<PAGE>
========================================================================
IAI RETIREMENT FUNDS, INC.
****
IAI REGIONAL PORTFOLIO
IAI BALANCED PORTFOLIO
IAI RESERVE PORTFOLIO
ANNUAL REPORT
December 31, 1995
=======================================================================
<PAGE>
[LOGO GLOBE ARTWORK]
Table of Contents
IAI Retirement Funds, Inc.
Annual Report
December 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Chairman's Letter................................ 2
Portfolio Managers' Reviews
IAI Regional Portfolio.......................... 3
IAI Balanced Portfolio.......................... 4
IAI Reserve Portfolio........................... 5
Schedules of Investments
IAI Regional Portfolio.......................... 6
IAI Balanced Portfolio.......................... 9
IAI Reserve Portfolio........................... 11
Notes to Schedules of Investments................ 12
Statements of Assets and Liabilities............. 13
Statements of Operations......................... 14
Statements of Changes in Net Assets
IAI Regional Portfolio.......................... 15
IAI Balanced Portfolio.......................... 16
IAI Reserve Portfolio........................... 17
Financial Highlights
IAI Regional Portfolio.......................... 18
IAI Balanced Portfolio.......................... 19
IAI Reserve Portfolio........................... 20
Notes to Financial Statements.................... 21
Independent Auditors' Report..................... 23
Federal Tax Information.......................... 24
</TABLE>
Distributor, Adviser, Custodian,
Legal Counsel, Independent Auditors,
Directors................................ Back Cover
[LOGO OF IAI 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>
[LOGO GLOBE ARTWORK]
Chairman's Letter
IAI Retirement Funds, Inc.
A Great Time To Diversify
[PHOTO OF NOEL P. RAHN]
Noel P. Rahn,
Chairman
By just about any measure, the six months ended December 31, 1995 was one of the
best periods in my memory for U.S. stocks and bonds. The economy has been
behaving just right; not too fast to bring back inflation, and not too slow to
bring on a recession. In addition, American business is the most productive in
the world. It's a perfect recipe for continued success in the markets.
But just as the investment world was gloomy in 1994, let's not assume that
1995's performance is the norm either. Stocks and bonds can be volatile. That's
particularly important to remember when prices are high. One of the most
important investment principles is diversification--not putting all your eggs in
one basket.
The U.S. markets will continue to be impacted by the performance of the economy,
the outlook for inflation, and the level of interest rates. Over the next six
months, the presidential primary season will also play a role. All of these
events are truly unpredictable and uncontrollable by the average investor. That
makes investing a continuing challenge, and another reason to stay diversified.
Economic Outlook
A summary of the economic outlook as provided by Larry Hill, IAI's Chief Fixed
Income Officer, is listed below.
Economic growth will be sluggish early in the year, but a recession is unlikely.
Inflation will not be a threat in the first half. Federal Reserve policy is
reactive and will likely remain on its gradual, go-slow path. However, the Fed
has ample room to aggressively lower short-term rates if the economy
deteriorates rapidly. Politics and the President will play a role this year. The
inability to reach a budget agreement in Washington is a risk to the market.
However, economic fundamentals should remain favorable for the markets.
Please read the Portfolio Managers' Reviews which follow this letter for a
detailed perspective on the Portfolios' 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
2
<PAGE>
Portfolio Manager's Review
[Globe Artwork]
IAI Regional Portfolio
IAI Regional Portfolio
The IAI Regional Portfolio invests in companies located in the Upper midwest, a
region of the United States with an excellent mixture of large, established
corporations as well as hundreds of small to midsized companies. For the year
ended December 31, 1995, the Portfolio returned 33.51%. The Portfolio's largest
gainers were in such industries as agriculture, manufacturing, and
telecommunications.
For several months, there have been signs of an across-the-board slowdown in
corporate profit growth. Since growth in corporate profits is a key variable to
stock price performance, we do not expect 1996 to be a repeat of 1995's
stellar stock market gains. However, the stock market should benefit somewhat
from generally lower interest rates brought about by a slowing economy.
[Photo of Mark C. Hoonsbeen]
Mark C. Hoonsbeen, CFA
IAI Regional Portfolio
Manager
Value of $10,000 Investment+
[GRAPH APPEARS HERE]
- -----------------------------------------------------------------
IAI Regional Portfolio (inception 1-31-94) S&P 500*
- -----------------------------------------------------------------
Feb 94 $ 10,000 $ 9,728
- -----------------------------------------------------------------
Jun 94 $ 10,020 $ 9,343
- -----------------------------------------------------------------
Dec 94 $ 10,620 $ 9,803
- -----------------------------------------------------------------
Jun 95 $ 11,986 $11,782
- -----------------------------------------------------------------
Dec 95 $ 14,178 $13,479
- -----------------------------------------------------------------
Average Annual Returns+
Through 12/31/95
[GRAPH APPEARS HERE]
Since Inception
1 Year 1/31/94
- ---------------------------------------------------------
IAI Regional Portfolio 33.51% 20.00%
- ---------------------------------------------------------
S&P 500 Index 37.50% 16.86%*
+ Past performance is not predictive of future performance
* Since 2/01/94
3
<PAGE>
Portfolio Managers' Review
[Globe Artwork]
IAI Balanced Portfolio
IAI Balanced Portfolio
The goal of the IAI Balanced Fund Portfolio is to invest in an optional mixture
of stocks and bonds. The mixture is determined by examining the relative outlook
of risk and reward to each asset class. For the year ended December 31, 1995,
the Portfolio produced a total return of 16.21%. During 1995, the stock/bond
mixture ranged from 50:50 to 60:40.
During the past year, the stock market surged due to lower interest rates and
healthy corporate profit growth. The bond market, which focuses on intermediate
and long-term interest rate trends, also rose substantially. This performance is
in sharp contrast to 1994, when both the stock and bond markets performed
poorly.
Since the growth of corporate profits is likely to slow in 1996, we do not
expect to see the stock market repeat its 1995 performance. Nevertheless, a
slowing economy typically leads to lower interest rates, which is generally
beneficial for stocks--and a key factor for bonds. Therefore, we would not be
surprised to see the bond market outperform the stock market in 1996.
[Photo of Larry R. Hill]
Larry R. Hill, CFA
IAI Balanced Portfolio
Manager
[Photo of John A. Twele]
John A. Twele, CFA
IAI Balanced Portfolio
Manager
[Photo of Mark L. Simenstad]
Mark L. Simenstad, CFA
IAI Balanced Portfolio
Manager
Value of $10,000 Investment+
[GRAPH APPEARS HERE]
- ------------------------------------------------------------------------------
IAI Balanced Portfolio (inception 2-03-94)
- ------------------------------------------------------------------------------
Balanced S&P 500 LB Govt/Corp+
- ------------------------------------------------------------------------------
Feb 94 $ 10,000 $ 9,728 $ 9,782
- ------------------------------------------------------------------------------
Jun 94 $ 9,900 $ 9,343 $ 9,425
- ------------------------------------------------------------------------------
Dec 94 $ 10,220 $ 9,803 $ 9,506
- ------------------------------------------------------------------------------
Jun 95 $ 11,282 $11,782 $10,627
- ------------------------------------------------------------------------------
Dec 95 $ 11,877 $13,479 $11,335
- ------------------------------------------------------------------------------
Average Annual Returns+
Through 12/31/95
[GRAPH APPEARS HERE]
Since Inception
1 Year 2/3/94
- ---------------------------------------------------------
IAI Balanced Portfolio 16.21% 9.44%
- ---------------------------------------------------------
S&P 500 Index 37.50% 16.36%*
- ---------------------------------------------------------
Lehman Government/
Corporate Bond Index 15.33% 6.76%*
+ Past performance is not predictive of future performance
* Since 2/01/94
4
<PAGE>
Portfolio Manager's Review
[Globe Artwork]
IAI Reserve Portfolio
IAI Reserve Portfolio
The IAI Reserve Portfolio continues to invest primarily in short-term U.S.
Government Securities to provide safety, liquidity and principal preservation.
As of December 31, 1995, the Portfolio's average maturity was 93 days. For 1995,
the Portfolio provided a total return of 5.09%.
During the past year, yields on short-term investments such as T-bills have not
fallen as much as yields on one to three year securities. Short-term yields are
driven primarily by Federal Reserve Board policy. During early 1995, the Fed
raised short-term rates by 0.50%, and then reduced rates by the same amount in
the second half of the year.
We kept the average maturity relatively short over the last year to provide
stability and liquidity. In addition, the yield advantage to slightly longer
maturity securities has been minimal, reducing their attractiveness.
[Photo of Timothy A. Palmer]
Timothy A. Palmer, CFA
IAI Reserve Portfolio
Manager
Value of $10,000 Investment+
[GRAPH APPEARS HERE]
- --------------------------------------------------------------
Salomon Brothers
IAI Reserve Portfolio One Year Treasury
(inception 4-07-94) Bill Index*
- --------------------------------------------------------------
Apr 94 $ 10,000 $ 9,991
- --------------------------------------------------------------
Jun 94 $ 10,044 $10,046
- --------------------------------------------------------------
Dec 94 $ 10,225 $10,232
- --------------------------------------------------------------
Jun 95 $ 10,496 $10,716
- --------------------------------------------------------------
Dec 95 $ 10,746 $11,060
- --------------------------------------------------------------
Average Annual Returns+
Through 12/31/95
[GRAPH APPEARS HERE]
Since Inception
1 Year 4/07/94
- ---------------------------------------------------------
IAI Reserve Portfolio 5.09% 4.23%
- ---------------------------------------------------------
Salomon Brothers One Year
Treasury Bill Index 8.09% 5.93%*
+ Past performance is not predictive of future performance
* Since 4/01/94
5
<PAGE>
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S C H E D U L E O F I N V E S T M E N T S
===============================================================================
IAI REGIONAL PORTFOLIO
December 31, 1995
(percentage figures indicate percentage of total net assets)
<TABLE>
<CAPTION>
COMMON STOCKS - 78.8%
Market
Quantity Value (a)
- ------------------------------------------------
<S> <C> <C>
COMMERCIAL SERVICES - 4.1%
Banta 700 $ 30,800
Bell & Howell Holdings (b) 1,300 36,400
Castle (A.M.) 2,100 59,063
Manpower 2,400 67,500
R.R. Donnelley & Sons 400 15,750
----------
209,513
- -------------------------------------------------
CONSUMER DURABLES - 3.8%
Clarcor 600 12,225
ITI Technologies (b) 1,200 35,700
Newell 3,000 77,625
Polaris Industries 1,700 49,938
Snap-On 400 18,100
----------
193,588
- -------------------------------------------------
CONSUMER NON-DURABLES - 1.7%
Sara Lee 1,400 44,625
Wrigley 800 42,000
---------
86,625
- -------------------------------------------------
CONSUMER SERVICES - 2.0%
Buffets (b) 2,400 33,000
McDonald's 1,500 67,688
----------
100,688
- -------------------------------------------------
ELECTRIC TECHNOLOGY - 7.0%
Aetrium (b) 3,200 64,000
Andrew (b) 200 7,650
ANTEC (b) 5,000 90,000
General Instrument (b) 1,600 37,400
Motorola 1,300 74,100
Sheldahl (b) 900 16,313
Tellabs (b) 1,800 66,600
----------
356,063
- -------------------------------------------------
ENERGY MINERALS - 1.4%
Amoco 1,000 71,875
- -------------------------------------------------
FINANCE - 10.7%
Allstate 710 29,223
Amerin (b) 3,800 101,650
Bankers Life Holding 3,300 66,825
Brenton Banks 1,000 21,250
Equitable of Iowa 1,600 51,400
FCB Financial 1,000 18,500
First Commonwealth (b) 200 5,200
Guarantee Life (b) 5,300 83,475
MGIC Investment 300 16,275
Reliastar Financial 1,800 79,875
Roosevelt Financial 2,000 38,750
Winthrop Resources 2,000 32,500
----------
544,923
- -------------------------------------------------
HEALTH SERVICES - 1.5%
InStent (b) 1,600 24,000
United HealthCare 800 52,400
----------
76,400
- -------------------------------------------------
HEALTH TECHNOLOGY - 8.6%
Abbott Laboratories 1,600 66,800
Angeion (b) 1,200 10,200
Baxter International 2,500 104,688
CIMA Labs (b) 3,000 18,000
Diametrics Medical (b) 2,400 11,700
Northfield Laboratories (b) 400 7,550
Possis Medical (b) 1,000 16,125
St. Jude Medical (b) 1,300 55,900
Spine-Tech (b) 2,000 46,500
Sybron International -
Wisconsin (b) 4,400 104,500
----------
441,963
- -------------------------------------------------
NON-ENERGY MINERALS - 0.5%
USG (b) 800 24,000
- -------------------------------------------------
PROCESS INDUSTRIES - 6.1%
Aptargroup 2,000 74,750
Bemis 1,000 25,625
BMC Industries 3,000 69,750
IMC Global 600 24,525
Northland Cranberries Class A 1,500 26,625
Valspar 400 17,850
Vigoro 1,200 74,100
----------
313,225
- -------------------------------------------------
</TABLE>
See Accompanying Notes to Schedule of Investments on page 12
6
<PAGE>
================================================================================
S C H E D U L E O F I N V E S T M E N T S
================================================================================
IAI REGIONAL PORTFOLIO
December 31, 1995
Market
Quantity Value (a)
- ------------------------------------------------------
PRODUCER MANUFACTURING - 13.7%
ABC Rail Products (b) 2,500 $ 55,313
Anixter International (b) 6,700 124,788
Case 1,700 77,775
Deere 3,300 116,325
FSI International (b) 2,900 58,725
Graco 600 18,300
Harnischfeger Industries 200 6,650
Honeywell 500 24,313
IDEX 1,300 52,975
Illinois Tool Works 200 11,800
Juno Lighting 500 8,000
Lindsay Manufacturing (b) 1,000 38,500
Minnesota Mining & Manufacturing 300 19,875
Pentair 900 44,775
Recovery Engineering (b) 1,700 25,925
Tower Automotive (b) 700 12,250
Woodhead Industries 300 4,274
----------
700,563
- ------------------------------------------------------
RETAIL TRADE - 3.4%
Boise Cascade Office Products (b) 800 34,200
Dayton-Hudson 500 37,500
Fingerhut 2,000 27,750
Kohl's (b) 500 26,250
Sears Roebuck 1,200 46,800
----------
172,500
- ------------------------------------------------------
TECHNOLOGY SERVICES - 4.8%
Analysts International 500 15,000
FIserv (b) 2,400 72,000
Secure Computing (b) 2,500 140,000
Technology Solutions (b) 1,000 19,499
----------
246,499
- ------------------------------------------------------
TRANSPORTATION - 5.0%
Heartland Express (b) 924 18,249
Illinois Central 2,400 92,100
Midwest Express Holdings (b) 1,000 27,750
TNT Freightways 3,500 70,438
Wisconsin Central Transportation (b) 700 46,024
----------
254,561
- ------------------------------------------------------
UTILITIES - 4.5%
Ameritech 1,100 64,900
MFS Communications (b) 3,100 165,074
----------
229,974
======================================================
TOTAL INVESTMENTS IN COMMON STOCKS
(Cost: $3,625,200) .......................$ 4,022,960
======================================================
TOTAL INVESTMENTS IN LONG-TERM
SECURITIES
(Cost: $3,625,200) .......................$ 4,022,960
======================================================
See Accompanying Notes to Schedule of Investments on page 12
7
<PAGE>
===============================================================================
S C H E D U L E O F I N V E S T M E N T S
===============================================================================
IAI REGIONAL PORTFOLIO
December 31, 1995
<TABLE>
<CAPTION>
SHORT-TERM SECURITIES - 19.3%
Principal Market
Rate Maturity Amount Value (a)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS - 19.3%
U.S. Treasury Bill 5.34% 04/25/96 $ 1,000,000 $ 984,642
- -------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SHORT-TERM SECURITIES
(Cost: $983,485) ............................................................ $ 984,642
- -------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $4,608,685) (c)........................................................ $ 5,007,602
- -------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (NET) - 1.9%
.............................................................................. $ 97,009
- -------------------------------------------------------------------------------------------
TOTAL NET ASSETS
.............................................................................. $ 5,104,611
- -------------------------------------------------------------------------------------------
</TABLE>
See Accompanying Notes to Schedule of Investments on page 12
8
<PAGE>
================================================================================
S C H E D U L E O F I N V E S T M E N T S
================================================================================
IAI BALANCED PORTFOLIO
December 31, 1995
(percentage figures indicate percentage of total net assets)
COMMON STOCKS - 47.5%
Market
Quantity Value(a)
- ----------------------------------------------------
COMMERCIAL SERVICES - 1.3%
Sysco 300 $ 9,750
- ----------------------------------------------------
CONSUMER DURABLES - 2.0%
Duracell International 200 10,350
Mattel 175 5,381
------------
15,731
- ----------------------------------------------------
CONSUMER NON-DURABLES - 2.1%
Gillette 100 5,213
UST 320 10,680
------------
15,893
- ----------------------------------------------------
CONSUMER SERVICES - 4.6%
CUC International (b) 275 9,384
McDonald's 190 8,574
Viacom Class B (b) 183 8,670
Wendy's International 400 8,500
------------
35,128
- ----------------------------------------------------
ELECTRIC TECHNOLOGY - 6.9%
Applied Materials (b) 150 5,906
Cisco Systems (b) 95 7,089
Ericsson (L.M.) ADR 300 5,850
Intel 270 15,323
KLA Instruments (b) 275 7,167
Motorola 205 11,685
------------
53,020
- ----------------------------------------------------
ENERGY MINERALS - 1.9%
Anadarko Petroleum 165 8,931
Enron Oil & Gas 245 5,880
------------
14,811
- ----------------------------------------------------
FINANCE - 6.3%
Federal National Mortgage
Association 125 15,516
Franklin Resources 130 6,549
General Re 50 7,750
NationsBank 140 9,747
Norwest 250 8,250
------------
47,812
- ----------------------------------------------------
HEALTH SERVICES - 4.3%
Cardinal Health 160 8,760
Columbia/HCA Healthcare 200 10,150
PacifiCare Health Systems
Class B (b) 60 5,220
United HealthCare 130 8,515
------------
32,645
- ----------------------------------------------------
HEALTH TECHNOLOGY - 4.4%
Bristol-Myers Squibb 130 11,164
Guidant 300 12,675
Pfizer 150 9,450
------------
33,289
- ----------------------------------------------------
PROCESS INDUSTRIES - 2.3%
Great Lakes Chemical 160 11,520
Morton International 165 5,919
------------
17,439
- ----------------------------------------------------
RETAIL TRADE - 7.2%
Best Buy (b) 300 4,875
Dollar General 200 4,150
Home Depot 330 15,799
Lowe's Companies 200 6,700
Pep Boys-Manny, Moe & Jack 250 6,406
Wal-Mart 250 5,594
Walgreen 380 11,352
------------
54,876
- ----------------------------------------------------
TECHNOLOGY SERVICES - 1.7%
General Motors Class E 200 10,400
Microsoft (b) 30 2,632
------------
13,032
- ----------------------------------------------------
UTILITIES - 2.5%
Airtouch Communications (b) 350 9,888
Enron 240 9,150
------------
19,038
====================================================
TOTAL INVESTMENTS IN COMMON STOCKS
(Cost: $340,395) ....................... $ 362,464
====================================================
NON-CONVERTIBLE PREFERRED STOCK - 1.7%
Market
Quantity Value (a)
- ----------------------------------------------------
ELECTRONIC TECHNOLOGY - 1.7%
Nokia Series A ADR 340 $ 13,218
====================================================
TOTAL INVESTMENTS IN NON-CONVERTIBLE
PREFERRED STOCK
(Cost: $17,457) ........................ $ 13,218
====================================================
See Accompanying Notes to Schedule of Investments on Page 12
9
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================
S C H E D U L E O F I N V E S T M E N T S
===========================================================================================
IAI BALANCED PORTFOLIO
December 31, 1995
U.S. GOVERNMENT OBLIGATIONS - 36.3%
Principal Market
Rate Maturity Amount Value (a)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. TREASURY NOTES - 23.4%
6.00 % 11/30/97 $ 20,000 $ 20,294
6.13 09/30/00 25,000 25,750
8.00 05/15/01 25,000 27,984
7.50 11/15/01 25,000 27,535
7.50 05/15/02 70,000 77,612
----------
179,175
- ---------------------------------------------------------------------------------------------------------------
U.S. TREASURY BOND - 12.9%
10.75 05/15/03 75,000 98,356
===============================================================================================================
TOTAL INVESTMENTS IN U.S. GOVERNMENT OBLIGATIONS
(Cost: $267,003)................................................................................... $ 277,531
===============================================================================================================
TOTAL INVESTMENTS IN SECURITIES
(Cost: $624,855) (c)............................................................................... $ 653,213
===============================================================================================================
OTHER ASSETS AND LIABILITIES (NET) - 14.5%
................................................................................................... $ 110,899
===============================================================================================================
TOTAL NET ASSETS
................................................................................................... $ 764,112
===============================================================================================================
</TABLE>
See Accompanying Notes to Schedule of Investments on page 12
10
<PAGE>
==============================================================================
S C H E D U L E O F I N V E S T M E N T S
==============================================================================
IAI RESERVE PORTFOLIO
December 31, 1995
(percentage figures indicate percentage of total net assets)
<TABLE>
<CAPTION>
U.S. GOVERNMENT OBLIGATIONS - 11.5%
Principal Market
Rate Maturity Amount Value (a)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. TREASURY BILL - 11.5%
5.56% 08/22/96 $ 100,000 $ 96,809
- ----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN U.S. GOVERNMENT OBLIGATIONS
(Cost: $96,594) .................................................................................$ 96,809
- ----------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES - 84.3%
Principal Market
Rate Maturity Amount Value (a)
- ----------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY DISCOUNT NOTES - 84.3%
Federal Agricultural Mortgage Corporation 5.60% 01/02/96 $ 100,000 $ 99,985
Federal Farm Credit Bank 5.50 03/18/96 120,000 118,588
Federal Home Loan Bank 5.42 06/12/96 150,000 146,319
Federal Home Loan Mortgage Corporation 5.47 03/07/96 100,000 98,997
Federal National Mortgage Association 5.43 03/25/96 100,000 98,733
Tennessee Valley Association 5.67 01/02/96 100,000 99,984
World Bank 5.46 03/04/96 50,000 49,522
==========================================================================================================
TOTAL INVESTMENTS IN U.S. GOVERNMENT AGENCY SECURITIES
(Cost: $712,128) ........................................................................... $ 712,128
==========================================================================================================
TOTAL INVESTMENTS IN SECURITIES
(Cost: $808,722) (c) ........................................................................ $ 808,937
==========================================================================================================
OTHER ASSETS & LIABILITIES (NET) - 4.2%
............................................................................................. $ 35,167
==========================================================================================================
TOTAL NET ASSETS
............................................................................................. $ 844,104
==========================================================================================================
</TABLE>
See Accompanying Notes to Schedule of Investments on page 12
11
<PAGE>
================================================================================
N O T E S T O S C H E D U L E S O F I N V E S T M E N T S
================================================================================
IAI RETIREMENT FUNDS, INC.
December 31, 1995
(a)
Market value of securities is determined as described in Note 1 to the financial
statements, under "Security Valuation".
(b)
Currently non-income producing security.
(c)
At December 31, 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 RESE
PORTFOLIO PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Cost for federal income tax purposes $ 4,609,840 $ 624,857 $ 808,722
-----------------------------------------------------
Gross unrealized appreciation $ 453,119 $ 43,892 $ 215
Gross unrealized depreciation $ (55,357) (15,536) -
Net unrealized appreciation $ 397,762 $ 28,356 $ 215
-----------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
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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
================================================================================
IAI RETIREMENT FUNDS, INC.
December 31, 1995
<TABLE>
<CAPTION>
IAI Regional IAI Balanced IAI Reserve
Portfolio Portfolio Portfolio
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments in securities, at market
(Cost: $4,608,685; $624,855; and $808,722) $ 5,007,602 $ 653,213 $ 808,937
Cash in bank on demand deposit 95,708 100,260 26,865
Dividends and accrued interest receivable 4,077 2,788 -
Organization costs (Note 1) 7,794 7,814 8,218
Other 2,931 319 541
-----------------------------------------------------
Total Assets 5,118,112 764,394 844,561
-----------------------------------------------------
LIABILITIES
Payable for investment securities purchased 10,100 - -
Accrued investment advisory fees 2,366 - -
Accrued dividend-disbursing, administrative, and
accounting fees 726 - -
Other accrued expenses 309 282 457
-----------------------------------------------------
Total liabilities 13,501 282 457
-----------------------------------------------------
Net assets applicable to outstanding
capital stock $ 5,104,611 $ 764,112 $ 844,104
=====================================================
REPRESENTED BY:
Capital stock $ 3,604 $ 649 $ 840
Additional paid-in capital 4,275,069 715,506 840,057
Undistributed net investment income 28,323 9,602 2,614
Accumulated net realized gains on investments 398,698 9,997 378
Unrealized appreciation on investments 398,917 28,358 215
-----------------------------------------------------
Total - representing net assets applicable to
outstanding capital stock
$ 5,104,611 $ 764,112 $ 844,104
=====================================================
Shares of common stock outstanding; authorized
10 billion shares of $.01 par value stock of
each Portfolio 360,396 64,875 83,958
-----------------------------------------------------
Net asset value per share of outstanding
capital stock $ 14.16 $ 11.78 $ 10.05
=====================================================
</TABLE>
See Accompanying Notes to Financial Statements on page 21
13
<PAGE>
===============================================================================
S T A T E M E N T S O F O P E R A T I O N S
===============================================================================
IAI RETIREMENT FUNDS
Year ended December 31, 1995
<TABLE>
<CAPTION>
IAI Regional IAI Balanced IAI Reserve
Portfolio Portfolio Portfolio
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET INVESTMENT INCOME
Income:
Interest $ 29,786 $ 11,160 $ 41,336
Dividends 28,223 2,249 --
--------------------------------------------
Total income 58,009 13,409 41,336
--------------------------------------------
Expenses:
Investment advisory fees 15,913 2,428 3,265
Dividend-disbursing, administrative, and
accounting fees 2,448 373 726
Legal fees 106 75 57
Custodian fees 11,890 7,055 5,065
Amortization of organization costs 2,519 2,519 2,547
Audit fees 5,660 5,650 5,650
Printing and shareholder reporting 1,276 1,267 1,266
Registration fees 266 266 266
Other expenses 163 141 145
--------------------------------------------
Total expenses 40,241 19,774 18,987
--------------------------------------------
Less fees reimbursed or waived by Advisers (6,737) (13,428) (11,528)
--------------------------------------------
Net expense before expenses paid indirectly 33,504 6,346 7,459
--------------------------------------------
Less expenses paid indirectly (Note 2) (2,955) (1,676) (1,275)
--------------------------------------------
Net expenses 30,549 4,670 6,184
--------------------------------------------
Net investment income 27,460 8,739 35,152
--------------------------------------------
NET REALIZED AND UNREALIZED GAINS (LOSSES)
Net realized gains on investments 402,797 10,667 391
Net change in unrealized appreciation
(depreciation) on investment
securities 377,323 28,015 215
--------------------------------------------
Net gain on investments 780,120 38,682 606
--------------------------------------------
Net increase in net assets resulting from operations $ 807,580 $ 47,421 $ 35,758
--------------------------------------------
</TABLE>
See Accompanying Notes to Financial Statements on page 21
14
<PAGE>
<TABLE>
<CAPTION>
================================================================================================
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 RETIREMENT FUNDS, INC.
IAI REGIONAL PORTFOLIO
Period from
Year Ended January 31, 1994* to
December 31, 1995 December 31, 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income $ 27,460 $ 2,183
Net realized gains (losses) 402,797 (4,099)
Net change in unrealized appreciation (depreciation) 377,323 21,594
-----------------------------------------------
Net increase in net assets resulting from operations 807,580 19,678
-----------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (2,961) -
-----------------------------------------------
Total distributions (2,961) -
-----------------------------------------------
CAPITAL SHARE TRANSACTIONS
Net proceeds from sale of 284,186 and 95,403 shares 3,496,985 991,183
Net asset value of 250 and 0 shares issued to shareholders
in reinvestment of distributions 2,976 -
Cost of 5,480 and 13,963 shares redeemed (65,151) (145,679)
-----------------------------------------------
Increase in net assets from capital share transactions 3,434,810 845,504
-----------------------------------------------
Total increase in net assets 4,239,429 865,182
Net assets at beginning of period 865,182 -
-----------------------------------------------
Net assets at end of period $ 5,104,611 $ 865,182
===============================================
(including undistributed net investment income of
$28,323 and $2,967)
</TABLE>
* Commencement of operations
See Accompanying Notes to Financial Statements on page 21
15
<PAGE>
<TABLE>
<CAPTION>
=====================================================================================
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 RETIREMENT FUNDS, INC.
IAI BALANCED PORTFOLIO
Period from
Year Ended February 3, 1994* to
December 31, 1995 December 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income $ 8,739 $ 1,944
Net realized gains (losses) 10,667 (670)
Net change in unrealized appreciation (depreciation) 28,015 343
---------------------------------------------------
Net increase in net assets resulting from operations 47,421 1,617
---------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (2,721) -
---------------------------------------------------
Total distributions (2,721) -
---------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Net proceeds from sale of 51,989 and 22,202 shares 595,671 225,111
Net asset value of 243 and 0 shares issued to shareholders
in reinvestment of distributions 2,721 -
Cost of 7,482 and 2,077 shares redeemed (84,648) (21,060)
---------------------------------------------------
Increase in net assets from capital share transactions 513,744 204,051
---------------------------------------------------
Total increase in net assets 558,444 205,668
Net assets at beginning of period 205,668 -
---------------------------------------------------
Net assets at end of period $ 764,112 $ 205,668
===================================================
(including undistributed net investment income of
$9,602 and $2,721)
</TABLE>
* Commencement of operations
See Accompanying Notes to Financial Statements on page 21
16
<PAGE>
<TABLE>
<CAPTION>
===============================================================================
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 RETIREMENT FUNDS, INC.
IAI RESERVE PORTFOLIO
Period from
Year Ended April 7,1994* to
December 31, 1995 December 31, 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income $ 35,152 $ 6,547
Net realized gains (losses) 391 (13)
Net change in unrealized appreciation (depreciation) 215 -
-----------------------------------------------
Net increase in net assets resulting from operations 35,758 6,534
-----------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (34,624) (5,962)
-----------------------------------------------
Total distributions (34,624) (5,962)
-----------------------------------------------
CAPITAL SHARE TRANSACTIONS
Net proceeds from sale of 110,373 and 86,052 shares 1,109,346 862,336
Net asset value of 3,456 and 595 shares issued to shareholders
in reinvestment of distributions 34,694 5,962
Cost of 84,066 and 32,452 shares redeemed (844,916) (325,024)
-----------------------------------------------
Increase in net assets from capital share transactions 299,124 543,274
-----------------------------------------------
Total increase in net assets 300,258 543,846
Net assets at beginning of period 543,846 -
-----------------------------------------------
Net assets at end of period $ 844,104 $ 543,846
===============================================
(including undistributed net investment income of
$2,614 and $1,214)
</TABLE>
* Commencement of operations
See Accompanying Notes to Financial Statements on page 21
17
<PAGE>
================================================================================
F I N A N C I A L H I G H L I G H T S
================================================================================
IAI RETIREMENT FUNDS, INC.
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>
Period from
Year Ended January 31, 1994* to
December 31, 1995 December 31, 1994
----------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE
Beginning of period $ 10.62 $ 10.00
----------------------------------------------------------
OPERATIONS
Net investment income 0.06 0.03
Net realized and unrealized gains 3.50 0.59
----------------------------------------------------------
Total from operations 3.56 0.62
----------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (0.02) -
----------------------------------------------------------
Total distributions (0.02) -
----------------------------------------------------------
NET ASSET VALUE
End of period $ 14.16 $ 10.62
==========================================================
Total investment return** 33.51% 6.20%
Net assets at end of period (000's
omitted) $ 5,105 $ 865
RATIOS:
Expenses to average daily
net assets**** 1.37% 1.13%***
Expenses to average daily net
assets (net of expenses paid
indirectly) 1.25% n/a
Net investment income to average
daily net assets**** 1.12% 0.81%***
Portfolio turnover rate (excluding
short-term securities) 156.0% 127.6%
* Commencement of operations
** 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 $6,737 and $7,455 in expenses for the year ended December 31, 1995 and the period
ended December 31, 1994, respectively. If the Portfolio had been charged these expenses, the ratio of expenses to average
daily net assets would have been 1.64% and 3.90% respectively, and the ratio of net investment income to average daily net
assets would have been .85% and (1.96%), respectively. Beginning in fiscal 1995, the ratio of expenses to average daily net
assets includes expenses paid indirectly by the Portfolio. Prior period expense ratios have not been adjusted.
</TABLE>
See Accompanying Notes to Financial Statements on Page 21
18
<PAGE>
================================================================================
F I N A N C I A L H I G H L I G H T S
================================================================================
IAI RETIREMENT FUNDS, INC.
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>
Period from
Year Ended February 3, 1994* to
December 31,1995 December 31, 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE
Beginning of period $ 10.22 $ 10.00
----------------------------------------------------
OPERATIONS
Net investment income 0.09 0.10
Net realized and unrealized gains 1.56 0.12
----------------------------------------------------
Total from operations 1.65 0.22
----------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (0.09) -
----------------------------------------------------
Total distributions (0.09) -
----------------------------------------------------
NET ASSET VALUE
End of period $ 11.78 $ 10.22
====================================================
Total investment return** 16.21% 2.20%
Net assets at end of period (000's
omitted) $ 764 $ 206
RATIOS:
Expenses to average daily net assets**** 1.70% 1.25%***
Expenses to average daily net assets (net of
expenses paid indirectly) 1.25% n/a
Net investment income to average daily net assets**** 2.34% 2.28%***
Portfolio turnover rate (excluding short-term securities) 56.0% 21.6%
* Commencement of operations
** 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 $13,428 and $7,756 in expenses for the year ended December 31, 1995 and the period
ended December 31, 1994, respectively. If the Portfolio had been charged these expenses, the ratio of expenses to average
daily net assets have been 5.29% and 10.33%, respectively, and the ratio of net investment income to average daily net assets
would have been (1.25%) and (6.80%), respectively. Beginning in fiscal 1995, the ratio of expenses to average daily net assets
includes expenses paid indirectly by the Portfolio. Prior period expense ratios have not been adjusted.
</TABLE>
See Accompanying Notes to Financial Statements on page 21
19
<PAGE>
==============================================================================
F I N A N C I A L H I G H L I G H T S
==============================================================================
IAI RETIREMENT FUNDS, INC.
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>
Period from
Year Ended April 7, 1994* to
December 31, 1995 December 31, 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE
Beginning of period $ 10.03 $ 10.00
----------------------------------------
OPERATIONS
Net investment income 0.48 0.20
Net realized and unrealized gains 0.02 0.02
----------------------------------------
Total from operations 0.50 0.22
----------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (0.48) (0.19)
----------------------------------------
Total distributions (0.48) (0.19)
----------------------------------------
NET ASSET VALUE
End of period $ 10.05 $ 10.03
----------------------------------------
Total investment return** 5.09% 2.25%
Net assets at end of period
(000's omitted) $ 844 $ 544
RATIOS:
Expenses to average daily net
assets**** 1.03% 0.85%***
Expenses to average daily net assets
(net of expenses paid indirectly) 0.85% n/a
Net investment income to average daily
net assets**** 4.84% 3.56%***
</TABLE>
* Commencement of operations
** 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 $11,528 and $6,930 in expenses
for the year ended December 31, 1995 and the period ended December 31,
1994, respectively. If the Portfolio had been charged these expenses, the
ratio of expenses to average daily net assets would have been 2.62% and
4.62%, respectively, and the ratio of net investment income to average
daily net assets would have been 3.25% and (.21%), respectively. Beginning
in fiscal 1995, the ratio of expenses to average daily net assets includes
expenses paid indirectly by the Portfolio. Prior period expense ratios have
not been adjusted.
See Accompanying Notes to Financial Statements on page 21
20
<PAGE>
===============================================================================
N O T E S T O F I N A N C I A L S T A T E M E N T S
===============================================================================
IAI RETIREMENT FUNDS, INC.
December 31, 1995
[1] S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G
P O L I C I E S
IAI Retirement Funds, Inc. is registered under the Investment Company Act of
1940 (as amended) as a diversified, open-end management investment company. IAI
Regional Portfolio (Regional Portfolio), IAI Balanced Portfolio (Balanced
Portfolio) and IAI Reserve Portfolio (Reserve Portfolio) are separate portfolios
of IAI Retirement Funds, Inc. Portfolio shares are not offered directly to the
public, but sold only to selected insurance companies' separate accounts in
connection with variable life insurance policies or variable annuity contracts.
This report covers only the Regional Portfolio, Balanced Portfolio and Reserve
Portfolio (the Portfolios).
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 sales
price or if the last reported sales price is not available, the last reported
bid price is used.
The values of debt securities are determined using pricing services or prices
quoted by independent brokers. Short-term securities with maturities of 60 days
or less from the date of acquisition are valued at amortized cost. Short-term
securities with maturities greater than 60 days from the date of acquisition 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 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.
On the statement of assets and liabilities, as a result of permanent book-to-tax
differences, undistributed net investment income has been increased, resulting
in reclassification adjustments to additional paid-in capital as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
IAI REGIONAL IAI BALANCED IAI RESERVE
PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Undistributed net $ 857 $ 863 $ 872
investment income
Additional paid-in capital $ (857) $ (863) $ (872)
- ------------------------------------------------------------------------------
</TABLE>
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, including level yield amortization of discount,
is accrued daily. 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 ex-date. Distributions from
net investment income are made annually for Regional Portfolio and Balanced
Portfolio and monthly for Reserve Portfolio. Capital gains, if any, are
primarily distributed in June. 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.
21
<PAGE>
===============================================================================
N O T E S T O F I N A N C I A L S T A T E M E N T S
===============================================================================
IAI RETIREMENT FUNDS, INC.
December 31, 1995
[ 1 ] S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G
P O L I C I E S ( C O N T . )
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 of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported results of operations during the reporting period. Actual results
could differ from those estimates.
[ 2 ] F E E S A N D E X P E N S E S
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.
Each Portfolio also pays 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.
As a result of earnings on cash balances on account with the custodian,
Regional, Balanced and Reserve Portfolios' custodian fees were reduced by
$2,955, $1,676 and $1,275, respectively, for the year ended December 31, 1995,
and are included in "expenses paid indirectly" on the Statements of Operations.
[ 3 ] I N V E S T M E N T T R A N S A C T I O N S
Purchases and Sales of Securities
For the period ended December 31, 1995, purchases of securities and sales
proceeds, including maturities, for the Reserve Portfolio aggregated $5,008,963
and $4,739,260, 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 $ 5,560,185 $ 2,991,726
IAI BALANCED PORTFOLIO $ 625,597 $ 160,736
- ----------------------------------------------------
</TABLE>
22
<PAGE>
===============================================================================
I N D E P E N D E N T A U D I T O R S' R E P O R T
===============================================================================
IAI RETIREMENT FUNDS, INC.
The Board of Directors and Shareholders
IAI Retirement Funds, Inc.:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of IAI Regional Portfolio, IAI Balanced Portfolio
and IAI Reserve Portfolio (portfolios within IAI Retirement Funds, Inc.) as of
December 31, 1995, the related statements of operations for the year then ended,
and the statements of changes in net assets and the financial highlights for the
year ended December 31, 1995 and the period from January 31, 1994 (commencement
of operations for IAI Regional Portfolio), February 3, 1994 (commencement of
operations for IAI Balanced Portfolio) and April 7, 1994 (commencement of
operations for IAI Reserve Portfolio) to December 31, 1994. These financial
statements and the financial highlights are the responsibility of the
Portfolios' 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 accounting
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. As to securities purchased but not received, we request
confirmations from brokers and where replies are not received, we carry out
other appropriate auditing procedures. 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
Regional Portfolio, IAI Balanced Portfolio and IAI Reserve Portfolio at December
31, 1995, the results of their operations for the year then ended, and the
changes in their 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
February 2, 1996
23
<PAGE>
===============================================================================
F E D E R A L T A X I N F O R M A T I O N
===============================================================================
IAI RETIREMENT FUNDS, INC.
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 information 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.
(A) includes distribution of short-term capital gains, if any, which are taxable
as ordinary income.
IAI REGIONAL PORTFOLIO
Payable Date Ordinary Income (A)
JUNE 1995 $.0157
For the year ended December 31, 1995, 100.0% of ordinary income distributions
qualify for deductions by corporations.
IAI BALANCED PORTFOLIO
Payable Date Ordinary Income (A)
JUNE 1995 $.0916
For the year ended December 31, 1995, 18.45% of ordinary income distributions
qualify for deductions by corporations.
IAI RESERVE PORTFOLIO
Payable Date Ordinary Income (A)
JANUARY 1995 $.0351
FEBRUARY 1995 .0445
MARCH 1995 .0445
APRIL 1995 .0450
MAY 1995 .0430
JUNE 1995 .0410
JULY 1995 .0390
AUGUST 1995 .0390
SEPTEMBER 1995 .0360
OCTOBER 1995 .0360
NOVEMBER 1995 .0390
DECEMBER 1995 .0370
$.4791
<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]
M U T U A L F U N D S
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
