LETTER TO SHAREHOLDERS
We are pleased to present the annual financial report for the Liquid Assets Fund
("Liquid Assets"), and the Municipal Assets Fund ("Municipal Assets"), for the
fiscal year ending June 30, 1997.
As explained more fully in the Management Discussion which follows, short-term
rates moved in a fairly narrow range over the last twelve months, ending the
period very nearly where they began. Still, rates remain very attractive for our
investors. Yields on Liquid Assets finished the year at between 4.67 percent and
5.43 percent, depending on the class of shares. Yields on Municipal Assets
ranged from 3.26 percent to 3.76 percent.
As you may be aware, Liquid Assets and Municipal Assets are concluding their
fifteenth and fourteenth years respectively. We are delighted to have been able
to serve the shareholders of the Funds for this many years. In October 1996,
shareholders voted to allow each Fund to be offered in multiple "classes" of
shares. Each class, "Sweep", "S-2", "Trust" and "Institutional" is designed to
meet the needs of different types of investors, ranging from our traditional
sweep account customer investing through their local bank, to large
institutional investors. The performance for each class of shares is illustrated
in the pages that follow.
We would also like to take this opportunity to introduce the new custodian for
your Funds -- AMCORE Bank, N.A. in Rockford, Illinois. We have been working with
AMCORE since third quarter 1996; they became the Funds' custodian in February
1997. We are pleased to be working with this quality financial services
organization.
We continue to build our distribution for the Funds, to reach a growing number
of investors across the country. Your Funds are now offered through bank sweep
programs in six states, and for the first time, to bank trust customers.
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 financial
institutions through which investments in the Funds may be made.
DAVID W. MILES, PRESIDENT
LIQUID ASSETS FUND
MUNICIPAL ASSETS FUND
<PAGE>
MANAGEMENT DISCUSSION
From July 1, 1996 to June 30, 1997, the bond market continued to trade in a
narrow range of yields. Over the period, yields on the one year treasury bill
reached as high as 6.07 percent and as low as 5.35 percent, ending the year
slightly below where they started.
From July 1996 through November 1996, we saw short-term and long-term interest
rates trend lower due to a slowing economy. Consumer debt burdens were large,
corporate profits were in question, top line sales growth was declining,
commodity prices rolled over, and retail sales were flat. However, while
interest rates were sliding lower in 1996, the economy was refueling to generate
one of the strongest one-quarter growth rates in GDP over the last 10 years
during the first quarter of 1997.
By the start of 1997 interest rates had reversed their downward trend and moved
higher. Toward the end of the first quarter, the increase in economic strength
was apparent and the Federal Reserve intervened by raising short-term interest
rates (the federal funds target rate) 0.25 percent. This sent one-year treasury
yields from 5.40 percent to 6.00 percent in less than a month. Meanwhile, long
treasury bonds rose from 6.40 percent to over 7.00 percent by early April.
Presently, three-month Treasury bills and six-month Treasury bills are yielding
30 and 20 basis points respectively below the federal funds rates. Short-term
interest rates appear vulnerable at these yields. The federal funds futures
market suggests that bond investors expect the Federal Reserve to raise
short-term rates within the next six months. We concur with this expectation.
Accordingly, we are posturing the Funds with a lower than average days to
maturity. While the short-term yield curve offers some incremental yield for
extending maturities, we believe that the risk of higher rates going forward
argues for a more conservative posture. In the Liquid Assets Fund, we favor
agency securities to boost yield over treasury bills and notes. Liquidity is
provided through overnight investments, secured by treasury and agency
securities. In the Municipal Assets Fund, we continue to emphasize purchasing
municipal notes rated AA or better to enhance portfolio yield. Liquidity is
provided by investments in daily and weekly floating rate demand obligations.
We appreciate your continued investment in the Liquid Assets Fund and the
Municipal Assets Fund.
JEFFREY D. LORENZEN
MANAGING DIRECTOR
<PAGE>
LIQUID ASSETS FUND
STATEMENT OF NET ASSETS
JUNE 30, 1997
(SHOWING PERCENTAGE OF NET ASSETS)
<TABLE>
<CAPTION>
YIELD AT
PAR TIME OF DUE AMORTIZED
VALUE DESCRIPTION PURCHASE DATE COST
----- ----------- -------- ---- ----
<S> <C> <C> <C> <C>
LOAN CERTIFICATES* -- FmHA GUARANTEED LOAN CERTIFICATES - 12.13%
$ 10,022,012 Guaranteed Loan Trust 6.25%* 10-Oct-1997 to 19-Dec-2034 $ 10,022,012
------------
TOTAL (cost - $10,022,012) $ 10,022,012
------------
TRUST CERTIFICATES** -- U.S. GOVT. GUARANTEED STUDENT LOANS - 52.90%
$ 43,720,000 Iowa Student Loan Trust 6.16%** 10-Jul-1997 to 26-Jun-1998 $ 43,720,000
------------
TOTAL (cost - $43,720,000) $ 43,720,000
------------
SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL - 34.16%
$ 7,568,502 J P Morgan Repurchase Agreement 5.90% 01-Jul-1997 $ 7,568,502
20,662,672 Swiss Bank Repurchase Agreement 5.90% 01-Jul-1997 20,662,672
------------
TOTAL (cost - $28,231,174) $ 28,231,174
------------
TOTAL INVESTMENTS-- 99.20% $ 81,973,186
EXCESS OF OTHER ASSETS OVER TOTAL LIABILITIES-- 0.81% $ 677,502
(Includes $16,034 payable to investment advisor and ------------
$289,505 dividends payable to shareholders)
NET ASSETS-- 100% $ 82,650,688
Applicable to 82,650,688 outstanding shares of $.001 par value ------------
common stock (5,000,000,000 shares authorized)***
NET ASSET VALUE: $ 1.00
Offering and redemption price per share ($82,650,688 ============
divided by 82,650,688 shares outstanding)
</TABLE>
* Interest rate fluctuates with prime rate. Put option subject to no longer
than 7-day settlement.
** Interest rate fluctuates with 3-month U. S. Treasury bill rate. Put option
subject to no longer than 7-day settlement.
*** Represents total of all classes of shares outstanding.
See Notes to Financial Statements.
<PAGE>
MUNICIPAL ASSETS FUND
STATEMENT OF NET ASSETS
JUNE 30, 1997
(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 -- 5.82%
$ 55,173 Iowa HFA (Gayman Project) 5.45%** 15-Aug-1999 $ 55,173
389,885 Vinton, IA (Twin City Concrete) 5.35%** 15-Jun-2002 389,885
1,070,910 Sioux City, IA (Handy Partnership Project) 5.45%** 15-Sep-2004 1,070,910
212,456 Iowa HFA (Starr-Terry Project) 5.95%** 15-May-2005 212,456
------------
TOTAL (cost - $1,728,424) $ 1,728,424
------------
VARIABLE RATE DEMAND OBLIGATIONS -- 50.49%
$ 900,000 Harris CO., TX HFC, Ser. 88A 7-Day 4.30%** 01-Jun-2005 $ 900,000
500,000 Phoenix, AZ IDR Multi-Family Hsg. 7-Day 4.10%** 15-Oct-2006 500,000
600,000 St. Charles Co., MO IDA 7-Day 4.10%** 01-Dec-2007 600,000
1,100,000 Portland, OR PCR (Reynolds Metals) DTN 4.10%* 01-Dec-2009 1,100,000
1,200,000 Metro Nashville Airport Auth., TN DTN 4.10%* 01-Oct-2012 1,200,000
100,000 Lone Star, TX Airport Ser. A1 DTN 4.10%* 01-Dec-2014 100,000
900,000 Illinois Health Fac. (Sisters) 7-Day 4.15%** 01-Dec-2014 900,000
500,000 Illinois Health Fac. (Sisters) 7-Day 4.15%** 01-Dec-2015 500,000
900,000 Kentucky Dev. Finance Auth. 7-Day 4.15%** 01-Dec-2015 900,000
1,500,000 Hampton Roads, VA Jail Auth 7-Day 4.15%** 01-Jul-2016 1,500,000
600,000 Illinois Educational Facility Auth 7-Day 4.20%** 01-May-2020 600,000
700,000 Apache Co, AZ IDA 7-Day 4.15%** 15-Jun-2020 700,000
600,000 Pima Co., AZ IDR 7-Day 4.15%** 15-Jun-2022 600,000
900,000 South Carolina Jobs Econ Dev Auth DTN 4.10%* 01-Jul-2022 900,000
900,000 Dearborn, MI Economic Dev 7-Day 4.15%** 01-Mar-2023 900,000
300,000 Martin Co., FL PCR DTN 3.90%* 01-Sep-2024 300,000
600,000 St. Lucie Co., FL PCR DTN 3.90%* 01-Jan-2026 600,000
1,500,000 Delaware State Econ Dev Auth 7-Day 4.20%** 01-Oct-2028 1,500,000
700,000 Desoto Parish, LA PCR 7-Day 4.15%** 01-Oct-2028 700,000
------------
TOTAL (cost - $15,000,000) $ 15,000,000
------------
MUNICIPAL NOTES-- 41.80%
$ 100,000 Albuquerque, NM Series A & B, 4.60% 3.75% 01-Jul-1997 $ 100,000
180,000 Hazel Crest, IL Hospital Fac, 9.13% 3.70% 01-Jul-1997 183,600
100,000 Intermountain Power Agency, UT, 8.63% 3.75% 01-Jul-1997 102,000
200,000 Maricopa Co., AZ Series A, 4.50% 3.80% 01-Jul-1997 200,000
360,000 New Jersey State Ed Fac Auth Rev, 5.50% 3.72% 01-Jul-1997 360,000
160,000 No Cent Texas Health Fac Corp, 7.88% 4.00% 01-Jul-1997 163,200
100,000 Portland, ME, 4.60% 3.75% 01-Jul-1997 100,000
* 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>
<CAPTION>
MUNICIPAL ASSETS FUND
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997
(SHOWING PERCENTAGE OF NET ASSETS)
YIELD AT
PAR TIME OF DUE AMORTIZED
VALUE DESCRIPTION PURCHASE DATE COST
----- ----------- -------- ---- ----
$ 250,000 Seattle, WA Mun Metro Sewer Rev, 6.50% 3.75% 01-Jul-1997 $ 252,500
50,000 St. Louis Park, MN Hospital Rev, 6.70% 4.25% 01-Jul-1997 50,000
500,000 Houston, TX Ind School Dist, 5.40% 3.75% 15-Jul-1997 500,303
200,000 Sandy City, UT Motor Fuel, 3.75% 3.75% 15-Jul-1997 200,000
200,000 Albuquerque, NM SD#12, 4.45% 3.85% 01-Aug-1997 200,099
200,000 Austin, TX Independent School Dist, 4.60% 4.00% 01-Aug-1997 200,091
200,000 Hawaii State Refunding, 6.00% 3.95% 01-Aug-1997 204,321
110,000 Illinois Health Facilities Auth Rev, 8.10% 3.73% 01-Aug-1997 112,598
55,000 Illinois Health Facilities Auth Rev, 8.10% 3.73% 01-Aug-1997 56,298
50,000 Illinois Health Facilities Auth Rev, 8.10% 3.80% 01-Aug-1997 51,174
200,000 Jefferson Co., TX Refunding, 3.70% 3.75% 01-Aug-1997 199,987
110,000 New York, NY Series D, 8.00% 3.95% 01-Aug-1997 112,559
50,000 North Carolina State, Public Impr, 3.50% 4.30% 01-Aug-1997 49,965
100,000 Park City, UT School District, 6.20% 4.00% 01-Aug-1997 100,176
100,000 Shelby Co., TN Schools, Series A, 6.50% 3.73% 01-Aug-1997 101,728
170,000 Bridgeport, CT, 8.30% 3.75% 15-Aug-1997 170,937
250,000 Dallas Co., TX Refunding Series A, 4.00% 3.65% 15-Aug-1997 250,105
100,000 Hamilton Twp, Mercer Co., NJ, 4.50% 3.80% 15-Aug-1997 100,085
100,000 Illinois Development Finance Auth, 5.00% 3.80% 24-Aug-1997 100,175
200,000 Garland, TX, 7.25% 3.80% 01-Sep-1997 201,158
120,000 Illinois Health Facilities Auth Rev, 7.88% 3.80% 01-Sep-1997 123,206
100,000 Pittsburgh, PA Water & Sewer Auth, 3.75% 3.78% 01-Sep-1997 99,995
200,000 Shreveport, LA Certificates, 4.40% 3.87% 01-Sep-1997 200,175
200,000 Tarrant Co., TX Health Fac Corp, 6.88% 4.00% 01-Sep-1997 204,924
100,000 Waco, TX New Public Hsg Auth, 3.25% 4.05% 01-Sep-1997 99,862
100,000 Washington State Motor Vehicle, 3.90% 3.85% 01-Sep-1997 100,007
500,000 Wyandotte Co., KS Capital Impr, 7.35% 3.66% 01-Sep-1997 513,042
100,000 Central Michigan University Rev, 7.25% 3.75% 01-Oct-1997 102,847
165,000 Charleston Co., SC Hospital Fac, 6.75% 3.75% 01-Oct-1997 169,488
250,000 Harris Co., TX Flood Control, 5.60% 3.73% 01-Oct-1997 251,149
200,000 Harris Co., TX Refunding, 5.60% 3.85% 01-Oct-1997 200,857
225,000 Honolulu, HI City & County, 4.20% 3.90% 01-Oct-1997 225,162
100,000 Illinois State, 5.25% 3.78% 01-Oct-1997 100,364
See Notes to Financial Statements.
<PAGE>
<CAPTION>
MUNICIPAL ASSETS FUND
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997
(SHOWING PERCENTAGE OF NET ASSETS)
YIELD AT
PAR TIME OF DUE AMORTIZED
VALUE DESCRIPTION PURCHASE DATE COST
----- ----------- -------- ---- ----
$ 200,000 Jacksonville, FL Electric Auth Rev, 6.50% 4.05% 01-Oct-1997 $ 201,196
115,000 Miami, FL Health Fac Auth, 8.38% 3.80% 01-Oct-1997 118,573
100,000 Portland, ME, 6.50% 3.75% 01-Oct-1997 100,676
200,000 Allegheny Co., PA Higher Ed, 6.45% 3.75% 01-Nov-1997 201,787
105,000 Benton Co., WA Pub Utility Dist, 11.63% 4.03% 01-Nov-1997 107,631
150,000 Brown Co., WI, 6.60% 3.85% 01-Nov-1997 151,364
200,000 Housing New York Corporation, 8.63% 3.82% 01-Nov-1997 207,111
200,000 Michigan State Recreation Project, 4.00% 3.85% 01-Nov-1997 200,095
250,000 Sun Prairie, WI, 6.00% 3.80% 01-Nov-1997 251,823
110,000 Washington State Health Care Fac, 8.38% 3.80% 01-Nov-1997 113,838
325,000 Chicago, IL Metro Water Dist., 4.70% 3.80% 01-Dec-1997 326,190
100,000 Cuyahoga Co., OH Hospital Rev, 7.88% 3.79% 01-Dec-1997 103,636
250,000 Hilliard, OH School District, 8.63% 3.79% 01-Dec-1997 259,857
350,000 Ohio State Water Dev Auth Rev, 4.70% 3.79% 01-Dec-1997 351,295
100,000 McDonough Co., IL CUSD #185, 0.00% 4.00% 15-Dec-1997 98,210
215,000 Noblesville, IN Sewer Rev, 4.00% 3.88% 01-Jan-1998 215,128
200,000 Washington State, Refunding R-89C, 7.40% 3.98% 01-Feb-1998 203,893
185,000 Northern Illinois Univ CTFS Partn, 4.00% 3.99% 01-Apr-1998 185,000
250,000 Lenawee Co., MI Sewage Disposal, 8.00% 4.08% 01-May-1998 257,942
150,000 Rock Co., WI Promissory Notes, 6.00% 4.20% 01-May-1998 152,177
100,000 Utah State Board of Regents, 4.95% 4.05% 01-May-1998 100,725
100,000 Ellis Co., TX Health Facility, 8.00% 4.00% 15-May-1998 105,313
290,000 Cleveland Co., OK Lease Rev, 3.90% 4.14% 01-Jun-1998 289,378
100,000 Coeur D Alene, ID Sewer Rev, 6.70% 4.10% 01-Jun-1998 103,271
300,000 Crawford Co., PA Refunding, 5.80% 4.14% 01-Jun-1998 304,429
115,000 Harris Co., TX Mun Util Dist, 6.90% 4.10% 01-Jun-1998 117,867
315,000 Harvey, IL Adv Refunding, 8.40% 3.95% 01-Jun-1998 327,483
250,000 Iowa City, IA, 4.63% 4.08% 01-Jun-1998 251,207
95,000 Sidney, IA Community School Dist, 5.20% 4.10% 01-Jun-1998 95,928
100,000 Washington Sub Sanitary Dist, MD, 3.75% 4.25% 01-Jun-1998 99,555
------------
TOTAL (cost - $12,416,715) $ 12,416,715
------------
See Notes to Financial Statements.
<PAGE>
<CAPTION>
MUNICIPAL ASSETS FUND
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997
(SHOWING PERCENTAGE OF NET ASSETS)
YIELD AT
PAR TIME OF DUE AMORTIZED
VALUE DESCRIPTION PURCHASE DATE COST
----- ----------- -------- ---- ----
SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL -- 1.35%
$ 400,804 Swiss Bank Repurchase Agreement 5.90% 01-Jul-1997 $ 400,804
------------
TOTAL (cost - $400,804) $ 400,804
------------
TOTAL INVESTMENTS-- 99.50% $ 29,545,943
EXCESS OF OTHER ASSETS OVER TOTAL LIABILITIES-- 0.54% $ 161,348
(Includes $3,912 payable to investment advisor and ------------
$84,375 dividends payable to shareholders)
NET ASSETS-- 100% $ 29,707,291
Applicable to 29,707,291 outstanding shares of $.001 par value ============
common stock (5,000,000,000 shares authorized)*
NET ASSET VALUE: $ 1.00
Offering and redemption price per share ($29,707,291 ============
divided by 29,707,291 shares outstanding)
</TABLE>
* Represents total of all classes of shares outstanding.
See Notes to Financial Statements.
<PAGE>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1997
LIQUID MUNICIPAL
ASSETS FUND ASSETS FUND
----------- -----------
INVESTMENT INCOME:
Interest $ 9,645,750 $ 795,005
----------- ------------
EXPENSES:
Advisory and service fees (Note 2) 428,125 51,871
Shareholder servicing costs 32,039 12,799
Directors' fees 10,381 3,029
Custodian fees and expenses 184,226 27,498
Portfolio accounting fees (Note 2) 59,982 7,262
Distribution fees - Sweep Shares (Note 3) 1,238,752 50,758
Distribution fees - S-2 Shares (Note 3) 759 0
Shareholder servicing fee - Trust Shares (Note 3) 14,257 29,791
Legal and auditing fees 14,249 3,301
Printing and postage 12,673 537
Registration fees 14,730 5,194
Miscellaneous expenses 5,854 1,309
------------ ------------
Total Expenses 2,016,027 193,349
Fees Waived (524) (31,087)
------------ ------------
Total Net Expenses 2,015,503 162,262
------------ ------------
NET INVESTMENT INCOME $ 7,630,247 $ 632,743
=========== ============
See Notes to Financial Statements.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED JUNE 30
<TABLE>
<CAPTION>
LIQUID ASSETS FUND MUNICIPAL ASSETS FUND
1997 1996 1997 1996
--------------------- ----------------------
<S> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
Net investment income and amounts
distributed to shareholders (Note 1) $ 7,630,247 $ 8,351,285 $ 632,743 $ 458,158
============== ============== ============ =============
FROM SHARE TRANSACTIONS:
(at constant net asset value of $1 per share)
Shares sold $ 886,850,854 $1,141,629,915 $112,440,950 $ 90,282,876
Shares issued in reinvestment of
dividends from net investment income 25,927 159,592 260 1,040
-------------- -------------- ------------ -------------
886,876,781 1,141,789,507 112,441,210 90,283,916
Shares redeemed 983,858,908 1,129,241,627 92,879,682 96,268,043
-------------- -------------- ------------ -------------
Net increase (decrease) in net assets
derived from share transactions (96,982,127) 12,547,880 19,561,528 (5,984,127)
NET ASSETS:
Beginning of period 179,632,815 167,084,935 10,145,763 16,129,890
-------------- -------------- ------------ -------------
End of period $ 82,650,688 $ 179,632,815 $ 29,707,291 $ 10,145,763
============== ============== ============ =============
</TABLE>
See Notes to Financial Statements.
<PAGE>
FINANCIAL HIGHLIGHTS
LIQUID ASSETS FUND
JUNE 30, 1997
<TABLE>
<CAPTION>
SELECTED DATA FOR A SHARE OF
EACH FUND OUTSTANDING
THROUGHOUT EACH PERIOD 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SWEEP SHARES
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 .045 .047 .047 .027 .027 .044 .063 .074 .076 .057
Dividends Distributed (.045) (.047) (.047) (.027) (.027) (.044) (.063) (.074) (.076) (.057)
-------------------------------------------------------------------------------------------------------
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 4.46% 4.68% 4.66% 2.66% 2.72% 4.37% 6.31% 7.40% 7.62% 5.74%
Ratio of Expenses to
Average Net Assets 1.20% 1.20% 1.20% 1.18% 1.16% 1.16% 1.15% 1.16% 1.17% 1.15%
Ratio of Net Income to
Average Net Assets 4.46% 4.68% 4.66% 2.66% 2.72% 4.37% 6.31% 7.40% 7.62% 5.74%
Net Assets, End of Period
(000 Omitted) $60,663 179,633 167,085 141,018 123,949 117,238 111,405 104,014 93,335 73,525
</TABLE>
See Notes to Financial Statements.
<PAGE>
FINANCIAL HIGHLIGHTS
LIQUID ASSETS FUND
JUNE 30, 1997
SELECTED DATA FOR A SHARE OF
EACH FUND OUTSTANDING
THROUGHOUT EACH PERIOD 1997
- ------------------------------------
TRUST SHARES
Net Asset Value
Beginning of Period $ 1.000
Net Investment Income .050
Dividends Distributed (.050)
--------
Net Asset Value
End of Period $ 1.000
========
Total Return 4.96%
Ratio of Expenses to
Average Net Assets 0.70%
Ratio of Net Income to
Average Net Assets 4.96%
Net Assets, End of Period
(000 Omitted) $ 17,859
See Notes to Financial Statements.
<PAGE>
FINANCIAL HIGHLIGHTS
LIQUID ASSETS FUND
JUNE 30, 1997
SELECTED DATA FOR A SHARE OF
EACH FUND OUTSTANDING
THROUGHOUT EACH PERIOD 1997
- -------------------------------------
INSTITUTIONAL SHARES
Net Asset Value
Beginning of Period $ 1.000
Net Investment Income .052
Dividends Distributed (.052)
--------
Net Asset Value
End of Period $ 1.000
========
Total Return 5.19%
Ratio of Expenses to
Average Net Assets 0.45%
Ratio of Net Income to
Average Net Assets 5.19%
Net Assets, End of Period
(000 Omitted) $ 2,356
See Notes to Financial Statements.
<PAGE>
FINANCIAL HIGHLIGHTS
LIQUID ASSETS FUND
JUNE 30, 1997
SELECTED DATA FOR A SHARE OF
EACH FUND OUTSTANDING
THROUGHOUT EACH PERIOD 1997
- -------------------------------------
S-2 SHARES
Net Asset Value
Beginning of Period $ 1.000
Net Investment Income .048
Dividends Distributed (.048)
--------
Net Asset Value
End of Period $ 1.000
========
Total Return 4.79%
Ratio of Expenses to
Average Net Assets* 0.85%
Ratio of Net Income to
Average Net Assets 4.79%
Net Assets, End of Period
(000 Omitted) $ 1,773
* During the year ended June 30, 1997, the distributor voluntarily waived
certain fees. Absent this waiver, the ratio of expenses to average net asset
would have been 0.95 percent.
See Notes to Financial Statements.
<PAGE>
FINANCIAL HIGHLIGHTS
MUNICIPAL ASSETS FUND
JUNE 30, 1997
<TABLE>
<CAPTION>
SELECTED DATA FOR A SHARE OF
EACH FUND OUTSTANDING
THROUGHOUT EACH PERIOD 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SWEEP SHARES
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 .029 .026 .025 .015 .017 .030 .044 .050 .051 .039
Dividends Distributed (.029) (.026) (.025) (.015) (.017) (.030) (.044) (.050) (.051) (.039)
-----------------------------------------------------------------------------------------------------------
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 2.90% 2.64% 2.53% 1.53% 1.69% 3.06% 4.40% 4.96% 5.10% 3.94%
Ratio of Expenses to
Average Net Assets* 0.93% 1.48% 1.38% 1.35% 1.35% 1.37% 1.39% 1.63% 1.50% 1.52%
Ratio of Net Income to
Average Net Assets 2.90% 2.64% 2.53% 1.53% 1.69% 3.06% 4.40% 4.96% 5.10% 3.94%
Net Assets, End of Period
(000 Omitted) $ 4,664 10,146 16,130 21,355 23,764 29,670 26,683 15,077 12,619 14,528
</TABLE>
* During the year ended June 30, 1997, the advisor and distributer voluntarily
waived certain fees. Absent this waiver, the ratio of expense to average net
assets would have been 1.15 percent.
See Notes to Financial Statements.
<PAGE>
FINANCIAL HIGHLIGHTS
MUNICIPAL ASSETS FUND
JUNE 30, 1997
SELECTED DATA FOR A SHARE OF
EACH FUND OUTSTANDING
THROUGHOUT EACH PERIOD 1997
- ------------------------------------
TRUST SHARES
Net Asset Value
Beginning of Period $ 1.000
Net Investment Income .032
Dividends Distributed (.032)
--------
Net Asset Value
End of Period $ 1.000
========
Total Return 3.17%
Ratio of Expenses to
Average Net Assets 0.66%
Ratio of Net Income to
Average Net Assets* 3.17%
Net Assets, End of Period
(000 Omitted) $ 25,036
* During the year ended June 30, 1997, the advisor and distributer voluntarily
waived certain fees. Absent this waiver, the ratio of expenses to average net
assets would have been 0.90 percent.
See Notes to Financial Statements.
<PAGE>
FINANCIAL HIGHLIGHTS
MUNICIPAL ASSETS FUND
JUNE 30, 1997
SELECTED DATA FOR A SHARE OF
EACH FUND OUTSTANDING
THROUGHOUT EACH PERIOD 1997
- -------------------------------------
INSTITUTIONAL SHARES
Net Asset Value
Beginning of Period $ 1.000
Net Investment Income .034
Dividends Distributed (.034)
--------
Net Asset Value
End of Period $ 1.000
========
Total Return 3.42%
Ratio of Expenses to
Average Net Assets 0.41%
Ratio of Net Income to
Average Net Assets 3.42%
Net Assets, End of Period
(000 Omitted) $ 7
* During the year ended June 30, 1997, the advisor and distributer voluntarily
waived certain fees. Absent this waiver, the ratio of expenses to average net
assets would have been 0.65 percent.
See Notes to Financial Statements.
<PAGE>
LIQUID ASSETS FUND
MUNICIPAL ASSETS FUND
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:
The Liquid Assets Fund and the Municipal Assets Fund (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.
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.
In September 1996, shareholders of the Liquid Assets Fund, approved to
amend the Articles of Incorporation to increase the amount of authorized
common stock from 1,000,000,000 to 5,000,000,000. In addition,
shareholders of the Funds approved to amend the Articles of Incorporation
to change the name of the IMG Government Assets Fund to the Liquid Assets
Fund and the IMG Tax Exempt Liquid Assets Fund to the Municipal Assets
Fund.
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.
The shares of the Liquid Assets Fund are divided into Sweep Shares, S-2
Shares, Institutional Shares and Trust Shares. The shares of the
Municipal Assets Fund are divided into Sweep Shares, Institutional Shares
and Trust Shares. Each class of shares has equal rights as to earnings,
assets and voting privileges except that the Sweep and S-2 Share classes
pay distribution expenses, and the Trust Share class pays shareholder
servicing expenses. Each class of shares has exclusive voting rights with
respect to matters that effect just that class. Income, expenses (other
than expenses attributable to a specific class), and realized and
unrealized gains or losses on investments are allocated to each class of
shares based upon its relative net assets.
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
Funds 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 which
has been determined by the Board of Directors of the Funds to represent
the fair value of the Fund's investments. 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, 1997, the securities purchased under overnight agreements to
resell were collateralized by Government Agency mortgage backed
securities with a market value of $28,919,962 for the Liquid Assets Fund
and $411,355 for the Municipal 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)
represents 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 limitations
on certificates sold by any individual bank. Each individual bank may not
sell more than five percent of the outstanding Trust Certificates.
(2) ADVISORY AND SERVICE FEES:
Under its management and investment advisory agreement, the Advisor
provides the Fund 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, the
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, 1997, Liquid Assets
Fund and Municipal Assets Fund paid $428,125 and $25,305, respectively,
to the Advisor for advisory and service fees. Beginning September 1, 1993
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.
During the year ended June 30, 1997, the Advisor of the Municipal Assets
Fund agreed to waive $51,871 and $7,262 for advisory and portfolio fund
accounting fees, respectively.
Certain officers of the Fund are also officers of the Advisor. At June
30, 1997, the Advisor owned 573,397 shares of the Liquid 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 its distribution expense plans (the "12b-1 Plans") adopted January
1, 1987 pursuant to Rule 12b-1 under the Act, and amended effective
August 13, 1996 the Funds may make payments to IMG Financial Services,
Inc. ("IFS") for the reimbursement of expenses related to marketing or
distribution of Sweep Shares and S-2 Shares 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
invested in Sweep Shares and 0.50 percent of the Fund's average daily net
asset value invested in S-2 Shares. For the period ended June 30, 1997,
payments under the 12b-1 Plan used by IFS to compensate financial
institutions for automated processing of Fund transactions and for other
services relating to the distribution of the Funds' Sweep Shares and S-2
Shares totaled $1,238,987 and $47,842 for Liquid Assets Fund, and
Municipal Assets Fund, respectively, and Rule 12b-1 fees payable at June
30, 1997, were $37,199 and $2,041, respectively.
During the year ended June 30, 1997, the Distributor of the Funds agreed
to waive $525 and $50,758 of it's distribution fees for the Liquid Assets
Fund and the Municipal Assets Fund, respectively.
Effective September 25, 1996, the Distribution fees for Municipal Assets
were decreased from .75 percent to .50 percent with the introduction of
additional classes.
Under its shareholder services plan (the "Services Plan") adopted August
13, 1996 under the Act, the Funds may make payments to IFS for the
reimbursement of expenses related to the servicing of shareholder
accounts of the Fund by financial service firms. Aggregate payments by
the Fund under the Services Plan in any month cannot exceed the annual
rate of 0.25 percent of the Fund's average daily net asset value invested
in Trust Shares. For the year ended June 30, 1997 payments under the
Services Plan used by IFS to compensate financial service firms for
servicing of shareholder accounts totaled $14,257 and $29,791 for Liquid
Assets Fund and Municipal Assets Fund, respectively, and Shareholder
Services fees payable as of June 30, 1997 were $3,046 and $5,496,
respectively.
<PAGE>
INDEPENDENT AUDITORS' REPORT
Shareholders and Board of Directors
Liquid Assets Fund and
Municipal Assets Fund:
We have audited the accompanying statements of net assets of Liquid Assets Fund
and Municipal Assets Fund as of June 30, 1997, 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 ten-year period then ended. 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, 1997, 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 Liquid Assets
Fund and Municipal Assets Fund at June 30, 1997 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 ten-year period then ended in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Des Moines, Iowa
July 25, 1997
<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
AMCORE Bank, N.A., Rockford KPMG Peat Marwick LLP
501 7th Street 2500 Ruan Center
Rockford, Illinois 61110-0037 Des Moines, Iowa 50309
COUNSEL
Cline, Williams, Wright, Johnson
& Oldfather
1900 First Bank Building
Lincoln, Nebraska 68508
Liquid Assets Fund
Municipal Assets Fund
Investors Management Group
2203 Grand Avenue
Des Moines, Iowa 50312-5338
