IDS Life
Variable
Annuity
Fund A
Invests in a wide range of securities with the objective of long-term
capital appreciation for contract owners.
1998 SEMIANNUAL REPORT
American Express Financial Advisors
Managed by IDS Life Insurance Company
<PAGE>
IDS Life Variable Annuity Fund A
Message from the executive vice president
If you're an experienced investor, you know that the past few years have
been unusually strong for the U.S. stock market. Perhaps just as
important, history shows that bull markets don't last forever. Though
they're often unpredictable, declines -- whether they're brief or
long-lasting, moderate or substantial -- are always a possibility. We saw
evidence of that last October, when declines in Asian markets spawned a
sharp drop in several financial markets worldwide, including the U.S.
The potential for such volatility reinforces the need for investors to
periodically review their long-term financial goals and examine whether
their investment program remains on track to achieving them. Your
quarterly investment statements are one part of that monitoring process.
The other is a meeting with your American Express financial advisor. That
becomes even more important if there's a major change in your financial
situation or in the financial markets.
Pamela J. Moret
(picture of) Pamela J. Moret
Executive Vice President, Variable Assets
IDS Life Insurance Company
<PAGE>
Semiannual Report
IDS Life Variable Annuity Fund A
From your portfolio manager: A perspective
A generally positive environment for U.S. stocks provided the foundation
for a double-digit gain by the Fund during the first half of the fiscal
year -- January, through June, 1998.
On June 31, 1998, the accumulation unit value of IDS Life Variable Fund A
was $23.89, compared with $20.91 at the beginning of the year. The
increase represented a gain of 14.25% for the six months. (If you
purchased additional accumulation units during the period, your return
would have been affected by the sales and administrative charges, as
described in the Fund's prospectus.)
The period began on an uncertain note, as investors continued to sort out
the potential impact of the financial crisis that first hit Asian markets
last fall. By February, they evidently had decided that the U.S. market
would weather the storm relatively well, and, with support from ongoing
reports of subdued inflation and a growing economy, they sent stocks
soaring into the spring. At that point, the rally petered out, as concerns
about the possibility of weaker corporate profits and higher interest
rates held stocks back over the final two months of the period.
Working in the Fund's favor was the ongoing strength of
large-capitalization growth stocks -- the core of its investment
portfolio. Within that broad category, the Fund's largest area of
investment was in technology-related stocks, which were highly volatile
but, on the whole, productive. Consumer-related stocks, including those of
healthcare companies and retail chains, constituted another substantial
investment and proved to be comparatively consistent, positive performers.
Financial services stocks also provided very good results for the period,
thanks to declining interest rates.
As is the norm for this Fund, there was little portfolio turnover during
the six months -- a reflection of my buy-and-hold management style. Also,
I maintained only a small amount of cash reserves, preferring instead to
keep the great majority of assets working in stocks. While this low-cash
strategy makes the Fund's value more volatile, I believe it benefits
performance over the long term. That was clearly the case during the past
period.
Looking to the rest of the fiscal year, the investment environment hasn't
changed markedly from last January; the economy continues to grow,
inflation remains subdued and long-term interest rates have yet to
experience a meaningful increase. The ultimate impact of the Asian
financial crisis, however, is a new ingredient in the mix, and it may well
keep the stock market off balance at times.
In any event, I plan to maintain my investment emphasis on stocks of
well-managed, high-quality companies with dominant positions in their
respective markets. I believe they will fare best in what could continue
to be a volatile period for stocks.
Mitzi Malevich
(picture of) Mitzi Malevich
Mitzi Malevich
Portfolio Manager
<PAGE>
IDS Life Variable Annuity Fund A
The Fund's ten largest holdings
Percent Value
of Fund's as of
net assets June 30, 1998
Tellabs 5.11% $ 21,487,500
Coca-Cola 4.05 17,031,600
Cisco Systems 3.94 16,571,250
Microsoft 3.61 15,172,500
Merrill Lynch & Co 3.51 14,760,000
WorldCom 3.46 14,531,250
Washington Mutual 3.41 14,334,375
Travelers Group 3.24 13,640,625
HEALTHSOUTH Rehabilitation 3.10 13,055,525
Pfizer 3.10 13,042,500
For further detail about these holdings, please refer to the section
entitled "Investments in securities" herein.
(icon of) pie chart
The ten holdings listed here make up 36.53% of the Fund's net assets
<PAGE>
<TABLE>
<CAPTION>
IDS Life Variable Annuity Fund A
Statement of assets, liabilities and contract owners' equity June 30, 1998
Assets
(Unaudited)
<S> <C>
Investments in securities, at value (Note 1)
(identified cost, $225,719,345)........................................................... $421,311,135
Cash in bank on demand deposit.............................................................. 69,277
Dividends and interest receivable........................................................... 201,290
Receivable from IDS Life Insurance Company for contract purchase payments................... 5,823,722
---------
Total assets................................................................................ $427,405,424
============
Liabilities
Payable for contract terminations........................................................... 5,878,664
Payable for investment securities purchased................................................. 1,004,236
Payable to IDS Life Insurance Company for:
Mortality and expense assurance fee......................................................... 5,045
Investment management fee................................................................... 11,127
------
Total liabilities........................................................................... 6,899,072
=========
Contract owners' equity
Contracts in accumulation period-- 17,310,294 units at $23.89 per unit (Note 5)............. $413,621,164
Contracts in payment period................................................................. 6,885,188
---------
Total contract owners' equity............................................................... 420,506,352
-----------
Total liabilities and contract owners' equity............................................... $427,405,424
============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of operations Six months ended June 30, 1998
Investment income (loss) -- net
(Unaudited)
Income:
<S> <C>
Dividends................................................................................... $ 1,156,204
Interest.................................................................................... 389,031
-------
Total income................................................................................ 1,545,235
=========
Expenses:
Mortality and expense assurance fee (Note 2)................................................ 2,005,477
Investment management fee (Note 3).......................................................... 802,234
-------
Total expenses.............................................................................. 2,807,711
---------
Investment income (loss)-- net.............................................................. (1,262,476)
==========
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on investments..................................................... 28,664,990
Net change in unrealized appreciation (depreciation) on investments......................... 26,177,188
----------
Net gain (loss) on investments.............................................................. 54,842,178
----------
Net increase (decrease) in contract owners' equity from operations.......................... $53,579,702
===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS LIFE VARIABLE ANNUITY FUND A
Statements of changes in contract owners' equity
Six months ended Year ended
Operations June 30, 1998 Dec. 31, 1997
(Unaudited)
<S> <C> <C>
Investment income (loss)-- net...................................... $(1,262,476) $(2,268,845)
Net realized gain (loss) on investments............................. 28,664,990 45,417,991
Net change in unrealized appreciation (depreciation) on investments. 26,177,188 29,771,785
---------- ----------
Net increase (decrease) in contract owners' equity from operations.. 53,579,702 72,920,931
========== ==========
Contract transactions
Net contract purchase payments (Note 2)............................. 895,108 1,936,783
Repayment of temporary withdrawals.................................. 19,454 15,682
Net transfers from (to) fixed annuities............................. (388,064) (539,306)
Actuarial adjustment for mortality assurance on annuities
in payment period (Note 2)........................................ -- (60,462)
Contract termination payments and temporary withdrawals............. (12,726,400) (21,690,813)
Annuity payments.................................................... (426,373) (808,071)
-------- --------
Net increase (decrease) from contract transactions.................. (12,626,275) (21,146,187)
----------- -----------
Net increase (decrease) in contract owners' equity.................. 40,953,427 51,774,744
========== ==========
Contract owners' equity at beginning of period...................... 379,552,925 327,778,181
=========== ===========
Contract owners' equity at end of period............................ $420,506,352 $379,552,925
============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
IDS Life Variable Annuity Fund A
Notes to financial statements (Unaudited)
1. Organization and summary of significant accounting policies
IDS Life Variable Annuity Fund A (the Fund) is organized as a segregated
asset account of IDS Life Insurance Company (IDS Life) under Minnesota law
and is registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company. The Fund's assets are
held for the exclusive benefit of its variable annuity contract owners and
are not chargeable with any liabilities arising from the other business
activities of IDS Life. The significant accounting policies followed by
the Fund are summarized as follows:
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.
Investments in securities
Securities traded on national securities exchanges are valued at the last
quoted sales price on the principal exchange on which traded. Securities
traded in the over-the-counter market are valued at the mean of the last
quoted bid and asked price. Short-term securities that mature in 60 days
or less are valued at amortized cost. Those 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. Short-term securities
originally purchased with maturities of more than 60 days but which
currently mature in 60 days or less are valued on an amortized cost basis
using the market value or approximate market value on the 61st day before
maturity. Bonds and other securities are valued at fair value as
determined by the Board of Managers when market quotations are not readily
available. Determination of fair value involves, among other things,
references to market indexes, matrices and data from independent brokers.
Security transactions are accounted for on the date the securities are
purchased and sold. Dividend income is recorded on the ex-dividend date.
Option contracts
In order to produce incremental earnings, protect gains and facilitate
buying and selling of securities for investment purposes, the Fund may buy
and sell put and call options and write covered call options on portfolio
securities. 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 an option is exercised, the proceeds on sales for a
written call option, the purchase cost for a written put option or the
cost of a security for a purchased put or call option is adjusted by the
amount of premium received or paid.
During the six months ended June 30, 1998, the Fund did not buy or sell
any put or call options or write any covered call or put options. There
were no option contracts outstanding at June 30, 1998.
Futures contracts
In order to gain exposure to or protect itself from changes in the market,
the Fund may buy and sell stock index futures contracts and related
options. 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 the
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.
During the six months ended June 30, 1998, the Fund did not buy or sell
stock index futures contracts and related options. There were no stock
index futures contracts outstanding at June 30, 1998.
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 rate of exchange
on the transaction date. It is not practicable to identify that portion of
realized and unrealized gain or loss arising from changes in the exchange
rates from the portion arising from changes in the market value of
investments.
The Fund may also 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.
There were no forward foreign currency exchange contracts outstanding at
June 30, 1998.
Federal income taxes
IDS Life is taxed as a life insurance company. The Fund is treated as part
of IDS Life for federal income tax purposes. Under current federal income
tax law, no taxes are payable with respect to any income of the Fund.
2. Mortality and expense assurance fee and sales charges
IDS Life makes contractual assurances to the Fund that possible future
adverse changes in administrative expenses and mortality experience of the
annuitants and beneficiaries will not affect the Fund. The mortality and
expense assurance fee paid to IDS Life is computed daily and is equal on
an annual basis to 1 percent of the average daily net assets of the Fund.
Charges by IDS Life for its sales and administrative services applicable
to the variable annuity contracts amounted to $37,737 for the six months
ended June 30, 1998, and $80,608 for the year ended Dec. 31, 1997. Such
charges are not an expense of the Fund. They are deducted from contract
purchase payments and are not included in the net contract purchase
payments to the Fund.
3. Investment management agreement
The Fund has an Investment Management Agreement with IDS Life. For its
services, IDS Life is paid a fee based on the aggregate average daily net
assets of the Fund. The investment management fee paid to IDS Life is
computed daily and is equal on an annual basis to 0.4 percent of the
average daily net assets of the Fund.
In addition to paying its own management fee, the Fund also pays all
brokerage commissions and charges in the purchase and sale of assets.
Brokerage charges are paid to IDS Life for reimbursement of charges
incurred in the purchase and sale of foreign securities.
4. Security transactions and basis for determining realized gain and loss
Cost of purchases and proceeds from sales of securities, (other than
short-term obligations) aggregated $41,529,654 and $58,436,355 for the six
months ended June 30, 1998. Net realized gain on investments has been
determined on the basis of identified costs.
5. Accumulation units
The changes in number of outstanding units applicable to contracts in the
accumulation period were as follows:
Six months ended Year ended
June 30, 1998 Dec.31,1997
Units outstanding at beginning of period............. 17,871,071 18,939,349
Additions for contract purchase payments and repayments 40,916 97,242
Net transfers from (to) fixed annuities.............. (19,174) (31,919)
Deductions for contract terminations and withdrawals. (582,519) (1,133,601)
-------- ----------
Units outstanding at end of period................... 17,310,294 17,871,071
========== ==========
<PAGE>
<TABLE>
<CAPTION>
6. Financial highlights
The table below shows certain important financial information for
evaluating the Fund's results.
Fiscal year ended Dec. 31,
1998a 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Accumulation unit value at beginning of period $20.91 $17.04 $13.93 $10.27 $10.70 $ 9.77
Income from investment operations:
Net investment income (loss)........ (.13) (.12) (.07) (.02) .03 (.02)
Net gains (losses) on securities, both realized
and unrealized...................... 3.11 3.99 3.18 3.68 (.46) 0.95
Total from investment operations.... 2.98 3.87 3.11 3.66 (.43) 0.93
Accumulation unit value at end of period $23.89 $20.91 $17.04 $13.93 $10.27 $10.70
Total returnb....................... 14.25% 22.71% 22.33% 35.64% (4.01%) 9.50%
Ratios/supplemental data
Total contract owner's equity at end of period
(000 omitted)....................... $420,506 $379,553 $327,778 $284,407 $223,317 $241,623
Ratio of operating expenses to average net assets 1.40%c 1.40% 1.40% 1.40% 1.40% 1.40%
Ratio of net investment income (loss) to average
net assets.......................... (.63%)c (.62%) (.43%) (.19%) .27% (.17%)
Portfolio turnover rate............. 11% 33% 13% 46% 63% 64%
Average brokerage commission rated.. $.0509 $.0502 $.0550 -- -- --
a Six months ended June 30, 1998 (Unaudited).
b Total return does not reflect payment of a sales charge.
c Adjusted to an annual basis.
d Effective fiscal year 1996, the Fund is required to disclose an average
brokerage commission rate per share for security trades on which commissions
are charged. The comparability of this information may be affected by the
fact that commission rates per share vary significantly among foreign
countries.
The foregoing table pertains to accumulation units only. There are two
kinds of units. As long as contract holders are paying into the Fund they
are called "accumulation" units. When contract owners begin to receive the
annuity, they change to "annuity" units.
The value of an annuity unit (assuming a 3.5 percent investment rate) was
$8.49 as of June 30, 1998, $7.55 as of Dec. 31, 1997, $6.37 as of Dec. 31,
1996, $5.39 as of Dec. 31, 1995, $4.11 as of Dec. 31, 1994, and $4.44 as
of Dec. 31, 1993. The value of an annuity unit (assuming a 5 percent
investment rate) was $5.48 as of June 30, 1998, $4.92 as of Dec. 31, 1997,
$4.21 as of Dec. 31, 1996, $3.61 as of Dec. 31, 1995, $2.80 as of Dec. 31,
1994, and $3.06 as of Dec. 31, 1993.
</TABLE>
<PAGE>
IDS Life Variable Annuity Fund A
Investments in securities, June 30, 1998 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (95.7%)
Issuer Shares Value(a)
Aerospace & defense (1.3%)
Boeing 120,000 $5,347,500
Airlines (1.2%)
Northwest Airlines Cl A 75,000(b) 2,892,187
UAL 30,000(b) 2,340,000
Total 5,232,187
Banks and savings & loans (4.5%)
BankBoston 80,000 4,450,000
Washington Mutual 330,000 14,334,375
Total 18,784,375
Beverages & tobacco (4.1%)
Coca-Cola 199,200 17,031,600
Chemicals (2.3%)
USA Waste Services 200,000(b) 9,875,000
Communications equipment & services (6.9%)
Andrew Corp 263,300(b) 4,755,856
MasTec 120,000(b) 2,865,000
Tellabs 300,000(b) 21,487,500
Total 29,108,356
Computers & office equipment (16.1%)
Cisco Systems 180,000(b) 16,571,250
Compaq Computer 300,000 8,512,500
Computer Associates Intl 75,000 4,167,188
EMC 100,000(b) 4,481,250
Hewlett-Packard 100,000 5,987,500
Intl Business Machines 50,000 5,740,625
Microsoft 140,000(b) 15,172,500
PeopleSoft 50,000(b) 2,350,000
Solectron 40,000(b) 1,682,500
Visio 61,800(b) 2,950,950
Total 67,616,263
Electronics (4.5%)
Applied Materials 195,600(b) 5,770,200
Intel 120,000 8,895,000
Maxim Integrated Products 140,000(b) 4,436,250
Total 19,101,450
Energy (2.0%)
Anadarko Petroleum 125,000 8,398,438
Energy equipment & services (1.7%)
Halliburton 160,000 7,130,000
Financial services (14.9%)
Associates First Capital Cl A 100,000 7,687,500
Franklin Resources 200,000 10,800,000
Household Intl 240,000 11,940,000
Merrill Lynch & Co 160,000 14,760,000
Providian Financial 51,300 4,030,256
Travelers Group 225,000 13,640,625
Total 62,858,381
Foreign (7.2%)(c)
Ericsson (LM) ADR Cl B 300,000 $8,587,500
Schlumberger 150,000 10,246,875
Tyco Intl 180,000 11,340,000
Total 30,174,375
Health care (9.1%)
Boston Scientific 50,000(b) 3,581,250
Guidant 150,000 10,696,875
Johnson & Johnson 30,000 2,212,500
Medtronic 70,000 4,462,500
Pfizer 120,000 13,042,500
Warner-Lambert 60,000 4,162,500
Total 38,158,125
Health care services (6.5%)
First Health Group 300,000(b) 8,550,000
HEALTHSOUTH Rehabilitation 489,200(b) 13,055,525
Service Corp Intl 130,000 5,573,750
Total 27,179,275
Household products (1.6%)
ServiceMaster 176,700 6,725,644
Industrial equipment & services (4.2%)
Caterpillar 160,000 8,460,000
Deere & Co 171,000 9,041,625
Total 17,501,625
Leisure time & entertainment (2.1%)
Mattel 212,500 8,991,406
Textiles & apparel (1.0%)
Nike Cl B 90,000 4,381,875
Utilities -- telephone (4.5%)
Sprint 60,000 4,230,000
WorldCom 300,000(b) 14,531,250
Total 18,761,250
Total common stocks
(Cost: $206,817,062) $402,357,125
Bond (0.1%)
Issuer Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
U.S. Treasury
05-15-16 7.25% $250,000 $292,750
Total bond
(Cost: $241,023) $292,750
Short-term securities (4.4%)
Issuer Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
U.S. government agencies (2.6%)
Federal Home Loan Mtge Corp Disc Nts
07-06-98 5.45% $3,000,000 $2,997,737
07-24-98 5.47 3,200,000 3,188,858
07-27-98 5.49 1,800,000 1,792,889
Federal Natl Mtge Assn Disc Nt
07-17-98 5.48 3,000,000 2,992,715
Total 10,972,199
Commercial paper (1.8%)
Becton Dickinson
07-15-98 5.65 1,000,000 997,807
Commerzbank U.S. Finance
07-10-98 5.65 1,000,000 998,587
Consolidated Natural Gas
07-09-98 5.53 1,100,000 1,098,653
Delaware Funding
07-15-98 5.58 1,100,000(d)1,097,622
Fleet Funding
07-16-98 5.56 1,100,000(d)1,097,465
GTE Funding
07-09-98 5.54 800,000 799,019
Morgan Stanley, Dean Witter, Discover & Co
07-01-98 6.25 1,000,000 1,000,000
Paccar Financial
07-02-98 5.54 600,000 599,908
Total 7,689,061
Total short-term securities
(Cost: $18,661,260) $18,661,260
Total investments in securities
(Cost: $225,719,345)(e) $421,311,135
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars.
(d)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.
(e)At June 30, 1998, the cost of securities for federal income tax purposes was
approximately $225,719,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation.............$202,209,000
Unrealized depreciation.............(6,617,000)
Net unrealized appreciation.........$195,592,000
See accompanying notes to investments in securities.
<PAGE>
IDS Life Variable Annuity Fund A
Managers and officers
Board of Managers
Richard W. Kling
president, IDSLife Insurance Company
Edward Landes
retired, former development consultant
Carl N. Platou
president emeritus, Fairview Hospital
and Healthcare Services
Gordon H. Ritz
president, Con Rad Broadcasting Corp.
Principal officers
Richard W. Kling
chairman of the board and president
Lorraine R. Hart
vice president, investments
Jeffrey S. Horton
vice president and treasurer
Timothy S. Meehan
secretary
William A. Stoltzmann
general counsel and assistant secretary
Philip C. Wentzel
controller
<PAGE>
IDS Life Variable Annuity Fund A
Additional information
The investment objective of IDSLife Variable Annuity Fund A is to invest
in securities that offer opportunities for long-term capital appreciation
consistent with accumulating Fund value and providing annuity payments
under variable annuity contracts issued by IDSLife.
There is a sales and administrative charge to the contract owner included
in the purchase payment.
This report is for the information of contract owners of IDSLife Variable
Annuity Fund A, but it may be used as sales literature when preceded or
accompanied by the current prospectus. For details and other material
information, see the current prospectus.
Issuer and investment manager:
IDSLife Insurance Company,
Minneapolis, Minn.
Custodian:
American Express Trust Company
Minneapolis, Minn.
Sub-custodian:
U.S. Bank National Association
St. Paul, Minn.
<PAGE>
IDS Life
Variable
Annuity
Fund A
1998 SEMIANNUAL REPORT
American Express Financial Advisors
BULK RATE
U.S. POSTAGE
PAID
PERMIT NO. 85
SPENCER, IA
IDS Life Insurance Company
IDS Tower 10
Minneapolis, MN 55440-0010
S-6445 M (8/98)
