1933 Act Registration No. 033-40496
1940 Act Registration No. 811-5990
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 1, 1999
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. __
Post-Effective Amendment No. 28
AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 28
(Check appropriate box or boxes)
IAI INVESTMENT FUNDS VI, INC.
(Exact Name of Registrant as Specified in Charter)
3700 U.S. Bank Place
P.O. Box 357
Minneapolis, Minnesota 55440
(Address of Principal Executive Offices, Zip Code)
(612) 376-2700
(Registrant's Telephone Number, including Area Code)
Steven G. Lentz, Esq.
3700 U.S. Bank Place
P.O. Box 357
Minneapolis, Minnesota 55440
(Name and Address of Agent for Service)
COPY TO:
Kathleen L. Prudhomme, Esq.
Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, Minnesota 55402-1498
It is proposed that this filing will become effective (check appropriate box):
___ immediately upon filing pursuant to paragraph (b) of Rule 485
___ on (specify date) pursuant to paragraph (b) of Rule 485
___ 75 days after filing pursuant to paragraph (a) of Rule 485
_X_ on June 1, 1999 pursuant to paragraph (a) of Rule 485
___ 60 days after filing pursuant to paragraph (a) of Rule 485
<PAGE>
IAI MUTUAL FUNDS
IAI MONEY MARKET FUND
PROSPECTUS June 1, 1999
As with all mutual funds, the Securities and Exchange Commission has
not approved or disapproved the shares of this Fund, or determined if the
information in this prospectus is accurate or complete. Any statement to the
contrary is a criminal offense.
P.O. BOX 357
MINNEAPOLIS, MINNESOTA 55440
TELEPHONE 1-612-376-2700
1-800-945-3863
<PAGE>
TABLE OF CONTENTS
Page
----
Fund Summary..................................................................3
Objective................................................................3
Principal Investment Strategies..........................................3
Principal Risks..........................................................3
Fund Performance.........................................................4
Fees and Expenses........................................................4
Buying and Selling Shares.....................................................5
How to Buy Shares........................................................5
How to Sell Shares.......................................................7
Exchange Privilege.......................................................9
Authorized Telephone Trading............................................10
Statements and Confirmations............................................10
Shareholder Reports.....................................................10
Dividends and Capital Gains Distributions....................................11
Taxes........................................................................11
Fund Management..............................................................11
More Information on the Fund.................................................12
Investment Strategies...................................................12
Year 2000 Issues........................................................12
Financial Highlights.........................................................13
<PAGE>
FUND SUMMARY
This section briefly describes the objective, principal investment
strategies and principal risks of IAI Money Market Fund (the "Fund"). It also
provides you with information on how the Fund has performed and on Fund
expenses. For further information on the Fund, please read the section entitled
"More Information on Investment Strategies and Risks."
OBJECTIVE
The Fund's objective is to provide shareholders with a high level of
current income consistent with the preservation of capital and liquidity.
PRINCIPAL INVESTMENT STRATEGIES
Money Market Fund is managed to provide a stable share price of $1.00.
The Fund invests in high quality, U.S. dollar-denominated, short-term debt
obligations including:
o securities issued or guaranteed by the U.S. Government, its
agencies and instrumentalities;
o obligations of U.S. and foreign banks, including time
deposits, certificates of deposit, and bankers' acceptances;
o domestic and foreign commercial paper;
o repurchase agreements;
o dollar-denominated obligations issued or guaranteed by one or
more foreign governments, or any of their political
subdivisions, agencies or instrumentalities, including
obligations of supranational entities; and
o other short-term corporate obligations, including those with
floating or variable rates of interest.
The Fund's adviser selects securities based on the relationships among yields on
various types and maturities of money market securities and the adviser's
interest rate outlook. For example, the adviser may focus on commercial paper if
it offers a yield advantage over other money market instruments. In selecting
commercial paper investments, the adviser may purchase longer-maturity
securities if interest rates are expected to fall. These purchases would be made
to try to preserve the Fund's income level, since longer maturity investments
typically have higher yields than those with shorter maturities. Conversely,
shorter maturities may be favored if interest rates are expected to rise.
PRINCIPAL RISKS
The principal risks that could adversely affect the value of the Fund's shares
and the yield on your investment include:
o INTEREST RATE RISK. Although the fund attempts to maintain a
constant share price of $1.00, if interest rates rise sharply
in a short period of time, the value of your investment could
decline.
o INCOME RISK. The level of income you receive from the Fund
will vary with movements in short- term interest rates.
o CREDIT RISK. The Fund is subject to the risk that the issuers
of debt securities it holds will not make timely payments of
interest or principal on the securities, which could cause the
value of your investment to decline below $1.00 per share.
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o RISKS OF FOREIGN SECURITIES. Although the Fund invests only in
U.S. dollar-denominated foreign securities, investing in these
securities nevertheless involves risks not associated with
U.S. investing. Risks of foreign investing include the risk of
adverse political and economic developments, the possibility
of expropriation, nationalization or confiscatory taxation or
limitations on the removal of Fund assets, potentially lower
liquidity and higher volatility, the risk that there may be
less publicly available information about foreign issuers than
domestic issuers, and possible problems arising from the fact
that foreign issuers generally are not subject to the uniform
accounting, auditing and financial reporting standards,
practices and requirements applicable to domestic issuers.
o MANAGER RISK. IAI manages the Fund according to the
traditional methods of "active" investment management, which
involves the buying and selling of securities based upon
economic, financial and market analysis and investment
judgment. Manager risk refers to the possibility that IAI may
fail to execute the Fund's investment strategy effectively. As
a result, the Fund may fail to achieve its stated objective.
An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Fund seeks to
preserve the value of your investment at $1.00, it is possible to lose money by
investing in the Fund.
FUND PERFORMANCE
The bar chart and table below provide you with information on the Fund's
volatility and performance. The bar chart shows how the Fund's performance has
varied from year to year. This information provides some indication of the risks
of investing in the Fund by showing changes in performance from year to year.
The table compares the Fund's average annual returns for 1, 5 and 10 years to
that of a broad measure of market performance. The Fund's past performance is
not necessarily an indication of how it will perform in the future.
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
[BAR CHART]
1993 2.79%
1994 3.74%
1995 5.40%
1996 4.89%
1997 5.04%
1998 5.05%
Best Quarter: Quarter ended June 30, 1995 1.35%
Worst Quarter: Quarter ended March 31, 1993 0.67%
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/98
Since Inception:
1 YEAR 5 YEARS (1/5/93)
5.05% 4.82% 4.49%
FEES AND EXPENSES
As an investor, you pay certain fees and expenses if you buy and hold shares of
the Fund. Shareholder fees are fees you pay directly when buying or selling
shares. Annual fund operating expenses are deducted from Fund assets. The
figures below are based on expenses during the year ended January 31, 1999.
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SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) None
Imposed on Purchases
Maximum Deferred Sales Charge (Load) None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED
FROM FUND ASSETS)(as a % of average net assets)
Management Fees 0.60%
Distribution and Service (12b-1) Fees None
Other Expenses None
Total Annual Fund Operating Expenses 0.60%
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. It assumes that you invest
$10,000 in the Fund for the time periods indicated, that your investment has a
5% return each year and that the Fund's operating expenses remain the same.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
1 year $ 61
3 years $ 192
5 years $ 335
10 years $ 750
BUYING AND SELLING SHARES
HOW TO BUY SHARES
You may purchase Fund shares either directly through the Fund or through certain
securities dealers. These dealers have the responsibility to promptly transmit
orders and may charge a processing fee.
MINIMUM INVESTMENTS
The Fund is a member of the IAI Family of Funds, a family of mutual funds
advised by Investment Advisers, Inc. ("IAI"). The minimum initial investment to
establish an account with the IAI Family of Funds is $5,000 for a retail account
and $2,000 for an IRA account. In each case, your initial investment may be
allocated in any way you wish among the Fund and other funds in the IAI Family
of Funds, so long as no less than $1,000 is allocated to any one fund. Once you
have met the account minimum, subsequent purchases can be made for as little as
$100.
You may satisfy the minimum investment requirement for retail accounts by
participating in the STAR Program. This requires an initial investment of $1,000
in any one fund in the IAI Family of Funds and a commitment to invest an
aggregate of $5,000 within 24 months. If you do not keep this commitment, IAI
has the right to redeem your shares. Contact the Fund if you would like a STAR
Program application.
DETERMINING YOUR PURCHASE PRICE
Your purchase price will be equal to the Fund's net asset value ("NAV") per
share next calculated after your order is placed in proper form. To make sure
that your order is in proper form, please follow the directions for purchasing
shares given below. No sales load or commission is charged when you purchase
shares. NAV is determined as of the close of regular trading on the New York
Stock Exchange each day the exchange is open.
The Fund's NAV per share is computed by adding up the value of the Fund's
investments, cash and other assets, subtracting its liabilities, and then
dividing the result by the number of shares outstanding. The securities held by
the
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Fund are valued on the basis of amortized cost. This involves valuing an
instrument at its cost and thereafter assuming a constant amortization of any
discount or premium until the instrument's maturity, rather than looking at
actual changes in the market value of the instrument. The Fund's net asset value
is normally expected to be $1.00 per share.
INVESTING BY MAIL
To invest by mail, send a completed, signed application and a check payable to
"IAI Funds" to the following address:
IAI Mutual Funds
P.O. Box 357
Minneapolis, Minnesota 55440-0357
Third party checks will not be accepted for initial account investments. After
the Fund receives your completed purchase order, your account will be credited
with the number of full and fractional shares that can be purchased at the next
determined net asset value.
For assistance in completing the application, please contact IAI Shareholder
Services at 1-800-945-3863.
INVESTING BY WIRE
If you have an account with a commercial bank that is a member of the Federal
Reserve System, you may purchase shares by requesting your bank to wire funds
to:
Norwest Bank Minnesota
ABA Number: 091000019
IAI Mutual Funds Account Number: 6355002264
For further credit to: (name of shareholder)
IAI Account Number: (your account number)
NOTE: PLEASE SPECIFY THE FUND'S NAME
If you are purchasing by wire for a new account, you must do the following
before you wire funds:
o call IAI Shareholder Services at 1-800-945-3863 to advise them
of your investment;
o obtain an account number, instructions and an application
form; and
o complete the application and send it to the Fund.
Your completed application must be received by the Fund before your wire is
sent.
Before initiating any subsequent wires, please call IAI Shareholder Services and
advise them of your name, account number and the name of the bank transmitting
the federal funds.
Wire orders will be accepted only on days when your bank, the Fund, the Fund's
transfer agent and Norwest Bank Minnesota are open for business. A wired
purchase will be considered made when the wired amount is received and the
purchase is accepted by the Fund. The Fund must receive payment before the close
of business for the purchase to be credited to your account on that day.
Otherwise, your purchase will be processed the next business day. The Fund may
reject your wire order if it does not contain the required information stated
above. If the Fund rejects your wire order, your money will be returned
promptly, less any costs incurred by the Fund or its transfer agent in rejecting
the order. You must pay any charges assessed by your bank for the wire service.
Any delays that may occur in wiring federal funds, including delays in
processing by the banks, are not the responsibility of the Fund or the Fund's
transfer agent.
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<PAGE>
RETIREMENT PLANS
Shares of the Fund may be an appropriate investment for various retirement
plans. If you would like information about establishing an Individual Retirement
Account or other retirement plan, please call IAI Shareholder Services at
1-800-945-3863.
All retirement plans involve a long-term commitment of assets and are subject to
various legal requirements and restrictions. You are urged to consult an
attorney or tax adviser before establishing such a plan.
AUTOMATIC INVESTMENT PLAN
You may arrange to make regular investments of $100 or more each month through
automatic deductions from your checking or savings account. To participate in
this program, simply complete the Automatic Investment Plan portion of your
application and return it to the Fund. You will receive quarterly confirmations
of all transactions and dividends under the Plan.
If you wish to change or terminate your participation in the Automatic
Investment Plan you must provide the Fund with written notice. Your instructions
must be received by 10 days prior to the date the change or termination is to
take place.
HOW TO SELL SHARES
You may redeem your shares on any day the New York Stock Exchange is open. Your
redemption price will be the net asset value of your shares next determined
after your redemption request is received in proper form by the Fund. To make
sure that your request is in proper form, please follow the directions for
selling shares given below.
BY MAIL
If you redeem by mail, your redemption price will be equal to the Fund's net
asset value per share next determined following receipt by the Fund of your
written redemption request in the form shown below (and a properly endorsed
stock certificate if one has been issued).
To redeem by mail, send a written request to the Fund at the following address:
IAI Mutual Funds
P.O. Box 357
Minneapolis, Minnesota 55440-0357
Your request should include the following information:
o name of the Fund,
o account number,
o dollar amount or number of shares to be redeemed,
o name on the account, and
o signatures of all registered account owners.
If you hold certificates for your shares, they must be included with your
request. They must be endorsed on the back with the signature of the person
whose name appears on the certificate and must be signature guaranteed.
7
<PAGE>
Signatures on your written request must be guaranteed if :
o you would like the proceeds from the sale to be paid to
someone other than the shareholder of record, or
o you have changed your address over the telephone within the
last 15 calendar days.
A signature guarantee assures that a signature is genuine and protects
shareholders from unauthorized account transfers. Banks, savings and loan
associations, trust companies, credit unions, broker-dealers and member firms of
a national securities exchange may guarantee signatures. NOTARIZATION BY A
NOTARY PUBLIC IS NOT ACCEPTED.
If Fund shares are held of record in the name of a corporation, partnership,
trust or fiduciary, the Fund may require additional evidence of authority prior
to accepting a redemption request.
To redeem money from your IRA account, an IRA Distribution Form must be
completed and returned to IAI. To receive a copy of the form, please call IAI
Shareholder Services at 1-800-945-3863.
BY PHONE
You may redeem shares by phone, subject to the following conditions:
o You must have completed the Authorized Telephone Trading
section of the account application.
o Your telephone instructions must be accompanied by your
personal identification number.
o Telephonic redemptions are limited to $50,000.
o Redemption proceeds must be made payable to the owner(s) of
record and delivered to the address of record.
o Telephone redemptions are not permitted for IRAs.
For assistance, please contact IAI Shareholder Services at 1-800-945-3863.
PAYMENT OF REDEMPTION PROCEEDS
BY WIRE. When you redeem by telephone, you may have the proceeds wired
to your bank account if you provided the required information at the time you
opened your account. Wire redemption requests will only be processed on days
your bank, the Fund, the Fund's transfer agent and Norwest Bank Minnesota are
open for business. If you choose to have your redemption proceeds wired to your
bank, please note the following:
o A minimum amount of $1,000 is required to wire redemption
proceeds.
o Proceeds will be wired on the next business day after your
redemption request.
o Your account will be charged a fee of $10 each time redemption
proceeds are wired to your bank. Your bank may also charge you
a fee for receiving a wire.
To add the ability to receive proceeds by wire to your account, or to change
existing bank account information, please submit a letter of instruction,
including your bank information and a signature guarantee, to:
IAI Shareholder Services
P.O. Box 357
Minneapolis, Minnesota 55440-0357
8
<PAGE>
BY CHECK. Normally the Fund will mail payment for shares redeemed on
the business day following the receipt of your redemption request, although
payment may be made as late as seven days after your request. However, the Fund
will not send redemption proceeds until checks (including certified checks,
cashiers checks or automatic investment credits) received in payment for shares
have cleared. This may take up to 15 days from the date of purchase.
INVOLUNTARY REDEMPTIONS
If your account balance falls below $500 as a result of selling or exchanging
shares, the Fund has the right to redeem your shares and send you the proceeds.
Before redeeming your account, the Fund will mail you a notice of its intention
to redeem, which will give you an opportunity to make an additional investment.
If you do not increase the value of your account to at least $500 within six
months of the date the notice was mailed, the Fund may redeem your account.
SYSTEMATIC CASH WITHDRAWAL PLAN
The Fund has a Systematic Cash Withdrawal Plan under which you may automatically
redeem a fixed dollar amount of Fund shares on either a monthly or quarterly
basis. Under the Systematic Cash Withdrawal Plan:
o Automatic redemptions must be for $100 or more.
o Shares will be redeemed at the net asset value determined on
the 15th of the applicable month (or the next business day).
o All income dividends and capital gains distributions must be
reinvested in Fund shares.
o Confirmations of all transactions and distributions will be
sent to you quarterly.
Plan application forms are available through the Fund. If you would like
assistance in completing the application, contact IAI Shareholder Services at
1-800-945-3863.
CHECK WRITING PRIVILEGE
You may sign up for check writing privileges by completing a Check Writing
application. With a Fund checking account, you may redeem shares simply by
writing a check for $500 or more. Fund shares held in IRAs, Roth IRAs, SEP IRAs
and Keogh Plans may not be redeemed by check. Please call IAI Shareholder
Services at 1-800-945-3863 for more information.
EXCHANGE PRIVILEGE
You may exchange your Fund shares for shares of another fund in the IAI Family
of Funds if you satisfy that Fund's purchase requirements. There currently is no
fee to exchange shares.
The Fund generally limits exchanges to four per year. This limit may be modified
for certain retirement plan accounts and for those participating in the
Automatic Exchange Plan described below. The Fund may change or cancel its
exchange privilege at any time.
When you exchange your Fund shares for shares of another fund in the IAI Family
of Funds the exchange is considered a sale of your Fund shares for federal
income tax purposes. However, because the Fund attempts to maintain a stable
share price of $1.00, you should not have a taxable capital gain or loss.
You may exchange shares by notifying the Fund in writing or, if you have
authorized the Fund to accept telephone instructions, by telephone. See "How to
Sell Shares -- By Telephone."
9
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AUTOMATIC EXCHANGE PLAN
You may arrange to make regular exchanges of $100 or more between any of the
funds in the IAI Family of Funds on a monthly basis. Please note the following
about automatic exchanges:
o If you wish to participate in the Plan, you must complete the
Automatic Exchange Plan portion of your IAI Mutual Fund
application.
o Exchanges will take place at the net asset value determined on
the fifth day of each month (or the next business day).
o If you participate in the Automatic Exchange Plan you will
receive quarterly confirmations of all transactions and
dividends.
o You may not close an account through the Automatic Exchange
Plan.
AUTHORIZED TELEPHONE TRADING
As discussed above, you may exchange and redeem shares by telephone if you have
completed the Authorized Telephone Trading section of the IAI Mutual Fund
application. You will be provided with a personal identification number ("PIN")
that must accompany any instructions by phone. Telephone redemptions are not
permitted for IRAs.
Address changes may also be made over the telephone, provided the request is
accompanied by your PIN. During the 15 calendar days following an address change
by telephone, you may only redeem shares in your account with a signature
guaranteed letter of instruction.
The Fund and its agents will not be responsible for any losses that may result
from acting on telephone instructions that they reasonably believe to be
genuine. The Fund will follow reasonable procedures to confirm that instructions
received by telephone are genuine. These procedures include tape recording all
redemption and exchange requests and requiring that they be accompanied by your
PIN.
STATEMENTS AND CONFIRMATIONS
Whenever you buy or sell shares of the Fund, IAI will send you a confirmation
statement showing how many shares you bought or sold and at what price. You will
also receive an account statement quarterly and a consolidated transaction
statement annually. Please review carefully all of the information relating to
transactions on your statements and confirmations to ensure that your
instructions were acted on properly. Please notify the Fund immediately in
writing if there is an error. If you do not provide the Fund with notice of an
error within 60 days of non-automatic transactions, or within 60 days of the
date of your consolidated quarterly statement in the case of automatic
transactions, you will be deemed to have ratified the transaction.
SHAREHOLDER REPORTS
Shareholder reports will be sent to you semi-annually. These reports contain
financial information about the Fund, including a list of investment securities
held. To reduce the volume of mail you receive, only one copy of Fund reports
may be mailed to your household (same surname and address). Please call IAI
Shareholder Services at 1-800-945-3863 if you wish to receive additional
shareholder reports.
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DIVIDEND AND CAPITAL GAINS DISTRIBUTIONS
Dividends from the fund's net investment income are declared daily and paid on
the first business day of each month. Because the Fund is managed to maintain a
constant share price, it is not expected to make any capital gains
distributions.
When you open an account, you should specify on your application how you want to
receive your distributions. The Fund offers two options:
o REINVESTMENT -- your income dividends are automatically
reinvested in additional shares of the Fund; or
o CASH -- your income dividends will be paid in cash.
If you elect to receive your dividends in cash, they can be sent to you by check
or transferred directly to your account at any bank, savings and loan or credit
union that is a member of the Automated Clearing House (ACH) network.
If you do not select an option when you open your account, the Fund will
automatically reinvest all dividends in additional Fund shares.
The Fund also has a Directed Dividend service which allows you to invest your
dividends into another IAI Mutual Fund. Contact IAI Shareholder Services at
1-800-945-3863 for details.
TAXES
Dividends you receive from the Fund generally will be taxable as ordinary
income, whether paid in cash or reinvested (unless your investment is in an IRA
or other tax advantaged account). However, because everyone's tax situation is
unique, be sure to consult with your tax adviser.
Information about the tax status of each year's dividends will be mailed
annually.
FUND MANAGEMENT
Investment Advisers, Inc. ("IAI") is the Fund's investment adviser. IAI, which
has been in the investment advisory business since 1947, also furnishes
investment advice to other concerns including other investment companies,
pension and profit sharing plans, portfolios of foundations, religious,
educational and charitable institutions, trusts, municipalities and individuals.
IAI is located at 601 Second Avenue South, Suite 3600, Minneapolis, Minnesota
55402.
The Fund has entered into a Management Agreement with IAI under which IAI
provides the Fund with investment advisory services and is responsible for
managing the Fund's business affairs, subject to the authority of the Board of
Directors. IAI also is responsible under the Management Agreement for providing
or arranging for the provision of all required administrative, stock transfer,
redemption, dividend disbursing, accounting and shareholder services. The
Management Agreement requires IAI to pay all of the Fund's operating expenses,
except for brokerage commissions and other expenditures in connection with the
purchase and sale of portfolio securities, interest and, in certain
circumstances, taxes and extraordinary expenses. The Fund pays IAI an annual fee
under the Management Agreement. During its most recent fiscal year, the Fund
paid IAI a management fee equal to 0.60% of the Fund's average daily net assets.
Because IAI is paying the Fund's operating expenses, this fee represents the
Fund's total expenses for the fiscal year.
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MORE INFORMATION ON THE FUND
INVESTMENT STRATEGIES
The principal investment strategies of the Fund are described above under "Fund
Summary." These are the strategies that IAI believes are most likely to be
important in trying to achieve the Fund's objectives. Of course, there is no
guarantee that the Fund will achieve its objective. Although not considered
principal strategies, you should be aware that the Fund may also use strategies
and invest in securities that are not described in this prospectus, but that are
described in the statement of additional information.
The Fund complies with Securities and Exchange Commission regulations that apply
to money market funds. These regulations require that the Fund's investments
mature within 397 days from the date of purchase, and that the average maturity
of the Fund's investments (on a dollar-weighted basis) be 90 days or less. The
Fund may invest in securities with variable or floating interest rates and
securities with demand features. The maturities of these securities are
determined according to regulations which allow the Fund to consider some of
these securities as having maturities shorter than their stated maturity dates.
All of the Fund's investments must be in U.S. dollar-denominated high quality
securities which have been determined by IAI to present minimal credit risks.
YEAR 2000 ISSUES
The investment advisory, transfer agency and administrative services provided to
the Fund by IAI depend on the smooth functioning of its computer systems. Many
computer software systems in use today cannot distinguish the year 2000 from the
year 1900 because of the way dates are encoded and calculated. That failure
could have a negative impact on handling securities trades, pricing and account
services. IAI has been actively working on necessary changes to its computer
systems to deal with the year 2000 and expects that its systems will be adapted
in time for that event, although there cannot be assurance of success.
IAI is working with third parties to asses the adequacy of their compliance
efforts and is developing contingency plans intended to assure that third-party
noncompliance will not materially affect IAI's operations.
Companies, organizations, governmental entities and markets in which the Fund
invests will be affected by the Year 2000 issue, but at this time the Fund
cannot predict the degree of impact. To the extent the effect is negative, the
Fund's returns could be adversely affected.
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FINANCIAL HIGHLIGHTS
The table that follows presents performance information about the Fund. This
information is intended to help you understand the Fund's financial performance
for the past five years. Some of this information reflects financial results for
a single Fund share. The total returns in the table represent the rate that you
would have earned or lost on an investment in the Fund, assuming you reinvested
all of your dividends and distributions. This information has been audited by
KPMG Peat Marwick LLP, independent auditors, whose report, along with the Fund's
financial statements, is included in the Fund's annual report, which is
available upon request.
MONEY MARKET FUND
<TABLE>
<CAPTION>
Period from
April 1, Year
1994 to ended
Years ended January 31, January 31, March 31,
1999 1998 1997 1996 1995(1) 1994
---------- ---------- ---------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
OPERATIONS
Net investment income 0.05 0.05 0.05 0.05 0.03 0.03
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (0.05) (0.05) (0.05) (0.05) (0.03) (0.03)
------ ------ ------ ------ ------ ------
NET ASSET VALUE
End of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== =====
Total investment return* 4.96% 5.05% 4.89% 5.46% 3.47% 2.88%
Net assets at end of period (000s omitted) $35,430 $22,507 $26,140 $27,395 $33.175 $29,788
RATIOS
Expenses to average net assets*** 0.60% 0.60% 0.56% 0.50% 0.50%** 0.45%
Net investment income to average
assets*** 4.80% 4.93% 4.80% 5.34% 4.12%** 2.73%
</TABLE>
- -------------------
* Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of all distributions at
net asset value.
** Annualized.
*** The Fund's adviser voluntarily waived $21,950, $76,386 and $81,895 in
expenses for the years ended January 31, 1997 and 1996 and the period
ended January 31, 1995, respectively. If the Fund had been charged for
these expenses, the ratio of expenses to average daily net assets would
have been .63%, .74% and .88%, respectively, and the ratio of net
investment income to average daily net assets would have been 4.73%, 5.10%
and 3.74%, respectively.
(1) Reflects fiscal year-end change from March 31 to January 31.
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FOR MORE INFORMATION ABOUT IAI MONEY MARKET FUND
The Fund's statement of additional information ("SAI") and annual and
semi-annual reports to shareholders include additional information about the
Fund. The SAI provides more details about the Fund and its policies. A current
SAI is on file with the Securities and Exchange Commission (SEC) and is
incorporated into this prospectus by reference (which means that it is legally
considered part of this prospectus). Additional information about the Fund's
investments is available in the Fund's annual and semiannual reports to
shareholders. You may obtain free copies of these materials by calling the Fund
toll free at 1-800-945-3863.
You may also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC or by sending your request and a duplicating fee to the SEC's
Public Reference Section, Washington, DC 20549-6009. For more information, call
1/800-SEC-0330.
Information about the Fund is also available on the Internet. Text only versions
of fund documents can be viewed online or downloaded from the SEC's Internet
site at http://www.sec.gov.
SEC file number: 811-5990
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IAI MONEY MARKET FUND
A SERIES OF
IAI INVESTMENT FUNDS VI, INC.
STATEMENT OF ADDITIONAL INFORMATION
DATED JUNE 1, 1999
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. THIS
STATEMENT OF ADDITIONAL INFORMATION RELATES TO A PROSPECTUS FOR IAI MONEY MARKET
FUND (THE "FUND") DATED JUNE 1, 1999, AND SHOULD BE READ IN CONJUNCTION
THEREWITH. THE FINANCIAL STATEMENTS INCLUDED AS PART OF THE FUND'S ANNUAL REPORT
TO SHAREHOLDERS FOR THE FISCAL PERIOD ENDED JANUARY 31, 1999 ARE INCORPORATED BY
REFERENCE INTO THIS STATEMENT OF ADDITIONAL INFORMATION. COPIES OF THE FUND'S
PROSPECTUS AND/OR ANNUAL REPORT ARE AVAILABLE, WITHOUT CHARGE, BY WRITING OR
CALLING THE FUND, P.O. BOX 357, MINNEAPOLIS, MINNESOTA 55440 (TELEPHONE NUMBER
1-612-376-2700 OR 1-800-945-3863).
TABLE OF CONTENTS
Page
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INVESTMENT OBJECTIVE AND STRATEGIES..........................................2
INVESTMENT RESTRICTIONS......................................................8
INVESTMENT PERFORMANCE.......................................................9
MANAGEMENT..................................................................11
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT.....................14
LEGAL COUNSEL...............................................................14
PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE..........................14
CAPITAL STOCK...............................................................14
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.........................15
NET ASSET VALUE AND PUBLIC OFFERING PRICE...................................15
PURCHASES AND REDEMPTIONS OF SHARES.........................................16
TAX STATUS..................................................................16
LIMITATION OF DIRECTOR LIABILITY............................................17
SHAREHOLDER MEETINGS........................................................17
FINANCIAL STATEMENTS........................................................18
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INVESTMENT OBJECTIVE AND STRATEGIES
IAI Money Market Fund ("Money Market Fund" or the "Fund") is a
diversified series of an open-end, management investment company. The investment
objective and principal investment strategies of the Fund are discussed in the
Prospectus under "Fund Summary" and "More Information on Fund." The Fund's
investment objective may not be changed without shareholder approval.
Investors should understand that all investments are subject to various
risks. There can be no guarantee against loss resulting from an investment in
the Fund, and there can be no assurance that the Fund's investment strategies
will be successful, or that its investment objective will be attained. Certain
of the Fund's principal investment strategies are discussed in more detail
below. In addition, the Fund may also use strategies and invest in securities
that are not described in the Prospectus, but that are described below.
RULE 2a-7
The Funds is subject to the investment restrictions of Rule 2a-7 under
the Investment Company Act of 1940 (the "1940 Act") in addition to the other
policies and restrictions discussed herein and in the Prospectus. Rule 2a-7
requires that the Fund invest exclusively in securities that mature within 397
days from the date of purchase and that it maintain an average dollar weighted
maturity of not more than 90 days. Under Rule 2a-7, securities which are subject
to specified types of demand or put features may be deemed to mature at the next
demand or put date although they have a longer stated maturity. Rule 2a-7 also
requires that all investments by the Fund be limited to United States
dollar-denominated investments that (a) present "minimal credit risk" and (b)
are at the time of acquisition "Eligible Securities." Eligible Securities
include, among others, securities that are rated by two Nationally Recognized
Statistical Rating Organizations ("NRSROs") in one of the two highest categories
for short-term debt obligations, such as A-1 or A-2 by Standard & Poor's Rating
Services, a division of The McGraw-Hill Companies, Inc. ("Standard & Poor's"),
or Prime-1 or Prime-2 by Moody's Investors Service, Inc. ("Moody's"). It is the
responsibility of the Fund's investment adviser, Investment Advisers, Inc.
("IAI"), to determine that the Fund's investments present only "minimal credit
risks" and are Eligible Securities, pursuant to the oversight of, and written
guidelines and procedures established by, the Fund's Board of Directors.
Rule 2a-7 requires that the Fund may not invest more than 5% of its
total assets in the securities of a single issuer; other than United States
"Government Securities" (as defined in the 1940 Act), provided that the Fund may
invest in First Tier Securities (as defined in Rule 2a-7) in excess of that
limitation for a period of up to three business days after the purchase thereof,
but the Fund may not make more than one such investment at any time. Rule 2a-7
also requires that (1) 95% of the assets of the fund be invested in Eligible
Securities that are deemed First Tier Securities, which include, among others,
securities rated by two NRSROs in the highest category (such as A-1 and P-1),
(2) the Fund may not invest more than 5% of its total assets in Second Tier
Securities (i.e., Eligible Securities that are not First Tier Securities) and
(3) the Fund's investment in Second Tier Securities of a single issuer may not
exceed the greater of 1% of the Fund's total assets or $1,000,000.
BANK OBLIGATIONS
The Fund may invest in commercial paper, certificates of deposit, bank
notes, time deposits and bankers' acceptances issued by domestic banks, foreign
branches of domestic banks, and domestic and foreign branches of foreign banks.
Certificates of deposit are certificates evidencing the obligation of a bank to
repay funds deposited with it for a specified period of time. Time deposits are
non-negotiable deposits maintained in a banking institution for a specified
period of time at a stated interest rate. Time deposits are not transferable and
are therefore illiquid prior to their maturity. The Fund will not invest more
than 10% of its net assets in time deposits and other illiquid securities. See
"Investment Restrictions," below. Bankers' acceptances are credit instruments
evidencing the obligation of a bank to pay a draft drawn on it by a customer.
These instruments reflect the obligation both of the bank and of the drawer to
pay the face amount of the instrument upon maturity. Certificates of deposit,
bank notes, time deposits and bankers' acceptances issued by foreign banks and
by foreign branches of
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domestic banks will not benefit from insurance from the Bank Insurance Fund or
the Savings Association Insurance Fund administered by the Federal Deposit
Insurance Corporation.
U.S. GOVERNMENT SECURITIES
The Fund may invest in securities issued or guaranteed as to principal
or interest by the United States Government, or agencies or instrumentalities of
the United States Government. The types of securities in which the Fund may
invest include direct obligations of the United States Treasury, such as United
States Treasury bonds, notes and bills. In addition, the Fund may invest in
obligations issued by instrumentalities which have been established or sponsored
by the United States Government. Some obligations issued or guaranteed by
agencies or instrumentalities are fully guaranteed by the United States
Government. Others rely on the assets and credit of the instrumentality, along
with rights to borrow from the United States Treasury and may involve more risk.
EXTENDIBLE NOTES
The Fund may invest in extendible notes. An extendible note is a debt
arrangement under which the holder, at its option, may require the issuer to
repurchase the note for a predetermined fixed price at one or more times prior
to the ultimate maturity date of the note. Typically, an extendible note is
issued at an interest rate that can be adjusted at fixed times throughout its
term. At the same times as the interest rate is adjusted by the issuer, the
holder of the note is typically given the option to "put" the note back to the
issuer at a predetermined price (e.g., at 100% of the outstanding principal
amount plus unpaid accrued interest) if the extended interest rate is
undesirable to the holder. This option to put the note back to the issuer (i.e.,
to require the issuer to repurchase the note) provides the holder with an
optional maturity date that is shorter than the actual maturity date of the
note.
Extendible notes are typically issued with maturity dates in excess of
397 days from the date of issuance. However, if such extendible notes provide
for an optional maturity date of 397 days or less, then such notes are deemed by
the Fund to have been issued for the shorter optional maturity date.
Accordingly, investment in such extendible notes would not be in contravention
of the Rule 2a-7 requirement that a money market fund not invest in securities
having a maturity date in excess of 397 days from the date of acquisition.
An investment in an extendible note is liquid, and the note may be
resold to another investor prior to its optional maturity date at its market
value. The market value of an extendible note with a given optional maturity
date is determined and fluctuates in a similar manner as the market value of a
fixed maturity note with a maturity equivalent to the optional maturity of the
extendible note. Compared to fixed term notes of the same issuer, however,
extendible notes with equivalent optional maturities generally yield higher
returns without a material increase in risk to the Fund.
The creditworthiness of the issuers of extendible notes is monitored
and rated by independent rating organizations and investments by the Fund in
such extendible notes are restricted to notes with the same investment ratings
as are acceptable with respect to other forms of investment. The
creditworthiness of such issuers is also monitored by IAI.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS
The Fund may invest in loans and other direct debt instruments. Direct
debt instruments are interests in amounts owed by a corporate, governmental, or
other borrower to lenders or lending syndicates (loans and loan participations),
to suppliers of goods or services (trade claims or other receivable), or to
other parties. Direct debt instruments are subject to the Fund's policies
regarding the quality of debt securities.
Purchasers of loans and other forms of direct indebtedness depend
primarily upon the creditworthiness of the borrower for payment of principal and
interest. Direct debt instruments may not be rated by any nationally recognized
rating service. If the Fund does not receive scheduled interest or principal
payments on such indebtedness, the Fund's share price and yield could be
adversely affected. Loans that are fully secured offer the Fund more protection
than an unsecured loan in the event of non-payment of scheduled interest or
principal.
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<PAGE>
However, there is no assurance that the liquidation of collateral from a secured
loan would satisfy the borrower's obligation, or that the collateral can be
liquidated.
Investments in loans through direct assignment of a financial
institution's interests with respect to a loan may involve additional risks to
the Fund. For example, if a loan is foreclosed, the Fund could become part owner
of any collateral, and would bear the costs and liabilities associated with
owning and disposing of the collateral. In addition, it is conceivable that
under emerging legal theories of lender liability, the Fund could be held liable
as a co-lender. Direct debt instruments may also involve a risk of insolvency of
the lending bank or other intermediaries. Direct debt instruments that are not
in the form of securities may offer less legal protection to the Fund in the
event of fraud or misrepresentation. In the absence of definitive regulatory
guidance, the Fund relies on IAI's research in an attempt to avoid situations
where fraud or misrepresentation could adversely affect the Fund.
A loan is often administered by a bank or other financial institution
that acts as agent for all holders. The agent administers the terms of the loan,
as specified in the loan agreement. Unless, under the terms of the loan or other
indebtedness, the Fund has direct recourse against the borrower, it may have to
rely on the agent to apply appropriate credit remedies against a borrower. If
assets held by the agent for the benefit of the Fund were determined to be
subject to the claims of the agent's general creditors, the Fund might incur
certain costs and delays in rendering payment on the loan or loan participation
and could suffer a loss of principal or interest.
Money Market limits the amount of the assets that it will invest in any
one issuer or in issuers within the same industry. For purposes of these
limitations, the Fund generally will treat the borrower as the "issuer" of
indebtedness held by such Fund. In the case of loan participations where a bank
or other lending institution serves as financial intermediary between the Fund
and the borrower, if the participation does not shift to the Fund the direct
debtor/creditor relationship with the borrower, SEC interpretations require the
Fund, in appropriate circumstances, to treat both the lending bank or other
lending institution and the borrower as "issuers" for the purpose of determining
whether the Fund has invested more than 5% of its total assets in a single
issuer. Treating a financial intermediary as an issuer of indebtedness may
restrict the Fund's ability to invest in indebtedness related to a single
financial intermediary, or a group of intermediaries engaged in the same
industry, even if the underlying borrowers represent many different companies
and industries.
SECURITIES OF FOREIGN ISSUERS
The Fund may invest in obligations issued or guaranteed by one or more
foreign governments or any of their political subdivisions, agencies or
instrumentalities that are determined by IAI to be of comparable quality to the
other obligations in which the Fund may invest. Such securities also include
debt obligations of supranational entities. Supranational entities include
international organizations designated or supported by governmental entities to
promote economic reconstruction or development and international banking
institutions and related government agencies. Examples include the International
Bank for Reconstruction and Development (the "World Bank"), the Asian
Development Bank and the InterAmerican Development Bank. The Fund may also
invest in commercial paper issued by foreign issuers and, as discussed above
under "Bank Obligations," in obligations of foreign banks and foreign branches
of domestic banks. The percentage of the Fund's assets invested in securities
issued by foreign governments and other foreign issuers will vary depending upon
the relative yields of such securities, the economic and financial markets of
the countries in which the investments are made, and the interest rate climate
of such countries.
Investing in foreign securities may result in greater risk than that
incurred by investing in domestic securities. There is generally less publicly
available information about foreign issuers comparable to reports and ratings
that are published about companies in the United States. Also, foreign issuers
are not subject to uniform accounting and auditing and financial reporting
standards, practices and requirements comparable to those applicable to United
States companies. Furthermore, volume and liquidity in most foreign bond markets
is less than in the United States and at times volatility of price can be
greater than in the United States. There is generally less government
supervision and regulation of foreign bond markets, brokers and companies than
in the United States.
4
<PAGE>
With respect to certain foreign countries, there is the possibility of
adverse changes in investment or exchange control regulations, expropriation or
confiscatory taxation, limitations on the removal of funds, political or social
instability, or diplomatic developments which could affect United States
investments in those countries. Moreover, individual foreign economies may
differ favorably or unfavorably from the United States' economy in such respects
as growth of gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position.
PARTICIPATION INTERESTS
The Fund may purchase from financial institutions participation
interests in loans and other securities in which the Fund may invest. A
participation interest gives the Fund an undivided interest in the security in
the proportion that the Fund's participation interest bears to the total
principal amount of the security. These instruments may have fixed, floating or
variable rates of interest, with remaining maturities of one year or less. For
certain participation interests, the Fund will have the right to demand payment,
on not more than seven days' notice, for all or any part of the Fund's
participation interest in the security, plus accrued interest. As to these
instruments, the Fund intends to exercise its right to demand payment only upon
a default under the terms of the security as needed to provide liquidity to meet
redemptions or to maintain or improve the quality of its investment portfolio.
ILLIQUID SECURITIES
The Fund may invest up to 10% of its net assets in illiquid securities.
However, certain restricted securities that are not registered for sale to the
general public that can be resold to institutional investors may be considered
liquid pursuant to guidelines adopted by the Board of Directors. In the case of
a Rule 144A Security, such security is deemed to be liquid if:
(1) IAI reasonably expects to be able to resell the security
to a qualified institutional buyer, as defined in paragraph (a)(1) of
Rule 144A, who is aware of the Fund's reliance upon Rule 144A in
selling the security without registration, as required by paragraph
(d)(2) of Rule 144A;
(2) the Rule 144A Security is not (a) of the same class as
securities listed on any national securities exchange or quoted in
NASDAQ as determined under paragraph (d)(3)(i) of Rule 144A, or (b) a
security of a registered investment company (other than a closed-end
investment company); and
(3) the issuer (a) is a foreign government eligible to
register securities under Schedule B of the Securities Act of 1933, (b)
is a company that files periodic reports under the Securities Act of
1934 on Forms 8-K, 10-Q, 10-K or 20-F or provides information under
Rule 12g3-2(b) thereunder, or (c) has agreed in writing to provide the
holder and any prospective purchaser of the Rule 144A Security with
reasonably current financial information as required under paragraph
(d)(4)(i) of Rule 144A.
Other securities are deemed to be liquid if IAI determines that the
security can be disposed of within seven days in the ordinary course of business
at approximately the amount at which the Fund has valued the instrument for
purposes of calculating the Fund's net asset value. In making this
determination, IAI will consider such factors as may be relevant to the Fund's
ability to dispose of the security, including but not limited to, the following
factors (none of which, standing alone, would necessarily be determinative):
1. the frequency of trades and quotes for the security;
2. the number of dealers willing to purchase or sell the
security and the number of potential purchasers;
3. dealer undertakings to make a market in the security; and
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<PAGE>
4. the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the
security, the method of soliciting offers and the mechanics of
transfer).
It is not possible to predict with assurance the maintenance of an institutional
trading market for such securities and the liquidity of the Fund's investments
could be impaired if trading declines.
ZERO COUPON OBLIGATIONS
The Fund may invest in zero coupon obligations of the U.S. government
or its agencies, tax exempt issuers and corporate issuers. Zero coupon
obligations do not make interest payments; instead, they are sold at a deep
discount from their face value and are redeemed at face value when they mature.
Because zero coupon obligations do not pay current income, their prices can be
very volatile when interest rates change.
A broker-dealer creates a derivative zero by separating the interest
and principal components of a U.S. Treasury security and selling them as two
individual securities. CATS (Certificates of Accrual on Treasury Securities),
TIGRs (Treasury Investment Growth Receipts), and TRs (Treasury Receipts) are
examples of derivative zeros.
The Federal Reserve Bank creates STRIPS (Separate Trading of Registered
Interest and Principal of Securities) by separating the interest and principal
components of an outstanding U.S. Treasury bond and selling them as individual
securities. Bonds issued by the Resolution Funding Corporation (REFCORP) and the
Financing Corporation (FICO) can also be separated in this fashion. Original
issue zeroes are zero coupon securities originally issued by the U.S.
government, a government agency, or a corporation in zero coupon form.
VARIABLE OR FLOATING RATE INSTRUMENTS
The Fund may invest in variable or floating rate instruments. Such
instruments (including notes purchased directly from issuers) bear variable or
floating interest rates and carry rights that permit holders to demand payment
of the unpaid principal balance plus accrued interest from the issuers or
certain financial intermediaries. Floating rate securities have interest rates
that change whenever there is a change in a designated base rate while variable
rate instruments provide for a specified periodic adjustment in the interest
rate. These formulas are designed to result in a market value for the instrument
that approximates its par value.
ASSET-BACKED SECURITIES
The Fund may invest in types of asset-backed securities which represent
forms of consumer credit such as automobile and credit card receivables,
manufactured (mobile) home loans, home improvement loans and home equity loans.
Asset-backed securities are generally privately issued and pass through cash
flows to investors. Interest and principal payments depend upon payment of the
underlying loans by individuals, although the securities may be supported by
letters of credit or other credit enhancements. The value of asset-backed
securities may also depend on the creditworthiness of the servicing agent for
the loan pool, the originator of the loans, or the financial institution
providing the credit enhancement.
REPURCHASE AGREEMENTS
The Fund may engage in repurchase agreements relating to the securities
in which it may invest. A repurchase agreement, which is functionally equivalent
to a loan by the Fund, involves the purchase of securities by the Fund with the
condition that, after a stated period of time, the original seller will buy back
the securities at a predetermined price or yield. The Fund's custodian will have
custody of, and will hold in a segregated account, securities acquired by the
Fund under a repurchase agreement or other securities as collateral. In the case
of a security registered on a book entry system, the book entry will be
maintained in the Fund's name or that of its custodian. Repurchase agreements
involve certain risks not associated with direct investments in securities. For
example, if the seller of the agreement defaults on its obligation to repurchase
the underlying securities at a time when the value of the securities has
declined, the Fund may incur a loss upon disposition of such securities. In the
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event that bankruptcy proceedings are commenced with respect to the seller of
the agreement, the Fund's ability to dispose of the collateral to recover its
investment may be restricted or delayed. While collateral will at all times be
maintained in an amount equal to the repurchase price under the agreement
(including accrued interest due thereunder), to the extent proceeds from the
sale of collateral were less than the repurchase price, the Fund could suffer a
loss.
LENDING PORTFOLIO SECURITIES
In order to generate additional income, the Fund may lend portfolio
securities to broker-dealers, banks or other financial borrowers of securities.
As with other extensions of credit, there are risks of delay in recovery or even
loss of rights in the collateral should the borrower of the securities fail
financially. However, the Fund will only enter into loan arrangements with
broker-dealers, banks or other institutions which IAI has determined are
creditworthy under guidelines established by the Fund's Board of Directors. The
Fund may also experience a loss if, upon the failure of a borrower to return
loaned securities, the collateral is not sufficient in value or liquidity to
cover the value of such loaned securities (including accrued interest thereon).
However, the Fund will receive collateral in the form of cash, United States
Government securities, certificates of deposit or other high-grade, short-term
obligations or interest-bearing cash equivalents equal to at least 102% of the
value of the securities loaned. The value of the collateral and of the
securities loaned will be marked to market on a daily basis. During the time
portfolio securities are on loan, the borrower pays the Fund an amount
equivalent to any dividends or interest paid on the securities and the Fund may
invest the cash collateral and earn additional income or may receive an agreed
upon amount of interest income from the borrower. However, the amounts received
by the Fund may be reduced by finders' fees paid to broker-dealers and related
expenses. Presently, the Fund does not intend to lend more than 5% of its net
assets to broker-dealers, banks, or other financial borrowers of securities.
WHEN ISSUED/DELAYED-DELIVERY TRANSACTIONS
The Fund may buy and sell securities on a delayed-delivery or
when-issued basis. These transactions involve a commitment by the Fund to
purchase or sell specific securities at a predetermined price or yield, with
payment and delivery taking place after the customary settlement period for that
type of security (and more than seven days in the future). Typically, no
interest accrues to the purchaser until the security is delivered.
When purchasing securities on a delayed-delivery basis, the Fund
assumes the rights and risks of ownership, including the risk of price and yield
fluctuations. Because the Fund is not required to pay for securities until the
delivery date, these risks are in addition to the risks associated with the
Fund's other investments. If the Fund remains substantially fully invested at a
time when delayed delivery purchases are outstanding, the delayed-delivery
purchases may result in a form of leverage. When delayed-delivery purchases are
outstanding, the Fund will set aside appropriate liquid assets in a segregated
custodial account to cover its purchase obligations, and these assets will be
marked to market daily. When the Fund has sold a security on a delayed-delivery
basis, the Fund does not participate in further gains or losses with respect to
the security. If the other party to a delayed-delivery transaction fails to
deliver or pay for the securities, the Fund could miss a favorable price or
yield opportunity, or could suffer a loss.
The Fund may renegotiate delayed-delivery transactions after they are
entered into, and may sell underlying securities before they are delivered,
which may result in capital gains or losses.
BORROWING
The Fund may borrow from banks for temporary or emergency purposes.
Interest paid on borrowed funds will decrease the net earning of the Fund. If
the Fund makes additional investments while borrowings are outstanding, this may
be considered a form of leverage. The Fund currently has a line or credit with a
bank at the prime interest rate. To the extent funds are drawn against the line
of credit, securities are held in a segregated account. No compensating balances
or commitment fees are required under the line of credit.
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INVESTMENT RESTRICTIONS
The Fund is subject to certain policies and restrictions which, along
with the Fund's investment objective, are "fundamental" and may not be changed
without shareholder approval. Shareholder approval consists of the approval of
the lesser of (i) more than 50% of the outstanding voting securities of the
Fund, or (ii) 67% or more of the voting securities present at a meeting if the
holders of more than 50% of the outstanding voting securities of the Fund are
present or represented by proxy. Limitations 1 through 8 below are deemed
fundamental limitations. The remaining limitations set forth below serve as
operating policies of the Fund and may be changed by the Board of Directors
without shareholder approval.
The Fund may not:
1. Purchase the securities of any issuer if such purchase would cause
the Fund to fail to meet the requirements of a "diversified company" as defined
under the 1940 Act.
As currently defined in the 1940 Act, "diversified company" means a
management company which meets the following requirements: at least 75 per
centum of the value of its total assets is represented by cash and cash items
(including receivables), Government securities, securities of other investment
companies and other securities for the purposes of this calculation limited in
respect of any one issuer to an amount not greater in value than 5 per centum of
the value of the total assets of such management company and not more than 10
per centum of the outstanding voting securities of such issuer.
2. Purchase the securities of any issuer (other than "Government
securities" as defined under the 1940 Act) if, as a result, more than 25% of the
value of the Fund's total assets would be invested in the securities of
companies whose principal business activities are in the same industry.
For purposes of applying this restriction, the Fund will not purchase
securities, as defined above, such that 25% or more of the value of the Fund's
total assets are invested in the securities of companies whose principal
business activities are in the same industry.
3. Issue any senior securities, except as permitted by the 1940 Act or
the Rules and Regulations of the Securities and Exchange Commission.
4. Borrow money, except from banks for temporary or emergency purposes
provided that such borrowings may not exceed 33-1/3% of the value of the Fund's
net assets (including the amount borrowed). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33-1/3% limitation. This
limitation shall not prohibit the Fund from engaging in reverse repurchase
agreements, making deposits of assets to margin or guaranteeing positions in
futures, options, swaps or forward contracts, or segregating assets in
connection with such agreements or contracts.
To the extent the Fund engages in reverse repurchase agreements,
because such transactions are considered borrowing, reverse repurchase
agreements are included in the 33-1/3% limitation.
5. Act as an underwriter of securities of other issuers, except to the
extent that in connection with the disposition of portfolio securities the Fund
may be deemed to be an underwriter under applicable laws.
6. Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments. This restriction shall not prevent
the Fund from investing in securities or other instruments backed by real estate
or securities of companies engaged in the real estate business.
7. Purchase or sell commodities other than foreign currencies unless
acquired as a result of ownership of securities. This limitation shall not
prevent the Fund from purchasing or selling options, futures, swaps and forward
contracts or from investing in securities or other instruments backed by
commodities.
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For purposes of applying this restriction, "commodities" shall be
deemed to include commodity contracts.
8. Make loans to other persons except to the extent not inconsistent
with the 1940 Act or the Rules and Regulations of the Securities and Exchange
Commission. This limitation does not apply to purchases of commercial paper,
debt securities or repurchase agreements, or to the lending of portfolio
securities.
9. Purchase securities on margin, except that the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases or sales
of securities and provided that margin payments in connection with transactions
in options, futures, swaps and forward contracts shall not be deemed to
constitute purchasing securities on margin.
10. Sell securities short, unless it owns or has the right to obtain
securities equivalent in kind and amount to the securities sold short, and
provided that transactions in options, swaps and forward futures contracts are
not deemed to constitute selling securities short.
For purposes of applying this restriction, the Fund will not sell
securities short except to the extent that it contemporaneously owns or has the
right to obtain, at no added cost, securities identical to those sold short.
11. Except as part of a merger, consolidation, acquisition, or
reorganization, invest more than 5% of the value of its total assets in the
securities of any one investment company or more than 10% of the value of its
total assets, in the aggregate, in the securities of two or more investment
companies, or acquire more than 3% of the total outstanding voting securities of
any one investment company.
12. Mortgage, pledge or hypothecate its assets except to the extent
necessary to secure permitted borrowings. This limitation does not apply to
reverse repurchase agreements or in the case of assets deposited to margin or
guarantee positions in futures, options, swaps or forward contracts or placed in
a segregated account in connection with such contracts.
13. Participate on a joint or a joint and several basis in any
securities trading account.
14. Invest more than 10% of its net assets in illiquid investments.
15. Invest directly in interests (including partnership interests) in
oil, gas or other mineral exploration or development leases or programs, except
the Fund may purchase or sell securities issued by corporations engaging in oil,
gas or other mineral exploration or development business.
Any of the Fund's investment policies set forth in the Prospectus, or
any restriction set forth above under "Investment Restrictions" which involves a
maximum percentage of securities or assets (other than Restriction 4) shall not
be considered to be violated unless an excess over the percentage occurs
immediately after an acquisition of securities or utilization of assets and
results therefrom.
INVESTMENT PERFORMANCE
Advertisements and other sales literature for the Fund may refer to its
yield and effective yield. Each such calculation assumes all distributions are
reinvested at net asset value on the appropriate reinvestment dates, and
includes all recurring fees, such as investment advisory and management fees,
charged as expenses to all shareholder accounts.
The Fund's current yield quotation is based on a seven-day period and
is computed by determining the net change in value, exclusive of capital
changes, of a hypothetical account having a balance of one share. This number is
then divided by the price per share at the beginning of the period ("base period
return"), and then the base period return is multiplied by (365/7).
9
<PAGE>
The effective yield for Money Market Fund is computed by taking the
base period return as calculated above and calculating the effect of assumed
compounding.
The formula for the effective yield is as follows:
365/7
Effective yield = [(Base period return + 1) ]-1
For the 7-day period ended January 31, 1999, Money Market Fund's
current yield was 4.47% and its effective yield was 4.57%.
In advertising and sales literature, the Fund may compare its
performance with that of other mutual funds, indexes or averages of other mutual
funds, indexes of related financial assets or data, and other competing
investment and deposit products available from or through other financial
institutions. The composition of these indexes, averages or products differs
from that of the Fund. The comparison of the Fund to an alternative investment
should be made with consideration of differences in features and expected
performance.
The indexes and averages noted below will be obtained from the
indicated sources or reporting services, which the Fund believes to be generally
accurate. The Fund may also note its mention in newspapers, magazines, or other
media from time to time. However, the Fund assumes no responsibility for the
accuracy of such data.
For example, (1) the Fund's performance or P/E ratio may be compared to
any one or a combination of the following: (i) the Standard & Poor's 500 Stock
Index and Dow Jones Industrial Average, so that you may compare the Fund's
results with those of a group of unmanaged securities widely regarded by
investors as representative of the U.S. stock market in general; (ii) other
groups of mutual funds, including the IAI Funds, tracked by: (A) Lipper
Analytical Services, Inc., a widely used independent research firm which ranks
mutual funds by overall performance, investment objectives, and assets; (B)
Morningstar, Inc., another widely used independent research firm which rates
mutual funds; or (C) other financial or business publications, which may
include, but are not limited to, Business Week, Money Magazine, Forbes and
Barron's, which provide similar information; (iii) The Financial Times (a London
based international financial newspaper)-Actuaries World Indices, including
Europe and sub indices comprising this Index (a wide range of comprehensive
measures of stock price performance for the major stock markets, as well as for
regional areas, broad economic sectors and industry groups); (iv) Morgan Stanley
Capital International Indices, including the EAFE Index; (v) Baring
International Investment Management Limited (an international securities
trading, research, and investment management firm), as a source for market
capitalization, GDP and GNP; (vi) the International Finance Corporation (an
affiliate of the World Bank established to encourage economic development in
less developed countries), World Bank, OECD (Organization for Economic
Co-Operation and Development) and IMF (International Monetary Fund) as a source
of economic statistics; and (ix) the performance of U.S. government and
corporate bonds, notes and bills. (The purpose of these comparisons would be to
illustrate historical trends in different market sectors so as to allow
potential investors to compare different investment strategies.); (2) the
Consumer Price Index (measure for inflation) may be used to assess the real rate
of return from an investment in the Fund; (3) other U.S. or foreign government
statistics such as GNP, and net import and export figures derived from
governmental publications, e.g., The Survey of Current Business, may be used to
illustrate investment attributes of the Fund or the general economic business,
investment, or financial environment in which the Fund operates; (4) the effect
of tax-deferred compounding on the Fund's investment returns, or on returns in
general, may be illustrated by graphs, charts, etc. where such graphs or charts
would compare, at various points in time, the return from an investment in the
Fund (or returns in general) on a tax-deferred basis (assuming reinvestment of
capital gains and dividends and assuming one or more tax rates) with the return
on a taxable basis; and (5) the sectors or industries in which the Fund invests
may be compared to relevant indices or surveys (e.g., S&P Industry Surveys) in
order to evaluate the Fund's historical performance or current or potential
value with respect to the particular industry or sector.
10
<PAGE>
MANAGEMENT
The names, addresses, positions and principal occupations of the
directors and executive officers of the Fund are given below.
<TABLE>
<CAPTION>
Name and Address Age Position Principal Occupation(s) During Past 5 Years
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Madeline Betsch 56 Director Currently retired; until April 1994, was Executive Vice
19 South 1st Street President, Director of Client Services, of CME-KHBB
Minneapolis, Minnesota 55401 Advertising since May 1985, and prior thereto was a Vice
President with Campbell-Mithun, Inc. (advertising
agency) since February 1977.
W. William Hodgson 74 Director Currently retired; served as information manager for the
1698 Dodd Road North Central Home Office of the Prudential Insurance
Mendota Heights, Minnesota 55118 Company of America from 1961 until 1984.
George R. Long 68 Director Chairman of Mayfield Corp. (financial consultants and
29 Las Brisas Way venture capitalists) since 1973.
Naples, Florida 33963
J. Peter Thompson 67 Director Grain farmer in southwestern Minnesota since 1974.
Route 1 Prior to that, Mr. Thompson was employed by Paine
Mountain Lake, Minnesota 56159 Webber, Jackson & Curtis, Incorporated, (a diversified
financial services concern), most recently as Senior Vice
President and General Partner.
Charles H. Withers 72 Director Currently retired; was Editor of the Rochester
Rochester Post Bulletin Post-Bulletin, Rochester, Minnesota from 1960 through
P.O. Box 6118 March 31, 1980.
Rochester, Minnesota 55903
John A. Alexander 42 President Chief Operating Officer of IAI since 1998. Prior to
601 Second Avenue South that time, Mr. Alexander served in various senior
P.O. Box 357 management capacities of Lloyds Bank plc since 1984.
Minneapolis, Minnesota 55440
David Koehler 61 Vice Independent training and marketing consultant from 1993
601 Second Avenue South President to current. Prior to that time, Mr. Koehler was a
P.O. Box 357 partner at IAI Venture Capital Group.
Minneapolis, Minnesota 55440
Paul H. Perseke 33 Treasurer Vice President of IAI. Prior to joining IAI in 1996,
601 Second Avenue South Mr. Perseke served as Vice President and Manager of
P.O. Box 357 Finance and Planning at Dain Rauscher Corporation from
Minneapolis, Minnesota 55440 1991 to 1996.
Michael J. Radmer 53 Secretary Partner of Dorsey & Whitney LLP, a Minnesota based law
220 South Sixth Street firm which acts as General Counsel to the Fund.
Minneapolis, Minnesota 55402
</TABLE>
11
<PAGE>
Each of the directors and executive officers of the Fund also serves in
the same capacity for each of the 14 other mutual funds for which IAI serves as
investment adviser (the "IAI Mutual Funds").
No compensation is paid by the Fund to any officers, other than Mr.
Koehler. Directors who are not affiliated with IAI receive from the IAI Mutual
Funds a $15,000 annual retainer, $2,500 for each Board meeting attended, $3,600
for each Audit Committee meeting attended (as applicable) and $1,800 for each
Securities Valuation Committee meeting attended. The Fund will pay its pro rata
share of these fees based on its net assets. Such unaffiliated directors also
are reimbursed for expenses incurred in connection with attending meetings.
<TABLE>
<CAPTION>
Compensation from Money Aggregate Compensation from
Name of Person, Position Market Fund* the 15 IAI Mutual Funds**
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Betsch, Madeline - Director $ 1,067 $ 37,200
Hodgson, W. William - Director $ 1,067 $ 37,200
Long, George R. - Director $ 1,119 $ 37,200
Thompson, J. Peter - Director $ 1,067 $ 37,200
Withers, Charles H. - Director $ 1,119 $ 37,200
Koehler, David - Vice President $ 871 $ 26,250
Totals: $ 6,310 $ 212,250
</TABLE>
- ---------------------------------------
* For the fiscal year ended January 31, 1999.
** For the calendar year ended December 31, 1999; excludes expenses
incurred in connection with attending meetings.
The Fund's Board of Directors has approved a Code of Ethics. The Code
permits access persons to engage in personal securities transactions subject to
certain policies and procedures. Such procedures prohibit certain persons from
acquiring of any securities in an initial public offering. In addition,
securities acquired through private placement must be pre-cleared. Procedures
have been adopted which would implement blackout periods for certain securities,
as well as a ban on short-term trading profits. Additional policies prohibit the
receipt of gifts in certain instances. Procedures have been implemented to
monitor employee trading. Each access person is required to certify annually
that they have read and understood the Code of Ethics. An annual report is
provided to the Funds' Board of Directors summarizing existing procedures and
changes, identifying material violations and recommending any changes needed.
Effective February 1998, the directors have agreed that the position of
Board Chair shall rotate from director to director.
MANAGEMENT AGREEMENT
Effective April 1, 1996, pursuant to a Management Agreement between the
Fund and IAI, IAI has agreed to provide the Fund with investment advice,
statistical and research facilities, and certain equipment and services,
including, but not limited to, office space and necessary office facilities,
equipment, and the services of required personnel and, in connection therewith,
IAI has the sole authority and responsibility to make and execute investment
decisions for the Fund within the framework of the Fund's investment policies,
subject to review by the directors of the Fund. In addition, IAI has agreed to
provide or arrange for the provision of all required administrative, stock
transfer, redemption, dividend disbursing, accounting, and shareholder services
including, without limitation, the following: (1) the maintenance of the Fund's
accounts, books and records; (2) the calculations of the daily net asset value
in accordance with the Fund's current Prospectus and Statement of Additional
Information; (3) daily and periodic reports; (4) all information necessary to
complete tax returns, questionnaires and other reports requested by the Fund;
(5) the maintenance of stock registry records; (6) the processing of requested
account registration changes, stock certificate issuances and redemption
requests; (7) the administration of payments and dividends and distributions
declared by the Fund; (8) answering shareholder questions, (9) providing reports
and other information and (10) other services designed to maintain shareholder
12
<PAGE>
accounts. IAI reimburses the Fund for paying qualifying third parties that
provide such services. In return for these services, the Fund has agreed to pay
IAI an annual fee as a percentage of the Fund's average daily net assets as set
forth below:
Daily Net Assets Fee IAI Receives Annually
---------------- -------------------------
For the first $100 million 0.60%
For the next $150 million 0.55%
Above $250 million 0.50%
Under the Management Agreement, except for brokerage commissions and
other expenditures in connection with the purchase and sale of portfolio
securities, interest expense, and, subject to the specific approval of a
majority of the disinterested directors of the Fund, taxes and extraordinary
expenses, IAI has agreed to pay all of the Fund's other costs and expenses,
including, for example, costs incurred in the purchase and sale of assets,
taxes, charges of the custodian of the Fund's assets, costs of reports and proxy
material sent to Fund shareholders, fees paid for independent accounting and
legal services, costs of printing Prospectuses for Fund shareholders and
registering the Fund's shares, postage, insurance premiums, and costs of
attending investment conferences. The Management Agreement further provides that
IAI will either reimburse the Fund for the fees and expenses it pays to
directors who are not "interested persons" of the Fund or reduce its fee by an
equivalent amount. IAI is not liable for any loss suffered by the Fund in the
absence of willful misfeasance, bad faith or negligence in the performance of
its duties and obligations.
The following table contains relevant information concerning fees the
Fund paid under the Management Agreement for the indicated periods:
<TABLE>
<CAPTION>
Period Net Assets of Fund Management Fee IAI Waiver*
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Period 2/1/98 to 1/31/99 $35,430,203 $200,061 $6,481
Period 2/1/97 to 1/31/98 $22,506,708 $176,847 $3,005
Period 4/1/96 to 1/31/97 $26,139,897 $141,194 $9,735
</TABLE>
- ----------------------------
* Resulting from IAI's reduction of its Management Fee in the amount
representing the Fund's pro rata payment of directors' fees and
expenses.
The Management Agreement will terminate automatically in the event of
its assignment. In addition, the Agreement is terminable at any time without
penalty by the Board of Directors of the Fund or by vote of a majority of the
Fund's outstanding voting securities on not more than 60 days' written notice to
IAI, and by IAI on 60 days' notice to the Fund. The Agreement shall continue in
effect from year to year only so long as such continuance is specifically
approved at least annually by either the Board of Directors of the Fund or by
vote of a majority of the Fund's outstanding voting securities, provided that in
either event such continuance is also approved by the vote of a majority of
directors who are not parties to the Agreement or interested persons of such
parties cast in person at a meeting called for the purpose of voting on such
approval.
PRIOR AGREEMENT
Effective March 31, 1996, the Investment Advisory Agreement between the
Fund and IAI terminated and was replaced by the Management Agreement described
above.
Pursuant to the prior agreement, Money Market Fund had agreed to pay
IAI a monthly fee equivalent to an annual rate of .30% of its average daily net
assets.
13
<PAGE>
The following table contains relevant information concerning fees the
Fund paid under the prior agreement:
Period Advisory Fee Fee Waiver
- ----------------------- ------------------- --------------- -----------------
Money Market Fund 2/1/96 to 3/31/96 $ 2,518 $ 14,181
FYE 1/31/96 $ 19,493 $ 76,386
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
The custodian for the Fund is Norwest Bank Minnesota, N.A. Norwest
Center, Sixth and Marquette, Minneapolis, MN 55479.
IAI acts as the Fund's transfer agent, dividend disbursing agent and
IRA Custodian, at P.O. Box 357, Minneapolis, Minnesota 55402.
LEGAL COUNSEL
Dorsey & Whitney LLP, 220 South Sixth Street, Minneapolis, Minnesota
55402, acts as General Counsel to the Fund.
PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE
Most of the Fund's portfolio transactions are effected with dealers
without the payment of brokerage commissions but at a net price which usually
includes a spread or markup. In effecting such portfolio transactions on behalf
of the Fund, IAI seeks the most favorable net price consistent with the best
execution. However, frequently IAI selects a dealer to effect a particular
transaction without contacting all dealers who might be able to effect such
transaction because of the volatility of the bond market and the desire of IAI
to accept a particular price for a security because the price offered by the
dealer meets its guidelines for profit, yield or both.
So long as IAI believes that it is obtaining the best net price
(including the spread or markup) consistent with the best execution, as
described above, it gives consideration in placing portfolio transactions to
dealers furnishing research, statistical information, or other services to IAI.
This allows IAI to supplement its own investment research activities and enables
IAI to obtain the views and information of individuals and research staffs of
many different securities firms prior to making investment decisions for a Fund.
To the extent portfolio transactions are effected with dealers who furnish
research services to it, IAI receives a benefit which is not capable of
evaluation in dollar amounts.
Consistent with the Rules of Fair Conduct of the National Association
of Securities Dealers, Inc. and subject to the policies set forth in the
preceding paragraphs and such other policies as the Board of Directors of the
Fund may determine, Advisers may consider sales of shares of the Fund as a
factor in the selection of broker-dealers to execute the Fund's securities
transactions.
IAI believes that most research services obtained by it generally
benefit one or more of the investment companies or other accounts which it
manages. Research services obtained from transactions in fixed income securities
would primarily benefit the managed funds investing such fixed income securities
and managed accounts investing in fixed income securities.
CAPITAL STOCK
Money Market Fund, which was created on January 5, 1993, is a separate
portfolio of IAI Investment Funds VI, Inc., a Minnesota corporation whose shares
of common stock are currently issued in seven series (Series A through G). On
June 25, 1993, the Fund's shareholders approved amended and restated Articles of
14
<PAGE>
Incorporation, which provided that the registered investment company whose
corporate name had been IAI Series Fund, Inc., be renamed IAI Investment Funds
VI, Inc. The investment portfolio represented by Series F common shares is
referred to as "IAI Money Market Fund."
Each share of a series is entitled to participate pro rata in any dividends and
other distributions of such series and all shares of a series have equal rights
in the event of liquidation of that series. The Board of Directors of IAI
Investment Funds VI, Inc. is empowered under the Articles of Incorporation of
such company to issue other series of the company's common stock without
shareholder approval. IAI Investment Funds VI, Inc., has authorized
10,000,000,000 shares of $.01 par value common stock to be issued as Series F
common shares. The investment portfolio represented by such shares is referred
to as IAI Money Market Fund.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of April 30, 1999 no person was a record holder or, to the knowledge
of Money Market Fund, beneficial owner of more than 5% of the outstanding shares
of Money Market Fund, except as set forth in the following table:
===============================================================================
Percent of Outstanding
Number of Shares Shares
Name and Address of Shareholder
===============================================================================
In addition, as of April 30, 1999 Money Market Fund's officers and
directors as a group owned less than 1% of Money Market Fund's outstanding
shares.
NET ASSET VALUE AND PUBLIC OFFERING PRICE
The net asset value per share of the Fund is determined once daily as
of the close of trading on the New York Stock Exchange on each business day on
which the New York Stock Exchange is open for trading, and may be determined on
additional days as required by the Rules of the Securities and Exchange
Commission. The New York Stock Exchange is closed, and the net asset value per
share of a Fund is not determined, on the following national holidays: New
Year's Day, Presidents' Day, Martin Luther King, Jr. Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
For the purpose of calculating Money Market Fund's net asset value per
share, securities are valued by the "amortized cost" method of valuation in
accordance with Rule 2a-7 under the 1940 Act. This involves valuing an
instrument at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instruments and regardless of any
unrealized capital gains or losses. While this method provides certainty in
valuation, it may result in periods during which a security's value, as
determined by amortized cost, is higher or lower than the price the Fund would
receive if it sold the instrument.
The Board of Directors has established procedures reasonably designed,
taking into account current market conditions, to stabilize the net asset value
per share as computed for the purpose of sales and redemptions at $1.00. These
procedures include periodic review, as the Board deems appropriate and at such
intervals as are reasonable in light of current market conditions, of the
relationship between the amortized cost value per share and a net asset value
per share based upon available indications of market value. In such a review,
investments for which market quotations are readily available are valued at the
most recent bid price or quoted yield equivalent for
15
<PAGE>
such securities or for securities of comparable maturity, quality and type as
obtained from one or more of the major market makers for the securities to be
valued. Other investments and assets are valued at fair value, as determined in
good faith by the Board.
In the event of a deviation that may result in material dilution or
that is otherwise unfair to existing shareholders between Money Market Fund's
net asset value based upon available market quotations or market equivalents and
$1.00 per share based on amortized cost, the Board of Directors will promptly
consider what action, if any, should be taken. Such action may include redeeming
shares in kind, selling instruments prior to maturity to realize capital gains
or losses or to shorten average maturity, withholding dividends, paying
distributions from capital or capital gains, or utilizing a net asset value per
share based upon available market quotations.
On January 31, 1999, the net asset value and public offering price per
share of Money Market Fund was calculated as follows:
NAV = Net Assets ($35,430,203) = $1.00
------------------------------------
Shares Outstanding (35,451,702)
PURCHASES AND REDEMPTIONS OF SHARES
The Fund has authorized one or more brokers to accept on its behalf
purchase and redemption orders, and such brokers are authorized to designate
other intermediaries to accept purchase and redemption orders on the Fund's
behalf. The Fund will be deemed to have received a purchase or redemption order
when an authorized broker or, if applicable, a broker's authorized designee,
accepts the order. In such circumstances, customer orders will be priced at the
Fund's NAV next computed after they are accepted by an authorized broker or the
broker's authorized designee.
PURCHASES AND REDEMPTIONS IN KIND
In extraordinary circumstances, Fund shares may be purchased in
exchange for securities which are permissible investments of the Fund, subject
to IAI's discretion and its determination that the securities are acceptable.
Securities accepted in exchange will be valued on the basis of market
quotations, or if market quotations are not available, by a method that IAI
believes accurately reflects fair value. In addition, securities accepted in
exchange are required to be liquid securities that are not restricted as to
transfer. Also in extraordinary circumstances, if a shareholder so desires, and
IAI so agrees, Fund shares may be redeemed in exchange for securities held by
the Fund. Securities redeemed in exchange will be valued on the basis of market
quotations, or if market quotations are not available, by a method that IAI
believes accurately reflects fair value.
TAX STATUS
The Fund qualified during its last taxable year, and intends to qualify
during its current taxable year, as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). If
the Fund so qualifies, it will not be subject to federal income tax on income
that it distributes to shareholders.
It is expected that none of the distributions of the Funds' net
investment income will qualify for the dividends received deduction available to
corporations under the Code.
Ordinarily, distributions and redemption proceeds earned by Fund
shareholders are not subject to withholding of federal income tax. However, the
Fund is required to withhold 31% of a shareholder's distributions and redemption
proceeds upon the occurrence of certain events specified in Section 3406 of the
Code and regulations promulgated thereunder. These events include the failure of
a Fund shareholder to supply the Fund with such shareholder's taxpayer
identification number, and the failure of a Fund shareholder who is otherwise
exempt from withholding to properly document such shareholder's status as an
exempt recipient. Additionally,
16
<PAGE>
distributions may be subject to state and local income taxes, and the treatment
thereunder may differ from the federal income tax consequences discussed above.
Under the Code, the Fund will be subject to a non-deductible excise tax
equal to 4% of the excess, if any, of the amount of investment income and
capital gains required to be distributed pursuant to the Code for each calendar
year over the amount actually distributed. In order to avoid this excise tax,
the Fund generally must declare dividends by the end of each calendar year
representing 98% of the Fund's ordinary income for such calendar year and 98% of
its capital gain net income, if any, for the twelve-month period ending October
31 of the same calendar year. The excise tax is not imposed, however, an
undistributed income that is already subject to corporate income tax.
The foregoing is a general and abbreviated summary of the Code and
Treasury regulations in effect as of the date of the Fund's Prospectus and this
Statement of Additional Information. The foregoing relates solely to federal
income tax law applicable to "U.S. persons," i.e., U.S. citizens and residents
and U.S. domestic corporations, partnerships, trusts and estates. Shareholders
who are not U.S. persons are encouraged to consult a tax adviser regarding the
income tax consequences of acquiring shares of a Fund.
LIMITATION OF DIRECTOR LIABILITY
Under Minnesota law, the Fund's Board of Directors owes certain
fiduciary duties to the Fund and to its shareholders. Minnesota law provides
that a director "shall discharge the duties of the position of director in good
faith, in a manner the director reasonably believes to be in the best interest
of the corporation, and with the care an ordinarily prudent person in a like
position would exercise under similar circumstances." Fiduciary duties of a
director of a Minnesota corporation include, therefore, both a duty of "loyalty"
(to act in good faith and act in a manner reasonably believed to be in the best
interests of the corporation) and a duty of "care" (to act with the care an
ordinarily prudent person in a like position would exercise under similar
circumstances). Minnesota law authorizes corporations to eliminate or limit the
personal liability of a director to the corporation or its shareholders for
monetary damages for breach of the fiduciary duty of "care." Minnesota law does
not, however, permit a corporation to eliminate or limit the liability of a
director (i) for any breach of the director's duty of "loyalty" to the
corporation or its shareholders, (ii) for acts or omissions not in good faith or
that involve intentional misconduct or a knowing violation of law, (iii) for
authorizing a dividend, stock repurchase or redemption or other distribution in
violation of Minnesota law or for violation of certain provisions of Minnesota
securities laws, or (iv) for any transaction from which the director derived an
improper personal benefit. The Articles of Incorporation of IAI Investment Funds
VI, Inc. limit the liability of directors to the fullest extent permitted by
Minnesota statutes, except to the extent that such liability cannot be limited
as provided in the 1940 Act (which Act prohibits any provisions which purport to
limit the liability of directors arising from such directors' willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of their role as directors).
Minnesota law does not eliminate the duty of "care" imposed upon a
director. It only authorizes a corporation to eliminate monetary liability for
violations of that duty. Minnesota law, further, does not permit elimination or
limitation of liability of "officers" of the corporation for breach of their
duties as officers (including the liability of directors who serve as officers
for breach of their duties as officers.) Minnesota law does not permit
elimination or limitation of the availability of equitable relief, such as
injunctive or recessionary relief. Further, Minnesota law does not permit
elimination or limitation of a director's liability under the Securities Act of
1933 or the Securities Exchange Act of 1934, and it is uncertain whether and to
what extent the elimination of monetary liability would extend to violations of
duties imposed on directors by the 1940 Act and the rules and regulations
adopted under such Act.
SHAREHOLDER MEETINGS
Annual or periodically scheduled regular meetings of shareholders will
not be held except as required by law. Minnesota corporation law does not
require an annual meeting; instead, it provides for the Board of Directors to
convene shareholder meetings when it deems appropriate. In addition, if a
regular meeting of shareholders has
17
<PAGE>
not been held during the immediately preceding fifteen months, shareholders
holding three percent or more of the voting shares of the Fund may demand a
regular meeting of shareholders by written notice of demand given to the Chief
Executive Officer or the Chief Financial Officer of the Fund. Within thirty days
after receipt of the demand by one of those officers, the Board of Directors
shall cause a regular meeting of shareholders to be called and held no later
than ninety days after receipt of the demand, all at the expense of the Fund. An
annual meeting will be held on the removal of a director or directors of the
Fund if requested in writing by holders of not less than 10% of the outstanding
shares of IAI Investment Funds VI, Inc.
FINANCIAL STATEMENTS
The financial statements, included as part of the Fund's 1999 Annual
Report to shareholders are incorporated herein by reference. Such Annual Report
may be obtained by shareholders on request from the Fund at no additional
charge.
18
<PAGE>
PART C
IAI Money Market Fund
a series of
IAI Investment Funds VI, Inc.
OTHER INFORMATION
Item 23. Exhibits
THE FUNDS ARE FILING OR INCORPORATING BY REFERENCE THE FOLLOWING
EXHIBITS:
(a).1 Amended and Restated Articles of Incorporation
dated 7/23/93 (1)
(a).2 Certificate of Designation of Series F dated 11/12/92 (1)
(b) Bylaws (4)
(c) Instruments Defining Rights of Security Holders - not
applicable
(d). Management Agreement dated 4/1/96 *
(e).1 Distribution and Shareholder Services Agreement (2)
(e).2 Dealer Sales Agreement (3)
(e).3 Shareholder Service Agreement (3)
(f) Bonus or Profit Sharing Contracts - not applicable
(g) Custody Agreement dated 5/12/93 (1)
(h) Other Material Contracts - not applicable
(i) Legal Opinion - not applicable
(j) Consent of KPMG Peat Marwick LLP *
(k) Omitted Financial Statements - not applicable
(l) Initial Capital Agreements - not applicable
(m) Rule 12b-1 Plan - not applicable
(n) Financial Data Schedule - not applicable
(o) Rule 18f-3 Plan - not applicable
(1) Incorporated by reference to Post-Effective Amendment No. 21 to the
Registrant's Registration Statement on Form N-1A filed with the
Commission on July 25, 1996.
(2) Incorporated by reference to Post-Effective Amendment No. 15 to the
Registrant's Registration Statement on Form N-1A filed with the
Commission on November 17, 1995.
(3) Incorporated by reference to Post-Effective Amendment No. 20 to the
Registrant's Registration Statement on Form N-1A filed with the
Commission on May 30, 1996.
(4) Incorporated by reference to Post-Effective Amendment No. 16 to the
Registrant's Registration Statement on Form N-1A filed with the
Commission on January 31, 1996.
* To be filed by amendment.
Item 24. Persons Controlled by or Under Common Control with the Fund
THE FOLLOWING IS A LIST OF ALL PERSONS DIRECTLY OR INDIRECTLY
CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND:
See the section of the Prospectus entitled "Fund Management" and the
section of the Statement of Additional Information entitled "Management" filed
as part of this Registration Statement.
1
<PAGE>
Item 25. Indemnification
STATE THE GENERAL EFFECT OF ANY CONTRACT, ARRANGEMENTS OR STATUTE UNDER
WHICH ANY DIRECTOR, OFFICER, UNDERWRITER OR AFFILIATED PERSON OF THE FUND IS
INSURED OR INDEMNIFIED AGAINST ANY LIABILITY INCURRED IN THEIR OFFICIAL
CAPACITY, OTHER THAN INSURANCE PROVIDED BY ANY DIRECTOR, OFFICER, AFFILIATED
PERSON, OR UNDERWRITER FOR THEIR OWN PROTECTION.
Incorporated by reference to Post-Effective Amendment #24 to
Registrant's Registration Statement on Form N-1A filed on May 30, 1997.
Item 26. Business and Other Connections of the Investment Adviser
DESCRIBE ANY OTHER BUSINESS, PROFESSION, VOCATION OR EMPLOYMENT OF A
SUBSTANTIAL NATURE THAT EACH INVESTMENT ADVISER, AND EACH DIRECTOR, OFFICER OR
PARTNER OF THE ADVISER, IS OR HAS BEEN ENGAGED WITHIN THE LAST TWO FISCAL YEARS
FOR HIS OR HER OWN ACCOUNT OR IN THE CAPACITY OF DIRECTOR, OFFICER, EMPLOYEE,
PARTNER OR TRUSTEE.
Information on the business of Investment Advisers, Inc. ("IAI") is
described in the Prospectus section "Management" and in Part B of this
Registration Statement in the section "Management."
The following senior officers and directors of IAI are not listed in
the Statement of Additional Information:
<TABLE>
<CAPTION>
Other Business/Employment
Name Position with Adviser During Past Two Years
- ---- --------------------- ---------------------
<S> <C> <C>
Iain D. Cheyne Chairman/Director None
E. Keith Wirtz President/Director Managing Director/Chief Investment
Officer-Equities, TradeStreet
Investment Associates, Charlotte, NC
1996 - 1999.
Stephen C. Coleman Senior Vice President None
Larry Ray Hill Executive Vice President None
Kevin McKendry Director None
Peter Phillips Director None
John Caravello Director Senior Vice President, Lloyds
Bank, New York, NY since 1980.
</TABLE>
Certain of the officers and directors of IAI also serve as officers and
directors of IAI International Ltd. The address of IAI International is 10 Fleet
Place, London, EC4M 7RH, England. Both IAI and IAI International's ultimate
corporate parent is Lloyds TSB Group plc, a publicly-held financial services
organization based in London, England. The senior officers and directors of IAI
International are John A. Alexander, Deputy Chief Investment Officer and Iain D.
Cheyne, Director.
Certain of the officers and directors of IAI also serve as officers and
directors of IAI Trust Company, a wholly-owned subsidiary of IAI. The address of
IAI Trust Company is 3600 U.S. Bank Place, Minneapolis, Minnesota 55402.
John A. Alexander is the President and a Director of IAI Trust Company.
2
<PAGE>
Item 27. Principal Underwriters
(a) STATE THE NAME OF EACH INVESTMENT COMPANY (OTHER THAN THE FUND) FOR WHICH
EACH PRINCIPAL UNDERWRITER CURRENTLY DISTRIBUTING THE FUND'S SECURITIES ALSO
ACTS AS A PRINCIPAL UNDERWRITER, DEPOSITOR, OR INVESTMENT ADVISER.
Not applicable.
(b) PROVIDE THE INFORMATION REQUIRED BY THE FOLLOWING TABLE FOR EACH DIRECTOR,
OFFICER, OR PARTNER OF EACH PRINCIPAL UNDERWRITER NAMED IN RESPONSE TO ITEM 20.
Not applicable.
(c) PROVIDE THE INFORMATION REQUIRED BY THE FOLLOWING TABLE FOR ALL COMMISSIONS
AND OTHER COMPENSATION RECEIVED, DIRECTLY OR INDIRECTLY, FROM THE FUND DURING
THE LAST FISCAL YEAR BY EACH PRINCIPAL UNDERWRITER WHO IS NOT AN AFFILIATED
PERSON OF THE FUND OR ANY AFFILIATED PERSON OF AN AFFILIATED PERSON.
Not applicable.
Item 28. Location of Accounts and Records
STATE THE NAME AND ADDRESS OF EACH PERSON MAINTAINING PHYSICAL
POSSESSION OF EACH ACCOUNT, BOOK, OR OTHER DOCUMENT REQUIRED TO BE MAINTAINED BY
SECTION 31(a) AND THE RULES UNDER THAT SECTION.
The Custodian for Registrant is Norwest Bank Minnesota, N.A., Norwest
Center, Sixth & Marquette, Minneapolis, Minnesota 55479. The Custodian maintains
records of all cash transactions of Registrant. All other books and records of
Registrant's investment portfolios are maintained by IAI. IAI also acts as
Registrant's transfer agent and dividend disbursing agent, at 601 Second Avenue
South, P.O. Bos 357, Minneapolis, Minnesota 55402.
Item 29. Management Services
PROVIDE A SUMMARY OF THE SUBSTANTIVE PROVISIONS OF ANY
MANAGEMENT-RELATED SERVICE CONTRACT NOT DISCUSSED IN PART A OR B, DISCLOSING THE
PARTIES TO THE CONTRACT AND THE TOTAL AMOUNT PAID AND BY WHOM FOR THE FUND FOR
THE LAST THREE FISCAL YEARS.
Not applicable.
Item 30. Undertakings
(a) IN INITIAL REGISTRATION STATEMENTS FILED UNDER THE SECURITIES ACT,
PROVIDE AN UNDERTAKING TO FILE AN AMENDMENT TO THE REGISTRATION
STATEMENT WITH CERTIFIED FINANCIAL STATEMENTS SHOWING THE INITIAL
CAPITAL RECEIVED BEFORE ACCEPTING SUBSCRIPTIONS FROM MORE THAN 25
PERSONS IF THE FUND INTENDS TO RAISE ITS INITIAL CAPITAL UNDER SECTION
14(a)(3).
Not applicable.
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement on Form N-1A to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Minneapolis and State of
Minnesota on the 1st day of April 1999.
IAI INVESTMENT FUNDS VI, INC.
(Registrant)
By /s/ John A. Alexander
--------------------------------------
John A. Alexander, President
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated:
/s/ John A. Alexander President (principal April 1, 1999
- ---------------------------- executive officer)
John A. Alexander
/s/ Paul H. Perseke Treasurer (principal financial April 1, 1999
- ---------------------------- and accounting officer)
Paul H. Perseke
Madeline Betsch * Director
W. William Hodgson * Director
George R. Long * Director
J. Peter Thompson * Director
Charles H. Withers * Director
*By /s/ William C. Joas April 1, 1999
------------------------------------
William C. Joas, Attorney-in-Fact
* Registrant's directors executing Powers of Attorney dated August 18, 1993,
filed with the Commission on June 28, 1994.
