<PAGE>
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. 48 (File Number 2-51586) X
--------- ------
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 33 (File Number 811-2503) X
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IDS BOND FUND, INC.
IDS Tower 10
Minneapolis, Minnesota 55402-0010
Leslie L. Ogg, 901 Marquette Ave. S., Suite 2810
Minneapolis, Minnesota 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 October 30, 1998 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(i)
on (date) pursuant to paragraph (a)(i)
75 days after filing pursuant to paragraph (a)(ii)
on (date) pursuant to paragraph (a)(ii) of rule 485
If appropriate, check the following box:
This Post-Effective Amendment designates a new effective date for a
previously filed Post-Effective Amendment.
<PAGE>
Cross reference sheet showing the location in the prospectus and Statement of
Additional Information of the information called for by items enumerated in
Parts A and B of Form N-1A.
Negative answers omitted are so indicated.
<PAGE>
PART A
Item No. Section in Prospectus
1 Cover page of prospectus
2 (a) Sales charge and Fund expenses
(b) The Fund in brief
(c) The Fund in brief
3 (a) Financial highlights
(b) NA
(c) Performance
(d) Financial highlights
4 (a) The Fund in brief; Investment policies and risks; How the Fund is
organized
(b) Investment policies and risks
(c) Investment policies and risks
5 (a) Board members and officers
(b)(i) Investment manager; About American Express Financial Corporation
- General information
(b)(ii) Investment manager
(b)(iii) Investment manager
(c) Portfolio manager
(d) Administrator and transfer agent
(e) Administrator and transfer agent
(f) Distributor
(g) Investment manager; About American Express Financial Corporation
- General information
5A (a) *
(b) *
6 (a) Shares; Voting rights
(b) NA
(c) NA
(d) Voting rights
(e) Cover page; Special shareholder services
(f) Dividend and capital gain distributions; Reinvestments
(g) Taxes
(h) Alternative purchase arrangements
7 (a) Distributor
(b) Valuing Fund shares
(c) How to purchase, exchange or redeem shares
(d) How to purchase shares
(e) NA
(f) Distributor
(g) Alternative purchase arrangements; Reductions and waivers of the
sales charge
8 (a) How to redeem shares
(b) NA
(c) How to purchase shares: Three ways to invest
(d) How to purchase, exchange or redeem shares: Redemption policies
- "Important...
9 None
<PAGE>
PART B
Item No. Section in Statement of Additional Information
10 Cover page of SAI
11 Table of Contents
12 NA
13 (a) Additional Investment Policies; all appendices except Dollar-Cost
Averaging
(b) Additional Investment Policies
(c) Additional Investment Policies
(d) Security Transactions
14 (a) Board members and officers**; Board Members and Officers
(b) Board Members and Officers
(c) Board Members and Officers
15 (a) NA
(b) Principal Holders of Securities, if applicable
(c) Board Members and Officers
16 (a)(i) How the Fund is organized; About the American Express Financial
Corporation**
(a)(ii) Agreements: Investment Management Services Agreement, Plan and
Agreement of Distribution
(a)(iii) Agreements: Investment Management Services Agreement
(b) Agreements: Investment Management Services Agreement
(c) NA
(d) Agreements: Administrative Services Agreement, Shareholder
Service Agreement
(e) NA
(f) Agreement: Distribution Agreement
(g) NA
(h) Custodian Agreement; Independent Auditors
(i) Agreements: Transfer Agency Agreement; Custodian Agreement
17 (a) Security Transactions
(b) Brokerage Commissions Paid to Brokers Affiliated with American
Express Financial Corporation
(c) Security Transactions
(d) Security Transactions
(e) Security Transactions
18 (a) Shares; Voting rights**
(b) NA
19(a) Investing in the Fund
(b) Valuing Fund Shares; Investing in the Fund
(c) Redeeming Shares
20 Taxes
21 (a) Agreements: Distribution Agreement
(b) NA
(c) NA
22 (a) Performance Information (for money market funds only)
(b) Performance Information (for all funds except money market funds)
23 Financial Statements
<PAGE>
* Designates information is located in annual report.
** Designates location in prospectus.
<PAGE>
IDS Bond Fund
Prospectus
Oct. 30, 1998
The goal of IDS Bond Fund, Inc. is to provide shareholders with a high level of
current income while attempting to conserve the value of the investment and to
continue a high level of income for the longest period of time. The Fund invests
primarily in corporate bonds and other debt securities.
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 (SEC) and available for
reference, along with other related materials, on the SEC Internet web site
(http://www.sec.gov). The SAI is incorporated by reference. For a free copy,
contact American Express Shareholder Service.
Like all mutual fund shares, 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.
Please note that the Fund:
o is not a bank deposit
o is not federally insured
o is not endorsed by any bank or government agency
o is not guaranteed to achieve its goal
American Express Shareholder Service
P.O. Box 534
Minneapolis, MN
55440-0534
800-862-7919
TTY: 800-846-4852
Web site address: http://www.americanexpress.com/advisors
<PAGE>
Table of contents
The Fund in brief
Goal
Investment policies and risks
Manager and distributor
Portfolio manager
Alternative purchase arrangements
Sales charge and Fund expenses
Performance
Financial highlights
Total returns
Yield
Investment policies and risks
Facts about investments and their risks
Alternative investment option
Valuing Fund shares
How to purchase, exchange or redeem shares
Alternative purchase arrangements
How to purchase shares
How to exchange shares
How to redeem shares Reductions and waivers of the sales charge
Special shareholder services
Services
Quick telephone reference
Distributions and taxes
Dividend and capital gain distributions
Reinvestments
Taxes
How to determine the correct TIN
How the Fund is organized
Shares
Voting rights
Shareholder meetings
Board members and officers
Investment manager
Administrator and transfer agent
Distributor
<PAGE>
About American Express Financial Corporation
General information
Year 2000
Appendices
Description of corporate bond ratings
Descriptions of derivative instruments
<PAGE>
The Fund in brief
Goal
IDS Bond Fund (the Fund) seeks to provide shareholders with a high level of
current income while attempting to conserve the value of the investment and to
continue a high level of income for the longest period of time. Because any
investment involves risk, achieving this goal cannot be guaranteed. Only
shareholders can change the goal.
Investment policies and risks
The Fund is a diversified mutual fund that invests primarily in bonds and other
debt securities, issued by U.S. and foreign corporations and governments. At
least half of the Fund's net assets must be in bonds rated "investment grade."
The Fund also invests in lower-quality debt securities, convertible securities,
stocks, derivative instruments and money market instruments. Some of the Fund's
investments may be considered speculative and involve additional investment
risks. For further information, refer to the later section in the prospectus
titled "Investment policies and risks."
Manager and distributor
The Fund is managed by American Express Financial Corporation (AEFC), a provider
of financial services since 1894. AEFC currently manages more than $71 billion
in assets for the IDS MUTUAL FUND GROUP. Shares of the Fund are sold through
American Express Financial Advisors Inc. (AEFA), a wholly-owned subsidiary of
AEFC.
Portfolio manager
Frederick Quirsfeld joined AEFC in 1985 and serves as senior vice president and
senior portfolio manager. He has managed this Fund since 1985. He also serves as
vice president - fixed income investments for the Fund.
Alternative purchase arrangements
The Fund offers its shares in three classes. Class A shares are subject to a
sales charge at the time of purchase. Class B shares are subject to a contingent
deferred sales charge (CDSC) on redemptions made within six years of purchase
and an annual distribution (12b-1) fee. Class Y shares are sold without a sales
charge to qualifying institutional investors.
Sales charge and Fund expenses
Shareholder transaction expenses are incurred directly by an investor on the
purchase or redemption of Fund shares. Fund operating expenses are paid out of
Fund assets for each class of shares. Operating expenses are reflected in the
Fund's daily share price and dividends, and are not charged directly to
shareholder accounts.
<PAGE>
<TABLE>
<CAPTION>
Shareholder transaction expenses
<S> <C> <C> <C>
Class A Class B Class Y
Maximum sales charge on purchases*
(as a percentage of offering price) 5% 0% 0%
Maximum deferred sales charge
imposed on redemptions (as a
percentage of original purchase price) 0% 5% 0%
</TABLE>
Annual Fund operating expenses (as a percentage of average daily net assets):
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Class A Class B Class Y
Management fee 0.48% 0.48% 0.48%
12b-1 fee 0.00% 0.75% 0.00%
Other expenses** 0.35% 0.36% 0.28%
Total 0.83% 1.59% 0.76%
</TABLE>
*This charge may be reduced depending on your total investments in IDS funds.
See "Reductions of the sales charge."
**Other expenses include an administrative services fee, a shareholder services
fee, a transfer agency fee and other nonadvisory expenses.
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:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 year 3 years 5 years 10 years
Class A $58 $75 $ 94 $148
Class B $66 $90 $107 $169**
Class B* $16 $50 $ 87 $169**
Class Y $ 8 $24 $ 42 $ 95
</TABLE>
*Assuming Class B shares are not redeemed at the end of the period.
**Based on conversion of Class B shares to Class A shares in the ninth year.
This example does not represent actual expenses, past or future. Actual expenses
may be higher or lower than those shown. Because Class B pays annual
distribution (12b-1) fees, long-term shareholders of Class B may indirectly pay
an equivalent of more than a 6.25% sales charge, the maximum permitted by the
National Association of Securities Dealers.
Performance
Financial highlights
<TABLE>
<CAPTION>
Fiscal period ended Aug. 31,
Per share income and capital changesa
Class A
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $5.22 $4.99 $5.05 $4.91 $5.48 $5.11 $4.74 $4.39 $4.74 $4.60
beginning of period
Income from investment operations:
Net investment income .36 .35 .36 .38 .41 .40 .40 .41 .40 .42
(loss)
Net gains (losses) (.03) .23 (.07) .23 (.51) .38 .37 .33 (.36) .15
(both realized
and unrealized)
Total from investment .33 .58 .29 .61 (.10) .78 .77 .74 .04 .57
operations
Less distributions:
Dividends from net (.36) (.35) (.35) (.37) (.41) (.41) (.40) (.39) (.39) (.43)
investment income
Distributions from (.08) -- -- (.10) (.06) -- -- -- -- --
realized gains
Total distributions (.44) (.35) (.35) (.47) (.47) (.41) (.40) (.39) (.39) (.43)
Net asset value, $5.11 $5.22 $4.99 $5.05 $4.91 $5.48 $5.11 $4.74 $4.39 $4.74
end of period
Ratios/supplemental data
Class A
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
Net assets, end of $2,709 $2,646 $2,563 $2,363 $2,249 $2,490 $2,174 $1,902 $1,730 $1,811
period (in millions)
Ratio of expenses to .83% .84% .84% .78% .68% .70% .72% .77% .77% .75%
average daily net assetsb
Ratio of net income 6.79% 6.86% 7.01% 7.84% 7.71% 7.78% 8.29% 9.03% 8.83% 9.04%
(loss) to average
daily net assets
Portfolio turnover rate 43% 50% 45% 43% 40% 60% 64% 74% 81% 97%
(excluding short-term
securities)
Total returnc 6.3% 12.1% 5.8% 13.7% (2.0%) 15.8% 16.9% 17.6% .9% 13.0%
aFor a share outstanding throughout the period. Rounded to the nearest cent.
bEffective fiscal year 1996, expense ratio is based on total expenses of the
Fund before reduction of earnings credits on cash balances.
cTotal return does not reflect payment of a sales charge.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Bond Fund, Inc.
Fiscal period ended Aug. 31,
Per share income and capital changesa
Class B Class Y
1998 1997 1996 1995b 1998 1997 1996 1995b
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $5.22 $4.99 $5.05 $4.79 $5.22 $4.99 $5.05 $4.79
beginning of period
Income from investment operations:
Net investment income .32 .31 .32 .17 .36 .36 .37 .19
(loss)
Net gains (both realized (.03) .23 (.07) .26 (.03) .23 (.07) .26
and unrealized)
Total from investment .29 .54 .25 .43 .33 .59 .30 .45
operations
Less distributions:
Dividends from net (.32) (.31) (.31) (.17) (.36) (.36) (.36) (.19)
investment income
Distributions from (.08) -- -- -- (.08) -- -- --
realized gains
Total distributions (.40) (.31) (.31) (.17) (.44) (.36) (.36) (.19)
Net asset value, $5.11 $5.22 $4.99 $5.05 $5.11 $5.22 $4.99 $5.05
end of period
Ratios/supplemental data
Class B Class Y
1998 1997 1996 1995b 1998 1997 1996 1995b
Net assets, end of $1,057 $913 $848 $782 $224 $116 $88 $64
period (in millions)
Ratio of expenses to 1.59% 1.60% 1.60% 1.63%c .76% .70% .67% .67%c
average daily net assetsd
Ratio of net income 6.03% 6.10% 6.24% 6.81%c 6.90% 7.01% 7.19% 8.44%c
(loss) to average
daily net assets
Portfolio turnover rate 43% 50% 45% 43% 43% 50% 45% 43%
(excluding short-term
securities)
Total returne 5.5% 11.2% 5.0% 9.0% 6.4% 12.2% 5.9% 9.4%
aFor a share outstanding throughout the period. Rounded to the nearest cent.
bInception date was March 20, 1995.
cAdjusted to an annual basis.
dEffective fiscal year 1996, expense ratio is based on total expenses of the
Fund before reduction of earnings credits on cash balances.
eTotal return does not reflect payment of a sales charge.
</TABLE>
The information in these tables has been audited by KPMG Peat Marwick LLP,
independent auditors. The independent auditors' report and additional
information about the performance of the Fund are contained in the Fund's annual
report which, if not included with this prospectus, may be obtained without
charge.
<PAGE>
Total returns
Total return is the sum of all of your returns for a given period, assuming you
reinvest all distributions. It is 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 is the annually compounded rate of return over a
given time period (usually two or more years). It is the total return for the
period converted to an equivalent annual figure.
Average annual total returns as of Aug. 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Purchase 1 year Since 5 years 10 years
made ago inception ago ago
- ------------------------ -------------------- --------------------- -------------------- --------------------
IDS Bond Fund:
Class A + .99% --% +5.91% +9.23%
Class B + 1.59% +8.31%* --% --%
Class Y + 6.40% +9.99%* --% --%
Lehman Aggregate Bond +10.57% +9.20%** +6.71% +9.26%
Index
*Inception date was March 20, 1995.
**Measurement period started April 1, 1995.
Cumulative total returns as of Aug. 31, 1998
Purchase 1 year Since 5 years 10 years
made ago inception ago ago
- ------------------------ -------------------- --------------------- -------------------- --------------------
IDS Bond Fund:
Class A + .99% --% +33.27% +141.80%
Class B + 1.59% + 31.72%* --% --%
Class Y + 6.40% +38.93%* --% --%
Lehman Aggregate Bond +10.57% +35.27%** +38.40% +142.45%
Index
*Inception date was March 20, 1995.
**Measurement period started April 1, 1995.
</TABLE>
These examples show total returns from hypothetical investments in Class A,
Class B and Class Y shares of the Fund. These returns are compared to those of a
popular index for the same periods. The performance of Class B and Class Y will
vary from the performance of Class A based on differences in sales charges and
fees. Past performance for Class Y for the periods prior to March 20, 1995 may
be calculated based on the performance of Class A, adjusted to reflect
differences in sales charges although not for other differences in expenses.
<PAGE>
For purposes of calculation, information about the Fund assumes:
o a sales charge of 5% for Class A shares
o redemption at the end of the period and deduction of the applicable contingent
deferred sales charge for Class B shares
o no sales charge for Class Y shares
o no adjustments for taxes an investor may have paid on the reinvested income
and capital gains o a period of widely fluctuating securities prices.
Returns shown should not be considered a representation of the Fund's future
performance.
Lehman Aggregate Bond Index is an unmanaged index made up of a representative
list of government and corporate bonds as well as asset-backed and
mortgage-backed securities. The index is frequently used as a general measure of
bond market performance. However, the securities used to create the index may
not be representative of the bonds held in the Fund. The index reflects
reinvestment of all distributions and changes in market prices, but excludes
brokerage commissions or other fees.
Yield
Yield is the net investment income earned per share for a specified time period,
divided by the offering price at the end of the period. The Fund's annualized
yield for the 30-day period ended Aug. 31, 1998, was 6.45% for Class A, 6.02%
for Class B and 6.88% for Class Y. The Fund calculates this 30-day annualized
yield by dividing:
o net investment income per share deemed earned during a 30-day period by
o the public offering price per share on the last day of the period, and
o converting the result to a yearly equivalent figure
This yield calculation does not include any contingent deferred sales charge,
ranging from 5% to 0% on Class B shares, which would reduce the yield quoted.
The Fund's yield varies from day to day, mainly because share values and
offering prices (which are calculated daily) vary in response to changes in
interest rates. Net investment income normally changes much less in the short
run. Thus, when interest rates rise and share values fall, yield tends to rise.
When interest rates fall, yield tends to follow.
Past yields should not be considered an indicator of future yields.
Investment policies and risks
The Fund invests primarily in bonds and other debt securities issued by U.S. and
foreign corporations and governments. At least 50% of the Fund's net assets will
be invested in investment-grade corporate bonds (bonds that independent rating
agencies rate in one of their top four grades), unrated corporate bonds the
investment manager believes have investment grade quality, and government bonds.
Under normal market conditions, 65% of the Fund's total assets will be in bonds.
<PAGE>
The Fund also invests in lower-rated debt securities, convertible securities,
preferred stocks, common stocks, derivative instruments and money market
instruments.
The various types of investments the investment 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
Debt securities: The price of bonds generally falls as interest rates increase,
and rises as interest rates decrease. The price of bonds also fluctuates if the
credit rating is upgraded or downgraded. The price of bonds below investment
grade may react more to the ability of the issuing company to pay interest and
principal when due than to changes in interest rates. They have greater price
fluctuations, are more likely to experience a default and sometimes are referred
to as junk bonds. Reduced market liquidity for these bonds may occasionally make
it more difficult to value them. In valuing bonds, the Fund relies both on
independent rating agencies and on the investment manager's credit analysis.
Securities that are subsequently downgraded in quality may continue to be held
by the Fund and will be sold only when the investment manager believes it is
advantageous to do so.
Bond ratings and holdings for fiscal 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Percent of
S&P rating Protection of net assets
Percent of (or Moody's principal and in unrated securities
net assets equivalent) interest assessed by AEFC
24.68% AAA Highest quality 0.28%
7.13 AA High quality --
14.21 A Upper medium grade --
19.36 BBB Medium grade 0.36
16.53 BB Moderately speculative 0.11
11.43 B Speculative 0.11
0.17 CCC Highly speculative 0.24
-- CC Poor quality --
-- C Lowest quality --
-- D In default --
2.77 Unrated Unrated securities 1.67
</TABLE>
(See the Appendix to this prospectus describing corporate bond ratings for
further information.)
[For the fiscal year ended Aug. 31, 1998, the Fund held less than 5% of its
average daily net assets in bonds rated below investment grade.]
<PAGE>
Debt securities sold at a deep discount: Some bonds are sold at deep discounts
because they do not pay interest until maturity. They include zero coupon bonds
and PIK (pay-in-kind) bonds. Because such securities do not pay current cash
income, the market value of these securities may be subject to greater
volatility than other debt securities. To comply with tax laws, the Fund has to
recognize a computed amount of interest income and pay dividends to shareholders
even though no cash has been received. In some instances, the Fund may have to
sell securities to have sufficient cash to pay the dividends.
Convertible securities: These securities generally are preferred stocks or bonds
that can be exchanged for other securities, usually common stock, at prestated
prices. When the trading price of the common stock makes the exchange likely,
convertible securities trade more like common stock.
Preferred stocks: If a company earns a profit, it generally must pay its
preferred stockholders a dividend at a pre-established rate.
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.
Foreign investments: There are risks when investing in securities of foreign
companies and governments in addition to those assumed when investing in
domestic securities. These risks are classified as country risk, currency risk,
and custody risk. Each can adversely affect the value of an investment. Country
risk includes the political, economic, and other conditions of a country. These
conditions include lack of publicly available information, less government
oversight, the possibility of government-imposed restrictions, even the
nationalization of assets. Currency risk results from the constantly changing
exchange rate between local currency and the U.S. dollar. Whenever the Fund
holds securities valued in local currency or holds the currency, changes in the
exchange rate add or subtract from the asset value of the Fund. Custody risk
refers to the process of clearing and settling trades. It also covers holding
securities with local agents and depositories. Low trading volumes and volatile
prices in less developed markets make trades harder to complete and settle.
Local agents are held only to the standard of care of the local market.
Governments or trade groups may compel local agents to hold securities in
designated depositories that are not subject to independent evaluation. The less
developed a country's securities market is, the greater the likelihood of
problems occurring. The risks of foreign investments are managed carefully but
the Fund cannot guarantee against losses that might result from them. The Fund
may invest up to 25% of its total assets in foreign investments.
Derivative instruments: The investment 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, 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
<PAGE>
the derivative instrument. Derivative instruments allow the investment 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. This does not, however, limit the portion of the Fund's
assets at risk to 5%. The Fund is not limited as to the percentage of its assets
that may be invested in permissible investments, including derivatives, except
as otherwise explicitly provided in this prospectus or the SAI. For descriptions
of these and other types of derivative instruments, see the Appendix to this
prospectus and the SAI.
Securities and other instruments that are illiquid: A security or other
instrument is illiquid if it 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. Securities and instruments, however, can be
sold in private sales, and many may be sold to other institutions and qualified
buyers or on foreign markets. The investment manager will follow guidelines
established by the board 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 other instruments that are illiquid.
Money market instruments: Short-term debt securities rated in the top two grades
or the equivalent are used to meet daily cash needs and at various times to hold
assets until better investment opportunities arise. 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.
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 a majority of the outstanding voting securities
approve otherwise, loans may not exceed 30% of the Fund's net assets.
Alternative investment option
In the future, the board of the Fund may determine for operating efficiencies to
use a master/feeder structure. Under that structure, the Fund's assets would be
invested in an investment company with the same goal as the Fund, rather than
invested directly in a portfolio of securities.
Valuing Fund shares
The public offering price is the net asset value (NAV) adjusted for the sales
charge for Class A. It is the NAV for Class B and Class Y.
<PAGE>
The NAV is the value of a single Fund share. The NAV usually changes daily, 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). NAV generally
declines as interest rates increase and rises as interest rates decline.
To establish the net assets, all securities are valued as of the close of each
business day. In valuing assets:
o Securities and assets with available market values are valued on that
basis
o Securities maturing in 60 days or less are valued at amortized cost
o Assets without readily available market values are valued according to
methods selected in good faith by the board
How to purchase, exchange or redeem shares
Alternative purchase arrangements
The Fund offers three different classes of shares - Class A, Class B and Class
Y. The primary differences among the classes are in the sales charge structures
and in their ongoing expenses. These differences are summarized in the table
below. You may choose the class that best suits your circumstances and
objectives.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Sales charge and
distribution
(12b-1) fee Service fee Other information
Class A Maximum initial sales 0.175% of average daily net Initial sales charge
charge of 5%; no 12b-1 fee assets waived or reduced for
certain purchases
Class B No initial sales charge; 0.175% of average daily net Shares convert to Class A
maximum CDSC of 5% assets in the ninth year of
declines to 0% after six ownership; CDSC waived in
years; 12b-1 fee of 0.75% certain circumstances
of average daily net assets
Class Y None 0.10% of average daily net Available only to certain
assets qualifying institutional
investors
</TABLE>
<PAGE>
Conversion of Class B shares to Class A shares - During the ninth calendar year
of owning your Class B shares, Class B shares will convert to Class A shares and
will no longer be subject to a distribution fee. Class B shares that convert to
Class A shares are not subject to a sales charge. Class B shares purchased
through reinvested dividends and distributions also will convert to Class A
shares in the same proportion as the other Class B shares. This means more of
your money will be put to work for you.
Considerations in determining whether to purchase Class A or Class B shares -
You should consider the information below in determining whether to purchase
Class A or Class B shares. The distribution fee (included in "Ongoing expenses")
and sales charges are structured so that you will have approximately the same
total return at the end of eight years regardless of which class you chose.
Sales charges on purchase or redemption
If you purchase Class A shares
o You will not have all of your purchase price invested. Part of your
purchase price will go to pay the sales charge. You will not pay a
sales charge when you redeem your shares.
o You will be able to take advantage of reductions in the sales charge.
If you purchase Class B shares
o All of your money is invested in shares of stock. However, you will pay
a sales charge if you redeem your shares within six years of purchase.
o No reductions of the sales charge are available for large purchases.
If your investments in IDS funds that are subject to a sales charge total
$250,000 or more, you are better off paying the reduced sales charge in Class A
than paying the higher fees in Class B. If you qualify for a waiver of the sales
charge, you should purchase Class A shares.
Ongoing expenses
If you purchase Class A shares
o Your shares will have a lower expense ratio than Class B shares because
Class A does not pay a distribution fee and the transfer agency fee for
Class A is lower than the fee for Class B. As a result, Class A shares
will pay higher dividends than Class B shares.
If you purchase Class B shares
o The distribution and transfer agency fees for Class B will cause your
shares to have a higher expense ratio and to pay lower dividends than
Class A shares. In the ninth year of ownership, Class B shares will
convert to Class A shares and you will no longer be subject to higher
fees.
<PAGE>
You should consider how long you plan to hold your shares and whether the
accumulated higher fees and CDSC on Class B shares prior to conversion would be
less than the initial sales charge on Class A shares. Also consider to what
extent the difference would be offset by the lower expenses on Class A shares.
To help you in this analysis, the example in the "Sales charge and Fund
expenses" section of the prospectus illustrates the charges applicable to each
class of shares.
Class Y shares - Class Y shares are offered to certain institutional investors.
Class Y shares are sold without a front-end sales charge or a CDSC and are not
subject to a distribution fee. The following investors are eligible to purchase
Class Y shares:
o Qualified employee benefit plans* if the plan:
- uses a daily transfer recordkeeping service offering participants
daily access to IDS funds and has
- at least $10 million in plan assets or
- 500 or more participants; or
- does not use daily transfer recordkeeping and has
- at least $3 million invested in funds of the IDS MUTUAL FUND
GROUP or
- 500 or more participants.
o Trust companies or similar institutions, and charitable organizations
that meet the definition in Section 501(c)(3) of the Internal Revenue
Code.* These organizations must have at least $10 million invested in
funds of the IDS MUTUAL FUND GROUP.
o Nonqualified deferred compensation plans* whose participants are
included in a qualified employee benefit plan described above.
* Eligibility must be determined in advance by AEFA. To do so, contact your
financial advisor.
How to purchase shares
If you are investing in this Fund for the first time, you will need to set up an
account. Your financial advisor will help you fill out and submit an
application. Once your account is set up, you can choose among several
convenient ways to invest.
Important: When opening an account, you must provide your correct Taxpayer
Identification Number (Social Security or Employer Identification number). See
"Distributions and taxes."
When you purchase 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.
<PAGE>
o The minimums allowed for investment may change from time to time.
o Wire orders can be accepted only on days when your bank, American
Express Client Service Corporation (AECSC), 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.
o AECSC 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.
o If your application does not specify which class of shares you are
purchasing, it will be assumed that you are investing in Class A
shares.
Three ways to invest
1 By regular account
Send your check and application (or your name and account number if you have an
established account) to:
American Express Financial Advisors Inc.
P.O. Box 74
Minneapolis, MN 55440-0074
Your financial advisor will help you with this process.
Minimum amounts
Initial investment: $ 2,000
Additional investments: $ 100
Account balances: $ 300*
Qualified retirement accounts: none
2 By scheduled investment plan
Contact your financial advisor to set up one of the following scheduled plans:
o automatic payroll deduction
o bank authorization
o direct deposit of Social Security check
o other plan approved by the Fund
<PAGE>
Minimum amounts
Initial investment: $ 100
Additional investments: $ 100/each payment for nonqualified accounts
$ 50/each payment for qualified accounts
Account balances: none
(on active plans of monthly payments)
If account balance is below $2,000, frequency of payments must be at least
monthly.
3 By wire
If you have an established account, you may wire money to:
Norwest Bank Minnesota
Routing Transit No. 091000019
Give these instructions: Credit American Express Financial Advisor's Account
#0000030015 for personal account # (your account number) for (your name).
If this information is not included, the order may be rejected and all money
received by the Fund, less any costs the Fund or AECSC incurs, will be returned
promptly.
Minimum amounts
Each wire investment: $ 1,000
*If your account balance falls below $300, you will be asked in writing to bring
it up to $300 or establish a scheduled investment plan. If you do not do so
within 30 days, your shares can be redeemed and the proceeds mailed to you. If
you are in a "wrap-fee" program sponsored by AEFA and your wrap program balance
falls below the required program minimum or is terminated, your shares will be
redeemed and the proceeds mailed to you.
How to exchange shares
You can exchange your shares of the Fund at no charge for shares of the same
class of any other publicly offered fund in the IDS MUTUAL FUND GROUP available
in your state. Exchanges into IDS Tax-Free Money Fund must be made from Class A
shares. For complete information on any other fund, including fees and expenses,
read that fund's prospectus carefully.
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.
<PAGE>
For tax purposes, an exchange represents a redemption and purchase and may
result in a gain or loss. However, you cannot use the sales charge imposed on
the purchase of Class A shares to create or increase 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.
How to redeem shares
You can redeem your shares at any time. American Express Shareholder Service
will mail payment within seven days after receiving your request.
When you redeem shares, the amount you receive may be more or less than the
amount you invested. Your shares will be redeemed at net asset value, minus any
applicable sales charge, 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, minus any
applicable sales charge, at the close of business on the next business day.
A redemption is a taxable transaction. If the proceeds from your redemption are
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 advisor.
Two ways to request an exchange or redemption of shares
1 By letter
Include in your letter:
o the name of the fund(s)
o the class of shares to be exchanged or redeemed
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 redeem
o signature of all registered account owners
o for redemptions, indicate how you want your money delivered to you
o any paper certificates of shares you hold
Regular mail:
American Express Shareholder Service
Attn: Redemptions
P.O. Box 534
Minneapolis, MN 55440-0534
Express mail:
American Express Shareholder Service
Attn: Redemptions
733 Marquette Ave.
Minneapolis, MN 55402
<PAGE>
2 By phone
American Express Financial Advisors Telephone Transaction Service:
800-437-3133 or
612-671-3800
o The Fund and AECSC will honor any telephone exchange or redemption request
believed to be authentic and will use reasonable procedures to confirm that
they are. This includes asking identifying questions and tape recording
calls. If reasonable procedures are followed, the Fund or AECSC will not 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 American Express
Shareholder Service. Each registered owner must sign the request.
o AECSC 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.
o Acting on your instructions, your financial advisor may conduct telephone
transactions on your behalf.
o Phone privileges may be modified or discontinued at any time.
Minimum amount
Redemption: $100
Maximum amount
Redemption: $50,000
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 Exchanges must be made into the same class of shares of the new fund.
o If your exchange creates a new account, it must satisfy the minimum
investment amount for new purchases.
o Once we receive your exchange request, you cannot cancel it.
o Shares of the new fund may not be used on the same day for another
exchange.
o If your shares are pledged as collateral, the exchange will be delayed
until written approval is obtained from the secured party.
<PAGE>
o AECSC and the Fund reserve the right to reject any exchange, limit the
amount, or modify or discontinue the exchange privilege, to prevent abuse
or adverse effects on the Fund and its shareholders. For example, if
exchanges are too numerous or too large, they may disrupt the Fund's
investment strategies or increase its costs.
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 purchase new shares in
the same account from which you redeemed. If you reinvest in Class A, you
will purchase the new shares at net asset value rather than the offering
price on the date of a new purchase. If you reinvest in Class B, any CDSC
you paid on the amount you are reinvesting also will be reinvested. To take
advantage of this option, send a 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. It may take up to 10 days from the date of purchase before a check is
mailed to you. (A check may be mailed earlier if your bank provides evidence
satisfactory to the Fund and AECSC that your check has cleared.)
Three ways to receive payment when you redeem shares
1 By regular or express mail
o Mailed to the address on record
o Payable to names listed on the account
NOTE: You will be charged a fee if you request express mail delivery.
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 fund account
NOTE: Pre-authorization required. For instructions, contact your
financial advisor or American Express Shareholder Service.
3 By scheduled payout plan
o Minimum payment: $50
o Contact your financial advisor or American Express Shareholder Service
to set up regular payments to you on a monthly, bimonthly, quarterly,
semiannual or annual basis
o Purchasing new shares while under a payout plan may be disadvantageous
because of the sales charges
<PAGE>
Reductions and waivers of the sales charge
Class A - initial sales charge alternative
On purchases of Class A shares, you pay a 5% sales charge on the first $50,000
of your total investment and less on investments after the first $50,000:
Total investment Sales charge as a
percentage of:*
Public Net
offering amount
price invested
Up to $50,000 5.0% 5.26%
Next $50,000 4.5 4.71
Next $400,000 3.8 3.95
Next $500,000 2.0 2.04
$1,000,000 or more 0.0 0.00
* To calculate the actual sales charge on an investment greater than $50,000 and
less than $1,000,000, amounts for each applicable increment must be totaled. See
the SAI.
Reductions of the sales charge on Class A shares 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
o the amount you and your primary household group are investing or have
in other funds in the IDS MUTUAL FUND GROUP that carry a sales charge.
(The primary household group consists of accounts in any ownership for
spouses or domestic partners and their unmarried children under 21.
Domestic partners are individuals who maintain a shared primary
residence and have joint property or other insurable interests.)
Other policies that affect your sales charge:
o IDS Tax-Free Money Fund and Class A shares of IDS Cash Management 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.
<PAGE>
o If you intend to invest $1 million over a period of 13 months, you can
reduce the sales charges in Class A by filing a letter of intent.
For more details, see the SAI.
Waivers of the sales charge for Class A shares Sales charges do not apply to:
o Current or retired board members, officers or employees of the Fund or AEFC
or its subsidiaries, their spouses and unmarried children under 21.
o Current or retired American Express financial advisors, their spouses and
unmarried children under 21.
o Investors who have a business relationship with a newly associated
financial advisor who joined AEFA from another investment firm provided
that (1) the purchase is made within six months of the advisor's
appointment date with AEFA, (2) the purchase is made with proceeds of a
redemption of shares that were sponsored by the financial advisor's
previous broker-dealer, and (3) the proceeds are the result of a redemption
of an equal or greater value where a sales load was previously assessed.
o Qualified employee benefit plans* using a daily transfer recordkeeping
system 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 Shareholders who have at least $1 million invested in funds of the IDS
MUTUAL FUND GROUP. If the investment is redeemed in the first year after
purchase, a CDSC of 1% will be charged on the redemption. The CDSC will be
waived only in the circumstances described for waivers for Class B shares.
o Purchases made within 30 days after a redemption of shares (up to the
amount redeemed): - of a product distributed by AEFA in a qualified plan
subject to a deferred sales charge or - in a qualified plan or account
where American Express Trust Company has a recordkeeping, trustee,
investment management or investment servicing relationship.
Send the Fund a written request along with your payment, indicating the amount
of the redemption and the date on which it occurred.
o Purchases made with dividend or capital gain distributions from the same
class of another fund in the IDS MUTUAL FUND GROUP that has a sales charge.
o Purchases made through or under a "wrap fee" product sponsored by AEFA
(total amount of all investments must be $50,000); the University of
Massachusetts After-Tax Savings Program; the University of Texas System
ORP; a segregated separate account offered by Nationwide Life Insurance
Company or Nationwide Life and Annuity Insurance Company; or a subsidiary
of AEFC offering Personal Trust Services' Asset-Based pricing alternative.
<PAGE>
o Purchases made with the proceeds from IDS Life Real Estate Variable Annuity
surrenders.
* Eligibility must be determined in advance by AEFA. To do so, contact your
financial advisor.
Class B - contingent deferred sales charge alternative
Where a CDSC is imposed on a redemption, it is based on the amount of the
redemption and the number of calendar years, including the year of purchase,
between purchase and redemption. The following table shows the declining scale
of percentages that apply to redemptions during each year after a purchase:
If a redemption is The percentage rate
made during the for the CDSC is:
First year 5%
Second year 4%
Third year 4%
Fourth year 3%
Fifth year 2%
Sixth year 1%
Seventh year 0%
If the amount you are redeeming reduces the current net asset value of your
investment in Class B shares below the total dollar amount of all your purchase
payments during the last six years (including the year in which your redemption
is made), the CDSC is based on the lower of the redeemed purchase payments or
market value.
The following example illustrates how the CDSC is applied. Assume you had
invested $10,000 in Class B shares and that your investment had appreciated in
value to $12,000 after 15 months, including reinvested dividend and capital gain
distributions. You could redeem any amount up to $2,000 without paying a CDSC
($12,000 current value less $10,000 purchase amount). If you redeemed $2,500,
the CDSC would apply only to the $500 that represented part of your original
purchase price. The CDSC rate would be 4% because a redemption after 15 months
would take place during the second year after purchase.
Because the CDSC is imposed only on redemptions that reduce the total of your
purchase payments, you never have to pay a CDSC on any amount you redeem that
represents appreciation in the value of your shares, income earned by your
shares or capital gains. In addition, when determining the rate of any CDSC,
your redemption will be made from the oldest purchase payment you made. Of
course, once a purchase payment is considered to have been redeemed, the next
amount redeemed is the next oldest purchase payment. By redeeming the oldest
purchase payments first, lower CDSCs are imposed than would otherwise be the
case.
<PAGE>
Waivers of the contingent deferred sales charge The CDSC on Class B shares will
be waived on redemptions of shares:
o In the event of the shareholder's death,
o Held in a trusteed employee benefit plan,
o Held in IRAs or certain qualified plans for which American Express
Trust Company acts as custodian, such as Keogh plans, tax-sheltered
custodial accounts or corporate pension plans, provided that the
shareholder is:
- - at least 59-1/2 years old, and
- - taking a retirement distribution (if the redemption is part of a
transfer to an IRA or qualified plan in a product distributed by AEFA,
or a custodian-to-custodian transfer to a product not distributed by
AEFA, the CDSC will not be waived), or
- - redeeming under an approved substantially equal periodic payment
arrangement.
Special shareholder services
Services
To help you track and evaluate the performance of your investments, AECSC
provides these services:
Quarterly statements featuring: (1) a list of all your holdings and transactions
during the previous three months and (2) personalized mutual fund performance
information about your specific account.
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 advisor.
Quick telephone reference
American Express Financial Advisors 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
TTY Service
For the hearing impaired
800-846-4852
American Express Financial Advisors Easy Access Line
Automated account information (TouchTone(R) phones only), including current Fund
prices and performance, account values and recent account transactions
800-862-7919
<PAGE>
Distributions and taxes
As a shareholder you are entitled to your share of the Fund's net income and any
net gains realized on its investments. The Fund distributes dividends and
capital gain distributions to qualify as a regulated investment company and to
avoid paying corporate income and excise taxes. Dividend and capital gain
distributions will have tax consequences you should know about.
Dividend and capital gain distributions
The Fund's net investment income from dividends and interest is distributed to
you monthly as dividends. Capital gains are realized when a security is sold for
a higher price than was paid for it. Short-term capital gains are distributed at
the end of the calendar year and are included in net investment income.
Long-term capital gains are realized when a security is held for more than one
year. The Fund will offset any net realized capital gains by any available
capital loss carryovers. Net realized long-term capital gains, if any, are
distributed at the end of the calendar year as capital gain distributions. These
long-term capital gains will be subject to differing tax rates depending on the
holding period of the underlying investments. Before they are distributed, net
long-term capital gains are included in the value of each share. After they are
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.)
Dividends for each class will be calculated at the same time, in the same manner
and will be the same amount prior to deduction of expenses. Expenses
attributable solely to a class of shares will be paid exclusively by that class.
Reinvestments
Dividends and capital gain distributions are automatically reinvested in
additional shares in the same class 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 the same class of
another publicly available IDS fund for which you have previously
opened an account.
The reinvestment price is the net asset value at close of business on the day
the distribution is paid. (Your quarterly statement will confirm the amount
invested and the number of shares purchased.)
If you choose cash distributions, you will receive cash only for distributions
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. Prior to
reinvestment, no interest will accrue on amounts represented by uncashed
distribution or redemption checks.
<PAGE>
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 declares them
regardless of whether you take them in cash or reinvest them.
Each January, you will receive a tax statement showing the kinds and total
amount of all distributions you received during the previous year. You must
report 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 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 short term (for shares held for one year or less) or long term (for shares
held for more than one year). Long-term capital gains will be taxed at rates
that vary depending upon the holding period. Long-term capital gains are divided
into two holding periods: (1) shares held more than one year but not more than
18 months and (2) shares held more than 18 months.
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.
If you do not provide the TIN, 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
<TABLE>
<CAPTION>
<S> <C>
Use the Social Security or
For this type of account: Employer Identification number of:
Individual or joint account The individual or one of the individuals listed on
the joint account
Custodian account of a minor The minor
(Uniform Gifts/Transfers to Minors Act)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
A living trust The grantor-trustee
(the person who puts the
money into the trust)
An irrevocable trust, The legal entity (not the personal representative
pension trust or estate or trustee, unless no legal entity is designated in
the account title)
Sole proprietorship The owner
Partnership The partnership
Corporate The corporation
Association, club or tax-exempt organization The organization
</TABLE>
For details on TIN requirements, ask your financial advisor or local American
Express Financial Advisors 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 advisor about your personal
situation.
How the Fund is organized
Shares
The Fund is owned by its shareholders. The Fund issues shares in three classes -
Class A, Class B and Class Y. Each class has different sales arrangements and
bears different expenses. Each class represents interests in the assets of the
Fund. Par value is one 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.
Shares of the Fund have cumulative voting rights. Each class has exclusive
voting rights with respect to the provisions of the Fund's distribution plan
that pertain to a particular class and other matters for which separate class
voting is appropriate under applicable law.
Shareholder meetings
The Fund does not hold annual shareholder meetings. However, the board members
may call meetings at their discretion, or on demand by holders of 10% or more of
the outstanding shares, to elect or remove board members.
<PAGE>
Board members and officers
Shareholders elect a board 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. Board members and
officers serve 47 IDS and IDS Life funds and 15 Master Trust portfolios, except
for William H. Dudley, who does not serve the nine IDS Life funds.
Independent board members and officers
Chairman of the board
William R. Pearce*
Chairman of the board, Board Services Corporation (provides administrative
services to boards including the boards of the IDS and IDS Life funds and Master
Trust portfolios).
H. Brewster Atwater, Jr.
Retired chairman and chief executive officer, General Mills, Inc.
Lynne V. Cheney
Distinguished fellow, American Enterprise Institute for Public Policy Research.
Heinz F. Hutter
Retired president and chief operating officer, Cargill, Inc.
Anne P. Jones
Attorney and telecommunications consultant.
Alan K. Simpson
Former United States senator for Wyoming.
Edson W. Spencer
Retired chairman and chief executive officer, Honeywell, Inc.
Wheelock Whitney
Chairman, Whitney Management Company.
C. Angus Wurtele
Chairman of the board, The Valspar Corporation.
Officer
Vice president, general counsel and secretary
Leslie L. Ogg*
President of Board Services Corporation.
<PAGE>
Board members and officers associated with AEFC
President
John R. Thomas*
Senior vice president, AEFC.
William H. Dudley*
Senior advisor to the chief executive officer, AEFC.
David R. Hubers*
President and chief executive officer, AEFC.
Officers associated with AEFC
Vice president
Peter J. Anderson*
Senior vice president, AEFC.
Vice president
Frederick C. Quirsfeld*
Vice president, AEFC.
Treasurer
Matthew N. Karstetter*
Vice president, AEFC.
Refer to the SAI for the board members' and officers' biographies.
* Interested person as defined by the Investment Company Act of 1940.
Investment manager
The Fund pays AEFC for managing its assets. Under its Investment Management
Services Agreement, AEFC is paid a fee for these services based on the average
daily net assets of the Fund, as follows:
Assets Annual rate
(billions)at each asset level
First $1.0 0.520%
Next 1.0 0.495
Next 1.0 0.470
Next 3.0 0.445
Next 3.0 0.420
Over 9.0 0.395
<PAGE>
For the fiscal year ended Aug. 31, 1998, the Fund paid AEFC a total investment
management fee of 0.48% of its average daily net assets. Under the Agreement,
the Fund also pays taxes, brokerage commissions and nonadvisory expenses.
Administrator and transfer agent
Under an Administrative Services Agreement, the Fund pays AEFC for
administration and accounting services at an annual rate of 0.05% decreasing in
gradual percentages to 0.025% as assets increase.
Under a separate Transfer Agency Agreement, AECSC maintains shareholder accounts
and records. The Fund pays AECSC an annual fee per shareholder account for this
service as follows:
o Class A $15.50
o Class B $16.50
o Class Y $15.50
Distributor
The Fund has an exclusive distribution agreement with AEFA. Financial advisors
representing AEFA provide information to investors about individual investment
programs, the Fund and its operations, new account applications, and exchange
and redemption requests.
The cost of these services is paid partially by the Fund's sales charges.
Persons who buy Class A shares pay a sales charge at the time of purchase.
Persons who buy Class B shares are subject to a contingent deferred sales charge
on a redemption in the first six years and pay an asset-based sales charge (also
known as a 12b-1 fee) of 0.75% of the Fund's average daily net assets. Class Y
shares are sold without a sales charge and without an asset-based sales charge.
Financial advisors may receive different compensation for selling Class A, Class
B and Class Y shares. Portions of the sales charge also may be paid to
securities dealers who have sold the Fund's shares or to banks and other
financial institutions. The amounts of those payments range from 0.8% to 4% of
the Fund's offering price depending on the monthly sales volume.
Under a Shareholder Service Agreement, the Fund also pays a fee for service
provided to shareholders by financial advisors and other servicing agents. The
fee is calculated at a rate of 0.175% of average daily net assets for Class A
and Class B shares and 0.10% for Class Y shares.
Total expenses paid by the Fund's Class A shares for the fiscal year ended Aug.
31, 1998, were 0.83% of its average daily net assets. Expenses for Class B and
Class Y were 1.59% and 0.76%, respectively.
<PAGE>
About American Express Financial Corporation
General information
The AEFC 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 funds in the IDS MUTUAL FUND GROUP, AEFC
also manages investments for itself and its subsidiaries, IDS Certificate
Company and IDS Life Insurance Company. Total assets under management on Aug.
31, 1998 were more than $184 billion.
AEFA serves individuals and businesses through its nationwide network of more
than 180 offices and more than 8,000 advisors.
Other AEFC subsidiaries provide investment management and related services for
pension, profit sharing, employee savings and endowment funds of businesses and
institutions.
AEFC is located at IDS Tower 10, Minneapolis, MN 55440-0010. It is a
wholly-owned subsidiary of American Express Company (American Express), 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 AEFC.
Year 2000
The Year 2000 issue is the result of computer programs having been written using
two digits rather than four to define a year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than 2000. This could result in the failure of major systems or miscalculations,
which would have a material impact on the operations of the Fund. The Fund has
no computer systems of its own but is dependent upon the systems maintained by
AEFC and certain other third parties.
A comprehensive review of AEFC's computer systems and business processes has
been conducted to identify the major systems that could be affected by the Year
2000 issue. Steps are being taken to resolve any potential problems including
modification of existing software and the purchase of new software. These
measures are scheduled to be completed and tested on a timely basis. AEFC's goal
is to complete internal remediation and testing of each of its critical systems
by the end of 1998 and to continue compliance efforts through 1999. The Year
2000 readiness of other third parties whose system failures could have an impact
on the Fund's operations currently is being evaluated. The companies or
governments in which the Fund invests also may be adversely affected by Year
2000 issues. This may affect the value of the Fund's investments. The potential
materiality of any impact is not known at this time.
<PAGE>
Appendix A
Description of corporate bond ratings
Bond 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 and C. Ratings by Standard & Poor's
Corporation are AAA, AA, A, BBB, BB, B, CCC, CC, C and D. The following is a
compilation of the two agencies' rating descriptions.
For further information, see the SAI.
Aaa/AAA - Judged to be of the best quality and carry the smallest degree of
investment risk. Interest and principal are secure.
Aa/AA - 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.
A - Considered upper-medium grade. Protection for interest and principal is
deemed adequate but may be susceptible to future impairment.
Baa/BBB - Considered medium-grade obligations. Protection for interest and
principal is adequate over the short-term; however, these obligations may have
certain speculative characteristics.
Ba/BB - Considered to have speculative elements. The protection of interest and
principal payments may be very moderate.
B - Lack characteristics of more desirable investments. There may be small
assurance over any long period of time of the payment of interest and principal.
Caa/CCC - Are of poor standing. Such issues may be in default or there may be
risk with respect to principal or interest.
Ca/CC - Represent obligations that are highly speculative. Such issues are often
in default or have other marked shortcomings.
C - Are obligations with a higher degree of speculation. These securities have
major risk exposures to default.
D - Are in payment default. The D rating is used when interest payments or
principal payments are not made on the due date.
Non-rated securities will be considered for investment when they possess a risk
comparable to that of rated securities consistent with the Fund's objectives and
policies. When assessing the risk involved in each non-rated security, the Fund
will consider the financial condition of the issuer or the protection afforded
by the terms of the security.
<PAGE>
Definitions of zero-coupon and pay-in-kind securities
A zero-coupon security is a security that is sold at a deep discount from its
face value and makes no periodic interest payments. The buyer of such a security
receives a rate of return by gradual appreciation of the security, which is
redeemed at face value on the maturity date.
A pay-in-kind security is a security in which the issuer has the option to make
interest payments in cash or in additional securities. The securities issued as
interest usually have the same terms, including maturity date, as the
pay-in-kind securities.
<PAGE>
Appendix B
Descriptions of derivative instruments
What follows are brief descriptions of derivative instruments the Fund may use.
At various times the Fund may use some or all of these instruments and is not
limited to these instruments. It may use other similar types of instruments if
they are consistent with the Fund's investment goal and policies. For more
information on these instruments, see the SAI.
Options and futures contracts - An option is an agreement to buy or sell an
instrument at a set price during a certain period of time. A futures contract is
an agreement to buy or sell an instrument for a set price on a future date. The
Fund may buy and sell options and futures contracts to manage its exposure to
changing interest rates, security prices and currency exchange rates. Options
and futures may be used to hedge the Fund's investments against price
fluctuations or to increase market exposure.
Asset-backed and mortgage-backed securities - Asset-backed securities include
interests in pools of assets such as motor vehicle installment sale contracts,
installment loan contracts, leases on various types of real and personal
property, receivables from revolving credit (credit card) agreements or other
categories of receivables. Mortgage-backed securities include collateralized
mortgage obligations and stripped mortgage-backed securities. Interest and
principal payments depend on payment of the underlying loans or mortgages. The
value of these securities may also be affected by changes in interest rates, the
market's perception of the issuers and the creditworthiness of the parties
involved. The non-mortgage related asset-backed securities do not have the
benefit of a security interest in the related collateral. Stripped
mortgage-backed securities include interest only (IO) and principal only (PO)
securities. Cash flows and yields on IOs and POs are extremely sensitive to the
rate of principal payments on the underlying mortgage loans or mortgage-backed
securities.
Indexed securities - The value of indexed securities is linked to currencies,
interest rates, commodities, indexes or other financial indicators. Most indexed
securities are short- to intermediate-term fixed income securities whose values
at maturity or interest rates rise or fall according to the change in one or
more specified underlying instruments. Indexed securities may be more volatile
than the underlying instrument itself.
Inverse floaters - Inverse floaters are created by underwriters using the
interest payment on securities. A portion of the interest received is paid to
holders of instruments based on current interest rates for short-term
securities. The remainder, minus a servicing fee, is paid to holders of inverse
floaters. As interest rates go down, the holders of the inverse floaters receive
more income and an increase in the price for the inverse floaters. As interest
rates go up, the holders of the inverse floaters receive less income and a
decrease in the price for the inverse floaters.
Structured products - Structured products are over-the-counter financial
instruments created specifically to meet the needs of one or a small number of
investors. The instrument may consist of a warrant, an option or a forward
contract embedded in a note or any of a wide variety of debt, equity and/or
currency combinations. Risks of structured products include the inability to
close such instruments, rapid changes in the market and defaults by other
parties.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
FOR
IDS BOND FUND
Oct. 30, 1998
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 American Express financial advisor
or by writing to American Express Shareholder Service, P.O. Box 534,
Minneapolis, MN 55440-0534.
This SAI is dated Oct. 30, 1998, and it is to be used with the prospectus dated
Oct. 30, 1998, and the Annual Report for the fiscal year ended Aug. 31, 1998.
<PAGE>
IDS BOND FUND, INC.
TABLE OF CONTENTS
Goal and Investment Policies.....................................See Prospectus
Additional Investment Policies..............................................p.4
Security Transactions.......................................................p.7
Brokerage Commissions Paid to Brokers Affiliated with
American Express Financial Corporation......................................p.9
Performance Information.....................................................p.9
Valuing Fund Shares........................................................p.11
Investing in the Fund......................................................p.12
Redeeming Shares...........................................................p.16
Pay-out Plans..............................................................p.17
Taxes......................................................................p.18
Agreements.................................................................p.19
Organizational Information.................................................p.21
Board Members and Officers.................................................p.22
Compensation for Fund Board Members........................................p.25
Independent Auditors.......................................................p.26
Financial Statements..........................................See Annual Report
Prospectus.................................................................p.26
Appendix A: Foreign Currency Transactions..................................p.27
Appendix B: Investing in Foreign Securities................................p.31
<PAGE>
Appendix C: Options and Interest Rate Futures Contracts....................p.32
Appendix D: Mortgage-Backed Securities.....................................p.37
Appendix E: Dollar-Cost Averaging..........................................p.38
<PAGE>
ADDITIONAL INVESTMENT POLICIES
These are investment policies in addition to those presented in the prospectus.
The policies below are fundamental policies of IDS Bond Fund, Inc. (the Fund)
and may be changed only with shareholder approval. Unless holders of a majority
of the outstanding voting securities agree to make the change the Fund will not:
`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.
`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.
`Make cash loans if the total commitment amount exceeds 5% of the Fund's total
assets.
`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.
`Purchase more than 10% of the outstanding voting securities of an issuer.
`Invest more than 5% of its total assets in securities of any one company,
government or political subdivision thereof, except the limitation will not
apply to investments in securities issued by the U.S. government, its agencies
or instrumentalities, and except that up to 25% of the Fund's total assets may
be invested without regard to this 5% limitation.
`Buy or sell real estate, unless acquired as a result of ownership of securities
or other instruments, except this shall not prevent the Fund from investing in
securities or other instruments backed by real estate or securities of companies
engaged in the real estate business or real estate investment trusts. For
purposes of this policy, real estate includes real estate limited partnerships.
`Buy or sell physical commodities unless acquired as a result of ownership of
securities or other instruments, except this shall not prevent the Fund from
buying or selling options and futures contracts or from investing in securities
or other instruments backed by, or whose value is derived from, physical
commodities.
`Purchase securities of an issuer if the board members and officers of the Fund
and of American Express Financial Corporation (AEFC) hold more than a certain
percentage of the issuer's outstanding securities. If the holdings of all board
members and officers of the Fund and of AEFC 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.
`Lend Fund securities in excess of 30% of its net assets. The current policy of
the Fund's board is to make these loans, either long- or short-term, to
broker-dealers. In making loans, the Fund receives the market price in cash,
U.S. government securities, letters of credit or such other collateral as may be
<PAGE>
permitted by regulatory agencies and approved by the board. 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 the Fund will not:
Buy on margin or sell short, except the Fund may make margin payments in
connection with transactions in stock index futures contracts.
`Pledge or mortgage its assets beyond 15% of total assets, buy securities on
margin, sell short or purchase commodity contracts, except the Fund may enter
into futures contracts. If the Fund were ever to pledge or mortgage its assets,
valuation of all of its assets would continue to be based on market values.
`Invest more than 5% of its total assets in securities of companies, including
any predecessors, that have a record of less than three years continuous
operations.
`Invest more than 10% of its total assets in securities of investment companies.
The Fund has no current intention to invest in securities of other investment
companies.
`Invest in a company to control or manage it.
`Invest in exploration or development programs for oil, gas or mineral leases.
`Invest more than 5% of its net assets in warrants.
`Invest 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, loans and loan participations, repurchase agreements with maturities
greater than seven days, non-negotiable fixed-time deposits and over-the-counter
options.
In determining the liquidity of Rule 144A securities, which are unregistered
securities offered to qualified institutional buyers, and interest-only and
principal-only fixed mortgage-backed securities (IOs and POs) issued by the U.S.
government or its agencies and instrumentalities, the investment manager, under
guidelines established by the board, will consider any relevant factors
including the frequency of trades, the number of dealers willing to purchase or
sell the security and the nature of marketplace trades.
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, 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.
<PAGE>
The term "municipal obligation" as used in the prospectus includes debt
obligations issued by or on behalf of states, territories or possessions of the
United States, the District of Columbia and interest on which is generally
exempt from federal income tax. Municipal obligations are classified as
principally as either "general obligations" or "revenue obligations". General
obligation bonds are secured by the municipality's pledge of its credit and
taxing power for the payment of principal and interest. Revenue obligations are
generally payable only from the revenue derived from a particular facility or
class of facilities, or in some cases from the proceeds of a special excise tax
or other special revenue source.
Loans, loan participations and interests in securitized loan pools are interests
in amounts owed by a corporate, governmental or other borrower to a lender or
consortium of lenders (typically banks, insurance companies, investment banks,
government agencies or international agencies). Loans involve a risk of loss in
case of default or insolvency of the borrower and may offer less legal
protection to the Fund in the event of fraud or misrepresentation. In addition,
loan participations involve a risk of insolvency of the lender or other
financial intermediary.
The Fund may 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
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.
The Fund may 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. (Moody's)or Standard & Poor's Corporation (S&P) 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.
The Fund may invest in foreign securities that are traded in the form of
American Depositary Receipts (ADRs). ADRs are receipts typically issued by a
U.S. bank or trust company evidencing ownership of the underlying securities of
foreign issuers. European Depositary Receipts (EDRs) and Global Depositary
Receipts (GDRs) are receipts typically issued by foreign banks or trust
companies, evidencing ownership of underlying securities issued by either a
foreign or U.S. issuer. Generally Depositary Receipts in registered form are
designed for use in the U.S. securities market and Depositary Receipts in bearer
form are designed for use in securities markets outside the U.S. Depositary
Receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. Depositary Receipts also
involve the risks of other investments in foreign securities.
<PAGE>
Notwithstanding any of the Fund's other investment policies, the Fund may invest
its assets in an open-end management investment company having substantially the
same investment objectives, policies and restrictions as the Fund for the
purpose of having those assets managed as part of a combined pool.
For a discussion about foreign currency transactions, see Appendix A. For a
discussion on investing in foreign securities, see Appendix B. For a discussion
on options and interest rate futures contracts, see Appendix C. For a discussion
on mortgage-backed securities, see Appendix D.
SECURITY TRANSACTIONS
Subject to policies set by the board, AEFC is authorized to determine,
consistent with the Fund's investment goal and policies, which securities will
be purchased, held or sold. In determining where the buy and sell orders are to
be placed, AEFC has been directed to use its best efforts to obtain the best
available price and most favorable execution except where otherwise authorized
by the board.
AEFC has a strict Code of Ethics that prohibits its affiliated personnel from
engaging in personal investment activities that compete with or attempt to take
advantage of planned portfolio transactions for any fund in the IDS MUTUAL FUND
GROUP. AEFC carefully monitors compliance with its Code of Ethics.
Normally, the Fund's securities are traded on a principal rather than an agency
basis. In other words, AEFC will trade directly with the issuer or with a dealer
who buys or sells for its own account, rather than acting on behalf of another
client. AEFC does not pay the dealer commissions. Instead, the dealer's profit,
if any, is the difference, or spread, between the dealer's purchase and sale
price for the security.
On occasion, it may be desirable to compensate a broker for research services or
for brokerage services by paying a commission that might not otherwise be
charged or a commission in excess of the amount another broker might charge. The
board has adopted a policy authorizing AEFC to do so to the extent authorized by
law, if AEFC determines, in good faith, that such commission is reasonable in
relation to the value of the brokerage or research services provided by a broker
or dealer, viewed either in the light of that transaction or AEFC's overall
responsibilities with respect to the Fund and other funds and trusts in the IDS
MUTUAL FUND GROUP for which it acts as investment advisor.
Research provided by brokers supplements AEFC's own research activities. Such
services include economic data on, and analysis of, U.S. and foreign economies;
information on specific industries; information about specific companies,
including earnings estimates; purchase recommendations for stocks and bonds;
portfolio strategy services; political, economic, business and industry trend
assessments; historical statistical information; market data services providing
information on specific issues and prices; and technical analysis of various
aspects of the securities markets, including technical charts. Research services
may take the form of written reports, computer software or personal contact by
telephone or at seminars or other meetings. AEFC has obtained, and in the future
may obtain, computer hardware from brokers, including but not limited to
personal computers that will be used exclusively for investment decision-making
purposes, which include the research, portfolio management and trading functions
and other services to the extent permitted under an interpretation by the SEC.
<PAGE>
When paying a commission that might not otherwise be charged or a commission in
excess of the amount another broker might charge, AEFC must follow procedures
authorized by the board. To date, three procedures have been authorized. One
procedure permits AEFC to direct an order to buy or sell a security traded on a
national securities exchange to a specific broker for research services it has
provided. The second procedure permits AEFC, in order to obtain research, to
direct an order on an agency basis to buy or sell a security traded in the
over-the-counter market to a firm that does not make a market in that security.
The commission paid generally includes compensation for research services. The
third procedure permits AEFC, in order to obtain research and brokerage
services, to cause the Fund to pay a commission in excess of the amount another
broker might have charged. AEFC has advised the Fund it is necessary to do
business with a number of brokerage firms on a continuing basis to obtain such
services as the handling of large orders, the willingness of a broker to risk
its own money by taking a position in a security, and the specialized handling
of a particular group of securities that only certain brokers may be able to
offer. As a result of this arrangement, some portfolio transactions may not be
effected at the lowest commission, but AEFC believes it may obtain better
overall execution. AEFC has represented that under all three procedures the
amount of commission paid will be reasonable and competitive in relation to the
value of the brokerage services performed or research provided.
All other transactions 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 AEFC in providing advice to all the funds
in the IDS MUTUAL FUND GROUP even though it is not possible to relate the
benefits to any particular fund 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 AEFC or any of its subsidiaries. When the Fund buys or sells the same
security as another fund or account, AEFC carries out the purchase or sale in a
way the Fund agrees in advance is fair. Although sharing in large transactions
may adversely affect the price or volume purchased or sold by the Fund, the Fund
hopes to gain an overall advantage in execution.
AEFC has assured the Fund it will continue to seek ways to reduce brokerage
costs.
On a periodic basis, AEFC makes a comprehensive review of the broker-dealers and
the overall reasonableness of their commissions. The review evaluates execution,
operational efficiency and research services.
The Fund paid total brokerage commissions of $155,481 for the fiscal year ended
Aug. 31, 1998, $159,232 for fiscal year 1997, and $49,696 for fiscal year 1996.
Substantially all firms through whom transactions were executed provide research
services.
No transactions were directed to brokers because of research services they
provided to the Fund.
<PAGE>
As of the fiscal year ended Aug. 31, 1998, the Fund held securities of its
regular brokers or dealers or of the parent of those brokers or dealers that
derived more than 15% of gross revenue from securities-related activities as
presented below:
Value of Securities owned at
Name of Issuer End of Fiscal Year
Bank of America $10,137,500
Equitable Companies 4,939,988
Lehman Brothers 20,768,400
Merrill Lynch 16,386,025
Morgan (JP) 12,017,980
Salomon 39,007,310
Salomon Smith Barney 15,144,150
The portfolio turnover rate was 43% in the fiscal year ended Aug. 31, 1998, and
50% in fiscal year 1997. Higher turnover rates may result in higher brokerage
expenses.
BROKERAGE COMMISSIONS PAID TO BROKERS AFFILIATED WITH AMERICAN EXPRESS FINANCIAL
CORPORATION
Affiliates of American Express Company (American Express) (of which AEFC is a
wholly-owned subsidiary) may engage in brokerage and other securities
transactions on behalf of the Fund according to procedures adopted by that
Fund's board and to the extent consistent with applicable provisions of the
federal securities laws. AEFC will use an American Express affiliate only if (i)
AEFC determines that the Fund will receive prices and executions at least as
favorable as those offered by qualified independent brokers performing similar
brokerage and other services for the Fund and (ii) the affiliate charges the
Fund commission rates consistent with those the affiliate charges comparable
unaffiliated customers in similar transactions and if such use is consistent
with terms of the Investment Management Services Agreement.
No brokerage commissions were paid to brokers affiliated with AEFC for the three
most recent fiscal years.
PERFORMANCE INFORMATION
The Fund may quote various performance figures to illustrate past performance.
Average annual total return and current yield quotations used by the Fund are
based on standardized methods of computing performance as required by the SEC.
An explanation of the methods used by the Fund to compute performance follows
below.
<PAGE>
Average annual total return
The Fund may calculate average annual total return for a class for certain
periods by finding the average annual compounded rates of return over the period
that would equate the initial amount invested to the ending redeemable value,
according to the following formula:
P (1 + T)n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment,
made at the beginning of a period, at the end of the period
(or fractional portion thereof)
Aggregate total return
The Fund may calculate aggregate total return for a class for certain periods
representing the cumulative change in the value of an investment in the Fund
over a specified period of time according to the following formula:
ERV - P
P
where: P = a hypothetical initial payment of $1,000
ERV = ending redeemable value of a hypothetical $1,000 payment,
made at the beginning of a period, at the end of the period
(or fractional portion thereof)
Annualized yield
The Fund may calculate an annualized yield for a class by dividing the net
investment income per share deemed earned during a period by the net asset value
per share on the last day of the period and annualizing the results.
Yield is calculated according to the following formula:
Yield = 2[(a-b + 1)6 - 1]
cd
where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum offering price per share on the last day of the
period
The Fund's annualized yield was 6.45% for Class A, 6.02% for Class B and 6.88%
for Class Y for the 30-day period ended Aug. 31, 1998.
<PAGE>
The Fund's yield, calculated as described above according to the formula
prescribed by the SEC, is a hypothetical return based on market value yield to
maturity for the Fund's securities. It is not necessarily indicative of the
amount which was or may be paid to the Fund's shareholders. Actual amounts paid
to Fund shareholders are reflected in the distribution yield.
Distribution yield
Distribution yield is calculated according to the following formula:
D divided by POPF equals DY
30 30
where: D = sum of dividends for 30-day period
POP = sum of public offering price for 30-day period
F = annualizing factor DY = distribution yield
The Fund's distribution yield was 6.69% for Class A, 6.26% for Class B and 7.11%
for Class Y for the 30-day period ended Aug. 31, 1998.
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, Morningstar, 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 for each class is determined by using the net
asset value before shareholder transactions for the day. On Sept. 1, 1998, the
first business day following the end of the fiscal year, the computation looked
like this:
<TABLE>
<CAPTION>
Net assets Shares
before outstanding at Net asset value
shareholder the end of of one share
transactions previous day
----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
Class A $2,705,576,612 divided by 530,505,218 equals $5.10
Class B 1,055,899,073 207,039,034 5.10
Class Y 224,078,501 43,936,961 5.10
</TABLE>
In determining net assets before shareholder transactions, the Fund's securities
are valued as follows as of the close of business of the New York Stock Exchange
(the Exchange):
`Securities traded on a securities exchange for which a last-quoted sales price
is readily available are valued at the last-quoted sales price on the exchange
where such security is primarily traded.
<PAGE>
`Securities traded on a securities exchange for which a last-quoted sales price
is not readily available are valued at the mean of the closing bid and asked
prices, looking first to the bid and asked prices on the exchange where the
security is primarily traded and, if none exist, to the over-the-counter market.
`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 Exchange. Foreign securities quoted in foreign currencies are translated
into U.S. dollars at the current rate of exchange. Occasionally, events
affecting the value of such securities may occur between such times and the
close of the Exchange that will not be reflected in the computation of the
Fund's net asset value. If events materially affecting the value of such
securities occur during such period, these securities will be valued at their
fair value according to procedures decided upon in good faith by the board.
`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 and other assets are valued
at fair value as determined in good faith by the board. The board is responsible
for selecting methods it believes provide fair value. When possible, bonds are
valued by a pricing service independent from the Fund. If a valuation of a bond
is not available from a pricing service, the bond will be valued by a dealer
knowledgeable about the bond if such a dealer is available.
The Exchange, AEFC and the Fund will be closed on the following holidays: New
Year's Day, 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 adjusted for the sales charge for Class A. For
Class B and Class Y, there is no initial sales charge so the public offering
<PAGE>
price is the same as the net asset value. For Class A, the public offering price
for an investment of less than $50,000, made Sept. 1, 1998, was determined by
dividing the net asset value of one share, $5.10, by 0.95 (1.00-0.05 for a
maximum 5% sales charge) for a public offering price of $5.37. The sales charge
is paid to American Express Financial Advisors Inc. (AEFA) by the person buying
the shares.
Class A - Calculation of the Sales Charge
Sales charges are determined as follows:
<TABLE>
<CAPTION>
Within each
increment, sales
charge as a
percentage of:
------------------------------------------------------------
Public Net
Amount of Investment Offering Price Amount Invested
- -------------------- -------------- ---------------
<S> <C> <C>
First $ 50,000 5.0% 5.26%
Next 50,000 4.5 4.71
Next 400,000 3.8 3.95
Next 500,000 2.0 2.04
$1,000,000 or more 0.0 0.00
</TABLE>
Sales charges on an investment greater than $50,000 and less than $1,000,000 are
calculated for each increment separately and then totaled. The resulting total
sales charge, expressed as a percentage of the public offering price and of the
net amount invested, will vary depending on the proportion of the investment at
different sales charge levels.
For example, compare an investment of $60,000 with an investment of $85,000. The
$60,000 investment is composed of $50,000 that incurs a sales charge of $2,500
(5.0% x $50,000) and $10,000 that incurs a sales charge of $450 (4.5% x
$10,000). The total sales charge of $2,950 is 4.92% of the public offering price
and 5.17% of the net amount invested.
In the case of the $85,000 investment, the first $50,000 also incurs a sales
charge of $2,500 (5.0% x $50,000) and $35,000 incurs a sales charge of $1,575
(4.5% x $35,000). The total sales charge of $4,075 is 4.79% of the public
offering price and 5.04% of the net amount invested.
The following table shows the range of sales charges as a percentage of the
public offering price and of the net amount invested on total investments at
each applicable level.
<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> <C>
First $ 50,000 5.00% 5.26%
Next 50,000 to 100,000 5.00-4.50 5.26-4.71
Next 100,000 to 500,000 4.50-3.80 4.71-3.95
Next 500,000 to 999,999 3.80-2.00 3.95-2.04
$1,000,000 or more 0.00 0.00
</TABLE>
<PAGE>
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%
- -------------------------------------------------------------------------------
Class A - 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 and
up to $100,000.
The total amount invested includes any shares held in the Fund in the name of a
member of your primary household group. (The primary household group consists of
accounts in any ownership for spouses or domestic partners and their unmarried
children under 21. Domestic partners are individuals who maintain a shared
primary residence and have joint property or other insurable interests.) For
instance, if your spouse already has invested $20,000 and you want to invest
$40,000, your total amount 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 board members, officers or employees of the Fund
or AEFC or its subsidiaries and deceased advisors.
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 $30,000 in another IDS 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.
<PAGE>
Class A - Letter of Intent (LOI)
If you intend to invest $1 million over a period of 13 months, you can reduce
the sales charges in Class A by filing a LOI. The agreement can start at any
time and will remain in effect for 13 months. Your investment will be charged
normal sales charges until you have invested $1 million. At that time, your
account will be credited with the sales charges previously paid. Class A
investments made prior to signing a LOI may be used to reach the $1 million
total, excluding Cash Management Fund and Tax-Free Money Fund. However, we will
not adjust for sales charges on investments made prior to the signing of the
LOI. If you do not invest $1 million by the end of 13 months, there is no
penalty, you'll just miss out on the sales charge adjustment. A LOI is not an
option (absolute right) to buy shares.
Here's an example. You file a LOI to invest $1 million and make an investment of
$100,000 at that time. You pay the normal 5% sales charge on the first $50,000
and 4.5% sales charge on the next $50,000 of this investment. Let's say you make
a second investment of $900,000 (bringing the total up to $1 million) one month
before the 13-month period is up. On the date that you bring your total to $1
million, AEFC makes an adjustment to your account. The adjustment is made by
crediting your account with additional shares, in an amount equivalent to the
sales charge previously paid.
Systematic Investment Programs
After you make your initial investment of $100 or more, you must make additional
payments of $100 or more on at least a monthly basis until your balance reaches
$2,000. These minimums do not apply to all systematic investment programs. You
decide how often to make payments - monthly, quarterly, or semiannually. You are
not obligated to make any payments. You can omit payments or discontinue the
investment program altogether. The Fund also can change the program or end it at
any time. 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? 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>
Automatic Directed Dividends
Dividends, including capital gain distributions, paid by another fund in the IDS
MUTUAL FUND GROUP subject to a sales charge, may be used to automatically
purchase shares in the same class of this Fund without paying a sales charge.
Dividends may be directed to existing accounts only. Dividends declared by a
fund are exchanged to this Fund the following day. Dividends can be exchanged
into the same class of another fund in the IDS MUTUAL FUND GROUP but cannot be
split to make purchases in two or more funds. Automatic directed dividends are
available between accounts of any ownership except:
Between a non-custodial account and an IRA, or 401(k) plan account or other
qualified retirement account of which American Express Trust Company acts as
custodian;
Between two American Express Trust Company custodial accounts with different
owners (for example, you may not exchange dividends from your IRA to the IRA of
your spouse);
Between different kinds of custodial accounts with the same ownership (for
example, you may not exchange dividends from your IRA to your 401(k) plan
account, although you may exchange dividends from one IRA to another IRA).
Dividends may be directed from accounts established under the Uniform Gifts to
Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) only into other UGMA
or UTMA accounts with identical ownership.
The Fund's investment goal is described in its prospectus along with other
information, including fees and expense ratios. Before exchanging dividends into
another fund, you should read that fund's prospectus. You will receive a
confirmation that the automatic directed dividend service has been set up for
your account.
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 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 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
`The SEC, under the provisions of the Investment Company Act of 1940, as amended
(the 1940 Act), declares a period of emergency to exist.
<PAGE>
Should the Fund stop selling shares, the board may make a deduction from the
value of the assets held by the Fund to cover the cost of future liquidations of
the assets so as to distribute fairly these costs among all shareholders.
The Fund has elected to be governed by Rule 18f-1 under the 1940 Act, which
obligates the Fund to redeem shares in cash, with respect to any one shareholder
during any 90-day period, up to the lesser of $250,000 or 1% of the net assets
of the Fund at the beginning of the period. Although redemptions in excess of
this limitation would normally be paid in cash, the Fund reserves the right to
make these payments in whole or in part in securities or other assets in case of
an emergency, or if the payment of a redemption in cash would be detrimental to
the existing shareholders of the Fund as determined by the board. In these
circumstances, the securities distributed would be valued as set forth in the
prospectus. Should the Fund distribute securities, a shareholder may incur
brokerage fees or other transaction costs in converting the securities to cash.
PAY-OUT PLANS
You can use any of several pay-out plans to redeem your investment in regular
installments. If you redeem Class B shares you may be subject to a contingent
deferred sales charge as discussed in the prospectus. While the plans differ on
how the pay-out is figured, they all are based on the redemption of your
investment. Net investment income dividends and any capital gain distributions
will automatically be reinvested, unless you elect to receive them in cash. If
you are redeeming a tax-qualified plan account for which American Express Trust
Company acts as custodian, you can elect to receive your dividends and other
distributions in cash when permitted by law. If you redeem an IRA or a qualified
retirement account, certain restrictions, federal tax penalties and special
federal income tax reporting requirements may apply. You should consult your tax
advisor about this complex area of the tax law.
Applications for a systematic investment in a class of the Fund subject to a
sales charge normally will not be accepted while a pay-out plan for any of those
funds is in effect. Occasional investments, however, may be accepted.
To start any of these plans, please write American Express Shareholder Service,
P.O. Box 534, Minneapolis, MN 55440-0534, or call American Express Financial
Advisors Telephone Transaction Service at 800-437-3133 (National/Minnesota) or
612-671-3800 (Mpls./St. Paul). Your authorization must be received in the
Minneapolis headquarters at least five days before the date you want your
payments to begin. The initial payment must be at least $50. Payments will be
made on a monthly, bimonthly, quarterly, semiannual or annual basis. Your choice
is effective until you change or cancel it.
The following pay-out plans are designed to take care of the needs of most
shareholders in a way AEFC can handle efficiently and at a reasonable cost. If
you need a more irregular schedule of payments, it may be necessary for you to
make a series of individual redemptions, in which case you'll have to send in a
separate redemption request for each pay-out. The Fund reserves the right to
change or stop any pay-out plan and to stop making such plans available.
Plan #1: Pay-out for a fixed period of time
If you choose this plan, a varying number of shares will be redeemed at regular
intervals during the time period you choose. This plan is designed to end in
complete redemption of all shares in your account by the end of the fixed
period.
<PAGE>
Plan #2: Redemption of a fixed number of shares
If you choose this plan, a fixed number of shares will be redeemed for each
payment and that amount will be sent to you. The length of time these payments
continue is based on the number of shares in your account.
Plan #3: Redemption of a fixed dollar amount
If you decide on a fixed dollar amount, whatever number of shares is necessary
to make the payment will be redeemed in regular installments until the account
is closed.
Plan #4: Redemption of a percentage of net asset value
Payments are made based on a fixed percentage of the net asset value of the
shares in the account computed on the day of each payment. Percentages range
from 0.25% to 0.75%. For example, if you are on this plan and arrange to take
0.5% each month, you will get $50 if the value of your account is $10,000 on the
payment date.
TAXES
If you buy shares in the Fund and then exchange into another fund, it is
considered a redemption and subsequent purchase of shares. Under the tax laws,
if this exchange is done within 91 days, any sales charge waived on Class A
shares on a subsequent purchase of shares applies to the new shares acquired in
the exchange. Therefore, you cannot create a tax loss or reduce a tax gain
attributable to the sales charge when exchanging shares within 91 days.
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 the Fund, you
can do so without paying a sales charge. However, this type of exchange is
considered a redemption of shares and may result in a gain or loss for tax
purposes. In addition, this type of exchange may result in an excess
contribution under IRA or qualified plan regulations if the amount exchanged
plus the amount of the initial sales charge applied to the amount exchanged
exceeds annual contribution limitations. For example: If you were to exchange
$2,000 in Class A shares from a nonqualified account to an IRA without
considering the 5% ($100) initial sales charge applicable to that $2,000, you
may be deemed to have exceeded current IRA annual contribution limitations. You
should consult your tax advisor for further details about this complex subject.
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 dividends the Fund received from domestic (U.S.) securities. For
the fiscal year ended Aug. 31, 1998, 0.96% of the Fund's net investment income
dividends qualified for the corporate deduction.
<PAGE>
Capital gain distributions, if any, received by corporate shareholders should be
treated as long-term capital gains regardless of how long they owned their
shares. Capital gain distributions, if any, received by individuals should be
treated as long-term if held for more than one year; however, recent tax laws
have divided long-term capital gains into two holding periods: (1) shares held
more than one year but not more than 18 months and (2) shares held more than 18
months. Short-term capital gains earned by the Fund are paid to shareholders as
part of their ordinary income dividend and are taxable.
Under federal tax law, by the end of a calendar year the Fund must declare and
pay dividends representing 98% of ordinary income for that calendar year and 98%
of net capital gains (both long-term and short-term) for the 12-month period
ending Oct. 31 of that calendar year. The Fund is subject to an excise tax equal
to 4% of the excess, if any, of the amount required to be distributed over the
amount actually distributed. The Fund intends to comply with federal tax law and
avoid any excise tax.
This is a brief summary that relates to federal income taxation only.
Shareholders should consult their tax advisor as to the application of federal,
state and local income tax laws to Fund distributions.
AGREEMENTS
Investment Management Services Agreement
The Fund has an Investment Management Services Agreement with AEFC. For its
services, AEFC is paid a fee based on the following schedule. Each class of the
Fund pays its proportionate share of the fee.
Assets Annual rate at
(billions) each asset level
- --------- ----------------
First $1.0 0.520%
Next 1.0 0.495
Next 1.0 0.470
Next 3.0 0.420
Over 9.0 0.395
On Aug. 31, 1998, the daily rate applied to the Fund's net assets was equal to
0.476% on an annual basis. The fee is calculated for each calendar day on the
basis of net assets as of the close of business two business days prior to the
day for which the calculation is made.
The management fee is paid monthly. Under the agreement, the total amount paid
was $18,753,472 for the fiscal year ended Aug. 31, 1998, $17,488,348 for fiscal
year 1997, and $16,984,406 for fiscal year 1996.
Under the agreement, the Fund also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees; audit and certain legal
fees; fidelity bond premiums; registration fees for shares; office expenses;
consultants' fees; compensation of board members, officers and employees;
corporate filing fees; organizational expenses; expenses incurred in connection
with lending securities of the Fund; and expenses properly payable by the Fund,
approved by the board. Under the agreement, the Fund paid nonadvisory expenses,
net of earnings credits, of $502,973 for the fiscal year ended Aug. 31, 1998,
$901,226 for fiscal year 1997, and $1,317,590 for fiscal year 1996.
<PAGE>
Administrative Services Agreement
The Fund has an Administrative Services Agreement with AEFC. Under this
agreement, the Fund pays AEFC for providing administration and accounting
services. The fee is calculated as follows:
Assets Annual rate
(billions) each asset level
- --------- ----------------
First $1.0 0.050%
Next 1.0 0.045
Next 1.0 0.040
Next 3.0 0.035
Next 3.0 0.030
Over 9.0 0.025
On Aug. 31, 1998, the daily rate applied to the Fund's net assets was equal to
0.043% on an annual basis. The fee is calculated for each calendar day on the
basis of net assets as of the close of business two business days prior to the
day for which the calculation is made. Under the agreement, the Fund paid fees
of $1,712,608 for the fiscal year ended Aug. 31, 1998.
Transfer Agency Agreement
The Fund has a Transfer Agency Agreement with American Express Client Service
Corporation (AECSC). This agreement governs AECSC's responsibility for
administering and/or performing transfer agent functions, for acting as service
agent in connection with dividend and distribution functions and for performing
shareholder account administration agent functions in connection with the
issuance, exchange and redemption or repurchase of the Fund's shares. Under the
agreement, AECSC will earn a fee from the Fund determined by multiplying the
number of shareholder accounts at the end of the day by a rate determined for
each class per year and dividing by the number of days in the year. The rate for
Class A and Class Y is $15.50 per year and for Class B is $16.50 per year. The
fees paid to AECSC may be changed from time to time upon agreement of the
parties without shareholder approval. Under the agreement, the Fund paid fees of
$3,948,575 for the fiscal year ended Aug. 31, 1998.
Distribution Agreement
Under a Distribution Agreement, sales charges deducted for distributing Fund
shares are paid to AEFA daily. These charges amounted to $10,637,483 for the
fiscal year ended Aug. 31, 1998. After paying commissions to personal financial
advisors, and other expenses, the amount retained was $(1,749,883). The amounts
were $8,298,848 and $(937,881) for fiscal year 1997, and $12,491,616 and
$(2,546,886) for fiscal year 1996.
Shareholder Service Agreement
The Fund pays a fee for service provided to shareholders by financial advisors
and other servicing agents. The fee is calculated at a rate of 0.175% of average
daily net assets for Class A and Class B and 0.10% for Class Y.
<PAGE>
Plan and Agreement of Distribution
For Class B shares, to help AEFA defray the cost of distribution and servicing,
not covered by the sales charges received under the Distribution Agreement, the
Fund and AEFA entered into a Plan and Agreement of Distribution (Plan). These
costs cover almost all aspects of distributing the Fund's shares 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, AEFA is paid a fee at an annual rate of 0.75% of the Fund's average daily
net assets attributable to Class B shares.
The Plan must be approved annually by the board, including a majority of the
disinterested board members, if it is to continue for more than a year. At least
quarterly, the board must review written reports concerning the amounts expended
under the Plan and the purposes for which such expenditures were made. The Plan
and any agreement related to it may be terminated at any time by vote of a
majority of board members who are not interested persons of the Fund and have no
direct or indirect financial interest in the operation of the Plan or in any
agreement related to the Plan, or by vote of a majority of the outstanding
voting securities of the Fund's Class B shares or by AEFA. The Plan (or any
agreement related to it) will terminate in the event of its assignment, as that
term is defined in the 1940 Act. The Plan may not be amended to increase the
amount to be spent for distribution without shareholder approval, and all
material amendments to the Plan must be approved by a majority of the board
members, including a majority of the board members who are not interested
persons of the Fund and who do not have a financial interest in the operation of
the Plan or any agreement related to it. The selection and nomination of
disinterested board members is the responsibility of the other disinterested
board members. No board member who is not an interested person, has any direct
or indirect financial interest in the operation of the Plan or any related
agreement. For the fiscal year ended Aug. 31, 1998, under the agreement, the
Fund paid fees of $7,541,095.
Custodian Agreement
The Fund's securities and cash are held by U.S. Bank National Association, 180
E. Fifth St., St. Paul, MN 55101-1631, through a custodian agreement. The
custodian is permitted to deposit some or all of its securities in central
depository systems as allowed by federal law. For its services, the Fund pays
the custodian a maintenance charge and a charge per transaction in addition to
reimbursing the custodian's out-of-pocket expenses.
Total fees and expenses
The Fund paid total fees and nonadvisory expenses, net of earnings credits, of
$39,039,761 for the fiscal year ended Aug. 31, 1998.
ORGANIZATIONAL INFORMATION
The Fund is a diversified, open-end management investment company, as defined in
the 1940 Act. Originally incorporated on June 27, 1974 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.
<PAGE>
BOARD MEMBERS AND OFFICERS
The following is a list of the Fund's board members. They serve 15 Master Trust
portfolios and 47 IDS and IDS Life funds (except for William H. Dudley, who does
not serve on the nine IDS Life fund boards). All shares have cumulative voting
rights with respect to the election of board members.
H. Brewster Atwater, Jr.
Born in 1931
4900 IDS Tower
Minneapolis, MN
Retired chairman and chief executive officer, General Mills, Inc. Director,
Merck & Co., Inc. and Darden Restaurants, Inc.
Lynne V. Cheney'
Born in 1941
American Enterprise Institute
for Public Policy Research (AEI)
1150 17th St., N.W. Washington, D.C.
Distinguished Fellow AEI. Former Chair of National Endowment of the Humanities.
Director, The Reader's Digest Association Inc., Lockheed-Martin and Union
Pacific Resources.
William H. Dudley**
Born in 1932
2900 IDS Tower
Minneapolis, MN
Senior advisor to the chief executive officer of AEFC.
David R. Hubers+**
Born in 1943
2900 IDS Tower
Minneapolis, MN
President, chief executive officer and director of AEFC.
Heinz F. Hutter+'
Born in 1929
P.O. Box 2187
Minneapolis, MN
Retired president and chief operating officer, Cargill, Incorporated (commodity
merchants and processors).
<PAGE>
Anne P. Jones
Born in 1935
5716 Bent Branch Rd.
Bethesda, MD
Attorney and telecommunications consultant. Former partner, law firm of
Sutherland, Asbill & Brennan. Director, Motorola, Inc. (electronics), C-Cor
Electronics, Inc., and Amnex, Inc. (communications).
William R. Pearce+*
Born in 1927
901 S. Marquette Ave.
Minneapolis, MN
Chairman of the board, Board Services Corporation (provides administrative
services to boards). Director, trustee and officer of registered investment
companies whose boards are served by the company. Retired vice chairman of the
board, Cargill, Incorporated (commodity merchants and processors).
Alan K. Simpson'
Born in 1931
1201 Sunshine Ave.
Cody, WY
Former three-term United States Senator for Wyoming. Former Assistant Republican
Leader, U.S. Senate. Director, PacifiCorp (electric power) and Biogen
(pharmaceuticals).
Edson W. Spencer+
Born in 1926
4900 IDS Center
80 S. 8th St.
Minneapolis, MN
President, Spencer Associates Inc. (consulting). Retired chairman of the board
and chief executive officer, Honeywell Inc. Director, Boise Cascade Corporation
(forest products). Member of International Advisory Council of NEC (Japan).
John R. Thomas**
Born in 1937
2900 IDS Tower
Minneapolis, MN
Senior vice president of AEFC.
<PAGE>
Wheelock Whitney+
Born in 1926
1900 Foshay Tower
821 Marquette Ave.
Minneapolis, MN
Chairman, Whitney Management Company (manages family assets).
C. Angus Wurtele'
Born in 1934
Valspar Corporation
Suite 1700
Foshay Tower
Minneapolis, MN
Chairman of the board and retired chief executive officer, The Valspar
Corporation (paints). Director, Bemis Corporation (packaging), Donaldson Company
(air cleaners & mufflers) and General Mills, Inc. (consumer foods).
+ Member of executive committee.
` Member of joint audit committee.
* Interested person by reason of being an officer and employee of the Fund.
**Interested person by reason of being an officer, board member, employee and/or
shareholder of AEFC or American Express.
The board also has appointed officers who are responsible for day-to-day
business decisions based on policies it has established.
In addition to Mr. Pearce, who is chairman of the board and Mr. Thomas, who is
president, the Fund's other officers are:
Leslie L. Ogg
Born in 1938
901 S. Marquette Ave.
Minneapolis, MN
President of Board Services Corporation. Vice president, general counsel and
secretary for the Fund.
Officers who also are officers and/or employees of AEFC
Peter J. Anderson
Born in 1942
IDS Tower 10
Minneapolis, MN
Director and senior vice president-investments of AEFC. Vice
president-investments for the Fund.
<PAGE>
Frederick C. Quirsfeld
Born in 1947
IDS Tower 10
Minneapolis, MN
Vice president - taxable mutual fund investments of AEFC. Vice president - fixed
income investments for the Fund.
Matthew N. Karstetter
Born in 1961
IDS Tower 10
Minneapolis, MN
Vice president of Investment Accounting for AEFC since 1996. Prior to joining
AEFC, he served as vice president of State Street Bank's mutual fund service
operation from 1991 to 1996. Treasurer for the Fund.
COMPENSATION FOR FUND BOARD MEMBERS
Members of the Fund board who are not officers of the Fund or of AEFC receive an
annual fee of $2,200 and the chair of the Contracts Committee receives an
additional fee of $83. Board members receive a $50 per day attendance fee for
board meetings. The attendance fee for meetings of the Contracts and Investment
Review Committees is $50; for meetings of the Audit Committee and Personnel
Committee $25 and for traveling from out-of-state $22. Expenses for attending
meetings are reimbursed.
During the fiscal year ended Aug. 31, 1998, the independent members of the
board, for attending up to 26 meetings, received the following compensation:
<TABLE>
<CAPTION>
Compensation Table
Total cash
ompensation from
the IDS MUTUAL
Aggregate Aggregate Pension or Retirement benefits Estimated annual FUND GROUP and
compensation compensation accrued as benefit upon Preferred Master
Board member from the Fund from the Fund or Portfolio expenses retirement Trust Group
Portfolio
<S> <C> <C> <C> <C> <C>
H. Brewster Atwater, $3,133 $0 $0 $0 $98,400
Jr.
Lynne V. Cheney 3,123 0 0 0 92,400
Robert F. Froehlke 925 0 0 0 29,100
Heinz F. Hutter 3,183 0 0 0 101,400
Anne P. Jones 3,194 0 0 0 96,900
Melvin R. Laird 584 0 0 0 16,400
Alan K. Simpson 2,972 0 0 0 84,400
Edson W. Spencer 3,375 0 0 0 112,900
Wheelock Whitney 3,233 0 0 0 104,400
C. Angus Wurtele 3,283 0 0 0 107,400
</TABLE>
On Aug. 31, 1998, the Fund's board members and officers as a group owned less
than 1% of the outstanding shares of any class.
<PAGE>
INDEPENDENT AUDITORS
The financial statements contained in the Annual Report to shareholders for the
fiscal year ended Aug. 31, 1998 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 Annual Report to shareholders for the fiscal year ended Aug.
31, 1998 pursuant to Section 30(d) of the 1940 Act, are hereby incorporated in
this SAI by reference. No other portion of the Annual Report, however, is
incorporated by reference.
PROSPECTUS
The prospectus for IDS Bond Fund, dated Oct. 30, 1998, is hereby incorporated in
this SAI by reference.
<PAGE>
APPENDIX A
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 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
securities or other assets denominated in that currency.
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.
<PAGE>
At maturity of a forward contract, the Fund may either sell the 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 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 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 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.
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 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 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.
<PAGE>
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 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.
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 Options Clearing Corporation (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
<PAGE>
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 options and write
covered call options on currency futures. 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 Commodity Futures Trading Commission (CFTC) limitations.
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 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>
APPENDIX B
Investing in Foreign Securities
Investors should recognize that investing in foreign securities involves certain
special considerations, including those set forth below and those described in
the prospectus, which are not typically associated with investing in United
States securities. Foreign companies are not generally subject to uniform
accounting and auditing and financial reporting standards comparable to those
applicable to domestic companies. Additionally, many foreign stock markets,
while growing in volume of trading activity, have substantially less volume than
the New York Stock Exchange, and securities of some foreign companies are less
liquid and more volatile than securities of domestic companies. Similarly,
volume and liquidity in most foreign bond markets are less than the volume and
liquidity in the United States and at times, volatility of price can be greater
than in the United States. Further, foreign markets have different clearance,
settlement, registration and communication procedures and in certain markets
there have been times when settlements have been unable to keep pace with the
volume of securities transactions making it difficult to conduct such
transactions. Delays in such procedures could result in temporary periods when
assets of the Fund are uninvested and no return is earned thereon. The inability
of the Fund is to make intended security purchases due to such problems could
cause the Fund to miss attractive investment opportunities. Payment for
securities without delivery may be required in certain foreign markets and, when
participating in new issues, some foreign countries require payment to be made
in advance of issuance (at the time of issuance, the market value of the
security may be more or less than the purchase price). Some foreign markets also
have compulsory depositories (i.e., the Fund does not have a choice as to where
the securities are held). Fixed commissions on some foreign stock exchanges are
generally higher than negotiated commissions on U.S. exchanges, although the
Fund will endeavor to achieve the most favorable net results on its portfolio
transactions. Further, the Fund may encounter difficulties or be unable to
pursue legal remedies and obtain judgments in foreign courts. There is generally
less government supervision and regulation of business and industry practices,
stock exchanges, brokers and listed companies than in the United States. It may
be more difficult for the Funds' agents to keep currently informed about
corporate actions such as stock dividends or other matters which may affect the
prices of portfolio securities. Communications between the United States and
foreign countries may be less reliable than within the United States, thus
increasing the risk of delays or loss of certificates for portfolio securities.
In addition, with respect to certain foreign countries, there is the possibility
of nationalization, expropriation, the imposition of withholding or confiscatory
taxes, political, social, or economic instability, diplomatic developments which
could affect United States investments in those countries, or other unforeseen
actions by regulatory bodies (such as changes to settlement or custody
procedures). Investments in foreign securities may also entail certain risks,
such as possible currency blockages or transfer restrictions, and the difficulty
of enforcing rights in other countries.
<PAGE>
APPENDIX C
OPTIONS AND INTEREST RATE 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 interest rate futures
contracts traded on any U.S. or foreign exchange. The Fund also may buy or write
put and call options on these futures. 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.
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 (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
a 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.
Options can be used to produce incremental earnings, protect gains and
facilitate buying and selling securities for investment purposes. The use of
options and futures contracts 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. Options are
used as a trading technique to take advantage of any disparity 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.
<PAGE>
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 subsequent 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.
Net premiums on call options closed or premiums on expired call options are
treated as short-term capital gains.
If a covered call option is exercised, the security is sold by the Fund. The
Fund will recognize a capital gain or loss based upon the difference between the
proceeds and the security's basis.
Options on many securities are listed on options exchanges. If the Fund writes
listed options, it will follow the rules of the options exchange. Options are
valued at the close of the New York Stock Exchange. An option listed on a
national exchange, Chicago Board Options 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.
FUTURES CONTRACTS. A futures contract is an agreement between two parties to buy
and sell a security for a set price on a future date. They have been established
by boards of trade which have been designated contracts markets by the Commodity
Futures Trading Commission (CFTC). Futures contracts trade on these markets in a
manner similar to the way a stock trades on a stock exchange, and the boards of
trade, through their clearing corporations, guarantee performance of the
contracts. Currently, there are futures contracts based on such debt securities
as long-term U.S. Treasury bonds, Treasury notes, GNMA modified pass-through
mortgage-backed securities, three-month U.S. Treasury bills and bank
certificates of deposit. While futures contracts based on debt securities do
provide for the delivery and acceptance of securities, such deliveries and
acceptances are very seldom made. Generally, the futures contract is terminated
by entering into an offsetting transaction. An offsetting transaction for a
futures contract sale is effected by the Fund entering into a futures contract
purchase for the same aggregate amount of the specific type of financial
instrument and same delivery date. If the price in the sale exceeds the price in
the offsetting purchase, the Fund immediately is paid the difference and
realizes a gain. If the offsetting purchase price exceeds the sale price, the
Fund pays the difference and realizes a loss. Similarly, closing out a futures
contract purchase is effected by the Fund entering into a futures
<PAGE>
contract sale. If the offsetting sale price exceeds the purchase price, the Fund
realizes a gain, and if the offsetting sale price is less than the purchase
price, the Fund realizes a loss. At the time a futures contract is made, a
good-faith deposit called initial margin is set up within a segregated account
at the Fund's custodian bank. The initial margin deposit is approximately 1.5%
of a contract's face value. Daily thereafter, the futures contract is valued and
the payment of variation margin is required so that each day the Fund would pay
out cash in an amount equal to any decline in the contract's value or receive
cash equal to any increase. At the time a futures contract is closed out, a
nominal commission is paid, which is generally lower than the commission on a
comparable transaction in the cash markets.
The purpose of a futures contract, in the case of a portfolio holding long-term
debt securities, is to gain the benefit of changes in interest rates without
actually buying or selling long-term debt securities. For example, if the Fund
owned long-term bonds and interest rates were expected to increase, it might
enter into futures contracts to sell securities which would have much the same
effect as selling some of the long-term bonds it owned.
Futures contracts are based on types of debt securities referred to above, which
have historically reacted to an increase or decline in interest rates in a
fashion similar to the debt securities the Fund owns. If interest rates did
increase, the value of the debt securities in the portfolio would decline, but
the value of the Fund's futures contracts would increase at approximately the
same rate, thereby keeping the net asset value of the Fund from declining as
much as it otherwise would have. If, on the other hand, the Fund held cash
reserves and interest rates were expected to decline, the Fund might enter into
interest rate futures contracts for the purchase of securities. If short-term
rates were higher than long-term rates, the ability to continue holding these
cash reserves would have a very beneficial impact on the Fund's earnings. Even
if short-term rates were not higher, the Fund would still benefit from the
income earned by holding these short-term investments. At the same time, by
entering into futures contracts for the purchase of securities, the Fund could
take advantage of the anticipated rise in the value of long-term bonds without
actually buying them until the market had stabilized. At that time, the futures
contracts could be liquidated and the Fund's cash reserves could then be used to
buy long-term bonds on the cash market. The Fund could accomplish similar
results by selling bonds with long maturities and investing in bonds with short
maturities when interest rates are expected to increase or by buying bonds with
long maturities and selling bonds with short maturities when interest rates are
expected to decline. But by using futures contracts as an investment tool, given
the greater liquidity in the futures market than in the cash market, it might be
possible to accomplish the same result more easily and more quickly. Successful
use of futures contracts depends on the investment manager's ability to predict
the future direction of interest rates. If the investment manager's prediction
is incorrect, the Fund would have been better off had it not entered into
futures contracts.
OPTIONS ON FUTURES CONTRACTS. Options on futures contracts give the holder a
right to buy or sell futures contracts in the future. Unlike a futures contract,
which requires the parties to the contract to buy and sell a security on a set
date, an option on a futures contract merely entitles its holder to decide on or
before a future date (within nine months of the date of issue) whether to enter
into such a contract. If the holder decides not to enter into the contract, all
that is lost is the amount (premium) paid for the option. Furthermore, because
the value of the option is fixed at the point of sale, there are no daily
payments of cash to reflect the change in the value of the underlying contract.
However, since an option gives the buyer the right to enter into a contract at a
set price for a fixed period of time, its value does change daily and that
change is reflected in the net asset value of the Fund.
<PAGE>
RISKS. There are risks in engaging in each of the management tools described
above. The risk the Fund assumes when it buys an option is the loss of the
premium paid for the option. Purchasing options also limits the use of monies
that might otherwise be available for long-term investments.
The risk involved in writing options on futures contracts the Fund owns, or on
securities held in its portfolio, is that there could be an increase in the
market value of such contracts or securities.
If that occurred, the option would be exercised and the asset sold at a lower
price than the cash market price. To some extent, the risk of not realizing a
gain could be reduced by entering into a closing transaction. The Fund could
enter into a closing transaction by purchasing an option with the same terms as
the one it had previously sold. The cost to close the option and terminate the
Fund's obligation, however, might be more or less than the premium received when
it originally wrote the option. Furthermore, the Fund might not be able to close
the option because of insufficient activity in the options market.
A risk in employing futures contracts to protect against the price volatility of
portfolio securities is that the prices of securities subject to futures
contracts may not correlate perfectly with the behavior of the cash prices of
the Fund's securities. The correlation may be distorted because the futures
market is dominated by short-term traders seeking to profit from the difference
between a contract or security price and their cost of borrowed funds. Such
distortions are generally minor and would diminish as the contract approached
maturity.
Another risk is that the Fund's investment manager could be incorrect in
anticipating as to the direction or extent of various interest rate movements or
the time span within which the movements take place. For example, if the Fund
sold futures contracts for the sale of securities in anticipation of an increase
in interest rates, and interest rates declined instead, the Fund would lose
money on the sale.
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 indexes will depend on whether such option is a section
1256 contract . If the option is a non-equity option, the Fund will either make
a 1256(d) election and treat the option as a mixed straddle or mark to market
the option at fiscal year end and treat the gain/loss as 40% short-term and 60%
long-term. Certain provisions of the Internal Revenue Code 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.
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.
<PAGE>
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>
APPENDIX D
MORTGAGE-BACKED SECURITIES
A mortgage pass-through certificate is one that represents an interest in a
pool, or group, of mortgage loans assembled by the Government National Mortgage
Association (GNMA), Federal Home Loan Mortgage Corporation (FHLMC), Federal
National Mortgage Association (FNMA) or non-governmental entities. In
pass-through certificates, both principal and interest payments, including
prepayments, are passed through to the holder of the certificate. Prepayments on
underlying mortgages result in a loss of anticipated interest, and the actual
yield (or total return) to the Fund, which is influenced by both stated interest
rates and market conditions, may be different than the quoted yield on
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.
Stripped Mortgage-Backed Securities. 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 affect the yield to maturity of POs. On
an IO, 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.
Mortgage-Backed Security Spread Options. 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 underperform
like-duration Treasury securities.
<PAGE>
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 technique 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 on a regular basis through changing market conditions,
including times when the price of their shares falls or the market declines, 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>
Independent auditors' report
The board and shareholders IDS Bond Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments in securities, of IDS Bond Fund,
Inc. as of August 31, 1998, and the related statement of operations for
the year then ended and the statements of changes in net assets for each
of the years in the two-year period then ended, and the financial
highlights for each of the years in the ten-year period ended August 31,
1998. These financial statements and the financial highlights are the
responsibility of fund management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and the
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Investment securities held in
custody are confirmed to us by the custodian. As to securities purchased
but not received, 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 Bond Fund, Inc. at
August 31, 1998, and the results of its operations, changes in its net
assets and the financial highlights for the periods stated in the first
paragraph above, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
October 2, 1998
(This annual report is not part of the prospectus.)
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statement of assets and liabilities
IDS Bond Fund, Inc.
Aug. 31, 1998
Assets
Investments in securities, at value (Note 1)
<S> <C>
(identified cost $3,925,211,911) $3,972,914,680
Dividends and accrued interest receivable 58,563,790
Cash in bank on demand deposit 3,558,374
U.S. government securities held as collateral (Note 4) 25,966,658
----------
Total assets 4,061,003,502
-------------
Liabilities
Payable for investment securities purchased 35,035,618
Payable upon return of securities loaned (Note 4) 30,566,658
Dividends payable to shareholders 3,766,639
Accrued investment management services fee 158,822
Accrued distribution fee 65,291
Accrued service fee 56,151
Accrued transfer agency fee 34,459
Accrued administrative services fee 13,988
Other accrued expenses 272,990
-------
Total liabilities 69,970,616
----------
Net assets applicable to outstanding capital stock $3,991,032,886
==============
Represented by
Capital stock-- $.01 par value (Note 1) $ 7,814,812
Additional paid-in capital 3,897,622,817
Undistributed net investment income 3,887,058
Accumulated net realized gain (loss) 34,077,807
Unrealized appreciation (depreciation) on investments and on translation
of assets and liabilities in foreign currencies 47,630,392
----------
Total-- representing net assets applicable to outstanding capital stock $3,991,032,886
==============
Net assets applicable to outstanding shares: Class A $2,709,267,781
Class B $1,057,345,392
Class Y $ 224,419,713
Net asset value per share of outstanding capital stock: Class A shares 530,505,218 $ 5.11
Class B shares 207,039,035 $ 5.11
Class Y shares 43,936,960 $ 5.11
See accompanying notes to financial statements.
(This annual report is not part of the prospectus.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
IDS Bond Fund, Inc.
Year ended Aug. 31, 1998
Investment income
Income:
<S> <C>
Dividends $ 3,732,071
Interest 290,918,829
-----------
Total income 294,650,900
-----------
Expenses (Note 2):
Investment management services fee 18,753,472
Distribution fee -- Class B 7,541,095
Transfer agency fee 3,872,654
Incremental transfer agency fee-- Class B 75,921
Service fee
Class A 4,686,759
Class B 1,745,064
Class Y 149,215
Administrative services fees and expenses 1,712,608
Compensation of board members 27,006
Custodian fees 239,246
Postage 498,902
Registration fees 228,153
Reports to shareholders 46,078
Audit fees 40,000
Other 21,604
------
Total expenses 39,637,777
Earnings credits on cash balances (Note 2) (598,016)
--------
Total net expenses 39,039,761
----------
Investment income (loss) -- net 255,611,139
-----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 40,583,121
Foreign currency transactions (8,858)
Financial futures contracts (5,484,968)
----------
Net realized gain (loss) on investments 35,089,295
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (67,075,582)
-----------
Net gain (loss) on investments and foreign currencies (31,986,287)
-----------
Net increase (decrease) in net assets resulting from operations $223,624,852
============
See accompanying notes to financial statements.
(This annual report is not part of the prospectus.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statements of changes in net assets
IDS Bond Fund, Inc.
Year ended Aug. 31,
Operations and distributions
1998 1997
<S> <C> <C>
Investment income (loss)-- net $ 255,611,139 $ 240,172,449
Net realized gain (loss) on investments 35,089,295 64,347,497
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (67,075,582) 98,764,325
----------- ----------
Net increase (decrease) in net assets resulting from operations 223,624,852 403,284,271
----------- -----------
Distributions to shareholders from:
Net investment income
Class A (185,166,841) (177,119,796)
Class B (60,794,441) (53,865,341)
Class Y (10,267,513) (6,665,317)
Net realized gain
Class A (41,282,498) --
Class B (14,848,739) --
Class Y (1,901,326) --
---------- -----
Total distributions (314,261,358) (237,650,454)
------------ ------------
Capital share transactions (Note 5)
Proceeds from sales
Class A shares (Note 2) 464,140,220 365,266,875
Class B shares 350,432,516 255,566,189
Class Y shares 161,452,699 58,488,053
Reinvestment of distributions at net asset value
Class A shares 158,793,960 120,214,339
Class B shares 66,114,629 47,142,116
Class Y shares 11,994,698 6,665,317
Payments for redemptions
Class A shares (498,864,299) (523,078,485)
Class B shares (Note 2) (247,706,628) (278,467,674)
Class Y shares (59,320,071) (41,490,635)
----------- -----------
Increase (decrease) in net assets from capital share transactions 407,037,724 10,306,095
----------- ----------
Total increase (decrease) in net assets 316,401,218 175,939,912
Net assets at beginning of year 3,674,631,668 3,498,691,756
------------- -------------
Net assets at end of year $3,991,032,886 $3,674,631,668
============== ==============
Undistributed net investment income $ 3,887,058 $ 5,069,429
-------------- --------------
See accompanying notes to financial statements.
(This annual report is not part of the prospectus.)
</TABLE>
<PAGE>
Notes to financial statements
IDS Bond Fund, Inc.
1
Summary of
significant
accounting policies
The Fund is registered under the Investment Company Act of 1940 (as
amended) as a diversified, open-end management investment company. The
Fund invests primarily in corporate bonds and other debt securities. The
Fund offers Class A, Class B and Class Y shares. Class A shares are sold
with a front-end sales charge. Class B shares may be subject to a
contingent deferred sales charge and such shares automatically convert to
Class A shares during the ninth calendar year of ownership. Class Y shares
have no sales charge and are offered only to qualifying institutional
investors.
All classes of shares have identical voting, dividend, liquidation and
other rights, and the same terms and conditions, except that the level of
distribution fee, transfer agency fee and service fee (class specific
expenses) differs among classes. Income, expenses (other than class
specific expenses) and realized and unrealized gains or losses on
investments are allocated to each class of shares based upon its relative
net assets.
Significant accounting policies followed by the Fund are summarized below:
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of increase and decrease in
net assets from operations during the period. Actual results could differ
from those estimates.
Valuation of securities
All securities are valued at the close of each business day. Securities
traded on national securities exchanges or included in national market
systems are valued at the last quoted sales price. Debt securities are
generally traded in the over-the-counter market and are valued at a price
deemed best to reflect fair value as quoted by dealers who make markets in
these securities or by an independent pricing service. Securities for
which market quotations are not readily available are valued at fair value
according to methods selected in good faith by the board. Short-term
securities maturing in more than 60 days from the valuation date are
valued at the market price or approximate market value based on current
interest rates; those maturing in 60 days or less are valued at amortized
cost.
Option transactions
In order to produce incremental earnings, protect gains, and facilitate
buying and selling of securities for investment purposes, the Fund may buy
and 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
<PAGE>
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.
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 options on debt securities or futures are exercised, the
Fund will realize a gain or loss. When other options are exercised, the
proceeds on sales for a written call option, the purchase cost for a
written put option or the cost of a security for a purchased put or call
option is adjusted by the amount of premium received or paid.
Futures transactions
In order to gain exposure to or protect itself from changes in the market,
the Fund may buy and sell financial futures contracts traded on any U.S.
or foreign exchange. The Fund also may buy and write put and call options
on these futures contracts. Risks of entering into futures contracts and
related options include the possibility that there may be an illiquid
market and that a change in the value of the contract or option may not
correlate with changes in the value of the underlying securities.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin)
are made or received by the Fund each day. The variation margin payments
are equal to the daily changes in the contract value and are recorded as
unrealized gains and losses. The Fund recognizes a realized gain or loss
when the contract is closed or expires.
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 exchange 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, if any, 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.
<PAGE>
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.
Illiquid securities
At Aug. 31, 1998, investments in securities included issues that are
illiquid. The Fund currently limits investments in illiquid securities to
10% of net assets, at market value, at the time of purchase. The aggregate
value of such securities at Aug. 31, 1998 was $6,204,371 representing 0.2%
of net assets. Pursuant to guidelines adopted by the Fund's board, certain
unregistered securities are determined to be liquid and are not included
in the 10% limitation specified above.
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
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
decreased by $564,715 and accumulated net realized gain has been increased
by $564,715.
Dividends to shareholders
Dividends from net investment income, declared daily and payable monthly,
are reinvested in additional shares of the Fund at net asset value or
payable in cash. Capital gains, when available, are distributed along with
the last income dividend of the calendar year.
Other
Security transactions are accounted for on the date securities are
purchased or sold. Dividend income is recognized on the ex-dividend date
or upon receipt of ex-dividend notification in the case of certain foreign
securities. For U.S. dollar denominated bonds, interest income includes
level-yield amortization of premium and discount. For foreign bonds the
Fund amortizes premium and original issue discount daily and market
discount is recognized at the time of sale. Interest income, including
level-yield amortization of premium and discount, is accrued daily.
<PAGE>
2
Expenses and
sales charges
Effective March 20, 1995, the Fund entered into agreements with American
Express Financial Corporation (AEFC) for managing its portfolio and
providing administrative services. Under its Investment Management
Services Agreement, AEFC determines which securities will be purchased,
held or sold. The management fee is a percentage of the Fund's average
daily net assets in reducing percentages from 0.52% to 0.395% annually.
Under its Administrative Services Agreement, the Fund pays AEFC a fee for
administration and accounting services at a percentage of the Fund's
average daily net assets in reducing percentages from 0.05% to 0.025%
annually. Additional administrative service expenses paid by the Fund are
office expenses, consultants' fees and compensation of officers and
employees. Under this agreement, the Fund also pays taxes, audit and
certain legal fees, registration fees for shares, compensation of board
members, corporate filing fees, organizational expenses and any other
expenses properly payable by the Fund and approved by the board.
Under a separate Transfer Agency Agreement, American Express Client
Service Corporation (AECSC) maintains shareholder accounts and records.
The Fund pays AECSC an annual fee per shareholder account for this service
as follows:
oClass A $15.50
oClass B $16.50
oClass Y $15.50
Also effective March 20, 1995, the Fund entered into agreements with
American Express Financial Advisors Inc. for distribution and shareholder
servicing-related services. Under a Plan and Agreement of Distribution,
the Fund pays a distribution fee at an annual rate of 0.75% of the Fund's
average daily net assets attributable to Class B shares for
distribution-related services.
Under a Shareholder Service Agreement, the Fund pays a fee for service
provided to shareholders by financial advisors and other servicing agents.
The fee is calculated at a rate of 0.175% of the Fund's average daily net
assets attributable to Class A and Class B shares and 0.10% of the Fund's
average daily net assets attributable to Class Y shares.
Sales charges received by American Express Financial Advisors Inc. for
distributing Fund shares were $9,935,397 for Class A and $702,086 for
Class B for the year ended Aug. 31, 1998.
During the year ended Aug. 31, 1998, the Fund's custodian and transfer
agency fees were reduced by $598,016 as a result of earnings credits from
overnight cash balances.
<PAGE>
3
Securities
transactions
Cost of purchases and proceeds from sales of securities (other than
short-term obligations) aggregated $1,984,350,693 and $1,596,919,692,
respectively, for the year ended Aug. 31, 1998. Realized gains and losses
are determined on an identified cost basis.
4
Lending of
portfolio securities
At Aug. 31, 1998, securities valued at $30,193,145 were on loan to
brokers. For collateral, the Fund received $4,600,000 in cash and U.S.
government securities valued at $25,966,658. Income from securities
lending amounted to $141,242 for the year ended Aug. 31, 1998. 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.
5
Capital share
transactions
Transactions in shares of capital stock for the years indicated are as
follows:
Year ended Aug. 31, 1998
Class A Class B Class Y
Sold 88,430,002 66,777,710 30,799,950
Issued for reinvested 30,359,464 12,641,358 2,294,191
distributions
Redeemed (95,013,501) (47,187,636) (11,310,471)
----------- ----------- -----------
Net increase (decrease) 23,775,965 32,231,432 21,783,670
Year ended Aug. 31, 1997
Class A Class B Class Y
Sold 70,920,637 49,648,273 11,312,033
Issued for reinvested 23,385,736 9,173,422 1,302,408
distributions
Redeemed (101,710,017) (54,072,632) (8,062,196)
------------ ----------- ----------
Net increase (decrease) (7,403,644) 4,749,063 4,552,245
<PAGE>
6
Financial
highlights
"Financial highlights" showing per share data and selected financial
information is presented on pages 6 and 7 of the prospectus.
(This annual report is not part of the prospectus.)
<PAGE>
<TABLE>
<CAPTION>
Investments in securities
IDS Bond Fund, Inc. (Percentages represent
Aug. 31, 1998 value of investments
compared to net assets)
Bonds (92.0%)
Issuer Coupon Principal Value(a)
rate amount
Government obligations (8.7%)
Argentina Govt Natl
(U.S. Dollar)
<S> <C> <C> <C>
09-19-27 9.75% $7,000,000(c) $4,690,000
City of Moscow
(U.S. Dollar) Zero Coupon
12-31-98 21.80 3,691,890(c,f) 2,339,551
Govt of Algeria
(U.S. Dollar)
03-04-00 7.13 2,181,818(c) 1,810,909
09-04-06 7.13 3,272,727(c) 1,963,637
Govt of Russia
(Russian Ruble)
09-27-00 14.00 19,002,914(c) 216,183
12-15-20 6.63 28,000,000(c) 2,800,001
Zero Coupon
05-05-99 -- 16,822,000(b,c,f) 253,598
(U.S. Dollar)
06-24-28 12.75 5,500,000(c,e) 1,278,750
12-29-49 6.63 70,173(c) 9,298
Govt Trust Certs Israel
11-15-01 9.25 7,256,904 7,544,277
People's Republic of China
(U.S. Dollar)
07-03-01 7.38 3,500,000(c) 3,609,081
01-15-96 9.00 10,000,000(c) 9,888,199
Province of Mendoza
(U.S. Dollar)
09-04-07 10.00 4,000,000(c,e) 3,261,480
Republic of Argentina
(Argentine Peso)
07-10-02 8.75 5,000,000(c) 2,750,000
02-12-07 11.75 5,000,000(c) 2,937,500
Republic of Brazil
(U.S. Dollar)
04-15-14 8.00 5,801,050(c) 2,987,541
Republic of Korea
(U.S. Dollar)
04-15-08 8.88 17,300,000(c) 12,223,989
Republic of Panama
(U.S. Dollar)
02-13-02 7.88 3,000,000(c,e) 2,709,780
Resolution Funding Corp
Zero Coupon
04-15-99 8.68 11,500,000(f) 11,144,995
United Mexican States
(U.S. Dollar)
05-15-26 11.50 10,500,000(c,h) 8,806,875
U.S. Treasury
01-15-99 6.38 2,000,000 2,009,380
09-30-99 7.13 26,500,000 27,057,825
11-15-01 7.50 29,900,000(h) 32,056,986
08-15-02 6.38 17,300,000 18,124,345
05-15-04 7.25 36,450,000 40,358,534
11-15-04 7.88 12,000,000 13,757,520
11-15-16 7.50 8,100,000 10,000,989
08-15-17 8.88 42,750,000 59,917,972
11-15-21 8.00 5,150,000 6,842,084
TIPS
01-15-07 3.38 5,900,000(k) 5,876,270
Zero Coupon
02-15-20 5.83 50,000,000(f) 15,417,000
08-15-20 5.83 115,000,000(f) 34,500,000
Total 349,144,549
Mortgage-backed securities (15.7%)
Federal Home Loan Mtge Corp
07-01-07 6.50 403,206 405,851
11-01-10 6.00 11,117,082 11,137,982
03-01-13 5.50 11,506,655 11,288,028
04-01-17 8.00 573,675 596,083
08-01-24 8.00 9,329,036 9,683,166
12-01-27 6.00 10,657,402 10,518,767
Collateralized Mtge Obligation
03-15-22 7.00 10,000,000 10,424,000
04-15-22 8.50 17,000,000 18,369,520
07-15-22 7.00 12,000,000 12,843,000
Trust Series Z
04-25-24 8.25 12,198,741(d) 12,613,010
Federal Natl Mtge Assn
02-15-08 5.75 22,365,000 22,640,537
07-01-08 6.50 10,264,212 10,425,053
01-01-09 5.50 8,407,154 8,298,281
11-01-09 9.00 2,176 2,317
06-01-10 6.50 21,916,642 22,246,269
08-01-11 8.50 33,923,295 35,356,869
04-01-13 6.00 50,520,886 50,405,695
04-01-23 8.50 9,921,294 10,415,672
05-01-23 6.50 34,792,746 35,237,745
08-01-23 6.50 3,121,093 3,161,012
09-01-23 6.50 3,888,749 3,938,486
11-01-23 6.50 7,947,733 8,024,588
01-01-24 6.50 53,452,213 53,969,094
02-01-24 6.50 7,335,840 7,370,245
05-01-24 6.00 54,765,103 54,481,966
06-01-24 9.00 8,125,219 8,662,133
07-01-24 8.50 4,116,208 4,296,910
02-01-25 8.00 5,436,965 5,632,261
09-01-25 6.50 24,488,867 24,679,635
09-01-25 8.00 9,236,654 9,568,434
01-01-26 6.00 22,090,177 21,741,373
02-01-26 7.00 40,281,124 41,035,590
Collateralized Mtge Obligation
01-25-24 5.00 5,107,220 5,063,502
05-18-26 5.00 15,000,000 14,171,982
Trust Series Z
02-25-24 6.00 6,545,417(d) 6,106,744
Govt Natl Mtge Assn
12-01-08 7.00 30,497,369 31,297,925
02-15-24 8.00 3,080,125 3,203,052
02-15-25 9.00 1,682,887 1,795,792
06-15-26 8.00 5,496,760 5,702,394
08-15-26 8.00 9,983,211 10,356,683
Merrill Lynch Mtge Investors
06-15-21 8.15 4,625,619 4,509,256
Prudential Bache
Collateralized Mtge Obligation
04-01-19 7.97 6,365,935 6,644,671
Total 628,321,573
Aerospace & defense (2.5%)
Boeing
09-15-31 8.75 15,000,000 19,564,050
Compass Aerospace
Sr Sub Nts
04-15-05 10.13 7,980,000(e) 8,059,800
Goodrich (BF)
07-01-01 9.63 10,000,000 10,985,700
L-3 Communications
Sr Sub Nts
05-15-08 8.50 6,400,000 6,272,000
Sr Sub Nts Series B
05-01-07 10.38 9,260,000 9,885,050
McDonnell Douglas Finance
Medium-term Sr Nts
01-27-10 7.22 10,000,000 10,926,900
Newport News Shipbuilding
Sr Nts
12-01-06 8.63 7,500,000 7,771,875
Northrop-Grumman
03-01-06 7.00 8,000,000 8,291,840
United Defense Inds
Company Guaranty
11-15-07 8.75 6,000,000 5,947,500
United Techonologies
11-15-19 8.88 10,000,000 12,724,300
Total 100,429,015
Airlines (1.0%)
Atlantic Express
Company Guaranty
02-01-04 10.75 4,000,000 4,180,000
Aviation Sales
Company Guaranty
02-15-08 8.13 4,135,000 3,948,925
Continental Airlines
Series 1996A
04-15-15 6.94 14,416,446 15,302,481
Series 1996B
04-15-15 7.82 4,805,482 5,370,414
Delta Air Lines
05-15-10 10.13 10,000,000 12,802,400
Total 41,604,220
Automotive & related (0.9%)
Arvin Capital
Company Guaranty
02-01-27 9.50 10,000,000 11,558,400
Ford Motor Credit
06-15-07 7.20 5,500,000 5,976,135
Hayes Lemmerz Intl
Company Guaranty Series B
07-15-07 9.13 10,000,000 9,625,000
MSX Intl
Company Guaranty
01-15-08 11.38 7,700,000 7,469,000
Total 34,628,535
Banks and savings & loans (4.5%)
ABN-Amro Bank
(U.S. Dollar) Sub Nts Series B
05-15-23 7.75 9,000,000(c) 10,397,520
Alfa-Russia Finance
(U.S. Dollar) Medium-term Nts Bank Guaranty
07-28-00 10.38 10,000,000(c) 500,000
Banca Commercial Italian
(U.S. Dollar)
07-15-07 8.25 9,200,000(c) 10,538,232
Banco General
(U.S. Dollar)
08-01-02 7.70 7,500,000(c,e) 7,098,975
BankAmerica
Sub Nts Series B
12-31-26 7.70 10,000,000 (e) 10,137,500
Central Fidelity Capital
Company Guaranty Series A
04-15-27 6.75 16,500,000 16,388,955
Dao Heng Bank
(U.S. Dollar) Sub Nts
01-24-07 7.75 12,000,000(c,e) 7,346,520
Firstar Capital
Company Guaranty Series B
12-15-26 8.32 10,000,000 11,224,600
Fleet Financial Group
Sub Deb
01-15-28 6.88 14,600,000 14,644,238
Sub Nts
05-15-08 6.38 4,000,000 4,108,640
Greenpoint Capital
Company Guaranty
06-01-27 9.10 5,000,000 5,739,850
Mellon Capital
Company Guaranty Series A
12-01-26 7.72 3,850,000 4,003,808
Meridian Bancorp
Sub Deb
07-15-02 7.88 10,400,000 11,155,456
Morgan (JP)
Sr Sub Medium-term Nts Series A
02-15-12 4.00 13,000,000 (l) 12,017,980
Scotland Bank
(U.S. Dollar)
01-27-04 8.80 20,500,000(c,e) 23,304,400
Society
Sub Nts
06-15-02 8.13 3,000,000 3,237,720
Union Planters Capital
Company Guaranty
12-15-26 8.20 10,000,000 10,777,900
Wachovia
Sub Nts
08-04-08 6.25 10,000,000 10,006,700
Washington Mutual Capital
Company Guaranty
06-01-27 8.38 5,800,000(e) 6,263,594
Total 178,892,588
Building materials & construction (0.9%)
Nortek
Sr Nts
08-01-08 8.88 7,500,000(e) 7,050,000
Pulte
Sr Nts
12-15-03 7.00 7,700,000 7,955,486
Tyco Intl Group
(U.S. Dollar) Company Guaranty
06-15-28 7.00 20,000,000(c) 20,376,200
Total 35,381,686
Chemicals (0.9%)
Solutia
10-15-27 7.38 6,000,000 6,201,240
USA Waste Services
Sr Nts
10-01-07 7.13 15,000,000 15,929,850
Waste Management
Sr Nts
07-15-28 7.00 12,500,000 12,452,000
Total 34,583,090
Communications equipment & services (2.0%)
BellSouth Telecommunications
12-01-95 7.00 10,000,000 10,635,700
Celcaribe
(U.S. Dollar)
03-15-04 13.50 2,870,000(c) 5,180,350
(U.S. Dollar) Sr Nts
03-15-04 13.50 3,250,000(c,e) 3,331,250
Comcast Cellular Holdings
Sr Nts Series B
05-01-07 9.50 8,500,000 8,255,625
GTE California
09-01-09 6.70 10,000,000 10,442,900
Jordan Telecommunications Products
Sr Nts Series B
08-01-07 9.88 15,000,000 14,550,000
Level 3 Communications
Sr Nts
05-01-08 9.13 7,500,000 6,712,500
NTL
Zero Coupon Sr Nts
04-01-03 9.78 7,625,000(e,g) 4,317,656
PhoneTel Technologies
Sr Nts
12-15-06 12.00 5,500,000 5,513,750
TCI Telecommunications
Sr Nts
02-15-28 7.13 8,000,000 8,248,256
Tele Communictions Intl
Cv Sub Deb
02-15-06 4.50 4,000,000 3,815,000
Total 81,002,987
Computers & office equipment (0.8%)
Cooperative Computing
Sr Sub Nts
02-01-08 9.00 7,000,000(e) 6,230,000
Hewlett-Packard
Zero Coupon Cv Sub Nts
10-15-17 3.13 12,500,000(e,f) 6,531,250
Zero Coupon Sub Nts
10-14-17 3.13 7,500,000(f) 3,975,000
Ingram Micro
Zero Coupon Cv
06-09-18 5.38 9,300,000(e,f) 3,359,625
Learning
Cv Sr Nts
11-01-00 5.50 12,000,000 10,350,000
Read-Rite
Sub Nts
09-01-04 6.50 4,725,000 2,510,156
Total 32,956,031
Consumer finance -- personal loans (0.2%)
Yale University
04-15-96 7.38 6,000,000 6,743,400
Electronics (0.6%)
Hyundai Semiconductor
(U.S. Dollar) Sr Nts
05-15-07 8.63 10,000,000(c,e) 6,862,500
Reliance Electric
04-15-03 6.80 6,000,000 6,288,840
Thomas & Betts
01-15-06 6.50 9,200,000 9,376,640
Total 22,527,980
Energy (2.9%)
Canadian Forest Oil
(U.S. Dollar) Company Guaranty
09-15-07 8.75 5,500,000(c) 4,950,000
Enron Oil & Gas
11-15-06 6.70 5,000,000 5,230,100
Honam Oil Refinery
(U.S. Dollar)
10-15-05 7.13 9,000,000(c,e) 6,722,910
Ocean Energy
Sr Nts
07-01-05 7.63 10,000,000(e) 10,027,300
Oryx Energy
04-01-01 10.00 9,650,000 10,469,768
Parker & Parsley Petroleum
Sr Nts
08-15-07 8.25 9,500,000 10,318,900
PDV America
Sr Nts
08-01-03 7.88 15,000,000 11,873,700
Pennzoil
Cv
08-15-08 4.95 2,300,000 2,219,500
Petronas
(U.S. Dollar)
08-15-15 7.75 10,000,000(c) 5,925,100
Roil
(U.S. Dollar)
12-05-02 12.78 4,790,000(c,i) 1,437,000
Swift Energy
Cv Sub Nts
11-15-06 6.25 2,175,000 1,805,250
Tesoro Petroleum
Sr Sub Nts
07-01-08 9.00 7,150,000(e) 6,998,063
Texaco Capital
04-01-32 8.63 10,000,000 13,142,599
Gtd Deb
03-01-43 7.50 3,000,000 3,424,950
USX-Marathon Group
05-15-22 9.38 17,500,000 22,223,075
Total 116,768,215
Energy equipment & services (0.8%)
DI Inds
Sr Nts
07-01-07 8.88 6,750,000 5,973,750
Foster Wheeler
11-15-05 6.75 11,000,000 11,501,490
Global Marine
09-01-07 7.13 10,000,000 10,609,200
Pride Intl
Zero Coupon Cv Sub Deb
04-24-18 5.84 9,300,000(f) 2,232,000
Total 30,316,440
Financial services (4.8%)
Airplanes GPA Cl D
(U.S. Dollar) Series 1
03-15-19 10.88 6,000,000(c) 6,961,800
Arcadia Financial
Sr Nts
03-15-07 11.50 5,000,000 3,987,500
Barclays North America Capital
05-15-21 9.75 13,600,000 15,629,256
Bat-Crave-800
08-12-00 6.68 10,100,000(e) 10,260,489
08-12-00 6.86 7,000,000 7,111,020
First Union-
Lehman Brothers Cl A3
Series 1997-C2
11-18-29 6.65 20,000,000 20,768,400
Ford Capital
(U.S. Dollar)
06-01-10 9.50 18,350,000(c) 23,239,358
FPL Energy Caithness Funding
12-31-18 7.65 20,000,000(e) 20,005,400
GenAmerica Capital
Company Guaranty
06-30-27 8.53 8,000,000 8,719,000
Household Finance
Medium-term Nts Series E
06-17-08 6.40 10,000,000 10,114,700
Merrill Lynch & Co
02-12-03 6.00 4,150,000 4,214,325
Merrill Lynch Mtge Investors Cl D
Series 1996-C2
12-21-28 6.96 7,515,000 7,662,444
Ohio Savings Capital
Company Guaranty
06-03-27 9.50 9,500,000 11,092,295
Salomon
Medium-term Nts
11-30-00 6.63 6,700,000 6,846,261
Sr Nts
05-15-99 7.00 21,000,000 21,211,050
Salomon Smith Barney Holdings
01-15-03 6.13 15,000,000 15,144,150
Total 192,967,448
Food (0.4%)
Chiquita Brands Intl
Sr Nts
11-01-06 10.25 7,000,000 7,446,250
Daya Guna
(U.S. Dollar) Company Guaranty
06-01-07 10.00 4,575,000(c,e) 2,859,375
Gruma
(U.S. Dollar) Sr Nts
10-15-07 7.63 6,000,000(c) 5,116,020
Total 15,421,645
Health care (0.6%)
Alaris Medical Systems
Company Guaranty
12-01-06 9.75 6,250,000 6,320,313
Athena Neurosciences
Cv
11-15-04 4.75 3,100,000(e) 3,456,500
Dura Pharmaceuticals
Cv Sub Nts
07-15-02 3.50 5,300,000 4,041,250
Lilly (Eli)
01-01-36 6.77 7,950,000 8,295,030
Phoenix Shannon
(U.S. Dollar) Cv Sr Sub Nts
11-01-00 9.50 1,697,635(b,c,e) 16,976
Total 22,130,069
Health care services (1.7%)
Equity Corp Intl
Cv Sub Db
12-31-04 4.50 2,000,000 2,217,500
Magellan Health Services
Sr Sub Nts
02-15-08 9.00 10,000,000(e) 8,100,000
Novacare
Cv Sub Deb
01-15-00 5.50 7,000,000 6,632,500
Owens & Minor
Company Guaranty
06-01-06 10.88 4,000,000 4,220,000
Paracelsus Healthcare
Sr Sub Nts
08-15-06 10.00 8,500,000 8,160,000
Physician Sales & Service
Company Guaranty
10-01-07 8.50 10,950,000 10,758,375
Tenet Healthcare
Sr Nts
12-01-03 8.63 3,850,000 3,946,250
Sr Sub Nts
12-01-08 8.13 22,700,000(e) 22,363,586
Total 66,398,211
Industrial equipment & services (0.4%)
AGCO
Sr Sub Nts
03-15-06 8.50 1,900,000 1,859,625
Ametek
Sr Nts
07-15-08 7.20 10,000,000(e) 10,097,100
Tyco Intl
Zero Coupon Cv Sub Nts
07-06-10 6.50 2,650,000(f) 3,905,438
Total 15,862,163
Insurance (3.4%)
American General Institute Capital
Company Guaranty Series A
12-01-45 7.57 10,000,000(e) 10,466,100
Americo Life
Sr Sub Nts
06-01-05 9.25 9,400,000 9,529,250
Arkwright CSN Trust
08-15-26 9.63 5,000,000(e) 6,242,300
Conseco Financing Trust
Company Guaranty
11-15-26 8.70 9,300,000 10,733,781
Equitable Cos
Sr Nts
12-15-04 9.00 4,250,000 4,939,988
Equitable Life Assurance Society US Cl B1
Series 174
05-15-09 7.33 5,500,000 5,893,030
Executive Risk Capital
Company Guaranty Series B
02-01-27 8.68 11,500,000 13,274,450
Leucadia Natl
Sr Sub Nts
10-15-06 7.88 10,850,000 11,609,066
Lincoln Natl
05-15-05 7.25 6,000,000 6,390,036
Nationwide CSN Trust
02-15-25 9.88 11,500,000(e) 14,260,920
New York Life Insurance
12-15-23 7.50 6,000,000(e) 6,178,800
Orion Capital
Company Guaranty
04-15-28 7.70 4,250,000 4,487,150
Principal Mutual
03-01-44 8.00 10,000,000(e) 11,229,500
SAFECO Capital
Company Guaranty
07-15-37 8.07 10,000,000 11,004,900
Zurich Capital
(U.S. Dollar) Company Guaranty
06-01-37 8.38 7,500,000(c,e) 8,711,250
Total 134,950,521
Leisure time & entertainment (2.3%)
Caesars World
Sr Sub Nts
08-15-02 8.88 6,000,000 6,157,500
Hammons (JQ) Hotels
1st Mtge
02-15-04 8.88 7,000,000 6,816,250
Icon Health & Fitness
Sr Sub Nts Series B
07-15-02 13.00 6,000,000 3,780,000
IHF Holdings
Zero Coupon Sr Disc Nts Series B
11-15-99 9.47 7,500,000(g) 1,500,000
Lodgenet Entertainment
Sr Nts
12-15-06 10.25 5,500,000 5,603,125
MGM Grand
02-01-05 6.95 10,000,000 9,928,000
Mirage Resorts
02-01-08 6.75 11,850,000 11,496,752
Time Warner
02-01-24 7.57 11,875,000 12,468,750
Sr Nts
01-15-28 6.95 17,000,000 16,623,620
Trump Atlantic City Assn/Funding
1st Mtge Company Guaranty
05-01-06 11.25 4,000,000 3,450,000
United Artists Theatres
Series 1995A
07-01-15 9.30 13,128,665 13,112,254
Total 90,936,251
Media (4.9%)
Cox Communications
06-15-25 7.63 7,000,000 7,697,270
08-01-28 6.80 7,000,000 6,902,700
CSC Holdings
Series B
08-15-09 8.13 5,000,000 4,993,750
Sr Nts
07-15-08 7.25 14,000,000 13,512,100
Sr Sub Nts
11-01-05 9.25 6,000,000 6,277,500
EchoStar Communications
Zero Coupon Sr Sec Disc Nts
06-01-99 6.73 6,000,000(g) 5,745,000
Globo Communicacoes Participacoes
(U.S. Dollar) Sr Nts
12-05-08 10.63 10,000,000(c,e) 6,780,300
Grupo Televisa
(U.S. Dollar) Sr Nts Series A
05-15-03 11.38 6,000,000(c) 5,550,000
Jacor Communications
Sr Sub Nts
02-15-10 8.00 6,300,000(e) 6,000,750
Lamar Advertising
Company Guaranty
09-15-07 8.63 9,000,000 9,022,500
News Corp
06-24-10 10.15 3,662,993(e) 4,169,164
Outdoor Systems
Company Guaranty
06-15-07 8.88 13,700,000 13,974,000
Price Communications Wireless
Sr Nts
12-15-06 9.13 15,000,000(e) 13,612,500
Rogers Cablesystems
(Canadian Dollar)
01-15-14 6.56 3,700,000(c) 2,472,203
TCI Communications
08-01-15 8.75 2,100,000 2,526,699
Time Warner Entertainment
Sr Nts
07-15-33 8.38 17,500,000 20,518,750
Turner Broadcasting
07-01-13 8.38 10,000,000 11,374,400
02-01-24 8.40 19,500,000 20,911,215
Viacom Intl
07-01-03 7.00 5,000,000 5,000,400
Sub Deb
07-07-06 8.00 30,150,000 29,961,563
Total 197,002,764
Metals (1.0%)
EnviroSource
Sr Nts
06-15-03 9.75 4,576,000 4,547,400
Sr Nts Series B
06-15-03 9.75 4,200,000 4,173,750
Grupo Minero Mexico
(U.S. Dollar) Company Guaranty Series A
04-01-08 8.25 5,000,000(c) 4,037,500
Imexsa Export Trust
(U.S. Dollar)
05-31-03 10.13 7,500,000(c,e) 6,525,000
NSM Steel
Company Guaranty
02-01-06 12.00 10,900,000 8,134,125
WMC Finance USA
(U.S. Dollar)
11-15-13 7.25 10,000,000(c) 10,960,500
Total 38,378,275
Miscellaneous (4.6%)
Adams Outdoor Advertising
Sr Nts
03-15-06 10.75 7,500,000 7,959,375
Bistro Trust
Sub Nts
12-31-02 9.50 22,750,000(e) 23,022,773
California Infrastructure
Southern California Edison
12-26-09 6.42 5,500,000 5,878,455
Centaur Mining & Exploration
(U.S. Dollar) Company Guaranty
12-01-07 11.00 5,500,000(c) 5,396,875
Comforce Operating
Sr Nts Series B
12-01-07 12.00 4,500,000 4,747,500
Continucare
Cv Sr Sub Nts
10-31-02 8.00 2,500,000 1,528,125
Delphes 2
(U.S. Dollar)
05-05-09 7.75 8,500,000(c) 7,607,500
ECM Funding LP
06-10-02 11.92 1,576,171(i ) 1,576,171
FCB/NC Capital
Company Guaranty
03-01-28 8.05 9,250,000 9,768,278
First Empire Capital
Company Guaranty
02-01-27 8.23 10,450,000 11,790,108
Great Central Mines
(U.S. Dollar) Sr Nts
04-01-08 8.88 6,000,000(c,e) 5,565,000
Hyder PLC
(U.S. Dollar)
12-15-17 7.25 8,000,000(c,e) 8,312,320
JTM Inds
Sr Sub Nts
04-15-08 10.00 8,280,000(e) 8,228,250
M & I Capital
Company Guaranty
12-01-26 7.65 10,000,000 10,898,900
Norcal Waste Systems
Company Guaranty Series B
11-15-05 13.50 7,500,000 8,531,250
Omnipoint Communications
Sr Nts
02-17-06 8.94 9,966,738(e) 9,468,401
Ormet
Company Guaranty
08-15-08 11.00 8,600,000(e) 8,363,500
Penn-American Water
1st Mtge Medium-term Nts
11-01-17 7.08 13,000,000 13,484,250
SC Intl
09-01-07 9.25 11,200,000 11,340,000
Stellex Inds
Sr Sub Nts Series B
11-01-07 9.50 6,100,000 5,863,625
United Utilities
(U.S. Dollar)
04-01-08 6.45 15,000,000(c) 15,245,190
Total 184,575,846
Multi-industry conglomerates (1.8%)
American Eco
Company Guaranty
05-15-08 9.63 8,700,000(e) 8,101,875
Coltec Inds
Sr Nts
04-15-08 7.50 11,750,000(e) 11,559,063
Hutchison Whampo Finance
(U.S. Dollar) Company Guaranty
08-01-27 7.50 8,000,000(c,e) 5,647,840
(U.S. Dollar) Company Guaranty Series B
08-01-17 7.45 2,600,000(c,e) 1,933,594
Pierce Leahy
Company Guaranty
05-15-08 8.13 12,125,000(e) 11,276,250
Prime Succession
Sr Sub Nts
08-15-04 10.75 4,240,000 4,330,100
Tenneco
06-15-07 7.63 5,000,000 5,546,450
USI American Holdings
Sr Nts Series B
12-01-06 7.25 10,920,000 11,238,427
Westinghouse Electric
06-01-01 8.88 10,000,000 10,622,600
Total 70,256,199
Municipal bonds (0.3%)
Denver Colorado City & County School
District 1 Taxable-Pension-School
Facilities Lease (AMBAC Insured)
12-15-12 6.94 7,700,000(m) 8,330,707
New Jersey Economic Development
Authority State Pension Funding
Revenue Bond (MBIA Insured)
02-15-29 7.43 4,600,000(m) 5,396,260
Total 13,726,967
Paper & packaging (2.3%)
Carter Holt Harvey
(U.S. Dollar)
12-01-04 8.88 10,500,000(c) 11,998,560
Doman Inds
(U.S. Dollar)
03-15-04 8.75 4,000,000(c) 3,440,000
(U.S. Dollar) Sr Nts Series B
11-15-07 9.25 3,500,000(c) 2,695,000
Fort Howard
Series 1991
01-02-02 11.00 8,395,305 8,437,282
Gaylord Container
Sr Nts
06-15-07 9.75 3,500,000 3,071,250
Sr Nts Series B
06-15-07 9.38 7,500,000 6,468,750
Intl Paper
11-15-12 5.13 9,000,000 8,118,000
MacMillan Bloe Delaware
(U.S. Dollar)
01-15-04 8.50 3,000,000(c) 3,185,700
Owens-Illinois
Sr Nts
05-15-08 7.35 20,000,000 19,996,800
Quno Corp
(U.S. Dollar) Sr Nts
05-15-05 9.13 7,000,000(c) 7,157,500
Repap New Brunswick
(U.S. Dollar) Sr Nts
06-01-04 9.00 5,900,000(c,e) 5,531,250
Tenneco
11-15-12 9.20 9,000,000 11,210,310
Total 91,310,402
Real estate investment trust (0.4%)
Property Trust of America
02-15-14 7.50 15,000,000 15,860,850
Restaurants & lodging (0.3%)
La Quinta Inns
Sr Sub Nts
05-15-03 9.25 10,000,000 10,312,500
Retail (1.4%)
Dairy Mart Convenience Stores
Sr Sub Nts
03-15-04 10.25 6,250,000 5,890,625
Kroger
Sr Nts
07-15-06 8.15 13,000,000 14,379,040
Meyer (Fred)
Company Guaranty
03-01-08 7.45 13,550,000 13,604,742
Rite Aid
Cv Sub Nts
09-15-02 5.25 3,100,000 3,751,000
Wal-Mart CRAVE Trust
07-17-06 7.00 15,420,242(e) 15,930,189
Wal-Mart Stores
06-29-11 8.88 3,500,000 3,635,660
Total 57,191,256
Textiles & apparel (0.3%)
Westpoint Stevens
Sr Nts
06-15-08 7.88 13,000,000(e) 12,723,750
Transportation (1.8%)
American Architectural
Company Guaranty
12-01-07 11.75 7,500,000 7,575,000
Atlas Air Series C
01-02-10 8.01 15,000,000 15,197,700
CSX
05-01-27 7.25 9,700,000 10,406,063
Enterprise Rent-A-Car USA Finance
02-15-08 6.80 10,000,000 10,042,300
Enterprises Shipholding
(U.S Dollar) Sr Nts
05-01-08 8.88 8,100,000(c,e) 6,964,866
Greater Beijing
(U.S. Dollar) Sr Nts
06-15-04 9.75 3,500,000(c,e) 1,400,000
06-15-07 10.00 5,000,000(c,e) 1,900,000
Norfolk Southern Corp
05-15-07 7.35 10,000,000 10,804,900
Zhuhai Highway
(U.S. Dollar) Sub Nts
07-01-08 12.00 10,000,000(c,e) 6,500,000
Total 70,790,829
Utilities -- electric (10.0%)
AEP Generating
Series F
12-07-22 9.82 4,968,432 5,505,469
Appalachian Power
1st Mtge Medium-term Nts
12-01-22 8.50 5,000,000 5,417,850
Arizona Public Service
1st Mtge Sale Lease-backed Obligation
12-30-15 8.00 12,556,000 13,992,783
Cajun Electric Power
Mtge Trust
03-15-19 8.92 5,000,000 5,332,250
California Energy
Disc Nts
01-15-04 10.25 10,000,000 10,550,000
China Power & Light
(U.S. Dollar) Sr Nts
04-15-06 7.50 8,000,000(c) 7,415,760
Cleveland Electric Illuminating
07-01-00 7.19 8,000,000 8,179,600
07-01-04 7.67 20,500,000 20,295,000
1st Mtge
12-01-11 8.38 8,115,000 8,338,487
1st Mtge Series B
05-15-05 9.50 15,100,000 17,651,447
CMS Energy
Sr Nts
05-15-02 8.13 10,000,000 10,435,400
11-15-04 7.63 12,000,000 12,467,760
Comp Paranaense De Energ
(U.S. Dollar)
05-02-05 9.75 4,000,000(c,e) 3,400,520
Connecticut Light & Power
1st Mtge Series A
06-01-01 7.88 3,500,000 3,647,140
1st Mtge Series C
06-01-02 7.75 28,750,000 29,942,550
EIP Funding-PNM
10-01-12 10.25 6,630,000 7,810,936
El Paso Electric
1st Mtge Series E
05-01-11 9.40 10,000,000 11,025,000
Espirito Santo-Escelsa
(U.S. Dollar)
07-15-07 10.00 6,000,000(c) 4,105,140
Indiana & Michigan Power
Sale Lease-backed Obligation Series F
12-07-22 9.82 4,968,426 5,505,463
Israel Electric
(U.S. Dollar) Sr Nts
12-15-06 7.25 10,000,000(c) 10,078,600
Korea Electric Power
(U.S. Dollar)
07-01-02 8.00 2,800,000(c) 2,229,108
12-01-03 6.38 5,000,000(c) 3,277,950
Midland Cogeneration
Series 1991-C
07-23-02 10.33 5,074,883 5,417,438
Midland Funding
Series 1994-C
07-23-02 10.33 2,732,274 2,916,702
Series A
07-23-05 11.75 14,900,000 17,339,875
Ohio Edison
1st Mtge
04-01-23 7.88 6,000,000 6,161,520
PSI Energy
08-01-05 6.50 10,000,000 10,188,300
Public Services Electric & Gas
1st & Ref Mtge (MBIA Insured)
03-01-06 6.75 5,500,000(m) 5,831,045
Salton Sea Funding
Series C
05-30-10 7.84 10,000,000 10,932,100
Sithe Independence Funding
Series A
06-30-07 8.50 7,500,000 8,424,600
12-30-13 9.00 4,700,000 5,673,887
Texas Utilities Electric
01-01-05 9.45 3,999,000 4,301,844
08-01-07 7.17 13,900,000 14,723,714
07-01-25 7.63 10,000,000 10,342,600
10-01-25 7.38 3,000,000 3,033,240
Texas-New Mexico Power
09-15-03 10.75 5,000,000 5,325,000
1st Mtge Series U
09-15-00 9.25 6,000,000 6,255,000
TU Electric Capital
Company Guaranty
01-30-37 8.18 10,000,000 10,231,100
Tucson Electric Power
10-01-09 8.50 7,000,000 7,026,250
Virginia Electric & Power
02-01-07 6.75 35,000,000 36,502,900
Western Massachusetts Electric
1st Mtge Series B
07-01-01 7.38 12,000,000 12,296,760
Wisconsin Electric Power
12-01-95 6.88 8,000,000 8,294,000
Total 397,822,088
Utilities -- gas (1.1%)
Coastal
Sr Deb
02-15-37 7.42 6,000,000 5,939,400
Columbia Gas System
Series C
11-28-05 6.80 7,700,000 8,010,618
Equitable Resources
07-01-99 7.50 5,000,000 5,083,350
Questar Pipeline
06-01-21 9.38 8,000,000 9,114,560
Southern California Gas
1st Mtge Series BB
03-01-23 7.38 6,900,000 7,176,207
Southwest Gas
Series F
06-15-02 9.75 7,900,000 8,862,615
Total 44,186,750
Utilities -- telephone (5.9%)
360 Communications
03-01-06 7.50 17,470,000 18,750,202
Airtouch Communications
05-01-08 6.65 10,600,000 10,841,150
Ameritech Capital Funding
06-01-16 9.10 16,000,000 20,479,680
AT&T
01-15-25 8.35 17,500,000 19,567,800
Call-Net Enterprises
(U.S. Dollar) Sr Nts
08-15-08 8.00 5,250,000(c) 4,803,750
Ches Pot Tel Virginia
01-15-22 7.88 10,000,000 11,733,900
Colt Telecom Group
(Deutsche Mark) Cv
08-06-05 1.12 6,900,000(c) 3,531,118
Geotek Communications
Zero Coupon Cv Sr Sub Nts
02-15-01 12.00 4,135,000(b,f) 5,169
Grupo Iusacell
(U.S. Dollar)
07-15-04 10.00 3,000,000(c) 2,445,000
GTE
11-01-20 10.25 7,000,000 7,833,770
GTE Florida
02-01-28 6.86 7,000,000 7,206,570
Intermedia Communications
Sr Nts Series B
11-01-07 8.88 3,200,000 3,004,000
Zero Coupon Sr Disc Nts Series B
07-15-02 9.67 15,000,000(g) 10,349,999
ITC Deltacom
Sr Nts
03-01-08 8.88 12,500,000 12,625,000
Metrocall
Sr Sub Nts
11-01-07 9.75 7,000,000 6,440,000
New York Telephone
07-15-31 9.38 27,200,000 31,024,591
Pacific Bell
07-15-43 7.38 10,000,000 10,683,700
Philippine Long Distance Telephone
(U.S. Dollar) Medium-term Nts Series E
03-06-07 7.85 4,000,000(c,e) 2,699,280
03-06-17 8.35 3,000,000(c,e) 1,740,630
Rogers Cantel
(U.S. Dollar)
06-01-08 9.38 9,300,000(c) 9,486,000
SBC Communications
10-15-34 6.63 10,000,000 9,924,400
U S WEST Communications
11-10-26 7.20 14,000,000 14,288,260
WorldCom
04-01-07 7.75 15,000,000 16,227,150
Total 235,691,119
Total bonds
(Cost: $3,622,436,093) $3,671,796,212
See accompanying notes to investments in securities.
(This annual report is not part of the prospectus.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Common stocks (0.1%)
Issuer Shares Value(a)
<S> <C> <C>
Celcaribe 528,450(b,c,e) $2,113,800
Intermedia Communications 1,088(b) 27,064
Total common stocks
(Cost: $672,172) $2,140,864
Preferred stocks & other (1.5%)
Issuer Shares Value(a)
APP Finance II Mauritius Cl B
12.00% 5,405(c) $2,432,250
Dairy Mart
Warrants 51,666(e) 25,833
Finova Finance Trust
5.50% Cv 29,850 1,962,638
Glenborough Realty Trust
7.75% Cv Series A 185,320 3,752,730
Houston Inds
7.00% Cv 54,300 3,882,450
Ingersoll-Rand
6.75% Cv 174,000 3,730,125
Lincoln Natl
7.75% Cm Cv 55,950 1,398,750
MediaOne Group
6.25% Cv 68,800 3,818,400
Newell Financial Trust
5.25% Cm Cv 10,000 571,250
Owens-Illinois
Cv 40,000 1,585,000
Pinto Totta Intl Finance
7.77% 100,000(b,c,e,n) 8,987,500
Salomon Income Financing Trust
9.50% 400,000 10,949,999
Sprint
8.25% Cv 41,575 2,450,327
Suiza Capital
5.50% Cm Cv 44,200(e) 1,911,650
Tosco Financing Trust
5.75% Cv 50,000 2,306,250
Tower Automotive Capital
6.75% Cv 70,000 3,167,500
Transdigm
Warrants 3,989(i) 3,191,200
Tribune/TLC
6.25% Cv 83,250 1,623,375
Wendys Financing
5.00% Cm Cv Series A 66,000 3,300,000
Total preferred stocks & other
(Cost: $64,131,733) $61,047,227
See accompanying notes to investments in securities.
(This annual report is not part of the prospectus.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Short-term securities (6.0%)
Issuer Annualized yield on Amount payable Value(a)
date of purchase at maturity
U.S. government agency (1.3%)
Federal Home Loan Mtge Corp Disc Nts
<S> <C> <C> <C>
09-04-98 5.49% $5,600,000 $5,597,452
09-08-98 5.49 38,900,000 38,858,626
09-23-98 5.49 6,800,000 6,777,311
09-30-98 5.47 376,000 374,349
Total 51,607,738
Commercial paper (4.7%)
ABB Treasury Center USA
09-17-98 5.56 2,800,000(j) 2,793,143
Alcoa Aluminum Co of America
10-15-98 5.54 7,000,000 6,952,944
Associates Corp North America
10-09-98 5.54 5,600,000 5,567,430
Cargill
09-16-98 5.51 15,000,000 14,965,625
Ciesco LP
09-24-98 5.54 6,300,000 6,277,822
10-22-98 5.58 9,600,000(j) 9,493,529
Commerzbank U.S. Finance
09-14-98 5.52 4,200,000 4,191,658
Delaware Funding
09-25-98 5.55 5,300,000(j) 5,280,461
10-08-98 5.57 8,500,000(j) 8,451,688
Dresdner US Finance
09-01-98 5.52 5,900,000 5,900,000
09-08-98 5.55 5,500,000 5,493,014
Fleet Funding
10-09-98 5.56 1,500,000(j) 1,491,260
10-14-98 5.56 3,800,000(j) 3,774,945
General Electric Capital
11-10-98 5.56 8,500,000 8,405,787
GTE Funding
09-03-98 5.56 9,200,000 9,197,163
Heinz (HJ)
09-23-98 5.56 18,600,000 18,537,256
Household Finance
09-24-98 5.54 4,700,000 4,683,425
Motorola
09-24-98 5.56 5,500,000 5,480,603
Novartis Finance
09-24-98 5.53 7,000,000 6,975,358
Reed Elsevier
09-25-98 5.53 13,900,000(j) 13,848,941
Toyota Motor Credit
09-21-98 5.53 2,600,000 2,592,041
10-01-98 5.58 10,000,000 9,948,264
UBS Finance (Delaware)
09-14-98 5.53 2,100,000 2,095,821
10-19-98 5.57 1,300,000 1,290,415
USAA Capital
09-01-98 5.57 2,600,000 2,600,000
09-18-98 5.52 11,100,000 11,071,171
Xerox
09-28-98 5.52 9,000,000 8,962,875
Total 186,322,639
Total short-term securities
(Cost: $237,971,913) $237,930,377
Total investments in securities
(Cost: $3,925,211,911)(n) $3,972,914,680
See accompanying notes to investments in securities.
(This annual report is not part of the prospectus.)
</TABLE>
<PAGE>
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing. For long-term debt securities, item identified is in
default as to payment of interest and/or principal.
(c) Foreign security values are stated in U.S. dollars. For debt securities,
principal amounts are denominated in the currency indicated. As of Aug. 31,
1998, the value of foreign securities represented 11.2% of net assets.
(d) This security is a collateralized mortgage obligation that pays no interest
or principal during its initial accrual period until payment of a previous
series within the trust have been paid off. Interest is accrued at an effective
yield; similar to a zero coupon bond.
(e) 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.
(f) For zero coupon bonds, the interest rate disclosed represents the annualized
effective yield on the date of acquisition.
(g) For those zero coupon bonds that become coupon paying at a future date, the
interest rate disclosed represents the annualized effective yield from the date
of acquisition to interest reset date disclosed.
(h) Security is partially or fully on loan. See Note 4 to the financial
statements.
(i) Identifies issues considered to be illiquid as to their marketability (see
Note 1 to the financial statements). Information concerning such security
holdings at Aug. 31, 1998, is as follows:
Security Acquisition dates Cost
ECM Funding LP
11.92% 2002 04-13-92 $1,576,171
Roil
(U.S. Dollar) 12.78% 2002 05-15-98 4,646,300
Transdigm
Warrants 12-06-95 274,974
(j) 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.
(k) U.S. Treasury inflation-protection securities (TIPS) are securities in which
the principal amount is adjusted for inflation and the semiannual interest
payments equal a fixed percentage of the inflation-adjusted principal amount.
(l) Interest rate varies either based on a predetermined schedule or to reflect
current market conditions; rate shown is the effective rate on Aug. 31, 1998.
(m) The following abbreviations are used in portfolio descriptions to identify
the insurer of the issue:
AMBAC -- American Municipal Bond Association Corporation
MBIA -- Municipal Bond Investors Assurance
(n) At Aug. 31, 1998, the cost of securities for federal income tax purposes was
$3,919,775,513 and the aggregate gross unrealized appreciation and depreciation
based on that cost was:
Unrealized appreciation.......................................... $200,250,280
Unrealized depreciation.... ..................................... (147,111,113)
------------
Net unrealized appreciation..................................... $ 53,139,167
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS:
List of financial statements filed as part of this Post-Effective
Amendment to the Registration Statement:
o Independent auditors' report dated Oct. 2, 1998
o Statement of assets and liabilities, Aug. 31, 1998
o Statement of operations, year ended Aug. 31, 1998
o Statements of changes in net assets, for the years ended Aug. 31, 1998
and Aug. 31, 1997
o Notes to financial statements
o Investments in securities, Aug. 31, 1998
o Notes to investments in securities
(b) EXHIBITS:
1. Copy of Articles of Incorporation, as amended Oct. 17, 1988, filed
electronically as Exhibit 1 to Registrant's Post-Effective Amendment No. 28
to Registration Statement No. 2-51586, is incorporated herein by reference.
2. Copy of By-laws, as amended Jan. 12, 1989, filed electronically as Exhibit
2 to Registrant's Post-Effective Amendment No. 30 to Registration Statement
No. 2-51586, is incorporated herein by reference.
3. Not Applicable.
4. Copy of Stock certificate, filed as Exhibit 4 to Registrant's Amendment
Number One to Registration Statement No. 2-51586 dated Oct. 29, 1974, is
incorporated herein by reference.
5. Copy of Investment Management Services Agreement between Registrant and
American Express Financial Corporation, dated March 20, 1995, filed
electronically as Exhibit 5 to Registrant's Post-Effective Amendment No. 47
to Registration Statement No. 2-51586 is incorporated herein by reference.
6. Copy of Distribution Agreement between Registrant and American Express
Financial Advisors Inc. dated March 20, 1995, filed electronically as
Exhibit 6 to Registrant's Post-Effective Amendment No. 47 to Registration
Statement No. 2-51586 is incorporated herein by reference.
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.
<PAGE>
8. Copy of Custodian Agreement between Registrant and First National Bank of
Minneapolis, dated July 23, 1986, filed electronically as Exhibit 8 to
Registrant's Post-Effective Amendment No. 46 to Registration Statement No.
2-51586 is incorporated herein by reference.
9(a).Copy of Plan and Agreement of Merger, dated April 10, 1986, filed
electronically as Exhibit 9 to Registrant's Post-Effective Amendment No. 24
to Registration Statement No. 2-51586, is incorporated herein by reference.
9(b).Copy of Transfer Agency Agreement between Registrant and American Express
Client Service Corporation, dated Jan. 1, 1998, is filed electronically
herewith.
9(c).Copy of License Agreement dated Jan. 25, 1988, between IDS Financial
Corporation and Registrant, filed as Exhibit 9c to Registrant's
Post-Effective Amendment No. 35 to Registration Statement No. 2-51586, is
herein incorporated by reference.
9(d).Copy of Shareholder Service Agreement between Registrant and American
Express Financial Advisors Inc., dated March 20, 1995, filed electronically
as Exhibit 9(d) to Registrant's Post-Effective Amendment No. 47 to
Registration Statement No. 2-51586 is incorporated herein by reference.
9(e).Copy of Administrative Services Agreement between Registrant and American
Express Financial Corporation, dated March 20, 1995, filed electronically
as Exhibit 9(e) to Registrant's Post-Effective Amendment No. 47 to
Registration Statement No. 2-51586 is incorporated herein by reference.
9(f).Copy of Agreement and Plan of Reorganization, dated September 8, 1994,
between IDS Strategy Fund, Inc. and IDS Bond Fund, Inc., filed
electronically as Exhibit 4 on Registrant's Pre-Effective Amendment No. 1,
on Form N-14, is incorporated herein by reference.
9(g).Copy of the Class Y Shareholder Service Agreement between IDS Precious
Metals Fund, Inc. and American Express Financial Advisors Inc., dated May
9, 1997 filed electronically on or about May 27, as Exhibit 9(e) to IDS
Precious Metals Fund Inc.'s Amendment No. 30 to Registration Statement No.
2-93745, is incorporated herein by reference.
Registrant's Class Y Shareholder Service Agreement differs from the
one incorporated by reference only by the fact that Registrant is one
executing party.
10. Opinion and consent of counsel as to the legality of the securities being
registered is filed electronically herewith.
11. Independent Auditors' Consent is filed electronically herewith.
12. None.
13. Not applicable.
<PAGE>
14. Forms of Keogh, IRA and other retirement plans, filed as Exhibits 14(a)
through 14(h) to IDS Growth Fund, Inc., Post-Effective Amendment No. 34 to
Registration Statement No. 2-38355 on Sept. 8, 1986, are incorporated
herein by reference.
15. Copy of Plan and Agreement of Distribution between Registrant and American
Express Financial Advisors Inc. dated March 20, 1995, filed electronically
as Exhibit 15 to Registrant's Post-Effective Amendment No. 47 to
Registration Statement No. 2-51586 is incorporated herein by reference.
16. Copy of Schedule for computation of each performance quotation provided in
the Registration Statement in response to Item 22(b), filed as Exhibit No.
16 to Registrant's Post-Effective Amendment No. 32 to Registration
Statement No. 2-51586 is incorporated herein by reference.
17. Financial Data Schedule is filed electronically herewith.
18. Copy of 18f-3 Plan dated May 9, 1997, filed electronically on or about Jan.
27, 1998 as Exhibit 18 to IDS Equity Select Fund, Inc.'s Post-Effective
Amendment No. 86 to Registration Statement No. 2-13188 is incorporated
herein by reference.
19(a).Directors' Power of Attorney to sign Amendments to this Registration
Statement, dated Jan. 7, 1998 is filed electronically herewith.
19(b).Officers' Power of Attorney dated Nov. 1, 1995 to sign Amendments to this
Registration Statement filed electronically as exhibit 19(b) to
Registrant's Post-Effective Amendment No. 46 to Registration Statement No.
2-51586 is incorporated herein by reference.
Item 25. Person 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 October 19, 1998
Class A 152,138
Class B 79,250
Class Y 34,435
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,
<PAGE>
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>
<TABLE>
<CAPTION>
Item 28. Business and Other Connections of Investment Adviser (American Express
Financial Corporation)
Directors and officers of American Express Financial Corporation who are directors and/or
officers of one or more other companies:
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Name and Title Other company(s) Address Title within other
company(s)
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
Ronald G. Abrahamson, American Express Client IDS Tower 10 Director and Vice President
Vice President Service Corporation Minneapolis, MN 55440
American Express Financial Vice President
Advisors Inc.
Public Employee Payment Director and Vice President
Company
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Douglas A. Alger, American Express Financial IDS Tower 10 Senior Vice President
Senior Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Peter J. Anderson, Advisory Capital IDS Tower 10 Director
Director and Senior Vice Strategies Group Inc. Minneapolis, MN 55440
President
American Express Asset Director and Chairman of
Management Group Inc. the Board
American Express Asset Director, Chairman of the
Management International, Board and Executive Vice
Inc. President
American Express Financial Senior Vice President
Advisors Inc.
IDS Capital Holdings Inc. Director and President
IDS Futures Corporation Director
NCM Capital Management 2 Mutual Plaza Director
Group, Inc. 501 Willard Street
Durham, NC 27701
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Ward D. Armstrong, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
American Express Service Vice President
Corporation
American Express Trust Director and Chairman of
Company the Board
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
John M. Baker, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
American Express Trust Senior Vice President
Company
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Gurudutt Baliga, American Express Asset IDS Tower 10 Senior Vice President and
Vice President Management Group Inc. Minneapolis, MN 55440 Chief Investment Officer
American Express Financial Vice President
Advisors Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Joseph M. Barsky III, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Timothy V. Bechtold, American Centurion Life IDS Tower 10 Director
Vice President Assurance Company Minneapolis, MN 55440
American Express Financial Vice President
Advisors Inc.
IDS Life Insurance Company Executive Vice President
IDS Life Insurance Company P.O. Box 5144 Director and President
of New York Albany, NY 12205
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
John C. Boeder, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
IDS Life Insurance Company P.O. Box 5144 Director
of New York Albany, NY 12205
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Douglas W. Brewers, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Karl J. Breyer, American Express Financial IDS Tower 10 Corporate Senior Vice
Director, Corporate Senior Advisors Inc. Minneapolis, MN 55440 President
Vice President
American Express Minnesota Director
Foundation
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Cynthia M. Carlson, American Enterprise IDS Tower 10 Director, President and
Vice President Investment Services Inc. Minneapolis, MN 55440 Chief Executive Officer
American Express Financial Vice President
Advisors Inc.
American Express Service Vice President
Corporation
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Mark W. Carter, American Express Financial IDS Tower 10 Senior Vice President and
Senior Vice President and Advisors Inc. Minneapolis, MN 55440 Chief Marketing Officer
Chief Marketing Officer
IDS Life Insurance Company Executive Vice President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
James E. Choat, American Enterprise Life IDS Tower 10 Director, President and
Director and Senior Vice Insurance Company Minneapolis, MN 55440 Chief Executive Officer
President
American Express Financial Senior Vice President
Advisors Inc.
American Express Insurance Vice President
Agency of Idaho Inc.
American Express Insurance Vice President
Agency of Nevada Inc.
American Express Insurance Vice President
Agency of Oregon Inc.
American Express Property Vice President
Casualty Insurance Agency
of Kentucky Inc.
American Express Property Vice President
Casualty Insurance Agency
of Maryland Inc.
American Express Property Vice President
Casualty Insurance Agency
of Pennsylvania Inc.
IDS Insurance Agency of Vice President
Alabama Inc.
IDS Insurance Agency of Vice President
Arkansas Inc.
IDS Insurance Agency of Vice President
Massachusetts Inc.
IDS Insurance Agency of Vice President
New Mexico Inc.
IDS Insurance Agency of Vice President
North Carolina Inc.
IDS Insurance Agency of Vice President
Ohio Inc.
IDS Insurance Agency of Vice President
Wyoming Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Kenneth J. Ciak, AMEX Assurance Company IDS Tower 10 Director and President
Vice President and General Minneapolis, MN 55440
Manager
American Express Financial Vice President and General
Advisors Inc. Manager
IDS Property Casualty 1 WEG Blvd. Director and President
Insurance Company DePere, WI 54115
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Paul A. Connolly, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Colleen Curran, American Express Financial IDS Tower 10 Vice President and
Vice President and Assistant Advisors Inc. Minneapolis, MN 55440 Assistant General Counsel
General Counsel
American Express Service Vice President and Chief
Corporation Legal Counsel
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Luz Maria Davis American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Douglas K. Dunning, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Gordon L. Eid, American Express Financial IDS Tower 10 Senior Vice President,
Director, Senior Vice Advisors Inc. Minneapolis, MN 55440 General Counsel and Chief
President, General Counsel Compliance Officer
and Chief Compliance Officer
American Express Insurance Director and Vice President
Agency of Arizona Inc.
American Express Insurance Director and Vice President
Agency of Idaho Inc.
American Express Insurance Director and Vice President
Agency of Nevada Inc.
American Express Insurance Director and Vice President
Agency of Oregon Inc.
American Express Property Director and Vice President
Casualty Insurance Agency
of Kentucky Inc.
American Express Property Director and Vice President
Casualty Insurance Agency
of Maryland Inc.
American Express Property Director and Vice President
Casualty Insurance Agency
of Pennsylvania Inc.
IDS Insurance Agency of Director and Vice President
Alabama Inc.
IDS Insurance Agency of Director and Vice President
Arkansas Inc.
IDS Insurance Agency of Director and Vice President
Massachusetts Inc.
IDS Insurance Agency of Director and Vice President
New Mexico Inc.
IDS Insurance Agency of Director and Vice President
North Carolina Inc.
IDS Insurance Agency of Director and Vice President
Ohio Inc.
IDS Insurance Agency of Director and Vice President
Wyoming Inc.
IDS Real Estate Services, Vice President
Inc.
Investors Syndicate Director
Development Corp.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Robert M. Elconin, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
IDS Life Insurance Company Vice President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Gordon M. Fines, American Express Asset IDS Tower 10 Senior Vice President and
Vice President Management Group Inc. Minneapolis, MN 55440 Chief Investment Officer
American Express Financial Vice President
Advisors Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Douglas L. Forsberg, American Centurion Life IDS Tower 10 Director
Vice President Assurance Company Minneapolis, MN 55440
American Express Financial Vice President
Advisors Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Jeffrey P. Fox, American Enterprise Life IDS Tower 10 Vice President and
Vice President and Corporate Insurance Company Minneapolis, MN 55440 Controller
Controller
American Express Financial Vice President and
Advisors Inc. Corporate Controller
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Harvey Golub, American Express Company American Express Tower Chairman and Chief
Director World Financial Center Executive Officer
New York, NY 10285
American Express Travel Chairman and Chief
Related Services Company, Executive Officer
Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
David A. Hammer, American Express Financial IDS Tower 10 Vice President and
Vice President and Marketing Advisors Inc. Minneapolis, MN 55440 Marketing Controller
Controller
IDS Plan Services of Director and Vice President
California, Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Lorraine R. Hart, AMEX Assurance Company IDS Tower 10 Vice President
Vice President Minneapolis, MN 55440
American Enterprise Life Vice President
Insurance Company
American Express Financial Vice President
Advisors Inc.
American Partners Life Director and Vice
Insurance Company President
IDS Certificate Company Vice President
IDS Life Insurance Company Vice President
IDS Life Series Fund, Inc. Vice President
IDS Life Variable Annuity Vice President
Funds A and B
Investors Syndicate Director and Vice
Development Corp. President
IDS Life Insurance Company P.O. Box 5144 Investment Officer
of New York Albany, NY 12205
IDS Property Casualty 1 WEG Blvd. Vice President
Insurance Company DePere, WI 54115
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Scott A. Hawkinson, American Express Financial IDS Tower 10 Vice President and
Vice President and Controller Advisors Inc. Minneapolis, MN 55440 Controller
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Janis K. Heaney, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
James G. Hirsh, American Express Financial IDS Tower 10 Vice President and
Vice President and Assistant Advisors Inc. Minneapolis, MN 55440 Assistant General Counsel
General Counsel
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Darryl G. Horsman, American Express Trust IDS Tower 10 Director and President
Vice President Company Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Jeffrey S. Horton, AMEX Assurance Company IDS Tower 10 Vice President, Treasurer
Vice President and Corporate Minneapolis, MN 55440 and Assistant Secretary
Treasurer
American Centurion Life Vice President and
Assurance Company Treasurer
American Enterprise Vice President and
Investment Services Inc. Treasurer
American Enterprise Life Vice President and
Insurance Company Treasurer
American Express Asset Vice President and
Management Group Inc. Treasurer
American Express Asset Vice President and
Management International Treasurer
Inc.
American Express Client Vice President and
Service Corporation Treasurer
American Express Vice President and
Corporation Treasurer
American Express Financial Vice President and
Advisors Inc. Treasurer
American Express Insurance Vice President and
Agency of Arizona Inc. Treasurer
American Express Insurance Vice President and
Agency of Idaho Inc. Treasurer
American Express Insurance Vice President and
Agency of Nevada Inc. Treasurer
American Express Insurance Vice President and
Agency of Oregon Inc. Treasurer
American Express Minnesota Vice President and
Foundation Treasurer
American Express Property Vice President and
Casualty Insurance Agency Treasurer
of Kentucky Inc.
American Express Property Vice President and
Casualty Insurance Agency Treasurer
of Maryland Inc.
American Express Property Vice President and
Casualty Insurance Agency Treasurer
of Pennsylvania Inc.
American Express Partners Vice President and
Life Insurance Company Treasurer
IDS Cable Corporation Director, Vice President
and Treasurer
IDS Cable II Corporation Director, Vice President
and Treasurer
IDS Capital Holdings Inc. Vice President, Treasurer
and Assistant Secretary
IDS Certificate Company Vice President and
Treasurer
IDS Insurance Agency of Vice President and
Alabama Inc. Treasurer
IDS Insurance Agency of Vice President and
Arkansas Inc. Treasurer
IDS Insurance Agency of Vice President and
Massachusetts Inc. Treasurer
IDS Insurance Agency of Vice President and
New Mexico Inc. Treasurer
IDS Insurance Agency of Vice President and
North Carolina Inc. Treasurer
IDS Insurance Agency of Vice President and
Ohio Inc. Treasurer
IDS Insurance Agency of Vice President and
Wyoming Inc. Treasurer
IDS Life Insurance Company Vice President, Treasurer
and Assistant Secretary
IDS Life Insurance Company P.O. Box 5144 Vice President and
of New York Albany, NY 12205 Treasurer
IDS Life Series Fund Inc. Vice President and
Treasurer
IDS Life Variable Annuity Vice President and
Funds A & B Treasurer
IDS Management Corporation Director, Vice President
and Treasurer
IDS Partnership Services Vice President and
Corporation Treasurer
IDS Plan Services of Vice President and
California, Inc. Treasurer
IDS Real Estate Services, Vice President and
Inc. Treasurer
IDS Realty Corporation Vice President and
Treasurer
IDS Sales Support Inc. Vice President and
Treasurer
IDS Securities Corporation Vice President and
Treasurer
Investors Syndicate Vice President and
Development Corp. Treasurer
IDS Property Casualty 1 WEG Blvd. Vice President, Treasurer
Insurance Company DePere, WI 54115 and Assistant Secretary
Public Employee Payment Vice President and
Company Treasurer
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
David R. Hubers, AMEX Assurance Company IDS Tower 10 Director
Director, President and Chief Minneapolis, MN 55440
Executive Officer
American Express Financial Chairman, President and
Advisors Inc. Chief Executive Officer
American Express Service Director and President
Corporation
IDS Certificate Company Director
IDS Life Insurance Company Director
IDS Plan Services of Director and President
California, Inc.
IDS Property Casualty 1 WEG Blvd. Director
Insurance Company DePere, WI 54115
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Martin G. Hurwitz, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
James M. Jensen, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
IDS Life Insurance Company Vice President
IDS Life Series Fund, Inc. Director
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Marietta L. Johns, American Express Financial IDS Tower 10 Senior Vice President
Director and Senior Vice Advisors Inc. Minneapolis, MN 55440
President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Nancy E. Jones, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
American Express Service Vice President
Corporation
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Ora J. Kaine, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Matthew N. Karstetter, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Linda B. Keene, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
G. Michael Kennedy, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Susan D. Kinder, American Express Financial IDS Tower 10 Senior Vice President
Director and Senior Vice Advisors Inc. Minneapolis, MN 55440
President
IDS Securities Corporation Director
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Brian C. Kleinberg, American Enterprise IDS Tower 10 Director
Executive Vice President Investment Services Inc. Minneapolis, MN 55440
American Express Financial Executive Vice President
Advisors Inc.
American Express Service Director
Corporation
AMEX Assurance Company Director and Chairman of
the Board
American Partners Life Executive Vice President
Insurance Company
IDS Property Casualty 1 WEG Blvd. Director and Chairman of
Insurance Company DePere, WI 54115 the Board
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Richard W. Kling, AMEX Assurance Company IDS Tower 10 Director
Director and Senior Vice Minneapolis, MN 55440
President
American Centurion Life Director
Assurance Company
American Enterprise Life Director and Chairman of
Insurance Company the Board
American Express Director and President
Corporation
American Express Financial Senior Vice President
Advisors Inc.
American Express Insurance Director and President
Agency of Arizona Inc.
American Express Insurance Director and President
Agency of Idaho Inc.
American Express Insurance Director and President
Agency of Nevada Inc.
American Express Insurance Director and President
Agency of Oregon Inc.
American Express Property Director and President
Casualty Insurance Agency
of Kentucky Inc.
American Express Property Director and President
Casualty Insurance Agency
of Maryland Inc.
American Express Property Director and President
Casualty Insurance Agency
of Pennsylvania Inc.
American Express Service Vice President
Corporation
American Partners Life Director and Chairman of
Insurance Company the Board
IDS Certificate Company Director and Chairman of
the Board
IDS Insurance Agency of Director and President
Alabama Inc.
IDS Insurance Agency of Director and President
Arkansas Inc.
IDS Insurance Agency of Director and President
Massachusetts Inc.
IDS Insurance Agency of Director and President
New Mexico Inc.
IDS Insurance Agency of Director and President
North Carolina Inc.
IDS Insurance Agency of Director and President
Ohio Inc.
IDS Insurance Agency of Director and President
Wyoming Inc.
IDS Life Insurance Company Director and President
IDS Life Series Fund, Inc. Director and President
IDS Life Variable Annuity Manager, Chairman of the
Funds A and B Board and President
IDS Property Casualty 1 WEG Blvd. Director
Insurance Company DePere, WI 54115
IDS Life Insurance Company P.O. Box 5144 Director, Chairman of the
of New York Albany, NY 12205 Board and President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Paul F. Kolkman, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
IDS Life Insurance Company Director and Executive
Vice President
IDS Life Series Fund, Inc. Vice President and Chief
Actuary
IDS Property Casualty 1 WEG Blvd. Director
Insurance Company DePere, WI 54115
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Claire Kolmodin, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Steve C. Kumagai, American Express Financial IDS Tower 10 Director and Senior Vice
Director and Senior Vice Advisors Inc. Minneapolis, MN 55440 President
President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Kurt A. Larson, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Lori J. Larson, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Daniel E. Laufenberg, American Express Financial IDS Tower 10 Vice President and Chief
Vice President and Chief U.S. Advisors Inc. Minneapolis, MN 55440 U.S. Economist
Economist
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Peter A. Lefferts, American Express Financial IDS Tower 10 Senior Vice President
Director and Senior Vice Advisors Inc. Minneapolis, MN 55440
President
American Express Trust Director
Company
IDS Plan Services of Director
California, Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Douglas A. Lennick, American Express Financial IDS Tower 10 Director and Executive
Director and Executive Vice Advisors Inc. Minneapolis, MN 55440 Vice President
President
IDS Securities Corporation Director, President and
Chief Executive Officer
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Jonathan S. Linen, IDS Tower 10
Director Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Mary J. Malevich, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Fred A. Mandell, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Sarah A. Mealey, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Paula R. Meyer, American Enterprise Life IDS Tower 10 Vice President
Vice President Insurance Company Minneapolis, MN 55440
American Express Director
Corporation
American Express Financial Vice President
Advisors Inc.
American Partners Life Director and President
Insurance Company
IDS Certificate Company Director and President
IDS Life Insurance Company Director and Executive
Vice President
Investors Syndicate Director, Chairman of the
Development Corporation Board and President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
William P. Miller, Advisory Capital IDS Tower 10 Vice President
Vice President and Senior Strategies Group Inc. Minneapolis, MN 55440
Portfolio Manager
American Express Asset Senior Vice President and
Management Group Inc. Chief Investment Officer
American Express Financial Vice President and Senior
Advisors Inc. Portfolio Manager
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
James A. Mitchell, AMEX Assurance Company IDS Tower 10 Director
Director and Executive Vice Minneapolis, MN 55440
President
American Enterprise Director
Investment Services Inc.
American Express Financial Executive Vice President
Advisors Inc.
American Express Service Director and Senior Vice
Corporation President
American Express Tax and Director
Business Services Inc.
IDS Certificate Company Director
IDS Life Insurance Company Director, Chairman of the
Board and Chief Executive
Officer
IDS Plan Services of Director
California, Inc.
IDS Property Casualty 1 WEG Blvd. Director
Insurance Company DePere, WI 54115
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Pamela J. Moret, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
American Express Trust Vice President
Company
IDS Life Insurance Company Executive Vice President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Barry J. Murphy, American Express Client IDS Tower 10 Director and President
Director and Senior Vice Service Corporation Minneapolis, MN 55440
President
American Express Financial Senior Vice President
Advisors Inc.
IDS Life Insurance Company Director and Executive
Vice President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Mary Owens Neal, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Michael J. O'Keefe, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
James R. Palmer, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
IDS Life Insurance Company Vice President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Carla P. Pavone, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
Public Employee Payment Director and President
Company
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Thomas P. Perrine, American Express Financial IDS Tower 10 Senior Vice President
Senior Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Susan B. Plimpton, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Ronald W. Powell, American Express Financial IDS Tower 10 Vice President and
Vice President and Assistant Advisors Inc. Minneapolis, MN 55440 Assistant General Counsel
General Counsel
IDS Cable Corporation Vice President and
Assistant Secretary
IDS Cable II Corporation Vice President and
Assistant Secretary
IDS Management Corporation Vice President and
Assistant Secretary
IDS Partnership Services Vice President and
Corporation Assistant Secretary
IDS Plan Services of Vice President and
California, Inc. Assistant Secretary
IDS Realty Corporation Vice President and
Assistant Secretary
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
James M. Punch, American Express Financial IDS Tower 10 Vice President and Project
Vice President and Project Advisors Inc. Minneapolis, MN 55440 Manager
Manager
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Frederick C. Quirsfeld, American Express Asset IDS Tower 10 Senior Vice President and
Senior Vice President Management Group Inc. Minneapolis, MN 55440 Senior Portfolio Manager
American Express Financial Senior Vice President
Advisors Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Rollyn C. Renstrom, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
ReBecca K. Roloff, American Express Financial IDS Tower 10 Senior Vice President
Senior Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Stephen W. Roszell, Advisory Capital IDS Tower 10 Director
Senior Vice President Strategies Group Inc. Minneapolis, MN 55440
American Express Asset Director, President and
Management Group Inc. Chief Executive Officer
American Express Asset Director
Management International,
Inc.
American Express Asset Director
Management Ltd.
American Express Financial Senior Vice President
Advisors Inc.
American Express Trust Director
Company
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Erven A. Samsel, American Express Financial IDS Tower 10 Senior Vice President
Director and Senior Vice Advisors Inc. Minneapolis, MN 55440
President
American Express Insurance Vice President
Agency of Idaho Inc.
American Express Insurance Vice President
Agency of Nevada Inc.
American Express Insurance Vice President
Agency of Oregon Inc.
American Express Property Vice President
Casualty Insurance Agency
of Kentucky Inc.
American Express Property Vice President
Casualty Insurance Agency
of Maryland Inc.
American Express Property Vice President
Casualty Insurance Agency
of Pennsylvania Inc.
IDS Insurance Agency of Vice President
Alabama Inc.
IDS Insurance Agency of Vice President
Arkansas Inc.
IDS Insurance Agency of Vice President
Massachusetts Inc.
IDS Insurance Agency of Vice President
New Mexico Inc.
IDS Insurance Agency of Vice President
North Carolina Inc.
IDS Insurance Agency of Vice President
Ohio Inc.
IDS Insurance Agency of Vice President
Wyoming Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Stuart A. Sedlacek, American Enterprise Life IDS Tower 10 Executive Vice President
Senior Vice President and Insurance Company Minneapolis, MN 55440
Chief Financial Officer
American Express Financial Senior Vice President and
Advisors Inc. Chief Financial Officer
American Express Trust Director
Company
American Partners Life Director and Vice President
Insurance Agency
IDS Certificate Company Director and President
IDS Life Insurance Company Executive Vice President
and Controller
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Donald K. Shanks, AMEX Assurance Company IDS Tower 10 Senior Vice President
Vice President Minneapolis, MN 55440
American Express Financial Vice President
Advisors Inc.
IDS Property Casualty 1 WEG Blvd. Senior Vice President
Insurance Company DePere, WI 54115
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
F. Dale Simmons, AMEX Assurance Company IDS Tower 10 Vice President
Vice President Minneapolis, MN 55440
American Enterprise Life Vice President
Insurance
American Express Financial Vice President
Advisors Inc.
American Partners Life Vice President
Insurance Company
IDS Certificate Company Vice President
IDS Life Insurance Company Vice President
IDS Partnership Services Director and Vice President
Corporation
IDS Real Estate Services Chairman of the Board and
Inc. President
IDS Realty Corporation Director and Vice President
IDS Life Insurance Company P.O. Box 5144 Vice President and
of New York Albany, NY 12205 Assistant Treasurer
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Judy P. Skoglund, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Bridget Sperl, American Express Client IDS Tower 10 Vice President
Vice President Service Corporation Minneapolis, MN 55440
American Express Financial Vice President
Advisors Inc.
Public Employee Payment Director and President
Company
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Lisa A. Steffes, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
William A. Stoltzmann, American Enterprise Life IDS Tower 10 Director, Vice President,
Vice President and Assistant Insurance Company Minneapolis, MN 55440 General Counsel and
General Counsel Secretary
American Express Director, Vice President
Corporation and Secretary
American Express Financial Vice President and
Advisors Inc. Assistant General Counsel
American Partners Life Director, Vice President,
Insurance Company General Counsel and
Secretary
IDS Life Insurance Company Vice President, General
Counsel and Secretary
IDS Life Series Fund Inc. General Counsel and
Assistant Secretary
IDS Life Variable Annuity General Counsel and
Funds A & B Assistant Secretary
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
James J. Strauss, American Express Financial IDS Tower 10 Vice President and General
Vice President and General Advisors Inc. Minneapolis, MN 55440 Auditor
Auditor
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Jeffrey J. Stremcha, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Barbara Stroup Stewart, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Wesley W. Wadman, American Express Asset IDS Tower 10 Executive Vice President
Vice President Management Group Inc. Minneapolis, MN 55440
American Express Asset Director and Senior Vice
Management International, President
Inc.
American Express Asset Director and Vice Chairman
Management Ltd.
American Express Financial Vice President
Advisors Inc.
IDS Fund Management Limited Director and Vice Chairman
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Norman Weaver Jr., American Express Financial IDS Tower 10 Senior Vice President
Director and Senior Vice Advisors Inc. Minneapolis, MN 55440
President
American Express Insurance Vice President
Agency of Arizona Inc.
American Express Insurance Vice President
Agency of Idaho Inc.
American Express Insurance Vice President
Agency of Nevada Inc.
American Express Insurance Vice President
Agency of Oregon Inc.
American Express Property Vice President
Casualty Insurance Agency
of Kentucky Inc.
American Express Property Vice President
Casualty Insurance Agency
of Maryland Inc.
American Express Property Vice President
Casualty Insurance Agency
of Pennsylvania Inc.
IDS Insurance Agency of Vice President
Alabama Inc.
IDS Insurance Agency of Vice President
Arkansas Inc.
IDS Insurance Agency of Vice President
Massachusetts Inc.
IDS Insurance Agency of Vice President
New Mexico Inc.
IDS Insurance Agency of Vice President
North Carolina Inc.
IDS Insurance Agency of Vice President
Ohio Inc.
IDS Insurance Agency of Vice President
Wyoming Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Michael L. Weiner, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
IDS Capital Holdings Inc. Vice President
IDS Futures Brokerage Group Vice President
IDS Futures Corporation Vice President, Treasurer
and Secretary
IDS Sales Support Inc. Director, Vice President
and Assistant Treasurer
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Lawrence J. Welte, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Jeffry F. Welter, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Edwin M. Wistrand, American Express Financial IDS Tower 10 Vice President and
Vice President and Assistant Advisors Inc. Minneapolis, MN 55440 Assistant General Counsel
General Counsel
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Michael D. Wolf, American Express Asset IDS Tower 10 Executive Vice President
Vice President Management Group Inc. Minneapolis, MN 55440 and Senior Portfolio
Manager
American Express Financial Vice President
Advisors Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Michael R. Woodward, American Express Financial IDS Tower 10 Senior Vice President
Director and Senior Vice Advisors Inc. Minneapolis, MN 55440
President
American Express Insurance Vice President
Agency of Idaho Inc.
American Express Insurance Vice President
Agency of Nevada Inc.
American Express Insurance Vice President
Agency of Oregon Inc.
American Express Property Vice President
Casualty Insurance Agency
of Kentucky Inc.
American Express Property Vice President
Casualty Insurance Agency
of Maryland Inc.
American Express Property Vice President
Casualty Insurance Agency
of Pennsylvania Inc.
IDS Insurance Agency of Vice President
Alabama Inc.
IDS Insurance Agency of Vice President
Arkansas Inc.
IDS Insurance Agency of Vice President
Massachusetts Inc.
IDS Insurance Agency of Vice President
New Mexico Inc.
IDS Insurance Agency of Vice President
North Carolina Inc.
IDS Insurance Agency of Vice President
Ohio Inc.
IDS Insurance Agency of Vice President
Wyoming Inc.
IDS Life Insurance Company P.O. Box 5144 Director
of New York Albany, NY 12205
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Item 29. Principal Underwriters.
(a) American Express Financial Advisors acts as principal underwriter for the following investment
companies:
IDS Bond Fund, Inc.; IDS California Tax-Exempt Trust; IDS Discovery Fund, Inc.; IDS Equity
Select Fund, Inc.; IDS Extra Income Fund, Inc.; IDS Federal Income Fund, Inc.; IDS Global
Series, Inc.; IDS Growth Fund, Inc.; IDS High Yield Tax-Exempt Fund, Inc.; IDS International
Fund, Inc.; IDS Investment Series, Inc.; IDS Managed Retirement Fund, Inc.; IDS Market
Advantage Series, Inc.; IDS Money Market Series, Inc.; IDS New Dimensions Fund, Inc.; IDS
Precious Metals Fund, Inc.; IDS Progressive Fund, Inc.; IDS Selective Fund, Inc.; IDS Special
Tax-Exempt Series Trust; IDS Stock Fund, Inc.; IDS Strategy Fund, Inc.; IDS Tax-Exempt Bond
Fund, Inc.; IDS Tax-Free Money Fund, Inc.; IDS Utilities Income Fund, Inc., Growth Trust;
Growth and Income Trust; Income Trust, Tax-Free Income Trust, World Trust and IDS Certificate
Company.
(b) As to each director, officer or partner of the principal underwriter:
Name and Principal Business Address Position and Offices with Offices with Registrant
Underwriter
- ---------------------------------------------- ---------------------------------- ----------------------------
<S> <C> <C>
Ronald G. Abrahamson Vice President-Service Quality None
IDS Tower 10 and Reengineering
Minneapolis, MN 55440
Douglas A. Alger Senior Vice President-Human None
IDS Tower 10 Resources
Minneapolis, MN 55440
Peter J. Anderson Senior Vice President-Investment Vice President
IDS Tower 10 Operations
Minneapolis, MN 55440
Ward D. Armstrong Vice President-American Express None
IDS Tower 10 Retirement Services
Minneapolis, MN 55440
John M. Baker Vice President-Plan Sponsor None
IDS Tower 10 Services
Minneapolis, MN 55440
Gurudutt Balgia Vice President-Structured None
IDS Tower 10 Products
Minneapolis, MN 55440
Joseph M. Barsky III Vice President-Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
Timothy V. Bechtold Vice President-Risk Management None
IDS Tower 10 Products
Minneapolis, MN 55440
John D. Begley Group Vice President-Ohio/Indiana None
Suite 100
7760 Olentangy River Rd.
Columbus, OH 43235
Brent L. Bisson Group Vice President-Los Angeles None
Suite 900, E. Westside Twr Metro
11835 West Olympic Blvd.
Los Angeles, CA 90064
John C. Boeder Vice President-Mature Market None
IDS Tower 10 Group
Minneapolis, MN 55440
Walter K. Booker Group Vice President-New Jersey None
Suite 200, 3500 Market Street
Camp Hill, NJ 17011
Bruce J. Bordelon Group Vice President-Gulf States None
Galleria One Suite 1900
Galleria Blvd.
Metairie, LA 70001
Charles R. Branch Group Vice President-Northwest None
Suite 200
West 111 North River Dr.
Spokane, WA 99201
Douglas W. Brewers Vice President-Sales Support None
IDS Tower 10
Minneapolis, MN 55440
Karl J. Breyer Corporate Senior Vice President None
IDS Tower 10
Minneapolis, MN 55440
Cynthia M. Carlson Vice President-American Express None
IDS Tower 10 Securities Services
Minneapolis, MN 55440
Mark W. Carter Senior Vice President and Chief None
IDS Tower 10 Marketing Officer
Minneapolis, MN 55440
James E. Choat Senior Vice None
IDS Tower 10 President-Institutional Products
Minneapolis, MN 55440 Group
Kenneth J. Ciak Vice President and General None
IDS Property Casualty Manager-IDS Property Casualty
1400 Lombardi Avenue
Green Bay, WI 54304
Paul A. Connolly Vice President-Advisor Staffing, None
IDS Tower 10 Training and Support
Minneapolis, MN 55440
Roger C. Corea Group Vice President-Upstate New None
290 Woodcliff Drive York
Fairport, NY 14450
Henry J. Cormier Group Vice President-Connecticut None
Commerce Center One
333 East River Drive
East Hartford, CT 06108
John M. Crawford Group Vice President-Arkansas/ None
Suite 200 Springfield/Memphis
10800 Financial Ctr Pkwy
Little Rock, AR 72211
Kevin F. Crowe Group Vice None
Suite 312 President-Carolinas/Eastern
7300 Carmel Executive Pk Georgia
Charlotte, NC 28226
Colleen Curran Vice President and Assistant None
IDS Tower 10 General Counsel
Minneapolis, MN 55440
Luz Maria Davis Vice President-Communications None
IDS Tower 10
Minneapolis, MN 55440
Scott M. DiGiammarino Group Vice None
Suite 500, 8045 Leesburg Pike President-Washington/Baltimore
Vienna, VA 22182
Bradford L. Drew Group Vice President-Eastern None
Two Datran Center Florida
Penthouse One B
9130 S. Dadeland Blvd.
Miami, FL 33156
Douglas K. Dunning Vice President-Assured Assets None
IDS Tower 10 Product Development and
Minneapolis, MN 55440 Management
James P. Egge Group Vice President-Western None
4305 South Louise, Suite 202 Iowa, Nebraska, Dakotas
Sioux Falls, SD 57103
Gordon L. Eid Senior Vice President, General None
IDS Tower 10 Counsel and Chief Compliance
Minneapolis, MN 55440 Officer
Robert M. Elconin Vice President-Government None
IDS Tower 10 Relations
Minneapolis, MN 55440
Phillip W. Evans Group Vice President-Rocky None
Suite 600 Mountain
6985 Union Park Center
Midvale, UT 84047-4177
Louise P. Evenson Group Vice President-San None
Suite 200 Francisco Bay Area
1333 N. California Blvd.
Walnut Creek, CA 94596
Gordon M. Fines Vice President-Mutual Fund None
IDS Tower 10 Equity Investments
Minneapolis, MN 55440
Douglas L. Forsberg Vice President-Institutional None
IDS Tower 10 Products Group
Minneapolis, MN 55440
Jeffrey P. Fox Vice President and Corporate None
IDS Tower 10 Controller
Minneapolis, MN 55440
William P. Fritz Group Vice President-Gateway None
Suite 160
12855 Flushing Meadows Dr
St. Louis, MO 63131
Carl W. Gans Group Vice President-Twin City None
8500 Tower Suite 1770 Metro
8500 Normandale Lake Blvd.
Bloomington, MN 55437
David A. Hammer Vice President and Marketing None
IDS Tower 10 Controller
Minneapolis, MN 55440
Teresa A. Hanratty Group Vice President-Northern None
Suites 6&7 New England
169 South River Road
Bedford, NH 03110
Robert L. Harden Group Vice President-Boston Metro None
Two Constitution Plaza
Boston, MA 02129
Lorraine R. Hart Vice President-Insurance None
IDS Tower 10 Investments
Minneapolis, MN 55440
Scott A. Hawkinson Vice President and None
IDS Tower 10 Controller-Private Client Group
Minneapolis, MN 55440
Brian M. Heath Group Vice President-North Texas None
Suite 150
801 E. Campbell Road
Richardson, TX 75081
Janis K. Heaney Vice President-Incentive None
IDS Tower 10 Management
Minneapolis, MN 55440
James G. Hirsh Vice President and Assistant None
IDS Tower 10 General Counsel
Minneapolis, MN 55440
Jon E. Hjelm Group Vice President-Rhode None
319 Southbridge Street Island/Central-Western
Auburn, MA 01501 Massachusetts
David J. Hockenberry Group Vice President-Eastern None
30 Burton Hills Blvd. Tennessee
Suite 175
Nashville, TN 37215
Jeffrey S. Horton Vice President and Treasurer None
IDS Tower 10
Minneapolis, MN 55440
David R. Hubers Chairman, President and Chief Board member
IDS Tower 10 Executive Officer
Minneapolis, MN 55440
Martin G. Hurwitz Vice President-Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
James M. Jensen Vice President-Insurance Product None
IDS Tower 10 Development and Management
Minneapolis, MN 55440
Marietta L. Johns Senior Vice President-Field None
IDS Tower 10 Management
Minneapolis, MN 55440
Nancy E. Jones Vice President-Business None
IDS Tower 10 Development
Minneapolis, MN 55440
Ora J. Kaine Vice President-Financial None
IDS Tower 10 Advisory Services
Minneapolis, MN 55440
Matthew N. Karstetter Vice President-Investment None
IDS Tower 10 Accounting
Minneapolis, MN 55440
Linda B. Keene Vice President-Market Development None
IDS Tower 10
Minneapolis, MN 55440
G. Michael Kennedy Vice President-Investment None
IDS Tower 10 Services and Investment Research
Minneapolis, MN 55440
Susan D. Kinder Senior Vice None
IDS Tower 10 President-Distribution Services
Minneapolis, MN 55440
Brian C. Kleinberg Executive Vice None
IDS Tower 10 President-Financial Direct
Minneapolis, MN 55440
Richard W. Kling Senior Vice President-Products None
IDS Tower 10
Minneapolis, MN 55440
Paul F. Kolkman Vice President-Actuarial Finance None
IDS Tower 10
Minneapolis, MN 55440
Claire Kolmodin Vice President-Service Quality None
IDS Tower 10
Minneapolis, MN 55440
David S. Kreager Group Vice President-Greater None
Suite 108 Michigan
Trestle Bridge V
5136 Lovers Lane
Kalamazoo, MI 49002
Steven C. Kumagai Director and Senior Vice None
IDS Tower 10 President-Field Management and
Minneapolis, MN 55440 Business Systems
Mitre Kutanovski Group Vice President-Chicago None
Suite 680 Metro
8585 Broadway
Merrillville, IN 48410
Kurt A. Larson Vice President-Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
Lori J. Larson Vice President-Brokerage and None
IDS Tower 10 Direct Services
Minneapolis, MN 55440
Daniel E. Laufenberg Vice President and Chief U.S. None
IDS Tower 10 Economist
Minneapolis, MN 55440
Peter A. Lefferts Senior Vice President-Corporate None
IDS Tower 10 Strategy and Development
Minneapolis, MN 55440
Douglas A. Lennick Director and Executive Vice None
IDS Tower 10 President-Private Client Group
Minneapolis, MN 55440
Mary J. Malevich Vice President-Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
Fred A. Mandell Vice President-Field Marketing None
IDS Tower 10 Readiness
Minneapolis, MN 55440
Daniel E. Martin Group Vice President-Pittsburgh None
Suite 650 Metro
5700 Corporate Drive
Pittsburgh, PA 15237
Sarah A. Mealey Vice President-Mutual Funds None
IDS Tower 10
Minneapolis, MN 55440
Paula R. Meyer Vice President-Assured Assets None
IDS Tower 10
Minneapolis, MN 55440
William P. Miller Vice President and Senior None
IDS Tower 10 Portfolio Manager
Minneapolis, MN 55440
James A. Mitchell Executive Vice None
IDS Tower 10 President-Marketing and Products
Minneapolis, MN 55440
Pamela J. Moret Vice President-Variable Assets None
IDS Tower 10
Minneapolis, MN 55440
Alan D. Morgenstern Group Vice President-Central None
Suite 200 California/Western Nevada
3500 Market Street
Camp Hill, NJ 17011
Barry J. Murphy Senior Vice President-Client None
IDS Tower 10 Service
Minneapolis, MN 55440
Mary Owens Neal Vice President-Mature Market None
IDS Tower 10 Segment
Minneapolis, MN 55440
Thomas V. Nicolosi Group Vice President-New York None
Suite 220 Metro Area
500 Mamaroneck Avenue
Harrison, NY 10528
Michael J. O'Keefe Vice President-Advisory Business None
IDS Tower 10 Systems
Minneapolis, MN 55440
James R. Palmer Vice President-Taxes None
IDS Tower 10
Minneapolis, MN 55440
Marc A. Parker Group Vice None
10200 SW Greenburg Road President-Portland/Eugene
Suite 110
Portland OR 97223
Carla P. Pavone Vice President-Compensation and None
IDS Tower 10 Field Administration
Minneapolis, MN 55440
Thomas P. Perrine Senior Vice President-Group None
IDS Tower 10 Relationship Leader/AXP
Minneapolis, MN 55440 Technologies Financial Services
Susan B. Plimpton Vice President-Marketing Services None
IDS Tower 10
Minneapolis, MN 55440
Larry M. Post Group Vice None
One Tower Bridge President-Philadelphia Metro
100 Front Street 8th Fl
West Conshohocken, PA 19428
Ronald W. Powell Vice President and Assistant None
IDS Tower 10 General Counsel
Minneapolis, MN 55440
Diana R. Prost Group Vice None
3030 N.W. Expressway President-Kansas/Oklahoma
Suite 900
Oklahoma City, OK 73112
James M. Punch Vice President and Project None
IDS Tower 10 Manager-Platform I Value Enhanced
Minneapolis, MN 55440
Frederick C. Quirsfeld Senior Vice President-Fixed None
IDS Tower 10 Income
Minneapolis, MN 55440
Rollyn C. Renstrom Vice President-Corporate None
IDS Tower 10 Planning and Analysis
Minneapolis, MN 55440
R. Daniel Richardson III Group Vice President-Southern None
Suite 800 Texas
Arboretum Plaza One
9442 Capital of Texas Hwy N.
Austin, TX 78759
ReBecca K. Roloff Senior Vice President-Field None
IDS Tower 10 Management and Financial
Minneapolis, MN 55440 Advisory Service
Stephen W. Roszell Senior Vice None
IDS Tower 10 President-Institutional
Minneapolis, MN 55440
Max G. Roth Group Vice None
Suite 201 S IDS Ctr President-Wisconsin/Upper
1400 Lombardi Avenue Michigan
Green Bay, WI 54304
Erven A. Samsel Senior Vice President-Field None
45 Braintree Hill Park Management
Suite 402
Braintree, MA 02184
Russell L. Scalfano Group Vice None
Suite 201 President-Illinois/Indiana/Kentucky
101 Plaza East Blvd.
Evansville, IN 47715
William G. Scholz Group Vice President-Arizona/Las None
Suite 205 Vegas
7333 E Doubletree Ranch Rd
Scottsdale, AZ 85258
Stuart A. Sedlacek Senior Vice President and Chief None
IDS Tower 10 Financial Officer
Minneapolis, MN 55440
Donald K. Shanks Vice President-Property Casualty None
IDS Tower 10
Minneapolis, MN 55440
F. Dale Simmons Vice President-Senior Portfolio None
IDS Tower 10 Manager, Insurance Investments
Minneapolis, MN 55440
Judy P. Skoglund Vice President-Quality and None
IDS Tower 10 Service Support
Minneapolis, MN 55440
James B. Solberg Group Vice President-Eastern None
466 Westdale Mall Iowa Area
Cedar Rapids, IA 52404
Bridget Sperl Vice President-Geographic None
IDS Tower 10 Service Teams
Minneapolis, MN 55440
Paul J. Stanislaw Group Vice President-Southern None
Suite 1100 California
Two Park Plaza
Irvine, CA 92714
Lisa A. Steffes Vice President-Cardmember None
IDS Tower 10 Initiatives
Minneapolis, MN 55440
Lois A. Stilwell Group Vice President-Outstate None
Suite 433 Minnesota Area/ North
9900 East Bren Road Dakota/Western Wisconsin
Minnetonka, MN 55343
William A. Stoltzmann Vice President and Assistant None
IDS Tower 10 General Counsel
Minneapolis, MN 55440
James J. Strauss Vice President and General None
IDS Tower 10 Auditor
Minneapolis, MN 55440
Jeffrey J. Stremcha Vice President-Information None
IDS Tower 10 Resource Management/ISD
Minneapolis, MN 55440
Barbara Stroup Stewart Vice President-Channel None
IDS Tower 10 Development
Minneapolis, MN 55440
Craig P. Taucher Group Vice None
Suite 150 President-Orlando/Jacksonville
4190 Belfort Road
Jacksonville, FL 32216
Neil G. Taylor Group Vice None
Suite 425 President-Seattle/Tacoma/Hawaii
101 Elliott Avenue West
Seattle, WA 98119
Peter S. Velardi Group Vice None
Suite 180 President-Atlanta/Birmingham
1200 Ashwood Parkway
Atlanta, GA 30338
Charles F. Wachendorfer Group Vice President-Detroit None
8115 East Jefferson Avenue Metro
Detroit, MI 48214
Wesley W. Wadman Vice President-Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
Donald F. Weaver Group Vice President-Greater None
3500 Market Street, Suite 200 Pennsylvania
Camp Hill, PA 17011
Norman Weaver Jr. Senior Vice President-Field None
1010 Main St. Suite 2B Management
Huntington Beach, CA 92648
Michael L. Weiner Vice President-Tax Research and None
IDS Tower 10 Audit
Minneapolis, MN 55440
Lawrence J. Welte Vice President-Investment None
IDS Tower 10 Administration
Minneapolis, MN 55440
Jeffry M. Welter Vice President-Equity and Fixed None
IDS Tower 10 Income Trading
Minneapolis, MN 55440
Thomas L. White Group Vice President-Cleveland None
Suite 200 Metro
28601 Chagrin Blvd.
Woodmere, OH 44122
Eric S. Williams Group Vice President-Virginia None
Suite 250
3951 Westerre Parkway
Richmond, VA 23233
William J. Williams Group Vice President-Western None
Two North Tamiami Trail Florida
Suite 702
Sarasota, FL 34236
Edwin M. Wistrand Vice President and Assistant None
IDS Tower 10 General Counsel
Minneapolis, MN 55440
Michael D. Wolf Vice President-Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
Michael R. Woodward Senior Vice President-Field None
32 Ellicott St Management
Suite 100
Batavia, NY 14020
</TABLE>
<PAGE>
Item 29(c). Not applicable.
Item 30. Location of Accounts and Records
American Express 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>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant, IDS Bond Fund, Inc., certifies that it
meets the requirements for the 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 27th day of Oct., 1998.
IDS BOND FUND, INC.
By __________________________________________
William R. Pearce, Chief Executive Officer
By: __________________________________________
John R. Thomas, Chief Financial Officer
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 27th day of Oct., 1998.
Signature Capacity
/s/ William R. Pearce* Chairman of the Board
William R. Pearce
/s/ John R. Thomas* Director
John R. Thomas
/s/ H. Brewster Atwater, Jr.* Director
H. Brewster Atwater, Jr.
/s/ Lynne V. Cheney* Director
Lynne V. Cheney
/s/ William H. Dudley* Director
William H. Dudley
/s/ David R. Hubers* Director
David R. Hubers
/s/ Heinz F. Hutter* Director
Heinz F. Hutter
<PAGE>
Signature Capacity
/s/ Anne. P. Jones* Director
Anne P. Jones
/s/ Alan K. Simpson* Director
Alan K. Simpson
/s/ Edson W. Spencer* Director
Edson W. Spencer
/s/ Wheelock Whitney* Director
Wheelock Whitney
/s/ C. Angus Wurtele* Director
C. Angus Wurtele
*Signed pursuant to Directors' Power of Attorney, dated Jan. 7, 1998, filed
electronically herewith, by:
_______________________________
William R. Pearce
<PAGE>
CONTENTS OF THIS POST-EFFECTIVE AMENDMENT NO. 48
TO REGISTRATION STATEMENT NO. 2-51586
This Post-Effective Amendment contains the following papers and documents:
The facing sheet.
Cross reference sheet.
Part A.
The prospectus.
Part B.
Statement of Additional Information.
Financial Statements.
Part C.
Other information.
The signatures.
<PAGE>
Exhibit Index
IDS Bond Fund Inc.
File No. 2-51586/811-2503
Exhibit Description
9(b). Copy of Transfer Agency Agreement between Registrant and
American Express Client Service Corporation, dated Jan. 1,
1998.
10. Opinion and consent of counsel as to the legality of the
securities being registered.
11. Independent Auditors' Consent.
17. Financial Data Schedule
19(a). Directors' Power of Attorney to sign Amendments to this
Registration Statement, dated Jan. 7, 1998
<PAGE>
TRANSFER AGENCY AGREEMENT
AGREEMENT dated as of January 1, 1998, between IDS Bond Fund, Inc., a Minnesota
corporation, (the "Company" or "Fund"), and American Express Client Service
Corporation (the "Transfer Agent"), a Minnesota corporation.
In consideration of the mutual promises set forth below, the Company and the
Transfer Agent agree as follows:
1. Appointment of the Transfer Agent. The Company hereby appoints the
Transfer Agent, as transfer agent for its shares and as shareholder
servicing agent for the Company, and the Transfer Agent accepts such
appointment and agrees to perform the duties set forth below.
2. Compensation. The Company will compensate the Transfer Agent for the
performance of its obligations as set forth in Schedule A. Schedule A
does not include out-of-pocket disbursements of the Transfer Agent for
which the Transfer Agent shall be entitled to bill the Company
separately.
The Transfer Agent will bill the Company monthly. The fee provided for
hereunder shall be paid in cash by the Company to the Transfer Agent
within five (5) business days after the last day of each month.
Out-of-pocket disbursements shall include, but shall not be limited to,
the items specified in Schedule B. Reimbursement by the Company for
expenses incurred by the Transfer Agent in any month shall be made as
soon as practicable after the receipt of an itemized bill from the
Transfer Agent.
Any compensation jointly agreed to hereunder may be adjusted from time
to time by attaching to this Agreement a revised Schedule A, dated and
signed by an officer of each party.
3. Documents. The Company will furnish from time to time such
certificates, documents or opinions as the Transfer Agent deems to be
appropriate or necessary for the proper performance of its duties.
4. Representations of the Company and the Transfer Agent.
(a) The Company represents to the Transfer Agent that all
outstanding shares are validly issued, fully paid and
non-assessable by the Company. When shares are hereafter
issued in accordance with the terms of the Company's Articles
of Incorporation and its By-laws, such shares shall be validly
issued, fully paid and non-assessable by the Company.
(b) The Transfer Agent represents that it is registered under
Section 17A(c) of the Securities Exchange Act of 1934. The
Transfer Agent agrees to maintain the necessary facilities,
equipment and personnel to perform its duties and obligations
under this agreement and to comply with all applicable laws.
<PAGE>
5. Duties of the Transfer Agent. The Transfer Agent shall be responsible,
separately and through its subsidiaries or affiliates, for the
following functions:
(a) Sale of Fund Shares.
(1) On receipt of an application and payment, wired
instructions and payment, or payment identified as
being for the account of a shareholder, the Transfer
Agent will deposit the payment, prepare and present
the necessary report to the Custodian and record the
purchase of shares in a timely fashion in accordance
with the terms of the Fund's prospectus. All shares
shall be held in book entry form and no certificate
shall be issued unless the Fund is permitted to do so
by its prospectus and the purchaser so requests.
(2) On receipt of notice that payment was dishonored, the
Transfer Agent shall stop redemptions of all shares
owned by the purchaser related to that payment, place
a stop payment on any checks that have been issued to
redeem shares of the purchaser and take such other
action as it deems appropriate.
(b) Redemption of Fund Shares. On receipt of instructions to
redeem shares in accordance with the terms of the Fund's
prospectus, the Transfer Agent will record the redemption of
shares of the Fund, prepare and present the necessary report
to the Custodian and pay the proceeds of the redemption to the
shareholder, an authorized agent or legal representative upon
the receipt of the monies from the Custodian.
(c) Transfer or Other Change Pertaining to Fund Shares. On receipt
of instructions or forms acceptable to the Transfer Agent to
transfer the shares to the name of a new owner, change the
name or address of the present owner or take other legal
action, the Transfer Agent will take such action as is
requested.
(d) Exchange of Fund Shares. On receipt of instructions to
exchange the shares of the Fund for the shares of another fund
in the IDS MUTUAL FUND GROUP or other American Express
Financial Corporation product in accordance with the terms of
the prospectus, the Transfer Agent will process the exchange
in the same manner as a redemption and sale of shares.
(e) Right to Seek Assurance. The Transfer Agent may refuse to
transfer, exchange or redeem shares of the Fund or take any
action requested by a shareholder until it is satisfied that
the requested transaction or action is legally authorized or
until it is satisfied there is no basis for any claims adverse
to the transaction or action. It may rely on the provisions of
the Uniform Act for the Simplification of Fiduciary Security
Transfers or the Uniform Commercial Code. The Company shall
indemnify the Transfer Agent for any act done or omitted to be
done in reliance on such laws or for refusing to transfer,
exchange or redeem shares or taking any requested action if it
acts on a good faith belief that the transaction or action is
illegal or unauthorized.
<PAGE>
(f) Shareholder Records, Reports and Services.
(1) The Transfer Agent shall maintain all shareholder
accounts, which shall contain all required tax,
legally imposed and regulatory information; shall
provide shareholders, and file with federal and state
agencies, all required tax and other reports
pertaining to shareholder accounts; shall prepare
shareholder mailing lists; shall cause to be printed
and mailed all required prospectuses, annual reports,
semiannual reports, statements of additional
information (upon request), proxies and other
mailings to shareholders; and shall cause proxies to
be tabulated.
(2) The Transfer Agent shall respond to all valid
inquiries related to its duties under this Agreement.
(3) The Transfer Agent shall create and maintain all
records in accordance with all applicable laws, rules
and regulations, including, but not limited to, the
records required by Section 31(a) of the Investment
Company Act of 1940.
(g) Dividends and Distributions. The Transfer Agent shall prepare
and present the necessary report to the Custodian and shall
cause to be prepared and transmitted the payment of income
dividends and capital gains distributions or cause to be
recorded the investment of such dividends and distributions in
additional shares of the Fund or as directed by instructions
or forms acceptable to the Transfer Agent.
(h) Confirmations and Statements. The Transfer Agent shall confirm
each transaction either at the time of the transaction or
through periodic reports as may be legally permitted.
(i) Lost or Stolen Checks. The Transfer Agent will replace lost or
stolen checks issued to shareholders upon receipt of proper
notification and will maintain any stop payment orders against
the lost or stolen checks as it is economically desirable to
do.
(j) Reports to Company. The Transfer Agent will provide reports
pertaining to the services provided under this Agreement as
the Company may request to ascertain the quality and level of
services being provided or as required by law.
(k) Other Duties. The Transfer Agent may perform other duties for
additional compensation if agreed to in writing by the parties
to this Agreement.
6. Ownership and Confidentiality of Records. The Transfer Agent agrees
that all records prepared or maintained by it relating to the services
to be performed by it under the terms of this Agreement are the
property of the Company and may be inspected by the Company or any
person retained by the Company at reasonable times. The Company and
Transfer Agent agree to protect the confidentiality of those records.
<PAGE>
7. Action by Board and Opinion of Counsel. The Transfer Agent may rely on
resolutions of the Board of Directors (the "Board") or the Executive
Committee of the Board and on opinion of counsel for the Company.
8. Duty of Care. It is understood and agreed that, in furnishing the Company
with the services as herein provided, neither the Transfer Agent, nor any
officer, director or agent thereof shall be held liable for any loss
arising out of or in connection with their actions under this Agreement so
long as they act in good faith and with due diligence, and are not
negligent or guilty of any willful misconduct. It is further understood and
agreed that the Transfer Agent may rely upon information furnished to it
reasonably believed to be accurate and reliable. In the event the Transfer
Agent is unable to perform its obligations under the terms of this
Agreement because of an act of God, strike or equipment or transmission
failure reasonably beyond its control, the Transfer Agent shall not be
liable for any damages resulting from such failure.
9. Term and Termination. This Agreement shall become effective on the date
first set forth above (the "Effective Date") and shall continue in effect
from year to year thereafter as the parties may mutually agree; provided
that either party may terminate this Agreement by giving the other party
notice in writing specifying the date of such termination, which shall be
not less than 60 days after the date of receipt of such notice. In the
event such notice is given by the Company, it shall be accompanied by a
vote of the Board, certified by the Secretary, electing to terminate this
Agreement and designating a successor transfer agent or transfer agents.
Upon such termination and at the expense of the Company, the Transfer Agent
will deliver to such successor a certified list of shareholders of the Fund
(with name, address and taxpayer identification or Social Security number),
a historical record of the account of each shareholder and the status
thereof, and all other relevant books, records, correspondence, and other
data established or maintained by the Transfer Agent under this Agreement
in the form reasonably acceptable to the Company, and will cooperate in the
transfer of such duties and responsibilities, including provisions for
assistance from the Transfer Agent's personnel in the establishment of
books, records and other data by such successor or successors.
10. Amendment. This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties.
11. Subcontracting. The Company agrees that the Transfer Agent may subcontract
for certain of the services described under this Agreement with the
understanding that there shall be no diminution in the quality or level of
the services and that the Transfer Agent remains fully responsible for the
services. Except for out-of-pocket expenses identified in Schedule B, the
Transfer Agent shall bear the cost of subcontracting such services, unless
otherwise agreed by the parties.
<PAGE>
12. Miscellaneous.
(a) This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable
without the written consent of the other party.
(b) This Agreement shall be governed by the laws of the State of
Minnesota.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers as of the day and year written above.
IDS BOND FUND, INC.
By: /s/ Leslie L. Ogg
Leslie L. Ogg
Vice President
AMERICAN EXPRESS CLIENT SERVICE CORPORATION
By: /s/ Barry J. Murphy
Barry J. Murphy
President
<PAGE>
Schedule A
IDS BOND FUND, INC.
FEE
The annual per account fee for services under this agreement, accrued daily and
payable monthly, is as follows:
Class A Class B Class Y
$15.50 $16.50 $15.50
<PAGE>
Schedule B
OUT-OF-POCKET EXPENSES
The Company shall reimburse the Transfer Agent monthly for the following
out-of-pocket expenses:
o typesetting, printing, paper, envelopes, postage and return postage for
proxy soliciting material, and proxy tabulation costs
o printing, paper, envelopes and postage for dividend notices, dividend
checks, records of account, purchase confirmations, exchange
confirmations and exchange prospectuses, redemption confirmations,
redemption checks, confirmations on changes of address and any other
communication required to be sent to shareholders
o typesetting, printing, paper, envelopes and postage for prospectuses,
annual and semiannual reports, statements of additional information,
supplements for prospectuses and statements of additional information
and other required mailings to shareholders
o stop orders
o outgoing wire charges
o other expenses incurred at the request or with the consent of the
Company
<PAGE>
October 27, 1998
IDS Bond Fund, Inc.
IDS Tower 10
Minneapolis, Minnesota 55440
Gentlemen:
I have examined the Articles of Incorporation and the By-Laws of IDS Bond Fund,
Inc. (the Company) and all necessary certificates, permits, minute books,
documents and records of the Company, and the applicable statutes of the State
of Minnesota, and it is my opinion that the shares sold in accordance with
applicable federal and state securities laws will be legally issued, fully paid,
and nonassessable.
This opinion may be used in connection with the Post-Effective Amendment.
Sincerely,
William R. Pearce
Attorney at Law
901 S. Marquette Ave., Suite 2810
Minneapolis, Minnesota 55402-3268
<PAGE>
Independent auditors' consent
The board and shareholders IDS Bond 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
October , 1998
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<NUMBER> 1
<NAME> IDS BOND FUND CLASS A
<S> <C>
<PERIOD-TYPE> YEAR
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<PERIOD-END> AUG-31-1998
<INVESTMENTS-AT-COST> 3925211911
<INVESTMENTS-AT-VALUE> 3972914680
<RECEIVABLES> 58563790
<ASSETS-OTHER> 29525032
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4061003502
<PAYABLE-FOR-SECURITIES> 35035618
<SENIOR-LONG-TERM-DEBT> 0
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<TOTAL-LIABILITIES> 69970616
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<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 33513092
<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 2709267781
<DIVIDEND-INCOME> 3732071
<INTEREST-INCOME> 290918829
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<EXPENSES-NET> 39039761
<NET-INVESTMENT-INCOME> 255611139
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<NET-CHANGE-FROM-OPS> 223624852
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<DISTRIBUTIONS-OF-INCOME> 185166841
<DISTRIBUTIONS-OF-GAINS> 41282498
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 88430002
<NUMBER-OF-SHARES-REDEEMED> 95013501
<SHARES-REINVESTED> 30359464
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<ACCUMULATED-NII-PRIOR> 5069429
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<GROSS-EXPENSE> 39637777
<AVERAGE-NET-ASSETS> 2705825098
<PER-SHARE-NAV-BEGIN> 5.22
<PER-SHARE-NII> 0.36
<PER-SHARE-GAIN-APPREC> (0.03)
<PER-SHARE-DIVIDEND> 0.36
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</TABLE>
<TABLE> <S> <C>
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<NAME> IDS BOND FUND CLASS B
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<PERIOD-TYPE> YEAR
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<PERIOD-END> AUG-31-1998
<INVESTMENTS-AT-COST> 3925211911
<INVESTMENTS-AT-VALUE> 3972914680
<RECEIVABLES> 58563790
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<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4061003502
<PAYABLE-FOR-SECURITIES> 35035618
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 34934989
<TOTAL-LIABILITIES> 69970616
<SENIOR-EQUITY> 0
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<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 1057345392
<DIVIDEND-INCOME> 3732071
<INTEREST-INCOME> 290918829
<OTHER-INCOME> 0
<EXPENSES-NET> 39039761
<NET-INVESTMENT-INCOME> 255611139
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<APPREC-INCREASE-CURRENT> (67075582)
<NET-CHANGE-FROM-OPS> 223624852
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 60794441
<DISTRIBUTIONS-OF-GAINS> 14848739
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 66777710
<NUMBER-OF-SHARES-REDEEMED> 47187636
<SHARES-REINVESTED> 12641358
<NET-CHANGE-IN-ASSETS> 316401218
<ACCUMULATED-NII-PRIOR> 5069429
<ACCUMULATED-GAINS-PRIOR> 56456360
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 18753472
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 39637777
<AVERAGE-NET-ASSETS> 999999011
<PER-SHARE-NAV-BEGIN> 5.22
<PER-SHARE-NII> 0.32
<PER-SHARE-GAIN-APPREC> (0.03)
<PER-SHARE-DIVIDEND> 0.32
<PER-SHARE-DISTRIBUTIONS> 0.08
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<PER-SHARE-NAV-END> 5.11
<EXPENSE-RATIO> 1.59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
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<NAME> IDS BOND FUND CLASS Y
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<PERIOD-END> AUG-31-1998
<INVESTMENTS-AT-COST> 3925211911
<INVESTMENTS-AT-VALUE> 3972914680
<RECEIVABLES> 58563790
<ASSETS-OTHER> 29525032
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4061003502
<PAYABLE-FOR-SECURITIES> 35035618
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 34934989
<TOTAL-LIABILITIES> 69970616
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3905437629
<SHARES-COMMON-STOCK> 43936961
<SHARES-COMMON-PRIOR> 22153291
<ACCUMULATED-NII-CURRENT> 4451773
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 33513092
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 47630392
<NET-ASSETS> 224419713
<DIVIDEND-INCOME> 3732071
<INTEREST-INCOME> 290918829
<OTHER-INCOME> 0
<EXPENSES-NET> 39039761
<NET-INVESTMENT-INCOME> 255611139
<REALIZED-GAINS-CURRENT> 35089295
<APPREC-INCREASE-CURRENT> (67075582)
<NET-CHANGE-FROM-OPS> 223624852
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 10267513
<DISTRIBUTIONS-OF-GAINS> 1901326
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 30799950
<NUMBER-OF-SHARES-REDEEMED> 11310471
<SHARES-REINVESTED> 2294191
<NET-CHANGE-IN-ASSETS> 316401218
<ACCUMULATED-NII-PRIOR> 5069429
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<GROSS-EXPENSE> 39637777
<AVERAGE-NET-ASSETS> 148397924
<PER-SHARE-NAV-BEGIN> 5.22
<PER-SHARE-NII> 0.36
<PER-SHARE-GAIN-APPREC> (0.03)
<PER-SHARE-DIVIDEND> 0.36
<PER-SHARE-DISTRIBUTIONS> 0.08
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 5.11
<EXPENSE-RATIO> 0.76
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
DIRECTORS/TRUSTEES POWER OF ATTORNEY
City of Minneapolis
State of Minnesota
Each of the undersigned, as directors and trustees of the below listed
open-end, diversified investment companies that previously have filed
registration statements and amendments thereto pursuant to the requirements of
the Securities Act of 1933 and the Investment Company Act of 1940 with the
Securities and Exchange Commission:
1933 Act 1940 Act
Reg. Number Reg. Number
IDS Bond Fund, Inc. 2-51586 811-2503
IDS California Tax-Exempt Trust 33-5103 811-4646
IDS Discovery Fund, Inc. 2-72174 811-3178
IDS Equity Select Fund, Inc. 2-13188 811-772
IDS Extra Income Fund, Inc. 2-86637 811-3848
IDS Federal Income Fund, Inc. 2-96512 811-4260
IDS Global Series, Inc. 33-25824 811-5696
IDS Growth Fund, Inc. 2-38355 811-2111
IDS High Yield Tax-Exempt Fund, Inc. 2-63552 811-2901
IDS International Fund, Inc. 2-92309 811-4075
IDS Investment Series, Inc. 2-11328 811-54
IDS Managed Retirement Fund, Inc. 2-93801 811-4133
IDS Market Advantage Series, Inc. 33-30770 811-5897
IDS Money Market Series, Inc. 2-54516 811-2591
IDS New Dimensions Fund, Inc. 2-28529 811-1629
IDS Precious Metals Fund, Inc. 2-93745 811-4132
IDS Progressive Fund, Inc. 2-30059 811-1714
IDS Selective Fund, Inc. 2-10700 811-499
IDS Special Tax-Exempt Series Trust 33-5102 811-4647
IDS Stock Fund, Inc. 2-11358 811-498
IDS Strategy Fund, Inc. 2-89288 811-3956
IDS Tax-Exempt Bond Fund, Inc. 2-57328 811-2686
IDS Tax-Free Money Fund, Inc. 2-66868 811-3003
IDS Utilities Income Fund, Inc. 33-20872 811-5522
hereby constitutes and appoints William R. Pearce and Leslie L. Ogg or either
one of them, as her or his attorney-in-fact and agent, to sign for her or him in
her or his name, place and stead any and all further amendments to said
registration statements filed pursuant to said Acts and any rules and
regulations thereunder, and to file such amendments with all exhibits thereto
and other documents in connection therewith with the Securities and Exchange
Commission, granting to either of them the full power and authority to do and
perform each and every act required and necessary to be done in connection
therewith.
<PAGE>
Dated the 7th day of January, 1998.
/s/ H. Brewster Atwater, Jr. /s/ William R. Pearce
H. Brewster Atwater, Jr. William R. Pearce
/s/ Lynne V. Cheney /s/ Alan K. Simpson
Lynne V. Cheney Alan K. Simpson
/s/ William H. Dudley /s/ Edson W. Spencer
William H. Dudley Edson W. Spencer
/s/ David R. Hubers /s/ John R. Thomas
David R. Hubers John R. Thomas
/s/ Heinz F. Hutter /s/ Wheelock Whitney
Heinz F. Hutter Wheelock Whitney
/s/ Anne P. Jones /s/ C. Angus Wurtele
Anne P. Jones C. Angus Wurtele
