<PAGE>
PAGE 1
IDS
Mutual
1995 annual report
(prospectus enclosed)
(icon of) a scale
The goal of IDS Mutual, a part of IDS Investment Series, Inc., is
to provide a balance of growth of capital and current income. The
Fund divides its investments between common stocks and senior
securities (bonds and preferred stocks).
(This annual report includes a prospectus that describes in detail
the Fund's objective, investment policies, risks, sales charges,
fees and other matters of interest. Please read the prospectus
carefully before you invest or send money.)
Distributed by
American Express Financial Advisors Inc.
<PAGE>
PAGE 2
(icon of) a scale
A beneficial balance
A balanced portfolio is one of the building blocks of investment
planning. And balance is what IDS Mutual is all about. The Fund
starts with a focus on stocks, many of which are part of the who's
who of corporate America. To help balance the fluctuations
inherent in stocks, as well as provide greater income to investors,
bonds are added to the portfolio. The result: a Fund that offers
income above that of a pure stock fund, while still providing
potential for capital appreciation.
<PAGE>
PAGE 3
Contents
1995 annual report
(to the left of the table of contents in italics)
The purpose of this annual report is to tell investors how the
Funds performed.
From the president 4
From the portfolio managers 4
Ten largest holdings 6
Making the most of your Fund 7
Long-term performance 8
Independent auditors' report 9
Financial statements 10
Notes to financial statements 13
Investments in securities 20
IDS mutual funds 28
Federal income tax information 31
1995 prospectus
(to the left of the table of contents in italics)
The prospectus, which is bound into the middle of this annual
report, describes the Fund in detail.
The Fund in brief
Goal 3p
Types of Fund investments and their risks 3p
Proposed conversion to master/feeder structure 3p
Manager and distributor 3p
Portfolio managers 4p
Alternative purchase arrangements 4p
Sales charge and Fund expenses 5p
Performance
Financial highlights 7p
Total returns 9p
Investment policies and risks
Facts about investments and their risks 12p
Valuing Fund shares 16p
How to purchase, exchange or redeem shares
Alternative purchase arrangements 17p
How to purchase shares 20p
How to exchange shares 22p
How to redeem shares 23p
Reductions and waivers of the sales charge 28p
Special shareholder services
Services 32p
Quick telephone reference 32p
Distributions and taxes
Dividend and capital gain distributions 33p
Reinvestments 34p
Taxes 35p
How to determine the correct TIN 37p
How the Fund is organized
Shares 38p
Voting rights 38p
Shareholder meetings 38p
Special considerations regarding
master/feeder structure 39p
Directors and officers 41p
Investment manager and transfer agent 43p
Distributor 44p
About American Express Financial Corporation
General information 45p
Appendix
Descriptions of derivative instruments 46p
<PAGE>
PAGE 4
To our shareholders
(on top left side, picture, William R. Pearce, President of the
Fund)
(in middle left side, picture, Thomas W. Medcalf, Portfolio
manager)
(on bottom left side, picture, Ed Labenski, Portfolio manager)
From the President
As I indicated in the Fund's previous reports, new agreements
between the Fund and American Express Financial Corporation (AEFC)
were approved by shareholders in November 1994. The new agreements
became effective when the Fund began offering multiple classes of
shares on March 20, 1995.
The advantage of offering more than a single class of shares is
that investors may choose how they wish to pay sales charges. A
portion of these charges compensates your American Express
financial advisor (formerly called your IDS planner), who is
committed to providing you with outstanding services.
Adding new classes of mutual fund shares does make the presentation
of financial information in this report more complex. However, we
will continue our effort to make the reports easier to read and
understand. Meanwhile, your American Express financial advisor is
available to answer your questions.
(signed)
William R. Pearce
From the portfolio manager
With the support of an improving investment environment, IDS Mutual
rebounded from an early downturn to post a double-digit total
return for the fiscal year - October 1994 through September 1995.
As had been the case since early in 1994, higher interest rates
continued to trouble the stock and bond markets in the fall of that
year, culminating in a sharp downturn in November. (Rising
interest rates depress bond prices, and often have the same effect
on stocks.) Stocks of financial services companies, chiefly banks
and insurance companies, were particularly affected. Because these
issues comprised a substantial portion of the portfolio, Fund
performance also suffered during November.
Timely turnaround
It didn't take long for the Fund to begin making up lost ground,
however, Long-term interest rates finally began to level off in
December and, at times during the ensuing months, moved lower.
That immediately helped bonds get back on their feet and began to
rouse a slumping stock market. Further prodding soon arrived in
the form of
(at bottom of page is the following in italics)
(This annual report is not part of the prospectus.)<PAGE>
PAGE 5
surprisingly strong corporate profit reports and continuing good
news on the inflation front. That was all the markets needed.
With the exception of a late summer stumble, stocks and bonds went
on to record consistent gains through the end of the fiscal year in
September.
Most of the time, growth stocks - those of companies with rapidly
growing profits - led the stock market's advance. Among them,
technology issues set the fastest pace. That trend worked to the
Fund's disadvantage, because growth stocks almost always fall
outside our investment parameters, which lead us instead toward
bargain-priced stocks of consistent, blew ship companies that pay
an above-average dividend.
Financial services strong
During the past year, a number of stocks in the financial services
sector, especially the banking an insurance areas, met our
criteria. Thanks to falling long-term interest rates in 1995,
those stocks gained considerable ground and provided the Fund with
its best performance. Among other sectors, health care also proved
quite productive for us, while autos, chemicals and retailing were
relatively weak performers.
On the bond side of the portfolio, our holdings issued by
corporations and the federal government and its agencies benefitted
from the decline in long-term interest rates. Therefore, not only
did the bonds generate interest income, they provided capital
appreciation because they increased in value as well, Bonds
comprised about a third of the portfolio during the fiscal year,
while the stock portion ranged between 50% and 60%, and cash
reserves stayed at about 10%.
As for the current fiscal year, while the investment environment
remains reasonably good, we expect stocks to find it increasingly
difficult to sustain their remarkable performance during the first
none months of 1995. Bonds, on the other hand, may find the going
easier, as the probability of ongoing low inflation should push
interest rates somewhat lower.
(signed)
Thomas W. Medcalf
Ed Labenski
(the following table down the right side of page)
Class A
12-month performance
(All figures per share)
Net asset value (NAV)
Sept. 30, 1995 $12.69
Sept. 30, 1994 $11.89
Increase $ 0.80
Distributions
Oct. 1, 1994 - Sept. 30, 1995
From income $ 0.84
From capital gains $ 0.21
Total distributions $ 1.05
Total return** +16.8%***
Class B
March 20, 1995 - Sept. 30, 1995
(All figures per share)
Net asset value (NAV)
Sept. 30, 1995 $12.66
March 20, 1995* $11.67
Increase $ 0.99
Distribution
March 20, 1995* - Sept. 30, 1995
From income $ 0.37
From capital gains $ __
Total distributions $ 0.37
Total return** +11.7%***
Class Y
March 20, 1995 - Sept 30, 1995
(All figures per share)
Net asset value (NAV)
Sept. 30, 1995 $12.69
March 20, 1995* $11.67
Increase $ 1.02
Distribution
March 20, 1995* - Sept. 30, 1995
From income $ 0.41
From capital gains $ --
Total distributions $ 0.41
Total return** +12.2%***
*Inception date.
**The prospectus discusses the effects of sales charges,if any, on
the various classes/
***The total return is a hypothetical investment in the Fund with
all distributions reinvested.
(at bottom of page is following in italics)
(This annual report is not part of the prospectus.)
<PAGE>
PAGE 6
<TABLE>
<CAPTION>
IDS Mutual
Your fund's ten largest holdings
_____________________________________________________________________________________
Percent Value
fund's net assets)(as of Sept. 30, 1995)
_____________________________________________________________________________________
<S> <C> <C>
Royal Dutch Petroleum .96 $33,756,250
NationsBank .96 33,625,000
Xerox .96 33,593,750
General Electric .95 33,468,750
General Electric is a diversified company with interest
in manufacturing, broadcasting (NBC), financial services
and technology.
Anheuser Bush .93 32,746,875
Exxon .93 32,512,500
Exxon is a major factor in the world crude oil, natural
gas and chemical industry and also has substantial coal
and mineral holdings.
Amer Home Products .91 31,828,125
Amer General .91 31,768,750
A large multi-line insurer with a strong presence in the
individual life and annuity areas.
Dow Chemical .90 31,662,500
The second largest U.S. chemical company. Dow produces
basic chemicals and plastics, industrial specialties
and household, drug and agricultural products.
Philip Morris .89 31,312,500
Philip Morris is the largest cigarette company and has
become the second largest packaged-food company in the
world as a result of the Kraft aquisition.
Total 9.30% $326,275,000
Excludes U.S. Treasury and government agency holdings that total 21% of the fund's
net assets.
/TABLE
<PAGE>
PAGE 7
<TABLE>
<CAPTION>
Class A
12-month performance
(All figures per share)
Net asset value (NAV)
_____________________________
<S> <C>
Sept. 30, 1995 $12.69
_____________________________
Sept. 30, 1994 $11.89
_____________________________
Increase $ 0.80
_____________________________
Distributions
Oct. 1, 1994 - Sept. 30, 1995
_____________________________
From income $ 0.84
_____________________________
From capital gains $ 0.21
_____________________________
Total distributions $ 1.05
_____________________________
Total return** 16.8%
_____________________________
Class B
March 20, 1995 - Sept. 30, 1995
(All figures per share)
Net asset value (NAV)
_____________________________
Sept. 30, 1995 $12.66
_____________________________
March 20, 1995* $11.66
_____________________________
Increase $ 1.00
_____________________________
Distributions
March 20, 1995 - Sept. 30, 1995
_____________________________
From income $ 0.37
_____________________________
From capital gains $ --
_____________________________
Total distributions $ 0.37
_____________________________
Total return** 10.4%
_____________________________
<PAGE>
PAGE 8
Class Y
March 20, 1995 - Sept. 30, 1995
(All figures per share)
Net asset value (NAV)
_____________________________
<S> <C>
Sept. 30, 1995 $12.69
_____________________________
March 20, 1995* $11.66
_____________________________
Increase $ 1.03
_____________________________
Distributions
March 20, 1995 - Sept. 30, 1995
_____________________________
From income $ 0.41
_____________________________
From capital gains $ --
_____________________________
Total distributions $ 0.41
_____________________________
Total return** 11.0%
_____________________________
*Commencement of operations.
**The prospectus discusses the
effects of the sales charge on
the various classes.
</TABLE>
<PAGE>
PAGE 9
Making the most of your fund
Average annual total return
(as of Sept. 30, 1995)
Class A
1 year 5 years 10 years
+10.97% +13.20% +12.40%
Total returns for Class A, Class B and Class Y for the period from
march 20, 1995 to Sept. 30, 1995 were +6.53%, +6.70% and +12.23%,
respectively. March 20, 1995 was the inception date for Class B
and Class Y. Total return for Class A is shown for comparative
purposes. The performance of Class B and Class Y will vary from
the performance of Class A based on differences in sales charges
and fees.
Your investment and return values fluctuate so that your shares,
when redeemed, may be worth more or less than the original cost.
Figures for Class A and Class B reflect the effect of the maximum
5% sales charge. This was a period of widely fluctuating security
prices. past performance is no guarantee of future results.
Build your assets systematically
One of the best ways to invest in the Fund is by dollar-cost
averaging--a time-tested strategy that can make market fluctuations
work for you. To dollar-cost average, simply invest a fixed amount
of money regularly. You'll automatically buy more shares when the
Fund's share price is low, fewer shares when it is high.
This does not ensure a profit or avoid a loss if the market
declines. But, if you can continue to invest regularly through
changing market conditions, it can be a effective way to accumulate
shares to meet you long-term goals.
How dollar-cost averaging works
Month Amount Per-share Number of shares purchased
Jan $100 $20 5.00
Feb 100 18 5.56
Mar 100 17 5.88
Apr 100 15 6.67
May 100 16 6.25
June 100 18 5.56
July 100 17 5.88
Aug 100 19 5.26
Sept 100 21 4.76
Oct 100 20 5.00
(to the left of the above table are the following three statements
with an arrow from the second statement pointed at the month of Apr
and an arrow from the third statement pointed at the month of Sept)
- -By investing an equal number of dollars each month...
- -you automatically buy more shares when the per share market price
is low
- -and fewer shares when the per share market price is high.
(continued)
You have paid an average price of only $17.91 per share over the 10
months, while the average market price actually was $18.10.
(This annual report is not part of the prospectus.)
<PAGE>
PAGE 10
Your Fund's long-term performance
Three ways to benefit from a mutual fund:
o your shares increase in value when the Fund's investments do well
o you receive capital gains when the gains on investments sold by
the Fund exceed losses
o you receive income when the Fund's stock dividends, interest and
short-term gains exceed its expenses.
All three make up your total return. And you potentially can
increase your investment if, like most investors, you reinvest your
dividends and capital gain distributions to buy additional shares
of the fund or another fund.
(down the left side of the page is the following)
Assumes:-Holding period from 9/30/85 to 9/30/95. -Returns do not
reflect taxes payable on distributions. -Reinvestment of all
income and capital gain distributions for the Fund, with a value of
$21,042. Also see "Performance" in the Fund's current prospectus.
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.
Lipper Balanced Fund Index, published by lipper Analytical
Services, Inc., includes 10 funds that are generally similar to the
Fund, although some funds in the index may have somewhat different
investment policies or objectives.
(Continue)
Class A*
(in the middle of the page there is a graph plotting out the
following information)
How your $10,000 has grown in IDS Mutual
Average annual total return
(as of Sept. 30, 1995)
1 year 5 years 10 years
+10.97% +13.20% +12.40%
*The graph above is for Class A only. Class B and Class Y are not
shown. Total returns for Class A, Class B and Class Y for the
period from march 20, 1995 to Sept. 30, 1995 were +6.53%, +6.70%
and +12.23%, respectively. march 20, 1995 was the inception date
for Class B and Class Y. Total return for Class A is shown for
comparative purposes. the performance of Class B and Class Y will
vary from the performance of Class A based on differences in sales
charges and fees.
On the graph above you can see how the Fund's total return compared
to two widely cited performance indexes, the S&P 500 and the Lipper
Balanced fund Index. in comparing IDS Mutual to the two indexes,
you should take into account the fact that the Fund's performance
reflects the maximum sales charge of 5%, while such charges are not
reflected in the performance of the indexes. If you were actually
to buy either individual securities or mutual funds, any sales
charges that you pay would reduce your total return as well.
Your investment and return values fluctuate so that your shares,
when redeemed, may be worth more or less than the original cost.
This was a period of widely fluctuating security prices. past
performance is no guarantee of future results.
(at bottom of page the following in italics)
(This annual report if not part of the prospectus.)
<PAGE>
PAGE 11
Independent auditors' report
___________________________________________________________________
The board of directors and shareholders
IDS Investment Series, Inc.:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments in securities,
of IDS Mutual (a series of IDS Investment Series, Inc.) as of
September 30, 1995, 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, 1995,
and the financial highlights for each of the years in the ten-year
period ended September 30, 1995. These financial statements and the
financial highlights are the responsibility of fund management.
Our responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements and the financial highlights are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Investment securities held in custody are
confirmed to us by the custodian. As to securities purchased but
not received and securities on loan, we request confirmations from
brokers, and where replies are not received, we carry out other
appropriate auditing procedures. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of IDS
Mutual at September 30, 1995, and the results of its operations for
the year then ended and the changes in its net assets for each of
the years in the two-year period ended September 30, 1995, 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 3, 1995
<PAGE>
PAGE 12
<TABLE> Statement of assets and liabilities
<CAPTION>
IDS Mutual
Sept. 30, 1995
_____________________________________________________________________________________________________________
Assets
_____________________________________________________________________________________________________________
<S> <C>
Investments in securities, at value (Note 1)
(identified cost $3,182,022,766) $3,492,685,402
Dividends and accrued interest receivable 32,342,604
U.S. government securities held as collateral (Note 5) 121,409,442
_____________________________________________________________________________________________________________
Total assets 3,646,437,448
_____________________________________________________________________________________________________________
Liabilities
____________________________________________________________________________________________________________
Disbursements in excess of cash on demand deposit 2,445,876
Dividends payable to shareholders 3,907,216
Payable for investment securities purchased 7,626,082
Payable upon return of securities loaned (Note 5) 126,964,442
Accrued investment management services fee 126,203
Accrued distribution fee 1,315
Accrued service fee 25,013
Accrued transfer agency fee 23,151
Accrued administrative services fee 6,419
Other accrued expenses 427,662
_____________________________________________________________________________________________________________
Total liabilities 141,553,379
_____________________________________________________________________________________________________________
Net assets applicable to outstanding capital stock $3,504,884,069
_____________________________________________________________________________________________________________
Represented by
_____________________________________________________________________________________________________________
Capital stock -- $.01 par value; (Note 1) $ 2,762,549
Additional paid-in capital 3,151,631,580
Undistributed net investment income 141,787
Accumulated net realized gain (Note 1) 39,660,918
Unrealized appreciation of investments and on translation of assets and
liabilities in foreign currencies 310,687,235
_____________________________________________________________________________________________________________
Total -- representing net assets applicable to outstanding capital stock $3,504,884,069
_____________________________________________________________________________________________________________
Net assets applicable to outstanding shares: Class A $2,595,767,248
Class B $ 33,069,355
Class Y $ 876,047,466
Net asset value per share of outstanding capital stock: Class A shares 204,596,326 $ 12.69
Class B shares 2,611,405 $ 12.66
Class Y shares 69,047,171 $ 12.69
See accompanying notes to financial statements. <PAGE>
PAGE 13
Financial statements
Statement of operations
IDS Mutual
Sept. 30, 1995
_________________________________________________________________________________________________________________
Investment income
_____________________________________________________________________________________________________________
<S> <C>
Income:
Interest $ 91,296,476
Dividends (net of foreign taxes withheld of $1,422,264) 78,425,802
_____________________________________________________________________________________________________________
Total income 169,722,278
_____________________________________________________________________________________________________________
Expenses (Note 2):
Investment management services fee 16,124,106
Distribution fee
Class A 812,464
Class B 55,191
Transfer agency fee 4,403,062
Incremental transfer agency fee - Class B 1,331
Service fee
Class A 2,316,914
Class B 12,878
Administrative services fee 600,853
Compensation of directors 62,298
Compensation of officers 32,121
Custodian fees 536,999
Postage 161,085
Registration fees 348,978
Reports to shareholders 94,750
Audit fees 33,750
Administrative 22,917
Other 32,867
_____________________________________________________________________________________________________________
Total expenses 25,652,564
_____________________________________________________________________________________________________________
Earnings credits on cash balances (Note 2) (19,007)
_____________________________________________________________________________________________________________
Total net expenses 25,633,557
_____________________________________________________________________________________________________________
Investment income -- net 144,088,721
_____________________________________________________________________________________________________________
Realized and unrealized gain -- net
_____________________________________________________________________________________________________________
Net realized gain on security and foreign currency transactions
(including gain of $1,371,220 from foreign currency transactions) (Note 3) 37,926,459
Net change in unrealized appreciation or depreciation of investments and on
translation of assets and liabilities in foreign currencies 320,251,829
_____________________________________________________________________________________________________________
Net gain on investments and foreign currency 358,178,288
___________________________________________________________________________________________________________
Net increase in net assets resulting from operations $502,267,009
_____________________________________________________________________________________________________________
See accompanying notes to financial statements.
/TABLE
<PAGE>
PAGE 14
<TABLE> Financial statements
<CAPTION>
Statements of changes in net assets
IDS Mutual
Year ended Sept. 30
_____________________________________________________________________________________________________________
Operations and distributions 1995 1994
_____________________________________________________________________________________________________________
<S> <C> <C>
Investment income -- net $ 144,088,721 $ 133,513,034
Net realized gain on investments and foreign currency 37,926,459 149,214,488
Net change in unrealized appreciation or depreciation of investments and on
translation of assets and liabilities in foreign currencies 320,251,829 (284,665,447)
_____________________________________________________________________________________________________________
Net increase (decrease) in net assets resulting from operations 502,267,009 (1,937,925)
_____________________________________________________________________________________________________________
Distributions to shareholders from:
Net investment income
Class A (117,584,771) (131,395,507)
Class B (432,989) --
Class Y (26,282,638 --
Net realized gain
Class A (127,571,078) (150,422,829)
Excess distribution of realized gain
Class A (1,051,260) --
Class Y (319,960) --
_____________________________________________________________________________________________________________
Total distributions (273,242,696) (281,818,336)
_____________________________________________________________________________________________________________
Capital share transactions (Note 4)
_____________________________________________________________________________________________________________
Proceeds from sales
Class A shares (Note 2) 354,292,541 664,265,348
Class B shares 32,239,278 __
Class Y shares 879,303,339 __
Reinvestment of distributions at net asset value
Class A shares 217,251,464 247,558,333
Class B shares 416,785 __
Class Y shares 26,602,598 __
Payments for redemptions
Class A shares (1,135,236,869) (417,171,236)
Class B shares (Note 2) (533,909) --
Class Y shares (97,142,295) __
_____________________________________________________________________________________________________________
Increase in net assets from capital share transactions 277,192,932 494,652,445
_____________________________________________________________________________________________________________
Total increase in net assets 506,217,245 210,896,184
Net assets at beginning of year 2,998,666,824 2,787,770,640
_____________________________________________________________________________________________________________
Net assets at end of year
(including undistributed net investment income of
$141,787 and $3,130,143) $3,504,884,069 $2,998,666,824
_____________________________________________________________________________________________________________
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 15
Notes to financial statements
IDS Mutual
___________________________________________________________________
1. Summary of significant accounting policies
The Fund is a series of IDS Investment Series, Inc. and registered
under the Investment Company Act of 1940 (as amended) as a
diversified, open-end management investment company. IDS Investment
Series, Inc. has 10 billion authorized shares of capital stock that
can be allocated among the separate series as designated by the
board of directors. 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, which the Fund began offering on March 20, 1995,
may be subject to a contingent deferred sales charge and such
shares automatically convert to Class A after eight years. Class Y
shares, which the Fund also began offering on March 20, 1995, 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:
Valuation of securities
All securities are valued at the close of each business day.
Securities traded on national securities exchanges or included in
national market systems are valued at the last quoted sales price;
securities for which market quotations are not readily available,
including illiquid securities, are valued at fair value according
to methods selected in good faith by the board of directors.
Determination of fair value involves, among other things, reference
to market indexes, matrixes and data from independent brokers.
Short-term securities maturing in more than 60 days from the
valuation date are valued at the market price or approximate market
value based on current interest rates; those maturing in 60 days or
less are valued at amortized cost.
Futures transactions
In order to gain exposure to or protect itself from changes in the
market, the Fund may buy and sell 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 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.
<PAGE>
PAGE 16
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. The effect on dividend distributions of certain book-to-
tax differences is presented as "excess distributions" in the
statement of changes in net assets. 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.
<PAGE>
PAGE 17
On the statement of assets and liabilities, as a result of
permanent book-to-tax differences, undistributed net investment
income has been reduced by $2,776,679, and accumulated net realized
gain has been icreased by $619,587, resulting in a net
reclassification adjustment to increase additional paid-in-capital
by $2,157,092.
Dividends to shareholders
Dividends from net investment income, declared and paid each
calendar quarter, are reinvested in additional shares of the Fund
at net asset value or payable in cash. Capital gains, when
available, are distributed along with the last income dividend of
the calendar year.
Other
Security transactions are accounted for on the date securities are
purchased or sold. Dividend income is recognized on the ex-dividend
date and interest income, including level-yield amortization of
premium and discount is accrued daily.
___________________________________________________________________
2. Expenses and sales charges
Under terms of a prior agreement that ended March 19, 1995, the
Fund paid AEFC a fee for managing its investments, recordkeeping
and other specified services. The fee was a percentage of the
fund's average daily net assets consisting of a group asset charge
in reducing percentages from 0.46% to 0.32% annually on the
combined net assets of all non-money market funds in the IDS MUTUAL
FUND GROUP and an individual annual asset charge of 0.14% of
average daily net assets. The fee was adjusted upward or downward
by a performance incentive adjustment based on the Fund's average
daily net assets over a rolling 12-month period as measured against
the change in the Lipper Balanced Fund Index. The maximum
adjustment is 0.08% of the Fund's average daily net assets after
deducting 1% from the performance difference. If the performance
difference was less than 1%, the adjustment would have been zero.
The adjustment decreased the fee by $102,475 for the year ended
Sept. 30, 1995.
Also under terms of the prior agreement, the Fund paid AEFC a
distribution fee at an annual rate of $6 per shareholder account
and a transfer agency fee at an annual rate of $15 per shareholder
account.
During the year ended Sept. 30, 1995, the Fund's custodian and
transfer agency fees were reduced by $19,007 as a result of
earnings credits from overnight cash balances.
Effective March 20, 1995, when the Fund began offering multiple
classes of shares, the Fund entered into agreements with AEFC for
managing its portfolio, providing administrative services and
serving as transfer agent as follows: 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
0.53% to 0.40% annually. The performance incentive adjustment<PAGE>
PAGE 18
remains unchanged from the prior agreement. Under an Administrative
Services Agreement, the Fund pays AEFC for administration and
accounting services at a percentage of the Fund's average daily net
assets in reducing percentages from 0.04% to 0.02% annually.
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:
o Class A $15
o Class B $16
o Class 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 as follows: Under the
Distribution Agreement, 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.
AEFC will assume and pay any expenses (except taxes and brokerage
commissions) that exceed the most restrictive applicable state
expense limitation.
Sales charges received by American Express Financial Advisors Inc.
for distributing Fund shares were $3,937,838 for Class A and $5,026
for Class B for the year ended Sept. 30, 1995. The Fund also pays
custodian fees to American Express Trust Company, an affiliate of
AEFC.
The Fund has a retirement plan for its independent directors. Upon
retirement, directors receive monthly payments equal to one-half of
the retainer fee for as many months as they served as directors up
to 120 months. There are no death benefits. The plan is not funded
but the Fund recognizes the cost of payments during the time the
directors serve on the board. The retirement plan expense amounted
to $34,967 for the year ended Sept. 30, 1995.
___________________________________________________________________
3. Securities transactions
Cost of purchases and proceeds from sales of securities (other than
short-term obligations) aggregated $1,284,362,359 and
$1,070,469,963, respectively, for the year ended Sept. 30, 1995.
Realized gains and losses are determined on an identified cost
basis.
<PAGE>
PAGE 19
___________________________________________________________________
4. Capital share transactions
Transactions in shares of capital stock for the periods indicated
are as follows:
<TABLE><CAPTION>
___________________________________________________________________
Year ended Sept. 30, 1995 Year ended
9/30/94
Class A Class B* Class Y* Class A
___________________________________________________________________
<S> <C> <C> <C> <C>
Sold 30,312,458 2,621,280 74,793,637 53,618,895
Issued for
reinvested 19,120,967 33,440 2,181,788 20,162,068
distributions
Redeemed (97,099,300) (43,315) (7,928,254) (33,760,095)
___________________________________________________________________
Net increase
(decrease) (47,665,875) 2,611,405 69,047,171 40,020,868
____________________________________________________________________
* Inception date was March 20, 1995.
</TABLE>
___________________________________________________________________
5. Lending of portfolio securities
At Sept. 30, 1995, securities valued at $124,202,552 were on loan
to brokers. For collateral, the Fund received $5,555,000 in cash
and U.S. government securities valued at $121,409,442. Income from
securities lending amounted to $399,308 for the year ended Sept.
30, 1995. 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.
___________________________________________________________________
6. Illiquid securities
At Sept. 30, 1995, investments in securities included issues that
are illiquid. The Fund currently limits investments in illiquid
securities to 10% of the net assets, at market value, at the time
of purchase. The aggregate value of such securities at Sept. 30,
1995, was $844,169 which represents 0.2% of net assets. Pursuant to
guidelines adopted by the Fund's board of directors, certain
unregistered securities are determined to be liquid and are not
included within the 10% limitation specified above.
___________________________________________________________________
7. Financial highlight
"Financial highlights" showing per share data and selected
information is presented on pages 7 and 8 of the prospectus.
<PAGE>
PAGE 20
<TABLE>
<CAPTION> Investments in securities
IDS Mutual (Percentages represent value of
Sept. 30, 1995 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Common stocks (55.3%)
_____________________________________________________________________________________________________________________________
Issuer Shares Value(a)
_____________________________________________________________________________________________________________________________
<S> <C> <C>
Aerospace & defense (1.7%)
Raytheon 350,000 $ 29,750,000
Rockwell Intl 600,000 28,350,000
_______________
Total 58,100,000
_____________________________________________________________________________________________________________________________
Automotive & related (3.0%)
Dana 800,000 23,100,000
Ford Motor 900,000 (c) 28,012,500
General Motors 600,000 28,125,000
Genuine Parts 625,000 25,078,125
______________
Total 104,315,625
_____________________________________________________________________________________________________________________________
Banks and savings & loans (4.5%)
BankAmerica 400,000 23,950,000
First Union 500,000 25,500,000
Fleet Financial 700,000 (c) 26,425,000
NationsBank 500,000 33,625,000
Norwest 800,000 26,200,000
Republic NY 350,000 20,475,000
______________
Total 156,175,000
_____________________________________________________________________________________________________________________________
Beverages & tobacco (2.6%)
Anheuser-Busch 525,000 32,746,875
Philip Morris 375,000 31,312,500
UST 1,000,000 28,625,000
______________
Total 92,684,375
_____________________________________________________________________________________________________________________________
Building materials (0.7%)
Masco 900,000 24,750,000
_____________________________________________________________________________________________________________________________
Chemicals (4.3%)
ARCO Chemical 575,000 28,031,250
Dow Chemical 425,000 31,662,500
Ethyl 1,500,000 16,687,500
See accompanying notes to investments in securities.
<PAGE>
PAGE 21
Lubrizol 750,000 24,468,750
Olin 350,000 24,062,500
Rohm & Haas 425,000 25,659,375
______________
Total 150,571,875
_____________________________________________________________________________________________________________________________
Computers & office equipment (1.8%)
IBM 300,000 28,312,500
Xerox 250,000 33,593,750
______________
Total 61,906,250
_____________________________________________________________________________________________________________________________
Energy (3.5%)
Amoco 475,000 30,459,375
Atlantic Richfield 275,000 29,528,125
Exxon 450,000 32,512,500
Mobil 300,000 29,887,500
______________
Total 122,387,500
_____________________________________________________________________________________________________________________________
Financial services (2.9%)
Alexander Haagen Properties 535,000 6,219,375
AMLI 375,000 7,218,750
Avalon 130,200 2,652,825
CBL & Associates 400,000 8,300,000
Crown Amer 760,200 6,271,650
Equity Residential 550,000 16,568,750
Kranzco Realty 217,800 3,675,375
Mills 332,600 6,028,375
Paragon 450,000 7,706,250
Simon Properties 600,000 15,225,000
Taubman Centers 1,100,000 11,000,000
Wellsford 500,000 (i) 10,687,500
______________
Total 101,553,850
_____________________________________________________________________________________________________________________________
Furniture & appliances (1.3%)
Maytag 1,300,000 22,750,000
Stanley Works 550,000 23,856,250
______________
Total 46,606,250
_____________________________________________________________________________________________________________________________
Health care (3.1%)
Amer Home Products 375,000 31,828,125
Baxter Intl 750,000 30,843,750
Bristol-Myers Squibb 400,000 29,150,000
SmithKline Beecham 350,000 17,718,750
______________
Total 109,540,625
_____________________________________________________________________________________________________________________________
<PAGE>
PAGE 22
Health care services (0.8%)
LTC Properties 400,000 5,800,000
Meditrust 400,000 13,850,000
Omega Healthcare Investors 300,000 8,025,000
______________
Total 27,675,000
_____________________________________________________________________________________________________________________________
Industrial equipment & services (0.3%)
General Signal 358,000 10,471,500
_____________________________________________________________________________________________________________________________
Industrial transporation (2.3%)
GATX 400,000 20,700,000
Norfolk Southern 400,000 29,900,000
Union Pacific 450,000 29,812,500
______________
Total 80,412,500
_____________________________________________________________________________________________________________________________
Insurance (4.1%)
Amer General 850,000 31,768,750
Aon 750,000 30,656,250
Providian 525,000 21,787,500
St. Paul Companies 525,000 30,646,875
Travelers 550,000 29,218,750
______________
Total 144,078,125
_____________________________________________________________________________________________________________________________
Media (2.1%)
Dun & Bradstreet 425,000 24,596,875
Gannett 525,000 28,678,125
Knight-Ridder 350,000 20,518,750
______________
Total 73,793,750
_____________________________________________________________________________________________________________________________
Multi-industry conglomerates (3.3%)
General Electric 525,000 33,468,750
Minnesota Mining & Manufacturing 525,000 29,662,500
Tenneco 575,000 26,593,750
Textron 400,000 27,300,000
______________
Total 117,025,000
_____________________________________________________________________________________________________________________________
Paper & packaging (1.5%)
Union Camp 500,000 28,812,500
Westvaco 550,000 25,093,750
______________
Total 53,906,250
_____________________________________________________________________________________________________________________________
Retail (3.8%)
Dayton Hudson 324,300 24,606,262
K mart 1,250,000 18,125,000
May Department Stores 650,000 28,437,500
Melville 600,000 20,700,000
Nordstrom 350,000 14,612,500
Shopko Stores 900,000 11,137,500
TJX 1,350,000 16,031,250
______________
Total 133,650,012
_____________________________________________________________________________________________________________________________
<PAGE>
PAGE 23
Utilities-electric (0.5%)
Amer Electric 92,200 3,353,775
Duke Power 213,100 9,243,212
Northern States Power 106,300 4,823,323
Union Electric 34,300 1,281,963
______________
Total 18,702,312
_____________________________________________________________________________________________________________________________
Utilities-telephone (0.6%)
Pacific Telesis Group 650,000 19,987,500
_____________________________________________________________________________________________________________________________
Foreign (6.6%) (h)
Anglian Water 1,500,000 13,486,500
B.T.R. 4,500,000 23,215,500
English China Clay 2,500,000 14,337,500
Hanson ADR 1,700,000 27,625,000
Imperial Chemical Inds 2,250,000 28,548,000
Repsol S.A. ADR 950,000 30,162,500
Royal Dutch Petroleum 275,000 33,756,250
Severn Trent Water 1,238,015 12,265,015
Southern Water 29,044 (i) 313,908
Southern Water 1,000,000 10,808,000
Thames Water 62,842 (i) 530,261
Thames Water 1,761,051 14,859,748
Tomkins 5,500,000 21,895,500
______________
Total 231,803,682
_____________________________________________________________________________________________________________________________
Total common stocks
(Cost: $1,691,638,127) $1,940,096,981
____________________________________________________________________________________________________________________________
Preferred stocks and other (1.0%)
_____________________________________________________________________________________________________________________________
Issuer Shares Value(a)
_____________________________________________________________________________________________________________________________
Atlantic Richfield
$9.00 Cv 700,000 $ 17,850,000
Reynolds Metals
3.31% Cv 300,000 15,525,000
Uirginia-Amer Wtr
5.05% Cm 2,600 (g) 218,954
Western Resources
4.25% Cm 10,000 (g) 584,590
_____________________________________________________________________________________________________________________________
Total preferred stocks and other
(Cost: $33,152,613) $ 34,178,544
_____________________________________________________________________________________________________________________________
/TABLE
<PAGE>
PAGE 24
<TABLE>
<CAPTION>
Bonds (34.7%)
_____________________________________________________________________________________________________________________________
Issuer Coupon Maturity Principal Value(a)
rate year amount
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
U.S. government obligations (12.4%)
U.S. Treasury 5.75% 2003 $15,000,000 $ 14,610,600
6.00 1997 20,000,000 20,066,600
6.25 2000 20,000,000 (c) 20,191,800
6.25 2023 50,000,000 47,594,500
6.375 1997 40,000,000 40,391,600
6.625 1997 20,000,000 20,239,000
6.75 2000 15,000,000 (c) 15,431,400
6.875 2000 20,000,000 20,664,800
7.125 1999 62,650,000 65,142,843
7.25 2016 15,000,000 16,053,150
7.50 2001 19,675,000 21,082,943
9.375 2006 13,500,000 16,682,355
10.375 2012 40,000,000 52,936,800
Govt Trust Certs Israel 9.250 2001 10,000,000 10,904,800
Resolution Funding Corp 8.125 2019 45,000,000 52,008,750
______________
Total 434,001,941
_____________________________________________________________________________________________________________________________
Mortgage-backed securities (8.5%)
Collateralized Mtge Obligation Trust 9.95 2014 5,000,000 5,318,550
Federal Home Loan Bank 7.32 1997 20,000,000 20,008,000
Federal Home Loan Mtge Corp 5.50 2009 6,093,700 5,794,743
6.50 2007 1,073,668 1,056,822
6.75 2008 3,141,846 3,063,300
8.00 2024 10,096,131 10,345,404
Collateralized Mtge Obligation 7.50 2003 7,800,000 8,052,564
8.50 2022 7,000,000 7,485,450
Inverse Floater 3.453 1997 5,287,981 (e) 4,833,373
Trust Series Z 6.00 2023 11,159,721 (f) 9,186,013
6.50 2023 19,319,818 (f) 16,419,854
8.25 2024 5,617,647 (f) 5,634,387
Federal Natl Mtge Assn 5.50 2009 8,739,883 8,311,105
6.50 2023-24 34,030,396 32,849,882
7.40 2004 33,750,000 (c) 35,863,088
7.50 2002-14 4,177,620 4,251,607
9.00 2024 10,623,349 11,121,372
Collateralized Mtge Obligation 4.50 2007 11,900,000 10,063,949
5.00 2024 6,696,553 6,171,743
Inverse Floater 5.602 2023 2,201,805 (e) 1,765,804
Trust Series Z 6.00 2024 6,596,552 (f) 5,046,494
6.50 2023 16,090,811 (f) 13,235,530
7.00 2016-22 48,073,378 (f) 45,680,597
7.50 2014 7,746,269 (f) 7,697,158
8.00 2006-20 18,573,106 (f) 19,243,433
_____________
Total 298,500,222
_____________________________________________________________________________________________________________________________
<PAGE>
PAGE 25
Financial (2.7%)
Banks and savings & loans (0.2%)
First Bank System 6.875 2007 5,750,000 5,715,040
_____________________________________________________________________________________________________________________________
Commercial finance (1.0%)
Carco Auto Master Trust
Asset-Backed Obligation 7.875 1998 6,000,000 6,073,680
GMAC 7.50 1999 8,000,000 8,231,360
Premium Auto
Asset-Backed Obligation 6.45 1998 7,000,000 7,039,480
Salomon Brothers 6.75 2006 7,000,000 6,397,930
Standard Credit Card Trust 5.95 2004 8,550,000 8,205,178
______________
Total 35,947,628
_____________________________________________________________________________________________________________________________
Financial services (0.9%)
Associates 6.00 2000 6,000,000 5,901,300
Avco Financial 7.25 1999 6,500,000 6,673,225
Corporate Property Investors 7.18 2013 1,500,000 (g) 1,426,110
General Electric Capital
Reset Nts 8.65 2018 4,000,000 (k) 4,061,400
Intl Lease Finance 5.99 1998 5,000,000 (g) 4,968,100
Nationwide Trust
Credit Sensitive Nts 9.875 2025 3,500,000 (g) 3,912,860
Property Trust Amer 7.50 2014 5,000,000 4,689,300
______________
Total 31,632,295
_____________________________________________________________________________________________________________________________
Insurance (0.6%)
Nationwide Mutual Insurance 7.50 2024 4,000,000 (g) 3,780,680
New York Life 7.50 2023 5,000,000 (g) 4,801,600
Principal Mutual 8.00 2044 7,150,000 (g) 6,799,006
SunAmerica 8.125 2023 5,150,000 5,258,408
______________
Total 20,639,694
_____________________________________________________________________________________________________________________________
Industrial (5.4%)
Aerospace & defense (0.3%)
United Technologies 8.875 2019 9,500,000 11,233,370
_____________________________________________________________________________________________________________________________
Airlines (0.7%)
AMR 6.125 2024 22,500,000 23,006,250
_____________________________________________________________________________________________________________________________
<PAGE>
PAGE 26
Beverages & tobacco (0.1%)
Coca-Cola 7.375 2093 3,000,000 3,093,840
_____________________________________________________________________________________________________________________________
Building materials (0.1%)
Owens-Corning Fiberglas 9.375 2012 3,500,000 4,001,340
_____________________________________________________________________________________________________________________________
Computers & office equipment (0.3%)
Apple Computer 6.50 2004 6,100,000 5,893,698
IBM 6.375 2000 5,100,000 5,104,488
______________
Total 10,998,186
_____________________________________________________________________________________________________________________________
Electronics (0.1%)
Harris 10.375 2018 4,000,000 4,450,080
20,858,940
_____________________________________________________________________________________________________________________________
Energy (0.6%)
Occidental Petroleum 9.25 2000 6,500,000 6,360,1202
Phillips Petroleum 7.20 2023 5,000,000 4,633,200
Standard Oil 9.00 2019 9,000,000 9,865,620
______________
Total 20,858,940
_____________________________________________________________________________________________________________________________
Food (0.6%)
Grand Met
Cv 6.50 2000 20,000,000 (g) 22,725,000
_____________________________________________________________________________________________________________________________
Health care (1.0%)
Johnson & Johnson 8.00 1998 20,000,000 20,429,800
Kaiser Foundation 9.55 2005 6,000,000 7,154,100
Schering-Plough
Zero Coupon 7.31 1996 9,300,000 (d,g) 8,677,086
______________
Total 36,260,986
_____________________________________________________________________________________________________________________________
Household products (0.1%)
Proctor & Gamble 8.00 2024 3,000,000 3,341,340
_____________________________________________________________________________________________________________________________
Media (0.4%)
Cox Communication 7.625 2025 9,000,000 9,003,690
Time Warner 8.375 2033 5,000,000 5,093,750
--------------
Total 14,097,440
_____________________________________________________________________________________________________________________________
Paper & packaging (0.9%)
Crown Cork & Seal 8.00 2023 6,000,000 6,169,380
Federal Paper Board 10.00 2011 7,000,000 8,567,230
Intl Paper 5.125 2012 13,400,000 10,869,276
Pope & Talbot 8.375 2013 4,500,000 4,252,590
______________
Total 29,858,476
<PAGE>
PAGE 27
Retail (0.2%)
Penney (JC) 9.05 2001 4,500,000 5,020,110
_____________________________________________________________________________________________________________________________
Utilities (2.8%)
Electric (1.1%)
Arizona Public Service
Sale Lease-Backed Obligation 8.00 2015 5,400,000 5,420,250
Commonwealth Edison 6.50 1997 10,000,000 10,025,200
Pacific Gas 7 Electric 8.25 2022 4,600,000 4,869,284
Pennsylvania Power & Light
1st Mtge 9.25 9019 5,000,000 5,391,650
Texas Utilities Electric
1st Mtge 7.375 2025 7,050,000 6,799,091
Wisconsin Electric Power
1st Mtge 7.75 2023 5,500,000 5,683,810
______________
Total 38,189,285
_____________________________________________________________________________________________________________________________
Telephone (1.7%)
BellSouth Tel 6.50 2005 9,000,000 (c) 8,960,490
Bell Tel Pennsylvania 7.375 2033 5,000,000 4,971,300
GTE 8.75 2021 5,000,000 5,567,900
9.375 2000 4,600,000 5,136,774
Illinois Bell Tel
1st Mtge 4.375 2003 4,600,000 3,991,926
New York Tel 4.875 2006 13,000,000 11,260,600
Pacific Bell Tel 6.625 2034 6,100,000 5,570,093
7.375 2043 7,500,000 7,454,625
U S WEST 6.625 2005 7,000,000 6,987,050
--------------
Total 59,900,758
_____________________________________________________________________________________________________________________________
Foreign (2.9%)(h)
ABN Amro Bank
(U.S. Dollar) 7.125 2093 7,000,000 6,562,500
Asian Development Bank
(U.S. Dollar) 9.125 2000 17,700,000 19,688,949
Canadian Natl Railway
(U.S. Dollar) 7.625 2023 6,000,000 5,948,040
Carter Holt Harvey
(U.S. Dollar) 7.625 2002 8,750,000 9,157,663
Govt of Canada
(Canadian Dollar) 10.50 2001 7,500,000 6,293,576
Hydro Quebec
(Canadian Dollar) 10.875 2001 10,000,000 8,418,977
Interamer Development Bank Euro
(U.S. Dollar) 9.50 2000 5,000,000 5,627,800
KFW Intl Finance
(U.S. Dollar) 8.00 2010 6,750,000 7,445,047
Legrand
(U.S. Dollar) 8.50 2025 10,000,000 11,240,700
Petronas
(U.S. Dollar) 7.75 2015 (g) 10,000,000 10,359,900
Republic of Italy
(U.S. Dollar) 6.875 2023 5,000,000 4,555,300
Republic of Poland
(U.S. Dollar) 7.75 2000 (g) 7,000,000 7,035,000
__________________
Total 102,333,452
/TABLE
<PAGE>
PAGE 28
<TABLE>
<CAPTION>
Total bonds
(Cost: $1,154,592,519) $ 1,215,805,673
_____________________________________________________________________________________________________________________________
Short-term securities (8.6%)
_____________________________________________________________________________________________________________________________
Issuer Annualized Amount Value(a)
yield on payable
date of at
purchase maturity
_____________________________________________________________________________________________________________________________
U.S. government agency (0.1%)
Federal Home Loan Bank
Disc Notes
10-02-95 5.66% $ 1,200,000 $ 1,199,622
10-16-95 5.66 2,200,000 2,194,466
______________
Total 3,394,088
_____________________________________________________________________________________________________________________________
Commercial paper (8.5%)
A.I. Credit
10-10-95 5.75 3,000,000 2,995,233
Amer General
10-24-95 5.76 10,000,000 9,961,867
Amgen
11-17-95 5.72 7,600,000 7,542,544
Aon
10-23-95 5.76 6,300,000 6,275,553
Associates North America
10-06-95 5.78 13,400,000 13,387,181
10-12-95 5.79 5,900,000 5,888,711
10-24-95 5.75 6,300,000 6,275,976
Avco Financial
10-17-95 5.77 4,600,000 4,587,553
10-26-95 5.78 3,600,000 3,584,191
Banque Paribas Canada
12-12-95 5.73 5,000,000 4,938,334
Beneficial
10-18-95 5.78 3,600,000 3,589,668
10-25-95 5.76 4,000,000 3,984,111
CAFCO Public
10-27-95 5.73 6,300,000 (j) 6,273,068
Campbell Soup
11-30-95 5.70 5,000,000 (j) 4,949,194
Cargill
10-06-95 5.76 3,500,000 3,496,657
10-13-95 5.75 6,500,000 6,486,574
CIT Group
10-12-95 5.76 9,700,000 9,681,473
Coca-Cola
11-16-95 5.73 10,000,000 9,922,572
Colgate-Palmolive
12-04-95 5.72 4,900,000 (j) 4,846,998
Commercial Credit
10-26-95 5.77 5,500,000 5,477,239
Credit Agricole
10-16-95 5.78 4,300,000 4,287,698
<PAGE>
PAGE 29
Dresdner
10-03-95 5.74 5,000,000 4,997,617
Gateway Fuel
01-11-96 5.73 8,200,000 8,060,709
General Electric Capital
10-04-95 5.76 7,500,000 7,495,233
Lincoln Natl
11-14-95 5.69 1,500,000 (j) 1,489,425
Merrill Lynch
10-19-95 5.78 4,200,000 4,187,299
Mobile Australia Finance
10-03-95 5.77 10,100,000 (j) 10,095,169
Natl Australia Funding
10-05-95 5.64 6,800,000 6,793,752
PACCAR Financial
10-11-95 5.76 5,300,000 5,290,721
Pacific Mutual
11-07-95 5.73 8,400,000 8,349,682
Penny (JC)
10-20-95 5.76 6,600,000 6,579,027
Pfizer
10-19-95 5.75 5,500,000 (j) 5,483,425
Pitney Bowes Credit
11-02-95 5.72 5,000,000 4,973,013
Reed Elsevier
10-10-95 5.76 15,000,000 (j) 14,976,125
SAFECO Credit
10-16-95 5.75 2,700,000 2,693,136
10-18-95 5.75 5,900,000 5,883,126
10-25-95 5.75 8,300,000 8,267,030
11-17-95 5.74 3,500,000 3,470,529
St. Paul Companies
10-31-95 5.74 3,100,000 (j) 3,084,784
Sandoz
11-17-95 5.80 7,400,000 7,340,523
Southern California Gas
10-04-95 5.79 2,300,000 (j) 2,298,531
Sysco
10-11-95 5.76 2,750,000 (j) 2,744,716
Toyota Motor Credit
10-26-95 5.75 7,300,000 7,269,948
Transam Financial
10-23-95 5.78 6,500,000 6,474,358
UBS Financial
10-02-95 6.52 10,800,000 10,796,088
US WEST Communications
10-27-95 5.75 3,800,000 3,783,755
Wachovia Bank
10-17-95 5.75 11,000,000 11,000,000
11-01-95 5.75 6,900,000 6,900,000
--------------
Total 299,210,116
_____________________________________________________________________________________________________________________________
Total short-term securities
(Cost: $302,639,507) $ 302,604,204
_____________________________________________________________________________________________________________________________
Total investments in securities
(Cost: $3,182,022,766)(l) $3,492,685,402
____________________________________________________________________________________________________________________________
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PAGE 30
_______________________________________________________________________________________________________________
Notes to investments in securities
________________________________________________________________________________________________________________
(a) Securities are valued by procedures described in Note 1 to the financial statements.
(b) Presently non-income producing.
(c) Security is partially or fully on loan. See Note 5 to the financial statements.
(d) For zero coupon bonds, the interest rate disclosed represents the annualized effective yield on
the date of acquisition.
(e) Inverse floaters represent securities which pay interest at a rate that increases (decreases) in the
same magnitude as, or in a multiple of, a decline (increase) in the LIBOR (London InterBank Offering Rate) Index.
Interest rate disclosed is the rate in effect on Sept. 30, 1995.
(f) This security is a collateralized mortgage obligation that pays no interest or principal during its initial accrual
period until payment of previous series within the trust have been paid off. Interest is accrued at an effective yield;
similar to a zero coupon bond.
(g) Represents a security sold under Rule 144A which is exempt from registration under the Securities
Act of 1933, as amended. This security has been determined to be liquid under guidelines established
by the board of directors.
(h) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated
in the currency indicated.
(i) Identifies issues considered to be illiquid (see Note 6 to the financial statements). Information
concerning such security holdings at Sept. 30, 1995, is as follows:
Acquisition
Security date Cost
__________________________________________________________________________________
<S> <C> <C>
Southern Water 06-26-95 $276,655
Thames Water 06-12-95 480,482
(j)Commercial paper sold within terms of a private placement memorandum, exempt from registration under
Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that
program or other "accredited investors." This security has been determined to be liquid under
guidelines established by the board of directors.
(k) Interest rate varies, rate shown is the effective rate on Sept. 30, 1995.
(l) At Sept. 30, 1995, the cost of securities for federal income tax purposes was
$3,176,730,644 and the aggregate gross unrealized appreciation and depreciation
based on that cost was:
Unrealized appreciation $370,228,162
Unrealized depreciation (54,273,404)
__________________________________________________________________________________
Net unrealized appreciation $315,954,758
__________________________________________________________________________________
</TABLE>
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PAGE 31
IDS mutual funds
Cash equivalent investments
These money market funds have three main goals: conservation of
capital, constant liquidity and the highest possible current income
consistent with these objectives. Very limited risk.
IDS Cash Management Fund
Invests in such money market securities as high quality commercial
paper, bankers' acceptances, certificates of deposits (CDs) and
other bank securities.
(icon of) piggy bank
IDS Tax-Free Money Fund
Invests primarily in short-term bonds and notes issued by state and
local governments to seek high current income exempt from federal
income taxes.
(icon of) shield with piggy bank enclosed
Income investments
The funds in this group invest their assets primarily in corporate
bonds or government securities to seek interest income. Secondary
objective is capital growth. Risk varies by bond quality.
IDS Global Bond Fund
Invests primarily in debt securities of U.S. and foreign issuers to
seek high total return through income and growth of capital.
(icon of) globe
IDS Extra Income Fund
Invests mainly in long-term, high-yielding corporate fixed-income
securities in the lower rated, higher risk bond categories to seek
high current income. Secondary objective is capital growth.
(icon of) cornucopia
IDS Bond Fund
Invests mainly in corporate bonds, at least 50% in the higher
rated, lower risk bond categories, or the equivalent, and in
government bonds.
(icon of) greek column
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PAGE 32
IDS Selective Fund
Invests in high-quality corporate bonds and other highly rated debt
instruments including government securities and short-term
investments. Seeks current income and preservation of capital.
(icon of) skyline
IDS Federal Income Fund
Invests primarily in securities issued or guaranteed as to the
timely payment of principal and interest by the U.S. government,
its agencies and instrumentalities. Seeks a high level of current
income and safety of principal consistent with its type of
investments.
(icon of) federal building
Tax-exempt income investments
These funds provide tax-free income by investing in municipal
bonds. The income is generally free from federal income tax. Risk
varies by bond quality.
IDS High Yield Tax-Exempt Fund
Invests primarily in medium- and lower-quality municipal bonds and
notes. Lower-quality securities generally involve greater risk of
principal and income.
(icon of) shield with basket of apples enclosed
IDS State Tax-Exempt Funds
(CA, MA, MI, MN, NY, OH)
Invests primarily in high- and medium-grade municipal securities to
provide income to residents of each respective state that is exempt
from federal, state and local income taxes. (New York is the only
state that is exempt at the local level.)
(icon of) shield with U.S. enclosed
IDS Tax-Exempt Bond Fund
Invests mainly in bonds and notes of state or local government
units, with at least 75% in the four highest rated, lowest risk
bond categories.
(icon of) shield with Greek column
IDS Insured Tax-Exempt Fund
Invests primarily in municipal securities that are insured as to
the timely payment of principal and interest. The insurance
feature minimizes credit risk of the fund but does not guarantee
the market value of the fund's shares.
(icon of) shield with eagle head
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PAGE 33
Growth and income investments
These funds focus on securities of medium to large, well-
established companies that offer long-term growth of capital and
reasonable income from dividends and interest. Moderate risk.
IDS International Fund
Invests primarily in common stocks of foreign companies that offer
potential for superior growth. The fund may invest up to 20% of
its assets in the U.S. market.
(icon of) three flags
IDS Managed Retirement Fund
Invests in a combination of common stocks, fixed-income investments
and money market securities to seek a maximum total return through
a combination of growth of capital and current income.
(icon of) bird in a nest
IDS Equity Select Fund
Invests primarily in a combination of moderate growth stocks,
higher-yielding equities and bonds. Seeks growth of capital and
income.
(icon of) three apple trees
IDS Blue Chip Advantage Fund
Invests in selected stocks from a major market index. Securities
purchased are those recommended by our research analysts as the
best from each industry represented on the index. Offers potential
for long-term growth as well as dividend income.
(icon of) ribbon
IDS Stock Fund
Invests in common stock of companies representing many sectors of
the economy. Seeks current income and growth of capital.
(icon of) building with columns
IDS Equity Value Fund
Invests primarily in undervalued common stocks that offer potential
for growth of capital and income.
(icon of) three growing flowers
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PAGE 34
IDS Utilities Income Fund
Invests primarily in the stocks of public utility companies to seek
high current income and growth of income and capital with reduced
volatility.
(icon of) electrical cord
IDS Diversified Equity Income Fund
Invests primarily in high-yielding common stocks to seek high
current income and, secondarily, to benefit from the growth
potential offered by stock investments.
(icon of) four puzzle pieces
IDS Mutual
Invests in a balance between common stocks and senior securities
(preferred stocks and bonds). Seeks a balance of growth of capital
and current income.
(icon of) scale of justice
Growth investments
Funds in this group seek capital growth, primarily from common
stocks. They are high risk mutual funds with a potential for high
reward.
IDS Discovery Fund
Invests in small- and medium-size, growth-oriented companies
emphasizing technological innovation and productivity enhancement.
Buys and holds larger growth-oriented stocks.
(icon of) ship
IDS Strategy Aggressive Fund
Invests primarily in common stocks of companies that are selected
for their potential for above-average growth. Above-average means
that their growth potential is better, in the opinion of the
portfolio's investment manager, than the Standard & Poor's
Corporation (S&P) 500 Stock Index.
(icon of) chess piece
IDS Growth Fund
Invests primarily in companies that have above-average potential
for long-term growth as a result of new management, marketing
opportunities or technological superiority.
(icon of) flower
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PAGE 35
IDS Global Growth Fund
Invests in stocks of companies throughout the world that are
positioned to meet market needs in a changing world economy. These
companies offer above-average potential for long-term growth.
(icon of) world
IDS New Dimensions Fund
Invests primarily in companies with significant growth potential
due to superiority in technology, marketing or management. The
fund frequently changes its industry mix.
(icon of) dimension
IDS Progressive Fund
Invests primarily in undervalued common stocks. The fund holds
stocks for the long term with the goal of capital growth.
(icon of) shooting star
Specialty growth investment
This fund aggressively seeks capital growth as a hedge against
inflation.
IDS Precious Metals Fund
Invests primarily in the securities of foreign or domestic
companies that explore for, mine and process or distribute gold and
other precious metals. This is the most aggressive and most
speculative IDS mutual fund.
(icon of) cart of precious gems
For more complete information about any of these funds, including
charges and expenses, you can obtain a prospectus by contacting
your financial advisor or writing to American Express Shareholder
Service, P.O. Box 534, Minneapolis, MN 55440-0534. Read it
carefully before you invest or send money.
<PAGE>
PAGE 36
Federal income tax information
IDS Mutual
___________________________________________________________________
The Fund is required by the Internal Revenue Code of 1986 to tell
its shareholders about the tax treatment of the dividends it pays
during its fiscal year. Some of the dividends listed below were
reported to you on Form 1099-DIV, Dividends and Distributions, last
January. Dividends paid to you since the end of last year will be
reported to you on a tax statement sent next January. Shareholders
should consult a tax advisor on how to report distributions for
state and local purposes.
IDS Mutual
Fiscal year ended Sept. 30, 1995
Class A
Income distributions
taxable as dividend income,
43.63% qualifying for deduction by corporations.
Payable date Per share
Dec. 29, 1994 $0.44772
March 30, 1995 0.13486
June 28, 1995 0.13160
Sept. 28, 1995 0.12842
Total $0.8426
Capital gain distribution taxable for long-term capital gain.
Payable date Per share
Dec. 29, 1994 $0.21041
Total distributions $1.05301
The distribution of $0.65813 per share, payable Dec. 29, 1994,
consisted of $0.15250 derived from net investment income, $0.29522
from net short-term capital gains (a total of $0.44772 taxable as
dividend income) and $0.21041 from net long term capital gains.
Class B
Income distributions taxable as dividend income, 43.63% qualifying
for deduction by corporations.
March 30, 1995 0.13415
June 28, 1995 0.12104
Sept. 28, 1995 0.11435
Total distributions $0.36954
<PAGE>
PAGE 37
Class Y
Income distributions taxable as dividend income, 43.63% qualifying
for deduction by corporations.
March 30, 1995 0.13547
June 28, 1995 0.13547
Sept. 28, 1995 0.13528
Total distributions $0.40622
<PAGE>
PAGE 38
Quick telephone reference
American Express 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
American Express Shareholder Service
Fund performance, objectives and account inquiries
612-671-3733
TTY Service
For the hearing impaired
800-846-4852
American Express Infoline
Automated account information (TouchToneR phones only), including
current fund prices and performance, account values and recent
account transactions
National/Minnesota: 800-272-4445
Mpls./St. Paul area: 671-1630
AMERICAN
EXPRESS
FINANCIAL
ADVISORS
IDS Mutual
IDS Tower 10
Minneapolis, MN 55440-0010
