<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 64 (File No. 2-30059) X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 39 (File No. 811-1714) X
IDS PROGRESSIVE FUND, INC.
IDS Tower 10, Minneapolis, Minnesota 55440
(612) 671-3717
Leslie L. Ogg - 901 S. Marquette Avenue, Suite 2810,
Minneapolis, MN 55402-3268
(612) 330-9283
Approximate Date of Proposed Public Offering:
It is proposed that this filing will become effective (check appropriate box)
_____ immediately upon filing pursuant to paragraph (b)
__X__ on Nov. 28, 1997 pursuant to paragraph (b) of Rule 485
_____ 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.
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
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
* Designates information is located in annual report.
** Designates location in prospectus.
<PAGE>
IDS Progressive Fund
Prospectus
Nov. 28, 1997
The goal of IDS Progressive Fund, Inc. is long-term growth of capital. The Fund
invests primarily in undervalued common stocks.
This prospectus contains facts that can help you decide if the Fund is the right
investment for you. Read it before you invest and keep it for future reference.
Additional facts about the Fund are in a Statement of Additional Information
(SAI), filed with the Securities and Exchange Commission (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
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
<PAGE>
How the Fund is organized
Shares
Voting rights
Shareholder meetings
Board members and officers
Investment manager
Administrator and transfer agent
Distributor
About American Express Financial Corporation
General information
Appendix
Descriptions of derivative instruments
<PAGE>
The Fund in brief
Goal
IDS Progressive Fund (the Fund) seeks to provide shareholders with long-term
growth of capital. Because any investment involves risk, achieving this goal
cannot be guaranteed. Only shareholders can change the goal.
Investment policies and risks
The Fund is a diversified mutual fund that invests primarily in undervalued
common stocks. It also may invest in preferred stocks, debt securities, foreign
securities, 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 $70 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
Kurt Winters joined AEFC in 1987 and serves as senior portfolio manager. He has
managed this Fund since December 1997. Kurt is responsible for overall
investment management, including the determination of the sectors in which the
fund will invest. A team of research professionals makes investment decisions
within those sectors. From 1992 to 1995, he managed IDS Life Series Fund,
Managed Portfolio. He was appointed to managed IDS Discovery Fund in 1995. He
also manages IDS Equity Value Fund, Balanced Portfolio and Equity Income
Portfolio.
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.
<PAGE>
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.
<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%
Annual Fund operating expenses (as a percentage of average daily net assets):
Class A Class B Class Y
Management fee** 0.68% 0.68% 0.68%
12b-1 fee 0.00% 0.75% 0.00%
Other expenses*** 0.42% 0.44% 0.35%
Total 1.10% 1.87% 1.03%
</TABLE>
*This charge may be reduced depending on your total investments in IDS funds.
See "Reductions of the sales charge." **Includes the impact of a performance fee
that increased the management fee by 0.05% in fiscal year 1997. ***Other
expenses include an administrative services fee, a shareholder services fee, a
transfer agency fee and other nonadvisory expenses. Class Y expenses have been
restated to reflect the 0.10% shareholder services fee effective on May 9, 1997.
Example: Suppose for each year for the next 10 years, Fund expenses are as above
and annual return is 5%. If you sold your shares at the end of the following
years, for each $1,000 invested, you would pay total expenses of:
1 year 3 years 5 years 10 years
Class A $61 $83 $108 $178
Class B $69 $99 $121 $199**
Class B* $19 $59 $101 $199**
Class Y $11 $33 $ 57 $126
*Assuming Class B shares are not redeemed at the end of the period.
**Based on conversion of Class B shares to Class A shares after eight years.
<PAGE>
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.
<PAGE>
Performance
Financial highlights
<TABLE>
<CAPTION>
Performance
Financial highlights
Fiscal period ended Sept. 30,
Per share income and capital changes(a)
Class A
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $8.23 $7.66 $6.94 $7.11 $6.26 $5.77 $5.03 $7.16 $6.40 $7.50
beginning of period
Income from investment operations:
Net investment income (loss) .08 .09 .13 .11 .10 .12 .18 .23 .31 .22
Net gains (losses) 2.54 .96 1.01 .44 .88 .53 .81 (1.24) .52 (.96)
(both realized
and unrealized)
Total from investment 2.62 1.05 1.14 .55 .98 .65 .99 (1.01) .83 (.74)
operations
Less distributions:
Dividends from net (.08) (.13) (.12) (.11) (.09) (.16) (.20) (.34) (.07) (.22)
investment income
Distributions from (.60) (.35) (.30) (.61) (.04) -- (.05) (.78) -- (.14)
realized gains
Total distributions (.68) (.48) (.42) (.72) (.13) (.16) (.25) (1.12) (.07) (.36)
Net asset value, $10.17 $8.23 $7.66 $6.94 $7.11 $6.26 $5.77 $5.03 $7.16 $6.40
end of period
Ratios/supplemental data
Class A
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
Net assets, end of $491 $368 $337 $277 $255 $174 $132 $127 $176 $179
period (in millions)
Ratio of expenses to 1.10% 1.04% 1.04% .99% 1.09% 1.06% .98% .79% .75% .70%
average daily net assets(c)
Ratio of net income .95% 1.21% 1.85% 1.65% 1.64% 2.07% 3.11% 3.38% 4.23% 3.33%
(loss) to average
daily net assets
Portfolio turnover rate 60% 56% 60% 77% 75% 87% 125% 86% 132% 64%
(excluding short-term
securities)
Total return(b) 33.9% 14.4% 17.6% 7.9% 15.9% 11.4% 20.8% (16.3%) 13.1% (9.6%)
Average brokerage $.0375 $.0504 -- -- -- -- -- -- -- --
commission rate(d)
</TABLE>
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Total return does not reflect payment of a sales charge. c Effective fiscal
year 1996, expense ratio is based on total expenses of the
Fund before reduction of earnings credits on cash balances.
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.
<PAGE>
<TABLE>
<CAPTION>
Fiscal period ended Sept. 30,
Per share income and capital changes(a)
Class B Class Y
1997 1996 1995(b) 1997 1996 1995(b)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, $8.15 $7.63 $6.88 $8.24 $7.67 $6.88
beginning of period
Income from investment operations:
Net investment income (loss) .03 .06 .02 .09 .11 .06
Net gains 2.49 .92 .73 2.54 .95 .73
(both realized
and unrealized)
Total from investment 2.52 .98 .75 2.63 1.06 .79
operations
Less distributions:
Dividends from net (.04) (.11) -- (.09) (.14) --
investment income
Distributions from (.60) (.35) -- (.60) (.35) --
realized gains
Total distributions (.64) (.46) -- (.69) (.49) --
Net asset value, $10.03 $8.15 $7.63 $10.18 $8.24 $7.67
end of period
Ratios/supplemental data
Class B Class Y
1997 1996 1995(b) 1997 1996 1995(b)
Net assets, end of $60 $25 $7 $7 $3 $2
period (in millions)
Ratio of expenses to 1.87% 1.81% 1.84%(c) .98% .87% .88%(c)
average daily net assets(e)
Ratio of net income .21% .36% 1.03%(c) 1.09% 1.31% 1.95%(c)
(loss) to average
daily net assets
Portfolio turnover rate 60% 56% 60% 60% 56% 60%
(excluding short-term
securities)
Total return(d) 32.9% 13.5% 10.9% 34.1% 14.6% 11.5%
Average brokerage $.0375 $.0504 -- $.0375 $.0504 --
commission ratef
</TABLE>
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Inception date was March 20, 1995.
c Adjusted to an annual basis.
d Total return does not reflect payment of a sales charge. e Effective fiscal
year 1996, expense ratio is based on total expenses of the
Fund before reduction of earnings credits on cash balances.
f 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 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.
<TABLE>
<CAPTION>
Average annual total returns as of Sept. 30, 1997
Purchase 1 year Since 5 years 10 years
made ago inception ago ago
- ---------------------------- ----------------- --------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Progressive:
Class A +27.18% --% +16.41% + 9.42%
Class B +28.85% +21.37%* --% --%
Class Y +34.06% +23.66%* --% --%
S&P 500 +40.43% +31.28%** +20.73% +14.73%
Lipper Capital
Appreciation Fund Index
+25.12% +24.71%** +18.19% +12.31%
*Inception date was March 20, 1995.
**Measurement period started April 1, 1995.
Cumulative total returns as of Sept. 30, 1997
Purchase 1 year Since 5 years 10 years
made ago inception ago ago
- ---------------------------- ----------------- --------------------- ------------------- -------------------
Progressive:
Class A +27.18% --% +113.84% +146.18%
Class B +28.85% +63.36%* --% --%
Class Y +34.06% +71.30%* --% --%
S&P 500 +40.43% +99.51%** +156.52% +295.09%
Lipper Capital
Appreciation Fund Index
+25.12% +73.68%** +130.58% +219.16%
</TABLE>
<PAGE>
*Inception date was March 20, 1995.
**Measurement period started April 1, 1995.
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
popular indexes 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.
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.
Standard & Poor's 500 Stock Index (S&P 500), an unmanaged list of common stocks,
is frequently used as a general measure of market performance. The index
reflects reinvestment of all distributions and changes in market prices, but
excludes brokerage commissions or other fees.
Lipper Capital Appreciation Fund Index, an unmanaged index published by Lipper
Analytical Services, Inc., includes 30 funds that are generally similar to the
Fund, although some funds in the index may have somewhat different investment
policies or objectives.
Investment policies and risks
The Fund invests primarily in undervalued common stocks. Securities may be
undervalued because a majority of investors have not recognized certain
fundamental values in the company or favorable changes taking place in the
company or the industry. The Fund also may invest in preferred stocks, debt
securities, 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.
<PAGE>
Facts about investments and their risks
Common stocks: Stock prices are subject to market fluctuations. Stocks of
companies that are undervalued may be subject to more abrupt or erratic price
movements than stocks that are currently being closely followed by investors or
the stock market as a whole. Therefore, some of the securities in which the Fund
invests involve substantial risk and may be considered speculative.
Stocks of smaller companies may be subject to more abrupt or erratic price
movements than large company stocks. Also, small companies often have limited
product lines, smaller markets or fewer financial resources. Small companies are
defined as having market capitalization of $1 billion or less.
Preferred stocks: If a company earns a profit, it generally must pay its
preferred stockholders a dividend at a pre-established rate.
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. These bonds have greater
price fluctuations and are more likely to experience a default. The Fund will
not invest more than 5% of its net assets in bonds below investment grade.
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.
Foreign investments: Securities of foreign companies and governments may be
traded in the United States, but often they are traded only on foreign markets.
Frequently, there is less information about foreign companies and less
government supervision of foreign markets. Foreign investments are subject to
political and economic risks of the countries in which the investments are made,
including the possibility of seizure or nationalization of companies, imposition
of withholding taxes on income, establishment of exchange controls or adoption
of other restrictions that might affect an investment adversely. If an
investment is made in a foreign market, the local currency may be purchased
using a forward contract in which the price of the foreign currency in U.S.
dollars is established on the date the trade is made, but delivery of the
currency is not made until the securities are received. As long as the Fund
holds foreign currencies or securities valued in foreign currencies, the value
of those assets will be affected by changes in the value of the currencies
relative to the U.S. dollar. Because of the limited trading volume in some
foreign markets, efforts to buy or sell a security may change the price of the
security, and it may be difficult to complete the transaction. The Fund may
invest up to 25% of its total assets in foreign investments.
<PAGE>
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 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.
<PAGE>
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.
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).
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.
<PAGE>
<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 waived
charge of 5%; no 12b-1 fee assets 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>
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.
<TABLE>
<CAPTION>
Sales charges on purchase or redemption
If you purchase Class A shares If you purchase Class B shares
<S> <C>
o You will not have all of your purchase price o All of your money is invested in shares of stock.
invested. Part of your purchase price will go to pay However, you will pay a sales charge if you redeem
the sales charge. You will not pay a sales charge your shares within six years of purchase.
when you redeem your shares.
o You will be able to take advantage of reductions o No reductions of the sales charge are available
in the sales charge. for large purchases.
</TABLE>
<PAGE>
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.
<TABLE>
<CAPTION>
Ongoing expenses
If you purchase Class A shares If you purchase Class B shares
<S> <C>
o Your shares will have a lower expense ratio than o The distribution and transfer agency fees for
Class B shares because Class A does not pay a Class B will cause your shares to have a higher
distribution fee and the transfer agency fee for expense ratio and to pay lower dividends than Class
Class A is lower than the fee for Class B. As a A shares. In the ninth year of ownership, Class B
result, Class A shares will pay higher dividends shares will convert to Class A shares and you will
than Class B shares. no longer be subject to higher fees.
</TABLE>
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 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.
<PAGE>
* 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.
o The minimums allowed for investment may change from time to time.
o Wire orders can be accepted only on days when your bank, AEFC, 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 AEFC 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.
<PAGE>
<TABLE>
<CAPTION>
Three ways to invest
<S> <C> <C>
1
By regular account Send your check and application (or your name Minimum amounts
and account number if you have an established Initial investment: $2,000
account) Additional
to: investments: $ 100
American Express Financial Advisors Inc. Account balances: $ 300*
P.O. Box 74 Qualified retirement
Minneapolis, MN 55440-0074 accounts: none
Your financial advisor will help you with this
process.
2
By scheduled investment Contact your financial advisor to set up one Minimum amounts
plan of the following scheduled plans: Initial investment: $ 100
Additional
o automatic payroll deduction investments: $ 100/
each payment
o bank authorization Account balances: none
(on active plans of
o direct deposit of Social Security check monthly payments)
o other plan approved by the Fund If account balance is below $2000,
frequency of payments must be at
least monthly.
3
By wire If you have an established account, you may If this information is not
wire money to: included, the order may be
rejected and all money
Norwest Bank Minneapolis received by the Fund, less any
Routing No. 091000019 costs the Fund or AEFC incurs,
Minneapolis, MN will be returned promptly.
Attn: Domestic Wire Dept.
Minimum amounts
Give these instructions: Each wire investment: $1,000
Credit IDS Account #00-30-015 for personal
account # (your account number) for (your
name).
</TABLE>
*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.
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.
<TABLE>
<CAPTION>
Two ways to request an exchange or redemption of shares
<S> <C>
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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
2
By phone
American Express Financial o The Fund and AEFC will honor any telephone exchange or redemption
Advisors Telephone Transaction request believed to be authentic and will use reasonable procedures to
Service: confirm that they are. This includes asking identifying questions and
800-437-3133 or tape recording calls. If reasonable procedures are not followed, the
612-671-3800 Fund or AEFC will be liable for any loss resulting from fraudulent requests.
o Phone exchange and redemption privileges automatically apply to all accounts except
custodial, corporate or qualified retirement accounts unless you request these privileges
NOT apply by writing American Express Shareholder Service. Each registered owner
must sign the request.
o AEFC 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
</TABLE>
Exchange policies:
o You may make up to three exchanges within any 30-day period, with each limited
to $300,000. These limits do not apply to scheduled exchange programs and
certain employee benefit plans or other arrangements through which one
shareholder represents the interests of several. Exceptions may be allowed with
pre-approval of the Fund.
o 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.
o AEFC 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.
<PAGE>
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 AEFC that your check has cleared.)
<TABLE>
<CAPTION>
Three ways to receive payment when you redeem shares
<S> <C>
1 o Mailed to the address on record
By regular or o Payable to names listed on the account
express mail NOTE: You will be charged a fee if you request express mail delivery.
2 o Minimum wire redemption: $1,000
By wire 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 o Minimum payment: $50
By scheduled o Contact your financial advisor or American Express Shareholder Service
payout plan 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
</TABLE>
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:
<PAGE>
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.
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.
<PAGE>
Waivers of the sales charge for Class A shares Sales charges do not apply to:
o Current or retired board members, officers or employees of the Fund or AEFC or
its subsidiaries, their spouses and unmarried children under 21.
o Current or retired American Express financial advisors, their spouses and
unmarried children under 21.
o Investors who have a business relationship with a newly associated financial
advisor who joined AEFA from another investment firm provided that (1) the
purchase is made within six months of the advisor's appointment date with AEFA,
(2) the purchase is made with proceeds of a redemption of shares that were
sponsored by the financial advisor's previous broker-dealer, and (3) the
proceeds must be 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 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.
<PAGE>
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 Texas System ORP;
or a segregated separate account offered by Nationwide Life Insurance Company or
Nationwide Life and Annuity Insurance Company.
o Purchases made with the proceeds from IDS Life Real Estate Variable Annuity
surrenders through December 31, 1997.
* 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.
<PAGE>
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.
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 Purchased by any board member, officer or employee of a fund or AEFC or its
subsidiaries, 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, AEFC
provides these services:
Quarterly statements listing all of your holdings and transactions during the
previous three months.
Yearly tax statements featuring average-cost-basis reporting of capital gains or
losses if you redeem your shares along with distribution information which
simplifies tax calculations.
<PAGE>
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 (TouchToneR phones only), including current Fund
prices and performance, account values and recent account transactions
800-862-7919
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 by the end of the calendar year as dividends. Capital gains are realized
when a security is sold for a higher price than was paid for it. Short-term
capital gains are included in net investment income. Long-term capital gains are
realized when a security is held for more than one year. The Fund 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, both net investment income
and 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.)
<PAGE>
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 only those declared after
your request has been processed.
If the U.S. Postal Service cannot deliver the checks for the cash distributions,
we will reinvest the checks into your account at the then-current net asset
value and make future distributions in the form of additional shares. Prior to
reinvestment, no interest will accrue on amounts represented by uncashed
distribution or redemption checks.
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 net investment income or a capital gain distribution. You pay the full
pre-distribution price for the shares, then receive a portion of your investment
back as a distribution, which is taxable.
<PAGE>
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.
<TABLE>
<CAPTION>
How to determine the correct TIN
<S> <C>
Use the Social Security or
For this type of account: Employer Identification number of:
Individual or joint account The individual or individuals listed on the account
Custodian account of a minor (Uniform The minor
Gifts/Transfers to Minors Act)
A living trust The grantor-trustee
(the person who puts the money into the trust)
<PAGE>
An irrevocable trust, The legal entity
pension trust or estate (not the personal representative 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.
<PAGE>
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.
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.
Former chairman and chief executive officer, General Mills, Inc.
Lynne V. Cheney
Distinguished fellow, American Enterprise Institute for Public Policy Research.
Heinz F. Hutter
Former 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
Former chairman and chief executive officer, Honeywell, Inc.
Wheelock Whitney
Chairman, Whitney Management Company.
<PAGE>
C. Angus Wurtele
Chairman of the board, The Valspar Corporation.
Officer
Vice president, general counsel and secretary
Leslie L. Ogg*
President, treasurer and corporate secretary of Board Services Corporation.
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.
Treasurer
Melinda S. Urion*
Senior vice president and chief financial officer, AEFC.
Refer to the SAI for the board members' and officers' biographies.
*Interested persons as defined by the Investment Company Act of 1940.
<PAGE>
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 $0.25 0.640%
Next 0.25 0.615
Next 0.25 0.590
Next 0.25 0.565
Next 1.0 0.540
Over 2.0 0.515
This fee may be increased or decreased by a performance adjustment based on a
comparison of performance of Class A shares of the Fund to the Lipper Capital
Appreciation Fund Index. The maximum adjustment is 0.12% of the Fund's average
daily net assets on an annual basis.
For the fiscal year ended Sept. 30, 1997, the Fund paid AEFC a total investment
management fee of 0.68% of its average daily net assets. Under the Agreement,
the Fund also pays taxes, brokerage commissions and nonadvisory expenses.
Administrator and transfer agent
The Fund pays AEFC for shareholder accounting and transfer agent services under
two agreements. The first agreement, the Administrative Services Agreement, has
a declining annual rate beginning at 0.06% and decreasing to 0.035% as assets
increase. The second agreement, the Transfer Agency Agreement, has an annual fee
per shareholder account as follows:
o Class A $15
o Class B $16
o Class Y $15
Distributor
The Fund has an exclusive distribution agreement with American Express Financial
Advisors, a wholly-owned subsidiary of AEFC. 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.
<PAGE>
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 Sept.
30, 1997, were 1.10% of its average daily net assets. Expenses for Class B and
Class Y were 1.87% and 0.98%, respectively.
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 Sept.
30, 1997 were more than $171 billion.
AEFA serves individuals and businesses through its nationwide network of more
than 8500 offices and more than 175 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.
<PAGE>
Appendix
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.
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.
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 PROGRESSIVE FUND
Nov. 28, 1997
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 Nov. 28, 1997, and it is to be used with the prospectus dated
Nov. 28, 1997, and the Annual Report for the fiscal year ended Sept. 30, 1997.
<PAGE>
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.10
Performance
Information..............................................................p.11
Valuing Fund Shares......................................................p.12
Investing in the
Fund.....................................................................p.13
Redeeming
Shares...................................................................p.18
Pay-out
Plans....................................................................p.18
Taxes....................................................................p.20
Agreements...............................................................p.21
Organizational
Information..............................................................p.25
Board Members and
Officers.................................................................p.25
Compensation for Fund Board Members......................................p.29
Independent
Auditors.................................................................p.30
Financial Statements...........................................See Annual Report
Prospectus...............................................................p.30
<PAGE>
Appendix A: Description of Bond Ratings and Additional
Information on Investment Policies......................p.30
Appendix B: Foreign Currency Transactions...............................p.33
Appendix C: Options and Futures Contracts...............................p.38
Appendix D: Mortgage-Backed Securities..................................p.45
Appendix E: Dollar-Cost Averaging.......................................p.46
<PAGE>
ADDITIONAL INVESTMENT POLICIES
These are investment policies in addition to those presented in the prospectus.
The policies below are fundamental policies of IDS Progressive 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.
'Make a loan of any part of its assets to American Express Financial Corporation
(AEFC), to the board members and officers of AEFC or to its own board members
and officers.
<PAGE>
'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
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. If the Fund were ever
to do so, valuation of the pledged or mortgaged assets would be based on market
values. For purposes of this policy, collateral arrangements for margin deposits
on a futures contract are not deemed to be a pledge of assets.
'Invest more than 5% of its total assets in securities of companies, including
any predecessors, which have a record of less than three years continuous
operations.
'Invest more than 10% of its 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, such as 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, 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.
<PAGE>
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.
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-graded 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 description of bond ratings and additional information on investment
policies, see Appendix A. For a discussion about foreign currency transactions,
see Appendix B. For a discussion on options and 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 the most favorable execution except where otherwise
authorized by the board. In selecting broker-dealers to execute transactions,
AEFC may consider the price of the security, including commission or mark-up,
the size and difficulty of the order, the reliability, integrity, financial
soundness and general operation and execution capabilities of the broker, the
broker's expertise in particular markets, and research services provided by the
broker.
AEFC has a strict Code of Ethics that prohibits its affiliated personnel from
engaging in personal investment activities that compete with or attempt to take
advantage of planned portfolio transactions for any fund in the IDS MUTUAL FUND
GROUP. AEFC carefully monitors compliance with its Code of Ethics.
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
<PAGE>
obtain, computer hardware from brokers, including but not limited to personal
computers that will be used exclusively for investment decision-making purposes,
which include the research, portfolio management and trading functions and other
services to the extent permitted under an interpretation by the SEC.
When paying a commission that might not otherwise be charged or a commission in
excess of the amount another broker might charge, AEFC must follow procedures
authorized by the board. To date, three procedures have been authorized. One
procedure permits AEFC to direct an order to buy or sell a security traded on a
national securities exchange to a specific broker for research services it has
provided. The second procedure permits AEFC, in order to obtain research, to
direct an order on an agency basis to buy or sell a security traded in the
over-the-counter market to a firm that does not make a market in that security.
The commission paid generally includes compensation for research services. The
third procedure permits AEFC, in order to obtain research and brokerage
services, to cause the Fund to pay a commission in excess of the amount another
broker might have charged. AEFC has advised the Fund 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 accounts
advised by AEFC or any AEFC subsidiary. 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.
<PAGE>
The Fund paid total brokerage commissions of $682,678 for the fiscal year ended
Sept. 30, 1997, $682,520 for the fiscal year 1996, and $434,580 for the fiscal
year 1995. Substantially all firms through whom transactions were executed
provide research services.
In fiscal year 1997, transactions amounting to $130,693,000, on which $304,091
in commissions were imputed or paid, were specifically directed to firms in
exchange for research services.
As of the fiscal year ended Sept. 30, 1997, 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
Morgan Stanley Group $10,179,332
Goldman Sachs Group 3,990,204
The portfolio turnover rate was 60% in the fiscal year ended Sept. 30, 1997, and
56% in fiscal year 1996.
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.
AEFC may direct brokerage to compensate an affiliate. AEFC will receive research
on South Africa from New Africa Advisors, a wholly-owned subsidiary of Sloan
Financial Group. AEFC owns 100% of IDS Capital Holdings Inc. which in turn owns
40% of Sloan Financial Group. New Africa Advisors will send research to AEFC and
in turn AEFC will direct trades to a particular broker. The broker will have an
agreement to pay New Africa Advisors. All transactions will be on a best
execution basis. Compensation received will be reasonable for the services
rendered.
<PAGE>
Information about brokerage commissions paid by the Fund for the last three
fiscal years to brokers affiliated with AEFC is contained in the following
table:
<TABLE>
<CAPTION>
For the Fiscal Year Ended Sept. 30,
1997 1996 1995
- --------------- ------------ --------------- --------------- --------------- --------------- ---------------
Percent of
Aggregate
Dollar Amount
Aggregate Percent of of Aggregate Aggregate
Dollar Amount Aggregate Transactions Dollar Amount Dollar Amount
Nature of of Brokerage Involving of of
Broker Affiliation Commissions Commissions Payment of Commissions Commissions
Paid to Broker Commissions Paid to Broker Paid to Broker
<S> <C> <C> <C> <C> <C> <C>
American (1) $28,560 4.18% 8.01% $28,606 $11,600
Enterprise
Investment
Services Inc.
</TABLE>
(1) Wholly-owned subsidiary of AEFC.
PERFORMANCE INFORMATION
The Fund may quote various performance figures to illustrate past performance.
Average annual total return 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.
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)
<PAGE>
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)
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
<TABLE>
<CAPTION>
The value of an individual share for each class is determined by using the net asset value before
shareholder transactions for the day. On Oct. 1, 1997, the first business day following the end of the
fiscal year, the computation looked like this:
Net assets Shares outstanding
before at end of previous Net asset value
shareholder day of one
transactions share
- -------------- ---------------------- --------------- -------------------- --------- -----------------------
<S> <C> <C> <C> <C> <C>
Class A $492,195,719 divided by 48,301,837 equals $10.19
Class B 59,791,359 5,943,475 10.06
Class Y 7,388,554 724,368 10.20
</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, except bonds other than convertibles, traded on a securities
exchange for which a last-quoted sales price is readily available are valued at
the last-quoted sales price on the exchange where such security is primarily
traded.
'Securities traded on a securities exchange for which a last-quoted sales price
is not readily available are valued at the mean of the closing bid and asked
prices, looking first
<PAGE>
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.
<PAGE>
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
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 Oct. 1, 1997, was determined by
dividing the net asset value of one share, $10.19, by 0.95 (1.00-0.05 for a
maximum 5% sales charge) for a public offering price of $10.73. 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
<TABLE>
<CAPTION>
Sales charges are determined as follows:
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 0.00 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.
<PAGE>
The following table shows the range of sales charges as a percentage of the
public offering price and of the net amount invested on total investments at
each applicable level.
<TABLE>
<CAPTION>
On total investment,
sales charge as a
percentage of:
Public Net
Offering Price Amount Invested
Amount of Investment ranges from:
<S> <C> <C>
- -------------------------------------------- ------------------------------ ------------------------------
First $ 50,000 5.00% 5.26%
- -------------------------------------------- ------------------------------ ------------------------------
- -------------------------------------------- ------------------------------ ------------------------------
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>
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
<PAGE>
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.
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 an 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 $2,000 or more, you can arrange to
make additional payments of $100 or more on a regular basis. These minimums do
not apply to
<PAGE>
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.
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).
<PAGE>
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.
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.
<PAGE>
PAY-OUT PLANS
You can use any of several pay-out plans to redeem your investment in regular
installments. If you redeem Class B shares you may be subject to a contingent
deferred sales charge as discussed in the prospectus. While the plans differ on
how the pay-out is figured, they all are based on the redemption of your
investment. Net investment income dividends and any capital gain distributions
will automatically be reinvested, unless you elect to receive them in cash. If
you are redeeming a tax-qualified plan account for which American Express Trust
Company acts as custodian, you can elect to receive your dividends and other
distributions in cash when permitted by law. If you redeem an IRA or a qualified
retirement account, certain restrictions, federal tax penalties and special
federal income tax reporting requirements may apply. You should consult your tax
advisor about this complex area of the tax law.
Applications for a systematic investment in a class of the Fund subject to a
sales charge normally will not be accepted while a pay-out plan for any of those
funds is in effect. Occasional investments, however, may be accepted.
To start any of these plans, please write American Express Shareholder Service,
P.O. Box 534, Minneapolis, MN 55440-0534, or call American Express Financial
Advisors Telephone Transaction Service at 800-437-3133 (National/Minnesota) or
612-671-3800 (Mpls./St. Paul). Your authorization must be received in the
Minneapolis headquarters at least five days before the date you want your
payments to begin. The initial payment must be at least $50. Payments will be
made on a monthly, bimonthly, quarterly, semiannual or annual basis. Your choice
is effective until you change or cancel it.
The following pay-out plans are designed to take care of the needs of most
shareholders in a way AEFC can handle efficiently and at a reasonable cost. If
you need a more irregular schedule of payments, it may be necessary for you to
make a series of individual redemptions, in which case you'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.
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.
<PAGE>
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 Sept. 30, 1997, 29.12% of the Fund's net investment income
dividends qualified for the corporate deduction.
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
<PAGE>
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.
The Fund may be subject to U.S. taxes resulting from holdings in a passive
foreign investment company (PFIC). A foreign corporation is a PFIC when 75% or
more of its gross income for the taxable year is passive income or if 50% or
more of the average value of its assets consists of assets that produce or could
produce passive income.
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:
- --------------------------- -------------------------
Assets Annual rate at
(billions) each asset level
- --------------------------- -------------------------
- --------------------------- -------------------------
- --------------------------- -------------------------
First $0.25 0.640%
- --------------------------- -------------------------
- --------------------------- -------------------------
Next 0.25 0.615
- --------------------------- -------------------------
- --------------------------- -------------------------
Next 0.25 0.590
- --------------------------- -------------------------
- --------------------------- -------------------------
Next 0.25 0.565
- --------------------------- -------------------------
- --------------------------- -------------------------
Next 1.0 0.540
- --------------------------- -------------------------
- --------------------------- -------------------------
Over 2.0 0.515
- --------------------------- -------------------------
On Sept. 30, 1997, the daily rate applied to the Fund's net assets was equal to
0.624% 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.
<PAGE>
Before the fee based on the asset charge is paid, it is adjusted for investment
performance. The adjustment, determined monthly, will be calculated using the
percentage point difference between the change in the net asset value of one
Class A share of the Fund and the change in the Lipper Capital Appreciation Fund
Index (Index). The performance of one Class A share of the Fund is measured by
computing the percentage difference between the opening and closing net asset
value of one Class A share of the Fund, as of the last business day of the
period selected for comparison, adjusted for dividend or capital gain
distributions which are treated as reinvested at the end of the month during
which the distribution was made. The performance of the Index for the same
period is established by measuring the percentage difference between the
beginning and ending Index for the comparison period. The performance is
adjusted for dividend or capital gain distributions (on the securities which
comprise the Index), which are treated as reinvested at the end of the month
during which the distribution was made. One percentage point will be subtracted
from the calculation to help assure that incentive adjustments are attributable
to AEFC's management abilities rather than random fluctuations and the result
multiplied by 0.01%. That number will be multiplied times the Fund's average net
assets for the comparison period and then divided by the number of months in the
comparison period to determine the monthly adjustment.
Where the Fund's Class A share performance exceeds that of the Index, the base
fee will be increased. Where the performance of the Index exceeds the
performance of Class A shares, the base fee will be decreased. The maximum
monthly increase or decrease will be 0.12% of the Fund's average net assets on
an annual basis.
The 12 month comparison period rolls over with each succeeding month, so that it
always equals 12 months, ending with the month for which the performance
adjustment is being computed. The adjustment increased the fee by $222,277 for
the fiscal year ended Sept. 30, 1997.
The management fee is paid monthly. Under the agreement, the total amount paid
was $3,051,855 for the fiscal year ended Sept. 30, 1997, $2,135,854 for the
fiscal year 1996, and $1,851,169 for fiscal year 1995.
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
of $193,080 for the fiscal year ended Sept. 30, 1997, $228,668 for fiscal year
1996, and $207,463 for fiscal year 1995.
<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 $0.25 0.060%
- --------------------------- -------------------------
- --------------------------- -------------------------
Next 0.25 0.055
- --------------------------- -------------------------
- --------------------------- -------------------------
Next 0.25 0.050
- --------------------------- -------------------------
- --------------------------- -------------------------
Next 0.25 0.045
- --------------------------- -------------------------
- --------------------------- -------------------------
Next 1.0 0.040
- --------------------------- -------------------------
- --------------------------- -------------------------
Over 2.0 0.035
- --------------------------- -------------------------
On Sept. 30, 1997, the daily rate applied to the Fund's net assets was equal to
0.057% 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 $266,087 for the fiscal year ended Sept. 30, 1997.
Transfer Agency Agreement
The Fund has a Transfer Agency Agreement with AEFC. This agreement governs
AEFC'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, AEFC 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 per year and
for Class B is $16 per year. The fees paid to AEFC may be changed from time to
time upon agreement of the parties without shareholder approval. Under the
agreement, the Fund paid fees of $649,858 for the fiscal year ended Sept. 30,
1997.
Distribution Agreement
Under a Distribution Agreement, sales charges deducted for distributing Fund
shares are paid to AEFA daily. These charges amounted to $781,265 for the fiscal
year ended Sept. 30, 1997. After paying commissions to personal financial
advisors, and other expenses, the amount retained was $15,914. The amounts were
$662,202 and $85,088 for fiscal year 1996, and $866,196 and $635,876 for fiscal
year 1995.
<PAGE>
Shareholder Service Agreement
The Fund pays a fee for service provided to shareholders by financial advisors
and other servicing agents. The fee is calculated at a rate of 0.175% of average
daily net assets for Class A and Class B and 0.10% for Class Y.
Plan and Agreement of Distribution
For Class B shares, to help AEFA defray the cost of distribution and servicing,
not covered by the sales charges received under the Distribution Agreement, the
Fund and AEFA entered into a Plan and Agreement of Distribution (Plan). These
costs cover almost all aspects of distributing the Fund's shares 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 Sept. 30, 1997, under the agreement, the
Fund paid fees of $282,071.
Custodian Agreement
The Fund's securities and cash are held by American Express Trust Company, 1200
Northstar Center West, 625 Marquette Ave., Minneapolis, MN 55402-2307, through a
custodian agreement. The custodian is permitted to deposit some or all of its
securities in central depository systems as allowed by federal law. 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.
<PAGE>
The custodian has entered into a sub-custodian arrangement with the Morgan
Stanley Trust Company (Morgan Stanley), One Pierrepont Plaza, Eighth Floor,
Brooklyn, NY 11201-2775. As part of this arrangement, securities purchased
outside the United States are maintained in the custody of various foreign
branches of Morgan Stanley or in such other financial institutions as may be
permitted by law and by the Fund's sub-custodian agreement.
Total fees and expenses
The Fund paid total fees and nonadvisory expenses, net of earnings credits, of
$5,210,403 for the fiscal year ended Sept. 30, 1997.
ORGANIZATIONAL INFORMATION
The Fund is a diversified, open-end management investment company, as defined in
the Investment Company Act of 1940. Originally incorporated on April 23, 1968 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.
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
Former chairman and chief executive officer, General Mills, Inc. Director,
Merck & Co., Inc. and Darden Restaurants, Inc.
<PAGE>
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, Union Pacific
Resources, and FPL Group, Inc. (holding company for Florida Power and Light).
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 and chief executive officer of AEFC since August 1993, and director of
AEFC. Previously, senior vice president, finance and chief financial officer of
AEFC.
Heinz F. Hutter+'
Born in 1929
P.O. Box 2187
Minneapolis, MN
Former president and chief operating officer, Cargill, Incorporated (commodity
merchants and processors).
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. and C-Cor
Electronics, Inc.
<PAGE>
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. Former 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).
Edson W. Spencer+
Born in 1926
4900 IDS Center
80 S. 8th St.
Minneapolis, MN
President, Spencer Associates Inc. (consulting). Former chairman of the board
and chief executive officer, Honeywell Inc. Director, Boise Cascade Corporation
(forest products). Member of International Advisory Council of NEC (Japan).
John R. Thomas**
Born in 1937
2900 IDS Tower
Minneapolis, MN
Senior vice president of AEFC.
Wheelock Whitney+
Born in 1926
1900 Foshay Tower
821 Marquette Ave.
Minneapolis, MN
Chairman, Whitney Management Company (manages family assets).
<PAGE>
C. Angus Wurtele'
Born in 1934
Valspar Corporation
Suite 1700
Foshay Tower
Minneapolis, MN
Chairman of the board and retired chief executive officer, The Valspar
Corporation (paints). Director, Bemis Corporation (packaging), Donaldson Company
(air cleaners & mufflers) and General Mills, Inc.
(consumer foods).
+ Member of executive committee.
' Member of joint audit committee.
* Interested person by reason of being an officer and employee of the Fund.
**Interested person by reason of being an officer, board member, employee and/or
shareholder of AEFC or American Express.
The board also has appointed officers who are responsible for day-to-day
business decisions based on policies it has established.
In addition to Mr. Pearce, who is chairman of the board, and Mr. Thomas, who is
president, the Fund's other officers are:
Leslie L. Ogg
Born in 1938
901 S. Marquette Ave.
Minneapolis, MN
President, treasurer and corporate secretary 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>
Melinda S. Urion
Born in 1953
IDS Tower 10
Minneapolis, MN
Director, senior vice president and chief financial officer of AEFC. Director,
executive vice president and controller of IDS Life Insurance Company. Treasurer
for the Fund.
COMPENSATION FOR FUND BOARD MEMBERS
Members of the Fund board who are not officers of the Fund or AEFC receive an
annual fee of $300, and the chair of the Contracts Committee receives an
additional $86. 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 $3. Expenses for attending meetings are
reimbursed.
During the fiscal year ended Sept. 30, 1997, the independent members of the
board, for attending up to 32 meetings, received the following compensation:
<TABLE>
<CAPTION>
Compensation Table
Pension or Total cash compensation
Aggregate Retirement Estimated annual from the IDS MUTUAL FUND
compensation benefits benefit upon GROUP and Preferred
Board member from the Fund accrued as retirement Master Trust Group
Fund expenses
- -------------------------------- --------------- --------------- ------------------ --------------------------
<S> <C> <C> <C> <C>
H. Brewster Atwater, Jr. $1,028 $0 $0 $90,300
(part of year)
Lynne V. Cheney 1,058 0 0 95,800
Robert F. Froehlke 1,203 0 0 103,000
Heinz F. Hutter 1,278 0 0 107,200
Anne P. Jones 1,289 0 0 110,000
Melvin R. Laird 1,074 0 0 97,000
Alan K. Simpson 1,040 0 0 94,600
(part of year)
Edson W. Spencer 1,289 0 0 100,700
Wheelock Whitney 1,328 0 0 110,400
C. Angus Wurtele 1,353 0 0 111,600
</TABLE>
On Sept. 30, 1997, 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 Sept. 30, 1997 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 Sept.
30, 1997, 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 Progressive Fund, dated Nov. 28, 1997, is hereby
incorporated in this SAI by reference.
<PAGE>
APPENDIX A
DESCRIPTION OF BOND RATINGS AND ADDITIONAL INFORMATION ON INVESTMENT POLICIES
These 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.
Bonds rated:
Aaa are judged to be of the best quality. They carry the smallest degree of
investment risk and are generally referred to as "gilt edged." Interest payments
are protected by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements may to change, such changes as can
be visualized are unlikely to impair the fundamentally strong position of such
issues.
Aa are judged to be of high quality by all standards. Together with the Aaa
group they comprise what are generally known as high grade bonds. They are rated
lower than the best bonds because the margins of protection may not be as large
as in Aaa securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long-term risk
appear somewhat larger than the Aaa securities.
A possess many favorable investment attributes and are to be considered as
upper-medium-grade obligations. Factors giving security to principal and
interest are considered adequate, but elements may be present which suggest a
susceptibility to impairment some time in the future.
Baa are considered as medium-grade obligations (i.e., they are neither highly
protected nor poorly secured). Interest payments and principal security appear
adequate for the present but certain protective elements may be lacking or may
be characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well.
Ba are judged to have speculative elements; their future cannot be considered as
well-assured. Often the protection of interest and principal payments may be
very moderate, and thereby not well safeguarded during both good and bad times
over the future. Uncertainty of position characterizes bonds in this class.
<PAGE>
B generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small.
Caa are of poor standing. Such issues may be in default or there may be present
elements of danger with respect to principal or interest.
Ca represent obligations which are speculative in a high degree. Such issues are
often in default or have other marked shortcomings.
C are the lowest rated class of bonds, and issues so rated can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Ratings by Standard & Poor's Corporation are AAA, AA, A, BBB, BB, B, CCC, CC, C
and D.
AAA has the highest rating assigned by S&P. Capacity to pay interest and repay
principal is extremely strong.
AA has a very strong capacity to pay interest and repay principal and differs
from the highest rated issues only in small degree.
A has a strong capacity to pay interest and repay principal, although it is
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than debt in higher-rated categories.
BBB is regarded as having adequate capacity to pay interest and repay principal.
Whereas it normally exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this category than in
higher-rated categories.
BB has less near-term vulnerability to default than other speculative issues.
However, it faces major ongoing uncertainties or exposure to adverse business,
financial, or economic conditions which could lead to inadequate capacity to
meet timely interest and principal payments. The BB rating category is also used
for debt subordinated to senior debt that is assigned an actual or implied BBB-
rating.
B has a greater vulnerability to default but currently has the capacity to meet
interest payments and principal repayments. Adverse business, financial, or
economic conditions will likely impair capacity or willingness to pay interest
and repay principal. The B rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied BB or BB- rating.
<PAGE>
CCC has a currently identifiable vulnerability to default, and is dependent upon
favorable business, financial, and economic conditions to meet timely payment of
interest and repayment of principal. In the event of adverse business,
financial, or economic conditions, it is not likely to have the capacity to pay
interest and repay principal. The CCC rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied B or B-
rating.
CC typically is applied to debt subordinated to senior debt that is assigned an
actual or implied CCC rating.
C typically is applied to debt subordinated to senior debt that is assigned an
actual or implied CCC- rating. The C rating may be used to cover a situation
where a bankruptcy petition has been filed, but debt service payments are
continued.
D is in payment default. The D rating category is used when interest payments or
principal payments are not made on the due date, even if the applicable grace
period has not expired, unless S&P believes that such payments will be made
during such grace period. The D rating also will be used upon the filing of a
bankruptcy petition if debt service payments are jeopardized.
Non-rated securities will be considered for investment when they possess a rosk
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.
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
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.
<PAGE>
The Fund will designate cash or securities in an amount equal to the value of
the Fund's total assets committed to consummating forward contracts entered into
under the second circumstance set forth above. If the value of the securities
declines, additional cash or securities will be designated on a daily basis so
that the value of the cash or securities will equal the amount of the Fund's
commitments on such contracts.
At maturity of a forward contract, the Fund may either sell the 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
<PAGE>
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.
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.
<PAGE>
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
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.
<PAGE>
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 C
OPTIONS AND 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 and stock index futures contracts traded on any U.S. or foreign
exchange. The Fund may also buy or write put and call options on these futures
and on stock indexes. Options in the over-the-counter market will be purchased
only when the investment manager believes a liquid secondary market exists for
the options and only from dealers and institutions the investment manager
believes present a minimal credit risk. Some options are exercisable only on a
specific date. In that case, or if a liquid secondary market does not exist, the
Fund could be required to buy or sell securities at disadvantageous prices,
thereby incurring losses.
OPTIONS. An option is a contract. A person who buys a call option for a security
has the right to buy the security at a set price for the length of the contract.
A person who sells a call option is called a writer. The writer of a call option
agrees to sell the security at the set price when the buyer wants to exercise
the option, no matter what the market price of the security is at that time. A
person who buys a put option has the right to sell a security at a set price for
the length of the contract. A person who writes a put option agrees to buy the
security at the set price if the purchaser wants to exercise the option, no
matter what the market price of the security is at that time. An option is
covered if the writer owns the security (in the case of a call) or sets aside
the cash or securities of equivalent value (in the case of a put) that would be
required upon exercise.
The price paid by the buyer for an option is called a premium. In addition the
buyer generally pays a broker a commission. The writer receives a premium, less
another commission, at the time the option is written. The cash received is
retained by the writer whether or not the option is exercised. A writer of a
call option may have to sell the security for a below-market price if the market
price rises above the exercise price. A writer of a put option may have to pay
an above-market price for the security if its market price decreases below the
exercise price. The risk of the writer is potentially unlimited, unless the
option is covered.
Options can be used to produce incremental earnings, protect gains and
facilitate buying and selling securities for investment purposes. The use of
options 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.
<PAGE>
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 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.
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, or for put options if a decision is made
to buy 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. Since the Fund is taxed as a regulated
investment company under the Internal Revenue Code, any gains on options and
other securities held less than three months must be limited to less than 30% of
its annual gross income.
<PAGE>
If a covered call option is exercised, the security is sold by the Fund. The
premium received upon writing the option is added to the proceeds received from
the sale of the security. The Fund will recognize a capital gain or loss based
upon the difference between the proceeds and the security's basis. Premiums
received from writing outstanding options are included as a deferred credit in
the Statement of Assets and Liabilities and adjusted daily to the current market
value.
Options on many securities are listed on options exchanges. If the Fund writes
listed options, it will follow the rules of the options exchange. Options are
valued at the close of the New York Stock Exchange. An option listed on a
national exchange, CBOE or NASDAQ will be valued at the last quoted sales price
or, if such a price is not readily available, at the mean of the last bid and
ask prices.
Options on certain securities are not actively traded on any exchange, but may
be entered into directly with a dealer. When the Fund writes such an option, the
Custodian will segregate assets as appropriate to cover the option. These
options may be more difficult to close. If the Fund is unable to effect a
closing purchase transaction, it will not be able to sell the underlying
security until the call written by the Fund expires or is exercised.
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. Futures contracts trade in
a manner similar to the way a stock trades on a stock exchange and the commodity
exchanges, through their clearing corporations, guarantee performance of the
contracts. Futures contracts are commodity contracts listed on commodity
exchanges. They include contracts based on U.S. Treasury bonds and on Standard &
Poor's 500 Index (S&P 500 Index). In the case of S&P 500 index futures
contracts, the specified multiple is $500. Thus, if the value of the S&P 500
Index were 150, the value of one contract would be $75,000 (150 x $500).
Unlike other futures contracts, a stock index futures contract specifies that no
delivery of the actual stocks making up the index will take place. Instead,
settlement in cash must occur upon the termination of the contract. For example,
excluding any transaction costs, if the Fund enters into one futures contract to
buy the S&P 500 Index at a specified future date at a contract value of 150 and
the S&P 500 Index is at 154 on that future date, the Fund will gain $500 x
(154-150) or $2,000. If the Fund enters into one futures contract to sell the
S&P 500 Index at a specified future date at a contract value of 150 and the S&P
500 Index is at 152 on that future date, the Fund will lose $500 x (152-150) or
$1,000.
<PAGE>
Generally, a futures contract is terminated by entering into an offsetting
transaction. An offsetting transaction is effected by the Fund taking an
opposite position. 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. 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 is to allow the Fund to gain rapid exposure to
or protect itself from changes in the market without actually buying or selling
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. 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.
<PAGE>
Risks of Transactions in Futures Contracts
The Fund may elect to close some or all of its contracts prior to expiration.
Although the Fund intends to enter into futures contracts only on exchanges or
boards of trade where there appears to be an active secondary market, there is
no assurance that a liquid secondary market will exist for any particular
contract at any particular time. In such event, it may not be possible to close
a futures contract position, and in the event of adverse price movements, the
Fund would have to make daily cash payments of variation margin. Such price
movements, however, will be offset all or in part by the price movements of the
securities owned by the Fund. Of course, there is no guarantee the price of the
securities will correlate with the price movements in the futures contract and
thus provide an offset to losses on a futures contract.
Another risk in employing futures contracts to protect against the price
volatility of 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.
In addition, the Fund's investment manager could be incorrect in its
expectations as to the direction or extent of various interest rate or market
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.
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. Further, because the
value of the option is fixed at the point of sale, there are no daily payments
of cash to reflect the change in the value of the underlying contract. However,
since an option gives the buyer the right to enter into a contract at a set
price for a fixed period of time, its value does change daily and that change is
reflected in the net asset value of the Fund.
<PAGE>
The risk the Fund assumes when it buys an option is the loss of the premium paid
for the option. 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. Further, the Fund might not be able to close the
option because of insufficient activity in the options market. Purchasing
options also limits the use of monies that might otherwise be available for
long-term investments.
OPTIONS ON STOCK INDEXES. Options on stock indexes are securities traded on
national securities exchanges. An option on a stock index is similar to an
option on a futures contract except all settlements are in cash. A fund
exercising a put, for example, would receive the difference between the exercise
price and the current index level. Such options would be used in the same manner
as options on futures contracts.
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 is presently unclear, although the Fund's tax
advisors currently believe marking to market is not required. Depending on
developments, the Fund may seek Internal Revenue Service (IRS) rulings
clarifying questions concerning such treatment. Certain provisions of the
Internal Revenue Code may also limit the Fund's ability to engage in futures
contracts and related options transactions. For example, at the close of each
quarter of the Fund's taxable year, at least 50% of the value of its assets must
consist of cash, government securities and other securities, subject to certain
diversification requirements. Less than 30% of its gross income must be derived
from sales of securities held less than three months.
<PAGE>
The IRS has ruled publicly that an exchange-traded call option is a security for
purposes of the 50%-of-assets test and that its issuer is the issuer of the
underlying security, not the writer of the option, for purposes of the
diversification requirements. In order to avoid realizing a gain within the
three-month period, the Fund may be required to defer closing out a contract
beyond the time when it might otherwise be advantageous to do so. The Fund also
may be restricted in purchasing put options for the purpose of hedging
underlying securities because of applying the short sale holding period rules
with respect to such underlying securities.
Accounting for futures contracts will be according to generally accepted
accounting principles. Initial margin deposits will be recognized as assets due
from a broker (the Fund's agent in acquiring the futures position). During the
period the futures contract is open, changes in value of the contract will be
recognized as unrealized gains or losses by marking to market on a daily basis
to reflect the market value of the contract at the end of each day's trading.
Variation margin payments will be made or received depending upon whether gains
or losses are incurred. All contracts and options will be valued at the
last-quoted sales price on their primary exchange.
<PAGE>
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).
Independent auditors' report
The board and shareholders IDS Progressive Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments in securities, of IDS Progressive
Fund, Inc. as of September 30, 1997, and the related statement of
operations for the year then ended and the statements of changes in net
assets for each of the years in the two-year period ended September 30,
1997, and the financial highlights for each of the years in the ten-year
period ended September 30, 1997. These financial statements and the
financial highlights are the responsibility of fund management. Our
responsibility is to express an opinion on these financial statements and
the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and the
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Investment securities held in
custody are confirmed to us by the custodian. As to securities purchased
and sold but not received or delivered, and securities on loan, we request
confirmations from brokers, and where replies are not received, we carry
out other appropriate auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of IDS Progressive Fund,
Inc. at September 30, 1997, 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
November 7, 1997
(This annual report is not part of the prospectus.)
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statement of assets and liabilities IDS Progressive Fund, Inc.
Sept. 30, 1997
Assets
<S> <C>
Investment in securities, at value (Note 1)
(identified cost $416,719,447) $558,431,561
Dividends and accrued interest receivable 820,623
Receivable for investment securities sold 9,049,385
Unrealized appreciation on foreign currency contracts held, at value (Notes 1 and 5) 16
--
Total assets 568,301,585
-----------
Liabilities
Disbursements in excess of cash on demand deposit
(includes bank overdraft of $1,778,720) 1,489,579
Payable for investment securities purchased 1,829,909
Payable upon return of securities loaned (Note 4) 6,834,800
Unrealized depreciation on foreign currency contracts held, at value (Notes 1 and 5) 11,989
Accrued investment management services fee 38,811
Accrued distribution fee 1,211
Accrued service fee 2,636
Accrued transfer agency fee 198
Accrued administrative services fees 860
Other accrued expenses 44,044
------
Total liabilities 10,254,037
----------
Net assets applicable to capital stock $558,047,548
============
Represented by
Capital stock-- $.01 par value (Note 1) $ 549,697
Additional paid-in capital 368,014,328
Undistributed net investment income 3,488,056
Accumulated net realized gain (loss) 44,283,160
Unrealized appreciation (depreciation) on investments and on translation
of assets and liabilities in foreign currencies 141,712,307
-----------
Total-- representing net assets applicable to outstanding capital stock $558,047,548
============
Net assets applicable to outstanding shares: Class A $491,047,485
Class B $ 59,627,432
Class Y $ 7,372,631
Net asset value per share of outstanding capital stock: Class A shares 48,301,837 $ 10.17
Class B shares 5,943,475 $ 10.03
Class Y shares 724,368 $ 10.18
See accompanying notes to financial statements.
(This annual report is not part of the prospectus.)
<PAGE>
Statement of operations
IDS Progressive Fund, Inc.
Year ended Sept. 30, 1997
Investment income
Income:
Dividends $ 6,504,561
Interest 2,712,277
Less: Foreign taxes withheld (7,968)
------
Total income 9,208,870
---------
Expenses (Note 2):
Investment management services fee 3,051,855
Distribution fee -- Class B 282,071
Transfer agency fee 644,781
Incremental transfer agency fee-- Class B 5,077
Service fee
Class A 699,480
Class B 65,586
Class Y 2,386
Administrative services fees and expenses 266,087
Compensation of board members 8,182
Compensation of officers 809
Custodian fees 69,568
Postage 34,501
Registration fees 54,993
Reports to shareholders 29,686
Audit fees 24,500
Other 10,412
------
Total expenses 5,249,974
Earnings credits on cash balances (Note 2) (39,571)
-------
Total net expenses 5,210,403
---------
Investment income (loss) -- net 3,998,467
---------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 44,683,973
Foreign currency transactions (3,092)
------
Net realized gain (loss) on investments 44,680,881
Net change in unrealized appreciation (depreciation) on investments and on
translation of assets and liabilities in foreign currencies 87,815,921
----------
Net gain (loss) on investments and foreign currencies 132,496,802
-----------
Net increase (decrease) in net assets resulting from operations $136,495,269
============
See accompanying notes to financial statements.
(This annual report is not part of the prospectus.)
<PAGE>
<CAPTION>
Financial statements
Statements of changes in net assets
IDS Progressive Fund, Inc.
Year ended Sept. 30,
Operations and distributions 1997 1996
<S> <C> <C>
Investment income (loss)-- net $ 3,998,467 $ 4,336,115
Net realized gain (loss) on investments 44,680,881 28,404,561
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 87,815,921 16,970,511
---------- ----------
Net increase (decrease) in net assets resulting from operations 136,495,269 49,711,187
----------- ----------
Distributions to shareholders from:
Net investment income
Class A (3,537,075) (5,559,877)
Class B (139,272) (152,829)
Class Y (37,540) (19,834)
Net realized gain
Class A (26,372,964) (15,575,830)
Class B (2,052,354) (495,315)
Class Y (238,498) (51,524)
Total distributions (32,377,703) (21,855,209)
Capital share transactions (Note 6)
Proceeds from sales
Class A shares (Note 2) 58,138,297 39,648,057
Class B shares 27,926,302 17,231,778
Class Y shares 3,669,597 2,550,315
Reinvestment of distributions at net asset value
Class A shares 29,257,627 20,738,354
Class B shares 2,173,196 644,113
Class Y shares 276,038 71,358
Payments for redemptions
Class A shares (57,382,629) (55,284,721)
Class B shares (Note 2) (4,832,125) (2,019,169)
Class Y shares (1,092,897) (1,410,053)
---------- ----------
Increase (decrease) in net assets from capital share transactions 58,133,406 22,170,032
---------- ----------
Total increase (decrease) in net assets 162,250,972 50,026,010
Net assets at beginning of year 395,796,576 345,770,566
----------- -----------
Net assets at end of year $558,047,548 $395,796,576
============ ============
Undistributed net investment income $ 3,488,056 $ 3,202,477
------------ ------------
See accompanying notes to financial statements.
(This annual report is not part of the prospectus.)
</TABLE>
<PAGE>
Notes to financial statements
IDS Progressive Fund, Inc.
1
Summary of
significant
accounting policies
The Fund is registered under the Investment Company Act of 1940 (as
amended) as a diversified, open-end management investment company. The
Fund has 10 billion authorized shares of capital stock. The Fund invests
primarily in undervalued common stocks. 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
or write options traded on any U.S. or foreign exchange or in the
over-the-counter market where the completion of the obligation is
dependent upon the credit standing of the other party. The Fund also may
buy or 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 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.
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 or 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 may arise from
sales of foreign currency, closed forward contracts, exchange gains or
losses realized between the trade date and settlement dates on securities
transactions, and other translation gains or losses on dividends, interest
income and foreign withholding taxes.
The Fund may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate
fluctuation. The net U.S. dollar value of foreign currency underlying all
contractual commitments held by the Fund and the resulting unrealized
appreciation or depreciation are determined using foreign currency
exchange rates from an independent pricing service. The Fund is subject to
the credit risk that the other party will not complete the obligations of
the contract.
Federal taxes
Since the Fund's policy is to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to shareholders, no provision for
income or excise taxes is required.
Net investment income (loss) and net realized gains (losses) may differ
for financial statement and tax purposes primarily because of the deferral
of losses on certain futures contracts, the recognition of certain foreign
currency gains (losses) as ordinary income (loss) for tax purposes and
losses deferred due to "wash sale" transactions. The character of
distributions made during the year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to the timing of dividend distributions,
the fiscal year in which amounts are distributed may differ from the year
that the income or realized gains (losses) were recorded by the Fund.
On the statement of assets and liabilities, as a result of permanent
book-to-tax differences, undistributed net investment income has been
increased by $999 and accumulated net realized gain has been decreased by
$999.
Dividends to shareholders
An annual dividend declared and paid at the end of the calendar year from
net investment income is reinvested in additional shares of the Fund at
net asset value or payable in cash. Capital gains, when available, are
distributed along with the income dividend.
Other
Security transactions are accounted for on the date securities are
purchased or sold. Dividend income is recognized on the ex-dividend date
and interest income, including level-yield amortization of premium and
discount, is accrued daily.
2
Expenses and
sales charges
Effective March 20, 1995, the Fund entered into agreements with American
Express Financial Corporation (AEFC) for managing its portfolio, providing
administrative services and serving as transfer agent. 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 0.64% to
0.515% annually. The fee is adjusted upward or downward by a performance
incentive adjustment based on the Fund's average daily net assets over a
rolling twelve-month period as measured against the change in the Lipper
Capital Appreciation Fund Index. The maximum adjustment is 0.12% of the
Fund's average daily net assets after deducting 1% from the performance
difference. If the performance difference is less than 1%, the adjustment
will be zero. The adjustment increased the fee by $222,277 for the year
ended Sept. 30, 1997.
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 0.06% to 0.035%
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 approved by the board.
Under a separate Transfer Agency Agreement, AEFC maintains shareholder
accounts and records. The Fund pays AEFC an annual fee per shareholder
account for this service as follows:
oClass A $15
oClass B $16
oClass Y $15
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 commencing on May 9,
1997, the fee is calculated at a rate of 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 $758,495 for Class A and $22,770 for Class B
for the year ended Sept. 30, 1997. The Fund also pays custodian fees to
American Express Trust Company, an affiliate of AEFC.
During the year ended Sept. 30, 1997, the Fund's custodian and transfer
agency fees were reduced by $39,571 as a result of earnings credits from
overnight cash balances.
3
Securities
transactions
Cost of purchases and proceeds from sales of securities (other than
short-term obligations) aggregated $249,497,990 and $282,958,149,
respectively, for the year ended Sept. 30, 1997. Realized gains and losses
are determined on an identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC were $28,560
for the year ended Sept. 30, 1997.
4
Lending of
portfolio securities
At Sept. 30, 1997, securities valued at $6,633,220 were on loan to
brokers. For collateral, the Fund received $6,834,800 in cash. Income from
securities lending amounted to $165,443 for the year ended Sept. 30, 1997.
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
Foreign currency
contracts
At Sept. 30, 1997, the Fund had entered into foreign currency exchange
contracts that obligate the Fund to deliver currencies at specified future
dates. The unrealized appreciation and /or depreciation on these contracts
is included in the accompanying financial statements. See Summary of
significant accounting policies. The terms of the open contracts are as
follows:
Exchange date Currency to Currency to Unrealized Unrealized
be delivered be received appreciation depreciation
Oct. 1, 1997 6,828,760 4,930,121 $-- $11,989
Canadian Dollar U.S. Dollar
Oct. 6, 1997 4,825,168 623,584 16 --
Hong Kong Dollar U.S. Dollar ______ _______
$16 $11,989
6
Capital share
transactions
Transactions in shares of capital stock for the years indicated are as
follows:
Year ended Sept. 30, 1997
Class A Class B Class Y
Sold 6,618,226 3,202,387 420,561
Issued for reinvested 3,597,404 269,232 33,932
distributions
Redeemed (6,614,552) (559,212) (125,747)
---------- -------- --------
Net increase (decrease) 3,601,078 2,912,407 328,746
Year ended Sept. 30, 1996
Class A Class B Class Y
Sold 5,118,893 2,232,425 332,283
Issued for reinvested 2,788,167 86,937 9,593
distributions
Redeemed (7,139,474) (261,613) (184,442)
---------- -------- --------
Net increase (decrease) 767,586 2,057,749 157,434
7
Financial
highlights
"Financial highlights" showing per share data and selected information is
presented on pages 6 and 7 of the prospectus.
(This annual report is not part of the prospectus.)
<PAGE>
Investments in securities
IDS Progressive Fund, Inc.
Sept. 30, 1997
(Percentages represent value of
investments compared to net assets)
Common stocks (81.8%)
Issuer Shares Value(a)
Automotive & related (4.2%)
Danaher 150,000 $ 8,700,000
Dura Automotive Systems 220,000(b) 6,930,000
Tower Automotive 168,200(b) 7,569,000
Total 23,199,000
Banks and savings & loans (5.6%)
F & M Bancorp 50,391 1,927,456
First Virginia Banks 243,000 11,770,312
Mercantile Bancorp 92,701 7,056,864
TCF Financial 180,000 10,518,750
Total 31,273,382
Building materials & construction (1.2%)
Juno Lighting 205,000 3,510,625
Southern Energy Homes 300,000(b) 3,168,750
Total 6,679,375
Chemicals (3.0%)
Ecolab 188,000 9,129,750
Schulman (A) 350,000 7,481,250
Total 16,611,000
Communications equipment & services (0.1%)
Norstan 35,000(b) 752,500
Computers & office equipment (6.9%)
Black Box 140,000(b) 6,125,000
Intl Imaging Materials 287,500(b) 8,337,500
Learning Co 500,000(b) 7,375,000
Read-Rite 100,000(b,c) 2,450,000
Solectron 146,000(b) 6,497,000
Sterling Software 210,000(b) 7,533,750
Total 38,318,250
Electronics (2.8%)
Belden 240,000 9,045,000
Lattice Semiconductor 100,000(b) 6,512,500
Total 15,557,500
Energy (1.8%)
Murphy Oil 100,000 5,712,500
Newfield Exploration 59,300(b) 1,664,106
United Meridian 65,000(b) 2,388,750
Total 9,765,356
Financial services (2.8%)
Providian Financial 80,000 3,175,000
Simon DeBartolo Group REIT 180,000 5,940,000
Sun Communities REIT 180,000 6,457,500
Total 15,572,500
Food (1.0%)
Hormel Foods 180,000 5,771,250
Health care (4.7%)
DENTSPLY Intl 95,000 5,320,000
IDEXX Laboratories 373,500(b) 6,256,125
Life Technologies 88,350 2,672,587
Marquette Medical System 200,000(b) 6,200,000
TECNOL Medical Products 300,000(b) 6,037,500
Total 26,486,212
Health care services (1.5%)
Patterson Dental 150,000(b) 6,075,000
York Group 115,000 2,501,250
Total 8,576,250
Household products (1.0%)
First Brands 53,900 1,441,825
Stanhome 135,000 3,990,937
Total 5,432,762
Industrial equipment & services (6.1%)
AGCO 165,000 5,228,437
Alamo Group 230,000 5,333,125
AMETEK 235,000 5,522,500
Kaydon 120,000 7,200,000
Lydall 200,000(b) 4,687,500
Minerals Technologies 130,000 5,793,125
Total 33,764,687
Insurance (4.7%)
Allied Group 345,000 17,530,313
Executive Risk 129,900 8,881,913
Total 26,412,226
Leisure time & entertainment (1.2%)
Station Casinos 500,000(b,c) 4,062,500
Vail Resorts 108,000(b) 2,889,000
Total 6,951,500
Media (0.5%)
Lee Enterprises 100,000 2,837,500
Metals (1.7%)
Martin Marietta Materials 260,700 9,385,200
Multi-industry conglomerates (9.1%)
Brady (WH) 200,000 6,250,000
Griffon 600,000(b) 9,750,000
Hubbell Cl B 120,000 5,550,000
Kelly Services Cl A 160,000 5,360,000
Lancaster Colony 225,000 11,953,125
Standex Intl 150,000 4,725,000
ZERO Corp 248,000 7,021,500
Total 50,609,625
Paper & packaging (2.0%)
AptarGroup 60,000 3,356,250
Rayonier 165,000 7,981,875
Total 11,338,125
Retail (4.4%)
Dept 56 200,000(b) 5,787,500
Hancock Fabrics 250,000 3,359,375
Jostens 220,000 5,967,500
Lands' End 300,000(b) 9,243,750
Total 24,358,125
Utilities -- electric (2.7%)
Duff & Phelps Utilities 475,000 4,631,250
KU Energy 160,000 5,550,000
Sierra Pacific Resources 160,000 5,130,000
Total 15,311,250
Utilities -- gas (2.3%)
New Jersey Resources 153,900 4,982,512
Questar 200,000 8,112,500
Total 13,095,012
Utilities -- telephone (2.7%)
Century Telephone
Enterprises 210,000 9,240,000
Cincinnati Bell 200,000 5,687,500
Total 14,927,500
Foreign (7.8%)(d)
ACE 96,273 9,049,662
Concordia Paper
Holdings ADR 90,000(b) 315,000
Credicorp 132,000 2,508,000
Empresas ICA Sociedad
Controladora ADR 200,000(c) 3,512,500
GP Batteries Intl 700,000 2,169,336
Gulf Indonesia Resources 12,700(b) 282,575
Kwik-Fit Holdings 660,000 3,409,849
Persimmon 600,000 2,210,042
Polypipe 600,000 2,089,143
Powerscreen Intl 404,494 4,831,628
South China Morning Post 246,000 224,128
Terra Nova Holdings Cl A 350,000 9,493,750
Volker Wessels Stevin 103,240 3,330,825
Total 43,426,438
Total common stocks
(Cost: $314,737,092) $456,412,525
<PAGE>
Bonds (1.6%)
Issuer Coupon Maturity Principal Value(a)
rate year amount
Computers & office equipment (0.9%)
Read-Rite 6.50% 2004 $ 5,000,000 $4,912,500
Foreign (0.7%)(d)
Eskom
(South African Rand) 11.00 2008 23,550,000 4,182,250
Total bonds
(Cost: $9,058,069) $9,094,750
Short-term securities (16.7%)
Issuer Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
U.S. government agencies (1.9%)
Federal Home Loan Mtge Corp Disc Nts
10-07-97 5.46% $3,000,000 $ 2,997,285
10-14-97 5.45 2,400,000 2,395,294
10-17-97 5.43 1,800,000 1,795,672
Federal Natl Mtge Assn Disc Nt
11-07-97 5.47 3,400,000 3,380,973
Total 10,569,224
Commercial paper (14.4%)
Abbott Laboratories
10-29-97 5.52 3,000,000 2,987,167
Albertson's
10-23-97 5.54 4,700,000 4,684,145
BBV Finance (Delaware)
10-29-97 5.54 4,000,000 3,982,827
Commerzbank U.S. Finance
10-28-97 5.55 3,900,000 3,883,825
Fleet Funding
10-06-97 5.55 3,700,000(e) 3,697,163
Gateway Fuel
10-22-97 5.52 600,000 598,075
Goldman Sachs Group
10-17-97 5.53 4,000,000 3,990,204
Kellogg
10-06-97 5.53 2,600,000 2,598,014
Kredietbank North America Finance
10-08-97 5.52 3,000,000 2,996,792
10-08-97 5.53 3,500,000 3,496,250
Metlife Funding
10-01-97 5.52 3,052,000 3,052,000
Morgan Stanley Group
10-14-97 5.54 7,700,000 7,684,679
10-15-97 5.54 2,500,000 2,494,653
NBD Bank
10-03-97 5.54 4,000,000 3,998,773
New Center Asset Trust
10-21-97 5.54 9,600,000 9,570,613
Paccar Financial
10-09-97 5.53 10,000,000 9,987,756
10-20-97 5.53 1,000,000 997,092
Reed Elsevier
10-29-97 5.55 2,600,000(e) 2,588,837
Southern California Gas
10-24-97 5.52 4,900,000 4,882,782
USAA Capital
10-22-97 5.53 2,000,000 1,993,572
Total 80,165,219
Letter of credit (0.4%)
Student Loan Marketing Assn-
Nebraska Higher Education
10-31-97 5.56 2,200,000 2,189,843
Total short-term securities
(Cost: $92,924,286) $ 92,924,286
Total investment in securities
(Cost: $416,719,447)(f) $558,431,561
See accompanying notes to investments in securities.
(This annual report is not part of the prospectus.)
<PAGE>
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing.
(c) Security is partially or fully on loan. See Note 4 to the financial
statements.
(d) Foreign security values are stated in U.S. dollars. For debt securities,
principal amounts are denominated in the currency indicated.
(e) 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.
(f) At Sept. 30, 1997, the cost of securities for federal income tax purposes
was $416,043,678 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation........................................$146,246,718
Unrealized depreciation..........................................(3,858,835)
----------
Net unrealized appreciation....................................$142,387,883
============
(This annual report is not part of the prospectus.)
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) FINANCIAL STATEMENTS:
These financial statements filed electronically as Item 24(a) to Registrant's
Post-Effective Amendment No. 62 to Registration Statement No. 2-30059 are
incorporated herein by reference.
Independent Auditors' Report dated November 7, 1997
Statement of Assets and Liabilities, September 30, 1997
Statement of Operations, Year ended September 30, 1997
Statement of Changes in Net Assets, for the two-year
period ended September 30, 1996 and September 30, 1997
Notes to Financial Statements Investments in Securities,
September 30, 1997 Notes to Investments in Securities
(b) EXHIBITS:
1. Copy of Articles of Incorporation, as amended Oct. 17, 1988, filed as
Exhibit 1 to Post-Effective Amendment No. 46 to Registration
Statement No. 2-30059, is incorporated herein by reference.
2. Copy of By-laws, as amended January 12, 1989, filed as Exhibit 2 to
Post-Effective Amendment No. 47 to Registration Statement
No. 2-30059, is incorporated herein by reference.
3. Not Applicable.
4. Copy of Stock certificate, filed as Exhibit No. 3 to Registrant's
Amendment No. 1 to Registration Statement No. 2-28529 dated July 8,
1968, is incorporated herein by reference.
5. Form 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. 60 to Registration Statement No. 2-30059 is
incorporated herein by reference.
6. Form 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. 60 to Registration Statement No. 2-30059 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.
8(a). Custodian Agreement between Registrant and American Express Trust
Company, dated March 20, 1995, filed electronically herewith.
8(b). Custody Agreement between Morgan Stanley Trust Company and IDS Bank
and Trust dated August, 1992, filed electronically herewith.
9(a). Copy of Agreement of Merger, dated April 10, 1986, filed as Exhibit
No. 9 to Post-Effective Amendment No. 40 to Registration Statement
No. 2-30059, is incorporated herein by reference.
9(b). Transfer Agency Agreement between Registrant and American Express
Financial Corporation, dated March 20, 1995, filed electronically
herewith.
9(c). Copy of License Agreement between Registrant and IDS Financial
Corporation, dated January 25, 1988, filed as Exhibit 9(c) to
Registrant's Post-Effective Amendment No. 52 to Registration
Statement No. 2-30059, is incorporated herein by reference.
9(d). Shareholder Service Agreement between Registrant and American Express
Financial Advisors Inc., dated March 20, 1995, filed electronically
herewith.
9(e). Administrative Services Agreement between Registrant and American
Express Financial Corporation, dated March 20, 1995, filed
electronically herewith.
9(f). Class Y Shareholder Service Agreement between Registrant and American
Express Financial Advisors Inc., dated May 9, 1997, filed
electronically herewith.
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.
14. Forms of Keogh, IRA and other retirement plans, filed as Exhibits
14(a) through 14(n) to IDS Growth Fund, Inc. Post-Effective Amendment
No. 34 to Registration Statement No. 2-38355, are incorporated
herein by reference.
15. Plan and Agreement of Distribution between Registrant and American
Express Financial Advisors Inc., dated March 20, 1995, filed
electronically herewith.
16. Copy of Schedule for computation of each performance quotation
provided in the Registration Statement in response to Item 22, filed
as exhibit no. 16 to Post-Effective Amendment No. 54 to Registration
Statement No. 2-30059 is hereby incorporated by reference.
17. Financial Data Schedules, are filed electronically herewith.
18. Copy of Plan pursuant to Rule 18f-3 under the 1940 Act, filed
electronically as Exhibit 18 to Registrant's Post-Effective Amendment
No. 61 to Registration Statement No. 2-30059, is incorporated herein
by reference.
19(a). Directors/Trustees Power of Attorney to sign Amendments to this
Registration Statement, dated January 8, 1997, filed electronically
herewith.
19(b). Officers' Power of Attorney to sign Amendments to this Registration
Statement, dated Nov. 1, 1995, is filed electronically as Exhibit
19(b) to Registrant's Post-Effective Amendment No. 62, is
incorporated herein by reference.
Item 25. Persons Controlled by or Under Common Control with Registrant.
None.
Item 26. Number of Holders of Securities.
(1) (2)
Number of Record
Holders as of
Title of Class Nov. 6, 1997
Common Stock
Class A 37,904
Class B 7,580
Class Y 2,911
Item 27. Indemnification
The Articles of Incorporation of the registrant provide that the Fund shall
indemnify any person who was or is a party or is threatened to be made a party,
by reason of the fact that she or he is or was a director, officer, employee or
agent of the Fund, or is or was serving at the request of the Fund as a
director, officer, employee or agent of another company, partnership, joint
venture, trust or other enterprise, to any threatened, pending or completed
action, suit or proceeding, wherever brought, and the Fund may purchase
liability insurance and advance legal expenses, all to the fullest extent
permitted by the laws of the State of Minnesota, as now existing or hereafter
amended. The By-laws of the registrant provide that present or former directors
or officers of the Fund made or threatened to be made a party to or involved
(including as a witness) in an actual or threatened action, suit or proceeding
shall be indemnified by the Fund to the full extent authorized by the Minnesota
Business Corporation Act, all as more fully set forth in the By-laws filed as an
exhibit to this registration statement.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Any indemnification hereunder shall not be exclusive of any other rights of
indemnification to which the directors, officers, employees or agents might
otherwise be entitled. No indemnification shall be made in violation of the
Investment Company Act of 1940.
<PAGE>
<PAGE>
PAGE 1
<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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant, IDS Progressive 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 1993,
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 25th day of November, 1997.
IDS PROGRESSIVE FUND, INC.
By: _______________________________
Matthew Karstetter, Treasurer
By: /s/William R. Pearce**
William R. Pearce, Chief Executive 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 25th day of November, 1997.
Signature Capacity
/s/ William R Pearce* Chairman of the Board
William R. Pearce
/s/ H. Brewster Atwater, Jr.* Director
H. Brewster Atwater, Jr.
/s/ Lynn V. Cheney* Director
Lynn V. Cheney
/s/ William H. Dudley* Director
William H. Dudley
/s/ David R. Hubers* Director
David R Hubers
/s/ Heinz F. Hutter* Director
Heinz F. Hutter
/s/ Anne P. Jones* Director
Anne P. Jones
/s/ Alan K. Simpson* Director
Alan K. Simpson
/s/ Edson W. Spencer* Director
Edson W. Spencer
/s/ John R. Thomas* Director
John R. Thomas
/s/ Wheelock Whitney* Director
Wheelock Whitney
/s/ C. Angus Wurtele* Director
C. Angus Wurtele
*Signed pursuant to Directors/Trustees Power of Attorney dated January 8, 1997,
filed electronically herewith, by:
- ---------------------------------
Leslie L. Ogg
**Signed pursuant to Officers' Power of Attorney dated Nov. 1, 1995, filed
electronically herewith, by:
- ---------------------------------
Leslie L. Ogg
CONTENTS OF THIS POST-EFFECTIVE AMENDMENT NO. 64 TO
REGISTRATION STATEMENT NO. 2-30059
This Post-Effective Amendment contains the following papers and documents:
The facing sheet.
The cross reference page.
Part A.
The prospectus.
Part B.
Statement of Additional Information.
Financial Statements.
Part C.
Other information.
Exhibits.
The signatures.
IDS PROGRESSIVE FUND, INC.
FILE NO.2-30059/811-1714
EXHIBIT INDEX
EXHIBIT 8(a): CUSTODIAN AGREEMENT, DATED MARCH 20, 1995
EXHIBIT 8(b): CUSTODY AGREEMENT, DATED AUGUST 1992
EXHIBIT 9(b): TRANSFER AGENCY AGREEMENT, DATED MARCH 20, 1995
EXHIBIT 9(d): SHAREHOLDER SERVICE AGREEMENT, DATED MARCH 20, 1995
EXHIBIT 9(e): ADMINISTRATIVE SERVICES AGREEMENT, DATED MARCH 20, 1995
EXHIBIT 9(f): CLASS Y SHAREHOLDER SERVICE AGREEMENT, DATED MAY 9, 1997
EXHIBIT 10: OPINION AND CONSENT OF COUNSEL
EXHIBIT 11: INDEPENDENT AUDITORS' CONSENT
EXHIBIT 15: PLAN AND AGREEMENT OF DISTRIBUTION, DATED MARCH 20, 1995
EXHIBIT 17: FINANCIAL DATA SCHEDULES
EXHIBIT 19(a):DIRECTOR'S/TRUSTEES POWER OF ATTORNEY, DATED JANUARY 8, 1997
CUSTODIAN AGREEMENT
THIS CUSTODIAN AGREEMENT dated March 20, 1995, between IDS Progressive Fund,
Inc., a Minnesota Corporation (the "Corporation") and American Express Trust
Company, a corporation organized under the laws of the State of Minnesota with
its principal place of business at Minneapolis, Minnesota (the "Custodian").
WHEREAS, the Corporation desires that its securities and cash be hereafter held
and administered by Custodian pursuant to the terms of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Corporation and the Custodian agree as follows:
Section 1. Definitions
The word "securities" as used herein shall be construed to include, without
being limited to, shares, stocks, treasury stocks, including any stocks of this
Corporation, notes, bonds, debentures, evidences of indebtedness, options to buy
or sell stocks or stock indexes, certificates of interest or participation in
any profit-sharing agreements, collateral trust certificates, preorganization
certificates or subscriptions, transferable shares, investment contracts, voting
trust certificates, certificates of deposit for a security, fractional or
undivided interests in oil, gas or other mineral rights, or any certificates of
interest or participation in, temporary or interim certificates for, receipts
for, guarantees of, or warrants or rights to subscribe to or purchase any of the
foregoing, acceptances and other obligations and any evidence of any right or
interest in or to any cash, property or assets and any interest or instrument
commonly known as a security. In addition, for the purpose of this Custodian
Agreement, the word "securities" also shall include other instruments in which
the Corporation may invest including currency forward contracts and commodities
such as interest rate or index futures contracts, margin deposits on such
contracts or options on such contracts.
The words "custodian order" shall mean a request or direction, including a
computer printout, directed to the Custodian and signed in the name of the
Corporation by any two individuals designated in the current certified list
referred to in Section 2.
The word "facsimile" shall mean an exact copy or likeness which is
electronically transmitted for instant reproduction.
Section 2. Names, Titles and Signatures of Authorized Persons
The Corporation will certify to the Custodian the names and signatures of its
present officers and other designated persons authorized on behalf of the
Corporation to direct the Custodian by custodian order as herein before defined.
The Corporation agrees that whenever any change occurs in this list it will file
with the Custodian a copy of a resolution certified by the Secretary or an
<PAGE>
Assistant Secretary of the Corporation as having been duly adopted by the Board
of Directors or the Executive Committee of the Board of Directors of the
Corporation designating those persons currently authorized on behalf of the
Corporation to direct the Custodian by custodian order, as herein before
defined, and upon such filing (to be accompanied by the filing of specimen
signatures of the designated persons) the persons so designated in said
resolution shall constitute the current certified list. The Custodian is
authorized to rely and act upon the names and signatures of the individuals as
they appear in the most recent certified list from the Corporation which has
been delivered to the Custodian as herein above provided.
Section 3. Use of Subcustodians
The Custodian may make arrangements, where appropriate, with other banks having
not less than two million dollars aggregate capital, surplus and undivided
profits for the custody of securities. Any such bank selected by the Custodian
to act as subcustodian shall be deemed to be the agent of the Custodian.
The Custodian also may enter into arrangements for the custody of securities
entrusted to its care through foreign branches of United States banks; through
foreign banks, banking institutions or trust companies; through foreign
subsidiaries of United States banks or bank holding companies, or through
foreign securities depositories or clearing agencies (hereinafter also called,
collectively, the "Foreign Subcustodian" or indirectly through an agent,
established under the first paragraph of this section, if and to the extent
permitted by Section 17(f) of the Investment Company Act of 1940 and the rules
promulgated by the Securities and Exchange Commission thereunder, any order
issued by the Securities and Exchange Commission, or any "no-action" letter
received from the staff of the Securities and Exchange Commission. To the extent
the existing provisions of the Custodian Agreement are consistent with the
requirements of such Section, rules, order or no-action letter, they shall apply
to all such foreign custodianships. To the extent such provisions are
inconsistent with or additional requirements are established by such Section,
rules, order or no-action letter, the requirements of such Section, rules, order
or no-action letter will prevail and the parties will adhere to such
requirements; provided, however, in the absence of notification from the
Corporation of any changes or additions to such requirements, the Custodian
shall have no duty or responsibility to inquire as to any such changes or
additions.
Section 4. Receipt and Disbursement of Money
(1) The Custodian shall open and maintain a separate account or accounts in the
name of the Corporation or cause its agent to open and maintain such account or
accounts subject only to checks, drafts or directives by the Custodian pursuant
to the terms of this Agreement. The Custodian or its agent shall hold in such
account or accounts, subject to the provisions hereof, all cash received by
<PAGE>
it from or for the account of the Corporation. The Custodian or its agent shall
make payments of cash to or for the account of the Corporation from such cash
only:
(a) for the purchase of securities for the portfolio of the
Corporation upon the receipt of such securities by the
Custodian or its agent unless otherwise instructed on behalf
of the Corporation;
(b) for the purchase or redemption of shares of capital stock of
the Corporation;
(c) for the payment of interest, dividends, taxes, management
fees, or operating expenses (including, without limitation
thereto, fees for legal, accounting and auditing services);
(d) for payment of distribution fees, commissions, or redemption
` fees, if any;
(e) for payments in connection with the conversion, exchange or
surrender of securities owned or subscribed to by the
Corporation held by or to be delivered to the Custodian;
(f) for payments in connection with the return of securities
loaned by the Corporation upon receipt of such securities or
the reduction of collateral upon receipt of proper notice;
(g) for payments for other proper corporate purposes;
(h) or upon the termination of this Agreement.
Before making any such payment for the purposes permitted under the terms of
items (a), (b), (c), (d), (e), (f) or (g) of paragraph (1) of this section, the
Custodian shall receive and may rely upon a custodian order directing such
payment and stating that the payment is for such a purpose permitted under these
items (a), (b), (c), (d), (e), (f) or (g) and that in respect to item (g), a
copy of a resolution of the Board of Directors or of the Executive Committee of
the Board of Directors of the Corporation signed by an officer of the
Corporation and certified by its Secretary or an Assistant Secretary, specifying
the amount of such payment, setting forth the purpose to be a proper corporate
purpose, and naming the person or persons to whom such payment is made.
Notwithstanding the above, for the purposes permitted under items (a) or (f) of
paragraph (1) of this section, the Custodian may rely upon a facsimile order.
(2) The Custodian is hereby appointed the attorney-in-fact of the Corporation to
endorse and collect all checks, drafts or other orders for the payment of money
received by the Custodian for the account of the Corporation and drawn on or to
the order of the Corporation and to deposit same to the account of the
Corporation pursuant to this Agreement.
<PAGE>
Section 5. Receipt of Securities
Except as permitted by the second paragraph of this section, the Custodian or
its agent shall hold in a separate account or accounts, and physically
segregated at all times from those of any other persons, firms or corporations,
pursuant to the provisions hereof, all securities received by it for the account
of the Corporation. The Custodian shall record and maintain a record of all
certificate numbers. Securities so received shall be held in the name of the
Corporation, in the name of an exclusive nominee duly appointed by the Custodian
or in bearer form, as appropriate.
Subject to such rules, regulations or guidelines as the Securities and Exchange
Commission may adopt, the Custodian may deposit all or any part of the
securities owned by the Corporation in a securities depository which includes
any system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Securities and Exchange Commission under the Securities Exchange Act of 1934, or
such other person as may be permitted by the Commission, pursuant to which
system all securities of any particular class or series of any issuer deposited
within the system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of such securities.
All securities are to be held or disposed of by the Custodian for, and subject
at all times to the instructions of, the Corporation pursuant to the terms of
this Agreement. The Custodian shall have no power or authority to assign,
hypothecate, pledge or otherwise dispose of any such securities, except pursuant
to the directive of the Corporation and only for the account of the Corporation
as set forth in Section 6 of this Agreement.
Section 6. Transfer Exchange, Delivery, etc. of Securities
The Custodian shall have sole power to release or deliver any securities of the
Corporation held by it pursuant to this Agreement. The Custodian agrees to
transfer, exchange or deliver securities held by it or its agent hereunder only:
(a) for sales of such securities for the account of the Corporation, upon
receipt of payment therefor;
(b) when such securities are called, redeemed, retired or otherwise become
payable;
(c) for examination upon the sale of any such securities in accordance with
"street delivery" custom which would include delivery against interim
receipts or other proper delivery receipts;
(d) in exchange for or upon conversion into other securities alone or other
securities and cash whether pursuant to any plan of
(e) merger, consolidation, reorganization, recapitalization or
readjustment, or otherwise;
<PAGE>
(f) for the purpose of exchanging interim receipts or temporary
certificates for permanent certificates;
(g) upon conversion of such securities pursuant to their terms into other
securities;
(h) upon exercise of subscription, purchase or other similar rights
represented by such securities; for loans of such securities by the
Corporation upon receipt of collateral; or
(i) for other proper corporate purposes.
As to any deliveries made by the Custodian pursuant to items (a), (b), (c), (d),
(e), (f), (g) and (h), securities or cash received in exchange therefore shall
be delivered to the Custodian, its agent, or to a securities depository. Before
making any such transfer, exchange or delivery, the Custodian shall receive a
custodian order or a facsimile from the Corporation requesting such transfer,
exchange or delivery and stating that it is for a purpose permitted under
Section 6 (whenever a facsimile is utilized, the Corporation will also deliver
an original signed custodian order) and, in respect to item (i), a copy of a
resolution of the Board of Directors or of the Executive Committee of the Board
of Directors of the Corporation signed by an officer of the Corporation and
certified by its Secretary or an Assistant Secretary, specifying the securities,
setting forth the purpose for which such payment, transfer, exchange or delivery
is to be made, declaring such purpose to be a proper corporate purpose, and
naming the person or persons to whom such transfer, exchange or delivery of such
securities shall be made.
Section 7. Custodian's Acts Without Instructions
Unless and until the Custodian receives a contrary custodian order from the
Corporation, the Custodian shall or shall cause its agent to:
(a) present for payment all coupons and other income items held by the
Custodian or its agent for the account of the Corporation which call
for payment upon presentation and hold all cash received by it upon
such payment for the account of the Corporation;
(b) present for payment all securities held by it or its agent which mature
or when called, redeemed, retired or otherwise become payable;
(c) ascertain all stock dividends, rights and similar securities to be
issued with respect to any securities held by the Custodian or its
agent hereunder, and to collect and hold for the account of the
Corporation all such securities; and
(d) ascertain all interest and cash dividends to be paid to security
holders with respect to any securities held by the Custodian or its
agent, and to collect and hold such interest and cash dividends for the
account of the Corporation.
<PAGE>
Section 8. Voting and Other Action
Neither the Custodian nor any nominee of the Custodian shall vote any of the
securities held hereunder by or for the account of the Corporation. The
Custodian shall promptly deliver to the Corporation all notices, proxies and
proxy soliciting materials with relation to such securities, such proxies to be
executed by the registered holder of such securities (if registered otherwise
than in the name of the Corporation), but without indicating the manner in which
such proxies are to be voted.
Custodian shall transmit promptly to the Corporation all written information
(including, without limitation, pendency of calls and maturities of securities
and expirations of rights in connection therewith) received by the Custodian
from issuers of the securities being held for the Corporation. With respect to
tender or exchange offers, the Custodian shall transmit promptly to the
Corporation all written information received by the Custodian from issuers of
the securities whose tender or exchange is sought and from the party (or his
agents) making the tender or exchange offer.
Section 9. Transfer Taxes
The Corporation shall pay or reimburse the Custodian for any transfer taxes
payable upon transfers of securities made hereunder, including transfers
resulting from the termination of this Agreement. The Custodian shall execute
such certificates in connection with securities delivered to it under this
Agreement as may be required, under any applicable law or regulation, to exempt
from taxation any transfers and/or deliveries of any such securities which may
be entitled to such exemption.
Section 10. Custodian's Reports
The Custodian shall furnish the Corporation as of the close of business each day
a statement showing all transactions and entries for the account of the
Corporation. The books and records of the Custodian pertaining to its actions as
Custodian under this Agreement and securities held hereunder by the Custodian
shall be open to inspection and audit by officers of the Corporation, internal
auditors employed by the Corporation's investment adviser, and independent
auditors employed by the Corporation. The Custodian shall furnish the
Corporation in such form as may reasonably be requested by the Corporation a
report, including a list of the securities held by it in custody for the account
of the Corporation, identification of any subcustodian, and identification of
such securities held by such subcustodian, as of the close of business of the
last business day of each month, which shall be certified by a duly authorized
officer of the Custodian. It is further understood that additional reports may
from time to time be requested by the Corporation. Should any report ever be
filed with any governmental authority pertaining to lost or stolen securities,
the Custodian will concurrently provide the Corporation with a copy of that
report.
<PAGE>
The Custodian also shall furnish such reports on its systems of internal
accounting control as the Corporation may reasonably request from time to time.
Section 11. Concerning Custodian
For its services hereunder the Custodian shall be paid such compensation at such
times as may from time to time be agreed on in writing by the parties hereto in
a Custodian Fee Agreement.
The Custodian shall not be liable for any action taken in good faith upon any
custodian order or facsimile herein described or certified copy of any
resolution of the Board of Directors or of the Executive Committee of the Board
of Directors of the Corporation, and may rely on the genuineness of any such
document which it may in good faith believe to have been validly executed.
The Corporation agrees to indemnify and hold harmless Custodian and its nominee
from all taxes, charges, expenses, assessments, claims and liabilities
(including counsel fees) incurred or assessed against it or its nominee in
connection with the performance of this Agreement, except such as may arise from
the Custodian's or its nominee's own negligent action, negligent failure to act
or willful misconduct. Custodian is authorized to charge any account of the
Corporation for such items. In the event of any advance of cash for any purpose
made by Custodian resulting from orders or instructions of the Corporation, or
in the event that Custodian or its nominee shall incur or be assessed any taxes,
charges, expenses, assessments, claims or liabilities in connection with the
performance of this Agreement, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the Corporation shall be
security therefor.
The Custodian shall maintain a standard of care equivalent to that which would
be required of a bailee for hire and shall not be liable for any loss or damage
to the Corporation resulting from participation in a securities depository
unless such loss or damage arises by reason of any negligence, misfeasance, or
willful misconduct of officers or employees of the Custodian, or from its
failure to enforce effectively such rights as it may have against any securities
depository or from use of an agent, unless such loss or damage arises by reason
of any negligence, misfeasance, or willful misconduct of officers or employees
of the Custodian, or from its failure to enforce effectively such rights as it
may have against any agent.
Section 12. Termination and Amendment of Agreement
The Corporation and the Custodian mutually may agree from time to time in
writing to amend, to add to, or to delete from any provision of this Agreement.
<PAGE>
The Custodian may terminate this Agreement by giving the Corporation ninety
days' written notice of such termination by registered mail addressed to the
Corporation at its principal place of business.
The Corporation may terminate this Agreement at any time by written notice
thereof delivered, together with a copy of the resolution of the Board of
Directors authorizing such termination and certified by the Secretary of the
Corporation, by registered mail to the Custodian.
Upon such termination of this Agreement, assets of the Corporation held by the
Custodian shall be delivered by the Custodian to a successor custodian, if one
has been appointed by the Corporation, upon receipt by the Custodian of a copy
of the resolution of the Board of Directors of the Corporation certified by the
Secretary, showing appointment of the successor custodian, and provided that
such successor custodian is a bank or trust company, organized under the laws of
the United States or of any State of the United States, having not less than two
million dollars aggregate capital, surplus and undivided profits. Upon the
termination of this Agreement as a part of the transfer of assets, either to a
successor custodian or otherwise, the Custodian will deliver securities held by
it hereunder, when so authorized and directed by resolution of the Board of
Directors of the Corporation, to a duly appointed agent of the successor
custodian or to the appropriate transfer agents for transfer of registration and
delivery as directed. Delivery of assets on termination of this Agreement shall
be effected in a reasonable, expeditious and orderly manner; and in order to
accomplish an orderly transition from the Custodian to the successor custodian,
the Custodian shall continue to act as such under this Agreement as to assets in
its possession or control. Termination as to each security shall become
effective upon delivery to the successor custodian, its agent, or to a transfer
agent for a specific security for the account of the successor custodian, and
such delivery shall constitute effective delivery by the Custodian to the
successor under this Agreement.
In addition to the means of termination herein before authorized, this Agreement
may be terminated at any time by the vote of a majority of the outstanding
shares of the Corporation and after written notice of such action to the
Custodian.
Section 13. General
Nothing expressed or mentioned in or to be implied from any provision of this
Agreement is intended to, or shall be construed to give any person or
corporation other than the parties hereto, any legal or equitable right, remedy
or claim under or in respect of this Agreement, or any covenant, condition or
provision herein contained, this Agreement and all of the covenants, conditions
and provisions hereof being intended to be and being for the sole and exclusive
benefit of the parties hereto and their respective successors and assigns.
<PAGE>
This Agreement shall be governed by the laws of the State of Minnesota.
This Agreement supersedes all prior agreements between the parties.
IDS PROGRESSIVE FUND, INC.
By: /s/ Leslie L. Ogg
Leslie L. Ogg
Vice President
AMERICAN EXPRESS TRUST COMPANY
By:/s/ Chandrakant A. Patel
Vice President
EXECUTION COPY
CUSTODY AGREEMENT
Custody Agreement, dated August , 1992, between MORGAN STANLEY TRUST
COMPANY (the "Custodian") and IDS BANK & TRUST (the "Customer").
1. The Customer hereby appoints the Custodian as a custodian of
Eligible Securities (as hereinafter defined) owned or held by the Customer and
instructs the Custodian to establish an account identified as belonging to the
Customer (the "Account"). The Custodian shall have general responsibility for
the safekeeping of such Eligible Securities and any and all monies and other
property (collectively, the "Property") received by the Custodian or any
Subcustodian appointed as described below for the account of the Customer.
"Eligible Securities" means the securities delivered from time to time to the
Custodian for custody in the Account. It is understood that the specific
procedures the Custodian will use in carrying out its responsibilities under
this Agreement are set forth in the procedures manual attached hereto as Exhibit
A (the "Procedures Manual"), as such Procedures Manual may be amended from time
to time by the Custodian by ninety days prior written notice to the Customer
(unless the Customer agrees to a shorter period). The Customer acknowledges that
the Procedures Manual constitutes an integral part of this Agreement.
2. The Customer agrees that the Property held for the Customer's
account may be physically held outside the United States.
3. The Property held in the Account may be held in custody and deposit
accounts that have been established by the Custodian with one or more domestic
or foreign banks, or through the facilities of one or more clearing agencies or
central securities depositories, as listed on Exhibit B hereto (the
"Subcustodians"), as such Exhibit may be amended from time to time by the
Custodian by written notice to the Customer. The Custodian shall deliver to the
Customer such information as is necessary or appropriate for the Customer to
determine that the Customer is in compliance with Rule 17f-5 promulgated under
the Investment Company Act of 1940, as amended. The Custodian may hold Property
for all of its customers with a Subcustodian in a single account that is
identified as belonging to the Custodian for the benefit of its customers. Any
Subcustodian may hold Property in a securities depository and may utilize a
clearing agency. The Custodian shall not be liable for any loss resulting
directly from the physical presence of any Property in a foreign country (and
not by virtue of the actions of the Custodian or any Subcustodian) including,
but not limited to, losses resulting from nationalization, expropriation,
exchange controls or acts of war or terrorism. Except as provided in the
previous sentence, the liability of the Custodian for losses incurred by the
Customer in respect of Property held by the Custodian for the Customer's account
shall not be affected by the Custodian's use of Subcustodians.
<PAGE>
4. With respect to Property held by a Subcustodian pursuant to
Section 3:
(a) The Custodian will identify on its books as belonging to
the Customer any Property held by such Subcustodian for the Custodian's
account;
(b) In the event that the Subcustodian holds Property in a
securities depository or clearing agency, such Subcustodian will be
required by its agreement with the Custodian to identify on its books
such Property as being held for the account of the Custodian as a
custodian for its customers;
(c) The Custodian shall require that Property held by the
Subcustodian for the Custodian's account be identified on the
Subcustodian's books as separate from any other property held by the
Subcustodian and as held solely for the benefit of customers of the
Custodian; and
(d) The Custodian will hold Property through a Subcustodian
only if (i) such Subcustodian and any securities depository or clearing
agency in which such Subcustodian holds Property, or any of their
creditors, may not assert any right, charge, security interest, lien,
encumbrance or other claim of any kind to such Property except a claim
of payment for its safe custody or administration and (ii) beneficial
ownership of such Property may be freely transferred without the
payment of money or value other than for safe custody or
administration.
5. The Custodian shall allow the Customer's accountants reasonable
access to the Custodian's records relating to the Property held by the Custodian
as such accountants may reasonably require in connection with their examination
of the Customer's affairs. The Custodian shall also obtain from any Subcustodian
(and will require each Subcustodian to obtain from any securities depository or
clearing agency in which it deposits Property) an undertaking, to the extent
consistent with the laws of the jurisdiction or jurisdictions to which such
Subcustodian, securities depository or clearing agency is subject, to permit
independent public accountants such reasonable access to the records of such
Subcustodian, securities depository or clearing agency as may be reasonably
required in connection with the examination of the Customer's affairs or to take
such other action as the Custodian in its judgment may deem sufficient to ensure
such reasonable access.
6. The Custodian shall provide such reports and other information to
the Customer as the Custodian and the Customer may agree from time to time,
including such reports which are described in the Procedures Manual.
7. The Custodian shall make or cause any Subcustodian to make payments
from monies held in the Customer's account, except as provided in Section 9
hereof, only
<PAGE>
(a) upon the purchase of Eligible Securities for the account
of the Customer and then only upon the delivery of such Eligible
Securities;
(b) for payments to be made in connection with the conversion,
exchange or surrender of Eligible Securities in the Customer's account;
(c) upon a request of the Customer that the Custodian return
monies being held in the Customer's account;
(d) upon termination of this Custody Agreement as hereinafter
set forth; and
(e) for any other purpose upon receipt of explicit
instructions of the Customer accompanied by evidence reasonably
acceptable to the Custodian as to the authorization of such payment.
Except as provided in the last sentence of this Section 7, all payments pursuant
to this Section 7 will be made only upon receipt by the Custodian of Authorized
Instructions (as hereinafter defined) of the Customer which shall specify the
purpose for which the payment is to be made. In the event that it is not
possible to make a payment in accordance with Authorized Instructions of the
Customer, the Custodian shall proceed in accordance with the procedures set
forth in the Procedures Manual. Any payment pursuant to subsection (d) of this
Section 7 will be made in accordance with Section 14.
8. Eligible Securities held in the Customer's account will be
transferred, exchanged or delivered by the Custodian or a Subcustodian, except
as provided in Section 9 hereof, only
(a) upon sale of such Eligible Securities for the account of
the Customer and then only upon receipt of payment therefor;
(b) upon exercise of conversion, subscription, purchase or
other similar rights represented by such Eligible Securities;
(c) in the case of warrants, rights or similar securities,
upon the surrender thereof in the exercise of such warrants, rights or
similar securities;
(d) for delivery in connection with any loans of securities
made by the Customer, but only against receipt of such collateral as
agreed upon from time to time by the Custodian and the Customer;
(e) upon the termination of this Custody Agreement as
hereinafter set forth; and
(f) for any other purpose upon receipt of explicit
instructions of the Customer accompanied by evidence reasonably
acceptable to the Custodian as to the authorization of such transfer,
exchange or delivery.
<PAGE>
Except as provided in the last sentence of this Section 8, all transfers,
exchanges or deliveries of Eligible Securities in the Customer's account
pursuant to this Section 8 will be made only upon receipt by the Custodian of
Authorized Instructions of the Customer which shall specify the purpose for
which the transfer, exchange or delivery is to be made. In the event that it is
not possible to transfer Eligible Securities in accordance with Authorized
Instructions of the Customer, the Custodian shall proceed in accordance with the
procedures set forth in the Procedures Manual. Any transfer or delivery pursuant
to subsection (e) of this Section 8 will be made in accordance with Section 14.
9. In the absence of Authorized Instructions from the Customer to the
contrary, the Custodian may, and it may authorize any Subcustodian to:
(a) make payments to itself or others for expenses of handling
Property or other similar items relating to its duties under this
Agreement, provided that all such payments shall be accounted for to
the Customer;
(b) receive and collect all income and principal with respect
to Eligible Securities in the Customer's account and to credit cash
receipts to the Customer's account;
(c) exchange securities when the exchange is purely
ministerial (including, without limitation, the exchange of interim
receipts or temporary securities for securities in definitive form and
the exchange of warrants, or other documents of entitlement to
securities, for the securities themselves);
(d) surrender Eligible Securities in the Customer's account at
maturity or when called for redemption upon receiving payment therefor;
(e) execute in the Customer's name such ownership and other
certificates as may be required to obtain the payment of income from
Eligible Securities held in the Customer's account;
(f) pay or cause to be paid, from the Customer's account, any
and all taxes and levies in the nature of taxes imposed on Property in
the Customer's account by any governmental authority in connection with
transactions in such Property;
(g) endorse for collection, in the name of the Customer,
checks, drafts and other negotiable instruments; and
(h) in general, attend to all nondiscretionary details in
connection with the sale, purchase, transfer and other dealings with
the Property held for the Customer's account by the Custodian or by a
Subcustodian, except as otherwise directed by the Customer.
<PAGE>
10. "Authorized Instructions" of the Customer shall mean instructions
received by tested telex or telecopy or by such other means as may be agreed in
writing between the Customer and the Custodian. Unless otherwise specified in
this Agreement, the Custodian shall be entitled to act, and shall have no
liability for acting, upon any instructions, notice, request, consent,
certificate or other instrument or paper reasonably believed by it to be genuine
and to have been properly executed by one or more persons which the Customer has
previously identified to the Custodian as authorized to act on the Customer's
behalf.
11. Eligible Securities held for the Customer's account which must be
held in registered form may be registered in the name of the Custodian's nominee
or, in the case of Eligible Securities in the custody of an entity other than
the Custodian, in the name of such entity's nominee. The Customer agrees to hold
any such nominee harmless from any liability as a holder of record of such
Eligible Securities. The Custodian may without notice to the Customer cause any
such Eligible Securities to cease to be registered in the name of any such
nominee and to be registered in the name of the Customer.
12. The Custodian shall be responsible for the performance of only such
duties as are set forth in this Agreement or the Procedures Manual or contained
in Authorized Instructions given to the Custodian which are not contrary to the
provisions of any relevant law or regulation or of this Agreement or the
Procedures Manual. The Custodian shall not be liable to the Customer or to any
other person for any action taken or omitted to be taken by it in connection
with this Agreement in the absence of negligence or willful misconduct on the
part of the Custodian.
13. The Customer agrees to pay to the Custodian from time to time such
compensation for its services pursuant to this Agreement as may be mutually
agreed upon from time to time and the Custodian's out-of-pocket or incidental
expenses. The Customer hereby agrees to hold the Custodian harmless from any
liability or loss resulting from any taxes or other governmental charges, and
any expenses related thereto, which may be imposed or assessed with respect to
the Customer's account or any Property held therein and also agrees to hold the
Custodian, any Subcustodians, and their respective nominees harmless from any
liability as a record holder of Eligible Securities in the Customer's account.
The Custodian is and any Subcustodians are authorized to charge any account of
the Customer for such items and the Custodian shall have a lien on any and all
Property in the Customer's account for any amount owing to the Custodian from
time to time under this Agreement. Except as set forth in the previous sentence,
or otherwise permitted pursuant to the terms of this agreement, the Custodian
shall not pledge, assign, hypothecate or otherwise encumber Eligible Securities
or cash without the Customer's Authorized Instructions; it being understood that
a Subcustodian will generally retain a lien against securities which the
Subcustodian has purchased for the Account but for which the Customer has not
yet paid.
<PAGE>
14. This Agreement may be terminated by the Customer or the Custodian
by 90 days written notice to the other, sent by registered mail. If notice of
termination is given, the Customer shall, within 60 days following the giving of
such notice, deliver to the Custodian a statement in writing specifying the
successor custodian or other person to whom the Custodian shall transfer the
Property in the Customer's account. In either event the Custodian, subject to
the satisfaction of any lien it may have, will transfer such Property to the
person so specified. If the Custodian does not receive such statement the
Custodian, at its election, may transfer such Property to a bank or trust
company established under the laws of the United States or any state thereof to
be held and disposed of pursuant to the provisions of this Agreement or may
continue to hold such Property until such a statement is delivered to the
Custodian. In such event the Custodian shall be entitled to fair compensation
for its services during such period as the Custodian remains in possession of
any Property and the provisions of this Agreement relating to the duties and
obligations of the Custodian shall remain in full force and effect; provided,
however, that the Custodian shall no longer settle any transactions in
securities for the Customer's account.
15. The Custodian, its agents and employees will maintain the
confidentiality of information concerning the Property held in the Customer's
account, including in dealings with affiliates of the Custodian. In the event
the Custodian or any Subcustodian is requested or required to disclose any
confidential information concerning the Property, the Custodian shall promptly
notify the Customer of such request or requirement so that the Customer may seek
a protective order or waive the Custodian's or such Subcustodian's compliance
with this Section 15. In the absence of such a waiver, if the Custodian or such
Subcustodian is compelled, in the opinion of its counsel, to disclose any
confidential information, the Custodian or such Subcustodian may disclose such
information to such persons as, in the opinion of counsel, is so required.
16. Any notice or other communication from the Customer to the
Custodian, unless otherwise provided by this Agreement, shall be sent by
certified or registered mail to Morgan Stanley Trust Company, One Pierrepont
Plaza, Brooklyn, New York 11201, Attention: President, and any notice from the
Custodian to the Customer is to be mailed postage prepaid, addressed to the
Customer at the address appearing below, or as it may hereafter be changed on
the Custodian's records in accordance with notice from the Customer.
17. The Custodian may assign all of its rights and obligations
hereunder to any other entity which is qualified to act as custodian under the
terms of this Agreement and majority-owned, directly or indirectly, by Morgan
Stanley Group Inc., and upon the assumption of the rights and obligations
hereunder by such entity, such entity shall succeed to all of the rights and
obligations of, and be substituted for, the Custodian hereunder as if such
entity had been originally named as custodian herein. The Custodian shall give
prompt written notice to the Customer upon the effectiveness of any such
assignment.
<PAGE>
This Agreement shall bind the successors and assigns of the Customer
and the Custodian and shall be governed by the laws of the State of New York.
IDS BANK & TRUST
By /s/ Mark Ellis Vice President
Authorized Signature
Address for record 2800 Multifoods Tower
Minneapolis, Minnesota 55402
Accepted:
MORGAN STANLEY TRUST COMPANY
By /s/ J Roberts
Authorized Signature
TRANSFER AGENCY AGREEMENT
AGREEMENT dated as of March 20, 1995, between IDS Progressive Fund, Inc. (the
"Fund"), a Minnesota corporation, and American Express Financial Corporation
(the "Transfer Agent"), a Delaware corporation.
In consideration of the mutual promises set forth below, the Fund and the
Transfer Agent agree as follows:
1. Appointment of the Transfer Agent. The Fund hereby appoints the Transfer
Agent, as transfer agent for its shares and as shareholder servicing agent for
the Fund, and the Transfer Agent accepts such appointment and agrees to perform
the duties set forth below.
2. Compensation. The Fund 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 Fund separately.
The Transfer Agent will bill the Fund monthly. The fee provided for hereunder
shall be paid in cash by the Fund to American Express Financial Corporation
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 Fund 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 Fund 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 Fund and the Transfer Agent.
(a) The Fund represents to the Transfer Agent that all outstanding shares are
validly issued, fully paid and non-assessable by the Fund. When shares are
hereafter issued in accordance with the terms of the Fund's Articles of
Incorporation and its prospectus, such shares shall be validly issued, fully
paid and non-assessable by the Fund.
(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 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 the
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 Fund 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.
(f) Shareholder Records, Reports and Services.
<PAGE>
(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 Fund. The Transfer Agent will provide reports pertaining to the
services provided under this Agreement as the Fund 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 Fund and may be
inspected by the Fund or any person retained by the Fund at reasonable times.
The Fund and Transfer Agent agree to protect the confidentiality of those
records.
7. Action by Board and Opinion of Fund's Counsel. The Transfer Agent may rely
on resolutions of the Board of Directors or the Executive Committee of the
Board of Directors and on opinion of counsel for the Fund.
<PAGE>
8. Duty of Care. It is understood and agreed that, in furnishing the Fund 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 Fund, it shall be accompanied by a vote of the Board of Directors, 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 Fund, 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 Fund, 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 Fund 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.
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.
<PAGE>
(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 PROGRESSIVE FUND, INC.
By: /s/ Leslie L. Ogg
Leslie L. Ogg
Vice President
AMERICAN EXPRESS FINANCIAL CORPORATION
By: /s/ Janis E. Miller
Vice President
<PAGE>
Schedule A
IDS PROGRESSIVE FUND, INC.
TRANSFER AGENT FEE
Effective the 20th day of March, 1995, the Annual Per Account Fee
accrued daily and payable monthly is revised as follows:
CLASS FEE
A $ 15
B 16
Y 15
<PAGE>
Schedule B
OUT-OF-POCKET EXPENSES
The Fund 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 Fund
Shareholder Service Agreement
This agreement is between IDS Progressive Fund, Inc. (the "Fund") and American
Express Financial Advisors Inc., the principal underwriter of the Fund, for
services to be provided to shareholders by personal financial advisors and other
servicing agents. It is effective on the first day the Fund offers multiple
classes of shares.
American Express Financial Advisors represents that shareholders consider their
financial advisor or servicing agent a significant factor in their satisfaction
with their investment and, to help retain financial advisors or servicing
agents, it is necessary for the Fund to pay annual servicing fees to financial
advisors and other servicing agents.
American Express Financial Advisors represents that fees paid to financial
advisors will be used by financial advisors to help shareholders thoughtfully
consider their investment goals and objectively monitor how well the goals are
being achieved. As principal underwriter, American Express Financial Advisors
will use its best efforts to assure that other distributors provide comparable
services to shareholders for the servicing fees received.
American Express Financial Advisors agrees to monitor the services provided by
financial advisors and servicing agents, to measure the level and quality of
services provided, to provide training and support to financial advisors and
servicing agents and to devise methods for rewarding financial advisors and
servicing agents who achieve an exemplary level and quality of services.
The Fund agrees to pay American Express financial advisors and other servicing
agents 0.15 percent of the net asset value for each shareholder account assigned
to a financial advisor or servicing agent that holds either Class A or Class B
shares. In addition, the Fund agrees to pay American Express Financial Advisors'
costs to monitor, measure, train and support services provided by financial
advisors or servicing agents up to 0.025 percent of the net asset value for each
shareholder account assigned to a financial advisor or servicing agent that
holds either Class A or Class B shares. The Fund agrees to pay American Express
Financial Advisors in cash within five (5) business days after the last day of
each month.
American Express Financial Advisors agrees to provide the Fund, prior to the
beginning of the calendar year, a budget covering its expected costs to monitor,
measure, train and support services and a quarterly report of its actual
expenditures. American Express Financial Advisors agrees to meet with
representatives of the Fund at their request to provide information as may be
reasonably necessary to evaluate its performance under the terms of this
agreement.
American Express Financial Advisors agrees that if, at the end of any month, the
expenses of the Fund, including fees under this agreement and any other
agreement between the Fund and American
<PAGE>
Express Financial Advisors or American Express Financial Corporation, but
excluding taxes, brokerage commissions and charges in connection with the
purchase and sale of assets exceed the most restrictive applicable state expense
limitation for the Fund's current fiscal year, the Fund shall not pay fees and
expenses under this agreement to the extent necessary to keep the Fund's
expenses from exceeding the limitation, it being understood that American
Express Financial Advisors will assume all unpaid expenses and bill the Fund for
them in subsequent months but in no event can the accumulation of unpaid
expenses or billing be carried past the end of the Fund's fiscal year.
This agreement shall continue in effect for a period of more than one year so
long as it is reapproved at least annually at a meeting called for the purpose
of voting on the agreement by a vote, in person, of the members of the Board who
are not interested persons of the Fund and have no financial interest in the
operation of the agreement, and of all the members of the Board.
This agreement may be terminated at any time without payment of any penalty by a
vote of a majority of the members of the Board who are not interested persons of
the Fund and have no financial interest in the operation of the agreement or by
American Express Financial Advisors. The agreement will terminate automatically
in the event of its assignment as that term is defined in the Investment Company
Act of 1940. This agreement may be amended at any time provided the amendment is
approved in the same manner the agreement was initially approved and the
amendment is agreed to by American Express Financial Advisors.
Approved this 20th day of March, 1995.
IDS PROGRESSIVE FUND, INC.
/s/ Leslie L. Ogg
Leslie L. Ogg
Vice President
AMERICAN EXPRESS FINANCIAL ADVISORS INC.
/s/ Janis E. Miller
Vice President
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT made the 20th day of March, 1995, by and between IDS Progressive Fund,
Inc. (the "Fund"), a Minnesota corporation, and American Express Financial
Corporation, a Delaware corporation.
Part One: SERVICES
(1) The Fund hereby retains American Express Financial Corporation, and American
Express Financial Corporation hereby agrees, for the period of this Agreement
and under the terms and conditions hereinafter set forth, to furnish the Fund
continuously with all administrative, accounting, clerical, statistical,
correspondence, corporate and all other services of whatever nature required in
connection with the administration of the Fund as provided under this Agreement;
and to pay such expenses as may be provided for in Part Three hereof; subject
always to the direction and control of the Board of Directors, the Executive
Committee and the authorized officers of the Fund. American Express Financial
Corporation agrees to maintain an adequate organization of competent persons to
provide the services and to perform the functions herein mentioned. American
Express Financial Corporation agrees to meet with any persons at such times as
the Board of Directors deems appropriate for the purpose of reviewing American
Express Financial Corporation's performance under this Agreement.
(2) The Fund agrees that it will furnish to American Express Financial
Corporation any information that the latter may reasonably request with respect
to the services performed or to be performed by American Express Financial
Corporation under this Agreement.
(3) It is understood and agreed that in furnishing the Fund with the services as
herein provided, neither American Express Financial Corporation, nor any
officer, director or agent thereof shall be held liable to the Fund or its
creditors or shareholders for errors of judgment or for anything except willful
misfeasance, bad faith, or gross negligence in the performance of its duties, or
reckless disregard of its obligations and duties under the terms of this
Agreement. It is further understood and agreed that American Express Financial
Corporation may rely upon information furnished to it reasonably believed to be
accurate and reliable.
Part Two: COMPENSATION FOR SERVICES
(1) The Fund agrees to pay to American Express Financial Corporation, and
American Express Financial Corporation covenants and agrees to accept from the
Fund in full payment for the services furnished, based on the net assets of the
Fund as set forth in the following table:
<PAGE>
Assets Annual Rate At
(Billions) Each Asset Level
First $0.25 0.060%
Next 0.25 0.055
Next 0.25 0.050
Next 0.25 0.045
Next 1 0.040
Over 2 0.035
The administrative fee for each calendar day of each year shall be equal to
1/365th (1/366th in each leap year) of the total amount computed. The
computation shall be made for each such day on the basis of net assets as of the
close of business of the full business day two (2) business days prior to the
day for which the computation is being made. In the case of the suspension of
the computation of net asset value, the administrative fee for each day during
such suspension shall be computed as of the close of business on the last full
business day on which the net assets were computed. As used herein, "net assets"
as of the close of a full business day shall include all transactions in shares
of the Fund recorded on the books of the Fund for that day.
(2) The administrative fee shall be paid on a monthly basis and, in the event of
the termination of this Agreement, the administrative fee accrued shall be
prorated on the basis of the number of days that this Agreement is in effect
during the month with respect to which such payment is made.
(3) The administrative fee provided for hereunder shall be paid in cash by the
Fund to American Express Financial Corporation within five (5) business days
after the last day of each month.
Part Three: ALLOCATION OF EXPENSES
(1) The Fund agrees to pay:
(a) Administrative fees payable to American Express Financial Corporation for
its services under the terms of this Agreement.
(b) Taxes.
(c) Fees and charges of its independent certified public accountants for
services the Fund requests.
(d) Fees and expenses of attorneys (i) it employs in matters not involving the
assertion of a claim by a third party against the Fund, its directors and
officers, (ii) it employs in conjunction with a claim asserted by the Board of
Directors against American Express Financial Corporation, except that American
Express Financial Corporation shall reimburse the Fund for such fees and
expenses if it is ultimately determined by a court of competent jurisdiction, or
American Express Financial Corporation agrees, that it is liable in whole or in
part to the Fund, and (iii) it employs to assert a claim against a third party.
<PAGE>
(e) Fees paid for the qualification and registration for public sale of the
securities of the Fund under the laws of the United States and of the several
states in which such securities shall be offered for sale.
(f) Office expenses which shall include a charge for occupancy, insurance on the
premises, furniture and equipment, telephone, telegraph, electronic information
services, books, periodicals, published services, and office supplies used by
the Fund, equal to the cost of such incurred by American Express Financial
Corporation.
(g) Fees of consultants employed by the Fund.
(h) Directors, officers and employees expenses which shall include fees,
salaries, memberships, dues, travel, seminars, pension, profit sharing, and all
other benefits paid to or provided for directors, officers and employees,
directors and officers liability insurance, errors and omissions liability
insurance, worker's compensation insurance and other expenses applicable to the
directors, officers and employees, except the Fund will not pay any fees or
expenses of any person who is an officer or employee of American Express
Financial Corporation or its affiliates.
(i) Filing fees and charges incurred by the Fund in connection with filing any
amendment to its articles of incorporation, or incurred in filing any other
document with the State of Minnesota or its political subdivisions.
(j) Organizational expenses of the Fund.
(k) One-half of the Investment Company Institute membership dues charged jointly
to the IDS MUTUAL FUND GROUP and American Express Financial Corporation.
(l) Expenses properly payable by the Fund, approved by the Board of Directors.
(2) American Express Financial Corporation agrees to pay all expenses associated
with the services it provides under the terms of this Agreement. Further,
American Express Financial Corporation agrees that if, at the end of any month,
the expenses of the Fund under this Agreement and any other agreement between
the Fund and American Express Financial Corporation, but excluding those
expenses set forth in (1)(b) of this Part Three, exceed the most restrictive
applicable state expenses limitation, the Fund shall not pay those expenses set
forth in (1)(a) and (c) through (m) of this Part Three to the extent necessary
to keep the Fund's expenses from exceeding the limitation, it being understood
that American Express Financial Corporation will assume all unpaid expenses and
bill the Fund for them in subsequent months but in no event can the accumulation
of unpaid expenses or billing be carried past the end of the Fund's fiscal year.
<PAGE>
Part Four: MISCELLANEOUS
(1) American Express Financial Corporation shall be deemed to be an independent
contractor and, except as expressly provided or authorized in this Agreement,
shall have no authority to act for or represent the Fund.
(2) A "full business day" shall be as defined in the By-laws.
(3) The Fund recognizes that American Express Financial Corporation now renders
and may continue to render investment advice and other services to other
investment companies and persons which may or may not have investment policies
and investments similar to those of the Fund and that American Express Financial
Corporation manages its own investments and/or those of its subsidiaries.
American Express Financial Corporation shall be free to render such investment
advice and other services and the Fund hereby consents thereto.
(4) Neither this Agreement nor any transaction had pursuant hereto shall be
invalidated or in anyway affected by the fact that directors, officers, agents
and/or shareholders of the Fund are or may be interested in American Express
Financial Corporation or any successor or assignee thereof, as directors,
officers, stockholders or otherwise; that directors, officers, stockholders or
agents of American Express Financial Corporation are or may be interested in the
Fund as directors, officers, shareholders, or otherwise; or that American
Express Financial Corporation or any successor or assignee, is or may be
interested in the Fund as shareholder or otherwise, provided, however, that
neither American Express Financial Corporation, nor any officer, director or
employee thereof or of the Fund, shall sell to or buy from the Fund any property
or security other than shares issued by the Fund, except in accordance with
applicable regulations or orders of the United States Securities and Exchange
Commission.
(5) Any notice under this Agreement shall be given in writing, addressed, and
delivered, or mailed postpaid, to the party to this Agreement entitled to
receive such, at such party's principal place of business in Minneapolis,
Minnesota, or to such other address as either party may designate in writing
mailed to the other.
(6) American Express Financial Corporation agrees that no officer, director or
employee of American Express Financial Corporation will deal for or on behalf of
the Fund with himself as principal or agent, or with any corporation or
partnership in which he may have a financial interest, except that this shall
not prohibit officers, directors or employees of American Express Financial
Corporation from having a financial interest in the Fund or in American Express
Financial Corporation.
(7) The Fund agrees that American Express Financial Corporation 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 American Express Financial Corporation remains fully
responsible for the services.
<PAGE>
(8) 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. This Agreement shall be governed by the laws of the State of Minnesota.
Part Five: RENEWAL AND TERMINATION
(1) 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.
(2) This Agreement may not be amended or modified in any manner except by a
written agreement executed by both parties.
IN WITNESS THEREOF, the parties hereto have executed the foregoing Agreement as
of the day and year first above written.
IDS PROGRESSIVE FUND, INC.
By: /s/ Leslie L. Ogg
Leslie L. Ogg
Vice President
AMERICAN EXPRESS FINANCIAL CORPORATION
By: /s/ Janis E. Miller
Vice President
Class Y Shareholder Service Agreement
This agreement is between IDS Progressive Fund, Inc. (the Fund) and American
Express Financial Advisors Inc. (AEFA), the principal underwriter of the Fund,
for services to be provided to shareholders of Class Y of the Fund by AEFA and
other servicing agents.
AEFA represents that shareholders consider personal service a significant factor
in their satisfaction with their investment. AEFA represents that fees paid by
the Fund will be used to help shareholders thoughtfully consider their
investment goals and objectively monitor how well the goals are being
achieved.
The Fund agrees to pay AEFA 0.10 percent of the net asset value of Class Y.
The Fund agrees to pay AEFA in cash within five (5) business days after the last
day of each month.
AEFA agrees to provide the Fund annually a budget covering its expected costs
and a quarterly report of its actual expenditures. AEFA agrees to meet with
representatives of the Fund at their request to provide information as may be
reasonably necessary to evaluate its performance under the terms of this
agreement.
This agreement shall continue in effect for a period of more than one year so
long as it is reapproved at least annually at a meeting called for the purpose
of voting on the agreement by a vote, in person, of the members of the Board who
are not interested persons of the Fund and have no financial interest in the
operation of the agreement, and of all the members of the Board.
This agreement may be terminated at any time without payment of any penalty
by a vote of a majority of the members of the Board who are not interested
persons of the Fund and have no financial interest in the operation of the
agreement or by AEFA. The agreement will terminate automatically in the
event of its assignment as that term is defined in the Investment Company Act
of 1940. This agreement may be amended at any time provided the amendment
is approved in the same manner the agreement was initially approved and the
amendment is agreed to by AEFA.
Approved as of this 9th day of May, 1997.
IDS PROGRESSIVE FUND, INC. AMERICAN EXPRESS
FINANCIAL ADVISORS INC.
/s/ Leslie L. Ogg /s/ Ward D. Armstrong
Leslie L. Ogg Ward D. Armstrong
Vice President Vice President
<PAGE>
November 25th, 1997
IDS Progressive Fund, Inc.
IDS Tower 10
Minneapolis, Minnesota 55440-0010
Gentlemen:
I have examined the Articles of Incorporation and the By-Laws of 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:
(a) That the Company is a corporation duly organized and existing under the
laws of the State of Minnesota with an authorized capital stock of
10,000,000,000 shares, all of $.01 par value, that such shares may be
issued as full or fractional shares;
(b) That all such authorized shares are, under the laws of the State of
Minnesota, redeemable as provided in the Articles of Incorporation of
the Company and upon redemption shall have the status of authorized and
unissued shares;
(c) That the Company registered on November 24, 1992, an indefinite amount
of shares pursuant to Rule 24f-2; and
(d) That shares which were sold at not less than their par value and in
accordance with applicable federal and state securities laws were
legally issued, fully paid and non-assessable.
I hereby consent that the foregoing opinion may be used in connection with this
Post-Effective Amendment.
Very truly yours,
Leslie L. Ogg
Attorney at Law
901 S. Marquette Ave., Suite 2810
Minneapolis, Minnesota 55402-3268
LLO/KB/rdh
Independent auditors' consent
- ------------------------------------------------------------------------------
The board and shareholders IDS Progressive 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
November , 1997
Plan and Agreement of Distribution
This plan and agreement is between IDS Progressive Fund, Inc. (the "Fund") and
American Express Financial Advisors Inc., the principal underwriter of the Fund,
for distribution services to the Fund. It is effective on the first day the Fund
offers multiple classes of shares.
The plan and agreement has been approved by members of the Board of Directors
(the "Board") of the Fund who are not interested persons of the Fund and have no
direct or indirect financial interest in the operation of the plan or any
related agreement, and all of the members of the Board, in person, at a meeting
called for the purpose of voting on the plan and agreement.
The plan and agreement provides that:
1. The Fund will reimburse American Express Financial Advisors for all sales and
promotional expenses attributable to the sale of Class B shares, including sales
commissions, business and employee expenses charged to distribution of Class B
shares, and corporate overhead appropriately allocated to the sale of Class B
shares.
2. The amount of the reimbursement shall be equal on an annual basis to 0.75% of
the average daily net assets of the Fund attributable to Class B shares. The
amount so determined shall be paid to American Express Financial Advisors in
cash within five (5) business days after the last day of each month. American
Express Financial Advisors agrees that if, at the end of any month, the expenses
of the Fund, including fees under this agreement and any other agreement between
the Fund and American Express Financial Advisors or American Express Financial
Corporation, but excluding taxes, brokerage commissions and charges in
connection with the purchase and sale of assets exceed the most restrictive
applicable state expense limitation for the Fund's current fiscal year, the Fund
shall not pay fees and expenses under this agreement to the extent necessary to
keep the Fund's expenses from exceeding the limitation, it being understood that
American Express Financial Advisors will assume all unpaid expenses and bill the
Fund for them in subsequent months, but in no event can the accumulation of
unpaid expenses or billing be carried past the end of the Fund's fiscal year.
3. For each purchase of Class B shares, after eight years the Class B shares
will be converted to Class A shares and those assets will no longer be included
in determining the reimbursement amount.
4. The Fund understands that if a shareholder redeems Class B shares before they
are converted to Class A shares, American Express Financial Advisors will impose
a sales charge directly on the redemption proceeds to cover those expenses it
has previously incurred on the sale of those shares.
5. American Express Financial Advisors agrees to provide at least quarterly an
analysis of distribution expenses and to meet with representatives of the Fund
as reasonably requested to provide additional information.
<PAGE>
6. The plan and agreement shall continue in effect for a period of more than one
year provided it is reapproved at least annually in the same manner in which it
was initially approved.
7. The plan and agreement may not be amended to increase materially the amount
that may be paid by the Fund without the approval of a least a majority of the
outstanding shares of Class B. Any other amendment must be approved in the
manner in which the plan and agreement was initially approved.
8. This agreement may be terminated at any time without payment of any penalty
by a vote of a majority of the members of the Board who are not interested
persons of the Fund and have no financial interest in the operation of the plan
and agreement, or by vote of a majority of the outstanding Class B shares, or by
American Express Financial Advisors. The plan and agreement will terminate
automatically in the event of its assignment as that term is defined in the
Investment Company Act of 1940.
Approved this 20th day of March, 1995.
IDS PROGRESSIVE FUND, INC.
/s/ Leslie L. Ogg
Leslie L. Ogg
Vice President
AMERICAN EXPRESS FINANCIAL ADVISORS INC.
/s/ Janis E. Miller
Vice President
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> IDS Progressive Fund Class A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 416719447
<INVESTMENTS-AT-VALUE> 558431561
<RECEIVABLES> 9870008
<ASSETS-OTHER> 16
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 568301585
<PAYABLE-FOR-SECURITIES> 1829909
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8424128
<TOTAL-LIABILITIES> 558047548
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 368564025
<SHARES-COMMON-STOCK> 48301837
<SHARES-COMMON-PRIOR> 44700759
<ACCUMULATED-NII-CURRENT> 3488056
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 44283160
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 141712307
<NET-ASSETS> 491047485
<DIVIDEND-INCOME> 6496593
<INTEREST-INCOME> 2712277
<OTHER-INCOME> 0
<EXPENSES-NET> 5210403
<NET-INVESTMENT-INCOME> 3998467
<REALIZED-GAINS-CURRENT> 44680881
<APPREC-INCREASE-CURRENT> 87815921
<NET-CHANGE-FROM-OPS> 136495269
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3537075
<DISTRIBUTIONS-OF-GAINS> 26372964
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6618226
<NUMBER-OF-SHARES-REDEEMED> 6614552
<SHARES-REINVESTED> 3597404
<NET-CHANGE-IN-ASSETS> 162250972
<ACCUMULATED-NII-PRIOR> 3202477
<ACCUMULATED-GAINS-PRIOR> 28267094
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3051855
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5249974
<AVERAGE-NET-ASSETS> 408029088
<PER-SHARE-NAV-BEGIN> 8.23
<PER-SHARE-NII> 0.08
<PER-SHARE-GAIN-APPREC> 2.54
<PER-SHARE-DIVIDEND> 0.08
<PER-SHARE-DISTRIBUTIONS> 0.60
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.17
<EXPENSE-RATIO> 1.10
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> IDS Progressive Fund Class B
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 416719447
<INVESTMENTS-AT-VALUE> 558431561
<RECEIVABLES> 9870008
<ASSETS-OTHER> 16
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 568301585
<PAYABLE-FOR-SECURITIES> 1829909
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8424128
<TOTAL-LIABILITIES> 558047548
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 368564025
<SHARES-COMMON-STOCK> 5943475
<SHARES-COMMON-PRIOR> 3031068
<ACCUMULATED-NII-CURRENT> 3488056
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 44283160
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 141712307
<NET-ASSETS> 59627432
<DIVIDEND-INCOME> 6496593
<INTEREST-INCOME> 2712277
<OTHER-INCOME> 0
<EXPENSES-NET> 5210403
<NET-INVESTMENT-INCOME> 3998467
<REALIZED-GAINS-CURRENT> 44680881
<APPREC-INCREASE-CURRENT> 87815921
<NET-CHANGE-FROM-OPS> 136495269
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 139272
<DISTRIBUTIONS-OF-GAINS> 2052354
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3202387
<NUMBER-OF-SHARES-REDEEMED> 559212
<SHARES-REINVESTED> 269232
<NET-CHANGE-IN-ASSETS> 162250972
<ACCUMULATED-NII-PRIOR> 3202477
<ACCUMULATED-GAINS-PRIOR> 28267094
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3051855
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<GROSS-EXPENSE> 5249974
<AVERAGE-NET-ASSETS> 37627946
<PER-SHARE-NAV-BEGIN> 8.15
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 2.49
<PER-SHARE-DIVIDEND> 0.04
<PER-SHARE-DISTRIBUTIONS> 0.60
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.03
<EXPENSE-RATIO> 1.87
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> IDS Progressive Fund Class Y
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 416719447
<INVESTMENTS-AT-VALUE> 558431561
<RECEIVABLES> 9870008
<ASSETS-OTHER> 16
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 568301585
<PAYABLE-FOR-SECURITIES> 1829909
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8424128
<TOTAL-LIABILITIES> 558047548
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 368564025
<SHARES-COMMON-STOCK> 724368
<SHARES-COMMON-PRIOR> 395622
<ACCUMULATED-NII-CURRENT> 3488056
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 44283160
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 141712307
<NET-ASSETS> 7372631
<DIVIDEND-INCOME> 6496593
<INTEREST-INCOME> 2712277
<OTHER-INCOME> 0
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<NET-INVESTMENT-INCOME> 3998467
<REALIZED-GAINS-CURRENT> 44680881
<APPREC-INCREASE-CURRENT> 87815921
<NET-CHANGE-FROM-OPS> 136495269
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<DISTRIBUTIONS-OF-INCOME> 37540
<DISTRIBUTIONS-OF-GAINS> 238498
<DISTRIBUTIONS-OTHER> 0
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<NUMBER-OF-SHARES-REDEEMED> 125747
<SHARES-REINVESTED> 33932
<NET-CHANGE-IN-ASSETS> 162250972
<ACCUMULATED-NII-PRIOR> 3202477
<ACCUMULATED-GAINS-PRIOR> 28267094
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3051855
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5249974
<AVERAGE-NET-ASSETS> 4759093
<PER-SHARE-NAV-BEGIN> 8.24
<PER-SHARE-NII> 0.09
<PER-SHARE-GAIN-APPREC> 2.54
<PER-SHARE-DIVIDEND> 0.09
<PER-SHARE-DISTRIBUTIONS> 0.60
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<AVG-DEBT-OUTSTANDING> 0
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</TABLE>
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 8th day of January, 1997.
/s/ H. Brewster Atwater, Jr. /s/ Melvin R. Laird
H. Brewster Atwater, Jr. Melvin R. Laird
/s/ Lynne V. Cheney /s/ William R. Pearce
Lynne V. Cheney William R. Pearce
/s/ William H. Dudley /s/ Alan K. Simpson
William H. Dudley Alan K. Simpson
/s/ Robert F. Froehlke /s/ Edson W. Spencer
Robert F. Froehlke 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
