<PAGE>
PAGE 1
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. 26 (File No. 2-72174)
X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 26 (File No. 811-3178)
X
IDS DISCOVERY FUND, INC.
IDS Tower 10, Minneapolis, Minnesota 55440-0010
Leslie L. Ogg - 901 S. Marquette Ave., 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 Sept. 29, 1994 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
on (date) pursuant to paragraph (a) of rule 485
Registrant has registered an indefinite number or amount of
securities under the Securities Act of 1933 pursuant to Section 24f
of the Investment Company Act of 1940. Registrant's Rule 24f-2
Notice for its most recent fiscal year will be filed on or about
Sept. 29, 1994.
<PAGE>
PAGE 2
Cross reference sheet showing location in the prospectus and
Statement of Additional Information of the information called for
by the items enumerated in Parts A and B of Form N-1A.
Negative answers omitted from prospectus are so indicated.
<TABLE><CAPTION>
PART A PART B
Page Number in
Page Number Statement of Additional
Item No. in Prospectus Item No. Information
<C> <C> <C> <C>
1 3 10 26
2 5-6 11 27
3(a) 6-7 12 N/A
(b) N/A
(c) 6-9 13(a) 28-30;50-66
(d) 6-7 (b) 28-30
(c) 29-30
4(a) 5;9-12;21-24 (d) 32
(b) 9-12
(c) 9-12 14(a) 22-23**;46-48
(b) 46-48
5(a) 22-23 (c) 48
(b) 21-25
(b)(i) 24-25 15(a) N/A
(b)(ii) 23 (b) N/A
(b)(iii) 23 (c) 48
(c) 5
(d) 5 16(a)(i) 21-25**
(e) 23 (a)(ii) 42-46
(f) 24 (a)(iii) 43-44
(g) 23 (b) 42-46
(c) N/A
5A(a) * (d) None
(b) * (e) N/A
(f) 44-46
6(a) 21 (g) N/A
(b) N/A (h) 49
(c) N/A (i) 44;49
(d) N/A
(e) 3 17(a) 30-32
(f) 19 (b) 33
(g) 19-20 (c) 30-32
(d) 32
7(a) 24 (e) 32
(b) 9
(c) 16-18 18(a) 21**
(d) 13 (b) N/A
(e) N/A
(f) 24 19(a) 36-39
(b) 34-39
8(a) 14-16 (c) N/A
(b) N/A
(c) 13 20 41-42
(d) 15
21(a) 44-45
9 None (b) 45
(c) N/A
22(a) N/A
(b) 33-34
23 68-87
</TABLE>
*Designates information is located in annual report.
**Designates page number in prospectus.
<PAGE>
PAGE 3
IDS Discovery Fund
Prospectus
Sept. 29, 1994
The goal of IDS Discovery Fund, Inc. is long-term growth of
capital. The fund invests primarily in common stocks.
This prospectus contains facts that can help you decide if the fund
is the right investment for you. Read it before you invest and
keep it for future reference.
Additional facts about the fund are in a Statement of Additional
Information (SAI), filed with the Securities and Exchange
Commission. The SAI, dated Sept. 29, 1994, is incorporated here by
reference. For a free copy contact IDS Shareholder Service.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND SHARES ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY.
IDS Shareholder Service
P.O. Box 534
Minneapolis, MN
55440-0534
612-671-3733
TTY: 800-846-4852
<PAGE>
PAGE 4
Table of contents
The fund in brief
Goal
Types of fund investments
Manager and distributor
Portfolio manager
Sales charge and fund expenses
Sales charge
Operating expenses
Performance
Financial highlights
Total returns
Key terms
Investment policies and risks
Facts about investments and their risks
Valuing assets
How to buy, exchange or sell shares
How to buy shares
How to exchange shares
How to sell shares
Reductions of the sales charge
Waivers of the sales charge
Special shareholder services
Services
Quick telephone reference
Distributions and taxes
Dividend and capital gain distributions
Reinvestments
Taxes
How the fund is organized
Shares
Voting rights
Shareholder meetings
Directors and officers
Investment manager and transfer agent
Distributor
About IDS
General information
<PAGE>
PAGE 5
The fund in brief
Goal
IDS Discovery Fund seeks to provide shareholders with long-term
growth of capital. Because any investment involves risk, achieving
this goal cannot be guaranteed. Only shareholders can change the
goal.
Types of fund investments
The fund is a diversified mutual fund that invests primarily in
common stocks of small- and medium-size growth companies. Many are
in businesses involving technological innovation or experiencing
rapidly improving productivity.
Stocks of smaller, growing companies historically have provided
higher returns to investors than stocks of larger, established
companies. But their prices have fluctuated more. Therefore, the
fund is appropriate for long-term investors who are comfortable
with a relatively high degree of short-term price variability and
investment risk.
Manager and distributor
The fund is managed by IDS Financial Corporation (IDS), a provider
of financial services since 1894. IDS currently manages more than
$37 billion in assets for the IDS MUTUAL FUND GROUP. Shares of the
fund are sold through IDS Financial Services Inc., a wholly owned
subsidiary of IDS.
Portfolio manager
Ray Hirsch joined IDS in 1986 and serves as senior portfolio
manager. He has managed this fund since 1988. He also serves as
portfolio manager for IDS Strategy, Aggressive Equity Fund and IDS
Life Aggressive Growth Fund. In addition, he manages investments
for IDS Growth Spectrum Advisors, a division of IDS Advisory Group,
Inc.
Sales charge and fund expenses
Sales charge
When you buy shares, you pay a maximum sales charge of 5% of the
public offering price. This charge can be reduced, depending on
your total investments in IDS funds. See "Reductions of the sales
charge."
Shareholder transaction expenses
Maximum sales charge on purchases
(as a percent of offering price).................5%
<PAGE>
PAGE 6
Operating expenses
The fund pays certain expenses out of its assets. The expenses are
reflected in the fund's daily share price and dividends, and are
not charged directly to shareholder accounts. The following chart
gives a projection of these expenses -- based on historical
expenses.
Annual fund operating expenses
(% of average daily net assets):
Management fee 0.57% Other expenses 0.31%
12b-1 fee 0.09% Total 0.97%
Example: Suppose for each year for the next 10 years, fund
expenses are as above and annual return is 5%. If you sold your
shares at the end of the following years, for each $1,000 invested,
you would pay total expenses of:
1 year 3 years 5 years 10 years
$59 $79 $101 $163
This example does not represent actual expenses, past or future.
Actual expenses may be higher or lower than those shown. Because
the fund pays annual distribution fees, shareholders who stay in
the fund for more than 20 years may indirectly pay an equivalent
of more than a 7.25% sales charge, the maximum permitted by the
National Association of Securities Dealers.
Fund expenses include fees paid to IDS for:
o managing its portfolio, providing investment research and
administrative services
o distribution (known as 12b-1 fees, after the federal rule that
authorizes them)
o transfer agent services, including handling shareholder
accounts and records.
Performance
Financial highlights
The information in this table 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 prospectus, may be obtained without charge.
<PAGE>
PAGE 7
<TABLE>
IDS Discovery Fund, Inc.
Performance
Financial highlights
Fiscal year ended July 31,
Per share income and capital changes*
<CAPTION>
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $11.37 $ 9.87 $9.58 $9.05 $7.75 $6.69 $7.99 $7.63 $6.72 $5.96
beginning of year
Income from investment operations:
Net investment income (.04) (.02) (.01) .04 .14 .13 .11 .07 .09 .11
(loss)
Net gains (losses) on (.52) 1.75 1.01 1.03 1.35 .98 (1.04) 1.21 1.41 .88
securities (both realized
and unrealized)
Total from investment (.56) 1.73 1.00 1.07 1.49 1.11 (.93) 1.28 1.50 .99
operations
Less distributions:
Dividends from net -- -- (.02) (.11) (.14) (.05) (.10) (.07) (.09) (.11)
investment income
Distributions from (.48) (.23) (.69) (.43) (.05) -- (.27) (.85) (.50) (.12)
realized gains
Total distributions (.48) (.23) (.71) (.54) (.19) (.05) (.37) (.92) (.59) (.23)
Net asset value, $10.33 $11.37 $9.87 $9.58 $9.05 $7.75 $6.69 $7.99 $7.63 $6.72
end of year
Ratios/supplemental data
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
Net assets, end of year $523 $445 $293 $207 $168 $167 $182 $257 $297 $288
(in millions)
Ratio of expenses to .97% 1.03% 1.04% .98% .76% .66% .63% .67% .70% .81%
average daily net assets
Ratio of net income (loss) (.39%) (.17%) (.11%) .40% 1.51% 1.86% 1.49% .71% 1.07% 1.50%
to average daily net assets
Portfolio turnover rate 67% 76% 90% 95% 76% 109% 61% 33% 63% 52%
(excluding short-term
securities)
Total return** (5.5%) 17.5% 9.9% 13.4% 19.8% 16.7% (10.9%) 16.8% 22.3% 16.7%
*For a share outstanding throughout the year. Rounded to the nearest cent.
**Total return does not reflect payment of a sales charge.
The information in this table has been audited by KPMG Peat Marwick LLP, independent auditors. The
independent auditors' report and additional information about the performance of the fund is
contained in the fund's annual report which, if not included with this prospectus, may be
obtained without charge.
</TABLE>
<PAGE>
PAGE 8
Total returns
Average annual total returns as of July 31, 1994
Purchase 1 year 5 years 10 years
made ago ago ago
Discovery -10.24 +9.52 +10.56
S&P 500 +5.16 +9.15 +15.63
Lipper Small
Co. Growth +3.28 +10.07 +12.23
Fund Index
Cumulative total returns as of July 31, 1994
Purchase 1 year 5 years 10 years
made ago ago ago
Discovery -10.24 +57.52 +172.82
S&P 500 +5.16 +54.86 +327.26
Lipper Small
Co. Growth +3.28 +61.58 +216.98
Fund Index
These examples show total returns from hypothetical investments in
the fund. These returns are compared to those of popular indexes
for the same periods.
For purposes of calculation, information about the fund assumes a
sales charge of 5%, makes no adjustments for taxes an investor may
have paid on the reinvested income and capital gains, and covers a
period of widely fluctuating securities prices. Returns shown
should not be considered a representation of the fund's future
performance.
The fund includes primarily common stocks that may be different
from those in the indexes. The indexes reflect reinvestment of all
distributions and changes in market prices, but exclude brokerage
commissions or other fees.
Standard & Poor's 500 Stock Index (S&P 500), an unmanaged list of
common stocks, is frequently used as a general measure of market
performance. However, the S&P 500 companies are generally larger
than those in which the fund invests.
Lipper Small Company Growth Fund Index, published by Lipper
Analytical Services, Inc., includes 30 funds that are generally
similar to the fund, although some funds in the index may have
somewhat different investment policies or objectives.
<PAGE>
PAGE 9
Key terms
Net asset value (NAV)
Value of a single fund share. It is the total market value of all
of a fund's investments and other assets, less any liabilities,
divided by the number of shares outstanding.
The NAV is the price you receive when you sell your shares. It
usually changes from day-to-day, and is calculated at the close of
business, normally 3 p.m. Central time, each business day (any day
the New York Stock Exchange is open).
Public offering price
Price at which you buy shares. It is the NAV plus the sales
charge. NAVs and public offering prices of IDS funds are listed
each day in major newspapers and financial publications.
Investment income
Dividends and interest earned on securities held by the fund.
Capital gains or losses
Increase or decrease in value of the securities the fund holds.
Gains or losses are realized when securities that have increased or
decreased in value are sold. A fund also may have unrealized gains
or losses when securities increase or decrease in value but are not
sold.
Distributions
Payments to shareholders of two types: investment income
(dividends) and realized net long-term capital gains (capital gains
distributions).
Total return
Sum of all of your returns for a given period, assuming you
reinvest all distributions. Calculated by taking the total value
of shares you own at the end of the period (including shares
acquired by reinvestment), less the price of shares you purchased
at the beginning of the period.
Average annual total return
The annually compounded rate of return over a given time period
(usually two or more years) -- total return for the period
converted to an equivalent annual figure.
Investment policies and risks
The fund invests primarily in common stocks of U.S. and foreign
small- and medium-size growth companies. Many of these companies
emphasize technological innovation or productivity improvements.
The fund invests in common stock and debt securities of large,
well-established companies when the portfolio manager believes such
investments offer the best opportunity for capital growth. The
fund also uses derivative instruments and money market instruments.
<PAGE>
PAGE 10
The various types of investments the portfolio manager uses to
achieve investment performance are described in more detail in the
next section and in the SAI.
Facts about investments and their risks
Common stocks: Stock prices are subject to market fluctuations.
Stocks of smaller companies may be subject to more abrupt or
erratic price movements than stocks of larger, established
companies or the stock market as a whole. Also, small companies
often have limited product lines, smaller markets or fewer
financial resources. Therefore, some of the securities in which
the fund invests involve substantial risk and may be considered
speculative.
Debt securities: The price of an investment-grade bond fluctuates
as interest rates change or if its credit rating is upgraded or
downgraded. Prices of bonds below investment grade may react more
to the ability of the issuing company to pay interest and principal
when due. These bonds have greater price fluctuations and are more
likely to experience a default.
Foreign investments: Securities of foreign companies and
governments may be traded in the United States, but often they are
traded only on foreign markets. Frequently, there is less
information about foreign companies and less government supervision
of foreign markets. Foreign investments are subject to political
and economic risks of the countries in which the investments are
made, including the possibility of seizure or nationalization of
companies, imposition of withholding taxes on income, establishment
of exchange controls or adoption of other restrictions that might
affect an investment adversely. If an investment is made in a
foreign market, the local currency must be purchased. This is done
by using a forward contract in which the price of the foreign
currency in U.S. dollars is established on the date the trade is
made, but delivery of the currency is not made until the securities
are received. As long as the fund holds foreign currencies or
securities valued in foreign currencies, the price of a fund share
will be affected by changes in the value of the currencies relative
to the U.S. dollar. Because of the limited trading volume in some
foreign markets, efforts to buy or sell a security may change the
price of the security, and it may be difficult to complete the
transaction. The fund may invest up to 25% of its total assets in
foreign investments.
Derivative instruments: The portfolio manager may use derivative
instruments in addition to securities to achieve investment
performance. Derivative instruments include futures, options and
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 and a daily change in price based on or derived
from a security, a currency, a group of securities or currencies, <PAGE>
PAGE 11
or an index. A number of strategies or combination of instruments
can be used to achieve the desired investment performance
characteristics. A small change in the value of the underlying
security, currency or index will cause a sizable gain or loss in
the price of the derivative instrument. Derivative instruments
allow the portfolio manager to change the investment performance
characteristics very quickly and at lower costs. Risks include
losses of premiums, rapid changes in prices, defaults by other
parties, and inability to close such instruments. The fund will
use derivative instruments only to achieve the same investment
performance characteristics it could achieve by directly holding
those securities and currencies permitted under the investment
policies. The fund will designate cash or appropriate liquid
assets to cover its portfolio obligations. 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. For further information, see
the options and futures appendix in the SAI.
Securities and derivative instruments that are illiquid: Illiquid
means the security or derivative instrument cannot be sold quickly
in the normal course of business. Some investments cannot be
resold to the U.S. public because of their terms or government
regulations. All securities and derivative instruments, however,
can be sold in private sales, and many may be sold to other
institutions and qualified buyers or on foreign markets. The
portfolio manager will follow guidelines established by the board
of directors and consider relevant factors such as the nature of
the security and the number of likely buyers when determining
whether a security is illiquid. No more than 10% of the fund's net
assets will be held in securities and derivative instruments that
are illiquid.
Money market instruments: Short-term debt securities rated in the
top two grades are used to meet daily cash needs and at various
times to hold assets until better investment opportunities arise.
Generally less than 25% of the fund's total assets are in these
money market instruments. However, for temporary defensive
purposes these investments could exceed that amount for a limited
period of time.
The investment policies described above may be changed by the board
of directors.
Lending portfolio securities: The fund may lend its securities to
earn income so long as borrowers provide collateral equal to the
market value of the loans. The risks are that borrowers will not
provide collateral when required or return securities when due.
Unless shareholders approve otherwise, loans may not exceed 30% of
the fund's net assets.
Valuing assets
o Securities (except bonds) and assets with available market
values are valued on that basis.<PAGE>
PAGE 12
o Securities maturing in 60 days or less are valued at amortized
cost.
o Bonds and assets without readily available market values are
valued according to methods selected in good faith by the
board of directors.
How to buy, exchange or sell shares
How to buy shares
If you're investing in this fund for the first time, you'll need to
set up an account. Your financial planner will help you fill out
and submit an application. Once your account is set up, you can
choose among several convenient ways to invest.
Important: When opening an account, you must provide IDS with your
correct Taxpayer Identification Number (Social Security or Employer
Identification number). See "Distributions and taxes."
When you buy shares for a new or existing account, the price you
pay per share is determined at the close of business on the day
your investment is received and accepted at the Minneapolis
headquarters.
Purchase policies:
o Investments must be received and accepted in the Minneapolis
headquarters on a business day before 3 p.m. Central time to
be included in your account that day and to receive that day's
share price. Otherwise your purchase will be processed the
next business day and you will pay the next day's share price.
o The minimums allowed for investment may change from time to
time.
o Wire orders can be accepted only on days when your bank, IDS,
the fund and Norwest Bank Minneapolis are open for business.
o Wire purchases are completed when wired payment is received
and the fund accepts the purchase.
IDS and the fund are not responsible for any delays that occur
in wiring funds, including delays in processing by the bank.
o You must pay any fee the bank charges for wiring.
o The fund reserves the right to reject any application for any
reason.
<PAGE>
PAGE 13
<TABLE><CAPTION>
Three ways to invest
<C> <C> <C>
1
By regular account Send your check and application Minimum amounts
(or your name and account number Initial investment: $2,000
if you have an established account) Additional
to: investments: $ 100
IDS Financial Services Inc. Account balances: $ 300*
P.O. Box 74 Qualified retirement
Minneapolis, MN 55440-0074 accounts: none
Your financial planner will help
you with this process.
2
By scheduled Contact your financial planner Minimum amounts
investment plan to set up one of the following Initial investment: $100
scheduled plans: Additional
investments: $100/mo
o automatic payroll deduction Account balances: none
(on active plans of
o bank authorization monthly payments)
o direct deposit of
Social Security check
o other plan approved by the fund
3
By wire If you have an established account, If this information is not
you may wire money to: included, the order may be
rejected and all money
Norwest Bank Minneapolis received by the fund, less
Routing No. 091000019 any costs the fund or IDS
Minneapolis, MN incurs, will be returned
Attn: Domestic Wire Dept. promptly.
Give these instructions: Minimum amounts
Credit IDS Account #00-30-015 Each wire investment: $1,000
for personal account # (your
account number) for (your name).
*If your account balance falls below $300, IDS will ask you in writing to bring it up to $300 or establish a scheduled
investment plan. If you don't do so within 30 days, your shares can be redeemed and the proceeds mailed to you.
</TABLE>
How to exchange shares
You can exchange your shares of the fund at no charge for shares of
any other publicly offered fund in the IDS MUTUAL FUND GROUP
available in your state. For complete information, including fees
and expenses, read the prospectus carefully before exchanging into
a new fund.
If your exchange request arrives at the Minneapolis headquarters
before the close of business, your shares will be redeemed at the
net asset value set for that day. The proceeds will be used to
purchase new fund shares the same day. Otherwise, your exchange
will take place the next business day at that day's net asset
value.
For tax purposes, an exchange represents a sale and purchase and
may result in a gain or loss. However, you cannot create a tax
loss (or reduce a taxable gain) by exchanging from the fund within
91 days of your purchase. For further explanation, see the SAI.
<PAGE>
PAGE 14
How to sell shares
You can sell (redeem) your shares at any time. IDS Shareholder
Service will mail payment within seven days after receiving your
request.
When you sell shares, the amount you receive may be more or less
than the amount you invested. Your shares will be redeemed at net
asset value at the close of business on the day your request is
accepted at the Minneapolis headquarters. If your request arrives
after the close of business, the price per share will be the net
asset value at the close of business on the next business day.
A redemption is a taxable transaction. If the fund's net asset
value when you sell shares is more or less than the cost of your
shares, you will have a gain or loss, which can affect your tax
liability. Redeeming shares held in an IRA or qualified retirement
account may subject you to certain federal taxes, penalties and
reporting requirements. Consult your tax adviser.
<TABLE><CAPTION>
Two ways to request an exchange or sale of shares
<S> <C>
1
By letter
Include in your letter: o the name of the fund(s)
o your account number(s) (for exchanges, both funds must
be registered in the same ownership)
o your Taxpayer Identification Number (TIN)
o the dollar amount or number of shares you want to
exchange or sell
o signature of all registered account owners
o for redemptions, indicate how you want your sales
proceeds delivered to you
o any paper certificates of shares you hold
Regular mail:
IDS Shareholder Service
Attn: Redemptions
P.O. Box 534
Minneapolis, MN 55440-0534
Express mail:
IDS Shareholder Service
Attn: Redemptions
733 Marquette Ave.
Minneapolis, MN 55402
2
By phone
IDS Telephone Transaction o The fund and IDS will honor any telephone exchange
Service: or redemption request believed to be authentic and will
800-437-3133 or use reasonable procedures to confirm that they are.
612-671-3800 This includes asking identifying questions and tape
recording calls. So long as reasonable procedures are
followed, neither the fund nor IDS will be liable for
any loss resulting from fraudulent requests.
o Phone exchange and redemption privileges automatically
apply to all accounts except custodial, corporate or
qualified retirement accounts unless you request these
privileges NOT apply by writing IDS Shareholder
Service. Each registered owner must sign the request.
o IDS answers phone requests promptly, but you may
experience delays when call volume is high. If you are
unable to get through, use mail procedure as an
alternative.
<PAGE>
PAGE 15
o Phone privileges may be modified or discontinued at any
time.
Minimum amount
Redemption: $100
Maximum amount
Redemption: $50,000
</TABLE>
Exchange policies:
o 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.
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 written approval is obtained from the secured party.
o IDS 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.
Redemption policies:
o A "change of mind" option allows you to change your mind after
requesting a redemption and to use all or part of the proceeds to
buy new shares in the same account at the net asset value, rather
than the offering price on the date of a new purchase. To do so,
send a written request within 30 days of the date your redemption
request was received. Include your account number and mention this
option. This privilege may be limited or withdrawn at any time,
and it may have tax consequences.
o A telephone redemption request will not be allowed within 30
days of a phoned-in address change.
Important: If you request a redemption of shares you recently
purchased by a check or money order that is not guaranteed, the
fund will wait for your check to clear. Please expect a minimum of
10 days from the date of purchase before IDS mails a check to you.
(A check may be mailed earlier if your bank provides evidence
satisfactory to the fund and IDS that your check has cleared.)
<PAGE>
PAGE 16
<TABLE><CAPTION>
Three ways to receive payment when you sell shares
<S> <C>
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 o Minimum wire redemption: $1,000.
o Request that money be wired to your bank.
o Bank account must be in the same
ownership as the IDS account.
NOTE: Pre-authorization required. For
instructions, contact your financial
planner or IDS Shareholder Service.
3
By scheduled payout plan o Minimum payment: $50.
o Contact your financial planner or IDS
Shareholder Service to set up regular
payments to you on a monthly, bimonthly,
quarterly, semiannual or annual basis.
o Buying new shares while under a payout
plan may be disadvantageous because of
sales charges.
</TABLE>
Reductions of the sales charge
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 a
percent of:*
Public Net
offering amount
price invested
Up to $50,000 5.0% 5.26%
Next $50,000 4.5 4.71
Next $150,000 4.0 4.17
Next $250,000 3.0 3.09
Next $500,000 2.0 2.04
Next $2,000,000 1.0 1.01
More than $3,000,000 0.5 0.50
* To calculate the actual sales charge on an investment greater
than $50,000, amounts for each applicable increment must be
totaled. See the SAI.
Your sales charge may be reduced, depending on the totals of:
o the amount you are investing in this fund now,
o the amount of your existing investment in this fund, if any, and
<PAGE>
PAGE 17
o the amount you and your immediate family (spouse or unmarried
children under 21) are investing or have in other funds in the IDS
MUTUAL FUND GROUP that carry a sales charge.
Other policies that affect your sales charge:
o IDS Cash Management Fund and IDS Tax-Free Money Fund do not
carry sales charges. However, you may count investments in these
funds if you acquired shares in them by exchanging shares from IDS
funds that carry sales charges.
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 entity, may be added together to reduce sales charges for
all shares purchased through that plan.
For more details, see the SAI.
Waivers of the sales charge
Sales charges do not apply to:
o Current or retired trustees, directors, officers or employees of
the fund or IDS or its subsidiaries, their spouses and unmarried
children under 21.
o Current or retired IDS planners, their spouses and unmarried
children under 21.
o Qualified employee benefit plans* if the plan:
- has at least $1 million invested in funds of the IDS MUTUAL
FUND GROUP; or
- has 500 or more participants; or
- uses a daily transfer recordkeeping service offering
participants daily access to IDS funds.
(Participants in certain qualified plans for which the initial
sales charge is waived may be subject to a deferred sales charge of
up to 4% on certain redemptions. For more information, see the
SAI.)
o Trust companies or similar institutions, and charitable
organizations that meet the definition in Section 501(c)(3) of the
Internal Revenue Code.* These must have at least $1 million
invested in funds of the IDS MUTUAL FUND GROUP.
o Purchases made within 30 days after certain redemptions. A
waiver applies up to the amount redeemed from:
- an IDS product in a qualified plan subject to a deferred sales
charge; or
- a qualified plan where IDS Trust acts as trustee and/or
recordkeeper; or
- IDS Strategy Fund.
<PAGE>
PAGE 18
Send the fund a written request along with your payment, indicating
the amount of the redemption and the date on which it occurred.
o Purchases made with dividend or capital gain distributions from
another fund in the IDS MUTUAL FUND GROUP that has a sales charge.
*Eligibility must be determined in advance by IDS. To do so,
contact your financial planner.
Special shareholder services
Services
To help you track and evaluate the performance of your investments,
IDS provides these services:
Quarterly statements listing all of your holdings and transactions
during the previous three months.
Yearly tax statements featuring average-cost-basis reporting of
capital gains or losses if you redeem your shares along with
distribution information - which simplifies tax calculations.
A personalized mutual fund progress report detailing returns on
your initial investment and cash-flow activity in your account. It
calculates a total return to reflect your individual history in
owning fund shares. This report is available from your financial
planner.
Quick telephone reference
IDS Telephone Transaction Service
Redemptions and exchanges, dividend payments or reinvestments and
automatic payment arrangements
National/Minnesota: 800-437-3133
Mpls./St. Paul area: 671-3800
IDS Shareholder Service
Fund performance, objectives and account inquiries
612-671-3733
TTY Service
For the hearing impaired
800-846-4852
IDS Infoline
Automated account information (TouchToneR phones only), including
current fund prices and performance, account values and recent
account transactions
National/Minnesota: 800-272-4445
Mpls./St. Paul area: 671-1630
<PAGE>
PAGE 19
Distributions and taxes
The fund distributes to shareholders investment income and net
capital gains. It does so to qualify as a regulated investment
company and to avoid paying corporate income and excise taxes.
Dividend and capital gains distributions will have tax consequences
you should know about.
Dividend and capital gain distributions
The fund distributes its net investment income (dividends and
interest earned on securities held by the fund, less operating
expenses) to shareholders of record by the end of the calendar
year. Short-term capital gains distributed are included in net
investment income. Net realized capital gains, if any, from
selling securities are distributed at the end of the calendar year.
Before they're distributed, both net investment income and net
capital gains are included in the value of each share. After
they're distributed, the value of each share drops by the per-share
amount of the distribution. (If your distributions are reinvested,
the total value of your holdings will not change.)
Reinvestments
Dividends and capital gain distributions are automatically
reinvested in additional shares of the fund, unless:
o you request the fund in writing or by phone to pay
distributions to you in cash, or
o you direct the fund to invest your distributions in any
publicly available IDS fund for which you've previously opened
an account. You pay no sales charge on shares purchased
through reinvestment from this fund into any IDS fund.
The reinvestment price is the net asset value at close of business
on the day the distribution is paid. (Your quarterly statement
from IDS will confirm the amount invested and the number of shares
purchased.)
If you choose cash distributions, you will receive only those
declared after your request has been processed.
If the U.S. Postal Service cannot deliver the checks for the cash
distributions, we will reinvest the checks into your account at the
then-current net asset value and make future distributions in the
form of additional shares.
Taxes
Distributions are subject to federal income tax and also may be
subject to state and local taxes. Distributions are taxable in the
year the fund pays them regardless of whether you take them in cash
or reinvest them.
<PAGE>
PAGE 20
Each January, IDS sends you a statement showing the kinds and total
amount of all distributions you received during the previous year.
You must report all distributions on your tax returns, even if they
are reinvested in additional shares.
"Buying a dividend" creates a tax liability. This means buying
shares shortly before a net investment income or a capital gain
distribution. You pay the full pre-distribution price for the
shares, then receive a portion of your investment back as a
distribution, which is taxable.
Redemptions and exchanges subject you to a tax on any capital gain.
If you sell shares for more than their cost, the difference is a
capital gain. Your gain may be either short term (for shares held
for one year or less) or long term (for shares held for more than
one year).
Your Taxpayer Identification Number (TIN) is important. As with
any financial account you open, you must list your current and
correct Taxpayer Identification Number (TIN) -- either your Social
Security or Employer Identification number. The TIN must be
certified under penalties of perjury on your application when you
open an account at IDS.
If you don't provide the TIN to IDS, or the TIN you report is
incorrect, 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
o criminal penalties for falsifying information
You also could be subject to backup withholding because you failed
to report interest or dividends on your tax return as required.
How to determine the correct TIN
Use the Social Security or
For this type of account: Employer Identification number
of:
Individual or joint account The individual or first person
listed on the account
Custodian account of a minor The minor
(Uniform Gift/Transfer to Minors
Act)
A living trust The grantor-trustee (the person
who puts the money into the
trust)
<PAGE>
PAGE 21
An irrevocable trust, pension The legal entity (not the
trust or estate personal representative or
trustee, unless no legal entity
is designated in the account
title)
Sole proprietorship or The owner or partnership
partnership
Corporate The corporation
Association, club or The organization
tax-exempt organization
For details on TIN requirements, ask your financial planner or
local IDS office for Federal Form W-9, "Request for Taxpayer
Identification Number and Certification."
Important: This information is a brief and selective summary of
certain federal tax rules that apply to this fund. Tax matters are
highly individual and complex, and you should consult a qualified
tax adviser about your personal situation.
How the fund is organized
The fund is a diversified, open-end management investment company,
as defined in the Investment Company Act of 1940. Originally
incorporated on April 29, 1981 in Nevada, the fund changed its
state of incorporation on June 13, 1986 by merging into a Minnesota
corporation incorporated on April 7, 1986. The fund headquarters
are at 901 S. Marquette Ave., Suite 2810, Minneapolis, MN 55402-
3268.
Shares
The fund is owned by its shareholders. All shares issued by the
fund are of the same class -- capital stock. Par value is 1 cent
per share. Both full and fractional shares can be issued.
The fund no longer issues stock certificates.
Voting rights
As a shareholder, you have voting rights over the fund's management
and fundamental policies. You are entitled to one vote for each
share you own.
Shareholder meetings
The fund does not hold annual shareholder meetings. However, the
directors may call meetings at their discretion, or on demand by
holders of 10% or more of the outstanding shares, to elect or
remove directors.
<PAGE>
PAGE 22
Directors and officers
Shareholders elect a board of directors that oversees the
operations of the fund and chooses its officers. Its officers are
responsible for day-to-day business decisions based on policies set
by the board. The board has named an executive committee that has
authority to act on its behalf between meetings. The directors
also serve on the boards of all of the other funds in the IDS
MUTUAL FUND GROUP, except for Mr. Dudley, who is a director of all
publicly offered funds.
Directors and officers of the fund
President and interested director
William R. Pearce
President of all funds in the IDS MUTUAL FUND GROUP.
Independent directors
Lynne V. Cheney
Distinguished fellow, American Enterprise Institute for Public
Policy Research.
Robert F. Froehlke
Former president of all funds in the IDS MUTUAL FUND GROUP.
Donald M. Kendall
Former chairman and chief executive officer, PepsiCo, Inc.
Melvin R. Laird
Senior counsellor for national and international affairs, The
Reader's Digest Association, Inc.
Lewis W. Lehr
Former chairman and chief executive officer, Minnesota Mining and
Manufacturing Company (3M).
Edson W. Spencer
Former chairman and chief executive officer, Honeywell, Inc.
Wheelock Whitney
Chairman, Whitney Management Company.
Interested director who is a partner in a law firm that has
represented an IDS subsidiary
Anne P. Jones
Partner, law firm of Sutherland, Asbill & Brennan.
Interested directors who are officers and/or employees of IDS
William H. Dudley
Executive vice president, IDS.
<PAGE>
PAGE 23
David R. Hubers
President and chief executive officer, IDS.
John R. Thomas
Senior vice president, IDS.
Other officer
Leslie L. Ogg
Vice president of all funds in the IDS MUTUAL FUND GROUP and
general counsel and treasurer of the publicly offered funds.
Refer to the SAI for the directors' and officers' biographies.
Investment manager and transfer agent
The fund pays IDS for managing its portfolio, providing
administrative services and serving as transfer agent (handling
shareholder accounts).
Under its Investment Management and Services Agreement, IDS
determines which securities will be purchased, held or sold
(subject to the direction and control of the fund's board of
directors). For these services the fund pays IDS a two-part fee.
The first part is based on the combined average daily net assets of
all funds in the IDS MUTUAL FUND GROUP, as follows:
Net assets of
IDS MUTUAL Annual
FUND GROUP* fee
First $5 billion 0.46%
Each additional Decreasing
$5 billion percentages
More than $50 billion 0.32%
*Includes all funds except the money market funds.
The second part is equal to 0.23% of the fund's average daily net
assets during the fiscal year. This fee may be increased or
decreased by a performance adjustment based on the Lipper Small
Company Growth Fund Index. The maximum adjustment is 0.12% of the
fund's average daily net assets on an annual basis.
For the fiscal year ended July 31, 1994, the fund paid IDS a total
investment management fee of 0.57% of its average daily net assets.
Under the Agreement, the fund also pays taxes, brokerage
commissions and nonadvisory expenses.
In addition, under a separate Transfer Agency Agreement, IDS
maintains shareholder accounts and records. The fund pays IDS an
annual fee of $15 per shareholder account for this service.<PAGE>
PAGE 24
Distributor
The fund sells shares through IDS Financial Services Inc., a wholly
owned subsidiary of IDS, under a Distribution Agreement. Financial
planners representing IDS Financial Services Inc. provide
information to investors about individual investment programs, the
fund and its operations, new account applications, exchange and
redemption requests. The cost of these services is paid partially
by the fund's sales charge.
Portions of sales charges may be paid to securities dealers who
have sold the fund's shares, or to banks and other financial
institutions. The proceeds paid to others range from 0.8% to 4% of
the fund's offering price depending on the monthly sales volume.
To help defray costs not covered by sales charges, including costs
for marketing, sales administration, training, overhead, direct
marketing programs, advertising and related functions, the fund
pays IDS a 12b-1 fee. This fee is paid under a Plan and
Supplemental Agreement of Distribution that follows the terms of
Rule 12b-1 of the Investment Company Act of 1940 (and a Securities
and Exchange Commission order). Under this Agreement, the fund
pays IDS $6 per shareholder account per year. The total 12b-1 fee
paid by the fund for the fiscal year ended July 31, 1994 was 0.09%
of its average daily net assets. This fee will not cover all of
the costs incurred by IDS.
Total management and distribution fees and expenses paid by the
fund in the fiscal year ended July 31, 1994 were 0.97% of its
average daily net assets.
Total fees and expenses (excluding taxes and brokerage commissions)
cannot exceed the most restrictive applicable state expense
limitation.
About IDS
General information
The IDS family of companies offers not only mutual funds but also
insurance, annuities, investment certificates and a broad range of
financial management services.
Besides managing investments for all publicly offered funds in the
IDS MUTUAL FUND GROUP, IDS also manages investments for itself and
its subsidiaries, IDS Certificate Company and IDS Life Insurance
Company. Total assets under management on July 31, 1994 were more
than $100 billion.
IDS Financial Services Inc. serves individuals and businesses
through its nationwide network of more than 175 offices and more
than 7,800 planners.
Other IDS subsidiaries provide investment management and related
services for pension, profit sharing, employee savings and
endowment funds of businesses and institutions.<PAGE>
PAGE 25
IDS is located at IDS Tower 10, Minneapolis, MN 55440-0010. It 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. The fund may pay brokerage
commissions to broker-dealer affiliates of American Express and
IDS.
<PAGE>
PAGE 26
STATEMENT OF ADDITIONAL INFORMATION
FOR
IDS DISCOVERY FUND
Sept. 29, 1994
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 Annual Report which may be obtained
from your IDS personal financial planner or by writing to IDS
Shareholder Service, P.O. Box 534, Minneapolis, MN 55440-0534.
This SAI is dated Sept. 29, 1994, and it is to be used with the
prospectus dated Sept. 29, 1994, and the Annual Report for the
fiscal year ended July 31, 1994.
<PAGE>
PAGE 27
TABLE OF CONTENTS
Goal and Investment Policies.........................See Prospectus
Additional Investment Policies................................p. 3
Portfolio Transactions........................................p. 5
Brokerage Commissions Paid to Brokers Affiliated with IDS.....p. 8
Performance Information.......................................p. 8
Valuing Fund Shares...........................................p. 9
Investing in the Fund.........................................p. 11
Redeeming Shares..............................................p. 14
Pay-out Plans.................................................p. 15
Exchanges.....................................................p. 16
Taxes.........................................................p. 16
Agreements....................................................p. 17
Directors and Officers........................................p. 21
Custodian.....................................................p. 24
Independent Auditors..........................................p. 24
Financial Statements..............................See Annual Report
Prospectus....................................................p. 24
Appendix A: Description of Corporate Bond Ratings............p. 25
Appendix B: Foreign Currency Transactions....................p. 27
Appendix C: Options and Stock Index Futures Contracts........p. 32
Appendix D: Mortgage-Backed Securities.......................p. 39
Appendix E: Dollar-Cost Averaging............................p. 42
<PAGE>
PAGE 28
ADDITIONAL INVESTMENT POLICIES
These are investment policies in addition to those presented in the
prospectus. Unless holders of a majority of the outstanding shares
agree to make the change the fund will not:
'Purchase more than 10% of the outstanding voting securities of an
issuer.
'Invest more than 5% of its total assets, at market value, 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.
'Concentrate in any one industry. According to the present
interpretation by the Securities and Exchange Commission (SEC),
this means no more than 25% of the fund's total assets, based on
current market value at time of purchase, can be invested in any
one industry.
'Invest more than 5% of its total assets, at cost, in securities of
companies, including any predecessors, that have a record of less
than three years continuous operations.
'Invest in securities of investment companies except by purchases
in the open market where the dealer's or sponsor's profit is the
regular commission. If any such investment is ever made, not more
than 10% of the fund's assets, at market, will be so invested. The
fund has not invested in securities of investment companies in the
past and has no present intention of investing in these securities.
'Buy or sell real estate, commodities, or commodity contracts,
except the fund may enter into stock index futures contracts.
'Buy on margin or sell short, but it may make margin payments in
connection with transactions in stock index futures contracts.
'Invest in a company to control or manage it.
'Pledge or mortgage its assets beyond 15% of the cost of total
assets. If the fund were ever to do so, valuation of the pledged
or mortgaged assets would be based on market values. For purposes
of this restriction, collateral arrangements for margin deposits on
a stock index futures contract are not deemed to be a pledge of
assets.
'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. The fund has not borrowed in the past and has
no present intention to borrow.<PAGE>
PAGE 29
'Make cash loans. The fund, however, does make investments in debt
securities where the sellers agree to repurchase the securities at
cost plus an agreed-upon interest rate within a specified period of
time.
'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.
'Make a loan of any part of its assets to IDS Financial Corporation
(IDS), to the directors and officers of IDS or to its own directors
and officers.
'Purchase securities of an issuer if the directors and officers of
the fund and of IDS hold more than a certain percentage of the
issuer's outstanding securities. The holdings of all directors and
officers of the fund and of IDS who own more than 0.5% of an
issuer's securities are added together and if in total they own
more than 5%, the fund will not purchase securities of that issuer.
'Invest in exploration or development programs, such as oil, gas or
mineral programs.
'Lend portfolio securities in excess of 30% of its net assets, at
market value. This policy may not be changed without shareholder
approval. The current policy of the fund's board of directors is
to make these loans, either long- or short-term, to broker-dealers.
In making such loans the fund gets 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 of directors. If the market price of the loaned securities
goes up, the fund 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. A loan will not be made unless the investment
manager believes the opportunity for additional income outweighs
the risks.
Unless changed by the board of directors, the fund may:
'Invest no more than 5% of its net assets in warrants. Under one
state's law no more than 2% of the fund's net assets may be
invested in warrants not listed on an exchange.
'Make contracts to purchase securities for a fixed price at a
future date beyond normal settlement time (when-issued securities
or forward commitments). Under normal market conditions, the fund
does not intend to commit more than 5% of its total assets to these
practices. The fund does not pay for the securities or receive
dividends or interest on them until the contractual settlement
date. The fund will designate cash or liquid high-grade debt
<PAGE>
PAGE 30
securities at least equal in value to its commitments to purchase
the securities. When-issued securities or forward commitments are
subject to market fluctuations and they may affect the fund's total
assets the same as owned securities.
'Invest no more than 10% of the fund's net assets in securities and
derivative instruments that are illiquid. For purposes of this
policy illiquid securities include some privately placed
securities, public securities and Rule 144A securities that for one
reason or another may no longer have a readily available market,
repurchase agreements with maturities greater than seven days, non-
negotiable fixed-time deposits and over-the-counter options.
In determining the liquidity of commercial paper issued in
transactions not involving a public offering under Section 4(2) of
the Securities Act of 1933, the investment manager, under
guidelines established by the board of directors, will evaluate
relevant factors such as the issuer and the size and nature of its
commercial paper programs, the willingness and ability of the
issuer or dealer to repurchase the paper, and the nature of the
clearance and settlement procedures for the paper.
'Maintain a portion of its assets in cash and cash-equivalent
investments. The cash-equivalent investments the fund may use are
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. Any cash-equivalent investments in foreign securities
will be subject to the limitations on foreign investments described
in the prospectus. The fund also may purchase short-term corporate
notes and obligations rated in the top two classifications by
Moody's Investors Service, Inc. or Standard & Poor's Corporation or
the equivalent and may use repurchase agreements with broker-
dealers registered under the Securities Exchange Act of 1934 and
with commercial banks. A risk of a repurchase agreement is that if
the seller seeks the protection of the bankruptcy laws, the fund's
ability to liquidate the security involved could be impaired.
For a discussion of corporate bond ratings and additional
information on investment policies, see Appendix A. For a
discussion about foreign currency transactions, see Appendix B.
For a discussion on options and stock index futures contracts, see
Appendix C.
PORTFOLIO TRANSACTIONS
Subject to policies set by the board of directors, IDS 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, IDS has
<PAGE>
PAGE 31
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 of directors. In selecting broker-dealers
to execute transactions, IDS 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.
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 of directors has
adopted a policy authorizing IDS to do so to the extent authorized
by law, if IDS 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 IDS' overall responsibilities to the funds
in the IDS MUTUAL FUND GROUP.
Research provided by brokers supplements IDS' 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. IDS 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, IDS
must follow procedures authorized by the board of directors. To
date, three procedures have been authorized. One procedure permits
IDS 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 IDS, 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 IDS, 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. IDS has advised
the fund it is necessary to do business with a number of brokerage <PAGE>
PAGE 32
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 commission, but IDS
believes it may obtain better overall execution. IDS has assured
the fund 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 shall 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 IDS in providing advice to all the funds in the IDS
MUTUAL FUND GROUP and other accounts advised by IDS, even though it
is not possible to relate the benefits to any particular fund or
account.
Each investment decision made for the fund is made independently
from any decision made for another fund in the IDS MUTUAL FUND
GROUP or other account advised by IDS or any IDS subsidiary. When
the fund buys or sells the same security as another fund or
account, IDS 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.
IDS has assured the fund it will continue to seek ways to reduce
brokerage costs.
On a periodic basis, IDS 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 $660,322 for the
fiscal year ended July 31, 1994, $449,685 for fiscal year 1993, and
$366,772 for fiscal year 1992. Substantially all firms through
whom transactions were executed provide research services. In
fiscal year 1994, transactions amounting to $14,321,000, on which
$37,899 in commissions were imputed or paid, were specifically
directed to firms.
The fund acquired no securities of its regular brokers or dealers
or of the parents of those brokers or dealers that derived more
than 15% of gross revenue from securities-related activities during
the fiscal year ended July 31, 1994.
The portfolio turnover rate was 67% in the fiscal year ended July
31, 1994, and 76% in fiscal year 1993.
<PAGE>
PAGE 33
BROKERAGE COMMISSIONS PAID TO BROKERS AFFILIATED WITH IDS
Affiliates of American Express Company (American Express) (of which
IDS is a wholly owned subsidiary) may engage in brokerage and other
securities transactions on behalf of the fund according to
procedures adopted by the fund's board of directors and to the
extent consistent with applicable provisions of the federal
securities laws. IDS will use an American Express affiliate only
if (i) IDS 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 and Services
Agreement.
Information about brokerage commissions paid by the fund for the
last three fiscal years to brokers affiliated with IDS is contained
in the following table:
<TABLE><CAPTION>
For the Fiscal Year Ended July 31,
1994 1993 1992
Aggregate Percent of Aggregate Aggregate
Dollar Aggregate Dollar Dollar Dollar
Amount of Percent of Amount of Amount of Amount of
Nature Commissions Aggregate Transactions Commissions Commissions
of Paid to Brokerage Involving Payment Paid to Paid to
Broker Affiliation Broker Commissions of Commissions Broker Broker
<S> <C> <C> <C> <C> <C> <C>
Lehman (1) $ 6,854 1.04% 1.42% $10,150 $ 9,200
Brothers, Inc.
American (2) 35,936 5.44 10.26 49,025 18,592
Enterprise Investment
Services Inc.
</TABLE>
(1) Under common control with IDS as a subsidiary of American
Express. Lehman Brothers, Inc. is no longer a subsidiary of
American Express as of May 31, 1994.
(2) Wholly owned subsidiary of IDS.
PERFORMANCE INFORMATION
The fund may quote various performance figures to illustrate past
performance. 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 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
<PAGE>
PAGE 34
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 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)
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, 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, Mutual Fund Forecaster,
Newsweek, The New York Times, Personal Investor, Stanger Report,
Sylvia Porter's Personal Finance, USA Today, U.S. News and World
Report, The Wall Street Journal and Wiesenberger Investment
Companies Service.
VALUING FUND SHARES
The value of an individual share is determined by using the net
asset value before shareholder transactions for the day. On Aug.
1, 1994, the first business day following the end of the fiscal
year, the computation looked like this:
<TABLE><CAPTION>
Net assets before Shares outstanding Net asset value
shareholder transactions at end of previous day of one share
<C> <C> <C> <C> <C>
$523,402,895 divided by 50,569,283 equals $10.35
</TABLE>
In determining net assets before shareholder transactions, the
fund's portfolio securities are valued as follows as of the close
of business of the New York Stock Exchange:
'Securities, except bonds other than convertibles, 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.
'Securities traded on a securities exchange for which a last-quoted
sales price is not readily available are valued at the mean of the <PAGE>
PAGE 35
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.
'Securities included in the NASDAQ National Market System are
valued at the last-quoted sales price in this market.
'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.
'Futures and options traded on major exchanges are valued at the
last-quoted sales price on their primary exchange.
'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 New York Stock 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 New York Stock 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
fund's board of directors.
'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.
'Securities without a readily available market price, bonds other
than convertibles and other assets are valued at fair value as
determined in good faith by the board of directors. The board of
directors 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.
The New York Stock Exchange, IDS and the fund will be closed on the
following holidays: New Year's Day, Presidents' Day, Good Friday, <PAGE>
PAGE 36
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
INVESTING IN THE FUND
Sales Charge
Shares of the fund are sold at the public offering price determined
at the close of business on the day an application is accepted.
The public offering price is the net asset value of one share plus
a sales charge. The public offering price for an investment of
less than $50,000, made Aug. 1, 1994, was determined by dividing
the net asset value of one share, $10.35, by 0.95 (1.00-0.05 for a
maximum 5% sales charge) for a public offering price of $10.89.
The sales charge is paid to IDS Financial Services Inc. by the
person buying the shares.
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 150,000 4.0 4.17
Next 250,000 3.0 3.09
Next 500,000 2.0 2.04
Next 2,000,000 1.0 1.01
More than 3,000,000 0.5 0.50
Sales charges on an investment greater than $50,000 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.
<PAGE>
PAGE 37
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.
<TABLE><CAPTION>
On total investment, sales
charge as a percentage of
Public Net
Offering Price Amount Invested
Amount of Investment ranges from:
<S> <C> <C>
First $ 50,000 5.00% 5.26%
More than 50,000 to 100,000 5.00-4.75 5.26-4.99
More than 100,000 to 250,000 4.75-4.30 4.99-4.49
More than 250,000 to 500,000 4.30-3.65 4.49-3.79
More than 500,000 to 1,000,000 3.65-2.83 3.79-2.91
More than 1,000,000 to 3,000,000 2.83-1.61 2.91-1.63
More than 3,000,000 1.61-0.50 1.63-0.50
</TABLE>
The initial sales charge is waived for certain qualified plans that
meet the requirements described in the prospectus. Participants in
these qualified plans may be subject to a deferred sales charge on
certain redemptions. The deferred sales charge on certain
redemptions will be waived if the redemption is a result of a
participant's death, disability, retirement, attaining age 59 1/2,
loans or hardship withdrawals. The deferred sales charge varies
depending on the number of participants in the qualified plan and
total plan assets as follows:
Deferred Sales Charge
Number of Participants
Total Plan Assets 1-99 100 or more
Less than $1 million 4% 0%
$1 million or more 0% 0%
_________________________________________________________
Reducing the Sales Charge
Sales charges are based on the total amount of your investments in
the fund. 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 to $100,000.
The total amount invested includes any shares held in the fund in
the name of a member of your immediate family (spouse and unmarried
children under 21). For instance, if your spouse already has
invested $20,000 and you want to invest $40,000, your total amount <PAGE>
PAGE 38
invested will be $60,000 and therefore you will pay the lower
charge of 4.5% on $10,000 of the $40,000.
Until a spouse remarries, the sales charge is waived for spouses
and unmarried children under 21 of deceased trustees, directors,
officers or employees of the fund or IDS or its subsidiaries and
deceased planners.
The total amount invested also includes any investment you or your
immediate family already have in the other publicly offered funds
in the IDS MUTUAL FUND GROUP where the investment is subject to a
sales charge. For example, suppose you already have an investment
of $25,000 in IDS Growth Fund and $5,000 in this fund. If you
invest $40,000 more in this fund, your total amount invested in the
funds will be $70,000 and therefore $20,000 of your $40,000
investment will incur a 4.5% sales charge.
Finally, Individual Retirement Account (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 entity, may be
added together to reduce sales charges for shares purchased through
that plan.
Systematic Investment Programs
After you make your initial investment of $2,000 or more, you can
arrange to make additional payments of $100 or more on a regular
basis. 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. If there is no obligation, why do it? Putting money
aside is an important part of financial planning. With a
systematic investment program, you have a goal to work for.
How does this work? When you send in your payment, your money is
invested at the public offering price. Your regular investment
amount will purchase more shares when the net asset value per share
decreases, and fewer shares when the net asset value per share
increases. Each purchase is a separate transaction. After each
purchase your new shares will be added to your account. Shares
bought through these programs are exactly the same as any other
fund shares. They can be bought and sold at any time. A
systematic investment program is not an option or an absolute right
to buy shares.
The systematic investment program itself cannot ensure a profit,
nor can it protect against a loss in a declining market. If you
decide to discontinue the program and redeem your shares when their
net asset value is less than what you paid for them, you will incur
a loss.
For a discussion on dollar-cost averaging, see Appendix E.
<PAGE>
PAGE 39
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 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 one fund but cannot
be split to make purchases in two or more funds. Automatic
directed dividends are available between accounts of any ownership
except:
'Between a non-custodial account and an IRA, or 401(k) plan account
or other qualified retirement account of which IDS Trust Company
acts as custodian;
'Between two IDS Trust Company custodial accounts with different
owners (for example, you may not exchange dividends from your IRA
to the IRA of your spouse);
'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).
Moreover, 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.
Each fund has a different investment goal described in its
prospectus along with other information, including fees and expense
ratios. Before exchanging dividends into another fund, you should
read its prospectus. You will receive a confirmation that the
automatic directed dividend service has been set up for your
account.
REDEEMING SHARES
You have a right to redeem your shares at any time. For an
explanation of redemption procedures, please see the prospectus.
During an emergency, the board of directors can suspend the
computation of net asset value, 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:
'The New York Stock Exchange closes for reasons other than the
usual weekend and holiday closings or trading on the Exchange is
restricted, or
'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<PAGE>
PAGE 40
'The SEC, under the provisions of the Investment Company Act of
1940, as amended, declares a period of emergency to exist.
Should the fund stop selling shares, the directors 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.
PAY-OUT PLANS
You can use any of several pay-out plans to redeem your investment
in regular installments at no extra cost. 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 IDS 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 adviser about this complex
area of the tax law.
IDS normally will not accept applications for a systematic
investment in any fund in the IDS MUTUAL FUND GROUP subject to a
sales charge 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 submit an authorization form
supplied by IDS Shareholder Service. For a copy, write or call IDS
Shareholder Service, P.O. Box 534, Minneapolis, MN 55440-0534, 612-
671-3733. 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 IDS 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 net asset value at regular intervals during the time
period you choose. This plan is designed to end in complete re-
demption of all shares in your account by the end of the fixed
period. <PAGE>
PAGE 41
Plan #2: Redemption of a fixed number of shares
If you choose this plan, a fixed number of shares will be redeemed
at net asset value 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 your 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.
EXCHANGES
If you buy shares in the fund and then exchange into another fund,
it is considered a sale and subsequent purchase of shares. Under
the tax laws, if this exchange is done within 91 days, any sales
charge waived 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.
Retirement Accounts
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 this fund, you can do so without paying a sales charge.
However, this type of exchange is considered a sale 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 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
adviser for further details about this complex subject.
TAXES
Net investment income dividends received should be treated as
dividend income for federal income tax purposes. Corporate
shareholders are generally entitled to a deduction equal to 70% of
that portion of the fund's dividend that is attributable to <PAGE>
PAGE 42
dividends the fund received from domestic (U.S.) securities. For
the fiscal year ended July 31, 1994, there were no investment
income dividends paid, therefore, 0% qualified for the corporate
deduction.
Capital gain distributions received by individual and corporate
shareholders, if any, should be treated as long-term capital gains
regardless of how long they owned their shares. Short-term capital
gains earned by the fund are paid to shareholders as part of their
ordinary income dividend and are taxable.
You may be able to defer taxes on current income from a fund by
investing through an IRA, 401(k) plan account or other qualified
retirement account. If you move all or part of a non-qualified
investment in the fund to a qualified account, this type of
exchange is considered a sale of shares. You pay no sales charge,
but the exchange may result in a gain or loss for tax purposes, or
excess contributions under IRA or qualified plan regulations.
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.
The fund may be subject to U.S. taxes resulting from holdings in a
passive foreign investment company (PFIC). A foreign corporation
is a PFIC when 75% or more of its gross income for the taxable year
is passive income or if 50% or more of the average value of its
assets consists of assets that produce or could produce passive
income. The fund has no current intention to invest in PFICs.
This is a brief summary that relates to federal income taxation
only. Shareholders should consult their tax adviser as to the
application of federal, state and local income tax laws to fund
distributions.
AGREEMENTS
Investment Management and Services Agreement
The fund has an Investment Management and Services Agreement with
IDS. For its services, IDS is paid a fee composed of an asset
charge in two parts. The first part, the group asset charge, is
based on the combined daily net assets of all funds in the IDS
MUTUAL FUND GROUP, except the money market funds, including any new
fund that may be organized in the future. The daily rate of the
group asset charge is based upon the following schedule:
<PAGE>
PAGE 43
Group Asset Charge
Group assets Annual rate at Effective
(billions) each asset level annual rate
First $5 0.460% 0.460%
Next $5 0.440 0.450
Next $5 0.420 0.440
Next $5 0.400 0.430
Next $5 0.390 0.422
Next $5 0.380 0.415
Next $5 0.360 0.407
Next $5 0.350 0.400
Next $5 0.340 0.393
Next $5 0.330 0.387
Over $50 0.320
The aggregate net assets of all non-money market funds in the IDS
MUTUAL FUND GROUP were $43,890,859,856 on July 31, 1994, and the
daily rate applied to the fund's assets was equal to approximately
0.39% on an annual basis.
The second part of the asset charge is calculated at an annual rate
of 0.23% and is based on the unique characteristics of the fund,
including the fund's use of services provided by IDS in the areas
of investment research, portfolio management, investment services
and fund accounting. The total 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.
Before the fee based on the asset charge is paid, it is adjusted
for investment performance. The adjustment, determined monthly,
will be calculated using the percentage point difference between
the change in the net asset value of one share of the fund's
capital stock and the change in the Lipper Small Company Growth
Fund Index Average (Average). The performance of one fund share is
measured by computing the percentage difference between the opening
and closing net asset value of one share of the fund, as of the
last business day of the period selected for comparison, adjusted
for dividend or capital gain distributions which are treated as
reinvested at the end of the month during which the distribution
was made. The performance of the Average for the same period is
established by measuring the percentage difference between the
beginning and ending Average for the comparison period. The
performance is adjusted for dividend or capital gain distributions
(on the securities which comprise the Average), which are treated
as reinvested at the end of the month during which the distribution
was made. One percentage point will be subtracted from the
calculation to help assure that incentive adjustments are
attributable to IDS' management abilities rather than random
fluctuations and the result multiplied by 0.01%. That number will
be multiplied times the fund's average net assets for the
comparison period and then divided by the number of months in the
comparison period to determine the monthly adjustment.
<PAGE>
PAGE 44
Where the fund's performance exceeds that of the Average, the base
fee will be increased. Where the performance of the Average
exceeds the performance of the fund, the base fee will be
decreased. The maximum monthly increase or decrease will be 0.12%
of the fund's average net assets on an annual basis.
The 12 month comparison period rolls over with each succeeding
month, so that it always equals 12 months, ending with the month
for which the performance adjustment is being computed. The
adjustment decreased the fee by $267,998 for the fiscal year ended
July 31, 1994.
The management fee is paid monthly. The total amount paid was
$2,909,548 for the fiscal year ended July 31, 1994, $2,322,801 for
fiscal year 1993, and $1,718,297 for fiscal year 1992.
Under the current Agreement, the fund also pays taxes, brokerage
commissions and nonadvisory expenses, that include custodian fees;
audit and certain legal fees; fidelity bond premiums; registration
fees for shares; fund office expenses; consultants' fees;
compensation of directors, officers and employees; corporate filing
fees; Investment Company Institute dues; organizational expenses;
expenses incurred in connection with lending portfolio securities
of the fund; and expenses properly payable by the fund, approved by
the board of directors. The fund paid nonadvisory expenses of
$477,399 for the fiscal year ended July 31, 1994, $347,298 for
fiscal year 1993, and $266,201 for fiscal year 1992.
Transfer Agency Agreement
The fund has a Transfer Agency Agreement with IDS. This agreement
governs IDS' 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, IDS will earn a fee from the
fund determined by multiplying the number of shareholder accounts
at the end of the day by a rate of $15 per year and dividing by the
number of days in the year. The fees paid to IDS may be changed
from time to time upon agreement of the parties without shareholder
approval. The fund paid fees of $1,095,455 for the fiscal year
ended July 31, 1994.
Distribution Agreement
Under a Distribution Agreement, sales charges deducted for
distributing fund shares are paid to IDS Financial Services Inc.
daily. These charges amounted to $3,173,756 for the fiscal year
ended July 31, 1994. After paying commissions to personal
financial planners, and other expenses, the amount retained was
$1,168,119. The amounts were $2,965,115 and $122,727 for fiscal
year 1993, and $2,666,717 and $817,003 for fiscal year 1992.
<PAGE>
PAGE 45
Additional information about commissions and compensation for the
fiscal year ended July 31, 1994, is contained in the following
table:
<TABLE><CAPTION>
(1) (2) (3) (4) (5)
Net Compensation
Name of Underwriting on Redemption
Principal Discounts and and Brokerage Other
Underwriter Commissions Repurchases Commissions Compensation
<S> <C> <C> <C> <C>
IDS None $47,064 $42,790* $439,675**
IDS Financial
Services Inc. $3,173,756 None None None
</TABLE>
*For further information see "Brokerage Commissions Paid to Brokers
Affiliated with IDS."
**Distribution fees paid pursuant to the Plan and Supplemental
Agreement of Distribution.
Plan and Supplemental Agreement of Distribution
To help IDS defray the cost of distribution and servicing, not
covered by the sales charges received under the Distribution
Agreement, the fund and IDS entered into a Plan and Supplemental
Agreement of Distribution (Plan). These costs cover almost all
aspects of distributing the fund shares except 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, IDS is paid a fee determined by multiplying
the number of shareholder accounts at the end of each day by a rate
of $6 per year and dividing by the number of days in the year.
The Plan must be approved annually by the directors, including a
majority of the disinterested directors, if it is to continue for
more than a year. At least quarterly, the directors 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 directors 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 or by IDS. The Plan (or any agreement related to it) shall
terminate in the event of its assignment, as that term is defined
in the Investment Company Act of 1940, as amended. The Plan may
not be 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 directors, including a
majority of the directors 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 such disinterested directors is the responsibility of
such disinterested directors. No interested person of the fund,
<PAGE>
PAGE 46
and no director who is not an interested person, has any direct or
indirect financial interest in the operation of the Plan or any
related agreement.
Total fees and nonadvisory expenses cannot exceed the most
restrictive applicable state limitation. Currently, the most
restrictive applicable state expense limitation, subject to
exclusion of certain expenses, is 2.5% of the first $30 million of
the fund's average daily net assets, 2% of the next $70 million and
1.5% of average daily net assets over $100 million, on an annual
basis. At the end of each month, if the fees and expenses of the
fund exceed this limitation for the fund's fiscal year in progress,
IDS will assume all expenses in excess of the limitation. IDS then
may bill the fund for such expenses in subsequent months up to the
end of that fiscal year, but not after that date. No interest
charges are assessed by IDS for expenses it assumes.
DIRECTORS AND OFFICERS
The following is a list of the fund's directors who, except for Mr.
Dudley, also are directors of all other funds in the IDS MUTUAL
FUND GROUP. Mr. Dudley is a director of all publicly offered
funds. All shares have cumulative voting rights when voting on the
election of directors.
Lynne V. Cheney'
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 Corp. and the Interpublic Group of Companies, Inc.
(advertising).
William H. Dudley+**
2900 IDS Tower
Minneapolis, MN
Executive vice president and director of IDS.
Robert F. Froehlke+
901 S. Marquette Ave.
Minneapolis, MN
Former president of all funds in the IDS MUTUAL FUND GROUP.
Director, the ICI Mutual Insurance Co., Institute for Defense
Analyses, Marshall Erdman and Associates, Inc. (architectual
engineering) and Public Oversight Board of the American Institute
of Certified Public Accountants.
<PAGE>
PAGE 47
David R. Hubers**
2900 IDS Tower
Minneapolis, MN
President, chief executive officer and director of IDS.
Previously, senior vice president, finance and chief financial
officer of IDS.
Anne P. Jones***
Sutherland, Asbill & Brennan
1275 Pennsylvania Ave., N.W.
Washington, D.C.
Partner, law firm of Sutherland, Asbill & Brennan. Director,
Motorola, Inc. and C-Cor Electronics, Inc.
Donald M. Kendall'
PepsiCo, Inc.
Purchase, NY
Former chairman and chief executive officer, PepsiCo, Inc.
Melvin R. Laird
Reader's Digest Association, Inc.
1730 Rhode Island Ave., N.W.
Washington, D.C.
Senior counsellor for national and international affairs, The
Reader's Digest Association, Inc. Chairman of the board, COMSAT
Corporation, former nine-term congressman, secretary of defense and
presidential counsellor. Director, Martin Marietta Corp.,
Metropolitan Life Insurance Co., The Reader's Digest Association,
Inc., Science Applications International Corp., Wallace Reader's
Digest funds and Public Oversight Board (SEC Practice Section,
American Institute of Certified Public Accountants).
Lewis W. Lehr'
3050 Minnesota World Trade Center
30 E. Seventh St.
St. Paul, MN
Former chairman of the board and chief executive officer, Minnesota
Mining and Manufacturing Company (3M). Director, Jack Eckerd
Corporation (drugstores). Advisory Director, Peregrine Inc.
(microelectronics).
William R. Pearce+*
901 S. Marquette Ave.
Minneapolis, MN
President of all funds in the IDS MUTUAL FUND GROUP since June
1993. Former vice chairman of the board, Cargill, Incorporated
(commodity merchants and processors).
<PAGE>
PAGE 48
Edson W. Spencer+'
4900 IDS Center
80 S. 8th St.
Minneapolis, MN
President, Spencer Associates Inc. (consulting). Chairman of the
board, Mayo Foundation (healthcare). Former chairman of the board
and chief executive officer, Honeywell Inc. Director, Boise
Cascade Corporation (forest products) and CBS Inc. Member of
International Advisory Councils, Robert Bosch (Germany) and NEC
(Japan).
John R. Thomas**
2900 IDS Tower
Minneapolis, MN
Senior vice president and director of IDS.
Wheelock Whitney+
1900 Foshay Tower
821 Marquette Ave.
Minneapolis, MN
Chairman, Whitney Management Company (manages family assets).
+ 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, director,
employee and/or shareholder of IDS or American Express.
***Interested person by reason of being a partner in a law firm
that has represented IDS or its subsidiaries.
The board also has appointed officers who are responsible for day-
to-day business decisions based on policies it has established.
Besides Mr. Pearce, who is president, the fund's other officer is:
Leslie L. Ogg
901 S. Marquette Ave.
Minneapolis, MN
Vice president of all funds in the IDS MUTUAL FUND GROUP and
general counsel and treasurer of the publicly offered funds.
On July 31, 1994, the fund's directors and officers as a group
owned less than 1% of the outstanding shares. During the fiscal
year ended July 31, 1994, no director or officer earned more than
$60,000 from this fund. All directors and officers as a group
earned $15,024, including $2,334 of retirement plan expense, from
this fund.
<PAGE>
PAGE 49
CUSTODIAN
The fund's securities and cash are held by IDS Trust Company, 1200
Northstar Center West, 625 Marquette Ave., Minneapolis, MN 55402-
2307, 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.
The custodian has entered into a sub-custodian arrangement with the
Morgan Stanley Trust Company (Morgan Stanley), One Pierrepont
Plaza, 8th Floor, Brooklyn, NY 11201-2775. As part of this
arrangement, portfolio securities purchased outside the United
States are maintained in the custody of various foreign branches of
Morgan Stanley or in such other financial institutions as may be
permitted by law and by the fund's sub-custodian agreement.
INDEPENDENT AUDITORS
The financial statements contained in the Annual Report to
shareholders, for the fiscal year ended July 31, 1994, 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.
FINANCIAL STATEMENTS
The Independent Auditors' Report and the Financial Statements,
including Notes to the Financial Statements and the Schedule of
Investments in Securities, contained in the 1994 Annual Report to
shareholders, pursuant to Section 30(d) of the Investment Company
Act of 1940, as amended, are hereby incorporated in this SAI by
reference. No other portion of the Annual Report however, is
incorporated by reference.
PROSPECTUS
The prospectus dated Sept. 29, 1994, is hereby incorporated in this
SAI by reference.
<PAGE>
PAGE 50
APPENDIX A
DESCRIPTION OF CORPORATE BOND RATINGS
Bond Ratings
The ratings concern the quality of the issuing corporation. They
are not an opinion of the market value of the security. Such
ratings are opinions on whether the principal and interest will be
repaid when due. A security's rating may change which could affect
its price. Ratings by Moody's Investors Service, Inc. are Aaa, Aa,
A, Baa, Ba, B, Caa, Ca, C and D. Ratings by Standard & Poor's
Corporation are AAA, AA, A, BBB, BB, B, CCC, CC, C and D.
Bonds rated Aaa and AAA are judged to be of the best quality and
carry the smallest degree of investment risk. Interest and
principal are secure. Prices are responsive only to interest rate
fluctuations.
Bonds rated Aa and AA also are judged to be high-grade although
margins of protection for interest and principal may not be quite
as good as Aaa or AAA rated securities. Long-term risk may appear
greater than the Aaa or AAA group. Prices are primarily responsive
to interest rate fluctuations.
Bonds rated A are considered upper-medium grade. Protection for
interest and principal is deemed adequate but susceptible to future
impairment. The market prices of such obligations move primarily
with interest rate fluctuations but also with changing economic or
trade conditions.
Bonds rated Baa and BBB are considered medium-grade obligations.
Protection for interest and principal is adequate over the short-
term; however, these obligations have certain speculative
characteristics. They are susceptible to changing economic
conditions and require constant review. Such bonds are more
responsive to business and trade conditions than to interest rate
fluctuations.
Bonds rated Ba and BB are considered to have speculative elements.
Their future cannot be considered well assured. The protection of
interest and principal payments may be very moderate and not well
safeguarded during future good and bad times. Uncertainty of
position characterizes these bonds.
Bonds rated B or lower lack characteristics of the desirable
investments. There may be small assurance over any long period of
time of the payment of interest and principal or of the maintenance
of other contract terms. Some of these bonds are of poor standing
and may be in default or have other marked short-comings.
Bonds rated Caa and CCC are of poor standing. Such issues may be
in default or there may be elements of danger with respect to
principal or interest.
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PAGE 51
Bonds rated Ca and CC represent obligations that are highly
speculative. Such issues are often in default or have other marked
shortcomings.
Bonds rated C are obligations with a higher degree of speculation.
These securities have major risk exposures to default.
Bonds rated D are in payment default. The D rating is used when
interest payments or principal payments are not made on the due
date.
<PAGE>
PAGE 52
APPENDIX B
FOREIGN CURRENCY TRANSACTIONS
Since investments in foreign countries usually involve currencies
of foreign countries, and since the fund may hold cash and cash-
equivalent investments in foreign currencies, the value of the
fund'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, the fund may incur costs in connection
with conversions between various currencies.
Spot Rates and Forward Contracts. The fund conducts its foreign
currency exchange transactions either at the spot (cash) rate
prevailing in the foreign currency exchange market or by entering
into forward currency exchange contracts (forward contracts) as a
hedge against fluctuations in future foreign exchange rates. A
forward contract involves an obligation to buy or sell a specific
currency at a future date, which may be any fixed number of days
from the contract date, at a price set at the time of the contract.
These contracts are traded in the interbank market conducted
directly between currency traders (usually large commercial banks)
and their customers. A forward contract generally has no deposit
requirements. No commissions are charged at any stage for trades.
The fund may enter into forward contracts to settle a security
transaction or handle dividend and interest collection. When the
fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency or has been notified of a
dividend or interest payment, it may desire to lock in the price of
the security or the amount of the payment in dollars. By entering
into a forward contract, the fund will be able to protect itself
against a possible loss resulting from an adverse change in the
relationship between different currencies from the date the
security is purchased or sold to the date on which payment is made
or received or when the dividend or interest is actually received.
The fund also may enter into forward contracts when management of
the fund believes the currency of a particular foreign country may
suffer a substantial decline against another currency. It may
enter into a forward contract to sell, for a fixed amount of
dollars, the amount of foreign currency approximating the value of
some or all of the fund's portfolio securities denominated in such
foreign currency. The precise matching of forward contract amounts
and the value of securities involved generally will not be possible
since the future value of such securities in foreign currencies
more than likely will change between the date the forward contract
is entered into and the date it matures. The projection of short-
term currency market movements is extremely difficult and
successful execution of a short-term hedging strategy is highly
uncertain. The fund will not enter into such forward contracts or
maintain a net exposure to such contracts when consummating the
contracts would obligate the fund to deliver an amount of foreign
currency in excess of the value of the fund's portfolio securities
or other assets denominated in that currency.<PAGE>
PAGE 53
The fund will designate cash or securities in an amount equal to
the value of the fund's total assets committed to consummating
forward contracts entered into under the second circumstance set
forth above. If the value of the securities declines, additional
cash or securities will be designated on a daily basis so that the
value of the cash or securities will equal the amount of the fund's
commitments on such contracts.
At maturity of a forward contract, the fund may either sell the
portfolio security and make delivery of the foreign currency or
retain the security and terminate its contractual obligation to
deliver the foreign currency by purchasing an offsetting contract
with the same currency trader obligating it to buy, on the same
maturity date, the same amount of foreign currency.
If the fund retains the portfolio security and engages in an
offsetting transaction, the fund will incur a gain or a loss (as
described below) to the extent there has been movement in forward
contract prices. If the fund engages in an offsetting transaction,
it may subsequently enter into a new forward contract to sell the
foreign currency. Should forward prices decline between the date
the fund enters into a forward contract for selling foreign
currency and the date it enters into an offsetting contract for
purchasing the foreign currency, the fund will realize a gain to
the extent that the price of the currency it has agreed to sell
exceeds the price of the currency it has agreed to buy. Should
forward prices increase, the fund will suffer a loss to the extent
the price of the currency it has agreed to buy exceeds the price of
the currency it has agreed to sell.
It is impossible to forecast what the market value of portfolio
securities will be at the expiration of a contract. Accordingly,
it may be necessary for the fund to buy additional foreign currency
on the spot market (and bear the expense of such purchase) if the
market value of the security is less than the amount of foreign
currency the fund is obligated to deliver and a decision is made to
sell the security and make delivery of the foreign currency.
Conversely, it may be necessary to sell on the spot market some of
the foreign currency received on the sale of the portfolio security
if its market value exceeds the amount of foreign currency the fund
is obligated to deliver.
The fund's dealing in forward contracts will be limited to the
transactions described above. This method of protecting the value
of the fund's portfolio securities against a decline in the value
of a currency does not eliminate fluctuations in the underlying
prices of the securities. It simply establishes a rate of exchange
that can be achieved at some point in time. Although such forward
contracts tend to minimize the risk of loss due to a decline in
value of hedged currency, they tend to limit any potential gain
that might result should the value of such currency increase.
<PAGE>
PAGE 54
Although the fund values its assets each business day in terms of
U.S. dollars, it does not intend to convert its foreign currencies
into U.S. dollars on a daily basis. It will do so from time to
time, and shareholders should be aware of currency conversion
costs. Although foreign exchange dealers do not charge a fee for
conversion, they do realize a profit based on the difference
(spread) between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign
currency to the fund at one rate, while offering a lesser rate of
exchange should the fund desire to resell that currency to the
dealer.
Options on Foreign Currencies. The fund may buy put and write
covered call options on foreign currencies for hedging purposes.
For example, a decline in the dollar value of a foreign currency in
which portfolio securities are denominated will reduce the dollar
value of such securities, even if their value in the foreign
currency remains constant. In order to protect against such
diminutions in the value of portfolio securities, the fund may buy
put options on the foreign currency. If the value of the currency
does decline, the fund will have the right to sell such currency
for a fixed amount in dollars and will thereby offset, in whole or
in part, the adverse effect on its portfolio which otherwise would
have resulted.
As in the case of other types of options, however, the benefit to
the fund derived from purchases of foreign currency options will be
reduced by the amount of the premium and related transaction costs.
In addition, where currency exchange rates do not move in the
direction or to the extent anticipated, the fund could sustain
losses on transactions in foreign currency options which would
require it to forego a portion or all of the benefits of
advantageous changes in such rates.
The fund may write options on foreign currencies for the same types
of hedging purposes. For example, when the fund anticipates a
decline in the dollar value of foreign-denominated securities due
to adverse fluctuations in exchange rates, it could, instead of
purchasing a put option, write a call option on the relevant
currency. If the expected decline occurs, the option will most
likely not be exercised and the diminution in value of portfolio
securities will be fully or partially offset by the amount of the
premium received.
As in the case of other types of options, however, the writing of a
foreign currency option will constitute only a partial hedge up to
the amount of the premium, and only if rates move in the expected
direction. If this does not occur, the option may be exercised and
the fund would be required to buy or sell the underlying currency
at a loss which may not be offset by the amount of the premium.
Through the writing of options on foreign currencies, the fund also
may be required to forego all or a portion of the benefits which
might otherwise have been obtained from favorable movements on
exchange rates.
<PAGE>
PAGE 55
All options written on foreign currencies will be covered. An
option written on foreign currencies is covered if the fund holds
currency sufficient to cover the option or has an absolute and
immediate right to acquire that currency without additional cash
consideration upon conversion of assets denominated in that
currency or exchange of other currency held in its portfolio. An
option writer could lose amounts substantially in excess of its
initial investments, due to the margin and collateral requirements
associated with such positions.
Options on foreign currencies are traded through financial
institutions acting as market-makers, although foreign currency
options also are traded on certain national securities exchanges,
such as the Philadelphia Stock Exchange and the Chicago Board
Options Exchange, subject to SEC regulation. In an over-the-
counter trading environment, many of the protections afforded to
exchange participants will not be available. For example, there
are no daily price fluctuation limits, and adverse market movements
could therefore continue to an unlimited extent over a period of
time. Although the purchaser of an option cannot lose more than
the amount of the premium plus related transaction costs, this
entire amount could be lost.
Foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the OCC, thereby
reducing the risk of counterparty default. Further, a liquid
secondary market in options traded on a national securities
exchange may be more readily available than in the over-the-counter
market, potentially permitting the fund to liquidate open positions
at a profit prior to exercise or expiration, or to limit losses in
the event of adverse market movements.
The purchase and sale of exchange-traded foreign currency options,
however, is subject to the risks of availability of a liquid
secondary market described above, as well as the risks regarding
adverse market movements, margining of options written, the nature
of the foreign currency market, possible intervention by
governmental authorities and the effects of other political and
economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-
counter market. For example, exercise and settlement of such
options must be made exclusively through the OCC, which has
established banking relationships in certain foreign countries for
the purpose. As a result, the OCC may, if it determines that
foreign governmental restrictions or taxes would prevent the
orderly settlement of foreign currency option exercises, or would
result in undue burdens on OCC or its clearing member, impose
special procedures on exercise and settlement, such as technical
changes in the mechanics of delivery of currency, the fixing of
dollar settlement prices or prohibitions on exercise.
Foreign Currency Futures and Related Options. The fund may enter
into currency futures contracts to sell currencies. It also may
buy put and write covered call options on currency futures.
<PAGE>
PAGE 56
Currency futures contracts are similar to currency forward
contracts, except that they are traded on exchanges (and have
margin requirements) and are standardized as to contract size and
delivery date. Most currency futures call for payment of delivery
in U.S. dollars. The fund may use currency futures for the same
purposes as currency forward contracts, subject to CFTC
limitations, including the limitation on the percentage of assets
that may be used, described in the prospectus. All futures
contracts are aggregated for purposes of the percentage
limitations.
Currency futures and options on futures values can be expected to
correlate with exchange rates, but will not reflect other factors
that may affect the values of the fund's investments. A currency
hedge, for example, should protect a Yen-denominated bond against a
decline in the Yen, but will not protect the fund against price
decline if the issuer's creditworthiness deteriorates. Because the
value of the fund's investments denominated in foreign currency
will change in response to many factors other than exchange rates,
it may not be possible to match the amount of a forward contract to
the value of the fund's investments denominated in that currency
over time.
The fund will not use leverage in its options and futures
strategies. The fund will hold securities or other options or
futures positions whose values are expected to offset its
obligations. The fund will not enter into an option or futures
position that exposes the fund to an obligation to another party
unless it owns either (i) an offsetting position in securities or
(ii) cash, receivables and short-term debt securities with a value
sufficient to cover its potential obligations.
<PAGE>
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APPENDIX C
OPTIONS AND STOCK INDEX FUTURES CONTRACTS
The fund may buy or write options traded on any U.S. or foreign
exchange or in the over-the-counter market. The fund may enter
into stock index futures contracts traded on any U.S. or foreign
exchange. The fund also may buy or write put and call options on
these futures and on stock indexes. Options in the over-the-
counter market will be purchased only when the investment manager
believes a liquid secondary market exists for the options and only
from dealers and institutions the investment manager believes
present a minimal credit risk. Some options are exercisable only
on a specific date. In that case, or if a liquid secondary market
does not exist, the fund could be required to buy or sell
securities at disadvantageous prices, thereby incurring losses.
There is no limit on the use of derivatives.
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 the buyer generally pays a broker a commission. The
writer receives a premium, less another commission, at the time the
option is written. The cash received is retained by the writer
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.
Options can be used to produce incremental earnings, protect gains
and facilitate buying and selling securities for investment
purposes. The use of options may benefit the fund and its
shareholders by improving the fund's liquidity and by helping to
stabilize the value of its net assets.
Buying options. Put and call options may be used as a trading
technique to facilitate buying and selling securities for
investment reasons. They also may be used for investment. Options
are used as a trading technique to take advantage of any disparity
<PAGE>
PAGE 58
between the price of the underlying security in the securities
market and its price on the options market. It is anticipated the
trading technique will be utilized only to effect a transaction
when the price of the security plus the option price will be as
good or better than the price at which the security could be bought
or sold directly. When the option is purchased, the fund 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 will be the combination
of the exercise price, the premium and both commissions. When
using options as a trading technique, commissions on the option
will be set as if only the underlying securities were traded.
Put and call options also may be held by the fund for investment
purposes. Options permit the fund to experience the change in the
value of a security with a relatively small initial cash
investment.
The risk the fund assumes when it buys an option is the loss of the
premium. To be beneficial to the fund, 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.
Writing covered options. The fund will write covered options when
it feels it is appropriate and will follow these guidelines:
'Underlying securities will continue to be bought or sold solely on
the basis of investment considerations consistent with the fund's
goal.
'All options written by the fund will be covered. For covered call
options if a decision is made to sell the security, the fund will
attempt to terminate the option contract through a closing purchase
transaction.
'The fund will deal only in standard option contracts traded on
national securities exchanges or those that may be quoted on NASDAQ
(a system of price quotations developed by the National Association
of Securities Dealers, Inc.).
'The fund will write options only as permitted under federal or
state laws or regulations, such as those that limit the amount of
total assets subject to the options. While no limit has been set
by the fund, it will conform to the requirements of those states.
For example, California limits the writing of options to 50% of the
assets of a fund.
<PAGE>
PAGE 59
Net premiums on call options closed or premiums on expired call
options are treated as short-term capital gains. Since the fund is
taxed as a regulated investment company under the Internal Revenue
Code, any gains on options and other securities held less than
three months must be limited to less than 30% of its annual gross
income.
If a covered call option is exercised, the security is sold by the
fund. The premium received upon writing the option is added to the
proceeds received from the sale of the security. The fund will
recognize a capital gain or loss based upon the difference between
the proceeds and the security's basis. Premiums received from
writing outstanding call options are included as a deferred credit
in the Statement of Assets and Liabilities and adjusted daily to
the current market value.
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 asked prices.
STOCK INDEX FUTURES CONTRACTS. Stock index futures contracts are
commodity contracts listed on commodity exchanges. They currently
include contracts on the Standard & Poor's 500 Stock Index (S&P 500
Index) and other broad stock market indexes such as the New York
Stock Exchange Composite Stock Index and the Value Line Composite
Stock Index, as well as narrower sub-indexes such as the S&P 100
Energy Stock Index and the New York Stock Exchange Utilities Stock
Index. A stock index assigns relative values to common stocks
included in the index and the index fluctuates with the value of
the common stocks so included.
A futures contract is a legal agreement between a buyer or seller
and the clearinghouse of a futures exchange in which the parties
agree to make a cash settlement on a specified future date in an
amount determined by the stock index on the last trading day of the
contract. The amount is a specified dollar amount (usually $100 or
$500) multiplied by the difference between the index value on the
last trading day and the value on the day the contract was struck.
For example, the S&P 500 Index consists of 500 selected common
stocks, most of which are listed on the New York Stock Exchange.
The S&P 500 Index assigns relative weightings to the common stocks
included in the Index, and the Index fluctuates with changes in the
market values of those stocks. In the case of S&P 500 Index
futures contracts, the specified multiple is $500. Thus, if the
value of the S&P 500 Index were 150, the value of one contract
would be $75,000 (150 x $500). Unlike other futures contracts, a
stock index futures contract specifies that no delivery of the
actual stocks making up the index will take place. Instead,
settlement in cash must occur upon the termination of the contract.
For example, excluding any transaction costs, if the fund enters
into one futures contract to buy the S&P 500 Index at a specified
future date at a contract value of 150 and the S&P 500 Index is at <PAGE>
PAGE 60
154 on that future date, the fund will gain $500 x (154-150) or
$2,000. If the fund enters into one futures contract to sell the
S&P 500 Index at a specified future date at a contract value of 150
and the S&P 500 Index is at 152 on that future date, the fund will
lose $500 x (152-150) or $1,000.
Unlike the purchase or sale of an equity security, no price would
be paid or received by the fund upon entering into futures
contracts. However, the fund would be required to deposit with its
custodian, in a segregated account in the name of the
futures broker, an amount of cash or U.S. Treasury bills equal to
approximately 5% of the contract value. This amount is known as
initial margin. The nature of initial margin in futures
transactions is different from that of margin in security
transactions in that futures contract margin does not involve
borrowing funds by the fund to finance the transactions. Rather,
the initial margin is in the nature of a performance bond or good-
faith deposit on the contract that is returned to the fund upon
termination of the contract, assuming all contractual obligations
have been satisfied.
Subsequent payments, called variation margin, to and from the
broker would be made on a daily basis as the price of the
underlying stock index fluctuates, making the long and short
positions in the contract more or less valuable, a process known as
marking to market. For example, when the fund enters into a
contract in which it benefits from a rise in the value of an index
and the price of the underlying stock index has risen, the fund
will receive from the broker a variation margin payment equal to
that increase in value. Conversely, if the price of the underlying
stock index declines, the fund would be required to make a
variation margin payment to the broker equal to the decline in
value.
How the Fund Would Use Stock Index Futures Contracts. The fund
intends to use stock index futures contracts and related options
for hedging and not for speculation. Hedging permits the fund to
gain rapid exposure to or protect itself from changes in the
market. For example, the fund may find itself with a high cash
position at the beginning of a market rally. Conventional
procedures of purchasing a number of individual issues entail the
lapse of time and the possibility of missing a significant market
movement. By using futures contracts, the fund can obtain
immediate exposure to the market and benefit from the beginning
stages of a rally. The buying program can then proceed and once it
is completed (or as it proceeds), the contracts can be closed.
Conversely, in the early stages of a market decline, market
exposure can be promptly offset by entering into stock index
futures contracts to sell units of an index and individual stocks
can be sold over a longer period under cover of the resulting short
contract position.
<PAGE>
PAGE 61
The fund may enter into contracts with respect to any stock index
or sub-index. To hedge the fund's portfolio successfully, however,
the fund must enter into contracts with respect to indexes or sub-
indexes whose movements will have a significant correlation with
movements in the prices of the fund's portfolio securities.
Special Risks of Transactions in Stock Index Futures Contracts.
1. Liquidity. The fund may elect to close some or all of its
contracts prior to expiration. The purpose of making such a move
would be to reduce or eliminate the hedge position held by the
fund. The fund may close its positions by taking opposite
positions. Final determinations of variation margin are then made,
additional cash as required is paid by or to the fund, and the fund
realizes a gain or a loss.
Positions in stock index futures contracts may be closed only on an
exchange or board of trade providing a secondary market for such
futures contracts. For example, futures contracts transactions can
currently be entered into with respect to the S&P 500 Stock Index
on the Chicago Mercantile Exchange, the New York Stock Exchange
Composite Stock Index on the New York Futures Exchange and the
Value Line Composite Stock Index on the Kansas City Board of Trade.
Although the fund intends to enter into futures contracts only on
exchanges or boards of trade where there appears to be an active
secondary market, there is no assurance that a liquid secondary
market will exist for any particular contract at any particular
time. In such event, it may not be possible to close a futures
contract position, and in the event of adverse price movements, the
fund would have to make daily cash payments of variation margin.
Such price movements, however, will be offset all or in part by the
price movements of the securities subject to the hedge. Of course,
there is no guarantee the price of the securities will correlate
with the price movements in the futures contract and thus provide
an offset to losses on a futures contract.
2. Hedging Risks. There are several risks in using stock index
futures contracts as a hedging device. One risk arises because the
prices of futures contracts may not correlate perfectly with
movements in the underlying stock index due to certain market
distortions. First, all participants in the futures market are
subject to initial margin and variation margin requirements.
Rather than making additional variation margin payments, investors
may close the contracts through offsetting transactions which could
distort the normal relationship between the index and futures
markets. Second, the margin requirements in the futures market are
lower than margin requirements in the securities market, and as a
result the futures market may attract more speculators than does
the securities market. Increased participation by speculators in
the futures market also may cause temporary price distortions.
Because of price distortion in the futures market and because of
imperfect correlation between movements in stock indexes and
movements in prices of futures contracts, even a correct forecast
of general market trends may not result in a successful hedging
transaction over a short period.<PAGE>
PAGE 62
Another risk arises because of imperfect correlation between
movements in the value of the futures contracts and movements in
the value of securities subject to the hedge. If this occurred,
the fund could lose money on the contracts and also experience a
decline in the value of its portfolio securities. While this could
occur, IDS believes that over time the value of the fund's
portfolio will tend to move in the same direction as the market
indexes and will attempt to reduce this risk, to the extent
possible, by entering into futures contracts on indexes whose
movements it believes will have a significant correlation with
movements in the value of the fund's portfolio securities sought to
be hedged. It also is possible that if the fund has hedged against
a decline in the value of the stocks held in its portfolio and
stock prices increase instead, the fund will lose part or all of
the benefit of the increased value of its stock which it has hedged
because it will have offsetting losses in its futures positions.
In addition, in such situations, if the fund has insufficient cash,
it may have to sell securities to meet daily variation margin
requirements. Such sales of securities may be, but will not
necessarily be, at increased prices which reflect the rising
market. The fund may have to sell securities at a time when it may
be disadvantageous to do so.
OPTIONS ON STOCK INDEX FUTURES CONTRACTS. Options on stock index
futures contracts are similar to options on stock except that
options on futures contracts give the purchaser the right, in
return for the premium paid, to assume a position in a stock index
futures contract (a long position if the option is a call and a
short position if the option is a put) at a specified exercise
price at any time during the period of the option. If the option
is closed instead of exercised, the holder of the option receives
an amount that represents the amount by which the market price of
the contract exceeds (in the case of a call) or is less than (in
the case of a put) the exercise price of the option on the futures
contract. If the option does not appreciate in value prior to the
exercise date, the fund will suffer a loss of the premium paid.
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. Such options would be used in the same manner
as options on futures contracts.
SPECIAL RISKS OF TRANSACTIONS IN OPTIONS ON STOCK INDEX FUTURES
CONTRACTS AND OPTIONS ON STOCK INDEXES. As with options on stocks,
the holder of an option on a futures contract or on a stock index
may terminate a position by selling an option covering the same
contract or index and having the same exercise price and expiration
date. The ability to establish and close out positions on such
options will be subject to the development and maintenance of a
liquid secondary market. The fund will not purchase options unless
the market for such options has developed sufficiently, so that the
<PAGE>
PAGE 63
risks in connection with options are not greater than the risks in
connection with stock index futures contracts transactions
themselves. Compared to using futures contracts, purchasing
options involves less risk to the fund because the maximum amount
at risk is the premium paid for the options (plus transaction
costs). There may be circumstances, however, when using an option
would result in a greater loss to the fund than using a futures
contract, such as when there is no movement in the level of the
stock index.
TAX TREATMENT. As permitted under federal income tax laws, 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 stock indexes is currently
unclear, although the fund's tax advisers currently believe marking
to market is not required. Depending on developments, and although
no assurance is given, the fund may seek Internal Revenue Service
(IRS) rulings clarifying questions concerning such treatment.
Certain provisions of the Internal Revenue Code may also 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. Less than 30% of
its gross income must be derived from sales of securities held less
than three months.
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. In order
to avoid realizing a gain within the three-month period, the fund
may be required to defer closing out a contract beyond the time
when it might otherwise be advantageous to do so. The fund also
may be restricted in purchasing put options for the purpose of
hedging underlying securities because of applying the short sale
holding period rules with respect to such underlying securities.
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 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.
<PAGE>
PAGE 64
APPENDIX D
MORTGAGE-BACKED SECURITIES
GNMA CERTIFICATES
The Government National Mortgage Association (GNMA) is a wholly
owned corporate instrumentality of the United States within the
Department of Housing and Urban Development. GNMA certificates are
mortgage-backed securities of the modified pass-through type, which
means that both interest and principal payments (including
prepayments) are passed through monthly to the holder of the
certificate. Each certificate evidences an interest in a specific
pool of mortgage loans insured by the Federal Housing
Administration or the Farmers Home Administration or guaranteed by
the Veterans Administration. The National Housing Act provides
that the full faith and credit of the United States is pledged to
the timely payment of principal and interest by GNMA of amounts due
on these certificates. GNMA is empowered to borrow without
limitation from the U.S. Treasury, if necessary, to make such
payments.
Underlying Mortgages of the Pool. Pools consist of whole mortgage
loans or participations in loans. The majority of these loans are
made to purchasers of 1-4 family homes. The terms and
characteristics of the mortgage instruments generally are uniform
within a pool but may vary among pools. For example, in addition
to fixed-rate fixed-term mortgages, the fund may purchase pools of
variable rate mortgages, growing equity mortgages, graduated
payment mortgages and other types.
All servicers apply standards for qualification to local lending
institutions which originate mortgages for the pools. Servicers
also establish credit standards and underwriting criteria for
individual mortgages included in the pools. In addition, many
mortgages included in pools are insured through private mortgage
insurance companies.
Average Life of GNMA Certificates. The average life of GNMA
certificates varies with the maturities of the underlying mortgage
instruments which have maximum maturities of 30 years. The average
life is likely to be substantially less than the original maturity
of the mortgage pools underlying the securities as the result of
prepayments or refinancing of such mortgages. Such prepayments are
passed through to the registered holder with the regular monthly
payments of principal and interest.
As prepayment rates vary widely, it is not possible to accurately
predict the average life of a particular pool. It is customary in
the mortgage industry in quoting yields on a pool of 30-year
mortgages to compute the yield as if the pool were a single loan
that is amortized according to a 30-year schedule and that is
prepaid in full at the end of the 12th year. For this reason, it
is standard practice to treat GNMA certificates as 30-year
mortgage-backed securities which prepay fully in the 12th year.<PAGE>
PAGE 65
Calculation of Yields. Yields on pass-through securities are
typically quoted based on the maturity of the underlying
instruments and the associated average life assumption.
Actual pre-payment experience may cause the yield to differ from
the assumed average life yield. When mortgage rates drop, pre-
payments will increase, thus reducing the yield. Reinvestment of
pre-payments may occur at higher or lower interest rates than the
original investment, thus affecting the yield of the fund. The
compounding effect from reinvestments of monthly payments received
by the fund will increase the yield to shareholders compared to
bonds that pay interest semi-annually. The yield also may be
affected if the certificate was issued at a premium or discount,
rather than at par. This also applies after issuance to
certificates trading in the secondary market at a premium or
discount.
"When-Issued" GNMA Certificates. Some U.S. government securities
may be purchased on a "when-issued" basis, which means that it may
take as long as 45 days after the purchase before the securities
are delivered to the fund. Payment and interest terms, however,
are fixed at the time the purchaser enters into the commitment.
However, the yield on a comparable GNMA certificate when the
transaction is consummated may vary from the yield on the GNMA
certificate at the time that the when-issued transaction was made.
The fund does not pay for the securities or start earning interest
on them until the contractual settlement date. When-issued
securities are subject to market fluctuations and they may affect
the fund's gross assets the same as owned securities.
Market for GNMA Certificates. Since the inception of the GNMA
mortgage-backed securities program in 1970, the amount of GNMA
certificates outstanding has grown rapidly. The size of the market
and the active participation in the secondary market by securities
dealers and many types of investors make the GNMA certificates a
highly liquid instrument. Prices of GNMA certificates are readily
available from securities dealers and depend on, among other
things, the level of market interest rates, the certificate's
coupon rate and the prepayment experience of the pool of mortgages
underlying each certificate.
The fund may invest in stripped mortgage-backed securities.
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 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
<PAGE>
PAGE 66
affect the yield to maturity of POs. If prepayments of principal
are greater than anticipated, an investor 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.
The fund may purchase mortgage-backed security (MBS) put spread
options and write covered MBS call spread options. MBS spread
options are based upon the changes in the price spread between a
specified mortgage-backed security and a like-duration Treasury
security. MBS spread options are traded in the OTC market and are
of short duration, typically one to two months. The fund would buy
or sell covered MBS call spread options in situations where
mortgage-backed securities are expected to under perform like-
duration Treasury securities.
<PAGE>
PAGE 67
APPENDIX E
DOLLAR-COST AVERAGING
A 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 in a fund to meet long term goals.
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).
<PAGE>
PAGE 68
Independent auditors' report
___________________________________________________________________
The board of directors and shareholders
IDS Discovery Fund, Inc.:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments in securities,
of IDS Discovery Fund, Inc. as of July 31, 1994, 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 July 31, 1994, and the financial highlights for each
of the years in the ten-year period ended July 31, 1994. 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 audit to obtain reasonable assurance about whether the
financial statements and the financial highlights are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Investment securities held in custody are
confirmed to us by the custodian. As to securities purchased and
sold but not received or delivered, and securities on loan, 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 IDS
Discovery Fund, Inc. at July 31, 1994, and the results of its
operations for the year then ended and the changes in its net
assets for each of the years in the two-year period ended July 31,
1994, and<PAGE>
PAGE 69
the financial highlights for the periods stated in the first
paragraph above, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
September 2, 1994
<PAGE>
PAGE 70
<TABLE>
Financial statements
<CAPTION>
Statement of assets and liabilities
IDS Discovery Fund, Inc.
July 31, 1994
__________________________________________________________________________________________________________
Assets
_________________________________________________________________________________________________________
<S> <C>
Investments in securities, at value (Note 1)
(identified cost $469,173,230) $522,471,862
Cash in bank on demand deposit 1,945,673
Receivable for investment securities sold 15,094,450
Dividends and accrued interest receivable 205,317
Receivable for foreign currency contracts held, at value (Notes 1 and 6) 52,929
__________________________________________________________________________________________________________
Total assets 539,770,231
__________________________________________________________________________________________________________
Liabilities
__________________________________________________________________________________________________________
Payable for investment securities purchased 12,385,543
Payable upon return of securities loaned (Note 5) 4,094,000
Payable for foreign currency contracts held, at value (Notes 1 and 6) 52,933
Accrued investment management and services fee 202,991
Accrued distribution fee 38,831
Accrued transfer agency fee 96,962
Other accrued expenses 292,257
__________________________________________________________________________________________________________
Total liabilities 17,163,517
__________________________________________________________________________________________________________
Net assets applicable to outstanding capital stock $522,606,714
__________________________________________________________________________________________________________
Represented by
__________________________________________________________________________________________________________
Capital stock -- authorized 10,000,000,000 shares of $.01 par value;
outstanding 50,569,283 shares $ 505,693
Additional paid-in capital 467,682,957
Accumulated net realized gain (Note 1) 1,119,436
Unrealized appreciation (Note 6) 53,298,628
__________________________________________________________________________________________________________
Total -- representing net assets applicable to outstanding capital stock $522,606,714
__________________________________________________________________________________________________________
Net asset value per share of outstanding capital stock $ 10.33
__________________________________________________________________________________________________________
See accompanying notes to financial statements.
<PAGE>
PAGE 71
Financial statements
Statement of operations
IDS Discovery Fund, Inc.
Year ended July 31, 1994
__________________________________________________________________________________________________________
Investment income
__________________________________________________________________________________________________________
Income:
Interest $ 1,571,643
Dividends (net of foreign taxes withheld of $18,638) 1,380,306
__________________________________________________________________________________________________________
Total income 2,951,949
__________________________________________________________________________________________________________
Expenses (Note 2):
Investment management and services fee 2,909,548
Distribution fee 439,675
Transfer agency fee 1,095,455
Compensation of directors 10,883
Compensation of officers 4,141
Custodian fees 104,235
Postage 143,557
Registration fees 117,139
Reports to shareholders 55,710
Audit fees 21,500
Administrative 9,535
Other 10,699
_________________________________________________________________________________________________________
Total expenses 4,922,077
__________________________________________________________________________________________________________
Investment loss -- net (1,970,128)
__________________________________________________________________________________________________________
Realized and unrealized gain (loss) -- net
__________________________________________________________________________________________________________
Net realized gain on investments and foreign currency transactions (including loss
of $4,095 from foreign currency transactions) (Note 3) 7,625,666
Net realized gain on closed option contracts written (Note 4) 156,549
__________________________________________________________________________________________________________
Net realized gain on investments and foreign currency
7,782,215
Net change in unrealized appreciation or depreciation (38,905,761)
__________________________________________________________________________________________________________
Net loss on investments and foreign currency (31,123,546)
__________________________________________________________________________________________________________
Net decrease in net assets resulting from operations $(33,093,674)
__________________________________________________________________________________________________________
See accompanying notes to financial statements.
<PAGE>
PAGE 72
Financial statements
<CAPTION>
Statements of changes in net assets
IDS Discovery Fund, Inc.
Year ended July 31,
_________________________________________________________________________________________________________
Operations and distributions 1994
1993
__________________________________________________________________________________________________________
<S> <C> <C>
Investment loss -- net $ (1,970,128)$ (638,737)
Net realized gain on investments and foreign currency 7,782,215 21,245,988
Net change in unrealized appreciation or depreciation (38,905,761) 35,065,405
__________________________________________________________________________________________________________
Net increase (decrease) in net assets resulting from operations (33,093,674) 55,672,656
__________________________________________________________________________________________________________
Distributions to shareholders from:
Net realized gain on investments (19,913,775) (7,803,311)
__________________________________________________________________________________________________________
Capital share transactions
__________________________________________________________________________________________________________
Proceeds from sales of
20,596,481 and 18,957,346 shares (Note 2) 238,713,182 206,523,903
Net asset value of 1,654,348 and 685,001 shares
issued in reinvestment of distributions 19,774,404 7,746,704
Payments for redemptions of
10,838,537 and 10,179,672 shares (127,923,797)(110,097,573)
__________________________________________________________________________________________________________
Increase in net assets from capital share transactions
representing net addition of
11,412,292 and 9,462,675 shares 130,563,789 104,173,034
__________________________________________________________________________________________________________
Total increase in net assets 77,556,340 152,042,379
Net assets at beginning of year 445,050,374 293,007,995
__________________________________________________________________________________________________________
Net assets at end of year $522,606,714 $445,050,374
__________________________________________________________________________________________________________
See accompanying notes to financial statements.
<PAGE>
PAGE 73
Notes to financial statements
IDS Discovery 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. Significant accounting policies followed
by the fund are summarized below:
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; securities for which market
quotations are not readily available are valued
at fair value according to methods selected in
good faith by the board of directors.
Determination of fair value involves, among other
things, reference to market indexes, matrixes and
data from independent brokers. 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.
Options transactions
In order to produce incremental earnings, protect
gains, and facilitate buying and selling of
securities for investment purposes, the fund may
buy or write options traded on any U.S. or
foreign exchange or in the over-the-counter
market where the completion of the obligation is
dependent upon the credit standing of the other
party. The fund also may buy and sell put and
call options and write covered call options on
portfolio securities and may write cash-secured
put options. The risk in writing a call option is
that the fund gives up the opportunity of profit
if the market price of the security increases.
The risk in writing a put option is that the fund
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 fund
pays a premium whether or not the option is
exercised. The fund also has the additional risk
of not being able to enter into a closing
transaction if a liquid secondary market does not
exist.<PAGE>
PAGE 74
Notes to financial statements
IDS Discovery Fund, Inc.
___________________________________________________________________
Option contracts are valued daily at the closing
prices on their primary exchanges and unrealized
appreciation or depreciation is recorded. The
fund will realize a gain or loss upon expiration
or closing of the option transaction. When an
option is 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.
Foreign currency translations and
foreign currency contracts
Securities and other assets and liabilities
denominated in foreign currencies are translated
daily into U.S. dollars at the closing rate of
exchange. Foreign currency amounts related to the
purchase or sale of securities and income and
expenses are translated at the exchange rate on
the transaction date. The effect of changes in
foreign exchnage rates on realized and unrealized
security gains or losses is reflected as a
component of such gains or losses. In the
statement of operations, net realized gains or
losses from foreign currency transactions may
arise from sales of foreign currency, closed
forward contracts, exchange gains or losses
realized between the trade date and settlement
dates on securities transactions, and other
translation gains or losses on dividends,
interest income and foreign withholding taxes.
The fund may enter into forward foreign currency
exchange contracts for operational purposes and
to protect against adverse exchange rate
fluctuation. The net U.S. dollar value of
foreign currency underlying all contractual
commitments held by the fund and the resulting
unrealized appreciation or depreciation are
determined using foreign currency exchange rates
from an independent pricing service. The fund
is subject to the credit risk that the other
party will not complete the obligations of the
contract.
Federal taxes
Since the fund's policy is to comply with all
sections of the Internal Revenue Code applicable
to regulated investment companies and to<PAGE>
PAGE 75
Notes to financial statements
IDS Discovery Fund, Inc.
___________________________________________________________________
distribute all of its taxable income to
shareholders, no provision for income or excise
taxes is required.
Net investment income (loss) and net realized
gains (losses) may differ for financial statement
and tax purposes primarily because of the
deferral of losses on certain futures contracts,
the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax
purposes, 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
increased by $1,970,128 and accumulated net
realized gain has been increased by $755
resulting in a net reclassification adjustment to
decrease paid-in-capital by $1,970,883.
Dividends to shareholders
An annual dividend declared and paid at the end
of the calendar year from net investment income
is reinvested in additional shares of the fund at
net asset value or payable in cash. Capital
gains, when available, are distributed along with
the income dividend.
Other
Security transactions are accounted for on the
date securities are purchased or sold. Dividend
income is recognized on the ex-dividend date and
interest income, including level-yield
amortization of premium and discount, is accrued
daily.
<PAGE>
PAGE 76
Notes to financial statements
IDS Discovery Fund, Inc.
__________________________________________________________________
2. Expenses and sales charges
Under terms of an agreement dated Nov. 14, 1991,
the fund pays IDS Financial Corporation (IDS) a
fee for managing its investments, recordkeeping
and other specified services. The fee is a
percentage of the fund's average daily net assets
consisting of a group asset charge in reducing
percentages from 0.46% to 0.32% annually on the
combined net assets of all non-money market funds
in the IDS MUTUAL FUND GROUP and an individual
annual asset charge of 0.23% of average daily net
assets. The fee is adjusted upward or downward by
a performance incentive adjustment based on the
fund's average daily net assets over a rolling
12-month period as measured against the change in
the Lipper Small Company Growth Fund Index. The
maximum adjustment is 0.12% of the fund's average
daily net assets after deducting 1% from the
performance difference. If the performance
difference is less than 1%, the adjustment will
be zero. The adjustment decreased the fee by
$267,998 for the year ended July 31, 1994.
The fund also pays IDS a distribution fee at an
annual rate of $6 per shareholder account and a
transfer agency fee at an annual rate of $15 per
shareholder account. The transfer agency fee is
reduced by earnings on monies pending shareholder
redemptions.
IDS will assume and pay any expenses (except
taxes and brokerage commissions) that exceed the
most restrictive applicable state expense
limitation.
Sales charges by IDS Financial Services Inc. for
distributing fund shares were $3,173,756 for the
year ended July 31, 1994. The fund also pays
custodian fees to IDS Trust Company, an affiliate
of IDS.
The fund has a retirement plan for its
independent directors. Upon retirement, directors
receive monthly payments equal to one-half of the
retainer fee for as many months as they served as
directors up to 120 months. There are no death
benefits. The plan is not funded but the fund
recognizes the cost of payments during the time
the directors serve on the board. The retirement
plan expense amounted to $2,334 for the year
ended July 31, 1994.<PAGE>
PAGE 77
Notes to financial statements
IDS Discovery Fund, Inc.
__________________________________________________________________
3. Securities transactions
Cost of purchases and proceeds from sales of
securities (other than short-term obligations)
aggregated $485,181,445 and $315,124,245,
respectively, for the year ended July 31, 1994.
Realized gains and losses are determined on an
identified cost basis.
Brokerage commissions paid to brokers affiliated
with IDS were $42,790 for the year ended July 31,
1994.
___________________________________________________________________
4. Option contracts written
The number of contracts and premium amounts
associated with call options written is as
follow:
</TABLE>
<TABLE>
<CAPTION>
Year ended July 31, 1994
Contracts Premium
____________________________________________________ <S>
<S> <C>
Balance July 31, 1993 550 $160,815
Opened 550 87,722
Closed (1,100) (248,537)
_____________________________________________________
Balance July 31, 1994 -- $ --
_____________________________________________________
</TABLE>
___________________________________________________________________
5. Lending of portfolio securities
At July 31, 1994, securities valued at $4,071,475
were on loan to brokers. For collateral, the fund
received $4,094,000 in cash. Income from
securities lending amounted to $63,056 for the
year ended July 31, 1994. The risks to the fund
of securities lending are that the borrower may
not provide additional collateral when required
or return the securities when due.
<PAGE>
PAGE 78
Notes to financial statements
IDS Discovery Fund, Inc.
________________________________________________________
6. Foreign currency contracts
At July 31, 1994, the fund had entered into two
foreign currency exchange contracts that obligate
the fund to deliver currencies at specified
future dates. The unrealized depreciation of $814
on these contracts is included in the
accompanying financial statements. The terms of
the open contracts are as follows:
<TABLE>
<CAPTION>
U.S. Dollar value U.S. Dollar value
Currency to be as of Currency to be as of
Exchange date delivered July 31, 1994 received July 31, 1994
____________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Aug. 1, 1994 26,318 $26,318 203,293 $26,315
U.S. Dollar Hong Kong Dollar
Aug. 2, 1994 26,615 26,615 205,595 26,614
U.S. Dollar Hong Kong Dollar
_______ _______
$52,933 $52,929
</TABLE>
_____________________________________________________________________________
7. Financial highlights
"Financial highlights" showing per share data and
selected information is presented on page 5 of the
prospectus.
<PAGE>
PAGE 79
<TABLE>
Investments in securities
<CAPTION>
IDS Discovery Fund, Inc. (Percentages represent value of
July 31, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Common stocks (94.5%)
_____________________________________________________________________________________________________________________________
Issuer Shares Value(a)
_____________________________________________________________________________________________________________________________
<S> <C> <C>
Airlines (1.0%)
Mesa Airlines 125,000 (b) $ 1,328,125
Southwest Airlines 140,000 3,797,500
____________
Total 5,125,625
_____________________________________________________________________________________________________________________________
Automotive & related (0.7%)
APS Holding Cl C 115,000 (b) 2,530,000
Gentex 50,000 (b) 1,012,500
____________
Total 3,542,500
_____________________________________________________________________________________________________________________________
Banks and savings & loans (7.7%)
AmSouth Bancorp 75,000 2,343,750
BB&T Financial 85,000 2,635,000
First Fidelity Bancorp 110,000 5,142,500
First Tennessee Natl 30,000 1,357,500
Firstar 150,000 5,193,750
Mercantile Bancorp 145,000 5,292,500
Meridian Bancorp 45,000 1,434,375
PNC Financial 175,000 5,031,250
Premier Bancorp 170,700 (b) 2,965,913
Roosevelt Financial 225,800 3,838,600
Signet Banking 125,000 5,046,875
____________
Total 40,282,013
_____________________________________________________________________________________________________________________________
Beverages & tobacco (0.4%)
Celestial Seasonings 125,000 (b) 1,968,750
_____________________________________________________________________________________________________________________________
Communications equipment (4.5%)
ADC Telecom 50,000 (b) 2,325,000
Cascade Comunications 11,200 (b) 168,000
Cisco Systems 340,000 (b) 7,140,000
CommNet Cellular 160,000 (b) 3,320,000
ECI Telecom 150,000 2,737,500
Octus 65,000 (b) 284,375
Tellabs 220,000 (b) 7,672,500
____________
Total 23,647,375
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 80
Investments in securities
IDS Discovery Fund, Inc. (Percentages represent value of
July 31, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Common stocks (continued)
_____________________________________________________________________________________________________________________________
Issuer Shares Value(a)
_____________________________________________________________________________________________________________________________
Computers & office equipment (15.6%)
Adobe Systems 170,000 $ 5,270,000
Amer Management Systems 145,100 (b) 3,627,500
Broderbund Software 40,000 (b) 1,940,000
BMC Software 102,000 (b) 4,934,250
Cabletron Systems 29,200 (b) 2,941,900
Compuware 80,200 (b) 3,157,875
FORE Systems 25,000 (b) 781,250
Informix 155,000 (b) 3,119,375
Intuit 50,000 (b) 1,800,000
Lotus Development 86,000 (b) 2,795,000
Microsoft 50,000 (b) 2,575,000
NetFRAME Systems 170,000 (b) 1,572,500
Oracle Systems 325,000 (b) 12,431,250
Parametric Technology 425,000 (b) 10,518,750
Powersoft 82,000 (b,c) 3,526,000
Read-Rite 210,000 (b) 2,887,500
Robotic Vision System 160,000 (b) 860,000
Silicon Graphics 200,000 (b) 4,725,000
Storage Technology 70,000 (b) 2,590,000
Sybase Software 120,000 (b) 4,725,000
Synopsys 130,000 (b) 5,005,000
____________
Total 81,783,150
_____________________________________________________________________________________________________________________________
Electronics (5.9%)
Amtech 105,000 1,076,250
Applied Materials 150,000 (b) 6,712,500
Atmel 145,000 (b) 3,552,500
Lam Research 50,000 (b) 1,412,500
Linear Technology 125,000 5,000,000
Maxim Integrated Products 50,000 (b) 2,412,500
Medar 80,000 (b) 930,000
Micro-chip 90,000 (b) 2,880,000
Sensormatic Electric 120,000 3,600,000
Valence Technology 280,000 (b) 910,000
Zilog 80,000 (b) 2,240,000
____________
Total 30,726,250
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 81
Investments in securities
IDS Discovery Fund, Inc. (Perecentages represent value of
July 31, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Common stocks (continued)
_____________________________________________________________________________________________________________________________
Issuer Shares Value(a)
_____________________________________________________________________________________________________________________________
Energy (0.6%)
Enron Oil & Gas 49,600 $ 985,800
HS Resources 101,900 (b) 2,101,687
____________
Total 3,087,487
_____________________________________________________________________________________________________________________________
Energy equipment & services (0.4%)
Corrpro 140,200 (b) 1,962,800
_____________________________________________________________________________________________________________________________
Financial services (5.1%)
ADVANTA Cl B 160,000 4,800,000
Felcor Hotel 60,900 (b) 1,370,250
First Financial Management 95,000 5,296,250
MBNA 105,000 2,415,000
Paychex 180,000 6,030,000
Regional Acceptance 128,800 (b) 2,028,600
RFS Hotel Investors 80,000 1,380,000
Tanger Factory Outlet Centers 50,000 1,325,000
Winston Hotels 200,000 2,150,000
____________
Total 26,795,100
_____________________________________________________________________________________________________________________________
Food (0.4%)
Performance Food Group 90,000 (b) 2,002,500
_____________________________________________________________________________________________________________________________
Health care (9.0%)
Amgen 60,000 (b) 2,981,250
Amylin Pharmaceuticals 100,000 (b) 650,000
Biogen 30,000 (b) 1,305,000
Cephalon 50,000 (b) 487,500
Chiron 60,000 (b) 3,225,000
Diametrics 200,000 (b) 1,350,000
Forest Laboratories 146,500 (b) 6,262,875
Genentech 108,100 (b) 5,432,025
Haemonetics 100,000 (b) 1,500,000
Heart Technology 185,000 (b) 3,653,750
IDEXX Laboratories 225,000 (b) 6,665,625
I-STAT 100,000 (b,c) 1,475,000
See accompanying notes to investments in securities.
<PAGE>
PAGE 82
Investments in securities
IDS Discovery Fund, Inc. (Percentages represent value of
July 31, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Common stocks (continued)
_____________________________________________________________________________________________________________________________
Issuer Shares Value(a)
_____________________________________________________________________________________________________________________________
Medisense 225,000 (b) $ 3,290,625
Molecular Dynamics 100,000 (b) 625,000
PLC Systems Unit 320,000 (b) 1,280,000
ProCyte 46,700 (b) 437,813
STERIS 135,000 (b) 2,463,750
Stryker 26,200 (c) 818,750
Ventritex 140,000 (b) 2,730,000
Viagene 54,600 (b) 225,225
____________
Total 46,859,188
_____________________________________________________________________________________________________________________________
Health care services (10.1%)
Advocat 185,200 (b) 1,689,950
Amer Medical Response 125,000 (b) 3,031,250
Anesta 95,000 (b) 724,375
Beverly Enterprises 120,000 (b) 1,470,000
Cardinal Distribution 168,750 6,504,785
Coastal Healthcare Group 46,000 (b) 1,587,000
HBO 450,000 12,825,000
Healthsource 92,000 (b) 2,599,000
HEALTHSOUTH Rehabilitation 18,100 (b) 549,787
Horizon Healthcare 100,000 (b) 2,337,500
Medaphis 55,000 (b) 1,615,625
Medicus Systems 95,000 1,045,000
Mid Atlantic Medical Services 95,000 (b,c) 3,942,500
PhyCor 170,000 (b) 5,227,500
Quantum Health Resources 75,000 (b) 2,475,000
Sun Healthcare Group 79,920 (b) 1,458,540
United Healthcare 80,000 3,640,000
____________
Total 52,722,812
_____________________________________________________________________________________________________________________________
Industrial equipment & services (2.1%)
Airgas 109,100 (b) 2,972,975
Calgon Carbon 150,000 1,762,500
Energy Bio 84,000 (b) 756,000
Ensys Environmental 65,000 (b) 211,250
Sanifill 210,000 (b) 5,118,750
____________
Total 10,821,475
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 83
Investments in securities
IDS Discovery Fund, Inc. (Percentages represent value of
July 31, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Common stocks (continued)
_____________________________________________________________________________________________________________________________
Issuer Shares Value(a)
_____________________________________________________________________________________________________________________________
Industrial transportation (1.4%)
Amer Freightways 235,000 (b) $ 5,170,000
Heartland Express 70,000 (b) 2,415,000
____________
Total 7,585,000
_____________________________________________________________________________________________________________________________
Insurance (0.8%)
Equitable of Iowa 115,000 4,053,750
_____________________________________________________________________________________________________________________________
Leisure time & entertainment (1.7%)
Bally Gaming Intl 12,100 (b) 142,175
Intl Game Technology 150,000 2,925,000
Iwerks Entertainment 20,000 (b) 127,500
Marvel Entertainment Group 72,100 (b) 1,306,813
Rio Hotel & Casino 215,000 (b) 2,795,000
Savoy Pictures Entertainment 50,000 (b) 550,000
Scientific Games Holdings 35,000 (b) 1,225,000
____________
Total 9,071,488
_____________________________________________________________________________________________________________________________
Media (3.1%)
Catalina Marketing 60,000 (b) 2,775,000
Cinergi Pictures Entertainment 250,000 (b) 2,093,750
Comcast 135,000 2,193,750
Comcast Cl A 65,000 1,080,625
Information Resources 190,000 (b) 2,470,000
Multimedia 85,600 (b) 2,589,400
University Patents 205,000 (b) 1,537,500
Westcott Communciations 142,000 (b) 1,464,375
____________
Total 16,204,400
_____________________________________________________________________________________________________________________________
Multi-industry conglomerates (0.3%)
Career Horizons 40,000 (b) 705,000
Norell 54,300 (b) 773,775
_____________
Total 1,478,775
_____________________________________________________________________________________________________________________________
Restaurants & lodging (6.5%)
Boston Chicken 72,200 (b) 2,869,950
Brinker Intl 360,000 (b) 8,055,000
Buffets 250,000 (b) 4,265,625
Chart House Enterprise 205,000 (b) 1,511,875
See accompanying notes to investments in securities.
<PAGE>
PAGE 84
Investments in securities
IDS Discovery Fund, Inc. (Percentages represent value of
July 31, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Common stocks (continued)
_____________________________________________________________________________________________________________________________
Issuer Shares Value(a)
_____________________________________________________________________________________________________________________________
Cracker Barrel Old Country 220,000 $ 5,115,000
Equity Inns 200,000 2,475,000
Fresh Choice 100,000 (b,c) 2,400,000
Hospitality Franchise System 100,000 (b) 2,675,000
Outback Steakhouse 135,000 (b) 3,408,750
Starbucks 35,800 (b) 1,038,200
____________
Total 33,814,400
_____________________________________________________________________________________________________________________________
Retail (6.1%)
Bed Bath & Beyond 110,000 (b) 3,327,500
Best Buy 130,000 (b) 3,185,000
CUC Intl 140,000 (b) 4,217,500
Gap 65,000 2,502,500
Kohl's 110,000 (b) 4,620,000
Mens Wearhouse 60,000 (b) 1,050,000
PETsMART 175,000 (b) 5,381,250
Price/Costco 175,000 (b) 2,625,000
Tiffany 40,000 1,465,000
Viking Office Products 106,000 (b) 2,464,500
Whole Foods Market 50,000 (b) 925,000
____________
Total 31,763,250
_____________________________________________________________________________________________________________________________
Soaps & cosmetics (0.2%)
Duracraft 30,000 (b) 1,200,000
_____________________________________________________________________________________________________________________________
Textiles & apparel (0.6%)
Donnkenny 135,000 (b) 3,290,625
_____________________________________________________________________________________________________________________________
Utilities - gas (0.5%)
Enron 85,000 2,751,875
_____________________________________________________________________________________________________________________________
Utilities - telephone (0.9%)
ALC Communications 89,700 (b) 2,904,038
KENETECH 100,000 (b) 1,600,000
____________
Total 4,504,038
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 85
Investments in securities
IDS Discovery Fund, Inc. (Percentages represent value of
July 31, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Common stocks (continued)
_____________________________________________________________________________________________________________________________
Issuer Shares Value(a)
_____________________________________________________________________________________________________________________________
Foreign (8.9%)(e)
Affymax NV 75,000 (b) $ 1,012,500
Cifra ADR Series B 1,200,000 3,330,000
Danka Business Systems ADR 105,000 4,501,875
EK Chor China Motorcycle 120,000 2,985,000
First Pacific 3,301,700 (b) 1,941,400
Grupo Iusacell Cl D 2,100 (b) 61,425
Grupo Iusacell Cl L 4,900 (b) 147,612
Grupo Situr 200,000 (b,d) 5,825,000
Grupo Televisa 24,000 (d) 1,344,000
Helicopter Lines 100,000 (b) 291,800
Imax 45,000 (b) 413,437
Newbridge Networks 115,000 (b) 4,822,813
Nokia Preferred Free 79,000 (b) 4,821,595
Renaissance Energy 128,700 (b) 2,744,926
Renaissance Energy 41,400 (b,d) 882,983
Sceptre Resources 270,000 (b) 2,586,492
Tarragon Oil & Gas 200,000 (b) 2,638,900
Television Broadcasts 1,000,000 4,440,000
Vodafone Group ADR 60,000 1,717,500
____________
Total 46,509,258
_____________________________________________________________________________________________________________________________
Total common stocks
(Cost: $445,119,359) $493,553,884
_____________________________________________________________________________________________________________________________
Preferred stocks & other (1.5%)
____________________________________________________________________________________________________________________________
Centocor
Warrants 25,000 $ 118,750
Hornbach 2,700 (e) 2,595,334
SAP 2,500 (e) 5,354,553
_____________________________________________________________________________________________________________________________
Total preferred stocks & other
(Cost: $3,204,530) $ 8,068,637
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities. <PAGE>
PAGE 86
Investments in securities
<CAPTION>
IDS Discovery Fund, Inc. (Percentages represent value of
July 31, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Short-term securities (4.0%)
_____________________________________________________________________________________________________________________________
Issuer Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
_____________________________________________________________________________________________________________________________
<S> <C> <C>
U.S. government agencies (0.8%)
Federal Home Loan Bank
Disc Note
08-19-94 4.24% $2,300,000 $ 2,294,608
Federal Home Loan Mtge Corp
Disc Notes
08-01-94 4.34 1,300,000 1,299,687
08-03-94 4.37 700,000 699,662
____________
Total 4,293,957
____________________________________________________________________________________________________________________ _________
Commercial paper (2.7%)
Colgate Palmolive
08-30-94 4.39 2,600,000 (f) 2,590,216
Eiger Capital
08-15-94 4.52 2,900,000 (f) 2,894,200
St. Paul Companies
08-19-94 4.38 700,000 (f) 698,300
Sandoz
08-11-94 4.52 3,600,000 3,594,600
Southwestern Bell Capital
08-19-94 4.52 4,500,000 (f) 4,488,750
____________
Total 14,266,066
_____________________________________________________________________________________________________________________________
Letter of credit (0.5%)
Bank of New York-
Riverfuel #2
09-06-94 4.42 2,300,000 2,289,318
_____________________________________________________________________________________________________________________________
Total short-term securities
(Cost: $20,849,341) $ 20,849,341
_____________________________________________________________________________________________________________________________
Total investments in securities
(Cost: $469,173,230)(g) $522,471,862
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 87
Investments in securities
IDS Discovery Fund, Inc.
July 31, 1994
_____________________________________________________________________________________________________________________________
Notes to investments in securities
_____________________________________________________________________________________________________________________________
(a) Securities are valued by procedures described in Note 1 to the financial statements.
(b) Presently non-income producing.
(c) Security is partially or fully on loan. See Note 5 to the financial statements.
(d) Represents a security sold under Rule 144A which is exempt from registration under the Securities Act
of 1933, as amended. This security has been determined to be liquid under guidelines established
by the board of directors.
(e) Foreign security values are stated in U.S. dollars.
(f) Commercial paper sold within terms of a private placement memorandum, exempt from registration under
Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that
program or other "accredited investors." This security has been determined to be liquid under
guidelines established by the board of directors.
(g) At July 31, 1994, the cost of securities for federal income tax purposes was $469,512,577
and the aggregate gross unrealized appreciation and depreciation based on that cost was:
<CAPTION>
<S> <C>
Unrealized appreciation $91,672,310
Unrealized depreciation (38,713,025)
_____________________________________________________________________________________________________________________________
Net unrealized appreciation $52,959,285
_____________________________________________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 88
PART C. OTHER INFORMATION
Item 24. (a) Financial Statements and Exhibits.
(a) FINANCIAL STATEMENTS
Financial Statements included with the prospectus:
Independent Auditors' Report, dated Sept. 2, 1994.
Statements:
Statement of Assets and Liabilities, July 31, 1994.
Statement of Operations, for the year ended July 31,
1994.
Statements of Changes in Net Assets, for the year ended
July 31, 1994 and the year ended July 31, 1993.
Notes to Financial Statements.
Schedules:
1. Investments in Securities, July 31, 1994.
Notes to Investments in Securities.
(b) EXHIBITS:
1. Articles of Incorporation, as amended October 17, 1988, filed
as Exhibit 1 to Post-Effective Amendment No. 16 to
Registration Statement No. 2-72174, is incorporated herein by
reference.
2. By-laws, as amended January 12, 1989, filed as Exhibit 3 to
Post-Effective Amendment No. 16 to Registration Statement No.
2-72174, is incorporated herein by reference.
3. Not Applicable.
4. Stock certificate, filed as Exhibit No.4 to Registrant's
Registration Statement No. 2-72174 on April 28, 1981, is
incorporated herein by reference.
5. Investment Management and Services Agreement between
Registrant and IDS Financial Corporation, dated Nov. 14,
1991, filed as Exhibit 5 to Post-Effective Amendment No. 22 to
Registration Statement No. 2-72174, is incorporated herein by
reference.
6. Distribution Agreement between Registrant and IDS Financial
Services Inc., dated January 1, 1987, filed as Exhibit 6 to
Post-Effective Amendment No. 12 to Registration Statement No.
2-72174, is incorporated herein by reference.
<PAGE>
PAGE 89
7. 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.
8. (a) Custodian Agreement, dated Jan. 2, 1985, filed as Exhibit
8 to Post-Effective Amendment No. 9 to Registration Statement
No. 2-72174, is incorporated herein by reference.
(b) Sub-Custodian Agreement, dated August 1992, filed as
Exhibit 8(b) to Post-Effective Amendment No. 24 to
Registration Statement No. 2-72174, is incorporated herein by
reference.
9. (a) Copy of Plan and Agreement of Merger dated April 10, 1986,
filed as Exhibit 9 to Post-Effective Amendment No. 10 to
Registration Statement No. 2-72174, is incorporated herein by
reference.
(b) Copy of Transfer Agency Agreement, between Registrant and
IDS Financial Corporation, dated Nov. 14, 1991, filed as
Exhibit 9(b) to Post-Effective Amendment No. 22 to
Registration Statement No. 2-72174, is incorporated herein by
reference.
(c) Copy of License Agreement, dated January 25, 1988, between
IDS and Registrant, filed as Exhibit 9(c) to Post-Effective
Amendment No. 16 to Registration Statement No. 2-72174, is
incorporated herein by reference.
10. Not Applicable.
11. Independent Auditors' Consent, filed electronically.
12. None.
13. Not Applicable.
14. Forms of Keogh, IRA and other retirement plans, filed as
Exhibits 14(a) through 14(n) to IDS Growth Fund, Inc., Post-
Effective Amendment No. 34 to Registration Statement No. 2-
38355, are incorporated herein by reference.
15. Plan and Supplemental Agreement of Distribution between
Registrant and IDS Financial Services Inc., dated January 1,
1987, filed as Exhibit 15 to Post-Effective Amendment No. 12
to Registration Statement No. 2-72174, is incorporated herein
by reference.
<PAGE>
PAGE 90
16. Schedule for computation of each performance quotation
provided in the Registration Statement in response to Item 22
filed as Exhibit 16 to Post-Effective Amendment No. 23 to
Registration Statement No. 2-72174, is incorporated herein by
reference.
17. Financial Data Schedule filed electronically.
18. (a) Directors' Power of Attorney to sign Amendments to this
Registration Statement, dated Feb. 11, 1993, filed as Exhibit
17(a) to Post-Effective Amendment No. 24 to Registration
Statement No. 2-72174, is incorporated herein by reference.
18. (b) Officers' Power of Attorney to sign Amendments to this
Registration Statement, dated June 1, 1993 filed as Exhibit
17(b) to Post-Effective Amendment No. 24 to Registration
Statement No. 2-72174, is incorporated herein by reference.
Item 25. Persons Controlled by or Under Common Control with
Registrant.
None.
Item 26. Number of Holders of Securities.
(1) (2)
Number of Record
Holders as of
Title of Class Sept. 13, 1994
Common Stock 80,439
<PAGE>
PAGE 91
<PAGE>
PAGE 1
Item 27. 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 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 2
<TABLE><CAPTION>
Item 28a. Business and Other Connections of Investment Adviser (IDS Financial Corporation)
Directors and officers of IDS Financial Corporation who are directors and/or officers of one
or more other companies:
<S> <C> <C>
Ronald G. Abrahamson, Vice President--Field Administration
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Vice President-Field
Administration
Douglas A. Alger, Vice President--Total Compensation
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Total Compensation
Jerome R. Amundson, Vice President and Controller--Mutual Funds Operations
IDS Financial Services Inc. IDS Tower 10 Vice President and
Minneapolis, MN 55440 Controller-Mutual Funds
Operations
Peter J. Anderson, Director and Senior Vice President--Investments
IDS Advisory Group Inc. IDS Tower 10 Director and Chairman
Minneapolis, MN 55440 of the Board
IDS Capital Holdings Inc. Director and President
IDS Financial Services Inc. Senior Vice President-
Investments
IDS Fund Management Limited Director
IDS International, Inc. Director, Chairman of the
Board and Executive Vice
President
IDS Securities Corporation Executive Vice President-
Investments
NCM Capital Management Group, Inc. 2 Mutual Plaza Director
501 Willard Street
Durham, NC 27701
Ward D. Armstrong, Vice President--Sales and Marketing, IDS Institutional Retirement Services
IDS Financial Services Inc. IDS Tower 10 Vice President-Sales and
Minneapolis, MN 55440 Marketing, IDS
Institutional Retirement
Services
Alvan D. Arthur, Region Vice President--Pacific Northwest Region
American Express Service Corporation IDS Tower 10 Vice President
IDS Financial Services Inc. Minneapolis, MN 55440 Region Vice President-
Pacific Northwest Region
<PAGE>
PAGE 3
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Kent L. Ashton, Vice President--Financial Education Services
IDS Financial Services Inc. IDS Tower 10 Vice President-Financial
Minneapolis, MN 55440 Education Services
Joseph M. Barsky III, Vice President--Senior Portfolio Manager
IDS Advisory Group Inc. IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Vice President-Senior
Portfolio Manager
Robert C. Basten, Vice President--Tax and Business Services
IDS Financial Services Inc. IDS Tower 10 Vice President-Tax
Minneapolis, MN 55440 and Business Services
Timothy V. Bechtold, Vice President--Insurance Product Development
IDS Financial Services Inc. IDS Tower 10 Vice President-Insurance
Minneapolis, MN 55440 Product Development
IDS Life Insurance Company Vice President-Insurance
Product Development
John D. Begley, Region Vice President--Mid-Central Region
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Region Vice President-
Mid-Central Region
IDS Insurance Agency of Alabama Inc. Vice President-Mid-Central
Region
IDS Insurance Agency of Arkansas Inc. Vice President-Mid-Central
Region
IDS Insurance Agency of Massachusetts Inc. Vice President-Mid-Central
Region
IDS Insurance Agency of Nevada Inc. Vice President-Mid-Central
Region
IDS Insurance Agency of New Mexico Inc. Vice President-Mid-Central
Region
IDS Insurance Agency of North Carolina Inc. Vice President-Mid-Central
Region
IDS Insurance Agency of Ohio Inc. Vice President-Mid-Central
Region
IDS Insurance Agency of Wyoming Inc. Vice President-Mid-Central
Region
Carl E. Beihl, Vice President--Strategic Technology Planning
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Strategic Technology
Planning
<PAGE>
PAGE 4
Item 28a. Business and Other Connections of Investment Adviser (IDS Financial
Corporation)(cont'd)
Alan F. Bignall, Vice President--Financial Planning Systems
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Vice President-
Financial Planning
Systems
Brent L. Bisson, Region Vice President--Northwest Region
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Region Vice President-
Northwest Region
IDS Insurance Agency of Alabama Inc. Vice President-
Northwest Region
IDS Insurance Agency of Arkansas Inc. Vice President-
Northwest Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
Northwest Region
IDS Insurance Agency of Nevada, Inc. Vice President-
Northwest Region
IDS Insurance Agency of New Mexico Inc. Vice President-
Northwest Region
IDS Insurance Agency of North Carolina Inc. Vice President-
Northwest Region
IDS Insurance Agency of Ohio Inc. Vice President-
Northwest Region
IDS Insurance Agency of Wyoming Inc. Vice President-
Northwest Region
John C. Boeder, Vice President--Mature Market Group
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Mature Market Group
IDS Life Insurance Company of New York Box 5144 Director
Albany, NY 12205
Karl J. Breyer, Director, Senior Vice President--Corporate Affairs and General Counsel
American Express Minnesota Foundation IDS Tower 10 Director
Minneapolis, MN 55440
IDS Aircraft Services Corporation Director and President
IDS Financial Services Inc. Senior Vice President-
Corporate Affairs and
Special Counsel
Harold E. Burke, Vice President and Assistant General Counsel
American Express Service Corporation IDS Tower 10 Vice President
IDS Financial Services Inc. Minneapolis, MN 55440 Vice President and
Assistant General Counsel
<PAGE>
PAGE 5
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Daniel J. Candura, Vice President--Marketing Support
IDS Financial Services Inc. IDS Tower 10 Vice President-Marketing
Minneapolis, MN 55440 Support
Cynthia M. Carlson, Vice President--IDS Securities Services
American Enterprise Investment IDS Tower 10 Director, President and
Services Inc. Minneapolis, MN 55440 Chief Executive Officer
IDS Financial Services Inc. Vice President-IDS
Securities Services
Orison Y. Chaffee III, Vice President--Field Real Estate
IDS Financial Services Inc. IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Real Estate
James E. Choat, Director and Senior Vice President--Field Management
American Express Minnesota Foundation IDS Tower 10 Director
American Express Service Corporation Minneapolis, MN 55440 Vice President
IDS Financial Services Inc. Senior Vice President-
Field Management
IDS Insurance Agency of Alabama Inc. Vice President--North
Central Region
IDS Insurance Agency of Arkansas Inc. Vice President--North
Central Region
IDS Insurance Agency of Massachusetts Inc. Vice President--North
Central Region
IDS Insurance Agency of Nevada Inc. Vice President--North
Central Region
IDS Insurance Agency of New Mexico Inc. Vice President--North
Central Region
IDS Insurance Agency of North Carolina Inc. Vice President--North
Central Region
IDS Insurance Agency of Ohio Inc. Vice President--North
Central Region
IDS Insurance Agency of Wyoming Inc. Vice President-- North
Central Region
IDS Property Casualty Insurance Co. Director
Kenneth J. Ciak, Vice President and General Manager--IDS Property Casualty
IDS Financial Services Inc. IDS Tower 10 Vice President and General
Minneapolis, MN 55440 Manager-IDS Property
Casualty
IDS Property Casualty Insurance Co. I WEG Blvd. Director and President
DePere, Wisconsin 54115
<PAGE>
PAGE 6
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Roger C. Corea, Region Vice President--Northeast Region
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Region Vice President-
Northeast Region
IDS Insurance Agency of Alabama Inc. Vice President -
Northeast Region
IDS Insurance Agency of Arkansas Inc. Vice President -
Northeast Region
IDS Insurance Agency of Massachusetts Inc. Vice President -
Northeast Region
IDS Insurance Agency of Nevada Inc. Vice President -
Northeast Region
IDS Insurance Agency of New Mexico Inc. Vice President -
Northeast Region
IDS Insurance Agency of North Carolina Inc. Vice President -
Northeast Region
IDS Insurance Agency of Ohio, Inc. Vice President -
Northeast Region
IDS Insurance Agency of Wyoming Inc. Vice President -
Northeast Region
IDS Life Insurance Co. of New York Box 5144 Director
Albany, NY 12205
Kevin F. Crowe, Region Vice President--Atlantic Region
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Region Vice President -
Atlantic Region
Alan R. Dakay, Vice President--Institutional Insurance Marketing
American Enterprise Life Insurance Co. IDS Tower 10 Director and President
Minneapolis, MN 55440
American Partners Life Insurance Co. Director and President
IDS Financial Services Inc. Vice President -
Institutional Insurance
Marketing
IDS Life Insurance Company Vice President -
Institutional Insurance
Marketing
William F. Darland, Region Vice President--South Central Region
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Region Vice President-
South Central Region
IDS Insurance Agency of Alabama Inc. Vice President-
South Central Region
IDS Insurance Agency of Arkansas Inc. Vice President -
South Central Region
<PAGE>
PAGE 7
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
IDS Insurance Agency of Massachusetts Inc. Vice President-
South Central Region
IDS Insurance Agency of Nevada Inc. Vice President-
South Central Region
IDS Insurance Agency of New Mexico Inc. Vice President-
South Central Region
IDS Insurance Agency of North Carolina Inc. Vice President-
South Central Region
IDS Insurance Agency of Ohio Inc. Vice President-
South Central Region
IDS Insurance Agency of Wyoming Inc. Vice President-
South Central Region
William H. Dudley, Director and Executive Vice President--Investment Operations
IDS Advisory Group Inc. IDS Tower 10 Director
Minneapolis, MN 55440
IDS Capital Holdings Inc. Director
IDS Financial Services Inc. Director and Executive
Vice President-
Investment Operations
IDS Futures Corporation Director
IDS Futures III Corporation Director
IDS International, Inc. Director
IDS Securities Corporation Director, Chairman of the
Board, President and
Chief Executive Officer
Roger S. Edgar, Director and Senior Vice President--Information Systems
IDS Financial Services Inc. IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Information Systems
Gordon L. Eid, Director, Senior Vice President and Deputy General Counsel
IDS Financial Services Inc. IDS Tower 10 Senior Vice President and
General Counsel
IDS Insurance Agency of Alabama Inc. Director and Vice President
IDS Insurance Agency of Arkansas Inc. Director and Vice President
IDS Insurance Agency of Massachusetts Inc. Director and Vice President
IDS Insurance Agency of Nevada Inc. Director and Vice President
IDS Insurance Agency of New Mexico Inc. Director and Vice President
IDS Insurance Agency of North Carolina Inc. Director and Vice President
IDS Insurance Agency of Ohio Inc. Director and Vice President
IDS Insurance Agency of Wyoming Inc. Director and Vice President
IDS Real Estate Services, Inc. Vice President
Investors Syndicate Development Corp. Director
Robert M. Elconin, Vice President--Government Relations
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Government Relations
IDS Life Insurance Company Vice President
<PAGE>
PAGE 8
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Mark A. Ernst, Vice President--Retail Services
American Enterprise Investment IDS Tower 10 Director
Services Inc. Minneapolis, MN 55440
IDS Financial Services Inc. Vice President-
Retail Services
Gordon M. Fines, Vice President--Mutual Fund Equity Investments
IDS Advisory Group Inc. IDS Tower 10 Executive Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Vice President-
Mutual Fund Equity
Investments
IDS International Inc. Vice President and
Portfolio Manager
Louis C. Fornetti, Director, Senior Vice President and Chief Financial Officer
American Enterprise Investment IDS Tower 10 Vice President
Services Inc. Minneapolis, MN 55440
IDS Cable Corporation Director
IDS Cable II Corporation Director
IDS Capital Holdings Inc. Senior Vice President
IDS Certificate Company Vice President
IDS Financial Services Inc. Senior Vice President and
Chief Financial Officer
IDS Insurance Agency of Alabama Inc. Vice President
IDS Insurance Agency of Arkansas Inc. Vice President
IDS Insurance Agency of Massachusetts Inc. Vice President
IDS Insurance Agency of Nevada Inc. Vice President
IDS Insurance Agency of New Mexico Inc. Vice President
IDS Insurance Agency of North Carolina Inc. Vice President
IDS Insurance Agency of Ohio Inc. Vice President
IDS Insurance Agency of Wyoming Inc. Vice President
IDS Life Insurance Company Director
IDS Life Series Fund, Inc. Vice President
IDS Life Variable Annuity Funds A&B Vice President
IDS Property Casualty Insurance Co. Director and Vice President
IDS Real Estate Services, Inc. Vice President
IDS Sales Support Inc. Director
IDS Securities Corporation Vice President
IDS Trust Company Director
Investors Syndicate Development Corp. Vice President
Douglas L. Forsberg, Vice President--Securities Services
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Securities Services
<PAGE>
PAGE 9
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Carl W. Gans, Region Vice President--North Central Region
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Region Vice President-
North Central Region
Robert G. Gilbert, Vice President--Real Estate
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Real Estate
John J. Golden, Vice President--Field Compensation Development
IDS Financial Services Inc. IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Compensation Development
Harvey Golub, Director
American Express Company American Express Tower Chairman and Chief
World Financial Center Executive Officer
New York, New York 10285
American Express Travel Chairman and Chief
Related Services Company, Inc. Executive Officer
National Computer Systems, Inc. 11000 Prairie Lakes Drive Director
Minneapolis, MN 55440
Morris Goodwin Jr., Vice President and Corporate Treasurer
American Enterprise Investment IDS Tower 10 Vice President and
Services Inc. Minneapolis, MN 55440 Treasurer
American Enterprise Life Insurance Co. Vice President and
Treasurer
American Express Minnesota Foundation Director, Vice President
and Treasurer
American Express Service Corporation Vice President and
Treasurer
IDS Advisory Group Inc. Vice President and
Treasurer
IDS Aircraft Services Corporation Vice President and
Treasurer
IDS Cable Corporation Vice President and
Treasurer
IDS Cable II Corporation Vice President and
Treasurer
IDS Capital Holdings Inc. Vice President and
Treasurer
IDS Certificate Company Vice President and
Treasurer
IDS Deposit Corp. Director, President
and Treasurer
IDS Financial Services Inc. Vice President and
Corporate Treasurer
<PAGE>
PAGE 10
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
IDS Insurance Agency of Alabama Inc. Vice President and
Treasurer
IDS Insurance Agency of Arkansas Inc. Vice President and
Treasurer
IDS Insurance Agency of Massachusetts Inc. Vice President and
Treasurer
IDS Insurance Agency of Nevada Inc. Vice President and
Treasurer
IDS Insurance Agency of New Mexico Inc. Vice President and
Treasurer
IDS Insurance Agency of North Carolina Inc. Vice President and
Treasurer
IDS Insurance Agency of Ohio Inc. Vice President and
Treasurer
IDS Insurance Agency of Wyoming Inc. Vice President and
Treasurer
IDS International, Inc. Vice President and
Treasurer
IDS Life Insurance Company Vice President and
Treasurer
IDS Life Series Fund, Inc. Vice President and
Treasurer
IDS Life Variable Annuity Funds A&B Vice President and
Treasurer
IDS Management Corporation Vice President and
Treasurer
IDS Partnership Services Corporation Vice President and
Treasurer
IDS Plan Services of California, Inc. Vice President and
Treasurer
IDS Property Casualty Insurance Co. Vice President and
Treasurer
IDS Real Estate Services, Inc Vice President and
Treasurer
IDS Realty Corporation Vice President and
Treasurer
IDS Sales Support Inc. Director, Vice President
and Treasurer
IDS Securities Corporation Vice President and
Treasurer
Investors Syndicate Development Corp. Vice President and
Treasurer
NCM Capital Management Group, Inc. 2 Mutual Plaza Director
501 Willard Street
Durham, NC 27701
Sloan Financial Group, Inc. Director
Suzanne Graf, Vice President--Systems Services
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Systems Services
<PAGE>
PAGE 11
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
David A. Hammer, Vice President and Marketing Controller
IDS Financial Services Inc. IDS Tower 10 Vice President and
Minneapolis, MN 55440 Marketing Controller
IDS Plan Services of California, Inc. Director and Vice President
Robert L. Harden, Region Vice President--Mid-Atlantic Region
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Region Vice President-
Mid Atlantic Region
IDS Insurance Agency of Alabama Inc. Vice President-
Mid Atlantic Region
IDS Insurance Agency of Arkansas Inc. Vice President-
Mid Atlantic Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
Mid Atlantic Region
IDS Insurance Agency of Nevada Inc. Vice President-
Mid Atlantic Region
IDS Insurance Agency of New Mexico Inc. Vice President-
Mid Atlantic Region
IDS Insurance Agency of North Carolina Inc. Vice President-
Mid Atlantic Region
IDS Insurance Agency of Ohio Inc. Vice President-
Mid Atlantic Region
IDS Insurance Agency of Wyoming Inc. Vice President-
Mid Atlantic Region
Lorraine R. Hart, Vice President--Insurance Investments
American Enterprise Life IDS Tower 10 Vice President-Investments
Insurance Company Minneapolis, MN 55440
American Partners Life Insurance Co. Director and Vice
President-Investments
IDS Certificate Company Vice President-Investments
IDS Financial Services Inc. Vice President-Insurance
Investments
IDS Life Insurance Company Vice President-Investments
Investors Syndicate Development Corp. Vice President-Investments
Mark S. Hays, Vice President--Senior Portfolio Manager, IDS International
IDS Financial Services Inc. IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager, IDS
International
IDS Fund Management Limited Director
IDS International, Inc. Senior Vice President
<PAGE>
PAGE 12
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Brian M. Heath, Region Vice President--Southwest Region
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Region Vice President-
Southwest Region
IDS Insurance Agency of Alabama Inc. Vice President-
Southwest Region
IDS Insurance Agency of Arkansas Inc. Vice President-
Southwest Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
Southwest Region
IDS Insurance Agency of Nevada Inc. Vice President-
Southwest Region
IDS Insurance Agency of New Mexico Inc. Vice President-
Southwest Region
IDS Insurance Agency of North Carolina Inc. Vice President-
Southwest Region
IDS Insurance Agency of Ohio Inc. Vice President-
Southwest Region
IDS Insurance Agency of Texas Inc. Director and President
IDS Insurance Agency of Wyoming Inc. Vice President-
Southwest Region
Raymond E. Hirsch, Vice President--Senior Portfolio Manager
IDS Advisory Group Inc. IDS Tower 10 Vice President
IDS Financial Services Inc. Minneapolis, MN 55440 Vice President-Senior
Portfolio Manager
James G. Hirsh, Vice President and Assistant General Counsel
IDS Financial Services Inc. IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
IDS Securities Corporation Director, Vice President
and General Counsel
Paul C. Hopkins, Vice President--Senior Portfolio Manager-IDS International
IDS Financial Services Inc. IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager-IDS
International
IDS International, Inc. Senior Vice President
Kevin P. Howe, Vice President--Government and Customer Relations and Chief Compliance Officer
American Enterprise Investment IDS Tower 10 Vice President and
Services Inc. Minneapolis, MN 55440 Compliance Officer
American Express Service Corporation Vice President
IDS Financial Services Inc. Vice President-
Government and
Customer Relations
IDS Securities Corporation Vice President and Chief
Compliance Officer
<PAGE>
PAGE 13
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
David R. Hubers, Director, President and Chief Executive Officer
American Express Service Corporation IDS Tower 10 Director and President
Minneapolis, MN 55440
IDS Aircraft Services Corporation Director
IDS Certificate Company Director
IDS Financial Services Inc. Chairman, Chief Executive
Officer and President
IDS Life Insurance Company Director
IDS Plan Services of California, Inc. Director and President
IDS Property Casualty Insurance Co. Director
Marietta L. Johns, Director and Senior Vice President--Field Management
IDS Financial Services Inc. IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Field Management
Douglas R. Jordal, Vice President--Taxes
IDS Aircraft Services Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Vice President-Taxes
Craig A. Junkins, Vice President--IDS 1994 Implementation Planning and Financial Planning
Development
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Vice President-IDS 1994
Implementation Planning
and Financial Planning
Development
James E. Kaarre, Vice President--Marketing Information
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Marketing Information
G. Michael Kennedy, Vice President--Investment Services and Investment Research
IDS Financial Services Inc. IDS Tower 10 Vice President-Investment
Minneapolis, MN 55440 Services and Investment
Research
Susan D. Kinder, Director and Senior Vice President--Human Resources
American Express Minnesota Foundation IDS Tower 10 Director
Minneapolis, MN 55440
American Express Service Corporation Vice President
IDS Financial Services Inc. Senior Vice President-
Human Resources
<PAGE>
PAGE 14
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Richard W. Kling, Director and Senior Vice President--Risk Management Products
American Enterprise Life Insurance Co. IDS Tower 10 Director and Chairman of
Minneapolis, MN 55440 the Board
American Partners Life Insurance Co. Director and Chairman of
the Board
IDS Financial Services Inc. Senior Vice President-
Risk Management Products
IDS Insurance Agency of Alabama Inc. Director and President
IDS Insurance Agency of Arkansas Inc. Director and President
IDS Insurance Agency of Massachusetts Inc. Director and President
IDS Insurance Agency of Nevada Inc. Director and President
IDS Insurance Agency of New Mexico Inc. Director and President
IDS Insurance Agency of North Carolina Inc. Director and President
IDS Insurance Agency of Ohio Inc. Director and President
IDS Insurance Agency of Wyoming Inc. Director and President
IDS Life Insurance Company Director and President
IDS Life Series Fund, Inc. Director and President
IDS Life Variable Annuity Funds A&B Member of Board of
Managers, Chairman of the
Board and President
IDS Property Casualty Insurance Co. Director and Chairman of
the Board
IDS Life Insurance Company P.O. Box 5144 Director, Chairman of the
of New York Albany, NY 12205 Board and President
Harold D. Knutson, Vice President--System Services
IDS Financial Services Inc. IDS Tower 10 Vice President--
Minneapolis, MN 55440 System Services
Paul F. Kolkman, Vice President--Actuarial Finance
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Actuarial Finance
IDS Life Insurance Company Director and Executive
Vice President
IDS Life Series Fund, Inc. Vice President and Chief
Actuary
Claire Kolmodin, Vice President--Service Quality
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Service Quality
David S. Kreager, Vice President--Field Management Development
IDS Financial Services Inc. IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Management Development
Christopher R. Kudrna, Vice President--Systems and Technology Development
IDS Financial Services Inc. IDS Tower 10 Vice President-Systems and
Minneapolis, MN 55440 Technology Development
<PAGE>
PAGE 15
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Steven C. Kumagai, Director and Senior Vice President--Field Management and Business Systems
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Director and Senior Vice
President-Field
Management and Business
Systems
Mitre Kutanovski, Region Vice President--Midwest Region
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Region Vice President-
Midwest Region
Edward Labenski, Vice President--Senior Portfolio Manager
IDS Advisory Group Inc. IDS Tower 10 Senior Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Vice President-
Senior Portfolio
Manager
Peter L. Lamaison, Vice President--IDS International Division
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 IDS International
Division
IDS Fund Management Limited Director and Chairman of
the Board
IDS International, Inc. Director, President and
Chief Executive Officer
Kurt A. Larson, Vice President--Senior Portfolio Manager
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio Manager
Ryan R. Larson, Vice President--IPG Product Development
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 IPG Product Development
IDS Life Insurance Company Vice President-
Annuity Product
Development
Daniel E. Laufenberg, Vice President and Chief U.S. Economist
IDS Financial Services Inc. IDS Tower 10 Vice President and
Minneapolis, MN 55440 Chief U.S. Economist
<PAGE>
PAGE 16
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Peter A. Lefferts, Director, Senior Vice President and Chief Marketing Officer
IDS Financial Services Inc. IDS Tower 10 Senior Vice President and
Minneapolis, MN 55440 Chief Marketing Officer
IDS Life Insurance Company Director and Executive
Vice President-Marketing
IDS Plan Services of California, Inc. Director
IDS Trust Company Director and Chairman of
the Board
Investors Syndicate Development Corp. Director
Douglas A. Lennick, Director and Executive Vice President--Private Client Group
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Director and Executive
Vice President-Private
Client Group
Mary J. Malevich, Vice President--Senior Portfolio Manager
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio
Manager
IDS International Inc. Vice President and
Portfolio Manager
Fred A. Mandell, Vice President--Field Marketing Readiness
IDS Financial Services Inc. IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Marketing Readiness
William J. McKinney, Vice President--Field Management Support
IDS Financial Services Inc. IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Management Support
Thomas W. Medcalf, Vice President--Senior Portfolio Manager
IDS Financial Services Inc. IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager
William C. Melton, Vice President-International Research and Chief International Economist
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 International Research
and Chief International
Economist
<PAGE>
PAGE 17
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Janis E. Miller, Vice President--Variable Assets
IDS Cable Corporation IDS Tower 10 Director and President
Minneapolis, MN 55440
IDS Cable II Corporation Director and President
IDS Financial Services Inc. Vice President-
Variable Assets
IDS Futures Corporation Director and President
IDS Futures III Corporation Director and President
IDS Life Insurance Company Director and Executive
Vice President-Variable
Assets
IDS Life Variable Annuity Funds A&B Director
IDS Life Series Fund, Inc. Director
IDS Management Corporation Director and President
IDS Partnership Services Corporation Director and President
IDS Realty Corporation Director and President
IDS Life Insurance Company of New York Box 5144 Executive Vice President
Albany, NY 12205
James A. Mitchell, Director and Executive Vice President--Marketing and Products
American Enterprise Investment IDS Tower 10 Director
Services Inc. Minneapolis, MN 55440
IDS Certificate Company Director and Chairman of
the Board
IDS Financial Services Inc. Executive Vice President-
Marketing and Products
IDS Life Insurance Company Director, Chairman of
the Board and Chief
Executive Officer
IDS Plan Services of California, Inc. Director
IDS Property Casualty Insurance Co. Director
Pamela J. Moret, Vice President--Corporate Communications
American Express Minnesota Foundation IDS Tower 10 Director and President
Minneapolis, MN 55440
IDS Financial Services Inc. Vice President-
Corporate Communications
Barry J. Murphy, Director and Senior Vice President--Client Service
IDS Financial Services Inc. IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Client Service
IDS Life Insurance Company Director and Executive
Vice President-Client
Service
Robert J. Neis, Vice President--Information Systems Operations
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Information Systems
Operations
<PAGE>
PAGE 18
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Vernon F. Palen, Region Vice President--Rocky Mountain Region
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Region Vice President-
Rocky Mountain Region
IDS Insurance Agency of Alabama Inc. Vice President-
Rocky Mountain Region
IDS Insurance Agency of Arkansas Inc. Vice President-
Rocky Mountain Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
Rocky Mountain Region
IDS Insurance Agency of Nevada Inc. Vice President-
Rocky Mountain Region
IDS Insurance Agency of New Mexico Inc. Vice President-
Rocky Mountain Region
IDS Insurance Agency of North Carolina Inc. Vice President-
Rocky Mountain Region
IDS Insurance Agency of Ohio Inc. Vice President-
Rocky Mountain Region
IDS Insurance Agency of Wyoming Inc. Vice President-
Rocky Mountain Region
James R. Palmer, Vice President--Insurance Operations
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Insurance Operations
IDS Life Insurance Company Vice President-Taxes
Judith A. Pennington, Vice President--Field Technology
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Field Technology
George M. Perry, Vice President--Corporate Strategy and Development
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Corporate Strategy
and Development
IDS Property Casualty Insurance Co. Director
Susan B. Plimpton, Vice President--Segmentation Development and Support
IDS Financial Services Inc. IDS Tower 10 Vice President--
Minneapolis, MN 55440 Segmentation Development
and Support
<PAGE>
PAGE 19
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Ronald W. Powell, Vice President and Assistant General Counsel
IDS Cable Corporation IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant Secretary
IDS Cable II Corporation Vice President and
Assistant Secretary
IDS Financial Services Inc. Vice President and
Assistant General Counsel
IDS Management Corporation Vice President and
Assistant Secretary
IDS Partnership Services Corporation Vice President and
Assistant Secretary
IDS Plan Services of California, Inc. Vice President and
Assistant Secretary
IDS Realty Corporation Vice President and
Assistant Secretary
James M. Punch, Vice President--TransAction Services
IDS Financial Services Inc. Vice President-Trans
Action Services
Frederick C. Quirsfeld, Vice President--Taxable Mutual Fund Investments
IDS Advisory Group Inc. IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Vice President--
Taxable Mutual Fund
Investments
Roger B. Rogos, Region Vice President--Great Lakes Region
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Region Vice President-
Great Lakes Region
IDS Insurance Agency of Alabama Inc. Vice President-
Great Lakes Region
IDS Insurance Agency of Arkansas Inc. Vice President-
Great Lakes Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
Great Lakes Region
IDS Insurance Agency of Nevada Inc. Vice President-
Great Lakes Region
IDS Insurance Agency of New Mexico Inc. Vice President-
Great Lakes Region
IDS Insurance Agency of North Carolina Inc. Vice President-
Great Lakes Region
IDS Insurance Agency of Ohio Inc. Vice President-
Great Lakes Region
IDS Insurance Agency of Wyoming Inc. Vice President-
Great Lakes Region
<PAGE>
PAGE 20
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
ReBecca K. Roloff, Vice President--1994 Program Director
IDS Financial Services Inc. IDS Tower 10 Vice President-1994
Minneapolis, MN 55440 Program Director
Stephen W. Roszell, Vice President--Advisory Institutional Marketing
IDS Advisory Group Inc. IDS Tower 10 President and Chief
Minneapolis, MN 55440 Executive Officer
IDS Financial Services Inc. Vice President-Advisory
Institutional Marketing
Robert A. Rudell, Vice President--IDS Institutional Retirement Services
IDS Financial Services Inc. IDS Tower 10 Vice President-IDS
Minneapolis, MN 55440 Institutional Retirement
Services
IDS Sales Support Inc. Director and President
IDS Trust Company Director
John P. Ryan, Vice President and General Auditor
IDS Financial Services Inc. IDS Tower 10 Vice President and General
Minneapolis, MN 55440 Auditor
Erven A. Samsel, Director and Senior Vice President--Field Management
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Senior Vice President-
Field Management
IDS Insurance Agency of Alabama Inc. Vice President-
New England Region
IDS Insurance Agency of Arkansas Inc. Vice President-
New England Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
New England Region
IDS Insurance Agency of Nevada Inc. Vice President-
New England Region
IDS Insurance Agency of New Mexico Inc. Vice President-
New England Region
IDS Insurance Agency of North Carolina Inc. Vice President-
New England Region
IDS Insurance Agency of Ohio Inc. Vice President-
New England Region
IDS Insurance Agency of Wyoming Inc. Vice President-
New England Region
<PAGE>
PAGE 21
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
R. Reed Saunders, Director and Senior Vice President--Corporate Strategy and Development
American Express Service Corporation IDS Tower 10 Director and Vice
Minneapolis, MN 55440 President
IDS Financial Services Inc. Director and Senior
Vice President-Corporate
Strategy and Development
IDS Property Casualty Insurance Co. Director
Stuart A. Sedlacek, Vice President--Assured Assets
American Enterprise Life Insurance Co. IDS Tower 10 Director and Executive
Minneapolis, MN 55440 Vice President, Assured
Assets
IDS Certificate Company Director and President
IDS Financial Services Inc. Vice President-
Assured Assets
IDS Life Insurance Company Director and Executive
Vice President, Assured
Assets
Investors Syndicate Development Corp. Chairman of the Board
and President
Donald K. Shanks, Vice President--Property Casualty
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Property Casualty
IDS Property Casualty Insurance Co. Senior Vice President
F. Dale Simmons, Vice President--Senior Portfolio Manager, Insurance Investments
American Enterprise Life Insurance Co. IDS Tower 10 Vice President-Real
Minneapolis, MN 55440 Estate Loan Management
American Partners Life Insurance Co. Vice President-Real
Estate Loan Management
IDS Certificate Company Vice President-Real
Estate Loan Management
IDS Financial Services Inc. Vice President-Senior
Portfolio Manager
Insurance Investments
IDS Life Insurance Company Vice President-Real
Estate Loan Management
IDS Partnership Services Corporation Vice President
IDS Real Estate Services Inc. Director and Vice President
IDS Realty Corporation Vice President
IDS Life Insurance Company of New York Box 5144 Vice President and
Albany, NY 12205 Assistant Treasurer
Judy P. Skoglund, Vice President--Human Resources and Organization Development
IDS Financial Services Inc. IDS Tower 10 Vice President-Human
Minneapolis, MN 55440 Resources and
Organization Development
<PAGE>
PAGE 22
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Julian W. Sloter, Region Vice President--Southeast Region
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Region Vice President-
Southeast Region
IDS Insurance Agency of Alabama Inc. Vice President-
Southeast Region
IDS Insurance Agency of Arkansas Inc. Vice President-
Southeast Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
Southeast Region
IDS Insurance Agency of Nevada Inc. Vice President-
Southeast Region
IDS Insurance Agency of New Mexico Inc. Vice President-
Southeast Region
IDS Insurance Agency of North Carolina Inc. Vice President-
Southeast Region
IDS Insurance Agency of Ohio Inc. Vice President-
Southeast Region
IDS Insurance Agency of Wyoming Inc. Vice President-
Southeast Region
Ben C. Smith, Vice President--Workplace Marketing
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Workplace Marketing
William A. Smith, Vice President and Controller--Private Client Group
IDS Financial Services Inc. IDS Tower 10 Vice President and
Minneapolis, MN 55440 Controller-Private
Client Group
James B. Solberg, Vice President--Advanced Financial Planning
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Advanced Financial
Planning
Bridget Sperl, Vice President--Human Resources Management Services
IDS Financial Services Inc. IDS Tower 10 Vice President-Human
Minneapolis, MN 55440 Resources Management
Services
Jeffrey E. Stiefler, Director
American Express Company American Express Tower Director and President
World Financial Center
New York, NY 10285
<PAGE>
PAGE 23
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Lois A. Stilwell, Vice President--Planner Training and Development
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Planner Training and
Development
William A. Stoltzmann, Vice President and Assistant General Counsel
American Partners Life Insurance Co. IDS Tower 10 Director, Vice President,
Minneapolis, MN 55440 General Counsel and
Secretary
IDS Financial Services Inc. Vice President and
Assistant General Counsel
IDS Life Insurance Company Vice President, General
Counsel and Secretary
IDS Life Series Fund, Inc. General Counsel and
Assistant Secretary
IDS Life Variable Annuity Funds A&B General Counsel and
Assistant Secretary
American Enterprise Life Insurance P.O. Box 534 Director, Vice President,
Company Minneapolis, MN 55440 General Counsel
and Secretary
James J. Strauss, Vice President--Corporate Planning and Analysis
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Corporate Planning and
Analysis
Jeffrey J. Stremcha, Vice President--Information Resource Management/ISD
IDS Financial Services Inc. IDS Tower 10 Vice President-Information
Minneapolis, MN 55440 Resource Management/ISD
Fenton R. Talbott, Director
ACUMA Ltd. ACUMA House President and Chief
The Glanty, Egham Executive Officer
Surrey TW 20 9 AT
UK
Neil G. Taylor, Vice President--Field Business Systems
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Field Business Systems
<PAGE>
PAGE 24
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
John R. Thomas, Director and Senior Vice President--Information and Technology
IDS Bond Fund, Inc. IDS Tower 10 Director
Minneapolis, MN 55440
IDS California Tax-Exempt Trust Trustee
IDS Discovery Fund, Inc. Director
IDS Equity Plus Fund, Inc. Director
IDS Extra Income Fund, Inc. Director
IDS Federal Income Fund, Inc. Director
IDS Financial Services Inc. Senior Vice President-
Information and
Technology
IDS Global Series, Inc. Director
IDS Growth Fund, Inc. Director
IDS High Yield Tax-Exempt Fund, Inc. Director
IDS Investment Series, Inc. Director
IDS Managed Retirement Fund, Inc. Director
IDS Market Advantage Series, Inc. Director
IDS Money Market Series, Inc. Director
IDS New Dimensions Fund, Inc. Director
IDS Precious Metals Fund, Inc. Director
IDS Progressive Fund, Inc. Director
IDS Selective Fund, Inc. Director
IDS Special Tax-Exempt Series Trust Trustee
IDS Stock Fund, Inc. Director
IDS Strategy Fund, Inc. Director
IDS Tax-Exempt Bond Fund, Inc. Director
IDS Tax-Free Money Fund, Inc. Director
IDS Utilities Income Fund, Inc. Director
Melinda S. Urion, Vice President and Corporate Controller
American Enterprise Life IDS Tower 10 Vice President and
Insurance Company Minneapolis, MN 55440 Controller
American Partners Life Insurance Co. Director, Vice President,
Controller and Treasurer
IDS Financial Services Inc. Vice President and
Corporate Controller
IDS Life Insurance Company Director, Executive Vice
President and Controller
IDS Life Series Fund, Inc. Vice President and
Controller
Wesley W. Wadman, Vice President--Senior Portfolio Manager
IDS Advisory Group Inc. IDS Tower 10 Executive Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Vice President-
Senior Portfolio Manager
IDS Fund Management Limited Director
IDS International, Inc. Senior Vice President
<PAGE>
PAGE 25
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Norman Weaver, Jr., Director and Senior Vice President--Field Management
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Senior Vice President-
Field Management
IDS Insurance Agency of Alabama Inc. Vice President-
Pacific Region
IDS Insurance Agency of Arkansas Inc. Vice President-
Pacific Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
Pacific Region
IDS Insurance Agency of Nevada Inc. Vice President-
Pacific Region
IDS Insurance Agency of New Mexico Inc. Vice President-
Pacific Region
IDS Insurance Agency of North Carolina Inc. Vice President-
Pacific Region
IDS Insurance Agency of Ohio Inc. Vice President-
Pacific Region
IDS Insurance Agency of Wyoming Inc. Vice President-
Pacific Region
Michael L. Weiner, Vice President--Corporate Tax Operations
IDS Capital Holdings Inc. IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Vice President-Corporate
Tax Operations
IDS Futures III Corporation Vice President, Treasurer
and Secretary
IDS Futures Brokerage Group Vice President
IDS Futures Corporation Vice President, Treasurer
and Secretary
Lawrence J. Welte, Vice President--Investment Administration
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Investment Administration
IDS Securities Corporation Director, Executive Vice
President and Chief
Operating Officer
William N. Westhoff, Director and Senior Vice President--Fixed Income Management
American Enterprise Life Insurance IDS Tower 10 Director
Company Minneapolis, MN 55440
IDS Financial Services Inc. Senior Vice President-
Fixed Income Management
IDS Partnership Services Corporation Director and Vice President
IDS Real Estate Services Inc. Director, Chairman of the
Board and President
IDS Realty Corporation Director and Vice President
Investors Syndicate Development Corp. Director
<PAGE>
PAGE 26
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Edwin M. Wistrand, Vice President and Assistant General Counsel
IDS Financial Services Inc. IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
Michael R. Woodward, Director and Senior Vice President--Field Management
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Senior Vice President-
Field Management
IDS Insurance Agency of Alabama Inc. Vice President-
North Region
IDS Insurance Agency of Arkansas Inc. Vice President-
North Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
North Region
IDS Insurance Agency of Nevada Inc. Vice President-
North Region
IDS Insurance Agency of New Mexico Inc. Vice President-
North Region
IDS Insurance Agency of North Carolina Inc. Vice President-
North Region
IDS Insurance Agency of Ohio Inc. Vice President-
North Region
IDS Insurance Agency of Wyoming Inc. Vice President-
North Region
IDS Life Insurance Company Box 5144 Director
of New York Albany, NY 12205
</TABLE>
<PAGE>
PAGE 27
Item 29. Principal Underwriters.
(a) IDS Financial Services Inc. acts as principal underwriter
for the following investment companies:
IDS Bond Fund, Inc.; IDS California Tax-Exempt Trust; IDS
Discovery Fund, Inc.; IDS Equity Plus 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. and IDS
Certificate Company.
(b) As to each director, officer or partner of the principal
underwriter:
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Ronald G. Abrahamson Vice President- None
IDS Tower 10 Field Administration
Minneapolis, MN 55440
Douglas A. Alger Vice President-Total None
IDS Tower 10 Compensation
Minneapolis, MN 55440
Jerome R. Amundson Vice President and None
IDS Tower 10 Controller-Mutual Funds
Minneapolis, MN 55440 Operations
Peter J. Anderson Senior Vice President- None
IDS Tower 10 Investments
Minneapolis, MN 55440
Ward D. Armstrong Vice President- None
IDS Tower 10 Sales and Marketing,
Minneapolis, MN 55440 IDS Institutional Retirement
Services
Alvan D. Arthur Region Vice President- None
IDS Tower 10 Pacific Northwest Region
Minneapolis, MN 55440
Kent L. Ashton Vice President- None
IDS Tower 10 Financial Education
Minneapolis, MN 55440 Services
<PAGE>
PAGE 28
Item 29. (Continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Joseph M. Barsky III Vice President-Senior None
IDS Tower 10 Portfolio Manager
Minneapolis, MN 55440
Robert C. Basten Vice President-Tax None
IDS Tower 10 and Business Services
Minneapolis, MN 55440
Timothy V. Bechtold Vice President-Insurance None
IDS Tower 10 Product Development
Minneapolis, MN 55440
John D. Begley Region Vice President- None
Olentangy Valley Center Mid-Central Region
Suite 300
7870 Olentangy River Rd.
Columbus, OH 43235
Carl E. Beihl Vice President- None
IDS Tower 10 Strategic Technology
Minneapolis, MN 55440 Planning
Alan F. Bignall Vice President- None
IDS Tower 10 Financial Planning
Minneapolis, MN 55440 Systems
Brent L. Bisson Region Vice President- None
Seafirst Financial Northwest Region
Center, Suite 1730
601 W. Riverside Ave.
Spokane, WA 99201
John C. Boeder Vice President- None
IDS Tower 10 Mature Market Group
Minneapolis, MN 55440
Karl J. Breyer Senior Vice President- None
IDS Tower 10 Corporate Affairs and
Minneapolis, MN 55440 Special Counsel
Harold E. Burke Vice President None
IDS Tower 10 and Assistant
Minneapolis, MN 55440 General Counsel
Daniel J. Candura Vice President- None
IDS Tower 10 Marketing Support
Minneapolis, MN 55440
Cynthia M. Carlson Vice President-IDS None
IDS Tower 10 Securities Services
Minneapolis, MN 55440
Orison Y. Chaffee III Vice President-Field None
IDS Tower 10 Real Estate
Minneapolis, MN 55440
<PAGE>
PAGE 29
Item 29. (continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
James E. Choat Senior Vice President- None
Suite 124 Field Management
6210 Campbell Rd.
Dallas, TX 75248
Kenneth J. Ciak Vice President and None
IDS Property Casualty General Manager-
1400 Lombardi Avenue IDS Property Casualty
Green Bay, WI 54304
Roger C. Corea Region Vice President- None
345 Woodcliff Drive Northeast Region
Fairport, NY 14450
Kevin F. Crowe Region Vice President- None
IDS Tower 10 Atlantic Region
Minneapolis, MN 55440
Alan R. Dakay Vice President- None
IDS Tower 10 Institutional Insurance
Minneapolis, MN 55440 Marketing
William F. Darland Region Vice President- None
Suite 108C South Central Region
301 Sovereign Court
Manchester, MO 63011
William H. Dudley Director and Executive Director/
IDS Tower 10 Vice President- Trustee
Minneapolis MN 55440 Investment Operations
Roger S. Edgar Senior Vice President- None
IDS Tower 10 Information Systems
Minneapolis, MN 55440
Gordon L. Eid Senior Vice President None
IDS Tower 10 and General Counsel
Minneapolis, MN 55440
Robert M. Elconin Vice President- None
IDS Tower 10 Government Relations
Minneapolis, MN 55440
Mark A. Ernst Vice President- None
IDS Tower 10 Retail Services
Minneapolis, MN 55440
Gordon M. Fines Vice President- None
IDS Tower 10 Mutual Fund Equity
Minneapolis MN 55440 Investments
Louis C. Fornetti Senior Vice President None
IDS Tower 10 and Chief Financial
Minneapolis, MN 55440 Officer
<PAGE>
PAGE 30
Item 29. (Continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Douglas L. Forsberg Vice President- None
IDS Tower 10 Securities Services
Minneapolis, MN 55440
Carl W. Gans Region Vice President- None
IDS Tower 10 North Central Region
Minneapolis, MN 55440
Robert G. Gilbert Vice President- None
IDS Tower 10 Real Estate
Minneapolis, MN 55440
John J. Golden Vice President- None
IDS Tower 10 Field Compensation
Minneapolis, MN 55440 Development
Morris Goodwin Jr. Vice President and None
IDS Tower 10 Corporate Treasurer
Minneapolis, MN 55440
Suzanne Graf Vice President- None
IDS Tower 10 Systems Services
Minneapolis, MN 55440
David A. Hammer Vice President None
IDS Tower 10 and Marketing
Minneapolis, MN 55440 Controller
Robert L. Harden Region Vice President- None
Suite 403 Mid-Atlantic Region
8500 Leesburg Pike
Vienna, VA 22180
Lorraine R. Hart Vice President- None
IDS Tower 10 Insurance Investments
Minneapolis, MN 55440
Mark S. Hays Vice President-Senior None
IDS Tower 10 Portfolio Manager, IDS
Minneapolis, MN 55440 International
Brian M. Heath Region Vice President- None
IDS Tower 10 Southwest Region
Minneapolis, MN 55440
Raymond E. Hirsch Vice President-Senior None
IDS Tower 10 Portfolio Manager
Minneapolis, MN 55440
James G. Hirsh Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
<PAGE>
PAGE 31
Item 29. (Continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Paul C. Hopkins Vice President- None
IDS Tower 10 Senior Portfolio Manager,
Minneapolis, MN 55440 IDS International
Kevin P. Howe Vice President- None
IDS Tower 10 Government and
Minneapolis, MN 55440 Customer Relations
David R. Hubers Chairman, Chief None
IDS Tower 10 Executive Officer and
Minneapolis, MN 55440 President
Marietta L. Johns Senior Vice President- None
IDS Tower 10 Field Management
Minneapolis, MN 55440
Douglas R. Jordal Vice President-Taxes None
IDS Tower 10
Minneapolis, MN 55440
Craig A. Junkins Vice President - IDS 1994 None
IDS Tower 10 Implementation Planning
Minneapolis, MN 55440 and Financial Planning
Development
James E. Kaarre Vice President- None
IDS Tower 10 Marketing Information
Minneapolis, MN 55440
G. Michael Kennedy Vice President-Investment None
IDS Tower 10 Services and Investment
Minneapolis, MN 55440 Research
Susan D. Kinder Senior Vice President- None
IDS Tower 10 Human Resources
Minneapolis, MN 55440
Richard W. Kling Senior Vice President- None
IDS Tower 10 Risk Management Products
Minneapolis, MN 55440
Harold D. Knutson Vice President- None
IDS Tower 10 System Services
Minneapolis, MN 55440
Paul F. Kolkman Vice President- None
IDS Tower 10 Actuarial Finance
Minneapolis, MN 55440
Claire Kolmodin Vice President- None
IDS Tower 10 Service Quality
Minneapolis, MN 55440
David S. Kreager Vice President-Field None
IDS Tower 10 Management Development
Minneapolis, MN 55440
<PAGE>
PAGE 32
Item 29. (Continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Christopher R. Kudrna Vice President- None
IDS Tower 10 Systems and Technology
Minneapolis, MN 55440 Development
Steven C. Kumagai Director and Senior None
IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Management and Business
Systems
Mitre Kutanovski Region Vice President- None
IDS Tower 10 Midwest Region
Minneapolis, MN 55440
Edward Labenski Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Peter L. Lamaison Vice President- None
One Broadgate IDS International
London, England Division
Kurt A. Larson Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Ryan R. Larson Vice President- None
IDS Tower 10 IPG Product Development
Minneapolis, MN 55440
Daniel E. Laufenberg Vice President and None
IDS Tower 10 Chief U.S. Economist
Minneapolis, MN 55440
Peter A. Lefferts Senior Vice President and None
IDS Tower 10 Chief Marketing Officer
Minneapolis, MN 55440
Douglas A. Lennick Director and Executive None
IDS Tower 10 Vice President-Private
Minneapolis, MN 55440 Client Group
Mary J. Malevich Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Fred A. Mandell Vice President- None
IDS Tower 10 Field Marketing Readiness
Minneapolis, MN 55440
William J. McKinney Vice President- None
IDS Tower 10 Field Management
Minneapolis, MN 55440 Support
Thomas W. Medcalf Vice President- None
IDS Tower 10 Senior Portfolio Manager
Minneapolis, MN 55440
<PAGE>
PAGE 33
Item 29. (Continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
William C. Melton Vice President- None
IDS Tower 10 International Research
Minneapolis, MN 55440 and Chief International
Economist
Janis E. Miller Vice President- None
IDS Tower 10 Variable Assets
Minneapolis, MN 55440
James A. Mitchell Executive Vice President- None
IDS Tower 10 Marketing and Products
Minneapolis, MN 55440
Pamela J. Moret Vice President- None
IDS Tower 10 Corporate Communications
Minneapolis, MN 55440
Barry J. Murphy Senior Vice President- None
IDS Tower 10 Client Service
Minneapolis, MN 55440
Robert J. Neis Vice President- None
IDS Tower 10 Information Systems
Minneapolis, MN 55440 Operations
Vernon F. Palen Region Vice President- None
Suite D-222 Rocky Mountain Region
7100 E. Lincoln Drive
Scottsdale, AZ 85253
James R. Palmer Vice President- None
IDS Tower 10 Insurance Operations
Minneapolis, MN 55440
Judith A. Pennington Vice President- None
IDS Tower 10 Field Technology
Minneapolis, MN 55440
George M. Perry Vice President- None
IDS Tower 10 Corporate Strategy
Minneapolis, MN 55440 and Development
Susan B. Plimpton Vice President- None
IDS Tower 10 Segmentation Development
Minneapolis, MN 55440 and Support
Ronald W. Powell Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
James M. Punch Vice President- None
IDS Tower 10 TransAction Services
Minneapolis, MN 55440
Frederick C. Quirsfeld Vice President-Taxable None
IDS Tower 10 Mutual Fund Investments
Minneapolis, MN 55440
<PAGE>
PAGE 34
Item 29. (Continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Roger B. Rogos Region Vice President- None
Suite 15, Parkside Place Great Lakes Region
945 Boardman-Canfield Rd
Youngstown, Ohio 44512
ReBecca K. Roloff Vice President-1994 None
IDS Tower 10 Program Director
Minneapolis, MN 55440
Stephen W. Roszell Vice President- None
IDS Tower 10 Advisory Institutional
Minneapolis, MN 55440 Marketing
Robert A. Rudell Vice President- None
IDS Tower 10 IDS Institutional
Minneapolis, MN 55440 Retirement Services
John P. Ryan Vice President and None
IDS Tower 10 General Auditor
Minneapolis, MN 55440
Erven A. Samsel Senior Vice President- None
45 Braintree Hill Park Field Management
Braintree, MA 02184
R. Reed Saunders Director and Senior None
IDS Tower 10 Vice President-Corporate
Minneapolis, MN 55440 Strategy and Development
Stuart A. Sedlacek Vice President- None
IDS Tower 10 Assured Assets
Minneapolis, MN 55440
Donald K. Shanks Vice President- None
IDS Tower 10 Property Casualty
Minneapolis, MN 55440
F. Dale Simmons Vice President-Senior None
IDS Tower 10 Portfolio Manager,
Minneapolis, MN 55440 Insurance Investments
Judy P. Skoglund Vice President- None
IDS Tower 10 Human Resources and
Minneapolis, MN 55440 Organization Development
Julian W. Sloter Region Vice President- None
9040 Roswell Rd. Southeast Region
River Ridge-Suite 600
Atlanta, GA 30350
Ben C. Smith Vice President- None
IDS Tower 10 Workplace Marketing
Minneapolis, MN 55440
<PAGE>
PAGE 35
Item 29. (Continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
William A. Smith Vice President and None
IDS Tower 10 Controller-Private
Minneapolis, MN 55440 Client Group
James B. Solberg Vice President- None
IDS Tower 10 Advanced Financial
Minneapolis, MN 55440 Planning
Bridget Sperl Vice President- None
IDS Tower 10 Human Resources
Minneapolis, MN 55440 Management Services
Lois A. Stilwell Vice President- None
IDS Tower 10 Planner Training and
Minneapolis, MN 55440 Development
William A. Stoltzmann Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
James J. Strauss Vice President- None
IDS Tower 10 Corporate Planning
Minneapolis, MN 55440 and Analysis
Jeffrey J. Stremcha Vice President-Information None
IDS Tower 10 Resource Management/ISD
Minneapolis, MN 55440
Neil G. Taylor Vice President- None
IDS Tower 10 Field Business Systems
Minneapolis, MN 55440
John R. Thomas Senior Vice President- Director/
IDS Tower 10 Information and Trustee
Minneapolis, MN 55440 Technology
Melinda S. Urion Vice President and None
IDS Tower 10 Corporate Controller
Minneapolis, MN 55440
Wesley W. Wadman Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Norman Weaver Jr. Senior Vice President- None
Suite 215 Field Management
1501 Westcliff Drive
Newport Beach, CA 92660
<PAGE>
PAGE 36
Item 29. (Continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Michael L. Weiner Vice President- None
IDS Tower 10 Corporate Tax
Minneapolis, MN 55440 Operations
Lawrence J. Welte Vice President- None
IDS Tower 10 Investment Administration
Minneapolis, MN 55440
William N. Westhoff Senior Vice President- None
IDS Tower 10 Fixed Income Management
Minneapolis, MN 55440
Edwin M. Wistrand Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
Michael R. Woodward Senior Vice President- None
Suite 815 Field Management
8585 Broadway
Merrillville, IN 46410
Item 29(c). Not applicable.
Item 30. Location of Accounts and Records
IDS Financial Corporation
IDS Tower 10
Minneapolis, MN 55440
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
(a) Not Applicable.
(b) Not Applicable.
(c) The Registrant undertakes to furnish each person
to whom a prospectus is delivered with a copy of
the Registrant's latest annual report to
shareholders, upon request and without charge.
<PAGE>
PAGE 92
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, IDS Discovery Fund,
Inc. certifies that it meets all of the requirements for
effectiveness of this Amendment to its Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 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 State of Minnesota on the 21st day
of September, 1994.
IDS DISCOVERY FUND, INC.
By /s/ William R. Pearce**
William R. Pearce, President
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 21st day
of September, 1994.
Signature Capacity
/s/ William R. Pearce** President, Principal
William R. Pearce Executive Officer and
Director
/s/ Leslie L. Ogg** Treasurer, Principal
Leslie L. Ogg Financial Officer and
Principal Accounting
Officer
/s/ William H. Dudley* Director
William H. Dudley
/s/ Robert F. Froehlke* Director
Robert F. Froehlke
/s/ Anne P. Jones* Director
Anne P. Jones
/s/ Donald M. Kendall* Director
Donald M. Kendall
/s/ Melvin R. Laird* Director
Melvin R. Laird
/s/ Lewis W. Lehr* Director
Lewis W. Lehr
/s/ Aulana L. Peters* Director
Aulana L. Peters
/s/ Edson W. Spencer* Director
Edson W. Spencer
<PAGE>
PAGE 93
/s/ Jeffrey E. Stiefler* Director
Jeffrey E. Stiefler
/s/ John R. Thomas* Director
John R. Thomas
/s/ Wheelock Whitney* Director
Wheelock Whitney
*Signed pursuant to Directors' Power of Attorney filed
electronically as Exhibit 17(a) to Post-Effective Amendment No. 24
to Registration Statement No. 2-72174, by:
____________________
Leslie L. Ogg
**Signed pursuant to Officers' Power of Attorney filed
electronically as Exhibit 17(b) to Post-Effective Amendment No. 24
to Registration Statement No. 2-72174, by:
____________________
Leslie L. Ogg
<PAGE>
PAGE 94
CONTENTS OF THIS
POST-EFFECTIVE AMENDMENT NO. 26
TO REGISTRATION STATEMENT NO. 2-72174
This post-effective amendment comprises the following papers and
documents:
The facing sheet.
The cross reference sheet.
Part A.
The prospectus.
Part B.
Statement of Additional Information.
Financial Statements.
Part C.
Other Information.
The signatures.
<PAGE>
PAGE 1
EXHIBIT INDEX
11 Independent Auditors' Consent
17 Financial Data Schedule
<PAGE>
PAGE 1
INDEPENDENT AUDITORS' CONSENT
___________________________________________________________________
The Board of Directors and Shareholders
IDS Discovery Fund, Inc.:
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.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
September , 1994
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
PAGE 1
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1994
<PERIOD-END> JUL-31-1994
<INVESTMENTS-AT-COST> 469173230
<INVESTMENTS-AT-VALUE> 522471862
<RECEIVABLES> 15352696
<ASSETS-OTHER> 1945673
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 539770231
<PAYABLE-FOR-SECURITIES> 12385543
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4777974
<TOTAL-LIABILITIES> 17163517
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 468188650
<SHARES-COMMON-STOCK> 50569283
<SHARES-COMMON-PRIOR> 39156991
<ACCUMULATED-NII-CURRENT> 0
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<NET-ASSETS> 522606714
<DIVIDEND-INCOME> 1380306
<INTEREST-INCOME> 1571643
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<EXPENSES-NET> 4922077
<NET-INVESTMENT-INCOME> (1970128)
<REALIZED-GAINS-CURRENT> 7782215
<APPREC-INCREASE-CURRENT> (38905761)
<NET-CHANGE-FROM-OPS> (33093674)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (19913775)
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 20596481
<NUMBER-OF-SHARES-REDEEMED> (10838537)
<SHARES-REINVESTED> 1654348
<NET-CHANGE-IN-ASSETS> 130563789
<ACCUMULATED-NII-PRIOR> (638737)
<ACCUMULATED-GAINS-PRIOR> 21245988
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2909548
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4922077
<AVERAGE-NET-ASSETS> 508285574
<PER-SHARE-NAV-BEGIN> 11.37
<PER-SHARE-NII> (.04)
<PER-SHARE-GAIN-APPREC> (.52)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.48)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.33
<EXPENSE-RATIO> .97
<PAGE>
PAGE 2
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
