IAA TRUST MONEY MARKET FUND INC, 485BPOS, 1996-10-28

IAA TRUST MONEY MARKET FUND INC
485BPOS, 1996-10-28

Previous: SHELTER PROPERTIES III LTD PARTNERSHIP, 10QSB, 1996-10-28

Next: IDS LIFE MONEYSHARE FUND INC, NSAR-B, 1996-10-28

As filed with the Securities and Exchange Commission File No. 2-73768
on October 28, 1996. File No. 811-3186

===============================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. [ 20 ]

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. [ 21 ]

IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.
(Exact Name of Registrant as Specified in Charter)

808 IAA Drive
Bloomington, Illinois 61702
----------------------------------------
(Address of Principal Executive Offices)

(309) 557-3092
------------------------------
(Registrant's Telephone Number)

IAA TRUST COMPANY
808 IAA Drive
Bloomington, Illinois 61702
-------------------------------------
(Name and Address of Agent for Service)

Fiscal Year Ended June 30, 1996

It is proposed that this filing will become effective (check appropriate box):

[X} immediately upon filing pursuant to paragraph (b);

[ ] on _______________________ (date) pursuant to paragraph (b);

[ ] 60 days after filing pursuant to paragraph (a)(i);

[ ] on ________________________ (date) pursuant to paragraph (a)(i);

[ ] 75 days after filing pursuant to paragraph (a)(ii); or

[ ] on _______________________ (date) pursuant to paragraph (a) of
Rule 485.

If appropriate, check the following box:

[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

Registrant has registered an indefinite number of securities under the
Securities Act of 1933 pursuant to Rule 24f-2 and the Rule of 24f-2 notice for
Registrant's most recent fiscal year was filed on or before August 31, 1996.

TOTAL PAGES: EXHIBITS BEGIN ON PAGE:

<PAGE>

IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.

CROSS REFERRENCE SHEET
INFORMATION REQUIRED IN THE PROSPECTUS

<TABLE>
<CAPTION>
Part A Prospectus Headings
- --------------------------------------------- -----------------------------------------------
<S> <C> <C>

Item 1. Cover Page Not Titled

Item 2. Synopsis Synopsis; Operating Expenses Table

Item 3. Condensed Financial Information Financial Highlights

Item 4. General Description Investment Objectives and
of Registrant Policies;

Item 5. Management of the Funds Management of the Funds; Management's Discussion
of Funds' Performance

Item 6. Capital Stock and Capital Stock; Income Dividends,
Other Securities Capital Gains Distributions, and Taxes

Item 7. Purchase of Securities Purchase of Shares; Special Plans and
Being Offered Other Purchase Information; Valuation of Shares

Item 8. Redemption or Repurchase Redemption of Shares

Item 9. Pending Legal Proceedings *

</TABLE>

- --------------

* The answer to the item is negative or the item is not applicable to
this filing, the registrant, or the securities being registered.

<PAGE>

IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.

CROSS REFERENCE SHEET
INFORMATION REQUIRED IN STATEMENT
OF ADDITIONAL INFORMATION

<TABLE>
<CAPTION>
Statement of Additional
Part B Information Headings
- -------------------------------- ----------------------------------
<S> <C> <C>
Item 10. Cover Page Not Titled

Item 11. Table of Contents Table of Contents

Item 12. General Information Investment Objectives and Policies;
and History Policies and Investment Restrictions
Aimed at Protecting Investors

Item 13. Investment Objectives Investment Objectives and Policies;
and Policies Policies and Investment Restrictions
Aimed at Protecting Investors

Item 14. Management of the
Registrant Directors and Officers of the Funds

Item 15. Control Persons and
Principal Holders Control Persons and Principal Holders
of Securities of Securities

Item 16. Investment Advisory
and Other Services Investment Advisory and Other Services

Item 17. Brokerage Allocation
and Other Practices Brokerage

Item 18. Capital Stock
and Other Securities Brokerage

Item 19. Purchase, Redemption and Purchases, Redemptions, and
Pricing of Securities Pricing of Fund Securities;
Being Offered Underwriter Compensation

Item 20. Tax Status Purchases, Redemptions, and
Pricing of Fund Securities

Item 21. Underwriters Underwriter Compensation

Item 22. Calculations of
Performance Data Investment Performance Information

Item 23. Financial Statements Report to Shareholders and
Financial Statements
</TABLE>

<PAGE>

IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.

CROSS REFERENCE SHEET

Part C - Other Information

Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C to this Registration Statement.

<PAGE>

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 Taxable Fixed Income Series Fund, Inc.

PROSPECTUS
OCTOBER 28, 1996

808 IAA Drive Bloomington, Illinois 61702
(309) 557-3222

The IAA Trust Mutual Funds represent four separate funds, with one Fund
containing three separate Series (referred to herein as "Funds" or "Series").
Each of the Funds and Series has distinct investment objectives and policies.
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 Taxable Fixed Income Series Fund, Inc. currently consists of
three separate investment Series designed to offer investors a variety of fixed
income investment opportunities.

IAA Trust Money Market Series 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 Series 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 Series will be successful in meeting its investment objective or in
maintaining a constant net asset value of $1.00 per share.

IAA Trust Short-Term Government Bond Series seeks maximum total return
consistent with the preservation of capital. The Series seeks to achieve its
investment objective by investing primarily in securities of the U.S. government
and its agencies and maintain a dollar-weighted average maturity of less than
three years.

<PAGE>

IAA Trust Long-Term Bond Series seeks to provide as high a level of
current income and capital appreciation as possible, consistent with the
preservation of capital and the maintenance of liquidity. The Series seeks to
achieve its investment objective by investing in bonds and other debt
obligations and maintain a dollar-weighted average maturity of more than ten
years.

The Funds' principal Underwriter is FPS Broker Services, Inc., 3200 Horizon
Drive, P.O. Box 61503, King of Prussia, PA 19406-0903 (formerly at #2 West Elm
Street, P.O. Box 874, Conshohocken, Pennsylvania 19428).

For information about how to invest in the IAA Trust Company Funds, contact FPS
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 FPS
Broker Services, Inc. Shares of the Funds are sold only in states where the
Funds are registered.

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.

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 28,
1996 are available upon request and without charge by contacting FPS 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

Subject Page
- ------- ----

Synopsis.................................................................

Operating Expenses Tables................................................

Financial Highlights.....................................................

Performance Calculations.................................................

Investment Objectives and Policies.......................................

Investment Strategies and Risk Considerations............................

Management of the Funds..................................................

Management's Discussion of the Funds' Performance........................

Distribution of the Funds' Shares........................................

Distribution Plans.......................................................

Capital Stock............................................................

Income Dividends, Capital Gains Distributions, and Taxes.................

Purchase of Shares.......................................................

Special Plans and Other Purchase Information.............................

Valuation of Shares......................................................

Redemption of Shares.....................................................

<PAGE>

SYNOPSIS

The Funds

The securities offered by this Prospectus consist of shares of four
separate Funds, one of which contains three separate Series, each Fund or Series
has distinct investment objectives and policies. The Funds are open-end,
diversified management investment companies 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.
("Growth Fund"); IAA Trust Asset Allocation Fund, Inc. ("Asset Allocation
Fund"); IAA Trust Tax Exempt Bond Fund, Inc. ("Tax Exempt Bond Fund"), and IAA
Trust Taxable Fixed Income Series Fund, Inc. ("Taxable Fixed Income Series
Fund"). Taxable Fixed Income Series Fund, Inc. currently consists of three
separate investment Series: IAA Trust Money Market Series ("Money Market
Series"); IAA Trust Short-Term Government Bond Series ("Short-Term Government
Bond Series"); and IAA Trust Long-Term Bond Series ("Long-Term Bond Series").

The value of each Fund's and Series' shares (with the exception of Money Market
Series) fluctuate because the value of the securities in which each Fund/Series
invests fluctuate. The Funds and Series will earn dividend or interest income to
the extent that they receive dividends or interest from their investments. An
investment in any of the Funds/Series is neither insured nor guaranteed by the
U.S. Government. There can be no assurance that any Fund's or Series' investment
objective will be achieved.

Investment Definitions

Open-end - The term "open-end" means that a Fund continually offers new shares
for sale to the public and are 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.

Diversified - The Funds 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. Each Fund and Series has adopted a policy prohibiting
it from investing more than 5% of its total assets in the securities of any one
issuer (other than securities issued by the United States Government or its
agencies or instrumentalities). This restriction applies to 75% of the total
asset of each Fund and Series, except for Growth Fund and Money Market Series
where this restriction applies to 100% of total assets.

Management Investment Company - The Funds are separate "management investment
companies" because upon the advice of professional investment managers, each
Fund continuously reviews, and from time to time changes, its portfolio holdings
in an effort to achieve its investment objective.

Investment Objectives

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.

Asset Allocation Fund:

<PAGE>

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.

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.

Taxable Fixed Income Series Fund:

Money Market Series:

This Series has an investment objective of earning a high level of current
income, consistent with maintaining liquidity and stability of principal. This
Series attempts to maintain the value of its shares at a constant $1.00,
although there can be no assurance that the Series will be able to maintain a
stable net asset value of $1.00 per share. This Series 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 Series is
neither insured nor guaranteed by the U.S. Government.

Short-Term Government Bond Series:

This Series seeks maximum total return consistent with the preservation of
capital. The Series seeks to achieve its investment objective by investing
primarily in securities of the U.S. Government and its agencies and maintain a
dollar-weighted average maturity of less than 3 years.

Long-Term Bond Series:

This Series seeks to provide as high a level of current income as possible,
consistent with the preservation of capital and the maintenance of liquidity.
The Series seeks to achieve its investment objective by investing in bonds and
other debt obligations and maintain a dollar-weighted average maturity of more
than 10 years.

How to Buy Shares

The minimum initial single purchase for all the Funds is $1,000. The minimum
additional investment for all the Funds is $100. The public offering price of
shares of a Fund is the net asset value per share next determined after receipt
and acceptance of the purchase order at the Transfer Agent in proper form with
accompanying check or other bank wire arrangements satisfactory to the Funds.
See "PURCHASE OF 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 "REDEMPTION OF
SHARES".

<PAGE>

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, Tax Exempt Bond Fund, Short-Term Government Bond
Series and Long-Term Bond Series 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 Series 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.

FPS Broker Services, Inc., 3200 Horizon Drive, P.O. Box 61503, King of Prussia,
PA 19406-0903 serves as the Funds' Underwriter. FPS Services, Inc., 3200 Horizon
Drive, P.O. Box 61503, King of Prussia, PA 19406-0903 (formerly at #2 West Elm
Street, P.O. Box 874, Conshohocken, Pennsylvania 19428) serves as the Funds'
Administrator, Accounting/Pricing Agent, and Transfer Agent.

<PAGE>

OPERATING EXPENSES TABLE

Tax
Asset Exempt Taxable
Growth Allocation Bond Fixed Income Series
Fund Fund Fund Series Fund
---- ---- ---- -----------------------------
Short-
Term Long-
Money Gov't Term
Market Bond Bond
Series Series(1) Series(1)
------ --------- ---------
<S> <C> <C> <C> <C> <C> <C>

Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price).............. none none none none none none
Maximum Sales Load Imposed
on Reinvested Dividends.......................... none none none none none none
Deferred Sales Load(2)............................... none none none none none none
Redemption Fee....................................... none none none none none none
Exchange Fee......................................... none none 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% 0.50% 0.75%
Waiver of Management Fees............................ 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
12(b)1 Fees.......................................... 0.25% 0.25% 0.25% none 0.25% 0.25%
Other Expenses....................................... 0.12% 0.44% 0.33% 0.40% 0.57% 0.57%
----- ----- ----- ----- ----- -----
Total Fund Operating Expenses........................ 1.12% 1.44% 1.08% 0.90% 1.32% 1.57%
</TABLE>
- ----------
(1) With respect to Short-Term Government Bond Series and Long-Term Bond Series,
the ratios shown are those expected to be incurred for the first fiscal
period for these new Series.

(2) The 3% sales load which existed prior to the date hereof, has been
eliminated as of the date hereof.

<TABLE>
Example:
<S> <C> <C> <C> <C> <C> <C> <C>

1 year $11 $15 $11 $9 $13 $16
You would pay the following expenses 3 years $36 $46 $34 $29 $42 $50
on a $1,000 investment, assuming a 5 years $62 $79 $60 $50
5% annual return. ....................... 10 years $136 $172 $132 $111
</TABLE>

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.

<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' Annual Report dated June 30, 1996. The following tables should be read
in conjunction with these financial statements and related notes which are
incorporated by reference in the Fund's Statement of Additional Information.

The table below sets 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,
---------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
------- ------ ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year ..... $ 17.23 $ 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 ................ 0.23 0.22 0.27 0.25 0.35 0.41 0.61 0.52 0.43 0.31
Net gains (losses) on securities
(both realized and unrealized) ..... 3.23 3.45 (0.63) 1.67 0.40 0.44 1.93 2.32 (1.62) 1.96
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment operations . 3.46 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) ............................ (0.25) (0.17) (0.22) (0.29) (0.38) (0.51) (0.65) (0.42) (0.54) (0.38)
Distributions (from capital gains) ... (1.56) (1.43) (1.81) (1.31) (0.49) (0.41) (1.30) (0.65) (2.64) (3.10)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions .............. (1.81) (1.60) (2.03) (1.60) (0.87) (0.92) (1.95) (1.07) (3.18) (3.48)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------

Net Asset Value, End of Year ........... $ 18.88 $ 17.23 $ 15.16 $ 17.55 $ 17.23 $ 17.35 $ 17.42 $ 16.83 $ 15.06 $ 19.43
======= ======= ======= ======= ======= ======= ======= ======= ======= =======

Total Return+ .......................... 21.51% 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) . $84,800 $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* ........................ 1.12% 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* ...... 1.30% 1.41% 1.03% 1.36% 1.91% 2.58% 3.58% 3.29% 2.69% 1.70%
Portfolio turnover rate .............. 32.95% 31.84% 49.12% 55.36% 45.50% 26.00% 18.10% 42.60% 51.20% 40.10%
Average Commission Rate Paid** ....... $0.0645 N/A N/A N/A N/A N/A N/A N/A N/A N/A
</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.
** Computed by dividing the total amount of commission paid by the total number
of shares purchased and sold during the period for which there was a
commission. The disclosure is required by the SEC beginning in 1996.

<PAGE>

FINANCIAL HIGHLIGHTS

ASSET ALLOCATION FUND:

The table below sets forth financial data for a share of capital stock
outstanding throughout each period presented.

IAA TRUST ASSET ALLOCATION FUND, INC.

Years ended June 30,
----------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year ..... $ 12.29 $ 11.08 $ 11.60 $ 11.20 $ 10.74 $ 10.56 $ 10.80 $ 10.51 $ 10.84 $ 11.14
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income From Investment Operations
Net investment income ................ 0.37 0.36 0.34 0.57 0.68 0.73 0.78 0.75 0.73 0.73
Net gains (losses) on securities
(both realized and unrealized) ..... 1.41 1.38 (0.25) 0.47 0.55 0.24 (0.11) 0.29 (0.08) (0.30)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment operations . 1.78 1.74 0.09 1.04 1.23 0.97 0.67 1.04 0.65 0.43
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Less Distributions
Dividends (from net investment
income) ............................ (0.37) (0.34) (0.34) (0.57) (0.68) (0.76) (0.77) (0.75) (0.72) (0.73)
Distributions (from capital gains) ... (0.31) (0.18) (0.27) (0.07) (0.09) (0.03) (0.14) 0.00 (0.26) 0.00
Distributions( from return of capital) 0.00 (0.01) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions .............. (0.68) (0.53) (0.61) (0.64) (0.77) (0.79) (0.91) (0.75) (0.98) (0.73)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Year ........... $ 13.39 $ 12.29 $ 11.08 $ 11.60 $ 11.20 $ 10.74 $ 10.56 $ 10.80 $ 10.51 $ 10.84
======= ======= ======= ======= ======= ======= ======= ======= ======= =======

Total Return+ .......................... 14.74% 16.29% 0.71% 9.58% 11.84% 9.47% 6.50% 10.40% 6.47% 3.91%

Ratios/Supplemental Data
Net assets, end of period (in 000's) . $10,083 $ 9,540 $ 8,653 $ 6,663 $ 6,233 $ 5,768 $ 5,714 $ 5,812 $ 5,966 $ 6,003
Ratio of expenses to average
net assets* ........................ 1.44% 1.46% 1.78% 1.71% 1.51% 1.33% 1.39% 1.34% 1.17% 1.42%
Ratio of net investment
income to average net assets* ...... 2.81% 3.18% 2.98% 4.97% 6.20% 6.83% 7.31% 7.12% 6.92% 6.61%
Portfolio turnover rate .............. 33.77% 21.03% 17.39% 36.70% 14.10% 20.60% 6.50% 45.20% 11.70% 51.40%
Average Commission Rate Paid** ....... 0.0861 N/A N/A N/A N/A N/A N/A N/A N/A N/A
</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.
** Computed by dividing the total amount of commission paid by the total number
of shares purchased and sold during the period for which there was a
commission. The disclosure is required by the SEC beginning in 1996.

<PAGE>

FINANCIAL HIGHLIGHTS

TAX EXEMPT BOND FUND:

The table below sets forth financial data for a share of capital stock
outstanding throughout each period presented.

IAA TRUST TAX EXEMPT BOND FUND, INC.

Years ended June 30,
----------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year ..... $ 8.36 $ 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 ................ 0.37 0.39 0.39 0.46 0.49 0.52 0.52 0.54 0.54 0.51
Net gains (losses) on securities
(both realized and unrealized) ..... 0.07 0.20 (0.54) 0.33 0.34 0.13 (0.09) 0.26 0.06 (0.01)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment operations . 0.44 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) ............................ (0.37) (0.39) (0.39) (0.46) (0.49) (0.53) (0.52) (0.54) (0.54) (0.51)
Distributions (from capital gains) ... (0.02) (0.03) (0.38) 0.00 0.00 0.00 0.00 0.00 0.00 0.00
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions .............. (0.39) (0.42) (0.77) (0.46) (0.49) (0.53) (0.52) (0.54) (0.54) (0.51)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Year ........... $ 8.41 $ 8.36 $ 8.19 $ 9.11 $ 8.78 $ 8.44 $ 8.32 $ 8.41 $ 8.15 $ 8.09
======= ======= ====== ======= ======= ======= ======= ======= ======= =======

Total Return+ .......................... 5.30% 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) . $17,744 $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* ........................ 1.08% 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* ...... 4.30% 4.79% 4.47% 5.11% 5.65% 6.17% 6.22% 6.51% 6.66% 6.27%
Portfolio turnover rate .............. 14.75% 24.89% 41.94% 39.60% 20.30% 6.30% 23.50% 12.70% 16.40% 13.90%
</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.

<PAGE>

FINANCIAL HIGHLIGHTS

TAXABLE FIXED INCOME SERIES FUND
MONEY MARKET SERIES:

The table below sets forth financial data for a share of capital stock of the
Money Market Series outstanding throughout each period presented. This Fund's
two new Series - IAA Trust Short-Term Government Bond Series and IAA Trust
Long-Term Bond Series, have not commenced investment operations.

<TABLE>
<CAPTION>
IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.
MONEY MARKET SERIES

Years ended June 30,
----------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <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 $ 1.00
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income From Investment Operations
Net investment income ................ 0.05 0.05 0.03 0.02 0.03 0.06 0.07 0.08 0.06 0.05
Net gains (losses) on securities
(both realized and unrealized) ..... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment operations . 0.05 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) (0.05) (0.03) (0.02) (0.03) (0.06) (0.07) (0.08) (0.06) (0.05)
Distributions (from capital gains) ... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions .............. (0.05) (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 $ 1.00
======= ======= ======= ======= ====== ======= ======= ======= ======= =======

Total Return .......................... 4.82% 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) . $33,664 $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 *+ ...................... 0.90% 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 * ..... 4.74% 4.80% 2.83% 2.67% 3.60% 6.26% 7.49% 7.58% 5.74% 5.01%
</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.

<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, the Tax Exempt Bond Fund, the
Short-Term Government Bond Series and the Long-Term Bond Series, 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 Series, 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 or Series.

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. 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 above performance measures are based on historical earnings and are not
intended to indicate future performance.

INVESTMENT OBJECTIVES AND POLICIES

The investment objective of each Fund is fundamental and may not be changed
without a vote of the holders of the majority of the voting securities of the
Fund. Unless otherwise stated in this Prospectus or the Statement of Additional
Information, each Fund's investment policies are not fundamental and may be
changed without shareowner approval. While a non-fundamental policy or
restriction may be changed by the Directors of the Fund without shareowner
approval, the Funds intend to notify shareowners before making any change in any
such policy or restriction. Fundamental policies may not be changed without
shareowner approval. The Funds strive to attain their investment objectives, but
there can, of course, be no assurance that they will do so.

<PAGE>

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.

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'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 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. 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.

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.

Income and capital appreciation will be derived from the Asset Allocation Fund's
investment in common stocks and

<PAGE>

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. 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.

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.

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. 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

<PAGE>

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. See the Appendix to the Statement of Additional Information
for explanations on applicable ratings. 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.

TAXABLE FIXED INCOME SERIES FUND:

Each Series of the Taxable Fixed Income Series Fund will invest at least 65% of
its total assets in taxable, fixed income securities, also known as "debt
securities". Examples of debt securities are bills, notes and bonds, each
representing a promise by the issuer to re-pay a debt which is generally secured
by the assets of such issuer. Also in this investment category are debentures,
which are bonds or promissory notes that are backed by the general credit of the
issuer, but not secured by specific assets of such issuer. The types of debt
securities in which each Series may invest have been determined by the
investment objective of the Series.

MONEY MARKET SERIES:

The investment objective of the Money Market Series 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 Series may not always
purchase securities offering the highest yield. The Series will only invest in
high-quality rated securities or unrated securities determined by the Board of
Directors to be of high-quality and present minimum credit risk. There can be no
assurance that the Series' stated objective will be realized.

The Money Market Series 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:

o Obligations of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities.

<PAGE>

o 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 Series 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 Series, the issuer agrees to
redeem them earlier, possibly at less than par. Accordingly, the Series
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. Banks are subject to
extensive but different government regulations which may limit the amount
and types of their loans and the interest rates that may be charged. In
addition, the profitability of the banking industry is largely dependent
upon the availability and cost of funds to finance lending operations and
the quality of underlying bank assets.

o 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.

o 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.

o Negotiable certificates of deposit of savings and loan associations in
amounts (currently $100,000) that are fully insured by The FDIC.

o 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 Series will only invest in
repurchase agreements maturing in seven days or less.

SHORT-TERM GOVERNMENT BOND SERIES:

The investment objective of the Short-Term Government Bond Series is to provide
maximum total return, consistent with preservation of capital and prudent
investment management. Total return consists of interest, and dividends from
underlying securities and capital appreciation realized from the purchase and
sale of securities. Under normal conditions, the Series seeks to achieve its
objective by investing at least 65% of the value of its total assets in
short-term government bonds. Short-term government bonds include U.S. Government
securities, such as bonds, notes, and bills which are (a) direct obligations of
the U.S. Treasury, and (b) securities issued or guaranteed by U.S. Government
agencies. The estimated portfolio turnover rate for the Series is less than
100%.

Government securities may be backed by (i) the full faith and credit of the
United States; (ii) the particular Government agency's ability to borrow
directly from the Treasury; (iii) some other type of United States support; or
(iv) the credit of the issuing agency, only. The government guarantee of the
U.S. Government securities in the Series' portfolio, however, does not guarantee
the net asset value of the shares of the Series. There are market risks inherent
in all investments in securities, and the value of an investment in the Series
will fluctuate over time. Normally, the value of the Series' investments varies
inversely with changes in interest rates. For example, as interest rates rise,
the value of the Series' investments will tend to decline, and as rates fall,
investment values tend to increase.

The Series expects to maintain a dollar-weighted average maturity of less than
three years. Because the manager seeks to minimize interest rate risk by
managing effective duration, the Series may invest in securities of any
maturity.

<PAGE>

The Series is designed primarily for investors who seek higher yields than money
market funds generally offer and are willing to accept nominal fluctuation in
the value of the shares but who are not willing to accept the greater
fluctuations that long-term bond funds might entail. This Series is not an
appropriate investment for investors whose primary investment objective is
absolute principal stability. Because the values of the securities in which this
Series invests generally change with interest rates, the value of its shares
will fluctuate, unlike the value of the shares of a money market fund, seeking
to maintain a stable net asset value per share of $1.00. Consequently, this
Series seeks to reduce such fluctuations by managing the effective duration, and
thus the interest rate risk, of its portfolio.

The Series also may invest up to 35% of its total assets in cash, commercial
paper and high grade liquid debt securities, including corporate debt
instruments and privately issued mortgage-related and asset-backed securities
rated within the three highest grades assigned by S&P (AAA, AA, A or A-1) or
Moody's (Aaa, Aa, A or P-1) or in unrated securities such as Certificates of
Deposit issued by Banks, Bankers' Acceptances, and Repurchase Agreements deemed
by the manager to be of comparable quality. Further, the Series may invest in
long-term fixed rate bonds that allow the Series to tender (or "put") bonds to
the issuer at specified intervals and receive face value for them. In addition,
the Series may invest in other investment companies investing primarily in U.S.
Government securities for the appropriate duration.

LONG-TERM BOND SERIES:

The investment objective of the Long-Term Bond Series is to provide the maximum
amount of current income and capital appreciation to the extent consistent with
the preservation of capital and the maintenance of liquidity. The Series invests
principally in debt obligations of corporations, the U.S. Government and its
agencies and instrumentalities, and major U.S. banking institutions and may also
purchase obligations of international agencies and U.S. dollar denominated
foreign debt securities. The estimated portfolio turnover rate for the Series is
less than 100%.

At least 80% of the value of the Series' net assets will consist of obligations
of corporations which, at the time of purchase by the Series are rated at least
A- by S&P or A3 by Moody's, and of securities issued or guaranteed as to
principal and interest by the U.S. Government or its agencies or
instrumentalities. The Series may also invest in securities which, while not
rated, are determined by the investment manager to be of comparable quality to
those rated securities in which the Series may invest; for purposes of the 80%
requirement described in this paragraph, such unrated securities shall be deemed
to have the ratings so determined. See the Appendix to the Statement of
Additional Information for explanations on applicable ratings. At least 65% of
the value of the Series' total assets (except when maintaining a temporary
defensive position) will be invested in bonds. Such instruments include U.S.
Government and corporate bonds, notes, and convertible issues.

On occasion, up to 20% of the Series' net assets may consist of commercial paper
of U.S. issuers rated A-1 or A-2 by S&P or P-1 or P-2 by Moody's, certificates
of deposit, time deposits and bankers' acceptances, and corporate bonds which
are rated in any category lower than A- by S&P and A3 by Moody's. When deemed
necessary for temporary defensive purposes, the Series' investment in commercial
paper, certificates of deposit, time deposits and bankers' acceptances may
exceed 20% of its net assets, although the Series currently does not intend to
invest more than 5% of its assets in any one of these types of instruments.
Commercial paper and certificates of deposit could be over 5%. Under no
circumstances will the Series invest more than 20% of its net assets in
corporate bonds which are rated lower than A- by S&P and A3 by Moody's or are
unrated. Obligations rated BBB by S&P and Baa by Moody's are considered
investment grade obligations which lack outstanding investment characteristics
and may have speculative characteristics as well. See the Appendix to the
Statement of Additional Information for explanations on applicable ratings. The
Series may invest up to 10% of its assets in securities of foreign issuers.

<PAGE>

INVESTMENT STRATEGIES AND RISK CONSIDERATIONS

Shareowners should understand that all investments involve risk and there can be
no guarantee against loss resulting from an investment in the Funds. Unless
otherwise indicated, all percentage limitations governing the investments of the
Funds apply only at the time of transaction.

Securities of Other Investment Companies

All Funds 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.

Repurchase Agreements

All Funds may enter into repurchase agreements which 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 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. The Funds 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.

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.

Municipal Bonds

The Tax Exempt Bond Fund may purchase municipal bonds which are generally 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.

<PAGE>

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.

Government Securities

The Long-Term Bond Series may invest in securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities which includes U.S.
Treasury securities, which differ in their interest rates, maturities and times
of issuance. Treasury Bills have initial maturities of one year or less;
Treasury Notes have initial maturities of one to ten years; and Treasury Bonds
generally have initial maturities of greater than ten years. Some obligations
issued or guaranteed by U.S. Government agencies and instrumentalities, for
example, Government National Mortgage Association pass-through certificates, are
supported by the full faith and credit of the U.S. Treasury; others, such as
those of the Federal Home Loan Banks, by the right of the issuer to borrow from
the Treasury; others, such as those issued by the Federal National Mortgage
Association, by discretionary authority of the U.S. Government to purchase
certain obligations of the agency or instrumentality; and others, such as those
issued by the Student Loan Marketing Association, only by the credit of the
agency or instrumentality. These securities bear fixed, floating or variable
rates of interest. Principal and interest may fluctuate based on generally
recognized reference rates or the relationship of rates. While the U.S.
Government provides financial support to such U.S. Government sponsored agencies
or instrumentalities, no assurance can be given that it will always do so since
it is not so obligated by law. The Series will invest in such securities only
when it is satisfied that the credit risk with respect to the issuer is minimal.

Zero Coupon Securities

The Long-Term Bond Series may invest in zero coupon U.S. Government securities,
which are U.S. Government obligations that have been stripped of their unmatured
interest coupons, the coupons themselves and receipts or certificates
representing interests in such stripped debt obligations and coupons. The Series
also may invest in zero coupon securities issued by corporations and financial
institutions and by foreign governments where such securities are denominated in
U.S. dollars. A zero coupon security pays no interest to its holder during its
life and is sold at a discount to its face value at maturity. The amount of the
discount fluctuates with the market price of the security. The market prices of
zero coupon securities generally are more volatile than the market price of
securities that pay interest periodically and are likely to respond to a greater
degree to changes in interest rates than non-zero coupon securities having
similar maturities and credit qualities.

<PAGE>

Mortgage-Related Securities

The Long-Term Bond Series may invest in mortgage-related securities which are
collateralized by pools of mortgage loans assembled for sale to investors by
various governmental agencies, such as Government National Mortgage Association
and government-related organizations such as Federal National Mortgage
Association and Federal Home Loan Mortgage Corporation, as well as by private
issuers such as commercial banks, savings and loan institutions, mortgage banks
and private mortgage insurance companies, and similar foreign entities.
Mortgage-related securities are a form of derivative securities. The
mortgage-related securities in which the Series may invest include those with
fixed, floating and variable interest rates and those with interest rates that
change based on multiples of changes in interest rates. Although certain
mortgage-related securities are guaranteed by a third party or otherwise
similarly secured, the market value of the security, which may fluctuate, is not
so secured. If a mortgage-related security is purchased at a premium, all or
part of the premium may be lost if there is a decline in the market value of the
security, whether resulting from changes in interest rates or prepayments in the
underlying mortgage collateral. As with other interest-bearing securities, the
prices of certain mortgage-backed securities are inversely affected by changes
in interest rates. However, although the value of a mortgage-related security
may decline when interest rates rise, the converse is not necessarily true,
since in periods of declining interest rates the mortgage underlying the
security are more likely to be prepaid. For this and other reasons, a
mortgage-related security's stated maturity may be shortened by unscheduled
prepayments on the underlying mortgage and, therefore, it is not possible to
predict accurately the security's return to the Series. The Series also may
invest in collateralized mortgage obligations structures on pools of mortgage
pass-through certificates or mortgage loans. The issuers of collateralized
mortgage obligations typically do not have assets other than those pledged to
secure separately the obligations. Holders of these obligations must rely
principally on distributions on the underlying mortgage related securities and
other collateral securing the obligations for payments of principal and interest
on the obligations. If the collateral securing the obligations is insufficient
to make payments on the obligations, a holder could sustain a loss.
Collateralized mortgage obligations will be purchased only if rated in one of
the two highest rating categories by a nationally recognized rating organization
such as Moody's or S&P.

Fixed-Income Securities

All Funds may invest in fixed-income securities. Even though interest-bearing
securities are investments which promise a stable stream of income, the prices
of such securities are inversely affected by changes in interest rates and,
therefore, are subject to the risk of market price fluctuations. The values of
fixed-income securities also may be affected by changes in the credit rating or
financial condition of the issuing entities. Once the rating of a portfolio
security has been changed, the Fund will consider all circumstances deemed
relevant in determining whether to continue to hold the security. The Growth
Fund, the Asset Allocation Fund, and the Tax Exempt Bond Fund may purchase
fixed-income securities rated Baa by Moody's and BBB by S&P. Such securities may
be subject to the aforementioned risk with respect to the issuing entity and to
greater market fluctuations than certain lower yielding, higher rated
fixed-income securities. Obligations which are rated Baa are considered medium
grade obligations; they are neither highly protected nor poorly secured, and are
considered by Moody's to have speculative characteristics. Bonds rated BBB by
S&P are regarded as having adequate capacity to pay interest and repay
principal, and while such bonds ordinarily 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 in higher rated categories.

Forward Commitments and When-Issued Securities

The Long-Term Bond Series may purchase securities on a forward commitment or
when-issued basis, which means that the price is fixed at the time of
commitment, but delivery and payment ordinarily take place a number of days
after the commitment to purchase. The Series will make commitments to purchase
such securities only with the intention of actually acquiring the securities,
but the Series may sell these securities before the settlement date if it is
deemed advisable. The Series will not accrue income in respect of a forward
commitment or when-issued security prior to its stated delivery date.

<PAGE>

Securities purchased on a forward commitment or when-issued basis and the
securities held in the Long-Term Bond Series portfolio are subject to changes in
value (both generally changing in the same way, i.e., appreciating when interest
rates decline and depreciating when interest rates rise) based upon the public's
perception of the creditworthiness of the issuer and changes, real or
anticipated, in the level of interest rates. Securities purchased on a forward
commitment or when-issued basis may expose the Series to risk because they may
experience such fluctuations prior to their actual delivery. Purchasing
securities on a forward commitment or when-issued basis can involve the
additional risk that the yield available in the market when the delivery takes
place actually may be higher than that obtained in the transaction itself. A
segregated account of the Series consisting of cash, cash equivalents or U.S.
Government securities or other high quality liquid debt securities at least
equal at all times to the amount of the forward commitment or when-issued
securities will be established and maintained at the Series' custodian bank.
Purchasing securities on a forward commitment or when-issued basis when the
Series is fully or almost fully invested may result in greater potential
fluctuation in the value of the Series' net assets and its net asset value per
share.

Foreign Securities

Since up to 10% of the Long-Term Bond Series' portfolio may consist of
securities of foreign issuers, the Series may be subject to investment risks as
to these securities that are greater in some respects than those incurred by a
Series which invests only in securities of U.S. domestic issuers. Such risks
include future political and economic developments, the possible imposition of
foreign withholding taxes on interest income payable on the securities, the
possible establishment of exchange controls, the possible seizure or
nationalization of foreign deposits, or the adoption of other foreign
governmental restrictions which might adversely affect the payment of principal
and interest on such securities.

MANAGEMENT OF 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, the Asset Allocation
Fund and the Long-Term Bond Series 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, the Money Market Series and the Short-Term
Government Bond Series each pay IAATC an annual fee of approximately .50% of
their respective average daily net assets. 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.

<PAGE>

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;
Bruce Finks, 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, Secretary; Robert
W. Weldon, Vice President--Finance and Treasurer; Richard F. Day, Controller.

<PAGE>

MANAGEMENT'S DISCUSSION OF FUNDS' PERFORMANCE

GROWTH FUND:

graph of below plot points, depicting Growth Fund performance vs. Standard &
Poor's Index goes here:

Growth 9,700 11,131 10,387 12,471 14,477 15,255 15,900 17,762 17,332 21,956 26,679

</TABLE>

The above graph reflects the impact of sales charges which were placed
on purchases. The maximum sales charge for the period indicated was
3.0%. Beginning October 28, 1996, no sales charges will be placed on
purchases.

The net asset value of the Growth Fund closed the fiscal year on June 30, 1996
at $18.88 per share. The figures below show historical compound annual returns
of Fund shares with dividends reinvested, as of June 30, 1996.

1 Year 5 Years 10 Years
------ ------- --------

Without Sales Charge 21.51% 11.83% 10.65%
Maximum Sales Charge Deducted 17.88% 11.14% 10.31%

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. Beginning October 28, 1996, no sales charge
will be deducted. The Maximum Sales Charge Deducted referred to in the above
chart applies to the Fund's performance during the periods indicated.

<PAGE>

picture of Bruce Finks, Investment Officer for the Growth Fund:
Bruce Finks Earned a B.S. in Business Administration from
here 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.

<PAGE>

ASSET ALLOCATION FUND:

graph of below plot points, depicting Asset Allocation Fund performance vs.
Merrill Lynch Corporate and Government Master Index and Lipper-Balanced Funds
Index goes here:

Asset Allocation 9,700 10,079 10,731 11,847 12,618 13,812 15,448 16,928 17,048 19,825 22,747

</TABLE>

The net asset value of the Asset Allocation Fund closed the fiscal year on June
30, 1996 at $13.39 per share. The figures below show historical compound annual
returns of Fund shares with dividends reinvested, as of June 30, 1996.

1 Year 5 Years 10 Years
------ ------- --------

Without Sales Charge 14.74% 10.49% 8.90%
Maximum Sales Charge Deducted 11.30% 9.83% 8.57%

<PAGE>

picture of John Jacobs, Investment Officer for the Asset
John Jacobs Allocation Fund: Earned a B.S. in Business and
here 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.

picture of Michael E. Marks: Earned his B.S. in Business
Michael Marks Administration from Washington University in St.
here 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.

<PAGE>

TAX EXEMPT BOND FUND:

graph of below plot points, depicting Tax Exempt Bond Fund performance vs.
Lehman Muni General Bond Index goes here:

Tax Exempt 9,700 10,299 11,091 12,217 12,857 13,892 15,289 16,694 16,383 17,614 18,547

</TABLE>

Note: The IAA Trust Tax Exempt Bond Fund's portfolio does not mirror the
Lehman Index.

The net asset value of the Tax Exempt Bond Fund closed the fiscal year on June
30, 1996 at $8.41 per share. The figures below show historical compound annual
returns of Fund shares with dividends reinvested, as of June 30, 1996.

1 Year 5 Years 10 Years
------ ------- --------

Without Sales Charge 5.30% 5.95% 6.70%
Maximum Sales Charge Deducted 2.12% 5.31% 6.37%

These returns assume all dividends and capital gains distributions were
reinvested and the maximum sales charge applied on initial investments.
Beginning October 28, 1996, no sales charge will be deducted. The Maximum Sales
Charge Deducted referred to in the above chart applies to the fund's performance
during the periods indicated. 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".

<PAGE>

picture of Mary S. Guinane, Investment Officer for the Tax
Mary S. Guinane Exempt Bond Fund: Earned a M.B.A. at Illinois State
here University and a B.A. in Psychology and Sociology at
St. Ambrose College. Ms. Guinane has been with IAA
Trust Company since 1981.

<PAGE>

TAXABLE FIXED INCOME SERIES FUND:

MONEY MARKET SERIES:

Robert L. Sammer, B.S., 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.

SHORT-TERM GOVERNMENT BOND SERIES:

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.

LONG-TERM BOND SERIES:

<PAGE>

FPS Services, Inc.

FPS Services, Inc. ("FPS"), 3200 Horizon Drive, P.O. Box 61503, King of Prussia,
Pennsylvania 19406-0903, 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. However, the Asset Allocation Fund, the Tax Exempt Bond Fund, and the
Taxable Fixed Income Series Fund are each required to pay a minimum annual fee
of $10,000 and the Growth Fund is required to pay a minimum annual fee of
$50,000 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 FPS Services, Inc. and the Funds or IAA Trust Company.

DISTRIBUTION OF THE FUNDS' SHARES

FPS Broker Services, Inc. ("FPBS") serves as the Distributor for the Funds on a
best efforts basis, pursuant to various Underwriting Agreements. The Distributor
is an affiliated company of FPS Services, Inc. ("FPS"), the Funds' servicing
agent, inasmuch as both the Distributor and FPS are under common ownership.

DISTRIBUTION PLANS

The shareholders of the Growth Fund, the Asset Allocation Fund, the Tax Exempt
Bond Fund, the Short-Term Government Bond Series and the Long-Term Bond Series
have each adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Money Market Series 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.

<PAGE>

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 Taxable Fixed Income Series 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 Money Market Series, 50,000,000 of its shares
are designated as Short-Term Government Bond Series, and 25,000,000 of its
shares are designated as Long-Term Bond Series. The remaining 75,000,000 shares
are undesignated.

Country Life Insurance Company

As of October 1, 1996, 446,787 shares or 9.42% 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 1, 1996, 96,228 shares or 12.20% 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.

Country Mutual Insurance Company

As of October 1, 1996, 248,175 shares or 11.85% 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 1, 1996, IAA Trust Company owned of record 1,913,648 shares or
40.37% of the issued and outstanding capital stock of the Growth Fund, 503,853
shares or 63.92% of the issued and outstanding capital stock of the Asset
Allocation Fund, and 26,655,025 shares or 79.25% of the issued and outstanding
capital stock of the Money Market Series.

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 "MANAGEMENT OF THE FUNDS".

<PAGE>

Shareholder inquiries should be directed to FPS Services, Inc., 3200 Horizon
Drive, P.O. Box 61503, King of Prussia, Pennsylvania 19406-0903, or call
toll-free 1 (800) 245-2100.

INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS, AND TAXES

Dividends and capital gains distributions may be automatically reinvested in
additional shares of a particular Fund/Series at net asset value, 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.

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.

ASSET ALLOCATION FUND,
SHORT-TERM GOVERNMENT BOND SERIES and
LONG-TERM BOND SERIES:

It is the policy of each of the Asset Allocation Fund, the Short-Term Government
Bond Series, and the Long-Term Bond Series 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.

TAX EXEMPT BOND FUND:

It is the policy of the Tax Exempt Bond Fund to pay monthly dividends from its
net investment income.

The Fund intends to qualify each fiscal year (under the Internal Revenue
Code of 1986 and any amendments thereto) to pay "exempt-interest dividends" to
their 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 shares.

<PAGE>

Shareholders of the 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
the 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 the Fund.

MONEY MARKET SERIES:

The Money Market Series 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 Series, 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 Series, which are accrued each day. Net income will be
calculated immediately prior to the determination of the net asset value per
share of the Series Since the net income of the Series (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 Series is
determined, the net asset value per share of the Series 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
Series representing the reinvestment of dividend income is reflected by an
increase in the number of shares of the Series in the account. Normally, the
Series 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
Series determined at any time is a negative amount, the net asset value per
share will be reduced below $1.00. The Series 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/SERIES:

The Board of Directors may revise the above dividend policies, or postpone the
payment of dividends, if a Fund/Series 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/Series 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/Series 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/Series 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.

<PAGE>

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.

PURCHASE OF SHARES

You may open an account by contacting FPS Broker Services, Inc., 3200
Horizon Drive, P.O. Box 61503, King of Prussia, Pennsylvania 19406-0903,
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 investment is
$1,000 for all Funds. The minimum subsequent investment amount is $100 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 FPS Broker Services Inc. ("FPBS"), 3200 Horizon Drive, P.O.
Box 61503, King of Prussia, Pennsylvania 19406-0903. Each check should be made
payable to a specific Fund. 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 $1,000.

Purchase Price

Shares of all Funds and Series 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." , or
IAA Trust ___________________ Series", whichever is appropriate, c/o FPS
Services, Inc., 3200 Horizon Drive, P.O. Box 61503, King of Prussia,
Pennsylvania 19406-0903. 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:

<PAGE>

UMB BANK, NA
ABA #10-10-00695
For: FPS Services, Inc.
Account #98-7037-071-9
IAA TRUST ________________ FUND (or SERIES)

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 $100 by mail and $1,000 by wire transfer.

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 FPBS or Country Capital Management Company.

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. 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.

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 Taxable Fixed
Income Series Fund . The minimum initial investment for each Fund is $100, with
no minimum for subsequent investments.

<PAGE>

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 plan holders will
receive monthly, quarterly or annual checks in the amount they designate.

VALUATION OF SHARES

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 Series
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 Series 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 Series, 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 Series 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.

<PAGE>

REDEMPTION OF 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 FPS Services, Inc. ("FPS"), as Transfer Agent, in
proper form. Accounts in the Money Market Series will earn daily dividends up to
the day before the date of redemption. Your redemption proceeds may be delayed
if you purchased the shares to be redeemed by check (including certified or
cashier checks) until such check has cleared and the Trust has collected good
funds for your purchase. Such collection may take 15 days or more.

You can redeem shares from an account -- by mail or by telephone, and with
respect to the Money Market Series only, by writing a check.

Redemptions by Mail

To redeem by mail, simply send a letter to:

IAA Trust Funds
c/o FPS Services, Inc.
P.O. Box 61503
King of Prussia, PA 19406-0903

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.

<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 Series 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 Series 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 other than
customary weekend and holiday closing, or (b) during which trading on the New
York Stock Exchange is

<PAGE>

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.

<PAGE>

IAA Trust Mutual Funds:
IAA Trust Growth Fund, Inc.
IAA Trust Asset Allocation Fund, Inc.
IAA Trust Tax Exempt Bond Fund, Inc.
IAA Trust Taxable Fixed Income Series Fund, Inc.
IAA Trust Money Market Series
IAA Trust Short-Term Government Bond Series
IAA Trust Long-Term Bond Series

Board of Directors:
Ronald R. Warfield
Herbert G. Allen
Charlot R. Cole
Nancy J. Erickson
William E. Klein, Sr.
Ailene Miller
Rollie D. Moore

Officers:

Ronald R. Warfield, President
Bruce Finks, Vice President
Gary E. Mede, Vice President
Richard M. Miller, Vice President
Rollie D. Moore, Vice President
Paul M. Harmon, Secretary
Robert W. Weldon, Treasurer
Richard F. Day, Controller

Investment Adviser:
IAA Trust Company
Bloomington, Illinois

Distributor:
FPS Broker Services, Inc.
King of Prussia, Pennsylvania

Transfer Agent:
FPS Services, Inc.
King of Prussia, Pennsylvania

Custodian:
IAA Trust Company
Bloomington, Illinois

Independent Accountants:
Coopers & Lybrand L.L.P.
Philadelphia, Pennsylvania

General Counsel
Paul M. Harmon, Esq.
Office of the General Counsel
Bloomington, IL

<PAGE>

Part B

STATEMENT OF ADDITIONAL INFORMATION

October 28, 1996

IAA TRUST GROWTH FUND, INC.
IAA TRUST ASSET ALLOCATION FUND, INC.
IAA TRUST TAX EXEMPT BOND FUND, INC.
IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.

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 Taxable Fixed Income
Series Fund, Inc. (the "Taxable Fixed Income Series Fund") which currently
consists of three Series: IAA Trust Money Market Series (the "Money Market
Series"); IAA Trust Short-Term Government Bond Series (the "Short-Term
Government Bond Series"); and IAA Trust Long-Term Bond Series (the "Long-Term
Bond Series"). This Statement of Additional Information is not a prospectus, but
should be read in conjunction with the Funds' Prospectus dated October 28, 1996.

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, FPS Broker Services, Inc., 3200
Horizon Drive, P.O. Box 61503, King of Prussia, PA 19406-0903 (formerly at #2
Elm Street, P.O. Box 874, Conshohocken, Pennsylvania 19428), or by calling
toll-free 1 (800) 245-2100.

TABLE OF CONTENTS

SUBJECT PAGE
- ------- ----
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...............
Exchange Privileges.............................................
Retirement Plans................................................
Automatic Investing.............................................
Systematic Withdrawal Plan......................................
Underwriter Compensation.............................................
Investment Performance Information...................................
Reports to Shareholders and Financial Statements.....................
Appendix.............................................................

<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

For information with respect to the Funds' individual investment objectives and
policies, see " Investment Objectives and Policies" 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, 1995 and 1996, the Growth Fund's portfolio
turnover rate was 31.84% and 32.95%, respectively. This Fund does not expect
that its turnover rate as of June 30, 1997 will vary significantly from that at
June 30, 1996.

For the fiscal years ended June 30, 1995, and 1996, the Asset Allocation Fund's
portfolio turnover rate was 21.03% and 33.77%, respectively. This Fund does not
expect that its turnover rate as of June 30, 1997 will vary significantly from
that at June 30, 1996.

For the fiscal years ended June 30, 1995 and 1996, the Tax Exempt Bond Fund's
portfolio turnover rate was 24.89% and 14.75%, respectively. This Fund does not
expect that its turnover rate as of June 30, 1997 will vary significantly from
that at June 30, 1996.

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:

o All Funds will not authorize or issue any class of senior securities.

o The Growth Fund, the Asset Allocation Fund, the Tax Exempt Bond Fund, the
Short-Term Government Bond Series and the Long-Term Bond Series 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 Series 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).

o All Funds will not underwrite or participate in the underwriting of
securities of other issuers.

o All Funds will not purchase or sell real estate, commodities, or commodity
contracts.

o 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).

<PAGE>

Restrictions Applicable to Certain Funds and Series:

The Growth Fund will not:

o Invest more than 5% of its assets in the securities of any one issuer.

o 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.

o Concentrate the investments of more than 25% of the total value of its
assets in any single industry.

The Asset Allocation Fund, the Short-Term Government Bond Series and the
Long-Term Bond Series will not:

o With respect to 75% of its assets, invest more than 5% of its assets in
the securities of any one issuer.

o 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.

o 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:

o 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.

o 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 Series will not:

o 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).

o Invest more than 5% of its total assets in the securities of any one issuer.

o 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

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.

All Funds will not:

o Invest in companies for purposes of exercising control or management.

o Buy from or sell portfolio securities to any of its Officers, Directors,
employees, Investment Advisers or Underwriters as principals except as
otherwise approved by the Board of Directors and in accordance with the
Investment Company Act of 1940.

<PAGE>

o 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.

o 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.

o 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.

All Funds will not:

o 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

Name and Position(s) Aggregate Total Principal Occupation(s) During Past Five Years
Age Held with Compensation Compensation
Fund(s) From Funds for From Funds
Fiscal Year & Fund
Ended 6/30/96 Complex Paid
to Directors
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>

Ronald R. Director 0 0 Director and President: Illinois Agricultural Association,
Warfield(2) since 1994 Agricultural Holding Co., CC Services, Inc.(4), Country Capital
(52) President 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: AgriVisor Services,
Inc., and IAA Trust Company, 1993 to date; Coordinating Committee
Member of GROWMARK, Inc. and Chairman, Board of Trustees, IAA
Foundation(2), 1993 to date; Director and President: IAA Trust
Growth Fund, Inc., IAA Trust Asset Allocation Fund, Inc., IAA Trust
Tax Exempt Bond Fund, Inc., IAA Trust Taxable Fixed Income Series
Fund, Inc.(1), Illinois Agricultural Service Company, 1994 to date;
Country Medical Plans, Inc., 1996 to date; President: AgriVisor
Services, Inc., 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. Director: American
Farm Bureau Federation and certain of its affiliated companies,
1995 to date. Farmer.

Herbert G. Director 1,400 1,400 Director: IAA Trust Growth Fund, Inc., IAA Trust Asset Allocation
Allen since 1987 Fund, Inc., IAA Trust Tax Exempt Bond Fund, Inc., and IAA Trust
(66) Taxable Fixed Income Series Fund, Inc.(1), 1987 to date. Farmer.

<PAGE>

Charlot R. Director 0 0 Property Developer, 1979 to date; Member Macoupin-Greene County
Cole since 1996 Cooperation Extension Council (Formerly Macoupin County Cooperative
(55) Extension Council), 1992 to date and President 1995 to date;
Secretary/Treasurer; Cole Farms, Inc., 1993 to date. Farmer

Nancy J. Director 700 700 President of McHatton Farm Management, Inc., 1981 to date; Director:
Erickson since 1995 IAA Growth Fund, Inc., IAA Trust Asset Allocation Fund, Inc., IAA
(39) Trust Taxable Fixed Income Series Fund, Inc.(1), and IAA Trust Tax
Exempt Bond Fund, Inc., 1995 to date. Farmer.

William E. Director 1,050 1,050 Director: Illinois Agricultural Association, Illinois Agricultural
Klein, Sr.(2) since 1993 Holding Co., CC Services, Inc.(4), Country Casualty Insurance
(68) 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., IAA Trust Asset Allocation Fund, Inc., IAA
Trust Tax Exempt Bond Fund Inc., and IAA Trust Taxable Fixed Income
Series Fund, Inc.(1), 1993 to date. Farmer.

Ailene Director 1,400 1,400 McLean County (Illinois) Board Member: 1986 to date; Member: IAA
Miller since 1991 Foundation(2), Trustee-Emeritus, 1988 to date; Director: IAA Trust
(70) Growth Fund, Inc., IAA Trust Asset Allocation Fund, Inc., IAA Trust
Tax Exempt Bond Fund, Inc., and IAA Trust Taxable Fixed Income
Series Fund, Inc.(1), 1991 to date.

Rollie D. Director 0 0 Director and Vice President: Illinois Agricultural Association,
Moore since 1996 Illinois Agricultural Holding Co., CC Services, Inc.(4), Country
(47) 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 Trust Company, 1993 to
date; Vice Chairman, Board of Trustees, IAA Foundation(2), 1993 to
date; Vice President: IAA Trust Growth Fund, Inc., IAA Trust Asset
Allocation Fund, Inc., IAA Trust Tax Exempt Bond Fund, Inc., and IAA
Trust Taxable Fixed Income Series Fund, Inc.(1), 1994 to date; Vice
President and Director: IAA Trust Company, 1994 to date and Country
Medical Plans, Inc., 1996 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; Country Capital Management
Company, 1989 to 1992; IAA Trust Growth Fund, Inc., IAA Trust Asset
Allocation Fund, Inc., IAA Trust Taxable Fixed Income Series Fund,
Inc.(1), and IAA Trust Tax Exempt Bond Fund, Inc., 1989 to 1993;
AgriVisor Services, Inc., 1991 to 1992. Farmer.

Bruce Finks Vice 0 0 Vice President -- Investments: IAA Trust Company, 1996 to date; Vice
(43) President President: IAA Trust Growth Fund, Inc., IAA Trust Asset Allocation
since 1996 Fund, Inc. IAA Trust Tax Exempt Bond Fund, Inc., and IAA Trust
Taxable Fixed Income Series Fund, Inc.(1), 1996 to date.

Gary E. Vice 0 0 Executive Vice President: IAA Trust Company, 1977 to date; Vice
Mede President President--Investments: Country Capital Management Company, 1977 to
(59) since 1978 date; Vice President: IAA Trust Growth Fund, Inc., IAA Trust Asset
Allocation Fund, Inc., and IAA Trust Tax Exempt Bond Fund, Inc.,
1978 to date; IAA Trust Taxable Fixed Income Series Fund, Inc.(1),
1981 to date.

Richard M. Vice 0 0 Senior Vice President and Senior Trust Officer: IAA Trust Company,
Miller President 1991 to date (prior thereto Senior Vice President and Trust Officer);
(58) since 1992 Vice President: IAA Trust Growth Fund, Inc., IAA Trust Asset
Allocation Fund, Inc., IAA Trust Tax Exempt Bond Fund, Inc., and
IAA Trust Taxable Fixed Income Series Fund, Inc.(1), 1992 to date.

<PAGE>

Paul M. Secretary 0 0 General Counsel: Illinois Agricultural Association and Affiliated
Harmon since 1995 Companies, 1996 to date. Deputy General Counsel: Illinois
(54) Agricultural Association and Affiliated Companies, 1991 to date.
Secretary: Country Capital Management Company, IAA Trust Growth Fund,
Inc., IAA Trust Asset Allocation Fund, Inc., IAA Trust Taxable Fixed
Income Series Fund, Inc.(1), IAA Trust Tax Exempt Bond Fund, Inc.,
1995 to date; and IAA Trust Company, 1995 to date. General Counsel:
each of the Companies and IAA Trust Company, 1996 to date; prior
thereto Deputy General Counsel.

Robert W. Treasurer 0 0 Vice President--Finance and Treasurer: IAA Trust Company, Illinois
Weldon since 1975 Agricultural Association, Country Life Insurance Company, Country
(62) 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., 1975 to date; IAA Trust Asset
Allocation Fund, Inc. and IAA Trust Tax Exempt Bond Fund, Inc., 1978
to date; IAA Trust Taxable Fixed Income Series Fund, Inc.(1), 1981 to
date; AgriVisor Services, Inc., 1984 to date.

Richard F. Controller 0 0 Controller: IAA Trust Company, 1974 to date; IAA Trust Growth Fund,
Day since 1992 Inc., IAA Trust Asset Allocation Fund, Inc., IAA Trust Tax Exempt
(56) Bond Fund, Inc., and IAA Trust Taxable Fixed Income Series Fund,
Inc.(1), 1992 to date.

</TABLE>

(1) IAA Trust Taxable Fixed Income Series Fund, Inc. was formerly IAA
Trust Money Market Fund, Inc

(2) Interested Directors: all directors classified by the Funds as
interested directors also serve as directors of Illinois
Agricultural Association (IAA), Illinois Agricultural Holding Co.
(IAHC), Country Life Insurance Company, Country Mutual Insurance
Company (CLIC). IAHC owns 99.9% of the outstanding stock of CLIC
and 100% of the outstanding stock of IAA Trust Company (IAATC).
Ronald R. Warfield and Rollie D. Moore also serve as directors of
IAATC and as president and vice president, respectively, of CLIC,
IAACT, IAHC and IAA.

(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.

Directors of the Funds are entitled to payment ($200 for the Growth
Fund, $50 for each of the Asset Allocation, Tax Exempt Bond and Taxable Fixed
Income Series Funds) for each day or a portion thereof spent in a meeting or
meetings of the Board of Directors or while engaged in special work
authorized by the President or the Board of Directors and to reimbursement of
expenses for each directors' meeting attended of while engaged in a special
work authorized by the President or by the Board of Directors, but no fees
are paid to any director if such director is also a director, officer or
employee of the Investment Adviser of the Funds. Directors and officers
receive no other compensation from the Funds for their services. During the
fiscal year ended June 30, 1996, the aggregate amount of fees and expenses
paid to directors and officers was $4,550.00.

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

Country Life Insurance Company

As of October 1, 1996, Country Life Insurance Company ("Country Life") owned
446,787 shares or 9.42% of the outstanding shares of the Growth Fund, and
96,228 shares or 12.20% of the outstanding shares of the Asset Allocation
Fund.

<PAGE>

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 1, 1996 Country Mutual Insurance Company ("Country Mutual")
owned 248,175 shares or 11.85% 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 1, 1996, IAA Trust Company owned of record 1,913,648 shares or
40.37% of the issued and outstanding capital stock of the Growth Fund,
503,853 shares or 63.92% of the issued and outstanding capital stock of the
Asset Allocation Fund, and 26,655,025 shares or 79.25% of the issued and
outstanding capital stock of the Money Market Series.

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 1, 1996, 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 " MANAGEMENT OF 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 " MANAGEMENT OF 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

<PAGE>

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
or Series 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, 1994, 1995, and 1996,
IAA Trust Company received $497,296, $476,164, and $580,601, 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, 1994, 1995, and
1996, IAA Trust Company received $58,895, $67,275, and $78,490,
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, 1994, 1995, and
1996, IAA Trust Company received, $100,624, $93,589, and $93,863,
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 Series pays approximately .50% of 1% in any fiscal year of
its average net assets. For the fiscal year ended June 30, 1994, IAA Trust
Company received $182,832 for investment advisory services, 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 totaling $86,900. For the fiscal year ended June 30,
1996, IAA Trust Company received $201,429 for investment advisory services.
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 Short-Term Government Bond Series pays approximately .50% of 1% in any
fiscal year of its average net assets. 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 Long-Term Bond Series pays approximately .75% of 1% in any fiscal year of
its average net assets. 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

FPS 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, the Tax
Exempt Bond Fund the Short-Term

<PAGE>

Government Bond Series, and the Long-Term Bond Series 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, 1996, the Growth Fund
paid $8,912 to FPBS from its Distribution Plan. During the fiscal year ended
June 30, 1996, the Asset Allocation Fund paid $8,538 to FPBS from its
Distribution Plan. During the fiscal year ended June 30,1996, the Tax Exempt
Bond Fund paid $15,380 to FPBS from its Distribution Plan. See "DISTRIBUTION
PLANS" in the Funds' Prospectus.

The Transfer Agent

FPS Services, Inc. ("FPS"), 3200 Horizon Drive, P.O. Box 61503, King of
Prussia, PA 19406-0903 (formerly at #2 Elm Street, P.O. Box 874,
Conshohocken, Pennsylvania 19428) 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, 1994, 1995, and
1996, $83,386, $68,022, and $67,980, respectively. These fees were for
transfer and dividend disbursing agent services.

The Asset Allocation Fund paid FPS, for the fiscal years ended June 30, 1994,
1995, and 1996, $15,771, $11,101, and $7,695, 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, 1994,
1995, and 1996, $28,536, $21,475, and $14,263, respectively. These fees were
for transfer and dividend disbursing agent services.

The Money Market Series paid FPS for the fiscal years ended June 30, 1994,
1995, and 1996, $71,526, $41,216, and $39,872, 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, 1994, 1995, and
1996, $45,128, $44,673, and $48,794, respectively.

The Asset Allocation Fund paid FPS for the fiscal years ended June 30, 1994,
1995, and 1996, $25,089, $25,883, and $28,996, respectively.

The Tax Exempt Bond Fund paid FPS for the fiscal years ended June 30, 1994,
1995, and 1996, $29,049, $30,271, and $35,352, respectively.

The Money Market Series paid FPS for the fiscal years ended June 30, 1994,
1995, and 1996, $39,106, $35,458, and $37,196, 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

<PAGE>

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, .0010% 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, the Money Market Series, and the
Taxable Fixed Income Series Fund is $10,000.

For the fiscal year ended June 30, 1996, the Growth Fund paid $79,358 to FPS
for administrative services.

For the fiscal year ended June 30, 1996, the Asset Allocation Fund paid
$10,737 to FPS for administrative services.

For the fiscal year ended June 30, 1996, the Tax Exempt Bond Fund paid
$19,820 to FPS for administrative services.

For the fiscal year ended June 30, 1996, the Money Market Series paid $42,050
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

GROWTH FUND, and 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,

<PAGE>

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, 1994, 1995, and 1996, brokerage
commissions paid by the Growth Fund totaled $135,169, $64,267, and $58,079,
respectively. No brokerage transactions were allocated to brokers or dealers
for the sale of the Fund's shares; such sales are made by FPS Broker
Services, Inc. and Country Capital Management Company through their own
representatives.

During the fiscal years ended June 30, 1994, 1995, and 1996, brokerage
commissions paid by the Asset Allocation Fund totaled $4,558, $6,980, and
$5,540, respectively. No brokerage transactions were allocated to brokers or
dealers for the sale of the Fund's shares; such sales are made by FPS 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.

TAX EXEMPT BOND FUND, SHORT-TERM GOVERNMENT BOND SERIES, AND LONG-TERM BOND
SERIES:

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 Tax Exempt Bond 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 Tax Exempt Bond 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 Tax Exempt Bond
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 each 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

<PAGE>

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 each 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, 1994, 1995, and 1996, 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 FPS 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.

MONEY MARKET SERIES:

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, 1994, 1995, and 1996, the Money Market
Series incurred no brokerage commissions.

There may be occasions when portfolio transactions for this Series 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 Series, they are

<PAGE>

effected only when a Series, acting on the advice of IAA Trust Company,
believes that to do so is in the interest of such Series. 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.

Exchange Privileges

A shareholder may exchange his/her shares of one IAA Trust Fund or Series for
shares of another IAA Trust Fund or Series 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 or Series are exchanged for shares of another Fund or Series, the
minimum investment requirement of such other Fund or Series must be met. 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 FPS Broker Services, Inc. ("FPSB"), c/o Fund
Plan Services, Inc., 3200 Horizon Drive, P.O. Box 61503, King of Prussia,
PA 19406-0903.

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 FPSB will be recorded. Neither the
Funds, Country Capital Management Company, or FPSB will be responsible for
the authenticity of the exchange instructions received by telephone.

An exchange is effected by redemption of shares of one Fund or Series and the
issuance of shares of the other Fund or Series selected, and only after
delivery of the current Prospectus. With respect to an exchange among the
Growth Fund, the Asset Allocation Fund, the Tax Exempt Bond Fund, the
Short-Term Government Bond Series, and the Long-Term Bond Series, 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 Series, assuming such Series maintains its share
value at $1.00 per share, an exchange of this Series' shares for shares of
another IAA Trust Fund or Series should 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, the Money Market Series, the
Short-Term Government Bond Series, or the Long-Term Bond Series.
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. Please note that tax laws with respect to retirement accounts are
being amended with changes that will become effective in 1997.

For individuals eligible to establish an Individual Retirement Account (IRA),
IAA Trust Company sponsors a

<PAGE>

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 FPSB 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,
the Tax Exempt Bond Fund, the Short-Term Government Bond Series, and the
Long-Term Bond Series, each redemption of shares may result in a gain or loss
which is reportable by the investor on his income tax return.

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.

FPS 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

<PAGE>

Shares of the Funds are continuously offered to the public through FPS Broker
Services, Inc. ("FPSB").

Currently, out of commissions to be received, FPSB has agreed to pay all
expenses incident to the distribution of shares. If commissions are not
sufficient to pay these expenses, FPSB will look to the Funds' Investment
Adviser for reimbursement. For the fiscal year ended June 30, 1996, FPSB
received no underwriting fees.

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 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. 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 Calculations

With respect to the Growth Fund, the Asset Allocation Fund, the Tax Exempt
Bond Fund, the Long-Term Government Bond Series, and the Short-Term Bond
Series the Funds and Series 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:

Average Annual Total Return = left (ERV over P right) sup {1/n} - 1

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.

The Funds and Series 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:

<PAGE>

Aggregate Total Return = (ERV) over P - 1

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.

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 and Series
should not be used to compare an investment in a Fund's or Series' 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, the Tax Exempt Bond Fund, the
Long-Term Government Bond Series, and the Short-Term Bond Series the yield of
each of these Funds or Series is calculated by dividing the net investment
income per share (as described below) earned by the Fund or Series 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 or Series' 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:

YIELD = 2 [ ( a - b + 1) - 1 ]
-------
cd

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.

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 or Series is recognized by accruing 1/360 of the stated

<PAGE>

dividend rate of the security each day that the security is in the Fund or
Series. Except as noted below, interest earned on any debt obligations held
by a Fund or Series is calculated by computing the yield to maturity of each
obligation held by that Fund or Series 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 or Series. 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 or Series to all shareholder accounts in
proportion to the length of the base period and the Fund's or Series' 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%.

<PAGE>

7-day Yield Calculations

The Money Market Series' standard yield quotations as they appear in reports
and other material distributed by the Series 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 Series 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:

365/7
Effective Yield = [(base period return + 1) ]-1

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. Please refer to the Prospectus for specific
information.

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, 1996 was 2.62%. 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. Please refer to the
Prospectus for specific information.

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, 1996 was 4.25%. 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. Please refer to the
Prospectus for specific information.

The above yield results in a tax-equivalent yield of 6.64% for the thirty
days ended June 30, 1996.

MONEY MARKET SERIES:

The yield and effective yield of this Series will vary in response to
fluctuations in interest rates and in the expenses of the Fund. For the seven
days ended June 30, 1996 the Fund's annualized standard (cash) yield was
4.49% and its annualized effective (compound) yield was 4.59%. 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>

REPORTS TO SHAREHOLDERS AND FINANCIAL STATEMENTS

Reports to Shareholders

Shareholders will receive unaudited semi-annual reports describing the Funds'
investment operations and annual financial statements audited by independent
certified public accountants.

Financial Statements

The Funds' financial statements, including the notes thereto, dated as of
June 30, 1996, which have been audited by Coopers & Lybrand L.L.P., are
incorporated by reference from the Funds' 1996 Annual Report to Shareholders.

<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:

<PAGE>

"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.

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.

Descriptions of Short-Term Instruments

<PAGE>

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 Series
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.

<PAGE>

IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.

PART C - OTHER INFORMATION

Item 24. Financial Statements and Exhibits:

(a) Financial Statements for Money Market Series included in Part A:
Financial Highlights

Financial Statements for Money Market Series incorporated by
reference in Part B:

From Annual Report to Shareholders dated June 30, 1996

(1) Portfolio Highlights

(2) Schedule of Investments as of June 30, 1996

(3) Statement of Assets and Liabilities as of June 30, 1996

(4) Statement of Operations for the Year Ended June 30, 1996

(5) Statements of Changes in Net Assets for the Years ended June
30, 1996 and 1995

(6) Notes to Financial Statements

(7) Financial Highlights

(8) Report of Independent Accountants

(b) Exhibits

(1) Charter. See Articles of Incorporation dated April 14, 1981,
as amended June 24, 1996, which are incorporated herein by
reference to and were filed electronically with Post-Effective
Amendment filing Number 19, on August 14, 1996.

(2) Bylaws. Bylaws of IAA Trust Taxable Fixed Income Series Fund,
Inc., as amended November 23, 1992 -- filed herewith.

(3) Voting Trust Agreement. None.

(4) a. Specimen stock certificate. See Exhibit 4 to Amendment
No. 1 to Form N-8B-1 filed March 1966, and incorporated
herein by reference.

b. Share account application form -- filed herewith.

(5) Investment Advisory Contracts.

a. Investment Advisory Agreement for IAA Trust Money Market
Fund, Inc., effective September 29, 1992 -- filed
herewith.

b. Investment Advisory Agreement, effective October 1, 1996
for IAA Trust Short-Term Government Bond Series -- filed
herewith.

c. Investment Advisory Agreement, effective October 1, 1996
for IAA Trust Long-Term Bond Series -- filed herewith.

(6) Underwriting Agreements.

a. Underwriting Agreement effective August 1, 1995 is
incorporated herein by reference and was filed
electronically with Post-Effective Amendment Number 19
on August 14, 1996.

b. Amendment dated July 29, 1996 to Underwriting Agreement
is incorporated herein by reference and was filed
electronically with Post-Effective Amendment Number 19
on August 14, 1996.

(7) Bonus, profit sharing, pension or similar agreements. None.
<PAGE>

(8) Custodian Agreements.

a. Custodian Agreement, effective March 31, 1992 for IAA
Trust Money Market Fund, Inc. -- filed herewith.

b. Custodian Agreement, effective October 1, 1996 for IAA
Trust Short-Term Government Bond Series -- filed
herewith.

c. Custodian Agreement, effective October 1, 1996 for IAA
Trust Long-Term Bond Series -- filed herewith.

(9) Other material contracts not made in the ordinary course of
business.

a.i. Transfer Agent Services Agreement, effective August 1,
1995 is incorporated herein by reference to and was
filed electronically with Post-Effective Amendment
Number 19 on August 14, 1996.

ii. Amendment dated July 29, 1996 to Transfer Agent Services
Agreement, reflecting the name change and the creation
of two new Series is incorporated herein by reference to
and was filed electronically with Post-Effective
Amendment Number 19 on August 14, 1996.

b.i. Administration Agreement, effective August 1, 1995 is
incorporated herein by reference to and was filed
electronically with Post-Effective Amendment Number 19
on August 14, 1996.

ii. Amendment dated July 29, 1996 to Administration
Agreement, reflecting the name change and the creation
of two new Series is incorporated herein by reference to
and was filed electronically with Post-Effective
Amendment Number 19 on August 14, 1996.

c.i. Accounting Services Agreement, effective August 1, 1995
is incorporated herein by reference to and was filed
electronically with Post-Effective Amendment Number 19
on August 14, 1996.

ii. Amendment dated July 29, 1996 to Accounting Services
Agreement, reflecting the name change and the creation
of two new Series is incorporated herein by reference to
and was filed electronically with Post-Effective
Amendment Number 19 on August 14, 1996.

(10) Opinion and consent of Counsel. See Exhibit A to 24f-2 Notice
filed August 1996, and incorporated herein by reference.

(11) Consent of Independent Accountants -- filed herewith.

(12) All financial statements omitted from Item 23. See Item 24(a)
above.

(13) Agreements regarding initial capital.

a. Subscription Agreement. Not Applicable.

b. Letter of Intent of initial subscriber of shares. Not
Applicable.

(14) Copies of model plan used in establishment of any retirement
plan in conjunction with which Registrant offers its
securities -- filed herewith.

(15) Plan pursuant to Rule 12b-1 describing financing of
distribution of Registrant's shares.

a. 12b-1 Plan Agreement with FPS Broker Services, Inc.,
effective October 1, 1996 for IAA Trust Short-Term
Government

<PAGE>

Bond Series -- filed herewith.

b. 12b-1 Plan Agreement with FPS Broker Services, Inc.,
effective October 1, 1996 for IAA Trust Long-Term Bond
Series -- filed herewith.

(16) Schedule for computation of each performance quotation. Not
applicable.

(27) Electronic Filers -- Financial Data Schedules attached.

Item 25. Persons Controlled by or under Common Control with Registrant.

IAA Control Chart -- filed herewith.

Item 26. Number of Holders of Securities.

(1) (2)
Title of Class Number of Record Holders
-------------- ------------------------
Common

As of October 1, 1996 2013

Item 27. Indemnification.

See Item 1.14 to Form N-1R filed for the fiscal year ended June 30,
1977, and incorporated herein by reference. The Registrant also
purchases Errors and Omissions insurance with Directors and Officers
liability coverage.

Item 28. Business and Other Connections of Investment Adviser.

As of September 29, 1992, IAA Trust Company became the Registrant's
Investment Adviser. The Trust Company serves as Investment Adviser
to IAA Trust Growth Fund, Inc., IAA Trust Asset Allocation Fund,
Inc., IAA Trust Tax Exempt Bond Fund, Inc., and IAA Trust Taxable
Fixed Income Series Fund, Inc. The Trust Company also provides
investment services to the Country Companies Insurance Group and
exercises fiduciary powers as permitted by its charter and the State
of Illinois.

Other substantial business, professional, vocational or employment
activities of each director and officer of the Registrant's
Investment Adviser during the past two fiscal years are:

Substantial Business Activities
Name and Position During Past Two Fiscal Years
- --------------------------- ---------------------------------------------
Ronald R. Warfield, See information on "Directors and Officers of
Director and President the Funds" - Part B.

Rollie D. Moore, See information on "Directors and Officers of
Director and Vice President the Funds" - Part B.

<PAGE>

O. Eugene Barkley, Director: AgriVisor Services, Inc., Illinois
Director Agricultural Association, CC Services, Inc.,
Country Casualty Insurance Company, Country
Investors Life Assurance Company, Country Life
Insurance Company, Country Medical Plans, Inc.,
Country Mutual Insurance Company, Country
Preferred Insurance Company, GROWMARK, Inc.,
Illinois Agricultural Holding Co., IAA Trust
Company. Farmer.

Robert L. Phelps, Director: AgriVisor Services, Inc., Illinois
Director Agricultural Association, CC Services, Inc.,
Country Casualty Insurance Company, Country
Investors Life Assurance Company, Country Life
Insurance Company, Country Mutual Insurance
Company, Country Preferred Insurance Company,
Illinois Agricultural Holding Co., IAA Trust
Company. Farmer.

Darell D. Sarff, Director: Illinois Agricultural Association,
Director AgriVisor Services, Inc., CC Services, Inc.,
Country Casualty Insurance Company, Country
Investors Life Assurance Company, Country Life
Insurance Company, Country Mutual Insurance
Company, Country Preferred Insurance Company, IAA
Communications Company, IAA Trust Company,
Illinois Agricultural Holding Co. Farmer.

Gary E. Mede, C.F.A., See information on "Directors and Officers of
Executive Vice President the Funds" - Part B.
and Trust Officer

Bruce Finks, See information on "Directors and Officers
Vice President the Funds" - Part B.
Investments

<PAGE>
Richard M. Miller, See information on "Directors and Officers of
Senior Vice President--Trusts the Funds" - Part B.
and Senior Trust Officer

Richard F. Day, See information on "Directors and Officers of
Vice President and Controller the Funds" - Part B.

David Tipsword, Vice President--Pension Trusts, Trust Officer:
Vice President--Pension IAA Trust Company.
Trusts and Trust Officer

Connie Denison Vice President--Management Information Systems
Vice President--Management and Assistant Trust Officer: IAA Trust Company.
Information Systems and
Assistant Trust Officer

Bernard Dornedon Vice President--Equity Investments: IAA Trust
Vice President-- Company.
Equity Investments

Paul M. Harmon, See information on "Directors and Officers
Secretary and General Counsel the Funds" - Part B

Robert W. Weldon, See information on "Directors and Officers of
Treasurer the Funds" - Part B.

Item 29. Principal Underwriters

(a) As of October 28, 1996, in addition to acting as the Registrant's
distributor, FPS Broker Services, Inc. also served as distributor of
the shares of IAA Trust Growth Fund, Inc., IAA Trust Tax Exempt Bond
Fund, Inc., and IAA Trust Taxable Fixed Income Series Fund, Inc. FPS
Broker Services, Inc., the principal underwriter for the
Registrant's securities, currently acts as principal underwriter for
the following entities:

The Brinson Funds
CT&T Funds
Dreman Mutual Fund Group

Fairport Funds
Farrell Alpha Strategies
First Mutual Funds
Focus Trust, Inc.

The HomeState PA Growth Fund
Matthews International Funds
McM Funds
Smith Breeden Series Fund
Smith Breeden Short Duration U.S. Government Fund
Smith Breeden Trust
The Stratton Funds, Inc.
Stratton Growth Fund, Inc.
Stratton Monthly Dividend Shares, Inc.
<PAGE>

The Timothy Plan

(b) The table below sets forth certain information as to the
Underwriter's Directors, Officers and Control Persons:

Name and Principal Position and Offices Position and Offices
Business Address with Underwriter with Registrant
- ------------------ -------------------- --------------------

Kenneth J. Kempf Director, and None
3200 Horizon Drive President
King of Prussia, PA 19406-0903

Lynne M. Cannon Vice President and None
3200 Horizon Drive Principal
King of Prussia, PA 19406-0903

Rocco J. Cavalieri Director and None
3200 Horizon Drive Vice President
King of Prussia, PA 19406-0903

Gerald J. Holland Director, None
3200 Horizon Drive Senior Vice President and
King of Prussia, PA 19406-0903 Principal

Joseph M. O'Donnell, Esq. Director and None
3200 Horizon Drive Vice President
King of Prussia, PA 19406-0903

Sandra L. Adams Assistant Vice None
3200 Horizon Drive President and
King of Prussia, PA 19406-0903 Principal

Mary P. Efstration Secretary None
3200 Horizon Drive
King of Prussia, PA 19406-0903

John H. Leven Treasurer None
3200 Horizon Drive
King of Prussia, PA 19406-0903

James W. Stratton may be considered a control person of the Underwriter due to
his direct or indirect ownership of Fund/Plan Services, Inc., the parent of the
Underwriter.

Item 30. Location of Accounts and Records.
<PAGE>

The following accounts, books and other documents of Registrant
required to be maintained by Section 31(a) of the 1940 Act and the
Rule(17 CFR 270.31a-1 to 31a-3) promulgated thereunder are
maintained by Barbara H. Tolle, Senior Vice President Accounting
Services, 3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA
19406-0903.

1. Journals, general ledger and supporting ledger.

2. Record of the proof of money balance in all ledger accounts in
form of trial balances.

3. Separate ledger accounts showing each shareholder of record
and the number of shares of capital stock held.

IAA Trust Company maintains record of all portfolio purchases and
sales with supporting authorization and records at 808 IAA Drive,
Bloomington, Illinois 61702.

The Certificate of Incorporation of Registrant is maintained in
safekeeping by Robert W. Weldon, Treasurer, 1701 Towanda Avenue,
Bloomington, Illinois 61702.

The Bylaws of Registrant and minute books of stockholders, directors
and directors' committee meetings are maintained by Paul M. Harmon,
Secretary, 1701 Towanda Avenue, Bloomington, Illinois 61702.

Item 31. Management Services. Not Applicable.

Item 32. Undertakings.

a. If requested to do so by the holders of at least 10% of the
outstanding shares of either IAA Trust Short-Term Governement
Bond Series or IAA Trust Long-Term Bond Series, the Fund will
call a meeting of the shareholders of the respective series
for the purpose of voting upon the question of removal of a
director or directors and to assist in communications with
other shareholders as required by section 16(c) of the
Investment Company Act of 1940.

b. Registrant will file a post-effective amendment for each of
IAA Trust Short-Term Government Bond Series and IAA Trust
Long-Term Bond Series containing unaudited financial
statements for within four to six months from the effective or
commencement date of such new Series.

c. Not applicable.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to rule
485(b) under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment No. 20 to its registration Statement under the Securities Act of 1933
and Amendment No. 21 to its Registration Statement under the Investment Company
Act of 1940 to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Bloomington and the State of Illinois on this 30th Day
of September, 1996.

IAA TRUST TAXABLE FIXED INCOME SERIES
FUND, INC.
(Registrant)

By: /s/ Ronald R. Warfield
------------------------------------
Ronald R. Warfield, President

Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 20 to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.

SIGNATURE TITLE DATE

/s/ Ronald R. Warfield President and Director September 30, 1996
- --------------------------- (Principal Executive Officer)
Ronald R. Warfield

/s/ Robert W. Weldon Treasurer September 30, 1996
- --------------------------- (Principal Financial and
Robert W. Weldon Accounting Officer)

/s/ Herbert G. Allen Director September 30, 1996
- ---------------------------
Herbert G. Allen

/s/ Charlot R. Cole Director September 30, 1996
- ---------------------------
Charlot R. Cole

/s/ Nancy J. Erickson Director September 30, 1996
- ---------------------------
Nancy J. Erickson

/s/ William E. Klein. Sr. Director September 30, 1996
- ---------------------------
William E. Klein, Sr.

/s/ Ailene Miller Director September 30, 1996
- ---------------------------
Ailene Miller

/s/ Rollie D. Moore Director September 30, 1996
- ---------------------------
Rollie D. Moore

<PAGE>

IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.

Exhibit Index to Part "C"
of
Post-Effective Amendment

Item No. Description
- -------- -----------

99(b)(2) By Laws

99(b)(4)(b) Share account application form

99(b)(5)(a) Investment Advisory Agreement, as amended, for
Money Market Series

99(b)(5)(b) Investment Advisory Agreement for
Short-Term Government Bond Series

99(b)(5)(c) Investment Advisory Agreement for
Long-Term Bond Series

99(b)(8)(a) Custodian Agreement, as amended, for
Money Market Series

99(b)(8)(b) Custodian Agreement for Short-Term Government Bond Series

99(b)(8)(c) Custodian Agreement for Long-Term Bond Series

99(b)(11) Consent of Independent Accountants

99(b)(14) Model Retirement Plan

99(b)(15)(a) 12b-1 Distribution Plan Agreement for
Short-Term Government Bond Series

99(b)(15)(b) 12b-1 Distribution Agreement Plan for Long-Term Bond Series

99(b)(27) Financial Data Schedules

(25) IAA Control Chart

As Amended November 23, 1992

BYLAWS
OF
IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.

ARTICLE I

Stockholders

Section 1. Place of Meeting. All meetings of the stockholders shall be held at
the principal office of the Corporation in the State of Illinois, or at such
other place as may be designated in the Notice of Meeting by the Board of
Directors.

Section 2. Annual Meeting. Except as otherwise set forth in this section, the
annual meeting of the stockholders of the Corporation shall be held on the last
Monday in September of each year, (or if said day be a legal holiday, then on
the next succeeding day not a legal holiday), for the purpose of electing
Directors for the ensuing year and for the transaction of such other business as
may be properly brought before the meeting, provided that the Board of Directors
may select any other date in the month of September for the holding of any
annual meeting. The Corporation need not, however, hold an annual meeting in any
year in which the election of directors is not required to be acted upon under
the Investment Company Act of 1940. If a meeting of stockholders is required to
elect directors, the meeting shall be held no later than 120 days after the
occurrence of the event requiring the meeting and the meeting shall be
designated as the annual meeting of stockholders for that year. (4/23/90)
(4/27/92) (11/23/92)

Section 3. Special or Extraordinary Meetings. Special or extraordinary meetings
of the stockholders for any purpose or purposes may be called by the President
or a majority of the Board of Directors, and shall be called by the Secretary
upon receipt of the request in writing signed by stockholders holding not less
than one quarter in amount of the entire capital stock issued and outstanding
and entitled to vote thereat. Such request shall state the purpose or purposes
of the meeting.

Section 4. Notice of Meetings of Stockholders. Not less than ten days and not
more than ninety days written or printed notice of every meeting of
stockholders, stating the time and place thereof (and the general nature of the
business proposed to be transacted at any special or extraordinary meeting),
shall be given to each stockholder

-1-
<PAGE>

entitled to vote thereat by leaving the same with him or at his residence or his
usual place of business or by mailing it, postage prepaid, and addressed to him
at his address as it appears on the books of the Corporation.

No notice of the time, place or purpose of any meeting of
stockholders need be given to any stockholder who attends in person or by proxy
or to any stockholder who, in writing executed and filed with the records of the
meeting, either before or after the holding thereof, waives such notice.

Section 5. Closing of Transfer Books: Record Dates. The Board of Directors may
fix the time, not exceeding twenty days preceding the date of any meeting of
stockholders, any dividend payment date or any date for the allotment of rights,
during which the books of the Corporation shall be closed against transfers of
stock. If such books are closed for the purpose of determining stockholders
entitled to notice of or to vote at a meeting of stockholders, such books shall
be closed for at least ten days immediately preceding such meeting. In lieu of
providing for the closing of the books against transfers of stock as aforesaid,
the Board of Directors may fix, in advance, a date, not exceeding sixty days and
not less than ten days preceding the date of any meeting of stockholders and not
exceeding sixty days preceding any dividend payment date or any date for the
allotment of rights, as a record date for the determination of the stockholders
entitled to notice of and to vote at such meeting, or entitled to receive such
dividends or rights, as the case may be; and only the stockholders of record on
such date shall be entitled to notice of and to vote at such meeting or to
receive such dividends or rights, as the case may be.

Section 6. Quorum, Adjournment of Meetings. The presence in person or by proxy
of the holders of record of a majority of the shares of the capital stock of the
Corporation issued and outstanding and entitled to vote thereat, shall
constitute a quorum at all meetings of the shareholders. If at any meeting of
the stockholders there shall be less than a quorum present, the stockholders
present at such meeting may, without further notice, adjourn the same from time
to time until a quorum shall attend, but no business shall be transacted at the
resumption of any such adjourned meeting except such as might have been lawfully
transacted had the meeting not been adjourned.

Section 7. Voting and Inspectors. At all meetings of stockholders every
stockholder of record entitled to vote thereat shall be entitled to one vote for
each share of stock standing in his name on the books of the Corporation (and
such stockholders of record holding fractional shares shall have proportionate
voting rights as provided in the Articles of Incorporation) on the date for the
determination of stockholders entitled to vote at such meeting, either in person
or by proxy appointed by instrument in writing subscribed by such stockholder or
his duly authorized attorney. No proxy which is dated more than eleven months
before the meeting at which it is offered shall be accepted, unless such proxy
shall, on its face, name a longer period for which it is to remain in force.

-2-
<PAGE>

All elections shall be had and all questions decided by a majority
of the votes cast at a duly constituted meeting, except as otherwise provided in
the Articles of Incorporation or these Bylaws or by specific statutory provision
superseding the restrictions and limitations contained in the Articles of
Incorporation or in these Bylaws.

At any election of Directors, the Board of Directors prior thereto
may, or, if they have not so acted, the chairman of the meeting may, and upon
the request of the holders of ten percent (l0%) of the stock entitled to vote at
such election, shall appoint two inspectors of election. No candidate for the
office of Director shall be appointed such Inspector.

The chairman of the meeting may cause a vote by ballot to be taken
upon any election or matter, and such vote shall be taken upon the request of
the holders of ten percent (l0%) of the stock entitled to vote on such election
or matter.

Section 8. Conduct of Stockholders' Meetings. The meetings of the stockholders
shall be presided over by the President, or if he is not present, by a Vice
President, or if neither the President nor a Vice President is present, by a
chairman to be elected at the meeting. The Secretary of the Corporation, if
present, shall act as secretary of such meetings, or if he is not present, an
Assistant Secretary shall so act; if neither the Secretary nor an Assistant
Secretary is present, then the meeting shall elect its secretary.

Section 9. Concerning Validity of Proxies, Ballots, Etc. At every meeting of the
stockholders, all proxies shall be received and taken in charge of and all
ballots shall be received and canvassed by the Secretary of the meeting, who
shall decide all questions touching the qualification of voters, the validity of
the proxies, and the acceptance or rejection of votes, unless inspectors of
election shall have been appointed as provided in Section 7, in which event such
inspectors of election shall decide all such questions.

ARTICLE II

Board of Directors

Section 1. Number and Tenure of Office. The business and property of the
Corporation shall be conducted and managed by a Board of Directors consisting of
seven Directors, which number may be increased or decreased as provided in
Section 3 of this Article. Each Director shall hold office until the annual
meeting of stockholders of the Corporation next succeeding his election or until
his successor is duly elected and qualified, whichever occurs first. Directors
need not be stockholders. (Effective 9/28/92)

Section 2. Vacancies. In case of any vacancy in the Board of Directors through
death, resignation or other cause, a majority of the remaining Directors may act
to fill

-3-
<PAGE>

such vacancy provided that immediately after filling such vacancy at least
two-thirds of the Directors then serving on the Board of Directors were elected
by the holders of the outstanding voting securities of the Corporation at an
annual or special meeting of stockholders called for that purpose. Such vacancy
may be filled by a majority of the remaining Directors, although such majority
is less than a quorum and any such successors so elected shall hold office until
the next annual meeting of the stockholders of the Corporation or until his
successor is duly elected and qualified, whichever first occurs. Further, if at
any time after the first annual meeting of stockholders, less than a majority in
number of the Board of Directors of the Corporation shall not have been elected
by the holders of the outstanding voting securities of the Corporation at an
annual or special meeting called for that purpose, then the Board of Directors
or proper officers of the Corporation shall forthwith call a special meeting of
the stockholders to be held as soon as possible and in no event later than 60
days for the purpose of filling any existing vacancies on the Board of
Directors.

Section 3. Increase or Decrease in Number of Directors. The number of Directors
may be decreased or increased by an amendment to the Bylaws. In no case shall
the number of Directors be less than three. In the event of a vacancy on the
Board of Directors caused by an increase in the number of Directors, the Board
of Directors by the vote of a majority of the entire Board may elect Directors
to fill any such vacancies until the next annual meeting of the shareholders or
until their successors are duly elected and qualified, whichever occurs first.

Section 4. Election of Entire New Board. If at any time after the first annual
meeting of stockholders of the Corporation a majority of the Directors in office
shall consist of Directors elected by the Board of Directors, a meeting of the
stockholders shall be called forthwith for the purpose of electing the entire
Board of Directors, and the terms of office of the Directors then in office
shall terminate upon the election and qualification of such Board of Directors.

Section 5. Place of Meeting. The Directors may hold their meetings, have one or
more offices, and keep the books of the Corporation outside the State of
Maryland, at any office or offices of the Corporation or at any other place as
they may from time to time by resolution determine, or in the case of meetings,
as shall be specified or fixed in the respective notices or waivers of notice
thereof.

Section 6. Regular Meetings. Regular meetings of the Board of Directors shall be
held at such time and on such notice, if any, as the Directors may from time to
time determine.

The annual meeting of the Board of Directors shall be held as soon
as practicable after the annual meeting of the stockholders for the election of
Directors in those years such a stockholders' meeting is held. In other years,
the annual meeting of

-4-
<PAGE>

the Board of Directors shall be held on the last Monday in September (or if said
day be a legal holiday, then the next succeeding day not a legal holiday),
provided that the Board of Directors may select any other date in the month of
September for the holding of its annual meeting. (11/23/92)

Section 7. Special Meetings. Special meetings of the Board of Directors may be
held from time to time upon call of the President or of a majority of the
Directors, by oral or telegraphic or written notice duly served on or sent or
mailed to each Director not less than one day before such meeting. No notice
need be given to any Director who attends in person or to any Director who, in
writing executed and filed with the records of the meeting either before or
after the holding thereof, waives such notice. Such notice or waiver of notice
need not state the purpose or purposes of such meeting.

Section 8. Quorum. A majority of the Directors shall constitute a quorum for the
transaction of business. If at any meeting of the Board there shall be less than
a quorum present, a majority of those present may adjourn the meeting from time
to time until a quorum shall have been obtained. The act of the majority of the
Directors present at any meeting at which there is a quorum shall be the act of
the Directors, except as may be otherwise specifically provided by statute, by
the Articles of Incorporation, by these Bylaws or by any contract or agreement
to which the Corporation is a party.

Section 9. Executive Committee. The Board of Directors may, in each year, by the
affirmative vote of a majority of the entire Board, elect from the Directors an
Executive Committee to consist of such number of Directors (not less than three)
as the Board may from time to time determine. The chairman of the Committee
shall be elected by the Board of Directors. The Board of Directors by such
affirmative vote shall have power at any time to change the members of such
Committee and may fill vacancies in the Committee by election from the
Directors. When the Board of Directors is not in session, the Executive
Committee shall have and may exercise any or all of the powers of the Board of
Directors in the management of the business and affairs of the Corporation
(including the power to authorize the seal of the Corporation to be affixed to
all papers which may require it) except as provided by law or by any contract or
agreement to which the Corporation is a party and except the power to increase
or decrease the size of, or fill vacancies on, the Board, to remove or appoint
executive officers or to dissolve or change the permanent membership of the
Executive Committee, or the power to make or amend the Bylaws of the
Corporation. The Executive Committee may fix its own rules of procedure, and may
meet when and as provided by such rules or by resolution of the Board of
Directors, but in every case the presence of a majority shall be necessary to
constitute a quorum. In the absence of any member of the Executive Committee,
the members thereof present at any meeting, whether or not they constitute a
quorum, may appoint a member of the Board of Directors to act in the place of
such absent member.

Section 10. Other Committees. The Board of Directors, by the affirmative
vote of a

-5-
<PAGE>

majority of the entire Board, may appoint other committees which shall in each
case consist of such number of members (not less than two) of the Board of
Directors and shall have and may exercise such powers as the Board may determine
in the resolution appointing them. A majority of all members of any such
committee may determine its action and fix the time and place of its meetings,
unless the Board of Directors shall otherwise provide. The Board of Directors
shall have power at any time to change the members and powers of any such
committee, to fill vacancies and to discharge any such committee.

Section 11. Compensation of Directors. No Director shall receive any stated
salary or fees from the Corporation for his services as such Director if such
Director is, otherwise than by reason of being such Director, affiliated (as
such term is defined by the Investment Company Act of l940) with the Corporation
or with its investment adviser. Except as provided in the preceding sentence,
Directors shall be entitled to receive such compensation from the Corporation
for their services as may from time to time be voted by the Board of Directors.

ARTICLE III

Officers

Section 1. Executive Officers. The executive officers of the Corporation shall
be chosen by the Board of Directors as soon as may be practicable after the
annual meeting of the stockholders. These shall include a President (who shall
be the principal executive officer of the Corporation, and shall be a Director),
one or more Vice Presidents (the number thereof to be determined by the Board of
Directors), a Secretary and a Treasurer. The Board of Directors may also in its
discretion appoint Assistant Secretaries, Assistant Treasurers, and other
officers, agents and employees, who shall have such authority and perform such
duties as the Board or the Executive Committee may determine. The Board of
Directors may fill any vacancy which may occur in any office. Any two offices,
except those of President and Vice President, may be held by the same person,
but no officer shall execute, acknowledge or verify any instrument in more than
one capacity, if such instrument is required by law or these Bylaws to be
executed, acknowledged or verified by two or more officers.

Section 2. Term of Office. The term of office of all officers shall be one year
or until their respective successors are chosen, whichever occurs first. Any
Officers may be removed from office at any time with or without cause by the
vote of a majority of the entire Board of Directors.

Section 3. Power and Duties. The Officers of the Corporation shall have such
powers and duties as generally pertain to their respective offices, as well as
such powers and

-6-
<PAGE>

duties as may from time to time be conferred on them by the Board of Directors
or the Executive Committee. In the absence of the President, a Vice President
shall exercise the powers and perform the duties of the President.

ARTICLE IV

Capital Stock

Section 1. Certificate of Shares. Certificates for shares of stock of the
Corporation shall not be issued to any stockholder unless requested by the
stockholder. Certificates for shares of stock shall be in such form as the Board
of Directors may from time to time prescribe. No certificate shall be valid
unless it is signed by the President or a Vice President and by the Secretary or
an Assistant Secretary or the Treasurer or an Assistant Treasurer of the
Corporation and sealed with its seal or unless it bears the facsimile signatures
of such officers and a facsimile of such seal.

-7-
<PAGE>

Section 2. Transfer of Shares. In cases where certificates for shares have not
been issued, the shares of the Corporation shall be transferable on the books of
the Corporation by the person in whose name the shares are held on the books of
the Corporation or by his duly authorized attorney or legal representative upon
receipt by the Corporation of written notice from such person, his duly
authorized attorney or legal representative requesting the transfer of such
shares accompanied by proper instruments of assignment and transfer and with
such proof of the authenticity of the signatures as the Corporation may
reasonably require.

In case of shares of the Corporation for which certificates have
been issued, the shares shall be transferable on the books of the Corporation by
the holder thereof in person or by his duly authorized attorney or legal
representative, upon surrender and cancellation of certificates for the same
number of shares of the same class, duly endorsed or accompanied by proper
instruments of assignment and transfer, with such proof of the authenticity of
the signatures as the Corporation may reasonably require.

Section 3. Stock Ledgers. The stock ledgers of the Corporation, containing the
names and addresses of the stockholders and the number of shares held by them
respectively shall be kept at the principal offices of the Corporation or at the
office of the Transfer Agent, and shall during the usual business hours of every
business day be open for the inspection of any person or persons who hold and
have held, for at least six months, in the aggregate, five percent of the
outstanding shares of the Corporation.

Section 4. Lost, Stolen or Destroyed Certificates. The Board of Directors or the
Executive Committee may determine the conditions upon which a new certificate of
stock of the Corporation of any class may be issued in place of a certificate
which is alleged to have been lost, stolen or destroyed; and may, in their
discretion, require the owner of such certificate or his legal representative to
give bond, with sufficient surety to the Corporation to indemnify it against any
and all loss of claims which may arise by reason of the issue of a new
certificate in the place of the one so lost, stolen or destroyed.

ARTICLE V

Corporate Seal

The Board of Directors shall provide a suitable corporate seal, in such form and
bearing such inscriptions as it may determine.

ARTICLE VI

-8-
<PAGE>

Fiscal Year

The fiscal year of the Corporation shall begin on the first day of July and
shall end on the thirtieth day of June in each year.

-9-
<PAGE>

ARTICLE VII

Indemnification
(1/25/82)

This Corporation shall indemnify to the fullest extent permitted by law, subject
always to any limitations imposed by the Federal Securities Laws, directors,
officers, employees or agents or former directors, officers, employees or
agents, their heirs, executors and administrators or anyone having served at
this Corporation's request in a similar capacity with any corporation,
partnership, joint venture, trust or other enterprise affiliated with this
Corporation, or any corporation, partnership, joint venture, trust or other
enterprise of which this Corporation is a stockholder or creditor, against any
expenses, liability or settlement based on asserted liability or incurred by
them solely by reason of their being or having been directors, officers,
employees or agents of this Corporation or at this Corporation's request, having
been directors, officers, employees or agents of any other corporation,
partnership, joint venture, trust or other enterprise affiliated with this
Corporation or any other corporation, partnership, joint venture, trust or other
enterprise of which this Corporation is a stockholder or creditor and from which
they are not entitled to be indemnified. The foregoing right of indemnification
shall be in addition to and not exclusive of any other rights to which a
director, officer, employee or agent may be entitled.

Absent a court determination that any party entitled to indemnification is not
liable on the merits or guilty of the disabling conduct as provided in Section
l7(h) of the Investment Company Act of l940, any decision to indemnify must be
based on a reasonable determination, after a review of the facts, that the
disabling conduct did not occur as determined by independent counsel or
disinterested non-party directors.

Any advancements to an indemnified party under this provision must be secured by
(l) the indemnitee providing security or (2) company insuring itself against
loss or (3) a majority of a quorum of disinterested non-party directors or
independent legal counsel in a written opinion determining, based on a review of
readily available facts, that there is reason to believe that the indemnitee
ultimately will be entitled to indemnification.

To the extent permitted by law, subject always to any limitations imposed by the
Federal Securities Laws, this Corporation may purchase and maintain insurance on
behalf of its directors, officers, employees or agents or former directors,
officers, employees or agents or anyone having served at this Corporation's
request in a similar capacity with any corporation, partnership, joint venture,
trust or other enterprise affiliated with this Corporation or any corporation,
partnership, joint venture, trust or other enterprise of which this Corporation
is a stockholder or creditor, against any expenses, liability or settlement
based on asserted liability or incurred by them by reason of their having been
directors, officers, employees or agents of this Corporation or at this
Corporation's

-10-
<PAGE>

request, having been directors, officers, employees or agents of any other
corporation, partnership, joint venture, trust or other enterprise affiliated
with this Corporation or any corporation, partnership, joint venture, trust or
other enterprise of which this Corporation is a stockholder or creditor, whether
or not this Corporation would have the power to indemnify them against such
liability or settlement.

ARTICLE VIII

Amendment of Bylaws

The Bylaws of the Corporation may be altered, amended, added to or repealed by
the vote of three-fourths of the entire Board of Directors.

-11-

IAA TRUST FUNDS APPLICATION
<TABLE>

<S> <C>
1. AMOUNT INVESTED ($1,000 minimum) [ ] IAA Trust Growth Fund
FORM OF PAYMENT - INITIAL INVESTMENT [ ] IAA Trust Asset Allocation Fund
[ ] Check for $_______ enclosed - payable to FUND(s)/SERIES of your choice [ ] IAA Trust Tax Exempt Bond Fund
[ ] NAV Purchase [ ] Farm Bureau Member - Membership No. ________________ IAA Trust Taxable Fixed
[ ] Customer of IAA Trust Company Income Series Fund
[ ] Employee of IAA or affiliate [ ] Money Market Series
[ ] Broker/Dealer [ ] Short-Term Government Bond Series
[ ] My Dealer purchased ______________ of the FUND/SERIES on ____________________ [ ] Long-Term Bond Series
Shares Date

2. REGISTRATION (Please Print)
INDIVIDUAL *(Joint ownership with rights of survivorship unless otherwise noted)

_________________________________________________________________________________________________________________________________
First name Middle Initial Last Name Social Security #

_________________________________________________________________________________________________________________________________
Jt. Owner First Name* Middle Initial Last Name Social Security #

GIFT TO MINORS

_________________________________________________________________________________________________________________________________
Name of Custodian (name one only) As Custodian For (name one only)

Under the ______________________________________________________ Uniform Gift to Minors Act _________________________
State Minor's Social Security #

CORPORATIONS, PARTNERSHIPS, TRUSTS and OTHERS (complete Corporate Resolution)

_________________________________________________________________________________________________________________________________
Name of Corporation, Partnership, Trust or Other

_________________________________________________________________________________________________________________________________
Tax I.D. # Name of Trustee(s) Date of Trust

Citizen of: [ ] United States [ ] Other (Please Indicate) _______________________________________________________________________

3. MAILING ADDRESS OF RECORD AND TELEPHONE NUMBER(S)

_________________________________________________________________________________________________________________________________
Street Address & Apt. # City State Zip

(_________)______________________________________ (_________)_____________________________________
Residence Number Business Number

4. DISTRIBUTION OPTIONS (Please indicate one - Distributions will be reinvested if no option is checked)
[ ] Automatic Compounding (dividends & capital gains in additional shares)
[ ] Cash Dividends (dividends in cash, capital gains in additional shares)
[ ] All Cash (dividends & capital gains in cash)

5. SYSTEMATIC WITHDRAWAL PLAN (Minimum investment $5,000)

A check will be sent each [ ] month or [ ] quarter in the amount of $_____________to you at your address of record unless
otherwise noted. Monthly minimum amount is $25.00.

6. TELEPHONE EXCHANGE and REDEMPTION OPTION

[ ] Permits exchanges between accounts with identical registrations.

[ ] I (we) authorize FPS Services to honor telephone instructions for my (our) account. Neither the Fund nor FPS Services will be
liable for properly acting upon telephone instructions believed to be genuine.

Please attach a voided check on the Transfer account or complete below.

_________________________________________________________________________________________________________________________________
Name of Bank City State

_________________________________________________________________________________________________________________________________
Account Number [ ] Checking [ ] Savings Bank Routing Number (nine digits)

7. SIGNATURE AND CERTIFICATION, And Back-up Withholding Certification

Under the penalties of perjury, I (we) certify the following:
1. I (We) certify that the number shown on this form is my (our) correct tax identification number.
2. I (We) am not (are not) subject to backup withholding as a result of failure to report all interest
and dividends, or the Internal Revenue Service has notified me (us) that I (we) am (are) no longer
subject to backup withholding.

Citizen of: [ ] United States [ ] Other (Please indicate)

"The Internal Revenue Service does not require your consent to any provision of this document other than the
certifications required to avoid backup withholding".

____________________________________________________________________________________________ _________________
Signature [ ] Owner [ ] Custodian [ ] Trustee Date
</TABLE>
<PAGE>

<TABLE>
<S> <C>
Signature of Joint Owner (if applicable) Date

[ ] Check box if you have been notified by the IRS that you are subject to backup withholding.

8. INVESTMENT DEALER INFORMATION

_________________________________________________________________________________________________________________________________
Firm Name Rep. Name & Number Authorized Signature

_________________________________________________________________________________________________________________________________
Street Address City State Zip
</TABLE>

INVESTMENT ADVISORY AGREEMENT

IAA TRUST MONEY MARKET FUND, INC.

AGREEMENT, effective commencing on September 29, 1992, between IAA Trust
Company, an Illinois corporation, (the "Adviser") and IAA Trust Money Market
Fund, Inc., a Maryland corporation, (the "Fund").

WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end, diversified management investment
company.

WHEREAS, the Fund wishes to retain the Adviser to render investment
advisory services to the Fund, and the Adviser is willing to furnish such
services to the Fund;

NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the Fund and the Adviser as follows:

1. Appointment. The Fund hereby appoints the Adviser to act as investment
adviser to the Fund for the periods and on the terms set forth in this
Agreement. The Adviser accepts such appointment and agrees to furnish the
services herein set forth, for the compensation herein provided.

2. Investment Advisory Duties. Subject to the supervision of the Directors
of the Fund, the Adviser will (a) provide a program of continuous investment
management for the Fund in accordance with the Fund's investment objectives,
policies and limitations as stated in the Fund's Prospectus and Statement of
Additional Information included as part of the Fund's Registration Statement
filed with the Securities and Exchange Commission, as they may be amended from
time to time, copies of which shall be provided to the Adviser by the Fund; (b)
make investment decisions for the Fund; and (c) place orders to purchase and
sell securities for the Fund.

judgments regarding individual investments, general economic conditions and
trends and long-range investment policy. The Adviser will determine the
securities, instruments, repurchase agreements, options and other investments
and techniques that the Fund will purchase, sell, enter into or use, and will
provide an ongoing evaluation of the Fund's portfolio. The Adviser will
determine what portion of the Fund's portfolio shall be invested in securities
and other assets, and what portion if any, should be held uninvested.

The Adviser further agrees that, in performing its duties hereunder,
it will:

(a) comply with the 1940 Act and all rules and regulations
thereunder, the Internal Revenue Code (the "Code") and all other applicable
federal and state laws and regulations, and with any applicable procedures
adopted by the Directors;

(b) use reasonable efforts to manage the Fund so that it will
qualify, and continue to qualify, as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder;

(c) place orders pursuant to its investment determinations for the
Fund directly with the issuer, or with any broker or dealer, in accordance with
applicable policies expressed in the Fund's Prospectus and/or Statement of
Additional Information and in accordance with applicable legal requirements;

(d) furnish to the Fund whatever statistical information the Fund
may reasonably request with respect to the Fund's assets or contemplated
investments. In addition, the Adviser will keep the Fund and the Directors
informed of developments materially affecting the Fund's portfolio and shall, on
the Adviser's own initiative, furnish to the Fund from time to time whatever
information the Adviser believes appropriate for this purpose;

(e) make available to the Fund's administrator, Fund/Plan Services,
Inc. (the "Administrator"), and the Fund, promptly upon their request, such
copies of its investment records and ledgers with respect to the Fund as may be
required to assist the Administrator and the Fund in their compliance with
applicable laws and regulations. The Adviser will furnish the Directors with
such periodic and special reports regarding the Fund as they may reasonably
request;
<PAGE>

(f) immediately notify the Fund in the event that the Adviser or any
of its affiliates (1) becomes aware that it is subject to a statutory
disqualification that prevents the Adviser from serving as investment adviser
pursuant to this Agreement; or (2) becomes aware that it is the subject of an
administrative proceeding or enforcement action by the Securities and Exchange
Commission ("SEC") or other regulatory authority. The Adviser further agrees to
notify the Fund immediately of any material fact known to the Adviser respecting
or relating to the Adviser that is not contained in the Fund's Registration
Statement regarding the Fund, or any amendment or supplement thereto, but that
is required to be disclosed thereon, and of any statement contained therein that
becomes untrue in any material respect.

3. Allocation of Charges and Expenses. Except as otherwise specifically
provided in this Section 3, the Adviser shall pay the compensation and expenses,
including office expenses, of all its directors, officers and employees who
serve as directors, officers and employees of the Fund (including the Fund's
share of payroll taxes), and the Adviser shall make available, without expense
to the Fund, the service of its directors, officers and employees who may be
duly elected directors and officers of the Fund, subject to their individual
consent to serve and to any limitations imposed by law.

The Adviser shall not be required to pay any expenses of the Fund
other than those specifically allocated to the Adviser in this Section 3. In
particular, but without limiting the generality of the foregoing, the Adviser
shall not be responsible, except to the extent of the reasonable compensation of
such of the Fund's employees as are directors, officers or employees of the
Adviser whose services may be involved, for the following expenses of the Fund:
organization and certain offering expenses of the Fund (including out-of-pocket
expenses, but not including the Adviser's overhead and employee costs); fees
payable to the Adviser and to any other Fund advisers or consultants; legal
expenses, auditing and accounting expenses; interest expenses; telephone, telex,
facsimile, postage and other communications expenses; taxes and governmental
fees; fees, dues and expenses incurred by or with respect to the Fund in
connection with membership in investment company trade organizations; cost of
insurance relating to fidelity coverage for the Fund's directors, officers and
employees, fees and expenses of the Fund's Administrator or of any custodian,
subcustodian, transfer agent, registrar, or dividend disbursing agent of the
Fund; payments to the Administrator for maintaining the Fund's financial books
and records and calculating its daily net asset value; other payments for
portfolio pricing or valuation services to pricing agents, accountants, bankers
and other specialists, if any; expenses of preparing share
<PAGE>

certificates; other expenses in connection with the issuance, offering,
distribution or sale of securities issued by the Fund; expenses relating to
investor and public relations; expenses of registering and qualifying shares of
the Fund for sale; freight, insurance and other charges in connection with the
shipment of the Fund's portfolio securities; brokerage commissions or other
costs of acquiring or disposing of any portfolio securities or other assets of
the Fund, or of entering into other transactions or engaging in any investment
practices with respect to the Fund; expenses of printing and distributing
Prospectuses, Statements of Additional Information, reports, notices and
dividends to stockholders; costs of stationery; any litigation expenses; costs
of stockholders' and other meetings; the compensation and all expenses
(specifically including travel expenses relating to the Fund's business) of
officers, directors and employees of the Fund who are not officers, directors,
employees, or otherwise interested persons of the Adviser.

4. Compensation. As compensation for the services provided and expenses
assumed by the Adviser under this Agreement, the Fund will pay the Adviser on
the tenth day of each calendar month an advisory fee computed daily at an annual
rate equal to 3/4ths of 1% of the Fund's average daily net assets. The value of
net assets of the Fund shall always be determined pursuant to the applicable
provisions of the Articles, the Registration Statement and the 1940 Act. If the
determination of net asset value is suspended for any particular business day,
then for the purposes of this Section 4, the value of the net assets of the Fund
as last determined shall be deemed to be the value of its net assets for that
day. If the determination of the net asset value of the shares of the Fund has
been so suspended for a period including any month end when the Adviser's
compensation is payable at the end of such month shall be computed on the basis
of the value of the net assets of the Fund as last determined (whether during or
prior to such month). If the Fund determines the value of the net assets of its
portfolio more than once on any day, then the last such determination
thereof on that day shall be deemed to be the sole determination thereof on that
day for the purposes of this Section 4.

5. Books and Records. The Adviser agrees to maintain such books and
records with respect to its services to the Fund as are required by Section 31
under the 1940 Act, and rules adopted thereunder, and by other applicable legal
provisions, and to preserve such records for the periods and in the manner
required by that Section, and those rules and legal provisions. The Adviser also
agrees that records it maintains and preserves pursuant to Rules 31a-1 and 31a-2
under the 1940 Act and otherwise in connection with its services hereunder are
the property of the Fund and will be surrendered promptly to the Fund upon
<PAGE>

its request. The Adviser further agrees that it will furnish to regulatory
authorities having the requisite authority any information or reports in
connection with its services hereunder which may be requested in order to
determine whether the operations of the Fund are being conducted in accordance
with applicable laws and regulations.

6. Standard of Care and Limitation of Liability. The Adviser shall
exercise its best judgment in rendering the services provided by it under this
Agreement. The Adviser shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Fund or the holders of the Fund's shares
in connection with the matters to which this Agreement relates, provided that
nothing in this Agreement shall be deemed to protect or purport to protect the
Adviser against any liability to the Fund or to holders of the Fund's shares to
which the Adviser would otherwise be subject by reason of willful misfeasance,
bad faith or negligence on its part in the performance of its duties or by
reason of the Adviser's reckless disregard of its obligations and duties under
this Agreement. As used in this Section 6, the term "Adviser" shall include any
officers, directors, employees, or other affiliates of the Adviser performing
services with respect to the Fund.

7. Services Not Exclusive. It is understood that the services of the
Adviser are not exclusive, and that nothing in this Agreement shall prevent the
Adviser from providing similar services to other investment companies or to
other series of investment companies, or from engaging in other activities,
provided such other services and activities do not, during the term of this
Agreement, interfere in a material manner with the Adviser's ability to meet its
obligations to the Fund hereunder. When the Adviser recommends the purchase or
sale of a security for other investment companies and other clients, and at the
same time the Adviser recommends the purchase or sale of the same security for
the Fund, it is understood that in light of its fiduciary duty to the Fund, such
transactions will be executed on a basis that is fair and equitable to the Fund.
In connection with purchases or sales of portfolio securities for the account of
the Fund, neither the Adviser nor any of its directors, officers or employees
shall act as a principal or agent or receive any commission. If the Adviser
provides any advice to its clients concerning the shares of the Fund, the
Adviser shall act solely as investment counsel for such clients and not in any
way on behalf of the Fund.

8. Duration and Termination. This Agreement shall continue until September
29, 1994, and thereafter shall continue automatically for successive annual
periods, provided such continuance is specifically approved at least annually by
(i) the Directors or (ii) a vote of a "majority" (as
<PAGE>

defined in the 1940 Act) of the Fund's outstanding voting securities (as defined
in the 1940 Act), provided that in either event the continuance is also approved
by a majority of the Directors who are not "interested persons" (as defined in
the 1940 Act) of any party to this Agreement, by vote cast in person at a
meeting called for the purpose of voting on such approval. Notwithstanding the
foregoing, this Agreement may be terminated: (a) at any time without penalty by
the Fund upon the vote of a majority of the Directors or by vote of the majority
of the Fund's outstanding voting securities, upon sixty (60) days' written
notice to the Adviser or (b) by the Adviser at any time without penalty, upon
sixty (60) days' written notice to the Fund. This Agreement will also terminate
automatically in the event of its assignment (as defined in the 1940 Act).

9. Amendments. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) a majority of the outstanding
voting securities of the Fund, and (ii) a majority of the Directors, including a
majority of Directors who are not interested persons of any party to this
Agreement, cast in person at a meeting called for the purpose of voting on such
approval, if such approval is required by applicable law.

10. Miscellaneous.

(a) This Agreement shall be governed by the laws of the State of
Illinois, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act or rules or orders of the SEC thereunder.

(b) The captions of this Agreement are included for convenience only
and in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
<PAGE>

(c) If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule, or otherwise, the remainder of this
Agreement shall not be affected thereby and, to this extent, the provisions of
this Agreement shall be deemed to be severable.

(d) Nothing herein shall be construed as constituting the Adviser as
an agent of the Fund.

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of September 29, 1992.

IAA TRUST MONEY MARKET FUND, INC.

By:__________________________________
President

IAA TRUST COMPANY

By:_________________________________
Executive Vice President

INVESTMENT ADVISORY AGREEMENT

IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.

(Short-Term Government Bond Series)

AGREEMENT, effective commencing on October 1, 1996, between IAA Trust Company,
an Illinois corporation, (the "Adviser") and IAA Trust Taxable Fixed Income
Series Fund, Inc., a Maryland corporation, IAA Trust Short-Term Government Bond
Series (the "Fund").

WHEREAS, the Fund is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as an open-end, diversified management investment
company.

WHEREAS, the Fund wishes to retain the Adviser to render investment advisory
services to the Fund with respect to the capital received from the sale of the
Fund's IAA Trust Short-Term Government Bond Fund Common Stock, and the Adviser
is willing to furnish such services to the Fund;

NOW, THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between the Fund and the Adviser as follows:

1. Appointment. The Fund hereby appoints the Adviser to act as investment
adviser to the Fund for the periods and on the terms set forth in this
Agreement with respect to the capital received from the sale of the Fund's
IAA Trust Short-Term Government Bond Fund Common Stock. The Adviser
accepts such appointment and agrees to furnish the services herein set
forth, for the compensation herein provided.

2. Investment Advisory Duties. Subject to the supervision of the Directors of
the Fund, the Adviser will (a) provide a program of continuous investment
management for the Fund in accordance with the Fund's investment
objectives, policies and limitations as stated in the Fund's Prospectus
and Statement of Additional Information included as part of the Fund's
Registration Statement filed with the Securities and Exchange Commission
("SEC"), as they may be amended from time to time, copies of which shall
be provided to the Adviser by the Fund; (b) make investment decisions for
the Fund; and (c) place orders to purchase and sell securities for the
Fund.

In performing its investment management services to the Fund hereunder,
the Adviser will provide the Fund with ongoing investment guidance and
policy direction, including oral and written research, analysis, advice,
statistical and economic data and judgments regarding individual
investments, general economic conditions and trends and long-range
investment policy. The Adviser will determine the securities, instruments,
repurchase agreements, options and other investments and techniques that
the Fund will purchase, sell, enter into or use, and will provide an
ongoing evaluation of the Fund's portfolio. The Adviser will determine
what portion of the Fund's portfolio shall be invested in securities and
other assets, and what portion if any, should be held uninvested.

The Adviser further agrees that, in performing its duties hereunder, it
will:

(a) comply with the 1940 Act and all rules and regulations thereunder,
the Internal Revenue Code (the "Code") and all other applicable
federal and state laws and regulations, and with any applicable
procedures adopted by the Directors, including, but not limited to,
the Fund's Code of Ethics;
<PAGE>

(b) use reasonable efforts to manage the Fund so that it will qualify,
and continue to qualify, as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder;

(c) place orders pursuant to its investment determinations for the Fund
directly with the issuer, or with any broker or dealer, in
accordance with applicable policies expressed in the Fund's
Prospectus and/or Statement of Additional Information and in
accordance with applicable legal requirements;

(d) furnish to the Fund whatever statistical information the Fund may
reasonably request with respect to the Fund's assets or contemplated
investments. In addition, the Adviser will keep the Fund and the
Directors informed of developments materially affecting the Fund's
portfolio and shall, on the Adviser's own initiative, furnish to the
Fund from time to time whatever information the Adviser believes
appropriate for this purpose;

(e) make available to the Fund's administrator, Fund/Plan Services, Inc.
(the "Administrator"), and the Fund, promptly upon their request,
such copies of its investment records and ledgers with respect to
the Fund as may be required to assist the Administrator and the Fund
in their compliance with applicable laws and regulations. The
Adviser will furnish the Directors with such periodic and special
reports regarding the Fund as they may reasonably request;

(f) immediately notify the Fund in the event that the Adviser or any of
its affiliates (1) becomes aware that it is subject to a statutory
disqualification that prevents the Adviser from serving as
investment adviser pursuant to this Agreement; or (2) becomes aware
that it is the subject of an administrative proceeding or
enforcement action by the SEC or other regulatory authority. The
Adviser further agrees to notify the Fund immediately of any
material fact known to the Adviser respecting or relating to the
Adviser that is not contained in the Fund's Registration Statement
regarding the Fund, or any amendment or supplement thereto, but that
is required to be disclosed thereon, and of any statement contained
therein that becomes untrue in any material respect.

3. Allocation of Charges and Expenses. Except as otherwise specifically
provided in this Section 3, the Adviser shall pay the compensation and
expenses, including office expenses, of all its directors, officers and
employees who serve as directors, officers and employees of the Fund
(including the Fund's share of payroll taxes), and the Adviser shall make
available, without expense to the Fund, the service of its directors,
officers and employees who may be duly elected directors and officers of
the Fund, subject to their individual consent to serve and to any
limitations imposed by law.

-2-
<PAGE>

directors, officers or employees of the Adviser whose services may be
involved, for the following expenses of the Fund: organization and certain
offering expenses of the Fund (including out-of-pocket expenses, but not
including the Adviser's overhead and employee costs); fees payable to the
Adviser and to any other Fund advisers or consultants; legal expenses,
auditing and accounting expenses; interest expenses; telephone, telex,
facsimile, postage and other communications expenses; taxes and
governmental fees; fees, dues and expenses incurred by or with respect to
the Fund in connection with membership in investment company trade
organizations; cost of insurance relating to fidelity coverage for the
Fund's directors, officers and employees, fees and expenses of the Fund's
Administrator or of any custodian, subcustodian, transfer agent,
registrar, or dividend disbursing agent of the Fund; payments to the
Administrator for maintaining the Fund's financial books and records and
calculating its daily net asset value; other payments for portfolio
pricing or valuation services to pricing agents, accountants, bankers and
other specialists, if any; expenses of preparing share certificates; other
expenses in connection with the issuance, offering, distribution or sale
of securities issued by the Fund; expenses relating to investor and public
relations; expenses of registering and qualifying shares of the Fund for
sale; freight, insurance and other charges in connection with the shipment
of the Fund's portfolio securities; brokerage commissions or other costs
of acquiring or disposing of any portfolio securities or other assets of
the Fund, or of entering into other transactions or engaging in any
investment practices with respect to the Fund; expenses of printing and
distributing Prospectuses, Statements of Additional Information, reports,
notices and dividends to stockholders; costs of stationery; any litigation
expenses; costs of stockholders' and other meetings; the compensation and
all expenses (specifically including travel expenses relating to the
Fund's business) of officers, directors and employees of the Fund who are
not officers, directors, employees, or otherwise interested persons of the
Adviser.

4. Compensation. As compensation for the services provided and expenses
assumed by the Adviser under this Agreement, the Fund will pay the Adviser
on the tenth day of each calendar month an advisory fee computed daily at
an annual rate equal to 1/2 of 1% of the Fund's average daily net assets.
The value of net assets of the Fund shall always be determined pursuant to
the applicable provisions of the Articles, the Registration Statement and
the 1940 Act. If the determination of net asset value is suspended for any
particular business day, then for the purposes of this Section 4, the
value of the net assets of the Fund as last determined shall be deemed to
be the value of its net assets for that day. If the determination of the
net asset value of the shares of the Fund has been so suspended for a
period including any month end when the Adviser's compensation is payable
at the end of such month, then such compensation shall be computed on the
basis of the value of the net assets of the Fund as last determined
(whether during or prior to such month). If the Fund determines the value
of the net assets of its portfolio more than once on any day, then the
last such determination thereof on that day shall be deemed to be the sole
determination thereof on that day for the purposes of this Section 4.

-3-
<PAGE>

and preserves pursuant to Rules 31a-1 and 31a-2 under the 1940 Act and
otherwise in connection with its services hereunder are the property of
the Fund and will be surrendered promptly to the Fund upon its request.
The Adviser further agrees that it will furnish to regulatory authorities
having the requisite authority any information or reports in connection
with its services hereunder which may be requested in order to determine
whether the operations of the Fund are being conducted in accordance with
applicable laws and regulations.

6. Standard of Care and Limitation of Liability. The Adviser shall exercise
its best judgment in rendering the services provided by it under this
Agreement. The Adviser shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Fund or the holders of the
Fund's shares in connection with the matters to which this Agreement
relates, provided that nothing in this Agreement shall be deemed to
protect or purport to protect the Adviser against any liability to the
Fund or to holders of the Fund's shares to which the Adviser would
otherwise be subject by reason of willful misfeasance, bad faith or
negligence on its part in the performance of its duties or by reason of
the Adviser's reckless disregard of its obligations and duties under this
Agreement. As used in this Section 6, the term "Adviser" shall include any
officers, directors, employees, or other affiliates of the Adviser
performing services with respect to the Fund.

7. Services Not Exclusive. It is understood that the services of the Adviser
are not exclusive, and that nothing in this Agreement shall prevent the
Adviser from providing similar services to other investment companies or
to other series of investment companies, or from engaging in other
activities, provided such other services and activities do not, during the
term of this Agreement, interfere in a material manner with the Adviser's
ability to meet its obligations to the Fund hereunder. When the Adviser
recommends the purchase or sale of a security for other investment
companies and other clients, and at the same time the Adviser recommends
the purchase or sale of the same security for the Fund, it is understood
that in light of its fiduciary duty to the Fund, such transactions will be
executed on a basis that is fair and equitable to the Fund. In connection
with purchases or sales of portfolio securities for the account of the
Fund, neither the Adviser nor any of its directors, officers or employees
shall act as a principal or agent or receive any commission. If the
Adviser provides any advice to its clients concerning the shares of the
Fund, the Adviser shall act solely as investment counsel for such clients
and not in any way on behalf of the Fund.

8. Duration and Termination. This Agreement shall continue through September
30, 1997, and thereafter shall continue automatically for successive
annual periods, provided such continuance is specifically approved at
least annually by (i) the Directors or (ii) a vote of a "majority" (as
defined in the 1940 Act) of the Fund's outstanding voting securities (as
defined in the 1940 Act), provided that in either event the continuance is
also approved by a majority of the Directors who are not "interested
persons" (as defined in the 1940 Act) of any party to this Agreement, by
vote cast in person at a meeting called for the purpose of voting on such
approval. Notwithstanding the foregoing, this Agreement may be terminated:
(a) at any time without penalty by the Fund upon the vote of a majority of
the Directors or by vote of the majority of the Fund's outstanding voting
securities, upon sixty (60) days' written notice to the Adviser or (b) by
the Adviser at any time without penalty, upon sixty (60)

-4-
<PAGE>

days' written notice to the Fund. This Agreement will also terminate
automatically in the event of its assignment (as defined in the 1940 Act).

9. Amendments. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement
shall be effective until approved by an affirmative vote of (i) a majority
of the outstanding voting securities of the Fund, and (ii) a majority of
the Directors, including a majority of Directors who are not interested
persons of any party to this Agreement, cast in person at a meeting called
for the purpose of voting on such approval, if such approval is required
by applicable law.

10. Miscellaneous.

(a) This Agreement shall be governed by the laws of the State of
Illinois, provided that nothing herein shall be construed in a
manner inconsistent with the 1940 Act or rules or orders of the SEC
thereunder.

(b) The captions of this Agreement are included for convenience only and
in no way define or limit any of the provisions hereof or otherwise
affect their construction or effect.

(c) If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule, or otherwise, the remainder of this
Agreement shall not be affected thereby and, to this extent, the
provisions of this Agreement shall be deemed to be severable.

(d) Nothing herein shall be construed as constituting the Adviser as an
agent of the Fund.

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of September _____, 1996.

IAA TRUST TAXABLE FIXED INCOME
SERIES FUND, INC.

By:______________________________________
President

IAA TRUST COMPANY

By:______________________________________

-5-
<PAGE>

Executive Vice President

-6-

INVESTMENT ADVISORY AGREEMENT

IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.

(Long-Term Bond Series)

WHEREAS, the Fund is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as an open-end, diversified management investment
company.

WHEREAS, the Fund wishes to retain the Adviser to render investment advisory
services to the Fund with respect to the capital received from the sale of the
Fund's IAA Trust Long-Term Bond Fund Common Stock, and the Adviser is willing to
furnish such services to the Fund;

NOW, THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between the Fund and the Adviser as follows:

1. Appointment. The Fund hereby appoints the Adviser to act as investment
adviser to the Fund for the periods and on the terms set forth in this
Agreement with respect to the capital received from the sale of the Fund's
IAA Trust Long-Term Bond Fund Common Stock. The Adviser accepts such
appointment and agrees to furnish the services herein set forth, for the
compensation herein provided.