<PAGE> 1
PRESIDENT'S LETTER
DEAR SHAREHOLDER:
The bulls were stopped this year, at least they were in professional
basketball as the Chicago Bulls failed to make the playoffs. However, in the
stock market, the bulls continued on a rampage. For the fifth year in a row, as
measured from July 1 to June 30, stocks were up more than 20% as the S & P 500
Index* advanced 22.8%. Bond investments did not fare as well as interest rates
rose in 1999's first half. The Merrill Lynch Domestic Master Bond index* had a
paltry 3.08% return over the past twelve months.
Large capitalization stocks continued to dominate the equity markets in
performance terms as all major indices reached record levels. At current
valuation levels, the stock market appears to be expecting continuation of the
current economic environment. Inflation fears have ebbed and the rate of
inflation has eased to around 2% per year. Consumer confidence is at an all time
high and corporate profits continue to grow.
Interest rates have backed up a bit on expectation that the Federal Reserve
Board would raise short-term rates. On June 30 the FOMC raised its target funds
rate by 25 basis points to 5%, but has no strong predisposition toward further
action in the near-term. The Fed had expressed concern about our full employment
economy and possible developing price pressures. While further tightening
remains a possibility, such action will depend on evidence that demand pressures
are raising the risks of inflation. In this environment Treasury bonds remain
locked in a 5 to 6 1/2% range.
IAA TRUST GROWTH FUND, INC.
INCEPTION DATE 4/21/66
The annualized total returns for the Fund for the period ended June 30, 1999,
are as follows:
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
- ------ ------- --------
<S> <C> <C>
26.10% 22.59% 14.43%
</TABLE>
These returns assume all dividends and capital gains distributions were
reinvested.
The IAA Trust Growth Fund returned better than 26% over the past year. This
compares very favorably with the 18.9% return of the average growth mutual fund
and the 22.8% return of the S&P 500 index* over this same time span. Until
recently, the largest capitalization stocks have been driving overall market
performance and the Fund has benefited from its strong core of these stocks.
Additionally, as market leadership has recently shifted allowing better
performance from smaller capitalization stocks and economically sensitive
issues, the Fund's diversification in these market sectors has provided positive
results.
By all conventional measures, today's stock market appears fully valued, if
not overvalued. In many respects, the market needs a continuation of steady
economic growth, low inflation and unemployment, and stable low interest rates
to maintain current valuations. Any event that clouds the economic outlook has
the potential to drive the market sharply lower; and individual stocks that have
fundamental disappointments can be punished severely. Increased volatility can
readily be seen in broad market indices and individual stock prices.
Nevertheless, solid values can still be found in the market. The largest of
the large cap companies dominate measures of market valuation due to their sheer
size and weighted contribution to market indices. Smaller companies with good
growth prospects and reasonable valuation can still be found. Our strategy
continues to be one of seeking out the growth stocks that add value for our
shareholders. We will not ignore the largest companies, they drive overall
market results, but we will take all opportunities that can provide a benefit to
our shareholders.
<PAGE> 2
IAA TRUST ASSET ALLOCATION FUND, INC.
INCEPTION DATE 12/7/78
The annualized total returns for the fund for the period ended June 30, 1999,
are as follows:
<TABLE>
<CAPTION>
1 YEAR 5 YEAR 10 YEAR
- ------ ------- --------
<S> <C> <C>
16.22% 15.69% 11.50%
</TABLE>
These returns assume all dividends and capital gains distributions were
reinvested.
The IAA Trust Asset Allocation Fund just finished one of its best years
ever. Performance was very good on both a relative and absolute basis. For the
year, the Fund was up 16.2%. This compares very favorably to the average
flexible fund, which returned 10.5% over the same period.
Increasing our exposure to stocks at the end of 1998 turned out to be a very
successful strategy. Since that time, the stock market has had one of its
strongest surges in history, with the S&P 500 Index* gaining about 45% off its
lows in August, 1998. Our performance was enhanced even more because we focused
on large capitalization stocks, which were the driving force behind the market's
strength. We also benefited from the great performance of a few key technology
holdings.
Our bond position was reduced to accommodate our higher equity weighting.
The timing was excellent, as the bond market stalled over inflation fears. We
also shifted our holdings from U.S. Treasuries to corporate issues, which helped
our performance compared to some of our peers.
The asset allocation as of June 30, 1999 was 60% stock, 36% bonds, and 4%
cash equivalents.
IAA TRUST TAX EXEMPT BOND FUND, INC.
INCEPTION DATE 12/7/78
The annualized total returns for the Fund for the period ended June 30, 1999,
are as follows:
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
- ------ ------- --------
<S> <C> <C>
2.14% 6.09% 6.06%
</TABLE>
These returns assume all dividends and capital gains distributions were
reinvested. Although the Fund's income is exempt from federal income tax, it may
be subject to state income taxation or the Federal alternative minimum tax.
Over the past year, the IAA Trust Tax-Exempt Bond Fund changed from a
long-term to an intermediate-term municipal bond fund. The duration of the Fund
has been reduced from approximately seven years to five. We will no longer use
the Lehman Municipal Bond Index* but instead use the Lehman Seven-Year Municipal
Bond Index*.
The Fund's one-year total return was 2.14%. This compares to the Lehman
Brothers Seven-Year Municipal Bond Index's* total return of 2.92%. The Lehman
Index* does not reflect investments in cash, the impact of any servicing,
investment management, or administrative expenses.
The municipal market outperformed the U.S. Treasury market over the past
year. Yields on municipals declined during the second half of 1998 and though
higher in 1999, remained below their August, 1998 levels until May of this year.
At that time, the upward pressure on yields in the Treasury market began to take
a toll on the municipal market. As we go forward into the last six months of
1999, we look for municipals to continue to outperform Treasuries. Higher
interest rates make bonds attractive again to investors but not to issuers.
Should demand exceed supply, we could see better performance in the municipal
market.
<PAGE> 3
IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.
MONEY MARKET SERIES**
INCEPTION DATE 10/26/81
In the fall of 1998, the Federal Reserve imposed three 25-basis-point rate
cuts over a 49-day period in order to combat the effects of the global slowdown.
Reflective of reduced short-term interest rates, the IAA Trust Money Market
Series' 7-day yield decreased from 4.88% to 4.21% over the past fiscal year. The
12-month total return also decreased from 4.94% on June 30, 1998, to 4.54% on
June 30, 1999. The fiscal year ended with the global economy recovering and
attention being refocused on mounting inflationary pressures domestically. This
caused the Federal Reserve to increase short-term interest rates by 25 basis
points on June 30, 1999. Some argue that the Federal Reserve's quick action last
fall was one cut too many, and this action simply reverses the last cut. While
the Fed has openly stated a neutral policy, we believe they will continue to
keep a vigilant watch for any signs of inflation creeping into our economy.
SHORT-TERM GOVERNMENT BOND SERIES***
INCEPTION DATE 1/2/97
The annualized total returns for the Fund for the period ended June 30, 1999,
are as follows:
<TABLE>
<CAPTION>
1 YEAR SINCE INCEPTION
- ------ ---------------
<S> <C>
4.27% 5.18%
</TABLE>
These returns assume all dividends and capital gains distributions were
reinvested.
Short duration bonds have outperformed long-maturity bonds the past year as
interest rates were rising. The star performers have been short mortgage and
asset-backed sectors that the Fund has been emphasizing. With higher interest
rates and a relatively flat yield curve, we are in the process of lengthening
the duration of the Fund. The majority of our purchases have been in the agency
sector. Agency bonds in today's market have attractive yield spreads versus
comparable Treasuries.
It is entirely possible that inflation will remain low, the stock market
will cool, and the Federal Reserve will not be pressured to raise rates. Under
this scenario, the Fund would be a rewarding investment. Even if these events do
not transpire, the Fund, because of its short maturity structure, should weather
any downturns.
LONG-TERM BOND SERIES***
INCEPTION DATE 1/2/97
The annualized total returns for the Fund for the period ended June 30, 1999,
are as follows:
<TABLE>
<CAPTION>
1 YEAR SINCE INCEPTION
- ------ ---------------
<S> <C>
3.29% 6.38%
</TABLE>
These returns assume all dividends and capital gains distributions were
reinvested.
Prices on most kinds of bonds have slumped this year, sending yields higher.
Bond investors are worried that the economy is growing too quickly, and that the
prospect of higher inflation might cause the Federal Reserve to unleash a string
of interest-rate increases. The yield of the bellwether 30 year Treasury bond
has jumped to 6.125% from 4.8% last fall. Rates are now at their highest levels
and prices at their lowest levels since late 1997.
<PAGE> 4
However, there is light at the end of the tunnel. Today's rates give the
investor a very attractive real return over inflation. Picking the exact peak in
bond yields is an impossible task, but we may be close. If this is the case,
total returns on bonds for the next year could be attractive. In this higher
interest rate environment, the Fund is extending its average maturity and
increasing its holdings of Treasury securities. The average life of the Fund is
approximately 13 years and is AA quality. AA is a rating to individual bonds and
not the Fund.
Sincerely,
[Ronald Warfield Photo]
[Ronald Warfield Signature]
Ronald R. Warfield
President
- ---------------
* All indices mentioned are unmanaged indices not available for investment.
** Although a money market seeks to maintain a stable net asset value of $1.00
per share, there is no assurance it will be able to do so. An investment in
the Fund is neither insured nor guaranteed by the U.S. Government, it is
possible to lose money.
*** U.S. Treasury bonds unlike mutual funds are direct obligations of the U.S.
Government that offer a fixed rate of return.
Past performance is no guarantee of future results. Share prices will
fluctuate and when redeemed, shares may be worth more or less than their
original investment. Funds are distributed by First Data Distributor, Inc. 4400
Computer Drive, Westborough, MA 01581. Must be preceded or accompanied by a
prospectus. DFU 8/99
<PAGE> 5
IAA TRUST MUTUAL FUNDS -- PORTFOLIO HIGHLIGHTS (UNAUDITED)
IAA TRUST GROWTH FUND, INC.
PORTFOLIO CHANGES For the Year Ended June 30, 1999
<TABLE>
<CAPTION>
MAJOR PURCHASES MAJOR SALES
<S> <C>
AT & T Corp. Mattel, Inc. (2)
American Greetings Corp. (1) Sun Microsystems, Inc.
Bristol-Myers Squibb Co. AutoZone, Inc. (2)
Gillette Co. (1) Invacare Corp. (2)
Office Depot, Inc. (1) Nucor Corp. (2)
Newell Rubbermaid, Inc. (1) American Stores Co. (2)
Dean Foods Co. (1) Cisco Systems, Inc.
U.S. West, Inc. (1) MediaOne Group, Inc. (2)
Reuters Group PLC, ADS (1) First Data Corp. (2)
(1) New Holdings (2) Deletions
</TABLE>
TEN LARGEST HOLDINGS June 30, 1999
<TABLE>
<CAPTION>
PERCENT
VALUE OF FUND
----------- -------
<S> <C> <C>
Microsoft Corp.............................................. $ 7,215,000 3.96%
General Electric Co......................................... 6,441,000 3.54
Sun Microsystems, Inc....................................... 5,530,663 3.04
Analog Devices, Inc......................................... 5,018,750 2.76
Tellabs, Inc................................................ 4,729,375 2.60
A T & T Corp................................................ 4,353,375 2.39
Merck & Co.................................................. 3,996,000 2.19
GTE Corp.................................................... 3,787,500 2.08
Cisco Systems, Inc.......................................... 3,612,000 1.98
Citigroup, Inc.............................................. 3,562,500 1.96
----------- -----
$48,246,163 26.50%
=========== =====
</TABLE>
IAA TRUST ASSET ALLOCATION FUND, INC.
PORTFOLIO CHANGES For the Year Ended June 30, 1999
<TABLE>
<CAPTION>
MAJOR PURCHASES MAJOR SALES
<S> <C>
Coca-Cola Enterprises, 7.000%, 10/01/26 (1) U.S. Treasury Note, 6.500%,
Federal Home Loan Mortgage Corp., 6.400%, 9/25/28 (1) 05/15/05 (2)
Province of Ontario, 5.500%, 10/01/08 (1) Pioneer Hi-Bred International, Inc.
Discover Credit Card Trust, 5.600%, 05/15/06 (1) Province of Ontario, 5.500%, 10/01/08
Merck & Co., Inc. (1) (2)
U.S. Treasury Bond, 5.250%, 11/15/28 (1) MediaOne Group, Inc.
Merck & Co., Inc., 5.760%, 05/03/37 (1) U.S. Treasury Note, 7.25%,
MGIC Investment Corp. (1) 05/15/04 (2)
Federal Home Loan Mortgage Corp., 6.000%, 12/15/08 (1) U.S. Treasury Note, 5.875%,
Xerox Corp., 5.545%, 07/22/37 (1) 03/31/99 (2)
Federal National Mortgage Assoc.,
7.060%,
11/02/05
Nucor Corp. (2)
Philips Electronics N.V. (2)
(1) New Holdings (2) Deletions
</TABLE>
TEN LARGEST HOLDINGS June 30, 1999
<TABLE>
<CAPTION>
PERCENT
VALUE OF FUND
---------- -------
<S> <C> <C>
Microsoft Corp.............................................. $ 541,125 2.32%
General Electric Co......................................... 452,000 1.94
Sun Microsystems Co......................................... 392,588 1.69
Cisco Systems, Inc.......................................... 361,200 1.55
Tellabs, Inc................................................ 344,569 1.48
Analog Devices, Inc......................................... 326,219 1.40
International Business Machines Corp........................ 310,200 1.33
Exxon Corp.................................................. 308,500 1.32
Oracle Systems.............................................. 308,138 1.32
Federal National Mortgage Association, 6.247%, 03/17/21..... 295,614 1.27
---------- -----
$3,640,153 15.62%
========== =====
</TABLE>
<PAGE> 6
IAA TRUST MUTUAL FUNDS -- PORTFOLIO HIGHLIGHTS (UNAUDITED)
IAA TRUST TAX EXEMPT BOND FUND, INC.
PORTFOLIO CHANGES For the Year Ended June 30, 1999
<TABLE>
<CAPTION>
MAJOR PURCHASES MAJOR SALES
<S> <C>
Illinois Health Facilities Revenue, 6.800%, 10/01/24 (1) San Bernardino, California Joint
Massachusetts State Grant Anticipation Notes Revenue Powers, Tax Allocation Revenue Bond,
Bond, 5.000%, 12/15/08 (1) 5.750%, 07/01/17 (2)
Indiana University Trustee Rev Bonds, Student Fees, Chicago, Illinois Water Revenue,
5.700%, 08/01/10 (1) 6.500%, 11/01/15 (2)
University of Kentucky, University Building Revenue, State of Rhode Island Refunding General
4.150%, 05/01/01 (1) Obligation, 7.000%, 06/15/05 (2)
Travis County, Texas Limited Tax General Obligation, Vicksburg-Warren, Mississippi School
4.500%, 03/01/18 (1) District, State Aid, Capital
Indiana Municipal Power Agency, Power Supply System Improvement Revenue Bond, 4.700%,
Revenue, 5.000%, 01/01/11 (1) 02/01/16 (2)
Long Island, New York Power Authority, 4.000%, 04/01/04 Travis County, Texas Limited Tax
(1) General Obligation, 4.500%, 03/01/18
Utah State Board of Regents Revenue, 5.500%, 08/01/05 (1) (2)
Pike Township, Indiana Revenue Bond, 5.700%, 02/01/01 (1) California State Public Works Board
Lease Revenue, 5.200%, 12/01/09 (2)
Denver, Colorado City & County General
Obligation, 5.000%, 10/01/10 (2)
(1) New Holdings (2) Deletions
</TABLE>
TEN LARGEST HOLDINGS June 30, 1999
<TABLE>
<CAPTION>
PERCENT
VALUE OF FUND
---------- -------
<S> <C> <C>
Illinois Health Facilities Authority Revenue, 6.800%,
10/01/24................................................... $ 857,448 4.90%
Massachusetts State Grant Anticipation Revenue Bond, 5.000%,
12/15/08................................................... 806,280 4.61
Wisconsin State Clean Water Revenue Bond, 5.300%,
06/01/12................................................... 724,283 4.14
University of Kentucky, University Building Revenue, 4.150%,
05/01/01................................................... 700,532 4.00
Texas A&M University Revenue Financing System, 5.375%,
05/15/14................................................... 604,416 3.45
Pennsylvania State Higher Education Revenue Bonds, 5.600%,
09/01/10................................................... 597,655 3.41
Peru, Indiana Community School Corp. Revenue, 6.750%,
01/01/09................................................... 592,570 3.38
Indiana University Trustee Rev Bonds, Student Fees, 5.700%,
08/01/10................................................... 571,692 3.27
Connecticut State Unlimited Tax General Obligation, 5.400%,
03/15/08................................................... 570,064 3.26
Cape Girardeau, Missouri Waterworks System Revenue, 7.450%,
03/01/05................................................... 562,610 3.21
---------- -----
$6,587,550 37.63%
========== =====
</TABLE>
IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.
MONEY MARKET SERIES
TEN LARGEST HOLDINGS June 30, 1999
<TABLE>
<CAPTION>
PERCENT
VALUE OF FUND
----------- -------
<S> <C> <C>
John Deere Capital Corp., 4.84%, 07/08/99................... $ 3,092,000 4.90%
Xerox Credit Corp., 4.82%, 07/19/99......................... 2,793,252 4.43
International Lease Finance Corp., 4.78%, 08/30/99.......... 2,767,773 4.39
Province of British Columbia, 4.95%, 09/27/99............... 2,044,953 3.24
AT & T Corp., 5.50%, 07/01/99............................... 2,000,000 3.17
Household Finance Corp., 4.95%, 08/23/99.................... 1,975,000 3.13
USAA Capital Corp., 4.78%, 07/16/99......................... 1,866,276 2.96
General Electric Capital Corp., 4.91%, 08/10/99............. 1,763,000 2.80
Commercial Credit Co., 5.04%, 08/04/99...................... 1,690,000 2.68
Prudential Funding Corp., 4.88%, 09/17/99................... 1,679,000 2.66
----------- -----
$21,671,254 34.36%
=========== =====
</TABLE>
PORTFOLIO CHARACTERISTICS June 30, 1999
CURRENT YIELD: 4.24%
30-DAY AVERAGE YIELD: 4.18%
7-DAY AVERAGE YIELD: 4.21%
AVERAGE DAYS TO MATURITY: 39.8
<PAGE> 7
IAA TRUST MUTUAL FUNDS -- PORTFOLIO HIGHLIGHTS (UNAUDITED)
IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.
SHORT-TERM GOVERNMENT BOND SERIES
PORTFOLIO CHANGES For the Year Ended June 30, 1999
<TABLE>
<CAPTION>
MAJOR PURCHASES MAJOR SALES
<S> <C>
Morgan Stanley Capital Corp., 6.850%, 02/15/20 (1) U.S. Treasury Note, 6.250%, 05/31/99
Federal Home Loan Mortgage Corp., 6.350%, 3/15/11 (1) (2)
Morgan Stanley Capital Corp., 6.850%, 02/15/20 (1) U.S. Treasury Note, 6.250%, 06/30/02
Federal Home Loan Mortgage Corp., 5.500%, 11/25/05 (1) (2)
General Motors Acceptance Corp., 4.891%, 07/26/99 (1) Federal Home Loan Bank, 6.000%,
Federal National Mortgage Association, 6.225%, 05/25/14 04/06/01 (2)
(1) Federal Home Loan Mortgage Corp.,
Federal National Mortgage Association, 5.100%, 09/25/00 6.830%, 06/07/01 (2)
(1) Federal Home Loan Mortgage Corp.,
Federal Farm Credit Bank, 4.630%, 11/05/01 (1) 6.825%, 09/18/02 (2)
Tennessee Valley Authority, 5.280%, 09/14/01 (1) Federal National Mortgage Association,
Federal National Mortgage Association, 5.400%, 05/07/01 6.820%, 11/05/01 (2)
(1) (2) Deletions
(1) New Holdings
</TABLE>
TEN LARGEST HOLDINGS June 30, 1999
<TABLE>
<CAPTION>
PERCENT
VALUE OF FUND
----------- -------
<S> <C> <C>
U.S. Treasury Notes, 6.500%, 08/31/01....................... $ 3,053,430 10.26%
U.S. Treasury Notes, 6.250%, 02/28/02....................... 2,028,120 6.82
Federal National Mortgage Association, 6.500%, 08/01/04..... 1,882,012 6.32
Morgan Stanley Capital Corp., 6.850%, 02/15/20.............. 1,096,029 3.68
Federal Home Loan Mortgage Corp., 5.500%, 11/25/05.......... 1,017,755 3.42
General Motors Acceptance Corp., 4.89%, 07/26/99............ 1,008,000 3.39
U.S. Treasury Notes, 5.500%, 02/29/00....................... 1,002,630 3.37
Federal National Mortgage Association, 5.08%, 09/24/99...... 999,280 3.36
Federal Home Loan Bank, 6.14%, 12/17/01..................... 997,800 3.35
Federal National Mortgage Association, 5.10%, 09/25/00...... 994,970 3.34
----------- -----
$14,080,026 47.31%
=========== =====
</TABLE>
IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.
LONG-TERM BOND SERIES
PORTFOLIO CHANGES For the Year Ended June 30, 1999
<TABLE>
<CAPTION>
MAJOR PURCHASES MAJOR SALES
<S> <C>
Federal Home Loan Mortgage Corp., 7.000%, 03/01/12 (1) U.S. Treasury Notes,
Government National Mortgage Association, 8.000%, 6.500%, 05/15/05 (2)
07/15/26 (1) U.S. Treasury Notes,
Merck & Co., 5.760%, 05/03/37 6.500%, 08/15/05
Government National Mortgage Association, 6.500%, U.S. Treasury Notes,
04/15/26 (1) 5.625%, 02/15/06 (2)
Federal Home Loan Mortgage Corp., 6.000%, 03/15/09 (1) U.S. Treasury Notes,
Associates Corp. of North America, 6.950%, 11/01/18 (1) 6.000%, 02/15/26 (2)
Associates Corp. of North America,
6.950%, 11/01/18 (2)
(1) New Holdings (2) Deletions
</TABLE>
TEN LARGEST HOLDINGS June 30, 1999
<TABLE>
<CAPTION>
PERCENT
VALUE OF FUND
----------- -------
<S> <C> <C>
Federal Home Loan Mortgage Corp., 7.000%, 03/01/12.......... $ 2,978,569 7.32%
Merck & Co., Inc., 5.760%, 05/03/37......................... 1,603,437 3.94
Government National Mortgage Association, 8.000%,
07/15/26................................................... 1,454,358 3.57
Government National Mortgage Association, 6.500%,
04/15/26................................................... 1,205,481 2.96
California Infrastructure PG & E, 6.420%, 09/25/08.......... 994,480 2.44
U.S. Treasury Notes, 6.000%, 02/15/26....................... 975,270 2.39
Federal Home Loan Mortgage Corp., 6.000%, 03/15/09.......... 921,041 2.26
Xerox Corp., 5.545%, 07/22/37............................... 905,223 2.22
Associates Corp. of North America, 5.960%, 05/15/37......... 752,615 1.85
Dayton Hudson Corp., 5.895%, 06/15/37....................... 700,875 1.72
----------- -----
$12,491,349 30.67%
=========== =====
</TABLE>
<PAGE> 8
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS June 30, 1999
- --------------------------------------------------------------------------------
IAA TRUST GROWTH FUND, INC.
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
COMMON STOCK -- 96.59%
BASIC INDUSTRY -- 1.09%
Monsanto Co. ........................ 50,000 $ 1,971,875
------------
CAPITAL GOODS -- 5.49%
Boeing Co. .......................... 40,050 1,769,709
Deere & Co. ......................... 45,000 1,783,125
General Electric Co. ................ 57,000 6,441,000
------------
9,993,834
------------
COMMUNICATION SERVICES -- 7.48%
AT & T Corp. ........................ 78,000 4,353,375
GTE Corp. ........................... 50,000 3,787,500
SBC Communications, Inc. ............ 60,000 3,480,000
U.S. West, Inc. ..................... 33,900 1,991,625
------------
13,612,500
------------
CONSUMER CYCLICAL -- 10.00%
American Greetings Corp., Cl. A ..... 75,000 2,259,375
Gentex Corp. ........................ 105,700 2,959,600
Intimate Brands, Inc. ............... 73,500 3,482,063
Newell Rubbermaid, Inc. ............. 42,800 1,990,200
Office Depot, Inc.* ................. 100,000 2,206,250
Wal-Mart Stores, Inc. ............... 60,000 2,895,000
Warnaco Group, Inc., Cl. A .......... 90,000 2,407,500
------------
18,199,988
------------
CONSUMER STAPLES -- 10.95%
Coca-Cola Co. ....................... 20,000 1,250,000
Dean Foods Co. ...................... 50,000 2,078,125
Fox Entertainment Group, Inc.* ...... 65,000 1,750,937
Gillette Co. ........................ 56,620 2,321,420
Kimberly-Clark Corp. ................ 55,000 3,135,000
PepsiCo, Inc. ....................... 39,000 1,508,813
Philip Morris Companies, Inc. ....... 50,000 2,009,375
Procter & Gamble Co. ................ 35,000 3,123,750
Rite Aid Corp. ...................... 36,000 886,500
Unilever N.V ........................ 26,785 1,868,254
------------
19,932,174
------------
ENERGY -- 7.92%
Chevron Corp. ....................... 22,800 2,170,275
Diamond Offshore Drilling, Inc. ..... 40,000 1,135,000
Exxon Corp. ......................... 20,000 1,542,500
Halliburton Co. ..................... 45,000 2,036,250
Phillips Petroleum Co. .............. 28,000 1,408,750
Royal Dutch Petroleum Co., ADR ...... 45,000 2,711,250
Schlumberger, Ltd. .................. 32,000 2,038,000
Unocal Corp. ........................ 35,000 1,386,875
------------
14,428,900
------------
FINANCE -- 14.50%
American Express Co. ................ 25,000 3,253,125
American International Group,
Inc. ............................... 25,000 2,926,562
Associates First Capital Corp. ...... 70,000 3,101,875
Bank Of New York .................... 75,000 2,751,563
Citigroup, Inc. ..................... 75,000 3,562,500
Fannie Mae .......................... 45,000 3,076,875
MBNA Corp. .......................... 90,000 2,756,250
MGIC Investment Corp. ............... 45,000 2,188,125
Wells Fargo Co. ..................... 65,000 2,778,750
------------
26,395,625
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
HEALTH -- 10.33%
Becton, Dickinson & Co. ............. 45,000 $ 1,350,000
Bristol-Myers Squibb Co. ............ 40,000 2,817,500
Elan Corp., PLC, ADS ................ 80,100 2,222,775
Johnson & Johnson ................... 35,000 3,430,000
Merck & Co., Inc. ................... 54,000 3,996,000
Pfizer, Inc. ........................ 21,475 2,356,881
Smithkline Beecham PLC, ADR ......... 40,000 2,642,500
------------
18,815,656
------------
TECHNOLOGY -- 23.76%
America Online, Inc.* ............... 12,000 1,326,000
Analog Devices, Inc. ................ 100,000 5,018,750
Cisco Systems, Inc.* ................ 56,000 3,612,000
W.W. Grainger, Inc. ................. 19,200 1,033,200
Hewlett-Packard Co. ................. 30,000 3,015,000
Intel Corp. ......................... 52,000 3,094,000
International Business Machines
Corp. .............................. 20,000 2,585,000
Microsoft Corp.* .................... 80,000 7,215,000
Oracle Corp.* ....................... 75,000 2,784,375
Raytheon Co., Cl. B ................. 15,000 1,055,625
Reuters Group PLC, ADS .............. 28,000 2,269,750
Sun Microsystems, Inc.* ............. 80,300 5,530,662
Tellabs, Inc.* ...................... 70,000 4,729,375
------------
43,268,737
------------
TRANSPORTATION -- 1.96%
Burlington Northern Corp. ........... 45,000 1,395,000
FDX Corp.* .......................... 40,000 2,170,000
------------
3,565,000
------------
UTILITIES -- 3.11%
DPL, Inc. ........................... 125,000 2,296,875
NICOR, Inc. ......................... 49,150 1,870,772
Wisconsin Energy Corp. .............. 60,000 1,503,750
------------
5,671,397
------------
TOTAL COMMON STOCK
(cost $105,150,407) ................ 175,855,686
------------
</TABLE>
<PAGE> 9
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS June 30, 1999
- --------------------------------------------------------------------------------
IAA TRUST GROWTH FUND, INC. (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------ ------------
<S> <C> <C>
COMMERCIAL PAPER -- 2.29%
AT&T Corp.
5.50%, 07/01/99................... $ 1,000,000 $ 1,000,000
Wells Fargo & Co.
4.90%, 07/06/99.................... 29,000 29,000
Coca-Cola Co.
4.75%, 07/12/99.................... 944,000 942,630
International Lease Finance Corp.
4.78%, 07/21/99.................... 551,000 545,081
CIT Group Holding Corp.
4.86%, 08/11/99.................... 1,000,000 1,000,000
General Motors Acceptance Corp.
4.88%, 08/18/99.................... 646,000 646,000
------------
TOTAL COMMERCIAL PAPER
(cost $4,162,711).................. 4,162,711
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------
<S> <C> <C>
OTHER SHORT TERM INVESTMENTS -- 1.13%
MONEY MARKET FUNDS
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------
<S> <C> <C>
Dreyfus Cash Management Money Market
Fund.................................. 218,712 $ 218,712
Federated Prime Obligation Fund........ 1,842,485 1,842,485
------------
TOTAL MONEY MARKET FUNDS
(cost $2,061,197)..................... 2,061,197
------------
TOTAL INVESTMENTS -- 100.01%
(cost $111,374,315)................... 182,079,594
------------
LIABILITIES NET OF CASH
& OTHER ASSETS -- (0.01%)............ (9,331)
------------
NET ASSETS -- 100.00%.................. $182,070,263
============
* non-income producing
</TABLE>
See notes to financial statements.
<PAGE> 10
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS June 30, 1999
- --------------------------------------------------------------------------------
IAA TRUST ASSET ALLOCATION FUND, INC.
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
COMMON STOCK -- 59.72%
BASIC INDUSTRIES -- 0.68%
Monsanto Co. ........................ 4,000 $ 157,750
------------
CAPITAL GOODS -- 3.13%
Boeing Co. .......................... 3,100 136,981
Deere & Co. ......................... 3,500 138,688
General Electric Co. ................ 4,000 452,000
------------
727,669
------------
COMMUNICATION SERVICES -- 3.83%
AT & T Corp. ........................ 4,500 251,156
BellSouth Corp. ..................... 3,000 140,625
GTE Corp. ........................... 3,000 227,250
SBC Communications, Inc. ............ 3,194 185,252
U.S. West, Inc. ..................... 1,500 88,125
------------
892,408
------------
CONSUMER CYCLICAL -- 6.12%
American Greetings Corp., Cl. A ..... 6,000 180,750
Gentex Corp. ........................ 7,000 196,000
Intimate Brands, Inc. ............... 4,725 223,847
Newell Rubbermaid, Inc. ............. 3,500 162,750
Office Depot, Inc.* ................. 7,000 154,437
Tribune Co. ......................... 2,000 174,250
Wal-Mart Stores, Inc. ............... 3,700 178,525
Warnaco Group, Inc., Cl. A .......... 5,800 155,150
------------
1,425,709
------------
CONSUMER STAPLES -- 6.98%
Albertson's, Inc. ................... 2,900 149,531
Dean Foods Co. ...................... 4,000 166,250
Fox Entertainment Group, Inc.* ...... 7,000 188,562
Gillette Co. ........................ 3,600 147,600
Kimberly-Clark Corp. ................ 4,500 256,500
PepsiCo, Inc. ....................... 4,000 154,750
Philip Morris Companies, Inc. ....... 5,000 200,938
Procter & Gamble Co. ................ 2,950 263,288
Rite Aid Corp. ...................... 4,000 98,500
------------
1,625,919
------------
ENERGY -- 4.43%
Atlantic Richfield Co. .............. 1,400 116,987
Diamond Offshore Drilling, Inc. ..... 2,800 79,450
Exxon Corp. ......................... 4,000 308,500
Halliburton Co. ..................... 3,000 135,750
Phillips Petroleum Co. .............. 3,000 150,937
Royal Dutch Petroleum Co., ADR ...... 4,000 241,000
------------
1,032,624
------------
FINANCE -- 9.39%
American Express Co. ................ 2,200 286,275
American International Group,
Inc. ............................... 2,000 234,125
Associates First Capital Corp. ...... 5,000 221,563
Bank of America Corp. ............... 3,055 223,970
Bank Of New York .................... 6,000 220,125
Citigroup, Inc. ..................... 4,312 204,820
Fannie Mae .......................... 3,800 259,825
MGIC Investment Corp. ............... 5,500 267,437
Wells Fargo Co. ..................... 6,300 269,325
------------
2,187,465
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
HEALTH -- 6.66%
Becton, Dickinson & Co. ............. 5,000 $ 150,000
Bristol-Myers Squibb Co. ............ 4,000 281,750
Elan Corp., PLC, ADS ................ 9,000 249,750
Johnson & Johnson ................... 3,000 294,000
Merck & Co., Inc. ................... 3,400 251,600
Pfizer, Inc. ........................ 1,500 164,625
SmithKline Beecham PLC, ADR ......... 2,400 158,550
------------
1,550,275
------------
TECHNOLOGY -- 14.85%
America Online, Inc.* ............... 1,000 110,500
Analog Devices, Inc. ................ 6,500 326,219
Cisco Systems, Inc.* ................ 5,600 361,200
W.W. Grainger, Inc. ................. 1,700 91,481
Hewlett-Packard Co. ................. 2,000 201,000
Intel Corp. ......................... 3,500 208,250
International Business Machine
Corp. .............................. 2,400 310,200
Microsoft Corp.* .................... 6,000 541,125
Oracle Corp.* ....................... 8,300 308,138
Raytheon Co., Cl. B ................. 2,000 140,750
Reuters Group PLC, ADS .............. 1,500 121,594
Sun Microsystems, Inc.* ............. 5,700 392,587
Tellabs, Inc.* ...................... 5,100 344,569
------------
3,457,613
------------
TRANSPORTATION -- 1.36%
Burlington Northern Corp. ........... 4,600 142,600
FDX Corp.* .......................... 3,200 173,600
------------
316,200
------------
UTILITIES/TELEPHONE -- 2.29%
Florida Progress Corp. .............. 2,200 90,888
NICOR, Inc. ......................... 4,500 171,281
Williams Companies, Inc. ............ 4,000 170,250
Wisconsin Energy Corp. .............. 4,000 100,250
------------
532,669
------------
TOTAL COMMON STOCK
(cost $8,463,196)................... 13,906,302
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
-----------
<S> <C> <C>
BONDS AND NOTES -- 35.88%
ASSET BACKED -- 4.48%
Amresco Residential Securities
Mortgage Loan Trust
6.925%, 06/25/25 ................... $ 100,000 101,741
Chemical Master Credit Card Trust
5.980%, 09/15/08 ................... 200,000 195,344
Discover Credit Card Trust
6.750%, 02/16/02 ................... 200,000 199,594
5.600%, 05/15/06 ................... 250,000 242,266
Green Tree Financial Corp.
6.870%, 01/15/29 ................... 100,000 99,022
The Money Store Home Equity Trust
8.140%, 10/15/27 ................... 200,000 205,684
------------
1,043,651
------------
</TABLE>
<PAGE> 11
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS June 30, 1999
- --------------------------------------------------------------------------------
IAA TRUST ASSET ALLOCATION FUND, INC. (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<S> <C> <C>
AUTO -- 1.56%
Ford Credit Auto Owner Trust
5.650%, 10/15/01 ................... $ 250,000 $ 249,667
General Motors Acceptance Corp.
8.875%, 06/01/10 ................... 100,000 113,000
------------
362,667
------------
BANKING -- 2.23%
ABN AMRO N.V. (Chicago) Global Bond
7.125%, 06/18/07.................... 100,000 100,875
Citicorp
7.200%, 06/15/07.................... 100,000 101,000
International American Development
Bank
8.875%, 06/01/09.................... 100,000 118,375
NationsBank Corp.
5.750%, 03/15/01.................... 200,000 199,000
------------
519,250
------------
CHEMICALS -- 0.44%
Dupont (E.I.) De Nemours & Co.
6.750%, 10/15/02.................... 100,000 101,500
------------
FINANCE -- 1.67%
Household Finance Corp.
6.400%, 06/17/08.................... 200,000 190,250
Merrill Lynch & Co., Inc.
6.020%, 05/11/01.................... 200,000 199,750
------------
390,000
------------
FOOD & BEVERAGE -- 2.31%
Campbell Soup Co.
4.750%, 10/01/03.................... 200,000 188,750
Coca-Cola Co.
6.625%, 10/01/02.................... 100,000 101,000
Coca-Cola Enterprises
7.000%, 10/01/26.................... 250,000 249,062
------------
538,812
------------
INDUSTRIAL -- 2.99%
Amoco Canada Petroleum Co.
7.950%, 10/01/22.................... 100,000 102,750
Mattel, Inc.
6.000%, 07/15/03.................... 200,000 195,500
Merck & Co., Inc.
5.760%, 05/03/37.................... 200,000 200,430
Raytheon Co.
5.950%, 03/15/01.................... 100,000 99,750
6.300%, 03/15/05.................... 100,000 97,375
------------
695,805
------------
MUNICIPAL -- 1.06%
New York State Power Authority
Revenue
6.050%, 02/15/15.................... 250,000 246,245
------------
OFFICE EQUIPMENT -- 0.86%
Xerox Corp.
5.545%, 07/22/37.................... 200,000 201,161
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<S> <C> <C>
RETAILING -- 2.54%
Dayton Hudson Corp.
5.895%, 06/15/37.................... $ 200,000 $ 200,250
Sears Roebuck Acceptance Corp.
6.000%, 03/20/03.................... 200,000 197,250
Sears Roebuck Credit Account Master
Trust
5.650%, 03/15/09.................... 200,000 194,138
------------
591,638
------------
TELEPHONE UTILITY -- 3.01%
Bell Telephone Co. of PA Putable
Debentures
8.350%, 12/15/30.................... 200,000 226,000
BellSouth Capital Funding Corp.
6.040%, 11/15/26.................... 200,000 200,500
Chesapeake & Potomac Telephone Co. of
Virginia Debentures
8.375%, 10/01/29.................... 100,000 113,125
New Jersey Bell Telephone Co.
7.850%, 11/15/29.................... 150,000 160,125
------------
699,750
------------
TRANSPORTATION -- 0.87%
Norfolk Southern Corp.
7.050%, 05/01/37.................... 200,000 202,750
------------
U.S. GOVERNMENT AGENCIES -- 6.12%
Federal Home Loan Bank
8.000%, 09/20/04.................... 100,000 100,635
Federal Home Loan Mortgage Corp.
10.750%, 07/01/00................... 628 658
8.750%, 04/01/01.................... 5,952 6,097
10.150%, 04/15/06................... 3,835 3,837
6.500%, 06/15/06.................... 200,000 202,088
6.000%, 12/15/08.................... 200,000 196,362
6.400%, 09/25/28.................... 250,000 239,108
Federal National Mortgage Association
6.000%, 02/18/21.................... 300,000 294,054
6.247%, 03/17/21.................... 300,000 295,614
Government National Mortgage
Association
Pool #30111
9.000%, 05/15/09.................... 15,987 16,976
Government National Mortgage
Association
Pool #23653
9.500%, 06/15/09.................... 6,916 7,454
Government National Mortgage
Association
Pool #32147
9.500%, 08/15/09.................... 4,246 4,577
Government National Mortgage
Association
Pool #161621
9.000%, 07/15/16.................... 53,323 56,622
------------
1,424,082
------------
U.S. GOVERNMENT OBLIGATIONS -- 5.74%
U.S. Treasury Bonds
5.250%, 11/15/28.................... 250,000 221,417
U.S. Treasury Notes
5.875%, 02/15/00.................... 100,000 100,451
6.625%, 04/30/02.................... 100,000 102,455
11.625%, 11/15/04................... 100,000 125,860
6.875%, 05/15/06.................... 150,000 157,977
6.500%, 10/15/06.................... 200,000 206,524
</TABLE>
<PAGE> 12
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS June 30, 1999
- --------------------------------------------------------------------------------
IAA TRUST ASSET ALLOCATION FUND, INC. (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<S> <C> <C>
U.S. Treasury Inflation Index Bond
3.625%, 04/15/28.................... $ 300,000 $ 283,218
Tennessee Valley Authority
5.375%, 11/13/08.................... 150,000 138,782
------------
1,336,684
------------
TOTAL BONDS AND NOTES
(cost $8,345,413)................... 8,353,994
------------
COMMERCIAL PAPER -- 0.16%
Wells Fargo & Co.
4.849%, 07/06/99................... 24,000 24,000
Coca-Cola Co.
4.750%, 07/12/99.................... 6,000 5,989
Prudential Funding Corp.
4.859%, 07/20/99.................... 7,700 7,700
------------
TOTAL COMMERCIAL PAPER
(cost $37,689)...................... 37,689
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
OTHER SHORT TERM INVESTMENTS -- 3.90%
MONEY MARKET FUNDS
Dreyfus Cash Management Money Market
Fund................................ 111,495 $ 111,495
Federated Prime Obligation Fund...... 795,660 795,660
------------
TOTAL MONEY MARKET FUNDS
(cost $907,155)..................... 907,155
------------
TOTAL INVESTMENTS -- 99.66%
(cost $17,753,453).................. 23,205,140
------------
CASH AND OTHER ASSETS NET OF
LIABILITIES -- 0.34%................ 79,599
------------
NET ASSETS -- 100.00%................ $ 23,284,739
============
* non-income producing
</TABLE>
See notes to financial statements.
<PAGE> 13
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS June 30, 1999
- --------------------------------------------------------------------------------
IAA TRUST TAX EXEMPT BOND FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<S> <C> <C>
MUNICIPAL BONDS
(TAX EXEMPT) -- 96.52%
ARIZONA -- 3.14%
Maricopa County, School District #93
Arizona Unlimited Tax General
Obligation
6.400%, 07/01/06.................... $ 500,000 $ 549,440
------------
CALIFORNIA -- 1.60%
City of Fresno, California Sewer
System Revenue
6.250%, 09/01/14.................... 250,000 280,233
------------
CONNECTICUT -- 3.26%
Connecticut State Unlimited Tax
General Obligation
5.400%, 03/15/08.................... 550,000 570,064
------------
ILLINOIS -- 13.37%
Illinois Health Facilities Authority
Revenue
6.800%, 10/01/24.................... 800,000 857,448
Illinois State Sales Tax Revenue
5.400%, 06/15/13.................... 550,000 554,406
Northwest Suburban Municipal Joint
Action Water Agency Illinois
Contract Revenue
6.450%, 05/01/07.................... 400,000 440,320
Northwest Water Commission Illinois,
Cook & Lake Revenue
5.000%, 05/01/13.................... 500,000 489,460
------------
2,341,634
------------
INDIANA -- 8.40%
Indiana University Trustee Revenue
Bonds, Student Fees
5.700%, 08/01/10.................... 550,000 571,692
Peru, Indiana Community School Corp.
Revenue
6.750%, 01/01/09.................... 550,000 592,570
Pike Township Indiana Revenue Bond
5.700%, 02/01/01.................... 300,000 306,507
------------
1,470,769
------------
KENTUCKY -- 6.86%
Jefferson County, Kentucky School
District Financing Corp. School
Building Revenue, Series A
5.300%, 07/01/15.................... 500,000 500,355
University of Kentucky, University
Building Revenue, Third Series
4.150%, 05/01/01.................... 700,000 700,532
------------
1,200,887
------------
MASSACHUSETTS -- 7.63%
Massachusetts State Grant
Anticipation Notes Revenue Bond
5.000%, 12/15/08.................... 800,000 806,280
Massachusetts State Water Resource
Authority Revenue
6.000%, 11/01/08.................... 500,000 529,020
------------
1,335,300
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<S> <C> <C>
MINNESOTA -- 2.88%
St. Paul, Minnesota Independent
School District #625 General
Obligation, Series C
5.250%, 02/01/13.................... $ 500,000 $ 503,710
------------
MISSOURI -- 4.67%
Cape Girardeau, Missouri Waterworks
System Revenue
7.450%, 03/01/05.................... 500,000 562,610
Missouri State Environmental
Improvement & Energy Resource
Authority Pollution Control Revenue
5.250%, 12/01/09.................... 250,000 255,488
------------
818,098
------------
NEVADA -- 5.26%
Clark County, Nevada School District
General Obligation
5.250%, 06/01/07.................... 500,000 510,550
Henderson, Nevada Water & Sewer
Unlimited Tax General Obligation
5.375%, 06/01/07.................... 400,000 410,928
------------
921,478
------------
NEW JERSEY -- 1.45%
Essex County, New Jersey Unlimited
General Obligation 5.000%,
08/01/07............................ 250,000 253,727
------------
NEW YORK -- 6.54%
Long Island, New York Power Authority
Revenue
4.000%, 04/01/04.................... 400,000 390,584
New York State Dormitory Authority
Revenue
5.500%, 07/01/12.................... 500,000 503,170
New York State Highway & Bridge
Authority Revenue, Series B
5.000%, 04/01/08.................... 250,000 251,832
------------
1,145,586
------------
NORTH CAROLINA -- 1.55%
North Carolina Eastern Municipal
Power Agency System Revenue
7.000%, 01/01/08.................... 250,000 270,785
------------
OHIO -- 2.96%
Montgomery County, Ohio Sewer System
Revenue
5.600%, 09/01/11.................... 500,000 517,805
------------
PENNSYLVANIA -- 6.38%
Pennsylvania Intergovernmental Corp.
Authority, Special Tax Revenue
5.450%, 06/15/08.................... 500,000 519,885
Pennsylvania State Higher Education
Revenue Bonds, Series A
5.600%, 09/01/10.................... 575,000 597,655
------------
1,117,540
------------
TENNESSEE -- 3.06%
Shelby County, Tennessee School
General Obligation, Series B
5.875%, 06/01/18.................... 500,000 535,100
------------
</TABLE>
<PAGE> 14
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS June 30, 1999
- --------------------------------------------------------------------------------
IAA TRUST TAX EXEMPT BOND FUND, INC. (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<S> <C> <C>
TEXAS -- 11.59%
Bexar County, Texas Detention
Facilities Limited Tax General
Obligation
5.750%, 06/15/10.................... $ 500,000 $ 527,375
Garland, Texas Limited Tax General
Obligation
5.800%, 08/15/12.................... 350,000 372,467
Texas A&M University Revenue
Financing System
5.375%, 05/15/14.................... 600,000 604,416
United Independent School District,
Texas
6.700%, 08/15/08.................... 465,000 525,873
------------
2,030,131
------------
UTAH -- 1.78%
Utah State Board Regents Revenue
5.500%, 08/01/05.................... 300,000 311,679
------------
WISCONSIN -- 4.14%
Wisconsin State Clean Water Revenue
Bond 5.300%, 06/01/12............... 700,000 724,283
------------
TOTAL MUNICIPAL BONDS
(cost $16,480,786).................. 16,898,249
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
--------- -----------
<S> <C> <C>
TAX EXEMPT MONEY MARKET
FUNDS -- 4.94%
Nuveen Tax Exempt Money Fund............ 850,000 $ 850,000
Provident Institutional MuniFund........ 15,654 15,654
-----------
TOTAL MONEY MARKET FUNDS
(cost $865,654)........................ 865,654
-----------
TOTAL INVESTMENTS -- 101.46%
(cost $17,346,440)..................... 17,763,903
-----------
LIABILITIES NET OF CASH & OTHER ASSETS
-- (1.46%)............................ (256,462)
-----------
NET ASSETS -- 100.00%................... $17,507,441
===========
</TABLE>
See notes to financial statements.
<PAGE> 15
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS June 30, 1999
- --------------------------------------------------------------------------------
IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.
MONEY MARKET SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- -----------
<S> <C> <C>
COMMERCIAL PAPER -- 99.37%
AIRLINES -- 5.05%
International Lease Finance Corp.
4.78%, 07/21/99...................... $ 419,000 $ 417,887
4.78%, 08/30/99...................... 2,790,000 2,767,773
-----------
3,185,660
-----------
AUTO & TRUCK -- 12.74%
Ford Motor Credit Co.
4.89%, 07/15/99...................... 954,000 954,000
4.85%, 08/05/99...................... 622,000 622,000
4.97%, 08/25/99...................... 1,660,000 1,660,000
General Motors Acceptance Corp.
4.88%, 08/18/99...................... 354,000 354,000
5.07%, 09/07/99...................... 1,279,000 1,279,000
5.24%, 09/16/99...................... 1,510,000 1,510,000
Toyota Motor Credit Co.
4.79%, 07/07/99...................... 1,650,000 1,648,683
-----------
8,027,683
-----------
COMMERCIAL FINANCE -- 13.08%
CIT Group Holding Corp.
4.85%, 07/29/99...................... 1,043,000 1,043,000
4.86%, 08/11/99...................... 877,000 877,000
4.87%, 08/16/99...................... 1,300,000 1,300,000
Prudential Funding Corp.
4.86%, 07/20/99...................... 409,000 409,000
4.94%, 07/28/99...................... 630,000 630,000
4.88%, 09/17/99...................... 1,679,000 1,679,000
Wells Fargo & Co.
4.85%, 07/06/99...................... 897,000 897,000
4.81%, 08/17/99...................... 1,415,000 1,406,114
-----------
8,241,114
-----------
CONSUMER FINANCE -- 25.50%
American Express Credit Corp.
4.89%, 07/13/99...................... 1,620,000 1,620,000
4.83%, 07/14/99...................... 1,590,000 1,590,000
American General Finance Corp.
4.77%, 07/01/99...................... 1,521,000 1,521,000
4.88%, 08/26/99...................... 777,000 777,000
4.97%, 09/02/99...................... 887,000 887,000
Associates Corp. of North America
4.86%, 07/27/99...................... 1,026,000 1,026,000
5.04%, 08/19/99...................... 1,174,000 1,174,000
5.13%, 10/06/99...................... 1,050,000 1,050,000
Commercial Credit Co.
4.89%, 07/22/99...................... 1,556,000 1,556,000
5.04%, 08/04/99...................... 1,690,000 1,690,000
Household Finance Corp.
4.95%, 08/23/99...................... 1,975,000 1,975,000
5.11%, 09/09/99...................... 1,202,000 1,202,000
-----------
16,068,000
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- -----------
<S> <C> <C>
ELECTRONICS -- 5.16%
General Electric Capital Corp.
4.91%, 08/10/99...................... $ 1,763,000 $ 1,763,000
5.03%, 08/24/99...................... 830,000 830,000
4.90%, 08/31/99...................... 662,000 662,000
-----------
3,255,000
-----------
FARM MACHINERY & EQUIPMENT -- 4.91%
John Deere Capital Corp.
4.84%, 07/08/99...................... 3,092,000 3,092,000
-----------
FOOD & BEVERAGE -- 5.08%
Coca-Cola Co.
4.75%, 07/12/99...................... 1,200,000 1,198,258
4.76%, 07/26/99...................... 1,010,000 1,006,661
4.82%, 08/12/99...................... 1,000,000 994,377
-----------
3,199,296
-----------
FOREIGN GOVERNMENTS -- 3.25%
Province Of British Columbia
4.95%, 09/27/99...................... 2,070,000 2,044,953
-----------
INSURANCE/MULTI-LINE -- 7.70%
Transamerica Financial Corp.
5.08%, 10/19/99...................... 1,685,000 1,658,845
USAA Capital Corp.
4.78%, 07/16/99...................... 1,870,000 1,866,276
4.79%, 08/09/99...................... 1,337,000 1,330,062
-----------
4,855,183
-----------
OFFICE EQUIPMENT -- 6.18%
IBM Credit Corp.
5.02%, 09/01/99...................... 1,101,000 1,101,000
Xerox Credit Corp.
4.82%, 07/19/99...................... 2,800,000 2,793,252
-----------
3,894,252
-----------
TELEPHONE/UTILITY -- 10.72%
AT & T Corp.
5.50%, 07/01/99...................... 2,000,000 2,000,000
Bell Atlantic Network Funding
4.85%, 07/08/99...................... 444,000 443,581
BellSouth Telecommunications, Inc.
4.95%, 08/03/99...................... 1,055,000 1,050,203
5.12%, 08/18/99...................... 975,000 968,344
GTE Funding, Inc.
4.93%, 07/07/99...................... 1,300,000 1,298,932
5.20%, 07/20/99...................... 1,000,000 997,256
-----------
6,758,316
-----------
TOTAL COMMERCIAL PAPER
(cost $62,621,457)................... 62,621,457
-----------
</TABLE>
<PAGE> 16
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS June 30, 1999
- --------------------------------------------------------------------------------
IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.
MONEY MARKET SERIES (CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE
--------- -----------
<S> <C> <C>
OTHER SHORT-TERM INVESTMENTS -- 0.46%
MONEY MARKET FUNDS
Dreyfus Cash Management Money Markey
Fund................................... 140 $ 140
Federated Prime Obligation Fund......... 290,867 290,867
-----------
TOTAL MONEY MARKET FUNDS
(cost $291,007)........................ 291,007
-----------
TOTAL INVESTMENTS -- 99.83%
(cost $62,912,464)..................... 62,912,464
-----------
CASH & OTHER ASSETS NET OF
LIABILITIES -- 0.17%................... 109,308
-----------
NET ASSETS -- 100.00%................... $63,021,772
===========
</TABLE>
See notes to financial statements.
<PAGE> 17
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS June 30, 1999
- --------------------------------------------------------------------------------
IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.
SHORT-TERM GOVERNMENT BOND SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<S> <C> <C>
BONDS AND NOTES -- 87.66%
U.S. GOVERNMENT AGENCIES -- 50.07%
Federal Farm Credit Bank
5.125%, 04/02/01.................... $ 500,000 $ 495,055
4.630%, 11/05/01.................... 1,000,000 972,700
Federal Home Loan Bank
5.500%, 08/13/01.................... 1,000,000 994,810
6.140%, 12/17/01.................... 1,000,000 997,800
5.945%, 04/01/02.................... 1,000,000 992,500
8.000%, 09/20/04.................... 750,000 754,762
8.340%, 01/26/05.................... 500,000 508,270
Federal Home Loan Mortgage Corp.
5.500%, 11/25/05.................... 1,051,074 1,017,755
6.350%, 03/15/11.................... 696,223 695,993
Federal National Mortgage Association
5.080%, 09/24/99.................... 1,000,000 999,280
5.100%, 09/25/00.................... 1,000,000 994,970
5.400%, 05/07/01.................... 1,000,000 990,000
5.375%, 03/15/02.................... 500,000 491,250
6.500%, 08/01/04.................... 1,899,833 1,882,012
6.225%, 05/25/14.................... 843,249 847,466
6.500%, 07/25/23.................... 274,361 267,875
Tennessee Valley Authority
5.280%, 09/14/01.................... 1,000,000 986,250
------------
14,888,748
------------
U.S. GOVERNMENT OBLIGATIONS -- 22.49%
U.S. Treasury Notes
5.875%, 11/15/99.................... 500,000 501,490
5.500%, 02/29/00.................... 1,000,000 1,002,630
6.500%, 08/31/01.................... 3,000,000 3,053,430
6.250%, 02/28/02.................... 2,000,000 2,028,120
6.625%, 04/30/02.................... 100,000 102,455
------------
6,688,125
------------
ASSET BACKED -- 11.24%
Banc One Auto Grantor Trust
6.270%, 11/20/03.................... 501,178 504,912
Discover Credit Card Master Trust
5.600%, 05/15/06.................... 300,000 290,907
First USA Credit Card Master Trust
6.420%, 03/17/05.................... 250,000 250,002
Ford Credit Auto Owner Trust
5.650%, 10/15/01.................... 450,000 449,402
J.P. Morgan Commercial Mortgage
Finance Corp.
6.952%, 09/15/29.................... 371,158 379,082
Morgan Stanley Capital Corp.
6.850%, 02/15/20.................... 1,089,655 1,096,029
The Money Store Home Equity Trust
7.800%, 10/15/21.................... 366,210 371,960
------------
3,342,295
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<S> <C> <C>
CORPORATE BONDS -- 3.86%
BellSouth Telecommunications, Inc.
6.000%, 06/15/02.................... $ 400,000 $ 397,000
Merck & Co., Inc.
5.760%, 05/03/37.................... 750,000 751,611
------------
1,148,611
------------
TOTAL BONDS AND NOTES
(cost $26,134,090).................. 26,067,778
------------
COMMERCIAL PAPER -- 6.78%
Wells Fargo & Co.
4.850%, 07/06/99.................... 540,000 540,000
Prudential Funding Corp.
4.860%, 07/20/99.................... 123,000 123,000
General Motors Acceptance Corp.
4.891%, 07/26/99.................... 1,008,000 1,008,000
Associates Corp. of North America
5.045%, 08/19/99.................... 346,000 346,000
------------
TOTAL COMMERCIAL PAPER
(cost $2,017,000)................... 2,017,000
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
---------
<S> <C> <C>
OTHER SHORT TERM INVESTMENTS -- 3.54%
MONEY MARKET FUNDS
Dreyfus Cash Management Money Market
Fund................................... 42,305 42,305
Federated Government Obligation Fund.... 1,010,293 1,010,293
-----------
TOTAL MONEY MARKET FUNDS
(cost $1,052,598)...................... 1,052,598
-----------
TOTAL INVESTMENTS -- 97.98%
(cost $29,203,688)..................... 29,137,376
-----------
CASH AND OTHER ASSETS NET OF
LIABILITIES -- 2.02%................... 600,242
-----------
NET ASSETS -- 100.00%................... $29,737,618
===========
</TABLE>
See notes to financial statements.
<PAGE> 18
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS June 30, 1999
- --------------------------------------------------------------------------------
IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.
LONG-TERM BOND SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- --------------
<S> <C> <C>
BONDS AND NOTES -- 89.74%
U.S. GOVERNMENT AGENCIES -- 24.42%
Federal Home Loan Mortgage Corp.
6.000%, 03/15/09.................. $ 928,440 $ 921,041
7.000%, 03/01/12.................. 2,962,837 2,978,569
6.500%, 02/15/21.................. 500,000 496,145
5.000%, 05/15/21.................. 625,000 580,387
6.400%, 09/25/28.................. 500,000 478,215
Federal National Mortgage
Association 6.000%, 02/18/21...... 300,000 292,125
6.247%, 03/17/21.................. 615,000 606,009
6.997%, 12/25/21.................. 400,000 412,000
6.500%, 09/25/22.................. 200,000 197,713
Government National Mortgage
Association 6.500%, 04/15/26...... 1,251,641 1,205,481
8.000%, 07/15/26.................. 1,415,007 1,454,358
Tennessee Valley Authority 5.375%,
11/13/08.......................... 350,000 323,824
--------------
9,945,867
--------------
U.S. GOVERNMENT OBLIGATIONS -- 4.83%
U.S. Treasury Bonds
6.000%, 02/15/26.................. 1,000,000 975,270
5.500%, 08/15/28.................. 600,000 548,910
5.250%, 11/15/28.................. 500,000 442,835
--------------
1,967,015
--------------
CORPORATE BONDS -- 51.76%
ABN AMRO N.V. (Chicago) Global Bond
7.125%, 06/18/07.................. 300,000 302,625
AT & T Corp.
5.625%, 03/15/04.................. 400,000 387,699
Abbott Laboratories Corp.
5.400%, 09/15/08.................. 500,000 460,684
Ameritech Capital Funding
5.950%, 01/15/38.................. 700,000 665,875
Amoco Canada Petroleum Co.
7.950%, 10/01/22.................. 500,000 513,750
Asian Development Bank
5.593%, 07/16/18.................. 500,000 488,210
Associates Corp. of North America
6.375%, 10/15/02.................. 250,000 250,000
5.960%, 05/15/37.................. 750,000 752,615
Burlington Northern Santa Fe
6.530%, 07/15/37.................. 400,000 397,304
California Infrastructure PG & E
6.420%, 09/25/08.................. 1,000,000 994,480
Canadian National Railway Co.
6.450%, 07/15/36.................. 400,000 387,500
Central Illinois Public Service Co.
7.610%, 06/01/17.................. 300,000 309,375
Citicorp
7.200%, 06/15/07.................. 250,000 252,500
Coca-Cola Enterprises
7.000%, 10/01/26.................. 500,000 498,125
Conagra, Inc.
6.700%, 08/01/27.................. 200,000 200,000
CSX Corp.
6.420%, 06/15/10.................. 250,000 237,469
Dayton Hudson Corp.
5.895%, 06/15/37.................. 700,000 700,875
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- --------------
<S> <C> <C>
Delphi Auto Systems Corp.
6.125%, 05/01/04.................. $ 500,000 $ 489,375
Federal Express Corp.
6.720%, 01/15/22.................. 399,882 388,337
Florida Power Corp.
6.000%, 07/01/03.................. 400,000 394,500
Ford Motor Credit Co.
5.125%, 10/15/01.................. 300,000 292,875
7.200%, 06/15/07.................. 600,000 615,000
General Electric Credit Co.
6.500%, 11/01/06.................. 300,000 296,625
GTE Corp.
6.360%, 04/15/06.................. 400,000 392,000
GTE South, Inc.
6.125%, 06/15/07.................. 200,000 192,750
Halliburton Co.
6.750%, 02/01/27.................. 250,000 256,875
Household Finance Corp.
6.400%, 06/17/08.................. 500,000 475,625
Ingersoll-Rand Co.
6.015%, 02/15/28.................. 500,000 496,795
J.P. Morgan & Co.
6.700%, 11/01/07.................. 250,000 246,718
Madison Gas and Electric Co.
6.020%, 09/15/08.................. 300,000 278,006
Mattel, Inc.
6.000%, 07/15/03.................. 500,000 488,750
Merck & Co., Inc.
5.760%, 05/03/37.................. 1,600,000 1,603,437
Merrill Lynch & Co., Inc.
7.150%, 07/30/12.................. 350,000 352,625
Morgan Stanley Dean Witter Discover
6.375%, 08/01/02.................. 250,000 249,687
NationsBank Corp.
5.750%, 03/15/01.................. 300,000 298,500
Norfolk Southern Corp.
7.050%, 05/01/37.................. 350,000 354,813
Oklahoma Gas & Electric Co.
6.650%, 07/15/27.................. 250,000 253,750
Province of Ontario
5.500%, 10/01/08.................. 400,000 368,000
Procter & Gamble Co.
5.250%, 09/15/03.................. 500,000 481,250
Raytheon Co.
5.950%, 03/15/01.................. 200,000 199,500
6.300%, 03/15/05.................. 200,000 194,750
Salomon Smith Barney Holding
6.250%, 05/15/03.................. 250,000 247,188
Sears Roebuck Acceptance Corp.
6.000%, 03/20/03.................. 200,000 197,250
Sherwin-Williams Co.
5.500%, 10/15/27.................. 550,000 552,387
Suntrust Capital II
7.900%, 06/15/27.................. 200,000 198,500
Transamerica Financial Corp.
6.125%, 11/01/01.................. 350,000 348,250
US West Capital Funding, Inc.
6.250%, 07/15/05.................. 300,000 285,750
Wachovia Corp.
6.605%, 10/01/25.................. 600,000 591,750
</TABLE>
<PAGE> 19
IAA TRUST MUTUAL FUNDS -- SCHEDULE OF INVESTMENTS June 30, 1999
- --------------------------------------------------------------------------------
IAA TRUST TAXABLE FIXED INCOME SERIES FUND, INC.
LONG-TERM BOND SERIES (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- --------------
<S> <C> <C>
Wisconsin Bell Telephone Co.
6.350%, 12/01/26.................. $ 300,000 $ 298,500
Xerox Corp.
5.545%, 07/22/37.................. 900,000 905,224
--------------
21,084,428
--------------
ASSET BACKED -- 8.25%
Discover Credit Card Master Trust
5.850%, 01/17/06.................. 500,000 490,775
First USA Credit Card Master Trust
6.420%, 03/17/05.................. 250,000 250,003
Goldman Sachs Mortgage Securities
Corp.-II
6.620%, 10/18/30.................. 300,000 294,363
Green Tree Financial Corp.
6.870%, 01/15/29.................. 200,000 198,044
J.C. Penney Master Credit Card
Trust 8.950%, 10/15/01............ 647,275 658,997
J.P. Morgan Commercial Mortgage Co.
Finance Corp.
7.088%, 09/15/29.................. 556,000 571,896
Sears Credit Account Master Trust
5.650%, 03/15/09.................. 350,000 339,741
The Money Store Home Equity Trust
5.675%, 02/15/09.................. 199,555 195,269
8.140%, 10/15/27.................. 350,000 359,947
--------------
3,359,036
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- --------------
<S> <C> <C>
MUNICIPAL -- 0.48%
Wisconsin State Unlimited General
Obligation
6.550%, 11/01/05.................. $ 200,000 $ 196,532
--------------
TOTAL BONDS AND NOTES
(cost $37,085,227)................ 36,552,877
--------------
COMMERCIAL PAPER -- 0.66%
Wells Fargo & Co................... 128,000 128,000
4.850%, 07/06/99
Prudential Funding Corp............ 141,000 141,000
4.860%, 07/20/99
--------------
TOTAL COMMERCIAL PAPER
(cost $269,000)................... 269,000
--------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
-----------
<S> <C> <C>
OTHER SHORT TERM INVESTMENTS -- 7.77%
MONEY MARKET FUNDS
Dreyfus Cash Management Money Market
Fund................................ 1,295,195 1,295,195
Federated Prime Obligation Fund...... 1,871,756 1,871,756
------------
TOTAL MONEY MARKET FUNDS
(cost $3,166,951)................... 3,166,951
------------
TOTAL INVESTMENTS -- 98.17%
(cost $40,521,178).................. 39,988,828
------------
CASH AND OTHER ASSETS
NET OF LIABILITIES -- 1.83%......... 745,385
------------
NET ASSETS -- 100.00%................ $ 40,734,213
============
</TABLE>
See notes to financial statements.
<PAGE> 20
STATEMENTS OF ASSETS AND LIABILITIES June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IAA TRUST
TAXABLE FIXED INCOME SERIES FUND, INC.
IAA TRUST IAA TRUST ------------------------------------------
IAA TRUST ASSET TAX EXEMPT SHORT-TERM LONG-TERM
GROWTH ALLOCATION BOND MONEY MARKET GOVERNMENT BOND
FUND, INC. FUND, INC. FUND, INC. SERIES BOND SERIES SERIES
------------ ----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in securities:
At cost............................. $111,374,315 $17,753,453 $17,346,440 $62,912,464 $29,203,688 $40,521,178
============ =========== =========== =========== =========== ===========
At value............................ $182,079,594 $23,205,140 $17,763,903 $62,912,464 $29,137,376 $39,988,828
Cash.................................. 7,393 -- 36,651 -- 151 --
Receivable for securities sold........ -- 305 -- -- -- 1,015,140
Receivable for capital stock sold..... 428,315 2,393 30,000 -- 275,894 312,764
Dividends receivable.................. 183,330 13,069 -- -- -- --
Interest receivable................... 34,043 84,552 216,335 229,565 339,398 454,394
Due from Advisor (Note E)............. -- -- -- -- 2,901 9,026
Prepaid Expenses...................... 4,119 856 487 1,473 573 726
------------ ----------- ----------- ----------- ----------- -----------
Total assets........................ 182,736,794 23,306,315 18,047,376 63,143,502 29,756,293 41,780,878
------------ ----------- ----------- ----------- ----------- -----------
LIABILITIES:
Cash overdraft........................ -- 82 -- 52,100 -- 110
Payable for securities purchased...... -- -- 524,342 -- -- 999,760
Payable for capital stock redeemed.... 500,398 -- -- -- -- 14,641
Distributions Payable................. -- -- 146 21,912 -- --
Accrued expenses and other
liabilities......................... 166,133 21,494 15,447 47,718 18,675 32,154
------------ ----------- ----------- ----------- ----------- -----------
Total liabilities................... 666,531 21,576 539,935 121,730 18,675 1,046,665
------------ ----------- ----------- ----------- ----------- -----------
NET ASSETS............................. $182,070,263 $23,284,739 $17,507,441 $63,021,772 $29,737,618 $40,734,213
============ =========== =========== =========== =========== ===========
NET ASSETS CONSIST OF:
Capital paid-in....................... $100,764,154 $16,602,862 $17,047,931 $63,021,940 $29,803,539 $40,855,390
Undistributed (Distributions in excess
of) net investment income........... 470,281 5,216 647 -- (1,608) (3,741)
Accumulated net realized gain (loss)
on investments...................... 10,130,549 1,224,974 41,400 (168) 1,999 414,914
Net unrealized appreciation
(depreciation) of investments....... 70,705,279 5,451,687 417,463 -- (66,312) (532,350)
============ =========== =========== =========== =========== ===========
$182,070,263 $23,284,739 $17,507,441 $63,021,772 $29,737,618 $40,734,213
============ =========== =========== =========== =========== ===========
Shares outstanding.................... 6,684,880 1,360,411 2,023,707 63,022,038 2,976,713 4,068,188
============ =========== =========== =========== =========== ===========
NET ASSET VALUE AND REDEMPTION PRICE
PER SHARE............................. $27.24 $17.12 $8.65 $1.00 $9.99 $10.01
---- ---- --- ---- ---- ----
---- ---- --- ---- ---- ----
</TABLE>
See notes to financial statements.
<PAGE> 21
STATEMENTS OF OPERATIONS for the Year Ended June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IAA TRUST
TAXABLE FIXED INCOME SERIES FUND, INC.
IAA TRUST IAA TRUST -----------------------------------------
IAA TRUST ASSET TAX EXEMPT SHORT-TERM LONG-TERM
GROWTH ALLOCATION BOND MONEY MARKET GOVERNMENT BOND
FUND, INC. FUND, INC. FUND, INC. SERIES BOND SERIES SERIES
----------- ----------- ---------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends................................ $ 2,079,177 $ 146,957 $ -- $ -- $ -- $ --
Interest................................. 496,922 587,247 863,686 3,194,913 1,679,269 $2,417,313
----------- ---------- -------- ---------- ---------- ----------
Total investment income................ 2,576,099 734,204 863,686 3,194,913 1,679,269 2,417,313
----------- ---------- -------- ---------- ---------- ----------
EXPENSES:
Investment advisory fees (Note E)........ 1,187,306 156,476 88,113 306,970 144,676 296,621
Distribution expenses (Note F)........... 96,309 6,869 9,474 -- 3,760 5,076
Transfer agent fees...................... 71,863 9,800 11,983 38,008 25,047 25,139
Audit fees............................... 39,079 4,773 3,483 14,056 6,912 8,825
Printing................................. 15,989 1,527 2,037 5,851 1,124 1,445
Custody fees............................. 55,194 12,066 12,521 26,555 15,505 16,743
Directors' fees.......................... 5,367 1,249 1,236 676 521 574
Administration fees...................... 122,662 15,314 13,857 46,738 21,238 28,843
Accounting fees.......................... 64,830 31,494 30,358 44,561 32,573 36,819
Insurance................................ 15,948 1,857 1,904 6,003 2,438 3,244
Registration fees........................ 9,937 4,529 5,583 3,130 2,639 2,821
Legal fees............................... 8,607 6,437 7,114 3,708 2,731 2,731
Miscellaneous............................ 9,099 1,993 1,163 3,263 1,605 2,146
----------- ---------- -------- ---------- ---------- ----------
Total expenses......................... 1,702,190 254,384 188,826 499,519 260,769 431,027
----------- ---------- -------- ---------- ---------- ----------
Less: Advisory fees waived and reimbursed
(Note E)............................... -- -- -- -- (3,969) (77,861)
Less: Expenses waived (Note E)........... (55,194) (12,066) (12,521) (26,555) (15,505) (16,743)
----------- ---------- -------- ---------- ---------- ----------
Net expenses........................... 1,646,996 242,318 176,305 472,964 241,295 336,423
----------- ---------- -------- ---------- ---------- ----------
NET INVESTMENT INCOME..................... 929,103 491,886 687,381 2,721,949 1,437,974 2,080,890
----------- ---------- -------- ---------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS -- NOTE (D):
Net realized gain on investments......... 12,717,971 1,177,178 310,798 -- 87,430 909,033
Net change in unrealized appreciation
(depreciation) on investments.......... 23,916,026 1,674,115 (624,536) -- (310,809) (1,718,979)
----------- ---------- -------- ---------- ---------- ----------
Net realized and unrealized gain (loss)
on investments......................... 36,633,997 2,851,293 (313,738) -- (223,379) (809,946)
----------- ---------- -------- ---------- ---------- ----------
INCREASE IN NET ASSETS FROM OPERATIONS.... $37,563,100 $3,343,179 $373,643 $2,721,949 $1,214,595 $1,270,944
=========== ========== ======== ========== ========== ==========
</TABLE>
See notes to financial statements.
<PAGE> 22
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IAA TRUST IAA TRUST ASSET
GROWTH FUND, INC. ALLOCATION FUND, INC.
--------------------------- -------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
06/30/99 06/30/98 06/30/99 06/30/98
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income...................................... $ 929,103 $ 1,155,616 $ 491,886 $ 430,133
Net realized gain on investments........................... 12,717,971 8,691,628 1,177,178 483,536
Net change in unrealized appreciation of investments....... 23,916,026 6,151,197 1,674,115 802,862
------------ ------------ ----------- -----------
Net increase in net assets from operations................. 37,563,100 15,998,441 3,343,179 1,716,531
------------ ------------ ----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: NOTE (B)
Investment income.......................................... (1,018,527) (945,434) (494,039) (427,135)
Realized gains on investments.............................. (8,886,026) (10,778,777) (164,915) (670,865)
------------ ------------ ----------- -----------
Total distributions........................................ (9,904,553) (11,724,211) (658,954) (1,098,000)
------------ ------------ ----------- -----------
CAPITAL STOCK TRANSACTIONS -- (NET) NOTE (C)................ (5,902,832) 15,253,968 1,950,772 3,758,827
------------ ------------ ----------- -----------
Total increase in net assets............................... 21,755,715 19,528,198 4,634,997 4,377,358
NET ASSETS:
Beginning of year.......................................... 160,314,548 140,786,350 18,649,742 14,272,384
------------ ------------ ----------- -----------
End of year................................................ $182,070,263 $160,314,548 $23,284,739 $18,649,742
============ ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
IAA TRUST
TAXABLE FIXED INCOME
IAA TRUST SERIES FUND, INC.
TAX EXEMPT BOND FUND, INC. MONEY MARKET SERIES
--------------------------- -------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
6/30/99 06/30/98 06/30/99 06/30/98
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income...................................... $ 687,381 $ 748,004 $2,721,949 $ 2,830,723
Net realized gain (loss) on investments.................... 310,798 65,805 -- (40)
Net change in unrealized appreciation (depreciation) of
investments.............................................. (624,536) 482,740 -- --
----------- ----------- ----------- -----------
Net increase in net assets from operations................. 373,643 1,296,549 2,721,949 2,830,683
----------- ----------- ----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: NOTE (B)
Investment income.......................................... (697,162) (747,014) (2,721,949) (2,830,723)
Realized gains on investments.............................. (273,899) (31,294) -- --
----------- ----------- ----------- -----------
Total distributions........................................ (971,061) (778,308) (2,721,949) (2,830,723)
----------- ----------- ----------- -----------
CAPITAL STOCK TRANSACTIONS -- (NET) NOTE (C)................ 435,516 (856,926) 9,999,569 (7,651,306)
----------- ----------- ----------- -----------
Total increase (decrease) in net assets.................... (161,902) (338,685) 9,999,569 (7,651,346)
NET ASSETS:
Beginning of year.......................................... 17,669,343 18,008,028 53,022,203 60,673,549
----------- ----------- ----------- -----------
End of year................................................ $17,507,441 $17,669,343 $63,021,772 $53,022,203
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
<PAGE> 23
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IAA TRUST IAA TRUST
TAXABLE FIXED INCOME TAXABLE FIXED INCOME
SERIES FUND, INC. SERIES FUND, INC.
SHORT-TERM GOVERNMENT BOND SERIES LONG-TERM BOND SERIES
---------------------------------- --------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
06/30/99 06/30/98 06/30/99 06/30/98
--------------- ---------------- ----------- ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income............................. $ 1,437,974 $ 1,433,346 $ 2,080,890 $ 2,010,422
Net realized gain on investments.................. 87,430 3,974 909,033 459,542
Net change in unrealized appreciation
(depreciation) of investments................... (310,809) 232,929 (1,718,979) 1,126,134
----------- ----------- ----------- -----------
Net increase in net assets from operations........ 1,214,595 1,670,249 1,270,944 3,596,098
----------- ----------- ----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
NOTE (B)
Investment income................................. (1,460,510) (1,421,743) (2,116,730) (1,989,821)
Realized gains on investments..................... (89,405) -- (937,981) (24,332)
----------- ----------- ----------- -----------
Total distributions............................... (1,549,915) (1,421,743) (3,054,711) (2,014,153)
----------- ----------- ----------- -----------
CAPITAL STOCK TRANSACTIONS -- (NET) NOTE (C)....... 1,763,522 3,775,891 3,717,509 4,286,371
----------- ----------- ----------- -----------
Total increase in net assets...................... 1,428,202 4,024,397 1,933,742 5,868,316
NET ASSETS:
Beginning of year................................. 28,309,416 24,285,019 38,800,471 32,932,155
----------- ----------- ----------- -----------
End of year....................................... $29,737,618 $28,309,416 $40,734,213 $38,800,471
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
<PAGE> 24
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The tables below set forth financial data for a share of capital stock
outstanding throughout each year presented.
<TABLE>
<CAPTION>
IAA TRUST
GROWTH FUND, INC.
--------------------------------------------------
YEARS ENDED JUNE 30,
--------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.......................... $ 23.04 $ 22.51 $ 18.88 $ 17.23 $ 15.16
-------- -------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income..................................... 0.15 0.17 0.15 0.23 0.22
Net gains on securities (both realized and unrealized).... 5.50 2.19 4.81 3.23 3.45
-------- -------- -------- ------- -------
Total from investment operations........................ 5.65 2.36 4.96 3.46 3.67
-------- -------- -------- ------- -------
LESS DISTRIBUTIONS
Dividends from net investment income...................... (0.15) (0.15) (0.20) (0.25) (0.17)
Distributions from capital gains.......................... (1.30) (1.68) (1.13) (1.56) (1.43)
-------- -------- -------- ------- -------
Total distributions..................................... (1.45) (1.83) (1.33) (1.81) (1.60)
-------- -------- -------- ------- -------
Net asset value, end of year................................ $ 27.24 $ 23.04 $ 22.51 $ 18.88 $ 17.23
======== ======== ======== ======= =======
TOTAL RETURN................................................ 26.10% 10.98% 28.54% 21.51% 26.68%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in 000's)........................ $182,070 $160,315 $140,786 $84,800 $70,577
Ratio of expenses to average net assets:.................. .
Before expense waiver................................... 1.08% 1.02% -- -- --
After expense waiver.................................... 1.04% 1.00% 1.16% 1.12% 1.14%
Ratio of net investment income to average net assets:
Before expense waiver................................... 0.55% 0.73% -- -- --
After expense waiver.................................... 0.59% 0.75% 0.84% 1.30% 1.41%
Portfolio turnover........................................ 31.88% 33.06% 30.74% 32.95% 31.84%
</TABLE>
<TABLE>
<CAPTION>
IAA TRUST
ASSET ALLOCATION FUND, INC.
----------------------------------------------
YEARS ENDED JUNE 30,
----------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.......................... $ 15.20 $ 14.64 $ 13.39 $ 12.29 $11.08
------- ------- ------- ------- ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income..................................... 0.37 0.39 0.35 0.37 0.36
Net gains on securities (both realized and unrealized).... 2.04 1.22 2.11 1.41 1.38
------- ------- ------- ------- ------
Total from investment operations........................ 2.41 1.61 2.46 1.78 1.74
------- ------- ------- ------- ------
LESS DISTRIBUTIONS
Dividends from net investment income...................... (0.37) (0.39) (0.34) (0.37) (0.34)
Distributions from capital gains.......................... (0.12) (0.66) (0.87) (0.31) (0.18)
Distributions from return of capital...................... -- -- -- -- (0.01)
------- ------- ------- ------- ------
Total distributions..................................... (0.49) (1.05) (1.21) (0.68) (0.53)
------- ------- ------- ------- ------
Net asset value, end of year................................ $ 17.12 $ 15.20 $ 14.64 $ 13.39 $12.29
======= ======= ======= ======= ======
TOTAL RETURN................................................ 16.22% 11.41% 19.95% 14.74% 16.29%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in 000's)........................ $23,285 $18,650 $14,272 $10,083 $9,540
Ratio of expenses to average net assets:
Before expense waiver................................... 1.22% 1.25% -- -- --
After expense waiver.................................... 1.16% 1.21% 1.46% 1.44% 1.46%
Ratio of net investment income to average net assets:
Before expense waiver................................... 2.30% 2.57% -- -- --
After expense waiver.................................... 2.36% 2.61% 2.57% 2.81% 3.18%
Portfolio turnover........................................ 33.91% 20.07% 19.25% 33.77% 21.03%
</TABLE>
See notes to financial statements.
<PAGE> 25
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The tables below set forth financial data for a share of capital stock
outstanding throughout each year presented.
<TABLE>
<CAPTION>
IAA TRUST
TAX EXEMPT BOND FUND, INC.
---------------------------------------------------
YEARS ENDED JUNE 30,
---------------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.......................... $ 8.95 $ 8.70 $ 8.41 $ 8.36 $ 8.19
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income..................................... 0.36 0.37 0.36 0.37 0.39
Net gains (losses) on securities (both realized and
unrealized)............................................. (0.16) 0.27 0.31 0.07 0.20
------- ------- ------- ------- -------
Total from investment operations........................ 0.20 0.64 0.67 0.44 0.59
------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net investment income...................... (0.36) (0.37) (0.36) (0.37) (0.39)
Distributions from capital gains.......................... (0.14) (0.02) (0.02) (0.02) (0.03)
------- ------- ------- ------- -------
Total distributions..................................... (0.50) (0.39) (0.38) (0.39) (0.42)
------- ------- ------- ------- -------
Net asset value, end of year................................ $ 8.65 $ 8.95 $ 8.70 $ 8.41 $ 8.36
======= ======= ======= ======= =======
TOTAL RETURN................................................ 2.14% 7.45% 8.15% 5.30% 7.51%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in 000's)........................ $17,507 $17,669 $18,008 $17,744 $18,833
Ratio of expenses to average net assets:
Before expense waiver................................... 1.07% 1.01% -- -- --
After expense waiver.................................... 1.00% 0.97% 1.14% 1.08% 1.06%
Ratio of net investment income to average net assets:
Before expense waiver................................... 3.83% 4.13% -- -- --
After expense waiver.................................... 3.90% 4.17% 4.23% 4.30% 4.79%
Portfolio turnover........................................ 39.85% 24.83% 11.35% 14.75% 24.89%
</TABLE>
<TABLE>
<CAPTION>
IAA TRUST
TAXABLE FIXED INCOME SERIES FUND, INC.
MONEY MARKET SERIES
---------------------------------------------------
YEARS ENDED JUNE 30,
---------------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income..................................... 0.04 0.05 0.05 0.05 0.05
------- ------- ------- ------- -------
Total from investment operations........................ 0.04 0.05 0.05 0.05 0.05
------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net investment income...................... (0.04) (0.05) (0.05) (0.05) (0.05)
------- ------- ------- ------- -------
Total distributions..................................... (0.04) (0.05) (0.05) (0.05) (0.05)
------- ------- ------- ------- -------
Net asset value, end of year................................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
TOTAL RETURN................................................ 4.54% 4.94% 4.63% 4.82% 4.85%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in 000's)........................ $63,022 $53,022 $60,674 $33,664 $36,415
Ratio of expenses to average net assets:
Before expense waiver................................... 0.82% 0.83% -- -- 0.97%
After expense waiver.................................... 0.77% 0.81% 0.94% 0.90% 0.73%
Ratio of net investment income to average net assets:
Before expense waiver................................... 4.39% 4.81% -- -- 4.56%
After expense waiver.................................... 4.44% 4.83% 4.55% 4.74% 4.80%
</TABLE>
See notes to financial statements.
<PAGE> 26
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The tables below set forth financial data for a share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
IAA TRUST
TAXABLE FIXED INCOME SERIES FUND, INC.
----------------------------------------------------------------------------------------
SHORT-TERM GOVERNMENT LONG-TERM
BOND SERIES BOND SERIES
------------------------------------------ ------------------------------------------
FOR THE PERIOD FOR THE PERIOD
01/02/97* 01/02/97*
YEAR ENDED YEAR ENDED THROUGH YEAR ENDED YEAR ENDED THROUGH
1999 1998 06/30/97 1999 1998 06/30/97
---------- ---------- -------------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period... $ 10.11 $ 10.01 $ 10.00 $ 10.48 $ 10.04 $ 10.00
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income................ 0.51 0.54 0.20 0.56 0.56 0.20
Net gains (losses) on securities
(both realized and unrealized)..... (0.09) 0.10 0.01 (0.21) 0.45 0.04
------- ------- ------- ------- ------- -------
Total from investment operations... 0.42 0.64 0.21 0.35 1.01 0.24
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net investment
income............................. (0.51) (0.54) (0.20) (0.56) (0.56) (0.20)
Distributions from capital gains..... (0.03) -- -- (0.26) (0.01) --
------- ------- ------- ------- ------- -------
Total distributions................ (0.54) (0.54) (0.20) (0.82) (0.57) (0.20)
------- ------- ------- ------- ------- -------
Net asset value, end of period......... $ 9.99 $ 10.11 $ 10.01 $ 10.01 $ 10.48 $ 10.04
======= ======= ======= ======= ======= =======
TOTAL RETURN........................... 4.27% 6.50% 2.10% 3.29% 10.24% 2.44%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
000's)............................. $29,738 $28,309 $24,285 $40,734 $38,800 $32,932
Ratio of expenses to average net
assets:
Before expense waiver and
reimbursement.................... 0.90% 0.92% 3.88%** 1.09% 1.12% 3.82%**
After expense waiver and
reimbursement.................... 0.83% 0.86% 0.76%** 0.85% 0.89% 0.78%**
Ratio of net investment income to
average net assets:
Before expense waiver and
reimbursement.................... 4.93% 5.30% 1.78%** 5.08% 5.24% 2.11%**
After expense waiver and
reimbursement.................... 5.00% 5.36% 4.90%** 5.32% 5.47% 5.15%**
Portfolio turnover................... 29.24% 1.54% 0.00% 29.19% 25.11% 41.77%
</TABLE>
* Commencement of operations.
** Annualized.
See notes to financial statements.
<PAGE> 27
IAA TRUST MUTUAL FUNDS -- NOTES TO FINANCIAL STATEMENTS June 30, 1999
- --------------------------------------------------------------------------------
NOTE (A) SIGNIFICANT ACCOUNTING POLICIES: The IAA Trust Mutual Funds represent
four separate funds, with one Fund containing three separate Series (referred to
herein as "Funds" or "Series"). Each of the Funds and Series has distinct
investment objectives and policies. The four Funds are as follows: IAA Trust
Growth Fund, Inc. ("Growth Fund"); IAA Trust Asset Allocation Fund, Inc. ("Asset
Allocation Fund"); IAA Trust Tax Exempt Bond Fund, Inc. ("Tax Exempt Bond
Fund"); and IAA Trust Taxable Fixed Income Series Fund, Inc. ("Taxable Fixed
Income Series Fund"), formerly known as IAA Trust Money Market Fund, Inc. The
Taxable Fixed Income Series Fund currently consists of the following three
separate investment Series: IAA Trust Money Market Series ("Money Market
Series"); IAA Trust Short-Term Government Bond Series ("Short-Term Government
Bond Series"); and IAA Trust Long-Term Bond Series ("Long-Term Bond Series").
The Short-Term Government Bond Series and the Long-Term Bond Series commenced
operations on January 2, 1997. The Funds are separately incorporated and
registered companies under the Investment Company Act of 1940 (the "Act"), as
amended, as diversified, open-ended management companies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies consistently followed
by each Fund in the preparation of its financial statements.
(1) SECURITY VALUATION: For the Growth Fund, the Asset Allocation Fund, the
Tax Exempt Bond Fund, the Short-Term Government Bond Series and the
Long-Term Bond Series, securities traded on national exchanges and
over-the-counter securities listed in the NASDAQ National Market System are
valued at the last reported sales price at the close of the New York Stock
Exchange. Securities for which there have been no sales on such day are
valued at the last reported bid price on such exchange. Over-the-counter
securities not listed on the NASDAQ National Market System are valued at the
mean of the current bid and asked prices. Fixed-income securities except
short-term securities may be valued on the basis of prices provided by a
pricing service when such prices are believed by the Advisor to reflect the
fair market value of such securities. Short-term investments, such as those
with a remaining maturity of 60 days or less, are valued at amortized cost,
which approximates market value. For the Money Market Series, all securities
are valued at amortized cost, which approximates market value. Under the
amortized cost method, discounts and premiums are accreted and amortized
ratably to maturity and are included in interest income.
(2) INVESTMENT INCOME AND SECURITIES TRANSACTIONS: Dividend income is
recorded on the ex-dividend date. Interest income is accrued daily.
Securities transactions are accounted for on the trade date basis. Gains or
losses on the sale of securities are determined by use of the specific
identification method for both financial reporting and income tax purposes.
(3) FEDERAL INCOME TAXES: The Funds have elected to be treated as "regulated
investment companies" under Sub-chapter M of the Internal Revenue Code and
to distribute substantially all of their net taxable income annually.
Accordingly, no provisions for Federal income taxes have been made in the
accompanying financial statements.
(4) DIVIDENDS AND DISTRIBUTIONS: Dividends and distributions to shareholders
are recorded on the ex-dividend date. Income distributions and capital gain
distributions are determined in accordance with income tax regulations,
which may differ from generally accepted accounting principles.
NOTE (B) DIVIDENDS FROM NET INVESTMENT INCOME AND DISTRIBUTIONS OF CAPITAL
GAINS: In the Growth Fund, net investment income from investment transactions is
declared and distributed to shareholders twice a year. The Asset Allocation
Fund, the Tax Exempt Bond Fund, the Short-Term Government Bond Series and the
Long-Term Bond Series, declare and distribute net investment income to
shareholders monthly. The Money Market Series declares dividends daily from its
net investment income, which are payable monthly. Dividends are automatically
reinvested in additional Fund shares, at the then current net asset value, for
those shareholders that have elected the reinvestment option. Net realized gains
from investment transactions, if any, of all Funds are generally distributed
twice a year.
NOTE (C) CAPITAL STOCK: At June 30, 1999, 10,000,000 shares of capital stock
were authorized for each of the Growth Fund, Asset Allocation Fund, and Tax
Exempt Bond Fund, each Fund having a par value of $1.00 per share. The
authorized capitalization of the Taxable Fixed Income Series Fund consists of
250,000,000 shares with the par value of $0.10 per share. 100,000,000 of this
Fund's
<PAGE> 28
IAA TRUST MUTUAL FUNDS -- NOTES TO FINANCIAL STATEMENTS June 30, 1999
(continued)
- --------------------------------------------------------------------------------
shares are designated as Money Market Series, 50,000,000 of its shares are
designated as Short-Term Government Bond Series, and 25,000,000 of its shares
are designated as Long-Term Bond Series. The remaining 75,000,000 shares are
undesignated.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
GROWTH FUND ASSET ALLOCATION FUND
----------- ---------
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 1999 JUNE 30, 1998 JUNE 30, 1999
------------------------- ------------------------ ----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ --------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold...................................... 346,692 $ 8,272,611 935,194 $ 20,754,538 259,768 $ 3,920,616
Shares issued through reinvestment of
dividends....................................... 424,032 9,386,928 509,499 11,204,174 36,834 576,698
---------- ------------ --------- ------------ -------- -----------
770,724 17,659,539 1,444,693 31,958,712 296,602 4,497,314
---------- ------------ --------- ------------ -------- -----------
Shares Redeemed.................................. (1,045,124) (23,562,371) (740,214) (16,704,744) (163,521) (2,546,542)
---------- ------------ --------- ------------ -------- -----------
Net increase (decrease).......................... (274,400) $ (5,902,832) 704,479 $ 15,253,968 133,081 $ 1,950,772
========== ============ ========= ============ ======== ===========
<CAPTION>
ASSET ALLOCATION FUND
---------
YEAR ENDED
JUNE 30, 1998
----------------------
SHARES AMOUNT
-------- -----------
<S> <C> <C>
Shares sold...................................... 350,739 $ 5,233,527
Shares issued through reinvestment of
dividends....................................... 61,757 911,781
-------- -----------
412,496 6,145,308
-------- -----------
Shares Redeemed.................................. (159,724) (2,386,481)
-------- -----------
Net increase (decrease).......................... 252,772 $ 3,758,827
======== ===========
</TABLE>
<TABLE>
<CAPTION>
TAX EXEMPT BOND FUND
--------------------
YEAR ENDED YEAR ENDED
JUNE 30, 1999 JUNE 30, 1998
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Shares sold.................................... 141,601 $ 1,303,303 90,306 $ 806,911
Shares issued through reinvestment of
dividends..................................... 73,436 656,860 57,420 510,560
-------- ----------- -------- -----------
215,037 1,960,163 147,726 1,317,471
-------- ----------- -------- -----------
Shares redeemed................................ (169,227) (1,524,647) (244,109) (2,174,397)
-------- ----------- -------- -----------
Net increase (decrease)........................ 45,810 $ 435,516 (96,383) $ (856,926)
======== =========== ======== ===========
<CAPTION>
TAXABLE FIXED INCOME SERIES FUND
--------------------------------
MONEY MARKET SERIES
-------------------
YEAR ENDED YEAR ENDED
JUNE 30, 1999 JUNE 30, 1998
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold.................................... 73,477,819 $ 73,477,819 53,195,087 $ 53,195,087
Shares issued through reinvestment of
dividends..................................... 2,685,481 2,685,481 2,821,173 2,821,173
----------- ------------ ----------- ------------
76,163,300 76,163,300 56,016,260 56,016,260
----------- ------------ ----------- ------------
Shares redeemed................................ (66,163,731) (66,163,731) (63,667,566) (63,667,566)
----------- ------------ ----------- ------------
Net increase (decrease)........................ 9,999,569 $ 9,999,569 (7,651,306) $ (7,651,306)
=========== ============ =========== ============
</TABLE>
<TABLE>
<CAPTION>
TAXABLE FIXED INCOME SERIES FUND
--------------------------------
SHORT-TERM GOVERNMENT TAXABLE FIXED INCOME SERIES FUND
--------------------- --------------------------------
BOND SERIES LONG-TERM BOND SERIES
----------- ---------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 1999 JUNE 30, 1998 JUNE 30, 1999 JUNE 30, 1998
---------------------- ---------------------- ----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
-------- ----------- -------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold................. 511,782 $ 5,186,589 663,670 $ 6,700,365 794,968 $ 8,300,725 896,757 $ 9,186,831
Shares issued through
reinvestment of
dividends.................. 139,753 1,413,533 132,147 1,333,212 276,431 2,875,782 187,795 1,936,407
-------- ----------- -------- ----------- --------- ----------- --------- -----------
651,535 6,600,122 795,817 8,033,577 1,071,399 11,176,507 1,084,552 11,123,238
-------- ----------- -------- ----------- --------- ----------- --------- -----------
Shares redeemed............. (475,781) (4,836,600) (421,052) (4,257,686) (705,688) (7,458,998) (662,006) (6,836,867)
-------- ----------- -------- ----------- --------- ----------- --------- -----------
Net increase................ 175,754 $ 1,763,522 374,765 $ 3,775,891 365,711 $ 3,717,509 422,546 $ 4,286,371
======== =========== ======== =========== ========= =========== ========= ===========
</TABLE>
<PAGE> 29
IAA TRUST MUTUAL FUNDS -- NOTES TO FINANCIAL STATEMENTS June 30, 1999
(continued)
- --------------------------------------------------------------------------------
NOTE (D) INVESTMENT TRANSACTIONS: Purchases and sales of investment securities,
other than U.S. Government obligations and short-term notes for the year ended
June 30, 1999 were:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
Growth Fund................................................. $47,610,866 $60,191,755
Asset Allocation Fund....................................... $ 8,002,211 $ 4,741,720
Tax Exempt Bond Fund........................................ $ 7,321,901 $ 7,480,573
Short-Term Government Bond Series........................... $ 8,318,415 $ 1,000,000
Long-Term Bond Series....................................... $20,918,559 $ 8,737,438
</TABLE>
For the year ended June 30, 1999, the aggregate cost of purchases and proceeds
from sales of U.S. Government Securities were:
<TABLE>
<S> <C> <C>
Asset Allocation Fund....................................... $ 675,801 $ 2,004,316
Short-Term Government Bond Series........................... $11,323,053 $ 6,438,437
Long-Term Bond Series....................................... $ 2,564,093 $ 2,067,296
</TABLE>
For both Federal income tax and financial statement purposes, the cost of
investments at June 30, 1999 was $111,374,315 for the Growth Fund, $17,753,453
for the Asset Allocation Fund, $17,346,440 for the Tax Exempt Bond Fund,
$62,912,464 for the Money Market Series, $29,203,688 for the Short-Term
Government Bond Series, and $40,521,178 for the Long-Term Bond Series.
The gross unrealized appreciation/depreciation for book and tax purposes at June
30, 1999 consisted of the following:
<TABLE>
<CAPTION>
APPRECIATION DEPRECIATION
------------ ------------
<S> <C> <C>
Growth Fund................................................. $73,230,729 $2,525,450
Asset Allocation Fund....................................... $ 5,775,390 $ 323,703
Tax Exempt Bond Fund........................................ $ 535,321 $ 117,858
Short-Term Government Bond Series........................... $ 105,350 $ 171,662
Long-Term Bond Series....................................... $ 114,246 $ 646,596
</TABLE>
NOTE (E) ADVISORY AND OTHER RELATED PARTY TRANSACTIONS: Under its Advisory
Agreements with the Funds, IAA Trust Company (the "Advisor") provides investment
advisory services for the Funds. The Funds pay the Advisor at the following
annual percentage rates of the average daily net assets of each Fund: Growth
Fund 0.75%; Asset Allocation Fund 0.75%; Tax Exempt Bond Fund 0.50%; Money
Market Series 0.50%; Short-Term Government Bond Series 0.50%; and Long-Term Bond
Series 0.75%. These fees are accrued daily and paid to the Advisor monthly. IAA
Trust Company serves as the Funds' Custodian, without compensation after
voluntary waivers. Custody fees waived for Growth Fund, Asset Allocation Fund,
Tax Exempt Fund, Money Market Series, Short-Term Government Bond Series and
Long-Term Bond Series for the year ended June 30, 1999 were: $55,194, $12,066,
$12,521, $26,555, $15,505 and $16,743, respectively.
For the period January 2, 1997(commencement of operations) through June 30,
1997, the Advisor voluntarily agreed to reduce its fees and reimburse the
Short-Term Government Bond Series and the Long-Term Bond Series to the extent
total annualized expenses exceeded 1.32% and 1.57% of the Funds average daily
net assets. Effective July 1, 1997, the Advisor agreed to continue to reduce its
fees and reimburse the Funds to the extent total annualized expenses exceed
0.98%. Effective November 1, 1997, the Advisor agreed to continue to reduce its
fees and reimburse the Funds to the extent total annualized expenses exceed
0.85% of average daily net assets. Investment advisory fees, for the year ended
June 30, 1999, are as follows:
<TABLE>
<CAPTION>
EXPENSES
WAIVED
AND
ADVISORY ADVISORY REIMBURSED
FEE FEE BY ADVISOR
-------- -------- ---------------
<S> <C> <C> <C>
Short-Term Government Bond Series........................... 0.50% $144,676 $ 3,969
Long-Term Bond Series....................................... 0.75% $296,621 $77,861
</TABLE>
The legal counsel to the Fund also serves as in-house counsel to the Advisor and
as secretary to the Fund. Fees paid by the Growth Fund, Asset Allocation Fund,
Tax Exempt Bond Fund, Money Market Series, Short-Term Government Bond Series and
Long-Term Bond Series for the year ended June 30, 1999 were $8,607, $6,437,
$7,114, $3,708, $2,731 and $2,731, respectively.
<PAGE> 30
IAA TRUST MUTUAL FUNDS -- NOTES TO FINANCIAL STATEMENTS June 30, 1999
(continued)
- --------------------------------------------------------------------------------
NOTE (F) DISTRIBUTION SERVICES AGREEMENTS: First Data Distributors, Inc.
(formerly FPS Broker Services, Inc.) serves as the Funds' Distributor. Pursuant
to Rule 12b-1 adopted by the Securities and Exchange Commission under the Act,
the Growth Fund, the Asset Allocation Fund, the Tax Exempt Bond Fund, the
Short-Term Government Bond Series, and the Long-Term Bond Series have each
adopted a Plan of Distribution (the "Plans"), effective April 1, 1993. The Plans
permit the participating Funds to pay certain expenses associated with the
distribution of their shares. The maximum annual contractual fee under the
Plans, is 0.25% of the average daily net assets of each Fund or Series. For the
year ended June 30, 1999, the annualized Rule 12b-1 Plan expenses incurred for
the Growth Fund, the Asset Allocation Fund, the Tax Exempt Bond Fund, the
Short-Term Government Bond Series and the Long-Term Bond Series were 0.06%,
0.03%, 0.05%, 0.01%, and 0.01% of average net assets, respectively.
NOTE (G) SHAREHOLDER CONCENTRATION: On June 30, 1999, three shareholders held
approximately 57.9% of the shares outstanding of the Growth Fund, two
shareholders held approximately 83.5% of the shares outstanding of the Asset
Allocation Fund, one shareholder held approximately 11.5% of the shares
outstanding of the Tax Exempt Bond Fund, two shareholders held approximately
89.2% of the shares outstanding of the Money Market Series, four shareholders
held approximately 99.0% of the shares outstanding of the Short-Term Government
Bond Series, and two shareholders held approximately 92.7% of the shares
outstanding of the Long-Term Bond Series.
<PAGE> 31
ILLUSTRATION OF $10,000 INVESTMENT June 30, 1999 (unaudited)
- --------------------------------------------------------------------------------
GROWTH FUND VS. STANDARD & POOR'S 500 INDEX
[GROWTH FUND CHART]
AVERAGE ANNUAL RETURNS*
1 Year 26.10%
5 Year 22.59%
10 Year 14.43%
<TABLE>
<CAPTION>
GROWTH S & P 500
------ ---------
<S> <C> <C>
'1989' 12006 12053
'1990' 13938 14030
'1991' 14686 15066
'1992' 15307 17094
'1993' 17100 19363
'1994' 16686 19636
'1995' 21138 24755
'1996' 25685 31191
'1997' 33015 42015
'1998' 36640 54686
'1999' 46203 67133
</TABLE>
Past performance is not indicative of future results.
ASSET ALLOCATION FUND VS. MERRILL LYNCH CORPORATE AND GOVERNMENT BOND MASTER
INDEX & LIPPER FLEXIBLE FUNDS INDEX
[GROWTH FUND CHART]
AVERAGE ANNUAL RETURNS*
1 Year 16.22%
5 Year 15.69%
10 Year 11.55%
<TABLE>
<CAPTION>
ASSET ALLOCATION MERRILL LYNCH LIPPER FLEXIBLE
---------------- ------------- ---------------
<S> <C> <C> <C>
'1989' 11040 11258 11122
'1990' 11758 12034 12105
'1991' 12871 13279 13302
'1992' 14395 15161 14940
'1993' 15774 17148 17012
'1994' 15886 17120 17230
'1995' 18474 19282 20028
'1996' 21197 20238 23074
'1997' 25426 21893 27338
'1998' 28327 24372 32303
'1999' 32921 24937 35682
</TABLE>
Past performance is not indicative of future results.
* Fund returns are net of all fees and transaction costs, while the index
returns are based solely on market returns without deduction for fees or
transaction costs for rebalancing. The Index is un-managed.
<PAGE> 32
ILLUSTRATION OF $10,000 INVESTMENT June 30, 1999 (unaudited)
- --------------------------------------------------------------------------------
TAX EXEMPT BOND FUND VS. LEHMAN BROTHERS' MUNICIPAL BOND INDEX AND LEHMAN
BROTHERS' 7 YEAR MUNICIPAL BOND INDEX**
TAX EXEMPT BOND FUND SERIES CHART
AVERAGE ANNUAL RETURNS*
1 Year 2.14%
5 Year 6.09%
10 Year 6.06%
<TABLE>
<CAPTION>
TAX EXEMPT BOND LEHMAN MUNI GENERAL LEHMAN 7 YR MUNI
--------------- ------------------- ----------------
<S> <C> <C> <C>
'1989' 11015 11139
'1990' 11592 11898
'1991' 12525 12970 10000
'1992' 13784 14496 11093
'1993' 15051 16230 12284
'1994' 14771 16257 12440
'1995' 15880 17691 13464
'1996' 16722 18694 14209
'1997' 18085 20237 15208
'1998' 19432 21989 16324
'1999' 19848 23893 16801
</TABLE>
Past performance is not indicative of future results.
SHORT-TERM GOVERNMENT BOND SERIES VS. MERRILL LYNCH U.S. DOMESTIC MASTER BOND
INDEX AND MERRILL LYNCH U.S. TREASURY/AGENCY 1-3 YEAR BOND INDEX
[SHORT-TERM GOVERNMENT BOND SERIES CHART]
AVERAGE ANNUAL RETURNS*
1 Year 4.27%
<TABLE>
<CAPTION>
MERRILL LYNCH U.S.
SHORT TERM MERRILL LYNCH DOMESTIC TREASURY/AGENCY
---------- ---------------------- ------------------
<S> <C> <C> <C>
'1-2-97' 10000 10000 10000
'1-31-97' 10037 10028 10047
'2-28-97' 10057 10046 10070
'3-31-97' 10054 9945 10067
'4-30-97' 10113 10096 10149
'5-31-97' 10156 10186 10219
'6-30-97' 10210 10308 10289
'6-30-98' 10874 11407 10989
'6-30-99' 11338 11759 11550
</TABLE>
Past performance is not indicative of future results.
The Tax Exempt Bond Fund's portfolio does not mirror the Lehman Index.
* Fund returns are net of all fees and transaction costs, while the Index
returns are based solely on market returns without deduction for fees or
transaction costs for rebalancing. The Index is un-managed.
** The Lehman Seven-Year Municipal Bond Index inception is 1991.
<PAGE> 33
ILLUSTRATION OF $10,000 INVESTMENT June 30, 1999 (unaudited)
- --------------------------------------------------------------------------------
LONG-TERM BOND SERIES VS. MERRILL LYNCH U.S. DOMESTIC MASTER BOND INDEX
LONG-TERM BOND SERIES CHART
AVERAGE ANNUAL RETURNS*
1 Year 3.29%
<TABLE>
<CAPTION>
LONG TERM MERRILL LYNCH
--------- -------------
<S> <C> <C>
'1-2-97' 10000 10000
'1-31-97' 10036 10028
'2-28-97' 10046 10046
'3-31-97' 9971 9945
'4-30-97' 10081 10096
'5-31-97' 10147 10186
'6-30-97' 10244 10308
'6-30-98' 11293 11407
'6-30-99' 11664 11759
</TABLE>
Past performance is not indicative of future results.
* Fund returns are net of all fees and transaction costs, while the Index
returns are based solely on market returns without deduction for fees or
transaction costs for rebalancing. The Index is un-managed.
<PAGE> 34
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
OF IAA TRUST COMPANY MUTUAL FUNDS
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations, changes
in net assets, and the financial highlights present fairly, in all material
respects, the financial position of IAA Trust Company Mutual Funds (the "Funds")
(comprising, respectively, the IAA Trust Growth Fund, Inc., the IAA Trust Asset
Allocation Fund, Inc., the IAA Trust Exempt Bond Fund, Inc. and the IAA Trust
Taxable Fixed Income Series Fund, Inc., which includes the IAA Trust Money
Market Series (formerly known as the IAA Trust Money Market Fund, Inc.), the IAA
Trust Short-Term Government Bond Series and the IAA Trust Long-Term Bond Series)
at June 30, 1999, and the results of its operations, changes in its net assets,
and its financial highlights for each of the periods presented, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at June 30, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia, Pennsylvania
August 6, 1999
<PAGE> 35
IAA TRUST MUTUAL FUNDS
IAA Trust Growth Fund, Inc.
IAA Trust Asset Allocation Fund, Inc.
IAA Trust Tax Exempt Bond Fund, Inc.
IAA Trust Taxable Fixed Income Series Fund, Inc.
Money Market Series
Short-Term Government Bond Series
Long-Term Bond Series
BOARD OF DIRECTORS
Ronald R. Warfield
Herbert G. Allen
Charlot R. Cole
Nancy J. Erickson
William E. Klein, Sr.
Ailene Miller
Rollie D. Moore
OFFICERS
Ronald R. Warfield, President
Bruce D. Finks, Vice President
Robert W. Rush Jr., Vice President
Duane L. Miller, Vice President
Richard M. Miller, Vice President
Rollie D. Moore, Vice President
Paul M. Harmon, Secretary
David A. Magers, Treasurer
Richard F. Day, Controller
INVESTMENT ADVISOR
IAA Trust Company
Bloomington, Illinois
DISTRIBUTOR
First Data Distributors, Inc.
Westborough, Massachusetts
TRANSFER AGENT
First Data Investor Services Group, Inc.
King of Prussia, Pennsylvania
CUSTODIAN
IAA Trust Company
Bloomington, Illinois
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
GENERAL COUNSEL
Paul M. Harmon, Esq.
Office of the General Counsel
Bloomington, Illinois
This Report has been prepared for the general information of shareholders of the
Funds and is not authorized for distribution to prospective investors unless
preceded or accompanied by an effective Prospectus which contains details
concerning the sales charge and other pertinent information.
F30-113-08 (8/99)
ANNUAL REPORT
[PHOTO]
IAA TRUST
MUTUAL FUNDS
June 30, 1999
A PLACE TO GROW
IAA Trust Growth Fund, Inc.
IAA Trust Asset Allocation Fund, Inc.
IAA Trust Tax Exempt Bond Fund, Inc.
IAA Trust Taxable Fixed Income Series Fund, Inc.
Money Market Series
Short-Term Government Bond Series
Long-Term Bond Series
