November 1996
Dear Shareholder:
We are pleased to provide you with this unaudited Semi-Annual Financial Report
for the IMG Mutual Funds for the period ended October 31, 1996. Many of the
Fund's investment relationships were begun prior to the formal registration of
the IMG Core Stock Fund and the IMG Bond Fund last year. All performance since
inception information illustrated herein reflects only the period of
registration subsequent to Fund registration on July 7, 1995.
For the semi-annual period ended October 31, 1996, the IMG Core Stock Fund
captured roughly forty-five percent of the market's nine percent advance. The
Fund's underperformance primarily relates to the defensive positioning of it's
portfolio of stocks to reflect our continued concern regarding current market
valuation levels.
The IMG Bond Fund outperformed the overall market's total return for the
semi-annual period ended October 31, 1996, with Select and Institutional shares
exceeding market returns by .23 and .34 percent respectively. As interest rates
in general declined, the IMG Bond Fund provided a greater level of return to
shareholders than the overall market.
Our investment strategy continues to focus on enabling both Funds to provide
above-market returns while experiencing below-market risk over complete market
cycles.
I invite you to review the investment commentary provided by the portfolio
managers elsewhere in this report. In closing, we appreciate your support of and
investment in the IMG Mutual Funds. If you have any additional questions, please
contact me personally.
Sincerely yours,
Mark A. McClurg
President, IMG Mutual Funds, Inc.
Senior Managing Director
Investors Management Group
<PAGE>
IMG CORE STOCK FUND
October 31, 1996
The U.S. stock market rebounded from a brief July correction to record another
strong gain in the six- month period ended October 31, 1996, with the S&P 500
Composite posting a 9.08 percent total return in the period. During the period,
the IMG Core Stock Fund increased in value with the Institutional, Select and
Advisor shares generating total returns of 4.23 percent, 4.10 percent, and 3.97
percent, respectively.
The shares' underperformance relative to the S&P 500 primarily reflects the poor
performance of the interest-sensitive telecommunications and electric utilities
shares. The weakness in these areas more than offset strong gains in the Fund's
regional bank stocks and drug stocks. In addition, returns were penalized by the
Fund's signficant underrepresentation in the technology sector, which staged a
strong rebound in the second half of the period despite a rash of warnings that
second-half profits for a broad range of technology firms will fall well short
of analysts' estimates. On the positive side, the Fund's significant
underweighting in cyclical stocks paid off during the period as that sector gave
back most of its early-year gains.
Our investment strategy remains based on the premise that growth in both the
economy and corporate profits will prove disappointing in the near term.
Corporate profitability has benefited in the last few years from dramatic
restructuring and downsizing, the liquidation of debt and lower tax burdens. We
believe that most of the benefits of these trends have been booked and that
profit growth will be pulled down in line with the much more sluggish trend in
corporate sales growth.
In an environment of sluggish profit growth and slowing economic momentum, we
think that investor interest will gravitate toward two sectors of the equity
market: (1) economically "defensive" companies with stable and highly
predictable earnings patterns and (2) interest-sensitive companies which are
positioned to benefit from declining long-term interest rates. The Portfolio
therefore remains overweighted in consumer nondurable industries, including
foods, drugs and consumer services; financial services, including regional banks
and insurance companies; and the utilities sector, including gas and electric
utilities and the telecommunications area. In addition, we have maintained the
Fund's position in long-term Treasury bonds on the belief that long-term
interest rates will fall as the economy loses steam. We continue to avoid
so-called "deep cyclicals" such as the chemical, paper, auto and machinery
stocks; capacity growth in these areas now outstrips demand, raising the
prospect of disappointing earnings in the next several quarters. In a similar
vein, earnings growth in the technology sector has already tumbled sharply, and,
based on the rash of negative profit "pre-announcements" from computer and chip
makers in the last two quarters, still has further to fall. We continue to avoid
the technology sector.
Finally, we believe that an emphasis on a high portfolio dividend yield is
appropriate in the current market environment. The dividend yield on the S&P 500
has collapsed to a record low of 2.01 percent, meaning that the current income
stream generated by the stock market has never been smaller. The Fund's current
yield is substantially higher at 3.80 percent. It is worth remembering that,
historically, dividend payments have provided nearly half of the stock market's
total return. While yield-oriented investment strategies have not paid off so
far in 1996, we believe that the traditional high-yielding sectors, such as the
finance and utilities stocks, continue to offer better relative value than most
market sectors. In addition, the dividend cushion should provide substantial
downside protection if the bull market hits a rough patch in the months ahead.
Douglas R. Ramsey, CFA James W. Paulsen, Ph.D.
Senior Equity Analyst Portfolio Manager
<PAGE>
IMG BOND FUND
October 31, 1996
For the six-month period ended October 31, 1996, the IMG Bond Fund increased in
value with Select and Institutional shares achieving total returns of 5.52
percent and 5.63 percent respectively. Both classes of shares outperformed the
Lehman Aggregate Bond Index which posted a total return of 5.29 percent. During
the last portion of the period, intermediate and long-term bond yields began to
decline. This enhanced the performance of the IMG Bond Fund. In addition,
several securities were added during the period to enhance the overall yield of
the Fund.
After rising in the spring and summer, bond yields began declining in September
and October. The economy continued to grow, but at a more moderate pace, and
inflation remained under control.
The consumer was primarily responsible for the recent moderation in economic
activity. Retail sales flattened in the third quarter after sizable advances in
the first half of 1996. Other sectors of the economy, however, are still
demonstrating solid growth. Residential housing, in particular, continues to
show surprising strength. While the economy is not growing nearly as fast as it
was in the first six months of the year, the economy is not collapsing either.
Rather, economic growth is hovering around two to three percent.
The bond market continues to be concerned about inflation. Wage pressures have
accelerated slightly this year to 3.5 percent from 3.0 percent a year ago, as
the unemployment rate has declined to near 5 percent. The economy is showing
signs of slowing, but it is uncertain whether it will slow enough to ease
inflationary pressures. Several factors, however, are likely to keep inflation
under control. First, industrial capacity is growing faster than demand. This
should keep bottlenecks from developing. Second, the use of debt has slowed
considerably in the 1990s. This should keep demand from outstripping supply.
Third, policy officials are focused on inflation. This focus should cause them
to act before inflation runs out of control.
Fears of inflation caused intermediate and long-term bond yields to rise sharply
during the spring and summer. If inflation remains under control, these yields
should continue their recent decline and provide attractive total returns.
Therefore, the average maturity of the Fund is longer than the Index.
We have a neutral stance toward the yield curve. The overall yield curve is
neither flat nor steep. The steepest portion of the yield curve is currently
between the three-month and two year Treasuries, since this portion of the yield
curve would be most impacted by Federal Reserve action.
We remain significantly underweighted in mortgage pass-throughs. Mortgages have
outperformed comparable Treasuries over the past six months. If long-term bond
yields continue to decline, however, mortgages are likely to underperform
Treasuries. Corporate bond yield spreads are still narrow relative to
Treasuries. This sector is likely to underperform in 1996 if corporate earnings
are disappointing. We have been extremely selective in this sector. As an
alternative to corporate bonds, we find taxable municipal bonds attractive. We
are using taxable municipals to obtain high quality securities at reasonable
yield spreads and to diversify the portfolio. Several taxable municipal
positions have been added to the portfolio.
In summary, the IMG Bond Fund is positioned for a declining interest rate
environment. We will be monitoring the yield curve posture of the portfolio
closely going forward. We continue to selectively examine yield enhancement
opportunities.
Kathryn D. Beyer, CFA Jeffrey D. Lorenzen, CFA James W. Paulsen, Ph.D.
Portfolio Manager Portfolio Manager Portfolio Manager
<PAGE>
KATHRYN D. BEYER, CFA, MANAGING DIRECTOR
Ms. Beyer serves as a fixed income strategist. Prior to joining IMG, she served
as the director of mortgage-backed securities and as a corporate bond fixed
income analyst for Central Life Assurance Company. She received her M.B.A. from
Drake University and her B.S. from Iowa State University.
JEFFREY D. LORENZEN, CFA, MANAGING DIRECTOR
Mr. Lorenzen serves as a fixed income strategist. Prior to joining IMG, he
served as a senior analyst for The Statesman Group under both the corporate and
mortgage-backed portfolios. He received his M.B.A. from Drake University and his
B.B.A. from the University of Iowa.
JAMES W. PAULSEN, PH.D., SENIOR MANAGING DIRECTOR
Dr. Paulsen is the advisor's chief portfolio strategist and chairs IMG's
Investment Policy Committee. Prior to joining IMG, he served as president of a
Cedar Rapids, Iowa investment firm. He received his Doctorate in economics and
his B.S. from Iowa State University.
DOUGLAS R. RAMSEY, CFA, SENIOR EQUITY ANALYST.
Mr. Ramsey serves as IMG's senior equity analyst. Prior to joining IMG, he was a
securities analyst at a Minneapolis-based regional brokerage firm and a
securities analyst and economist at a Cedar Rapids, Iowa-based investment firm.
Doug received his B.A. degree in business administration and economics from Coe
College and his M.A. degree in economics from Ohio State University.
<PAGE>
IMG MUTUAL FUNDS, INC.
IMG CORE STOCK FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1996 (UNAUDITED)
SHARE/
PAR VALUE DESCRIPTION VALUE
- - --------------------------------------------------------------------------------
COMMON STOCK (77.06%)
UTILITIES (15.65%)
10,900 Central & S.W. Corp. $ 288,850
12,500 Central Louisiana Electric 339,063
11,700 Consolidated Edison of NY 342,225
10,900 DTE Energy Company 328,360
15,900 Enova Corporation 357,750
12,800 South Jersey Industries 300,800
11,300 WPS Resources Corp. 336,175
--------------
2,293,223
--------------
ELECTRONIC TECHNOLOGY (9.59%)
6,900 Ameritech Corporation 377,774
8,300 Nynex Corporation 369,350
12,900 Tele Danmark 322,500
7,300 U.S. Media Group 114,063
7,300 U.S. West, Incorporated 221,738
--------------
1,405,425
--------------
FINANCE (16.26%)
5,000 Ambac Inc. 312,500
16,500 American Heritage Life 365,062
8,140 Banc One Corp. 344,933
6,300 Chubb Corp. 315,000
7,600 Key Corp. 354,350
7,900 National City Corp. 342,663
7,400 Providan 347,800
--------------
2,382,308
--------------
Consumer Services (4.22%)
9,600 Knight-Ridder Inc. 358,800
12,400 Luby's Cafeterias, Inc. 260,400
--------------
619,200
--------------
COMSUMER NON-DURABLES (10.71%)
11,400 American Greetings 334,163
13,800 Hormel Foods Corp. 326,025
3,400 Kimberly-Clark Corp. 317,050
11,600 Rubbermaid, Inc. 269,700
11,200 UST, Inc. 323,400
--------------
1,570,338
--------------
HEALTH TECHNOLOGY (6.19%)
6,400 Abbott Laboratories 324,000
3,300 Bristol-Meyers Squibb Co. 348,975
6,520 Pharmacia & Upjohn, Inc. 234,720
--------------
907,695
--------------
PROCESS INDUSTRIES (3.60%)
4,300 Great Lakes Chemical 224,138
11,400 Sonoco Products Co. 303,525
--------------
527,663
--------------
PRODUCER MANUFACTURING (2.21%)
7,400 Genuine Parts Co. 323,750
--------------
INDUSTRIAL SERVICES (6.19%)
6,500 Flightsafety International 320,938
4,200 Grainger, Inc. 311,325
8,000 WMX Technologies, Incorporated 275,000
--------------
907,263
--------------
ENERGY (2.44%)
2,700 Atlantic Richfield Co. 357,750
--------------
Total Common Stocks
(Cost $10,161,789) 11,294,615
--------------
U.S. GOVERNMENT SECURITIES (16.54%)
5,285,000 Treasury Principal Strips, 6.47%, 5/15/20* 1,063,131
1,285,000 U.S. Treasury Bond, 7.25%, 05/15/16 1,360,519
--------------
(Cost $2,428,317) 2,423,650
--------------
CASH EQUIVALENTS (3.68%)
539,581 Merrill Lynch LMS Repurchase Agreement, 5.68%, 11/1/96 539,581
--------------
(Cost $539,581)
TOTAL INVESTMENTS IN SECURITIES (97.28%)
(Cost $13,129,687) 14,257,846
--------------
Other Assets and Liabilities, Net (2.72%) 398,078
--------------
NET ASSETS 100.0% $ 14,655,924
==============
*Interest rate for Zero Coupon Security equates effective yield at date of
purchase.
Based on the cost of investments of $13,129,687 for federal income tax purposes
at October 31, 1996, the aggregate gross unrealized appreciation was $1,622,695,
the aggregate gross unrealized depreciation was $494,536, and the net unrealized
appreciation was $1,128,159.
See notes to financial statements.
<PAGE>
MG MUTUAL FUNDS, INC.
IMG BOND FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1996 (UNAUDITED)
SHARE/
PAR VALUE DESCRIPTION VALUE
- - --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (34.36%)
GOVERNMENT AGENCIES (2.31%)
187,500 Government Export Trust, 4.85%, 11/01/97 $ 186,695
--------------
U.S. TREASURY BONDS (21.02%)
1,605,000 U.S. T-Bond, 7.25%, 5/15/16 1,699,326
--------------
U.S. TREASURY NOTES (11.03%)
275,000 U.S. T-Notes, 5.75%, 8/15/03 267,872
100,000 U.S. T-Note, 5.875%, 2/15/04 97,756
460,000 U.S. T-Note, 6.25%, 2/15/03 461,780
60,000 U.S. T-Note, 7.85%, 8/15/01 64,397
--------------
891,805
--------------
Total Government Securities
(Cost $2,737,180) 2,777,826
--------------
CORPORATE BONDS (22.57%)
210,000 Analog Devices, 6.625%, 3/01/00 209,633
75,000 Dayton Hudson, 10.00%, 12/01/00 84,000
205,000 GMAC, 8.875%, 6/1/10 238,569
130,000 Hubco, Inc., 7.75%, 1/15/04 131,903
75,000 Hydro-Quebec, 8.25%, 1/15/27 81,000
165,000 Lehman Brothers, 8.05%, 1/15/19 167,962
183,000 Manitoba, 7.75%, 7/17/16 193,479
250,000 Naples, City of, Italy, 7.52%, 7/15/06 257,110
185,000 Nova Scotia, 8.25%, 11/15/19 208,588
250,000 WMX Tech., 6.65%, 5/15/05 252,500
--------------
Total Corporate Bonds
(Cost $1,807,487) 1,824,744
--------------
TAXABLE MUNICIPAL BONDS (23.41%)
230,000 Berry Creek Met Dist, CO., 7.05%, 12/01/03 225,400
125,000 Cottonwood county, MN, 7.40%, 2/1/01 126,873
125,000 Fulton, MO Import Taxable, 7.60%, 7/1/11 128,906
45,000 Iowa Lakes Community College, 6.65%, 6/01/04 43,763
45,000 Iowa Lakes Community College, 6.55%, 6/01/03 43,819
115,000 Illinois Dev Financial Authority, 8.65%, 7/1/97 114,920
100,000 Kirkwood Comunity College, 7.80%, 6/1/02 105,125
155,000 New Orleans, LA Hsg. Dev., 8.00%, 12/01/03 156,550
87,703 Oregon Department of Transportation, 9.00%, 6/15/00 92,069
175,000 Portland, OR, 7.625%, 12/1/01 171,063
100,000 Prairie Du Chien, WI, Redevelopment Authority,
7.625%, 4/1/06 102,105
150,000 St. Paul, MN Port Authority, 6.65%, 9/1/99 150,938
50,000 Texas St. G.O. Taxable, 8.70%, 12/01/09 56,563
200,000 Volusia County, FL Health, 7.40%, 6/1/03 204,500
165,000 Washington St. Housing, 7.65%, 1/1/04 170,278
--------------
Total Municipal Bonds
(Cost 1,865,593) 1,892,872
--------------
MORTAGE-BACKED SECURITIES (17.30%)
COLLATERALIZED MORTGAGE OBLIGATIONS (13.97%)
46,922 Chase Mortgage Finance Corp, 5.75%, 4/25/09 46,312
22,994 Citicop Mortgage Sec. 1987-13 A3, 9.35%, 6/1/10 22,861
16,580 FHLMC Series L Class 5, 7.90%, 5/01/01 16,508
100,000 FHLMC 1504 B, 7.00%, 12/15/22 97,328
38,526 FHLMC 91 Series 188 Class F, 7.50%, 5/15/20 38,682
150,000 FNMA G92-60 C, 7.00%, 2/25/21 148,337
50,000 FNMA 1991-137 G, 8.30%, 6/25/20 51,144
155,000 Green Tree, 5.20%, 10/15/18 154,254
79,097 Housing Securities, Inc 1992-EA A6, Zero Coupon,
9.13%, 10/25/07** 58,220
2,089 Housing Securities, Inc 1992 EB B1A, Zero Coupon,
6.84%, 5/25/20** 2,080
72,847 Housing Securities, Inc 1993-C C3, Zero Coupon,
9.06%, 5/25/08** 53,420
62,340 Housing Securities, Inc 1993-E E-14, Zero Coupon,
10.27%, 5/20/18** 44,880
83,999 Kidder Peabody Mtg Asset Trust, 8.45%, 5/20/18 83,631
52,845 Residential Funding Mtg. Sec I, Series 1993-S7,
Class A6, 7.15%, 2/25/08 52,969
44,279 Resolution Trust Corp. Series 1992-17 Class A1,
Variable Rate, 8.86%,12/25/20* 44,762
309,981 Salomon Maortgage Sec. VII 1995-1 PO, Zero Coupon,
10.54%, 6/01/22** 213,620
--------------
1,129,008
--------------
FHLMC MORTGAGE-BACKED POOLS (0.24%)
18,811 FHLMC Pool #C00126, 8.50%, 6/1/22 19,449
--------------
GNMA MORTGAGE-BACKED POOLS (3.09%)
40,924 GNMA #315929, 9.00%, 6/15/22 43,251
60,541 GNMA #341681, 8.50%, 1/15/23 62,748
51,008 GNMA #354189, 7.50%, 05/01/23 51,164
92,605 GNMA #359600, 7.50%, 7/15/23 92,894
--------------
250,057
--------------
Total Mortgage-Backed Securities
(Cost $1,392,193) 1,398,514
--------------
CASH EQUIVALENTS (0.27%)
21,298 Norwest Cash Investment Fund, 5.01% (cost $21,298) 21,298
--------------
TOTAL INVESTMENTS IN SECURITIES (97.91%)
(Cost $7,823,751) 7,915,254
--------------
Other Assets and Liabilities, Net (2.09%) 169,295
--------------
NET ASSETS 100.0% $ 8,084,549
==============
Based on the cost of investments of $7,823,751 for federal income tax purposes
at October 31,1996, the aggregate gross unrealized appreciation was $180,103,
the aggregate gross unrealized depreciation was $88,600, and the net unrealized
appreciation was $91,503.
*Denotes a floating rate investment with interest rate as of October 31, 1996.
** Interest presented for zero coupon bond equates effective yield at date of
purchase.
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
IMG MUTUAL FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES
OCTOBER 31, 1996 (UNAUDITED)
IMG CORE IMG
STOCK BOND
FUND FUND
- - -------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investments in Securities at Value
(Cost $13,129,687; and 7,823,751 respectively) $ 14,257,846 $ 7,915,254
Dividends & Interest Receivable 75,799 171,933
Investment Securities Sold 334,249 --
Other Assets -- 2,033
-----------------------------
Total Assets 14,667,894 8,089,220
LIABILITIES:
Income Distribution Payable -- --
Investment Securities Purchased -- --
Accrued Operating Expenses and Other Liabilities 11,970 4,671
Total Liabilities 11,970 4,671
-----------------------------
NET ASSETS $ 14,655,924 $ 8,084,549
=============================
ANALYSIS OF NET ASSETS
Excess of Amounts Received from Issuance of
Shares over Amounts Paid on Redemption of Shares $ 12,187,699 $ 7,964,675
Undistributed Net Realized Gain/(Loss) 1,142,851 (17,072)
Unrealized Appreciation 1,128,159 91,503
Undistributed Net Investment Income 197,215 45,443
-----------------------------
Net Assets Applicable to Shares Outstanding $ 14,655,924 $ 8,084,549
=============================
PRICING OF ADVISOR SHARES
Net Assets Applicable to Advisor Shares Outstanding $ 545,851 $ 0
=============================
Shares Outstanding, $.001 par value* 47,113 0
=============================
Net Asset Value, Offering Price and Redemption Price
per Advisor Shares $ 11.586 $ 0.000
=============================
PRICING OF SELECT SHARES
Net Assets Applicable to Select Shares Outstanding $ 6,340,774 $ 3,968,829
=============================
Shares Outstanding, $.001 par value* 545,851 396,770
=============================
Net Asset Value, Offering Price and Redemption Price
per Select Shares $ 11.616 $ 10.003
=============================
PRICING OF INSTITUTIONAL SHARES
Net Assets Applicable to Institutional Shares Outstanding $ 7,769,299 $ 4,115,720
=============================
Shares Outstanding, $.001 par value* 668,425 411,352
=============================
Net Asset Value, Offering Price and Redemption Price
per Institutional Shares $ 11.623 $ 10.005
=============================
</TABLE>
*Shares outstanding reflect rounding to the nearest whole share.
See notes to financial statements.
<PAGE>
IMG MUTUAL FUNDS, INC.
STATEMENTS OF OPERATIONS
FOR THE PERIOD MAY 1, 1996 TO OCTOBER 31, 1996 (UNAUDITED)
IMG CORE IMG
STOCK BOND
FUND FUND
INCOME:
Interest Income $ 150,322 $ 279,630
Dividend Income 223,380 --
----------------------------
Total Income 373,702 279,630
----------------------------
EXPENSES:
Advisory Fees 35,890 12,026
Administration Fee 14,118 4,945
Distribution Fee-Advisor 1,054 --
Distribution Fee-Select 4,633 2,810
Fund Accounting Fee/Custody 7,178 4,009
Transfer Agent Fee 3,589 2,004
Other Expenses 4,206 2,343
----------------------------
Total Expenses 70,668 28,137
----------------------------
NET INVESTMENT INCOME 303,034 251,493
----------------------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net Realized Gain/(Loss) on Investments 729,676 (45,666)
Net Change in Unrealized Appreciation/
(Depreciation)(note 1) (440,747) 223,964
----------------------------
NET GAIN ON INVESTMENTS 288,929 178,298
----------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 591,963 $ 429,791
============================
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
IMG MUTUAL FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD MAY 1, 1996 TO OCTOBER 31, 1996
AND JULY 7, 1995 TO OCTOBER 31, 1995 (UNAUDITED)
IMG CORE IMG BOND
STOCK FUND FUND PORTFOLIO
1996 1995 1996 1995
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income $ 303,034 $ 102,418 $ 251,493 $ 115,199
Net Realized Gain/(Loss) on Investments 729,676 (40,911) (45,666) 3,884
Net Change in Unrealized
Appreciation/(Depreciation) (440,747) 750,198 223,964 31,213
------------------------------------------------------------------
Increase in Net Assets from Operations 591,963 811,705 429,791 150,296
------------------------------------------------------------------
DISTRIBUTIONS:
Dividend Distibutions Paid
Investor Shares 0 0 0 1,833
Advisor Shares 9,258 0 0 0
Select Shares 105,570 0 114,567 37,187
Institutional Shares 151,805 0 136,931 45,126
Capital Gains Distributions Paid
Investor Shares 0 0 0 0
Advisor Shares 0 0 0 0
Select Shares 0 0 0 0
Institutional Shares 0 0 0 0
------------------------------------------------------------------
Total Distributions 266,633 0 251,498 84,196
------------------------------------------------------------------
CAPITAL SHARES TRANSACTIONS
Sales -- Investor Shares 0 483,217 0 1,083
Advisor Shares 0 0 0 0
Select Shares 287,728 754,555 318,564 335,964
Institutional Shares 139,792 1,646,476 101,665 674,376
Reinvestments -- Investor Shares 0 0 0 1,883
Advisor Shares 9,258 0 0 0
Select Shares 105,570 0 114,567 37,187
Institutional Shares 147,433 0 118,066 45,127
Exchanges -- Investor Shares 0 33,008 0 0
Advisor Shares 0 0 0 0
Select Shares (20,000) 0 20,000 0
Institutional Shares 0 0 0 0
Redemptions -- Investor Shares 0 (15,043) 0 (14,744)
Advisor Shares 0 0 0 0
Select Shares (510,906) (227,550) (218,728) (264,953)
Institutional Shares (168,361) (70,064) (552,450) (19,665)
------------------------------------------------------------------
Increase in Net Assets from Capital Shares Transactions (9,486) 2,604,599 (98,316) 796,258
------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 315,844 3,416,304 79,977 862,358
------------------------------------------------------------------
NET ASSETS:
Beginning of Period 14,340,080 8,868,148 8,004,572 4,673,414
------------------------------------------------------------------
End of Period $ 14,655,924 $ 12,284,452 $ 8,084,549 $ 5,535,772
==================================================================
Undistributed net investment income
at end of period $ 197,215 $ 102,418 $ 45,443 $ 31,003
==================================================================
</TABLE>
See notes to financial statements.
<PAGE>
IMG MUTUAL FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1996
1. ORGANIZATIONS AND SIGNIFICANT ACCOUNTING POLICIES
IMG Mutual Funds, Inc. (the "Fund") was incorporated on November 16, 1994
and capitalized on May 1, 1995 with an initial $100,000 purchase of 5,000
shares of each series by the Investment Advisor. The Fund did not commence
operations until July 7, 1995 when registration became effective under the
1933 Act. The Fund is registered under the Investment Company Act of 1940
(the "1940 Act"), as amended, as a diversified open-end management
investment company issuing its shares in two series, each series
representing a diversified portfolio with distinct investment objectives
and policies. The IMG Core Stock Fund seeks long-term capital appreciation
through a diversified portfolio of equity securities including common
stock, convertible bonds and preferred stock among others. The IMG Bond
Fund seeks to obtain income by investing in a portfolio of fixed income
securities 75% of which at all times will be Investment Grade Fixed Income
Securities and, secondarily, seeks capital appreciation consistent with the
preservation of capital and prudent investment risk.
At the close of business on July 7, 1995, IMG Mutual Funds, Inc., acquired
the assets and assumed the identifiable liabilities of IMG Private
Investment Trust (the "Trust"). The net assets at the close of business on
July 7, 1995, were $8,818,148 and $4,623,413 for the IMG Equity Trust and
the IMG Income Trust respectively. In exchange for the Trusts, the Fund
issued the following capital stock for $10 per share.
SHARES ISSUED
PORTFOLIO INVESTOR SELECT INSTITUTIONAL
-------------------------------------------------------------------
IMG Core Stock Fund 21,331.600 600,833.985 259,649.196
IMG Bond Fund 12,639.557 231,990.759 217,711.043
Unrealized appreciation on the day of exchange totaled $615,904 for the IMG
Core Stock Fund and $177,267 for the IMG Bond Fund.
The shares of each series are divided into Advisor, Select, and
Institutional Shares. A fourth class, Investor Shares, ceased to be issued
as of April 4, 1996. Outstanding Investor Shares as of April 4, 1996 were
converted to other classes of shares. Advisor Shares (first offered on
April 5, 1996) are only available through Financial Services Firms. Select
and Institutional Shares may be purchased directly. Investments in specific
class levels are based upon minimum investment requirements. Each class of
shares has equal rights as to earnings, assets, and voting privileges
except that each class bears different distribution expenses. Each class of
shares has exclusive voting rights with respect to matters that affect just
that class. Income, expenses (other than expenses attributable to a
specific class), and realized and unrealized gains or losses on investments
are allocated to each class of shares based upon its relative net assets.
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
disclosire of contingent assets and liabilities at the date of the
financial statements and the reported amounts of increase and decrease in
net assets from operations during the period. Actual results could differ
from those estimates.
SECURITY VALUATION
Equity securities are values at the last sales price on the national
securities exchange. Fixed Income securities are valued on the basis of
valuations furnished by a pricing service that utilizes electronic data
processing techniques to determine valuations for normal institutional
sized trading units of Fixed Income securities without regard to sale or
bid prices when such valuations are believed to more accurately reflect the
fair market value of such institutional securities. Otherwise sale or bid
prices are used. Any securities or other assets for which market quotations
are not readily available are valued at fair value as determined by the
Portfolio Manager. Fixed Income securities in a portfolio having maturities
of 60 days of less are valued by the amortized cost method.
SECURITY TRANSACTIONS
Security transactions are recorded on a trade date basis. Realized gains
and losses are determined on an identified cost basis.
INVESTMENT INCOME
Interest income is recorded on an accrual basis and dividend income is
recorded on the ex-dividend date. Original issue discounts and premiums on
securities purchased are amortized over the expected life of the respective
securities.
DISTRIBUTION OF INCOME AND GAINS
The Fund's dividend distribution policy provides for quarterly dividends
for the IMG Bond Fund and semi-annual dividends for IMG Core Stock Fund.
Any net realized capital gains will be distributed annually, after using
any available capital loss carry-over.
2. FEDERAL TAXES
The Fund's policy is to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
taxable income to shareholders in amounts that will avoid or minimize
federal income or excise taxes of the fund. Net investment income and net
realized gains (losses) for the funds may differ for financial statement
and tax purposes. The character of distributions made during the year from
net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing
of dividend distributions, the fiscal year in which amounts are distributed
may differ from the year that the income or realized gains (losses) were
recorded by the Funds.
3. TRANSACTIONS WITH AFFILIATES
FEES AND EXPENSES
The Fund has entered into an investment advisory agreement with Investors
Management Group (the "Advisor"), for management of the Fund's assets. The
annual fees for such services are 0.50 percent of the average daily net
assets of the IMG Core Stock Fund and 0.30 percent of the average daily net
assets of the IMG Bond Fund. Organization costs were borne by the Advisor.
The Fund has entered into an administrative services agreement with the
Advisor to provide certain information and administrative services to the
Fund. The annual fees for such services will range from 0.10 percent to
0.25 percent of average daily net assets, depending on the type of shares
owned.
IMG also acts as fund accountant, transfer agent, and dividend paying agent
for the Funds, and maintain shareholder records. Fees for such services
including custodian fees are accrued at 0.15 percent of average daily net
assets.
In addition, the Fund is responsible for paying most other operating
expenses including outside directors' fees and expenses; registration fees;
printing and shareholder reports; transfer agent fees and expenses; legal,
auditing, and accounting services; insurance; interest; and other
miscellaneous expenses.
DISTRIBUTION PLAN
The Fund has entered into a distribution agreement, pursuant to Rule 12b-1
under the 1940 Act, with IMG Financial Services, Inc. (the "Distributor")
for the marketing and distribution of the shares of the Fund. The fees for
such services for the IMG Core Stock Fund are 0.40 percent and 0.15 percent
of the average daily net assets of the Advisor and Select Shares,
respectively. Fees paid by the IMG Bond Fund amount to 0.25 percent and
0.15 percent of the average daily net assets of the Advisor and Select
Shares, respectively. The Fund pays no distribution fees in relation to the
Institutional Shares outstanding.
INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term securities) for the period
May 1, 1996 through October 31, 1996, are as follows:
IMG CORE STOCK FUND IMG BOND FUND
Purchases $ 2,555,972 $ 2,173,366
Proceeds From Sales $ 3,322,180 $ 2,162,692
4. CAPITAL SHARE TRANSACTIONS
SHARE ACTIVITY
The following table summarizes the activity in each class of shares of the
Funds:
IMG CORE IMG BOND
STOCK FUND FUND
ADVISOR SHARES
For the semi-annual period ended October 31 1996 1995 1996 1995
---- ---- ---- ----
Shares sold 0 0 0 0
Shares issued in reinvestment of dividends 821 0 0 0
Shares exchanged 0 0 0 0
Shares redeemed 0 0 0 0
-----------------------------------
Net increase from capital share transactions 821 0 0 0
===================================
SELECT SHARES
For the semi-annual period ended October 31
Shares sold 42,864 72,023 51,736 33,895
Shares issued in reinvestment of dividends 9,349 0 11,751 3,739
Shares exchanged (1,776) 0 2,054 0
Shares redeemed (61,592) (19,131) (41,061) (26,879)
-----------------------------------
Net increase from capital share transactions (11,155) 52,892 24,480 10,755
===================================
INSTITUTIONAL SHARES
For the semi-annual period ended October 31
Shares sold 28,792 164,943 29,030 67,894
Shares issued in reinvestment of dividends 13,060 0 12,110 4,538
Shares exchanged 0 0 0 0
Shares redeemed (31,942) (6,825) (75,645) (2,000)
-----------------------------------
Net increase from capital share transactions 9,910 158,118 (34,505) 70,432
===================================
INVESTOR SHARES
For the semi-annual period ended October 31
Shares sold 75,806 46,124 20,081 99
Shares issued in reinvestment of dividends 845 0 419 189
Shares exchanged (75,651) 0 (20,000) 0
Shares redeemed (1,500) (1,500) (12,000) (1,500)
-----------------------------------
Net increase from capital share transactions (1,500) 44,624 (1,500) (1,212)
===================================
IMG MUTUAL FUNDS, INC.
FINANCIAL HIGHLIGHTS
FOR THE SEMI-ANNUAL PERIODS ENDED OCTOBER 31, 1996 AND 1995 (UNAUDITED)
The following table presents information relating to an Investor Share of
Capital Stock of the Fund outstanding for the period July 7, 1995 to October 31,
1995.
IMG CORE IMG BOND
STOCK FUND FUND
1995 1995
- - --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 10.000 $ 10.000
---------------------------
Net Investment Income 0.048 0.213
Net Realized and Unrealized Gains
on Investments 0.694 0.047
---------------------------
Total from Investment Operations 0.742 0.260
---------------------------
Less:
Distributions from Net Investment Income -- 0.149
--------------------------
Total Distributions -- 0.149
--------------------------
Net Asset Value, End of Period $ 10.742 $ 10.111
===========================
Total Return 7.42% 2.62%
Net Assets, End of Period $ 724,594 $ 130,714
Ratio of Expenses to Average Net Assets 1.35% 1.00%
Ratio of Net Investment Income
to Average Net Assets 5.34% 6.56%
Portfolio Turnover Rate 7.21% 10.82%
Average Commission Rate Paid to Brokers $ 835.00 $ 0
- - --------------------------------------------------------------------------------
The following table presents information relating to an Advisor Share of Capital
Stock of the Fund outstanding for the periods May 1, 1996 to October 31, 1996.
Net Asset Value, Beginning of Period $ 11.341 $ 0.000
---------------------------
Net Investment Income 0.218 0.000
Net Realized and Unrealized Gains
on Investments 0.227 0.000
---------------------------
Total from Investment Operations 0.445 0.000
---------------------------
Less:
Distributions from Net Investment Income 0.200 0.000
---------------------------
Total Distributions 0.200 0.000
---------------------------
Net Asset Value, End of Period $ 11.586 $ 0.000
===========================
Total Return 3.97%
Net Assets, End of Period $ 545,851
Ratio of Expenses to Average Net Assets 1.35%
Ratio of Net Investment Income
to Average Net Assets 3.84%
Portfolio Turnover Rate 18.77%
Average Commission Rate Paid to Brokers $1,428.00
Note for all Portfolios: Ratios have been determined on an annualized basis.
Total return is not annualized for periods less than a full year.
See notes to financial statements.
- - --------------------------------------------------------------------------------
The following table presents information relating to an Select Share of Capital
Stock of the Fund outstanding for the periods May 1, 1996 to October 31, 1996
and July 7, 1995 to October 31, 1995.
<TABLE>
<CAPTION>
IMG CORE IMG BOND
STOCK FUND FUND
1996 1995 1996 1995
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 11.359 $ 10.000 $ 9.782 $ 10.000
----------------------------------------------------------------
Net Investment Income 0.244 0.088 0.308 0.213
Net Realized and Unrealized Gains
on Investments 0.216 0.662 0.222 0.054
---------------------------------------------------------------
Total from Investment Operations 0.460 0.750 0.530 0.267
---------------------------------------------------------------
Less:
Distributions from Net Investment Income 0.203 0.000 0.309 0.154
---------------------------------------------------------------
Total Distributions 0.203 0.000 0.309 0.154
---------------------------------------------------------------
Net Asset Value, End of Period $ 11.616 $ 10.750 $ 10.003 $ 10.113
===============================================================
Total Return 4.10% 7.50% 5.52% 7.50%
Net Assets, End of Period $ 6,340,774 $ 7,043,735 $ 3,968,829 $ 2,470,119
Ratio of Expenses to Average Net Assets 1.11% 1.10% 0.81% 0.81%
Ratio of Net Investment Income
to Average Net Assets 4.09% 2.85% 6.15% 6.71%
Portfolio Turnover Rate 18.77% 7.21% 29.62% 10.82%
Average Commission Rate Paid to Brokers $ 1,428.00 $ 835.00
- - -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
The following table presents information relating to an Institutional Share of
Capital Stock of the Fund outstanding for the periods May 1, 1996 to October 31,
1996 and July 7, 1995 to October 31, 1995.
Net Asset Value, Beginning of Period $ 11.371 $ 10.000 $ 9.785 $ 10.000
-----------------------------------------------------------------
Net Investment Income 0.242 0.099 0.320 0.212
Net Realized and Unrealized Gains
on Investments 0.232 0.660 0.219 0.061
-----------------------------------------------------------------
Total from Investment Operations 0.474 0.759 0.539 0.273
-----------------------------------------------------------------
Less:
Distributions from Net Investment Income 0.222 0.000 0.319 0.158
-----------------------------------------------------------------
Total Distributions 0.222 0.000 0.319 0.158
-----------------------------------------------------------------
Net Asset Value, End of Period $ 11.623 $ 10.759 $ 10.005 $ 10.115
=================================================================
Total Return 4.23% 7.59% 5.63% 2.76%
Net Assets, End of Period $ 7,769,299 $ 4,516,123 $ 4,115,720 $ 2,934,939
Ratio of Expenses to Average Net Assets 0.86% 0.85% 0.61% 0.60%
Ratio of Net Investment Income
to Average Net Assets 4.43% 3.11% 6.35% 6.83%
Portfolio Turnover Rate 18.77% 7.21% 29.62% 10.82%
Average Commission Rate Paid to Brokers $ 1,428.00 $ 835.00
</TABLE>
Note for all Portfolios: Ratios have been determined on an annualized basis.
Total return is not annualized for periods less than a full year.
See notes to financial statements.
