IMG MUTUAL FUNDS, INC.
ANNUAL FINANCIAL REPORT
IMG CORE STOCK FUND
IMG BOND FUND
SELECT SHARES
INSTITUTIONAL SHARES
ADVISOR SHARES
APRIL 30, 1997
<PAGE>
May 1997
Dear Shareholder:
We are pleased to provide you with this Annual Financial Report for the IMG
Mutual Funds for the fiscal year ended April 30, 1997. This represents the first
full year report for the IMG Core Stock Fund and the IMG Bond Fund since their
registration with the Securities and Exchange Commission on July 7, 1995.
Financial information presented in this Report covers the period from May 1,
1996 through April 30, 1997.
During this twelve-month period, the bond markets were predominantly concerned
about possible inflation that might result from an expanding economy and
increasing wages. While wages have increased on a year-over-year basis, all
other primary inflation measures remain in check. The fear of a resurgence in
inflation drove yields higher throughout the period, holding down total returns
within the IMG Bond Fund.
During the same period, the equity markets continued to surge ahead. While
equity returns were relatively volatile within the period, final returns for the
twelve months were quite strong by historical standards. The IMG Core Stock Fund
was defensively positioned for much of the period in reaction to concerns about
equity market relative valuations and a possible slowing economy.
This positioning caused the Fund to underperform for the period.
I invite you to review the comments of the portfolio managers for both Funds
elsewhere in this Report. You will find them both helpful and interesting.
Sincerely yours,
Mark A. McClurg
President, IMG Mutual Funds, Inc.
Senior Managing Director
Investors Management Group
<PAGE>
IMG MUTUAL FUNDS, INC.
IMG CORE STOCK FUND
APRIL 30, 1997
I would like to re-introduce myself after returning to IMG on April 28, 1997, as
the firm's Equity Strategist.
Going forward, I will be responsible for managing the IMG Core Stock Fund. As
many shareholders may remember, I was associated with IMG as a Managing
Director, serving as the firm's Equity Strategist from 1991 through 1995. While
at IMG, I was responsible for selecting IMG's equity portfolio holdings and
helping the firm's Investment Policy Committee determine our investment outlook.
I am delighted to rejoin IMG's strong asset management team, and I look forward
to working to enhance the investment returns of the Fund in the future.
For the twelve-month period ended April 30, 1997, the IMG Core Stock Fund
generated total returns of 7.44 percent, 7.71 percent and 7.17 percent for
Select, Institutional and Advisor Shares, respectively. These returns fell short
of the 25.13 percent return generated by the S&P 500 Index and the 14.10 percent
return produced by the average equity growth mutual fund tracked by Lipper
Analytical Services.
- - --------------------------------------------------------------------------------
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at the Fund's inception, with a similar investment
in the Standard & Poors 500 Stock Index (S&P). The S&P is an unmanaged index of
common stocks. An additional fee of $10 will be charged for redemption from a
retirement plan account and redemptions payable by wire transfer. The
performance of other classes will be greater or less than the line shown based
on the differences in charges and fees paid by shareholders investing in
different classes.
AVERAGE ANNUAL TOTAL RETURNS
Share Class 1 Year 5 Year Life of Fund
Select Shares* 7.44% N/A 12.36%
Institutional Shares* 7.71% N/A 12.64%
Advisor Shares** 7.17% N/A 6.05%
The Fund began operation on July 7, 1995.
Figures assume reinvestment of all dividends and capital gain distributions at
net asset value.
* The Fund began offering Select and Institutional Shares on July 7, 1995.
** The Fund began offering Advisory Shares on April 4, 1996. Advisory shares
are not sold directly to the general public and are only available through
financial services firms.
THE DATA ABOVE REPRESENT PAST PERFORMANCE OF THE FUND'S SHARES, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
- - --------------------------------------------------------------------------------
The Fund's shortfall relative to the S&P 500 primarily resulted from (1) a
significant underrepresentation of the core group of blue-chip stocks in which
the market's advance has recently been concentrated and (2) an overemphasis on
interest-sensitive sectors of the market.
We have been disappointed in the performance of the Fund over the last year. As
a result, we have reviewed our investment process and are making some
modifications in order to improve our performance going forward.
As a first step, we are now focusing more closely on what we call "benchmark
risk". The performance benchmark for the Fund is the widely used S&P 500 Index.
For this Fund, benchmark risk is the risk of significant negative deviations
from the performance of the S&P 500.
We have therefore adjusted our investment process to achieve a better balance
between the risk of loss (which is inherent in the stock market) and our
benchmark risk. These adjustments include:
o Broader diversification among roughly 60 stocks.
o Tighter limitations on over or underweighting sectors.
o Varying individual stock positions relative to their weighting in the S&P 500.
o A shift toward somewhat larger market capitalization stocks.
To be sure that we fully understand how the Fund's entire portfolio might react
in different circumstances, we have invested in a risk management tool that
analyzes the risk characteristics of each stock held, and measures the major
portfolio level risks. Each time we consider the purchase or sale of a security,
which by itself looks attractive, we can analyze the effect of buying/selling
that security will have on the overall risk of the portfolio. Using this system,
we can establish a "playing field" in which we seek to outperform over time,
while significantly reducing the risk of producing returns which severely
deviate from the benchmark.
We have also strengthened our stock selection process. At IMG, we believe in
identifying companies selling at discounts to their historical valuations. We
have long been adept at finding such undervalued securities. But while
undervaluation is necessary, we realize it is not sufficient. Securities are
typically cheap because of some underlying fundamental problem in the company.
And, while they may be cheap, we often found that they can get significantly
cheaper before their fundamentals and, ultimately, their prices improved.
In addition to our proven value criteria, we now require that companies selected
in our portfolios have sound business fundamentals: revenue growth, earnings
growth, widening profit margins, and superior returns on equity. Combining the
fundamental criteria with our valuation analysis leads us to select companies
with a greater potential for price expansion while avoiding deeply discounted
companies with poor prospects.
As a result of the changes outlined above, the IMG Core Stock Fund is currently
being repositioned to increase diversification and lower active residual risk.
Over the next several weeks, the number of transactions in the Fund will be
greater than normal as this process is completed.
The last five months have been an important period of growth for IMG. We have
examined ourselves critically, and have taken the sometimes difficult steps to
improve our processes. We thank you for investing with IMG and look forward to
serving your investment needs in the future.
JAMES T. RICHARDS
PORTFOLIO MANAGER
<PAGE>
IMG MUTUAL FUNDS, INC.
IMG BOND FUND
APRIL 30, 1997
For the period October 31, 1996 to April 30, 1997, the IMG Bond Fund increased
in value with Select and Institutional Shares achieving total returns of 1.37
percent and 1.48 percent respectively. Returns of both classes of shares were
near the Lehman Aggregate Bond Index return of 1.71 percent.
Bond yields declined in the fall and the duration of the portfolio was reduced
in mid-November. Over the last few months, bond yields rose as the economy grew
faster than expected. Gross domestic product (GDP) grew at an annual rate of
5.60 percent in the first calendar quarter of the year and was fueled by
consumption spending and residential construction. The growth in the economy and
the low unemployment rate that has resulted has caused increasing fears of
inflation. The Federal Reserve raised the federal funds rate by 0.25 percent at
the end of March as a preemptive measure.
- - --------------------------------------------------------------------------------
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at the Fund's inception, with a similar investment
in the Lehman Aggregate Index. The Lehman Aggregate includes fixed rate debt
issues rated investment grade or higher by Moody's Investors Services, Standard
and Poor's Corporation or Fitch Investor's Service. All issues have at least one
year to maturity and an outstanding par value of at least $100 million. The
Lehman Aggregate Index includes bonds with maturities of 1 - 30 years. Price,
coupon and total return are reported for all sectors on a month-end basis. An
additional fee of $10 will be charged for redemptions from a retirement plan
account and redemptions payable by wire transfer. The performance of other
classes will be greater or less than the line shown based on the differences in
charges and fees paid by shareholders investing in different classes.
AVERAGE ANNUAL TOTAL RETURNS
Share Class 1 Year 5 Year Life of Fund
Select Shares 6.97% N/A 4.98%
Institutional Shares 7.19% N/A 5.19%
The Fund began operation on July 7, 1995.
Figures assume reinvestment of all dividends and capital gain distributions at
net asset value.
THE DATA ABOVE REPRESENT PAST PERFORMANCE OF THE FUND'S SHARES, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
- - --------------------------------------------------------------------------------
We expect consumption to moderate in the last half of the year, due to the
combination of no major consumer demands for durable goods, higher interest
rates, and the halt of income tax refunds and year-end bonuses. Other factors
are also likely to slow growth. The dollar has risen over 10 percent since the
beginning of the year. This is making U.S. exports more expensive.
The bond market continues to be concerned about inflation. Wage pressures have
accelerated this year to 4 percent from 3 percent a year ago, as the
unemployment rate has declined to near 5 percent. The inflation threat from the
labor market, however, is tempered by the lack of pricing power of U.S.
corporations.
Despite the strength in the economy and wages, forward-looking inflation
indicators remain subdued. Gold prices are hovering near $350 per ounce, down
from $410 per ounce a year ago, and industrial commodity prices have been flat
over the last year. The strength of the dollar also restrains inflation as
domestic producers must compete with imported goods.
Most importantly, the Federal Reserve has adopted price stability as their
primary policy objective. The Fed has tightened policy before broad measures of
inflation begin to rise on top of a policy that was already slightly
restrictive. As long as the Fed continues to err on the side of price stability,
fears of inflation will dissipate and long-term bond yields will eventually
fall.
Over the past 40 years, the inflation-adjusted or "real" funds rate has averaged
about 175 basis points. At 5.50 percent, the real funds rate is now over 250
basis points. Typically, when the real funds rate has exceeded 300 basis points,
the U.S. economy has dipped into recession. The Fed may tighten further, but it
is clearly not their intention to push the economy into a recession.
Long-term bond yields are likely to be volatile in the near term, but inflation
pressures are limited and eventually long-term bond yields are likely to move
lower.
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 increased exposure to mortgage pass-throughs during the period by purchasing
a GNMA 7.5 percent pool. Since that time, mortgage spreads have narrowed and we
are not adding further exposure to the sector. Corporate bond yield spreads
remain at historically narrow levels. Corporate profit margins may begin to come
under pressure if corporations are unable to pass on cost increases. We did
purchase one corporate bond, which has an attractive put feature. As an
alternative to corporate bonds, we continue to utilize taxable municipals to
increase the yield of 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
PORTFOLIO MANAGER PORTFOLIO MANAGER
<PAGE>
IMG MUTUAL FUND, INC.
MANAGEMENT TEAM
APRIL 30, 1997
KATHRYN D. BEYER, CFA
MANAGING DIRECTOR
Ms. Beyer is a fixed income strategist. Prior to joining IMG, she was the
Director of Mortgage-Backed Securities for Central Life Assurance Company with
the responsibility of managing two portfolios which comprised 20 percent of the
company's assets. Prior to her promotion, Kathy was a Senior Fixed Income
Analyst. In this position, she performed research and analysis of corporate
bonds and mortgage-backed securities and formulated specific investment
strategies for the company's total fixed income portfolio of $2 billion. She
received her M.B.A. from Drake University and her B.S. from Iowa State
University. Kathy is a Chartered Financial Analyst.
JEFFREY D. LORENZEN, CFA
MANAGING DIRECTOR
Mr. Lorenzen serves as a fixed income strategist and portfolio manager for
discretionary and nondiscretionary fixed income portfolios. Prior to joining
IMG, he served as a Senior Analyst for The Statesman Group, responsible for the
analytical and management functions under both the corporate and mortgage-backed
portfolios which totaled over $3 billion. Jeff received his M.B.A. degree from
Drake University and his B.B.A. degree from the University of Iowa. He is a
Chartered Financial Analyst, and an active member of the Association for
Investment Management and Research, where he serves as a CFA exam grader and a
member of the Council of Examiners. He also serves as the Vice President of the
Iowa Society of Financial Analysts.
JAMES T. RICHARDS
MANAGING DIRECTOR
Mr. Richards is IMG's equity strategist. He returned to IMG in 1997, after
leaving the firm for one year to head the trust investment division of Brenton
Bank. At Brenton, he directed the investment strategy for all discretionary
assets under management which totaled over $500 million. James served as
Managing Director - Equity Strategist for IMG from 1991 to 1995. He originally
joined IMG to expand the firm's equity management effort. Prior to IMG, he
served as Managing Director - Equity Strategist for SCI Capital Management, a
Cedar Rapids, Iowa investment management firm. He received his M.B.A. from the
University of Iowa and his B.A. from Coe College.
<PAGE>
IMG MUTUAL FUNDS, INC.
IMG CORE STOCK FUND
SCHEDULE OF INVESTMENTS
APRIL 30, 1997
SHARE/
PAR VALUE DESCRIPTION VALUE
- - --------------------------------------------------------------------------------
COMMON STOCK (97.84%)
BASIC MATERIALS (6.67%)
4,300 Great Lakes Chemical $ 182,213
9,800 International Paper Co. 414,050
11,400 Sonoco Products 306,375
-------------
902,638
-------------
CONSUMER CYCLICALS (10.95%)
11,400 American Greetings 364,800
11,550 Genuine Parts Co. 373,931
7,000 Goodyear Tire & Rubber Co 368,375
9,600 Knight-Ridder, Inc. 373,200
-------------
1,480,306
-------------
CONSUMER STAPLES (17.97%)
11,600 Albertson's, Inc. 382,800
13,800 Hormel Foods Corp. 338,100
6,800 Kimberly-Clark Corp. 348,500
15,100 Luby's Cafeterias, Inc. 275,575
11,300 Newell Company 395,500
11,200 Sysco Corp. 397,600
11,200 UST, Inc. 292,600
-------------
2,430,675
-------------
HEALTH CARE (8.50%)
6,400 Abbott Laboratories 390,400
6,600 Bristol-Meyers Squibb Co. 432,300
11,020 Pharmacia & Upjohn, Inc. 326,468
-------------
1,149,168
-------------
ENERGY (9.88%)
3,300 Atlantic Richfield Co. 449,213
6,000 Chevron Corp. 411,000
8,400 Exxon Corp. 475,650
-------------
1,335,863
-------------
FINANCIALS (21.82%)
5,000 Ambac, Inc. 323,750
14,100 American Heritage Life 356,025
8,140 Banc One Corp. 344,933
7,500 Chubb Corp. 433,125
4,200 J.P. Morgan & Co. 333,600
6,400 Key Corporation 427,875
7,900 National City Corp. 385,125
6,000 Providian 346,500
-------------
2,950,933
-------------
INDUSTRIALS (5.12%)
4,900 Grainger (W.W.), Inc. 369,338
11,000 WMX Technologies 323,125
-------------
692,463
-------------
TECHNOLOGY (2.20%)
8,900 Electronic Data Systems 297,038
------------
See notes to financial statements.
<PAGE>
IMG MUTUAL FUNDS, INC.
IMG CORE STOCK FUND (CONT.)
SCHEDULE OF INVESTMENTS
APRIL 30, 1997
SHARE/
PAR VALUE DESCRIPTION VALUE
- - --------------------------------------------------------------------------------
COMMUNICATIONS SERVICES (7.14%)
4,900 Ameritech Corporation $ 299,510
10,000 AT&T Corp. 335,000
6,400 Nynex Corporation 331,200
-------------
965,710
-------------
UTILITIES (7.59%)
12,900 Central & Southwest Corporation 259,612
10,300 Central Louisiana Electric 263,938
12,800 South Jersey Industries 272,000
9,400 WPS Resources Corp. 231,475
-------------
1,027,025
-------------
Total Common Stocks 13,231,819
(Cost $11,982,410) -------------
CASH EQUIVALENTS (2.04%)
276,527 Merrill Lynch LMS Repurchase Agreement, 5.36%, 5/1/97 276,527
(Cost $276,527)* -------------
TOTAL INVESTMENTS IN SECURITIES (99.88%)
(Cost $12,258,937) 13,508,346
-------------
Other Assets and Liabilities, Net (0.12%) 15,611
-------------
NET ASSETS 100.0% $ 13,523,957
=============
* The market value of the security collateralizing this repurchase agreement
(including accrued interest) is in excess of 102 percent of the resale price,
and will not be less than 100 percent of the resale price over the term of the
agreement. At April 30, 1997, the repurchase agreement was collateralized by a
mortgage-backed security with a market value of $285,126. Based on the cost of
investments of $12,258,937 for federal income tax purposes at April 30, 1997,
the aggregate gross unrealized appreciation was $1,934,629, the aggregate gross
unrealized depreciation was $685,220, and the net unrealized appreciation was
$1,249,409.
See notes to financial statements.
<PAGE>
IMG MUTUAL FUNDS, INC.
IMG BOND FUND
SCHEDULE OF INVESTMENTS
APRIL 30, 1997
SHARE/
PAR VALUE DESCRIPTION VALUE
- - --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (28.25%)
GOVERNMENT AGENCIES (1.65%)
125,000 Government Export Trust, 4.85%, 11/01/97 $ 124,481
-------------
U.S. TREASURY BONDS (15.15%)
1,120,000 U.S. T-Bond, 7.25%, 5/15/16 1,146,062
-------------
U.S. TREASURY NOTES (11.45%)
500,000 U.S. Treasury Note, 5.13%, 12/31/98 491,870
125,000 U.S. Treasury Note, 5.75%, 8/15/03 119,386
200,000 U.S. Treasury Note, 5.88%, 2/15/04 191,278
60,000 U.S. Treasury Note, 7.89%, 8/15/01 62,952
-------------
865,486
-------------
Total Government Securities 2,136,029
(Cost $2,227,787) -------------
CORPORATE BONDS (24.41%)
210,000 Analog Devices, 6.63%, 3/01/00 207,144
75,000 Citizens Utility Co., 6.80%, 8/15/26 74,275
75,000 Dayton Hudson, 10.00%, 12/01/00 81,938
205,000 GMAC, 8.88%, 6/01/10 232,419
130,000 Hubco, Inc., 7.75%, 1/15/04 129,045
75,000 Hydro-Quebec, 8.25%, 1/15/27 77,906
165,000 Lehman Brothers, 8.05%, 1/15/19 165,982
183,000 Manitoba, 7.75%, 7/17/16 187,209
237,500 Naples, City of, Italy, 7.52%, 7/15/06 239,507
185,000 Nova Scotia, 8.25%, 11/15/19 200,494
250,000 WMX Technologies, 6.65%, 5/15/05 249,375
-------------
Total Corporate Bonds 1,845,294
(Cost $1,868,810) -------------
TAXABLE MUNICIPAL BONDS (24.59%)
230,000 Berry Creek Met. Dist. Co., 7.05%, 12/01/03 222,812
125,000 Cottonwood County, MN, 7.40%, 2/01/01 125,745
125,000 Fulton, MO Import Taxable, 7.60%, 7/01/11 126,668
45,000 IA Lakes Community College, 6.65%, 6/01/04 43,547
45,000 IA Lakes Community College, 6.55%, 6/01/03 43,707
115,000 Illinois Dev Financial Authority, 8.65%, 7/01/97 114,872
100,000 Kirkwood Community College, 7.80%, 6/01/02 103,375
155,000 New Orleans, LA Hsg. Dev., 8.00%, 12/01/03 155,245
77,090 Oregon Department of Transportation, 9.00%, 6/15/00 80,143
175,000 Portland, OR, 7.63%, 12/01/01 169,531
100,000 Prairie Du Chien, WI, Redevelopment Authority,
7.63%, 4/01/06 99,575
150,000 St. Paul, MN Port Authority, 6.65%, 9/01/99 149,813
50,000 Texas St. G.O. Taxable, 8.70%, 12/01/09 55,438
200,000 Volusia County, FL Health, 7.40%, 6/01/03 202,502
165,000 Washington St. Housing, 7.65%, 1/01/04 166,252
-------------
Total Taxable Municipal Bonds 1,859,225
(Cost $1,854,980) -------------
See notes to financial statements.
<PAGE>
IMG MUTUAL FUNDS, INC.
IMG BOND FUND (CONT.)
SCHEDULE OF INVESTMENTS
APRIL 30, 1997
SHARE/
PAR VALUE DESCRIPTION VALUE
- - --------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES (20.25%)
COLLATERALIZED MORTGAGE OBLIGATIONS (13.69%)
40,851 Chase Mtge. Finance Corp, 5.75%, 4/25/09 $ 40,166
4,333 Citicorp Mtge. Sec. 1987-13 A3, 9.35%, 6/01/10 4,279
14,681 FHLMC Series L Class 5, 7.90%, 5/01/01 14,446
100,000 FHLMC 1504 B, 7.00%, 12/15/22 95,207
24,972 FHLMC 91 Series 188 Class F, 7.50%, 5/15/20 25,011
150,000 FNMA G92-60 C, 7.00%, 2/25/21 146,103
50,000 FNMA 1991-137 G, 8.30%, 6/25/20 50,846
60,000 FNMA 1991-174 K, 7.00%, 4/25/06 59,475
95,022 Green Tree, 5.20%, 10/15/18 94,901
76,503 Housing Securities, Inc 1992-EA A6, P/O,
9.13%, 10/25/07** 55,927
68,128 Housing Securities, Inc 1993-C C3, P/O, 9.06%, 9/25/08** 49,603
59,247 Housing Securities, Inc 1993-E E-14, P/O,
10.27%, 5/20/18** 42,357
83,999 Kidder Peabody Mtg. Asset Trust, 8.45%, 5/20/18 83,631
45,204 Residential Funding Mtg. Sec. I, Series 1993-S7,
Class A6, 7.15%, 2/25/08 45,227
32,268 Resolution Trust Corp. Series 1992-17 Class A1,
Variable Rate, 8.86%, 12/25/20* 32,369
287,214 Salomon Mortgage Sec. VII 1995-1, P/O,
10.54%, 2/25/25** 195,541
-------------
1,035,089
-------------
FHLMC MORTGAGE-BACKED POOLS (0.24%)
17,601 FHLMC Pool #C00126, 8.50%, 6/01/22 18,151
-------------
GNMA MORTGAGE-BACKED POOLS (6.32%)
32,843 GNMA #315929, 9.00%, 6/15/22 34,464
52,573 GNMA #341681, 8.50%, 1/15/23 54,182
47,539 GNMA #354189, 7.50%, 5/01/23 47,206
91,319 GNMA #359600, 7.50%, 7/15/23 90,726
253,003 GNMA #376218, 7.50%, 8/15/25 250,931
-------------
477,509
-------------
Total Mortgage-Backed Securities 1,530,749
(Cost $1,511,642) -------------
CASH EQUIVALENTS (0.49%)
37,262 Norwest Cash Investment Fund, 5.17% 37,262
(Cost $37,262) -------------
TOTAL INVESTMENTS IN SECURITIES (97.99%)
(Cost $7,500,481) 7,408,559
-------------
Other Assets and Liabilities, Net (2.01%) 151,709
-------------
NET ASSETS 100.0% $ 7,560,268
=============
* Denotes a floating-rate investment with interest rate as of April 30, 1997. **
Interest presented for principal only bond equates effective yield at date of
purchase. Based on the cost of investments of $7,500,481 for federal income tax
purposes at April 30, 1997, the aggregate gross unrealized appreciation was
$50,485, the aggregate gross unrealized depreciation was $142,407, and the net
unrealized depreciation was $91,922.
See notes to financial statements.
<PAGE>
IMG MUTUAL FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES
APRIL 30, 1997
<TABLE>
<CAPTION>
IMG CORE IMG
STOCK BOND
FUND FUND
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investment in Securities
at Value (Cost $12,258,937; and $7,500,481 respectively) $13,508,346 $7,408,559
Dividends & Interest Receivable 27,587 154,732
Other Assets 0 1,944
-----------------------------------------
Total Assets 13,535,933 7,565,235
LIABILITIES
Accrued Operating Expenses and Other Liabilities 11,976 4,967
-----------------------------------------
Total Liabilities 11,976 4,967
-----------------------------------------
Net Assets $13,523,957 $7,560,268
=========================================
ANALYSIS OF NET ASSETS
Excess of amounts received from issuance of shares over amounts
paid on redemptions of shares 11,955,326 7,585,316
Undistributed net realized gain 218,805 20,112
Unrealized Appreciation/Depreciation 1,249,409 (91,922)
Undistributed net investment income 100,417 46,762
-----------------------------------------
Net assets applicable to shares outstanding $13,523,957 $7,560,268
=========================================
PRICING OF ADVISOR SHARES
Net assets applicable to Advisor Shares outstanding $ 562,664 $ 0
=========================================
Shares outstanding, $.001 par value* 51,749 0
=========================================
Net asset value, offering price and redemption price per Advisor Share $ 10.873 $ 0.000
=========================================
PRICING OF SELECT SHARES
Net assets applicable to Select Shares outstanding $ 5,766,756 $3,200,523
=========================================
Shares outstanding, $.001 par value* 528,808 325,843
=========================================
Net asset value, offering price and redemption price per Select Share $ 10.905 $ 9.822
=========================================
PRICING OF INSTITUTIONAL SHARES
Net assets applicable to Institutional Shares outstanding $ 7,194,537 $4,359,745
=========================================
Shares outstanding, $.001 par value* 659,239 443,794
=========================================
Net asset value, offering price and redemption price per Institutional Share $ 10.913 $ 9.824
=========================================
</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 YEAR ENDED APRIL 30, 1997
IMG CORE IMG
STOCK BOND
FUND FUND
- - --------------------------------------------------------------------------------
INCOME
Interest Income $ 193,228 $ 556,858
Dividend Income 429,291 0
-----------------------
Total Income 622,519 556,858
-----------------------
EXPENSES
Advisory Fee-IMG 71,780 23,870
Administration Fee 28,294 9,821
Distribution Fee-Advisor Shares 2,181 0
Distribution Fee-Select Shares 9,322 5,594
Fund Accounting Custody Fee 14,356 7,957
Transfer Agent Fee 7,178 3,978
Other Expenses 11,384 6,291
-----------------------
Total Expenses 144,495 57,511
-----------------------
NET INVESTMENT INCOME 478,024 499,347
-----------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net Realized Gain (Loss) on Investments 925,620 (992)
Net Change in Unrealized Appreciation (note 1) (319,498) 40,539
-----------------------
NET GAIN (LOSS) ON INVESTMENTS 606,122 39,547
-----------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $1,084,146 $ 538,894
=======================
See notes to financial statements.
<PAGE>
IMG MUTUAL FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED APRIL 30, 1997 AND 1996
<TABLE>
<CAPTION>
IMG CORE IMG
STOCK BOND
FUND FUND
1997 1996 1997 1996
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net Investment Income $ 478,024 $ 334,913 $ 499,347 $ 329,846
Net Realized Gain (Loss) on Investments 925,620 413,175 (992) 32,638
Net Change in Unrealized Appreciation (319,498) 953,002 40,539 (309,728)
-------------------------------------------------------------------
Net Increase in Net Assets from Operations 1,084,146 1,701,090 538,894 52,756
-------------------------------------------------------------------
DISTRIBUTIONS
Dividend Distributions Paid
Advisor Shares 18,524 0 0 0
Investor Shares 0 9,618 0 6,627
Select Shares 221,195 99,756 225,559 121,845
Institutional Shares 298,702 64,725 272,474 155,926
Capital Gain Distribution Paid
Advisor Shares 41,668 0 0 0
Investor Shares 0 0 0 111
Select Shares 486,781 0 3,670 1,902
Institutional Shares 591,541 0 3,820 2,031
-------------------------------------------------------------------
Total Distributions 1,658,411 174,099 505,523 288,442
-------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Sales- Advisor Shares 0 0 0 0
Investor Shares 0 784,372 0 201,168
Select Shares 607,794 7,860,056 527,650 4,348,326
Institutional Shares 412,325 6,361,593 284,210 4,197,204
Reinvestments- Advisor Shares 60,191 0 0 0
Investor Shares 0 9,618 0 4,249
Select Shares 698,930 99,756 223,068 123,746
Institutional Shares 696,348 64,725 235,744 157,957
Exchanges- Advisor Shares 0 530,571 0 0
Investor Shares 0 (867,071) 0 (197,449)
Select Shares 20,000 (1,317,640) (20,000) (328,893)
Institutional Shares 0 1,654,140 0 526,342
Redemptions- Advisor Shares 0 0 0 0
Investor Shares 0 (15,801) 0 (19,894)
Select Shares (1,655,820) (1,211,178) (1,197,163) (405,944)
Institutional Shares (1,081,626) (1,190,052) (531,184) (416,556)
-------------------------------------------------------------------
Increase (Decrease) in Net Assets from Capital
Shares Transactions (241,858) 12,763,089 (477,675) 8,190,258
-------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (816,123) 14,290,080 (444,304) 7,954,572
-------------------------------------------------------------------
NET ASSETS
Beginning of Period 14,340,080 50,000 8,004,572 50,000
-------------------------------------------------------------------
End of Period $13,523,957 $14,340,080 $ 7,560,268 $ 8,004,572
===================================================================
Undistributed Net Investment Income at End of Period $ 100,417 $ 160,814 $ 39,272 $ 45,448
===================================================================
</TABLE>
See notes to financial statements.
<PAGE>
IMG MUTUAL FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997
1. ORGANIZATION 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 percent 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 the IMG Private
Investment Trusts (the "Trusts"). 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 5, 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. Shares will
automatically convert to the next class level upon attainment of the
minimum investment requirement. Each class of shares has equal rights as to
earnings, assets, and voting privileges except that each class bears
different distribution and/or shareholder servicing 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,
disclosure 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 valued 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 or 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 semiannual dividends for the IMG Core Stock Fund.
Any net realized capital gains will be distributed annually, after using
any available capital loss carryover.
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. For federal income tax purposes, the IMG Bond Fund
has a capital loss carryover at April 30, 1997, of $1,223 expiring in 2005
if not offset by subsequent capital gains. It is unlikely the Board of
Directors will authorize a distribution of any net realized gains until the
available capital loss carryover has been offset or expires.
2. 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 class of shares
owned.
IMG also acts as fund accountant, transfer agent, and dividend paying agent
for the Funds, and maintains 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.
3. INVESTMENT TRANSACTIONS
-----------------------
Investment transactions (excluding short-term securities) for the year
ending April 30, 1997, are as follows:
IMG Core IMG Bond
Stock Fund Fund
Purchases $ 7,296,938 $ 3,180,151
Proceeds from sales $ 9,031,817 $ 3,809,309
4. CAPITAL SHARE TRANSACTIONS
--------------------------
SHARE ACTIVITY
The following table summarizes the activity in each class of capital share
of the Funds:
<TABLE>
<CAPTION>
IMG CORE IMG
STOCK BOND
FUND FUND
1997 1996* 1997 1996*
------------------------------------------------------------
<S> <C> <C> <C> <C>
ADVISOR SHARES
For the years ended April 30, 1997 and 1996:
Shares sold 0 0 0 0
Shares issued in reinvestment of dividends 5,457 0 0 0
Share class exchanges 0 46,292 0 0
Shares redeemed 0 0 0 0
------------------------------------------------------------
Net increase from capital share transactions 5,457 46,292 0 0
============================================================
INVESTOR SHARES
For the years ended April 30, 1997 and 1996:
Shares sold 0 75,806 0 20,081
Shares issued in reinvestment of dividends 0 845 0 419
Share class exchanges 0 (75,651) 0 (20,000)
Shares redeemed 0 (1,500) 0 (2,000)
------------------------------------------------------------
Net increase (decrease) from capital share transactions 0 (1,500) 0 (1,500)
============================================================
SELECT SHARES
For the years ended April 30, 1997 and 1996:
Shares sold 70,653 767,668 82,098 430,230
Shares issued in reinvestment of dividends 63,195 8,753 22,804 12,328
Share class exchanges 1,560 (114,833) (1,892) (29,767)
Shares redeemed (163,606) (106,082) (149,457) (42,001)
------------------------------------------------------------
Net increase (decrease) from capital share transactions (28,198) 555,506 (46,447) 370,790
============================================================
INSTITUTIONAL SHARES
For the years ended April 30, 1997 and 1996:
Shares sold 52,820 611,049 57,305 417,832
Shares issued in reinvestment of dividends 62,843 5,679 24,120 15,738
Share class exchanges 0 144,098 0 51,616
Shares redeemed (114,939) (104,311) (83,488) (41,329)
------------------------------------------------------------
Net increase (decrease) from capital share transactions 724 656,515 (2,063) 443,857
============================================================
</TABLE>
* Advisor Shares were first issued on April 5, 1996. Investor Shares were
converted to Advisor and Select Shares at their net asset value as of the close
of business on April 4, 1996.
See notes to financial statements.
<PAGE>
IMG MUTUAL FUNDS, INC.
FINANCIAL HIGHLIGHTS
APRIL 30, 1997
The following presents information relating to an Advisor Share of Capital Stock
of the Fund outstanding for the entire period.
<TABLE>
<CAPTION>
IMG CORE IMG
STOCK BOND
FUND FUND
1997 1996* 1997 1996*
- - ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF PERIOD $ 11.341 $ 11.461 $ 0.000 $ 0.000
-------------------------------------------------------------
Net Investment Income 0.336 0.066 0.000 0.000
Net Realized and Unrealized Gains (Losses) on Investments 0.462 (0.186) 0.000 0.000
-------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.798 (0.120) 0.000 0.000
-------------------------------------------------------------
LESS
Distributions from Net Investment Income 0.382 0.000 0.000 0.000
Distributions from Net Realized Gains 0.884 0.000 0.000 0.000
-------------------------------------------------------------
TOTAL DISTRIBUTIONS 1.266 0.000 0.000 0.000
-------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.873 $ 11.341 $ 0.000 $ 0.000
=============================================================
Total Return 7.17% (1.05%) 0.00% 0.00%
Net Assets, End of Period $ 562,664 $ 525,011 $ 0 $ 0
Ratio of Expenses to Average Net Assets 1.38% 1.45% 0.00% 0.00%
Ratio of Net Investment Income to Average Net Assets 2.91% 8.18% 0.00% 0.00%
Portfolio Turnover Rate 54.09% 38.44% 0.00% 0.00%
Average Commissions Paid to Brokers $ 0.0968 $ 0.0956
</TABLE>
* Advisor Shares were first issued on April 5, 1996. Investor Shares were
converted to Advisor Shares at their net asset value as of the close of business
on April 4, 1996. 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.
<PAGE>
IMG MUTUAL FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONT.)
APRIL 30, 1997
The following presents information relating to an Investor Share of Capital
Stock of the Fund outstanding for the entire period.
<TABLE>
<CAPTION>
IMG CORE IMG
STOCK BOND
FUND FUND
1997 1996* 1997 1996*
- - ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF PERIOD $ 0.000 $ 10.000 $ 0.000 $ 10.000
-------------------------------------------------------------
Net Investment Income 0.000 0.194 0.000 0.432
Net Realized and Unrealized Gains (Losses) on Investments 0.000 1.405 0.000 (0.140)
-------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.000 1.599 0.000 0.292
-------------------------------------------------------------
LESS
Distributions from Net Investment Income 0.000 0.138 0.000 0.413
Distributions from Net Realized Gains 0.000 0.000 0.000 0.007
-------------------------------------------------------------
TOTAL DISTRIBUTIONS 0.000 0.138 0.000 0.420
-------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD** $ 0.000 $ 11.461 $ 0.000 $ 9.872
=============================================================
Total Return 0.00% 16.00% 0.00% 2.91%
Net Assets, End of Period $ 0 $ 0 $ 0 $ 0
Ratio of Expenses to Average Net Assets 0.00% 1.35% 0.00% 1.00%
Ratio of Net Investment Income to Average Net Assets 0.00% 2.88% 0.00% 6.02%
Portfolio Turnover Rate 0.00% 38.44% 0.00% 60.43%
Average Commissions Paid to Brokers $ 0 $ 0.0956
</TABLE>
* From inception of the Fund July 7, 1995.
** Investor Shares were converted to Advisor and Select Shares on April 5, 1996
at which time Investor Shares ceased to be issued.
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.
<PAGE>
IMG MUTUAL FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONT.)
APRIL 30, 1997
The following presents information relating to an Select Share of Capital Stock
of the Fund outstanding for the entire period.
<TABLE>
<CAPTION>
IMG CORE IMG
STOCK BOND
FUND FUND
1997 1996* 1997 1996*
- - ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF PERIOD $ 11.359 $ 10.000 $ 9.782 $ 10.000
---------------------------------------------------------------
Net Investment Income 0.352 0.273 0.619 0.493
Net Realized and Unrealized Gains on Investments 0.476 1.229 0.045 (0.278)
---------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.828 1.502 0.664 0.215
---------------------------------------------------------------
LESS
Distributions from Net Investment Income 0.398 0.143 0.624 0.426
Distributions from Net Realized Gains 0.884 0.000 0.000 0.007
---------------------------------------------------------------
TOTAL DISTRIBUTIONS 1.282 0.143 0.624 0.433
---------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.905 $ 11.359 $ 9.822 $ 9.782
===============================================================
Total Return 7.44% 15.02% 6.97% 2.10%
Net Assets, End of Period $5,766,756 $6,327,236 $3,200,523 $3,641,921
Ratio of Expenses to Average Net Assets 1.13% 1.10% 0.83% 0.80%
Ratio of Net Investment Income to Average Net Assets 3.20% 3.11% 6.16% 6.24%
Portfolio Turnover Rate 54.09% 38.44% 42.22% 60.43%
Average Commissions Paid to Brokers $ 0.0968 $ 0.0956
</TABLE>
* From inception of the Fund July 7, 1995.
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.
<PAGE>
IMG MUTUAL FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONT.)
APRIL 30, 1997
The following presents information relating to an Institutional Share of Capital
Stock of the Fund outstanding for the entire period.
<TABLE>
<CAPTION>
IMG CORE IMG
STOCK BOND
FUND FUND
1997 1996* 1997 1996*
- - ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF PERIOD $ 11.371 $ 10.000 $ 9.785 $ 10.000
-------------------------------------------------------------
Net Investment Income 0.384 0.284 0.640 0.486
Net Realized and Unrealized Gains (Losses) on Investments 0.472 1.242 0.044 (0.254)
-------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.856 1.526 0.684 0.232
-------------------------------------------------------------
LESS
Distributions from Net Investment Income 0.430 0.155 0.645 0.440
Distributions from Net Realized Gains 0.884 0.000 0.000 0.007
-------------------------------------------------------------
TOTAL DISTRIBUTIONS 1.314 0.155 0.645 0.447
-------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.913 $ 11.371 $ 9.824 $ 9.785
=============================================================
Total Return 7.71% 15.25% 7.19% 2.27%
Net Assets, End of Period $7,194,537 $7,487,833 $4,359,745 $4,362,650
Ratio of Expenses to Average Net Assets 0.88% 0.85% 0.63% 0.60%
Ratio of Net Investment Income to Average Net Assets 3.45% 3.37% 6.36% 6.40%
Portfolio Turnover Rate 54.09% 38.44% 42.22% 60.43%
Average Commissions Paid to Brokers $ 0.0968 $ 0.0956
</TABLE>
* From inception of the Fund July 7, 1995.
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.
<PAGE>
IMG MUTUAL FUNDS, INC.
INDEPENDENT AUDITORS' REPORT
APRIL 30, 1997
The Shareholders and Board of Directors
IMG Mutual Funds, Inc.:
We have audited the statements of assets and liabilities for the year ended
April 30, 1997, including the schedules of investments of the IMG Core Stock
Fund and the IMG Bond Fund (series of IMG Mutual Funds, Inc.), and the related
statements of operations for the year then ended; the statements of changes in
net assets, and financial highlights for the year ended April 30, 1997 and for
the period July 7, 1995 (commencement of operations) through April 30, 1996.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and 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 were confirmed to us by the custodian. As
to securities purchased and sold but not received or delivered, we requested
confirmations from brokers, and where replies are not received, we carry out
other appropriate auditing procedures. An audit 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
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
IMG Core Stock Fund and the IMG Bond Fund as of April 30, 1997, and 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
Des Moines, Iowa
May 30, 1997
<PAGE>
IMG MUTUAL FUNDS, INC.
2203 GRAND AVENUE
DES MOINES, IA 50312-5338
515-244-5426 TOLL FREE: 1-800-798-1819
