/02............ 200,000 200,625
Thrift Financial Corp.
8.550%, 05/20/18............ 74,906 77,628
----------
278,253
----------
Telephone Utility - 6.58%
Bell of Pennsylvania
Putable Debentures
8.350%, 12/15/30............ 200,000 238,000
New Jersey Bell Telephone Company
7.850%, 11/15/29............ 150,000 163,125
Chesapeake & Potomac Telephone
Company of Virginia Debentures
8.375%, 10/01/29........... 200,000 226,250
----------
627,375
----------
U.S. Government Agencies - 5.96%
Federal Farm Credit Bank
5.800%, 12/18/00............ 100,000 96,511
Federal Home Loan Bank
8.000%, 09/20/04............ 100,000 101,421
Federal Home Loan Mortgage Corp.
10.750%, 07/01/00........... 7,835 7,835
Federal Home Loan Mortgage Corp.
8.750%, 04/01/01............ 66,610 68,858
Federal Home Loan Mortgage Corp.
10.150%, 04/15/06........... 44,013 45,444
Government National Mortgage
Association Pool #60721
9.750%, 04/15/98............ 6,019 6,403
Government National Mortgage
Association Pool #30111
9.000%, 05/15/09............ 27,848 29,284
Government National Mortgage
Association Pool #23653
9.500%, 06/15/09............ 17,207 18,266
Government National Mortgage
Association Pool #32147
9.500%, 08/15/09............ 17,099 18,151
Government National Mortgage
Association Pool #161621
9.000%, 07/15/16............ 167,756 176,406
----------
568,579
----------
U.S. Government Obligations - 12.16%
United States Treasury Notes
4.750%, 02/15/97............ 200,000 196,700
United States Treasury Notes
6.000%, 12/31/97............ 100,000 100,320
United States Treasury Notes
5.875%, 03/31/99............ 200,000 199,546
United States Treasury Notes
6.750%, 06/30/99 ........... 100,000 102,733
United States Treasury Notes
6.875%, 07/31/99 ........... 100,000 103,117
United States Treasury Notes
7.250%, 05/15/04............ 200,000 213,716
United States Treasury Notes
7.250%, 08/15/04 ........... 100,000 106,932
United States Treasury Bonds
11.625%, 11/15/04 .......... 100,000 137,487
----------
1,160,551
----------
TOTAL BONDS AND NOTES
(cost $3,082,642)........... 3,302,508
----------
<CAPTION>
Shares Value
--------- --------
COMMON STOCKS - 51.78%
Aerospace/Defense - 0.89%
Raytheon...................... 1,100 85,388
----------
Auto/Auto Parts - 1.28%
Chrysler Corp. ............... 1,000 47,875
Ford Motor Co. ............... 1,000 29,750
Magna International, Inc.,
Cl. A .................... 1,000 44,125
----------
121,750
----------
Air Courier Services - 0.89%
Federal Express Corp.*........ 1,400 85,050
----------
Banks - 4.00%
BankAmerica Corp. ............ 1,000 52,625
Bank of New York.............. 1,500 60,562
Citicorp...................... 2,950 170,731
Norwest Corp. ................ 3,400 97,750
----------
381,668
----------
Beverages - 1.34%
Coca-Cola Company............. 2,000 127,500
----------
Construction and Engineering-0.82%
Fluor Corp. .................. 1,500 78,000
----------
Construction Machinery - 1.08%
Caterpillar, Inc. ............ 1,600 102,800
----------
Consumer Products - 4.02%
Department 56, Inc. .......... 1,900 72,675
Gillette Co. ................. 2,000 89,250
Procter & Gamble.............. 2,000 143,750
Wolverine World Wide.......... 3,750 77,812
----------
383,487
----------
Electric Utility - 1.92%
Cilcorp, Inc. ................ 1,200 43,650
Florida Progress Corp. ....... 1,200 37,500
Texas Utilities, Inc. ........ 1,000 34,375
Wisconsin Energy Corp. ....... 2,400 67,200
----------
182,725
----------
</TABLE>
<PAGE>
IAA Trust Mutual Funds - Schedule of Investments June 30, 1995
- ----------------------------------------------------------------
IAA Trust Asset Allocation Fund, Inc. (continued)
<TABLE>
<CAPTION>
Shares Value
--------- --------
<S> <C> <C>
COMMON STOCKS (continued)
Electronics - 3.06%
General Electric Co. ......... 1,200 $ 67,650
Phillips N.V ................. 2,950 126,113
Tektronix, Inc. .............. 2,000 98,500
----------
292,263
----------
Energy - 5.45%
Atlantic Richfield Co. ....... 700 76,825
Exxon Corp. .................. 2,000 141,250
Repsol S.A., ADR ............. 2,100 66,412
Schlumberger, Ltd. ........... 1,300 80,763
Williams Companies............ 2,800 97,650
YPF Sociedad Anonima, ADS ... 3,000 56,625
----------
519,525
----------
Financial Services - 0.79%
Travelers Group, Inc. ........ 1,733 75,819
----------
Healthcare - 6.67%
Bristol-Myers Squibb Co. ..... 1,000 68,125
Columbia/HCA Healthcare....... 2,700 116,775
Elan Corp., PLC* ............. 2,000 81,500
Invacare Corp. ............... 2,000 83,000
Johnson & Johnson............. 2,200 148,775
Mylan Labs.................... 2,000 61,500
US Healthcare, Inc. .......... 2,500 76,562
----------
636,237
----------
Household Appliances - 0.29%
Whirlpool Corp. .............. 500 $27,500
----------
Manufacturing - 0.90%
Minnesota Mining & Manufacturing 1,500 85,875
----------
Motor Homes - 0.70%
Fleetwood Enterprises......... 3,400 67,150
----------
Motorcycles - 0.79%
Harley-Davidson, Inc. ........ 3,100 75,562
----------
Newspapers - Publishing - 0.64%
Tribune Co. .................. 1,000 61,375
----------
Office Equipment - 0.86%
Xerox Corporation............. 700 82,075
----------
Paper & Allied Products - 1.24%
Mead Corp. ................... 1,200 71,250
Weyerhaeuser Co. ............. 1,000 47,125
----------
118,375
----------
Real Estate - 1.16%
Meditrust .................... 1,700 58,013
National Golf Properties ..... 2,500 52,500
----------
110,513
----------
Retail - 3.94%
Albertson's, Inc. ............ 2,900 86,275
Best Buy Co., Inc.* .......... 1,400 37,275
Penney (J.C.) Co. ............ 1,500 72,000
Walgreen's.................... 2,000 100,250
Wal-Mart Stores, Inc. ........ 3,000 80,250
----------
376,050
----------
Technology - 6.15%
Intel Corp. ................. 2,000 126,625
Microsoft Corp.* ............. 1,000 90,375
Motorola, Inc. ............... 1,900 127,537
Oracle Corp. ................. 3,750 144,844
Sun Microsystems, Inc. ....... 2,000 97,000
----------
586,381
----------
Telecommunication Services - 0.45%
AirTouch Communications* ..... 1,500 42,750
----------
Telephone Utility - 1.59%
American Telephone & Telegraph 1,200 63,750
Bell South Corp. ............. 750 47,625
Pacific Telesis Group, Inc. .. 1,500 40,125
----------
151,500
----------
Tool Products - 0.86%
Illinois Tool Works........... 1,500 82,500
----------
TOTAL COMMON STOCKS
(cost $3,844,658)........... 4,939,818
----------
Principal
Amount Value
--------- --------
COMMERCIAL PAPER - 9.74%
Heller Financial, Inc.
6.013%, 07/24/95............ $250,000 250,000
Province of Quebec
6.180%, 07/24/95............ 100,000 99,605
AVCO Financial Services, Inc.
6.048%, 08/14/95............ 381,000 381,000
International Leasing Financial Corp.
5.900%, 08/22/95............ 200,000 198,296
----------
TOTAL COMMERCIAL PAPER
(cost $928,901)............. 928,901
----------
OTHER SHORT-TERM INVESTMENTS - 3.21%
Money Market Fund
(cost $306,360)
Federated Prime Obligation Fund,
5.93% ...................... 306,360 306,360
----------
TOTAL INVESTMENTS - 99.35%
(cost $8,162,561)........... 9,477,587
----------
CASH AND OTHER ASSETS
NET OF LIABILITIES - 0.65% . 62,242
----------
NET ASSETS - 100% ............ $9,539,829
==========
</TABLE>
* Non-income producing security
See notes to financial statements
<PAGE>
IAA Trust Mutual Funds - Schedule of Investments June 30, 1995
- ----------------------------------------------------------------
IAA Trust Tax Exempt Bond Fund, Inc.
<TABLE>
<CAPTION>
Principal
Amount Value
--------- -----
<S> <C> <C>
MUNICIPAL BONDS
(Tax Exempt)-96.97%
Arizona - 7.18%
Bullhead City Arizona Parkway Revenue
6.100%, 01/01/07...................... $250,000 $ 249,063
Gilbert School District #41
Maricopa County
General Obligation
12.000%, 07/01/98..................... 250,000 303,125
Maricopa County School District #93
Arizona Unlimited Tax
General Obligation
6.400%, 07/01/06...................... 500,000 543,125
Salt River Project Arizona Agriculture
Improvement & Power District Electric
System Revenue
5.625%, 01/01/06...................... 250,000 257,187
---------
1,352,500
---------
California - 6.37%
California State Public Works Board
Lease Revenue
5.200%, 12/01/09...................... 500,000 452,500
City of Fresno California
Sewer System Revenue
6.250%, 09/01/14...................... 250,000 255,938
Los Angeles California Wastewater
System Revenue
6.000%, 11/01/14...................... 500,000 491,875
---------
1,200,313
---------
Connecticut - 2.88%
Connecticut State Unlimited Tax
General Obligation
5.400%, 03/15/08...................... 550,000 543,125
---------
Florida - 2.68%
Port St. Lucie, Florida
Utility System Revenue
5.900%, 09/01/09...................... 500,000 505,000
---------
Illinois - 17.79%
Chicago, Illinois Water Revenue
6.500%, 11/01/15...................... 500,000 533,125
Chicago, Illinois O'Hare
International Airport Revenue
5.000%, 01/01/16...................... 500,000 427,500
Dupage Water Commission Illinois
General Obligation
5.750%, 03/01/11...................... 500,000 493,750
Illinois State Sales Tax Revenue
5.400%, 06/15/13...................... 550,000 513,562
Illinois State Toll Highway
Authority Revenue, Series A
6.300%, 01/01/12...................... 275,000 287,031
Northwest Suburban Municipal
Joint Action Water Agency
Illinois Contract Revenue
6.450%, 05/01/07...................... 400,000 430,000
Northwest Water Commission
Illinois, Cook & Lake Revenue
5.000%, 05/01/13...................... 500,000 449,375
Sangamon County Illinois Tax
General Obligation
6.500%, 03/01/08...................... 200,000 216,000
---------
3,350,343
---------
Indiana - 4.28%
Peru Indiana Community School
Corp. Revenue
6.750%, 01/01/09...................... $550,000 $578,875
South Vermillion Middle School
Building Corp. Revenue
5.125%, 07/15/13...................... 250,000 226,563
---------
805,438
---------
Kentucky - 2.88%
Louisville & Jefferson County
Met. Sewer Dist. Rev. Series A
5.250%, 05/15/10...................... 575,000 542,656
---------
Massachusetts - 5.37%
Massachusetts Bay Transit
Authority, Revenue Bonds, Series A
5.875%, 03/01/15...................... 500,000 498,125
Massachusetts State Water
Resource Authority Revenue
6.000%, 11/01/08...................... 500,000 512,500
---------
1,010,625
---------
Mississippi - 1.35%
Mississippi State Unlimited
General Obligation, Series B
5.900%, 11/15/11...................... 250,000 254,062
---------
Missouri - 3.02%
Cape Girardeau Missouri Waterworks
System Revenue
7.450%, 03/01/05...................... 500,000 569,375
---------
Nebraska - 1.58%
Grand Island Nebraska Sewer
Project Revenue
5.850%, 04/01/08...................... 200,000 201,500
Nebraska Public Power Dist. Revenue
5.400%, 01/01/10...................... 100,000 95,750
---------
297,250
---------
Nevada - 4.69%
Clark County Nevada School District
General Obligation
5.250%, 06/01/07...................... 500,000 487,500
Henderson Nevada Water and Sewer
Unlimited Tax General Obligation
5.375%, 06/01/07...................... 400,000 395,500
---------
883,000
---------
New York - 2.42%
New York State Dormitory Authority
Revenue
5.500%, 07/01/12...................... 500,000 456,250
---------
North Carolina - 1.43%
North Carolina East Municipal
Power Agency Power System Revenue
7.000%, 01/01/08...................... 250,000 268,438
---------
Ohio - 2.59%
Montgomery County, Ohio
Sewer System Revenue
5.600%, 09/01/11...................... 500,000 486,875
---------
Pennsylvania - 5.61%
Pennsylvania Intergovernmental Corp.
Authority, Special Tax Revenue
5.450%, 06/15/08...................... 500,000 493,125
</TABLE>
<PAGE>
IAA Trust Mutual Funds - Schedule of Investments June 30, 1995
- ----------------------------------------------------------------
IAA Trust Tax Exempt Bond Fund, Inc. (continued)
<TABLE>
<CAPTION>
Principal
Amount Value
--------- -----
<S> <C> <C>
MUNICIPAL BONDS (continued)
Pennsylvania State Higher Education
Revenue Bonds, Series A
5.600%, 09/01/10...................... $575,000 $ 563,500
-----------
1,056,625
-----------
Rhode Island - 3.02%
State of Rhode Island Refunding
General Obligation
7.000%, 06/15/05...................... 500,000 569,375
-----------
Texas - 6.59%
Austin Texas Limited Tax
General Obligation
7.250%, 09/01/03...................... 350,000 394,187
Bexar County, Texas,
Detention Facilities Limited Tax
General Obligation
5.750%, 06/15/10...................... 500,000 500,000
Garland Texas Limited Tax
General Obligation
5.800%, 08/15/12...................... 350,000 346,063
-----------
1,240,250
-----------
Washington - 6.74%
Public Utility District #1 of
Chelan County Washington Revenue
5.250%, 06/01/13...................... 500,000 442,500
Washington Public Power Supply
System, Nuclear Project #1,
Refunding Revenue, 1990-C
7.625%, 07/01/01...................... 500,000 559,375
Washington Public Power Supply
System Ref. Revenue Bonds, Series
1991-A, Project #3
6.500%, 07/01/02...................... 250,000 266,875
-----------
1,268,750
-----------
West Virginia - 2.12%
Pleasant County West Virginia
Pollution Control Revenue (West
Penn Power) Pleasants Station
7.000%, 08/01/08...................... $400,000 $ 400,000
-----------
Wisconsin - 6.38%
Brookfield Wisconsin Unlimited Tax
Corp. General Obligation
6.900%, 03/15/03...................... 250,000 279,063
Kaukauna Wisconsin Electric System
Revenue
7.250%, 12/15/08...................... 500,000 648,750
Wisconsin Clean Water
Revenue Bond
5.300%, 06/01/12...................... 400,000 374,000
-----------
1,201,813
-----------
TOTAL MUNICIPAL BONDS
(cost $18,489,481).................... 18,262,063
-----------
Shares Value
------ -----
TAX EXEMPT
MONEY MARKET FUNDS - 1.51%
(cost $285,036)
Nuveen Tax Exempt ...................... 285,036 285,036
-----------
TOTAL INVESTMENTS - 98.48%
(cost $18,774,517).................... 18,547,099
-----------
CASH AND OTHER ASSETS
NET OF LIABILITIES - 1.52%............. 285,447
-----------
NET ASSETS - 100%....................... $18,832,546
===========
</TABLE>
See notes to financial statements
<PAGE>
IAA Trust Mutual Funds - Schedule of Investments June 30, 1995
- ---------------------------------------------------------------
IAA Trust Money Market Fund, Inc.
<TABLE>
<CAPTION>
Principal
Amount Value
--------- --------
<S> <C> <C>
COMMERCIAL PAPER - 95.16%
Auto & Truck - 4.31%
Ford Motor Credit Co.
6.16%, 07/26/95.................. $826,000 $ 826,000
Ford Motor Credit Co.
5.92%, 08/02/95.................. 244,000 244,000
Ford Motor Credit Co.
6.03%, 08/02/95.................. 500,000 500,000
-----------
1,570,000
-----------
Commercial Banking - 5.76%
US Central Credit Union
5.95%, 07/17/95.................. 590,000 588,440
Norwest Corp.
5.90%, 08/23/95.................. 500,000 495,657
Norwest Corp.
5.85%, 08/29/95.................. 1,015,000 1,015,000
-----------
2,099,097
-----------
Commercial Finance - 8.80%
CIT Group, Inc.
5.92%, 09/05/95.................. 500,000 500,000
CIT Group, Inc.
5.93%, 09/06/95.................. 500,000 500,000
CIT Group, Inc.
5.83%, 09/11/95.................... 600,000 600,000
Heller Financial, Inc.
6.06%, 07/12/95.................. 592,000 592,000
Heller Financial, Inc.
6.15%, 07/17/95.................. 325,000 325,000
Heller Financial, Inc.
6.27%, 08/01/95.................. 690,000 690,000
-----------
3,207,000
-----------
Commercial Services - 1.31%
PHH Corp.
5.95%, 07/12/95.................. 478,320 477,451
-----------
Consumer Finance - 37.70%
American Express Credit Corp.
5.99%, 07/20/95.................. 950,000 950,000
American Express Credit Corp.
5.83%, 07/25/95.................. 296,000 296,000
American Express Credit Corp.
5.98%, 08/17/95................. 500,000 500,000
American General Finance Corp.
6.21%, 07/31/95.................. 900,000 900,000
American General Finance Corp.
5.95%, 08/28/95.................. 750,000 750,000
Associates Corp. of N. America
5.99%, 07/13/95.................. 700,000 700,000
Associates Corp. of N. America
5.93%, 08/30/95.................. 820,000 820,000
AVCO Financial Services, Inc.
6.01%, 08/07/95.................. 440,202 437,483
AVCO Financial Services, Inc.
6.05%, 08/14/95.................. 319,000 319,000
AVCO Financial Services, Inc.
6.07%, 08/21/95.................. 900,000 900,000
Beneficial Corp.
6.07%, 07/19/95.................. 600,000 600,000
Beneficial Corp.
6.12%, 08/22/95.................. 800,000 800,000
Commercial Credit Co.
5.97%, 08/02/95.................. 113,000 113,000
Commercial Credit Co.
5.96%, 08/07/95.................. 1,500,000 1,500,000
Household Finance Corp.
6.11%, 07/06/95.................. 1,079,000 1,079,000
Household Finance Corp.
5.93%, 08/15/95.................. 600,000 600,000
International Lease Finance Corp.
5.90%, 08/14/95.................. 307,000 304,786
International Lease Finance Corp.
5.90%, 08/22/95.................. 700,000 694,034
Prudential Funding Corp.
6.01%, 08/03/95.................... 750,340 750,340
Prudential Funding Corp.
5.99%, 08/08/95.................... 383,000 383,000
Prudential Funding Corp.
5.92%, 08/10/95.................... 330,000 330,000
-----------
13,726,643
-----------
Electronics - 4.19%
General Electric Capital Corp.
6.07%, 07/27/95.................. 400,000 400,000
General Electric Capital Corp.
5.93%, 08/15/95.................. 522,000 522,000
General Electric Capital Corp.
5.84%, 08/31/95.................. 602,000 602,000
-----------
1,524,000
-----------
Environmental Services - 4.09%
Waste Management, Inc.
6.30%, 08/09/95.................. 1,500,000 1,489,763
-----------
Farm Machinery & Equipment - 3.94%
John Deere Capital Corp.
6.01%, 07/25/95.................. 500,000 500,000
John Deere Capital Corp.
5.94%, 08/31/95.................. 435,000 435,000
John Deere Capital Corp.
5.83%, 09/13/95.................... 500,000 500,000
-----------
1,435,000
-----------
Food Products - 2.18%
Philip Morris Companies, Inc.
5.75%, 08/17/95.................. 800,000 793,994
-----------
Foreign Governments - 1.37%
Province of Quebec
6.18%, 07/24/95.................. 500,000 498,026
-----------
Insurance/Multi-Line - 4.61%
Transamerica Financial Corp.
6.02%, 07/18/95.................. 945,000 942,314
Transamerica Financial Corp.
6.02%, 10/16/95.................. 750,000 736,580
-----------
1,678,894
-----------
Office Equipment - 4.55%
IBM Credit Corp.
5.98%, 07/11/95.................. 856,000 856,000
</TABLE>
<PAGE>
IAA Trust Mutual Funds - Schedule of Investments June 30, 1995
- ---------------------------------------------------------------
IAA Trust Money Market Fund, Inc. (continued)
<TABLE>
<CAPTION>
Principal
Amount Value
--------- --------
<S> <C> <C>
COMMERCIAL PAPER - (continued)
IBM Credit Corp.
5.79%, 08/24/95.................. $500,000 $ 500,000
IBM Credit Corp.
5.91%, 09/07/95.................. 300,000 300,000
-----------
1,656,000
-----------
Pharmaceuticals - 0.57%
Schering-Plough Corp.
6.02%, 09/12/95.................. 210,000 207,436
-----------
Petroleum Refining - 8.83%
Chevron Oil Finance Co.
5.97%, 07/05/95.................. 950,000 950,000
Chevron Oil Finance Co.
5.93%, 08/16/95.................. 615,000 615,000
Texaco, Inc.
5.98%, 07/11/95.................. 435,000 435,000
Texaco, Inc.
5.89%, 07/27/95.................. 909,000 909,000
Texaco, Inc.
5.94%, 08/08/95.................... 305,000 305,000
-----------
3,214,000
-----------
Telephone/Utility - 2.95%
AT&T Corp.
6.13%, 07/10/95................... 600,000 599,080
AT&T Corp.
5.75%, 08/14/95................... 480,000 476,627
-----------
1,075,707
-----------
TOTAL COMMERCIAL PAPER
(cost $34,653,012) .............. 34,653,011
-----------
CORPORATE BONDS - 2.20%
U.S. Government Agencies
(cost $800,000)
Federal Home Loan Bank-
Variable rate (reset quarterly)
5.85%, 06/03/96.................. 800,000 800,000
-----------
OTHER SHORT-TERM INVESTMENTS - 2.11%
Money Market Funds
(cost $768,703)
Federated Prime
Obligation Fund, 5.93% ........... 768,703 768,703
-----------
TOTAL INVESTMENTS - 99.47%
(cost $36,221,714) .............. 36,221,714
-----------
CASH AND OTHER ASSETS
NET OF LIABILITIES - 0.53% ....... 193,749
-----------
NET ASSETS - 100% ................. $36,415,463
===========
</TABLE>
See notes to financial statements
<PAGE>
Statements of Assets and Liabilities June 30, 1995
<TABLE>
<CAPTION>
IAA Trust IAA Trust IAA Trust
IAA Trust Asset Tax Exempt Money Market
Growth Fund, Inc. Allocation Fund, Inc. Bond Fund, Inc. Fund, Inc.
----------------- --------------------- --------------- ------------
<S> <C> <C> <C> <C>
Assets:
Investments in securities at value (cost
$50,851,895, $8,162,561,
$18,774,517 and $36,221,714, respectively). . . $70,367,126 $9,477,587 $18,547,099 $36,221,714
Cash. . . . . . . . . . . . . . . . . . . . . . . 71,548 14,577 150 50,530
Receivable for capital stock sold . . . . . . . . 3,003 19 -- 6,758
Dividends and interest receivable . . . . . . . . 162,522 55,656 298,665 178,04
Other assets. . . . . . . . . . . . . . . . . . . 25,196 2,401 5,113 7,025
----------- ---------- ----------- -----------
Total assets. . . . . . . . . . . . . . . . . . 70,629,395 9,550,240 18,851,027 36,464,071
----------- ---------- ----------- -----------
Liabilities:
Payable for capital stock redeemed. . . . . . . . 100 -- -- 19,045
Distributions payable . . . . . . . . . . . . . . -- -- -- 11,290
Accrued expenses and other liabilities. . . . . . 52,191 10,411 18,481 18,273
----------- ---------- ----------- -----------
Total liabilities . . . . . . . . . . . . . . . 52,291 10,411 18,481 48,608
----------- ---------- ----------- -----------
Net assets:
Applicable to 4,096,719, 776,202, 2,253,392
and 36,415,615 shares
outstanding, respectively . . . . . . . . . . . $70,577,104 $9,539,829 $18,832,546 $36,415,463
=========== ========== =========== ===========
Net Assets Consist of:
Capital paid-in . . . . . . . . . . . . . . . . . $47,497,509 $8,258,032 $19,023,437 $36,415,463
Undistributed net investment income . . . . . . . 503,361 0 1,584 --
Accumulated net realized gain (loss)
on investments . . . . . . .. . .. . .. . .. . . 3,061,003 (33,229) 34,943 --
Net unrealized appreciation (depreciation) of
investments . . . . . . .. . .. . .. . .. . . . . 19,515,231 1,315,026 (227,418) --
----------- ---------- ----------- -----------
$70,577,104 $9,539,829 $18,832,546 $36,415,463
=========== ========== =========== ===========
Net asset value and redemption price per share . . $17.23 $12.29 $8.36 $1.00
====== ====== ===== =====
Offering price per share
(net asset value +.97,
except Money Market Fund) . . . . . . . . . . .. $17.76 $12.67 $8.62 $1.00
====== ====== ===== =====
</TABLE>
See notes to financial statements.
<PAGE>
Statements of Operations for the Year Ended June 30, 1995
<TABLE>
<CAPTION>
IAA Trust IAA Trust IAA Trust
IAA Trust Asset Tax Exempt Money Market
Growth Fund, Inc. Allocation Fund, Inc. Bond Fund, Inc. Fund, Inc.
----------------- --------------------- --------------- ------------
<S> <C> <C> <C> <C>
Investment Income:
Dividends . . . . . . . . . . . . . . . . . . $ 1,081,733 $ 94,042 $ -- $ --
Interest. . . . . . . . . . . . . . . . . . . 535,750 321,972 1,093,946 1,974,531
----------- --------- ---------- ----------
Total investment income 1,617,483 416,014 1,093,946 1,974,531
----------- --------- ---------- ----------
Expenses:
Investment advisory fees (Note E) . . . . . . 476,164 67,275 93,589 91,618
Distribution expenses (Note E). . . . . . . . 2,597 1,940 7,979 --
Legal fees. . . . . . . . . . . . . . . . . . 4,828 2,948 2,967 6,245
Transfer agent fees (Note E). . . . . . . . . 68,022 11,101 21,475 41,216
Auditing fees . . . . . . . . . . . . . . . . 25,537 4,811 10,423 26,079
Printing. . . . . . . . . . . . . . . . . . . 7,061 723 1,622 3,529
Directors' fees . . . . . . . . . . . . . . . 5,006 1,167 1,297 1,520
Administration fees (Note E). . . . . . . . . 61,289 10,009 18,089 34,763
Accounting fees (Note E). . . . . . . . . . . 44,673 25,883 30,271 35,458
Insurance . . . . . . . . . . . . . . . . . . 19,529 2,665 6,165 12,008
Registration fees . . . . . . . . . . . . . . 1,266 2,008 1,366 2,795
Miscellaneous . . . . . . . . . . . . . . . 8,260 513 2,781 4,894
----------- --------- ---------- ----------
Total expenses. . . . . . . . . . . . . . . 724,232 131,043 198,024 260,125
----------- --------- ---------- ----------
Net Investment Income. . . . . . . . . . . . . 893,251 284,971 895,922 1,714,406
----------- --------- ---------- ----------
Realized and Unrealized Gain
on Investments-- Note (D):
Net realized gain (loss) on investments . . . 4,148,412 (37,078) 35,903 --
Net change in unrealized appreciation
on investments. . . . . . . . . . . . . . . 10,210,477 1,113,816 411,011 --
----------- --------- ---------- ----------
Net realized and unrealized gain
on investments. . . . . . . . . . . . . . . 14,358,889 1,076,738 446,914 --
----------- --------- ---------- ----------
Increase in Net Assets from Operations . . . . $15,252,140 $1,361,709 $1,342,836 $1,714,406
=========== ========== ========== ==========
</TABLE>
See notes to financial statements.
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
IAA Trust IAA Trust Asset
Growth Fund, Inc. Allocation Fund, Inc.
------------------------ ------------------------
Year Ended Year Ended Year Ended Year Ended
6/30/95 6/30/94 6/30/95 6/30/94
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Operations:
Net investment income . . . . . . . . . . . . . . . . . $ 893,251 $ 686,215 $ 284,971 $ 234,195
Net realized gain (loss) on investments . . . . . . . . 4,148,412 6,503,030 (37,078) 195,297
Net change in unrealized appreciation (depreciation)
of investments. . . . . . . . . . . . . . . . . . . . 10,210,477 (8,484,217) 1,113,816 (421,301)
----------- ----------- ------------ -----------
Increase (decrease) in net assets from operations . . . 15,252,140 (1,294,972) 1,361,709 8,191
----------- ----------- ------------ -----------
Dividends and Distributions to Shareholders from:
Investment income . . . . . . . . . . . . . . . . . . . (671,272) (881,964) (269,547) (233,617)
Realized gains on investments . . . . . . . . . . . . . (5,659,861) (7,182,675) (145,553) (161,313)
Return of capital. . . . . . . . . . . . . . . . . . . -- -- (6,398) --
----------- ----------- ------------ -----------
(6,331,133) (8,064,639) (421,498) (394,930)
----------- ----------- ------------ -----------
Capital Stock Transactions -- (Net) Note (C) . . . . . . 2,208,346 (1,975,906) (52,911) 2,376,426
----------- ----------- ------------ -----------
Total increase (decrease) in net assets . . . . . . . . 11,129,353 (11,335,517) 887,300 1,989,687
Net Assets:
Beginning of year . . . . . . . . . . . . . . . . . . . 59,447,751 70,783,268 8,652,529 6,662,842
----------- ----------- ------------ -----------
End of year . . . . . . . . . . . . . . . . . . . . . . $70,577,104 $59,447,751 $9,539,829 $8,652,529
----------- ----------- ------------ -----------
</TABLE>
<TABLE>
<CAPTION>
IAA Trust IAA Trust
Tax Exempt Bond Fund, Inc. Money Market Fund, Inc.
-------------------------- ------------------------
Year Ended Year Ended Year Ended Year Ended
6/30/95 6/30/94 6/30/95 6/30/94
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Operations:
Net investment income . . . . . . . . . . . . . . . . . $ 895,922 $ 900,397 $ 1,714,406 1,036,030
Net realized gain on investments. . . . . . . . . . . . 35,903 500,759 -- --
Net change in unrealized appreciation (depreciation)
of investments . . . . . . . . . . . . . . . . . . . . 411,011 (1,773,997) -- --
----------- ----------- ------------ -----------
Increase (decrease) in net assets from operations . . . 1,342,836 (372,841) 1,714,406 1,036,030
----------- ----------- ------------ -----------
Dividends and Distributions to Shareholders from:
Investment income . . . . . . . . . . . . . . . . . . . (894,338) (902,067) (1,714,510) (1,035,982)
Realized gains on investments . . . . . . . . . . . . . (69,768) (864,483) -- --
(964,106) (1,766,550) (1,714,510) (1,035,982)
----------- ----------- ------------ -----------
Capital Stock Transactions -- (Net) Note (C) . . . . . . (640,781) 1,207,940 (2,283,706) 5,396,848
----------- ----------- ------------ -----------
Total increase (decrease) in net assets . . . . . . . . (262,051) (931,451) (2,283,810) 5,396,896
Net Assets:
Beginning of year . . . . . . . . . . . . . . . . . 19,094,597 20,026,048 38,699,273 33,302,377
----------- ----------- ------------ -----------
End of year . . . . . . . . . . . . . . . . . . . . $18,832,546 $19,094,597 $36,415,463 $38,699,273
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS
The tables below set forth financial data for a share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
IAA Trust
Growth Fund, Inc.
Years Ended June 30,
--------------------------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year............. $15.16 $ 17.55 $ 17.23 $ 17.35 $ 17.42
------ ------- ------- ------- -------
Income from investment operations
Net investment income ........................ 0.22 0.27 0.25 0.35 0.41
Net gains or losses on securities (both
realized and unrealized) .................... 3.45 (0.63) 1.67 0.40 0.44
------ ------- ------- ------- -------
Total from investment operations............ 3.67 (0.36) 1.92 0.75 0.85
------ ------- ------- ------- -------
Less distributions
Dividends from net investment income ......... (0.17) (0.22) (0.29) (0.38) (0.51)
Distributions from capital gains ............. (1.43) (1.81) (1.31) (0.49) (0.41)
------ ------- ------- ------- -------
Total distributions ........................ (1.60) (2.03) (1.60) (0.87) (0.92)
------ ------- ------- ------- -------
Net asset value, end of year .................. $ 17.23 $ 15.16 $ 17.55 $ 17.23 $ 17.35
======= ======= ======= ======= =======
Total return + ................................ 26.68% (2.42%) 11.71% 4.23% 5.37%
Ratios/Supplemental Data
Net assets, end of period (in 000's) ........ $70,577 $59,448 $70,785 $76,147 $81,974
Ratio of expenses to average net assets* .... 1.14% 1.24% 1.18% 0.85% 0.82%
Ratio of net investment income to
average net assets* ........................ 1.41% 1.03% 1.36% 1.91% 2.58%
Portfolio turnover ........................... 31.84% 49.12% 55.36% 45.50% 26.00%
* Average net assets have been computed based on the aggregate value of the
fund's daily net assets.
+ Total return calculation does not reflect sales load.
</TABLE>
<TABLE>
<CAPTION>
IAA Trust
Asset Allocation Fund, Inc.
Years Ended June 30,
----------------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year .......................... $ 11.08 $ 11.60 $ 11.20 $ 10.74 $ 10.56
------- ------- ------- ------- -------
Income from investment operations
Net investment income ...................................... 0.36 0.34 0.57 0.68 0.73
Net gains or losses on securities (both
realized and unrealized) .................................. 1.38 (0.25) 0.47 0.55 0.24
------- ------- ------- ------- -------
Total from investment operations ......................... 1.74 0.09 1.04 1.23 0.97
------- ------- ------- ------- -------
Less distributions
Dividends from net investment income ....................... (0.34) (0.34) (0.57) (0.68) (0.76)
Distributions from capital gains............................ (0.18) (0.27) (0.07) (0.09) (0.03)
Distributions from return of capital ....................... (0.01) (0.00) (0.00) (0.00) (0.00)
------- ------- ------- ------- -------
Total distributions ...................................... (0.53) (0.61) (0.64) (0.77) (0.79)
------- ------- ------- ------- -------
Net asset value, end of year ................................ $ 12.29 $ 11.08 $ 11.60 $ 11.20 $ 10.74
======= ======= ======= ======= =======
Total return + .............................................. 16.29% 0.71% 9.58% 11.84% 9.47%
Ratios/Supplemental Data
Net assets, end of period (in 000's) ...................... $9,540 $8,653 $6,663 $6,233 $5,768
Ratio of expenses to average net assets*.................... 1.46% 1.78% 1.71% 1.51% 1.33%
Ratio of net investment income to
average net assets* ...................................... 3.18% 2.98% 4.97% 6.20% 6.83%
Portfolio turnover ......................................... 21.03% 17.39% 36.70% 14.10% 20.60%
* Average net assets have been computed based on the aggregate value of the fund's daily net assets.
+ Total return calculation does not reflect sales load.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
The tables below set forth financial data for a share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
IAA Trust
Tax Exempt Bond Fund, Inc.
Years Ended June 30,
-----------------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ......................... $ 8.19 $ 9.11 $ 8.78 $ 8.44 $ 8.32
------- ------- ------- ------- -------
Income from investment operations
Net investment income ..................................... 0.39 0.39 0.46 0.49 0.52
Net gains or losses on securities (both
realized and unrealized) ................................. 0.20 (0.54) 0.33 0.34 0.13
------- ------- ------- ------- -------
Total from investment operations ........................ 0.59 (0.15) 0.79 0.83 0.65
------- ------- ------- ------- -------
Less distributions
Dividends from net investment income ...................... (0.39) (0.39) (0.46) (0.49) (0.53)
------- ------- ------- ------- -------
Distributions from capital gains .......................... (0.03) (0.38) 0.00 0.00 0.00
------- ------- ------- ------- -------
Total distributions ..................................... (0.42) (0.77) (0.46) (0.49) (0.53)
------- ------- ------- ------- -------
Net asset value, end of year ............................... $ 8.36 $ 8.19 $ 9.11 $ 8.78 $ 8.44
======= ======= ======= ======= =======
Total return + ............................................. 7.51% (1.86%) 9.19% 10.05% 8.05%
Ratios/Supplemental Data
Net assets, end of period (in 000's) ..................... $18,833 $19,095 $20,026 $17,872 $16,035
Ratio of expenses to average net assets* ................. 1.06% 1.15% 1.03% 0.95% 0.83%
Ratio of net investment income to
average net assets* ..................................... 4.79% 4.47% 5.11% 5.65% 6.17%
Portfolio turnover......................................... 24.89% 41.94% 39.60% 20.30% 6.30%
* Average net assets have been computed based on the aggregate value of the fund's daily net assets.
+ Total return calculation does not reflect sales load.
</TABLE>
<TABLE>
<CAPTION>
IAA Trust
Money Market Fund, Inc.
Years Ended June 30,
-----------------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<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 0.03 0.02 0.03 0.06
------- ------- ------- ------- -------
Total from investment operations........... 0.05 0.03 0.02 0.03 0.06
------- ------- ------- ------- -------
Less distributions
Dividends from net investment income ........ (0.05) (0.03) (0.02) (0.03) (0.06)
------- ------- ------- ------- -------
Total distributions ....................... (0.05) (0.03) (0.02) (0.03) (0.06)
------- ------- ------- ------- -------
Net asset value, end of year ................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total return ................................. 4.85% 2.86% 2.41% 3.49% 6.40%
Ratios/Supplemental Data
Net assets, end of period (in 000's) ....... $36,415 $38,699 $33,302 $10,191 $19,839
Ratio of expenses to average net assets* +... 0.73% 0.56% 0.58% 1.32% 1.03%
Ratio of net investment income to
average net assets* ....................... 4.80% 2.83% 2.67% 3.60% 6.26%
* Average net assets have been computed based on the aggregate value of the fund's daily net assets.
+ After voluntary waiver of advisory fees. Before voluntary waiver of advisory fees, the ratio of expenses to
average net assets was .97%, 1.06% and 1.02% for the years ended June 30, 1995, June 30, 1994 and
June 30, 1993 respectively.
</TABLE>
<PAGE>
IAA Trust Mutual Funds - Notes to Financial Statements June 30, 1995
Note (A) Significant Accounting Policies: 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 Money
Market Fund, Inc. ("Money Market Fund") (collectively, "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 following is a summary of the significant accounting policies
consistently followed by each Fund in the preparation of its financial
statements. These policies are in conformity with generally accepted accounting
principles.
(1) Security Valuation: For the Growth Fund, the Asset Allocation Fund and
the Tax Exempt Bond Fund, 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 GNOSTIC 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,
those with a remaining maturity of 60 days or less, are valued at amortized
cost, which approximates market value. For the Money Market Fund, 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 date securities are
purchased or sold. Securities gains and losses are determined on the
identified cost basis.
(3) Federal Income Taxes: The Funds have elected to be treated as
"regulated investment companies" under Sub-chapter M of the Internal
Revenue Code and to distribute substantially all of their net taxable
income annually. Accordingly, no provisions for Federal income taxes have
been made in the accompanying financial statements.
(4) Dividends and Distributions: Dividends and distributions to
shareholders are recorded on the ex-dividend date. Income distributions and
capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
Note (B) Dividends from Net Investment Income and Distributions of Capital
Gains: In the Growth Fund, net investment income from investment transactions
are distributed to shareholders twice a year. The Asset Allocation Fund
distributes net investment income to shareholders monthly. Net investment income
of the Tax Exempt Bond Fund is distributed to shareholders monthly. The Money
Market Fund 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 once a year.
Note (C) Capital Stock: At June 30, 1995, 10,000,000 shares of capital stock
were authorized for each of the Growth Fund, Asset Allocation Fund, and Tax
Exempt Bond Fund. The shares of capital stock authorized for the Money Market
Fund were 250,000,000. The par value for each share of the Growth Fund, Asset
Allocation Fund, and Tax Exempt Bond Fund is $1.00 per share. The par value for
each share of the Money Market Fund is $0.10 per share.
<PAGE>
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
GROWTH FUND ASSET ALLOCATION FUND
----------- ---------------------
Year Ended Year Ended Year Ended Year Ended
June 30, 1995 June 30, 1994 June 30, 1995 June 30, 1994
----------------- ----------------- ----------------- -----------------
Shares Amount Shares Amount Shares Amount Shares Amount
------ ---------- ------- ----------- ------ --------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold. . . . . . . . . . . . . . 82,369 $1,266,232 214,566 $ 3,470,762 70,254 $ 788,460 237,408 $ 2,731,183
Shares issued through reinvestment of
dividends. . . . . . . . . . . . . . . 424,176 6,030,680 483,039 7,779,673 23,407 261,811 19,634 224,250
------- ----------- ------- ----------- ------ --------- ------- -----------
506,545 7,296,912 697,605 11,250,435 93,661 1,050,271 257,042 2,955,433
------- ----------- ------- ----------- ------ --------- ------- -----------
Shares redeemed . . . . . . . . . . . . (331,902) (5,088,566) (808,870) (13,226,341) (98,290) (1,103,182) (50,719) (579,007)
Net increase (decrease) . . . . . . . . 174,643 $ 2,208,346 (111,265) $(1,975,906) (4,629) $ (52,911) 206,323 $ 2,376,426
</TABLE>
<TABLE>
<CAPTION>
TAX EXEMPT BOND FUND MONEY MARKET FUND
-------------------- -----------------
Year Ended Year Ended Year Ended Year Ended
June 30, 1995 June 30, 1994 June 30, 1995 June 30, 1994
------------------ --------------------- ------------------------- -------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
-------- ---------- ------- ----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold . . . . . . . 66,402 $ 546,984 183,322 $ 1,615,818 4,472,453 $54,472,453 75,655,484 $75,655,484
Shares issued through
reinvestment of
dividends . . . . . . . . 76,197 620,434 126,457 1,111,563 1,587,538 1,587,538 960,883 960,883
-------- ---------- ------- ----------- ---------- ----------- ---------- -----------
142,599 1,167,418 309,779 2,727,381 56,059,991 56,059,99 76,616,367 76,616,367
-------- ---------- ------- ----------- ---------- ----------- ---------- -----------
Shares redeemed . . . . . (221,928) (1,808,199) (176,084) (1,519,441) (58,343,697) (58,343,697) (71,219,519) (71,219,519)
-------- ---------- ------- ----------- ---------- ----------- ---------- -----------
Net increase
(decrease) . . . . . . . (79,329) $ (640,781) 133,695 $ 1,207,940 (2,283,706) $ (2,283,706) 5,396,848 $ 5,396,848
</TABLE>
Note (D) Investment Transactions: Purchases and sales of investment securities,
other than U.S. Government obligations and short term notes for the year ended
June 30, 1995 were:
<TABLE>
<CAPTION>
Purchases Sales
----------- -----------
<S> <C> <C>
Growth Fund. . . . . . . . . . . . . . . . . . $17,138,312 $23,837,818
Asset Allocation Fund. . . . . . . . . . . . . $ 2,104,651 $ 1,471,038
Tax Exempt Bond Fund . . . . . . . . . . . . . $ 4,504,040 $ 5,214,557
</TABLE>
For the year ended June 30, 1995, the aggregate cost of purchases and proceeds
from sales of U.S. Government Securities for IAA Asset Allocation Fund were
$199,003 and $124,750, respectively.
For both Federal income tax and financial statement purposes, the identified
cost of investments at June 30, 1995 was $50,851,895 for the Growth Fund,
$8,162,561 for the Asset Allocation Fund, $18,774,517 for the Tax Exempt Bond
Fund and $36,221,714 for the Money Market Fund.
<PAGE>
IAA Trust Mutual Funds - Notes to Financial Statements June 30, 1995
(continued)
The gross unrealized appreciation/depreciation for book and tax purposes at June
30, 1995 consisted of the following:
<TABLE>
<CAPTION>
Appreciation Depreciation
------------ ------------
<S> <C> <C>
Growth Fund. . . . . . . . . . . . . . . . . . $19,560,881 $ 45,650
Asset Allocation Fund. . . . . . . . . . . . . $ 1,359,565 $ 44,539
Tax Exempt Bond Fund . . . . . . . . . . . . . $ 210,523 $437,941
</TABLE>
Note (E) Advisory, Administration and Distribution Services Agreements: Under
its Advisory Agreements with the Funds, IAA Trust Company (the "Advisor")
provides investment advisory services for the Funds. The Funds pay the Advisor
at the following annual percentage rates of the average daily net assets of each
Fund: Growth Fund 0.75%; Asset Allocation Fund 0.75%; Tax Exempt Bond Fund
0.50%; and Money Market Fund 0.50%. These fees are accrued daily and paid the
Advisor monthly. For the year ended June 30, 1995, the Advisor voluntarily
agreed to waive fees totalling $86,900 from the Money Market Fund. IAA Trust
Company also serves as the Funds' Custodian, without compensation.
Under its agreements with the Funds, Fund/Plan Services, Inc., the Funds'
Administrator, provides certain administrative services for which the Funds pay
an annual fee at the following annual percentage rates of the combined average
net assets of the Funds: 0.15% of the first $50,000,000; 0.07% on the next
$50,000,000; and 0.05% of the balance. Fund/Plan Services Inc., also serves as
the Funds' Accounting and Transfer Agent.
Fund/Plan Broker Services, Inc. serves as the Funds' Distributor. Pursuant to
Rule 12b-1 adopted by the Securities and Exchange Commission under the Act, the
Growth Fund, the Asset Allocation Fund, and the Tax Exempt Bond Fund have each
adopted a Plan of Distribution (the "Plans"), effective April 1, 1993. The Plans
permit the participating Funds to pay certain expenses associated with the
distribution of their shares. The maximum amount payable under the Plans, on an
annual basis, is 0.25% of each Fund's average daily net assets.
<PAGE>
