<PAGE>
IAI RETIREMENT FUNDS, INC.
* * * *
IAI REGIONAL PORTFOLIO
IAI BALANCED PORTFOLIO
IAI RESERVE PORTFOLIO
SEMI-ANNUAL REPORT
June 30, 1995
(unaudited)
<PAGE>
Table of Contents
-----------------
IAI Retirement Funds, Inc.
[GLOBE ARTWORK]
Semi-Annual Report
June 30, 1995
(unaudited)
<TABLE>
<CAPTION>
<S> <C>
Chairman's Letter........................2
Managers' Reviews
IAI Regional Portfolio..................5
IAI Balanced Portfolio..................6
IAI Reserve Portfolio...................7
Fund Portfolios
IAI Regional Portfolio..................8
IAI Balanced Portfolio.................11
IAI Reserve Portfolio..................13
Notes to Fund Portfolios................14
Statements of Assets and Liabilities....15
Statements of Operations................16
Statements of Changes in Net Assets.....17
Financial Highlights....................20
Notes to Financial Statements...........23
Distributor, Adviser, Custodian,
Legal Counsel, Independent Auditors,
Directors.......................Back Cover
</TABLE>
[IAI LOGO]
MUTUAL FUNDS
Investment Advisers, Inc.
3700 First Bank Place, P.O. Box 357, Minneapolis, Minnesota 55440-0357 USA
fax 612.376.2737
800.945.3863
612.376.2700
<PAGE>
Chairman's Letter
-----------------
IAI Retirement Funds, Inc.
[GLOBE ARTWORK]
[PHOTO]
Noel. P. Rahn,
Chairman
The good news for retirement is we are living longer. The bad news is it will
cost more. Both of these developments make it increasingly important for you to
develop and implement a well considered investment plan.
According to statistics published by the American Association of Retired Persons
(AARP), retired people are living longer now than ever before. The Association
recently reported that people reaching age 65 could expect to live an additional
17.3 years, on average, (19 years more for women and 15.3 years for men).
Obviously, funding retirement for those additional years can be a formidable
challenge.
However, an even bigger challenge to a comfortable retirement could be the
insidious depletion of your purchasing power due to inflation. Even though
conventional wisdom tells us that a relatively low rate of inflation is
tolerable, when it comes to retirement, no inflation is good inflation.
For example, if you anticipated needing $25,000 a year to cover living expenses
for 18 years after retirement, and inflation was running at a constant 3.5%, the
value of your annual pension would ultimately be cut almost in half, to only
$13,165 a year of purchasing power in today's terms. Even a small increase in
inflation, following several recent years of unusually low rates, could be
devastating. If the inflation rate rose to 5%, the value of your $25,000 annual
pension would be cut to only $9,930 per year in real purchasing power, less than
40% of the amount needed.
We have been taught that saving for retirement is important, and it is. However,
savings alone may not be enough since significant purchasing power can be lost
to inflation. A better approach might be saving for investment, and investing
for retirement. Over the last 10 years, savings rates as represented by money
market mutual funds (Donoghue and Lipper indices) have yielded an annualized
return of 5.7%. However, inflation, running at an annualized rate of 3.6%, as
measured by the Consumer Price Index (CPI), has reduced the purchasing power of
the money market return by more than half.
Over the same period, an investment in bonds, as measured by the Lehman Brothers
Aggregate Bond Index, has outpaced inflation more than two-and-a-half times,
earning an annualized 10.1%, and an investment in stocks, as measured by the S&P
500 Index, has appreciated an annualized 14.5%, more than four times the rate of
inflation.
Of course future performance may be different from past performance, but history
shows that investing in financial assets such as stocks and bonds, can be an
important part of a well balanced plan for funding and enjoying the additional
years of retirement.
2
<PAGE>
Chairman's Letter
-----------------
IAI Retirement Funds, Inc.
[GLOBE ARTWORK]
Economic Outlook
Larry Hill, IAI's Chief Investment Officer, provides his economic outlook below,
as published recently in the Adviser.
Outlook
The myth of an economic soft landing is an attractive idea-growth strong enough
to create new jobs and keep the economy moving forward, and yet slow enough to
prevent inflationary pressures from building. Unfortunately, business cycles
have not been eliminated, and even when a soft landing seems imminent, it is
usually just a temporary phase before moving in one of two different directions.
When the economy pauses, as it has recently in what looks like a soft landing,
it is usually just a temporary phase of continuing growth or slowdown. The key
to which way the economy goes after the pause lies with interest rates. Rising
interest rates lead to slower economic growth, and a recession can follow. On
the other hand, when interest rates fall, as they have recently, there is still
plenty of financial capacity for the economy to grow. Generally, this type of
pause is followed by a reacceleration of economic growth. We expect the
reacceleration to occur in the second half of 1995.
While there are several factors influencing whether, and how much, interest
rates rise or fall, two are key-growth and inflation.
While we anticipate an acceleration of growth, we are not looking for a robust
burst of economic activity. The fourth quarter of 1994 was much stronger than
the long-term trend, and typically when that happens, succeeding quarters are
slower. First quarter 1995 real GDP growth was only 2.7%, and the second quarter
is likely to be weaker.
Looking at the second half of the year, we anticipate a recovery to about 3%
growth in real GDP. With this increase in growth, we expect rising credit
demands, and upward pressure on interest rates.
Inflationary pressures will also increase in the second half of 1995. Price
increases have entered the economic pipeline at the producers' end, but have not
yet flowed into the retail market. Consumers are very price conscious and
businesses have cut costs to compete. However, at some point they will not be
able to cut further, and they will be forced to pass along their higher costs.
The year-over-year increase in the Consumer Price Index has already established
a clear up trend, rising by 3.1% over the last 12 months. We anticipate as much
as a 3.5%-4% increase in inflation on consumer prices which is higher than the
consensus expectation of approximately 3%.
In addition to growth and inflation, several other factors earlier this year
will influence interest rates in the months ahead. The moves in the U.S.
Congress to cut expenditures and balance the budget are gathering momentum, and
that has helped the U.S. bond market. However, the failure of the balanced
budget amendment sparked a substantial decline in the value of the U.S. dollar.
Ironically, this decline helped the U.S. bond market.
As the dollar declined, compared with major currencies, foreign central banks
became large buyers of U.S. bonds in their dollar-support effort which helped
fuel the recent rally in the bond market. However, foreign governments are not
economic buyers, and if the dollar stabilizes or strengthens, they could become
large sellers which could adversely impact U.S. bond prices.
3
<PAGE>
Chairman's Letter
-----------------
IAI Retirement Funds, Inc.
[GLOBE ARTWORK]
Furthermore, cash flows into bond mutual funds have been a negative for bonds
indicating continuing weak demand from individual investors.
Both bonds and stocks have recently been appreciating together which is very
unusual for this latter stage of the cycle. This kind of market behavior is more
typical of the period immediately following a recession, when the Federal
Reserve Board (the Fed) is lowering interest rates and profit growth is
accelerating. The stock market, like the bond market, is also overextended, and
there is a cyclical risk of a relatively strong pullback which could be
triggered by the fear of decelerating earnings.
The larger economic picture is still very positive for financial assets and
should continue over the long term. However, economic cycles still dominate
financial markets, and the current cycle has not yet ended.
We do not anticipate a recession this year. Typically, rates rise into a
recession, and they have been declining during the first half of the year. Those
lower rates will fuel a new burst of economic activity and higher consumer
prices, both of which will put upward pressure on interest rates.
Thus, we are cautious on both bonds and stocks for the second half of this year.
The equity market appears to be more overextended than the bond market, although
both are running well above their average total return trends. We believe the
high rates of return earned in the first half are not sustainable for the full
year.
The Fed has been holding short-term rates steady; however, higher growth and
inflation will begin to push market interest rates up. We believe the Fed is
falling behind the trend toward higher prices, and will be forced to raise
interest rates again as the inflation rate increases later this year.
Strategically, we would remain cautious now, and average in new investments on
significant pullbacks. The conservative investment virtues of patience and
discipline are those most likely to be rewarded during the remainder of the
year.
Please read the Portfolio Managers' Reviews, which follow this letter, for a
detailed perspective on the Funds' performance and our strategy going forward.
We appreciate your continued trust and confidence in IAI. If there is any way we
can serve you better, please let us know by calling our toll-free Investor
Services Hotline at 1-800-945-3863.
Sincerely,
/s/ Noel P. Rahn
- ----------------
Noel P. Rahn
Chairman
4
<PAGE>
Fund Managers' Review
---------------------
IAI Regional Portfolio
[GLOBE ARTWORK]
IAI Regional Portfolio
[PHOTO]
Julian P. "Bing"
Carlin, CFA
IAI Regional Portfolio Manager
[PHOTO]
Mark C. Hoonsbeen,
CFA
IAI Regional Portfolio
Manager
During the first half of 1995, large-cap companies outperformed small-cap
companies. However, leadership changed late in the second quarter as small-cap
companies surged ahead. The Fund owns a diversified mix of both large and small
cap companies.
The groups that led performance at the end of 1994 have continued to advance
strongly during the first half of 1995. The two best performing sectors of our
market have been the telecommunications and financial groups.
The telecommunications companies that have contributed most to performance are
those that are serving the needs of the rapidly growing information
superhighway. And, as interest rates have declined, the earnings for financial
companies have soared, particularly for specialty finance companies. In
addition, even though the capital goods sector has not been a major performer as
a group, some broadly diversified capital goods companies have performed
extremely well.
Value of $10,000 Investment+
<TABLE>
<CAPTION>
[GRAPH APPEARS HERE]
IAI Regional Portfolio S&P
(Inception 1/31/94) 500 INDEX
- --------------------------------------------------------------------
<S> <C> <C>
Measurement Pt-
01/31/94 $10,000 $10,000
06/30/94 $ $
12/31/94 $ $
06/30/95 $11,986 $11,782
</TABLE>
<TABLE>
<CAPTION>
Average Annual Returns+
Through 6/30/95
Since
Inception
Six Months** 1/31/94
==========================================================
<S> <C> <C>
IAI Regional Portfolio 12.86% 13.70%
..........................................................
S&P 500 Index 20.19% 12.27%*
</TABLE>
+ Past performance is not predictive of future performance
* As of 2/1/94
** Not annualized
5
<PAGE>
Fund Managers' Review
---------------------
IAI Balanced Portfolio
[GLOBE ARTWORK]
IAI Balanced Portfolio
[PHOTO]
Larry R. Hill, CFA
IAI Balanced Portfolio
Manager
[PHOTO]
John A. Twele, CFA
IAI Balanced Portfolio
Manager
[PHOTO]
Mark L. Simenstad, CFA
IAI Balanced Portfolio
Manager
The asset allocation of the IAI Balanced Portfolio is currently 60% invested in
stocks and 40% invested in bonds.
In the stock portion of the portfolio, we continued to apply our bottom-up
approach in the first half of 1995, to identify high quality stocks and
capitalize on opportunities caused by market overreactions to short-term
earnings disappointments.
Our outlook for the fixed income market is cautious. We believe that going
forward, yield, not bond price appreciation, will contribute the most to total
fixed income performance. We have maintained our position in a high quality
intermediate-term security and added exposure in preferred stock to enhance
portfolio yield.
Value of $10,000 Investment+
<TABLE>
<CAPTION>
[GRAPH APPEARS HERE]
IAI Balanced Portfolio S&P 500 Lehman Government/
(inception 2/03/94) Index Corporate Bond Index
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Measurement Pt-
02/03/94 $10,000 $10,000 $10,000
06/30/94 $ $ $
12/31/94 $ $ $
06/30/95 $11,282 $11,782 $10,627
</TABLE>
Average Annual Returns+
Through 6/30/95
<TABLE>
<CAPTION>
Since Inception
Six Months** 2/3/94
==============================================================================
<S> <C> <C>
IAI Balanced Portfolio 10.39% 8.98%
..............................................................................
S&P 500 Index 20.19% 12.27%*
..............................................................................
Lehman Government/Corporate Bond Index 11.80% 4.39%*
</TABLE>
+ Past performance is not predictive of future performance
* As of 2/1/94
** Not annualized
6
<PAGE>
Fund Manager's Review
---------------------
IAI Reserve Portfolio
[GLOBE ARTWORK]
IAI Reserve Portfolio
[PHOTO]
Timothy A. Palmer, CFA
IAI Reserve Portfolio
Manager
The IAI Reserve Portfolio continues to invest in high quality debt issues to
pursue its goals of current income and principal preservation.
The Portfolio is currently invested 23.6% in United States Treasuries and 76.4%
in agency discount notes.
The U.S. economy is in the latter half of the second phase of the credit cycle,
which is characterized by an expanding economy, diminishing resource capacity,
and adequate credit availability. The Fed has followed a loose monetary policy,
and even though economic growth slowed in the first half of 1995, it is likely
to increase later this year and put upward pressure on interest rates.
Strategically, we continue to maintain a conservative risk stance both in terms
of duration and quality.
Value of $10,000 Investment+
<TABLE>
<CAPTION>
[GRAPH APPEARS HERE]
IAI Reserve Portfolio Salomon Brothers
(Inception 4/7/94) One Year Treasury Bill
- --------------------------------------------------------------------------------
<S> <C> <C>
Measurement Pt-
04/07/94 $10,000 $10,000
06/30/94 $ $
12/31/94 $ $
06/30/95 $10,496 $10,716
</TABLE>
<TABLE>
<CAPTION>
Average Annual Returns+
Through 6/30/95
Since Inception
Six Months** 4/07/94
================================================================
<S> <C> <C>
IAI Reserve Portfolio 2.65% 4.02%
................................................................
Salomon Brothers One Year
Treasury Bill Index 4.73% 5.69%*
</TABLE>
+ Past performance is not predictive of future performance
* As of 4/1/94
** Not annualized
7
<PAGE>
IAI RETIREMENT FUNDS, INC.
================================================================================
I A I R E G I O N A L P O R T F O L I O
================================================================================
(percentage figures indicate percentage of total net assets)
June 30, 1995
(unaudited)
<TABLE>
<CAPTION>
====================================================
COMMON STOCKS - 70.9%
====================================================
MARKET
QUANTITY VALUE (a)
-------- -----------
<S> <C> <C>
Commercial Services - 3.6%
Banta 700 $ 23,275
Donnelley (R.R.) & Sons 900 32,400
Grainger 200 11,750
Manpower 200 5,100
Merrill 600 11,100
-----------
83,625
- -----------------------------------------------------
Consumer Durables - 6.4%
Bandag 600 37,500
Briggs & Stratton 200 6,900
Clarcor 100 2,287
Department 56 (b) 400 15,300
Harley-Davidson 1,400 34,125
ITI Technologies (b) 500 11,875
Newell 1,500 36,750
Winnebago Industries 500 4,375
-----------
149,112
- -----------------------------------------------------
Consumer Non-Durables - 1.8%
Sara Lee 800 22,800
Wrigley 400 18,550
-----------
41,350
- -----------------------------------------------------
Consumer Services - 2.5%
Buffets (b) 1,400 19,075
McDonald's 1,000 39,125
-----------
58,200
- -----------------------------------------------------
Electronic Technology - 5.5%
ADC Telecommunications (b) 300 10,650
Aetrium (b) 1000 18,000
Cyberoptics (b) 400 10,050
General Instrument (b) 900 34,537
Motorola 600 40,275
Tellabs (b) 300 14,400
-----------
127,912
- -----------------------------------------------------
Energy Minerals - 2.5%
Amoco 500 33,313
Royal Dutch Petroleum, ADR 200 24,375
-----------
57,688
- -----------------------------------------------------
Finance - 8.4%
Bankers Life Holding 1,300 24,700
Equitable of Iowa 900 29,588
First Chicago 350 20,956
Reliaster Financial 1,500 57,375
Roosevelt Financial Group 1,300 21,450
TCF Financial 600 28,500
Winthrop Resources 1,000 13,250
-----------
195,819
- -----------------------------------------------------
Health Services - 1.9%
InStent (b) 1,600 22,800
United HealthCare 500 20,687
-----------
43,487
- -----------------------------------------------------
Health Technology - 7.5%
Abbott Laboratories 500 20,250
Baxter International 1,000 36,375
CIMA Labs (b) 2,000 7,750
Diametrics Medical (b) 2,000 19,250
Medtronic 100 7,712
Spine-Tech (b) 1,000 10,500
Sybron (b) 1,200 47,850
Warner-Lambert 300 25,912
-----------
175,599
- -----------------------------------------------------
Process Industries - 6.2%
Aptargroup 1,100 35,338
Archer Daniels Midland 1,600 29,800
BMC Industries 1,200 30,150
Bemis Company 800 20,800
Nalco Chemical 800 29,100
-----------
145,188
- -----------------------------------------------------
Producer Manufacturing - 13.4%
ABC Rail Products (b) 1,000 22,750
Automotive Industries Holdings (b) 700 18,812
Borg-Warner Automotive 600 17,100
Cherry Corporation, Class A (b) 500 6,625
Deere & Company 200 17,125
Harnischfeger 800 27,700
Honeywell 200 8,625
IDEX 700 23,450
Illinois Tool Works 300 16,500
Itel (b) 950 37,050
Johnson Controls 400 22,600
Juno Lighting 500 7,875
Lindsay Manufacturing (b) 600 20,400
</TABLE>
See Accompanying Notes to Fund Portfolios on page 14
8
<PAGE>
IAI RETIREMENT FUNDS, INC.
================================================================================
I A I R E G I O N A L P O R T F O L I O
================================================================================
(percentage figures indicate percentage of total net assets)
June 30, 1995
(unaudited)
<TABLE>
<CAPTION>
MARKET
QUANTITY VALUE (a)
-------- ----------------
<S> <C> <C>
Minnesota Mining & Manufacturing 200 $ 11,450
Pentair 100 4,350
Truck Components (b) 1,000 15,625
Woodhead Industries 400 5,400
Zebra Technologies, Class A (b) 550 29,287
---------------
312,724
- ----------------------------------------------------------------
Retail Trade - 4.2%
Boise Cascade Office Products (b) 800 17,800
Casey's General Stores 1,000 17,625
Kohl's (b) 300 13,688
Sears Roebuck 800 47,900
---------------
97,013
- ----------------------------------------------------------------
Technology Services - 2.0%
Bell & Howell Holdings (b) 1,000 20,250
FIserv (b) 1,000 27,750
---------------
48,000
- ----------------------------------------------------------------
Transportation - 2.8%
Illinois Central 1,500 51,750
Wisconsin Central Transportation (b) 300 14,475
----------------
66,225
- ----------------------------------------------------------------
Utilities - 2.2%
Ameritech 1,150 50,600
----------------
50,600
- ----------------------------------------------------------------
Total Investments in Common Stock
(Cost: $1,510,915) $ 1,652,542
- ----------------------------------------------------------------
</TABLE>
See Accompanying Notes to Fund Portfolios on page 14
9
<PAGE>
IAI RETIREMENT FUNDS, INC.
================================================================================
I A I R E G I O N A L P O R T F O L I O
================================================================================
(percentage figures indicate percentage of total net assets)
June 30, 1995
(unaudited)
<TABLE>
<CAPTION>
===================================================================
SHORT-TERM SECURITIES - 12.7%
===================================================================
PRINCIPAL MARKET
RATE MATURITY AMOUNT VALUE (a)
---------- -------- --------- ----------
<S> <C> <C> <C> <C>
U.S. Government Securities - 12.7%
U.S. Treasury Bill 5.56% 09/21/95 $300,000 $ 296,428
- ------------------------------------------------------------------------------------------------------------
Total Investments in Short-Term Securities
(Cost: $296,303) $296,428
- ------------------------------------------------------------------------------------------------------------
Total Investments in Securities
(Cost: $1,807,218) (c) $1,948,970
- ------------------------------------------------------------------------------------------------------------
Other Assets and Liabilities (Net) - 16.4% $ 381,897
- ------------------------------------------------------------------------------------------------------------
Total Net Assets $2,330,867
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See Accompanying Notes to Fund Portfolios on page 14
10
<PAGE>
IAI RETIREMENT FUNDS, INC.
================================================================================
I A I B A L A N C E D P O R T F O L I O
================================================================================
(percentage figures indicate percentage of total net assets)
June 30, 1995
(unaudited)
<TABLE>
<CAPTION>
=====================================================
COMMON STOCKS - 45.0%
=====================================================
MARKET
QUANTITY VALUE (a)
-------- ----------
<S> <C> <C>
Commercial Services - 0.4%
Sensormatic Electronics 40 $ 1,420
- -----------------------------------------------------
Consumer Durables - 2.8%
American Greetings, Class A 75 2,194
Mattel 175 4,550
Newell 90 2,205
--------
8,949
- -----------------------------------------------------
Consumer Non-Durables - 2.3%
Philip Morris 50 3,719
UST 120 3,570
--------
7,289
- -----------------------------------------------------
Consumer Services - 3.5%
CUC International (b) 50 2,100
McDonald's 90 3,521
Viacom, Class B (b) 83 3,849
Wendy's International 100 1,787
--------
11,257
- -----------------------------------------------------
Electronic Technology - 7.3%
Cabletron Systems (b) 40 2,130
Cisco Systems (b) 45 2,272
Compaq Computer (b) 100 4,538
Intel 50 3,163
Motorola 105 7,048
Scientific-Atlanta 200 4,400
--------
23,551
- -----------------------------------------------------
Energy Minerals - 1.9%
Anadarko Petroleum 65 2,803
Enron Oil & Gas 145 3,154
--------
5,957
- -----------------------------------------------------
Finance - 3.8%
Federal National Mortgage 25 2,359
Franklin Resources 30 1,335
General Re 15 2,008
NationsBank 40 2,145
Norwest 150 4,313
--------
12,160
- -----------------------------------------------------
Health Services - 5.8%
Cardinal Health 60 2,835
Columbia HCA Healthcare 145 6,271
United HealthCare 130 5,379
US Healthcare 135 4,134
--------
18,619
- -----------------------------------------------------
Health Technology - 1.8%
Bristol-Myers Squibb 30 2,044
Medtronic 20 1,542
Pfizer 25 2,309
--------
5,895
- -----------------------------------------------------
Industrial Service - 0.4%
Schlumberger, ADR 20 1,243
- -----------------------------------------------------
Non-Energy Minerals - 0.8%
Georgia Pacific 30 2,603
- -----------------------------------------------------
Process Industries - 1.7%
Great Lakes Chemical 60 3,615
Morton International 65 1,901
--------
5,516
- -----------------------------------------------------
Retail Trade - 7.0%
Best Buy Company (b) 100 2,663
Home Depot 130 5,281
Lowe's Companies 100 2,987
Pep Boys-Manny, Moe & Jack 100 2,675
Tandy 30 1,556
Wal-Mart Stores 200 5,350
Walgreen 40 2,005
--------
22,517
- -----------------------------------------------------
Technology Services - 3.4%
General Motors, Class E 100 4,350
Microsoft (b) 50 4,519
Sybase (b) 70 2,021
--------
10,890
- -----------------------------------------------------
Utilities - 2.1%
Airtouch Communications (b) 150 4,275
Enron 70 2,459
--------
6,734
- -----------------------------------------------------
Total Investments in Common Stocks
(Cost: $ 129,814).................... $ 144,600
- -----------------------------------------------------
=====================================================
PREFERRED STOCKS, NONCONVERTIBLE - 5.5%
=====================================================
Grand Metro Delaware 9.42%
Series A 550 $ 15,263
Nokia ADR A 40 2,385
--------
17,648
- -----------------------------------------------------
Total Investments in Preferred Stocks
(Cost: $ 16,264)..................... $ 17,648
- -----------------------------------------------------
</TABLE>
See Accompanying Notes to Fund Portfolios on Page 14
11
<PAGE>
IAI RETIREMENT FUNDS, INC.
================================================================================
I A I B A L A N C E D P O R T F O L I O
================================================================================
(percentage figures indicate percentage of total net assets)
June 30, 1995
(unaudited)
===============================================================
U.S. GOVERNMENT OBLIGATIONS - 23.5%
===============================================================
<TABLE>
<CAPTION>
PRINCIPAL MARKET
RATE MATURITY AMOUNT VALUE (a)
--------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
U.S. Government Obligations - 23.5%
U.S. Treasury Note 7.50% 05/15/02 $70,000 $ 75,359
- -------------------------------------------------------------------------------------------------------
Total Investments in U.S. Government Obligations
(Cost: $70,402) $ 75,359
- -------------------------------------------------------------------------------------------------------
Total Investments in Securities
(Cost: $216,480) (c) $237,607
- -------------------------------------------------------------------------------------------------------
Other Assets and Liabilities (Net) - 26.0% $ 83,458
- -------------------------------------------------------------------------------------------------------
Total Net Assets $321,155
- -------------------------------------------------------------------------------------------------------
</TABLE>
See Accompanying Notes to Fund Portfolios on Page 14
12
<PAGE>
IAI RETIREMENT FUNDS, INC.
================================================================================
I A I R E S E R V E P O R T F O L I O
================================================================================
(percentage figures indicate percentage of total net assets)
June 30, 1995
(unaudited)
=========================================================================
SHORT-TERM SECURITIES - 93.3%
=========================================================================
<TABLE>
<CAPTION>
PRINCIPAL MARKET
RATE MATURITY AMOUNT VALUE (a)
-------- --------- --------- -----------
<S> <C> <C> <C> <C>
U.S. Government and Government Agency Securities - 93.3%
U.S. Treasury Bills 6.03% 10/19/95 $ 50,000 $ 49,183
6.89% 02/08/96 100,000 96,755
-----------
145,938
- ------------------------------------------------------------------------------------------------------------------
Federal Agricultural Mortgage Corporation (discount note) 5.85% 08/16/95 100,000 99,253
- ------------------------------------------------------------------------------------------------------------------
Federal Farm Credit Bank (discount note) 5.85% 08/01/95 75,000 74,622
- ------------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank (discount note) 5.84% 07/10/95 100,000 99,854
- ------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corporation (discount note) 5.87% 07/05/95 100,000 99,935
- ------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Association (discount note) 5.80% 08/02/95 50,000 49,742
5.78% 08/28/95 50,000 49,534
-----------
99,276
- ------------------------------------------------------------------------------------------------------------------
Total Investments in U.S. Government and Government Agency Securities
(Cost: $618,145) $618,878
- ------------------------------------------------------------------------------------------------------------------
Total Investments in Securities
(Cost: $618,145) (c) $618,878
- ------------------------------------------------------------------------------------------------------------------
Other Assets and Liabilities (Net) - 6.7% $44,673
- ------------------------------------------------------------------------------------------------------------------
Total Net Assets $663,551
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See Accompanying Notes to Fund Portfolios on page 14
13
<PAGE>
IAI RETIREMENT FUNDS, INC.
================================================================================
N O T E S T O F U N D P O R T F O L I O S
================================================================================
June 30, 1995
(unaudited)
(a)
Market value of securities is determined as described in Note 1 to the financial
statements, under "Security Valuation".
(b)
Currently non-income producing.
(c)
At June 30, 1995, the cost of securities for federal income tax purposes and the
aggregate gross unrealized appreciation and depreciation based on that cost
were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
IAI REGIONAL IAI BALANCED IAI RESERVE
PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cost for federal income tax purposes $ 1,809,358 $ 216,480 $ 618,145
============= ============== =============
Gross unrealized appreciation $ 155,855 $ 23,426 $ 733
Gross unrealized depreciation (16,236) (2,299) -
------------- -------------- -------------
Net unrealized appreciation $ 139,619 $ (21,127) $ 733
============= ============== =============
- ---------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
IAI RETIREMENT FUNDS, INC.
================================================================================
S T A T E M E N T S O F A S S E T S A N D L I A B I L I T I E S
================================================================================
June 30, 1995
(unaudited)
<TABLE>
<CAPTION>
===============================================================================================================
IAI IAI IAI
Regional Balanced Reserve
Portfolio Portfolio Portfolio
------------ ------------ ------------
<C> <C> <C> <C>
ASSETS
Investments in securities, at market
(Cost: $1,807,218; $216,480; and $618,145) $ 1,948,970 $ 237,607 $ 618,878
Cash in bank on demand deposit 357,028 57,849 22,906
Dividends and accrued interest receivable 2,203 743 -
Organization costs 9,064 9,084 9,730
Receivable from investment securities sold 59,561 - -
Due from Advisers (note 2) 3,363 11,957 8,240
Other 5,203 3,915 3,797
----------- ------------ ------------
Total Assets 2,385,392 321,155 663,551
----------- ------------ ------------
LIABILITIES
Payable for investment securities purchased 54,525 - -
----------- ------------ ------------
Total liabilities 54,525 - -
----------- ------------ ------------
Net assets applicable to outstanding capital stock $ 2,330,867 $ 321,155 $ 663,551
=========== ============ ============
REPRESENTED BY:
Capital stock $ 1,947 $ 287 $ 661
Additional paid-in capital 2,121,578 296,573 661,478
Undistributed net investment income 10,344 2,759 575
Accumulated net realized gains on investments 55,246 409 104
Unrealized appreciation on investments 141,752 21,127 733
----------- ------------ ------------
Total - representing net assets applicable to outstanding
capital stock $ 2,330,867 $ 321,155 $ 663,551
=========== ============ ============
Shares of common stock outstanding; authorized 10 billion shares of
$.01 par value stock each of Series A, B, and C stock 194,671 28,706 66,070
----------- ------------ ------------
Net asset value per share of outstanding capital stock $ 11.97 $ 11.19 $ 10.04
=========== ============ ============
===============================================================================================================
</TABLE>
See Accompanying Notes to Financial Statements on page 23
15
<PAGE>
IAI RETIREMENT FUNDS, INC.
================================================================================
S T A T E M E N T S O F O P E R A T I O N S
================================================================================
June 30, 1995
(unaudited)
<TABLE>
<CAPTION>
==========================================================================================================
IAI IAI IAI
Regional Balanced Reserve
Portfolio Portfolio Portfolio
------------- ------------- -------------
<S> <C> <C> <C>
NET INVESTMENT INCOME:
Income:
Dividends $ 10,098 $ 601 $ -
Interest 9,147 3,679 18,480
------------- ------------- -------------
Total income 19,245 4,280 18,480
------------- ------------- -------------
Expenses:
Investment advisory fees 4,632 799 1,425
Dividend - disbursing, administrative, and accounting fees 713 122 317
Legal fees 83 52 34
Custodian fees 2,892 2,479 1,360
Amortization of organization costs 1,249 1,249 1,035
Audit fees 2,156 2,146 2,146
Printing and shareholder reporting 334 334 334
Registration fees 225 225 225
Other expenses 104 101 101
------------- ------------- -------------
Total expenses 12,388 7,498 6,977
------------- ------------- -------------
Less fees waived by Advisers (3,480) (5,977) (4,282)
------------- ------------- -------------
Net expenses 8,908 1,521 2,695
------------- ------------- -------------
Net investment income 10,337 2,759 15,785
------------- ------------- -------------
NET REALIZED AND UNREALIZED GAINS (LOSSES):
Net realized gains 59,345 1,079 117
Net change in unrealized appreciation or depreciation 120,158 20,784 733
------------- ------------- -------------
Net gain on investments 179,503 21,863 850
------------- ------------- -------------
Net increase in net assets resulting from operations $ 189,840 $ 24,622 $ 16,635
============= ============= =============
=========================================================================================================
</TABLE>
See Accompanying Notes to Financial Statements on page 23
16
<PAGE>
IAI RETIREMENT FUNDS, INC.
================================================================================
S T A T E M E N T S O F C H A N G E S I N N E T A S S E T S
================================================================================
IAI REGIONAL PORTFOLIO
<TABLE>
<CAPTION>
======================================================================================================================
Six months ended Period ended
June 30, 1995 December 31, 1994 *
------------------ --------------------
(Unaudited)
<S> <C> <C>
OPERATIONS:
Net investment income $ 10,337 $ 2,183
Net realized gains (losses) 59,345 (4,099)
Net change in unrealized appreciation or depreciation 120,158 21,594
------------------- -------------------
Net increase in net assets resulting from operations 189,840 19,678
------------------- -------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (2,960) -
------------------- -------------------
Total distributions (2,960) -
------------------- -------------------
CAPITAL SHARE TRANSACTIONS (note 4):
Net proceeds from sale of shares 1,305,645 991,183
Net asset value of shares issued to shareholders in
reinvestment of distributions 2,976 -
Cost of shares redeemed (29,816) (145,679)
------------------- -------------------
Increase in net assets from capital share transactions 1,278,805 845,504
------------------- -------------------
Total increase in net assets 1,465,685 865,182
Net assets at beginning of period 865,182 -
------------------- -------------------
Net assets at end of period $ 2,330,867 $ 865,182
(including undistributed net investment income of ------------------- -------------------
$10,344 and $2,967)
======================================================================================================================
</TABLE>
* Commencement of operations January 31, 1994
See Accompanying Notes to Financial Statements on page 23
17
<PAGE>
IAI RETIREMENT FUNDS, INC.
================================================================================
S T A T E M E N T S O F C H A N G E S I N N E T A S S E T S
================================================================================
IAI BALANCED PORTFOLIO
<TABLE>
<CAPTION>
============================================================================================================================
Six months ended Period ended
June 30, 1995 December 31, 1994 *
---------------- -------------------
(Unaudited)
<S> <C> <C>
OPERATIONS:
Net investment income $ 2,759 $ 1,944
Net realized gains (losses) 1,079 (670)
Net change in unrealized appreciation or depreciation 20,784 343
---------------- -------------------
Net increase in net assets resulting from operations 24,622 1,617
---------------- -------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (2,721) -
---------------- -------------------
Total distributions (2,721) -
---------------- -------------------
CAPITAL SHARE TRANSACTIONS (note 4):
Net proceeds from sale of shares 126,623 225,111
Net asset value of shares issued to shareholders in
reinvestment of distributions 2,720 -
Cost of shares redeemed (35,757) (21,060)
---------------- -------------------
Increase in net assets from capital share transactions 93,586 204,051
---------------- -------------------
Total increase in net assets 115,487 205,668
Net assets at beginning of period 205,668 -
---------------- -------------------
Net assets at end of period $ 321,155 $ 205,668
---------------- -------------------
(including undistributed net investment income of
$2,759 and $2,721)
============================================================================================================================
</TABLE>
* Commencement of operations February 3, 1994
See Accompanying Notes to Financial Statements on page 23
18
<PAGE>
IAI RETIREMENT FUNDS, INC.
================================================================================
S T A T E M E N T S O F C H A N G E S I N N E T A S S E T S
================================================================================
IAI RESERVE PORTFOLIO
<TABLE>
<CAPTION>
============================================================================================================================
Six months ended Period ended
June 30, 1995 December 31, 1994 *
---------------- -------------------
(Unaudited)
<S> <C> <C>
OPERATIONS:
Net investment income $ 15,785 $ 6,547
Net realized gains (losses) 117 (13)
Net change in unrealized appreciation or depreciation 733 -
---------------- -------------------
Net increase in net assets resulting from operations 16,635 6,534
---------------- -------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (16,424) (5,962)
---------------- -------------------
Total distributions (16,424) (5,962)
---------------- -------------------
CAPITAL SHARE TRANSACTIONS (note 4):
Net proceeds from sale of shares 323,883 862,336
Net asset value of shares issued to shareholders in
reinvestment of distributions 16,489 5,962
Cost of shares redeemed (220,878) (325,024)
---------------- -------------------
Increase in net assets from capital share transactions 119,494 543,274
---------------- -------------------
Total increase in net assets 119,705 543,846
Net assets at beginning of period 543,846 -
---------------- -------------------
Net assets at end of period $ 663,551 $ 543,846
---------------- -------------------
(including undistributed net investment income of
$575 and $1,214)
============================================================================================================================
</TABLE>
* Commencement of operations April 7, 1994
See Accompanying Notes to Financial Statements on page 23
19
<PAGE>
IAI RETIREMENT FUNDS, INC.
===============================================================================
F I N A N C I A L H I G H L I G H T S
===============================================================================
IAI REGIONAL PORTFOLIO
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>
===================================================================================================================================
Six Months Period from
Ended January 31, 1994 **** to
June 30, 1995 December 31, 1994
--------------- -------------------------
(Unaudited)
<S> <C> <C>
NET ASSET VALUE:
Beginning of period $ 10.62 $ 10.00
--------------- ------------------------
OPERATIONS:
Net investment income 0.05 0.03
Net realized and unrealized gains 1.32 0.59
--------------- ------------------------
Total from operations 1.37 0.62
--------------- ------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (0.02) -
--------------- ------------------------
Total distributions (0.02) -
--------------- ------------------------
NET ASSET VALUE:
End of period $ 11.97 $ 10.62
=============== ========================
Total investment return* 12.86% 6.20%
Net assets at end of period (000's omitted) $ 2,331 $ 865
RATIOS:
Expenses to average daily net assets** 1.25% *** 1.13%***
Net investment income to average daily net assets** 1.45% *** 0.81%***
Portfolio turnover rate (excluding short-term securities) 75.4% 127.6%
===================================================================================================================================
</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 Portfolio's adviser voluntarily waived $3,480 and $7,455 in expenses.
If the Portfolio had been charged for these expenses, the ratio of
expenses to average daily net assets would have been 1.74% and 3.90%, and
the ratio of net investment income to average daily net assets would
have been .96% and (1.96%).
**** Commencement of operations
See Accompanying Notes to Financial Statements on page 23
20
<PAGE>
IAI RETIREMENT FUNDS, INC.
===============================================================================
F I N A N C I A L H I G H L I G H T S
===============================================================================
IAI BALANCED PORTFOLIO
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>
===================================================================================================================================
Six Months Period from
Ended February 3, 1994 **** to
June 30, 1995 December 31, 1994
--------------- ------------------------
(Unaudited)
<S> <C> <C>
NET ASSET VALUE:
Beginning of period $ 10.22 $ 10.00
--------------- ------------------------
OPERATIONS:
Net investment income 0.05 0.10
Net realized and unrealized gains 1.01 0.12
--------------- ------------------------
Total from operations 1.06 0.22
--------------- ------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (0.09) -
--------------- ------------------------
Total distributions (0.09) -
--------------- ------------------------
NET ASSET VALUE:
End of period $ 11.19 $ 10.22
=============== ========================
Total investment return* 10.39% 2.20%
Net assets at end of period (000's omitted) $ 321 $ 206
RATIOS:
Expenses to average daily net assets** 1.25% *** 1.25%***
Net investment income to average daily net assets** 2.27% *** 2.28%***
Portfolio turnover rate (excluding short-term securities) 22.0% 21.6%
===================================================================================================================================
</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 Portfolio's adviser voluntarily waived $5,977 and $7,756 in expenses.
If the Portfolio had been charged for these expenses, the ratio of
expenses to average daily net assets would have been 6.16% and 10.33%,
and the ratio of net investment income to average daily net assets would
have been (2.64%) and (6.80%).
**** Commencement of operations
See Accompanying Notes to Financial Statements on page 23
21
<PAGE>
IAI RETIREMENT FUNDS, INC.
===============================================================================
F I N A N C I A L H I G H L I G H T S
===============================================================================
IAI RESERVE PORTFOLIO
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>
===================================================================================================================================
Six Months Period from
Ended April 7, 1994 **** to
June 30, 1995 December 31, 1994
--------------- -------------------------
(Unaudited)
<S> <C> <C>
NET ASSET VALUE:
Beginning of period $ 10.03 $ 10.00
--------------- ------------------------
OPERATIONS:
Net investment income 0.24 0.20
Net realized and unrealized gains 0.02 0.02
--------------- ------------------------
Total from operations 0.26 0.22
--------------- ------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (0.25) (0.19)
--------------- ------------------------
Total distributions (0.25) (0.19)
--------------- ------------------------
NET ASSET VALUE:
End of period $ 10.04 $ 10.03
=============== ========================
Total investment return* 2.65% 2.25%
Net assets at end of period (000's omitted) $ 664 $ 544
RATIOS:
Expenses to average daily net assets** 0.85% *** 0.85%***
Net investment income to average daily net assets** 4.98% *** 3.56%***
Portfolio turnover rate (excluding short-term securities) 0.0% 0.0%
===================================================================================================================================
</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 Portfolio's adviser voluntarily waived $4,282 and $6,930 in expenses.
If the Portfolio had been charged for these expenses, the ratio of
expenses to average daily net assets would have been 2.20% and 4.62%, and
the ratio of net investment income to average daily net assets would
have been 3.63% and (.21%).
**** Commencement of operations
See Accompanying Notes to Financial Statements on page 23
22
<PAGE>
IAI RETIREMENT FUNDS, INC.
================================================================================
NOTES TO FINANCIAL STATEMENTS
================================================================================
June 30, 1995
(unaudited)
[1]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
IAI Retirement Funds, Inc. is registered under the Investment Company Act of
1940 (as amended) as a diversified, open-end management investment company. The
IAI Regional Portfolio ("Regional Portfolio"), IAI Balanced Portfolio ("Balanced
Portfolio") and IAI Reserve Portfolio ("Reserve Portfolio"), (collectively
referred to as "the Portfolios") are separate portfolios of IAI Retirement
Funds, Inc. Significant accounting policies followed by the Portfolios are
summarized below:
SECURITY VALUATION
Investments in securities traded on national securities exchanges are valued at
the last reported sales price at the close of each business day; securities
traded on the over-the-counter market are valued at the last reported bid price.
The values of debt securities are determined using pricing services or prices
quoted by independent brokers. Restricted securities for which there is no
public market are valued at fair value in good faith as determined by the Board
of Directors. Short-term securities with a maturity of 60 days or less from the
date of purchase are valued at amortized cost. Short-term securities with a
maturity greater than 60 days from the date of purchase are marked-to-market on
a daily basis.
FEDERAL TAXES
Since it is each Portfolio's policy to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of their taxable income to shareholders, no provision for income
taxes is required.
Net investment income and net realized gains may differ for financial statement
and tax purposes primarily because of the deferral of "wash sale" losses for tax
purposes. The character of distributions made during the year for net
investment income or net realized gains may also differ from its ultimate
characterization for tax purposes.
For federal income tax purposes, Regional Portfolio, Balanced Portfolio and
Reserve Portfolio have capital loss carryovers of $1,959, $670, and $13,
respectively, at December 31, 1994 which, if not offset by subsequent capital
gains, will expire in 2002. It is unlikely the Board of Directors will
authorize a distribution of any net realized gains until the available capital
loss carryover is offset or expires.
SECURITY TRANSACTIONS AND INVESTMENT INCOME
The Portfolios record security transactions on trade date, the date the
securities are purchased or sold. Dividend income is recorded on the ex-
dividend date. Interest income is recorded on the accrual basis. The
Portfolios amortize discount purchased on long-term bonds using the level yield
method of amortization. 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 are recorded on the record date. Cash payment and
reinvestments in additional shares are made at the net asset value at the close
of business on the payable date. Distributions from net investment income are
made semi-annually for Regional Portfolio and Balanced Portfolio and monthly for
Reserve Portfolio. Capital gains, if any, are primarily distributed at the end
of the calendar year. Additional capital gains distributions as needed to
comply with federal tax regulations are distributed during the year.
ORGANIZATION COSTS
Organization costs are being amortized over 60 months on a straight-line basis.
23
<PAGE>
IAI RETIREMENT FUNDS, INC.
================================================================================
NOTES TO FINANCIAL STATEMENTS
================================================================================
June 30, 1995
(unaudited)
[2]
FEES AND EXPENSES
Under the terms of an investment advisory agreement, Regional Portfolio,
Balanced Portfolio and Reserve Portfolio pay Investment Advisers, Inc.
(Advisers) a management fee based upon average daily net assets equal, on an
annual basis, to .65%, .65% and .45%, respectively.
The Portfolios also pay an annual fee to Advisers for acting as the Portfolios'
dividend-disbursing, administrative, and accounting services agent. The fee is
based on an annual rate of .10% of average daily net assets for each Portfolio.
In addition to the advisory and dividend-disbursing, administrative, and
accounting services fees, the Portfolios are responsible for paying their
operating expenses, including costs incurred in the purchase and sale of assets.
Advisers has currently voluntarily agreed to waive expenses for Regional
Portfolio, Balanced Portfolio and Reserve Portfolio in excess of 1.25%, 1.25%
and .85%, respectively, of average daily net assets.
[3]
INVESTMENT TRANSACTIONS
PURCHASES AND SALES OF SECURITIES
For the period ended June 30, 1995, purchases of securities and sales proceeds,
including maturities, for the Reserve Portfolio aggregated $3,078,090 and
$2,977,261, respectively. Purchases of securities and sales proceeds, other
than investments in short-term securities for Regional Portfolio and Balanced
Portfolio, were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------
PURCHASES SALES
- --------------------------------------------------
<S> <C> <C>
IAI REGIONAL PORTFOLIO $ 1,616,335 $ 818,709
- --------------------------------------------------
IAI BALANCED PORTFOLIO $ 105,516 $ 39,428
- --------------------------------------------------
</TABLE>
[4]
CAPITAL STOCK
The Portfolios each have authorized 10 billion shares of $.01 par value stock.
Transactions in shares of capital stock during the periods indicated were as
follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
REGIONAL PORTFOLIO BALANCED PORTFOLIO RESERVE PORTFOLIO
------------------------------ ---------------------------- --------------------------------
Period from Period from
January 31, February 3, Period from
Six months 1994 to Six months 1994 to Six months April 7, 1994
ended June 30, December 31, ended June December 31, ended June 30, to December 31,
1995 1994 30, 1995 1994 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SOLD 115,681 95,403 11,608 22,202 32,216 86,052
ISSUED FOR REINVESTED 250 0 243 0 1,643 595
DISTRIBUTIONS
REDEEMED (2,700) (13,963) (3,270) (2,077) (21,984) (32,452)
- ----------------------------------------------------------------------------------------------------------------------------------
INCREASE IN SHARES
OUTSTANDING 113,231 81,440 8,581 20,125 11,875 54,195
====================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
this page is intentionally left blank
25
<PAGE>
===================================
Distributor
IAI Securities, Inc.
Investment Adviser
and Manager
Investment Advisers, Inc.
P.O. Box 357
Minneapolis, MN 55440-0357 USA
800.945.3863
612.376.2700
Custodian
Norwest Bank Minnesota, N.A.
Sixth and Marquette
Minneapolis, MN 55479
Legal Counsel
Dorsey & Whitney P.L.L.P.
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
Noel P. Rahn
Richard E. Struthers
J. Peter Thompson
Charles H. Withers
===================================
[IAI LOGO]
MUTUAL FUNDS
Investment Advisers, Inc.
3700 First Bank Place, P.O. Box 357, Minneapolis, Minnesota 55440-0357 USA
fax 612.376.2737
800.945.3863
612.376.2700
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> IAI Regional Portfolio
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 1,807
<INVESTMENTS-AT-VALUE> 1,949
<RECEIVABLES> 422
<ASSETS-OTHER> 14
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,385
<PAYABLE-FOR-SECURITIES> 55
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 55
<SENIOR-EQUITY> 2
<PAID-IN-CAPITAL-COMMON> 2,122
<SHARES-COMMON-STOCK> 195
<SHARES-COMMON-PRIOR> 81
<ACCUMULATED-NII-CURRENT> 10
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 55
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 142
<NET-ASSETS> 2,331
<DIVIDEND-INCOME> 10
<INTEREST-INCOME> 9
<OTHER-INCOME> 0
<EXPENSES-NET> 9
<NET-INVESTMENT-INCOME> 10
<REALIZED-GAINS-CURRENT> 60
<APPREC-INCREASE-CURRENT> 120
<NET-CHANGE-FROM-OPS> 190
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 116
<NUMBER-OF-SHARES-REDEEMED> 3
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,466
<ACCUMULATED-NII-PRIOR> 2
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 4
<GROSS-ADVISORY-FEES> 5
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 12
<AVERAGE-NET-ASSETS> 1,440
<PER-SHARE-NAV-BEGIN> 10.62
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 1.32
<PER-SHARE-DIVIDEND> .02
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.97
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 03
<NAME> IAI Balanced Portfolio
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 216
<INVESTMENTS-AT-VALUE> 238
<RECEIVABLES> 71
<ASSETS-OTHER> 12
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 321
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 297
<SHARES-COMMON-STOCK> 29
<SHARES-COMMON-PRIOR> 20
<ACCUMULATED-NII-CURRENT> 3
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 21
<NET-ASSETS> 321
<DIVIDEND-INCOME> 1
<INTEREST-INCOME> 3
<OTHER-INCOME> 0
<EXPENSES-NET> 1
<NET-INVESTMENT-INCOME> 3
<REALIZED-GAINS-CURRENT> 1
<APPREC-INCREASE-CURRENT> 21
<NET-CHANGE-FROM-OPS> 25
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12
<NUMBER-OF-SHARES-REDEEMED> 3
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 115
<ACCUMULATED-NII-PRIOR> 2
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 1
<GROSS-ADVISORY-FEES> 1
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7
<AVERAGE-NET-ASSETS> 245
<PER-SHARE-NAV-BEGIN> 10.22
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 1.01
<PER-SHARE-DIVIDEND> .09
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.19
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> IAI Reserve Portfolio
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
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