LETTER TO SHAREHOLDERS
- ----------------------
We are pleased to present the annual financial report for IMG Government Assets
Fund ("Government Assets"), and IMG Tax Exempt Liquid Assets Fund ("Tax
Exempt"), for the year ending June 30, 1996.
Short-term interest rates were generally higher over the period, though they
fluctuated in acccord with actions by the Federal Reserve and inflation
expectations. A more detailed discussion of last year's market and our
investment outlook is provided in the Management Discussion which follows.
As of June 30, 1996, assets invested in Government Assets were $179 million,
paying an average current yield to shareholders of 4.68 percent over the period;
Tax Exempt assets totalled $10 million, and paid an average of 2.64 percent
during the year.
We look forward to continued growth for the Funds. Most of our shareholders
invest through an automated sweep service offered by their local financial
institution. Twelve new financial institutions have begun offering this service
to their customers in the last six months alone.
Thank you again for your continued support of the Funds. As always, we welcome
your comments and suggestions. If you wish to contact the Funds, please write or
call IMG directly at (800) 798-1819, or contact any of the Participating
Organizations through which investments in the Funds may be made.
DAVID W. MILES, PRESIDENT
IMG GOVERNMENT ASSETS FUND
IMG TAX EXEMPT LIQUID ASSETS FUND, INC.
July 8, 1996
<PAGE>
MANAGEMENT DISCUSSION
- ---------------------
Over the period July 1, 1995 to July 1, 1996, the bond market continued to
display a high degree of volatility. During the period, the one-year Treasury
bill reached as high as 5.90 percent and as low as 4.80 percent, ending
approximately where it began at 5.60 percent.
During the first eight months of this period, we saw interest rates decline due
to a slowing economy. Corporate profits were falling, unemployment claims were
up, housing starts were down, and monetary policy was anemic causing the Fed to
boost economic growth by lowering short-term rates. Three-month Treasury bills
declined from 5.60 percent to 4.90 percent in yield, while one-year Treasury
rates declined from 5.80 percent to 4.80 percent in yield. In early February of
this year, interest rates bottomed and began to rise. Renewed signs of growth
and fears of inflation caused investors to demand higher yields. Two strong
employment reports and a variety of other signs inferring economic strength
created enough optimism about the economy to raise growth expectations, and
fears of higher inflation. These concerns carried through to the Treasury market
in higher interest rates. Since early February, three-month Treasury rates have
risen from 4.90 percent to 5.30 percent, while one-year Treasury rates have
risen from 4.80 percent to 5.90 percent. This shift has created a much steeper
yield curve.
We are posturing the portfolio to maintain as much yield as possible in this
volatile environment and to take advantage of the steeper yield curve. In IMG
Government Assets (IGA), we favor agency securities to boost yield over Treasury
bills or notes. Government agencies offer similar credit quality but often offer
higher yields for equivalent maturities. Liquidity is provided through overnight
investments, backed by Treasury and agency securities. We have maintained the
average days-to-maturity between 50 and 70 days depending on fund flows and
interest rate movements. In IMG Tax Exempt Liquid Assets (ITE), we look to
augment yield by purchasing municipal notes which are highly rated by a
nationally recognized statistical rating organization. We utilize daily and
weekly demand obligations to provide the liquidity within the Fund. The average
days-to-maturity in ITE have also ranged between 50 and 70 days over the course
of the period. As always, in both portfolios, we strive to provide a high
yielding product without sacrificing the safety of principal. We appreciate your
continued support of IMG Government Assets and IMG Tax Exempt Liquid Assets.
JEFFREY D. LORENZEN
MANAGING DIRECTOR
<PAGE>
IMG GOVERNMENT ASSETS FUND, INC.
STATEMENT OF NET ASSETS
JUNE 30, 1996
(SHOWING PERCENTAGE OF NET ASSETS)
- ----------------------------------
<TABLE>
<CAPTION>
Yield at
PAR TIME OF DUE AMORTIZED
VALUE DESCRIPTION PURCHASE DATE COST
----- ----------- -------- ---- ----
<S> <C> <C> <C> <C>
DISCOUNTED GOVERNMENT SECURITIES -- 13.7%
$ 10,000,000 Federal Home Loan Mtge. Disc. Note 5.35% 01-Jul-96 $ 10,000,000
3,000,000 Federal Home Loan Bank Disc. Note 5.69% 25-Jul-96 2,989,160
3,000,000 Federal Home Loan Bank Disc. Note 5.35% 11-Oct-96 2,956,395
3,000,000 U.S. Treasury Bills 5.08% 14-Nov-96 2,944,920
3,000,000 U.S. Treasury Bills 5.35% 06-Mar-97 2,894,910
3,000,000 Federal Farm Credit Bank Disc. Note 5.88% 14-May-97 2,852,595
------------
TOTAL (cost - $24,637,980) $ 24,637,980
------------
COUPON SECURITIES -- 21.6%
$ 1,000,000 Federal Home Loan Mtge. Corp., 4.53% 5.66% 01-Jul-96 $ 1,000,000
1,400,000 Student Loan Mortgage Assn. Float 5.71% 01-Jul-96 1,400,000
250,000 Student Loan Mortgage Assn. Float 5.58% 01-Jul-96 250,000
958,820 Federal Home Loan Bank, 3.346% 5.82% 23-Jul-96 957,428
61,596 Federal Nat'l. Mtge. Assn. CMO, 7.50% 5.69% 25-Jul-96 61,596
1,000,000 Federal Farm Credit Bank Float 5.42% 25-Oct-96 1,001,345
3,000,000 Tennessee Valley Authority, 8.25% 5.54% 15-Nov-96 3,029,204
5,000,000 U.S. Treasury Note, 7.25% 4.93% 30-Nov-96 5,046,652
3,000,000 Tennessee Valley Authority, 4.60% 5.55% 15-Dec-96 2,987,171
1,965,000 Federal Home Loan Bank, 4.61% 5.18% 20-Dec-96 1,959,864
2,000,000 Tennessee Valley Authority, 6.00% 5.60% 15-Jan-97 2,003,933
1,900,000 Private Export Funding, 7.70% 5.48% 31-Jan-97 1,923,479
5,000,000 U.S. Treasury Note, 6.875% 5.26% 28-Feb-97 5,051,421
1,700,000 Federal Home Loan Bank, 9.15% 5.84% 25-Mar-97 1,739,540
1,000,000 Federal Home Loan Bank Float 5.65% 18-Apr-97 1,007,225
250,000 Federal Home Loan Bank, 6.99% 5.71% 25-Apr-97 252,480
3,000,000 Federal Farm Credit Bank, 5.50% 5.69% 01-May-97 2,995,142
3,000,000 U.S. Treasury Note, 6.50% 5.70% 15-May-97 3,019,956
3,000,000 U.S. Treasury Note, 6.75% 5.80% 31-May-97 3,024,858
------------
TOTAL (cost - $38,711,294) $ 38,711,294
------------
LOAN CERTIFICATES* -- FmHA GUARANTEED LOAN CERTIFICATES -- 6.7%
$ 12,002,358 Guaranteed Loan Trust 6.00%* 01-Jun-97 to 23-Dec-06 $ 12,002,358
------------
TOTAL (cost - $12,002,358) $ 12,002,358
------------
*Interest rate fluctuates with Prime rate. Put option subject to no longer than 7-day settlement.
See Notes to Financial Statements.
<PAGE>
IMG GOVERNMENT ASSETS FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1996
(SHOWING PERCENTAGE OF NET ASSETS)
- ----------------------------------
YIELD AT
PAR TIME OF DUE AMORTIZED
VALUE DESCRIPTION PURCHASE DATE COST
----- ----------- -------- ---- ----
TRUST CERTIFICATES -- U.S. GOVT. GUARANTEED STUDENT LOANS -- 48.6%
$ 87,435,000 Iowa Student Loan Trust 5.99%* 05-Jul-96 to 27-Jun-97 $ 87,435,000
------------
TOTAL (cost - $87,435,000) $ 87,435,000
------------
SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL -- 8.7%
$ 15,543,479 J P Morgan Repo Agreement 5.35% 01-Jul-96 $ 15,543,479
------------
TOTAL (cost - $15,543,479) $ 15,543,479
------------
TOTAL INVESTMENTS-- 99.3% $178,330,111
EXCESS OF OTHER ASSETS OVER TOTAL LIABILITIES-- 0.7% $ 1,302,704
(Includes $35,387 payable to investment advisor and ------------
$589,879 dividends payable to shareholders)
NET ASSETS-- 100% $179,632,815
Applicable to 179,632,815 outstanding shares of $.001 par value ============
common stock (1,000,000,000 shares authorized)
NET ASSET VALUE: $ 1.00
Offering and redemption price per share ($179,632,815 ============
divided by 179,632,815 shares outstanding)
</TABLE>
* Interest rate fluctuates with 3-month U. S. Treasury bill rate. Put option
subject to no longer than 7-day settlement.
** Interest rate fluctuates monthly with Prime rate. Put option subject to no
longer than 7-day settlement.
See Notes to Financial Statements.
<PAGE>
IMG TAX EXEMPT LIQUID ASSETS FUND, INC.
STATEMENT OF NET ASSETS
JUNE 30, 1996
(SHOWING PERCENTAGE OF NET ASSETS)
- ----------------------------------
<TABLE>
<CAPTION>
YIELD AT
PAR TIME OF DUE AMORTIZED
VALUE DESCRIPTION PURCHASE DATE COST
----- ----------- -------- ---- ----
<S> <C> <C> <C> <C>
INDUSTRIAL DEVELOPMENT BONDS --18.9%
$ 76,453 Iowa HFA (Gayman Project) 5.20%** 15-Aug-99 $ 76,453
457,055 Vinton, IA (Twin City Concrete) 5.14%** 15-Jun-2002 457,055
1,159,475 Sioux City, IA (Handy Partnership Project) 5.20%** 15-Sep-2004 1,159,475
228,374 Iowa HFA (Starr-Terry Project) 5.70%** 15-May-2005 228,374
-----------
TOTAL (cost - $1,921,357) $ 1,921,357
-----------
VARIABLE RATE DEMAND OBLIGATIONS -- 34.5%
$ 200,000 Massachusetts State G.O. Ser. B DTN 3.60%* 01-Dec-97 $ 200,000
500,000 Harris Co., TX HFC, Ser. 88A 7-Day 3.60%** 01-Jun-2005 500,000
500,000 Portland, Port of, OR PCR DTN 3.65%* 01-Dec-2009 500,000
300,000 Savannah, GA Multi-Family Housing 7-Day 3.80%** 01-Oct-2013 300,000
500,000 Chicago, IL O'Hare Airport 7-Day 3.40%** 01-Jan-2015 500,000
500,000 Missouri State Health & Ed 7-Day 3.50%** 01-Jun-2022 500,000
300,000 Dearborn, MI Economic Dev 7-Day 3.45%** 01-Mar-2023 300,000
300,000 Burke Co., GA Dev Auth DTN 3.65%* 01-Jul-2024 300,000
300,000 Manatee Co., FL PCR DTN 3.60%* 01-Sep-2024 300,000
100,000 St. Lucie Co., FL PCR DTN 3.60%* 01-01-2026 100,000
-----------
TOTAL (cost - $3,500,000) $ 3,500,000
-----------
MUNICIPAL NOTES -- 45.3%
$ 70,000 Grand Co., UT School District, 8.00% 4.10% 01-Jul-96 $ 70,000
100,000 Iowa City, IA Sewer Rev., 5.80% 3.90% 01-Jul-96 100,000
160,000 LaPorte, IN Elem. School Bldg., 7.40% 3.85% 01-Jul-96 160,000
100,000 Minnesota State, Various Purpose, 6.60% 3.80% 01-Aug-96 100,234
100,000 Oakland, CA Refunding Rev., 6.80% 3.75% 01-Aug-96 100,253
100,000 So Cent Connecticut, Wtr Rev., 7.125% 3.65% 01-Aug-96 102,283
150,000 A & M Cons. Ind. School Dist., TX, 6.00% 4.00% 15-Aug-96 150,358
100,000 Eanes, TX Ind. School District, 4.50% 4.10% 15-Aug-96 100,048
40,000 Millcreek Township, PA School Dist., 7.00% 4.00% 15-Aug-96 40,143
110,000 Brownsville, TX Utility Systems Rev., 8.00% 3.70% 01-Sep-96 112,980
120,000 Flower Mound, TX, 9.25% 3.52% 01-Sep-96 121,159
50,000 Irving, TX Flood Control Dist., 6.50% 4.52% 01-Sep-96 50,158
170,000 Kansas City, KS Utility System Rev., 5.80% 3.90% 01-Sep-96 170,544
100,000 Leawood, KS Series A, 4.10% 3.95% 01-Sep-96 100,016
50,000 Lenexa, KS, 6.25% 3.80% 01-Sep-96 50,206
50,000 Maryland State, 8.75% 3.75% 01-Sep-96 50,423
100,000 Missouri State Health & Ed. Fac., 7.40% 3.65% 01-Sep-96 102,617
80,000 Pecan Grove Mun. Utility Dist., TX, 4.70% 3.80% 01-Sep-96 80,121
105,000 Atlanta, GA IDR Underground Project, 7.75% 3.80% 01-Oct-96 108,094
* Variable rate, put option subject to next business day settlement.
** Variable rate, put option subject to no longer than 7-day settlement.
See Notes to Financial Statements.
<PAGE>
IMG TAX EXEMPT LIQUID ASSETS FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1996
(SHOWING PERCENTAGE OF NET ASSETS)
- ----------------------------------
YIELD AT
PAR TIME OF DUE AMORTIZED
VALUE DESCRIPTION PURCHASE DATE COST
----- ----------- -------- ---- ----
$ 100,000 Honolulu, HI, City & Co., Series A, 7.90% 3.50% 01-Oct-96 $ 102,573
95,000 Key West, FL Sewer Rev., 7.125% 3.85% 01-Oct-96 98,583
100,000 Jacksonville, FL Electric Auth. Rev., 9.40% 3.90% 01-Oct-96 101,344
100,000 Jacksonville, FL Electric Auth. Rev., 9.40% 3.80% 01-Oct-96 101,369
45,000 Sedgwick Co., KS USD #266, 5.80% 4.00% 01-Oct-96 45,643
95,000 Waunakee, WI Refunding, 5.80% 4.00% 01-Oct-96 95,417
225,000 Chicago, IL Waterworks Rev., 6.75% 3.80% 01-Nov-96 229,377
300,000 Manhattan, KS Refunding, 8.80% 3.80% 01-Nov-96 304,897
100,000 Cook Co., IL Series B, 4.50% 3.72% 15-Nov-96 100,280
50,000 Anchorage, AK Tel. Utility Rev., 3.50% 4.18% 01-Dec-96 49,861
100,000 California Health Facility Auth. Rev., 3.80% 3.79% 01-Dec-96 100,000
120,000 Glencoe, IL Series A, 3.00% 4.10% 01-Dec-96 119,462
45,000 Houston, TX Water & Sewer Rev., 8.20% 3.90% 01-Dec-96 46,677
90,000 Houston, TX Water & Sewer Rev., 8.20% 3.40% 01-Dec-96 93,547
70,000 Houston, TX Water & Sewer Rev., 8.20% 3.80% 01-Dec-96 72,632
100,000 Houston, TX Water & Sewer Rev., 8.20% 3.70% 01-Dec-96 103,804
100,000 Joliet, IL Park District Series A, 5.60% 3.80% 01-Dec-96 100,734
50,000 Libertyville, IL, 4.60% 3.95% 15-Dec-96 50,144
100,000 Wauconda, IL Pub. Library Dist., 5.875% 3.70% 30-Dec-96 101,053
200,000 Minneapolis & St. Paul, MN Airport, 4.00% 3.85% 01-Jan-97 200,144
75,000 Univ. of Nebraska Med. Center, 6.70% 3.81% 01-Jan-97 76,062
125,000 Kootenai Co., ID Solid Waste Fac., 6.40% 3.80% 01-Feb-97 128,073
100,000 York Penn City School Dist., PA, 6.50% 3.88% 01-Feb-97 101,489
100,000 Lakeshore, WI Tech College Dist., 4.70% 3.55% 01-Mar-97 100,747
100,000 New Hampshire State, 3.40% 3.97% 01-Mar-97 99,620
-----------
TOTAL (cost - $4,593,169) $ 4,593,169
-----------
TOTAL INVESTMENTS-- 98.7% $10,014,526
EXCESS OF OTHER ASSETS OVER TOTAL LIABILITIES-- 1.3% $ 131,237
(Includes $2,151 payable to investment advisor and -----------
$20,761 dividends payable to shareholders)
NET ASSETS-- 100% $10,145,763
Applicable to 10,145,763 outstanding shares of $.001 par value ===========
common stock (200,000,000 shares authorized)
NET ASSET VALUE: $ 1.00
Offering and redemption price per share ($10,145,763 ===========
divided by 10,145,763 shares outstanding)
</TABLE>
See Notes to Financial Statements.
<PAGE>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1996
- --------------------------------
IMG GOVERNMENT IMG TAX EXEMPT
ASSETS FUND LIQUID ASSETS FUND, INC.
----------- ------------------------
INVESTMENT INCOME:
Interest $10,489,812 $ 713,786
EXPENSES:
Advisory and service fees (Note 2) 444,793 43,217
Shareholder servicing costs 39,180 14,819
Directors' fees 13,201 6,001
Custodian fees and expenses 196,801 33,322
Portfolio accounting fees (Note 2) 50,000 6,050
Distribution fees (Note 3) 1,334,402 129,650
Legal and auditing fees 23,471 13,194
Printing and postage 19,239 2,444
Registration fees 14,318 5,589
Miscellaneous expenses 3,122 1,342
----------- -----------
TOTAL EXPENSES 2,138,527 255,628
----------- -----------
NET INVESTMENT INCOME $ 8,351,285 $ 458,158
=========== ===========
See Notes to Financial Statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED JUNE 30,
- ----------------------------
<TABLE>
<CAPTION>
IMG GOVERNMENT IMG TAX EXEMPT
ASSETS FUND LIQUID ASSETS FUND, INC.
1996 1995 1996 1995
----------------------------------------------------------------
<S> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
Net investment income and amounts
distributed to shareholders (Note 1) $ 8,351,285 $ 7,313,242 $ 458,158 $ 528,532
============= ============== =========== ============
FROM SHARE TRANSACTIONS:
(at constant net asset value of $1 per share)
Shares sold $1,141,629,915 $1,115,555,874 $90,282,876 $ 91,834,860
Shares issued in reinvestment of
dividends from net investment income 159,592 107,888 1,040 532
-------------- -------------- ----------- ------------
1,141,789,507 1,115,663,762 90,283,916 91,835,392
Shares redeemed 1,129,241,627 1,089,596,341 96,268,043 97,060,399
-------------- -------------- ----------- ------------
Net increase (decrease) in net assets
derived from share transactions 12,547,880 26,067,421 (5,984,127) (5,225,007)
NET ASSETS:
Beginning of period 167,084,935 141,017,514 16,129,890 21,354,897
-------------- -------------- ----------- ------------
End of period $ 179,632,815 $ 167,084,935 $10,145,763 $ 16,129,890
============== ============== =========== ============
</TABLE>
See Notes to Financial Statements.
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------
<TABLE>
<CAPTION>
SELECTED DATA FOR A SHARE OF
EACH FUND OUTSTANDING
THROUGHOUT EACH PERIOD 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
IMG GOVERNMENT ASSETS FUND
Net Asset Value
Beginning of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Net Investment Income .047 .047 .027 .027 .044 .063 .074 .076 .057 .051
Dividends Distributed (.047) (.047) (.027) (.027) (.044) (.063) (.074) (.076) (.057) (.051)
--------------------------------------------------------------------------------------------------
Net Asset Value
End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
==================================================================================================
Total Return 4.68% 4.66% 2.66% 2.72% 4.37% 6.31% 7.40% 7.62% 5.74% 5.13%
Ratio of Expenses to
Average Net Assets 1.20% 1.20% 1.18% 1.16% 1.16% 1.15% 1.16% 1.17% 1.15% 1.17%
Ratio of Net Income to
Average Net Assets 4.68% 4.66% 2.66% 2.72% 4.37% 6.31% 7.40% 7.62% 5.74% 5.13%
Net Assets, End of Period
(000 Omitted) $179,633 167,085 141,018 123,949 117,238 111,405 104,014 93,335 73,525 67,020
See Note to Financial Statements.
<PAGE>
<CAPTION>
SELECTED DATA FOR A SHARE OF
EACH FUND OUTSTANDING
THROUGHOUT EACH PERIOD 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
IMG TAX EXEMPT LIQUID ASSETS FUND, INC.
Net Asset Value
Beginning of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Net Investment Income .026 .025 .015 .017 .030 .044 .050 .051 .039 .035
Dividends Distributed (.026) (.025) (.015) (.017) (.030) (.044) (.050) (.051) (.039) (.035)
--------------------------------------------------------------------------------------------------
Net Asset Value
End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
==================================================================================================
Total Return 2.64% 2.53% 1.53% 1.69% 3.06% 4.40% 4.96% 5.10% 3.94% 3.45%
Ratio of Expenses to
Average Net Assets 1.48% 1.38% 1.35% 1.35% 1.37% 1.39% 1.63% 1.50% 1.52% 1.46%
Ratio of Net Income to
Average Net Assets 2.64% 2.53% 1.53% 1.69% 3.06% 4.40% 4.96% 5.10% 3.94% 3.45%
Net Assets, End of Period
(000 Omitted) $ 10,146 16,130 21,355 23,764 29,670 26,683 15,077 12,619 14,528 14,560
</TABLE>
See Notes to Financial Statements.
<PAGE>
<PAGE>
IMG GOVERNMENT ASSETS FUNDS
IMG TAX EXEMPT LIQUID ASSETS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
- ---------------------------------------
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:
The IMG Government Assets Fund, and the IMG Tax Exempt Liquid Assets
Fund, Inc. (the Funds) are registered under the Investment Company Act of
1940 (the Act), as open-end, diversified investment companies,
established as Iowa corporations. Investors Management Group ("Advisor"),
through an affiliated company (IMG Financial Services, Inc.), acts as the
exclusive distributor of the Funds' shares which are sold to the public
without a sales charge.
In November 1995, Shareholders of IMG Liquid Assets Fund, Inc., approved
to amend the Articles of Incorporation to increase the amount of
authorized common stock from 200,000,000 to 1,000,000,000 shares. On
January 16, 1996, the Board of Directors adopted the fictitious name of
IMG Government Assets Fund as the name to be used in dealings between IMG
Liquid Assets Fund, Inc., and the public.
It is each Fund's policy to maintain a continuous net asset value per
share of $1.00; the Funds have adopted certain investment portfolio
valuation and dividend and distribution policies to enable them to do so.
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
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of increase and decrease in
net assets from operations during the period. Actual results could differ
from those estimates.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions
are recorded on a trade date basis. Realized gains or losses, if any,
from securities transactions are recorded on the identified cost basis.
Interest income is recorded on the accrual basis. Cost of investments
represents amortized cost.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. It is the policy of the Fund
to declare and accrue dividends from net investment income on each
business day.
FEDERAL INCOME TAXES. The Funds intend to comply with requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute taxable income to shareholders in amounts which avoid or
minimize federal income or excise taxes for the Funds.
INVESTMENT VALUATION. The investments are valued at amortized cost
pursuant to Rule 2a-7 of the Act. This involves valuing a portfolio
security at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium.
REPURCHASE AGREEMENTS. The Funds may engage in repurchase agreements with
banks and broker dealers whereby independent custodians receive delivery
of the underlying securities. The market value of these securities
(including accrued interest) on acquisition date is required to be an
amount equal to 102 percent of the resale price, and will not be less
than 100 percent of the resale price over the term of the agreement. At
June 30, 1996, the securities purchased under overnight agreements to
resell were collateralized by Government Agency mortgage backed
securities with a market value of $15,855,810 for IMG Government Assets
Fund.
LOAN CERTIFICATES. FmHA Guaranteed Loan Certificates represent interests
in the guaranteed portion of Farmer's Home Administration ("FmHA") loans
issued by one or more guaranteed loan trusts subject to repurchase on no
more than five business days' written notice. The Loan Certificates are
diversified through limitations on certificates sold by any one
individual bank.
TRUST CERTIFICATES. U.S. Government Guaranteed Student Loans (the Trust)
represent interests in student loans sold by certain Iowa banks subject
to repurchase, on no more than seven days written notice. The Trust and,
accordingly, the Trust Certificates are diversified through a limitation
on certificates sold by any individual bank. Each individual bank may not
sell more than 5 percent of the outstanding Trust Certificates.
(2) ADVISORY AND SERVICE FEES:
Under its management and investment advisory agreement, the Advisor
provides the Funds with investment supervision, office space, management
and other personnel, and will pay the costs of computing the Funds' net
asset value and related bookkeeping expenses. For these services, each
Fund pays a fee computed daily and payable monthly at an annual rate of
0.25 percent of average daily assets up to $200 million and at a sliding
rate from 0.24 percent to 0.20 percent of average daily net assets
exceeding $200 million. For the year ended June 30, 1996, IMG Government
Assets Fund and IMG Tax Exempt Liquid Assets Fund, Inc. paid $444,793 and
$43,217, respectively, to the Advisor for advisory fees.
The Funds have also entered into an administrative services agreement
with the Advisor to provide portfolio fund accounting services to the
Funds. For these services, each Fund pays a fee computed daily and
payable monthly at an annual rate of 0.035 percent of average daily
assets to a maximum of $50,000 per year.
Certain officers of the Fund are also officers of the Advisor. At June
30, 1996, the Advisor owned 347,309 shares in IMG Government Assets Fund.
IMG also acts as transfer agent and dividend paying agent for the Funds,
and maintains all shareholder records. Fees for such services are based
upon the number of accounts and are reflected as shareholder servicing
costs in the accompanying statement of operations.
(3) DISTRIBUTION EXPENSE PLAN:
Under distribution expense plans (the "Plans") adopted January 1, 1987
pursuant to Rule 12b-1 under the Act, and amended effective January 8,
1991 the Fund may make payments to IMG Financial Services, Inc. ("IFS")
for the reimbursement of expenses related to marketing or distribution of
the Funds. Aggregate payments by each Fund under the Plans in any month
cannot exceed the annual rate of 0.75 percent of the Fund's average daily
net asset value. For the year ended June 30, 1996, amounts under the
Plans used by IFS to compensate financial institutions for automated
processing of Fund transactions and for other services relating to the
distribution of the Funds' shares totaled $1,334,402 and $129,650 for IMG
Government Assets Fund and IMG Tax Exempt Liquid Assets Fund, Inc.,
respectively, and Rule 12b-1 fees payable at June 30, 1996, were $106,161
and $6,452, respectively.
<PAGE>
INDEPENDENT AUDITORS' REPORT
- ----------------------------
Shareholders and Board of Directors
IMG Government Assets Fund and
IMG Tax Exempt Liquid Assets Fund, Inc.:
We have audited the accompanying statements of net assets of IMG Government
Assets Fund, and IMG Tax Exempt Liquid Assets Fund, Inc., as of June 30, 1996,
and the related statements of operations for the year then ended, the statements
of changes in net assets for each of the years in the two-year period then
ended, and the financial highlights for each of the years in the nine-year
period then ended. The financial highlights of IMG Government Assets Fund and
IMG Tax Exempt Liquid Assets Fund, Inc., for the year ended June 30, 1987, were
examined by other auditors whose reports dated July 31, 1987, expressed an
unqualified opinion on that information. These financial statements, including
the financial highlights, are the responsibility of the Funds' management. Our
responsibility is to express an opinion on the financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1996, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the net assets of IMG Government
Assets Fund and IMG Tax Exempt Liquid Assets Fund, Inc., at June 30, 1996 and
the results of their operations for the year then ended, the changes in their
net assets for each of the years in the two-year period then ended, and the
financial highlights for each of the years in the nine-year period then ended in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Des Moines, Iowa
July 19, 1996
<PAGE>
INVESTMENT ADVISOR, TRANSFER AND UNDERWRITER
DIVIDEND DISBURSING AGENT IMG Financial Services, Inc.
Investors Management Group 2203 Grand Avenue
2203 Grand Avenue Des Moines, Iowa 50312-5338
Des Moines, Iowa 50312-5338
CUSTODIAN AUDITORS
Mercantile Bank of Polk County KPMG Peat Marwick LLP
East 5th & Locust Streets 2500 Ruan Center
Des Moines, Iowa 50307 Des Moines, Iowa 50309
COUNSEL
Cline, Williams, Wright, Johnson
& Oldfather
1900 FirsTier Bank Building
Lincoln, Nebraska 68508
IMG Government Assets Fund
IMG Tax Exempt Liquid Assets Fund, Inc.
Investors Management Group
2203 Grand Avenue
Des Moines, Iowa 50312-5338
