MONEY MARKET FUND
ANNUAL REPORT
IAI MONEY MARKET FUND
JANUARY 31, 1999
[LOGO] IAI
MUTUAL FUNDS
<PAGE>
TABLE OF CONTENTS
IAI MONEY MARKET FUND
ANNUAL REPORT
JANUARY 31, 1999
Letter to Shareholders.......................................... 2
Fund Manager's Review............................................4
Fund Portfolio...................................................6
Notes to Fund Portfolio......................................... 8
Statement of Assets and Liabilities............................. 9
Statement of Operations........................................ 10
Statements of Changes in Net Assets............................ 11
Financial Highlights............................................12
Notes to Financial Statements...................................13
Independent Auditors' Report....................................15
Federal Tax Information.........................................16
IAI Mutual Fund Family......................................... 17
Adviser, Custodian, Legal Counsel,
Independent Auditors,
Directors....................................... Inside Back Cover
<PAGE>
LETTER TO SHAREHOLDERS
IAI MONEY MARKET FUND
THE REMARKABLE U.S. ECONOMY
Japan is in a decade-long recession. Russia's economy has collapsed. Brazil's
currency is plunging. Even Europe is struggling to grow. But somehow, in this
global economy, none of this seems to affect us. In 1999, America's economy
remains the undisputed leader in the world.
It was just last summer when the latest global crisis had pundits predicting a
recession. The stock market dropped 20%. Suddenly, the Federal Reserve Board
went into action, cut interest rates three times. Confidence returned, the stock
market hit new highs, and Gross Domestic Product grew 6.1% in the fourth quarter
of 1998. Meanwhile, inflation is less than 2%, interest rates are declining,
unemployment is 4.3% and the federal budget is in surplus for the first time in
three decades.
But how is this possible, when our trading partners are having such a tough
time? In some ways, their loss is our gain. When Asia's currencies falter,
imports become cheaper and U.S. companies must keep prices down to compete
domestically. As a result, inflation is held in check. Many countries have
followed the Federal Reserve policy of cutting interest rates in an effort to
stimulate the economy. As a result, money that might be invested locally in
bonds is leaving for higher returns in the United States. In Japan, interest
rates are close to zero, so Japanese institutions looking for income are buying
our Treasury bonds. Meanwhile, global investors like the direction of our stock
market better than their local markets, and they're increasingly investing here,
thus pumping money into the U.S. economy.
But another reason for America's invincibility is that trade, while important,
is not a huge factor on the U.S. economy. Although it makes up a larger share
than it did a decade ago, exports only amount to 11% of U.S. GDP. Most of that
trade is with Europe, Canada and Mexico, which have suffered much less than Asia
and Latin America. True, some U.S. industries have suffered from declining
exports, such as agriculture, capital equipment and steel. Banks wrote off
millions in losses when Russia defaulted last summer. But cheap imports of oil,
lumber, agricultural products and raw materials have kept costs down for many
American companies.
In addition, we have reasserted our global leadership in a number of industries.
In technology, there's really nothing comparable outside the United States to
Microsoft and Intel. The explosive growth of the internet is largely an
American-based phenomenon. Technology has produced hundreds of thousands of jobs
in this country, and technology stocks led the S&P 500 Index in 1998.
In the 1970s, it was said that the era of U.S. economic leadership had passed. A
generation later, it certainly looks like that was a premature conclusion.
Indeed, the stock and bond markets are just one indication of that.
2
<PAGE>
LETTER TO SHAREHOLDERS
IAI MONEY MARKET FUND
ECONOMIC OUTLOOK
A summary of economic outlook as provided by Larry Hill, IAI's Chief Fixed
Income Officer, is presented below.
Real GDP expanded by 4.3% last year, and the fourth quarter produced one of the
strongest growth rates in the last 15 years. At the same time inflation, as
measured by the broad based GDP price deflator rose by less than 1%. Economic
momentum is continuing in the first quarter. Early strength is becoming a
regular event, fueled by income tax refunds and year-end incentive bonus
payments. This year the economy is also benefiting from strong consumer
confidence, a favorable job market, higher stock prices, and rising personal
income.
Last fall, financial markets around the world stumbled. Liquidity dried up as
investors rushed to dump securities and reduce leverage in their portfolio.
Lower quality, illiquid assets suffered the greatest damage. The Fed was forced
to cut short term interest rates on three separate occasions to restore
confidence and reliquify the markets. By the end of the year, many analysts saw
economic weakness spreading from overseas economies to the U.S. Most anticipated
further interest rate reductions. However, the unanticipated strength caused the
Fed to pause.
Stocks and bonds both had good returns in January, but suffered setbacks in
February. Since year-end longer term interest rates have risen by as much as 65
basis points, pushing bond returns into negative territory. The stock market has
cautiously moved higher as the prospect for better growth has somewhat offset
higher rates. Yet, stock market leadership continues to be focused on a narrow
group of stocks while the broader market has lagged.
Looking ahead we expect 1999 to be another year of growth for the U.S. economy,
with real GDP expanding by about 3.5%. Inflation will continue to be a bright
spot in the forecast. The Consumer Price Index should increase by 2% or less
during the year. Excess global capacity and waning global demand for commodities
and commodity products will support the low inflation environment. Moreover,
recent productivity gains have reduced unit labor costs, helping to reinforce
lower inflation rates. The U.S. has benefited from an extraordinary domestic
investment cycle which is unprecedented in the last 50 years. Ample employment
opportunities, relative price stability, budget surpluses and a higher standard
of living have been a direct result.
Although some risks exist, this favorable economic background should continue to
support U.S. financial asset prices. Occasional market corrections should be
viewed as longer term investment opportunities.
We hope that you read the Fund Manager's Review which follows this letter. It
offers a detailed perspective on the Fund's performance and strategy. As always,
we appreciate your continued trust and confidence in IAI. If there is any way
that we can serve you better, please let us know by calling our toll-free
Investor Services Hotline at 1-800-945-3863.
3
<PAGE>
FUND MANAGER'S REVIEW
IAI MONEY MARKET FUND
IAI MONEY MARKET FUND
HOW HAS THE FUND PERFORMED?
The Fund earned a return of 4.96% for the year ended January 31, 1999. This
compares favorably with the Lipper Money Market Instrument Fund Average Index
return of 4.79%.
WERE THERE ANY SIGNIFICANT CHANGES?
There were no major changes in strategy during the past year. The Fund
emphasized high quality commercial paper and Federal agency issues.
CAN YOU POINT TO ANY SPECIFIC MARKET FACTORS THAT INFLUENCED THE FUND'S
PERFORMANCE?
During the year, the Federal Reserve continued to lower short-term interest
rates by cutting the Federal Funds rate. While the longer bond market
experienced dramatic swings early in the year, the very short end of the market
moved downward in an orderly fashion. Top tier 30 day commercial paper yields
moved from 5.32% at the beginning of the year to 4.90% at year end. However, 90
day Treasury bill rates moved slightly higher from 4.29% to 4.40%. In general,
the Fund benefited from a risk adverse strategy of holding high quality
commercial paper and Federal agency issues. The average maturity was generally
under 30 days.
WHAT IS YOUR OUTLOOK FOR THE FUND?
Looking ahead, the fundamental economic background should remain favorable for
bonds. We expect real growth in the U.S. economy to slow modestly from its rapid
pace of 4.3%. For the first half of 1999, real GDP should expand by 3.5% while
inflation should stay below 1.5%. The Federal Reserve will continue to provide
ample liquidity, but short-term rates are unlikely to change unless instability
overseas (for example, Brazil) or a dramatic deterioration in domestic business
conditions forces another policy shift. In this environment a continuation of
last years strategy seems appropriate.
4
<PAGE>
FUND MANAGER'S REVIEW
IAI MONEY MARKET FUND
AVERAGE ANNUAL RETURNS+
THROUGH 1/31/99
Since Inception
1 Year 5 Years 1/05/93
- --------------------------------------------------------------------------------
IAI MONEY MARKET FUND 4.96% 4.83% 4.48%
- --------------------------------------------------------------------------------
Lipper Money Market 4.79% 4.72% 4.33%*
Instrument Fund Average
+ PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
* SINCE 1/1/93
SECTORS
% OF PORTFOLIO AS OF 1/31/99
[PIE CHART]
Commercial Paper 80%
U.S. Government Agency 20%
EFFECTIVE MATURITY
% OF PORTFOLIO AS OF 1/31/99
[BAR CHART]
MONTHS
- ------
0-1 88%
1-2 12%
NOTE TO THE LETTER TO SHAREHOLDERS & FUND MANAGER'S REVIEW
PERFORMANCE DATA FOR THE IAI MONEY MARKET FUND ASSUMES REINVESTMENT OF ALL
DIVIDENDS. THE IAI MONEY MARKET FUND IS MANAGED TO MAINTAIN A STABLE SHARE VALUE
OF $1.00 AND HISTORICALLY HAS ALWAYS ACHIEVED THIS OBJECTIVE. BUT, UNLIKE BANK
DEPOSITS AND CDS, MONEY MARKET FUNDS ARE NOT GUARANTEED, AND THERE CAN BE NO
ASSURANCE THAT A STABLE SHARE VALUE WILL BE MAINTAINED.
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. MORE COMPLETE INFORMATION
ABOUT THE FUND, INCLUDING CHARGES AND EXPENSES, IS AVAILABLE IN THE PROSPECTUS.
PLEASE READ THE FUND'S PROSPECTUS CAREFULLY BEFORE INVESTING. ALL INDICES CITED
ARE UNMANAGED, AND ARE EITHER TRADEMARKS, REGISTERED TRADEMARKS OR COPYRIGHTS OF
THEIR RESPECTIVE SPONSORING COMPANIES.
5
<PAGE>
FUND PORTFOLIO
IAI MONEY MARKET FUND
JANUARY 31, 1999
(PERCENTAGE FIGURES INDICATE PERCENTAGE OF TOTAL NET ASSETS)
U.S. GOVERNMENT AGENCY SECURITIES - 20.3%
<TABLE>
<CAPTION>
Principal Market
Rate Maturity Amount Value (a)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 1.1%
Federal National Mortgage Association (MEDIUM-TERM NOTE) 5.84% 03/29/99 $ 400,000 $ 400,636
- ---------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY DISCOUNT NOTES - 19.2%
Federal Home Loan Mortgage Corporation 4.76 02/09/99 2,000,000 1,997,884
Federal Home Loan Mortgage Corporation 4.85 02/17/99 1,800,000 1,796,120
Federal National Mortgage Association 5.04 02/19/99 1,500,000 1,496,220
Federal National Mortgage Association 5.03 02/26/99 1,500,000 1,494,760
-------------
6,784,984
===============================================================================================================
TOTAL INVESTMENTS IN U.S. GOVERNMENT AGENCY SECURITIES
(COST: $7,185,620).................................................................................$7,185,620
===============================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO FUND PORTFOLIO ON PAGE 8
6
<PAGE>
FUND PORTFOLIO
IAI MONEY MARKET FUND
JANUARY 31, 1999
COMMERCIAL PAPER - 79.1%
<TABLE>
<CAPTION>
Principal Market
Rate Maturity Amount Value (a)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FINANCIAL - 27.1%
Associates 4.82% 02/01/99 $ 1,950,000 $ 1,950,000
Bell Atlantic Network Funding 4.80 02/09/99 1,770,000 1,768,112
Ford Motor Credit 4.77 02/10/99 1,935,000 1,932,693
IBM Credit 4.84 02/03/99 1,950,000 1,949,476
KFW International Finance 5.17 02/05/99 2,000,000 1,998,851
--------------
9,599,132
- ---------------------------------------------------------------------------------------------------
FOODS AND FOOD PROCESSING - 21.7%
Anheuser-Busch 5.20 02/05/99 2,000,000 1,998,844
Coca Cola 5.00 03/29/99 2,000,000 1,984,445
Dupont (E.I.) de Nemours 4.86 02/01/99 425,000 425,000
Dupont (E.I.) de Nemours 5.25 02/05/99 1,500,000 1,499,125
Pepsico 4.79 02/16/99 1,770,000 1,766,467
--------------
7,673,881
- ---------------------------------------------------------------------------------------------------
INDUSTRIAL - 12.1%
Xerox Capital 4.83 02/11/99 2,150,000 2,147,115
Export Development 4.77 02/08/99 2,140,000 2,138,015
--------------
4,285,130
- ---------------------------------------------------------------------------------------------------
RETAIL - 5.6%
Procter and Gamble 4.80 02/04/99 2,000,000 1,999,200
- ---------------------------------------------------------------------------------------------------
UTILITIES - 12.6%
Emerson Electric 5.05 02/12/99 2,200,000 2,196,606
General Electric 4.87 02/02/99 500,000 499,933
Wisconsin Electric Fuel 4.81 03/09/99 1,770,000 1,761,486
--------------
4,458,025
===================================================================================================
TOTAL INVESTMENTS IN COMMERCIAL PAPER
(COST: $28,015,368)................................................................. $ 28,015,368
===================================================================================================
TOTAL INVESTMENTS IN SECURITIES
(COST: $35,200,988) (b)............................................................. $ 35,200,988
===================================================================================================
OTHER ASSETS AND LIABILITIES (NET) - 0.6%
................................................................................ $ 229,215
===================================================================================================
TOTAL NET ASSETS
................................................................................ $ 35,430,203
===================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO FUND PORTFOLIO ON PAGE 8
7
<PAGE>
NOTES TO FUND PORTFOLIO
IAI MONEY MARKET FUND
JANUARY 31, 1999
(a)
Market value of securities is determined as described in Note 1 to the financial
statements, under "Security Valuation."
(b)
At January 31, 1999, the cost of securities for federal income tax purposes and
the aggregate gross unrealized appreciation and depreciation based on that cost
were as follows:
Cost for federal tax purposes $ 35,200,988
- --------------------------------------------------------------------------------
Gross unrealized appreciation $ --
Gross unrealized depreciation --
- --------------------------------------------------------------------------------
Net unrealized appreciation $ --
================================================================================
8
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
IAI MONEY MARKET FUND
JANUARY 31, 1999
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at value
(Cost: $35,200,988) $ 35,200,988
Cash in bank on demand deposit 337,692
Dividends and accrued interest receivable 7,981
Other assets 3,378
--------------
TOTAL ASSETS 35,550,039
--------------
LIABILITIES
Accrued management fee 582
Dividends payable ($0.0035 per share) 119,254
--------------
TOTAL LIABILITIES 119,836
--------------
NET ASSETS APPLICABLE TO OUTSTANDING CAPITAL STOCK $ 35,430,203
==============
REPRESENTED BY:
Capital stock $ 354,517
Additional paid-in capital 35,075,686
Undistributed net investment income --
Accumulated net realized losses on investments --
--------------
TOTAL - REPRESENTING NET ASSETS APPLICABLE TO OUTSTANDING CAPITAL STOCK $ 35,430,203
==============
Shares of capital stock outstanding; authorized 10 billion shares of $.01 par value stock 35,451,702
--------------
NET ASSET VALUE PER SHARE OF OUTSTANDING CAPITAL STOCK $ 1.00
==============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ON PAGE 13
9
<PAGE>
STATEMENT OF OPERATIONS
IAI MONEY MARKET FUND
YEAR ENDED JANUARY 31, 1999
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME
INCOME
Interest $ 1,811,635
---------------
TOTAL INCOME 1,811,635
---------------
EXPENSES (NOTE 3)
Management fees 200,061
Compensation of Directors 6,481
---------------
TOTAL EXPENSES 206,542
Less fees reimbursed by Advisers (6,481)
---------------
NET EXPENSES 200,061
---------------
NET INVESTMENT INCOME $ 1,611,574
---------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ON PAGE 13
10
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
IAI MONEY MARKET FUND
<TABLE>
<CAPTION>
Year ended Year ended
January 31, 1999 January 31, 1998
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income $ 1,611,574 $ 1,456,327
Net realized gains -- 805
---------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 1,611,574 1,457,132
---------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (1,624,333) 1,465,067)
---------------------------------------
TOTAL DISTRIBUTIONS (1,624,333) 1,465,067)
---------------------------------------
CAPITAL SHARE TRANSACTIONS ($1 PER SHARE)
Net proceeds from sale of shares 319,779,221 209,446,323
Net asset value of shares issued in
reinvestment of distributions 1,544,057 1,303,891
Cost of shares redeemed (308,387,024) (214,375,468)
---------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS 12,936,254 (3,625,254)
---------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 12,923,495 (3,633,189)
NET ASSETS AT BEGINNING OF PERIOD 22,506,708 26,139,897
---------------------------------------
NET ASSETS AT END OF PERIOD $ 35,430,203 $ 22,506,708
=======================================
INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF: $ -- $ 42
=======================================
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ON PAGE 13
11
<PAGE>
FINANCIAL HIGHLIGHTS
IAI MONEY MARKET FUND
PER SHARE DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
AND SELECTED INFORMATION FOR EACH PERIOD INDICATED ARE AS FOLLOWS:
<TABLE>
<CAPTION>
Years ended
January 31, Period from Year ended
------------------------------------------------ April 1, 1994 to March 31,
1999 1998 1997 1996 January 31, 1995+ 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
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
(000's omitted) $ 35,430 $ 22,507 $ 26,140 $ 27,395 $ 33,175 $ 29,788
RATIOS
Expenses to average daily
net assets*** 0.60% 0.60% 0.56% 0.50% 0.50%** 0.45%
Net investment income
to average daily net 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, $81,895 AND
$147,924 IN EXPENSES FOR THE YEARS ENDED JANUARY 31, 1997 AND 1996, THE
PERIOD ENDED JANUARY 31, 1995 AND THE YEAR ENDED MARCH 31, 1994,
RESPECTIVELY. IF THE FUND HAD BEEN CHARGED FOR THESE EXPENSES, THE RATIO
OF EXPENSES TO AVERAGE DAILY NET ASSETS WOULD HAVE BEEN .63%, .74%, .88%
AND .88%, RESPECTIVELY, AND THE RATIO OF NET INVESTMENT INCOME TO AVERAGE
DAILY NET ASSETS WOULD HAVE BEEN 4.73%, 5.10%, 3.74% AND 2.30%,
RESPECTIVELY.
+ REFLECTS FISCAL YEAR-END CHANGE FROM MARCH 31 TO JANUARY 31.
12
<PAGE>
NOTES TO FINANCIAL HIGHLIGHTS
IAI MONEY MARKET FUND
JANUARY 31, 1999
[1] SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
IAI Investment Funds VI, Inc. is registered under the Investment Company Act of
1940 (as amended) as a diversified, open-end management investment company. IAI
Money Market Fund (Money Market Fund) is a separate portfolio of IAI Investment
Funds VI, Inc. The Fund's objective is to provide shareholders with a high level
of current income consistent with the preservation of capital and liquidity.
This report covers only the Money Market Fund (the Fund).
Significant accounting policies followed by the Fund are summarized below:
SECURITY VALUATION
Pursuant to Rule 2a-7 of the Investment Company Act of 1940 (as amended), all
securities in the Fund are valued daily at amortized cost, which approximates
market value, in order to maintain a constant net asset value of $1 per share.
FEDERAL TAXES
Since it is the Fund's policy to comply with the provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its taxable income to its shareholders, no provision for income taxes is
required. In order to avoid the payment of any federal excise taxes, the Fund is
required to distribute substantially all of its net investment income and net
realized gains on a calendar year basis.
On the statement of assets and liabilities, as a result of permanent book-to-tax
differences, undistributed net investment income has been increased by $12,717,
accumulated net realized losses have been decreased by $42 and additional
paid-in capital has been decreased by $12,759.
SECURITY TRANSACTIONS AND INVESTMENT INCOME
The Fund records security transactions on trade date, the date the securities
are purchased or sold. Interest income is accrued daily. Discounts and premiums
are accreted and amortized, respectively, to interest income over the lives of
the respective securities. Security gains and losses are determined on the basis
of identified cost, which is the same basis used for federal income tax
purposes.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders from net investment income are declared daily and
paid on the first business day of the following month. Capital gains, if any,
are primarily distributed as of the end of the calendar year. Additional capital
gains distributions as needed to comply with federal tax regulations are
distributed during the year.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements. Actual results could
differ from those estimates.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
IAI MONEY MARKET FUND
JANUARY 31, 1999
[2] COMMITMENTS AND CONTINGENCIES
INSURANCE
For purposes of obtaining certain types of insurance coverage for the Fund and
its officers and directors, the Fund is a policyholder in an industry-sponsored
mutual insurance company (the Company). In connection with its obligation as a
policy holder, the Fund is committed to make future capital contributions, if
requested by the Company.
LINE OF CREDIT
The Fund has available a line of credit of $3,800,000, with a bank at the prime
interest rate. To the extent funds are drawn against the line, securities are
held in a segregated account. No compensating balances or commitment fees are
required under the line of credit. During the year ended January 31, 1999, the
Fund paid $2,243 in interest on the line of credit at a rate ranging from 7.75%
to 8.50%. This interest expense is included as a reduction of interest income on
the Statement of Operations. There were no borrowings outstanding at January 31,
1999.
[3] FEES AND EXPENSES
Under terms of the Fund's Management Agreement, Investment Advisers, Inc.
(Advisers) is required to pay for all expenses of the Fund, except certain costs
(primarily those incurred in the purchase and sale of assets, taxes, interest
and extraordinary expenses), in return for the Fund paying an all inclusive
management fee (unified fee) to Advisers. This fee is equal to an annual rate of
0.60% declining to 0.50% of average daily net assets. The fee is paid monthly.
The Management Agreement further provides that Advisers will 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.
[4] PURCHASES AND SALES OF SECURITIES
For the year ended January 31, 1999, purchases of securities and sales proceeds
for the Fund aggregated $1,549,275,595 and $1,537,196,148, respectively.
14
<PAGE>
INDEPENDENT AUDITORS' REPORT
IAI MONEY MARKET FUND
THE BOARD OF DIRECTORS AND SHAREHOLDERS
IAI INVESTMENT FUNDS VI, INC.:
We have audited the accompanying statement of assets and liabilities, including
the fund portfolio, of IAI Money Market Fund (a portfolio within IAI Investment
Funds VI, Inc.) as of January 31, 1999, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
years in the two-year period then ended, and the financial highlights for the
periods presented on page 12 of the annual report. These financial statements
and the financial highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial statements and
the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Investment securities held in custody are confirmed to us by the
custodian. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of IAI
Money Market Fund at January 31, 1999, and the results of its operations, the
changes in its net assets and the financial highlights for the periods stated in
the first paragraph above, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
March 5, 1999
15
<PAGE>
FEDERAL TAX INFORMATION
IAI MONEY MARKET FUND
TAX INFORMATION
- --------------------------------------------------------------------------------
Payable Date Ordinary Income (A)
- --------------------------------------------------------------------------------
FEBRUARY 1998 $ 0.0038
MARCH 1998 0.0041
APRIL 1998 0.0041
MAY 1998 0.0042
JUNE 1998 0.0041
JULY 1998 0.0045
AUGUST 1998 0.0040
SEPTEMBER 1998 0.0041
OCTOBER 1998 0.0041
NOVEMBER 1998 0.0037
DECEMBER 1998 0.0043
JANUARY 1999 0.0035
================================================================================
$ 0.0485
(A) INCLUDES DISTRIBUTIONS OF SHORT-TERM CAPITAL GAINS, IF ANY, WHICH ARE
TAXABLE AS ORDINARY INCOME.
16
<PAGE>
IAI MUTUAL FUND FAMILY
TO DIVERSIFY YOUR PORTFOLIO, PLEASE CONSIDER ALL OF THE MUTUAL FUNDS IN OUR
FUND FAMILY
<TABLE>
<CAPTION>
SECONDARY
IAI FUND PRIMARY OBJECTIVE OBJECTIVE PORTFOLIO COMPOSITION
................................................................................................................................
<S> <C> <C> <C>
IAI INTERNATIONAL FUND Capital Appreciation Income Equity securities of non-U.S. companies
- --------------------------------------------------------------------------------------------------------------------------------
IAI EMERGING GROWTH FUND Capital Appreciation -- Common stocks of small- to medium-sized
emerging growth companies
- --------------------------------------------------------------------------------------------------------------------------------
IAI CAPITAL Capital Appreciation -- Common stocks of small- to medium-sized
APPRECIATION FUND growth companies
- --------------------------------------------------------------------------------------------------------------------------------
IAI MIDCAP GROWTH FUND Capital Appreciation -- Common stocks of medium-sized growth companies
- --------------------------------------------------------------------------------------------------------------------------------
IAI REGIONAL FUND Capital Appreciation -- Common stocks of Upper Midwest companies
- --------------------------------------------------------------------------------------------------------------------------------
IAI GROWTH FUND Capital Appreciation -- Common stocks with potential for above-average
growth and appreciation
- --------------------------------------------------------------------------------------------------------------------------------
IAI VALUE FUND Capital Appreciation -- Common stocks which are considered to be undervalued
- --------------------------------------------------------------------------------------------------------------------------------
IAI GROWTH AND INCOME FUND Capital Appreciation Income Common stocks with potential for long-term
appreciation, and common stocks that are expected to
produce income
- --------------------------------------------------------------------------------------------------------------------------------
IAI BALANCED FUND Total Return Income Common stocks, investment-grade bonds and
[CAPITAL APPRECIATION short-term instruments
+ INCOME]
- --------------------------------------------------------------------------------------------------------------------------------
IAI BOND FUND Income Capital Preservation Investment-grade bonds
- --------------------------------------------------------------------------------------------------------------------------------
IAI MONEY MARKET FUND Stability/Liquidity Income The portfolio's average dollar-weighted maturity is
less than 90 days, investing in high quality, money
market securities
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INVESTMENT ADVISER
AND MANAGER
Investment Advisers, Inc.
P.O. Box 357
Minneapolis, MN 55440-0357 USA
800.945.3863
612.376.2700
http://www.iaifunds.com
CUSTODIAN
Norwest Bank Minnesota, N.A.
Sixth and Marquette
Minneapolis, MN 55479
LEGAL COUNSEL
Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, MN 55402
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
4200 Norwest Center
Minneapolis, MN 55402
DIRECTORS
Madeline Betsch
W. William Hodgson
George R. Long
J. Peter Thompson
Charles H. Withers
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[LOGO] IAI
MUTUAL FUNDS
P.O. BOX 357, MINNEAPOLIS, MINNESOTA 55440 USA FAX 612.376.2737
800.945.3863 500-0104-0199
612.376.2700
