SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. _____ [ ]
Post-Effective Amendment No. 37 (File No. 2-63552) [x]
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 38 (File No. 811-2901) [x]
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IDS HIGH YIELD TAX-EXEMPT FUND, INC.
IDS Tower 10
Minneapolis, MN 55440-0010
Leslie L. Ogg
901 S. Marquette Avenue, Suite 2810
Minneapolis, MN 55402-3268
(612) 330-9283
Approximate Date of Proposed Public Offering:
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[x] on January 29, 1999 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
[ ] This Post-Effective Amendment designates a new effective date for a
previously filed Post-Effective Amendment.
Tax-Free Income Trust also has executed this Amendment to the Registration
Statement.
<PAGE>
IDS High Yield Tax-Exempt Fund
Prospectus Jan. 29, 1999
IDS High Yield Tax-Exempt Fund seeks to provide shareholders with a high yield
generally exempt from federal income taxes.
Please note that this Fund:
o is not a bank deposit
o is not federally insured
o is not endorsed by any bank or government agency
o is not guaranteed to achieve its goal
Like all mutual funds, the Securities and Exchange Commission has not approved
or disapproved these securities or passed upon the adequacy of this prospectus.
Any representation to the contrary is a criminal offense.
AMERICAN
EXPRESS
Financial
Advisors
<PAGE>
Table of Contents
TAKE A CLOSER LOOK AT:
The Fund 3p
Goal 3p
Investment Strategy 3p
Risks 4p
Past Performance 6p
Fees and Expenses 8p
Management 9p
Buying and Selling Shares 9p
Valuing Fund Shares 9p
Investment Options 10p
Purchasing Shares 11p
Sales Charges 14p
Exchanging/Selling Shares 18p
Distributions and Taxes 22p
Personalized Shareholder Information 24p
Master/Feeder Structure 25p
About the Company 26p
Quick Telephone Reference 28p
Financial Highlights 29p
Appendix 31p
FUND INFORMATION KEY
Goal and Investment Strategy
The Fund's particular investment goal and the strategies it intends
to use in pursuing its goal.
Risks
The major risk factors associated with the Fund.
Fees and Expenses
The overall costs incurred by an investor in the Fund, including
sales charges and annual expenses.
Management
The individual or group designated by the investment manager to
handle the Fund's day-to-day management.
Master/Feeder Structure
Describes the Fund's investment structure.
Financial Highlights
Tables showing the Fund's financial performance.
<PAGE>
The Fund
Goal
IDS High Yield Tax-Exempt Fund (the Fund) seeks to provide shareholders with a
high yield generally exempt from federal income taxes. Because any investment
involves risk, achieving this goal cannot be guaranteed.
Investment Strategy
The Fund's assets primarily are invested in medium and lower quality bonds (junk
bonds) and other debt obligations. Under normal market conditions, the Fund will
invest at least 80% of its net assets in bonds and in other debt obligations
issued by or on behalf of state or local governmental units whose interest is
exempt from federal income tax and is not subject to the alternative minimum
tax. However, the Fund may invest up to 20% of its net assets in debt
obligations the interest from which is subject to the alternative minimum tax.
The selection of municipal obligations that are tax-exempt is the primary
decision in building the investment portfolio.
American Express Financial Corporation (AEFC), the Fund's investment manager,
chooses investments by:
o Considering opportunities and risks in municipal obligations given current
and expected interest rates.
o Identifying municipal obligations that:
-- are medium or lower quality,
-- have similar qualities, in AEFC's opinion, even though they are not rated
or have been given a lower rating by a rating agency,
-- have long-term maturities with higher yields,
-- have characteristics (coupon, call, maturity, etc.) that fit our
investment strategy at the time of purchase.
o Identifying investments that contribute to portfolio diversification.
<PAGE>
In evaluating whether to sell a security, AEFC considers, among other factors,
whether:
-- the security is overvalued,
-- the issuer's credit rating declines or AEFC expects a decline (the Fund
may continue to own securities that are down-graded until AEFC believes it
is advantageous to sell),
-- political, economic, or other events could affect the issuer's
performance,
-- AEFC expects the issuer to call the security,
-- AEFC identifies a more attractive opportunity, and
-- the issuer or the security continues to meet the other standards
described above.
The Fund also may invest in derivative instruments, money market securities and
other short-term tax-exempt securities, and other instruments.
During weak or declining markets, the Fund may invest more of its assets in
money market securities or certain taxable investments. Although the Fund
primarily will invest in these securities to avoid losses, this type of
investing also could reduce the benefit from any improvement in the market. AEFC
may make frequent securities trades that could result in increased fees,
expenses, and taxes.
For more information on strategies and holdings, see the Fund's Statement of
Additional Information (SAI) and the annual/semiannual reports.
Risks
Please remember that with any mutual fund investment you may lose money.
Principal risks associated with an investment in the Fund include:
Market Risk
Interest Rate Risk
Credit Risk
Market Risk
The market may drop and you may lose money. Market risk may affect a single
issuer, sector of the economy, industry, or the market as a whole. The market
value of all securities may move up and down, sometimes rapidly and
unpredictably.
<PAGE>
Interest Rate Risk
The risk of losses attributable to changes in interest rates. This term is
generally associated with bond prices (when interest rates rise, bond prices
fall).
Credit Risk
The risk that the issuer of a security, or the counterparty to a contract, will
default or otherwise become unable to honor a financial obligation (such as
payments due on a bond or note). The price of junk bonds may react more to the
ability of the issuing company to pay interest and principal when due than to
changes in interest rates. They have greater price fluctuations and are more
likely to experience a default.
<PAGE>
Past Performance
The following bar chart and table indicate the risks and variability of
investing in the Fund by showing:
o how the Fund's performance has varied for each full calendar year shown on
the charts below, and
o how the Fund's average annual total returns compare to a recognized index.
How the Fund has performed in the past does not indicate how the Fund will
perform in the future.
Class A Performance (based on calendar years)
+11.39% +5.10% +12.02% +8.70% +9.73% -5.07% +17.39% +2.71% +9.37% +5.44%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
During the period shown in the bar chart, the highest return for a calendar
quarter was +6.69% (quarter ending March 1995) and the lowest return for a
calendar quarter was -4.91% (quarter ending March 1994).
The 5% sales charge applicable to Class A shares of the Fund is not reflected in
the bar chart; if reflected, returns would be lower than those shown. The
performance of Class B and Class Y may vary from that shown above because of
differences in sales charges and fees.
The Fund's year to date return as of Dec. 31, 1998 was +5.44%.
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Returns ( as of Dec. 31, 1998)
1 year Since inception (B&Y) 5 years 10 years (A)
<S> <C> <C> <C> <C>
==========================================================================================================
High Yield:
==========================================================================================================
Class A +0.16% -- +4.63% +6.97%
==========================================================================================================
Class B +0.68% +6.02%a -- --
Class Y +5.54% +7.46%a -- --
==========================================================================================================
Lehman Brothers
==========================================================================================================
Municipal Bond Index +6.48% +7.40%b +5.84% +8.01%
</TABLE>
a Inception date was March 20, 1995.
b Measurement period started April 1, 1995.
This table shows total returns from hypothetical investments in Class A, Class B
and Class Y shares of the Fund. These returns are compared to the index shown
for the same periods. The performance of Classes A, B and Y vary because of
differences in sales charges and fees. Past performance for Class Y for the
periods prior to March 20, 1995 may be calculated based on the performance of
Class A, adjusted to reflect differences in sales charges, although not for
other differences in expenses.
For purposes of this calculation we assumed:
o a sales charge of 5% for Class A shares,
o sales at the end of the period and deduction of the applicable contingent
deferred sales charge (CDSC)for Class B shares,
o no sales charge for Class Y shares,
o conversion of Class B shares to Class A shares in the ninth calendar year of
ownership, and
o no adjustments for taxes paid by an investor on the reinvested income and
capital gains.
Lehman Brothers Municipal Bond Index is an unmanaged index made up of a
representative list of general obligation, revenue, insured and pre-refunded
bonds. The index is frequently used as a general measure of tax-exempt bond
market performance. However, the securities used to create the index may not be
representative of the bonds held by the Fund. The index reflects reinvestment of
all distributions and changes in market prices, but excludes brokerage
commissions or other fees.
<PAGE>
Fees and Expenses
Fund investors pay various expenses. The table below describes the fees and
expenses that you may pay if you buy and hold shares of the Fund.
<TABLE>
<CAPTION>
==========================================================================================================
Shareholder Fees (fees paid directly from your investment)
Class A Class B Class Y
<S> <C> <C> <C>
Maximum sales charge (load) imposed on purchasesa
(as a percentage of offering price) 5% none none
- ----------------------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) imposed on sales
(as a percentage of offering price at time of purchase) none 5% none
==========================================================================================================
Annual Fund operating expensesb (expenses that are deducted from Fund assets)
As a percentage of average daily net assets: Class A Class B Class Y
==========================================================================================================
Management fees 0.44% 0.44% 0.44%
Distribution (12b-1) fees 0.00% 0.75% 0.00%
Other expensesc 0.26% 0.26% 0.18%
Total 0.70% 1.45% 0.62%
</TABLE>
a This charge may be reduced depending on your total investments in IDS
funds. See "Sales Charges."
b Both in this table and the following example fund operating expenses
include expenses charged by both the Fund and its Master Portfolio as
described under "Management".
c Other expenses include an administrative services fee, a shareholder
services fee, a transfer agency fee and other nonadvisory expenses.
<PAGE>
Example
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
Assume you invest $10,000 and the Fund earns a 5% annual return. The operating
expenses remain the same each year. If you hold your shares until the end of the
years shown, your costs would be:
1 year 3 years 5 years 10 years
Class Aa $568 $713 $871 $1,331
Class Bb $648 $859 $993 $1,535d
Class Bc $148 $459 $793 $1,535d
Class Y $ 63 $199 $346 $ 778
a Includes a 5% sales charge.
b Assumes you sold your Class B shares at the end of the period and incurred
the applicable CDSC.
c Assumes you did not sell your Class B shares at the end of the period.
d Based on conversion of Class B shares to Class A shares in the ninth year
of ownership.
This example does not represent actual expenses, past or future. Actual expenses
may be higher or lower than those shown.
Management
The Fund's assets are invested in Tax-Free High Yield Portfolio (the Portfolio),
which is managed by AEFC. Kurt Larson, vice president and senior portfolio
manager, joined AEFC in 1961. He has managed the assets of the Fund since 1979.
Buying and Selling Shares
Valuing Fund Shares
The public offering price for Class A is the net asset value (NAV) adjusted for
the sales charge. For Class B and Class Y, it is the NAV.
The NAV is the value of a single Fund share. The NAV usually changes daily, and
is calculated at the close of business of the New York Stock Exchange, normally
3 p.m. Central Standard Time (CST), each business day (any day the New York
Stock Exchange is open).
<PAGE>
The Fund's investments are valued based on market value, or where market
quotations are not readily available, on methods selected in good faith by the
board. Please see the SAI for further information.
Investment Options
1. Class A shares are sold to the public with a sales charge at the time of
purchase.
2. Class B shares are sold to the public with a CDSC and an annual distribution
(12b-1) fee.
3. Class Y shares are sold to qualifying institutional investors without a sales
charge or distribution fee. Please see the SAI for information on eligibility to
purchase Class Y shares.
Investment options summary:
Class A Maximum sales charge of 5%
Initial sales charge waived or reduced for certain
purchases
No annual distribution fee
Service fee of 0.175% of average daily net assets
Lower annual expenses than Class B shares
Class B No initial sales charge
CDSC on shares sold in the first six years (maximum of 5%
in first year, reduced to 0% after year six)
CDSC waived in certain circumstances
Shares convert to Class A in ninth year of ownership
Annual distribution fee of 0.75% of average daily net
assets*
Service fee of 0.175% of average daily net assets
Higher annual expenses than Class A shares
Class Y No initial sales charge
No annual distribution fee
Service fee of 0.10% of average daily net assets
Available only to certain qualifying institutional
investors
* The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act
of 1940 that allows it to pay distribution fees for the sale of Class B
shares. Because these fees are paid out of the Fund's assets on an on-going
basis, long-term shareholders of Class B shares may end up paying more than
the 6.25% sales charge permitted by the National Association of Securities
Dealers.
<PAGE>
Should you purchase Class A or Class B shares?
If your investments in IDS funds total $250,000 or more, Class A shares may be
the better option. If you qualify for a waiver of the sales charge, Class A
shares will be the best option.
If you invest less than $250,000, consider how long you plan to hold your
shares. Class B shares have an additional annual distribution fee of 0.75% and a
CDSC for six years. To help you determine what is best for you, consult your
financial advisor.
Class B shares convert to Class A shares in the ninth calendar year of
ownership. Class B shares purchased through reinvested dividends and
distributions also will convert to Class A shares in the same proportion as the
other Class B shares.
Purchasing Shares
If you do not have a mutual fund account, you need to establish one. Your
financial advisor will help you fill out and submit an application. Once your
account is set up, you can choose among several convenient ways to invest.
When you purchase shares for a new or existing account, your order will be
priced at the next NAV calculated after your order is accepted by the Fund. If
your application does not specify which class of shares you are purchasing, we
will assume you are investing in Class A shares.
Important: When you open an account, you must provide your correct Taxpayer
Identification Number (TIN), which is either your Social Security or Employer
Identification number.
If you do not provide the correct TIN, you could be subject to backup
withholding of 31% of taxable distributions and proceeds from certain sales and
exchanges. You also could be subject to further penalties, such as:
o a $50 penalty for each failure to supply your correct TIN,
o a civil penalty of $500 if you make a false statement that results in no
backup withholding, and
o criminal penalties for falsifying information.
You also could be subject to backup withholding because you failed to report
required interest or dividends on your tax return.
<PAGE>
<TABLE>
<CAPTION>
How to determine the correct TIN
For this type of account: Use the Social Security or Employer Identification number of:
<S> <C>
Individual or joint account The individual or one of the individuals listed on the joint account
Custodian account of a minor The minor
(Uniform Gifts/Transfers to Minors Act)
A living trust The grantor-trustee (the person who puts the money into the trust)
An irrevocable trust, pension trust The legal entity (not the personal representative or trustee, unless no legal entity is
or estate title) designated in the account
Sole proprietorship The owner
Partnership The partnership
Corporate The corporation
Association, club or tax-exempt The organization
organization
</TABLE>
For details on TIN requirements, ask your financial advisor or contact your
local American Express Financial Advisors office for federal Form W-9, "Request
for Taxpayer Identification Number and Certification."
Three ways to invest
1 By mail:
Once your account has been established, send your check with the account number
on it to:
American Express Financial Advisors Inc.
P.O. Box 74
Minneapolis, MN 55440-0074
Minimum amounts
Initial investment: $2,000
Additional investments: $100
Account balances: $300
If your account balance falls below $300, you will be asked to increase it to
$300 or establish a scheduled investment plan. If you do not do so within 30
days, your shares can be sold and the proceeds mailed to you.
<PAGE>
2 By scheduled investment plan:
Contact your financial advisor to set up one of the following scheduled plans:
o automatic payroll deduction,
o bank authorization,
o direct deposit of Social Security check, or
o other plan approved by the Fund.
Minimum amounts
Initial investment: $100
Additional investments: $100/mo.
Account balances: none (on active plans of monthly payments)
If your account falls below $2,000, you must make payments at least monthly.
3 By wire or electronic funds transfer: If you have an established account, you
may wire money to:
Norwest Bank Minnesota
Routing Transit No. 091000019
Give these instructions:Credit American Express Financial Advisors Account
#0000030015 for personal account # (your account number) for (your name).
If this information is not included, the order may be rejected, and all money
received by the Fund, less any costs the Fund or American Express Client Service
Corporation (AECSC) incurs, will be returned promptly.
Minimum amounts
Each wire investment: $1,000
If you are in a wrap fee program sponsored by AEFA and your balance falls below
the required program minimum or your program is terminated, your shares will be
sold and the proceeds will be mailed to you.
<PAGE>
Sales Charges
Class A -- initial sales charge alternative
When you purchase Class A shares, you pay a 5% sales charge on the first $50,000
of your total investment and less on investments after the first $50,000:
Total investment Sales charge as percentage of:a
Public offering priceb Net amount invested
Up to $50,000 5.0% 5.26%
Next $50,000 4.5 4.71
Next $400,000 3.8 3.95
Next $500,000 2.0 2.04
$1,000,000 or more 0.0 0.00
a To calculate the actual sales charge on an investment greater than $50,000
and less than $1,000,000, you must total the amounts of all increments that
apply.
b Offering price includes a 5% sales charge.
The sales charge on Class A shares may be lower than 5%, depending on the total
amount:
o you now are investing in this Fund,
o you have previously invested in this Fund, or
o you and your primary household group are investing or have invested in
other funds in the IDS MUTUAL FUND GROUP that have a sales charge. (The
primary household group consists of accounts in any ownership for spouses
or domestic partners and their unmarried children under 21. Domestic
partners are individuals who maintain a shared primary residence and have
joint property or other insurable interests.) IDS Tax-Free Money Fund and
Class A shares of IDS Cash Management Fund do not have sales charges.
Other Class A sales charge policies:
o IRA purchases or other employee benefit plan purchases made through a
payroll deduction plan or through a plan sponsored by an employer,
association of employers, employee organization or other similar group, may
be added together to reduce sales charges for all shares purchased through
that plan, and
o if you intend to invest $1 million over a period of 13 months, you can
reduce the sales charges in Class A by filing a letter of intent. For more
details, please see the SAI.
<PAGE>
Waivers of the sales charge for Class A shares
Sales charges do not apply to:
o current or retired board members, officers or employees of the Fund or AEFC
or its subsidiaries, their spouses, and unmarried children under 21.
o current or retired American Express financial advisors, their spouses, and
unmarried children under 21.
o investors who have a business relationship with a newly associated
financial advisor who joined AEFA from another investment firm provided
that (1) the purchase is made within six months of the advisor's
appointment date with AEFA, (2) the purchase is made with proceeds of
shares sold that were sponsored by the financial advisor's previous
broker-dealer, and (3) the proceeds are the result of a sale of an equal or
greater value where a sales load was assessed.
o qualified employee benefit plans using a daily transfer recordkeeping
system offering participants daily access to funds of the IDS MUTUAL FUND
GROUP. Eligibility must be determined in advance by AEFA. For assistance,
please contact your financial advisor. (Participants in certain qualified
plans where the initial sales charge is waived may be subject to a deferred
sales charge of up to 4%.)
o shareholders who have at least $1 million invested in funds of the IDS
MUTUAL FUND GROUP. If the investment is sold in the first year after
purchase, a CDSC of 1% will be charged. The CDSC will be waived only in the
circumstances described for waivers for Class B shares.
o purchases made within 30 days after a sale of shares (up to the amount
sold):
-- of a product distributed by AEFA in a qualified plan subject to a
deferred sales charge, or
-- in a qualified plan or account where American Express Trust Company
has a recordkeeping, trustee, investment management, or investment
servicing relationship.
Send the Fund a written request along with your payment, indicating the date and
the amount of the sale.
<PAGE>
o purchases made:
-- with dividend or capital gain distributions from this Fund or from the
same class of another fund in the IDS MUTUAL FUND GROUP that has a
sales charge,
-- through or under a wrap fee product sponsored by AEFA,
-- within the University of Texas System ORP,
-- within a segregated separate account offered by Nationwide Life
Insurance Company or Nationwide Life and Annuity Insurance Company,
-- within the University of Massachusetts After-Tax Savings Program,
-- with the proceeds from IDS Life Real Estate Variable Annuity
surrenders, or
-- through or under a subsidiary of AEFC offering Personal Trust
Services' Asset-Based pricing alternative.
Class B -- contingent deferred sales charge (CDSC) alternative
A CDSC is based on the sale amount and the number of calendar years -- including
the year of purchase -- between purchase and sale. The following table shows how
CDSC percentages on sales decline after a purchase:
If the sale is made during the: The CDSC percentage rate is:
First year 5%
Second year 4%
Third year 4%
Fourth year 3%
Fifth year 2%
Sixth year 1%
Seventh year 0%
If the amount you are selling causes the value of your investment in Class B
shares to fall below the cost of the shares you have purchased during the last
six years including the current year, the CDSC is based on the lower of the cost
of those shares purchased or market value.
<PAGE>
Example:
Assume you had invested $10,000 in Class B shares and that your investment had
appreciated in value to $12,000 after 15 months, including reinvested dividends
and capital gain distributions. You could sell up to $2,000 worth of shares
without paying a CDSC ($12,000 current value less $10,000 purchase amount). If
you sold $2,500 worth of shares, the CDSC would apply to the $500 representing
part of your original purchase price. The CDSC rate would be 4% because the sale
was made during the second year after the purchase.
Because the CDSC is imposed only on sales that reduce your total purchase
payments, you never have to pay a CDSC on any amount that represents
appreciation in the value of your shares, income earned by your shares or
capital gains. In addition, the CDSC rate on your sale will be based on your
oldest purchase payment. The CDSC on the next amount sold will be based on the
next oldest purchase payment.
The CDSC on Class B shares will be waived on sales of shares:
o in the event of the shareholder's death,
o held in trust for an employee benefit plan, or
o held in IRAs or certain qualified plans if American Express Trust Company
is the custodian, such as Keogh plans, tax-sheltered custodial accounts or
corporate pension plans, provided that the shareholder is:
-- at least 591/2 years old AND
-- taking a retirement distribution (if the sale is part of a transfer to
an IRA or qualified plan in a product distributed by AEFA, or a
custodian-to-custodian transfer to a product not distributed by AEFA,
the CDSC will not be waived) OR
-- selling under an approved substantially equal periodic payment
arrangement.
<PAGE>
Exchanging/Selling Shares
Exchanges
You can exchange your Fund shares at no charge for shares of the same class of
any other publicly offered fund in the IDS MUTUAL FUND GROUP. Exchanges into IDS
Tax-Free Money Fund may only be made from Class A shares. For complete
information on the other funds, including fees and expenses, read that fund's
prospectus carefully. Your exchange will be priced at the next NAV calculated
after it is accepted by that fund.
You may make up to three exchanges within any 30-day period, with each limited
to $300,000. These limits do not apply to scheduled exchange programs and
certain employee benefit plans or other arrangements through which one
shareholder represents the interests of several. Exceptions may be allowed with
pre-approval of the Fund.
Other exchange policies:
o Exchanges must be made into the same class of shares of the new fund.
o If your exchange creates a new account, it must satisfy the minimum
investment amount for new purchases.
o Once we receive your exchange request, you cannot cancel it.
o Shares of the new fund may not be used on the same day for another exchange.
o If your shares are pledged as collateral, the exchange will be delayed until
AECSC receives written approval from the secured party.
AECSC and the Fund reserve the right to reject any exchange, limit the amount,
or modify or discontinue the exchange privilege, to prevent abuse or adverse
effects on the Fund and its shareholders. For example, if exchanges are too
numerous or too large, they may disrupt the Fund's investment strategies or
increase its costs.
Selling Shares
You can sell your shares at any time. AECSC will mail payment within seven days
after accepting your request.
When you sell shares, the amount you receive may be more or less than the amount
you invested. Your sale price will be the next NAV calculated after your request
is accepted by the Fund, minus any applicable CDSC.
<PAGE>
You can change your mind after requesting a sale and use all or part of the
proceeds to purchase new shares in the same account from which you sold. If you
reinvest in Class A, you will purchase the new shares at NAV rather than the
offering price on the date of a new purchase. If you reinvest in Class B, any
CDSC you paid on the amount you are reinvesting also will be reinvested. To take
advantage of this option, send a request within 30 days of the date your sale
request was received and include your account number. This privilege may be
limited or withdrawn at any time and may have tax consequences.
Requests to sell shares of the Fund are not allowed within 30 days of a
telephoned-in address change.
The Fund reserves the right to redeem in kind.
Important: If you request a sale of shares you recently purchased by a check or
money order that is not guaranteed, the Fund will wait for your check to clear.
It may take up to 10 days from the date of purchase before payment is made.
(Payment may be made earlier if your bank provides evidence satisfactory to the
Fund and AECSC that your check has cleared.)
For more details and a description of other sales policies, please see the SAI.
<PAGE>
Two ways to request an exchange or sale of shares
1 By letter:
Include in your letter:
o the name of the fund(s),
o the class of shares to be exchanged or sold,
o your mutual fund account number(s) (for exchanges, both funds must be
registered in the same ownership),
o your TIN,
o the dollar amount or number of shares you want to exchange or sell,
o signature(s) of all registered account owners,
o for sales, indicate how you want your money delivered to you, and
o any paper certificates of shares you hold.
Regular mail:
American Express Client Service Corporation
Attn: Transactions
P.O. Box 534
Minneapolis, MN 55440-0534
Express mail:
American Express Client Service Corporation
Attn: Transactions
733 Marquette Ave.
Minneapolis, MN 55402
2 By telephone:
American Express Financial Advisors
Telephone Transaction Service
800-437-3133 or 612-671-3800
o The Fund and AECSC will use reasonable procedures to confirm authenticity
of telephone exchange or sale requests.
o Telephone exchange and sale privileges automatically apply to all accounts
except custodial, corporate or qualified retirement accounts. You may
request that these privileges NOT apply by writing AECSC. Each registered
owner must sign the request.
o Acting on your instructions, your financial advisor may conduct telephone
transactions on your behalf.
o Telephone privileges may be modified or discontinued at any time.
Minimum sale amount: $100 Maximum sale amount: $50,000
<PAGE>
Three ways to receive payment when you sell shares
1 By regular or express mail:
o Mailed to the address on record.
o Payable to names listed on the account.
NOTE: The express mail delivery charges you pay will vary depending on the
courier you select.
2 By wire or electronic funds transfer:
o Minimum wire: $1,000.
o Request that money be wired to your bank.
o Bank account must be in the same ownership as the IDS fund account.
NOTE: Pre-authorization required. For instructions, contact your financial
advisor or AECSC.
3 By scheduled payout plan:
o Minimum payment: $50.
o Contact your financial advisor or AECSC to set up regular payments on a
monthly, bimonthly, quarterly, semiannual or annual basis.
o Purchasing new shares while under a payout plan may be disadvantageous
because of the sales charges.
<PAGE>
Distributions and Taxes
As a shareholder you are entitled to your share of the Fund's net income and net
gains. The Fund distributes dividends and capital gains to qualify as a
regulated investment company and to avoid paying corporate income and excise
taxes.
Dividends and capital gain distributions
The Fund's net investment income is distributed to you as dividends. Capital
gains are realized when a security is sold for a higher price than was paid for
it. Short-term capital gains are included in net investment income. Long-term
capital gains are realized when a security is held for more than one year. The
Fund offsets any net realized capital gains by any available capital loss
carryovers. Net realized long-term capital gains, if any, are distributed by the
end of the calendar year as capital gain distributions.
Reinvestments
Dividends and capital gain distributions are automatically reinvested in
additional shares in the same class of the Fund, unless:
o you request distributions in cash, or
o you direct the Fund to invest your distributions in the same class of any
publicly offered fund in the IDS MUTUAL FUND GROUP for which you have
previously opened an account.
We reinvest the distributions for you at the next calculated NAV after the
distribution is paid.
If you choose cash distributions, you will receive cash only for distributions
declared after your request has been processed.
<PAGE>
Taxes
Dividends distributed from interest earned on tax-exempt securities
(exempt-interest dividends) are exempt from federal income taxes but may be
subject to state and local taxes. Dividends distributed from other income earned
and capital gain distributions are not exempt from federal income taxes.
Distributions are taxable in the year the Fund declares them regardless of
whether you take them in cash or reinvest them.
Interest on certain private activity bonds is a preference item for purposes of
the individual and corporate alternative minimum taxes. To the extent the Fund
earns such income, it will flow through to its shareholders and may be taxable
to those shareholders who are subject to the alternative minimum tax.
Because interest on municipal bonds and notes is tax-exempt for federal income
tax purposes, any interest on borrowed money used directly or indirectly to
purchase Fund shares is not deductible on your federal income tax return. You
should consult a tax advisor regarding its deductibility for state and local
income tax purposes.
If you buy shares shortly before a distribution you will pay taxes on money
earned by the Fund before you were a shareholder. You pay the full
pre-distribution price for the shares, then receive a portion of your investment
back as a distribution, which is taxable.
For tax purposes, an exchange is considered a sale and purchase and may result
in a gain or loss. A sale is a taxable transaction. If you sell shares for more
than their cost, the difference is a capital gain. Your gain may be short term
(for shares held for one year or less) or long term (for shares held for more
than one year). If you sell shares for less than their cost, the difference is a
capital loss. If you buy Class A shares of another fund in the IDS MUTUAL FUND
GROUP and within 91 days exchange into this Fund, you may not include the sales
charge in your calculation of tax gain or loss on the sale of the first fund you
purchased. The sales charge may be included in the calculation of your tax gain
or loss on a subsequent sale of this Fund.
Selling shares held in an IRA or qualified retirement account may subject you to
federal taxes, penalties and reporting requirements. Please consult your tax
advisor.
Important: This information is a brief and selective summary of some of the tax
rules that apply to this Fund. Because tax matters are highly individual and
complex, you should consult a qualified tax advisor.
<PAGE>
Personalized Shareholder Information
To help you track and evaluate the performance of your investments, AECSC
provides these individualized reports:
Quarterly statements
List your holdings and transactions during the previous three months, as well as
individualized return information.
Yearly tax statements
Feature average-cost-basis reporting of capital gains or losses if you sell your
shares, along with distribution information to simplify tax calculations.
Personalized mutual fund progress reports
Detail returns on your initial investment and cash-flow activity in your
account. This report calculates a total return reflecting your individual
history in owning Fund shares and is available from your financial advisor.
<PAGE>
Master/Feeder Structure
This Fund uses a master/feeder structure. This means that the Fund (a feeder
fund) invests all of its assets in the Portfolio (the master fund). Other feeder
funds also invest in the Portfolio. The master/feeder structure offers the
potential for reduced costs because it spreads fixed costs of portfolio
management over a larger pool of assets. The Fund may withdraw its assets from
the Portfolio at any time if the Fund's board determines that it is best. In
that event, the board would consider what action should be taken, including
whether to hire an investment advisor to manage the Fund's assets directly or to
invest all of the Fund's assets in another pooled investment entity. Here is an
illustration of the structure:
Investors buy shares in the Fund
The Fund buys units in the Portfolio
The Portfolio invests in securities, such as stocks or bonds
Other feeders may include mutual funds and institutional accounts. These feeders
buy the Portfolio's securities on the same terms and conditions as the Fund and
pay their proportionate share of the Portfolio's expenses. However, their
operating costs and sales charges are different from those of the Fund.
Therefore, the investment returns for other feeders are different from the
returns of the Fund. Information about other feeders may be obtained by calling
American Express Financial Advisors at 800-AXP-SERV.
<PAGE>
About the Company
Business Structure
Shareholders
Your American Express financial advisor and other servicing agents:
May receive a fee for their sales efforts and ongoing service.
Transfer Agent: American Express Client Service Corporation Maintains
shareholder accounts and records for the Fund; receives a fee based on the
number of accounts it services.
Administrative Services Agent: American Express Financial Corporation Provides
administrative and accounting services for the Fund; receives a fee based on
assets.
The Fund invests its assets in the Portfolio. The Fund an/or the Portfolio have
contracts with certain providers.
The Fund
Distributor and Shareholder Services Agent: American Express Financial Advisors
Markets and distributes shares; receives a portion of the sales charge or CDSC
and distribution fee. Also provides a variety of ongoing shareholder services.
Investment Manager: American Express Financial Corporation Manages the
Portfolio's investments and receives a fee based on average daily net assets.*
The Portfolio
Custodian: U.S. Bank National Association Provides safekeeping of assets;
receives a fee that varies based on the number of securities held.
*The Portfolio pays AEFC a fee for managing its assets. The Fund pays its
proportionate share of the fee. Under the Investment Management Services
Agreement, the fee for the most recent fiscal year was 0.44% of its average
daily net assets. Under the Agreement, the Portfolio also pays taxes, brokerage
commissions and nonadvisory expenses.
<PAGE>
American Express Financial Corporation
AEFC has been a provider of financial services since 1894. Its family of
companies offers not only mutual funds but also insurance, annuities, investment
certificates and a broad range of financial management services.
In addition to managing assets of more than $80 billion for all funds in the IDS
MUTUAL FUND GROUP, AEFC manages investments for itself and its subsidiaries, IDS
Certificate Company and IDS Life Insurance Company. Total assets under
management as of the end of the most recent fiscal year were more than $204
billion.
AEFA serves individuals and businesses through its nationwide network of more
than 180 offices and more than 8,700 advisors.
AEFC, located at IDS Tower 10, Minneapolis, MN 55440-0010, is a wholly-owned
subsidiary of American Express Company, a financial services company with
headquarters at American Express Tower, World Financial Center, New York, NY
10285.
Year 2000
The Fund could be adversely affected if the computer systems used by AEFC and
the Fund's other service providers do not properly process and calculate
date-related information from and after Jan. 1, 2000.
While Year 2000-related computer problems could have a negative effect on the
Fund, AEFC is working to avoid such problems and to obtain assurances from
service providers that they are taking similar steps. The companies or
governments in which the Fund invests also may be adversely affected by Year
2000 issues.
<PAGE>
Quick Telephone Reference
American Express Financial Advisors Telephone Transaction Service
Sales and exchanges, dividend payments or reinvestments and automatic payment
arrangements
National/Minnesota: 800-437-3133
Mpls./St. Paul area: 612-671-3800
American Express Client Service Corporation
Fund performance, objectives and account inquiries: 800-862-7919
TTY Service
For the hearing impaired: 800-846-4852
American Express Financial Advisors
Automated account information (TouchTone(R) telephones only), including current
Fund prices and performance, account values and recent account transactions:
800-862-7919
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
Fiscal period ended Nov. 30,
Per share income and capital changesa
Class A
1998 1997 1996 1995 1994
Net asset value,
<S> <C> <C> <C> <C> <C>
beginning of period $4.64 $4.56 $4.66 $4.18 $4.76
Income from investment operations:
Net investment income (loss) .26 .27 .27 .28 .30
Net gains (losses) (both realized
and unrealized) .04 .08 (.10) .48 (.56)
Total from investment operations .30 .35 .17 .76 (.26)
Less distributions:
Dividends from net
investment income (.26) (.27) (.27) (.28) (.30)
Distributions from realized gains -- -- -- -- (.02)
Total distributions (.26) (.27) (.27) (.28) (.32)
Net asset value, end of period $4.68 $4.64 $4.56 $4.66 $4.18
Ratios/supplemental data
Class A
1998 1997 1996 1995 1994
Net assets, end of period
(in millions) $5,722 $5,785 $6,001 $6,316 $5,769
Ratio of expenses to
average daily net assetsb .70% .70% .70% .68% .59%
Ratio of net investment income (loss)
to average daily net assets 5.56% 5.85% 6.02% 6.31% 6.50%
Portfolio turnover rate
(excluding short-term securities) 14% 4% 9% 14% 17%
Total returnc 6.67% 7.86% 4.02% 18.64% (5.78%)
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Effective fiscal year 1996, expense ratio is based on total expenses of the
Fund before reduction of earnings credits on cash balances.
c Total return does not reflect payment of a sales charge.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Fiscal period ended Nov. 30,
Per share income and capital changesa
Class B Class Y
1998 1997 1996 1995b 1998 1997 1996 1995b
Net asset value,
<S> <C> <C> <C> <C> <C> <C> <C> <C>
beginning of period $4.64 $4.56 $4.66 $4.46 $4.64 $4.56 $4.66 $4.46
Income from investment operations:
Net investment income (loss) .22 .23 .24 .19 .26 .27 .28 .22
Net gains (losses)
(both realized and unrealized) .04 .08 (.10) .20 .04 .08 (.10) .20
Total from investment operations .26 .31 .14 .39 .30 .35 .18 .42
Less distributions:
Dividends from
net investment income (.22) (.23) (.24) (.19) (.26) (.27) (.28) (.22)
Net asset value,
end of period $4.68 $4.64 $4.56 $4.66 $4.68 $4.64 $4.56 $4.66
Ratios/supplemental data
Class B Class Y
1998 1997 1996 1995b 1998 1997 1996 1995b
Net assets, end of
period (in millions) $270 $190 $138 $71 $7 $9 $21 $25
Ratio of expenses to
average daily net assetsc 1.45% 1.46% 1.46% 1.48%d .62% .61% .53% .54%d
Ratio of net investment income
(loss) to average daily net assets 4.81% 5.06% 5.29% 5.36%d 5.63% 5.88% 6.15% 6.32%d
Portfolio turnover rate
(excluding short-term securities) 14% 4% 9% 14% 14% 4% 9% 14%
Total returne 5.85% 7.08% 3.22% 9.02% 6.73% 7.96% 4.22% 9.15%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Inception date was March 20, 1995.
c Effective fiscal year 1996, expense ratio is based on total expenses of the
Fund before reduction of earnings credits on cash balances.
d Adjusted to an annual basis.
e Total return does not reflect payment of a sales charge.
The information in these tables has been audited by KPMG Peat Marwick LLP,
independent auditors. The independent auditors' report and additional
information about the performance of the Fund are contained in the Fund's annual
report which, if not included with this porisoectus, may be obtained without
charge.
</TABLE>
<PAGE>
Appendix
1999 Federal tax-exempt and taxable equivalent yield calculation
These tables will help you determine your federal taxable yield equivalents for
given rates of tax-exempt income.
STEP 1:
Using your Taxable Income and Adjusted Gross Income figures as guides, you can
locate your Marginal Tax Rate in the table below.
First locate your Taxable Income in a filing status and income range in the
left-hand column. Then, locate your Adjusted Gross Income at the top of the
chart. At the point where your Taxable Income line meets your Adjusted Gross
Income column the percentage indicated is an approximation of your federal
Marginal Tax Rate. For example: Let's assume you are married filing jointly,
your taxable income is $138,000 and your adjusted gross income is $175,000.
Under Taxable Income married filing jointly status, $138,000 is in the
$104,050-$158,550 range. Under Adjusted Gross Income, $175,000 is in the
$126,600 to $189,950 column. The Taxable Income line and Adjusted Gross Income
column meet at 31.93%. This is the rate you'll use in Step 2.
<PAGE>
<TABLE>
<CAPTION>
Adjusted gross income*
<S> <C> <C> <C> <C>
Taxable income** $0 $126,600 $189,950 Over
to to to
$126,600(1) $189,950(2) $312,450(3) $312,450(2)
- ----------------------------------------------------------------------------------------------------------
Married Filing Jointly
$ 0 - $ 43,050 15.00%
43,050 - 104,050 28.00 28.84%
104,050 - 158,550 31.00 31.93 33.29%
158,550 - 283,150 36.00 37.08 38.66 37.08%
283,150 + 39.60 42.53*** 40.79
- ----------------------------------------------------------------------------------------------------------
Adjusted gross income*
- ----------------------------------------------------------------------------------------------------------
Taxable income** $0 $126,600 Over
to to
$126,600(1) $249,100(3) $249,100(2)
- ----------------------------------------------------------------------------------------------------------
Single
$ 0 - $ 25,750 15.00%
25,750 - 62,450 28.00
62,450 - 130,250 31.00 32.61%
130,250 - 283,150 36.00 37.87 37.08%
283,150 + 39.60 40.79
- ----------------------------------------------------------------------------------------------------------
</TABLE>
* Gross income with certain adjustments before taking itemized deductions and
personal exemptions.
** Amount subject to federal income tax after itemized deductions (or standard
deduction) and personal exemptions.
*** This rate is applicable only in the limited case where your adjusted gross
income is less than $312,450 and your taxable income exceeds $283,150.
(1) No Phase-out -- Assumes no phase-out of itemized deductions or personal
exemptions.
(2) Itemized Deductions Phase-out -- Assumes a phase-out of itemized deductions
and no current phase-out of personal exemptions.
(3) Itemized Deductions and Personal Exemption Phase-outs -- Assumes a single
taxpayer has one personal exemption, joint taxpayers have two personal
exemptions, personal exemptions phase-out and itemized deductions continue
to phase-out. If these assumptions do not apply to you, it will be
necessary to construct your own personalized tax equivalency table.
<PAGE>
STEP 2: Determining your federal taxable yield equivalents.
Using 31.93%, you may determine that a tax-exempt yield of 4% is equivalent to
earning a taxable 5.88% yield.
<TABLE>
<CAPTION>
For these Tax-Exempt Rates:
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2.50% 3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00%
- ----------------------------------------------------------------------------------------------------------
Marginal Tax Rates Equal the Taxable Rates shown below:
15.00% 2.94 3.53 4.12 4.71 5.29 5.88 6.47 7.06
28.00% 3.47 4.17 4.86 5.56 6.25 6.94 7.64 8.33
28.84% 3.51 4.22 4.92 5.62 6.32 7.03 7.73 8.43
31.00% 3.62 4.35 5.07 5.80 6.52 7.25 7.97 8.70
31.93% 3.67 4.41 5.14 5.88 6.61 7.35 8.08 8.81
32.61% 3.71 4.45 5.19 5.94 6.68 7.42 8.16 8.90
33.29% 3.75 4.50 5.25 6.00 6.75 7.50 8.24 8.99
36.00% 3.91 4.69 5.47 6.25 7.03 7.81 8.59 9.38
37.08% 3.97 4.77 5.56 6.36 7.15 7.95 8.74 9.54
37.87% 4.02 4.83 5.63 6.44 7.24 8.05 8.85 9.66
38.66% 4.08 4.89 5.71 6.52 7.34 8.15 8.97 9.78
39.60% 4.14 4.97 5.79 6.62 7.45 8.28 9.11 9.93
40.79% 4.22 5.07 5.91 6.76 7.60 8.44 9.29 10.13
42.53% 4.35 5.22 6.09 6.96 7.83 8.70 9.57 10.44
- ----------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
This Fund, along with the other funds in the IDS MUTUAL FUND GROUP, is
distributed by American Express Financial Advisors Inc. and can be found under
the "Amer Express" banner in most mutual fund quotations.
Additional information about the Fund and its investments is available in the
Fund's SAI, annual and semiannual reports to shareholders. In the Fund's annual
report, you will find a discussion of market conditions and investment
strategies that significantly affected the Fund during its last fiscal year. The
SAI is incorporated by reference in this prospectus. For a free copy of the SAI,
the annual report, or the semiannual report contact American Express Client
Service Corporation.
American Express Client Service Corporation
P.O. Box 534, Minneapolis, MN 55440-0534
800-862-7919 TTY: 800-846-4852
Web site address:
http://www.americanexpress.com/advisors
You may review and copy information about the Fund, including the SAI, at the
Securities and Exchange Commission's (Commission) Public Reference Room in
Washington, D.C. (for information about the public reference room call
1-800-SEC-0330). Reports and other information about the Fund are available on
the Commission's Internet site at http://www.sec.gov. Copies of this information
may be obtained by writing and paying a duplicating fee to the Public Reference
Section of the Commission, Washington, D.C. 20549-6009.
Investment Company Act File #811-2901
TICKER SYMBOL
Class A: INHYX Class B: IHYBX Class Y: IHTYX
S-6430-99 N (1/99)
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
FOR
IDS HIGH YIELD TAX-EXEMPT FUND (the Fund)
Jan. 29, 1999
This Statement of Additional Information (SAI) is not a prospectus. It should be
read together with the prospectus and the financial statements contained in the
most recent Annual Report to shareholders (Annual Report) that may be obtained
from your American Express financial advisor or by writing to American Express
Shareholder Service, P.O. Box 534, Minneapolis, MN 55440-0534 or by calling
800-862-7919.
The Independent Auditors' Report and the Financial Statements, including Notes
to the Financial Statements and the Schedule of Investments in Securities,
contained in the Annual Report are incorporated in this SAI by reference. No
other portion of the Annual Report, however, is incorporated by reference. The
prospectus for the Fund, dated the same date as this SAI, also is incorporated
in this SAI by reference.
<PAGE>
TABLE OF CONTENTS
Mutual Fund Checklist......................................p. 3
Fundamental Investment Policies............................p. 5
Investment Strategies and Types of Investments.............p. 7
Information Regarding Risks and Investment Strategies......p. 9
Security Transactions.....................................p. 28
Brokerage Commissions Paid to Brokers Affiliated with
American Express Financial Corporation....................p. 29
Performance Information...................................p. 30
Valuing Fund Shares.......................................p. 32
Investing in the Fund.....................................p. 34
Selling Shares............................................p. 37
Pay-out Plans.............................................p. 38
Capital Loss Carryover....................................p. 39
Taxes.....................................................p. 40
Agreements................................................p. 42
Organizational Information................................p. 44
Board Members and Officers................................p. 46
Compensation for Board Members............................p. 49
Independent Auditors......................................p. 49
Appendix: Description of Ratings.........................p. 50
<PAGE>
MUTUAL FUND CHECKLIST
X Mutual funds are NOT guaranteed or insured by any
bank or government agency. You can lose money.
X Mutual funds ALWAYS carry investment risks. Some
types carry more risk than others.
X A higher rate of return typically involves a
higher risk of loss.
X Past performance is not a reliable indicator of
future performance.
X ALL mutual funds have costs that lower investment
return.
X You can buy some mutual funds by contacting them
directly. Others, like this one, are sold mainly
through brokers, banks, financial planners, or
insurance agents. If you buy through these
financial professionals, you generally will pay a
sales charge.
X Shop around. Compare a mutual fund with others of
the same type before you buy.
OTHER IDEAS FOR SUCCESSFUL MUTUAL FUND INVESTING:
Develop a Financial Plan
Have a plan - even a simple plan can help you take control of your financial
future. Review your plan with your advisor at least once a year or more
frequently if your circumstances change.
Dollar-Cost Averaging
An investment technique that works well for many investors is one that
eliminates random buy and sell decisions. One such system is dollar-cost
averaging. Dollar-cost averaging involves building a portfolio through the
investment of fixed amounts of money on a regular basis regardless of the price
or market condition. This may enable an investor to smooth out the effects of
the volatility of the financial markets. By using this strategy, more shares
will be purchased when the price is low and less when the price is high. As the
accompanying chart illustrates, dollar-cost averaging tends to keep the average
price paid for the shares lower than the average market price of shares
purchased, although there is no guarantee.
While this does not ensure a profit and does not protect against a loss if the
market declines, it is an effective way for many shareholders who can continue
investing through changing market conditions to accumulate shares to meet
long-term goals.
<PAGE>
Dollar-cost averaging:
- -------------------------------------------------------------
Regular Market Price Shares
Investment of a Share Acquired
- -------------------------------------------------------------
$100 $6.00 16.7
100 4.00 25.0
100 4.00 25.0
100 6.00 16.7
100 5.00 20.0
----- -------- ------
$500 $25.00 103.4
Average market price of a share over 5 periods: $5.00 ($25.00 divided by 5)
The average price you paid for each share: $4.84 ($500 divided by 103.4)
Diversify
Diversify your portfolio. By investing in different asset classes and different
economic environments you help protect against poor performance in one type of
investment while including investments most likely to help you achieve your
important goals.
Understand Your Investment
Know what you are buying. Make sure you understand the potential risks, rewards,
costs, and expenses associated with each of your investments.
<PAGE>
FUNDAMENTAL INVESTMENT POLICIES
The Fund pursues its investment objective by investing all of its assets in
Tax-Free High Yield Portfolio (the Portfolio) of Tax-Free Income Trust (the
Trust), a separate investment company, rather than by directly investing in and
managing its own portfolio of securities. The Portfolio has the same investment
objectives, policies, and restrictions as the Fund. References to "Fund" in this
SAI, where applicable, refer to the Fund and Portfolio, collectively, to the
Fund, singularly, or to the Portfolio, singularly.
Fundamental investment policies adopted by the Fund cannot be changed without
the approval of a majority of the outstanding voting securities of the Fund as
defined in the Investment Company Act of 1940, as amended (the 1940 Act).
Notwithstanding any of the Fund's other investment policies, the Fund may invest
its assets in an open-end management investment company having substantially the
same investment objectives, policies, and restrictions as the Fund for the
purpose of having those assets managed as part of a combined pool.
The policies below are fundamental policies that apply to the Fund and may be
changed only with shareholder approval. Unless holders of a majority of the
outstanding voting securities agree to make the change, the Fund will not:
o Under normal market conditions, invest less than 80% of its net assets in
bonds and notes issued by or on behalf of state and local governmental
units whose interest, in the opinion of counsel for the issuer, is exempt
from federal income tax and is not subject to the alternative minimum tax.
o Act as an underwriter (sell securities for others). However, under the
securities laws, the Fund may be deemed to be an underwriter when it
purchases securities directly from the issuer and later resells them.
o Borrow money or property, except as a temporary measure for extraordinary
or emergency purposes, in an amount not exceeding one-third of the market
value of its total assets (including borrowings) less liabilities (other
than borrowings) immediately after the borrowing.
o Make cash loans if the total commitment amount exceeds 5% of the Fund's
total assets.
o Invest more than 5% of its total assets in securities of any one company,
government, or political subdivision thereof, except the limitation will
not apply to investments in securities issued by the U.S. government, its
agencies, or instrumentalities, and except that up to 25% of the Fund's
total assets may be invested without regard to this 5% limitation. For
purposes of this policy, the terms of a municipal security determine the
issuer.
o Buy or sell real estate, unless acquired as a result of ownership of
securities or other instruments, except this shall not prevent the Fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business or real estate
investment trusts. For purposes of this policy, real estate includes real
estate limited partnerships.
o Buy or sell physical commodities unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent the Fund
from buying or selling options and futures contracts or from investing in
securities or other instruments backed by, or whose value is derived from,
physical commodities.
o Lend Fund securities in excess of 30% of its net assets.
<PAGE>
Except for the fundamental investment policies listed above, the other
investment policies described in the prospectus and in this SAI are not
fundamental and may be changed by the board at any time.
<PAGE>
INVESTMENT STRATEGIES AND TYPES OF INVESTMENTS
This table shows various investment strategies and investments that many funds
are allowed to engage in and purchase. It also lists certain percentage
guidelines that are generally followed by the Fund's investment manager. This
table is intended to show the breadth of investments that the investment manager
may make on behalf of the Fund. For a description of principal risks, please see
the prospectus. Notwithstanding the Fund's ability to utilize these strategies
and techniques, the investment manager is not obligated to use them at any
particular time. For example, even though the investment manager is authorized
to adopt temporary defensive positions and is authorized to attempt to hedge
against certain types of risk, these practices are left to the investment
manager's sole discretion.
- --------------------------------------------------------------------------------
Investment strategies & types of investments: IDS High Yield
Tax-Exempt
Allowable for the Fund?
- --------------------------------------------------------------------------------
Agency and Government Securities yes
- --------------------------------------------------------------------------------
Borrowing yes
- --------------------------------------------------------------------------------
Cash/Money Market Instruments yes
- --------------------------------------------------------------------------------
Collateralized Bond Obligations yes
- --------------------------------------------------------------------------------
Commercial Paper yes
- --------------------------------------------------------------------------------
Common Stock no
- --------------------------------------------------------------------------------
Convertible Securities yes
- --------------------------------------------------------------------------------
Corporate Bonds yes
- --------------------------------------------------------------------------------
Debt Obligations yes
- --------------------------------------------------------------------------------
Depositary Receipts no
- --------------------------------------------------------------------------------
Derivative Instruments yes
- --------------------------------------------------------------------------------
Foreign Currency Transactions yes
- --------------------------------------------------------------------------------
Foreign Securities yes
- --------------------------------------------------------------------------------
High-Yield (High-Risk) Securities (Junk Bonds) yes
- --------------------------------------------------------------------------------
Illiquid and Restricted Securities yes
- --------------------------------------------------------------------------------
Indexed Securities yes
- --------------------------------------------------------------------------------
Inverse Floaters yes
- --------------------------------------------------------------------------------
Investment Companies no
- --------------------------------------------------------------------------------
Lending of Portfolio Securities yes
- --------------------------------------------------------------------------------
Loan Participations yes
- --------------------------------------------------------------------------------
Mortgage- and Asset-Backed Securities yes
- --------------------------------------------------------------------------------
Mortgage Dollar Rolls yes
- --------------------------------------------------------------------------------
Municipal Obligations yes
- --------------------------------------------------------------------------------
Preferred Stock no
- --------------------------------------------------------------------------------
Real Estate Investment Trusts yes
- --------------------------------------------------------------------------------
Repurchase Agreements yes
- --------------------------------------------------------------------------------
Reverse Repurchase Agreements yes
- --------------------------------------------------------------------------------
Short Sales no
- --------------------------------------------------------------------------------
Sovereign Debt yes
- --------------------------------------------------------------------------------
Structured Products yes
- --------------------------------------------------------------------------------
Variable- or Floating-Rate Securities yes
- --------------------------------------------------------------------------------
Warrants yes
- --------------------------------------------------------------------------------
When-Issued Securities yes
- --------------------------------------------------------------------------------
Zero-Coupon, Step-Coupon, and Pay-in-Kind Securities yes
- --------------------------------------------------------------------------------
<PAGE>
The following are guidelines that may be changed by the board at any time:
o The Fund may invest more than 25% of its total assets in industrial revenue
bonds, but it does not intend to invest more than 25% of its total assets
in industrial revenue bonds issued for companies in the same industry or
state.
o No more than 5% of the Fund's net assets can be used at any one time for
good faith deposits on futures and premiums for options on futures that do
not offset existing investment positions.
o No more than 10% of the Fund's net assets will be held in securities and
other instruments that are illiquid.
o Short-term tax-exempt debt securities rated in the top two grades or the
equivalent are used to meet daily cash needs and at various times to hold
assets until better investment opportunities arise. Under extraordinary
conditions where, in the opinion of the investment manager, appropriate
short-term tax-exempt securities are not available, the Fund may invest up
to 20% of its net assets in certain taxable investments for temporary
defensive purposes.
o The Fund will not buy on margin or sell short, except the Fund may use
derivative instruments.
o Under normal market conditions, the Fund does not intend to commit more
than 5% of its total assets to when-issued securities or forward
commitments.
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INFORMATION REGARDING RISKS AND INVESTMENT STRATEGIES
RISKS
The following is a summary of common risk characteristics. Following this
summary is a description of certain investments and investment strategies and
the risks most commonly associated with them (including certain risks not
described below and, in some cases, a more comprehensive discussion of how the
risks apply to a particular investment or investment strategy). Please remember
that a mutual fund's risk profile is largely defined by the fund's primary
securities and investment strategies. However, most mutual funds are allowed to
use certain other strategies and investments that may have different risk
characteristics. Some of these investments are speculative and involve a high
degree of risk. Accordingly, one or more of the following types of risk will be
associated with the Fund at any time (for a description of principal risks,
please see the prospectus):
Call/Prepayment Risk
The risk that a bond or other security might be called (or otherwise converted,
prepaid, or redeemed) before maturity. This type of risk is closely related to
"reinvestment risk."
Credit Risk
The risk that the issuer of a security, or the counterparty to a contract, will
default or otherwise become unable to honor a financial obligation (such as
payments due on a bond or a note). The price of junk bonds may react more to the
ability of the issuing company to pay interest and principal when due than to
changes in interest rates. They have greater price fluctuations and are more
likely to experience default.
Event Risk
Occasionally, the value of a security may be seriously and unexpectedly changed
by a natural or industrial accident or occurrence.
Foreign/Emerging Markets Risk
The following are all components of foreign/emerging markets risk:
Country risk includes the political, economic, and other conditions of
a country. These conditions include lack of publicly available information, less
government oversight (including lack of accounting, auditing, and financial
reporting standards), the possibility of government-imposed restrictions, and
even the nationalization of assets.
Currency risk results from the constantly changing exchange rate
between local currency and the U.S. dollar. Whenever the Fund holds securities
valued in a foreign currency or holds the currency, changes in the exchange rate
add or subtract from the value of the investment.
Custody risk refers to the process of clearing and settling trades. It
also covers holding securities with local agents and depositories. Low trading
volumes and volatile prices in less developed markets make trades harder to
complete and settle. Local agents are held only to the standard of care of the
local market. Governments or trade groups may compel local agents to hold
securities in designated depositories that are not subject to independent
evaluation. The less developed a country's securities market is, the greater the
likelihood of problems occurring.
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Emerging markets risk includes the dramatic pace of change (economic, social,
and political) in these countries as well as the other considerations listed
above. These markets are in early stages of development and are extremely
volatile. They can be marked by extreme inflation, devaluation of currencies,
dependence on trade partners, and hostile relations with neighboring countries.
Inflation Risk
Also known as purchasing power risk, inflation risk measures the effects of
continually rising prices on investments. If an investment's yield is lower than
the rate of inflation, your money will have less purchasing power as time goes
on.
Interest Rate Risk
The risk of losses attributable to changes in interest rates. This term is
generally associated with, but not limited to, bond prices (when interest rates
rise, bond prices fall).
Issuer Risk
The risk that an issuer, or the value of its stocks or bonds, will perform
poorly. Poor performance may be caused by poor management decisions, competitive
pressures, breakthroughs in technology, reliance on suppliers, labor problems or
shortages, corporate restructurings, fraudulent disclosures, or other factors.
Legal/Legislative Risk
Congress and other governmental units have the power to change existing laws
affecting securities. A change in law might affect an investment adversely.
Leverage Risk
Some derivative investments (such as options, futures, or options on futures)
require little or no initial payment and base their price on a security, a
currency, or an index. A small change in the value of the underlying security,
currency, or index may cause a sizable gain or loss in the price of the
instrument.
Liquidity Risk
Securities may be difficult or impossible to sell at the time that the Fund
would like. The Fund may have to lower the selling price, sell other
investments, or forego an investment opportunity.
Management Risk
The risk that a strategy or selection method utilized by the investment manager
may fail to produce the intended result. When all other factors have been
accounted for and the investment manager chooses an investment, there is always
the possibility that the choice will be a poor one.
Market Risk
The market may drop and you may lose money. Market risk may affect a single
issuer, sector of the economy, industry, or the market as a whole. The market
value of all securities may move up and down, sometimes rapidly and
unpredictably.
Reinvestment Risk
The risk that an investor will not be able to reinvest their income or principal
at the same rate as it currently is earning.
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Sector/Concentration Risk
Investments that are concentrated in a particular issuer, geographic region, or
industry will be more susceptible to changes in price (the more you diversify,
the more you spread risk).
Small Company Risk
Investments in small and medium companies often involve greater risks than
investments in larger, more established companies because small and medium
companies may lack the management experience, financial resources, product
diversification, and competitive strengths of larger companies. In addition, in
many instances the securities of small and medium companies are traded only
over-the-counter or on regional securities exchanges and the frequency and
volume of their trading is substantially less than is typical of larger
companies.
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INVESTMENT STRATEGIES
The following information supplements the discussion of the Fund's investment
objectives, policies, and strategies that are described in the prospectus and in
this SAI. The following describes many strategies that many mutual funds use and
types of securities that they purchase. Please refer to the section entitled
Investment Strategies and Types of Investments to see which are applicable to
the Fund.
Agency and Government Securities
The U.S. government and its agencies issue many different types of securities.
U.S. Treasury bonds, notes, and bills and securities including mortgage pass
through certificates of the Government National Mortgage Association (GNMA) are
guaranteed by the U.S. government. Other U.S. government securities are issued
or guaranteed by federal agencies or government-sponsored enterprises but are
not guaranteed by the U.S. government. This may increase the credit risk
associated with these investments.
Government-sponsored entities issuing securities include privately owned,
publicly chartered entities created to reduce borrowing costs for certain
sectors of the economy, such as farmers, homeowners, and students. They include
the Federal Farm Credit Bank System, Farm Credit Financial Assistance
Corporation, Federal Home Loan Bank, FHLMC, FNMA, Student Loan Marketing
Association (SLMA), and Resolution Trust Corporation (RTC). Government-sponsored
entities may issue discount notes (with maturities ranging from overnight to 360
days) and bonds. Agency and government securities are subject to the same
concerns as other debt obligations. (See also Debt Obligations and Mortgage- and
Asset-Backed Securities.)
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with agency and government securities include:
Call/Prepayment Risk, Inflation Risk, Interest Rate Risk, Management Risk, and
Reinvestment Risk.
Borrowing
The Fund may borrow money from banks for temporary or emergency purposes and
make other investments or engage in other transactions permissible under the
1940 Act that may be considered a borrowing (such as derivative instruments).
Borrowings are subject to costs (in addition to any interest that may be paid)
and typically reduce the Fund's total return. Except as qualified above,
however, the Fund will not buy securities on margin.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with borrowing include: Inflation Risk and Management
Risk.
Cash/Money Market Instruments
The Fund may maintain a portion of its assets in cash and cash-equivalent
investments. Cash-equivalent investments include short-term U.S. and Canadian
government securities and negotiable certificates of deposit, non-negotiable
fixed-time deposits, bankers' acceptances, and letters of credit of banks or
savings and loan associations having capital, surplus, and undivided profits (as
of the date of its most recently published annual financial statements) in
excess of $100 million (or the equivalent in the instance of a foreign branch of
a U.S. bank) at the date of investment. The Fund also may purchase short-term
notes and obligations of U.S. and foreign banks and corporations and may use
repurchase agreements with broker-dealers registered under the Securities
Exchange Act of 1934 and with commercial banks. (See also Commercial Paper, Debt
Obligations, Repurchase Agreements, and Variable- or Floating-Rate Securities.)
These types of instruments generally offer low rates of return and subject the
Fund to certain costs and expenses.
See the appendix for a discussion of securities ratings.
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Although one or more of the other risks described in this SAI may apply, the
largest risks associated with cash/money market instruments include: Credit
Risk, Inflation Risk, and Management Risk.
Collateralized Bond Obligations
Collateralized bond obligations (CBOs) are investment grade bonds backed by a
pool of junk bonds. CBOs are similar in concept to collateralized mortgage
obligations (CMOs), but differ in that CBOs represent different degrees of
credit quality rather than different maturities. (See also Mortgage- and
Asset-Backed Securities.) Underwriters of CBOs package a large and diversified
pool of high-risk, high-yield junk bonds, which is then separated into "tiers."
Typically, the first tier represents the higher quality collateral and pays the
lowest interest rate; the second tier is backed by riskier bonds and pays a
higher rate; the third tier represents the lowest credit quality and instead of
receiving a fixed interest rate receives the residual interest payments--money
that is left over after the higher tiers have been paid. CBOs, like CMOs, are
substantially overcollateralized and this, plus the diversification of the pool
backing them earns them investment-grade bond ratings. Holders of third-tier
CBOs stand to earn high yields or less money depending on the rate of defaults
in the collateral pool.
(See also High-Yield (High-Risk) Securities.)
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with CBOs include: Call/Prepayment Risk, Credit Risk,
Interest Rate Risk, and Management Risk.
Commercial Paper
Commercial paper is a short-term debt obligation with a maturity ranging from 2
to 270 days issued by banks, corporations, and other borrowers. It is sold to
investors with temporary idle cash as a way to increase returns on a short-term
basis. These instruments are generally unsecured, which increases the credit
risk associated with this type of investment. (See also Debt Obligations and
Illiquid and Restricted Securities.)
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with commercial paper include: Credit Risk, Liquidity
Risk, and Management Risk.
Common Stock
Common stock represents units of ownership in a corporation. Owners typically
are entitled to vote on the selection of directors and other important matters
as well as to receive dividends on their holdings. In the event that a
corporation is liquidated, the claims of secured and unsecured creditors and
owners of bonds and preferred stock take precedence over the claims of those who
own common stock.
The price of a common stock is generally determined by corporate earnings, type
of products or services offered, projected growth rates, experience of
management, liquidity, and general market conditions for the markets on which
the stock trades.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with common stock include: Issuer Risk, Management
Risk, Market Risk, and Small Company Risk.
Convertible Securities
Convertible securities are bonds, debentures, notes, preferred stocks, or other
securities that may be converted into common stock of the same or a different
issuer within a particular period of time at a specified price. Some convertible
securities, such as preferred equity-redemption cumulative stock (PERCs), have
mandatory conversion features. Others are voluntary. A convertible security
entitles the holder to receive interest normally paid or accrued on debt or the
dividend paid on preferred stock until the convertible security matures or is
redeemed, converted, or exchanged. Convertible securities have unique investment
characteristics in that they generally (i) have higher yields than common stocks
but lower yields
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than comparable non-convertible securities, (ii) are less subject to fluctuation
in value than the underlying stock since they have fixed income characteristics,
and (iii) provide the potential for capital appreciation if the market price of
the underlying common stock increases.
The value of a convertible security is a function of its "investment value"
(determined by its yield in comparison with the yields of other securities of
comparable maturity and quality that do not have a conversion privilege) and its
"conversion value" (the security's worth, at market value, if converted into the
underlying common stock). The investment value of a convertible security is
influenced by changes in interest rates, with investment value declining as
interest rates increase and increasing as interest rates decline. The credit
standing of the issuer and other factors also may have an effect on the
convertible security's investment value. The conversion value of a convertible
security is determined by the market price of the underlying common stock. If
the conversion value is low relative to the investment value, the price of the
convertible security is governed principally by its investment value. Generally,
the conversion value decreases as the convertible security approaches maturity.
To the extent the market price of the underlying common stock approaches or
exceeds the conversion price, the price of the convertible security will be
increasingly influenced by its conversion value. A convertible security
generally will sell at a premium over its conversion value by the extent to
which investors place value on the right to acquire the underlying common stock
while holding a fixed income security.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with convertible securities include: Call/Prepayment
Risk, Interest Rate Risk, Issuer Risk, Management Risk, Market Risk, and
Reinvestment Risk.
Corporate Bonds
Corporate bonds are debt obligations issued by private corporations, as distinct
from bonds issued by a government agency or a municipality. Corporate bonds
typically have four distinguishing features: (1) they are taxable; (2) they have
a par value of $1000; (3) they have a term maturity, which means they come due
all at once; and (4) many are traded on major exchanges. Corporate bonds are
subject to the same concerns as other debt obligations. (See also Debt
Obligations and High-Yield (High-Risk) Securities.)
Corporate bonds may be either secured or unsecured. Unsecured corporate bonds
are generally referred to as "debentures." See the appendix for a discussion of
securities ratings.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with corporate bonds include: Call/Prepayment Risk,
Credit Risk, Interest Rate Risk, Issuer Risk, Management Risk, and Reinvestment
Risk.
Debt Obligations
Many different types of debt obligations exist (for example, bills, bonds, or
notes). Issuers of debt obligations have a contractual obligation to pay
interest at a specified rate on specified dates and to repay principal on a
specified maturity date. Certain debt obligations (usually intermediate- and
long-term bonds) have provisions that allow the issuer to redeem or "call" a
bond before its maturity. Issuers are most likely to call these securities
during periods of falling interest rates. When this happens, an investor may
have to replace these securities with lower yielding securities, which could
result in a lower return.
The market value of debt obligations is affected primarily by changes in
prevailing interest rates and the issuers perceived ability to repay the debt.
The market value of a debt obligation generally reacts inversely to interest
rate changes. When prevailing interest rates decline, the price usually rises,
and when prevailing interest rates rise, the price usually declines.
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In general, the longer the maturity of a debt obligation, the higher its yield
and the greater the sensitivity to changes in interest rates. Conversely, the
shorter the maturity, the lower the yield but the greater the price stability.
As noted, the values of debt obligations also may be affected by changes in the
credit rating or financial condition of their issuers. Generally, the lower the
quality rating of a security, the higher the degree of risk as to the payment of
interest and return of principal. To compensate investors for taking on such
increased risk, those issuers deemed to be less creditworthy generally must
offer their investors higher interest rates than do issuers with better credit
ratings. (See also Agency and Government Securities, Corporate Bonds, and
High-Yield (High-Risk) Securities.)
See the appendix for a discussion of securities ratings.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with debt obligations include: Call/Prepayment Risk,
Credit Risk, Interest Rate Risk, Issuer Risk, Management Risk, and Reinvestment
Risk.
Depositary Receipts
Some foreign securities are traded in the form of American Depositary Receipts
(ADRs). ADRs are receipts typically issued by a U.S. bank or trust company
evidencing ownership of the underlying securities of foreign issuers. European
Depositary Receipts (EDRs) and Global Depositary Receipts (GDRs) are receipts
typically issued by foreign banks or trust companies, evidencing ownership of
underlying securities issued by either a foreign or U.S. issuer. Generally,
depositary receipts in registered form are designed for use in the U.S. and
depositary receipts in bearer form are designed for use in securities markets
outside the U.S. Depositary receipts may not necessarily be denominated in the
same currency as the underlying securities into which they may be converted.
Depositary receipts involve the risks of other investments in foreign
securities. (See also Common Stock and Foreign Securities.)
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with depositary receipts include: Foreign/Emerging
Markets Risk, Issuer Risk, Management Risk, and Market Risk.
Derivative Instruments
Derivative instruments are commonly defined to include securities or contracts
whose values depend on (or "derive" from) the value of one or more other assets,
such as securities, currencies, or commodities.
A derivative instrument generally consists of, is based upon, or exhibits
characteristics similar to options or forward contracts. Such instruments may be
used to maintain cash reserves while remaining fully invested, to offset
anticipated declines in values of investments, to facilitate trading, to reduce
transaction costs, or to pursue higher investment returns. Derivative
instruments are characterized by requiring little or no initial payment. Their
value changes daily based on a security, a currency, a group of securities or
currencies, or an index. A small change in the value of the underlying security,
currency, or index can cause a sizable gain or loss in the price of the
derivative instrument.
Options and forward contracts are considered to be the basic "building blocks"
of derivatives. For example, forward-based derivatives include forward
contracts, swap contracts, and exchange-traded futures. Forward-based
derivatives are sometimes referred to generically as "futures contracts."
Option-based derivatives include privately negotiated, over-the-counter (OTC)
options (including caps, floors, collars, and options on futures) and
exchange-traded options on futures. Diverse types of derivatives may be created
by combining options or futures in different ways, and by applying these
structures to a wide range of underlying assets.
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Options. An option is a contract. A person who buys a call option for a
security has the right to buy the security at a set price for the length of the
contract. A person who sells a call option is called a writer. The writer of a
call option agrees to sell the security at the set price when the buyer wants to
exercise the option, no matter what the market price of the security is at that
time. A person who buys a put option has the right to sell a security at a set
price for the length of the contract. A person who writes a put option agrees to
buy the security at the set price if the purchaser wants to exercise the option,
no matter what the market price of the security is at that time. An option is
covered if the writer owns the security (in the case of a call) or sets aside
the cash or securities of equivalent value (in the case of a put) that would be
required upon exercise.
The price paid by the buyer for an option is called a premium. In addition to
the premium, the buyer generally pays a broker a commission. The writer receives
a premium, less another commission, at the time the option is written. The
premium received by the writer is retained whether or not the option is
exercised. A writer of a call option may have to sell the security for a
below-market price if the market price rises above the exercise price. A writer
of a put option may have to pay an above-market price for the security if its
market price decreases below the exercise price. The risk of the writer is
potentially unlimited, unless the option is covered.
When an option is purchased, the buyer pays a premium and a commission. It then
pays a second commission on the purchase or sale of the underlying security when
the option is exercised. For record keeping and tax purposes, the price obtained
on the purchase of the underlying security is the combination of the exercise
price, the premium, and both commissions.
One of the risks an investor assumes when it buys an option is the loss of the
premium. To be beneficial to the investor, the price of the underlying security
must change within the time set by the option contract. Furthermore, the change
must be sufficient to cover the premium paid, the commissions paid both in the
acquisition of the option and in a closing transaction or in the exercise of the
option and sale (in the case of a call) or purchase (in the case of a put) of
the underlying security. Even then, the price change in the underlying security
does not ensure a profit since prices in the option market may not reflect such
a change.
Options on many securities are listed on options exchanges. If the Fund writes
listed options, it will follow the rules of the options exchange. Options are
valued at the close of the New York Stock Exchange. An option listed on a
national exchange, CBOE, or NASDAQ will be valued at the last quoted sales price
or, if such a price is not readily available, at the mean of the last bid and
ask prices.
Options on certain securities are not actively traded on any exchange, but may
be entered into directly with a dealer. These options may be more difficult to
close. If an investor is unable to effect a closing purchase transaction, it
will not be able to sell the underlying security until the call written by the
investor expires or is exercised.
Futures Contracts. A futures contract is a sales contract between a buyer
(holding the "long" position) and a seller (holding the "short" position) for an
asset with delivery deferred until a future date. The buyer agrees to pay a
fixed price at the agreed future date and the seller agrees to deliver the
asset. The seller hopes that the market price on the delivery date is less than
the agreed upon price, while the buyer hopes for the contrary. Many futures
contracts trade in a manner similar to the way a stock trades on a stock
exchange and the commodity exchanges.
Generally, a futures contract is terminated by entering into an offsetting
transaction. An offsetting transaction is effected by an investor taking an
opposite position. At the time a futures contract is made, a good faith deposit
called initial margin is set up. Daily thereafter, the futures contract is
valued and the payment of variation margin is required so that each day an
investor would pay out cash in an amount equal to any decline in the contract's
value or receive cash equal to any increase. At the time a futures
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contract is closed out, a nominal commission is paid, which is generally lower
than the commission on a comparable transaction in the cash market.
Options on Futures Contracts. Options on futures contracts give the holder
a right to buy or sell futures contracts in the future. Unlike a futures
contract, which requires the parties to the contract to buy and sell a security
on a set date, an option on a futures contract merely entitles its holder to
decide on or before a future date (within nine months of the date of issue)
whether to enter into a contract. If the holder decides not to enter into the
contract, all that is lost is the amount (premium) paid for the option. Further,
because the value of the option is fixed at the point of sale, there are no
daily payments of cash to reflect the change in the value of the underlying
contract. However, since an option gives the buyer the right to enter into a
contract at a set price for a fixed period of time, its value does change daily.
One of the risks in buying an option on a futures contract is the loss of the
premium paid for the option. The risk involved in writing options on futures
contracts an investor owns, or on securities held in its portfolio, is that
there could be an increase in the market value of these contracts or securities.
If that occurred, the option would be exercised and the asset sold at a lower
price than the cash market price. To some extent, the risk of not realizing a
gain could be reduced by entering into a closing transaction. An investor could
enter into a closing transaction by purchasing an option with the same terms as
the one previously sold. The cost to close the option and terminate the
investor's obligation, however, might still result in a loss. Further, the
investor might not be able to close the option because of insufficient activity
in the options market. Purchasing options also limits the use of monies that
might otherwise be available for long-term investments.
Options on Stock Indexes. Options on stock indexes are securities traded
on national securities exchanges. An option on a stock index is similar to an
option on a futures contract except all settlements are in cash. A fund
exercising a put, for example, would receive the difference between the exercise
price and the current index level.
Tax Treatment. As permitted under federal income tax laws and to the
extent the Fund is allowed to invest in futures contacts, the Fund intends to
identify futures contracts as mixed straddles and not mark them to market, that
is, not treat them as having been sold at the end of the year at market value.
Such an election may result in the Fund being required to defer recognizing
losses incurred by entering into futures contracts and losses on underlying
securities identified as being hedged against.
Federal income tax treatment of gains or losses from transactions in options on
futures contracts and indexes will depend on whether the option is a section
1256 contract. If the option is a non-equity option, the Fund will either make a
1256(d) election and treat the option as a mixed straddle or mark to market the
option at fiscal year end and treat the gain/loss as 40% short-term and 60%
long-term. Certain provisions of the Internal Revenue Code also may limit the
Fund's ability to engage in futures contracts and related options transactions.
For example, at the close of each quarter of the Fund's taxable year, at least
50% of the value of its assets must consist of cash, government securities and
other securities, subject to certain diversification requirements.
The IRS has ruled publicly that an exchange-traded call option is a security for
purposes of the 50%-of-assets test and that its issuer is the issuer of the
underlying security, not the writer of the option, for purposes of the
diversification requirements.
Accounting for futures contracts will be according to generally accepted
accounting principles. Initial margin deposits will be recognized as assets due
from a broker (the Fund's agent in acquiring the futures position). During the
period the futures contract is open, changes in value of the contract will be
recognized as unrealized gains or losses by marking to market on a daily basis
to reflect the market value of the contract at the end of each day's trading.
Variation margin payments will be made or received
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depending upon whether gains or losses are incurred. All contracts and options
will be valued at the last-quoted sales price on their primary exchange.
Other Risks of Derivatives.
Derivatives are risky investments.
The primary risk of derivatives is the same as the risk of the underlying asset,
namely that the value of the underlying asset may go up or down. Adverse
movements in the value of an underlying asset can expose an investor to losses.
Derivative instruments may include elements of leverage and, accordingly, the
fluctuation of the value of the derivative instrument in relation to the
underlying asset may be magnified. The successful use of derivative instruments
depends upon a variety of factors, particularly the investment manager's ability
to predict movements of the securities, currencies, and commodity markets, which
requires different skills than predicting changes in the prices of individual
securities. There can be no assurance that any particular strategy will succeed.
Another risk is the risk that a loss may be sustained as a result of the failure
of a counterparty to comply with the terms of a derivative instrument. The
counterparty risk for exchange-traded derivative instruments is generally less
than for privately-negotiated or OTC derivative instruments, since generally a
clearing agency, which is the issuer or counterparty to each exchange-traded
instrument, provides a guarantee of performance. For privately-negotiated
instruments, there is no similar clearing agency guarantee. In all transactions,
an investor will bear the risk that the counterparty will default, and this
could result in a loss of the expected benefit of the derivative transaction and
possibly other losses.
When a derivative transaction is used to completely hedge another position,
changes in the market value of the combined position (the derivative instrument
plus the position being hedged) result from an imperfect correlation between the
price movements of the two instruments. With a perfect hedge, the value of the
combined position remains unchanged for any change in the price of the
underlying asset. With an imperfect hedge, the values of the derivative
instrument and its hedge are not perfectly correlated. For example, if the value
of a derivative instrument used in a short hedge (such as writing a call option,
buying a put option, or selling a futures contract) increased by less than the
decline in value of the hedged investment, the hedge would not be perfectly
correlated. Such a lack of correlation might occur due to factors unrelated to
the value of the investments being hedged, such as speculative or other
pressures on the markets in which these instruments are traded.
Derivatives also are subject to the risk that they cannot be sold, closed out,
or replaced quickly at or very close to their fundamental value. Generally,
exchange contracts are very liquid because the exchange clearinghouse is the
counterparty of every contract. OTC transactions are less liquid than
exchange-traded derivatives since they often can only be closed out with the
other party to the transaction.
Another risk is caused by the legal unenforcibility of a party's obligations
under the derivative. A counterparty that has lost money in a derivative
transaction may try to avoid payment by exploiting various legal uncertainties
about certain derivative products.
(See also Foreign Currency Transactions.)
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with derivative instruments include: Leverage Risk,
Liquidity Risk, and Management Risk.
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Foreign Currency Transactions
Since investments in foreign countries usually involve currencies of foreign
countries, the value of an investor's assets as measured in U.S. dollars may be
affected favorably or unfavorably by changes in currency exchange rates and
exchange control regulations. Also, an investor may incur costs in connection
with conversions between various currencies. Currency exchange rates may
fluctuate significantly over short periods of time causing a fund's NAV to
fluctuate. Currency exchange rates are generally determined by the forces of
supply and demand in the foreign exchange markets, actual or anticipated changes
in interest rates, and other complex factors. Currency exchange rates also can
be affected by the intervention of U.S. or foreign governments or central banks,
or the failure to intervene, or by currency controls or political developments.
Many funds utilize diverse types of derivative instruments in connection with
their foreign currency exchange transactions.
(See also Derivative Instruments and Foreign Securities.)
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with foreign currency transactions include: Correlation
Risk, Interest Rate Risk, Leverage Risk, Liquidity Risk, and Management Risk.
Foreign Securities and Domestic Companies with Foreign Operations
Investors should recognize that investing in foreign securities involves special
risks, including those set forth below, which are not typically associated with
investing in U.S. securities. Foreign companies are not generally subject to
uniform accounting, auditing, and financial reporting standards comparable to
those applicable to domestic companies. Additionally, many foreign stock
markets, while growing in volume of trading activity, have substantially less
volume than the New York Stock Exchange, and securities of some foreign
companies are less liquid and more volatile than securities of domestic
companies. Similarly, volume and liquidity in most foreign bond markets are less
than the volume and liquidity in the U.S. and, at times, volatility of price can
be greater than in the U.S. Further, foreign markets have different clearance,
settlement, registration, and communication procedures and in certain markets
there have been times when settlements have been unable to keep pace with the
volume of securities transactions making it difficult to conduct such
transactions. Delays in such procedures could result in temporary periods when
assets are uninvested and no return is earned on them. The inability of an
investor to make intended security purchases due to such problems could cause
the investor to miss attractive investment opportunities. Payment for securities
without delivery may be required in certain foreign markets and, when
participating in new issues, some foreign countries require payment to be made
in advance of issuance (at the time of issuance, the market value of the
security may be more or less than the purchase price). Some foreign markets also
have compulsory depositories (i.e., an investor does not have a choice as to
where the securities are held). Fixed commissions on some foreign stock
exchanges are generally higher than negotiated commissions on U.S. exchanges.
Further, an investor may encounter difficulties or be unable to pursue legal
remedies and obtain judgments in foreign courts. There is generally less
government supervision and regulation of business and industry practices, stock
exchanges, brokers, and listed companies than in the U.S. It may be more
difficult for an investor's agents to keep currently informed about corporate
actions such as stock dividends or other matters that may affect the prices of
portfolio securities. Communications between the U.S. and foreign countries may
be less reliable than within the U.S., thus increasing the risk of delays or
loss of certificates for portfolio securities. In addition, with respect to
certain foreign countries, there is the possibility of nationalization,
expropriation, the imposition of withholding or confiscatory taxes, political,
social, or economic instability, diplomatic developments that could affect
investments in those countries, or other unforeseen actions by regulatory bodies
(such as changes to settlement or custody procedures).
<PAGE>
The expected introduction of a single currency, the euro, on January 1, 1999 for
participating European nations in the Economic and Monetary Union ("EU")
presents unique uncertainties, including whether the payment and operational
systems of banks and other financial institutions will be ready by the scheduled
launch date; the creation of suitable clearing and settlement payment systems
for the new currency; the legal treatment of certain outstanding financial
contracts after January 1, 1999 that refer to existing currencies rather than
the euro; the establishment and maintenance of exchange rates; the fluctuation
of the euro relative to non-euro currencies during the transaction period from
January 1, 1999 to December 31, 2000 and beyond; whether the interest rate, tax
or labor regimes of European countries participating in the euro will converge
over time; and whether the conversion of the currencies of other EU countries
such as the United Kingdom, Denmark, and Greece into the euro and the admission
of other non-EU countries such as Poland, Latvia, and Lithuania as members of
the EU may have an impact on the euro.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with foreign securities include: Foreign/Emerging
Markets Risk, Issuer Risk, and Management Risk.
High-Yield (High-Risk) Securities (Junk Bonds)
High yield (high-risk) securities are sometimes referred to as "junk bonds."
They are non-investment grade (lower quality) securities that have speculative
characteristics. Lower quality securities, while generally offering higher
yields than investment grade securities with similar maturities, involve greater
risks, including the possibility of default or bankruptcy. They are regarded as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal. The special risk considerations in connection with
investments in these securities are discussed below.
See the appendix for a discussion of securities ratings. (See also Debt
Obligations.)
The lower-quality and comparable unrated security market is relatively new and
its growth has paralleled a long economic expansion. As a result, it is not
clear how this market may withstand a prolonged recession or economic downturn.
Such conditions could severely disrupt the market for and adversely affect the
value of such securities.
All interest-bearing securities typically experience appreciation when interest
rates decline and depreciation when interest rates rise. The market values of
lower-quality and comparable unrated securities tend to reflect individual
corporate developments to a greater extent than do higher rated securities,
which react primarily to fluctuations in the general level of interest rates.
Lower-quality and comparable unrated securities also tend to be more sensitive
to economic conditions than are higher-rated securities. As a result, they
generally involve more credit risks than securities in the higher-rated
categories. During an economic downturn or a sustained period of rising interest
rates, highly leveraged issuers of lower-quality securities may experience
financial stress and may not have sufficient revenues to meet their payment
obligations. The issuer's ability to service its debt obligations also may be
adversely affected by specific corporate developments, the issuer's inability to
meet specific projected business forecast, or the unavailability of additional
financing. The risk of loss due to default by an issuer of these securities is
significantly greater than issuers of higher-rated securities because such
securities are generally unsecured and are often subordinated to other
creditors. Further, if the issuer of a lower quality security defaulted, an
investor might incur additional expenses to seek recovery.
Credit ratings issued by credit rating agencies are designed to evaluate the
safety of principal and interest payments of rated securities. They do not,
however, evaluate the market value risk of lower-quality securities and,
therefore, may not fully reflect the true risks of an investment. In addition,
credit rating agencies may or may not make timely changes in a rating to reflect
changes in the economy or in the condition of the issuer that affect the market
value of the securities. Consequently, credit ratings are used only as a
preliminary indicator of investment quality.
<PAGE>
An investor may have difficulty disposing of certain lower-quality and
comparable unrated securities because there may be a thin trading market for
such securities. Because not all dealers maintain markets in all lower quality
and comparable unrated securities, there is no established retail secondary
market for many of these securities. To the extent a secondary trading market
does exist, it is generally not as liquid as the secondary market for
higher-rated securities. The lack of a liquid secondary market may have an
adverse impact on the market price of the security. The lack of a liquid
secondary market for certain securities also may make it more difficult for an
investor to obtain accurate market quotations. Market quotations are generally
available on many lower-quality and comparable unrated issues only from a
limited number of dealers and may not necessarily represent firm bids of such
dealers or prices for actual sales.
Legislation may be adopted from time to time designed to limit the use of
certain lower quality and comparable unrated securities by certain issuers.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with high-yield (high-risk) securities include:
Call/Prepayment Risk, Credit Risk, Currency Risk, Interest Rate Risk, and
Management Risk.
Illiquid and Restricted Securities
The Fund may invest in illiquid securities (i.e., securities that are not
readily marketable). These securities may include, but are not limited to,
certain securities that are subject to legal or contractual restrictions on
resale, certain repurchase agreements, and derivative instruments.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with illiquid and restricted securities include:
Liquidity Risk and Management Risk.
Indexed Securities
The value of indexed securities is linked to currencies, interest rates,
commodities, indexes, or other financial indicators. Most indexed securities are
short- to intermediate-term fixed income securities whose values at maturity or
interest rates rise or fall according to the change in one or more specified
underlying instruments. Indexed securities may be more volatile than the
underlying instrument itself and they may be less liquid than the securities
represented by the index. (See also Derivative Instruments.)
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with indexed securities include: Liquidity Risk,
Management Risk, and Market Risk.
Inverse Floaters
Inverse floaters are created by underwriters using the interest payment on
securities. A portion of the interest received is paid to holders of instruments
based on current interest rates for short-term securities. The remainder, minus
a servicing fee, is paid to holders of inverse floaters. As interest rates go
down, the holders of the inverse floaters receive more income and an increase in
the price for the inverse floaters. As interest rates go up, the holders of the
inverse floaters receive less income and a decrease in the price for the inverse
floaters. (See also Derivative Instruments.)
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with inverse floaters include: Interest Rate Risk and
Management Risk.
<PAGE>
Investment Companies
The Fund may invest in securities issued by registered and unregistered
investment companies. These investments may involve the duplication of advisory
fees and certain other expenses.
Although one or more of the other risks described in this SAI may apply, the
largest risk associated with the securities of other investment companies
includes: Management Risk and Market Risk.
Lending of Portfolio Securities
The Fund may lend certain of its portfolio securities to broker-dealers. The
current policy of the Fund's board is to make these loans, either long- or
short-term, to broker-dealers. In making loans, the Fund receives the market
price in cash, U.S. government securities, letters of credit, or such other
collateral as may be permitted by regulatory agencies and approved by the board.
If the market price of the loaned securities goes up, an investor will get
additional collateral on a daily basis. The risks are that the borrower may not
provide additional collateral when required or return the securities when due.
During the existence of the loan, the Fund receives cash payments equivalent to
all interest or other distributions paid on the loaned securities. The Fund may
pay reasonable administrative and custodial fees in connection with a loan and
may pay a negotiated portion of the interest earned on the cash or money market
instruments held as collateral to the borrower or placing broker. The Fund will
receive reasonable interest on the loan or a flat fee from the borrower and
amounts equivalent to any dividends, interest, or other distributions on the
securities loaned.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with the lending of portfolio securities include:
Credit Risk and Management Risk.
Loan Participations
Loans, loan participations, and interests in securitized loan pools are
interests in amounts owed by a corporate, governmental, or other borrower to a
lender or consortium of lenders (typically banks, insurance companies,
investment banks, government agencies, or international agencies). Loans involve
a risk of loss in case of default or insolvency of the borrower and may offer
less legal protection to an investor in the event of fraud or misrepresentation.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with loan participations include: Credit Risk and
Management Risk.
Mortgage- and Asset-Backed Securities
Mortgage-backed securities represent direct or indirect participations in, or
are secured by and payable from, mortgage loans secured by real property, and
include single- and multi-class pass-through securities and Collateralized
Mortgage Obligations (CMOs). These securities may be issued or guaranteed by
U.S. government agencies or instrumentalities (see also Agency and Government
Securities), or by private issuers, generally originators and investors in
mortgage loans, including savings associations, mortgage bankers, commercial
banks, investment bankers, and special purpose entities. Mortgage-backed
securities issued by private lenders may be supported by pools of mortgage loans
or other mortgage-backed securities that are guaranteed, directly or indirectly,
by the U.S. government or one of its agencies or instrumentalities, or they may
be issued without any governmental guarantee of the underlying mortgage assets
but with some form of non-governmental credit enhancement.
Stripped mortgage-backed securities are a type of mortgage-backed security that
receive differing proportions of the interest and principal payments from the
underlying assets. Generally, there are two classes of stripped mortgage-backed
securities: Interest Only (IO) and Principal Only (PO). IOs entitle the holder
to receive distributions consisting of all or a portion of the interest on the
underlying pool of
<PAGE>
mortgage loans or mortgage-backed securities. POs entitle the holder to receive
distributions consisting of all or a portion of the principal of the underlying
pool of mortgage loans or mortgage-backed securities. The cash flows and yields
on IOs and POs are extremely sensitive to the rate of principal payments
(including prepayments) on the underlying mortgage loans or mortgage-backed
securities. A rapid rate of principal payments may adversely affect the yield to
maturity of IOs. A slow rate of principal payments may adversely affect the
yield to maturity of POs. If prepayments of principal are greater than
anticipated, an investor in IOs may incur substantial losses. If prepayments of
principal are slower than anticipated, the yield on a PO will be affected more
severely than would be the case with a traditional mortgage-backed security.
CMOs are hybrid mortgage-related instruments secured by pools of mortgage loans
or other mortgage-related securities, such as mortgage pass through securities
or stripped mortgage-backed securities. CMOs may be structured into multiple
classes, often referred to as "tranches," with each class bearing a different
stated maturity and entitled to a different schedule for payments of principal
and interest, including prepayments. Principal prepayments on collateral
underlying a CMO may cause it to be retired substantially earlier than its
stated maturity.
The yield characteristics of mortgage-backed securities differ from those of
other debt securities. Among the differences are that interest and principal
payments are made more frequently on mortgage-backed securities, usually
monthly, and principal may be repaid at any time. These factors may reduce the
expected yield.
Asset-backed securities have structural characteristics similar to
mortgage-backed securities. Asset-backed debt obligations represent direct or
indirect participation in, or secured by and payable from, assets such as motor
vehicle installment sales contracts, other installment loan contracts, home
equity loans, leases of various types of property, and receivables from credit
card or other revolving credit arrangements. The credit quality of most
asset-backed securities depends primarily on the credit quality of the assets
underlying such securities, how well the entity issuing the security is
insulated from the credit risk of the originator or any other affiliated
entities, and the amount and quality of any credit enhancement of the
securities. Payments or distributions of principal and interest on asset-backed
debt obligations may be supported by non-governmental credit enhancements
including letters of credit, reserve funds, overcollateralization, and
guarantees by third parties. The market for privately issued asset-backed debt
obligations is smaller and less liquid than the market for government sponsored
mortgage-backed securities. (See also Derivative Instruments.)
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with mortgage- and asset-backed securities include:
Call/Prepayment Risk, Credit Risk, Interest Rate Risk, Liquidity Risk, and
Management Risk.
Mortgage Dollar Rolls
Mortgage dollar rolls are investments whereby an investor would sell
mortgage-backed securities for delivery in the current month and simultaneously
contract to purchase substantially similar securities on a specified future
date. While an investor would forego principal and interest paid on the
mortgage-backed securities during the roll period, the investor would be
compensated by the difference between the current sales price and the lower
price for the future purchase as well as by any interest earned on the proceeds
of the initial sale. The investor also could be compensated through the receipt
of fee income equivalent to a lower forward price.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with mortgage dollar rolls include: Credit Risk,
Interest Rate Risk, and Management Risk.
<PAGE>
Municipal Obligations
Municipal obligations include debt obligations issued by or on behalf of states,
territories, or possessions of the United States (including the District of
Columbia). The interest on these obligations is generally exempt from federal
income tax. Municipal obligations are generally classified as either "general
obligations" or "revenue obligations."
General obligation bonds are secured by the issuer's pledge of its full faith,
credit, and taxing power for the payment of interest and principal. Revenue
bonds are payable only from the revenues derived from a project or facility or
from the proceeds of a specified revenue source. Industrial development bonds
are generally revenue bonds secured by payments from and the credit of private
users. Municipal notes are issued to meet the short-term funding requirements of
state, regional, and local governments. Municipal notes include tax anticipation
notes, bond anticipation notes, revenue anticipation notes, tax and revenue
anticipation notes, construction loan notes, short-term discount notes,
tax-exempt commercial paper, demand notes, and similar instruments.
Municipal lease obligations may take the form of a lease, an installment
purchase, or a conditional sales contract. They are issued by state and local
governments and authorities to acquire land, equipment, and facilities. An
investor may purchase these obligations directly, or it may purchase
participation interests in such obligations. Municipal leases may be subject to
greater risks than general obligation or revenue bonds. State constitutions and
statutes set forth requirements that states or municipalities must meet in order
to issue municipal obligations. Municipal leases may contain a covenant by the
state or municipality to budget for and make payments due under the obligation.
Certain municipal leases may, however, provide that the issuer is not obligated
to make payments on the obligation in future years unless funds have been
appropriated for this purpose each year.
Yields on municipal bonds and notes depend on a variety of factors, including
money market conditions, municipal bond market conditions, the size of a
particular offering, the maturity of the obligation, and the rating of the
issue. The municipal bond market has a large number of different issuers, many
having smaller sized bond issues, and a wide choice of different maturities
within each issue. For these reasons, most municipal bonds do not trade on a
daily basis and many trade only rarely. Because many of these bonds trade
infrequently, the spread between the bid and offer may be wider and the time
needed to develop a bid or an offer may be longer than other security markets.
See the appendix for a discussion of securities ratings. (See also Debt
Obligations.)
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with municipal obligations include: Credit Risk, Event
Risk, Inflation Risk, Interest Rate Risk, Legal/Legislative Risk, and Market
Risk.
Preferred Stock
Preferred stock is a type of stock that pays dividends at a specified rate and
that has preference over common stock in the payment of dividends and the
liquidation of assets. Preferred stock does not ordinarily carry voting rights.
The price of a preferred stock is generally determined by earnings, type of
products or services, projected growth rates, experience of management,
liquidity, and general market conditions of the markets on which the stock
trades.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with preferred stock include: Issuer Risk, Management
Risk, and Market Risk.
<PAGE>
Real Estate Investment Trusts
Real estate investment trusts (REITs) are entities that manage a portfolio of
real estate to earn profits for their shareholders. REITs can make investments
in real estate such as shopping centers, nursing homes, office buildings,
apartment complexes, and hotels. REITs can be subject to extreme volatility due
to fluctuations in the demand for real estate, changes in interest rates, and
adverse economic conditions. Additionally, the failure of a REIT to continue to
qualify as a REIT for tax purposes can materially affect its value.
Although one or more of the other risks described in this SAI may apply, the
largest associated with REITs include: Issuer Risk, Management Risk, and Market
Risk.
Repurchase Agreements
The Fund may enter into repurchase agreements with certain banks or non-bank
dealers. In a repurchase agreement, the Fund buys a security at one price, and
at the time of sale, the seller agrees to repurchase the obligation at a
mutually agreed upon time and price (usually within seven days). The repurchase
agreement, thereby, determines the yield during the purchaser's holding period,
while the seller's obligation to repurchase is secured by the value of the
underlying security. Repurchase agreements could involve certain risks in the
event of a default or insolvency of the other party to the agreement, including
possible delays or restrictions upon the Fund's ability to dispose of the
underlying securities. A specific risk of a repurchase agreement is that if the
seller seeks the protection of bankruptcy laws, the Fund's ability to liquidate
the security involved could be impaired.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with repurchase agreements include: Credit Risk and
Management Risk.
Reverse Repurchase Agreements
In a reverse repurchase agreement, the investor would sell a security and enter
into an agreement to repurchase the security at a specified future date and
price. The investor generally retains the right to interest and principal
payments on the security. Since the investor receives cash upon entering into a
reverse repurchase agreement, it may be considered a borrowing. (See also
Derivative Instruments.)
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with reverse repurchase agreements include: Credit
Risk, Interest Rate Risk, and Management Risk.
Short Sales
With short sales, an investor sells a security that it does not own in
anticipation of a decline in the market value of the security. To complete the
transaction, the investor must borrow the security to make delivery to the
buyer. The investor is obligated to replace the security that was borrowed by
purchasing it at the market price on the replacement date. The price at such
time may be more or less than the price at which the investor sold the security.
A fund that is allowed to utilize short sales will designate cash or liquid
securities to cover its open short positions. Those funds also may engage in
"short sales against the box," a form of short-selling that involves selling a
security that an investor owns (or has an unconditioned right to purchase) for
delivery at a specified date in the future. This technique allows an investor to
hedge protectively against anticipated declines in the market of its securities
or to defer an unrealized gain. If the value of the securities sold short
increased prior to the scheduled delivery date, the investor loses the
opportunity to participate in the gain.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with short sales include: Management Risk and Market
Risk.
<PAGE>
Sovereign Debt
A sovereign debtor's willingness or ability to repay principal and pay interest
in a timely manner may be affected by a variety of factors, including its cash
flow situation, the extent of its reserves, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of the debt
service burden to the economy as a whole, the sovereign debtor's policy toward
international lenders, and the political constraints to which a sovereign debtor
may be subject. (See also Foreign Securities.)
With respect to sovereign debt of emerging market issuers, investors should be
aware that certain emerging market countries are among the largest debtors to
commercial banks and foreign governments. At times, certain emerging market
countries have declared moratoria on the payment of principal and interest on
external debt.
Certain emerging market countries have experienced difficulty in servicing their
sovereign debt on a timely basis that led to defaults and the restructuring of
certain indebtedness.
Sovereign debt includes Brady Bonds, which are securities issued under the
framework of the Brady Plan, an initiative announced by former U.S. Treasury
Secretary Nicholas F. Brady in 1989 as a mechanism for debtor nations to
restructure their outstanding external commercial bank indebtedness.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with sovereign debt include: Credit Risk,
Foreign/Emerging Markets Risk, and Management Risk.
Structured Products
Structured products are over-the-counter financial instruments created
specifically to meet the needs of one or a small number of investors. The
instrument may consist of a warrant, an option, or a forward contract embedded
in a note or any of a wide variety of debt, equity, and/or currency
combinations. Risks of structured products include the inability to close such
instruments, rapid changes in the market, and defaults by other parties. (See
also Derivative Instruments.)
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with structured products include: Credit Risk,
Liquidity Risk, and Management Risk.
Variable- or Floating-Rate Securities
The Fund may invest in securities that offer a variable- or floating-rate of
interest. Variable-rate securities provide for automatic establishment of a new
interest rate at fixed intervals (e.g., daily, monthly, semi-annually, etc.).
Floating-rate securities generally provide for automatic adjustment of the
interest rate whenever some specified interest rate index changes.
Variable- or floating-rate securities frequently include a demand feature
enabling the holder to sell the securities to the issuer at par. In many cases,
the demand feature can be exercised at any time. Some securities that do not
have variable or floating interest rates may be accompanied by puts producing
similar results and price characteristics.
Variable-rate demand notes include master demand notes that are obligations that
permit the Fund to invest fluctuating amounts, which may change daily without
penalty, pursuant to direct arrangements between the Fund as lender, and the
borrower. The interest rates on these notes fluctuate from time to time. The
issuer of such obligations normally has a corresponding right, after a given
period, to prepay in its discretion the outstanding principal amount of the
obligations plus accrued interest upon a specified number of days' notice to the
holders of such obligations. Because these obligations are direct lending
arrangements between the lender and borrower, it is not contemplated that such
instruments generally will be traded. There generally is not an established
secondary market for these obligations. Accordingly, where these
<PAGE>
obligations are not secured by letters of credit or other credit support
arrangements, the Fund's right to redeem is dependent on the ability of the
borrower to pay principal and interest on demand. Such obligations frequently
are not rated by credit rating agencies and may involve heightened risk of
default by the issuer.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with variable- or floating-rate securities include:
Credit Risk and Management Risk.
Warrants
Warrants are securities giving the holder the right, but not the obligation, to
buy the stock of an issuer at a given price (generally higher than the value of
the stock at the time of issuance) during a specified period or perpetually.
Warrants may be acquired separately or in connection with the acquisition of
securities. Warrants do not carry with them the right to dividends or voting
rights and they do not represent any rights in the assets of the issuer.
Warrants may be considered to have more speculative characteristics than certain
other types of investments. In addition, the value of a warrant does not
necessarily change with the value of the underlying securities, and a warrant
ceases to have value if it is not exercised prior to its expiration date.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with warrants include: Management Risk and Market Risk.
When-Issued Securities
These instruments are contracts to purchase securities for a fixed price at a
future date beyond normal settlement time (when-issued securities or forward
commitments). The price of debt obligations purchased on a when-issued basis,
which may be expressed in yield terms, generally is fixed at the time the
commitment to purchase is made, but delivery and payment for the securities take
place at a later date. Normally, the settlement date occurs within 45 days of
the purchase although in some cases settlement may take longer. The investor
does not pay for the securities or receive dividends or interest on them until
the contractual settlement date. Such instruments involve a risk of loss if the
value of the security to be purchased declines prior to the settlement date,
which risk is in addition to the risk of decline in value of the investor's
other assets.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with when-issued securities include: Credit Risk and
Management Risk.
Zero-Coupon, Step-Coupon, and Pay-in-Kind Securities
These securities are debt obligations that do not make regular cash interest
payments (see also Debt Obligations). Zero-coupon and step-coupon securities are
sold at a deep discount to their face value because they do not pay interest
until maturity. Pay-in-kind securities pay interest through the issuance of
additional securities. Because these securities do not pay current cash income,
the price of these securities can be extremely volatile when interest rates
fluctuate. See the appendix for a discussion of securities ratings.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with zero-coupon, step-coupon, and pay-in-kind
securities include: Credit Risk, Interest Rate Risk, and Management Risk.
<PAGE>
SECURITY TRANSACTIONS
Subject to policies set by the board, AEFC is authorized to determine,
consistent with the Fund's investment goal and policies, which securities will
be purchased, held, or sold. In determining where the buy and sell orders are to
be placed, AEFC has been directed to use its best efforts to obtain the best
available price and the most favorable execution except where otherwise
authorized by the board. In selecting broker-dealers to execute transactions,
AEFC may consider the price of the security, including commission or mark-up,
the size and difficulty of the order, the reliability, integrity, financial
soundness, and general operation and execution capabilities of the broker, the
broker's expertise in particular markets, and research services provided by the
broker.
AEFC has a strict Code of Ethics that prohibits its affiliated personnel from
engaging in personal investment activities that compete with or attempt to take
advantage of planned portfolio transactions for any fund or trust for which it
acts as investment manager.
The Fund's securities may be traded on a principal rather than an agency basis.
In other words, AEFC will trade directly with the issuer or with a dealer who
buys or sells for its own account, rather than acting on behalf of another
client. AEFC does not pay the dealer commissions. Instead, the dealer's profit,
if any, is the difference, or spread, between the dealer's purchase and sale
price for the security.
On occasion, it may be desirable to compensate a broker for research services or
for brokerage services by paying a commission that might not otherwise be
charged or a commission in excess of the amount another broker might charge. The
board has adopted a policy authorizing AEFC to do so to the extent authorized by
law, if AEFC determines, in good faith, that such commission is reasonable in
relation to the value of the brokerage or research services provided by a broker
or dealer, viewed either in the light of that transaction or AEFC's overall
responsibilities with respect to the Fund and the other funds and trusts in the
IDS MUTUAL FUND GROUP for which it acts as investment manager.
Research provided by brokers supplements AEFC's own research activities. Such
services include economic data on, and analysis of, U.S. and foreign economies;
information on specific industries; information about specific companies,
including earnings estimates; purchase recommendations for stocks and bonds;
portfolio strategy services; political, economic, business, and industry trend
assessments; historical statistical information; market data services providing
information on specific issues and prices; and technical analysis of various
aspects of the securities markets, including technical charts. Research services
may take the form of written reports, computer software, or personal contact by
telephone or at seminars or other meetings. AEFC has obtained, and in the future
may obtain, computer hardware from brokers, including but not limited to
personal computers that will be used exclusively for investment decision-making
purposes, which include the research, portfolio management, and trading
functions and other services to the extent permitted under an interpretation by
the SEC.
When paying a commission that might not otherwise be charged or a commission in
excess of the amount another broker might charge, AEFC must follow procedures
authorized by the board. To date, three procedures have been authorized. One
procedure permits AEFC to direct an order to buy or sell a security traded on a
national securities exchange to a specific broker for research services it has
provided. The second procedure permits AEFC, in order to obtain research, to
direct an order on an agency basis to buy or sell a security traded in the
over-the-counter market to a firm that does not make a market in that security.
The commission paid generally includes compensation for research services. The
third procedure permits AEFC, in order to obtain research and brokerage
services, to cause the Fund to pay a commission in excess of the amount another
broker might have charged. AEFC has advised the Fund that it is necessary to do
business with a number of brokerage firms on a continuing basis to obtain such
services as the handling of large orders, the willingness of a broker to risk
its own money by taking a position in a security, and the specialized handling
of a particular group of securities that only certain brokers may be able to
offer. As a result of this arrangement, some portfolio transactions may not be
effected at the lowest
<PAGE>
commission, but AEFC believes it may obtain better overall execution. AEFC has
represented that under all three procedures the amount of commission paid will
be reasonable and competitive in relation to the value of the brokerage services
performed or research provided.
All other transactions will be placed on the basis of obtaining the best
available price and the most favorable execution. In so doing, if in the
professional opinion of the person responsible for selecting the broker or
dealer, several firms can execute the transaction on the same basis,
consideration will be given by such person to those firms offering research
services. Such services may be used by AEFC in providing advice to all the funds
in the IDS MUTUAL FUND GROUP even though it is not possible to relate the
benefits to any particular fund.
Each investment decision made for the Fund is made independently from any
decision made for another portfolio, fund, or other account advised by AEFC or
any of its subsidiaries. When the Fund buys or sells the same security as
another portfolio, fund, or account, AEFC carries out the purchase or sale in a
way the Fund agrees in advance is fair. Although sharing in large transactions
may adversely affect the price or volume purchased or sold by the Fund, the Fund
hopes to gain an overall advantage in execution.
On a periodic basis, AEFC makes a comprehensive review of the broker-dealers and
the overall reasonableness of their commissions. The review evaluates execution,
operational efficiency, and research services.
The Fund paid total brokerage commissions of $-0- for fiscal year, ended Nov.
30, 1998, $-0- for fiscal year 1997, and $150,492 for fiscal year 1996.
Substantially all firms through whom transactions were executed provide research
services.
No transactions were directed to brokers because of research services they
provided to the Fund.
As of the end of the most recent fiscal year, the Fund held no securities of its
regular brokers or dealers or of the parent of those brokers or dealers that
derived more than 15% of gross revenue from securities-related activities.
The portfolio turnover rate was 14% in the most recent fiscal year, and 4% in
the year before.
BROKERAGE COMMISSIONS PAID TO BROKERS AFFILIATED WITH AMERICAN EXPRESS FINANCIAL
CORPORATION
Affiliates of American Express Company (of which AEFC is a wholly-owned
subsidiary) may engage in brokerage and other securities transactions on behalf
of the Fund according to procedures adopted by the board and to the extent
consistent with applicable provisions of the federal securities laws. AEFC will
use an American Express affiliate only if (i) AEFC determines that the Fund will
receive prices and executions at least as favorable as those offered by
qualified independent brokers performing similar brokerage and other services
for the Fund and (ii) the affiliate charges the Fund commission rates consistent
with those the affiliate charges comparable unaffiliated customers in similar
transactions and if such use is consistent with terms of the Investment
Management Services Agreement.
No brokerage commissions were paid to brokers affiliated with AEFC for the three
most recent fiscal years.
<PAGE>
PERFORMANCE INFORMATION
The Fund may quote various performance figures to illustrate past performance.
Average annual total return and current yield quotations, if applicable, used by
the Fund are based on standardized methods of computing performance as required
by the SEC. An explanation of the methods used by the Fund to compute
performance follows below.
AVERAGE ANNUAL TOTAL RETURN
The Fund may calculate average annual total return for a class for certain
periods by finding the average annual compounded rates of return over the period
that would equate the initial amount invested to the ending redeemable value,
according to the following formula:
P(1+T)n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment,
made at the beginning of a period, at the end of the period
(or fractional portion thereof)
AGGREGATE TOTAL RETURN
The Fund may calculate aggregate total return for a class for certain periods
representing the cumulative change in the value of an investment in the Fund
over a specified period of time according to the following formula:
ERV - P
P
where: P = a hypothetical initial payment of $1,000
ERV = ending redeemable value of a hypothetical $1,000 payment,
made at the beginning of a period, at the end of the period
(or fractional portion thereof)
Annualized yield
The Fund may calculate an annualized yield for a class by dividing the net
investment income per share deemed earned during a 30-day period by the public
offering price per share (including the maximum sales charge) on the last day of
the period and annualizing the results.
Yield is calculated according to the following formula:
Yield = 2[(a-b + 1)6 - 1]
cd
where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum offering price per share on the last day of the
period
The Fund's annualized yield was 4.13% for Class A, 3.59% for Class B, and 4.42%
for Class Y for the 30-day period ended Nov. 30, 1998.
<PAGE>
Distribution yield
Distribution yield is calculated according to the following formula:
D divided by POPF equals DY
30 30
where: D = sum of dividends for 30-day period
POP = sum of public offering price for 30-day period
F = annualizing factor DY = distribution yield
The Fund's distribution yield was 5.24% for Class A, 4.77% for Class B, and
5.59% for Class Y for the 30-day period ended Nov. 30, 1998.
Tax-equivalent yield
Tax-equivalent yield is calculated by dividing that portion of the yield (as
calculated above) which is tax-exempt by one minus a stated income tax rate and
adding the result to that portion, if any, of the yield that is not tax-exempt.
The following table shows the fund's tax equivalent yield, based on federal but
not state tax rates, for the 30-day period ended Nov. 30, 1998.
Marginal
Income Tax Tax-Equivalent Yield
Bracket Distribution Annualized
------- ------------ ----------
Class A
15.0% 6.16% 4.86%
28.0% 7.28% 5.74%
31.0% 7.59% 5.99%
36.0% 8.19% 6.45%
39.6% 8.68% 6.84%
Class B
15.0% 5.61% 4.22%
28.0% 6.63% 4.99%
31.0% 6.91% 5.20%
36.0% 7.45% 5.61%
39.6% 7.90% 5.94%
Class Y
15.0% 6.58% 5.20%
28.0% 7.76% 6.14%
31.0% 8.10% 6.41%
36.0% 8.73% 6.91%
39.6% 9.25% 7.32%
In its sales material and other communications, the Fund may quote, compare or
refer to rankings, yields, or returns as published by independent statistical
services or publishers and publications such as The Bank Rate Monitor National
Index, Barron's, Business Week, CDA Technologies, Donoghue's Money Market Fund
Report, Financial Services Week, Financial Times, Financial World, Forbes,
Fortune, Global Investor, Institutional Investor, Investor's Daily, Kiplinger's
Personal Finance, Lipper Analytical Services, Money, Morningstar, Mutual Fund
Forecaster, Newsweek, The New York Times, Personal Investor, Shearson Lehman
Aggregate Bond Index, Stanger Report, Sylvia Porter's Personal Finance, USA
Today, U.S. News and World Report, The Wall Street Journal, and Wiesenberger
Investment Companies Service.
<PAGE>
VALUING FUND SHARES
The value of an individual share for each class is determined by using the net
asset value (NAV) before shareholder transactions for the day. On the first
business day following the end of the fiscal year, the computation looked like
this:
<TABLE>
<CAPTION>
Net assets Shares
before outstanding at Net asset value
shareholder the end of of one share
transactions previous day
----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
Class A $5,717,787,066 divided by 1,221,749,373 equals $4.68
Class B 269,481,120 57,581,436 4.68
Class Y 7,450,630 1,592,015 4.68
</TABLE>
In determining net assets before shareholder transactions, the Fund's securities
are valued as follows as of the close of business of the New York Stock Exchange
(the Exchange):
o Securities traded on a securities exchange for which a last-quoted sales
price is readily available are valued at the last-quoted sales price on the
exchange where such security is primarily traded.
o Securities traded on a securities exchange for which a last-quoted sales
price is not readily available are valued at the mean of the closing bid
and asked prices, looking first to the bid and asked prices on the exchange
where the security is primarily traded and, if none exist, to the
over-the-counter market.
o Securities included in the NASDAQ National Market System are valued at the
last-quoted sales price in this market.
o Securities included in the NASDAQ National Market System for which a
last-quoted sales price is not readily available, and other securities
traded over-the-counter but not included in the NASDAQ National Market
System are valued at the mean of the closing bid and asked prices.
o Futures and options traded on major exchanges are valued at the last-quoted
sales price on their primary exchange.
o Foreign securities traded outside the United States are generally valued as
of the time their trading is complete, which is usually different from the
close of the Exchange. Foreign securities quoted in foreign currencies are
translated into U.S. dollars at the current rate of exchange. Occasionally,
events affecting the value of such securities may occur between such times
and the close of the Exchange that will not be reflected in the computation
of the Fund's net asset value. If events materially affecting the value of
such securities occur during such period, these securities will be valued
at their fair value according to procedures decided upon in good faith by
the board.
o Short-term securities maturing more than 60 days from the valuation date
are valued at the readily available market price or approximate market
value based on current interest rates. Short-term securities maturing in 60
days or less that originally had maturities of more than 60 days at
acquisition date are valued at amortized cost using the market value on the
61st day before maturity. Short-term securities maturing in 60 days or less
at acquisition date are valued at amortized cost. Amortized cost is an
approximation of market value determined by systematically increasing the
carrying value of a security if acquired at a discount, or reducing the
carrying value if acquired at a premium, so that the carrying value is
equal to maturity value on the maturity date.
<PAGE>
o Securities without a readily available market price and other assets are
valued at fair value as determined in good faith by the board. The board is
responsible for selecting methods it believes provide fair value. When
possible, bonds are valued by a pricing service independent from the Fund.
If a valuation of a bond is not available from a pricing service, the bond
will be valued by a dealer knowledgeable about the bond if such a dealer is
available.
<PAGE>
INVESTING IN THE FUND
SALES CHARGE
Shares of the Fund are sold at the public offering price. The public offering
price is the NAV of one share adjusted for the sales charge for Class A. For
Class B and Class Y, there is no initial sales charge so the public offering
price is the same as the NAV. For Class A, the public offering price for an
investment of less than $50,000, made on the first business day following the
end of the fiscal year, was determined by dividing the NAV of one share, $4.68,
by 0.95 (1.00-0.05 for a maximum 5% sales charge) for a public offering price of
$4.93. The sales charge is paid to American Express Financial Advisors Inc.
(AEFA) by the person buying the shares.
Class A - Calculation of the Sales Charge
Sales charges are determined as follows:
Within each increment, sales
charge as a percentage of:
------------------------------------------------
Public Net
Amount of Investment Offering Price Amount Invested
- -------------------- -------------- ---------------
First $ 50,000 5.0% 5.26%
Next 50,000 4.5 4.71
Next 400,000 3.8 3.95
Next 500,000 2.0 2.04
$1,000,000 or more 0.0 0.00
Sales charges on an investment greater than $50,000 and less than $1,000,000 are
calculated for each increment separately and then totaled. The resulting total
sales charge, expressed as a percentage of the public offering price and of the
net amount invested, will vary depending on the proportion of the investment at
different sales charge levels.
For example, compare an investment of $60,000 with an investment of $85,000. The
$60,000 investment is composed of $50,000 that incurs a sales charge of $2,500
(5.0% x $50,000) and $10,000 that incurs a sales charge of $450 (4.5% x
$10,000). The total sales charge of $2,950 is 4.92% of the public offering price
and 5.17% of the net amount invested.
In the case of the $85,000 investment, the first $50,000 also incurs a sales
charge of $2,500 (5.0% x $50,000) and $35,000 incurs a sales charge of $1,575
(4.5% x $35,000). The total sales charge of $4,075 is 4.79% of the public
offering price and 5.04% of the net amount invested.
The following table shows the range of sales charges as a percentage of the
public offering price and of the net amount invested on total investments at
each applicable level.
On total investment, sales
charge as a percentage of:
---------------------------------------------
Public Net
Offering Price Amount Invested
Amount of investment ranges from:
- --------------------------------------
First $ 50,000 5.00% 5.26%
Next 50,000 to 100,000 5.00-4.50 5.26-4.71
Next 100,000 to 500,000 4.50-3.80 4.71-3.95
Next 500,000 to 999,999 3.80-2.00 3.95-2.04
$1,000,000 or more 0.00 0.00
<PAGE>
Class A - Reducing the Sales Charge
Your total investments in the Fund determine your sales charges. The amount of
all prior investments plus any new purchase is referred to as your "total amount
invested." For example, suppose you have made an investment of $20,000 and later
decide to invest $40,000 more. Your total amount invested would be $60,000. As a
result, $10,000 of your $40,000 investment qualifies for the lower 4.5% sales
charge that applies to investments of more than $50,000 and up to $100,000.
Class A - Letter of Intent (LOI)
If you intend to invest $1 million over a period of 13 months, you can reduce
the sales charges in Class A by filing a LOI. The agreement can start at any
time and will remain in effect for 13 months. Your investment will be charged
normal sales charges until you have invested $1 million. At that time, your
account will be credited with the sales charges previously paid. Class A
investments made prior to signing a LOI may be used to reach the $1 million
total, excluding IDS Cash Management Fund and IDS Tax-Free Money Fund. However,
we will not adjust for sales charges on investments made prior to the signing of
the LOI. If you do not invest $1 million by the end of 13 months, there is no
penalty, you will just miss out on the sales charge adjustment. A LOI is not an
option (absolute right) to buy shares.
Class Y Shares
Class Y shares are offered to certain institutional investors. Class Y shares
are sold without a front-end sales charge or a CDSC and are not subject to a
distribution fee. The following investors are eligible to purchase Class Y
shares:
o Qualified employee benefit plans* if the plan:
- uses a daily transfer recordkeeping service offering participants
daily access to IDS funds and has
- at least $10 million in plan assets or
- 500 or more participants; or
- does not use daily transfer recordkeeping and has
- at least $3 million invested in funds of the IDS MUTUAL FUND
GROUP or
- 500 or more participants.
o Trust companies or similar institutions, and charitable organizations that
meet the definition in Section 501(c)(3) of the Internal Revenue Code.*
These institutions must have at least $10 million in funds of the IDS
MUTUAL FUND GROUP.
o Nonqualified deferred compensation plans* whose participants are included
in a qualified employee benefit described above.
* Eligibility must be determined in advance by AEFA. To do so, contact your
financial advisor.
<PAGE>
SYSTEMATIC INVESTMENT PROGRAMS
After you make your initial investment of $100 or more, you must make additional
payments of $100 or more on at least a monthly basis until your balance reaches
$2,000. These minimums do not apply to all systematic investment programs. You
decide how often to make payments - monthly, quarterly, or semiannually. You are
not obligated to make any payments. You can omit payments or discontinue the
investment program altogether. The Fund also can change the program or end it at
any time.
AUTOMATIC DIRECTED DIVIDENDS
Dividends, including capital gain distributions, paid by another fund in the IDS
MUTUAL FUND GROUP subject to a sales charge, may be used to automatically
purchase shares in the same class of this Fund without paying a sales charge.
Dividends may be directed to existing accounts only. Dividends declared by a
fund are exchanged to this Fund the following day. Dividends can be exchanged
into the same class of another fund in the IDS MUTUAL FUND GROUP but cannot be
split to make purchases in two or more funds. Automatic directed dividends are
available between accounts of any ownership except:
o Between a non-custodial account and an IRA, or 401(k) plan account or other
qualified retirement account of which American Express Trust Company acts
as custodian;
o Between two American Express Trust Company custodial accounts with
different owners (for example, you may not exchange dividends from your IRA
to the IRA of your spouse); and
o Between different kinds of custodial accounts with the same ownership (for
example, you may not exchange dividends from your IRA to your 401(k) plan
account, although you may exchange dividends from one IRA to another IRA).
Dividends may be directed from accounts established under the Uniform Gifts to
Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) only into other UGMA
or UTMA accounts with identical ownership.
The Fund's investment goal is described in its prospectus along with other
information, including fees and expense ratios. Before exchanging dividends into
another fund, you should read that fund's prospectus. You will receive a
confirmation that the automatic directed dividend service has been set up for
your account.
REJECTION OF BUSINESS
The Fund reserves the right to reject any business, in its sole discretion.
<PAGE>
SELLING SHARES
You have a right to sell your shares at any time. For an explanation of sales
procedures, please see the prospectus.
During an emergency, the board can suspend the computation of NAV, stop
accepting payments for purchase of shares, or suspend the duty of the Fund to
redeem shares for more than seven days. Such emergency situations would occur
if:
o The Exchange closes for reasons other than the usual weekend and holiday
closings or trading on the Exchange is restricted, or
o Disposal of the Fund's securities is not reasonably practicable or it is
not reasonably practicable for the Fund to determine the fair value of its
net assets, or
o The SEC, under the provisions of the 1940 Act, declares a period of
emergency to exist.
Should the Fund stop selling shares, the board may make a deduction from the
value of the assets held by the Fund to cover the cost of future liquidations of
the assets so as to distribute fairly these costs among all shareholders.
The Fund has elected to be governed by Rule 18f-1 under the 1940 Act, which
obligates the Fund to redeem shares in cash, with respect to any one shareholder
during any 90-day period, up to the lesser of $250,000 or 1% of the net assets
of the Fund at the beginning of the period. Although redemptions in excess of
this limitation would normally be paid in cash, the Fund reserves the right to
make these payments in whole or in part in securities or other assets in case of
an emergency, or if the payment of a redemption in cash would be detrimental to
the existing shareholders of the Fund as determined by the board. In these
circumstances, the securities distributed would be valued as set forth in this
SAI. Should the Fund distribute securities, a shareholder may incur brokerage
fees or other transaction costs in converting the securities to cash.
<PAGE>
PAY-OUT PLANS
You can use any of several pay-out plans to redeem your investment in regular
installments. If you redeem Class B shares you may be subject to a contingent
deferred sales charge as discussed in the prospectus. While the plans differ on
how the pay-out is figured, they all are based on the redemption of your
investment. Net investment income dividends and any capital gain distributions
will automatically be reinvested, unless you elect to receive them in cash. If
you are redeeming a tax-qualified plan account for which American Express Trust
Company acts as custodian, you can elect to receive your dividends and other
distributions in cash when permitted by law. If you redeem an IRA or a qualified
retirement account, certain restrictions, federal tax penalties, and special
federal income tax reporting requirements may apply. You should consult your tax
advisor about this complex area of the tax law.
Applications for a systematic investment in a class of the Fund subject to a
sales charge normally will not be accepted while a pay-out plan for any of those
funds is in effect. Occasional investments, however, may be accepted.
To start any of these plans, please write American Express Shareholder Service,
P.O. Box 534, Minneapolis, MN 55440-0534, or call American Express Financial
Advisors Telephone Transaction Service at 800-437-3133 (National/Minnesota) or
612-671-3800 (Mpls./St. Paul). Your authorization must be received in the
Minneapolis headquarters at least five days before the date you want your
payments to begin. The initial payment must be at least $50. Payments will be
made on a monthly, bimonthly, quarterly, semiannual, or annual basis. Your
choice is effective until you change or cancel it.
The following pay-out plans are designed to take care of the needs of most
shareholders in a way AEFC can handle efficiently and at a reasonable cost. If
you need a more irregular schedule of payments, it may be necessary for you to
make a series of individual redemptions, in which case you will have to send in
a separate redemption request for each pay-out. The Fund reserves the right to
change or stop any pay-out plan and to stop making such plans available.
Plan #1: Pay-out for a fixed period of time
If you choose this plan, a varying number of shares will be redeemed at regular
intervals during the time period you choose. This plan is designed to end in
complete redemption of all shares in your account by the end of the fixed
period.
Plan #2: Redemption of a fixed number of shares
If you choose this plan, a fixed number of shares will be redeemed for each
payment and that amount will be sent to you. The length of time these payments
continue is based on the number of shares in your account.
Plan #3: Redemption of a fixed dollar amount
If you decide on a fixed dollar amount, whatever number of shares is necessary
to make the payment will be redeemed in regular installments until the account
is closed.
Plan #4: Redemption of a percentage of net asset value
Payments are made based on a fixed percentage of the net asset value of the
shares in the account computed on the day of each payment. Percentages range
from 0.25% to 0.75%. For example, if you are on this plan and arrange to take
0.5% each month, you will get $50 if the value of your account is $10,000 on the
payment date.
<PAGE>
CAPITAL LOSS CARRYOVER
For federal income tax purposes, the Fund had total capital loss carryovers of
$47,884,156 at the end of the most recent fiscal year, that if not offset by
subsequent capital gains will expire as follows:
2002 2004 2005
---- ---- ----
$37,164,809 $2,605,565 $8,113,782
It is unlikely that the board will authorize a distribution of any net realized
capital gains until the available capital loss carryover has been offset or has
expired except as required by Internal Revenue Service rules.
<PAGE>
TAXES
If you buy shares in the Fund and then exchange into another fund, it is
considered a redemption and subsequent purchase of shares. Under the tax laws,
if this exchange is done within 91 days, any sales charge waived on Class A
shares on a subsequent purchase of shares applies to the new shares acquired in
the exchange. Therefore, you cannot create a tax loss or reduce a tax gain
attributable to the sales charge when exchanging shares within 91 days.
For example:
You purchase 100 shares of one fund having a public offering price of $10.00 per
share. With a sales load of 5%, you pay $50.00 in sales load. With a NAV of
$9.50 per share, the value of your investment is $950.00. Within 91 days of
purchasing that fund, you decide to exchange out of that fund, now at a NAV of
$11.00 per share, up from the original NAV of $9.50, and purchase into a second
fund, at a NAV of $15.00 per share. The value of your investment is now
$1,100.00 ($11.00 x 100 shares). You cannot use the $50.00 paid as a sales load
when calculating your tax gain or loss in the sale of the first fund shares. So
instead of having $100.00 gain ($1,100.00 - $1,000.00), you have a $150.00 gain
($1,100.00 - $950.00). You can include the $50.00 sales load in the calculation
of your tax gain or loss when you sell shares in the second fund.
If you have a nonqualified investment in the Fund and you wish to move part or
all of those shares to an IRA or qualified retirement account in the Fund, you
can do so without paying a sales charge. However, this type of exchange is
considered a redemption of shares and may result in a gain or loss for tax
purposes. In addition, this type of exchange may result in an excess
contribution under IRA or qualified plan regulations if the amount exchanged
plus the amount of the initial sales charge applied to the amount exchanged
exceeds annual contribution limitations. For example: If you were to exchange
$2,000 in Class A shares from a nonqualified account to an IRA without
considering the 5% ($100) initial sales charge applicable to that $2,000, you
may be deemed to have exceeded current IRA annual contribution limitations. You
should consult your tax advisor for further details about this complex subject.
The Fund may purchase tax-exempt securities at a discount from the price at
which they were originally issued, especially during periods of rising interest
rates. For federal income tax purposes, some or all of this market discount will
be included in the Fund's ordinary income and will be taxable income when it is
distributed to you.
If you are a "substantial user" (or related person) of facilities financed by
industrial development bonds, you should consult your tax advisor before
investing. The income from such bonds may not be tax-exempt for you.
Interest on private activity bonds generally issued after August 1986 is a
preference item for purposes of the individual and corporate alternative minimum
taxes. "Private-activity" (non-governmental purpose) municipal bonds include
industrial revenue bonds, student-loan bonds and multi- and single-family
housing bonds. An exception is made for private-activity bonds issued for
qualified--501(c)(3)--organizations, including non-profit colleges, universities
and hospitals. These bonds will continue to be tax-exempt and will not be
subject to the alternative minimum tax for individuals. To the extent a fund
earns income subject to the alternative minimum tax, it will flow through to
that fund's shareholders and may subject some shareholders, depending on their
tax status, to the alternative minimum tax. The Fund reports the percentage of
its income earned from these bonds to shareholders with their other tax
information.
<PAGE>
State law determines whether interest income on a particular municipal bond is
tax-exempt for state tax purposes. It also determines the tax treatment of those
bonds when earned by a mutual fund and paid to the Fund's shareholders. The Fund
will tell you the percentage of interest income from municipal bonds it received
during the year on a state-by-state basis. Your tax advisor should help you
report this income for state tax purposes.
All distributions of net investment income during the year will have the same
percentage designated as tax-exempt. This annual percentage is expected to be
substantially the same as the percentage of tax-exempt income actually earned
during any particular distribution period. For the most recent fiscal year
99.86% of the income distribution was designated as exempt from federal income
taxes.
Capital gain distributions, if any, received by corporate shareholders should be
treated as long-term capital gains regardless of how long they owned their
shares. Capital gain distributions, if any, received by individuals should be
treated as long-term if held for more than one year. Short-term capital gains
earned by the Fund are paid to shareholders as part of their ordinary income
dividend and are taxable.
Under federal tax law, by the end of a calendar year the Fund must declare and
pay dividends representing 98% of ordinary income for that calendar year and 98%
of net capital gains (both long-term and short-term) for the 12-month period
ending Oct. 31 of that calendar year. The Fund is subject to an excise tax equal
to 4% of the excess, if any, of the amount required to be distributed over the
amount actually distributed. The Fund intends to comply with federal tax law and
avoid any excise tax.
This is a brief summary that relates to federal income taxation only.
Shareholders should consult their tax advisor as to the application of federal,
state, and local income tax laws to Fund distributions.
<PAGE>
AGREEMENTS
INVESTMENT MANAGEMENT SERVICES AGREEMENT
AEFC, a wholly-owned subsidiary of American Express Company, is the investment
manager for the Fund. Under the Investment Management Services Agreement, AEFC,
subject to the policies set by the board, provides investment management
services.
For its services, AEFC is paid a fee based on the following schedule. Each class
of the Fund pays its proportionate share of the fee.
Assets Annual rate at
(billions) each asset level
- --------- ----------------
First $1.0 0.490%
Next 1.0 0.465
Next 1.0 0.440
Next 3.0 0.415
Next 3.0 0.390
Over 9.0 0.360
On the last day of the most recent fiscal year, the daily rate applied to the
Fund's net assets was equal to 0.44% on an annual basis. The fee is calculated
for each calendar day on the basis of net assets as of the close of business two
business days prior to the day for which the calculation is made.
The management fee is paid monthly. Under the agreement, the total amount paid
was $26,484,165 for fiscal year 1998, $26,174,871 for fiscal year 1997, and
$27,125,069 for fiscal year 1996.
Under the agreement, the Fund also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees; audit and certain legal
fees; fidelity bond premiums; registration fees for shares; office expenses;
postage of confirmations except purchase confirmations; consultants' fees;
compensation of board members, officers and employees; corporate filing fees;
organizational expenses; expenses incurred in connection with lending
securities; and expenses properly payable by the Fund, approved by the board.
Under the agreement, nonadvisory expenses, net of earnings credits, paid by the
Fund were $300,758 for fiscal year 1998, $126,648 for fiscal year 1997, and
$1,295,944 for fiscal year 1996.
Administrative Services Agreement
The Fund has an Administrative Services Agreement with AEFC. Under this
agreement, the Fund pays AEFC for providing administration and accounting
services. The fee is calculated as follows:
Assets Annual rate
(billions) each asset level
- --------- ----------------
First $1.0 0.040%
Next 1.0 0.035
Next 1.0 0.030
Next 3.0 0.025
Next 3.0 0.020
Over 9.0 0.020
<PAGE>
On the last day of the most recent fiscal year, the daily rate applied to the
Fund's net assets was equal to 0.030% on an annual basis. The fee is calculated
for each calendar day on the basis of net assets as of the close of business two
business days prior to the day for which the calculation is made. Under the
agreement, the Fund paid fees of $1,827,691 for fiscal year 1998, $1,803,799 for
fiscal year 1997, and $1,834,276 for fiscal year 1996.
Transfer Agency Agreement
The Fund has a Transfer Agency Agreement with American Express Client Service
Corporation (AECSC). This agreement governs AECSC's responsibility for
administering and/or performing transfer agent functions, for acting as service
agent in connection with dividend and distribution functions and for performing
shareholder account administration agent functions in connection with the
issuance, exchange and redemption or repurchase of the Fund's shares. Under the
agreement, AECSC will earn a fee from the Fund determined by multiplying the
number of shareholder accounts at the end of the day by a rate determined for
each class per year and dividing by the number of days in the year. The rate for
Class A and Class Y is $15.50 per year and for Class B is $16.50 per year. The
fees paid to AECSC may be changed by the board without shareholder approval.
DISTRIBUTION AGREEMENT
AEFA is the Fund's principal underwriter (distributor). The Fund's shares are
offered on a continuous basis.
Under a Distribution Agreement, sales charges deducted for distributing Fund
shares are paid to AEFA daily. These charges amounted to $10,756,783 for fiscal
year 1998. After paying commissions to personal financial advisors, and other
expenses, the amount retained was $1,732,359. The amounts were $8,673,516 and
$1,506,603 for fiscal year 1997, and $10,631,633 and $1,834,508 for fiscal year
1996.
SHAREHOLDER SERVICE AGREEMENT
The Fund pays a fee for service provided to shareholders by financial advisors
and other servicing agents. The fee is calculated at a rate of 0.175% of average
daily net assets for Class A and Class B and 0.10% for Class Y.
PLAN AND AGREEMENT OF DISTRIBUTION
For Class B shares, to help AEFA defray the cost of distribution and servicing,
not covered by the sales charges received under the Distribution Agreement, the
Fund and AEFA entered into a Plan and Agreement of Distribution (Plan). These
costs cover almost all aspects of distributing the Fund's shares.
These costs do not include compensation to the sales force. A substantial
portion of the costs are not specifically identified to any one fund in the IDS
MUTUAL FUND GROUP. Under the Plan, AEFA is paid a fee up to actual expenses
incurred at an annual rate of 0.75% of the Fund's average daily net assets
attributable to Class B shares.
The Plan must be approved annually by the board, including a majority of the
disinterested board members, if it is to continue for more than a year. At least
quarterly, the board must review written reports concerning the amounts expended
under the Plan and the purposes for which such expenditures were made. The Plan
and any agreement related to it may be terminated at any time by vote of a
majority of board members who are not interested persons of the Fund and have no
direct or indirect financial interest in the operation of the Plan or in any
agreement related to the Plan, or by vote of a majority of the outstanding
voting securities of the Fund's Class B shares or by AEFA. The Plan (or any
agreement related to it) will terminate in the event of its assignment, as that
term is defined in the 1940 Act. The Plan may not be
<PAGE>
amended to increase the amount to be spent for distribution without shareholder
approval, and all material amendments to the Plan must be approved by a majority
of the board members, including a majority of the board members who are not
interested persons of the Fund and who do not have a financial interest in the
operation of the Plan or any agreement related to it. The selection and
nomination of disinterested board members is the responsibility of the other
disinterested board members. No board member who is not an interested person,
has any direct or indirect financial interest in the operation of the Plan or
any related agreement. For the most recent fiscal year, under the agreement, the
Fund paid fees of $1,725,801. The fee is not allocated to any one service (such
as advertising, payments to underwriters, or other uses). However, a significant
portion of the fee is generally used for sales and promotional expenses.
Custodian Agreement
The Fund's securities and cash are held by U.S. Bank National Association, 180
E. Fifth St., St. Paul, MN 55101-1631, through a custodian agreement. The
custodian is permitted to deposit some or all of its securities in central
depository systems as allowed by federal law. For its services, the Fund pays
the custodian a maintenance charge and a charge per transaction in addition to
reimbursing the custodian's out-of-pocket expenses.
ORGANIZATIONAL INFORMATION
The Fund is an open-end management investment company. The Fund headquarters are
at 901 S. Marquette Ave., Suite 2810, Minneapolis, MN 55402-3268.
SHARES
The shares of the Fund represent an interest in that fund's assets only (and
profits or losses), and, in the event of liquidation, each share of the Fund
would have the same rights to dividends and assets as every other share of that
Fund.
VOTING RIGHTS
As a shareholder in the Fund, you have voting rights over the Fund's management
and fundamental policies. You are entitled to one vote for each share you own.
Each class, if applicable, has exclusive voting rights with respect to matters
for which separate class voting is appropriate under applicable law. All shares
have cumulative voting rights with respect to the election of board members.
This means that you have as many votes as the number of shares you own,
including fractional shares, multiplied by the number of members to be elected.
Dividend Rights
Dividends paid by the Fund, if any, with respect to each class of shares, if
applicable, will be calculated in the same manner, at the same time, on the same
day, and will be in the same amount, except for differences resulting from
differences in fee structures.
<PAGE>
<TABLE>
<CAPTION>
FUND HISTORY TABLE FOR ALL PUBLICLY OFFERED FUNDS IN THE IDS MUTUAL FUND GROUP
Date of Form of State of Fiscal
Fund Organization Organization Organization Year End Diversified
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
IDS Bond Fund, Inc. 6/27/74, Corporation NV/MN 8/31 Yes
6/31/86*
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Discovery Fund, Inc. 4/29/81, Corporation NV/MN 7/31 Yes
6/13/86*
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Equity Select Fund, Inc. 3/18/57, Corporation NV/MN 11/30 Yes
6/13/86*
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Extra Income Fund, Inc. 8/17/83 Corporation MN 5/31 Yes
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Federal Income Fund, Inc. 3/12/85 Corporation MN 5/31 Yes
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Global Series, Inc. 10/28/88 Corporation MN 10/31
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Emerging Markets Fund Yes
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Global Balanced Fund Yes
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Global Bond Fund No
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Global Growth Fund Yes
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Innovations Fund Yes
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Growth Fund, Inc. 5/21/70, Corporation NV/MN 7/31
6/13/86*
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Growth Fund Yes
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Research Opportunities Fund Yes
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS High Yield Tax-Exempt Fund, Inc. 12/21/78, Corporation NV/MN 11/30 Yes
6/13/86*
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS International Fund, Inc. 7/18/84 Corporation MN 10/31 Yes
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Investment Series, Inc. 1/18/40, Corporation NV/MN 9/30
6/13/86*
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Diversified Equity Income Yes
Fund
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Mutual Yes
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Managed Retirement Fund, Inc. 10/9/84 Corporation MN 9/30
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Managed Allocation Fund Yes
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Market Advantage Series, Inc. 8/25/89 Corporation MN 1/31
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Blue Chip Advantage Fund Yes
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Small Company Index Fund Yes
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Money Market Series, Inc. 8/22/75, Corporation NV/MN 7/31
6/13/86*
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Cash Management Fund Yes
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS New Dimensions Fund, Inc. 2/20/68, Corporation NV/MN 7/31 Yes
6/13/86*
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Precious Metals Fund, Inc. 10/5/84 Corporation MN 3/31 No
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Progressive Fund, Inc. 4/23/68, Corporation NV/MN 9/30 Yes
6/13/86*
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Selective Fund, Inc. 2/10/45, Corporation NV/MN 5/31 Yes
6/13/86*
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Stock Fund, Inc. 2/10/45, Corporation NV/MN 9/30 Yes
6/13/86*
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Strategy Fund, Inc. 1/24/84 Corporation MN 3/31
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Strategy Aggressive Fund Yes
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Equity Value Fund Yes
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Tax-Exempt Bond Fund, Inc. 9/30/76, Corporation NV/MN 11/31
6/13/86*
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Tax-Exempt Bond Fund Yes
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Intermediate Tax-Exempt Fund Yes
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Tax-Free Money Fund, Inc. 2/29/80, Corporation NV/MN 12/31 Yes
6/13/86*
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Utilities Income Fund, Inc. 3/25/88 Corporation MN 6/30 Yes
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS California Tax-Exempt Trust 4/7/86 Business MA 6/30
Trust**
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS California Tax-Exempt Fund No
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Special Tax-Exempt Series Trust 4/7/86 Business MA 6/30
Trust**
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Insured Tax-Exempt Fund Yes
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Massachusetts Tax-Exempt Fund No
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Michigan Tax-Exempt Fund No
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Minnesota Tax-Exempt Fund No
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS New York Tax-Exempt Fund No
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
IDS Ohio Tax-Exempt Fund No
- -------------------------------------- ---------------- --------------- ------------- ----------- -----------
</TABLE>
* Date merged into a Minnesota corporation incorporated on 4/7/86.
** Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which the
trust itself is unable to meet its obligations.
<PAGE>
BOARD MEMBERS AND OFFICERS
Shareholders elect a board that oversees the Fund's operations. The board
appoints officers who are responsible for day-to-day business decisions based on
policies set by the board.
The following is a list of the Fund's board members. They serve 15 Master Trust
portfolios and 47 IDS and IDS Life funds (except for William H. Dudley, who does
not serve on the nine IDS Life fund boards).
H. Brewster Atwater, Jr.+'
Born in 1931
4900 IDS Tower
Minneapolis, MN
Retired chairman and chief executive officer, General Mills, Inc. Director,
Merck & Co., Inc. and Darden Restaurants, Inc.
Arne H. Carlson+*
Born in 1934
901 S. Marquette Ave.
Minneapolis, MN
Former two-term Governor for Minnesota.
Lynne V. Cheney'
Born in 1941
American Enterprise Institute
for Public Policy Research (AEI)
1150 17th St., N.W. Washington, D.C.
Distinguished Fellow AEI. Former Chair of National Endowment of the Humanities.
Director, The Reader's Digest Association Inc., Lockheed-Martin, and Union
Pacific Resources.
William H. Dudley**
Born in 1932
2900 IDS Tower
Minneapolis, MN
Senior advisor to the chief executive officer of AEFC.
David R. Hubers+**
Born in 1943
2900 IDS Tower
Minneapolis, MN
President, chief executive officer and director of AEFC.
Heinz F. Hutter+
Born in 1929
P.O. Box 2187
Minneapolis, MN
Retired president and chief operating officer, Cargill, Incorporated (commodity
merchants and processors).
<PAGE>
Anne P. Jones'
Born in 1935
5716 Bent Branch Rd.
Bethesda, MD
Attorney and telecommunications consultant. Former partner, law firm of
Sutherland, Asbill & Brennan. Director, Motorola, Inc. (electronics), C-Cor
Electronics, Inc., and Amnex, Inc. (communications).
William R. Pearce+*
Born in 1927
901 S. Marquette Ave.
Minneapolis, MN
Chairman of the board, Board Services Corporation (provides administrative
services to boards). Director, trustee and officer of registered investment
companies whose boards are served by the company. Retired vice chairman of the
board, Cargill, Incorporated (commodity merchants and processors).
Alan K. Simpson'
Born in 1931
1201 Sunshine Ave.
Cody, WY
Former three-term United States Senator for Wyoming. Former Assistant Republican
Leader, U.S. Senate. Director, PacifiCorp (electric power) and Biogen
(pharmaceuticals).
Edson W. Spencer+
Born in 1926
4900 IDS Center
80 S. 8th St.
Minneapolis, MN
President, Spencer Associates Inc. (consulting). Retired chairman of the board
and chief executive officer, Honeywell Inc. Director, Boise Cascade Corporation
(forest products). Member of International Advisory Council of NEC (Japan).
John R. Thomas**
Born in 1937
2900 IDS Tower
Minneapolis, MN
Senior vice president of AEFC.
Wheelock Whitney+
Born in 1926
1900 Foshay Tower
821 Marquette Ave.
Minneapolis, MN
Chairman, Whitney Management Company (manages family assets).
<PAGE>
C. Angus Wurtele
Born in 1934
Valspar Corporation
Suite 1700
Foshay Tower
Minneapolis, MN
Chairman of the board and retired chief executive officer, The Valspar
Corporation (paints). Director, Bemis Corporation (packaging), Donaldson Company
(air cleaners & mufflers), and General Mills, Inc.
(consumer foods).
+ Member of executive committee.
' Member of joint audit committee.
* Interested person by reason of being an officer and employee of the Fund.
**Interested person by reason of being an officer, board member, employee and/or
shareholder of AEFC or American Express.
The board also has appointed officers who are responsible for day-to-day
business decisions based on policies it has established.
In addition to Mr. Pearce, who is chairman of the board and Mr. Thomas, who is
president, the Fund's other officers are:
Leslie L. Ogg
Born in 1938
901 S. Marquette Ave.
Minneapolis, MN
President of Board Services Corporation. Vice president, general counsel and
secretary for the Fund.
Officers who also are officers and employees of AEFC:
Peter J. Anderson
Born in 1942
IDS Tower 10
Minneapolis, MN
Director and senior vice president-investments of AEFC. Vice
president-investments for the Fund.
Frederick C. Quirsfeld
Born in 1947
IDS Tower 10
Minneapolis, MN
Vice president - taxable mutual fund investments of AEFC. Vice president - fixed
income investments for the Fund.
Stuart A. Sedlacek
Born in 1957
IDS Tower 10
Minneapolis, MN
Senior vice president and chief financial officer of AEFC since January 1998.
Vice president-assured assets of AEFC from 1994 to 1997. Treasurer for the Fund.
<PAGE>
COMPENSATION FOR BOARD MEMBERS
During the most recent fiscal year, the independent members of the Fund and
Portfolio boards, for attending up to 28 meetings, received the following
compensation:
<TABLE>
<CAPTION>
Compensation Table
Total cash compensation
from the IDS MUTUAL
FUND GROUP and Preferred
Board member Aggregate compensation Aggregate compensation Master Trust Group
from the Fund from the Portfolio
<S> <C> <C> <C>
H. Brewster Atwater, Jr. $2,017 $3,300 $105,900
- -----------------------------
Lynne V. Cheney 1,858 3,213 95,400
- -----------------------------
Heinz F. Hutter 1,942 3,225 101,400
- -----------------------------
Anne P. Jones 2,069 3,436 107,900
- -----------------------------
Alan K. Simpson 1,808 3,163 92,400
- -----------------------------
Edson W. Spencer 2,033 3,317 106,900
- -----------------------------
Wheelock Whitney 1,992 3,275 104,400
- -----------------------------
C. Angus Wurtele 2,192 3,475 116,400
</TABLE>
As of 30 days prior to the date of this SAI, the Fund's board members and
officers as a group owned less than 1% of the outstanding shares of any class.
INDEPENDENT AUDITORS
The financial statements contained in the Annual Report were audited by
independent auditors, KPMG Peat Marwick LLP, 4200 Norwest Center, 90 S. Seventh
St., Minneapolis, MN 55402-3900. The independent auditors also provide other
accounting and tax-related services as requested by the Fund.
<PAGE>
APPENDIX
DESCRIPTION OF RATINGS
Standard & Poor's Debt Ratings
A Standard & Poor's corporate or municipal debt rating is a current assessment
of the creditworthiness of an obligor with respect to a specific obligation.
This assessment may take into consideration obligors such as guarantors,
insurers, or lessees.
The debt rating is not a recommendation to purchase, sell, or hold a security,
inasmuch as it does not comment as to market price or suitability for a
particular investor.
The ratings are based on current information furnished by the issuer or obtained
by S&P from other sources it considers reliable. S&P does not perform an audit
in connection with any rating and may, on occasion, rely on unaudited financial
information. The ratings may be changed, suspended, or withdrawn as a result of
changes in, or unavailability of such information or based on other
circumstances.
The ratings are based, in varying degrees, on the following considerations:
o Likelihood of default capacity and willingness of the obligor as
to the timely payment of interest and repayment of principal in
accordance with the terms of the obligation.
o Nature of and provisions of the obligation.
o Protection afforded by, and relative position of, the obligation
in the event of bankruptcy, reorganization, or other arrangement
under the laws of bankruptcy and other laws affecting creditors'
rights.
Investment Grade
Debt rated AAA has the highest rating assigned by Standard & Poor's. Capacity to
pay interest and repay principal is extremely strong.
Debt rated AA has a very strong capacity to pay interest and repay principal and
differs from the highest rated issues only in a small degree.
Debt rated A has a strong capacity to pay interest and repay principal, although
it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
Debt rated BBB is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher-rated categories.
Speculative grade
Debt rated BB, B, CCC, CC, and C is regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal. BB
indicates the least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major exposures to adverse conditions.
<PAGE>
Debt rated BB has less near-term vulnerability to default than other speculative
issues. However, it faces major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions that could lead to inadequate
capacity to meet timely interest and principal payments. The BB rating category
also is used for debt subordinated to senior debt that is assigned an actual or
implied BBB- rating.
Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category also is used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
Debt rated CCC has a currently identifiable vulnerability to default and is
dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category also is
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.
Debt rated CC typically is applied to debt subordinated to senior debt that is
assigned an actual or implied CCC rating.
Debt rated C typically is applied to debt subordinated to senior debt that is
assigned an actual or implied CCC rating. The C rating may be used to cover a
situation where a bankruptcy petition has been filed, but debt service payments
are continued.
The rating CI is reserved for income bonds on which no interest is being paid.
Debt rated D is in payment default. The D rating category is used when interest
payments or principal payments are not made on the date due, even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
Moody's Long-Term Debt Ratings
Aaa - Bonds that are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk. Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present that make the
long-term risk appear somewhat larger than in Aaa securities.
A - Bonds that are rated A possess many favorable investment attributes and are
to be considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment some time in the future.
Baa - Bonds that are rated Baa are considered as medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
<PAGE>
Ba - Bonds that are rated Ba are judged to have speculative elements--their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds that are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or maintenance of other
terms of the contract over any long period of time may be small.
Caa - Bonds that are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca - Bonds that are rated Ca represent obligations that are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C - Bonds that are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Fitch Investors Service, Inc. Bond Ratings
Fitch investment grade bond and preferred stock ratings provide a guide to
investors in determining the credit risk associated with a particular security.
The ratings represent Fitch's assessment of the issuer's ability to meet the
obligations of a specific debt or preferred issue in a timely manner.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be provided by
insurance policies or financial guaranties unless otherwise indicated.
Bonds and preferred stock carrying the same rating are of similar but not
necessarily identical credit quality since the rating categories do not fully
reflect small differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell, or hold any security.
Ratings do not comment on the adequacy of market price, the suitability of any
security for a particular investor, or the tax-exempt nature or taxability of
payments made in respect of any security.
Fitch ratings are based on information obtained from issuers, other obligors,
underwriters, their experts, and other sources Fitch believes to be reliable.
Fitch does not audit or verify the truth or accuracy of such information.
Ratings may be changed, suspended, or withdrawn as a result of changes in, or
the unavailability of, information or for other reasons.
AAA Bonds and preferred stock considered to be investment grade
and of the highest credit quality. The obligor has an
exceptionally strong ability to pay interest and/or dividends
and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA Bonds and preferred stock considered to be investment grade
and of very high credit quality. The obligor's ability to pay
interest and/or dividends and repay principal is very strong,
although not quite as strong as bonds rated AAA.
<PAGE>
A Bonds and preferred stock considered to be investment grade
and of high credit quality. The obligor's ability to pay
interest and/or dividends and repay principal is considered to
be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than debt or preferred
securities with higher ratings.
BBB Bonds and preferred stock considered to be investment grade
and of satisfactory credit quality. The obligor's ability to
pay interest or dividends and repay principal is considered to
be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact
on these securities and, therefore, impair timely payment. The
likelihood that the ratings of these bonds or preferred stock
will fall below investment grade is higher than for securities
with higher ratings.
Fitch speculative grade bond or preferred stock ratings provide a guide to
investors in determining the credit risk associated with a particular security.
The ratings (BB to C) represent Fitch's assessment of the likelihood of timely
payment of principal and interest or dividends in accordance with the terms of
obligation for issues not in default. For defaulted bonds or preferred stock,
the rating (DDD to D) is an assessment of the ultimate recovery value through
reorganization or liquidation.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer or possible recovery value in
bankruptcy, the current and prospective financial condition and operating
performance of the issuer and any guarantor, as well as the economic and
political environment that might affect the issuer's future financial strength.
Bonds or preferred stock that have the same rating are of similar but not
necessarily identical credit quality since the rating categories cannot fully
reflect the differences in the degrees of credit risk.
BB Bonds or preferred stock are considered speculative. The
obligor's ability to pay interest or dividends and repay
principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be
identified, which could assist the obligor in satisfying its
debt service requirements.
B Bonds or preferred stock are considered highly speculative.
While bonds in this class are currently meeting debt service
requirements or paying dividends, the probability of continued
timely payment of principal and interest reflects the
obligor's limited margin of safety and the need for reasonable
business and economic activity throughout the life of the
issue.
CCC Bonds or preferred stock have certain identifiable
characteristics that if not remedied, may lead to default. The
ability to meet obligations requires an advantageous business
and economic environment.
CC Bonds or preferred stock are minimally protected. Default in
payment of interest and/or principal seems probable over time.
C Bonds are in imminent default in payment of interest or
principal or suspension of preferred stock dividends is
imminent.
DDD,
DD,
and D Bonds are in default on interest and/or principal payments
or preferred stock dividends are suspended. Such securities
are extremely speculative and should be valued on the basis of
their ultimate recovery value in liquidation or reorganization
of the obligor. DDD represents the highest potential for
recovery of these securities and D represents the lowest
potential for recovery.
<PAGE>
Duff & Phelps, Inc. Long-Term Debt Ratings
These ratings represent a summary opinion of the issuer's long-term fundamental
quality. Rating determination is based on qualitative and quantitative factors
that may vary according to the basic economic and financial characteristics of
each industry and each issuer. Important considerations are vulnerability to
economic cycles as well as risks related to such factors as competition,
government action, regulation, technological obsolescence, demand shifts, cost
structure, and management depth and expertise. The projected viability of the
obligor at the trough of the cycle is a critical determination.
Each rating also takes into account the legal form of the security (e.g. first
mortgage bonds, subordinated debt, preferred stock, etc.). The extent of rating
dispersion among the various classes of securities is determined by several
factors including relative weightings of the different security classes in the
capital structure, the overall credit strength of the issuer, and the nature of
covenant protection. Review of indenture restrictions is important to the
analysis of a company's operating and financial constraints.
The Credit Rating Committee formally reviews all ratings once per quarter (more
frequently, if necessary). Ratings of BBB- and higher fall within the definition
of investment grade securities, as defined by bank and insurance supervisory
authorities. Structured finance issues, including real estate, asset-backed and
mortgage-backed financings, use this same rating scale with minor modification
in the definitions. Thus, an investor can compare the credit quality of
investment alternatives across industries and structural types. A "Cash Flow
Rating" (as noted for specific ratings) addresses the likelihood that aggregate
principal and interest will equal or exceed the rated amount under appropriate
stress conditions.
<TABLE>
<CAPTION>
Rating Scale Definition
-------------------------- --------------------------------------------------------------------------------
<S> <C>
AAA Highest credit quality. The risk factors are
negligible, being only slightly more than for
risk-free U.S. Treasury debt.
-------------------------- --------------------------------------------------------------------------------
AA+ High credit quality. Protection factors are strong. Risk is modest, but may
AA vary slightly from time to time because of economic conditions.
AA-
-------------------------- --------------------------------------------------------------------------------
A+ Protection factors are average but adequate. However, risk factors are more
A variable and greater in periods of economic stress.
A-
-------------------------- --------------------------------------------------------------------------------
BBB+ Below-average protection factors but still considered sufficient for prudent
BBB investment. Considerable variability in risk during economic cycles.
BBB-
-------------------------- --------------------------------------------------------------------------------
BB+ Below investment grade but deemed likely to meet obligations when due. Present
BB or prospective financial protection factors fluctuate according to industry
BB- conditions or company fortunes. Overall quality may move up or down frequently
within this category.
-------------------------- --------------------------------------------------------------------------------
B+ Below investment grade and possessing risk that obligations will not be met
B when due. Financial protection factors will fluctuate widely according to
B- economic cycles, industry conditions, and/or company fortunes. Potential
exists for frequent changes in the rating within
this category or into a higher or lower rating
grade.
-------------------------- --------------------------------------------------------------------------------
<PAGE>
-------------------------- --------------------------------------------------------------------------------
CCC Well below investment grade securities. Considerable
uncertainty exists as to timely payment of
principal, interest, or preferred dividends.
Protection factors are narrow and risk can be
substantial with unfavorable economic/industry
conditions, and or with unfavorable company
developments.
-------------------------- --------------------------------------------------------------------------------
DD Defaulted debt obligations. Issuer failed to meet
scheduled principal and/or interest payments.
DP Preferred stock with dividend arrearages.
-------------------------- --------------------------------------------------------------------------------
</TABLE>
IBCA Long-Term Debt Ratings
AAA Obligations for which there is the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial, such that adverse changes in business, economic, or
financial conditions are unlikely to increase investment risk
substantially.
AA Obligations for which there is a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic, or financial
conditions may increase investment risk, albeit not very significantly.
A Obligations for which there is a low expectation of investment risk.
Capacity for timely repayment of principal and interest is strong,
although adverse changes in business, economic, or financial conditions
may lead to increased investment risk.
BBB Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal and
interest is adequate, although adverse changes in business, economic,
or financial conditions are more likely to lead to increased investment
risk than for obligations in other categories.
BB Obligations for which there is a possibility of investment risk
developing. Capacity for timely repayment of principal and interest
exists, but is susceptible over time to adverse changes in business,
economic, or financial conditions.
B Obligations for which investment risk exists. Timely repayment of
principal and interest is not sufficiently protected against adverse
changes in business, economic, or financial conditions.
CCC Obligations for which there is a current perceived possibility of
default. Timely repayment of principal and interest is dependent on
favorable business, economic, or financial conditions.
CC Obligations that are highly speculative or that have a high risk of
default.
C Obligations that are currently in default.
Notes: "+" or "-" may be appended to a rating below AAA to denote relative
status within major rating categories. Ratings of BB and below are assigned
where it is considered that speculative characteristics are present.
<PAGE>
Thomson Bank Watch Long-Term Debt Ratings
Investment Grade
AAA (LC-AAA) Indicates that the ability to repay principal and interest
on a timely basis is extremely high.
AA (LC-AA) Indicates a very strong ability to repay principal
and interest on a timely basis, with limited incremental
risk compared to issues rated in the highest category.
A (LC-A) Indicates the ability to repay principal and
interest is strong. Issues rated A could be more
vulnerable to adverse developments (both internal and
external) than obligations with higher ratings.
BBB (LC-BBB) The lowest investment-grade category: indicates
an acceptable capacity to repay principal and interest.
BBB issues are more vulnerable to adverse developments
(both internal and external) than obligations with higher
ratings.
Non-Investment Grade - may be speculative in the likelihood of timely repayment
of principal and interest.
BB (LC-BB) While not investment grade, the BB rating suggests
that the likelihood of default is considerably less than
for lower-rated issues. However, there are significant
uncertainties that could affect the ability to adequately
service debt obligations.
B (LC-B) Issues rated B show higher degree of uncertainty
and therefore greater likelihood of default than
higher-rated issues. Adverse developments could negatively
affect the payment of interest and principal on a timely
basis.
CCC (LC-CCC) Issues rated CCC clearly have a high likelihood
of default, with little capacity to address further
adverse changes in financial circumstances.
CC (LC-CC) CC is applied to issues that are subordinate to
other obligations rated CCC and are afforded less
protection in the event of bankruptcy or reorganization.
D (LC-D) Default.
SHORT-TERM RATINGS
Standard & Poor's Commercial Paper Ratings
A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt considered short-term in the relevant
market.
Ratings are graded into several categories, ranging from A-1 for the highest
quality obligations to D for the lowest. These categories are as follows:
A-1 This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to
possess extremely strong safety characteristics are denoted
with a plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as
high as for issues designated A-1.
<PAGE>
A-3 Issues carrying this designation have adequate capacity for
timely payment. They are, however, more vulnerable to the
adverse effects of changes in circumstances than obligations
carrying the higher designations.
B Issues are regarded as having only speculative capacity for
timely payment.
C This rating is assigned to short-term debt obligations with
doubtful capacity for payment.
D Debt rated D is in payment default. The D rating category is
used when interest payments or principal payments are not made
on the date due, even if the applicable grace period has not
expired, unless S&P believes that such payments will be made
during such grace period.
Standard & Poor's Note Ratings
An S&P note rating reflects the liquidity factors and market-access risks unique
to notes. Notes maturing in three years or less will likely receive a note
rating. Notes maturing beyond three years will most likely receive a long-term
debt rating.
Note rating symbols and definitions are as follows:
SP-1 Strong capacity to pay principal and interest. Issues
determined to possess very strong characteristics are given a
plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over
the term of the notes.
SP-3 Speculative capacity to pay principal and interest.
Moody's Short-Term Ratings
Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually senior debt obligations. These obligations have an original maturity
not exceeding one year, unless explicitly noted.
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:
Issuers rated Prime-l (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-l
repayment ability will often be evidenced by many of the following
characteristics: (i) leading market positions in well-established
industries, (ii) high rates of return on funds employed, (iii)
conservative capitalization structure with moderate reliance on debt
and ample asset protection, (iv) broad margins in earnings coverage of
fixed financial charges and high internal cash generation, and (v) well
established access to a range of financial markets and assured sources
of alternate liquidity.
Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above, but
to a lesser degree. Earnings trends and coverage ratios, while sound,
may be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.
<PAGE>
Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of
industry characteristics and market compositions may be more
pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurements and may require
relatively high financial leverage.
Adequate alternate liquidity is maintained.
Issuers rated Not Prime do not fall within any of the Prime rating
categories.
Fitch Investors Service, Inc. Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
The short-term rating places greater emphasis than a long-term rating on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.
F-1+ Exceptionally Strong Credit Quality. Issues assigned this
rating are regarded as having the strongest degree of
assurance for timely payment.
F-1 Very Strong Credit Quality. Issues assigned this rating
reflect an assurance of timely payment only slightly less in
degree than issues rated F.
F-2 Good Credit Quality. Issues assigned this rating have a
satisfactory degree of assurance for timely payment but the
margin of safety is not as great as for issues assigned F-1+
and F-1 ratings.
F-3 Fair Credit Quality. Issues assigned this rating have
characteristics suggesting that the degree of assurance for
timely payment is adequate; however, near-term adverse changes
could cause these securities to be rated below investment
grade.
F-S Weak Credit Quality. Issues assigned this rating have
characteristics suggesting a minimal degree of assurance for
timely payment and are vulnerable to near-term adverse changes
in financial and economic conditions.
D Default Issues assigned this rating are in actual or
imminent payment default.
LOC The symbol LOC indicates that the rating is based on a letter
of credit issued by a commercial bank.
Duff & Phelps, Inc. Short-Term Debt Ratings
Duff & Phelps' short-term ratings are consistent with the rating criteria used
by money market participants. The ratings apply to all obligations with
maturities of under one year, including commercial paper, the uninsured portion
of certificates of deposit, unsecured bank loans, master notes, banker's
acceptances, irrevocable letters of credit, and current maturities of long-term
debt. Asset-backed commercial paper also is rated according to this scale.
Emphasis is placed on liquidity, which is defined as not only cash from
operations but also access to alternative sources of funds including trade
credit, bank lines, and the capital markets. An important consideration is the
level of an obligor's reliance on short-term funds on an ongoing basis.
<PAGE>
Rating Scale: Definition
High Grade
D-1+ Highest certainty of timely payment. Short-term
liquidity, including internal operating factors and
or access to alternative sources of funds, is
outstanding, and safety is just below risk-free
U.S. Treasury short-term obligations.
D-1 Very high certainty of timely payment. Liquidity
factors are excellent and supported by good
fundamental protection factors. Risk factors are
minor.
D-1 High certainty of timely payment. Liquidity factors
are strong and supported by good fundamental
protection factors. Risk factors are very small.
Good Grade
D-2 Good certainty of timely payment. Liquidity factors
and company fundamentals are sound. Although
ongoing funding needs may enlarge total financing
requirements, access to capital markets is good.
Risk factors are small.
Satisfactory Grade
D-3 Satisfactory liquidity and other protection factors
qualify issues as to investment grade. Risk factors
are larger and subject to more variation.
Nevertheless, timely payment is expected.
Non-Investment Grade
D-4 Speculative investment characteristics. Liquidity
is not sufficient to insure against disruption in
debt service. Operating factors and market access
may be subject to a high degree of variation.
Default
D-5 Issuer failed to meet scheduled principal and/or
interest payments.
Thomson BankWatch (TBW) Short-Term Ratings
The TBW Short-Term Ratings apply, unless otherwise noted, to specific debt
instruments of the rated entities with a maturity of one year or less. TBW
Short-Term Ratings are intended to assess the likelihood of untimely or
incomplete payments of principal or interest.
TBW-1 The highest category; indicates a very high likelihood that
principal and interest will be paid on a timely basis.
TBW-2 The second highest category; while the degree of safety
regarding timely repayment of principal and interest is
strong, the relative degree of safety is not as high as for
issues rated TBW- I.
<PAGE>
TBW-3 The lowest investment-grade category; indicates that while
the obligation is more susceptible to adverse developments
(both internal and external) than those with higher ratings,
the capacity to service principal and interest in a timely
fashion is considered adequate.
TBW-4 The lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.
IBCA Short-Term Ratings
IBCA Short-Term Ratings assess the borrowing characteristics of banks and
corporations, and the capacity for timely repayment of debt obligations. The
Short-Term Ratings relate to debt that has a maturity of less than one year.
A1 Obligations supported by the highest capacity for timely
repayment. Where issues possess a particularly strong credit
feature, a rating of A1+ is assigned.
A2 Obligations supported by a good capacity for timely
repayment.
A3 Obligations supported by a satisfactory capacity for timely
repayment.
B Obligations for which there is an uncertainty as to the
capacity to ensure timely repayment.
C Obligations for which there is a high risk of default or
which are currently in default.
Moody's & S&P's
Short-Term Muni Bonds and Notes
Short-term municipal bonds and notes are rated by Moody's and by S&P. The
ratings reflect the liquidity concerns and market access risks unique to notes.
Moody's MIG 1/VMIG 1 indicates the best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
Moody's MIG 2/VMIG 2 indicates high quality. Margins of protection are ample
although not so large as in the preceding group.
Moody's MIG 3/VMIG 3 indicates favorable quality. All security elements are
accounted for but there is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
Moody' s MIG 4/VMIG 4 indicates adequate quality. Protection commonly regarded
as required of an investment security is present and although not distinctly or
predominantly speculative, there is specific risk.
Standard & Poor's rating SP-1 indicates very strong or strong capacity to pay
principal and interest. Those issues determined to possess overwhelming safety
characteristics will be given a plus (+) designation.
Standard & Poor's rating SP-2 indicates satisfactory capacity to pay principal
and interest.
Standard & Poor's rating SP-3 indicates speculative capacity to pay principal
and interest.
<PAGE>
Independent Auditors' Report
THE BOARD AND SHAREHOLDERS
IDS HIGH YIELD TAX-EXEMPT FUND, INC.
We have audited the accompanying statement of assets and liabilities of IDS High
Yield Tax-Exempt Fund, Inc. as of November 30, 1998, and the related statement
of operations for the year then ended and the statements of changes in net
assets for each of the years in the two-year period ended November 30, 1998, and
the financial highlights for each of the years in the five-year period ended
November 30, 1998. These financial statements and the financial highlights are
the responsibility of fund management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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. 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 referred to above present fairly, in
all material respects, the financial position of IDS High Yield Tax-Exempt Fund,
Inc. at November 30, 1998, and the results of its operations, changes in its net
assets and the financial highlights for the periods stated in the first
paragraph above, in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
January 8, 1999
<PAGE>
<TABLE>
<CAPTION>
Financial Statements
Statement of assets and liabilities
IDS High Yield Tax-Exempt Fund, Inc.
Nov. 30, 1998
Assets
<S> <C>
Investment in Tax-Free High Yield Portfolio (Note 1) $6,004,803,745
--------------
Liabilities
Dividends payable to shareholders 5,341,638
Accrued distribution fee 16,547
Accrued service fee 86,081
Accrued transfer agency fee 19,292
Accrued administrative services fee 14,770
Other accrued expenses 89,984
------
Total liabilities 5,568,312
---------
Net assets applicable to outstanding capital stock $5,999,235,433
==============
Represented by
Capital stock-- $.01 par value (Note 1) $ 12,809,228
Additional paid-in capital 5,481,962,955
Undistributed net investment income 568,578
Accumulated net realized gain (loss) (Note 4) (114,913,135)
Unrealized appreciation (depreciation) on investments 618,807,807
-----------
Total-- representing net assets applicable to outstanding capital stock $5,999,235,433
==============
Net assets applicable to outstanding shares: Class A $5,722,109,684
Class B $ 269,671,392
Class Y $ 7,454,357
Net asset value per share of outstanding capital stock: Class A shares 1,221,749,373 $ 4.68
Class B shares 57,581,436 $ 4.68
Class Y shares 1,592,015 $ 4.68
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
IDS High Yield Tax-Exempt Fund, Inc.
Year ended Nov. 30, 1998
Investment income
Income:
<S> <C>
Interest $375,293,898
------------
Expenses (Note 2):
Expenses allocated from Tax-Free High Yield Portfolio 26,795,359
Distribution fee -- Class B 1,725,801
Transfer agency fee 2,401,052
Incremental transfer agency fee-- Class B 8,938
Service fee
Class A 9,974,466
Class B 399,967
Class Y 5,153
Administrative services fees and expenses 1,827,691
Compensation of board members 15,909
Postage 365,881
Registration fees 62,453
Reports to shareholders 7,857
Audit fees 11,750
Other 11,477
------
Total expenses 43,613,754
Earnings credits on cash balances (Note 2) (489,422)
- --------
Total net expenses 43,124,332
----------
Investment income (loss) -- net 332,169,566
-----------
Realized and unrealized gain (loss) -- net Net realized gain (loss) on:
Security transactions 3,879,140
Financial futures contracts (8,961,291)
----------
Net realized gain (loss) on investments (5,082,151)
Net change in unrealized appreciation (depreciation) on investments 61,776,386
----------
Net gain (loss) on investments 56,694,235
----------
Net increase (decrease) in net assets resulting from operations $388,863,801
------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
IDS High Yield Tax Exempt Fund, Inc.
Year ended Nov. 30, 1998 1997
Operations and distributions
<S> <C> <C>
Investment income (loss)-- net $ 332,169,566 $ 346,040,291
Net realized gain (loss) on investments (5,082,151) (34,199,942)
Net change in unrealized appreciation (depreciation) on investments 61,776,386 137,305,411
---------- -----------
Net increase (decrease) in net assets resulting from operations 388,863,801 449,145,760
----------- -----------
Distributions to shareholders from:
Net investment income
Class A (320,696,664) (337,662,833)
Class B (11,052,190) (8,167,910)
Class Y (291,004) (311,325)
-------- --------
Total distributions (332,039,858) (346,142,068)
------------ ------------
Capital share transactions (Note 3)
Proceeds from sales
Class A shares (Note 2) 2,190,389,184 1,249,451,657
Class B shares 103,906,651 72,253,356
Class Y shares 15,951,744 29,199,158
Reinvestment of distributions at net asset value
Class A shares 217,522,599 231,303,569
Class B shares 8,764,909 6,572,876
Class Y shares 705 687
Payments for redemptions
Class A shares (2,525,842,128) (1,795,576,283)
Class B shares (Note 2) (35,324,448) (30,024,379)
Class Y shares (17,386,399) (41,363,058)
----------- -----------
Increase (decrease) in net assets from capital share transactions (42,017,183) (278,182,417)
----------- ------------
Total increase (decrease) in net assets 14,806,760 (175,178,725)
Net assets at beginning of year 5,984,428,673 6,159,607,398
------------- -------------
Net assets at end of year $ 5,999,235,433 $ 5,984,428,673
=============== ===============
Undistributed net investment income $ 568,578 $ 488,411
--------------- ---------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
IDS High Yield Tax-Exempt Fund, Inc.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 (as amended) as
a diversified, open-end management investment company. The Fund has 10 billion
authorized shares of capital stock.
The Fund offers Class A, Class B and Class Y shares.
o Class A shares are sold with a front-end sales charge.
o Class B shares may be subject to a contingent deferred sales charge and
automatically convert to Class A shares during the ninth calendar year
of ownership.
o Class Y shares have no sales charge and are offered only to qualifying
institutional investors.
All classes of shares have identical voting, dividend and liquidation rights.
The distribution fee, transfer agency fee and service fee (class specific
expenses) differs among classes. Income, expenses (other than class specific
expenses) and realized and unrealized gains or losses on investments are
allocated to each class of shares based upon its relative net assets.
Investment in Tax-Free High Yield Portfolio
Effective May 13, 1996, the Fund began investing all of its assets in the
Tax-Free High Yield Portfolio (the Portfolio), a series of Tax-Free Income
Trust, an open-end investment company that has the same objectives as the Fund.
This was accomplished by transferring the Fund's assets to the Portfolio in
return for a proportionate ownership interest in the Portfolio. Tax-Free High
Yield Portfolio invests primarily in medium- and lower-quality bonds and other
debt obligations.
The Fund records daily its share of the Portfolio's income, expenses and
realized and unrealized gains and losses. The financial statements of the
Portfolio are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
The Fund records its investment in the Portfolio at the value that is equal to
the Fund's proportionate ownership interest in the Portfolios' net assets. The
percentage of the Portfolio owned by the Fund at Nov. 30, 1998 was 99.99%.
Valuation of securities held by the Portfolio is discussed in Note 1 of the
Portfolio's "Notes to financial statements" (included elsewhere in this report).
Use of estimates
Preparing financial statements that conform to generally accepted accounting
principles requires management to make estimates (e.g., on assets and
liabilities) that could differ from actual results.
Federal taxes
The Fund's policy is to comply with all sections of the Internal Revenue Code
that apply to regulated investment companies and to distribute all of its
taxable income to the shareholders. No provision for income or excise taxes is
thus required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts and losses deferred due to "wash sale" transactions.
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 Fund.
On the statement of assets and liabilities, as a result of permanent book-to-tax
differences, undistributed net investment income has been decreased by $49,541
and accumulated net realized loss has been increased by $9,754 resulting in a
net reclassification adjustment to increase paid-in capital by $59,295.
Dividends to shareholders
Dividends from net investment income, declared daily and payable monthly, are
reinvested in additional shares of the Fund at net asset value or payable in
cash. Capital gains, when available, are distributed along with the last income
dividend of the calendar year.
2. EXPENSES AND SALES CHARGES
In addition to the expenses allocated from the Portfolio, the Fund accrues its
own expenses as follows:
Effective March 20, 1995, the Fund entered into an agreement with American
Express Financial Corporation (AEFC) to provide administrative services. Under
its Administrative Services Agreement, the Fund pays AEFC a fee for
administration and accounting services at a percentage of the Fund's average
daily net assets in reducing percentages from 0.04% to 0.02% annually.
Additional administrative service expenses paid by the Fund are office expenses,
consultants' fees and compensation of officers and employees. Under this
agreement, the Fund also pays taxes, audit and certain legal fees, registration
fees for shares, compensation of board members, corporate filing fees and any
other expenses properly payable by the Fund and approved by the board.
Under a separate Transfer Agency Agreement, American Express Client Service
Corporation (AECSC) maintains shareholder accounts and records. The Fund pays
AECSC an annual fee per shareholder account for this service as follows:
o Class A $15.50
o Class B $16.50
o Class Y $15.50
Also effective March 20, 1995, the Fund entered into agreements with American
Express Financial Advisors Inc. for distribution and shareholder services. Under
a Plan and Agreement of Distribution, the Fund pays a distribution fee at an
annual rate of 0.75% of the Fund's average daily net assets attributable to
Class B shares for distribution services.
Under a Shareholder Service Agreement, the Fund pays a fee for service provided
to shareholders by financial advisors and other servicing agents. The fee is
calculated at a rate of 0.175% of the Fund's average daily net assets
attributable to Class A and Class B shares and 0.10% of the Fund's average daily
net assets attributable to Class Y shares.
Sales charges received by American Express Financial Advisors Inc. for
distributing Fund shares were $10,426,591 for Class A and $330,192 for Class B
for the year ended Nov. 30, 1998.
During the year ended Nov. 30, 1998, the Fund's transfer agency fees were
reduced by $489,422 as a result of earnings credits from overnight cash
balances.
<TABLE>
<CAPTION>
3. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the years indicated are as follows:
Year ended Nov. 30, 1998
Class A Class B Class Y
<S> <C> <C> <C>
Sold 468,619,472 22,219,938 3,428,457
Issued for reinvested distributions 46,549,715 1,875,641 151
Redeemed (539,880,213) (7,554,155) (3,697,495)
------------ ---------- ----------
Net increase (decrease) (24,711,026) 16,541,424 (268,887)
Year ended Nov. 30, 1997
Class A Class B Class Y
Sold 273,106,758 15,867,346 6,431,214
Issued for reinvested distributions 50,812,160 1,442,620 151
Redeemed (393,208,181) (6,596,087) (9,080,510)
------------ ---------- ----------
Net increase (decrease) (69,289,263) 10,713,879 (2,649,145)
</TABLE>
<PAGE>
4. CAPITAL LOSS CARRYOVER
For federal income tax purposes, the Fund has a capital loss carryover of
$47,884,156 at Nov. 30, 1998, that will expire in 2002 through 2005 if not
offset by subsequent capital gains. It is unlikely the board will authorize a
distribution of any net realized capital gains until the available capital loss
carryover has been offset or expires.
5. BANK BORROWINGS
The Fund entered into a revolving credit agreement with U.S. Bank, N.A., whereby
the Fund is permitted to have bank borrowings for temporary or emergency
purposes to fund shareholder redemptions. The Fund must have asset coverage for
borrowings not to exceed the aggregate of 333% of advances equal to or less than
5 business days plus 367% of advances over 5 business days. The agreement, which
enables the Fund to participate with other IDS Funds, permits borrowings up to
$200 million, collectively. Interest is charged to each Fund based on its
borrowings at a rate equal to the Federal Funds Rate plus 0.30% or the
Eurodollar Rate (Reserve Adjusted) plus 0.20%. Borrowings are payable up to 90
days after such loan is executed. The Fund also pays a commitment fee equal to
its pro rata share of the amount of credit facility at a rate of 0.05% per
annum. The Fund had no borrowings outstanding during the year ended Nov. 30,
1998.
6. FINANCIAL HIGHLIGHTS
"Financial highlights" showing per share data and selected financial information
is presented on pages 29 and 30 of the prospectus.
<PAGE>
Independent Auditors' Report
THE BOARD OF TRUSTREES AND UNITHOLDERS
TAX-FREE INCOME TRUST
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments in securities, of Tax-Free High Yield Portfolio (a
series of Tax-Free Income Trust) as of November 30, 1998, the related statement
of operations for the year then ended and the statements of changes in net
assets for each of the years in the two-year period ended November 30, 1998.
These financial statements are the responsibility of portfolio management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements 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
and sold but not received or delivered, 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 referred to above present fairly, in
all material respects, the financial position of Tax-Free High Yield Portfolio
at November 30, 1998, and the results of its operations and the changes in its
net assets for the periods stated in the first paragraph above, in conformity
with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
January 8, 1999
<PAGE>
Financial Statements
Statement of assets and liabilities
Tax-Free High Yield Portfolio
Nov. 30, 1998
Assets
Investments in securities, at value (Note 1)
(identified cost $5,285,205,796) $5,904,062,280
Accrued interest receivable 110,837,009
Receivable for investment securities sold 2,480,000
---------
Total assets 6,017,379,289
-------------
Liabilities
Disbursements in excess of cash on demand deposit 831,659
Payable for investment securities purchased 10,599,592
Accrued investment management services fee 216,673
Other accrued expenses 36,407
------
Total liabilities 11,684,331
----------
Net assets $6,005,694,958
==============
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
Tax-Free High Yield Portfolio
Year ended Nov. 30, 1998
Investment income
Income:
<S> <C>
Interest $375,334,322
------------
Expenses (Note 2):
Investment management services fee 26,484,165
Compensation of board members 26,404
Custodian fees 183,131
Audit fees 35,250
Other 71,718
------
Total expenses 26,800,668
Earnings credits on cash balances (Note 2) (1,650)
------
Total net expenses 26,799,018
----------
Investment income (loss) -- net 348,535,304
-----------
Realized and unrealized gain (loss) -- net Net realized gain (loss) on:
Security transactions (Note 3) 3,877,026
Financial futures contracts (8,962,494)
----------
Net realized gain (loss) on investments (5,085,468)
Net change in unrealized appreciation (depreciation) on investments 61,787,273
----------
Net gain (loss) on investments 56,701,805
----------
Net increase (decrease) in net assets resulting from operations $405,237,109
------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
Tax-Free High Yield Portfolio
Year ended Nov. 30, 1998 1997
Operations
<S> <C> <C>
Investment income (loss)-- net $ 348,535,304 $ 361,599,248
Net realized gain (loss) on investments (5,085,468) (34,205,753)
Net change in unrealized appreciation (depreciation) on investments 61,787,273 137,325,053
---------- -----------
Net increase (decrease) in net assets resulting from operations 405,237,109 464,718,548
Net contributions (withdrawals) from partners (387,941,646) (640,111,208)
------------ ------------
Total increase (decrease) in net assets 17,295,463 (175,392,660)
Net assets at beginning of year 5,988,399,495 6,163,792,155
------------- -------------
Net assets at end of year $6,005,694,958 $5,988,399,495
============== ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
Tax-Free High Yield Portfolio
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Tax-Free High Yield Portfolio (the Portfolio) is a series of Tax-Free Income
Trust (the Trust) and is registered under the Investment Company Act of 1940 (as
amended) as a diversified, open-end management investment company. Tax-Free High
Yield Portfolio invests primarily in medium- and lower-quality bonds and other
debt obligations. The Declaration of Trust permits the Trustees to issue
non-transferable interests in the Portfolio.
The Portfolios' significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to generally accepted accounting
principles requires management to make estimates (e.g., on assets and
liabilities) that could differ from actual results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Securities for which market quotations are not readily available are valued at
fair value according to methods selected in good faith by the board. Short-term
securities maturing in more than 60 days from the valuation date are valued at
the market price or approximate market value based on current interest rates;
those maturing in 60 days or less are valued at amortized cost.
Option transactions
To produce incremental earnings, protect gains and facilitate buying and selling
of securities for investments, the Portfolio may buy and sell put and call
options and write covered call options on portfolio securities as well as write
cash-secured put options. The risk in writing a call option is that the
Portfolio gives up the opportunity for profit if the market price of the
security increases. The risk in writing a put option is that the Portfolio may
incur a loss if the market price of the security decreases and the option is
exercised. The risk in buying an option is that the Portfolio pays a premium
whether or not the option is exercised. The Portfolio also has the additional
risk of being unable to enter into a closing transaction if a liquid secondary
market does not exist. The Portfolio may write over-the-counter options where
completing the obligation depends upon the credit standing of the other party.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Portfolio
will realize a gain or loss when the option transaction expires or closes. When
options on debt securities or futures are exercised, the Portfolio will realize
a gain or loss. When other options are exercised, the proceeds on sales for a
written call option, the purchase cost for a written put option or the cost of a
security for a purchased put or call option is adjusted by the amount of premium
received or paid.
Futures transactions
To gain exposure to or protect itself from market changes, the Portfolio may buy
and sell financial futures contracts. Risks of entering into futures contracts
and related options include the possibility of an illiquid market and that a
change in the value of the contract or option may not correlate with changes in
the value of the underlying securities.
Upon entering into a futures contract, the Portfolio is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Portfolio each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as unrealized
gains and losses. The Portfolio recognizes a realized gain or loss when the
contract is closed or expires.
Securities purchased on a when-issued basis
Delivery and payment for securities that have been purchased by the Portfolio on
a forward-commitment or when-issued basis can take place one month or more after
the transaction date. During this period, such securities are subject to market
fluctuations and they may affect the Portfolio's net assets the same as owned
securities. The Portfolio designates cash or liquid high-grade short-term debt
securities at least equal to the amount of its commitment. As of Nov. 30, 1998
the Portfolio had entered into outstanding when-issued or forward-commitments of
$7,669,520.
Federal taxes
For federal income tax purposes the Portfolio qualifies as a partnership and
each investor in the Portfolio is treated as the owner of its proportionate
share of the net assets, income, expenses and realized and unrealized gains and
losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore
does not pay any income dividends or capital gain distributions.
Other
Security transactions are accounted for on the date securities are purchased or
sold. Interest income, including level-yield amortization of premium and
discount, is accrued daily.
2. FEES AND EXPENSES
The Trust, on behalf of the Portfolio, has entered into an Investment Management
Services Agreement with AEFC for managing its portfolio. Under this agreement,
AEFC determines which securities will be purchased, held or sold. The management
fee is a percentage of the Portfolio's average daily net assets in reducing
percentages from 0.49% to 0.36% annually.
Under the agreement, the Trust also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees, audit and certain legal
fees, fidelity bond premiums, registration fees for units, office expenses,
consultants' fees, compensation of trustees, corporate filing fees and any other
expenses properly payable by the Trust or Portfolio and approved by the board.
During the year ended Nov. 30, 1998, the Portfolio's custodian fees were reduced
by $1,650 as a result of earnings credits from overnight cash balances.
According to a Placement Agency Agreement, American Express Financial Advisors
Inc. acts as placement agent of the Trust's units.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $852,223,946 and $817,753,955, respectively, for the
year ended Nov. 30, 1998. For the same period, the portfolio turnover rate was
14%. Realized gains and losses are determined on an identified cost basis.
<PAGE>
<TABLE>
<CAPTION>
Investments in Securities
Tax-Free High Yield Portfolio
Nov. 30, 1998
(Percentages represent value of investment compared to net assets)
Municipal bonds (96.8%)
Name of issuer and Coupon Principal Value(a)
title of issue(b,g) rate amount
Alabama (0.2%)
Baldwin County Eastern Shore Health Care Authority
Hospital Revenue Bonds Thomas Hospital Series 1991
<S> <C> <C> <C> <C>
04-01-16 8.50% $4,765,000 $5,349,141
Camden Industrial Development Board Solid Waste Disposal Revenue Bonds MacMillan
Bloedel Series 1991A A.M.T.
04-01-19 7.75 8,500,000 9,106,305
Total 14,455,446
Alaska (0.2%)
Industrial Development & Exploration Authority
Electric Power Revenue Bonds
Upper Lynn Canal Regional Power
Series 1997 A.M.T.
01-01-18 5.80 830,000 832,913
01-01-32 5.88 1,800,000 1,806,588
North Slope Borough General Obligation Bonds
Zero Coupon Series 1994B (CGIC Insured)
06-30-04 7.05 7,000,000(d) 5,568,500
06-30-05 7.15 7,000,000(d) 5,317,410
Total 13,525,411
Arizona (1.2%)
Chandler Industrial Development Authority
Beverly Enterprises Series 1994
09-01-08 7.63 2,660,000 2,771,826
Flagstaff Industrial Development Authority
Lifecare Revenue Bonds Northern Arizona
Senior Living Community Series 1998
09-01-28 6.20 5,020,000 4,985,011
09-01-38 6.30 6,165,000 6,098,603
Maricopa County Hospital System Revenue Bonds
Samaritan Health Services Series 1981
01-01-08 12.00 255,000 401,888
Maricopa County Industrial Development Authority
Multi-family Housing Revenue Bonds Series B
07-01-26 7.38 2,295,000 2,782,481
Maricopa County Industrial Development Authority
Senior Living Facilities Revenue Bonds Series 1997A
04-01-27 7.88 15,000,000 16,444,649
Maricopa County Pollution Control Refunding
Revenue Bonds Palo Verde Public Service
08-15-23 6.38 3,500,000 3,686,550
Navajo Industrial Development Authority Revenue Bonds
Stone Container Corporation Series 1997 A.M.T.
06-01-27 7.20 3,000,000 3,357,630
Phoenix Civic Improvement Waste Water System
Lease Refunding Revenue Bonds
07-01-18 5.00 5,000,000 5,028,000
Phoenix Industrial Development Authority
Refunding Revenue Bonds Christian Care Apartments
01-01-26 6.50 9,525,000 10,278,237
PimaCounty Industrial Development Authority Multi-family Housing Revenue Bonds
Las Villas De Kino Apartments Series 1997 A.M.T.
08-01-29 6.90 7,000,000 7,201,390
Pima County Industrial Development Authority
Revenue Bonds LaPosada Park Centre Series 1996A
05-15-27 7.00 5,750,000 6,173,200
Scottsdale Industrial Development Authority
Beverly Enterprises Series 1994
09-01-08 7.63 2,940,000 3,063,833
Total 72,273,298
Arkansas (0.1%)
PopeCounty Solid Waste Disposal Revenue Bonds Arkansas Power & Light Series
1991 A.M.T.
01-01-21 8.00 3,250,000 3,512,990
California (9.1%)
ABAG Financial Authority for Nonprofit Corporations
Certificate of Participation International School
Series 1996
05-01-26 7.38 8,000,000 8,504,160
Anaheim Public Financing Authority Lease
Capital Appreciation Revenue Bonds
Zero Coupon (FSA Insured)
09-01-26 5.08 4,430,000(d) 1,074,142
09-01-27 5.08 17,860,000(d) 4,112,801
09-01-28 5.08 8,835,000(d) 1,932,038
Community Development Authority Health Facilities
Unihealth America Certificate of Participation
Series 1993 Inverse Floater (AMBAC Insured)
10-01-11 7.77 22,400,000(c) 27,328,000
Contra Costa County Residential Rent Facility
Multi-family Housing Revenue Bonds Cypress Meadows
Series 1998E A.M.T.
09-01-28 7.00 5,000,000 4,983,750
East Bay Municipal Utility District Water Revenue Bonds
Series 1993 Inverse Floater (MBIA Insured)
06-01-08 6.12 15,500,000(c) 17,263,125
Foothill/Eastern Transportation Corridor Agency
Toll Road Revenue Bonds Series 1995A
01-01-35 5.00 41,070,000 39,413,647
Fresno Health Facility Refunding Revenue Bonds
Holy Cross Health System (MBIA Insured)
12-01-13 5.63 3,000,000 3,254,010
Irwindale Redevelopment Agency Subordinate Lien
Tax Allocation Bonds
12-01-26 7.05 5,750,000 6,429,765
Lake Elsinore Public Financing Authority
Local Agency Revenue Bonds Series 1997F
09-01-20 7.10 12,000,000 13,019,040
Los Angeles County Certificate of Participation
05-01-15 6.71 20,000,000 21,726,200
Los Angeles International Airport Regional Airports
Improvement Corporation Refunding
Revenue Bonds Delta Airlines
11-01-25 6.35 13,000,000 14,185,210
Los Angeles International Airport Regional Airports
Improvement Corporation Refunding Revenue Bonds
United Airlines Series 1984
11-15-21 8.80 11,650,000 12,815,816
Los Angeles Water & Power Electric Plant
Refunding Revenue Bonds Series 1992
02-01-20 6.38 10,000,000 10,841,800
Millbrae Residential Facility Revenue Bonds
Magnolia of Millbrae Series 1997A A.M.T.
09-01-27 7.38 2,500,000 2,640,600
Modesto Santa Clara Redding Public Power Bonds
San Juan Series C (AMBAC Insured)
07-01-21 5.50 4,500,000 4,504,230
Northern California Power Agency Geothermal 3
Revenue Bonds
07-01-09 5.00 49,635,000 49,653,860
Novato Community Facility District 1 Vintage Oaks
Public Improvement Special Tax Refunding Bonds
08-01-21 7.25 5,000,000 5,482,700
Oceanside Certificate of Participation Refunding Bonds
Oceanside Civic Center (MBIA Insured)
08-01-19 5.25 7,000,000 7,190,750
Orange County Special Tax Community Facilities Bonds
Aliso Veijo District 88-1 Series 1992A
08-15-18 7.35 6,000,000 6,886,020
Pleasanton Joint Powers Financing Authority Reassessment
Revenue Bonds Series 1993A
09-02-12 6.15 4,395,000 4,739,744
Regional Airports Improvement Facilities Sublease
Revenue Bonds Continental Airlines Los Angeles
International Airport Series 1988 A.M.T.
08-01-08 9.00 3,700,000 3,786,284
08-01-17 9.00 8,100,000 8,285,895
Sacramento Cogeneration Authority Revenue Bonds
Procter & Gamble Series 1995
07-01-14 6.50 3,800,000 4,430,192
07-01-21 6.50 8,000,000 9,326,720
Sacramento Municipal Utility District Electric
Refunding Revenue Bonds Series 1993D
Inverse Floater (FSA Insured)
11-15-05 7.12 15,800,000(c) 18,189,750
11-15-06 7.32 16,400,000(c) 18,962,500
Sacramento Municipal Utility District Electric
Refunding Revenue Bonds Series 1993D
Inverse Floater (MBIA Insured)
11-15-15 7.77 15,000,000(c) 16,537,500
Sacramento Power Authority Cogeneration
Revenue Bonds Campbell Soup Series 1995
07-01-22 6.00 25,000,000 26,805,500
San Joaquin Hills Orange County Transportation
Corridor Agency Senior Lien Toll Road Revenue Bonds
01-01-32 6.75 14,785,000 16,770,773
San Joaquin Hills Transportation Corridor Agency
Capital Appreciation Toll Road Refunding Revenue
Bonds Zero Coupon Series 1997A (MBIA Insured)
01-15-24 5.62 9,000,000(d) 2,526,930
01-15-25 5.03 69,375,000(d) 18,518,269
01-15-26 5.51 30,000,000(d) 7,613,100
01-15-27 5.51 6,670,000(d) 1,608,337
01-15-28 5.05 13,880,000(d) 3,180,047
01-15-32 5.41 27,000,000(d) 5,042,790
01-15-36 5.42 88,415,000(d) 13,484,172
San Joaquin Hills Transportation Corridor Agency
Senior Lien Toll Road Revenue Bonds
Zero Coupon Escrowed to Maturity
01-01-17 5.35 34,860,000(d) 14,295,040
San Jose Redevelopment Agency Merged Area
Tax Allocation Bonds Series 1993 Inverse Floater
(MBIA Insured)
08-01-14 6.81 33,600,000(c) 36,330,000
Sierra Unified School District Fresno County
Certificate of Participation Capital Funding
Refunding Bonds Series 1993
03-01-18 6.13 6,470,000 6,855,224
South Tahoe Joint Powers Financing Authority
Refunding Revenue Bonds South Tahoe Area 1
Series 1995B
10-01-28 6.00 9,900,000 10,418,760
Southern California Public Power Authority
Power Revenue Bonds Palo Verde
Series 1993 Inverse Floater (FGIC Insured)
07-01-17 6.62 20,000,000(c) 21,175,000
Ukiah Unified School District
Mendocino County Certificate of Participation
Series 1993
09-01-10 6.00 5,000,000 5,326,200
University of California Refunding Revenue Bonds
Multiple Purpose Project (AMBAC Insured)
09-01-16 5.25 6,000,000 6,195,600
Total 543,645,991
Colorado (6.9%)
Arapahoe County Industrial Development Revenue Bonds
Dillion Real Estate-Kroger
04-01-09 8.00 4,000,000 4,503,600
Arapahoe County Public Highway Authority Capital
Improvement Trust Fund E-470 Highway
Revenue Bonds
08-31-26 7.00 22,000,000 26,388,559
Aurora Centretech Metropolitan District
Arapahoe County Series 1987B
12-01-23 6.00 5,699,785 5,899,107
Bowles Metropolitan District General Obligation Bonds
Series 1995
12-01-15 7.75 15,500,000 16,478,050
Briargate Public Building Authority
Landowner Assessment Lien Bonds Series 1985A
12-15-00 10.25 4,064,880(j) 3,455,148
Castle Rock Ranch Public Facility Improvement
Revenue Bonds Series 1996
12-01-17 6.25 10,000,000 11,193,300
Colorado Springs Hospital Revenue Bonds
Memorial Hospital Series 1990
12-15-10 7.88 5,000,000 5,422,350
Colorado Springs Utilities System
Pre-refunded Revenue Bonds Series 1991C
11-15-15 6.50 1,505,000 1,652,731
Colorado Springs Utilities System
Refunding Revenue Bonds Series 1991C
11-15-15 6.50 24,895,000 27,130,570
11-15-21 6.75 30,000,000 32,964,452
Dawson Ridge Metropolitan District
Refunding Revenue Bonds
Zero Coupon Series B Escrowed to Maturity
10-01-22 5.21 40,000,000(d) 11,284,800
Denver City & County Airport Systems Revenue Bonds
Series 1991A A.M.T.
11-15-23 8.75 10,000,000 11,328,000
Denver City & County Airport Systems Revenue Bonds
Series 1991D A.M.T.
11-15-21 7.75 8,650,000 9,538,961
Denver City & County Airport Systems Revenue Bonds
Series 1992A
11-15-25 7.25 20,975,000 23,980,507
Denver City & County Airport Systems Revenue Bonds
Series 1992B A.M.T.
11-15-23 7.25 20,500,000 22,748,030
Denver City & County Airport Systems Revenue Bonds
Series 1994A
11-15-12 7.50 5,000,000 5,762,000
Denver City & County Airport Systems Revenue Bonds
Series 1994A A.M.T.
11-15-23 7.50 19,340,000 22,385,663
Denver City & County GVR Metropolitan District
General Obligation Refunding Bonds Series 1991
12-01-06 8.00 1,385,000 1,689,008
Denver City & County GVR Metropolitan District
General Obligation Refunding Bonds Series 1995B
12-01-06 11.00 730,000 721,167
Denver Special Facility Airport Revenue Bonds
United Airlines Series A A.M.T.
10-01-32 6.88 25,400,000 27,286,457
Denver Urban Renewal Authority Tax Increment
Revenue Bonds Downtown Denver Redevelopment
Adams Mark Hotel Series 1989 A.M.T.
09-01-15 8.00 16,285,000 18,389,999
09-01-16 8.00 1,785,000 2,015,729
09-01-17 8.00 1,930,000 2,179,472
Denver Urban Renewal Authority Tax Increment
Revenue Bonds South Broadway Montgomery Ward
Urban Renewal Series 1992
05-01-16 8.50 13,730,000 15,322,543
Denver West Metropolitan District
General Obligation Bonds Series 1996
06-01-16 6.50 2,560,000 2,835,098
Denver West Metropolitan District
General Obligation Refunding Improvement Bonds
Series 1995
12-01-14 7.00 4,230,000 4,765,307
Hotchkiss Industrial Development Revenue Bonds
Dillion Real Estate-Kroger
09-01-09 8.00 1,500,000 1,691,595
Housing Finance Authority Single Family Program
Senior Bonds Series 1991B (FGIC Insured)
08-01-11 7.25 2,150,000 2,270,293
02-01-18 7.30 1,950,000 2,056,958
Lowry Economic Redevelopment Authority
Revenue Bonds Series 1996
12-01-10 7.50 19,000,000 21,893,700
Lowry Economic Redevelopment Authority
Series A
12-01-10 7.00 3,600,000 4,032,288
Saddle Rock Metropolitan District Limited Tax
General Obligation Bonds Series 1997
12-01-16 7.63 5,590,000 5,939,207
State Health Facility Authority Hospital Improvement
Refunding Revenue Bonds
Parkview Episcopal Medical Center Series 1995
09-01-25 6.13 7,000,000 7,444,920
State Health Facility Authority Revenue Bonds
Liberty Heights Zero Coupon Escrowed to Maturity
07-15-22 7.50 81,465,000(d) 23,728,311
Superior Metropolitan District 2 Limited Tax
General Obligation Refunding Bonds
MDC Holdings Series 1994B
12-01-98 7.50 945,000 945,066
12-01-13 8.25 2,580,000 3,172,755
12-01-13 8.50 12,000,000 13,477,680
Thornton Industrial Development Revenue Bonds
Dillion Real Estate-Kroger
09-01-09 8.00 4,500,000 5,066,550
Westminster Industrial Development Revenue Bonds
Dillion Real Estate-Kroger
04-01-09 8.00 3,500,000 3,947,055
Total 412,986,986
Connecticut (0.2%)
State Development Authority Pollution Control
Refunding Revenue Bonds Connecticut Light & Power
Series 1993B A.M.T.
09-01-28 5.95 10,000,000 10,065,600
District of Columbia (0.7%)
General Obligation Refunding Bonds Series 1994A
(MBIA Insured)
06-01-10 6.00 27,875,000 31,052,472
06-01-11 6.10 7,580,000 8,481,186
Housing Finance Agency Multi-family Mortgage
Revenue Bonds Temple Courts Section 8
Series 1985 (FHA Insured)
02-01-22 12.00 1,305,000 1,521,212
Total 41,054,870
Florida (4.2%)
Arbor Greene Community Development District
Special Assessment Revenue Bonds Series 1996
05-01-18 7.60 4,995,000 5,438,956
Arbor Greene Community Development District
Special Assessment Revenue Bonds Series 1998
05-01-19 6.30 1,390,000 1,415,590
Brooks of Bonita Springs Community
Development District Special Assessment
District Capital Improvement Revenue Bonds
Series 1998A
05-01-19 6.20 11,200,000 11,302,592
Brooks of Bonita Springs Community
Development District Special Assessment
District Capital Improvement Revenue Bonds
Series 1998B
05-01-06 5.65 2,750,000 2,746,563
Charlotte County Development Authority 1st Mortgage
Refunding Revenue Bonds
Royal Palm Retirement Centre Series 1991
03-01-14 9.50 3,945,000 4,306,323
Crossings at Fleming Island Community Development
District Special Assessment Bonds Series 1995
05-01-16 8.25 10,010,000 11,099,088
Crossings at Fleming Island Community Development
District Utility Revenue Bonds Series 1994
10-01-19 7.38 13,250,000 14,098,133
Department of Transportation Turnpike Revenue Bonds
Series 1991A (AMBAC Insured)
07-01-20 6.25 20,000,000 21,306,999
Gateway Centre Development District Pinellas County
Special Assessment Revenue Bonds Series 1988
01-01-09 9.13 1,015,000 1,049,256
Grand Haven Community Development District
Special Assessment Bonds Flagler County
Series 1997A
05-01-02 6.30 4,900,000 5,034,995
Grand Haven Community Development District
Special Assessment Revenue Bonds
Series 1998A
05-01-19 6.90 1,000,000 1,039,800
Heritage Harbor Community Development District
Special Assessment Revenue Bonds
Series 1997B
05-01-03 6.00 1,250,000 1,271,175
05-01-05 5.75 1,650,000 1,670,823
Hillsborough County Utility Refunding Revenue Bonds
Series 1991A
08-01-14 7.00 24,000,000 25,979,376
Hillsborough County Utility Refunding Revenue Bonds
Series 1991A (MBIA Insured)
08-01-16 6.50 24,760,000 26,822,012
Lakewood Ranch Community Development District 1
Manatec County Benefit Special Assessment Bonds
Series 1998
05-01-17 7.30 3,680,000 3,765,523
Lakewood Ranch Community Development District 1
Special Assessment Bonds Series 1994
05-01-14 8.25 3,050,000 3,340,757
Miami Health Facility Authorization Revenue Bonds
Inverse Floater (AMBAC Insured)
08-15-15 7.12 3,500,000(c) 3,696,875
North Springs Improvement Special Assessment
District Revenue Bonds Heron Bay Series 1997
05-01-19 7.00 3,000,000 3,163,830
North Springs Improvement Special Assessment
District Revenue Bonds Parkland Isles Series 1997B
05-01-05 6.25 3,000,000 3,080,520
Palm Beach County Health Facilities Authority Hospital
Revenue Bonds Good Samaritan Health Series 1993
10-01-22 6.30 3,750,000 4,173,488
Polk County Industrial Development Authority 1st Mortgage
Refunding Revenue Bonds Spring Haven II
12-01-14 8.75 6,115,000 6,678,069
Port Everglades Port Authority Revenue Bonds Junior Lien
09-01-16 5.00 18,635,000 18,700,036
River Ridge Community Development District
Special Assessment Revenue Bonds Series 1998
05-01-08 5.75 4,000,000 4,025,520
Riverwood Community Development District
Charlotte County Special Assessment Revenue Bonds
Series 1992A-B
05-01-12 8.50 5,610,000(j) 5,980,709
Sumter County Industrial Development Authority
Industrial Development Revenue Bonds
Little Sumter Utility Company Series 1997 A.M.T.
10-01-27 7.25 4,200,000 4,277,532
Sumter County Industrial Development Authority
Industrial Development Water & Sewer Revenue Bonds
Little Sumter Utility Company Series 1998 A.M.T.
10-01-27 6.75 2,950,000 2,964,573
Sumter County Village Community Development
District 1 Capital Improvement Revenue Bonds
Series 1992
05-01-12 8.40 935,000 1,005,901
Sunrise Utility System Refunding & Improvement
Revenue Bonds
10-01-18 10.75 5,000,000 5,633,500
Tampa Health Systems Revenue Bonds
Catholic Health East Obligation Group
Series 1998A-2 (AMBAC Insured)
11-15-28 4.88 26,330,000 25,661,480
Village Center Community Development District
Sub Recreational Revenue Bonds
Series 1998C
01-01-19 7.38 2,670,000 2,714,189
Village Center Community District Recreational
Revenue Bonds Series 1996B
01-01-17 8.25 2,785,000 3,051,135
Village Community Development District 2
Special Assessment District Revenue Bonds
Series 1996
05-01-17 7.63 5,435,000 5,863,278
Volusia County Industrial Development Authority
1st Mortgage Refunding Revenue Bonds Series 1996
11-01-26 7.63 10,925,000 12,159,853
Total 254,518,449
Georgia (2.2%)
Atlanta Special Purpose Facility Revenue Bonds
Delta Airlines Series 1989B A.M.T.
12-01-18 7.90 13,500,000 14,206,050
12-01-19 6.25 8,685,000 8,762,818
Colquitt County Development Authority Revenue Bonds
Zero Coupon Escrowed to Maturity
12-01-21 6.87 46,350,000(d) 13,698,279
Effingham County Pollution Control Revenue Bonds
Fort Howard Series 1988
10-01-05 7.90 19,850,000 20,944,132
Fulco Hospital Authority Revenue Anticipation Certificate
Georgia Baptist Health Care Systems Series 1992A
09-01-22 6.38 20,300,000 22,478,392
George L. Smith II World Congress Center Authority
Miscellaneous Revenue Bonds Dome Stadium
Series 2000 (MBIA Insured) A.M.T.
07-01-20 5.50 8,000,000(i) 8,029,600
Municipal Electric Authority Power Refunding Bonds
Series 1989R
01-01-14 6.00 9,130,000 9,152,003
Municipal Electric Authority Power Revenue Bonds
Series L
01-01-20 5.00 1,150,000 1,135,200
Rockdale County Development Authority Solid Waste
Disposal Revenue Bonds Visy Paper Series 1993 A.M.T.
01-01-26 7.50 10,000,000 10,694,200
Savannah Economic Development Authority
1st Mortgage Revenue Bonds Zero Coupon Series 1991A
12-01-21 5.40 13,755,000(d) 4,065,153
Savannah Economic Development Authority
Revenue Bonds Zero Coupon Escrowed to Maturity
12-01-21 6.87 64,220,000(d) 18,979,579
Total 132,145,406
Hawaii (0.4%)
City & County of Honolulu Refunding & Improvement
General Obligation Bonds Series 1993B Inverse Floater
09-07-06 6.77 10,000,000(c) 11,450,000
09-11-08 6.93 10,000,000(c) 11,650,000
Total 23,100,000
Idaho (--%)
State Building Authority Lease
Revenue Bonds Series 1998A (MBIA Insured)
09-01-25 4.75 1,250,000 1,213,063
Illinois (7.7%)
Bradley Kankakee County Tax Increment
Refunding Revenue Bonds Series 1993
12-01-12 8.40 5,590,000 6,339,619
Broadview Cook County Senior Lien Tax Increment
Revenue Bonds Series 1993
07-01-13 8.25 11,360,000 12,928,930
Chicago General Obligation Bonds
Series 1991 (AMBAC Insured)
01-01-16 6.00 6,170,000 6,688,342
Chicago General Obligation Bonds
Series 1994A (AMBAC Insured)
01-01-22 5.88 17,850,000 19,285,140
Chicago General Obligation Refunding Bonds
Series 1995A (AMBAC Insured)
01-01-18 5.50 20,000,000 21,605,600
Chicago O'Hare International Airport
General Airport Refunding Revenue Bonds Series 1993A
01-01-16 5.00 14,450,000 14,318,361
Chicago O'Hare International Airport
General Airport Revenue Bonds Series 1990A A.M.T.
01-01-16 7.50 21,000,000 22,163,190
01-01-18 6.00 29,000,000 29,904,219
Chicago O'Hare International Airport
Special Revenue Bonds (FGIC Insured) A.M.T.
11-01-25 7.88 17,750,000 19,120,478
Chicago O'Hare International Airport
Special Revenue Bonds A.M.T.
01-01-17 7.50 32,250,000 33,923,129
Chicago O'Hare International Airport
Special Revenue Facility Bonds Delta Airlines
Series 1992
05-01-18 6.45 10,000,000 10,625,500
Chicago O'Hare International Airport
Special Revenue Facility Bonds United Airlines
Series C
05-01-18 8.20 22,285,000 23,308,772
Chicago Ridge Special Service Area 1 Unlimited
Ad Valorem Tax Bonds Series 1990
12-01-08 9.00 2,700,000 3,031,425
Chicago Wastewater Transmission Revenue Bonds
Series 1994 (MBIA Insured)
01-01-24 6.38 22,500,000 25,727,174
Cook County Bedford Park Senior Lien Tax Increment
Revenue Bonds
01-01-06 7.00 1,090,000 1,178,573
01-01-12 7.38 1,700,000 1,854,836
Cook County Bedford Park Senior Lien Tax Increment
Revenue Bonds Mark IV Series 1992
03-01-12 9.75 1,710,000 2,024,042
Development Finance Authority Lifecare Revenue Bonds
Presbyterian Homes Series 1996B
09-01-31 6.40 6,700,000 7,539,778
Development Finance Authority Pollution Control
Refunding Revenue Bonds Central Illinois
Public Service 2nd Series 1993B
06-01-28 5.90 2,500,000 2,640,925
Development Finance Authority Pollution Control
Refunding Revenue Bonds Commonwealth Edison
Series 1994
01-15-09 5.70 2,000,000 2,214,280
01-15-14 5.85 4,500,000 5,089,995
Development Finance Authority Pollution Control
Refunding Revenue Bonds Illinois Power
Series 1991A
07-01-21 7.38 19,250,000 22,145,970
Development Finance Authority Retirement Housing
Revenue Bonds Zero Coupon Escrowed to Maturity
04-15-20 7.75 68,000,000(d) 21,101,760
DuPage County Tax Increment Revenue Bonds
Series 1997
01-01-17 7.88 4,690,000 5,274,421
Educational Facilities Authority Refunding Revenue Bonds
Lewis University Series 1996
10-01-26 6.13 8,780,000 9,294,420
Educational Facilities Authority Refunding Revenue Bonds
Loyola University of Chicago Series 1993
Inverse Floater (FGIC Insured)
07-01-12 7.42 11,000,000(c) 12,333,750
Granite City Madison County Hospital
Refunding Revenue Bonds St. Elizabeth Medical Center
Series 1989A
06-01-08 8.13 3,120,000 3,223,771
Health Facilities Authority Refunding Revenue Bonds
Edwards Hospital Series 1993A
02-15-19 6.00 6,350,000 6,686,614
Health Facilities Authority Refunding Revenue Bonds
Masonic Medical Center Series 1993
10-01-19 5.50 2,000,000 2,053,660
Health Facilities Authority Refunding Revenue Bonds
Morris Hospital
12-01-23 6.13 3,005,000 3,182,656
Health Facilities Authority Refunding Revenue Bonds
University of Chicago Series 1993 Inverse Floater
(MBIA Insured)
08-15-14 7.62 10,000,000(c) 11,175,000
Health Facilities Authority Revenue Bonds
Sarah Bush Lincoln Health Center Series 1992
05-15-12 7.25 2,000,000 2,258,800
05-15-22 7.25 2,000,000 2,258,800
Health Facilities Authority Revenue Bonds
Sarah Bush Lincoln Health Center Series 1996B
02-15-22 5.75 2,915,000 3,019,474
Health Facility Authority Revenue Bonds
South Suburban Hospital Series 1992
02-15-09 7.00 4,000,000 4,581,640
02-15-18 7.00 5,000,000 5,880,963
Hodgkins General Obligation Tax Increment Bonds
Series 1991
12-01-09 9.50 11,630,000 13,590,053
Hodgkins General Tax Increment Bonds
Series 1995A
12-01-13 7.63 9,000,000 10,034,550
Huntley Special Tax Bonds
Series 1998
02-01-25 6.75 2,450,000 2,498,780
Lakemoor Special Tax Revenue Bonds
Series 1997
03-01-27 7.80 9,000,000 9,768,330
Lansing Tax Increment Refunding Revenue Bonds
Landings Redevelopment Area Limited Sales
Tax Pledge Series 1992
12-01-08 7.00 10,000,000 11,095,000
Marion General Obligation Hospital Alternate
Revenue Source Bonds Series 1991
12-01-16 7.50 3,800,000 4,268,198
Metropolitan Pier & Exposition Authority
Dedicated State Tax Refunding Revenue Bonds
McCormick Place Zero Coupon (FGIC Insured)
06-15-19 6.37 6,000,000(d) 2,102,760
Metropolitan Pier & Exposition Authority
Dedicated State Tax Refunding Revenue Bonds
McCormick Place Zero Coupon (MBIA Insured)
06-15-17 6.61 11,210,000(d) 4,390,397
Metropolitan Pier & Exposition Authority
Sales Tax & Miscellaneous Tax Revenue
Capital Appreciation Refunding Bonds
Zero Coupon Series 1996A (MBIA Insured)
12-15-22 6.05 16,225,000(d) 4,713,849
Regional Transportation Authority General
Obligation Bonds Counties of Cook, DuPage, Kane, Lake,
McHenry & Will Series 1992A (AMBAC Insured)
06-01-22 6.13 7,200,000 7,647,120
State Development Finance Authority Regency Park
Retirement Housing Revenue Bonds Zero Coupon
Series 1991B Escrowed to Maturity
07-15-25 5.49 10,000,000(d) 2,328,000
Tinley Park Cook & Will Counties Limited Sales Tax
Revenue Bonds Series 1988
11-01-99 10.25 895,000(j) 322,200
Tinley Park Cook & Will Counties Unlimited Ad Valorem
Tax Bonds of Special Service
12-01-98 10.65 75,000 72,000
12-01-99 10.65 80,000 75,200
12-01-00 10.65 90,000 83,700
12-01-01 10.65 100,000 92,000
12-01-02 10.65 110,000 101,200
12-01-03 10.65 120,000 110,400
12-01-04 10.65 135,000 124,200
12-01-05 10.65 150,000 138,000
12-01-06 10.65 165,000 151,800
12-01-07 10.65 185,000 170,200
Total 459,861,944
Indiana (2.3%)
Brazil 1st Mortgage Revenue Bonds Hoosier Care II
Series 1990
06-01-20 10.38 4,095,000 4,368,423
Carmel Retirement Rental Housing Refunding
Revenue Bonds Beverly Enterprises Series 1992
12-01-08 8.75 6,565,000 7,401,644
Development Finance Authority Environmental
Improvement Refunding Revenue Bonds USX Corporation
Series 1996
07-15-30 6.25 2,000,000 2,148,880
East Chicago Elementary School Building Lake County
1st Mortgage Refunding Bonds Series 1996
01-05-16 6.25 8,000,000 9,280,880
Hanover 1st Mortgage Revenue Bonds Hoosier Care II
Series 1990
06-01-20 10.38 6,710,000 7,158,027
Health Facility Authority Hospital Revenue Bonds
Community Hospital of Anderson Series 1993
01-01-23 6.00 10,000,000 10,380,600
Health Facility Authority Hospital Revenue Bonds
Union Hospital Series 1993 (MBIA Insured)
09-01-18 5.13 10,000,000 10,047,300
Health Facility Finance Authority Hospital Revenue Bonds
Hancock Memorial Series 1996
08-15-17 6.13 2,295,000 2,460,447
La Porte County Hospital Authority Hospital Refunding
Revenue Bonds La Porte Hospital Series 1993
03-01-12 6.25 5,070,000 5,493,446
03-01-23 6.00 2,990,000 3,116,029
Lawrenceburg Pollution Control Refunding Revenue Bonds
Methodist Hospital Series 1989
09-01-08 6.50 15,555,000 16,216,243
Marion County Hospital Authority Refunding Revenue Bonds
Methodist Hospital Series 1989 (MBIA Insured)
09-01-13 6.50 4,115,000 4,249,807
Rockport Pollution Control Refunding Revenue Bonds
Indiana Michigan Electric Series B
03-01-16 7.60 5,500,000 5,916,625
St. Joseph County Hospital Authority
Health Systems Revenue Bonds
Memorial Health System
Series 1998A (MBIA Insured)
08-15-28 4.63 30,000,000 27,402,300
St. Joseph County Hospital Facility Revenue Bonds
Memorial Hospital of South Bend
06-01-10 9.40 1,850,000 2,403,520
Vincennes Economic Development
Revenue Bonds Southwest Indiana
Regional Youth Village Facility Series 1993
01-01-24 8.50 16,575,000 17,819,285
Total 135,863,456
Iowa (0.6%)
Keokuk Hospital Facilities Refunding Revenue Bonds
Keokuk Area Hospital Series 1991
12-01-21 7.63 5,350,000 6,028,006
Muscatine Electric Refunding Revenue Bonds Series 1986
01-01-05 6.00 10,845,000 10,866,690
01-01-06 6.00 11,330,000 11,352,660
01-01-07 5.00 2,250,000 2,250,675
01-01-08 5.00 5,100,000 5,101,326
Total 35,599,357
Kansas (0.1%)
Wyandotte County Kansas City Multi-family
Housing Revenue Bonds Park Victoria Apartments
Series 1998 A.M.T.
08-01-28 6.25 5,035,000 5,057,204
Kentucky (0.9%)
Development Finance Authority Hospital Facility
Revenue Bonds St. Luke Hospital Series 1989B
10-01-19 6.00 22,695,000 23,539,027
Economic Development Finance Authority Hospital
Refunding Revenue & Improvement Bonds
Appalachian Regional Hospital Series 1997
10-01-22 5.88 5,000,000 5,168,950
Muhlenberg County Hospital
Refunding Revenue Bonds
Muhlenberg Community Hospital Series 1996
07-01-10 6.75 9,045,000 9,569,972
Turnpike Authority Economic Road Development
Refunding Revenue Bonds Series 1993 Inverse Floater
(AMBAC Insured)
06-06-12 7.40 15,000,000(c) 16,968,750
Total 55,246,699
Louisiana (2.6%)
Calcasieu Parish Industrial Development Pollution Control
Refunding Revenue Bonds Gulf State Utilities
Series 1992
10-01-12 6.75 10,500,000 11,224,815
Energy & Power Authority Refunding Revenue Bonds
Rodemacher Unit 2 Series 1991 (FGIC Insured)
01-01-13 6.00 28,000,000 29,165,920
Hodge Village Combined Utility System Revenue Bonds
Stone Container Series 1990 A.M.T.
03-01-10 9.00 23,000,000 24,386,670
New Orleans Audubon Park Commission Aquarium
Revenue Bonds Series 1992A
04-01-12 8.00 7,100,000 8,138,730
Public Facilities Authority Revenue Bonds
Glen Retirement Systems Series 1995
12-01-15 6.50 1,000,000 1,078,420
12-01-25 6.70 1,500,000 1,632,195
Public Facilities Authority Revenue Bonds
Windsor Multi-family Housing Foundation
Series 1996A
01-01-26 6.25 9,570,000(j) 7,177,500
Southern Louisiana Port Commission Terminal
Refunding Revenue Bonds GATX Terminal Series 1993
03-01-23 7.00 13,180,000 14,350,120
St. Charles Parish Pollution Control Revenue Bonds
Louisiana Power & Light 2nd Series 1984
12-01-14 8.00 29,155,000 30,983,602
St. Charles Parish Pollution Control Revenue Bonds
Louisiana Power & Light Series 1991 A.M.T.
06-01-21 7.50 20,700,000 22,423,068
West Feliciana Parish Demand Pollution Control
Revenue Bonds Gulf State Utilities Series 1985B
05-01-15 9.00 6,000,000 6,517,500
Total 157,078,540
Maine (0.1%)
Finance Authority Multi-family Housing Revenue
Obligation Securities Huntington Common
Series 1997A
09-01-27 7.50 5,000,000 5,208,950
Maryland (0.8%)
Frederick County Economic Refunding Revenue Bonds
Alumax Series 1992
04-01-17 7.25 9,880,000 10,650,047
Frederick County Obligation Special Tax Revenue Bonds
Urbana Community Development Authority Series 1998
07-01-25 6.63 6,000,000 6,043,560
Harford County Industrial Development Revenue Bonds
Dorsey
04-16-05 8.00 467,000 469,690
Prince George's County Hospital Revenue Bonds
Dimensions Health Series 1992
07-01-17 7.25 11,400,000 12,926,232
07-01-22 7.00 7,000,000 7,881,510
State Transportation Authority Facility
Capital Appreciation Revenue Bonds
Zero Coupon Series 1992 (FGIC Insured)
07-01-10 6.33 3,000,000(d) 1,807,740
07-01-11 6.33 6,700,000(d) 3,817,325
State Transportation Authority Facility
Revenue Bonds Zero Coupon
Series 1992 (FGIC Insured)
07-01-12 6.35 5,000,000(d) 2,688,250
Total 46,284,354
Massachusetts (3.2%)
Bay Transportation Authority Refunding Revenue Bonds
Series 1994A (MBIA Insured)
03-01-12 6.00 8,000,000 8,688,960
03-01-21 4.75 5,000,000 4,819,950
Health & Educational Facilities Authority
Revenue Bonds Berkshire Health Systems
Series C
10-01-11 5.90 1,800,000 1,870,326
10-01-20 6.00 4,000,000 4,180,360
Health & Educational Facilities Authority
Revenue Bonds Beverly Hospital Inverse Floater
(MBIA Insured)
06-18-20 7.47 8,000,000(c) 9,250,000
Health & Educational Facilities Authority
Revenue Bonds Charlton Memorial Hospital
Series 1991B
07-01-13 7.25 6,455,000 7,139,101
Health & Educational Facilities Authority
Revenue Bonds Holyoke Hospital
Series B
07-01-15 6.50 500,000 532,075
Industrial Finance Agency Pollution Control
Refunding Revenue Bonds Eastern Edison
Series 1993
08-01-08 5.88 4,250,000 4,408,355
Industrial Finance Agency Resource Recovery
Revenue Bonds SEMASS Series 1991A
07-01-15 9.00 18,885,000 20,951,397
Industrial Finance Agency Resource Recovery
Revenue Bonds SEMASS Series 1991B A.M.T.
07-01-15 9.25 24,800,000 27,514,607
Municipal Wholesale Electric Power
Supply System Pre-refunded Revenue Bonds
Series 1992B
07-01-17 6.75 10,130,000 11,328,683
Municipal Wholesale Electric Power
Supply System Revenue Bonds
Series 1993A Inverse Floater (AMBAC Insured)
07-01-18 7.02 6,500,000(c) 6,955,000
State Industrial Finance Agency Assisted Living
Facility Revenue Bonds Marina Bay LLC
Series 1997 A.M.T.
12-01-27 7.50 2,000,000 2,091,880
State Industrial Finance Agency Assisted Living
Facility Revenue Bonds Newton Group Properties LLC
Series 1997 A.M.T.
09-01-27 8.00 4,300,000 4,734,429
State Water Authority
Water & Sewer General Revenue Bonds
Series 1998A (FSA Insured)
08-01-27 4.75 12,000,000 11,527,200
Water Resource Authority General
Refunding Revenue Bonds Series 1992B
11-01-15 5.50 22,175,000 22,942,699
Water Resource Authority General
Revenue Bonds Series 1992A
07-15-19 6.50 3,500,000 4,202,065
Water Resource Authority General
Revenue Bonds Series 1993B-95B
(MBIA Insured)
12-01-25 5.00 9,000,000 8,894,790
Water Resource Authority General
Revenue Bonds Series 1998A
(FSA Insured)
08-01-37 4.75 24,500,000 23,135,595
Water Resource Authority General
Revenue Bonds Series B (MBIA Insured)
03-01-22 5.00 10,000,000 9,850,500
Total 195,017,972
Michigan (4.2%)
Concord Academy Certificate of Participation Series 1998
10-01-19 7.00 1,000,000 995,530
Crawford County Economic Development Corporation
Environmental Improvement Revenue Bonds
Weyerhaeuser Series 1991A
07-15-07 7.13 10,800,000 12,651,876
Detroit Unlimited Tax General Obligation Bonds
Series 1993
04-01-14 6.35 5,725,000 6,215,461
Detroit Unlimited Tax General Obligation Bonds
Series 1995A
04-01-15 6.80 1,375,000 1,599,881
Lincoln Consolidated School District Unlimited Tax
General Obligation Refunding Bonds (FGIC Insured)
05-01-18 5.85 6,455,000 6,997,478
Midland County Economic Development Corporation
Pollution Control Limited Obligation Refunding Revenue
Bonds Midland Cogeneration Series 1990 A.M.T.
07-23-09 9.50 35,200,000 37,944,544
Midland County Economic Development Corporation
Pollution Control Limited Obligation Refunding Revenue
Bonds Midland Cogeneration Series 1990C
07-23-09 8.50 18,900,000 20,112,246
Monroe County Pollution Control
Revenue Bonds Detroit Edison A.M.T.
12-01-19 7.75 40,250,000 42,671,440
State Hospital Finance Authority
Hospital Pre-refunded Revenue Bonds
McLaren Obligated Group Series 1991A
09-15-21 7.50 7,500,000 8,390,925
State Hospital Finance Authority
Hospital Refunding Revenue Bonds
Sinai Hospital of Greater Detroit Series 1995
01-01-26 6.70 3,000,000 3,349,020
State Hospital Finance Authority
Refunding Revenue Bonds
Detroit Medical Center
Series 1993A
08-15-18 6.50 10,000,000 10,943,300
State Hospital Finance Authority
Refunding Revenue Bonds
Sinai Hospital of Greater Detroit Series 1995
01-01-16 6.63 2,750,000 3,066,498
State Hospital Finance Authority
Revenue Bonds Central Michigan Community Hospital
10-01-27 6.25 2,095,000 2,223,570
State Job Development Authority Pollution Control
Revenue Bonds Chrysler
11-01-99 5.70 4,350,000 4,416,164
State Trunk Line Bonds Series A (MBIA Insured)
11-01-20 4.75 10,500,000 10,165,995
Strategic Fund Environmental Improvement Limited
Obligation Refunding Revenue Bonds
Crown Paper Company Series 1997B
08-01-12 6.25 1,100,000 1,014,398
Strategic Fund Limited Obligation Refunding
Revenue Bonds Detroit Edison
Series 1995AA (MBIA Insured)
09-01-25 6.40 12,000,000 13,604,640
Strategic Fund Limited Obligation Refunding
Revenue Bonds Great Lakes Pulp & Fibre
Zero Coupon Series 1994 A.M.T.
12-01-27 10.25 21,509,600(d) 15,056,720
Strategic Fund Limited Tax Obligation
Refunding Revenue Bonds Ford Motor
Series 1991A
02-01-06 7.10 16,400,000 19,303,456
Summit Academy Certificate of Participation
Series 1998
09-01-18 7.00 2,500,000 2,505,050
Troy City Downtown Development Authority
County of Oakland Development Bonds
Series 1995A Asset Guaranty
11-01-18 6.38 1,000,000 1,121,900
Van Buren Township Tax Increment Revenue Bonds
Series 1994
10-01-16 8.40 3,970,000 4,544,022
Wayne Charter County Airport Revenue Bonds
Detroit Metro Wayne County Series 1998A
(MBIA Insured) A.M.T.
12-01-28 5.00 13,900,000 13,479,942
Wayne County Special Airport Facilities
Refunding Revenue Bonds Northwest Airlines Series 1995
12-01-15 6.75 11,280,000 12,389,839
Total 254,763,895
Minnesota (4.1%)
Becker Solid Waste Disposal Facility
Revenue Bonds Liberty Paper Series 1994B A.M.T.
08-01-15 9.00 17,800,000 19,351,447
Bloomington Health Care Facility Revenue Bonds
Friendship Village of Bloomington Series 1992
04-01-02 8.50 3,060,000 3,277,321
Brainerd Economic Development Authority
Health Care Facility Revenue Bonds
Benedictine Health System St. Joseph Medical Center
Series 1990
02-15-20 8.38 4,670,000 5,032,392
Duluth Economic Development Authority
Health Care Facility Pre-refunded Revenue Bonds
Benedictine Health System St. Mary's Medical Center
Series 1990
02-15-20 8.38 8,300,000 8,944,080
Fergus Falls Health Care Facilities Revenue Bonds
LRHC Long-Term Care Facility Series 1995
12-01-25 6.50 1,530,000 1,670,638
International Falls Solid Waste Disposal
Revenue Bonds Boise Cascade
Series 1990 A.M.T.
01-01-15 7.75 10,000,000 10,407,100
Little Canada Multi-family Housing Revenue Bonds
Housing Alternative Development Company
Series 1997A
12-01-27 6.25 1,755,000 1,785,169
Mahtomedi Multi-family Housing
Revenue Bonds Briarcliff A.M.T.
06-01-36 7.35 1,995,000 2,097,942
Maplewood Elder Care Facility Revenue Bonds
Care Institute Series 1994
01-01-24 7.75 8,000,000 8,420,880
Maplewood Multi-family Housing
Refunding Revenue Bonds Carefree Cottages
of Maplewood III Series 1995 A.M.T.
11-01-32 7.20 4,955,000 5,152,110
Mille Lacs Capital Improvement Authority Infrastructure
Revenue Bonds Series 1992A
11-01-12 9.25 4,455,000 5,406,232
Minneapolis Housing & Healthcare Facility Revenue Bonds
Augustana Chapel View Homes Incorporated Series 1997
06-01-27 6.75 2,640,000 2,787,550
Richfield Multi-family Housing
Refunding Revenue Bonds
Village Shores Apartments Series 1996
08-01-31 7.63 4,945,000 5,185,970
Robbinsdale Multi-family Housing Revenue Bonds
Copperfield Hill Series 1996A
12-01-31 7.35 3,500,000 3,614,975
Roseville Housing Facilities Nursing Home
Refunding Revenue Bonds College Properties
Incorporated Series 1998
10-01-28 5.88 7,000,000 7,005,880
Southern Minnesota Municipal Power Agency
Power Supply System Refunding Revenue Bonds
Series 1992
01-01-18 5.75 32,210,000 33,703,255
Southern Minnesota Municipal Power Agency
Power Supply System Refunding Revenue Bonds
Zero Coupon Series 1994A (MBIA Insured)
01-01-21 6.87 13,500,000(d) 4,458,105
Southern Minnesota Municipal Power Agency
Power Supply System Revenue Bonds
Zero Coupon Series 1994A (MBIA Insured)
01-01-22 6.73 17,500,000(d) 5,491,325
01-01-23 6.74 27,500,000(d) 8,199,125
01-01-24 6.75 19,960,000(d) 5,653,870
01-01-25 6.75 27,500,000(d) 7,399,975
01-01-26 6.75 27,500,000(d) 7,029,550
01-01-27 6.75 12,450,000(d) 3,026,097
St. Louis Park Health Care Facilities
Pre-refunded Revenue Bonds
Park Nicollet Medical Center Series 1990A
01-01-20 9.25 6,000,000 6,490,800
St. Louis Park Health Care Facilities
Revenue Bonds Healthsystem Minnesota
Obligated Group Series 1993 Inverse Floater
(AMBAC Insured)
07-01-05 5.28 10,200,000(c) 10,735,500
St. Louis Park Health Care Facilities
Revenue Bonds Healthsystem Minnesota
Obligated Group Series 1993B Inverse Floater
(AMBAC Insured)
07-01-13 6.28 18,000,000(c) 18,719,999
St. Louis Park Multi-family Housing
Refunding Revenue Bonds
Park Boulevard Towers Series 1996A
04-01-31 7.00 11,480,000 12,014,624
St. Paul Housing & Redevelopment Authority
Health Care Facility Revenue Bonds
Lyngblomsten Care Center Series 1993A
11-01-06 7.13 1,610,000 1,704,040
11-01-17 7.13 2,635,000 2,829,121
St. Paul Housing & Redevelopment Authority
Health Care Facility Revenue Bonds
Lyngblomsten Multi-family Rental Housing
Series 1993B
11-01-24 7.00 2,725,000 2,796,259
St. Paul Port Authority Redevelopment Multi-family
Refunding Revenue Bonds Burlington Apartments
Series A (GNMA Insured)
05-01-31 5.75 14,355,000 14,925,611
St. Paul Port Authority Redevelopment Multi-family
Subordinate Refunding Revenue Bonds
Burlington Apartments Series A
02-01-31 8.63 3,770,000 3,867,756
Vadnais Heights Multi-family Housing
Refunding Revenue Bonds
Cottages of Vadnais Heights
Series 1995 A.M.T.
12-01-31 7.00 1,980,000 2,058,269
Washington County Housing & Redevelopment
Authority Refunding Revenue Bonds
Woodbury Multi-family Housing Series 1996
12-01-23 6.95 4,835,000 5,022,018
Total 246,264,985
Mississippi (0.8%)
Claiborne County Pollution Control Refunding Revenue Bonds
System Energy Resources Series 1995
05-01-25 7.30 4,000,000 4,190,920
Claiborne County Pollution Control Revenue Bonds
Middle South Energy
12-01-13 9.50 1,195,000 1,235,176
Harrison County Waste Water Management District
Refunding Bonds Series 1986
02-01-15 5.00 4,250,000 4,372,188
Jackson Industrial Development Revenue Bonds Dorsey
04-16-05 8.00 397,000 401,006
Long Beach Urban Renewal Multi-family Housing
Revenue Bonds Long Beach Square Apartments
Series 1998 A.M.T.
08-01-28 6.75 3,870,000 3,825,495
Lowndes County Solid Waste Disposal Pollution Control
Refunding Revenue Bonds Weyerhaeuser Series 1989
04-01-22 8.45 4,000,000(h) 4,797,880
Lowndes County Solid Waste Disposal Pollution Control
Revenue Bonds Weyerhaeuser Series 1989 A.M.T.
12-01-05 7.88 12,250,000 13,007,785
Medical Center Educational Building
Hospital Refunding Revenue Bonds
University of Mississippi Medical Center
Series 1998B (AMBAC Insured)
12-01-23 5.50 14,000,000 15,118,599
Total 46,949,049
Missouri (0.7%)
Regional Convention & Sports Complex Authority Bonds
St. Louis Sponsor Series 1991B
08-15-21 7.00 5,810,000 6,598,824
Sikeston Electric System Refunding Revenue Bonds
Series 1992 (MBIA Insured)
06-01-02 5.80 4,165,000 4,442,847
St. Louis Industrial Development Authority
Refunding Revenue Bonds Kiel Center
Multi-purpose Arena Series 1992 A.M.T.
12-01-24 7.88 15,400,000 16,821,111
St. Louis Regional Convention & Sports Complex Authority
Refunding Revenue Bonds Series 1991C
08-15-21 7.90 2,575,000 3,022,381
St. Louis Regional Convention & Sports Complex Authority
Revenue Bonds Series 1991C
08-15-21 7.90 125,000 138,645
State Environment & Improvement Energy Resources
Authority Pollution Control Revenue Bonds Chrysler
10-01-99 5.70 9,250,000 9,346,478
Total 40,370,286
Nebraska (--%)
Omaha Public Power District Electric System
Revenue Bonds Series 1986A
02-01-15 6.00 1,370,000 1,533,318
Nevada (0.8%)
Clark County Collateralized Pollution Control Revenue Bonds
Nevada Power A.M.T.
10-01-09 7.80 11,850,000 12,358,839
Clark County Industrial Development Revenue Bonds
Nevada Power Series 1990 A.M.T.
06-01-20 7.80 5,000,000 5,293,850
Clark County Passenger Facility Charge Airport
Refunding Revenue Bonds
Las Vegas McCarran Intl Airport
Series 1998 (MBIA Insured)
07-01-22 4.75 10,000,000 9,628,800
Las Vegas Redevelopment Agency Tax Increment
Subordinate Lien Revenue Bonds Series 1994A
06-15-10 6.00 2,000,000 2,111,920
06-15-14 6.10 2,750,000 2,891,158
Las Vegas Special Improvement District 707
Local Improvement Bonds
Summerlin Area Series 1996
06-01-16 7.10 6,000,000 6,257,460
Washoe County Hospital Revenue Bonds
Washoe Medical Center Series 1993A
06-01-15 6.00 7,250,000 7,694,425
Total 46,236,452
New Hampshire (2.1%)
Business Financial Authority Pollution Control
& Solid Waste Disposal Refunding Revenue Bonds
Crown Paper Company Series 1996
01-01-22 7.75 4,255,000 4,331,037
Business Financial Authority Pollution Control
Refunding Revenue Bonds United Illuminating
Series 1993A
10-01-33 5.88 13,200,000 13,439,448
Higher Education & Health Facilities Authority
Lifecare Revenue Bonds Rivermead at Peterborough
Retirement Community Series 1998
07-01-18 5.63 1,365,000 1,353,097
07-01-28 5.75 2,500,000 2,509,300
Industrial Development Authority Pollution Control
Revenue Bonds State Public Service Series 1991B
05-01-21 7.50 51,485,000 54,766,139
Industrial Development Authority Pollution Control
Revenue Bonds State Public Service Series 1991C A.M.T.
05-01-21 7.65 25,000,000 26,647,750
Industrial Development Authority Pollution Control
Revenue Bonds United Illuminating Series 1989A A.M.T.
12-01-14 8.00 8,000,000 8,437,040
State Higher Education & Health Facility Authority Hospital
Revenue Bonds Hitchcock Clinic Series 1994
(MBIA Insured)
07-01-24 6.00 13,000,000 14,264,250
Total 125,748,061
New Jersey (0.2%)
Health Care Facility Finance Authority Revenue Bonds
St. Peter Medical Center Series 1994F (MBIA Insured)
07-01-16 5.00 10,000,000 10,027,400
Health Care Facility Finance Authority Revenue Bonds
Zurbrugg Memorial Hospital Series C
07-01-12 8.50 3,500,000 3,467,835
Total 13,495,235
New Mexico (1.8%)
Albuquerque Health Care System Revenue Bonds
Lovelace Medical Fund
03-01-11 10.25 55,000 55,911
Bernalillo County Muti-family Housing Revenue Bonds
Series 1997D
04-01-27 7.70 9,915,000 10,314,575
Farmington Pollution Control Refunding Revenue Bonds
Series 1996A-B
12-01-16 6.30 10,000,000 10,736,500
Farmington Pollution Control Refunding Revenue Bonds
Series 1997A
10-01-20 6.95 4,000,000 4,429,920
Farmington Pollution Control Refunding Revenue Bonds
State Public Service San Juan Series 1994A
08-15-23 6.40 30,650,000 32,343,719
Farmington Power Refunding Revenue Bonds
Generating Division
01-01-13 9.88 5,000,000 6,636,450
Las Vegas Hospital Facility Refunding Revenue Bonds
Northeastern Regional Hospital Series 1987
08-01-13 9.63 5,370,000 5,483,307
Lordsberg Pollution Control Refunding Revenue Bonds
Phelps Dodge
04-01-13 6.50 20,000,000 22,054,800
Sandoval County Multi-family Housing
Refunding Revenue Bonds Meadowlark Apartments
Series 1998A A.M.T.
07-01-38 6.38 11,300,000 11,465,658
Sandoval County Multi-family Housing
Refunding Revenue Bonds Meadowlark Apartments
Series 1998B A.M.T.
07-01-01 6.38 1,000,000 1,004,170
Santa Fe County Lifecare Revenue Bonds
El Castillo Retirement Series 1998A
05-15-15 5.50 1,000,000 993,560
05-15-25 5.63 2,500,000 2,472,775
Total 107,991,345
New York (9.1%)
Battery Park City Authority Refunding Revenue Bonds
Series 1993A
11-01-10 5.50 9,940,000 10,549,223
Dormitory Authority New York City University System
Consolidated 2nd Generation Resource Revenue Bonds
Series 1990C
07-01-16 6.00 39,465,000 40,500,361
07-01-17 5.00 20,820,000 20,570,993
Dormitory Authority New York City University System
Consolidated 2nd Generation Resource Revenue Bonds
Series 1990D
07-01-09 7.00 5,000,000 5,863,000
Dormitory Authority New York City University System
Consolidated 2nd Generation Resource Revenue Bonds
Series 1994A
07-01-18 5.75 5,500,000 6,054,785
Dormitory Authority New York Court Facility Lease
Revenue Bonds Series 1993A
05-15-16 5.38 11,000,000 11,176,440
Dormitory Authority New York State
Memorial Sloan-Kettering Cancer Center
Series 1998 (MBIA Insured)
07-01-20 5.75 7,500,000 8,429,100
07-01-23 5.50 7,700,000 8,437,352
Dormitory Authority New York State
University Education Facility Revenue Bonds
Series 1993A
05-15-13 5.50 24,530,000 26,625,598
Long Island Power Authority
Revenue Bonds Series A
12-01-26 5.25 8,445,000 8,503,017
12-01-29 5.50 7,500,000 7,755,525
Metropolitan Transportation Authority
Transportation Facility Revenue Bonds
Series 1998A (MBIA Insured)
07-01-24 4.75 12,850,000 12,352,705
New York & New Jersey Port Authority Special Obligation
Revenue Bonds KIAC Partners Series 4 A.M.T.
10-01-19 6.75 3,500,000 3,843,245
New York City General Obligation Bonds Series 1992B
02-01-00 7.40 30,000,000 31,307,699
New York City General Obligation Bonds Series 1996F-G
02-01-19 5.75 5,500,000 5,854,860
02-01-20 5.75 2,325,000 2,475,009
New York City General Obligation Bonds Series 1998H
08-01-22 5.00 30,000,000 29,346,300
New York City Industrial Development Agency
Special Facility Revenue Bonds American Airlines
Series 1990 A.M.T.
07-01-20 8.00 16,130,000 16,503,893
New York City Municipal Water Finance Authority
Water & Sewer System Refunding Revenue Bonds
Series 1998D (MBIA Insured)
06-15-25 4.75 8,000,000 7,684,960
New York City Municipal Water Finance Authority
Water & Sewer System Revenue Bonds
Series 1994B Inverse Floater (MBIA Insured)
06-15-09 7.11 15,500,000(c) 17,166,250
New York City Municipal Water Finance Authority
Water & Sewer System Revenue Bonds Series A
06-15-21 6.25 55,500,000 58,594,124
New York City Municipal Water Finance Authority
Water & Sewer System Revenue Bonds Series B
06-15-17 5.00 6,255,000 6,269,637
New York City Pre-refunded Unlimited General
Obligation Bonds Series 1994B-1
08-15-16 7.00 16,500,000 19,216,890
New York City Transitional Finance Authority
Future Tax Secured Sales Tax Revenue Bonds
Series 1998B
11-15-27 4.50 15,000,000 13,901,850
New York City Unlimited Tax General
Obligation Bonds Series 1996G
02-01-17 5.75 20,000,000 21,290,400
New York City Unlimited Tax General
Obligation Bonds Series 1998F
08-01-23 5.00 7,235,000 7,083,861
New York City Unlimited Tax General
Obligation Bonds Series 1998G
08-01-22 5.00 10,000,000 9,782,100
New York City Unlimited Tax General
Obligation Bonds Series 1998J
08-01-23 5.00 10,760,000 10,520,482
North Hempstead Nassau County New York
Various Purpose Bonds
Series 1998A (FGIC Insured)
01-15-23 4.75 3,100,000 2,983,502
Port Authority Special Project Bonds La Guardia
Airport Passenger Terminal
Continental & Eastern Airlines A.M.T.
12-01-06 9.00 2,645,000 2,907,649
Port Authority Special Project Bonds La Guardia
Airport Passenger Terminal
Continental & Eastern Airlines Series 2 A.M.T.
12-01-10 9.00 8,800,000 9,673,840
12-01-15 9.13 17,500,000 19,278,000
State Dormitory Authority State University Education Facility
Pre-refunded Revenue Bonds Series 1990A
05-15-12 7.70 10,000,000 10,797,700
State Housing Finance Agency Service Contract Obligation
Revenue Bonds Series 1995A
03-15-25 6.50 12,475,000 14,517,418
State Housing Finance Agency State University Construction
Refunding Bonds Series 1986A
05-01-13 6.50 3,500,000 4,189,430
State Medical Facilities Finance Agency
Mental Health Services Improvement Refunding
Revenue Bonds Series 1993D
08-15-23 5.25 15,000,000 15,074,550
State Medical Facilities Finance Agency
Mental Health Services Improvement Refunding
Revenue Bonds Series 1993F
02-15-19 5.25 5,790,000 5,844,831
State Urban Development Correctional Capital Facilities
Refunding Revenue Bonds Series 1993A
01-01-21 5.25 12,110,000 12,173,456
State Urban Development Correctional Facility
Refunding Revenue Bonds Series A
01-01-16 5.50 2,750,000 2,827,770
State Urban Development Correctional Facility
Revenue Bonds Series 6
01-01-25 5.38 9,000,000 9,158,130
State Urban Development Correctional Facility
Services Contract Lease Revenue Bonds
Series 1998A (FSA Insured)
01-01-28 5.00 10,000,000 9,938,800
Total 547,024,735
North Carolina (3.6%)
Eastern Municipal Power Agency Power System
Refunding Revenue Bonds Series 1986A
01-01-17 5.00 6,500,000 6,613,913
01-01-18 4.00 8,675,000 7,753,542
Eastern Municipal Power Agency Power System
Refunding Revenue Bonds Series 1988A
01-01-26 6.00 1,940,000 2,229,448
Eastern Municipal Power Agency Power System
Refunding Revenue Bonds Series 1989A
01-01-10 7.50 29,160,000 36,153,504
01-01-11 5.50 37,800,000 37,811,340
Eastern Municipal Power Agency Power System
Refunding Revenue Bonds Series 1991A
01-01-19 5.75 55,000,000 55,646,250
Eastern Municipal Power Agency Power System
Refunding Revenue Bonds Series 1993B
01-01-12 6.25 24,655,000 26,239,577
Eastern Municipal Power Agency Power System
Refunding Revenue Bonds Series 1994B
01-01-07 7.25 5,000,000 5,814,500
Eastern Municipal Power Agency Power System
Refunding Revenue Bonds Series B
01-01-09 6.13 10,000,000 10,986,100
Eastern Municipal Power Agency Power System
Revenue Bonds Series 1993D
01-01-13 5.88 2,300,000 2,401,913
Municipal Power Agency 1 Catawba Electric
Revenue Bonds Series 1993
Inverse Floater (MBIA Insured)
01-01-12 6.97 7,400,000(c) 8,158,500
01-01-20 7.17 15,000,000(c) 16,218,750
Total 216,027,337
North Dakota (0.3%)
Fargo Hospital Refunding Revenue & Improvement Bonds
Dakota Hospital Series 1992
11-15-12 6.88 3,000,000 3,377,640
11-15-22 7.00 4,250,000 4,803,478
Ward County Health Care Facilities
Refunding Revenue Bonds Series 1996B
07-01-21 6.25 4,000,000 4,299,600
Ward County Health Care Facilities
Refunding Revenue Bonds Trinity Group Series 1996A
07-01-26 6.25 6,110,000 6,567,639
Total 19,048,357
Ohio (3.2%)
Air Quality Development Authority
Pollution Control Refunding Revenue Bonds
Cleveland Electric Company Series 1997B
08-01-20 6.00 10,000,000 10,240,400
Air Quality Development Authority
Pollution Control Refunding Revenue Bonds
Ohio Edison Series A
05-15-29 5.95 13,300,000 13,745,683
Air Quality Development Authority
Pollution Control Revenue Bonds
Ohio Edison Series 1989A
07-01-23 7.63 6,750,000 6,985,575
Bellefontaine Hospital Facility
Refunding Revenue Bonds
Mary Rutan Health Association of Logan County
Series 1993
12-01-13 6.00 5,330,000 5,561,748
Butler County Hospital Facility Improvement
Refunding Revenue Bonds
Fort Hamilton-Hughes Memorial Center
Series 1991
01-01-10 7.50 9,800,000 10,582,726
Carroll Water & Sewer District
Unlimited Tax General Obligation Bonds
12-01-10 6.25 1,895,000 2,018,402
Carroll Water & Sewer District
Water System Improvement Unlimited Tax
General Obligation Bonds
12-01-10 6.25 7,855,000 8,415,376
Cleveland Parking Facilities Improvement
Revenue Bonds Series 1992
09-15-22 8.10 15,000,000 17,499,000
Coshocton County Solid Waste Disposal
Refunding Revenue Bonds
Stone Container Series 1992
08-01-13 7.88 17,500,000 19,289,199
Cuyahoga County Health Care Facilities
Lifecare Refunding Revenue Bonds
Judson Retirement Community Series 1996A
11-15-13 7.25 2,080,000 2,281,032
Cuyahoga County Health Care Facilities
Refunding Revenue Bonds
Judson Retirement Community Series A
11-15-18 7.25 4,130,000 4,529,165
Erie County Hospital Improvement Refunding
Revenue Bonds Firelands Community Hospital
Series 1992
01-01-15 6.75 6,540,000 7,114,866
Franklin County Multi-family Housing
Refunding Revenue Bonds
Jefferson Chase Apartments
Series 1998B A.M.T.
11-01-35 6.40 1,465,000 1,468,531
Franklin County Multi-family Housing
Refunding Revenue Bonds
West Bay Apartments A.M.T.
12-01-25 6.38 8,425,000 8,584,233
Lorain County Independent Living & Hospital Facilities
Refunding Revenue Bonds Elyria United Methodist
Series 1996C
06-01-22 6.88 3,100,000 3,421,594
Marion County Health Care Facilities
Improvement Refunding Revenue Bonds
United Church Homes Series 1993
11-15-10 6.38 2,000,000 2,123,480
Marion County Health Care Facilities
Refunding & Improvement Revenue Bonds
United Church Homes Series 1993
11-15-15 6.30 1,800,000 1,903,572
Montgomery County Health Facilities Refunding
Revenue Bonds Friendship Village Dayton Series 1990A
02-01-16 9.25 9,025,000 9,787,342
State Water & Air Quality Development Authority
Pollution Control Refunding Revenue Bonds
Cleveland Electric Illuminating Series 1995
08-01-25 7.70 13,000,000 14,801,410
State Water Development Authority Pollution Control
Refunding Revenue Bonds Toledo Edison
Series 1994A A.M.T.
10-01-23 8.00 10,000,000 11,424,100
Water Development Authority Collateralized Pollution Control Revenue Bonds
Cleveland Electric Series 1989 A.M.T.
10-01-23 8.00 10,000,000 10,204,900
Water Development Authority Collateralized Pollution Control Revenue Bonds
Toledo Edison Series 1989 A.M.T.
10-01-23 8.00 8,500,000 8,836,685
Water Development Authority Pollution Control
Revenue Bonds Ohio Edison A.M.T.
10-01-23 8.10 10,000,000 10,517,700
Total 191,336,719
Oklahoma (1.0%)
Grand River Dam Authority Refunding Revenue Bonds
Series 1987
06-01-12 5.00 10,105,000 10,106,112
Hinton Economic Development Authority
Certificate of Participation
Dominion Leasing Series 1990A
07-01-15 9.75 19,090,000 21,854,804
Hinton Economic Development Authority
Certificate of Participation
Series 1994
07-01-15 8.75 11,415,000 12,826,807
Jackson County Hospital Authority
Refunding Revenue Bonds
Jackson County Memorial Hospital Series 1994
08-01-15 7.30 6,580,000 7,153,842
Midwest City Memorial Hospital Authority Hospital
Revenue Bonds Series 1992
04-01-22 7.38 7,815,000 8,809,459
Stillwater Medical Center Authority
Hospital Revenue Bonds Series 1997B
05-15-19 6.50 1,750,000 1,898,470
Total 62,649,494
Oregon (0.6%)
State Health Housing Educational & Cultural Facilities
Authority Revenue Bonds Oregon Baptist Retirement
Homes-Weidler Retirement Center Series 1995
11-15-26 8.00 7,645,000 8,602,154
Western Generation Agency Revenue Bonds
Wauna Cogeneration Series 1994A
01-01-21 7.13 13,600,000 14,749,200
Western Generation Agency Revenue Bonds
Wauna Cogeneration Series 1994B A.M.T.
01-01-16 7.40 9,000,000 9,865,440
Total 33,216,794
Pennsylvania (4.1%)
Allegheny County Industrial Development Authority
Environment Improvement Revenue Bonds
USX Corporation Series 1994A
12-01-20 6.70 6,000,000 6,567,780
Beaver County Industrial Development Authority
Collateralized Pollution Control Refunding Revenue Bonds
Cleveland Electric Illuminating Series 1995
05-01-25 7.63 7,500,000 8,459,775
Beaver County Industrial Development Authority
Collateralized Pollution Control Refunding Revenue Bonds
Cleveland Electric Illuminating Series 1995A
07-15-25 7.75 21,150,000 24,061,932
Beaver County Industrial Development Authority
Collateralized Pollution Control Refunding Revenue Bonds
Toledo Edison Series 1995A
05-01-20 7.75 14,000,000 15,988,420
Beaver County Industrial Development Authority
Pollution Control Revenue Bonds
Ohio Edison
09-01-24 7.75 34,650,000 36,070,996
Beaver County Industrial Development Authority
Pollution Control Revenue Bonds
Toledo Edison-Beaver Valley Series 1995
05-01-20 7.63 11,700,000 13,197,249
Butler County Industrial Development Authority Health Care
Refunding Revenue Bonds Pittsburgh Lifetime Care
Community Sherwood Oaks Series 1993
06-01-11 5.75 2,000,000 2,093,700
06-01-16 5.75 3,000,000 3,100,080
Convention Center Authority Refunding Revenue Bonds
Philadelphia Series 1994A
09-01-19 6.75 5,300,000 5,948,455
Delaware County Authority 1st Mortgage Revenue Bonds
Riddle Village Series 1996
06-01-26 7.00 10,000,000 10,532,300
Delaware County Authority 1st Mortgage Revenue Bonds
Whitehorse Village Continuing Care Series 1989
07-01-09 9.70 1,000,000 1,066,670
07-01-19 9.70 10,000,000 10,666,700
Delaware County Industrial Development Authority
Pollution Control Refunding Revenue Bonds
Philadelphia Electric Series A
04-01-21 7.38 900,000 966,249
Harrisburg Dauphin County General Obligation Bonds
Zero Coupon Series 1997F (AMBAC Insured)
09-15-20 5.50 3,000,000(d) 988,500
09-15-21 5.52 1,000,000(d) 310,840
09-15-22 5.52 1,000,000(d) 295,040
Montgomery County Higher Education & Health Authority
Retirement Community Revenue Bonds G.D.L. Farms
Series A
01-01-20 9.50 3,000,000 3,249,000
Philadelphia Gas Works Revenue Bonds Series 13
06-15-21 7.70 4,150,000 4,631,359
Philadelphia Hospital & Higher Education Facility
Authority Hospital Revenue Bonds
Albert Einstein Medical Center
04-01-11 7.63 15,545,000 16,084,101
Philadelphia Municipal Authority Lease
Refunding Revenue Bonds Series 1993D
07-15-13 6.25 2,500,000 2,675,800
07-15-17 6.30 1,550,000 1,660,174
Philadelphia Water & Sewer Revenue Bonds Series 16
08-01-10 7.50 13,200,000 14,723,148
08-01-18 7.00 14,000,000 15,188,320
Philadelphia Water & Wastewater Revenue Bonds
Series 1993 (CGIC Insured)
06-15-15 5.50 11,000,000 11,421,410
State Department of General Services
Certificate of Participation
Series 1994A (AMBAC Insured)
07-01-15 5.00 25,000,000 24,998,999
Wilkins Industrial Development Authority Revenue Bonds
Retirement Community Longwood at Oakmont
Series 1991A
01-01-21 10.00 8,495,000 9,778,680
Total 244,725,677
Puerto Rico (1.0%)
Commonwealth Public Improvement General Obligation
Refunding Revenue Bonds Series 1998
07-01-23 4.50 13,200,000 12,289,068
Electric Power Agency Revenue Bonds
Series N
07-01-10 6.00 40,000,000 40,538,800
Electric Power Agency Revenue Bonds
Series O
07-01-10 6.00 5,305,000 5,376,458
Total 58,204,326
South Carolina (1.1%)
Cherokee County Spring City Industrial Development
Revenue Bonds Knitting Cluett Peabody
09-01-09 7.40 5,200,000 6,318,416
Jobs Economic Development Authority
1st Mortgage Health Facilities Nursing Home Refunding
Revenue Bonds Lutheran Homes Series 1998
05-01-26 5.70 5,235,000 5,246,674
Piedmont Municipal Power Agency Electric
Refunding Revenue Bonds Series 1986B
01-01-24 5.75 7,550,000 7,553,398
Public Service Authority Electric System
Expansion Revenue Bonds Santee Cooper
Series 1991D
07-01-31 6.63 14,975,000 16,695,478
Public Service Authority Electric System
Revenue Bonds Santee Cooper
Series 1991B
07-01-31 6.00 8,000,000 8,465,760
Public Service Authority Electric System
Revenue Bonds Santee Cooper
Series 1993A Inverse Floater (MBIA Insured)
06-28-13 7.04 17,700,000(c) 19,425,749
Total 63,705,475
South Dakota (0.6%)
Heartland Consumers Power District Electric System
Refunding Revenue Bonds Series 1986
01-01-10 6.00 10,205,000 11,342,245
Sioux Falls Multi-family Housing Revenue Bonds
Series 1996A
12-01-34 7.50 12,200,000 13,265,792
State Lease Revenue Trust Certificates Series 1993
(CGIC Insured)
09-01-17 6.70 7,260,000 8,880,795
Total 33,488,832
Tennessee (0.4%)
Nashville & Davidson Counties Health & Education
Facilities 1st Mortgage Revenue Bonds
Blakeford at Green Hills CCRC
07-01-24 9.25 12,230,000 15,554,481
Nashville & Davidson Counties Health & Education
Facilities Board Revenue Bonds
Zero Coupon Escrowed to Maturity
06-01-21 5.38 29,109,000(d) 8,931,223
Total 24,485,704
Texas (6.7%)
Alliance Airport Authority Special Facility Revenue Bonds
American Airlines Series 1990 A.M.T.
12-01-29 7.50 37,400,000 40,120,476
Austin Combined Utility Systems Refunding Revenue Bonds
Series 1985
05-15-10 10.75 10,000,000 11,024,700
05-15-15 10.75 2,000,000 2,204,940
Austin Combined Utility Systems Refunding Revenue Bonds
Series 1986
11-15-13 5.00 19,985,000 19,986,199
Board of Regents of the University System General
Refunding Revenue Bonds Series 1986
08-15-07 6.50 2,565,000 2,906,504
Brazos River Authority Collateralized Pollution Control
Revenue Bonds Texas Utility Electric
Series 1989A A.M.T.
01-01-19 8.25 14,000,000 14,323,120
Brazos River Authority Collateralized Pollution Control
Revenue Bonds Texas Utility Electric
Series 1990A A.M.T.
02-01-20 8.13 13,205,000 13,988,057
Brazos River Authority Collateralized Pollution Control
Revenue Bonds Texas Utility Electric
Series 1991A A.M.T.
03-01-21 7.88 24,450,000 26,530,451
Castlewood Municipal Utility District Water &
Sewer Systems Unlimited Tax & Refunding Revenue Bonds
Series 1997
04-01-14 6.75 2,860,000 3,039,236
Colony Municipal Utility District 1 Denton County
Series 1980
08-01-07 9.25 1,000,000 1,364,830
Cypress Hill Municipal Utility District 1
General Obligation Bonds
09-01-22 5.30 2,045,000 2,037,986
Dallas & Fort Worth International Airport Special Facility
Revenue Bonds American Airlines Series 1990 A.M.T.
11-01-25 7.50 26,200,000 28,049,458
Dallas & Fort Worth International Airport Special Facility
Revenue Bonds Delta Airlines Series 1991 A.M.T.
11-01-26 7.13 13,500,000 14,318,505
Dallas Civic Center Miscellaneous Refunding Revenue
& Improvement Bonds Series 1998 (MBIA Insured)
08-15-23 4.88 29,850,000 29,094,497
Denison Hospital Authority Hospital Revenue Bonds
Texoma Medical Center Series 1994
08-15-24 7.10 3,950,000 4,414,639
Harris County Health Facilities Hospital Revenue Bonds
Memorial Hospital Series 1992
06-01-15 7.13 16,000,000 17,978,240
Harris County Industrial Development Marine Terminal
Refunding Revenue Bonds GATX Terminal Series 1992
02-01-22 6.95 15,000,000 16,148,550
Harris County Municipal Utility District 196
Water & Sewer Revenue Bonds Series 1998
09-01-23 5.50 2,585,000 2,553,773
Hidalgo County Health Services Corporation
Hospital Revenue Bonds Mission Hospital
Series 1996
08-15-26 6.88 7,880,000 8,704,484
Interstate Municipal Utility District
Unlimited Tax Bonds Harris County Series 1996
09-01-21 6.75 3,020,000 3,289,112
Karnes County Public Facility Lease Revenue Bonds
03-01-15 9.20 15,645,000 19,738,827
Kings Manor Municipal Utility District
Waterworks & Sewer Systems Combination
Unlimited Tax & Revenue Bonds Series 1995
03-01-18 6.88 2,470,000 2,719,025
Lower Colorado River Authority Combined Utility
Junior Lien Revenue Bonds 7th Supplement
Series 1998 (FSA Insured)
01-01-28 4.75 10,500,000 10,037,475
Midland County Hospital District Revenue Bonds Series 1992
06-01-16 7.50 3,025,000 3,410,052
Mineral Wells Independent School Districts Palo Pinto &
Parker Counties Unlimited Tax General Obligation School
Building & Refunding Bonds Series 1998
Permanent School Fund Guarantee
02-15-22 4.75 5,430,000 5,244,403
02-15-28 4.75 8,345,000 8,001,019
Municipal Power Agency
Refunding Revenue Bonds (MBIA Insured)
09-01-09 5.25 8,000,000 8,619,680
Municipal Power Agency
Revenue Bonds
09-01-13 5.50 7,410,000 7,417,632
Rio Grande City Consolidated Independent School District
Public Facilities Lease Revenue Bonds Series 1995
07-15-10 6.75 4,000,000 4,409,840
Rolling Creek Utility District Unlimited Tax
General Obligation Refunding Bonds
Series 1998
03-01-15 5.75 3,660,000 3,708,788
Sabine River Authority Collateralized Pollution Control
Revenue Bonds Texas Utilities Electric Series 1990A A.M.T.
02-01-20 8.13 30,500,000 32,311,090
San Antonio Electric & Gas Systems
Revenue Bonds Series 1987
02-01-14 5.00 8,680,000 8,680,781
Uvalde Consolidated Independent School District
General Obligation Bonds
Permanent School Fund Guarantee
08-01-22 4.50 5,100,000 4,728,108
West Side Calhoun County Navigation District
Solid Waste Disposal Revenue Bonds
Union Carbide Chemical & Plastics Series 1991 A.M.T.
03-15-21 8.20 17,550,000 19,173,375
Total 400,277,852
Utah (1.6%)
Carbon County Solid Waste Disposal
Refunding Revenue Bonds Sunnyside
Cogeneration Associates Series 1991 A.M.T.
07-01-18 9.25 25,350,000(j) 13,942,500
Housing Finance Agency Single Family Mortgage
Senior Bonds Series 1991C (FGIC Insured)
07-01-11 7.30 570,000 601,669
07-01-16 7.35 450,000 474,705
Hurricane Health Facilities Development Revenue Bonds
Mission Health Services Series 1990
07-01-20 10.50 7,570,000 8,311,482
Intermountain Power Agency Power Supply
Refunding Revenue Bonds Series 1993B Inverse Floater
07-01-11 7.30 7,600,000(c) 8,512,000
Intermountain Power Agency Power Supply
Refunding Revenue Bonds Series 1996C (MBIA Insured)
07-01-17 5.70 46,000,000 49,294,980
Intermountain Power Agency Power Supply
Refunding Revenue Bonds Series F (AMBAC Insured)
07-01-13 5.00 5,000,000 5,000,800
Intermountain Power Agency Power Supply
Revenue Bonds Series 1987A (MBIA Insured)
07-01-12 5.00 8,000,000 8,001,760
Tooele County Pollution Control Refunding Revenue Bonds
Laidlaw Environmental Services Incorporated
Series 1997A A.M.T.
07-01-27 7.55 4,000,000 4,434,080
Total 98,573,976
Virginia (0.7%)
Fairfax County Economic Development Authority
Educational Facilities Revenue Bonds
Browne Academy Series 1998
10-01-08 6.00 1,500,000 1,517,625
10-01-23 6.45 5,200,000 5,303,844
Fairfax County Redevelopment & Housing Authority
Multi-family Housing Revenue Bonds
Burkeshire Commons Series 1996
10-01-36 7.60 13,155,000 14,437,349
Hopewell City Industrial Development Authority
Pollution Control Refunding Revenue Bonds
Stone Container Series 1992
05-01-10 8.25 3,170,000 3,516,640
Housing Development Authority Commonwealth
Mortgage Bonds Series 1992A
01-01-33 7.15 11,890,000 12,506,497
Prince William County Service Authority Water & Sewer
Systems Refunding Revenue Bonds
Series 1997 (FGIC Insured)
07-01-29 4.75 1,875,000 1,804,706
Total 39,086,661
Washington (2.7%)
King County Housing Authority Pooled Housing
Refunding Revenue Bonds Series 1995A
03-01-26 7.20 4,000,000 4,176,120
Longview Industrial Development Corporation Solid Waste
Revenue Bonds Weyerhaeuser Series 1991 A.M.T.
02-01-13 7.45 20,000,000 21,504,000
Public Power Supply System Nuclear Project 1
Refunding Revenue Bonds Bonneville Power Administration
Series 1993A Inverse Floater (FSA Insured)
07-01-11 7.47 25,000,000(c) 30,593,750
Public Power Supply System Nuclear Project 1
Refunding Revenue Bonds Series A
07-01-15 6.50 21,000,000 23,287,740
Public Power Supply System Nuclear Project 1
Revenue Bonds Series 1990A
07-01-17 6.00 38,875,000 40,372,465
Public Power Supply System Nuclear Project 2
Revenue Bonds Series 1994A
07-01-11 5.38 10,000,000 10,387,300
Snohomish County Public Utility District 1
Generation System Revenue Bonds Series 1986A
01-01-20 5.00 17,750,000 17,978,975
State General Obligation
Refunding Revenue Bonds
Zero Coupon Series 1997A
07-01-19 5.95 16,260,000(d) 5,765,959
State Housing Finance Commission
Refunding Revenue Bonds Horizon House
Series 1995A (Asset Guaranty)
07-01-17 6.00 3,700,000 3,953,413
07-01-27 6.13 3,845,000 4,128,530
Total 162,148,252
West Virginia (1.2%)
Kanawha County Pollution Control
Revenue Bonds Union Carbide Series 1984
08-01-04 7.35 3,000,000 3,449,760
Mason County Pollution Control
Refunding Revenue Bonds Appalachian Power
Series 1992J
10-01-22 6.60 25,000,000 26,810,250
Pea Ridge Public Service District Sewer
Refunding Revenue Bonds Series 1990
05-01-20 9.25 2,540,000 2,811,018
Putnam County Pollution Control Revenue Bonds
Appalachian Power Series C
07-01-19 6.60 10,600,000 11,310,518
School Building Authority Capital Improvement
Revenue Bonds Series 1991A
07-01-21 6.00 20,785,000 21,782,888
South Charleston Pollution Control Refunding
Revenue Bonds Union Carbide Series 1985
08-01-05 7.63 3,000,000 3,524,910
Total 69,689,344
Wisconsin (0.6%)
Health & Education Facilities Authority
Revenue Bonds St. Clare Hospital
02-15-22 7.00 12,115,000 13,132,175
Madison Industrial Development
Refunding Revenue Bonds Madison Gas & Electric
Series 1992B
10-01-27 6.70 19,300,000 20,958,449
State Health & Education Facilities Authority
Lifecare Revenue Bonds United Lutheran
Program for the Aging - Luther Manor Series 1998
03-01-28 5.70 3,250,000 3,233,620
Total 37,324,244
Wyoming (0.2%)
Natrona County Hospital Revenue Bonds
Wyoming Medical Center
09-15-10 8.13 6,500,000 7,141,940
State Farm Loan Board Capital Facilities
Revenue Bonds Series 1994
04-01-24 6.10 5,000,000 5,477,950
Total 12,619,890
Total municipal bonds
(Cost: $5,189,274,609) $5,814,702,281
Other (--%)
Issuer Value(a)
Smoky Mountain Golf Course(k) $599,999
Total other
(Cost: $7,171,187) $599,999
Municipal notes (1.5%)
Issuer(b,f,g) Effective Amount Value(a)
yield payable at
maturity
Burke County Georgia Development Authority Pollution
Control Revenue Bonds (Georgia Power) Vogtle
2nd Series V.R.
07-01-24 3.30% $1,700,000 $1,700,000
Burke County Georgia Development Authority Pollution
Control Revenue Bonds (Georgia Power) Vogtle
3rd Series 1995 V.R.
09-01-25 3.25 4,200,000 4,200,000
Burke County Georgia Development Authority Pollution
Control Revenue Bonds (Georgia Power) Vogtle
Series 1995 V.R.
04-01-25 3.25 1,300,000 1,300,000
Burke County Georgia Pollution Control Revenue
Bonds (Georgia Power) Series 1994 V.R.
07-01-24 3.35 2,800,000 2,800,000
Emery County Utah Pollution Control Refunding
Revenue Bonds (Pacificorp) Series 1994 V.R.
11-01-24 3.35 7,050,000 7,050,000
Harris County Texas Development Solid Waste
Exxon Series 1997 V.R.
04-01-33 3.30 3,700,000 3,700,000
Illinois Health Facility Provena Health
Series 1998B V.R.
05-01-28 3.35 4,900,000 4,900,000
Jackson County Mississippi Pollution Control
Revenue Bonds (Chevron) Series 1992 V.R.
12-01-16 3.25 1,200,000 1,200,000
Jacksonville Florida Pollution Control Revenue Bonds
Power & Light Series 1995 V.R.
05-01-29 3.25 6,100,000 6,100,000
Long Island New York Power Authority Electric
Revenue Bonds 5th Series V.R.
05-01-33 3.25 12,800,000 12,800,000
Louisiana State Offshore Terminal Authority
Deepwater Port Revenue Bonds Loop
Series 1992 V.R.
09-01-08 3.30 3,650,000 3,650,000
Monroe County Georgia Development Authority
(Georgia Power) 2nd Series V.R.
07-01-25 3.65 4,900,000 4,900,000
New York City Municipal Water Finance Authority
Series G V.R. (FGIC Insured)
06-15-24 3.25 15,700,000 15,700,000
Orange County California Sanitation
Certificate of Participation Series 1992 V.R.
08-01-17 3.20 10,000,000 10,000,000
Roanoke Virginia Hospital Revenue Bonds
Carlton Health System Series 1997A V.R.
07-01-32 3.30 2,200,000 2,200,000
Uinta County Wyoming Pollution Control
Revenue Bonds (Chevron) Series 1993 V.R.
08-15-20 3.25 2,000,000 2,000,000
Valdez Alaska Marine Terminal Revenue Bonds
(Exxon Pipeline) Series 1985 V.R.
10-01-25 3.30 1,000,000 1,000,000
Valdez Alaska Marine Terminal Revenue Bonds
(Exxon Pipeline) Series 1993A V.R.
12-01-33 3.30 2,460,000 2,460,000
Washington Health Care Facility Authority
(Sisters of Providence) Series 1985D V.R.D.N.
10-01-05 3.25 1,100,000 1,100,000
Total municipal notes
(Cost: $88,760,000) $88,760,000
Total investments in securities
(Cost: $5,285,205,796)(l) $5,904,062,280
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) The following abbreviations may be used in portfolio descriptions to
identify the insurer of the issue: ACA -- ACA Financial Guaranty Corporation
AMBAC -- American Municipal Bond Association Corporation
BIG -- Bond Investors Guarantee
CGIC -- Capital Guaranty Insurance Company
FGIC -- Financial Guarantee Insurance Corporation
FHA -- Federal Housing Authority
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
MBIA -- Municipal Bond Investors Assurance
(c) Inverse floaters represent securities that pay interest at a rate that
increases (decreases) in the same magnitude as, or in a multiple of, a decline
(increase) in market short-term rates. Interest rate disclosed is the rate in
effect on Nov. 30, 1998. Inverse floaters in the aggregate represent 6.14% of
the Fund's net assets as of Nov. 30, 1998.
(d) For zero coupon bonds, the interest rate disclosed represents the annualized
effective yield on the date of acquisition.
(e) For those zero coupon bonds that become coupon paying at a future date, the
interest rate disclosed represents the annualized effective yield from the date
of acquisition to interest reset date disclosed.
(f) The Portfolio is entitled to receive principal amount from issuer or
corporate guarantor, if indicated in parentheses, after a day or a week's
notice. The maturity date disclosed represents the final maturity. Interest rate
varies to reflect current market conditions; rate shown is the effective rate on
Nov. 30, 1998.
(g) The following abbreviations may be used in the portfolio descriptions:
A.M.T. -- Alternative Minimum Tax-- As of Nov. 30, 1998, the value of
securities subject to alternative minimum tax represented 16.63%
of net assets.
B.A.N. -- Bond Anticipation Note
C.P. -- Commercial Paper
R.A.N. -- Revenue Anticipation Note
T.A.N. -- Tax Anticipation Note
T.R.A.N. -- Tax & Revenue Anticipation Note
V.R. -- Variable Rate
V.R.D.B. -- Variable Rate Demand Bond
V.R.D.N. -- Variable Rate Demand Note
(h) Interest rate varies to reflect current market conditions; rate shown is the
effective rate on Nov. 30, 1998.
(i) At Nov. 30, 1998, the cost of securities purchased, including interest
purchased, on awhen-issued basis was $7,669,520.
(j) Non-income producing. Items identified are in default as to payment of
interest and/or principal.
(k) This property was acquired through foreclosure in connection with the
default of a bond issue. The property is valued as of Nov. 30, 1998 at the
approximate sales price realized by the portfolio subsequent to year end.
(l) At Nov. 30, 1998, the cost of securities for federal income tax purposes was
$5,292,047,829 and the aggregate gross unrealized appreciation and depreciation
based on that cost was:
Unrealized appreciation........................................$640,676,997
Unrealized depreciation.........................................(28,662,546)
Net unrealized appreciation....................................$612,014,451
<PAGE>
PART C. OTHER INFORMATION
Item 23. Exhibits
(a) Articles of Incorporation, filed as Exhibit 1 to Registrant's
Post-Effective Amendment No. 19 to Registration Statement No. 2-63552,
are incorporated by reference.
(b) By-laws, as amended Feb 14, 1991, filed as Exhibit 2 to Registrant's
Post-Effective Amendment No. 20 to Registration Statement No. 2-63552,
are incorporated by reference.
(c) Stock certificate, filed as Exhibit 4 to Registrant's Registration
Statement No. 2-63552, on February 9, 1979, is incorporated by
reference.
(d) Investment Management Services Agreement between Registrant and
American Express Financial Corporation, dated March 20, 1995, filed
electronically as Exhibit 5 to Registrant's Post-Effective Amendment
No. 34 to Registration Statement No. 2-63552, is incorporated by
reference. The agreement was assumed by the Portfolio when the Fund
adopted the master/feeder structure.
(e) Distribution Agreement Between Registrant and American Express
Financial Advisors Inc., dated March 20, 1995, filed electronically as
Exhibit 6 to Registrant's Post-Effective Amendment No. 34 to
Registration Statement No. 2-63552, is incorporated by reference.
(f) All employees are eligible to participate in a profit sharing plan.
Entry into the plan is Jan. 1 or July 1. The Registrant contributes
each year an amount up to 15 percent of their annual salaries, the
maximum deductible amount permitted under Section 404(a) of the
Internal Revenue Code.
(g)(1) Custodian Agreement between Registrant and First National Bank of
Minneapolis, dated August 16, 1979, filed electronically as Exhibit
8(a) to Registrant's Post-Effective Amendment No. 34 to Registration
Statement No. 2-63552, is incorporated by reference.
(g)(2) Addendum to the Custodian Agreement between Registrant, First Bank
National Association and American Express Financial Corporation, dated
May 13, 1996 filed electronically as Exhibit 8(b) to Registrant's
Post-Effective Amendment No. 34 to Registration Statement No. 2-63552,
is incorporated by reference.
(h)(1) Administrative Services Agreement between Registrant and American
Express Financial Corporation, dated March 20, 1995, filed
electronically as Exhibit 9(e) to Registrant's Post-Effective
Amendment No. 34 to Registration Statement No. 2-63552, is
incorporated by reference.
(h)(2) Agreement and Declaration of Unitholders between Registrant and
Strategist Tax-Free Income Fund, Inc., dated May 13, 1996, filed
electronically as Exhibit 9(f) to Registrant's Post-Effective
Amendment No. 34 to Registration Statement No. 2-63552, is
incorporated by reference.
(h)(3) License Agreement between Registrant and IDS Financial Corporation
dated January 25, 1988, filed as Exhibit 9(c) to Registrant's
Post-Effective Amendment No. 21 to Registration Statement No. 2-63552,
is incorporated by reference.
(h)(4) Plan and Agreement of Merger, dated April 10, 1986, filed
electronically as Exhibit No. 9 to Registrant's Post-Effective
Amendment No. 13 to Registration Statement No. 2-63552, is
incorporated by reference.
(h)(5) Shareholder Service Agreement between Registrant and American Express
Financial Advisors Inc., dated March 20, 1995, filed electronically as
Exhibit 9(d) to Registrant's Post-Effective Amendment No. 34 to
Registration Statement No. 2-63552, is incorporated by reference.
(h)(6) Class Y Shareholder Service Agreement between IDS Precious Metals
Fund, Inc. and American Express Financial Advisors Inc., dated May 9,
1997, filed electronically on or about May 27, 1997 as Exhibit 9(e) to
IDS Precious Metals Fund, Inc.'s Post-Effective Amendment No. 30 to
Registration Statement No. 2-93745, is incorporated by reference.
Registrant's Class Y Shareholder Service Agreement differs from the
one incorporated by reference only by the fact that Registrant is one
executing party.
<PAGE>
(h)(7) Transfer Agency Agreement between Registrant and American Express
Client Service Corporation, dated Jan. 1, 1998 is incorporated by
reference to Exhibit 9(b) of Registrant's Post-Effective Amendment No.
35 filed on or about Jan. 26, 1998.
(i) Opinion and consent of counsel as to the legality of the securities
being registered is filed electronically herewith.
(j) Independent Auditors' Consent is filed electronically herewith.
(k) Omitted Financial Statements: None
(l) Initial Capital Agreements: Not Applicable.
(m) Plan and Agreement of Distribution between Registrant and American
Express Financial Advisors Inc., dated March 20, 1995, filed
electronically as Exhibit 15 to Registrant's Post-Effective Amendment
No. 34 to Registration Statement No. 2-63552, is incorporated by
reference.
(n) Financial Data Schedules are filed electronically herewith.
(o) Rule 18f-3 plan, dated May 9, 1997, filed electronically on or about
January 26, 1998 as Exhibit 18 to IDS Equity Select Fund, Inc.'s
Post-Effective Amendment No. 86 to Registration Statement No. 2-13188,
is incorporated by reference.
(p)(1) Directors' Power of Attorney dated January 14, 1999 is filed
electronically herewith.
(p)(2) Officers' Power of Attorney dated November 1, 1995, to sign amendments
to this Registration Statement, filed electronically herewith as
Exhibit 19(b) to Registrant's Post-Effective Amendment No. 33, is
incorporated by reference.
(p)(3) Trustees' Power of Attorney dated January 14, 1999 is filed
electronically herewith.
(p)(4) Officers' Power of Attorney dated April 11, 1996 filed electronically
as Exhibit 19(d) to Registrant's Post-Effective Amendment No. 34 to
Registration Statement No. 2-63552, is incorporated by reference.
Item 24. Persons Controlled by or under Common Control with Registrant
None.
Item 25. Indemnification
The Articles of Incorporation of the registrant provide that the Fund shall
indemnify any person who was or is a party or is threatened to be made a party,
by reason of the fact that she or he is or was a director, officer, employee or
agent of the Fund, or is or was serving at the request of the Fund as a
director, officer, employee or agent of another company, partnership, joint
venture, trust or other enterprise, to any threatened, pending or completed
action, suit or proceeding, wherever brought, and the Fund may purchase
liability insurance and advance legal expenses, all to the fullest extent
permitted by the laws of the State of Minnesota, as now existing or hereafter
amended. The By-laws of the registrant provide that present or former directors
or officers of the Fund made or threatened to be made a party to or involved
(including as a witness) in an actual or threatened action, suit or proceeding
shall be indemnified by the Fund to the full extent authorized by the Minnesota
Business Corporation Act, all as more fully set forth in the By-laws filed as an
exhibit to this registration statement.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in
<PAGE>
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
Any indemnification hereunder shall not be exclusive of any other rights of
indemnification to which the directors, officers, employees or agents might
otherwise be entitled. No indemnification shall be made in violation of the
Investment Company Act of 1940.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Item 26. Business and Other Connections of Investment Adviser (American Express
Financial Corporation)
Directors and officers of American Express Financial Corporation who are
directors and/or officers of one or more other companies:
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Name and Title Other company(s) Address Title within other
company(s)
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
Ronald G. Abrahamson, American Express Client IDS Tower 10 Director and Vice President
Vice President Service Corporation Minneapolis, MN 55440
American Express Financial Vice President
Advisors Inc.
Public Employee Payment Director and Vice President
Company
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Douglas A. Alger, American Express Financial IDS Tower 10 Senior Vice President
Senior Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Peter J. Anderson, Advisory Capital IDS Tower 10 Director
Director and Senior Vice Strategies Group Inc. Minneapolis, MN 55440
President
American Express Asset Director and Chairman of
Management Group Inc. the Board
American Express Asset Director, Chairman of the
Management International, Board and Executive Vice
Inc. President
American Express Financial Senior Vice President
Advisors Inc.
IDS Capital Holdings Inc. Director and President
IDS Futures Corporation Director
NCM Capital Management 2 Mutual Plaza Director
Group, Inc. 501 Willard Street
Durham, NC 27701
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Ward D. Armstrong, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
American Express Service Vice President
Corporation
American Express Trust Director and Chairman of
Company the Board
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
John M. Baker, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
American Express Trust Senior Vice President
Company
Joseph M. Barsky III, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Timothy V. Bechtold, American Centurion Life IDS Tower 10 Director and President
Vice President Assurance Company Minneapolis, MN 55440
American Express Financial Vice President
Advisors Inc.
IDS Life Insurance Company Executive Vice President
IDS Life Insurance Company P.O. Box 5144 Director and President
of New York Albany, NY 12205
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
John C. Boeder, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
IDS Life Insurance Company P.O. Box 5144 Director
of New York Albany, NY 12205
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Douglas W. Brewers, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Karl J. Breyer, American Express Financial IDS Tower 10 Corporate Senior Vice
Director, Corporate Senior Advisors Inc. Minneapolis, MN 55440 President
Vice President
American Express Financial Director
Advisors Japan Inc.
American Express Minnesota Director
Foundation
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Cynthia M. Carlson, American Enterprise IDS Tower 10 Director, President and
Vice President Investment Services Inc. Minneapolis, MN 55440 Chief Executive Officer
American Express Financial Vice President
Advisors Inc.
American Express Service Vice President
Corporation
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Mark W. Carter, American Express Financial IDS Tower 10 Senior Vice President and
Senior Vice President and Advisors Inc. Minneapolis, MN 55440 Chief Marketing Officer
Chief Marketing Officer
IDS Life Insurance Company Executive Vice President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
James E. Choat, American Centurion Life IDS Tower 10 Executive Vice President
Director and Senior Vice Assurance Company Minneapolis, MN 55440
President
American Enterprise Life Director, President and
Insurance Company Chief Executive Officer
American Express Financial Senior Vice President
Advisors Inc.
American Express Insurance Vice President
Agency of Idaho Inc.
American Express Insurance Vice President
Agency of Nevada Inc.
American Express Insurance Vice President
Agency of Oregon Inc.
American Express Property Vice President
Casualty Insurance Agency
of Kentucky Inc.
American Express Property Vice President
Casualty Insurance Agency
of Maryland Inc.
American Express Property Vice President
Casualty Insurance Agency
of Pennsylvania Inc.
IDS Insurance Agency of Vice President
Alabama Inc.
IDS Insurance Agency of Vice President
Arkansas Inc.
IDS Insurance Agency of Vice President
Massachusetts Inc.
IDS Insurance Agency of Vice President
New Mexico Inc.
IDS Insurance Agency of Vice President
North Carolina Inc.
IDS Insurance Agency of Vice President
Ohio Inc.
IDS Insurance Agency of Vice President
Wyoming Inc.
IDS Life Insurance Company Executive Vice President
of New York
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Kenneth J. Ciak, AMEX Assurance Company IDS Tower 10 Director and President
Vice President and General Minneapolis, MN 55440
Manager
American Express Financial Vice President and General
Advisors Inc. Manager
IDS Property Casualty 1 WEG Blvd. Director and President
Insurance Company DePere, WI 54115
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Paul A. Connolly, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Colleen Curran, American Express Financial IDS Tower 10 Vice President and
Vice President and Assistant Advisors Inc. Minneapolis, MN 55440 Assistant General Counsel
General Counsel
American Express Service Vice President and Chief
Corporation Legal Counsel
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Luz Maria Davis American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Douglas K. Dunning, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Gordon L. Eid, American Express Financial IDS Tower 10 Senior Vice President,
Director, Senior Vice Advisors Inc. Minneapolis, MN 55440 General Counsel and Chief
President, General Counsel Compliance Officer
and Chief Compliance Officer
American Express Financial Vice President and Chief
Advisors Japan Inc. Compliance Officer
American Express Insurance Director and Vice President
Agency of Arizona Inc.
American Express Insurance Director and Vice President
Agency of Idaho Inc.
American Express Insurance Director and Vice President
Agency of Nevada Inc.
American Express Insurance Director and Vice President
Agency of Oregon Inc.
American Express Property Director and Vice President
Casualty Insurance Agency
of Kentucky Inc.
American Express Property Director and Vice President
Casualty Insurance Agency
of Maryland Inc.
American Express Property Director and Vice President
Casualty Insurance Agency
of Pennsylvania Inc.
IDS Insurance Agency of Director and Vice President
Alabama Inc.
IDS Insurance Agency of Director and Vice President
Arkansas Inc.
IDS Insurance Agency of Director and Vice President
Massachusetts Inc.
IDS Insurance Agency of Director and Vice President
New Mexico Inc.
IDS Insurance Agency of Director and Vice President
North Carolina Inc.
IDS Insurance Agency of Director and Vice President
Ohio Inc.
IDS Insurance Agency of Director and Vice President
Wyoming Inc.
IDS Real Estate Services, Vice President
Inc.
Investors Syndicate Director
Development Corp.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Robert M. Elconin, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
IDS Life Insurance Company Vice President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Gordon M. Fines, American Express Asset IDS Tower 10 Senior Vice President and
Vice President Management Group Inc. Minneapolis, MN 55440 Chief Investment Officer
American Express Financial Vice President
Advisors Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Douglas L. Forsberg, American Centurion Life IDS Tower 10 Director
Vice President Assurance Company Minneapolis, MN 55440
American Express Financial Vice President
Advisors Inc.
American Express Financial Director, President and
Advisors Japan Inc. Chief Executive Officer
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Jeffrey P. Fox, American Enterprise Life IDS Tower 10 Vice President and
Vice President and Corporate Insurance Company Minneapolis, MN 55440 Controller
Controller
American Express Financial Vice President and
Advisors Inc. Corporate Controller
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Harvey Golub, American Express Company American Express Tower Chairman and Chief
Director World Financial Center Executive Officer
New York, NY 10285
American Express Travel Chairman and Chief
Related Services Company, Executive Officer
Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
David A. Hammer, American Express Financial IDS Tower 10 Vice President and
Vice President and Marketing Advisors Inc. Minneapolis, MN 55440 Marketing Controller
Controller
IDS Plan Services of Director and Vice President
California, Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Lorraine R. Hart, AMEX Assurance Company IDS Tower 10 Vice President
Vice President Minneapolis, MN 55440
American Centurion Life Vice President
Assurance Company
American Enterprise Life Vice President
Insurance Company
American Express Financial Vice President
Advisors Inc.
American Partners Life Director and Vice
Insurance Company President
IDS Certificate Company Vice President
IDS Life Insurance Company Vice President
IDS Life Series Fund, Inc. Vice President
IDS Life Variable Annuity Vice President
Funds A and B
Investors Syndicate Director and Vice
Development Corp. President
IDS Life Insurance Company P.O. Box 5144 Vice President
of New York Albany, NY 12205
IDS Property Casualty 1 WEG Blvd. Vice President
Insurance Company DePere, WI 54115
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Scott A. Hawkinson, American Express Financial IDS Tower 10 Vice President and
Vice President and Controller Advisors Inc. Minneapolis, MN 55440 Controller
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Janis K. Heaney, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
James G. Hirsh, American Express Financial IDS Tower 10 Vice President and
Vice President and Assistant Advisors Inc. Minneapolis, MN 55440 Assistant General Counsel
General Counsel
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Darryl G. Horsman, American Express Trust IDS Tower 10 Director and President
Vice President Company Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Jeffrey S. Horton, AMEX Assurance Company IDS Tower 10 Vice President, Treasurer
Vice President and Corporate Minneapolis, MN 55440 and Assistant Secretary
Treasurer
American Centurion Life Vice President and
Assurance Company Treasurer
American Enterprise Vice President and
Investment Services Inc. Treasurer
American Enterprise Life Vice President and
Insurance Company Treasurer
American Express Asset Vice President and
Management Group Inc. Treasurer
American Express Asset Vice President and
Management International Treasurer
Inc.
American Express Client Vice President and
Service Corporation Treasurer
American Express Vice President and
Corporation Treasurer
American Express Financial Vice President and
Advisors Inc. Treasurer
American Express Financial Vice President and
Advisors Japan Inc. Treasurer
American Express Insurance Vice President and
Agency of Arizona Inc. Treasurer
American Express Insurance Vice President and
Agency of Idaho Inc. Treasurer
American Express Insurance Vice President and
Agency of Nevada Inc. Treasurer
American Express Insurance Vice President and
Agency of Oregon Inc. Treasurer
American Express Minnesota Vice President and
Foundation Treasurer
American Express Property Vice President and
Casualty Insurance Agency Treasurer
of Kentucky Inc.
American Express Property Vice President and
Casualty Insurance Agency Treasurer
of Maryland Inc.
American Express Property Vice President and
Casualty Insurance Agency Treasurer
of Pennsylvania Inc.
American Partners Life Vice President and
Insurance Company Treasurer
IDS Cable Corporation Director, Vice President
and Treasurer
IDS Cable II Corporation Director, Vice President
and Treasurer
IDS Capital Holdings Inc. Vice President, Treasurer
and Assistant Secretary
IDS Certificate Company Vice President and
Treasurer
IDS Insurance Agency of Vice President and
Alabama Inc. Treasurer
IDS Insurance Agency of Vice President and
Arkansas Inc. Treasurer
IDS Insurance Agency of Vice President and
Massachusetts Inc. Treasurer
IDS Insurance Agency of Vice President and
New Mexico Inc. Treasurer
IDS Insurance Agency of Vice President and
North Carolina Inc. Treasurer
IDS Insurance Agency of Vice President and
Ohio Inc. Treasurer
IDS Insurance Agency of Vice President and
Wyoming Inc. Treasurer
IDS Life Insurance Company Vice President, Treasurer
and Assistant Secretary
IDS Life Insurance Company P.O. Box 5144 Vice President and
of New York Albany, NY 12205 Treasurer
IDS Life Series Fund Inc. Vice President and
Treasurer
IDS Life Variable Annuity Vice President and
Funds A & B Treasurer
IDS Management Corporation Director, Vice President
and Treasurer
IDS Partnership Services Vice President and
Corporation Treasurer
IDS Plan Services of Vice President and
California, Inc. Treasurer
IDS Real Estate Services, Vice President and
Inc. Treasurer
IDS Realty Corporation Vice President and
Treasurer
IDS Sales Support Inc. Vice President and
Treasurer
Investors Syndicate Vice President and
Development Corp. Treasurer
IDS Property Casualty 1 WEG Blvd. Vice President, Treasurer
Insurance Company DePere, WI 54115 and Assistant Secretary
Public Employee Payment Vice President and
Company Treasurer
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
David R. Hubers, AMEX Assurance Company IDS Tower 10 Director
Director, President and Chief Minneapolis, MN 55440
Executive Officer
American Express Financial Chairman, President and
Advisors Inc. Chief Executive Officer
American Express Service Director and President
Corporation
IDS Certificate Company Director
IDS Life Insurance Company Director
IDS Plan Services of Director and President
California, Inc.
IDS Property Casualty 1 WEG Blvd. Director
Insurance Company DePere, WI 54115
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Martin G. Hurwitz, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
James M. Jensen, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
IDS Life Insurance Company Vice President
IDS Life Series Fund, Inc. Director
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Marietta L. Johns, American Express Financial IDS Tower 10 Senior Vice President
Director and Senior Vice Advisors Inc. Minneapolis, MN 55440
President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Nancy E. Jones, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
American Express Service Vice President
Corporation
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Ora J. Kaine, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Linda B. Keene, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
G. Michael Kennedy, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Susan D. Kinder, American Express Financial IDS Tower 10 Senior Vice President
Director and Senior Vice Advisors Inc. Minneapolis, MN 55440
President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Richard W. Kling, AMEX Assurance Company IDS Tower 10 Director
Director and Senior Vice Minneapolis, MN 55440
President
American Centurion Life Director and Chairman of
Assurance Company the Board
American Enterprise Life Director and Chairman of
Insurance Company the Board
American Express Director and President
Corporation
American Express Financial Senior Vice President
Advisors Inc.
American Express Insurance Director and President
Agency of Arizona Inc.
American Express Insurance Director and President
Agency of Idaho Inc.
American Express Insurance Director and President
Agency of Nevada Inc.
American Express Insurance Director and President
Agency of Oregon Inc.
American Express Property Director and President
Casualty Insurance Agency
of Kentucky Inc.
American Express Property Director and President
Casualty Insurance Agency
of Maryland Inc.
American Express Property Director and President
Casualty Insurance Agency
of Pennsylvania Inc.
American Express Service Vice President
Corporation
American Partners Life Director and Chairman of
Insurance Company the Board
IDS Certificate Company Director and Chairman of
the Board
IDS Insurance Agency of Director and President
Alabama Inc.
IDS Insurance Agency of Director and President
Arkansas Inc.
IDS Insurance Agency of Director and President
Massachusetts Inc.
IDS Insurance Agency of Director and President
New Mexico Inc.
IDS Insurance Agency of Director and President
North Carolina Inc.
IDS Insurance Agency of Director and President
Ohio Inc.
IDS Insurance Agency of Director and President
Wyoming Inc.
IDS Life Insurance Company Director and President
IDS Life Series Fund, Inc. Director and President
IDS Life Variable Annuity Manager, Chairman of the
Funds A and B Board and President
IDS Property Casualty 1 WEG Blvd. Director
Insurance Company DePere, WI 54115
IDS Life Insurance Company P.O. Box 5144 Director and Chairman of
of New York Albany, NY 12205 the Board
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Paul F. Kolkman, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
IDS Life Insurance Company Director and Executive
Vice President
IDS Life Series Fund, Inc. Vice President and Chief
Actuary
IDS Property Casualty 1 WEG Blvd. Director
Insurance Company DePere, WI 54115
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Claire Kolmodin, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Steve C. Kumagai, American Express Financial IDS Tower 10 Director and Senior Vice
Director and Senior Vice Advisors Inc. Minneapolis, MN 55440 President
President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Kurt A. Larson, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Lori J. Larson, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Daniel E. Laufenberg, American Express Financial IDS Tower 10 Vice President and Chief
Vice President and Chief U.S. Advisors Inc. Minneapolis, MN 55440 U.S. Economist
Economist
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Peter A. Lefferts, American Express Financial IDS Tower 10 Senior Vice President
Director and Senior Vice Advisors Inc. Minneapolis, MN 55440
President
American Express Trust Director
Company
IDS Plan Services of Director
California, Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Douglas A. Lennick, American Express Financial IDS Tower 10 Director and Executive
Director and Executive Vice Advisors Inc. Minneapolis, MN 55440 Vice President
President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Jonathan S. Linen, IDS Tower 10
Director Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Mary J. Malevich, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Fred A. Mandell, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Sarah A. Mealey, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Paula R. Meyer, American Enterprise Life IDS Tower 10 Vice President
Vice President Insurance Company Minneapolis, MN 55440
American Express Director
Corporation
American Express Financial Vice President
Advisors Inc.
American Partners Life Director and President
Insurance Company
IDS Certificate Company Director and President
IDS Life Insurance Company Director and Executive
Vice President
Investors Syndicate Director, Chairman of the
Development Corporation Board and President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
William P. Miller, Advisory Capital IDS Tower 10 Vice President
Vice President and Senior Strategies Group Inc. Minneapolis, MN 55440
Portfolio Manager
American Express Asset Senior Vice President and
Management Group Inc. Chief Investment Officer
American Express Financial Vice President and Senior
Advisors Inc. Portfolio Manager
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
James A. Mitchell, AMEX Assurance Company IDS Tower 10 Director
Director and Executive Vice Minneapolis, MN 55440
President
American Enterprise Director
Investment Services Inc.
American Express Financial Executive Vice President
Advisors Inc.
American Express Service Director and Senior Vice
Corporation President
American Express Tax and Director
Business Services Inc.
IDS Certificate Company Director
IDS Life Insurance Company Director, Chairman of the
Board and Chief Executive
Officer
IDS Plan Services of Director
California, Inc.
IDS Property Casualty 1 WEG Blvd. Director
Insurance Company DePere, WI 54115
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Pamela J. Moret, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
American Express Trust Vice President
Company
IDS Life Insurance Company Executive Vice President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Barry J. Murphy, American Express Client IDS Tower 10 Director and President
Director and Senior Vice Service Corporation Minneapolis, MN 55440
President
American Express Financial Senior Vice President
Advisors Inc.
IDS Life Insurance Company Director and Executive
Vice President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Mary Owens Neal, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Michael J. O'Keefe, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
James R. Palmer, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
IDS Life Insurance Company Vice President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Carla P. Pavone, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
Public Employee Payment Director and President
Company
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Thomas P. Perrine, American Express Financial IDS Tower 10 Senior Vice President
Senior Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Susan B. Plimpton, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Ronald W. Powell, American Express Financial IDS Tower 10 Vice President and
Vice President and Assistant Advisors Inc. Minneapolis, MN 55440 Assistant General Counsel
General Counsel
IDS Cable Corporation Vice President and
Assistant Secretary
IDS Cable II Corporation Vice President and
Assistant Secretary
IDS Management Corporation Vice President and
Assistant Secretary
IDS Partnership Services Vice President and
Corporation Assistant Secretary
IDS Plan Services of Vice President and
California, Inc. Assistant Secretary
IDS Realty Corporation Vice President and
Assistant Secretary
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
James M. Punch, American Express Financial IDS Tower 10 Vice President and Project
Vice President and Project Advisors Inc. Minneapolis, MN 55440 Manager
Manager
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Frederick C. Quirsfeld, American Express Asset IDS Tower 10 Senior Vice President and
Senior Vice President Management Group Inc. Minneapolis, MN 55440 Senior Portfolio Manager
American Express Financial Senior Vice President
Advisors Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Rollyn C. Renstrom, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
ReBecca K. Roloff, American Express Financial IDS Tower 10 Senior Vice President
Senior Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Stephen W. Roszell, Advisory Capital IDS Tower 10 Director
Senior Vice President Strategies Group Inc. Minneapolis, MN 55440
American Express Asset Director, President and
Management Group Inc. Chief Executive Officer
American Express Asset Director
Management International,
Inc.
American Express Asset Director
Management Ltd.
American Express Financial Senior Vice President
Advisors Inc.
American Express Trust Director
Company
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Erven A. Samsel, American Express Financial IDS Tower 10 Senior Vice President
Director and Senior Vice Advisors Inc. Minneapolis, MN 55440
President
American Express Insurance Vice President
Agency of Idaho Inc.
American Express Insurance Vice President
Agency of Nevada Inc.
American Express Insurance Vice President
Agency of Oregon Inc.
American Express Property Vice President
Casualty Insurance Agency
of Kentucky Inc.
American Express Property Vice President
Casualty Insurance Agency
of Maryland Inc.
American Express Property Vice President
Casualty Insurance Agency
of Pennsylvania Inc.
IDS Insurance Agency of Vice President
Alabama Inc.
IDS Insurance Agency of Vice President
Arkansas Inc.
IDS Insurance Agency of Vice President
Massachusetts Inc.
IDS Insurance Agency of Vice President
New Mexico Inc.
IDS Insurance Agency of Vice President
North Carolina Inc.
IDS Insurance Agency of Vice President
Ohio Inc.
IDS Insurance Agency of Vice President
Wyoming Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Stuart A. Sedlacek, AMEX Assurance Company IDS Tower 10 Director
Senior Vice President and Minneapolis, MN 55440
Chief Financial Officer
American Enterprise Life Executive Vice President
Insurance Company
American Express Financial Senior Vice President and
Advisors Inc. Chief Financial Officer
American Express Trust Director
Company
American Partners Life Director and Vice President
Insurance Agency
IDS Certificate Company Director and President
IDS Life Insurance Company Executive Vice President
and Controller
IDS Property Casualty 1 WEG Blvd. Director
Insurance Company DePere, WI 54115
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Donald K. Shanks, AMEX Assurance Company IDS Tower 10 Senior Vice President
Vice President Minneapolis, MN 55440
American Express Financial Vice President
Advisors Inc.
IDS Property Casualty 1 WEG Blvd. Senior Vice President
Insurance Company DePere, WI 54115
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
F. Dale Simmons, AMEX Assurance Company IDS Tower 10 Vice President
Vice President Minneapolis, MN 55440
American Centurion Life Vice President
Assurance Company
American Enterprise Life Vice President
Insurance
American Express Financial Vice President
Advisors Inc.
American Partners Life Vice President
Insurance Company
IDS Certificate Company Vice President
IDS Life Insurance Company Vice President
IDS Partnership Services Director and Vice President
Corporation
IDS Real Estate Services Chairman of the Board and
Inc. President
IDS Realty Corporation Director and Vice President
IDS Life Insurance Company P.O. Box 5144 Vice President
of New York Albany, NY 12205
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Judy P. Skoglund, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Bridget Sperl, American Express Client IDS Tower 10 Vice President
Vice President Service Corporation Minneapolis, MN 55440
American Express Financial Vice President
Advisors Inc.
Public Employee Payment Director and President
Company
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Lisa A. Steffes, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
William A. Stoltzmann, American Enterprise Life IDS Tower 10 Director, Vice President,
Vice President and Assistant Insurance Company Minneapolis, MN 55440 General Counsel and
General Counsel Secretary
American Express Director, Vice President
Corporation and Secretary
American Express Financial Vice President and
Advisors Inc. Assistant General Counsel
American Partners Life Director, Vice President,
Insurance Company General Counsel and
Secretary
IDS Life Insurance Company Vice President, General
Counsel and Secretary
IDS Life Series Fund Inc. General Counsel and
Assistant Secretary
IDS Life Variable Annuity General Counsel and
Funds A & B Assistant Secretary
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
James J. Strauss, American Express Financial IDS Tower 10 Vice President and General
Vice President and General Advisors Inc. Minneapolis, MN 55440 Auditor
Auditor
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Jeffrey J. Stremcha, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Barbara Stroup Stewart, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Wesley W. Wadman, American Express Asset IDS Tower 10 Executive Vice President
Vice President Management Group Inc. Minneapolis, MN 55440
American Express Asset Director and Senior Vice
Management International, President
Inc.
American Express Asset Director and Vice Chairman
Management Ltd.
American Express Financial Vice President
Advisors Inc.
IDS Fund Management Limited Director and Vice Chairman
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Norman Weaver Jr., American Express Financial IDS Tower 10 Senior Vice President
Director and Senior Vice Advisors Inc. Minneapolis, MN 55440
President
American Express Insurance Vice President
Agency of Arizona Inc.
American Express Insurance Vice President
Agency of Idaho Inc.
American Express Insurance Vice President
Agency of Nevada Inc.
American Express Insurance Vice President
Agency of Oregon Inc.
American Express Property Vice President
Casualty Insurance Agency
of Kentucky Inc.
American Express Property Vice President
Casualty Insurance Agency
of Maryland Inc.
American Express Property Vice President
Casualty Insurance Agency
of Pennsylvania Inc.
IDS Insurance Agency of Vice President
Alabama Inc.
IDS Insurance Agency of Vice President
Arkansas Inc.
IDS Insurance Agency of Vice President
Massachusetts Inc.
IDS Insurance Agency of Vice President
New Mexico Inc.
IDS Insurance Agency of Vice President
North Carolina Inc.
IDS Insurance Agency of Vice President
Ohio Inc.
IDS Insurance Agency of Vice President
Wyoming Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Michael L. Weiner, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
IDS Capital Holdings Inc. Vice President
IDS Futures Brokerage Group Vice President
IDS Futures Corporation Vice President, Treasurer
and Secretary
IDS Sales Support Inc. Director, Vice President
and Assistant Treasurer
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Lawrence J. Welte, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Jeffry F. Welter, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Edwin M. Wistrand, American Express Financial IDS Tower 10 Vice President and
Vice President and Assistant Advisors Inc. Minneapolis, MN 55440 Assistant General Counsel
General Counsel
American Express Financial Vice President and Chief
Advisors Japan Inc. Legal Officer
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Michael D. Wolf, American Express Asset IDS Tower 10 Executive Vice President
Vice President Management Group Inc. Minneapolis, MN 55440 and Senior Portfolio
Manager
American Express Financial Vice President
Advisors Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Michael R. Woodward, American Express Financial IDS Tower 10 Senior Vice President
Director and Senior Vice Advisors Inc. Minneapolis, MN 55440
President
American Express Insurance Vice President
Agency of Idaho Inc.
American Express Insurance Vice President
Agency of Nevada Inc.
American Express Insurance Vice President
Agency of Oregon Inc.
American Express Property Vice President
Casualty Insurance Agency
of Kentucky Inc.
American Express Property Vice President
Casualty Insurance Agency
of Maryland Inc.
American Express Property Vice President
Casualty Insurance Agency
of Pennsylvania Inc.
IDS Insurance Agency of Vice President
Alabama Inc.
IDS Insurance Agency of Vice President
Arkansas Inc.
IDS Insurance Agency of Vice President
Massachusetts Inc.
IDS Insurance Agency of Vice President
New Mexico Inc.
IDS Insurance Agency of Vice President
North Carolina Inc.
IDS Insurance Agency of Vice President
Ohio Inc.
IDS Insurance Agency of Vice President
Wyoming Inc.
IDS Life Insurance Company P.O. Box 5144 Director
of New York Albany, NY 12205
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Item 27. Principal Underwriters.
(a) American Express Financial Advisors acts as principal underwriter for
the following investment companies:
IDS Bond Fund, Inc.; IDS California Tax-Exempt Trust; IDS Discovery
Fund, Inc.; IDS Equity Select Fund, Inc.; IDS Extra Income Fund, Inc.;
IDS Federal Income Fund, Inc.; IDS Global Series, Inc.; IDS Growth
Fund, Inc.; IDS High Yield Tax-Exempt Fund, Inc.; IDS International
Fund, Inc.; IDS Investment Series, Inc.; IDS Managed Retirement Fund,
Inc.; IDS Market Advantage Series, Inc.; IDS Money Market Series, Inc.;
IDS New Dimensions Fund, Inc.; IDS Precious Metals Fund, Inc.; IDS
Progressive Fund, Inc.; IDS Selective Fund, Inc.; IDS Special
Tax-Exempt Series Trust; IDS Stock Fund, Inc.; IDS Strategy Fund, Inc.;
IDS Tax-Exempt Bond Fund, Inc.; IDS Tax-Free Money Fund, Inc.; IDS
Utilities Income Fund, Inc., Growth Trust; Growth and Income Trust;
Income Trust, Tax-Free Income Trust, World Trust and IDS Certificate
Company.
(b) As to each director, officer or partner of the principal underwriter:
Name and Principal Business Address Position and Offices with Offices with Registrant
Underwriter
- ---------------------------------------------- ---------------------------------- ----------------------------
<S> <C> <C>
Ronald G. Abrahamson Vice President-Service Quality None
IDS Tower 10 and Reengineering
Minneapolis, MN 55440
Douglas A. Alger Senior Vice President-Human None
IDS Tower 10 Resources
Minneapolis, MN 55440
Peter J. Anderson Senior Vice President-Investment Vice President
IDS Tower 10 Operations
Minneapolis, MN 55440
Ward D. Armstrong Vice President-American Express None
IDS Tower 10 Retirement Services
Minneapolis, MN 55440
John M. Baker Vice President-Plan Sponsor None
IDS Tower 10 Services
Minneapolis, MN 55440
Joseph M. Barsky III Vice President-Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
Timothy V. Bechtold Vice President-Risk Management None
IDS Tower 10 Products
Minneapolis, MN 55440
John D. Begley Group Vice President-Ohio/Indiana None
Suite 100
7760 Olentangy River Rd.
Columbus, OH 43235
Brent L. Bisson Group Vice President-Los Angeles None
Suite 900, E. Westside Twr Metro
11835 West Olympic Blvd.
Los Angeles, CA 90064
John C. Boeder Vice President-Mature Market None
IDS Tower 10 Group
Minneapolis, MN 55440
Walter K. Booker Group Vice President-New Jersey None
Suite 200, 3500 Market Street
Camp Hill, NJ 17011
Bruce J. Bordelon Group Vice President-Gulf States None
Galleria One Suite 1900
Galleria Blvd.
Metairie, LA 70001
Charles R. Branch Group Vice President-Northwest None
Suite 200
West 111 North River Dr.
Spokane, WA 99201
Douglas W. Brewers Vice President-Sales Support None
IDS Tower 10
Minneapolis, MN 55440
Karl J. Breyer Corporate Senior Vice President None
IDS Tower 10
Minneapolis, MN 55440
Cynthia M. Carlson Vice President-American Express None
IDS Tower 10 Securities Services
Minneapolis, MN 55440
Mark W. Carter Senior Vice President and Chief None
IDS Tower 10 Marketing Officer
Minneapolis, MN 55440
James E. Choat Senior Vice None
IDS Tower 10 President-Institutional Products
Minneapolis, MN 55440 Group
Kenneth J. Ciak Vice President and General None
IDS Property Casualty Manager-IDS Property Casualty
1400 Lombardi Avenue
Green Bay, WI 54304
Paul A. Connolly Vice President-Advisor Staffing, None
IDS Tower 10 Training and Support
Minneapolis, MN 55440
Roger C. Corea Group Vice President-Upstate New None
290 Woodcliff Drive York
Fairport, NY 14450
Henry J. Cormier Group Vice President-Connecticut None
Commerce Center One
333 East River Drive
East Hartford, CT 06108
John M. Crawford Group Vice President-Arkansas/ None
Suite 200 Springfield/Memphis
10800 Financial Ctr Pkwy
Little Rock, AR 72211
Kevin F. Crowe Group Vice None
Suite 312 President-Carolinas/Eastern
7300 Carmel Executive Pk Georgia
Charlotte, NC 28226
Colleen Curran Vice President and Assistant None
IDS Tower 10 General Counsel
Minneapolis, MN 55440
Luz Maria Davis Vice President-Communications None
IDS Tower 10
Minneapolis, MN 55440
Scott M. DiGiammarino Group Vice None
Suite 500, 8045 Leesburg Pike President-Washington/Baltimore
Vienna, VA 22182
Bradford L. Drew Group Vice President-Eastern None
Two Datran Center Florida
Penthouse One B
9130 S. Dadeland Blvd.
Miami, FL 33156
Douglas K. Dunning Vice President-Assured Assets None
IDS Tower 10 Product Development and
Minneapolis, MN 55440 Management
James P. Egge Group Vice President-Western None
4305 South Louise, Suite 202 Iowa, Nebraska, Dakotas
Sioux Falls, SD 57103
Gordon L. Eid Senior Vice President, General None
IDS Tower 10 Counsel and Chief Compliance
Minneapolis, MN 55440 Officer
Robert M. Elconin Vice President-Government None
IDS Tower 10 Relations
Minneapolis, MN 55440
Phillip W. Evans Group Vice President-Rocky None
Suite 600 Mountain
6985 Union Park Center
Midvale, UT 84047-4177
<PAGE>
Louise P. Evenson Group Vice President-San None
Suite 200 Francisco Bay Area
1333 N. California Blvd.
Walnut Creek, CA 94596
Gordon M. Fines Vice President-Mutual Fund None
IDS Tower 10 Equity Investments
Minneapolis, MN 55440
Douglas L. Forsberg Vice President-Institutional None
IDS Tower 10 Products Group
Minneapolis, MN 55440
Jeffrey P. Fox Vice President and Corporate None
IDS Tower 10 Controller
Minneapolis, MN 55440
William P. Fritz Group Vice President-Gateway None
Suite 160
12855 Flushing Meadows Dr
St. Louis, MO 63131
Carl W. Gans Group Vice President-Twin City None
8500 Tower Suite 1770 Metro
8500 Normandale Lake Blvd.
Bloomington, MN 55437
David A. Hammer Vice President and Marketing None
IDS Tower 10 Controller
Minneapolis, MN 55440
Teresa A. Hanratty Group Vice President-Northern None
Suites 6&7 New England
169 South River Road
Bedford, NH 03110
Robert L. Harden Group Vice President-Boston Metro None
Two Constitution Plaza
Boston, MA 02129
Lorraine R. Hart Vice President-Insurance None
IDS Tower 10 Investments
Minneapolis, MN 55440
Scott A. Hawkinson Vice President and None
IDS Tower 10 Controller-Private Client Group
Minneapolis, MN 55440
Brian M. Heath Group Vice President-North Texas None
Suite 150
801 E. Campbell Road
Richardson, TX 75081
Janis K. Heaney Vice President-Incentive None
IDS Tower 10 Management
Minneapolis, MN 55440
James G. Hirsh Vice President and Assistant None
IDS Tower 10 General Counsel
Minneapolis, MN 55440
Jon E. Hjelm Group Vice President-Rhode None
319 Southbridge Street Island/Central-Western
Auburn, MA 01501 Massachusetts
David J. Hockenberry Group Vice President-Tennessee None
30 Burton Hills Blvd. Valley
Suite 175
Nashville, TN 37215
Jeffrey S. Horton Vice President and Treasurer None
IDS Tower 10
Minneapolis, MN 55440
David R. Hubers Chairman, President and Chief Board member
IDS Tower 10 Executive Officer
Minneapolis, MN 55440
Martin G. Hurwitz Vice President-Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
James M. Jensen Vice President-Insurance Product None
IDS Tower 10 Development and Management
Minneapolis, MN 55440
Marietta L. Johns Senior Vice President-Field None
IDS Tower 10 Management
Minneapolis, MN 55440
Nancy E. Jones Vice President-Business None
IDS Tower 10 Development
Minneapolis, MN 55440
Ora J. Kaine Vice President-Financial None
IDS Tower 10 Advisory Services
Minneapolis, MN 55440
Linda B. Keene Vice President-Market Development None
IDS Tower 10
Minneapolis, MN 55440
G. Michael Kennedy Vice President-Investment None
IDS Tower 10 Services and Investment Research
Minneapolis, MN 55440
Susan D. Kinder Senior Vice None
IDS Tower 10 President-Distribution Services
Minneapolis, MN 55440
Richard W. Kling Senior Vice President-Products None
IDS Tower 10
Minneapolis, MN 55440
Paul F. Kolkman Vice President-Actuarial Finance None
IDS Tower 10
Minneapolis, MN 55440
Claire Kolmodin Vice President-Service Quality None
IDS Tower 10
Minneapolis, MN 55440
David S. Kreager Group Vice President-Greater None
Suite 108 Michigan
Trestle Bridge V
5136 Lovers Lane
Kalamazoo, MI 49002
Steven C. Kumagai Director and Senior Vice None
IDS Tower 10 President-Field Management and
Minneapolis, MN 55440 Business Systems
Mitre Kutanovski Group Vice President-Chicago None
Suite 680 Metro
8585 Broadway
Merrillville, IN 48410
Kurt A. Larson Vice President-Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
Lori J. Larson Vice President-Brokerage and None
IDS Tower 10 Direct Services
Minneapolis, MN 55440
Daniel E. Laufenberg Vice President and Chief U.S. None
IDS Tower 10 Economist
Minneapolis, MN 55440
Peter A. Lefferts Senior Vice President-Corporate None
IDS Tower 10 Strategy and Development
Minneapolis, MN 55440
Douglas A. Lennick Director and Executive Vice None
IDS Tower 10 President-Private Client Group
Minneapolis, MN 55440
Mary J. Malevich Vice President-Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
<PAGE>
Fred A. Mandell Vice President-Field Marketing None
IDS Tower 10 Readiness
Minneapolis, MN 55440
Daniel E. Martin Group Vice President-Pittsburgh None
Suite 650 Metro
5700 Corporate Drive
Pittsburgh, PA 15237
Sarah A. Mealey Vice President-Mutual Funds None
IDS Tower 10
Minneapolis, MN 55440
Paula R. Meyer Vice President-Assured Assets None
IDS Tower 10
Minneapolis, MN 55440
William P. Miller Vice President and Senior None
IDS Tower 10 Portfolio Manager
Minneapolis, MN 55440
James A. Mitchell Executive Vice None
IDS Tower 10 President-Marketing and Products
Minneapolis, MN 55440
Pamela J. Moret Vice President-Variable Assets None
IDS Tower 10
Minneapolis, MN 55440
Alan D. Morgenstern Group Vice President-Central None
Suite 200 California/Western Nevada
3500 Market Street
Camp Hill, NJ 17011
Barry J. Murphy Senior Vice President-Client None
IDS Tower 10 Service
Minneapolis, MN 55440
Mary Owens Neal Vice President-Mature Market None
IDS Tower 10 Segment
Minneapolis, MN 55440
Thomas V. Nicolosi Group Vice President-New York None
Suite 220 Metro Area
500 Mamaroneck Avenue
Harrison, NY 10528
Michael J. O'Keefe Vice President-Advisory Business None
IDS Tower 10 Systems
Minneapolis, MN 55440
James R. Palmer Vice President-Taxes None
IDS Tower 10
Minneapolis, MN 55440
Marc A. Parker Group Vice None
10200 SW Greenburg Road President-Portland/Eugene
Suite 110
Portland, OR 97223
Carla P. Pavone Vice President-Compensation and None
IDS Tower 10 Field Administration
Minneapolis, MN 55440
Thomas P. Perrine Senior Vice President-Group None
IDS Tower 10 Relationship Leader/American
Minneapolis, MN 55440 Express Technologies Financial
Services
Susan B. Plimpton Vice President-Marketing Services None
IDS Tower 10
Minneapolis, MN 55440
Larry M. Post Group Vice None
One Tower Bridge President-Philadelphia Metro
100 Front Street 8th Fl
West Conshohocken, PA 19428
Ronald W. Powell Vice President and Assistant None
IDS Tower 10 General Counsel
Minneapolis, MN 55440
Diana R. Prost Group Vice None
3030 N.W. Expressway President-Kansas/Oklahoma
Suite 900
Oklahoma City, OK 73112
James M. Punch Vice President and Project None
IDS Tower 10 Manager-Platform I Value Enhanced
Minneapolis, MN 55440
Frederick C. Quirsfeld Senior Vice President-Fixed None
IDS Tower 10 Income
Minneapolis, MN 55440
Rollyn C. Renstrom Vice President-Corporate None
IDS Tower 10 Planning and Analysis
Minneapolis, MN 55440
R. Daniel Richardson III Group Vice President-Southern None
Suite 800 Texas
Arboretum Plaza One
9442 Capital of Texas Hwy N.
Austin, TX 78759
ReBecca K. Roloff Senior Vice President-Field None
IDS Tower 10 Management and Financial
Minneapolis, MN 55440 Advisory Service
Stephen W. Roszell Senior Vice None
IDS Tower 10 President-Institutional
Minneapolis, MN 55440
Max G. Roth Group Vice None
Suite 201 S IDS Ctr President-Wisconsin/Upper
1400 Lombardi Avenue Michigan
Green Bay, WI 54304
Erven A. Samsel Senior Vice President-Field None
45 Braintree Hill Park Management
Suite 402
Braintree, MA 02184
Russell L. Scalfano Group Vice None
Suite 201 President-Illinois/Indiana/Kentucky
101 Plaza East Blvd.
Evansville, IN 47715
William G. Scholz Group Vice President-Arizona/Las None
Suite 205 Vegas
7333 E Doubletree Ranch Rd
Scottsdale, AZ 85258
Stuart A. Sedlacek Senior Vice President and Chief None
IDS Tower 10 Financial Officer
Minneapolis, MN 55440
Donald K. Shanks Vice President-Property Casualty None
IDS Tower 10
Minneapolis, MN 55440
F. Dale Simmons Vice President-Senior Portfolio None
IDS Tower 10 Manager, Insurance Investments
Minneapolis, MN 55440
Judy P. Skoglund Vice President-Quality and None
IDS Tower 10 Service Support
Minneapolis, MN 55440
James B. Solberg Group Vice President-Eastern None
466 Westdale Mall Iowa Area
Cedar Rapids, IA 52404
Bridget Sperl Vice President-Geographic None
IDS Tower 10 Service Teams
Minneapolis, MN 55440
Paul J. Stanislaw Group Vice President-Southern None
Suite 1100 California
Two Park Plaza
Irvine, CA 92714
Lisa A. Steffes Vice President-Cardmember None
IDS Tower 10 Initiatives
Minneapolis, MN 55440
Lois A. Stilwell Group Vice President-Outstate None
Suite 433 Minnesota Area/ North
9900 East Bren Road Dakota/Western Wisconsin
Minnetonka, MN 55343
William A. Stoltzmann Vice President and Assistant None
IDS Tower 10 General Counsel
Minneapolis, MN 55440
James J. Strauss Vice President and General None
IDS Tower 10 Auditor
Minneapolis, MN 55440
Jeffrey J. Stremcha Vice President-Information None
IDS Tower 10 Resource Management/ISD
Minneapolis, MN 55440
Barbara Stroup Stewart Vice President-Channel None
IDS Tower 10 Development
Minneapolis, MN 55440
Craig P. Taucher Group Vice None
Suite 150 President-Orlando/Jacksonville
4190 Belfort Road
Jacksonville, FL 32216
Neil G. Taylor Group Vice None
Suite 425 President-Seattle/Tacoma/Hawaii
101 Elliott Avenue West
Seattle, WA 98119
John R. Thomas Senior Vice President None
IDS Tower 10
Minneapolis, MN 55440
Peter S. Velardi Group Vice None
Suite 180 President-Atlanta/Birmingham
1200 Ashwood Parkway
Atlanta, GA 30338
Charles F. Wachendorfer Group Vice President-Detroit None
8115 East Jefferson Avenue Metro
Detroit, MI 48214
Wesley W. Wadman Vice President-Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
Donald F. Weaver Group Vice President-Greater None
3500 Market Street, Suite 200 Pennsylvania
Camp Hill, PA 17011
Norman Weaver Jr. Senior Vice President-Field None
1010 Main St. Suite 2B Management
Huntington Beach, CA 92648
Michael L. Weiner Vice President-Tax Research and None
IDS Tower 10 Audit
Minneapolis, MN 55440
Lawrence J. Welte Vice President-Investment None
IDS Tower 10 Administration
Minneapolis, MN 55440
Jeffry M. Welter Vice President-Equity and Fixed None
IDS Tower 10 Income Trading
Minneapolis, MN 55440
Thomas L. White Group Vice President-Cleveland None
Suite 200 Metro
28601 Chagrin Blvd.
Woodmere, OH 44122
Eric S. Williams Group Vice President-Virginia None
Suite 250
3951 Westerre Parkway
Richmond, VA 23233
William J. Williams Group Vice President-Western None
Two North Tamiami Trail Florida
Suite 702
Sarasota, FL 34236
Edwin M. Wistrand Vice President and Assistant None
IDS Tower 10 General Counsel
Minneapolis, MN 55440
Michael D. Wolf Vice President-Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
Michael R. Woodward Senior Vice President-Field None
32 Ellicott St Management
Suite 100
Batavia, NY 14020
</TABLE>
<PAGE>
Item 27(c). Not applicable.
Item 28. Location of Accounts and Records
American Express Financial Corporation
IDS Tower 10
Minneapolis, MN 55440
Item 29. Management Services
Not Applicable.
Item 30. Undertakings
Not Applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant, IDS High Yield Tax-Exempt Fund Inc.
certifies that it meets all of the requirements for effectiveness of this
registration statement under Rule 485(b) under the Securities Act and has duly
caused this Amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Minneapolis and
the State of Minnesota on the 26th day of January, 1999.
IDS HIGH YIELD TAX-EXEMPT FUND, INC.
By /s/ William R. Pearce**
William R. Pearce, Chief Executive Officer
By_/s/ Stuart A. Sedlacek
Stuart A. Sedlacek, Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
its Registration Statement has been signed below by the following persons in the
capacities indicated on the 26th day of January, 1999.
Signature Capacity
/s/ William R. Pearce* Chairman of the Board
William R. Pearce
/s/ H. Brewster Atwater, Jr.* Director
H. Brewster Atwater, Jr.
/s/ Arne H. Carlson Director
Arne H. Carlson
/s/ Lynne V. Cheney* Director
Lynne V. Cheney
/s/ William H. Dudley* Director
William H. Dudley
/s/ David R. Hubers* Director
David R. Hubers
/s/ Heinz F. Hutter* Director
Heinz F. Hutter
/s/ Anne P. Jones* Director
Anne P. Jones
/s/ Alan K. Simpson* Director
Alan K. Simpson
/s/ Edson W. Spencer* Director
Edson W. Spencer
<PAGE>
Signature Capacity
/s/ John R. Thomas* Director
John R. Thomas
Director
Wheelock Whitney
/s/ C. Angus Wurtele* Director
C. Angus Wurtele
*Signed pursuant to Directors' Power of Attorney dated January 14, 1999, filed
electronically as Exhibit herewith, as Exhibit (p)(1), by:
/s/ Leslie L. Ogg
- ------------------------------
Leslie L. Ogg
**Signed pursuant to Officers' Power of Attorney dated November 1, 1995, filed
electronically as Exhibit 19(b) to Registrant's Post-Effective Amendment No. 33,
by:
/s/ Leslie L. Ogg
- ------------------------------
Leslie L. Ogg
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Act of 1933 and the Investment
Company Act of 1940, TAX-FREE INCOME TRUST consents to the filing of this
Amendment to the Registration Statement signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Minneapolis and the State of
Minnesota, on the 26th day of January, 1999.
TAX-FREE INCOME TRUST
By /s/ William R. Pearce**
William R. Pearce, Chief Executive Officer
By_/s/ Stuart A. Sedlacek
Stuart A. Sedlacek, Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below by the following persons in the
capacities indicated on the 26th day of January, 1999.
Signatures Capacity
/s/ William R. Pearce* Trustee
William R. Pearce
/s/ H. Brewster Atwater, Jr.* Trustee
H. Brewster Atwater, Jr.
/s/ Arne H. Carlson Trustee
Arne H. Carlson
/s/ Lynne V. Cheney* Trustee
Lynne V. Cheney
/s/ William H. Dudley* Trustee
William H. Dudley
/s/ David R. Hubers* Trustee
David R. Hubers
/s/ Heinz F. Hutter* Trustee
Heinz F. Hutter
/s/ Anne P. Jones* Trustee
Anne P. Jones
/s/ Alan K. Simpson* Trustee
Alan K. Simpson
/s/ Edson W. Spencer* Trustee
Edson W. Spencer
/s/ John R. Thomas* Trustee
John R. Thomas
Trustee
Wheelock Whitney
/s/ C. Angus Wurtele* Trustee
C. Angus Wurtele
<PAGE>
* Signed pursuant to Trustees Power of Attorney dated January 14, 1999, filed
electronically herewith as Exhibit (p)(3), by:
/s/ Leslie L. Ogg
- ----------------------------------
Leslie L. Ogg
** Signed pursuant to Officers Power of Attorney dated April 11, 1996, filed
electronically as Exhibit 19(d) to Registrant's Post-Effective Amendment No. 34,
by:
/s/ Leslie L. Ogg
- ----------------------------------
Leslie L. Ogg
<PAGE>
CONTENTS OF THIS POST-EFFECTIVE AMENDMENT NO. 37
TO REGISTRATION STATEMENT NO. 2-63552
This post-effective amendment comprises the following papers and documents:
The facing sheet.
Part A.
The prospectus.
Part B.
Statement of Additional Information.
Part C.
Other information.
Exhibits
The signatures.
Exhibit Index
(i) Opinion and consent of counsel
(j) Independent Auditors' Consent
(n) Financial Data Schedules
(p)(1) Directors' Power of Attorney dated January 14, 1999
(p)(3) Trustees' Power of Attorney dated January 14, 1999
Opinion of Counsel
January 26, 1999
IDS High Yield Tax-Exempt Fund, Inc.
IDS Tower 10
Minneapolis, Minnesota 55440-0010
Gentlemen:
I have examined the Articles of Incorporation and the By-Laws of IDS High Yield
Tax-Exempt Fund, Inc. (the Company) and all necessary certificates, permits,
minute books, documents and records of the Company, and the applicable statutes
of the State of Minnesota, and it is my opinion that the shares sold in
accordance with applicable federal and state securities laws will be legally
issued, fully paid and nonassessable.
This opinion may be used in connection with the Post-Effective Amendment.
Sincerely,
/s/ Leslie L. Ogg
Leslie L. Ogg
Attorney at Law
901 S. Marquette Ave., Suite 2810
Minneapolis, Minnesota 55401-3268
Independent auditors' consent
The board and shareholders
IDS High Yield Tax-Exempt Fund, Inc.:
The board of trustees and unitholders Tax-Free Income Trust:
Tax-Free High Yield Portfolio
We consent to the use of our report incorporated herein by reference and to the
references to our Firm under the headings "Financial highlights" in Part A and
"INDEPENDENT AUDITORS" in Part B of the Registration Statement.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
January 27, 1999
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> IDS HIGH YIELD TAX-EXEMPT FUND CLASS A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-END> NOV-30-1998
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<PER-SHARE-NII> .26
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<PER-SHARE-DIVIDEND> .26
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<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 4.68
<EXPENSE-RATIO> .70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
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<NUMBER> 2
<NAME> IDS HIGH YIELD TAX-EXEMPT FUND CLASS B
<S> <C>
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<PERIOD-END> NOV-30-1998
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<OTHER-ITEMS-ASSETS> 6004803745
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<OVERDISTRIBUTION-GAINS> 114913135
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<INTEREST-INCOME> 375293898
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<EXPENSES-NET> 43124332
<NET-INVESTMENT-INCOME> 332169566
<REALIZED-GAINS-CURRENT> (5082151)
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<NET-CHANGE-FROM-OPS> 388863801
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 11052190
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 22219938
<NUMBER-OF-SHARES-REDEEMED> 7554155
<SHARES-REINVESTED> 1875641
<NET-CHANGE-IN-ASSETS> 14806760
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<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-ADVISORY-FEES> 1204477
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 43613754
<AVERAGE-NET-ASSETS> 228849986
<PER-SHARE-NAV-BEGIN> 4.64
<PER-SHARE-NII> .22
<PER-SHARE-GAIN-APPREC> .04
<PER-SHARE-DIVIDEND> .22
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 4.68
<EXPENSE-RATIO> 1.45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> IDS HIGH YIELD TAX-EXEMPT FUND CLASS Y
<S> <C>
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<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-END> NOV-30-1998
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<RECEIVABLES> 0
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<OTHER-ITEMS-ASSETS> 6004803745
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<SHARES-COMMON-PRIOR> 1860902
<ACCUMULATED-NII-CURRENT> 568578
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 114913135
<ACCUM-APPREC-OR-DEPREC> 618807807
<NET-ASSETS> 7454357
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<INTEREST-INCOME> 375293898
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<EXPENSES-NET> 43124332
<NET-INVESTMENT-INCOME> 332169566
<REALIZED-GAINS-CURRENT> (5082151)
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<DISTRIBUTIONS-OF-INCOME> 291004
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3428457
<NUMBER-OF-SHARES-REDEEMED> 3697495
<SHARES-REINVESTED> 151
<NET-CHANGE-IN-ASSETS> 14806760
<ACCUMULATED-NII-PRIOR> 488411
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 109821230
<GROSS-ADVISORY-FEES> 33295
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<NAME> TAX-FREE HIGH YIELD PORTFOLIO
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DIRECTORS/TRUSTEES POWER OF ATTORNEY
City of Minneapolis
State of Minnesota
Each of the undersigned, as directors and trustees of the below listed
open-end, diversified investment companies that previously have filed
registration statements and amendments thereto pursuant to the requirements of
the Securities Act of 1933 and the Investment Company Act of 1940 with the
Securities and Exchange Commission:
1933 Act 1940 Act
Reg. Number Reg. Number
IDS Bond Fund, Inc. 2-51586 811-2503
IDS California Tax-Exempt Trust 33-5103 811-4646
IDS Discovery Fund, Inc. 2-72174 811-3178
IDS Equity Select Fund, Inc. 2-13188 811-772
IDS Extra Income Fund, Inc. 2-86637 811-3848
IDS Federal Income Fund, Inc. 2-96512 811-4260
IDS Global Series, Inc. 33-25824 811-5696
IDS Growth Fund, Inc. 2-38355 811-2111
IDS High Yield Tax-Exempt Fund, Inc. 2-63552 811-2901
IDS International Fund, Inc. 2-92309 811-4075
IDS Investment Series, Inc. 2-11328 811-54
IDS Managed Retirement Fund, Inc. 2-93801 811-4133
IDS Market Advantage Series, Inc. 33-30770 811-5897
IDS Money Market Series, Inc. 2-54516 811-2591
IDS New Dimensions Fund, Inc. 2-28529 811-1629
IDS Precious Metals Fund, Inc. 2-93745 811-4132
IDS Progressive Fund, Inc. 2-30059 811-1714
IDS Selective Fund, Inc. 2-10700 811-499
IDS Special Tax-Exempt Series Trust 33-5102 811-4647
IDS Stock Fund, Inc. 2-11358 811-498
IDS Strategy Fund, Inc. 2-89288 811-3956
IDS Tax-Exempt Bond Fund, Inc. 2-57328 811-2686
IDS Tax-Free Money Fund, Inc. 2-66868 811-3003
IDS Utilities Income Fund, Inc. 33-20872 811-5522
hereby constitutes and appoints William R. Pearce, Arne H. Carlson and Leslie L.
Ogg or either one of them, as her or his attorney-in-fact and agent, to sign for
her or him in her or his name, place and stead any and all further amendments to
said registration statements filed pursuant to said Acts and any rules and
regulations thereunder, and to file such amendments with all exhibits thereto
and other documents in connection therewith with the Securities and Exchange
Commission, granting to either of them the full power and authority to do and
perform each and every act required and necessary to be done in connection
therewith.
<PAGE>
Dated the 14th day of January, 1999.
/s/ H. Brewster Atwater, Jr. /s/ William R. Pearce
H. Brewster Atwater, Jr. William R. Pearce
/s/ Arne H. Carlson /s/ Alan K. Simpson
Arne H. Carlson Alan K. Simpson
/s/ Lynne V. Cheney /s/ Edson W. Spencer
Lynne V. Cheney Edson W. Spencer
/s/ William H. Dudley /s/ John R. Thomas
William H. Dudley John R. Thomas
/s/ David R. Hubers
David R. Hubers Wheelock Whitney
/s/ Heinz F. Hutter /s/ C. Angus Wurtele
Heinz F. Hutter C. Angus Wurtele
/s/ Anne P. Jones
Anne P. Jones
TRUSTEES POWER OF ATTORNEY
City of Minneapolis
State of Minnesota
Each of the undersigned, as trustees of the below listed open-end,
diversified investment companies that previously have filed registration
statements and amendments thereto pursuant to the requirements of the Investment
Company Act of 1940 with the Securities and Exchange Commission:
1940 Act
Reg. Number
Growth Trust 811-07395
Growth and Income Trust 811-07393
Income Trust 811-07307
Tax-Free Income Trust 811-07397
World Trust 811-07399
hereby constitutes and appoints William R. Pearce, Arne H. Carlson and Leslie L.
Ogg or either one of them, as her or his attorney-in-fact and agent, to sign for
her or him in her or his name, place and stead any and all further amendments to
said registration statements filed pursuant to said Act and any rules and
regulations thereunder, and to file such amendments with all exhibits thereto
and other documents in connection therewith with the Securities and Exchange
Commission, granting to either of them the full power and authority to do and
perform each and every act required and necessary to be done in connection
therewith.
Dated the 14th day of January, 1999.
/s/ H. Brewster Atwater, Jr. /s/ William R. Pearce
H. Brewster Atwater, Jr. William R. Pearce
/s/ Arne H. Carlson /s/ Alan K. Simpson
Arne H. Carlson Alan K. Simpson
/s/ Lynne V. Cheney /s/ Edson W. Spencer
Lynne V. Cheney Edson W. Spencer
/s/ William H. Dudley /s/ John R. Thomas
William H. Dudley John R. Thomas
/s/ David R. Hubers
David R. Hubers Wheelock Whitney
/s/ Heinz F. Hutter /s/ C. Angus Wurtele
Heinz F. Hutter C. Angus Wurtele
/s/ Anne P. Jones
Anne P. Jones
