<PAGE> 1
1997 ANNUAL REPORT
IDS
Mutual
(prospectus enclosed)
SCALE ART
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.
(R) [AMERICAN EXPRESS FINANCIAL ADVISORS LOGO]
<PAGE> 2
[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> 3
<TABLE>
<CAPTION>
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CONTENTS
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1997 ANNUAL REPORT
----------------------------------------------
<S> <C>
The purpose of From the chairman 4
this annual From the portfolio managers 4
report is to tell The Portfolio's ten largest holdings 6
investors how Making the most of the Fund 7
the Fund performed. The Fund's long-term performance 8
Independent auditors' report (Fund) 9
Financial statements (Fund) 10
Notes to financial statements (Fund) 13
[BOOKS] Independent auditors' report
(Portfolio) 18
Financial statements (Portfolio) 19
Notes to financial statements
(Portfolio) 22
Investments in securities 33
IDS mutual funds 41
Federal income tax information 45
</TABLE>
<TABLE>
<CAPTION>
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1997 PROSPECTUS
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<S> <C>
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THE FUND IN BRIEF 3p
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Goal 3p
Investment policies and risks 3p
Structure of the Fund 4p
The Manager and distributor 4p
prospectus, Portfolio managers 5p
which is Alternative purchase arrangements 5p
bound into
the middle ----------------------------------------------
of this SALES CHARGE AND FUND EXPENSES 6p
annual ----------------------------------------------
report,
describes ----------------------------------------------
the Fund in PERFORMANCE 8p
detail. ----------------------------------------------
Financial highlights 8p
Total returns 10p
----------------------------------------------
INVESTMENT POLICIES AND RISKS 12p
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Facts about investments and their
risks 13p
Valuing Fund shares 16p
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HOW TO PURCHASE, EXCHANGE OR REDEEM
SHARES 18p
----------------------------------------------
Alternative purchase arrangements 18p
How to purchase shares 20p
How to exchange shares 23p
How to redeem shares 24p
Reductions and waivers of the sales
charge 29p
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SPECIAL SHAREHOLDER SERVICES 34p
----------------------------------------------
Services 34p
Quick telephone reference 34p
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DISTRIBUTIONS AND TAXES 35p
----------------------------------------------
Dividend and capital gain
distributions 35p
Reinvestments 36p
Taxes 36p
How to determine the correct TIN 38p
----------------------------------------------
HOW THE FUND AND PORTFOLIO ARE
ORGANIZED 39p
----------------------------------------------
Shares 39p
Voting rights 39p
Shareholder meetings 39p
Special considerations regarding
master/feeder structure 40p
Board members and officers 41p
Investment manager 43p
Administrator and transfer agent 43p
Distributor 44p
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ABOUT AMERICAN EXPRESS FINANCIAL
CORPORATION 45p
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General information 45p
----------------------------------------------
APPENDIX 46p
----------------------------------------------
Descriptions of derivative
instruments 46p
</TABLE>
(This annual report is not part of the prospectus.) 3
<PAGE> 4
PHOTO
William R. Pearce
Chairman of the board
PHOTO
Thomas W. Medcalf
Portfolio manager
PHOTO
Ed Labenski
Portfolio manager
FROM THE CHAIRMAN
If you're an experienced investor, you know that the past few years have been
unusually strong ones in many financial markets. Perhaps just as important,
history shows that bull markets don't last forever. Though they're often
unpredictable, declines -- whether they're brief or long-lasting, moderate or
substantial -- are always a possibility. We saw evidence of that in late October
when huge declines in certain Asian markets spawned a sharp drop in the U.S.
stock market.
That fact reinforces the need for investors to periodically review their
long-term goals and examine whether their investment program remains on track to
achieving them. Your quarterly investment statements are one part of that
monitoring process. The other is a meeting with your American Express financial
advisor. That becomes even more important if there's a major change in your
financial situation or in the financial markets.
I also want to point out that, on Dec. 1, 1997, Kurt Winters will become manager
of the equity portion of the Fund. Please see the prospectus for information on
his investment experience.
SIG
William R. Pearce
FROM THE PORTFOLIO MANAGERS
Stocks and bonds enjoyed a largely favorable environment during much of the past
12 months, leading to a productive period for IDS Mutual. For the Fund's fiscal
year, October 1996 through September 1997, investors in Class A shares realized
a total return of 24.9%. (This figure includes a capital gain that was paid to
shareholders in December 1996 and reduced the Fund's net asset value by the same
amount at that time).
The factors that have propelled the stock market in recent years -- low
inflation, generally low long-term interest rates, solid economic growth and
healthy corporate profits -- remained in place as the period began last fall.
Stocks responded with a powerful rally that, aside from moderate dips last
spring and again in August, continued throughout the 12 months.
Like stocks, bonds enjoyed a substantial run-up in the fall of 1996. But by late
winter hints of a strengthening economy soon began fueling inflation fears,
which in turn drove long-term interest rates up and bond prices down. The bond
4 (This annual report is not part of the prospectus.)
To our shareholders
<PAGE> 5
market was subsequently reassured by tame inflation reports over the spring and
summer, allowing long-term rates to come back down and bonds to recover much of
their lost ground.
BANKS, INSURANCE TOP PERFORMERS
Consistent with their history, value stocks were less volatile than the broad
stock market. Stocks of banks and insurance companies, a substantial exposure
for the portfolio for some time, led the way during the 12 months. They were
complemented by certain consumer stocks, including the drug, health care and
food/beverage sectors, which also gave the Fund overall positive results.
As for changes to the stock side of the portfolio, we gradually moved more money
into "defensive" issues such as utility stocks and real estate investment trusts
to cushion the Fund's net asset value in the event of a stock market downturn.
In addition, we allowed the cash position in the portfolio to rise to about
14% by period-end. This strategy paid off well during stocks' decline last
August, when the Fund held up much better than the market as a whole.
We also employed a conservative strategy with the bond portion of the portfolio.
This included shifting some money out of U.S. Treasury bonds, which are
penalized most by rising interest rates, and keeping a neutral duration among
the bond holdings, also to lessen the negative effect of an increase in interest
rates.
Given the stock market's run-up in 1997, it's become increasingly difficult to
find stocks that offer good investment value. Therefore, as of this writing
(mid-October), we continue to hold an above-average cash level and maintain a
conservative structure in the bond holdings.
SIG
Thomas W. Medcalf
SIG
Ed Labenski
CLASS A
12-MONTH PERFORMANCE
(All figures per share)
NET ASSET VALUE (NAV)
----------------------------
Sept. 30, 1997 $15.32
----------------------------
Sept. 30, 1996 $13.51
----------------------------
Increase $ 1.81
----------------------------
DISTRIBUTIONS
Oct. 1, 1996 - Sept. 30, 1997
----------------------------
From income $ 0.66
----------------------------
From capital gains $ 0.71
----------------------------
Total distributions $ 1.37
----------------------------
Total return* +24.9% **
----------------------------
CLASS B
12-MONTH PERFORMANCE
(All figures per share)
NET ASSET VALUE (NAV)
----------------------------
Sept. 30, 1997 $15.25
----------------------------
Sept. 30, 1996 $13.47
----------------------------
Increase $ 1.78
----------------------------
DISTRIBUTIONS
Oct. 1, 1996 - Sept. 30, 1997
----------------------------
From income $ 0.56
----------------------------
From capital gains $ 0.71
----------------------------
Total distributions $ 1.27
----------------------------
Total return* +23.9% **
-------------------------
CLASS Y
12-MONTH PERFORMANCE
(All figures per share)
NET ASSET VALUE (NAV)
----------------------------
Sept. 30, 1997 $15.32
----------------------------
Sept. 30, 1996 $13.51
----------------------------
Increase $ 1.81
----------------------------
DISTRIBUTIONS
Oct. 1, 1996 - Sept. 30, 1997
----------------------------
From income $ 0.68
----------------------------
From capital gains $ 0.71
----------------------------
Total distributions $ 1.39
----------------------------
Total return* +25.0% **
-------------------------
* The prospectus discusses the effect of sales charges, if any, on the
various classes.
** The total return is a hypothetical investment in the Fund with all
distributions reinvested.
(This annual report is not part of the prospectus.) 5
<PAGE> 6
------------------------------------
The Portfolio's ten largest holdings
------------------------------------
<TABLE>
<CAPTION>
-----------------------------------------------------------
PERCENT VALUE
-----------------------------------------------------------
(of Portfolio's net assets) (as of Sept. 30, 1997)
<S> <C> <C>
Emerson Electric 1.01% $48,981,250
British Petroleum ADR .98 47,676,562
Amoco .94 45,778,125
[PIE CHART]
Dow Chemical .93 45,343,750
The ten
holdings SAFECO .93 45,050,000
listed here
make up Mobil .92 44,400,000
9.32% of
the Portfolio's Bell South .91 43,937,500
net assets
Penney (JC) .90 43,687,500
Chevron .90 43,673,438
May Dept Stores .90 43,600,000
Excludes U.S. Treasury and government agency holdings.
</TABLE>
6 (This annual report is not part of the prospectus.)
<PAGE> 7
Making the most of the Fund
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.
Using this strategy does not ensure a profit or avoid
a loss if the market declines, and requires that you
be able to keep on investing on a regular basis, even
when the price of your shares falls or the market
declines. Investing in this manner can be an effective
way to accumulate shares to meet your long-term goals.
Dollar Cost Average Graph
How dollar-cost averaging works
<TABLE>
<CAPTION>
Month Amount Per-share Number of shares purchased
invested market price
<S> <C> <C> <C>
Jan $ 100 $ 20 5.00 XXXXX
Feb 100 18 5.56 XXXXXx
March 100 17 5.88 XXXXXx
April 100 15 6.67 XXXXXXx
May 100 16 6.25 XXXXXXx
June 100 18 5.56 XXXXXx
July 100 17 5.88 XXXXXx
Aug 100 19 5.26 XXXXXx
Sept 100 21 4.76 XXXXx
Oct 100 20 5.00 XXXXX
</TABLE>
(footnotes to table) By investing an equal number of dollars each month.....
(arrow in table pointing to April) you automatically buy more shares when the
per share market price is low.....
(arrow in table pointing to September) and fewer shares when the per share
market price is high.
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.) 7
<PAGE> 8
--------------------------------------------
The Fund's long-term performance
--------------------------------------------
THREE WAYS TO BENEFIT FROM A MUTUAL FUND:
-your shares increase in value when the Fund's
investments do well
-you receive capital gains when the gains on
investments sold by the Fund exceed losses
-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.
----------------------------------------------
How your $10,000 has grown in IDS Mutual
----------------------------------------------
$40,000
S&P 500 STOCK INDEX
$30,000
Lipper Balanced
Ford Index
$20,000
$10,000
$28,138
Mutual
Class A
$9,500
'87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
(as of Sept. 30, 1997)
Since
1 year inception 5 years 10 years
<S> <C> <C> <C> <C>
Class A +18.63% --% +12.54% +10.89%
Class B +19.93% +17.31%* --% --%
Class Y +25.04% +19.62%* --% --%
</TABLE>
*inception date was March 20, 1995.
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 (Class A) 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.
Your investment and return values fluctuate so that
your shares, when redeemed, may be worth more or less
than the original cost. Average annual total return
figures reflect the impact of the applicable sales
charge, up to a maximum of 5%. This was a period of
widely fluctuating security prices. Past performance
is no guarantee of future results.
Assumes: -Holding period from 10/01/87 to 9/30/97. -Returns do not reflect taxes
payable on distributions.
- -Reinvestment of all income and capital gain
distributions for the Fund, with a value of $16,688. 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 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.
8 (This annual report is not part of the prospectus.)
<PAGE> 9
The financial statements contained in Post-Effective Amendment No. 98 to
Registration Statement No. 2-11328 filed on or about November 25, 1997, are
incorporated herein by reference.
<PAGE> 10
IDS mutual funds
<TABLE>
<S> <C>
GLOBAL/INTERNATIONAL FUNDS
Funds in this group seek capital growth and/or income
by investing primarily in foreign securities. Foreign
investments may be subject to currency fluctuations and
political and economic risks of the countries in which
the investments are made. They are high risk mutual
funds with a potential for high reward.
- -------------------------------------------------------------------------------------
IDS EMERGING Invests in a Portfolio comprised primarily (icon of)
MARKETS FUND of stocks of companies in developing world
countries throughout the world that are with
believed to offer growth potential. Seeks to countries
provide long-term growth of capital.
- -------------------------------------------------------------------------------------
IDS GLOBAL Invests in a Portfolio comprised primarily (icon of)
GROWTH FUND of stocks of companies throughout the world world
that are positioned to meet market needs in
a changing world economy. These companies
offer above-average potential for long-term
growth.
- -------------------------------------------------------------------------------------
IDS INTERNATIONAL Invests primarily in common stocks of (icon of)
FUND foreign companies that offer potential for three
superior growth. The Fund may invest up to flags
20% of its assets in the U.S. market.
- -------------------------------------------------------------------------------------
IDS GLOBAL Invests in stocks and bonds in, for the most (icon of)
BALANCED FUND part, major markets throughout the world, scale of
including the U.S. Seeks to provide a globes
balance of growth of capital and current
income.
- -------------------------------------------------------------------------------------
IDS GLOBAL Invests in a Portfolio comprised primarily (icon of)
BOND FUND of debt securities of U.S. and foreign globe
issuers to seek high total return through
income and growth of capital.
- -------------------------------------------------------------------------------------
GROWTH FUNDS
Funds in this group seek capital growth, primarily from
common stocks. They are high risk mutual funds with a
potential for high reward.
- -------------------------------------------------------------------------------------
IDS PRECIOUS Invests primarily in the securities of (icon of)
METALS FUND foreign or domestic companies that explore cart of
for, mine and process or distribute gold and precious
other precious metals. A highly aggressive gems
and speculative fund that seeks long-term
growth of capital.
- -------------------------------------------------------------------------------------
IDS DISCOVERY Invests in small- and medium-size, (icon of)
FUND growth-oriented companies emphasizing ship
technological innovation and productivity
enhancement. Buys and holds larger growth-
oriented stocks.
- -------------------------------------------------------------------------------------
IDS SMALL COMPANY Invests in all or a representative group of (icon of)
INDEX FUND the equity securities comprising the S&P building
SmallCap 600 Index, as it strives to provide
long-term capital appreciation.
- -------------------------------------------------------------------------------------
IDS STRATEGY Invests primarily in common stocks of (icon of)
AGGRESSIVE FUND companies that are selected for their chess
potential for above-average growth. piece
Above-average means that their growth
potential is better, in the opinion of the
investment manager, than the Standard &
Poor's Corporation (S&P) 500 Stock Index.
- -------------------------------------------------------------------------------------
IDS RESEARCH Invests in a Portfolio comprised primarily (icon of)
OPPORTUNITIES FUND of equity securities of companies included magnifying
in the S&P 500 Index that are believed to glass
have strong growth potential. The Portfolio
is managed using a research methodology by
the Research Department of AEFC. Goal is
long-term appreciation.
</TABLE>
(This annual report is not part of the prospectus.) 41
<PAGE> 11
IDS mutual funds
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------
IDS GROWTH Invests in a Portfolio comprised primarily (icon of)
FUND of companies that have above-average trees
potential for long-term growth as a result
of new management, marketing opportunities
or technological superiority.
- -------------------------------------------------------------------------------------
IDS NEW Invests in a Portfolio comprised primarily (icon of)
DIMENSIONS FUNDS of companies with significant growth dimension
potential due to superiority in technology,
marketing or management. The Fund frequently
changes its industry mix.
- -------------------------------------------------------------------------------------
IDS PROGRESSIVE Invests primarily in undervalued common (icon of)
FUND stocks. The Fund holds stocks for the long shooting
term with the goal of capital growth. star
- -------------------------------------------------------------------------------------
GROWTH & INCOME FUNDS
- -------------------------------------------------------------------------------------
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. Foreign investments may be subject to
currency fluctuations and political and economic risks
of the countries in which the investments are made.
- -------------------------------------------------------------------------------------
IDS EQUITY Invests primarily in a combination of (icon of)
SELECT FUND moderate growth stocks, higher-yielding three
equities and bonds. Seeks growth of capital pine
and income. trees
- -------------------------------------------------------------------------------------
IDS BLUE CHIP Invests in selected stocks from a major (icon of)
ADVANTAGE FUND market index. Securities purchased are those ribbon
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.
- -------------------------------------------------------------------------------------
IDS MANAGED Invests in a Portfolio comprised primarily (icon of)
ALLOCATION FUND of U.S. equity securities, U.S. and foreign gyroscope
debt securities, foreign equity securities
and money market instruments. The Fund
provides diversification among these major
investment categories and has a target mix
that represents the way the Fund's
investments will be allocated over the long
term. Seeks maximum total return.
- -------------------------------------------------------------------------------------
IDS STOCK Invests in a Portfolio comprised primarily (icon of)
FUND of common stock of companies representing building
many sectors of the economy. Seeks current with
income and growth of capital. columns
- -------------------------------------------------------------------------------------
IDS EQUITY Invests primarily is undervalued common (icon of)
VALUE FUND stocks that offer potential for growth of three
capital and income. growing
flowers
- -------------------------------------------------------------------------------------
IDS UTILITIES Invests primarily in the stocks of public (icon of)
INCOME FUND utility companies to seek high current light
income and growth of income and capital with bulb
reduced volatility.
- -------------------------------------------------------------------------------------
IDS DIVERSIFIED Invests in a Portfolio comprised primarily (icon of)
EQUITY INCOME FUND of high-yielding common stocks to seek high two
current income and, secondarily, to benefit puzzle
from the growth potential offered by stock pieces
investments.
- -------------------------------------------------------------------------------------
IDS MUTUAL Invests in a Portfolio that seeks to balance (icon of)
between common stocks and senior securities scale of
(preferred stocks and bonds). Seeks a justice
balance of growth of capital and current
income.
</TABLE>
42 (This annual report is not part of the prospectus.)
<PAGE> 12
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------
INCOME FUNDS
- -------------------------------------------------------------------------------------
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 EXTRA Invests in a Portfolio comprised mainly of (icon of)
INCOME FUND long-term, high-yielding corporate two coins
fixed-income securities in the lower rated,
higher risk bond categories to seek high
current income. Secondary objective is
capital growth.
- -------------------------------------------------------------------------------------
IDS BOND Invests mainly in corporate bonds, at least (icon of)
FUND 50% in the higher rated, lower risk bond Greek
categories, or the equivalent, and in column
government bonds.
- -------------------------------------------------------------------------------------
IDS SELECTIVE Invests in a Portfolio comprised primarily (icon of)
FUND of high-quality corporate bonds and other skyline
highly rated debt instruments including
government securities and short-term
investments. Seeks current income and
preservation of capital.
- -------------------------------------------------------------------------------------
IDS FEDERAL Invests in a Portfolio comprised primarily (icon of)
INCOME FUND of securities issued or guaranteed as to the shield
timely payment of principal and interest by with
the U.S. government, its agencies and eagle
instrumentalities. Seeks a high level of head
current income and safety of principal
consistent with its type of investments.
- -------------------------------------------------------------------------------------
TAX-EXEMPT INCOME FUNDS
- -------------------------------------------------------------------------------------
These funds provide tax-free income by investing in
municipal bonds. The income is generally free from
federal income tax, but a portion of the income may be
subject to state and local taxes. Risk varies by bond
quality.
- -------------------------------------------------------------------------------------
IDS TAX-EXEMPT Invests mainly in bonds and notes of state (icon of)
BOND FUND or local government units, with at least 75% shield
in the four highest rated, lowest risk bond with
categories. Greek
column
- -------------------------------------------------------------------------------------
IDS INSURED Invests primarily in municipal securities (icon of)
TAX-EXEMPT FUND that are insured as to the timely payment of shield
principal and interest. The insurance with star
feature minimizes credit risk of the Fund
but does not guarantee the market value of
the Fund's shares.
- -------------------------------------------------------------------------------------
IDS STATE Invests primarily in high- and medium-grade (icon of)
TAX-EXEMPT FUNDS municipal securities to provide income to shield
(CA, MA, MI, MN, NY, OH) residents of each respective state that is with U.S.
exempt from federal, state and local income enclosed
taxes. (New York is the only state that is
exempt at the local level.)
- -------------------------------------------------------------------------------------
IDS HIGH YIELD Invests in a Portfolio comprised primarily (icon of)
TAX-EXEMPT FUND of medium- and lower-quality municipal bonds shield
and notes. Lower-quality securities with
generally involve greater risk of principal basket of
and income. apples
enclosed
- -------------------------------------------------------------------------------------
IDS INTERMEDIATE Invests in mainly investment-grade bonds and (icon of)
TAX-EXEMPT FUND other debt securities with intermediate-term shield
maturities issued by state and local with tree
government units. Goal is to seek a high enclosed
level of current income exempt from federal
taxes.
</TABLE>
(This annual report is not part of the prospectus.) 43
<PAGE> 13
IDS mutual funds
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------
MONEY MARKET FUNDS
- -------------------------------------------------------------------------------------
These money market funds have three main goals:
conservation of capital, constant liquidity and the
highest possible current income consistent with these
objectives. An investment in these funds is neither
insured nor guaranteed by the U.S. government, and
there can be no assurance that these funds will be able
to maintain a stable net asset value of $1.00 per
share. Very limited risk.
- -------------------------------------------------------------------------------------
IDS CASH Invests in such money market securities as (icon of)
MANAGEMENT FUND high quality commercial paper, bankers' piggy
acceptances, certificates of deposit (CDs) bank
and other bank securities.
- -------------------------------------------------------------------------------------
IDS TAX-FREE Invests primarily in short-term bonds and (icon of)
MONEY FUND notes issued by state and local governments shield
to seek high current income exempt from with
federal income taxes. piggy
bank
enclosed
- -------------------------------------------------------------------------------------
</TABLE>
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.
44 (This annual report is not part of the prospectus.)
<PAGE> 14
Federal income tax information
IDS Mutual Fund
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
a 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.
CLASS A
<TABLE>
<CAPTION>
INCOME DISTRIBUTION
taxable as dividend income, 27.52% qualifying for
deduction by corporations.
Payable date Per share
<S> <C>
Dec. 27, 1996 $0.24112
March 27, 1997 0.13793
June 27, 1997 0.13297
Sept. 26, 1997 0.15073
Total $0.66275
<CAPTION>
CAPITAL GAIN DISTRIBUTION
taxable as long-term capital gain.
Payable date Per share
<S> <C>
Dec. 27, 1996 $0.71129
Total distributions $1.37404
</TABLE>
The distribution of $0.95241 per share, payable Dec.
27, 1996, consisted of $0.11680 derived from net
investment income, $0.12432 from net short-term
capital gains (a total of $0.24112 taxable as dividend
income) and $0.71129 from net long-term capital gains.
(This annual report is not part of the prospectus.) 45
<PAGE> 15
Federal income tax information
IDS Mutual Fund
CLASS B
<TABLE>
<CAPTION>
INCOME DISTRIBUTION
taxable as dividend income, 27.52% qualifying for
deduction by corporations.
Payable date Per share
<S> <C>
Dec. 27, 1996 $0.21657
March 27, 1997 0.11409
June 27, 1997 0.10777
Sept. 26, 1997 0.12405
Total $0.56248
<CAPTION>
CAPITAL GAIN DISTRIBUTION
taxable as long-term capital gain.
Payable date Per share
<S> <C>
Dec. 27, 1996 $0.71129
Total distributions $1.27377
</TABLE>
The distributions of $0.92786 per share, payable Dec.
27, 1996, consisted of $0.09225 derived from net
investment income, $0.12432 from net short-term
capital gains (a total of $0.21657 taxable as dividend
income) and $0.71129 from net long-term capital gains.
46 (This annual report is not part of the prospectus.)
<PAGE> 16
CLASS Y
<TABLE>
<CAPTION>
INCOME DISTRIBUTION
taxable as dividend income, 27.52% qualifying for
deduction by corporations.
Payable date Per share
<S> <C>
Dec. 27, 1996 $0.24706
March 27, 1997 0.14374
June 27, 1997 0.13706
Sept. 26, 1997 0.15336
Total $0.68122
<CAPTION>
CAPITAL GAIN DISTRIBUTION
taxable as long-term capital gain.
Payable date Per share
<S> <C>
Dec. 27, 1996 $0.71129
Total distributions $1.39251
</TABLE>
The distribution of $0.95835 per share, payable Dec.
27, 1996, consisted of $0.12274 derived from net
investment income, $0.12432 from net short-term
capital gains (a total of $0.24706 taxable as dividend
income) and $0.71129 from net long-term capital gains.
(This annual report is not part of the prospectus.) 47
<PAGE> 17
2
QUICK TELEPHONE REFERENCE
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------------------
AMERICAN EXPRESS Redemptions and exchanges, National/Minnesota:
FINANCIAL ADVISORS dividend payments or 800-437-3133
TELEPHONE TRANSACTION reinvestments and automatic
SERVICE payment arrangements Mpls./St. Paul area:
671-3800
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TTY SERVICE For the hearing impaired 800-846-4852
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AMERICAN EXPRESS Automated account 800-862-7919
FINANCIAL ADVISORS information (TouchTone(R)
EASY ACCESS LINE phones only),
including current fund
prices and
performance, account values
and recent account
transactions
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IDS MUTUAL
IDS Tower 10
Minneapolis, MN 55440-0010 AMERICAN EXPRESS FINANCIAL ADVISORS LOGO
BULK RATE
U.S. POSTAGE
PAID
PERMIT NO. 85
SPENCER, IA
PRINTED WITH SOY INK LOGO S-6326 M (11/97)
<PAGE> 18
STATEMENT OF DIFFERENCES:
Difference Description
1) The layout is different 1) Some of the layout in the
throughout the annual report. annual report to
shareholders is in two
columns.
2) Headings. 2) The headings in the
annual report are
placed in a blue strip
at the top of the page.
3) There are pictures, icons 3) Each picture, icon and
and graphs throughout the graph is described in
annual report. parentheses.
4) Footnotes for charts and 4) The footnotes for each
graphs are described at chart or graph are typed
the left margin. below the description of
the chart or graph.
