ANNUAL REPORT
IAI MONEY MARKET FUND
JANUARY 31, 2000
[LOGO] IAI
MUTUAL FUNDS
<PAGE>
TABLE OF CONTENTS
-----------------
IAI MONEY MARKET FUND
ANNUAL REPORT
JANUARY 31, 2000
Letter to Shareholders ...................... 2
Fund Manager's Review ....................... 3
Fund Portfolio .............................. 5
Notes to Fund Portfolio ..................... 7
Statement of Assets and Liabilities ......... 8
Statement of Operations ..................... 9
Statements of Changes in Net Assets ......... 10
Financial Highlights ........................ 11
Notes to Financial Statements ............... 12
Independent Auditors' Report ................ 14
Federal Tax Information ..................... 15
Adviser, Custodian, Distributor, Legal Counsel,
Independent Auditors,
Directors .................... Inside Back Cover
<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.
GENERAL ECONOMY
Consumer spending propelled the economy higher in the final quarter of last
year. Consumer confidence remains high, helped by a strong labor market and
higher equity prices. Tax refunds and year-end bonus payments will increase
consumer cash flow in the first quarter, continuing the year-end momentum.
INFLATION
Arguments for higher inflation are well founded, but the actual numbers have not
risen to match expectations. Commodity prices accelerated for much of last year
but leveled off in the final months. Tight labor markets are producing anecdotal
signs of higher wages, but productivity gains are helping control labor costs.
The mere threat of higher inflation, however, presents a current risk to the
financial markets.
LABOR MARKET
The unemployment rate remains at a 30 year low, giving a strong boost to
consumer confidence. Labor markets have grown more flexible over the last few
years as new technology has created new opportunities while "old economy" jobs
are being eliminated through mergers and changes in business strategy. This
trend, along with higher capital spending, globalization and capacity expansion
have helped keep a lid on labor costs. However, tight labor markets are a
concern for the Fed and are, therefore, a concern for the markets.
MONETARY POLICY
The Fed was well prepared for Y2K, having flooded the banking system with a vast
amount of excess liquidity to cover any cash shortfall. Ironically, this excess
liquidity was met with strong borrowing demand rather than fear-inspired
retrenchment. As a result, credit and broad money growth accelerated in the
final quarter, with much of the increase flowing into the equity market. The Fed
remains in a tightening bias, and the withdrawal of this year-end liquidity will
be a further drain on money and credit.
BOND MARKET OUTLOOK
Bond yields ended the year at their highs, reacting as expected to a strong
economy, tight labor markets and the prospect of a tighter Fed policy. The bond
market has already priced in a boost in rates in anticipation of the Fed's March
2000 meeting. The movement of the yield curve was erratic in January, adding to
investor concerns. Despite a new Treasury buy-back program, bond prices remain
at risk until the economy shows clear signs of cooling.
2
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<PAGE>
FUND MANAGER'S REVIEW
---------------------
IAI MONEY MARKET FUND
IAI MONEY MARKET FUND
HOW HAS THE FUND PERFORMED?
The Fund earned a return of 4.76% during the twelve months ended January 31,
2000. This compares favorably with the Lipper Money Market Fund Average Index
which gained 4.54% for the same period.
WERE THERE ANY SIGNIFICANT CHANGES?
There were no major changes in investment approach during the past year.
CAN YOU POINT TO ANY SPECIFIC MARKET FACTORS THAT INFLUENCED THE FUND'S
PERFORMANCE?
Interest rates continued the rise started in the first half of 1999. Concern
that strong economic growth and tight labor markets will put upward pressure on
inflation resulted in the Federal Reserve increasing short-term interest rates.
One month top tier commercial paper yields rose from 4.81% to 5.74% from January
1999 to January 2000. Three month Treasury Bills increased from 4.48% to 5.76%
during the twelve months ended January 31, 2000.
WHAT IS YOUR OUTLOOK FOR THE FUND?
Economic fundamentals continue to show rapid economic growth with little
inflation. However, concerns about future Fed rate increases to slow the economy
and control inflation are widespread. Bond market participants have already
priced in several Federal Reserve tightenings in 2000 in anticipation of
continued strong growth in the first quarter of 2000. Each year for the past
five years, first quarter growth has been more rapid than expected as year-end
bonuses and tax refunds spur consumer spending. This year the trend is likely to
persist. The yield curve, a graph of the level of interest rates for various
maturity Treasury bonds, has moved erratically in recent months. In addition,
intermediate bonds have higher yields than the long bond, an unusual shape for
the yield curve. This has added to investor uncertainty. Investment strategy in
the Fund continues to emphasize tier I commercial paper. Average maturity is
being kept short in anticipation of increasing short-term interest rates.
3
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<PAGE>
FUND MANAGER'S REVIEW
---------------------
IAI MONEY MARKET FUND
AVERAGE ANNUAL RETURNS+
THROUGH 1/31/00
Since
Inception
1 Year 5 Years 1/05/93
================================================================================
IAI MONEY MARKET FUND 4.76% 5.01% 4.52%
- --------------------------------------------------------------------------------
Lipper Money Market Instrument Fund Average 4.54% 4.85% 4.36%*
+ PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
* SINCE 1/1/93.
SECTORS
% OF PORTFOLIO AS OF 1/31/00
[PIE CHART]
79% Commercial Paper
11% U.S. Government Agency
10% Foreign Securities
EFFECTIVE MATURITY
% OF PORTFOLIO AS OF 1/31/00
[BAR CHART]
MONTHS
0-1 1-3
- -------------
95% 5%
NOTE TO 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.
4
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<PAGE>
FUND PORTFOLIO
--------------
IAI MONEY MARKET FUND
JANUARY 31, 2000
(PERCENTAGE FIGURES INDICATE PERCENTAGE OF TOTAL NET ASSETS)
U.S. GOVERNMENT AGENCY SECURITIES - 10.6%
<TABLE>
<CAPTION>
Principal Market
Rate Maturity Amount Value (a)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY DISCOUNT NOTE - 5.8%
Federal Home Loan Bank Discount Note 5.51% 02/03/00 $1,200,000 $1,199,633
- ------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATION - 4.8%
Private Export Funding (c) 5.84 02/04/00 1,000,000 999,513
================================================================================================
TOTAL INVESTMENTS IN U.S. GOVERNMENT AGENCY SECURITIES
(COST: $2,199,146)................................................................... $2,199,146
================================================================================================
</TABLE>
FOREIGN SECURITIES - 9.8%
<TABLE>
<CAPTION>
Principal Market
Rate Maturity Amount Value (a)(b)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FOREIGN GOVERNMENT AGENCY SECURITY - 4.8%
Caisse D'Amortissement De La Dette Sociale 5.56% 02/04/00 $1,000,000 $ 999,537
- -------------------------------------------------------------------------------------------------
FOREIGN COMMERCIAL PAPER - 5.0%
Xerox Capital (Europe) PLC (Financial) 5.70 02/02/00 1,025,000 1,024,838
=================================================================================================
TOTAL INVESTMENTS IN FOREIGN SECURITIES
(COST: $2,024,375).................................................................... $2,024,375
=================================================================================================
</TABLE>
COMMERCIAL PAPER - 79.1%
<TABLE>
<CAPTION>
Principal Market
Rate Maturity Amount Value (a)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AUTOMOBILE FINANCING - 9.9%
Ford Motor Credit 5.84% 02/02/00 $1,000,000 $ 999,838
General Motors Acceptance 5.65 02/16/00 1,050,000 1,047,528
----------
2,047,366
- ------------------------------------------------------------------------------------------------
CHEMICALS - 5.1%
Dupont (E.I.) De Nemours 5.53 02/02/00 1,050,000 1,049,839
- ------------------------------------------------------------------------------------------------
COSMETICS - 10.0%
Gillette (c) 5.20 02/01/00 1,020,000 1,020,000
Procter & Gamble 5.60 02/10/00 1,050,000 1,048,530
----------
2,068,530
- ------------------------------------------------------------------------------------------------
DRUGS - 4.8%
Pfizer 5.65 03/01/00 1,000,000 995,489
- ------------------------------------------------------------------------------------------------
ENERGY - 5.1%
Exxon Mobil 5.54 02/08/00 1,050,000 1,048,869
- ------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FUND PORTFOLIO.
5
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<PAGE>
FUND PORTFOLIO
--------------
IAI MONEY MARKET FUND
JANUARY 31, 2000
(PERCENTAGE FIGURES INDICATE PERCENTAGE OF TOTAL NET ASSETS)
COMMERCIAL PAPER (CONT.)
<TABLE>
<CAPTION>
Principal Market
Rate Maturity Amount Value (a)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FINANCIAL - 20.0%
Associates 5.77% 02/01/00 $1,020,000 $1,020,000
General Electric Capital 5.98 02/11/00 1,050,000 1,048,375
IBM Credit 5.55 02/04/00 1,000,000 999,537
KFW International Finance 5.57 02/07/00 1,050,000 1,049,025
----------
4,116,937
- ----------------------------------------------------------------------------------------
FOODS AND FOOD PROCESSING - 9.6%
Anheuser Busch 5.77 02/01/00 925,000 925,000
General Mills 5.54 02/04/00 1,050,000 1,049,515
----------
1,974,515
- ----------------------------------------------------------------------------------------
MULTIMEDIA - 4.9%
Walt Disney 5.50 02/02/00 1,000,000 999,847
- ----------------------------------------------------------------------------------------
PUBLISHING - 4.8%
Washington Post (c) 5.61 02/09/00 1,000,000 998,753
- ----------------------------------------------------------------------------------------
TELECOMMUNICATIONS - 4.9%
Bellsouth Telecommunications 5.55 02/08/00 1,000,000 998,921
========================================================================================
TOTAL INVESTMENTS IN COMMERCIAL PAPER
(COST: $16,299,066)......................................................... $16,299,066
========================================================================================
</TABLE>
INVESTMENT COMPANY - 0.2%
<TABLE>
<CAPTION>
Market
Rate Shares Value (a)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Firstar Institutional Money Market Fund 5.46% 35,163 $ 35,163
========================================================================================
TOTAL INVESTMENT IN INVESTMENT COMPANY
(COST: $35,163).............................................................. $ 35,163
========================================================================================
TOTAL INVESTMENTS IN SECURITIES
(COST: $20,557,750) (D)..................................................... $20,557,750
========================================================================================
OTHER ASSETS AND LIABILITIES (NET) - 0.3%................................... $ 54,942
========================================================================================
TOTAL NET ASSETS............................................................ $20,612,692
========================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO FUND PORTFOLIO.
6
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<PAGE>
NOTES TO FUND PORTFOLIO
-----------------------
IAI MONEY MARKET FUND
JANUARY 31, 2000
(a)
Market value of securities is determined as described in Note 1 to the financial
statements, under "Security Valuation."
(b)
Foreign security cost and market values are stated in U.S. dollars.
(c)
Represents security sold within terms of a private placement memorandum exempt
from registration under Section 144A 4(2) of the Securities Act of 1933. These
issues may only be sold to other qualified institutional buyers and are
considered liquid under guidelines established by the Board of Directors. The
market value of such securities was $3,018,266 (14.6% of net assets) at January
31, 2000.
(d)
At January 31, 2000, 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 ......... $20,557,750
===========
Gross unrealized appreciation ......... $ --
Gross unrealized depreciation ......... --
-----------
Net unrealized appreciation ........... $ --
===========
7
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<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
-----------------------------------
IAI MONEY MARKET FUND
JANUARY 31, 2000
- ------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (Cost: $20,557,750) $ 20,557,750
Cash 64,810
Interest receivable 968
------------
TOTAL ASSETS 20,623,528
------------
LIABILITIES
Accrued management fee 10,836
------------
TOTAL LIABILITIES 10,836
------------
NET ASSETS $ 20,612,692
============
NET ASSETS REPRESENTED BY:
Paid in capital $ 20,612,692
Undistributed net investment income --
Accumulated net realized losses on investments --
------------
NET ASSETS $ 20,612,692
============
Shares of capital stock outstanding (authorized 10 billion
shares, $0.01 par value) 20,645,493
------------
NET ASSET VALUE, REDEMPTION AND OFFERING PRICE PER SHARE $ 1.00
============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
8
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<PAGE>
STATEMENT OF OPERATIONS
-----------------------
IAI MONEY MARKET FUND
YEAR ENDED JANUARY 31, 2000
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME
INCOME:
Interest $1,361,202
----------
TOTAL INCOME 1,361,202
----------
EXPENSES (NOTE 3)
Management fees 158,427
Compensation of Directors 9,847
----------
TOTAL EXPENSES 168,274
Less fees reimbursed by Advisers (9,847)
----------
NET EXPENSES 158,427
----------
NET INVESTMENT INCOME $1,202,775
==========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
9
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<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
-----------------------------------
IAI MONEY MARKET FUND
<TABLE>
<CAPTION>
Year ended Year ended
January 31, 2000 January 31, 1999
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income $ 1,202,775 $ 1,611,574
------------- --------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 1,202,775 1,611,574
------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (1,214,077) (1,624,333)
------------- --------------
TOTAL DISTRIBUTIONS (1,214,077) (1,624,333)
------------- --------------
CAPITAL SHARE TRANSACTIONS
Net proceeds from sale of 41,931,306 and 319,779,221 shares 41,931,306 319,779,221
Net asset value of 1,256,715 and 1,544,057 shares issued in
reinvestment of distributions 1,256,715 1,544,057
Cost of 57,994,230 and 308,387,023 shares redeemed (57,994,230) (308,387,024)
------------- --------------
INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (14,806,209) 12,936,254
------------- --------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (14,817,511) 12,923,495
NET ASSETS AT BEGINNING OF PERIOD 35,430,203 22,506,708
------------- --------------
NET ASSETS AT END OF PERIOD $ 20,612,692 $ 35,430,203
============= ==============
INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF: $ -- $ --
============= ==============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
10
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<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,
--------------------------------------------------------------
2000 1999 1998 1997 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------------------------------------------------------------
OPERATIONS
Net investment income 0.05 0.05 0.05 0.05 0.05
--------------------------------------------------------------
DISTRIBUTIONS
Net investment income (0.05) (0.05) (0.05) (0.05) (0.05)
--------------------------------------------------------------
NET ASSET VALUE
End of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
==============================================================
Total investment return* 4.76% 4.96% 5.05% 4.89% 5.46%
Net assets at end of period
(000's omitted) $20,613 $35,430 $22,507 $26,140 $27,395
RATIOS
Expenses to average daily net
assets** 0.60% 0.60% 0.60% 0.56% 0.50%
Net investment income to
average daily net assets** 4.56% 4.80% 4.93% 4.80% 5.34%
</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.
**THE FUND'S ADVISER VOLUNTARILY WAIVED $21,950 AND $76,386 IN EXPENSES FOR THE
YEARS ENDED JANUARY 31, 1997 AND 1996. IF THE FUND HAD BEEN CHARGED THESE
EXPENSES, THE RATIO OF EXPENSES TO AVERAGE DAILY NET ASSETS WOULD HAVE BEEN
0.63% AND 0.74%, RESPECTIVELY, AND THE RATIO OF NET INVESTMENT INCOME TO
AVERAGE DAILY NET ASSETS WOULD HAVE BEEN 4.73% AND 5.10%, RESPECTIVELY.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11
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<PAGE>
NOTES TO FINANCIAL STATEMENTS
-----------------------------
IAI MONEY MARKET FUND
JANUARY 31, 2000
[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 $11,302
and additional paid in capital has been decreased by $11,302.
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.
[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
policyholder, the Fund is committed to make future capital contributions, if
requested by the Company.
LINE OF CREDIT
The Fund has an available line of credit of $25,000,000 with Firstar Bank, N.A.
at the prime interest rate less 2%. To the extent funds are drawn against the
line, securities are segregated by the Fund. No compensating balances are
required under the line of credit, however, a commitment fee of .10% per annum
on the commitment amount of the line is payable quarterly in arrears. Advisers
has agreed to pay the commitment fee on behalf of the Fund. During the year
ended January 31, 2000, the Fund did not access the line of credit.
12
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<PAGE>
NOTES TO FINANCIAL STATEMENTS
-----------------------------
IAI MONEY MARKET FUND
JANUARY 31, 2000
[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, 2000, purchases of securities and sales proceeds
for the Fund aggregated:
U.S. Government Other
----------------- ------------
Purchases $87,835,408 $525,960,170
Sales $94,276,701 $535,493,194
13
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<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 schedule of investments, of IAI Money Market Fund (a portfolio within IAI
Investment Funds VI, Inc.) as of January 31, 2000, 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 each of the years in the five-year period then ended. 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. Our procedures included confirmation of securities owned as of
January 31, 2000, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of IAI
Money Market Fund as of January 31, 2000, and the results of its operations for
the year then ended, the changes in its net assets for each of the years in the
two-year period then ended and its financial highlights for each of the years in
the five-year period then ended, in conformity with generally accepted
accounting principles.
KPMG LLP
Minneapolis, Minnesota
March 17, 2000
14
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<PAGE>
FEDERAL TAX INFORMATION
-----------------------
IAI MONEY MARKET FUND
(UNAUDITED)
We are required by federal tax regulations to provide shareholders with certain
information regarding dividend distributions paid during our fiscal year. The
figures provided are for informational purposes only and should not be used for
reporting to federal or state revenue agencies. You will receive all necessary
tax information on Form 1099-DIV, Dividends and Distributions, in January of
each year.
TAX INFORMATION
- --------------------------------------------------------------------------------
Payable Date Ordinary Income (A)
- --------------------------------------------------------------------------------
February 1999 0.0033
March 1999 0.0037
April 1999 0.0036
May 1999 0.0037
June 1999 0.0036
July 1999 0.0038
August 1999 0.0039
September 1999 0.0040
October 1999 0.0041
November 1999 0.0041
December 1999 0.0047
January 2000 0.0042
- --------------------------------------------------------------------------------
$ 0.0467
================================================================================
(A)INCLUDES DISTRIBUTIONS OF SHORT-TERM CAPITAL GAINS, IF ANY, WHICH ARE TAXABLE
AS ORDINARY INCOME.
15
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(THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY.)
16
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<PAGE>
(THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY.)
17
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<PAGE>
INVESTMENT ADVISER
AND MANAGER
Investment Advisers, Inc.
P.O. Box 357
Minneapolis, MN 55440-0357 USA
800.945.3863
http://www.iaifunds.com
CUSTODIAN
Firstar Bank, N.A.
425 Walnut Street
Cincinnati, OH 45202
LEGAL COUNSEL
Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, MN 55402
INDEPENDENT AUDITORS
KPMG LLP
4200 Norwest Center
Minneapolis, MN 55402
DIRECTORS
Madeline Betsch
W. William Hodgson
David Koehler
George R. Long
J. Peter Thompson
Charles H. Withers
<PAGE>
[LOGO] IAI
MUTUAL FUNDS
C/O FIRSTAR MUTUAL FUND SERVICES, LLC, P.O. BOX 701,
MILWAUKEE, WISCONSIN 53201 USA
800.945.3863
