<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 81 File No. 2-10700) /X/
and/or
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 31 (File No. 811-499) /X/
------------------------
IDS SELECTIVE FUND
IDS Tower 10, Minneapolis, MN 55440
Leslie L. Ogg
901 S. Marquette Avenue, Suite 2810,
Minneapolis, MN 55402-3268
(612) 330-9283
------------------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
It is proposed that this filing will become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b)
/X/ on March 20, 1995 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(i)
/ / on (date) pursuant to paragraph (a)(i)
/ / 75 days after filing pursuant to paragraph (a)(ii)
/ / on (date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
/X/ this post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
------------------------
THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OR AMOUNT OF SECURITIES
UNDER THE SECURITIES ACT OF 1933 PURSUANT TO SECTION 24(F) OF THE INVESTMENT
COMPANY ACT OF 1940. REGISTRANT'S RULE 24F-2 NOTICE FOR ITS MOST RECENT FISCAL
YEAR ENDED NOVEMBER 30, 1994 WAS FILED ON OR ABOUT JAN. 27, 1995.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CROSS REFERENCE
SHEET SHOWING LOCATION IN THE PROSPECTUS AND THE STATEMENT OF
ADDITIONAL INFORMATION OF THE INFORMATION CALLED FOR BY THE ITEMS
ENUMERATED IN PARTS A AND B OF FORM N-1A.
Negative answers omitted from prospectus are so indicated.
<TABLE>
<CAPTION>
PART A
- ---------------------------------------------------------------------------------
ITEM NO. SECTION IN PROSPECTUS
- ------------ ------------------------------------------------------------------
<C> <S>
1 Cover page of prospectus
2 The fund in brief; Sales charge and fund expenses
3(a) Financial highlights
(b) NA
(c) Performance
(d) Financial highlights
4(a) The fund in brief; Investment policies and risks; How the fund is
organized
(b) Investment policies and risks
(c) Investment policies and risks
5(a) Directors and officers; Directors and officers of the fund
(listing)
(b) How the fund is organized; About American Express Financial
Corporation
(b)(i) About American Express Financial Corporation -- General
information
(b)(ii) Investment manager and transfer agent
(b)(iii) Investment manager and transfer agent
(c) Portfolio manager
(d) The fund in brief
(e) Investment manager and transfer agent
(f) Distributor
(g) Investment manager and transfer agent
5A(a) *
(b) *
6(a) Shares; Voting rights
(b) NA
(c) NA
(d) Voting rights
(e) Cover page; Special shareholder services
(f) Dividends and capital gain distributions; Reinvestments
(g) Taxes
7(a) Distributor
(b) Key terms; Valuing assets
(c) How to buy, exchange or sell shares
(d) How to buy shares
(e) NA
(f) Distributor
8(a) How to sell shares
(b) NA
(c) How to buy shares: Three ways to invest
(d) How to buy, exchange or sell shares: Redemption policies --
"Important..."
9 None
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART B
- ---------------------------------------------------------------------------------
ITEM NO. SECTION IN SAI
- ------------ ------------------------------------------------------------------
<C> <S>
10 Cover page of SAI
11 Table of Contents
12 NA
13(a) Additional Investment Policies; all appendices except Dollar-Cost
Averaging
(b) Additional Investment Policies
(c) Additional Investment Policies
(d) Portfolio Transactions
14(a) Directors and officers of the fund;** Directors and Officers
(b) Directors and Officers
(c) Directors and Officers
15(a) NA
(b) NA
(c) Directors and Officers
16(a)(i) How the fund is organized; About American Express Financial
Corporation**
(a)(ii) Agreements: Investment Management Services Agreement, Plan and
Agreement of Distribution
(a)(iii) Agreements: Investment Management Services Agreement
(b) Agreements: Investment Management Services Agreement
(c) NA
(d) Agreements: Administrative Services Agreement, Shareholder Service
Agreement
(e) NA
(f) Agreements: Distribution Agreement
(g) NA
(h) Custodian; Independent Auditors
(i) Agreements: Transfer Agency Agreement; Custodian
17(a) Portfolio Transactions
(b) Brokerage Commissions Paid to Brokers Affiliated with American
Express Financial Corporation
(c) Portfolio Transactions
(d) Portfolio Transactions
(e) Portfolio Transactions
18(a) Shares and Voting rights**
(b) NA
19(a) Investing in the Fund
(b) Valuing Fund Shares; Investing in the Fund
(c) NA
20 Taxes
21(a) Agreements: Distribution Agreement
(b) Agreements: Distribution Agreement
(c) NA
22(a) Performance Information (for money market funds only)
(b) Performance Information (for all funds except money market funds)
23 Financial Statements
<FN>
- ------------------------
*Designates information is located in annual report.
**Designates page number in prospectus.
</TABLE>
<PAGE>
This prospectus IDS
contains facts that can SELECTIVE
help you decide if the FUND
fund is the right
investment for you. PROSPECTUS
Read it before you MARCH 20, 1995
invest and keep it for
future reference. [GRAPHIC]
Additional facts about THE GOALS OF IDS
the fund are in a SELECTIVE FUND, INC.
Statement of Additional ARE CURRENT INCOME AND
Information (SAI), THE PRESERVATION OF
filed with the CAPITAL BY INVESTING IN
Securities and Exchange INVESTMENT- GRADE
Commission. The SAI, BONDS.
dated March 20, 1995,
is incorporated here by American Express
reference. For a free Shareholder Service
copy, contact American P.O. Box 534
Express Shareholder Minneapolis, MN
Service. 55440-0534
612-671-3733
THESE SECURITIES HAVE TTY: 800-846-4852
NOT BEEN APPROVED OR
DISAPPROVED BY THE
SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE
SECURITIES COMMISSION,
NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES
COMMISSION PASSED UPON
THE ACCURACY OR
ADEQUACY OF THIS
PROSPECTUS. ANY
REPRESENTATION TO
THE CONTRARY IS A
CRIMINAL OFFENSE.
SHARES IN THE FUND
ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR
GUARANTEED OR
ENDORSED BY, ANY
BANK, AND SHARES ARE
NOT FEDERALLY INSURED
BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION,
THE FEDERAL RESERVE
BOARD, OR ANY
OTHER AGENCY.
<PAGE>
- ------------------------------------------
TABLE OF CONTENTS
- ------------------------------------------
THE FUND IN BRIEF
Goals 3P
Types of fund investments 3P
Manager and distributor 3P
Portfolio manager 3P
Alternative sales arrangements 4P
- ------------------------------------------
SALES CHARGE AND FUND EXPENSES
- ------------------------------------------
PERFORMANCE
Financial highlights 7P
Total returns 8P
Yield 9P
Key terms 10P
- ------------------------------------------
INVESTMENT POLICIES AND RISKS
Facts about investments and their
risks 11P
Alternative investment option 14P
Valuing assets 14P
- ------------------------------------------
HOW TO BUY, EXCHANGE OR SELL SHARES
Alternative sales arrangements 15P
How to buy shares 17P
How to exchange shares 20P
How to sell shares 20P
Reductions and waivers of the
sales charge 24P
- ------------------------------------------
SPECIAL SHAREHOLDER SERVICES
Services 28P
Quick telephone reference 28P
- ------------------------------------------
DISTRIBUTIONS AND TAXES
Dividend and capital gain
distributions 29P
Reinvestments 30P
Taxes 30P
- ------------------------------------------
HOW THE FUND IS ORGANIZED
Shares 33P
Voting rights 33P
Shareholder meetings 33P
Directors and officers 33P
Investment manager and transfer
agent 35P
Distributor 36P
- ------------------------------------------
ABOUT AMERICAN EXPRESS FINANCIAL CORPORATION
General information 37P
- ------------------------------------------
APPENDIX
Descriptions of derivative
instruments 38P
2P
<PAGE>
----------------------------------------------------------
The fund in brief
GOALS
IDS Selective Fund seeks to provide shareholders with current
income and preservation of capital by investing in
investment-grade bonds. Because any investment involves risk,
achieving these goals cannot be guaranteed. Only shareholders can
change the goals.
TYPES OF FUND INVESTMENTS
The fund is a diversified mutual fund that invests at least 90%
of its net assets in the four highest investment grades of
corporate debt securities, certain unrated debt securities the
portfolio manager believes have the same investment qualities,
government securities, derivative instruments and money market
securities. Other investments may include common and preferred
stocks and convertible securities. The investments are both U.S.
and foreign. Some of the fund's investments may be considered
speculative and involve additional investment risks.
MANAGER AND DISTRIBUTOR
The fund is managed by American Express Financial Corporation, a
provider of financial services since 1894. American Express
Financial Corporation currently manages more than $37 billion in
assets for the IDS MUTUAL FUND GROUP. Shares of the fund are sold
through American Express Financial Advisors Inc., a wholly
owned subsidiary of American Express Financial Corporation.
PORTFOLIO MANAGER
Ray Goodner joined American Express Financial Corporation in 1977
and serves as vice president and senior portfolio manager. He
began his career in portfolio management in 1980. He has managed
this fund since 1985. Since 1989 he also has served as portfolio
manager of IDS Global Bond Fund.
3P
<PAGE>
- ---------------------------------------------------------------------------
The fund in brief
ALTERNATIVE SALES ARRANGEMENTS
The fund offers its shares in three classes. Class A shares are
subject to a sales charge at the time of purchase. Class B shares
are subject to a contingent deferred sales charge (CDSC) on
redemptions made within six years of purchase and an annual
distribution (12b-1) fee. Class Y shares are sold without a sales
charge to qualifying institutional investors. Other differences
between the classes include the fees paid by each class. The fund
offers these alternatives so you may choose the method of
purchasing shares that is most beneficial given the amount of
purchase, length of time you expect to hold the shares and other
circumstances.
4P
<PAGE>
----------------------------------------------------------
Sales charge and fund expenses
When you buy Class A shares, you pay a maximum sales charge of 5%
of the public offering price. This charge can be reduced,
depending on your total investments in IDS funds. See "Reductions
of the sales charge." No sales charge applies at the time of
purchase of Class B shares, although Class B shares may be
subject to a CDSC on redemptions made within 6 years and are
subject to annual distribution (12b-1) fees. Class Y shares are
sold without a sales charge to qualifying institutional
investors. Shareholder transaction expenses are incurred directly
by an investor on the purchase or redemption of fund shares. Fund
operating expenses are paid out of fund assets for each class of
shares. Operating expenses are reflected in the fund's daily
share price and dividends, and are not charged directly to
shareholder accounts.
-------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS Y
<S> <C> <C> <C>
Maximum sales charge on
purchases (as a percentage of
offering price)............... 5% 0% 0%
Maximum deferred sales charge
imposed on redemptions (as a
percentage of original
purchase price)............... 0% 5% 0%
-----------------------------------------------------------
</TABLE>
-------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES*
(% OF AVERAGE DAILY NET ASSETS):
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS Y
<S> <C> <C> <C>
-----------------------------------------------------------
Management fee............... 0.51% 0.51% 0.51%
-----------------------------------------------------------
12b-1 fee.................... 0.00% 0.75% 0.00%
-----------------------------------------------------------
Other expenses**............. 0.39% 0.40% 0.21%
-----------------------------------------------------------
Total........................ 0.90% 1.66% 0.72%
<FN>
*Expenses for Class A are based on actual expenses for the
last fiscal year, restated to reflect current fees. Expenses
for Class B and Class Y are estimated based on the restated
expenses for Class A, except that the 12b-1 fee and transfer
agent fee (under other expenses) for Class B are based on
agreements for that class.
**Other expenses include an administrative services fee, a
shareholder services fee, a transfer agent fee and other
non-advisory expenses.
</TABLE>
5P
<PAGE>
- ---------------------------------------------------------------------------
Sales charge and fund expenses
EXAMPLE: Suppose for each year for the next 10 years, fund
expenses are as above and annual return is 5%. If you sold your
shares at the end of the following years, for each $1,000
invested, you would pay total expenses of:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years**
<S> <C> <C> <C> <C>
------------------------------------------------------------------------
Class A...................... $59 $77 $97 $156
------------------------------------------------------------------------
Class B...................... $67 $92 $110 $177
------------------------------------------------------------------------
Class B*..................... $17 $52 $90 $177
------------------------------------------------------------------------
Class Y...................... $7 $23 $40 $90
<FN>
*Assuming Class B shares are not redeemed at the end of the
period.
**Based on conversion of Class B shares to Class A shares after
8 years.
</TABLE>
THIS EXAMPLE DOES NOT REPRESENT ACTUAL EXPENSES, PAST OR FUTURE.
ACTUAL EXPENSES MAY BE HIGHER OR LOWER THAN THOSE SHOWN. Because
Class B pays annual distribution (12b-1) fees, long-term
shareholders of Class B may indirectly pay an equivalent of more
than a 6.25% sales charge, the maximum permitted by the National
Association of Securities Dealers.
6P
<PAGE>
----------------------------------------------------------
Performance
FINANCIAL HIGHLIGHTS
FISCAL YEAR ENDED NOV. 30,
<TABLE>
<CAPTION>
- --------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES*
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------
Net asset value, $9.77 $9.20 $8.93 $8.41 $8.69 $8.44 $8.27 $9.03 $8.24 $7.69
beginning of year
INCOME FROM INVESTMENT OPERATIONS:
-------------------------------------------------------------------------------
Net investment income .60 .63 .66 .69 .70 .72 .74 .77 .81 .89
-------------------------------------------------------------------------------
Net gains (losses) (both realized and (1.05) .69 .27 .52 (.30) .27 .17 (.71) .79 .55
unrealized)
-------------------------------------------------------------------------------
Total from investment operations (.45) 1.32 .93 1.21 .40 .99 .91 .06 1.60 1.44
LESS DISTRIBUTIONS:
-------------------------------------------------------------------------------
Dividends from net investment income (.60) (.64) (.66) (.69) (.68) (.74) (.74) (.77) (.81) (.89)
-------------------------------------------------------------------------------
Distributions from (.15) (.11) -- -- -- -- -- (.05) -- --
realized gains
-------------------------------------------------------------------------------
Total distributions (.75) (.75) (.66) (.69) (.68) (.74) (.74) (.82) (.81) (.89)
-------------------------------------------------------------------------------
Net asset value, $8.57 $9.77 $9.20 $8.93 $8.41 $8.69 $8.44 $8.27 $9.03 $8.24
end of year
</TABLE>
- ------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------
Net assets, end of year (in millions) $1,402 $1,737 $1,541 $1,403 $1,196 $1,167 $1,081 $1,101 $1,181 $906
-------------------------------------------------------------------------------
Ratio of expenses to average daily net assets .72% .72% .74% .77% .76% .77% .74% .75% .66% .61%
-------------------------------------------------------------------------------
Ratio of net income to average daily net 6.53% 6.57% 7.32% 7.94% 8.58% 8.42% 8.67% 8.80% 9.29% 11.37%
assets
-------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term 30% 30% 62% 59% 54% 79% 86% 74% 108% 176%
securities)
-------------------------------------------------------------------------------
Total return** (4.7%) 14.8% 10.8% 15.0% 4.8% 12.3% 11.3% 0.6% 20.2% 19.7%
<FN>
** Total return does not reflect payment of a sales charge.
</TABLE>
The information in this table has been audited by KPMG Peat Marwick LLP,
independent auditors. The independent auditors' report and additional
information about the performance of the fund are contained in the fund's annual
report which, if not included with this prospectus, may be obtained without
charge. Information on Class B and Class Y shares is not included because no
shares of those classes were outstanding for the periods shown.
7P
<PAGE>
- ---------------------------------------------------------------------------
Performance
TOTAL RETURNS
- ----------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
AS OF NOV. 30, 1994
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
PURCHASE MADE AGO AGO AGO
<S> <C> <C> <C>
Selective:
------------------------------------------------------------
Class A -9.49% +6.76% +9.64%
------------------------------------------------------------
Lehman Aggregate Bond Index -3.65% +7.43% +9.98%
</TABLE>
- ----------------------------------------------
CUMULATIVE TOTAL RETURNS
AS OF NOV. 30, 1994
<TABLE>
<CAPTION>
10
1 YEAR 5 YEARS YEARS
PURCHASE MADE AGO AGO AGO
<S> <C> <C> <C>
Selective:
-----------------------------------------------------------
Class A -9.49% +38.67% +150.97%
-----------------------------------------------------------
Lehman Aggregate Bond Index -3.65% +43.09% +158.92%
</TABLE>
These examples show total returns from hypothetical investments in Class A
shares of the fund. These returns are compared to those of a popular index for
the same periods. No shares for Class B and Class Y were outstanding during the
periods presented.
For purposes of calculation, information about the fund assumes:
- -a sales charge of 5% for Class A shares
- -no adjustments for taxes an investor may have paid on the reinvested income and
capital gains
- -a period of widely fluctuating securities prices. Returns shown should not be
considered a representation of the fund's future performance.
8P
<PAGE>
- --------------------------------------------------------------------------------
The fund invests primarily in corporate bonds and other debt securities that may
be different from those in the index. The index reflects reinvestment of all
distributions and changes in market prices, but excludes brokerage commissions
or other fees.
Lehman Aggregate Bond Index is made up of a representative list of government
and corporate bonds as well as asset-backed and mortgage-backed securities. The
index is frequently used as a general measure of bond market performance.
However, the securities used to create the index may not be representative of
the bonds held in the fund.
YIELD
The fund's annualized yield for the 30-day period ended Nov. 30, 1994, was
6.85%. The fund calculates this 30-day annualized yield by dividing:
- -net investment income per share deemed earned during a 30-day period by
- -the public offering price per share on the last day of the period, and
- -converting the result to a yearly equivalent figure.
THIS YIELD CALCULATION DOES NOT INCLUDE ANY CONTINGENT DEFERRED SALES CHARGE,
RANGING FROM 5% TO 0% ON CLASS B SHARES, WHICH WOULD REDUCE THE YIELD QUOTED.
The fund's yield varies from day to day, mainly because share values and
offering prices (which are calculated daily) vary in response to changes in
interest rates. Net investment income normally changes much less in the short
run. Thus, when interest rates rise and share values fall, yield tends to rise.
When interest rates fall, yield tends to follow.
Past yields should not be considered an indicator of future yields.
9P
<PAGE>
- ---------------------------------------------------------------------------
Performance
- ----------------------------------------------
KEY TERMS
NET ASSET VALUE (NAV)
Value of a single fund share. For each class, it is the total
market value of all of a fund's investments and other assets
attributable to that class, less any liabilities attributable to
that class, divided by the number of shares of that class
outstanding.
When you buy shares, you pay the NAV plus any applicable sales
charge. When you sell shares, the price you receive is the NAV
minus any applicable sales charge. The NAV usually changes daily,
and is calculated at the close of business, normally 3 p.m.
Central time, each business day (any day the New York Stock
Exchange is open). NAV generally declines as interest rates
increase and rises as interest rates decline.
PUBLIC OFFERING PRICE
Price at which you buy shares. It is the NAV plus the sales
charge for Class A. It is the NAV for Class B and Class Y. NAVs
and public offering prices of IDS funds are listed each day in
major newspapers and financial publications for classes of funds
large enough to be listed.
INVESTMENT INCOME
Dividends and interest earned on securities held by the fund.
CAPITAL GAINS OR LOSSES
Increase or decrease in value of the securities the fund holds.
Gains or losses are realized when securities that have increased
or decreased in value are sold. A fund also may have unrealized
gains or losses when securities increase or decrease in value but
are not sold.
DISTRIBUTIONS
Payments to shareholders of two types: investment income
(dividends) and realized net long-term capital gains (capital
gains distributions).
TOTAL RETURN
Sum of all of your returns for a given period, assuming you
reinvest all distributions. Calculated by taking the total value
of shares you own at the end of the period (including shares
acquired by reinvestment), less the price of shares you purchased
at the beginning of the period.
AVERAGE ANNUAL TOTAL RETURN
The annually compounded rate of return over a given time period
(usually two or more years) -- total return for the period
converted to an equivalent annual figure.
YIELD
Net investment income earned per share for a specified time
period, divided by the offering price at the end of the period.
10P
<PAGE>
----------------------------------------------------------
Investment policies and risks
The fund invests in the four highest investment grades of
marketable corporate debt securities, certain unrated debt
securities the portfolio manager believes have the same
investment qualities, government securities, derivative
instruments and money market instruments. Under normal market
conditions, at least 90% of the fund's net assets will be in
these investments. The remaining 10% of the fund's net assets may
be invested in common and preferred stocks and convertible
securities. The investments are both U.S. and foreign.
The various types of investments the portfolio manager uses to
achieve investment performance are described in more detail in
the next section and in the SAI.
FACTS ABOUT INVESTMENTS AND THEIR RISKS
DEBT SECURITIES: The price of an investment-grade bond fluctuates
as interest rates change or if its credit rating is upgraded or
downgraded. The fund does not invest in securities considered by
the portfolio manager to have investment qualities lower than
investment grade. Securities that are subsequently downgraded in
quality may continue to be held by the fund and will be sold only
if the fund's portfolio manager believes it is advantageous to do
so.
COMMON STOCKS: Common stocks are subject to market fluctuations.
Stocks of larger, established companies that pay dividends may be
less volatile than the stock market as a whole.
PREFERRED STOCKS: If a company earns a profit, it generally must
pay its preferred stockholders a dividend at a pre-established
rate.
CONVERTIBLE SECURITIES: These securities generally are preferred
stocks or bonds that can be exchanged for other securities,
usually common stock, at prestated prices. When the trading price
of the common stock makes the exchange likely, the convertible
securities trade more like common stock.
11P
<PAGE>
- ---------------------------------------------------------------------------
Investment policies and risks
FOREIGN INVESTMENTS: Securities of foreign companies and
governments may be traded in the United States, but often they
are traded only on foreign markets. Frequently, there is less
information about foreign companies and less government
supervision of foreign markets. Foreign investments are subject
to political and economic risks of the countries in which the
investments are made, including the possibility of seizure or
nationalization of companies, imposition of withholding taxes on
income, establishment of exchange controls or adoption of other
restrictions that might affect an investment adversely. If an
investment is made in a foreign market, the local currency must
be purchased. This is done by using a forward contract in which
the price of the foreign currency in U.S. dollars is established
on the date the trade is made, but delivery of the currency is
not made until the securities are received. As long as the fund
holds foreign currencies or securities valued in foreign
currencies, the price of a fund share will be affected by changes
in the value of the currencies relative to the U.S. dollar.
Because of the limited trading volume in some foreign markets,
efforts to buy or sell a security may change the price of the
security, and it may be difficult to complete the transaction.
The fund may invest up to 25% of its total assets in foreign
investments.
12P
<PAGE>
- --------------------------------------------------------------------------------
DERIVATIVE INSTRUMENTS: The portfolio manager may use derivative
instruments in addition to securities to achieve investment
performance. Derivative instruments include futures, options and
forward contracts. Such instruments may be used to maintain cash
reserves while remaining fully invested, to offset anticipated
declines in values of investments, to facilitate trading, to
reduce transaction costs, or to pursue higher investment returns.
Derivative instruments are characterized by requiring little or
no initial payment and a daily change in price based on or
derived from a security, a currency, a group of securities or
currencies, or an index. A number of strategies or combination of
instruments can be used to achieve the desired investment
performance characteristics. A small change in the value of the
underlying security, currency or index will cause a sizable gain
or loss in the price of the derivative instrument. Derivative
instruments allow the portfolio manager to change the investment
performance characteristics very quickly and at lower costs.
Risks include losses of premiums, rapid changes in prices,
defaults by other parties, and inability to close such
instruments. The fund will use derivative instruments only to
achieve the same investment performance characteristics it could
achieve by directly holding those securities and currencies
permitted under the investment policies. The fund will designate
cash or appropriate liquid assets to cover its portfolio
obligations. No more than 5% of the fund's net assets can be used
at any one time for good faith deposits on futures and premiums
for options on futures that do not offset existing investment
positions. For further information, see the Appendix to this
prospectus.
SECURITIES AND DERIVATIVE INSTRUMENTS THAT ARE ILLIQUID: Illiquid
means the security or derivative instrument cannot be sold
quickly in the normal course of business. Some investments cannot
be resold to the U.S. public because of their terms or government
regulations. All securities and derivative instruments, however,
can be sold in private sales, and many may be sold to other
institutions and qualified buyers or on foreign markets. The
portfolio manager will follow guidelines established by the board
of directors and consider relevant factors such as the nature of
the security and the number of likely buyers when determining
whether a security is illiquid. No more than 10% of the fund's
net assets will be held in securities and derivative instruments
that are illiquid.
13P
<PAGE>
- ---------------------------------------------------------------------------
Investment policies and risks
MONEY MARKET INSTRUMENTS: Short-term debt securities rated in the
top two grades are used to meet daily cash needs and at various
times to hold assets until better investment opportunities arise.
Generally less than 25% of the fund's total assets are in these
money market instruments. However, for temporary defensive
purposes these investments could exceed that amount for a limited
period of time.
The investment policies described above may be changed by the
board of directors.
LENDING PORTFOLIO SECURITIES: The fund may lend its securities to
earn income so long as borrowers provide collateral equal to the
market value of the loans. The risks are that borrowers will not
provide collateral when required or return securities when due.
Unless shareholders approve otherwise, loans may not exceed 30%
of the fund's net assets.
ALTERNATIVE INVESTMENT OPTION
In the future, the board of the fund may determine for operating
efficiencies to use a master/feeder structure. Under that
structure, the fund's investment portfolio would be managed by
another investment company with the same goal as the fund, rather
than investing directly in a portfolio of securities.
VALUING ASSETS
- Securities (except bonds) and assets with available market
values are valued on that basis.
- Securities maturing in 60 days or less are valued at amortized
cost.
- Bonds and assets without readily available market values are
valued according to methods selected in good faith by the board
of directors.
14P
<PAGE>
----------------------------------------------------------
How to buy, exchange or sell shares
ALTERNATIVE SALES ARRANGEMENTS
The fund offers three different classes of shares -- Class A,
Class B and Class Y. The primary differences among the classes
are in the sales charge structures and in their ongoing expenses.
These differences are summarized in the table below. You may
choose the class that best suits your circumstances and
objectives.
<TABLE>
<CAPTION>
SERVICE FEE
SALES CHARGE AND DISTRIBUTION (AS A % OF AVERAGE
(12B-1) FEE DAILY NET ASSETS) OTHER INFORMATION
<S> <C> <C> <C>
----------------------------------------------------------
Class A Maximum initial sales charge Service fee of 0.175% Initial sales charge waived or
of 5% reduced for certain purchases
----------------------------------------------------------
Class B No initial sales charge; Service fee of 0.175% Shares convert to Class A
distribution fee of 0.75% of after 8 years; CDSC waived in
daily net assets; maximum CDSC certain circumstances
of 5% declines to 0% after 6
years
----------------------------------------------------------
Class Y None None Available only to certain
qualifying institutional
investors
</TABLE>
CONVERSION OF CLASS B SHARES TO CLASS A SHARES -- Eight calendar
years after Class B shares were originally purchased, Class B
shares will convert to Class A shares and will no longer be
subject to a distribution fee. The conversion will be on the
basis of relative net asset values of the two classes, without
the imposition of any sales charge. Class B shares purchased
through reinvested dividends and distributions will convert to
Class A shares in a pro-rata portion as the Class B shares
purchased other than through reinvestment.
15P
<PAGE>
- ---------------------------------------------------------------------------
How to buy, exchange or sell shares
CONSIDERATIONS IN DETERMINING WHETHER TO PURCHASE CLASS A OR CLASS B SHARES --
You should consider the information below in determining whether to purchase
Class A or Class B shares.
SALES CHARGES ON PURCHASE OR REDEMPTION
IF YOU PURCHASE CLASS A SHARES IF YOU PURCHASE CLASS B SHARES
- - You will not have all of your purchase - All of your money is invested in
price invested. Part of your purchase shares of stock. However, you will
price will go to pay the sales charge. pay a sales charge if you redeem
You will not pay a sales charge when your shares within six years of
you redeem your shares. purchase.
- - You will be able to take advantage of - No reductions of the sales charge
reductions in the sales charge. If are available for large purchases.
your investments in IDS funds total
$250,000 or more, you are better off
paying the reduced sales charge in
Class A than paying the higher fees in
Class B. If you qualify for a waiver
of the sales charge, you should
purchase Class A shares.
- - The sales charges and distribution fee are structured so that you will have
approximately the same total return at the end of eight years regardless of
which class you chose.
ONGOING EXPENSES
- - Your shares will have a lower expense - The distribution and transfer agent
ratio than Class B shares because fees for Class B will cause your
Class A does not pay a distribution shares to have a higher expense
fee and the transfer agent fee for ratio and to pay lower dividends
Class A is lower than the fee for than Class A shares. After eight
Class B. As a result, Class A shares years, Class B shares will convert
will pay higher dividends than Class B to Class A shares and will no longer
shares. be subject to higher fees.
You should consider how long you plan to hold your shares and whether the
accumulated higher fees and CDSC on Class B shares prior to conversion would be
less than the initial sales charge on Class A shares. Also consider to what
extent the difference would be offset by the lower expenses on Class A shares.
To help you in this analysis, the Example in the "Sales charge and fund
expenses" section of the prospectus illustrates the charges applicable to each
class of shares.
16P
<PAGE>
- --------------------------------------------------------------------------------
CLASS Y SHARES -- Class Y shares are offered to certain
institutional investors. Class Y shares are sold without a
front-end sales charge or a CDSC and are not subject to either a
service fee or a distribution fee. The following investors are
eligible to purchase Class Y shares:
- Qualified employee benefit plans* if the plan:
-- uses a daily transfer recordkeeping service offering
participants daily access to IDS funds and has
-- at least $10 million in plan assets or
-- 500 or more participants; or
-- does not use daily transfer recordkeeping and has
-- at least $3 million invested in funds of the IDS MUTUAL
FUND GROUP or
-- 500 or more participants.
- Trust companies or similar institutions, and charitable
organizations that meet the definition in Section 501(c)(3) of
the Internal Revenue Code.* These must have at least $10 million
invested in funds of the IDS MUTUAL FUND GROUP.
- Nonqualified deferred compensation plans* whose participants
are included in a qualified employee benefit plan described
above.
* Eligibility must be determined in advance by American
Express Financial Advisors. To do so, contact your
financial advisor.
Financial advisors may receive different compensation for selling
Class A, Class B and Class Y shares.
HOW TO BUY SHARES
If you're investing in this fund for the first time, you'll need
to set up an account. Your financial advisor will help you fill
out and submit an application. Once your account is set up, you
can choose among several convenient ways to invest.
17P
<PAGE>
- ---------------------------------------------------------------------------
How to buy, exchange or sell shares
IMPORTANT: When opening an account, you must provide your correct
Taxpayer Identification Number (Social Security or Employer
Identification number). See "Distributions and taxes."
When you buy shares for a new or existing account, the price you
pay per share is determined at the close of business on the day
your investment is received and accepted at the Minneapolis
headquarters.
PURCHASE POLICIES:
- Investments must be received and accepted in the Minneapolis
headquarters on a business day before 3 p.m. Central time to be
included in your account that day and to receive that day's
share price. Otherwise your purchase will be processed the next
business day and you will pay the next day's share price.
- The minimums allowed for investment may change from time to
time.
- Wire orders can be accepted only on days when your bank,
American Express Financial Corporation, the fund and Norwest
Bank Minneapolis are open for business.
- Wire purchases are completed when wired payment is received and
the fund accepts the purchase.
- American Express Financial Corporation and the fund are not
responsible for any delays that occur in wiring funds, including
delays in processing by the bank.
- You must pay any fee the bank charges for wiring.
- The fund reserves the right to reject any application for any
reason.
- If your application does not specify which class of shares you
are purchasing, it will be assumed that you are investing in
Class A shares.
18P
<PAGE>
- --------------------------------------------------------------------------------
THREE WAYS TO INVEST
- --------------------------------------------------------------
- --
1
BY REGULAR Send your check and application MINIMUM AMOUNTS
ACCOUNT (or your name and account number Initial investment: $2,000
if you have an established Additional investments: $100
account) to: Account balances: $300 *
American Express Qualified retirement
Financial Advisors Inc. accounts: none
P.O. Box 74
Minneapolis, MN 55440-0074
Your financial advisor will help
you with this process.
- --------------------------------------------------------------
- --
2
BY Contact your financial advisor to MINIMUM AMOUNTS
SCHEDULED set up one of the following Initial investment: $100
INVESTMENT scheduled plans: Additional investments: $100 /mo
PLAN - automatic payroll deduction Account balances: none
- bank authorization (on active plans of
- direct deposit of Social monthly payments)
Security check
- other plan approved by the fund
- --------------------------------------------------------------
- --
3
BY WIRE If you have an established If this information is not
account, you may wire money to: included, the order may be
Norwest Bank Minneapolis rejected and all money received
Routing No. 091000019 by the fund, less any costs the
Minneapolis, MN fund or American Express
Attn: Domestic Wire Dept. Financial Corporation incurs will
be returned promptly.
Give these instructions: MINIMUM AMOUNTS
Credit IDS Account #00-30-015 for Each wire investment: $1,000
personal account # (your account
number) for (your name).
*If your account balance falls below $300, you will be asked in
writing to bring it up to $300 or establish a scheduled
investment plan. If you don't do so within 30 days, your
shares can be redeemed and the proceeds mailed to you.
19P
<PAGE>
- ---------------------------------------------------------------------------
How to buy, exchange or sell shares
HOW TO EXCHANGE SHARES
You can exchange your shares of the fund at no charge for shares
of the same class of any other publicly offered fund in the IDS
MUTUAL FUND GROUP available in your state. Exchanges into IDS
Tax-Free Money Fund must be made from Class A shares. For
complete information, including fees and expenses, read the
prospectus carefully before exchanging into a new fund.
If your exchange request arrives at the Minneapolis headquarters
before the close of business, your shares will be redeemed at the
net asset value set for that day. The proceeds will be used to
purchase new fund shares the same day. Otherwise, your exchange
will take place the next business day at that day's net asset
value.
For tax purposes, an exchange represents a sale and purchase and
may result in a gain or loss. However, you cannot create a tax
loss (or reduce a taxable gain) by exchanging from the fund
within 91 days of your purchase. For further explanation, see the
SAI.
HOW TO SELL SHARES
You can sell (redeem) your shares at any time. American Express
Shareholder Service will mail payment within seven days after
receiving your request.
When you sell shares, the amount you receive may be more or less
than the amount you invested. Your shares will be redeemed at net
asset value, minus any applicable sales charge, at the close of
business on the day your request is accepted at the Minneapolis
headquarters. If your request arrives after the close of
business, the price per share will be the net asset value, minus
any applicable sales charge, at the close of business on the next
business day.
A redemption is a taxable transaction. If the fund's net asset
value when you sell shares is more or less than the cost of your
shares, you will have a gain or loss, which can affect your tax
liability. Redeeming shares held in an IRA or qualified
retirement account may subject you to certain federal taxes,
penalties and reporting requirements. Consult your tax advisor.
20P
<PAGE>
- --------------------------------------------------------------------------------
TWO WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES
- --------------------------------------------------------------
- --
1
BY LETTER Include in your letter: REGULAR MAIL:
- the name of the fund(s) American Express Shareholder
- the class of shares to be Service
exchanged or redeemed Attn: Redemptions
- your account number(s) (for P.O. Box 534
exchanges, both funds must be Minneapolis, MN 55440-0534
registered in the same EXPRESS MAIL:
ownership) American Express Shareholder
- your Taxpayer Identification Service
Number (TIN) Attn: Redemptions
- the dollar amount or number 733 Marquette Ave.
of shares you want to Minneapolis, MN 55402
exchange or sell
- signature of all registered
account owners
- for redemptions, indicate how
you want your sales proceeds
delivered to you
- any paper certificates of
shares you hold
- --------------------------------------------------------------
- --
2
BY PHONE - The fund and American Express American Express Shareholder
American Financial Corporation will Service. Each registered owner
Express honor any telephone exchange must sign the request.
Telephone or redemption request - American Express Financial
Transaction believed to be authentic and Corporation answers phone
Service: will use reasonable requests promptly, but you
800-437-3133 procedures to confirm that may experience delays when
or they are. This includes call volume is high. If you
612-671-3800 asking identifying questions are unable to get through,
and tape recording calls. So use mail procedure as an
long as reasonable procedures alternative.
are followed, neither the - Phone privileges may be
fund nor American Express modified or discontinued at
Financial Corporation will be any time.
liable for any loss resulting MINIMUM AMOUNT
from fraudulent requests. Redemption: $100
- Phone exchange and redemption MAXIMUM AMOUNT
privileges automatically Redemption: $50,000
apply to all accounts except
custodial, corporate or
qualified retirement accounts
unless you request these
privileges NOT apply by
writing
21P
<PAGE>
- --------------------------------------------------------------------------------
How to buy, exchange or sell shares
EXCHANGE POLICIES:
- You may make up to three exchanges within any 30-day period,
with each limited to $300,000. These limits do not apply to
scheduled exchange programs and certain employee benefit plans
or other arrangements through which one shareholder represents
the interests of several. Exceptions may be allowed with
pre-approval of the fund.
- Exchanges must be made into the same class in the new fund.
- If your exchange creates a new account, it must satisfy the
minimum investment amount for new purchases.
- Once we receive your exchange request, you cannot cancel it.
- Shares of the new fund may not be used on the same day for
another exchange.
- If your shares are pledged as collateral, the exchange will be
delayed until written approval is obtained from the secured
party.
- American Express Financial Corporation and the fund reserve the
right to reject any exchange, limit the amount, or modify or
discontinue the exchange privilege, to prevent abuse or adverse
effects on the fund and its shareholders. For example, if
exchanges are too numerous or too large, they may disrupt the
fund's investment strategies or increase its costs.
REDEMPTION POLICIES:
- A "change of mind" option allows you to change your mind after
requesting a redemption and to use all or part of the proceeds
to buy new shares in the same account at the net asset value,
rather than the offering price on the date of a new purchase. If
you reinvest in this manner, any CDSC you paid on the amount you
are reinvesting also will be reinvested in the fund. To take
advantage of this option, send a written request within 30 days
of the date your redemption request was received. Include your
account number and mention this option. This privilege may be
limited or withdrawn at any time, and it may have tax
consequences.
- A telephone redemption request will not be allowed within 30
days of a phoned-in address change.
IMPORTANT: If you request a redemption of shares you recently
purchased by a check or money order that is not guaranteed, the
fund will wait for your check to clear. Please expect a minimum
of 10 days from the date of purchase before a check is mailed to
you. (A check may be mailed earlier if your bank provides
evidence satisfactory to the fund and American Express Financial
Corporation that your check has cleared.)
22P
<PAGE>
- --------------------------------------------------------------------------------
THREE WAYS TO RECEIVE PAYMENT WHEN YOU SELL SHARES
- --------------------------------------------------------------
- --
1
BY REGULAR - Mailed to the address on record.
OR EXPRESS - Payable to names listed on the account.
MAIL
NOTE: The express mail delivery charges you pay will vary
depending on the courier you select.
- --------------------------------------------------------------
- --
2
BY WIRE - Minimum wire redemption: $1,000.
- Request that money be wired to your bank.
- Bank account must be in the same ownership as the IDS fund
account.
NOTE: Pre-authorization required. For instructions, contact your
financial advisor or American Express Shareholder Service.
- --------------------------------------------------------------
- --
3
BY SCHEDULED - Minimum payment: $50.
PAYOUT PLAN - Contact your financial advisor or American Express Shareholder
Service to set up regular payments to you on a monthly,
bimonthly, quarterly, semiannual or annual basis.
- Buying new shares while under a payout plan may be
disadvantageous because of the sales charges.
23P
<PAGE>
- ---------------------------------------------------------------------------
How to buy, exchange or sell shares
REDUCTIONS AND WAIVERS OF THE SALES CHARGE
CLASS A -- INITIAL SALES CHARGE ALTERNATIVE
On purchases of Class A shares, you pay a 5% sales charge on the
first $50,000 of your total investment and less on investments
after the first $50,000:
-------------------------------------------------------------
TOTAL INVESTMENT SALES CHARGE AS A PERCENT OF:*
<TABLE>
<CAPTION>
PUBLIC OFFERING NET AMOUNT
PRICE INVESTED
<S> <C> <C> <C>
----------------------------------------------------------------------------------
Up to $50,000 5.0% 5.26%
----------------------------------------------------------------------------------
Next $50,000 4.5 4.71
----------------------------------------------------------------------------------
Next $400,000 3.8 3.95
----------------------------------------------------------------------------------
Next $500,000 2.0 2.04
----------------------------------------------------------------------------------
More than $1,000,000 0.0 0.00
<FN>
*To calculate the actual sales charge on an investment greater
than $50,000, amounts for each applicable increment must be
totaled. See the SAI.
</TABLE>
REDUCTIONS OF THE SALES CHARGE ON CLASS A SHARES
Your sales charge may be reduced, depending on the totals of:
- the amount you are investing in this fund now,
- the amount of your existing investment in this fund, if any,
and
- the amount you and your immediate family (spouse or unmarried
children under 21) are investing or have in other funds in the
IDS MUTUAL FUND GROUP that carry a sales charge.
Other policies that affect your sales charge:
- IDS Tax-Free Money Fund and Class A shares of IDS Cash
Management Fund do not carry sales charges. However, you may
count investments in these funds if you acquired shares in them
by exchanging shares from IDS funds that carry sales charges.
- IRA purchases or other employee benefit plan purchases made
through a payroll deduction plan or through a plan sponsored by
an employer, association of employers, employee organization or
other similar entity, may be added together to reduce sales
charges for all shares purchased through that plan.
For more details, see the SAI.
24P
<PAGE>
- --------------------------------------------------------------------------------
WAIVERS OF THE SALES CHARGE FOR CLASS A SHARES
Sales charges do not apply to:
- Current or retired trustees, directors, officers or employees
of the fund or American Express Financial Corporation or its
subsidiaries, their spouses and unmarried children under 21.
- Current or retired American Express financial advisors, their
spouses and unmarried children under 21.
- Qualified employee benefit plans* using a daily transfer
recordkeeping system offering participants daily access to IDS
funds.
(Participants in certain qualified plans for which the initial
sales charge is waived may be subject to a deferred sales charge
of up to 4% on certain redemptions. For more information, see the
SAI.)
- Shareholders who have at least $1 million invested in funds of
the IDS MUTUAL FUND GROUP. If the investment is redeemed in the
first year after purchase, a CDSC of 1% will be charged on the
redemption.
- Purchases made within 30 days after a redemption of shares (up
to the amount redeemed):
-- of a product distributed by American Express Financial
Advisors in a qualified plan subject to a deferred sales charge
or
-- in a qualified plan where American Express Trust Company acts
as trustee or recordkeeper.
Send the fund a written request along with your payment,
indicating the amount of the redemption and the date on which it
occurred.
- Purchases made with dividend or capital gain distributions from
another fund in the IDS MUTUAL FUND GROUP that has a sales
charge.
* Eligibility must be determined in advance by American Express
Financial Advisors. To do so, contact your financial advisor.
25P
<PAGE>
- ---------------------------------------------------------------------------
How to buy, exchange or sell shares
CLASS B -- CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE
Where a CDSC is imposed on a redemption, it is based on the
amount of the redemption and the number of calendar years,
including the year of purchase, between purchase and redemption.
The following table shows the declining scale of percentages that
apply to redemptions during each year after a purchase:
<TABLE>
<CAPTION>
IF A REDEMPTION THE PERCENTAGE
IS MADE RATE FOR THE
DURING THE CDSC IS:
<S> <C>
-----------------------------------------------------------------
First year 5%
-----------------------------------------------------------------
Second year 4%
-----------------------------------------------------------------
Third year 4%
-----------------------------------------------------------------
Fourth year 3%
-----------------------------------------------------------------
Fifth year 2%
-----------------------------------------------------------------
Sixth year 1%
-----------------------------------------------------------------
Seventh year 0%
</TABLE>
If the amount you are redeeming reduces the current net asset
value of your investment in Class B shares below the total dollar
amount of all your purchase payments during the last 6 years
(including the year in which your redemption is made), the CDSC
is based on the lower of the redeemed purchase payments or market
value.
The following example illustrates how the CDSC is applied. Assume
you had invested $10,000 in Class B shares and that your
investment had appreciated in value to $12,000 after 15 months,
including reinvested dividend and capital gain distributions. You
could redeem any amount up to $2,000 without paying a CDSC
($12,000 current value less $10,000 purchase amount). If you
redeemed $2,500, the CDSC would apply only to the $500 that
represented part of your original purchase price. The CDSC rate
would be 4% because a redemption after 15 months would take place
during the second year after purchase.
26P
<PAGE>
- --------------------------------------------------------------------------------
Because the CDSC is imposed only on redemptions that reduce the
total of your purchase payments, you never have to pay a CDSC on
any amount you redeem that represents appreciation in the value
of your shares, income earned by your shares or capital gains. In
addition, when determining the rate of any CDSC, your redemption
will be made from the oldest purchase payment you made. Of
course, once a purchase payment is considered to have been
redeemed, the next amount redeemed is the next oldest purchase
payment. By redeeming the oldest purchase payments first, lower
CDSCs are imposed than would otherwise be the case.
WAIVERS OF THE SALES CHARGE FOR CLASS B SHARES
The CDSC on Class B shares will be waived on redemptions of
shares:
- In the event of the shareholder's death,
- Purchased by any trustee, director, officer or employee of a
fund or American Express Financial Corporation or its
subsidiaries,
- Purchased by any American Express financial advisor,
- Held in a trusteed employee benefit plan,
- Held in IRAs or certain qualified plans for which American
Express Trust Company acts as custodian, such as Keogh plans,
tax-sheltered custodial accounts or corporate pension plans,
provided that the shareholder is:
-- at least 59 1/2 years old, and
-- taking a retirement distribution (if the redemption is part of
a transfer to an IRA or qualified plan in a product distributed
by American Express Financial Advisors, or a
custodian-to-custodian transfer to a product not distributed by
American Express Financial Advisors, the CDSC will not be
waived), or
-- redeeming under an approved substantially equal periodic
payment arrangement.
27P
<PAGE>
----------------------------------------------------------
Special shareholder services
SERVICES
To help you track and evaluate the performance of your
investments, American Express Financial Corporation provides
these services:
QUARTERLY STATEMENTS listing all of your holdings and
transactions during the previous three months.
YEARLY TAX STATEMENTS featuring average-cost-basis reporting of
capital gains or losses if you redeem your shares along with
distribution information -- which simplifies tax calculations.
A PERSONALIZED MUTUAL FUND PROGRESS REPORT detailing returns on
your initial investment and cash-flow activity in your account.
It calculates a total return to reflect your individual history
in owning fund shares. This report is available from your
financial advisor.
-------------------------------------------------------------
QUICK TELEPHONE REFERENCE
<TABLE>
<S> <C> <C>
AMERICAN Redemptions and exchanges, National/Minnesota:
EXPRESS dividend payments or 800-437-3133
TELEPHONE reinvestments and automatic Mpls./St. Paul area:
TRANSACTION payment arrangements 671-3800
SERVICE
----------------------------------------------------
AMERICAN Fund performance, objectives 612-671-3733
EXPRESS and account inquiries
SHAREHOLDER
SERVICE
----------------------------------------------------
TTY SERVICE For the hearing impaired 800-846-4852
----------------------------------------------------
AMERICAN Automated account information National/Minnesota:
EXPRESS (TouchTone-Registered Trademark- 800-272-4445
INFOLINE phones only), including Mpls./St. Paul area:
current fund prices and 671-1630
performance, account values
and recent account
transactions
----------------------------------------------------
</TABLE>
28P
<PAGE>
----------------------------------------------------------
Distributions and taxes
The fund distributes to shareholders investment income and net
capital gains. It does so to qualify as a regulated investment
company and to avoid paying corporate income and excise taxes.
Dividend and capital gains distributions will have tax
consequences you should know about.
DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS
The fund distributes its net investment income (dividends and
interest earned on securities held by the fund, less operating
expenses) to shareholders of record monthly. Short-term capital
gains distributed are included in net investment income. Net
realized capital gains, if any, from selling securities are
distributed at the end of the calendar year. Before they're
distributed, net capital gains are included in the value of each
share. After they're distributed, the value of each share drops
by the per-share amount of the distribution. (If your
distributions are reinvested, the total value of your holdings
will not change.)
Dividends paid by each class will be calculated at the same time,
in the same manner and in the same amount, except the expenses
attributable solely to Class A, Class B and Class Y will be paid
exclusively by that class. Class B shareholders will receive
lower per share dividends than Class A and Class Y shareholders
because expenses for Class B are higher than for Class A or Class
Y. Class A shareholders will receive lower per share dividends
than Class Y shareholders because expenses for Class A are higher
than for Class Y.
29P
<PAGE>
- ---------------------------------------------------------------------------
Distributions and taxes
REINVESTMENTS
Dividends and capital gain distributions are automatically
reinvested in additional shares in the same class of the fund,
unless:
- you request the fund in writing or by phone to pay
distributions to you in cash, or
- you direct the fund to invest your distributions in any
publicly available IDS fund for which you've previously opened
an account. You pay no sales charge on shares purchased through
reinvestment from this fund into any IDS fund.
The reinvestment price is the net asset value at close of
business on the day the distribution is paid. (Your quarterly
statement will confirm the amount invested and the number of
shares purchased.)
If you choose cash distributions, you will receive only those
declared after your request has been processed.
If the U.S. Postal Service cannot deliver the checks for the cash
distributions, we will reinvest the checks into your account at
the then-current net asset value and make future distributions in
the form of additional shares.
TAXES
Distributions are subject to federal income tax and also may be
subject to state and local taxes. Distributions are taxable in
the year the fund pays them regardless of whether you take them
in cash or reinvest them.
Each January, you will receive a statement showing the kinds and
total amount of all distributions you received during the
previous year. You must report all distributions on your tax
returns, even if they are reinvested in additional shares.
30P
<PAGE>
- --------------------------------------------------------------------------------
"Buying a dividend" creates a tax liability. This means buying
shares shortly before a capital gain distribution. You pay the
full pre-distribution price for the shares, then receive a
portion of your investment back as a distribution, which is
taxable.
Redemptions and exchanges subject you to a tax on any capital
gain. If you sell shares for more than their cost, the difference
is a capital gain. Your gain may be either short term (for shares
held for one year or less) or long term (for shares held for more
than one year).
YOUR TAXPAYER IDENTIFICATION NUMBER (TIN) IS IMPORTANT. As with
any financial account you open, you must list your current and
correct Taxpayer Identification Number (TIN) -- either your
Social Security or Employer Identification number. The TIN must
be certified under penalties of perjury on your application when
you open an account at American Express Financial Corporation.
If you don't provide the TIN, or the TIN you report is incorrect,
you could be subject to backup withholding of 31% of taxable
distributions and proceeds from certain sales and exchanges. You
also could be subject to further penalties, such as:
- a $50 penalty for each failure to supply your correct TIN
- a civil penalty of $500 if you make a false statement that
results in no backup withholding
- criminal penalties for falsifying information
You also could be subject to backup withholding because you
failed to report interest or dividends on your tax return as
required.
31P
<PAGE>
- ---------------------------------------------------------------------------
Distributions and taxes
-------------------------------------------------------------
HOW TO DETERMINE THE CORRECT TIN
FOR THIS TYPE OF ACCOUNT: USE THE SOCIAL SECURITY OR
EMPLOYER IDENTIFICATION
NUMBER OF:
----------------------------------------------------
Individual or joint The individual or first person
account listed on the account
----------------------------------------------------
Custodian account of a The minor
minor (Uniform
Gifts/Transfers to Minors
Act)
----------------------------------------------------
A living trust The grantor-trustee (the person
who puts the money into the trust)
----------------------------------------------------
An irrevocable trust, The legal entity (not the personal
pension trust or estate representative or trustee, unless
no legal entity is designated in
the account title)
----------------------------------------------------
Sole proprietorship or The owner or partnership
partnership
----------------------------------------------------
Corporate The corporation
----------------------------------------------------
Association, club or The organization
tax-exempt organization
----------------------------------------------------
For details on TIN requirements, ask your financial advisor or
local American Express Financial Advisors office for Federal Form
W-9, "Request for Taxpayer Identification Number and
Certification."
IMPORTANT: This information is a brief and selective summary of
certain federal tax rules that apply to this fund. Tax matters
are highly individual and complex, and you should consult a
qualified tax advisor about your personal situation.
32P
<PAGE>
----------------------------------------------------------
How the fund is organized
The fund is a diversified, open-end management investment
company, as defined in the Investment Company Act of 1940.
Originally incorporated on Feb. 10, 1945 in Nevada, the fund
changed its state of incorporation on June 13, 1986 by merging
into a Minnesota corporation incorporated on April 7, 1986. The
fund headquarters are at 901 S. Marquette Ave., Suite 2810,
Minneapolis, MN 55402-3268.
SHARES
The fund is owned by its shareholders. The fund issues shares in
three classes -- Class A, Class B and Class Y. Each class has
different sales arrangements and bears different expenses. Each
class represents interests in the assets of the fund. Par value
is 1 cent per share. Both full and fractional shares can be
issued.
The fund no longer issues stock certificates.
VOTING RIGHTS
As a shareholder, you have voting rights over the fund's
management and fundamental policies. You are entitled to one vote
for each share you own. Each class has exclusive voting rights
with respect to the provisions of the fund's distribution plan
that pertain to a particular class and other matters for which
separate class voting is appropriate under applicable law.
SHAREHOLDER MEETINGS
The fund does not hold annual shareholder meetings. However, the
directors may call meetings at their discretion, or on demand by
holders of 10% or more of the outstanding shares, to elect or
remove directors.
DIRECTORS AND OFFICERS
Shareholders elect a board of directors that oversees the
operations of the fund and chooses its officers. Its officers are
responsible for day-to-day business decisions based on policies
set by the board. The board has named an executive committee that
has authority to act on its behalf between meetings. The
directors also serve on the boards of all of the other funds in
the IDS MUTUAL FUND GROUP, except for Mr. Dudley, who is a
director of all publicly offered funds.
33P
<PAGE>
- ---------------------------------------------------------------------------
How the fund is organized
- ------------------------------------------------------------------
DIRECTORS AND OFFICERS OF THE FUND
President and WILLIAM R. PEARCE
interested director President of all funds in the IDS MUTUAL FUND GROUP.
- ------------------------------------------------------------------
Independent LYNNE V. CHENEY
directors Distinguished fellow, American Enterprise Institute for
Public Policy Research.
ROBERT F. FROEHLKE
Former president of all funds in the IDS MUTUAL FUND
GROUP.
HEINZ F. HUTTER
Former president and chief operating officer, Cargill,
Inc.
ANNE P. JONES
Attorney and telecommunications consultant.
DONALD M. KENDALL
Former chairman and chief executive officer, PepsiCo,
Inc.
MELVIN R. LAIRD
Senior counsellor for national and international
affairs,
The Reader's Digest Association, Inc.
LEWIS W. LEHR
Former chairman and chief executive officer, Minnesota
Mining and Manufacturing Company (3M).
EDSON W. SPENCER
Former chairman and chief executive officer, Honeywell,
Inc.
WHEELOCK WHITNEY
Chairman, Whitney Management Company.
C. ANGUS WURTELE
Chairman of the board and chief executive officer,
The Valspar Corporation.
- ------------------------------------------------------------------
Interested directors WILLIAM H. DUDLEY
who are officers Executive vice president, American Express Financial
and/or employees Corporation.
of American Express DAVID R. HUBERS
Financial President and chief executive officer, American Express
Corporation Financial Corporation.
JOHN R. THOMAS
Senior vice president, American Express Financial
Corporation.
- ------------------------------------------------------------------
Other officer LESLIE L. OGG
Vice president of all funds in the IDS MUTUAL FUND GROUP
and general counsel and treasurer of the publicly
offered funds.
Refer to the SAI for the directors' and officers' biographies.
34P
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT MANAGER AND TRANSFER AGENT
The fund pays American Express Financial Corporation for managing
its portfolio, providing administrative services and serving as
transfer agent (handling shareholder accounts).
Under its Investment Management Services Agreement, American
Express Financial Corporation determines which securities will be
purchased, held or sold (subject to the direction and control of
the fund's board of directors). Effective March 1995, the fund
pays American Express Financial Corporation a fee for these
services based on the average daily net assets of the fund, as
follows:
<TABLE>
<CAPTION>
ASSETS ANNUAL RATE
(BILLIONS) AT EACH ASSET VALUE
<S> <C> <C>
----------------------------------------
First $ 1.0 0.520%
----------------------------------------
Next 1.0 0.495
----------------------------------------
Next 1.0 0.470
----------------------------------------
Next 3.0 0.445
----------------------------------------
Next 3.0 0.420
----------------------------------------
Over 9.0 0.395
</TABLE>
For the fiscal year ended Nov. 30, 1994, under a prior agreement,
the fund paid American Express Financial Corporation a total
investment management fee of 0.52% of its average daily net
assets. Under the Agreement, the fund also pays taxes, brokerage
commissions and nonadvisory expenses.
Under an Administrative Services Agreement, the fund pays
American Express Financial Corporation for administration and
accounting services at an annual rate of 0.05% decreasing in
gradual percentages to 0.025% as assets increase.
In addition, under a separate Transfer Agency Agreement, American
Express Financial Corporation maintains shareholder accounts and
records. The fund pays American Express Financial Corporation an
annual fee per shareholder account for this service as follows:
- Class A $15.50
- Class B $16.50
- Class Y $15.50
35P
<PAGE>
- ---------------------------------------------------------------------------
How the fund is organized
DISTRIBUTOR
The fund sells shares through American Express Financial
Advisors, a wholly owned subsidiary of American Express Financial
Corporation, under a Distribution Agreement. Financial advisors
representing American Express Financial Advisors provide
information to investors about individual investment programs,
the fund and its operations, new account applications, exchange
and redemption requests. The cost of these services is paid
partially by the fund's sales charge.
Portions of sales charges may be paid to securities dealers who
have sold the fund's shares, or to banks and other financial
institutions. The proceeds paid to others range from 0.8% to 4%
of the fund's offering price depending on the monthly sales
volume.
For Class B shares, to help defray costs not covered by sales
charges, including costs for marketing, sales administration,
training, overhead, direct marketing programs, advertising and
related functions, the fund pays American Express Financial
Advisors a distribution fee, also known as a 12b-1 fee. This fee
is paid under a Plan and Agreement of Distribution that follows
the terms of Rule 12b-1 of the Investment Company Act of 1940.
Under this 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.
The total 12b-1 fee paid by the fund under a prior agreement for
the fiscal year ended Nov. 30, 1994 was 0.04% of its average
daily net assets. This fee will not cover all of the costs
incurred by American Express Financial Advisors.
Under a Shareholder Service Agreement, the fund also pays a fee
for service provided to shareholders by financial advisors and
other servicing agents. The fee is calculated at a rate of 0.175%
of the fund's average daily net assets attributable to Class A
and Class B shares.
Total expenses paid by the fund in the fiscal year ended Nov. 30,
1994 were 0.72% of its average daily net assets.
Total fees and expenses (excluding taxes and brokerage
commissions) cannot exceed the most restrictive applicable state
expense limitation.
36P
<PAGE>
----------------------------------------------------------
About American Express Financial Corporation
GENERAL INFORMATION
The American Express Financial Corporation family of companies
offers not only mutual funds but also insurance, annuities,
investment certificates and a broad range of financial management
services.
Besides managing investments for all publicly offered funds in
the IDS MUTUAL FUND GROUP, American Express Financial Corporation
also manages investments for itself and its subsidiaries, IDS
Certificate Company and IDS Life Insurance Company. Total assets
under management on Nov. 30, 1994 were more than $104 billion.
American Express Financial Advisors serves individuals and
businesses through its nationwide network of more than 175
offices and more than 7,800 advisors.
Other American Express Financial Corporation subsidiaries provide
investment management and related services for pension, profit
sharing, employee savings and endowment funds of businesses and
institutions.
American Express Financial Corporation is located at IDS Tower
10, Minneapolis, MN 55440-0010. It is a wholly owned subsidiary
of American Express Company, a financial services company with
headquarters at American Express Tower, World Financial Center,
New York, NY 10285. The fund may pay brokerage commissions to
broker-dealer affiliates of American Express and American Express
Financial Corporation.
37P
<PAGE>
----------------------------------------------------------
Appendix
-------------------------------------------------------------
DESCRIPTIONS OF DERIVATIVE INSTRUMENTS
What follows are brief descriptions of derivative instruments the
fund may use. At various times the fund may use some or all of
these instruments and is not limited to these instruments. It may
use other similar types of instruments if they are consistent
with the fund's investment goal and policies. For more
information on these instruments, see the Statement of Additional
Information.
OPTIONS AND FUTURES CONTRACTS. An option is an agreement to buy
or sell an instrument at a set price during a certain period of
time. A futures contract is an agreement to buy and sell an
instrument for a set price on a future date. The fund may buy and
sell options and futures contracts to manage its exposure to
changing interest rates, security prices and currency exchange
rates. Options and futures may be used to hedge the fund's
investments against price fluctuations or to increase market
exposure.
ASSET-BACKED AND MORTGAGE-BACKED SECURITIES. Asset-backed and
mortgage-backed securities include interests in pools of consumer
loans or mortgages, such as collateralized mortgage obligations
and stripped mortgage-backed securities. Interest and principal
payments depend on payment of the underlying loans or mortgages.
The value of these securities may also be affected by changes in
interest rates, the market's perception of the issuers and the
creditworthiness of the parties involved. Stripped
mortgage-backed securities include interest only (IO) and
principal only (PO) securities. Cash flows and yields on IOs and
POs are extremely sensitive to the rate of principal payments on
the underlying mortgage loans or mortgage-backed securities.
INDEXED SECURITIES. The value of indexed securities is linked to
currencies, interest rates, commodities, indexes or other
financial indicators. Most indexed securities are short- to
intermediate-term fixed income securities whose values at
maturity or interest rates rise or fall according to the change
in one or more specified underlying instruments. Indexed
securities may be more volatile than the underlying instrument
itself.
38P
<PAGE>
- --------------------------------------------------------------------------------
INVERSE FLOATERS. Inverse floaters are created using the interest
payment on securities. A portion of the interest received is paid
to holders of instruments based on current interest rates for
short-term securities. The remainder, minus a servicing fee, is
paid to holders of inverse floaters. Inverse floaters are
extremely sensitive to changes in interest rates.
STRUCTURED PRODUCTS. Structured products are over-the-counter
financial instruments created specifically to meet the needs of
one or a small number of investors. The instrument may consist of
a warrant, an option or a forward contract embedded in a note or
any of a wide variety of debt, equity and/or currency
combinations. Risks of structured products include the inability
to close such instruments, rapid changes in the market and
defaults by other parties.
39P
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
FOR
IDS SELECTIVE FUND
March 20, 1995
This Statement of Additional Information (SAI) is not a prospectus. It should
be read together with the prospectus and the financial statements contained in
the Annual Report which may be obtained from your American Express financial
advisor or by writing to American Express Shareholder Service, P.O. Box 534,
Minneapolis, MN 55440-0534.
This SAI is dated March 20, 1995, and it is to be used with the prospectus dated
March 20, 1995, and the Annual Report for the fiscal year ended Nov. 30, 1994.
-1-
<PAGE>
TABLE OF CONTENTS
Goal and Investment Policies . . . . . . . . . . . . . . . . . See Prospectus
Additional Investment Policies . . . . . . . . . . . . . . . . . . . p.
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . p.
Brokerage Commissions Paid to Brokers Affiliated with
American Express Financial Corporation. . . . . . . . . . . . . . . p.
Performance Information. . . . . . . . . . . . . . . . . . . . . . . p.
Valuing Fund Shares. . . . . . . . . . . . . . . . . . . . . . . . . p.
Investing in the Fund. . . . . . . . . . . . . . . . . . . . . . . . p.
Redeeming Shares . . . . . . . . . . . . . . . . . . . . . . . . . . p.
Pay-out Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . p.
Exchanges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p.
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p.
Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p.
Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . p.
Custodian. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p.
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . p.
Financial Statements . . . . . . . . . . . . . . . . . . . . .See Annual Report
Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p.
Appendix A: Foreign Currency Transactions . . . . . . . . . . . . . p.
Appendix B: Options and Interest Rate Futures Contracts
and Additional Information on Investment
Policies. . . . . . . . . . . . . . . . . . . . . . . . p.
Appendix C: Mortgage-Backed Securities. . . . . . . . . . . . . . . p.
Appendix D: Description of Corporate Bond Ratings . . . . . . . . . p.
Appendix E: Dollar-Cost Averaging . . . . . . . . . . . . . . . . . p.
-2-
<PAGE>
ADDITIONAL INVESTMENT POLICIES
These are investment policies in addition to those presented in the prospectus.
Unless holders of a majority of the outstanding shares agree to make the change
the fund will not:
'Act as an underwriter (sell securities for others). However, under the
securities laws, the fund may be deemed to be an underwriter when it purchases
securities directly from the issuer and later resells them.
'Borrow money or property, except as a temporary measure for extraordinary
or emergency purposes, in an amount not exceeding one-third of the market value
of its total assets (including borrowings) less liabilities (other than
borrowings) immediately after the borrowing. The fund has not borrowed in the
past and has no present intention to borrow.
'Make cash loans if the total commitment amount exceeds 5% of the fund's
total assets.
'Concentrate in any one industry. According to the present interpretation
by the Securities and Exchange Commission (SEC), this means no more than 25% of
the fund's total assets, based on current market value at time of purchase, can
be invested in any one industry.
'Purchase more than 10% of the outstanding voting securities of an issuer.
'Invest more than 5% of its total assets, at market value, in securities of any
one company, government or political subdivision thereof, except the limitation
will not apply to investments in securities issued by the U.S. government, its
agencies or instrumentalities, and except that up to 25% of the fund's total
assets may be invested without regard to this limitation.
'Buy or sell real estate, unless acquired as a result of ownership of securities
or other instruments, except this shall not prevent the fund from investing in
securities or other instruments backed by real estate or securities of companies
engaged in the real estate business. For purposes of this policy, real estate
includes real estate limited partnerships.
'Buy or sell physical commodities unless acquired as a result of ownership of
securities or other instruments, except this shall not prevent the fund from
buying or selling options and futures contracts or from investing in securities
or other instruments backed by, or whose value is derived from, physical
commodities.
'Make a loan of any part of its assets to American Express Financial
Corporation, to the directors and officers of American Express Financial
Corporation or to its own directors and officers.
'Purchase securities of an issuer if the directors and officers of the fund and
of American Express Financial Corporation hold more than a certain
percentage of the issuer's outstanding securities. If the holdings of all
directors and officers of the fund and of American Express Financial
Corporation who own more than 0.5% of an issuer's securities
-3-
<PAGE>
are added together, and if in total they own more than 5%, the fund will not
purchase securities of that issuer.
'Lend portfolio securities in excess of 30% of its net assets. This policy may
not be changed without shareholder approval. The current policy of the fund's
board of directors is to make these loans, either long- or short-term, to
broker-dealers. In making such loans the fund gets the market price in cash,
U.S. government securities, letters of credit or such other collateral as may be
permitted by regulatory agencies and approved by the board of directors. If the
market price of the loaned securities goes up, the fund will get additional
collateral on a daily basis. The risks are that the borrower may not provide
additional collateral when required or return the securities when due. During
the existence of the loan, the fund receives cash payments equivalent to all
interest or other distributions paid on the loaned securities. A loan will not
be made unless the investment manager believes the opportunity for additional
income outweighs the risks.
Unless changed by the board of directors, the fund will not:
'Buy on margin or sell short, except it may enter into interest rate futures
contracts.
'Pledge or mortgage its assets beyond 15% of total assets. If the
fund were ever to do so, valuation of the pledged or mortgaged assets would be
based on market values. For purposes of this restriction, collateral
arrangements for margin deposits on futures contracts are not deemed to be a
pledge of assets.
'Invest more than 5% of its total assets in securities of companies,
including any predecessors, that have a record of less than three years
continuous operations.
'Invest more than 10% of its total assets in securities of investment companies
except by purchases in the open market where the dealer's or sponsor's profit
is the regular commission.
'Invest in a company to control or manage it.
'Invest in exploration or development programs, such as oil, gas or mineral
programs.
'Invest more than 5% of its net assets in warrants. Under one state's law no
more than 2% of the fund's net assets may be invested in warrants not listed on
an Exchange.
'Invest more than 10% of the fund's net assets in securities and derivative
instruments that are illiquid. For purposes of this policy illiquid securities
include some privately placed securities, public securities and Rule 144A
securities that for one reason or another may no longer have readily available
markets, loans and loan participations, repurchase agreements with maturities
greater than seven days, non-negotiable fixed-time deposits and over-the-counter
options.
-4-
<PAGE>
In determining the liquidity of Rule 144A securities, which are unregistered
securities offered to qualified institutional buyers, and interest-only and
principal-only fixed mortgage-backed securities (IOs and POs) issued by the
United States government or its agencies and instrumentalities, the investment
manager, under guidelines established by the board of directors, will consider
any relevant factors including the frequency of trades, the number of dealers
willing to purchase or sell the security and the nature of marketplace trades.
In determining the liquidity of commercial paper issued in transactions not
involving a public offering under Section 4(2) of the Securities Act of 1933,
the investment manager, under guidelines established by the board of directors,
will evaluate relevant factors such as the issuer and the size and nature of its
commercial paper programs, the willingness and ability of the issuer or dealer
to repurchase the paper, and the nature of the clearance and settlement
procedures for the paper.
The fund may maintain a portion of its assets in cash and cash-equivalent
investments. The cash-equivalent investments the fund may use are short-term
U.S. and Canadian government securities and negotiable certificates of deposit,
non-negotiable fixed-time deposits, bankers' acceptances and letters of credit
of banks or savings and loan associations having capital, surplus and undivided
profits (as of the date of its most recently published annual financial
statements) in excess of $100 million (or the equivalent in the instance of a
foreign branch of a U.S. bank) at the date of investment. Any cash-equivalent
investments in foreign securities will be subject to the limitations on foreign
investments described in the prospectus. The fund also may purchase short-term
corporate notes and obligations rated in the top two classifications by Moody's
or S&P or the equivalent and may use repurchase agreements with broker-dealers
registered under the Securities Exchange Act of 1934 and with commercial banks.
A risk of a repurchase agreement is that if the seller seeks the protection of
the bankruptcy laws, the fund's ability to liquidate the security involved could
be impaired.
Notwithstanding any of the fund's other investment policies, the fund may invest
its assets in an open-end management investment company having substantially the
same investment objectives, policies and restrictions as the fund for the
purpose of having those assets managed as part of a combined pool.
For a discussion about foreign currency transaction, see Appendix A. For a
discussion on options and interest rate futures contracts and additional
information on investment policies, see Appendix B. For a discussion on
mortgage-backed securities, see Appendix C. For a description of corporate bond
ratings, see Appendix D.
PORTFOLIO TRANSACTIONS
Subject to policies set by the board of directors, American Express Financial
Corporation is authorized to determine, consistent with the fund's investment
goal and policies, which securities will be purchased, held or sold. In
determining where the buy and sell orders are to be placed, American Express
Financial Corporation has been directed to use its best efforts to obtain the
best available price and most favorable execution except where otherwise
authorized by the board of directors.
Normally, the fund's securities are traded on a principal rather than an agency
basis. In other words, American Express Financial Corporation will trade
directly with the issuer or with a dealer who buys or sells for its own account,
rather than acting on behalf of another client. American Express Financial
Corporation does not pay the dealer commissions. Instead, the dealer's profit,
if any, is the difference, or spread, between the dealer's purchase and sale
price for the security.
On occasion, it may be desirable to compensate a broker for research services
or for brokerage services by paying a commission that might not otherwise be
charged or a commission in excess of the amount another broker might charge.
The board of directors has adopted a policy authorizing American Express
Financial Corporation to do so to the extent authorized by law, if American
Express Financial Corporation determines, in good faith, that such commission is
reasonable in relation to the value of the brokerage or research services
provided by a broker or dealer, viewed either in the light of that transaction
or American Express Financial Corporation's overall responsibilities to the
funds in the IDS MUTUAL FUND GROUP and other funds for which it acts as
investment advisor.
Research provided by brokers supplements American Express Financial
Corporation's own research activities. Such services include economic data on,
and analysis of, U.S. and foreign economies; information on specific industries;
information about specific companies, including earnings estimates; purchase
recommendations for stocks and bonds; portfolio strategy services; political,
economic, business and industry trend assessments; historical statistical
information; market data services providing information on specific issues and
prices; and technical analysis of various aspects of the securities markets,
including technical charts. Research services may take the form of written
reports, computer software or personal contact by telephone or at seminars or
other meetings. American Express Financial Corporation has obtained, and in
the future may obtain, computer hardware from brokers, including but not limited
to personal computers that will be used exclusively for investment decision-
making purposes, which include the research, portfolio management and trading
functions and other services to the extent permitted under an interpretation by
the Securities and Exchange Commission.
When paying a commission that might not otherwise be charged or a commission in
excess of the amount another broker might charge, American Express Financial
Corporation must follow procedures authorized by the board of directors. To
date, three procedures have been authorized. One procedure
-5-
<PAGE>
permits American Express Financial Corporation to direct an order to buy or sell
a security traded on a national securities exchange to a specific broker for
research services it has provided. The second procedure permits American
Express Financial Corporation, in order to obtain research, to direct an order
on an agency basis to buy or sell a security traded in the over-the-counter
market to a firm that does not make a market in that security. The commission
paid generally includes compensation for research services. The third
procedure permits American Express Financial Corporation, in order to obtain
research and brokerage services, to cause a fund to pay a commission in excess
of the amount another broker might have charged. American Express Financial
Corporation has advised the funds that it is necessary to do business with a
number of brokerage firms on a continuing basis to obtain such services as the
handling of large orders, the willingness of a broker to risk its own money by
taking a position in a security, and the specialized handling of a particular
group of securities that only certain brokers may be able to offer. As a result
of this arrangement, some portfolio transactions may not be effected at the
lowest commission, but American Express Financial Corporation believes it may
obtain better overall execution. American Express Financial Corporation has
assured the funds that under all three procedures the amount of commission paid
will be reasonable and competitive in relation to the value of the brokerage
services performed or research provided.
All other transactions shall be placed on the basis of obtaining the best
available price and the most favorable execution. In so doing, if in the
professional opinion of the person responsible for selecting the broker or
dealer, several firms can execute the transaction on the same basis,
consideration will be given to those firms offering research services. Research
services may be used by American Express Financial Corporation in providing
advice to all the funds in the IDS MUTUAL FUND GROUP even though it is not
possible to relate the benefits to any particular fund or account.
Each investment decision made for a fund is made independently from any decision
made for another fund in the IDS MUTUAL FUND GROUP or other account advised by
American Express Financial Corporation or any of its subsidiaries. When a fund
buys or sells the same security as another fund or account, American Express
Financial Corporation carries out the purchase or sale in a way the fund agrees
in advance is fair. Although sharing in large transactions may adversely affect
the price or volume purchased or sold by the fund, the fund hopes to gain an
overall advantage in execution. American Express Financial Corporation has
assured the funds it will continue to seek ways to reduce brokerage costs.
On a periodic basis, American Express Financial Corporation makes a
comprehensive review of the broker-dealers and the overall reasonableness of
their commissions. The review evaluates execution, operational efficiency and
research services.
The fund paid total brokerage commissions of $54,600 for the fiscal year
ended Nov. 30, 1994, $7,120 for fiscal year 1993, and $96,633 for fiscal year
1992. Substantially all firms through whom transactions were executed provide
research services.
-6-
<PAGE>
No transactions were directed to brokers because of research services they
provided to the fund.
On November 30, 1994, at the end of the fiscal year, the fund held securities of
its regular brokers or dealers or of the parent of those brokers or dealers that
derived more than 15% of gross revenue from securities-related activities as
presented below:
Value of Securities
Owned at End of
Name of Issuer Fiscal Year
- -------------- -------------------
Goldman Sachs Group $ 7,476,000
Merrill Lynch 5,958,792
First Chicago 10,857,875
Morgan Stanley 7,458,437
BankAmerica 8,259,375
The portfolio turnover rate was 30% in the fiscal year ended Nov. 30, 1994,
and 30% in fiscal year 1993.
BROKERAGE COMMISSIONS PAID TO BROKERS AFFILIATED WITH AMERICAN EXPRESS
FINANCIAL CORPORATION
Affiliates of American Express Company (American Express) (of which American
Express Financial Corporation is a wholly owned subsidiary) may engage in
brokerage and other securities transactions on behalf of the fund according to
procedures adopted by the fund's board of directors and to the extent consistent
with applicable provisions of the federal securities laws. American Express
Financial Corporation will use an American Express affiliate only if
(i) American Express Financial Corporation determines that the fund will receive
prices and executions at least as favorable as those offered by qualified
independent brokers performing similar brokerage and other services for the fund
and (ii) the affiliate charges the fund commission rates consistent with those
the affiliate charges comparable unaffiliated customers in similar transactions
and if such use is consistent with terms of the Investment Management Services
Agreement.
American Express Financial Corporation may direct brokerage to compensate an
affiliate. American Express Financial Corporation will receive research on
South Africa from New Africa Advisers a wholly-owned subsidiary of Sloan
Financial Group. American Express Financial Corporation owns 100% of
IDS Capital Holdings Inc. which in turn owns 40% of Sloan Financial Group.
New Africa Advisers will send research to American Express Financial
Corporation and in turn American Express Financial Corporation will direct
trades to a particular broker. The broker will have an agreement to pay
New Africa Advisers. All transactions will be on a best execution basis.
Compensation received will be reasonable for the services rendered.
No brokerage commissions were paid to brokers affiliated with American Express
Financial Corporation for the three most recent fiscal years.
-7-
<PAGE>
PERFORMANCE INFORMATION
The fund may quote various performance figures to illustrate past performance.
Average annual total return and current yield quotations used by the fund are
based on standardized methods of computing performance as required by the SEC.
An explanation of these and any other methods used by the fund to compute
performance follows below.
AVERAGE ANNUAL TOTAL RETURN
The fund may calculate average annual total return for a class for certain
periods by finding the average annual compounded rates of return over the period
that would equate the initial amount invested to the ending redeemable value,
according to the following formula:
P(1+T)n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment, made at the beginning of a period, at the
end of the period (or fractional portion thereof)
AGGREGATE TOTAL RETURN
The fund may calculate aggregate total return for a class for certain periods
representing the cumulative change in the value of an investment in the fund
over a specified period of time according to the following formula:
ERV - P
-------
P
where: P = a hypothetical initial payment of $1,000
ERV = ending redeemable value of a hypothetical $1,000
payment, made at the beginning of a period, at the
end of the period (or fractional portion thereof)
ANNUALIZED YIELD
The fund may calculate an annualized yield for a class by dividing the net
investment income per share deemed earned during a period by the net asset value
per share on the last day of the period and annualizing the results.
-8-
<PAGE>
Yield is calculated according to the following formula:
Yield = 2[(a-b + 1)6 - 1]
--
cd
where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of
reimbursements)
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends
d = the maximum offering price per share on the last
day of the period
The fund's annualized yield was 6.85% for the 30-day period ended Nov. 30, 1994.
The fund's yield, calculated as described above according to the formula
prescribed by the SEC, is a hypothetical return based on market value yield to
maturity for the fund's securities. It is not necessarily indicative of the
amount which was or may be paid to the fund's shareholders. Actual amounts paid
to fund shareholders are reflected in the distribution yield.
DISTRIBUTION YIELD
Distribution yield is calculated according to the following formula:
D divided by POP F equals DY
--- -----
30 30
where: D = sum of dividends for 30-day period
POP = sum of public offering price for 30-day period
F = annualizing factor
DY = distribution yield
The fund's distribution yield was 6.33% for the 30-day period ended Nov. 30,
1994.
In its sales material and other communications, the fund may quote, compare or
refer to rankings, yields or returns as published by independent statistical
services or publishers and publications such as The Bank Rate Monitor National
Index, Barron's, Business Week, Donoghue's Money Market Fund Report, Financial
Services Week, Financial Times, Financial World, Forbes, Fortune, Global
Investor, Institutional Investor, Investor's Daily, Kiplinger's Personal
Finance, Lipper Analytical Services, Money, Mutual Fund Forecaster, Newsweek,
The New York Times, Personal Investor, Stanger Report, Sylvia Porter's Personal
Finance, USA Today, U.S. News and World Report, The Wall Street Journal and
Wiesenberger Investment Companies Service.
-9-
<PAGE>
VALUING FUND SHARES
The value of an individual share for each class is determined by using the net
asset value before shareholder transactions for the day. On December 1, 1994,
the first business day following the end of the fiscal year, the computation
looked like this:
<TABLE>
<CAPTION>
Net assets before Shares outstanding Net asset value
shareholder transactions at end of previous day of one share
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A* $1,401,252,059 divided by 163,598,056 equals $8.57
<FN>
*Shares of Class B and Class Y were not outstanding on that date.
</TABLE>
In determining net assets before shareholder transactions, the fund's portfolio
securities are valued as follows as of the close of business of the New York
Stock Exchange:
'Securities, except bonds other than convertibles, traded on a securities
exchange for which a last-quoted sales price is readily available are valued at
the last-quoted sales price on the exchange where such security is primarily
traded.
'Securities traded on a securities exchange for which a last-quoted sales price
is not readily available are valued at the mean of the closing bid and asked
prices, looking first to the bid and asked prices on the exchange where the
security is primarily traded and, if none exist, to the over-the-counter market.
'Securities included in the NASDAQ National Market System are valued at the
last-quoted sales price in this market.
'Securities included in the NASDAQ National Market System for which a
last-quoted sales price is not readily available, and other securities traded
over-the-counter but not included in the NASDAQ National Market System are
valued at the mean of the closing bid and asked prices.
'Futures and options traded on major exchanges are valued at the last-quoted
sales price on their primary exchange.
'Foreign securities traded outside the United States are generally valued as of
the time their trading is complete, which is usually different from the close of
the New York Stock Exchange (the "Exchange"). Foreign securities quoted in
foreign currencies are translated into U.S. dollars at the current rate of
exchange. Occasionally, events affecting the value of such securities may occur
between such times and the close of the Exchange that will not be reflected in
the computation of the fund's net asset value. If events materially affecting
the value of such securities occur during such period, these securities will be
valued at their fair value according to procedures decided upon in good faith by
the fund's board of directors (the "board").
'Short-term securities maturing more than 60 days from the valuation date are
valued at the readily available market price or approximate market value based
on current interest rates. Short-term securities maturing in 60 days or less
that originally had maturities of more than 60 days at acquisition date are
valued at
-10-
<PAGE>
amortized cost using the market value on the 61st day before maturity.
Short-term securities maturing in 60 days or less at acquisition date are valued
at amortized cost. Amortized cost is an approximation of market value
determined by systematically increasing the carrying value of a security if
acquired at a discount, or reducing the carrying value if acquired at a premium,
so that the carrying value is equal to maturity value on the maturity date.
'Securities without a readily available market price, bonds other than
convertibles and other assets are valued at fair value as determined in good
faith by the board. The board is responsible for selecting methods it believes
provide fair value. When possible, bonds are valued by a pricing service
independent from the fund. If a valuation of a bond is not available from a
pricing service, the bond will be valued by a dealer knowledgeable about the
bond if such a dealer is available.
The New York Stock Exchange, American Express Financial Corporation, and the
fund will be closed on the following holidays: New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
INVESTING IN THE FUND
Sales Charge
Shares of the fund are sold at the public offering price determined at the close
of business on the day an application is accepted. The public offering price is
the net asset value of one share plus a sales charge, if applicable. For Class
B and Class Y, there is no initial sales charge so the public offering price is
the same as the net asset value. For Class A, the public offering price for an
investment of less than $50,000, made Dec. 1, 1994, was determined by dividing
the net asset value of one share, $8.57, by 0.95 (1.00-0.05 for a maximum 5%
sales charge) for a public offering price of $9.02. The sales charge is paid
to American Express Financial Advisors by the person buying the shares.
Class A - Calculation of the Sales Charge
Sales charges are determined as follows:
<TABLE>
<CAPTION>
Within each increment,
sales charge as a
percentage of:
----------------------------------------
Public Net
Amount of Investment Offering Price Amount Invested
- -------------------- -------------- ---------------
<S> <C> <C> <C>
First $ 50,000 5.0% 5.26%
Next 50,000 4.5 4.71
Next 400,000 3.8 3.95
Next 500,000 2.0 2.04
More than 1,000,000 0.0 0.00
</TABLE>
-11-
<PAGE>
Sales charges on an investment greater than $50,000 are calculated for each
increment separately and then totaled. The resulting total sales charge,
expressed as a percentage of the public offering price and of the net amount
invested, will vary depending on the proportion of the investment at different
sales charge levels.
For example, compare an investment of $60,000 with an investment of $85,000.
The $60,000 investment is composed of $50,000 that incurs a sales charge of
$2,500 (5.0% x $50,000) and $10,000 that incurs a sales charge of $450 (4.5% x
$10,000). The total sales charge of $2,950 is 4.92% of the public offering
price and 5.17% of the net amount invested.
In the case of the $85,000 investment, the first $50,000 also incurs a sales
charge of $2,500 (5.0% x $50,000) and $35,000 incurs a sales charge of $1,575
(4.5% x $35,000). The total sales charge of $4,075 is 4.79% of the public
offering price and 5.04% of the net amount invested.
The following table shows the range of sales charges as a percentage of the
public offering price and of the net amount invested on total investments at
each applicable level.
<TABLE>
<CAPTION>
On total investment, sales
charge as a percentage of
-------------------------------------------
Public Net
Offering Price Amount Invested
-------------- ---------------
Amount of Investment ranges from:
- -------------------- -------------------------------------------
<S> <C> <C> <C>
First $ 50,000 5.00% 5.26%
More than 50,000 to 100,000 5.00-4.50 5.26-4.71
More than 100,000 to 500,000 4.50-3.80 4.71-3.95
More than 500,000 to 1,000,000 3.80-2.00 3.95-2.04
More than 1,000,000 0.00 0.00
</TABLE>
The initial sales charge is waived for certain qualified plans that meet the
requirements described in the prospectus. Participants in these qualified plans
may be subject to a deferred sales charge on certain redemptions. The deferred
sales charge on certain redemptions will be waived if the redemption is a result
of a participant's death, disability, retirement, attaining age 59 1/2, loans or
hardship withdrawals. The deferred sales charge varies depending on the number
of participants in the qualified plan and total plan assets as follows:
Deferred Sales Charge
<TABLE>
<CAPTION>
Number of Participants
----------------------
Total Plan Assets 1-99 100 or more
- ----------------- ---- -----------
<S> <C> <C>
Less than $1 million 4% 0%
$1 million or more 0% 0%
- ---------------------------------------------------------
</TABLE>
-12-
<PAGE>
Class A - Reducing the Sales Charge
Sales charges are based on the total amount of your investments in the fund.
The amount of all prior investments plus any new purchase is referred to as your
"total amount invested." For example, suppose you have made an investment of
$20,000 and later decide to invest $40,000 more. Your total amount invested
would be $60,000. As a result, $10,000 of your $40,000 investment qualifies for
the lower 4.5% sales charge that applies to investments of more than $50,000 to
$100,000.
The total amount invested includes any shares held in the fund in the name of a
member of your immediate family (spouse and unmarried children under 21). For
instance, if your spouse already has invested $20,000 and you want to invest
$40,000, your total amount invested will be $60,000 and therefore you will pay
the lower charge of 4.5% on $10,000 of the $40,000.
Until a spouse remarries, the sales charge is waived for spouses and unmarried
children under 21 of deceased trustees, directors, officers or employees of the
fund or American Express Financial Corporation or its subsidiaries and deceased
advisors.
The total amount invested also includes any investment you or your immediate
family already have in the other publicly offered funds in the IDS MUTUAL FUND
GROUP where the investment is subject to a sales charge. For example, suppose
you already have an investment of $25,000 in IDS Growth Fund and $5,000 in this
fund. If you invest $40,000 more in this fund, your total amount invested in
the funds will be $70,000 and therefore $20,000 of your $40,000 investment will
incur a 4.5% sales charge.
Finally, Individual Retirement Account (IRA) purchases, or other employee
benefit plan purchases made through a payroll deduction plan or through a plan
sponsored by an employer, association of employers, employee organization or
other similar entity, may be added together to reduce sales charges for shares
purchased through that plan.
Class A - Letter of Intent
You can reduce the sales charges in Class A by filing a letter-of-intent stating
that you intend to invest $1 million over a period of 13 months. The agreement
can start at any time and will remain in effect for 13 months. Your investment
will be charged normal sales charges until you have invested $1 million. At
that time, the sales charges previously paid will be reversed. If you do not
invest $1 million by the end of 13 months, there is no penalty, you'll just miss
out on the sales charge adjustment. A letter-of-intent is not an option
(absolute right) to buy shares.
Here's an example. You file a letter-of-intent to invest $1 million and make an
investment of $100,000 at that time. You pay the normal 5% sales charge on the
first $50,000 and 4.5% sales charge on the next $50,000 of this investment.
Let's say you make a second investment of $900,000 (bringing the total up to $1
million) one month before the 13-month period is up. What sales
-13-
<PAGE>
charge do you pay? American Express Financial Corporation makes an adjustment
on your last purchase so that there's no sales charge on the total $1 million
investment, just as if you had invested $1 million all at once.
Systematic Investment Programs
After you make your initial investment of $2,000 or more, you can arrange to
make additional payments of $100 or more on a regular basis. These minimums do
not apply to all systematic investment programs. You decide how often to make
payments - monthly, quarterly or semiannually. You are not obligated to make
any payments. You can omit payments or discontinue the investment program
altogether. The fund also can change the program or end it at any time. If
there is no obligation, why do it? Putting money aside is an important part of
financial planning. With a systematic investment program, you have a goal to
work for.
How does this work? Your regular investment amount will purchase more shares
when the net asset value per share decreases, and fewer shares when the net
asset value per share increases. Each purchase is a separate transaction.
After each purchase your new shares will be added to your account. Shares
bought through these programs are exactly the same as any other fund shares.
They can be bought and sold at any time. A systematic investment program is not
an option or an absolute right to buy shares.
The systematic investment program itself cannot ensure a profit, nor can it
protect against a loss in a declining market. If you decide to discontinue the
program and redeem your shares when their net asset value is less than what you
paid for them, you will incur a loss.
For a discussion on dollar-cost averaging, see Appendix E.
Automatic Directed Dividends
Dividends, including capital gain distributions, paid by another fund in the IDS
MUTUAL FUND GROUP subject to a sales charge, may be used to automatically
purchase shares in the same class of this fund without paying a sales charge.
Dividends may be directed to existing accounts only. Dividends declared by a
fund are exchanged to this fund the following day. Dividends can be exchanged
into one fund but cannot be split to make purchases in two or more funds.
Automatic directed dividends are available between accounts of any ownership
EXCEPT:
'Between a non-custodial account and an IRA, or 401(k) plan account or other
qualified retirement account of which American Express Trust Company acts as
custodian;
'Between two American Express Trust Company custodial accounts with different
owners (for example, you may not exchange dividends from your IRA to the IRA of
your spouse);
'Between different kinds of custodial accounts with the same ownership (for
example, you may not exchange dividends from your IRA to your 401(k) plan
account, although you may exchange dividends from one IRA to another IRA).
-14-
<PAGE>
Dividends may be directed from accounts established under the Uniform Gifts to
Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) only into other UGMA
or UTMA accounts with identical ownership.
The fund's investment goal is described in its prospectus along with other
information, including fees and expense ratios. Before exchanging dividends
into another fund, you should read its prospectus. You will receive a
confirmation that the automatic directed dividend service has been set up for
your account.
REDEEMING SHARES
You have a right to redeem your shares at any time. For an explanation of
redemption procedures, please see the prospectus.
DURING AN EMERGENCY, the board can suspend the computation of net asset value,
stop accepting payments for purchase of shares or suspend the duty of the fund
to redeem shares for more than seven days. Such emergency situations would
occur if:
'The New York Stock Exchange closes for reasons other than the usual weekend
and holiday closings or trading on the Exchange is restricted, or
'Disposal of the fund's securities is not reasonably practicable or it is not
reasonably practicable for the fund to determine the fair value of its net
assets, or
'The SEC, under the provisions of the Investment Company Act of 1940, as
amended, declares a period of emergency to exist.
Should the fund stop selling shares, the board may make a deduction from the
value of the assets held by the fund to cover the cost of future liquidations of
the assets so as to distribute fairly these costs among all shareholders.
PAY-OUT PLANS
You can use any of several pay-out plans to redeem your investment in regular
installments. If you redeem Class B shares you may be subject to a contingent
deferred sales charge as discussed in the prospectus. While the plans differ on
how the pay-out is figured, they all are based on the redemption of your
investment. Net investment income dividends and any capital gain distributions
will automatically be reinvested, unless you elect to receive them in cash. If
you are redeeming a tax-qualified plan account for which American Express Trust
Company acts as custodian, you can elect to receive your dividends and other
distributions in cash when permitted by law. If you redeem an IRA or a
qualified retirement account, certain restrictions, federal tax penalties and
special federal income tax reporting requirements may apply. You should consult
your tax advisor about this complex area of the tax law.
-15-
<PAGE>
Applications for a systematic investment in a class of the fund subject to a
sales charge normally will not be accepted while a pay-out plan for any of those
funds is in effect. Occasional investments, however, may be accepted.
To start any of these plans, please write or call American Express Shareholder
Service, P.O. Box 534, Minneapolis, MN 55440-0534, 612- 671-3733. Your
authorization must be received in the Minneapolis headquarters at least five
days before the date you want your payments to begin. The initial payment must
be at least $50. Payments will be made on a monthly, bimonthly, quarterly,
semiannual or annual basis. Your choice is effective until you change or cancel
it.
The following pay-out plans are designed to take care of the needs of most
shareholders in a way American Express Financial Corporation can handle
efficiently and at a reasonable cost. If you need a more irregular schedule of
payments, it may be necessary for you to make a series of individual
redemptions, in which case you'll have to send in a separate redemption request
for each pay-out. The fund reserves the right to change or stop any pay-out
plan and to stop making such plans available.
Plan #1: Pay-out for a fixed period of time
If you choose this plan, a varying number of shares will be redeemed at regular
intervals during the time period you choose. This plan is designed to end in
complete redemption of all shares in your account by the end of the fixed
period.
Plan #2: Redemption of a fixed number of shares
If you choose this plan, a fixed number of shares will be redeemed for each
payment and that amount will be sent to you. The length of time these payments
continue is based on the number of shares in your account.
Plan #3: Redemption of a fixed dollar amount
If you decide on a fixed dollar amount, whatever number of shares is necessary
to make the payment will be redeemed in regular installments until the account
is closed.
Plan #4: Redemption of a percentage of net asset value
Payments are made based on a fixed percentage of the net asset value of the
shares in the account computed on the day of each payment. Percentages range
from 0.25% to 0.75%. For example, if you are on this plan and arrange to take
0.5% each month, you will get $50 if the value of your account is $10,000 on the
payment date.
EXCHANGES
If you buy shares in the fund and then exchange into another fund, it is
considered a sale and subsequent purchase of shares. Under the tax laws, if
this exchange is done within 91 days, any sales
-16-
<PAGE>
charge waived on Class A shares on a subsequent purchase of shares applies to
the new shares acquired in the exchange. Therefore, you cannot create a tax
loss or reduce a tax gain attributable to the sales charge when exchanging
shares within 91 days.
Retirement Accounts
If you have a nonqualified investment in the fund and you wish to move part or
all of those shares to an IRA or qualified retirement account in the fund, you
can do so without paying a sales charge. However, this type of exchange is
considered a sale of shares and may result in a gain or loss for tax purposes.
In addition, this type of exchange may result in an excess contribution under
IRA or qualified plan regulations if the amount exchanged plus the amount of the
initial sales charge applied to the amount exchanged exceeds annual contribution
limitations. For example: If you were to exchange $2,000 in Class A shares
from a nonqualified account to an IRA without considering the 5% ($100) initial
sales charge applicable to that $2,000, you may be deemed to have exceeded
current IRA annual contribution limitations. You should consult your tax
advisor for further details about this complex subject.
TAXES
Net investment income dividends received should be treated as dividend income
for federal income tax purposes. Corporate shareholders are generally entitled
to a deduction equal to 70% of that portion of the fund's dividend that is
attributable to dividends the fund received from domestic (U.S.) securities.
For the fiscal year ended Nov. 30, 1994, 0.41% of the fund's net investment
income dividends qualified for the corporate deduction.
Capital gain distributions received by individual and corporate shareholders, if
any, should be treated as long-term capital gains regardless of how long they
owned their shares. Short-term capital gains earned by the fund are paid to
shareholders as part of their ordinary income dividend and are taxable.
Under federal tax law and an election made by the fund under federal tax
regulations, by the end of a calendar year the fund must declare and pay
dividends representing 98% of ordinary income for that calendar year and 98% of
net capital gains (both long-term
-17-
<PAGE>
and short-term) for the 12-month period ending Nov. 30 of that calendar year.
The fund is subject to an excise tax equal to 4% of the excess, if any, of the
amount required to be distributed over the amount actually distributed. The
fund intends to comply with federal tax law and avoid any excise tax.
The fund may be subject to U.S. taxes resulting from holdings in a passive
foreign investment company (PFIC). A foreign corporation is a PFIC when 75% or
more of its gross income for the taxable year is passive income or if 50% or
more of the average value of its assets consists of assets that produce or could
produce passive income.
This is a brief summary that relates to federal income taxation only.
Shareholders should consult their tax advisor as to the application of federal,
state and local income tax laws to fund distributions.
AGREEMENTS
Investment Management Services Agreement
The fund has an Investment Management Services Agreement with American Express
Financial Corporation. For its services, American Express Financial Corporation
is paid a fee based on the following schedule:
Assets Annual rate at
(billions) each asset level
- ---------- ----------------
First $1.0 0.520%
Next 1.0 0.495
Next 1.0 0.470
Next 3.0 0.445
Next 3.0 0.420
Over 9.0 0.395
In March 1995, the daily rate applied to the fund's assets is expected
to be approximately 0.51% on an annual basis. The fee is calculated for
each calendar day on the basis of net assets as of the close of business two
business days prior to the day for which the calculation is made.
The management fee is paid monthly. Under a prior agreement, the total amount
paid was $8,228,895 for the fiscal year ended Nov. 30, 1994, $8,932,798 for
fiscal year 1993, and $8,159,007 for fiscal year 1992.
Under the current Agreement, the fund also pays taxes, brokerage commissions and
nonadvisory expenses, that include custodian fees; audit and certain legal fees;
fidelity bond premiums; registration fees for shares; fund office expenses;
consultants' fees; compensation of directors, officers and employees; corporate
filing fees; organizational expenses; expenses incurred in connection with
lending portfolio securities of the fund; and expenses properly payable by the
fund, approved by the board of directors. Under a
-18-
<PAGE>
prior agreement, the fund paid nonadvisory expenses of $734,701 for the fiscal
year ended Nov. 30, 1994, $778,877 for fiscal year 1993, and $654,094 for fiscal
year 1992.
Administrative Services Agreement
The fund has an Administrative Services Agreement with American Express
Financial Corporation. Under this agreement, the fund pays American Express
Financial Corporation for providing administration and accounting services.
The fee is calculated as follows:
Assets Annual rate
(billions) each asset level
---------- ----------------
First $1 0.050%
Next 1 0.045
Next 1 0.040
Next 3 0.035
Next 3 0.030
Over 9 0.025
Transfer Agency Agreement
The fund has a Transfer Agency Agreement with American Express Financial
Corporation. This agreement governs American Express Financial Corporation's
responsibility for administering and/or performing transfer agent functions,
for acting as service agent in connection with dividend and distribution
functions and for performing shareholder account administration agent
functions in connection with the issuance, exchange and redemption or repurchase
of the fund's shares. Under the agreement, American Express Financial
Corporation will earn a fee from the fund determined by multiplying the number
of shareholder accounts at the end of the day by a rate determined for each
class and dividing by the number of days in the year. The rate for Class A and
for Class Y is $15.50 per year. The rate for Class B is $16.50 per year. The
fees paid to American Express Financial Corporation may be changed from time to
time upon agreement of the parties without shareholder approval. The fund paid
fees of $1,716,609 for the fiscal year ended Nov. 30, 1994.
Distribution Agreement
Under a Distribution Agreement, sales charges deducted for distributing fund
shares are paid to American Express Financial Advisors daily. These charges
amounted to $3,861,526 for the fiscal year ended Nov. 30, 1994. After paying
commissions to personal financial advisors, and other expenses, the amount
retained was $1,385,907. The amounts were $7,381,370 and $2,611,931 for fiscal
year 1993, and $7,205,702 and $2,577,031 for fiscal year 1992.
-19-
<PAGE>
Additional information about commissions and compensation for the fiscal year
ended Nov. 30, 1994, is contained in the following table:
(1) (2) (3) (4) (5)
Net Compensation
Name of Underwriting on Redemption
Principal Discounts and and Brokerage Other
Underwriter Commissions Repurchases Commissions Compensation
- ----------- ------------- ----------- ----------- ------------
American
Express
Financial
Corporation None None None* $672,430**
American
Express
Financial
Advisors $3,861,526 None None None
*For further information see "Brokerage Commissions Paid to Brokers Affiliated
with American Express Financial Corporation."
**Distribution fees paid pursuant to the Plan and Supplemental Agreement of
Distribution.
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.
Plan and Agreement of Distribution
For Class B shares, to help American Express Financial Advisors defray the cost
of distribution and servicing, not covered by the sales charges received under
the Distribution Agreement, the fund and American Express Financial Advisors
entered into a Plan and Agreement of Distribution (Plan). These costs cover
almost all aspects of distributing the fund's shares except compensation to the
sales force. A substantial portion of the costs are not specifically identified
to any one fund in the IDS MUTUAL FUND GROUP. Under the Plan, American Express
Financial Advisors is paid a fee at an annual rate of 0.75% of the fund's
average daily net assets attributable to Class B shares.
The Plan must be approved annually by the board, including a majority of the
disinterested directors, if it is to continue for more than a year. At least
quarterly, the board must review written reports concerning the amounts expended
under the Plan and the purposes for which such expenditures were made. The Plan
and any agreement related to it may be terminated at any time by vote of a
majority of directors who are not interested persons of the fund and have no
direct or indirect financial interest in the operation of the Plan or in any
agreement related to the Plan, or by vote of a majority of the outstanding
voting securities of the fund or by American Express Financial Advisors. The
Plan (or any agreement related to it) will terminate in the event of its
assignment, as that term is defined in the Investment Company Act of 1940, as
amended. The Plan may not be amended to increase the amount to be spent for
distribution
-20-
<PAGE>
without shareholder approval, and all material amendments to the Plan must be
approved by a majority of the directors, including a majority of the directors
who are not interested persons of the fund and who do not have a financial
interest in the operation of the Plan or any agreement related to it. The
selection and nomination of disinterested directors is the responsibility of the
other disinterested directors. No interested person of the fund, and no
director who is not an interested person, has any direct or indirect financial
interest in the operation of the Plan or any related agreement.
Total fees and nonadvisory expenses cannot exceed the most restrictive
applicable state limitation. Currently, the most restrictive applicable state
expense limitation, subject to exclusion of certain expenses, is 2.5% of the
first $30 million of the fund's average daily net assets, 2% of the next $70
million and 1.5% of average daily net assets over $100 million, on an annual
basis. At the end of each month, if the fees and expenses of the fund exceed
this limitation for the fund's fiscal year in progress, American Express
Financial Corporation will assume all expenses in excess of the limitation.
American Express Financial Corporation then may bill the fund for such expenses
in subsequent months up to the end of that fiscal year, but not after that date.
No interest charges are assessed by American Express Financial Corporation for
expenses it assumes.
DIRECTORS AND OFFICERS
The following is a list of the fund's directors who, except for Mr. Dudley, also
are directors of all other funds in the IDS MUTUAL FUND GROUP. Mr. Dudley is a
director of all publicly offered funds. All shares have cumulative voting
rights when voting on the election of directors.
LYNNE V. CHENEY+'
Born in 1941.
American Enterprise Institute
for Public Policy Research (AEI)
1150 17th St., N.W.
Washington, D.C.
Distinguished Fellow AEI. Former Chair of National Endowment of the Humanities.
Director, The Reader's Digest Association Inc., Lockheed Corp., and the
Interpublic Group of Companies, Inc. (advertising).
WILLIAM H. DUDLEY+**
Born in 1932.
2900 IDS Tower
Minneapolis, MN
Executive vice president and director of American Express Financial Corporation.
ROBERT F. FROEHLKE+
Born in 1922.
1201 Yale Place
Minneapolis, MN
Former president of all funds in the IDS MUTUAL FUND GROUP. Director, the ICI
Mutual Insurance Co., Institute for Defense Analyses, Marshall Erdman and
Associates, Inc. (architectual engineering) and Public Oversight Board of the
American Institute of Certified Public Accountants.
-21-
<PAGE>
DAVID R. HUBERS**
Born in 1943.
2900 IDS Tower
Minneapolis, MN
President, chief executive officer and director of American Express Financial
Corporation. Previously, senior vice president, finance and chief financial
officer of American Express Financial Corporation.
HEINZ F. HUTTER+
Born in 1929.
P.O. Box 5724
Minneapolis, MN
President and chief operating officer, Cargill, Incorporated (commodity
merchants and processors) from February 1991 to September 1994. Executive vice
president from 1981 to February 1991.
ANNE P. JONES+
Born in 1935.
5716 Bent Branch Rd.
Bethesda, MD
Attorney and telecommunications consultant. Former partner, law firm of
Sutherland, Asbill & Brennan. Director, Motorola, Inc. and C-Cor Electronics,
Inc.
DONALD M. KENDALL'
Born in 1921.
PepsiCo, Inc.
Purchase, NY
Former chairman and chief executive officer, PepsiCo, Inc.
MELVIN R. LAIRD+
Born in 1922.
Reader's Digest Association, Inc.
1730 Rhode Island Ave., N.W.
Washington, D.C.
Senior counsellor for national and international affairs, The Reader's Digest
Association, Inc. Chairman of the board, COMSAT Corporation, former nine-term
congressman, secretary of defense and presidential counsellor. Director, Martin
Marietta Corp., Metropolitan Life Insurance Co., The Reader's Digest
Association, Inc., Science Applications International Corp., Wallace Reader's
Digest Funds and Public Oversight Board (SEC Practice Section, American
Institute of Certified Public Accountants).
LEWIS W. LEHR'
Born in 1921.
3050 Minnesota World Trade Center
30 E. Seventh St.
St. Paul, MN
Former chairman of the board and chief executive officer, Minnesota Mining and
Manufacturing Company (3M). Director, Jack Eckerd Corporation (drugstores).
Advisory Director, Peregrine Inc. (microelectronics).
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WILLIAM R. PEARCE+*
Born in 1927.
901 S. Marquette Ave.
Minneapolis, MN
President of all funds in the IDS MUTUAL FUND GROUP since June 1993. Former
vice chairman of the board, Cargill, Incorporated (commodity merchants and
processors).
EDSON W. SPENCER
Born in 1926.
4900 IDS Center
80 S. 8th St.
Minneapolis, MN
President, Spencer Associates Inc. (consulting). Chairman of the board, Mayo
Foundation (healthcare). Former chairman of the board and chief executive
officer, Honeywell Inc. Director, Boise Cascade Corporation (forest products)
and CBS Inc. Member of International Advisory Councils, Robert Bosch (Germany)
and NEC (Japan).
JOHN R. THOMAS**
Born in 1937.
2900 IDS Tower
Minneapolis, MN
Senior vice president and director of American Express Financial Corporation.
WHEELOCK WHITNEY+
Born in 1926.
1900 Foshay Tower
821 Marquette Ave.
Minneapolis, MN
Chairman, Whitney Management Company (manages family assets).
C. ANGUS WURTELE
Born in 1934.
1101 S. 3rd St.
Minneapolis, MN
Chairman of the board and chief executive officer, The Valspar Corporation
(paints). Director, Bemis Corporation (packaging), Donaldson Company (air
cleaners & mufflers) and General Mills, Inc. (consumer foods).
+ Member of executive committee.
' Member of joint audit committee.
* Interested person by reason of being an officer and employee of the fund.
**Interested person by reason of being an officer, director, employee and/or
shareholder of American Express Financial Corporation or American Express.
The board also has appointed officers who are responsible for day-to-day
business decisions based on policies it has established.
Besides Mr. Pearce, who is president, the fund's other officer is:
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LESLIE L. OGG
Born in 1938.
901 S. Marquette Ave.
Minneapolis, MN
Vice president of all funds in the IDS MUTUAL FUND GROUP and general counsel and
treasurer of the publicly offered funds.
Members who are not officers of the fund or officers or directors of American
Express Financial Corporation receive an annual base fee of $2,000. They
receive a fee for all board and committee meetings they attend. The fee is
shared equally among each fund in the IDS MUTUAL FUND GROUP holding concurrent
meetings. The fees are $500 for Board, Executive, Audit and Investment Review
committees, $750 for Personnel with out-of-state members receiving an
additional $500 if an extra day of travel is required. The Chair of Contracts
receives an additional $5000. In addition members who retire after age 70 or
earlier for health reasons receive monthly retirement benefits of 1/2 of the
base fee on the date they retire divided by 12 for each month of service up to
120 months.
During the fiscal year that ended Nov. 30, 1994, the members of the board, for
attending up to 51 meetings, received the following compensation, in total, from
all funds in the IDS MUTUAL FUND GROUP.
<TABLE>
<CAPTION>
Board compensation
Aggregate Retirement Estimated Total Cash
compensation benefits annual compensation
from the accrued as benefit on from the IDS
Board member fund fund expenses retirement MUTUAL FUND GROUP
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Lynne V. Cheney $2,292 $ 397 $1,375 $54,600
(part of year)
Robert F. Froehlke 3,103 3,081 1,375 74,800
Heinz F. Hutter 249 -- 665 11,300
(part of year)
Anne P. Jones 3,020 740 1,375 71,300
Donald M. Kendall 2,941 2,415 1,375 68,000
Melvin R. Laird 3,015 2,233 1,375 71,100
Lewis W. Lehr 3,036 2,923 1,341 72,000
William R. Pearce -- 1,241 1,375 --
(part of year)
Edson W. Spencer 2,005 1,374 733 70,700
Wheelock Whitney 3,060 1,376 1,375 73,300
C. Angus Wurtele 241 -- 1,364 11,000
(part of year)
</TABLE>
On Nov. 30, 1994, the fund's directors and officers as a group owned less than
1% of the outstanding shares. During the fiscal year ended Nov. 30, 1994, no
director or officer earned more than $60,000 from this fund. All directors and
officers as a group earned $60,744, including $17,255 of retirement plan
expense, from this fund.
CUSTODIAN
The fund's securities and cash are held by First Bank National Association, 180
E. Fifth St., St. Paul, MN 55101-1631, through a custodian agreement. The
custodian is permitted to deposit some or all of its securities in central
depository systems as allowed by federal law.
INDEPENDENT AUDITORS
The financial statements contained in the Annual Report to shareholders, for the
fiscal year ended Nov. 30, 1994, were audited by independent auditors, KPMG Peat
Marwick LLP, 4200 Norwest Center, 90 S. Seventh St., Minneapolis, MN
55402-3900. The independent auditors also provide other accounting and
tax-related services as requested by the fund.
FINANCIAL STATEMENTS
The Independent Auditors' Report and the Financial Statements, including Notes
to the Financial Statements and the Schedule of Investments in Securities,
contained in the 1994 Annual Report to shareholders, pursuant to Section 30(d)
of the Investment Company Act of 1940, as amended, are hereby incorporated in
this SAI by reference. No other portion of the Annual Report however, is
incorporated by reference.
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PROSPECTUS
The prospectus for IDS Selective Fund dated March 20, 1995 is hereby
incorporated in this SAI by reference.
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<PAGE>
APPENDIX A
FOREIGN CURRENCY TRANSACTIONS
Since investments in foreign countries usually involve currencies of foreign
countries, and since the fund may hold cash and cash-equivalent investments in
foreign currencies, the value of the fund's assets as measured in U.S. dollars
may be affected favorably or unfavorably by changes in currency exchange rates
and exchange control regulations. Also, the fund may incur costs in connection
with conversions between various currencies.
SPOT RATES AND FORWARD CONTRACTS. The fund conducts its foreign currency
exchange transactions either at the spot (cash) rate prevailing in the foreign
currency exchange market or by entering into forward currency exchange contracts
(forward contracts) as a hedge against fluctuations in future foreign exchange
rates. A forward contract involves an obligation to buy or sell a specific
currency at a future date, which may be any fixed number of days from the
contract date, at a price set at the time of the contract. These contracts are
traded in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. A forward contract
generally has no deposit requirements. No commissions are charged at any stage
for trades.
The fund may enter into forward contracts to settle a security transaction or
handle dividend and interest collection. When the fund enters into a contract
for the purchase or sale of a security denominated in a foreign currency or has
been notified of a dividend or interest payment, it may desire to lock in the
price of the security or the amount of the payment in dollars. By entering into
a forward contract, the fund will be able to protect itself against a possible
loss resulting from an adverse change in the relationship between different
currencies from the date the security is purchased or sold to the date on which
payment is made or received or when the dividend or interest is actually
received.
The fund also may enter into forward contracts when management of the fund
believes the currency of a particular foreign country may suffer a substantial
decline against another currency. It may enter into a forward contract to sell,
for a fixed amount of dollars, the amount of foreign currency approximating the
value of some or all of the fund's portfolio securities denominated in such
foreign currency. The precise matching of forward contract amounts and the
value of securities involved generally will not be possible since the future
value of such securities in foreign currencies more than likely will change
between the date the forward contract is entered into and the date it matures.
The projection of short- term currency market movements is extremely difficult
and successful execution of a short-term hedging strategy is highly uncertain.
The fund will not enter into such forward contracts or maintain a net exposure
to such contracts when consummating the contracts would obligate the fund to
deliver an amount of foreign currency in excess of the value of the fund's
portfolio securities or other assets denominated in that currency.
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<PAGE>
The fund will designate cash or securities in an amount equal to the value of
the fund's total assets committed to consummating forward contracts entered into
under the second circumstance set forth above. If the value of the securities
declines, additional cash or securities will be designated on a daily basis so
that the value of the cash or securities will equal the amount of the fund's
commitments on such contracts.
At maturity of a forward contract, the fund may either sell the portfolio
security and make delivery of the foreign currency or retain the security and
terminate its contractual obligation to deliver the foreign currency by
purchasing an offsetting contract with the same currency trader obligating it to
buy, on the same maturity date, the same amount of foreign currency.
If the fund retains the portfolio security and engages in an offsetting
transaction, the fund will incur a gain or a loss (as described below) to the
extent there has been movement in forward contract prices. If the fund engages
in an offsetting transaction, it may subsequently enter into a new forward
contract to sell the foreign currency. Should forward prices decline between
the date the fund enters into a forward contract for selling foreign currency
and the date it enters into an offsetting contract for purchasing the foreign
currency, the fund will realize a gain to the extent that the price of the
currency it has agreed to sell exceeds the price of the currency it has agreed
to buy. Should forward prices increase, the fund will suffer a loss to the
extent the price of the currency it has agreed to buy exceeds the price of the
currency it has agreed to sell.
It is impossible to forecast what the market value of portfolio securities will
be at the expiration of a contract. Accordingly, it may be necessary for the
fund to buy additional foreign currency on the spot market (and bear the expense
of such purchase) if the market value of the security is less than the amount of
foreign currency the fund is obligated to deliver and a decision is made to sell
the security and make delivery of the foreign currency. Conversely, it may be
necessary to sell on the spot market some of the foreign currency received on
the sale of the portfolio security if its market value exceeds the amount of
foreign currency the fund is obligated to deliver.
The fund's dealing in forward contracts will be limited to the transactions
described above. This method of protecting the value of the fund's portfolio
securities against a decline in the value of a currency does not eliminate
fluctuations in the underlying prices of the securities. It simply establishes
a rate of exchange that can be achieved at some point in time. Although such
forward contracts tend to minimize the risk of loss due to a decline in value of
hedged currency, they tend to limit any potential gain that might result should
the value of such currency increase.
Although the fund values its assets each business day in terms of U.S. dollars,
it does not intend to convert its foreign currencies into U.S. dollars on a
daily basis. It will do so from time to time, and shareholders should be aware
of currency conversion costs. Although foreign exchange dealers do not charge a
fee for
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<PAGE>
conversion, they do realize a profit based on the difference (spread) between
the prices at which they are buying and selling various currencies. Thus, a
dealer may offer to sell a foreign currency to the fund at one rate, while
offering a lesser rate of exchange should the fund desire to resell that
currency to the dealer.
OPTIONS ON FOREIGN CURRENCIES. The fund may buy put and write covered call
options on foreign currencies for hedging purposes. For example, a decline in
the dollar value of a foreign currency in which portfolio securities are
denominated will reduce the dollar value of such securities, even if their value
in the foreign currency remains constant. In order to protect against such
diminutions in the value of portfolio securities, the fund may buy put options
on the foreign currency. If the value of the currency does decline, the fund
will have the right to sell such currency for a fixed amount in dollars and will
thereby offset, in whole or in part, the adverse effect on its portfolio which
otherwise would have resulted.
As in the case of other types of options, however, the benefit to the fund
derived from purchases of foreign currency options will be reduced by the amount
of the premium and related transaction costs. In addition, where currency
exchange rates do not move in the direction or to the extent anticipated, the
fund could sustain losses on transactions in foreign currency options which
would require it to forego a portion or all of the benefits of advantageous
changes in such rates.
The fund may write options on foreign currencies for the same types of hedging
purposes. For example, when the fund anticipates a decline in the dollar value
of foreign-denominated securities due to adverse fluctuations in exchange rates,
it could, instead of purchasing a put option, write a call option on the
relevant currency. If the expected decline occurs, the option will most likely
not be exercised and the diminution in value of portfolio securities will be
fully or partially offset by the amount of the premium received.
As in the case of other types of options, however, the writing of a foreign
currency option will constitute only a partial hedge up to the amount of the
premium, and only if rates move in the expected direction. If this does not
occur, the option may be exercised and the fund would be required to buy or sell
the underlying currency at a loss which may not be offset by the amount of the
premium. Through the writing of options on foreign currencies, the fund also
may be required to forego all or a portion of the benefits which might otherwise
have been obtained from favorable movements on exchange rates.
All options written on foreign currencies will be covered. An option written on
foreign currencies is covered if the fund holds currency sufficient to cover the
option or has an absolute and immediate right to acquire that currency without
additional cash consideration upon conversion of assets denominated in that
currency or exchange of other currency held in its portfolio. An
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<PAGE>
option writer could lose amounts substantially in excess of its initial
investments, due to the margin and collateral requirements associated with such
positions.
Options on foreign currencies are traded through financial institutions acting
as market-makers, although foreign currency options also are traded on certain
national securities exchanges, such as the Philadelphia Stock Exchange and the
Chicago Board Options Exchange, subject to SEC regulation. In an over-the-
counter trading environment, many of the protections afforded to exchange
participants will not be available. For example, there are no daily price
fluctuation limits, and adverse market movements could therefore continue to an
unlimited extent over a period of time. Although the purchaser of an option
cannot lose more than the amount of the premium plus related transaction costs,
this entire amount could be lost.
Foreign currency option positions entered into on a national securities exchange
are cleared and guaranteed by the OCC, thereby reducing the risk of counterparty
default. Further, a liquid secondary market in options traded on a national
securities exchange may be more readily available than in the over-the-counter
market, potentially permitting the fund to liquidate open positions at a profit
prior to exercise or expiration, or to limit losses in the event of adverse
market movements.
The purchase and sale of exchange-traded foreign currency options, however, is
subject to the risks of availability of a liquid secondary market described
above, as well as the risks regarding adverse market movements, margining of
options written, the nature of the foreign currency market, possible
intervention by governmental authorities and the effects of other political and
economic events. In addition, exchange-traded options on foreign currencies
involve certain risks not presented by the over-the- counter market. For
example, exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in certain foreign
countries for the purpose. As a result, the OCC may, if it determines that
foreign governmental restrictions or taxes would prevent the orderly settlement
of foreign currency option exercises, or would result in undue burdens on OCC or
its clearing member, impose special procedures on exercise and settlement, such
as technical changes in the mechanics of delivery of currency, the fixing of
dollar settlement prices or prohibitions on exercise.
FOREIGN CURRENCY FUTURES AND RELATED OPTIONS. The fund may enter into currency
futures contracts to sell currencies. It also may buy put and write covered
call options on currency futures. Currency futures contracts are similar to
currency forward contracts, except that they are traded on exchanges (and have
margin requirements) and are standardized as to contract size and delivery date.
Most currency futures call for payment of delivery in U.S. dollars. The fund
may use currency futures for the same purposes as currency forward contracts,
subject to CFTC
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<PAGE>
limitations, including the limitation on the percentage of assets that may be
used, described in the prospectus. All futures contracts are aggregated for
purposes of the percentage limitations.
Currency futures and options on futures values can be expected to correlate with
exchange rates, but will not reflect other factors that may affect the values of
the fund's investments. A currency hedge, for example, should protect a
Yen-denominated bond against a decline in the Yen, but will not protect the fund
against price decline if the issuer's creditworthiness deteriorates. Because
the value of the fund's investments denominated in foreign currency will change
in response to many factors other than exchange rates, it may not be possible to
match the amount of a forward contract to the value of the fund's investments
denominated in that currency over time.
The fund will not use leverage in its currency options and futures strategies.
The fund will hold securities or other options or futures positions whose values
are expected to offset its obligations. The fund will not enter into an option
or futures position that exposes the fund to an obligation to another party
unless it owns either (i) an offsetting position in securities or (ii) cash,
receivables and short-term debt securities with a value sufficient to cover its
potential obligations.
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<PAGE>
APPENDIX B
OPTIONS AND INTEREST RATE FUTURES CONTRACTS AND ADDITIONAL INFORMATION ON
INVESTMENT POLICIES
The fund may buy or write options traded on any U.S. or foreign exchange or in
the over-the-counter market. The fund may enter into interest rate futures
contracts traded on any U.S. or foreign exchange. The fund also may buy or
write put and call options on these futures. Options in the over-the-counter
market will be purchased only when the investment manager believes a liquid
secondary market exists for the options and only from dealers and institutions
the investment manager believes present a minimal credit risk. Some options are
exercisable only on a specific date. In that case, or if a liquid secondary
market does not exist, the fund could be required to buy or sell securities at
disadvantageous prices, thereby incurring losses.
OPTIONS. An option is a contract. A person who buys a call option for a
security has the right to buy the security at a set price for the length of the
contract. A person who sells a call option is called a writer. The writer of a
call option agrees to sell the security at the set price when the buyer wants to
exercise the option, no matter what the market price of the security is at that
time. A person who buys a put option has the right to sell a security at a set
price for the length of the contract. A person who writes a put option agrees
to buy the security at the set price if the purchaser wants to exercise the
option, no matter what the market price of the security is at that time. An
option is covered if the writer owns the security (in the case of a call) or
sets aside the cash (in the case of a put) that would be required upon exercise.
The price paid by the buyer for an option is called a premium. In addition the
buyer generally pays a broker a commission. The writer receives a premium, less
a commission, at the time the option is written. The cash received is retained
by the writer whether or not the option is exercised. A writer of a call option
may have to sell the security for a below-market price if the market price rises
above the exercise price. A writer of a put option may have to pay an
above-market price for the security if its market price decreases below the
exercise price.
Options can be used to produce incremental earnings, protect gains and
facilitate buying and selling securities for investment purposes. The use of
options and futures contracts may benefit the fund and its shareholders by
improving the fund's liquidity and by helping to stabilize the value of its net
assets.
BUYING OPTIONS. Put and call options may be used as a trading technique to
facilitate buying and selling securities for investment reasons. They also may
be used for investment. Options are used as a trading technique to take
advantage of any disparity between the price of the underlying security in the
securities market and its price on the options market. It is anticipated the
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<PAGE>
trading technique will be utilized only to effect a transaction when the price
of the security plus the option price will be as good or better than the price
at which the security could be bought or sold directly. When the option is
purchased, the fund pays a premium and a commission. It then pays a second
commission on the purchase or sale of the underlying security when the option is
exercised. For record-keeping and tax purposes, the price obtained on the
purchase of the underlying security will be the combination of the exercise
price, the premium and both commissions. When using options as a trading
technique, commissions on the option will be set as if only the underlying
securities were traded.
Put and call options also may be held by the fund for investment purposes.
Options permit the fund to experience the change in the value of a security with
a relatively small initial cash investment. The risk the fund assumes when it
buys an option is the loss of the premium. To be beneficial to the fund, the
price of the underlying security must change within the time set by the option
contract. Furthermore, the change must be sufficient to cover the premium paid,
the commissions paid both in the acquisition of the option and in a closing
transaction or in the exercise of the option and subsequent sale (in the case of
a call) or purchase (in the case of a put) of the underlying security. Even
then the price change in the underlying security does not ensure a profit since
prices in the option market may not reflect such a change.
WRITING COVERED OPTIONS. The fund will write covered options when it feels it
is appropriate and will follow these guidelines:
'Underlying securities will continue to be bought or sold solely on the basis of
investment considerations consistent with the fund's goal.
'All options written by the fund will be covered. For covered call options if a
decision is made to sell the security, the fund will attempt to terminate the
option contract through a closing purchase transaction.
'The fund will write options only as permitted under federal or state laws or
regulations, such as those that limit the amount of total assets subject to the
options. While no limit has been set by the fund, it will conform to the
requirements of those states. For example, California limits the writing of
options to 50% of the assets of a fund.
Net premiums on call options closed or premiums on expired call options are
treated as short-term capital gains. Since the fund is taxed as a regulated
investment company under the Internal Revenue Code, any gains on options and
other securities held less than three months must be limited to less than 30% of
its annual gross income.
If a covered call option is exercised, the security is sold by the fund. The
fund will recognize a capital gain or loss based upon the difference between the
proceeds and the security's basis.
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<PAGE>
Options on many securities are listed on options exchanges. If the fund writes
listed options, it will follow the rules of the options exchange. Options are
valued at the close of the New York Stock Exchange. An option listed on a
national exchange, CBOE or NASDAQ will be valued at the last quoted sales price
or, if such a price is not readily available, at the mean of the last bid and
asked prices.
FUTURES CONTRACTS. A futures contract is an agreement between two parties to
buy and sell a security for a set price on a future date. They have been
established by boards of trade which have been designated contracts markets by
the Commodity Futures Trading Commission (CFTC). Futures contracts trade on
these markets in a manner similar to the way a stock trades on a stock exchange,
and the boards of trade, through their clearing corporations, guarantee
performance of the contracts. Currently, there are futures contracts based on
such debt securities as long-term U.S. Treasury bonds, Treasury notes, GNMA
modified pass-through mortgage-backed securities, three-month U.S. Treasury
bills and bank certificates of deposit. While futures contracts based on debt
securities do provide for the delivery and acceptance of securities, such
deliveries and acceptances are very seldom made. Generally, the futures
contract is terminated by entering into an offsetting transaction. An
offsetting transaction for a futures contract sale is effected by the fund
entering into a futures contract purchase for the same aggregate amount of the
specific type of financial instrument and same delivery date. If the price in
the sale exceeds the price in the offsetting purchase, the fund immediately is
paid the difference and realizes a gain. If the offsetting purchase price
exceeds the sale price, the fund pays the difference and realizes a loss.
Similarly, closing out a futures contract purchase is effected by the fund
entering into a futures contract sale. If the offsetting sale price exceeds
the purchase price, the fund realizes a gain, and if the offsetting sale price
is less than the purchase price, the fund realizes a loss. At the time a
futures contract is made, a good-faith deposit called initial margin is set up
within a segregated account at the fund's custodian bank. The initial margin
deposit is approximately 1.5% of a contract's face value. Daily thereafter, the
futures contract is valued and the payment of variation margin is required so
that each day the fund would pay out cash in an amount equal to any decline in
the contract's value or receive cash equal to any increase. At the time a
futures contract is closed out, a nominal commission is paid, which is generally
lower than the commission on a comparable transaction in the cash markets.
The purpose of a futures contract, in the case of a portfolio holding long-term
debt securities, is to gain the benefit of changes in interest rates without
actually buying or selling long-term debt securities. For example, if the fund
owned long-term bonds and interest rates were expected to increase, it might
enter into futures contracts to sell securities which would have much the same
effect as selling some of the long-term bonds it owned.
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Futures contracts are based on types of debt securities referred to above, which
have historically reacted to an increase or decline in interest rates in a
fashion similar to the debt securities the fund owns. If interest rates did
increase, the value of the debt securities in the portfolio would decline, but
the value of the fund's futures contracts would increase at approximately the
same rate, thereby keeping the net asset value of the fund from declining as
much as it otherwise would have. If, on the other hand, the fund held cash
reserves and interest rates were expected to decline, the fund might enter into
interest rate futures contracts for the purchase of securities. If short-term
rates were higher than long-term rates, the ability to continue holding these
cash reserves would have a very beneficial impact on the fund's earnings. Even
if short-term rates were not higher, the fund would still benefit from the
income earned by holding these short-term investments. At the same time, by
entering into futures contracts for the purchase of securities, the fund could
take advantage of the anticipated rise in the value of long-term bonds without
actually buying them until the market had stabilized. At that time, the futures
contracts could be liquidated and the fund's cash reserves could then be used to
buy long-term bonds on the cash market. The fund could accomplish similar
results by selling bonds with long maturities and investing in bonds with short
maturities when interest rates are expected to increase or by buying bonds with
long maturities and selling bonds with short maturities when interest rates are
expected to decline. But by using futures contracts as an investment tool,
given the greater liquidity in the futures market than in the cash market, it
might be possible to accomplish the same result more easily and more quickly.
Successful use of futures contracts depends on the investment manager's ability
to predict the future direction of interest rates. If the investment manager's
prediction is incorrect, the fund would have been better off had it not entered
into futures contracts.
OPTIONS ON FUTURES CONTRACTS. Options give the holder a right to buy or sell
futures contracts in the future. Unlike a futures contract, which requires the
parties to the contract to buy and sell a security on a set date, an option on a
futures contract merely entitles its holder to decide on or before a future date
(within nine months of the date of issue) whether to enter into such a contract.
If the holder decides not to enter into the contract, all that is lost is the
amount (premium) paid for the option. Furthermore, because the value of the
option is fixed at the point of sale, there are no daily payments of cash to
reflect the change in the value of the underlying contract. However, since an
option gives the buyer the right to enter into a contract at a set price for a
fixed period of time, its value does change daily and that change is reflected
in the net asset value of the fund.
RISKS. There are risks in engaging in each of the management tools described
above. The risk the fund assumes when it buys an option is the loss of the
premium paid for the option. Purchasing options also limits the use of monies
that might otherwise be available for long-term investments.
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<PAGE>
The risk involved in writing options on futures contracts the fund owns, or on
securities held in its portfolio, is that there could be an increase in the
market value of such contracts or securities. If that occurred, the option
would be exercised and the asset sold at a lower price than the cash market
price. To some extent, the risk of not realizing a gain could be reduced by
entering into a closing transaction. The fund could enter into a closing
transaction by purchasing an option with the same terms as the one it had
previously sold. The cost to close the option and terminate the fund's
obligation, however, might be more or less than the premium received when it
originally wrote the option. Furthermore, the fund might not be able to close
the option because of insufficient activity in the options market.
A risk in employing futures contracts to protect against the price volatility of
portfolio securities is that the prices of securities subject to futures
contracts may not correlate perfectly with the behavior of the cash prices of
the fund's portfolio securities. The correlation may be distorted because the
futures market is dominated by short-term traders seeking to profit from the
difference between a contract or security price and their cost of borrowed
funds. Such distortions are generally minor and would diminish as the contract
approached maturity.
Another risk is that the fund's investment manager could be incorrect in
anticipating as to the direction or extent of various interest rate movements or
the time span within which the movements take place. For example, if the fund
sold futures contracts for the sale of securities in anticipation of an increase
in interest rates, and interest rates declined instead, the fund would lose
money on the sale.
TAX TREATMENT. As permitted under federal income tax laws, the fund intends to
identify futures contracts as mixed straddles and not mark them to market, that
is, not treat them as having been sold at the end of the year at market value.
Such an election may result in the fund being required to defer recognizing
losses incurred by entering into futures contracts and losses on underlying
securities identified as being hedged against.
Federal income-tax treatment of gains or losses from transactions in options on
futures contracts and indexes is presently unclear, although the fund's tax
advisors currently believe marking to market is not required. Depending on
developments, and although no assurance is given, the fund may seek Internal
Revenue Service (IRS) rulings clarifying questions concerning such treatment.
Certain provisions of the Internal Revenue Code may also limit the fund's
ability to engage in futures contracts and related options transactions. For
example, at the close of each quarter of the fund's taxable year, at least 50%
of the value of its assets must consist of cash, government securities and other
securities, subject to certain diversification requirements. Less than 30% of
its gross income must be derived from sales of securities held less than three
months.
-35-
<PAGE>
The IRS has ruled publicly that an exchange-traded call option is a security for
purposes of the 50%-of-assets test and that its issuer is the issuer of the
underlying security, not the writer of the option, for purposes of the
diversification requirements. In order to avoid realizing a gain within the
three-month period, the fund may be required to defer closing out a contract
beyond the time when it might otherwise be advantageous to do so. The fund
also may be restricted in purchasing put options for the purpose of hedging
underlying securities because of applying the short sale holding period rules
with respect to such underlying securities.
Accounting for futures contracts will be according to generally accepted
accounting principles. Initial margin deposits will be recognized as assets due
from a broker (the fund's agent in acquiring the futures position). During the
period the futures contract is open, changes in value of the contract will be
recognized as unrealized gains or losses by marking to market on a daily basis
to reflect the market value of the contract at the end of each day's trading.
Variation margin payments will be made or received depending upon whether gains
or losses are incurred. All contracts and options will be valued at the
last-quoted sales price on their primary exchange.
WHEN-ISSUED SECURITIES
The fund may purchase some securities in advance of when they are issued. Price
and rate of interest are set on the date the commitments are given but no
payment is made or interest earned until the date the securities are issued,
usually within two months, but other terms may be negotiated. The commitment
requires the fund to buy the security when it is issued so the commitment is
valued daily the same way as owning a security would be valued. The fund
designates cash or liquid high-grade debt securities to at least equal the
amount of its commitment. [Under normal market conditions, the fund does not
intend to commit more than 5% of its total assets to these practices.] The fund
may sell the commitment just like it can sell a security. Frequently, the fund
has the opportunity to sell the commitment back to the institution.
INVERSE FLOATERS
The Fund may invest in securities called "inverse floaters." Inverse floaters
are created by underwriters using the interest payments on securities. A
portion of the interest received is paid to holders of instruments based on
current interest rates for short-term securities. What is left over, less a
servicing fee, is paid to holders of the inverse floaters. As interest rates go
down, the holders of the inverse floaters receive more income and an increase in
the price for the inverse floaters. As interest rates go up, the holders of the
inverse floaters receive less income and a decrease in the price for the inverse
floaters.
-36-
<PAGE>
APPENDIX C
MORTGAGE-BACKED SECURITIES
A mortgage pass through certificate is one that represents an interest in a
pool, or group, of mortgage loans assembled by the Government National Mortgage
Association (GNMA), Federal Home Loan Mortgage Corporation (FHLMC), Federal
National Mortgage Association (FNMA) or non-governmental entities. In
pass-through certificates, both principal and interest payments, including
prepayments, are passed through to the holder of the certificate. Prepayments
on underlying mortgages result in a loss of anticipated interest, and the actual
yield (or total return) to the fund, which is influenced by both stated interest
rates and market conditions, may be different than the quoted yield on
certificates. Some U.S. government securities may be purchased on a
"when-issued" basis, which means that it may take as long as 45 days after the
purchase before the securities are delivered to the fund.
STRIPPED MORTGAGE-BACKED SECURITIES. The fund may invest in stripped
mortgage-backed securities. Generally, there are two classes of stripped
mortgage-backed securities: Interest Only (IO) and Principal Only (PO). IOs
entitle the holder to receive distributions consisting of all or a portion of
the interest on the underlying pool of mortgage loans or mortgage-backed
securities. POs entitle the holder to receive distributions consisting of all
or a portion of the principal of the underlying pool of mortgage loans or
mortgage-backed securities. The cash flows and yields on IOs and POs are
extremely sensitive to the rate of principal payments (including prepayments) on
the underlying mortgage loans or mortgage-backed securities. A rapid rate of
principal payments may adversely affect the yield to maturity of IOs. A slow
rate of principal payments may adversely affect the yield to maturity of POs.
If prepayments of principal are greater than anticipated, an investor may incur
substantial losses. If prepayments of principal are slower than anticipated,
the yield on a PO will be affected more severely than would be the case with a
traditional mortgage-backed security.
MORTGAGE-BACKED SECURITY SPREAD OPTIONS. The fund may purchase mortgage-backed
security (MBS) put spread options and write covered MBS call spread options.
MBS spread options are based upon the changes in the price spread between a
specified mortgage-backed security and a like-duration Treasury security. MBS
spread options are traded in the OTC market and are of short duration, typically
one to two months. The fund would buy or sell covered MBS call spread options
in situations where mortgage-backed securities are expected to under perform
like-duration Treasury securities.
-37-
<PAGE>
APPENDIX D
DESCRIPTION OF CORPORATE BOND RATINGS
BOND RATINGS
The ratings concern the quality of the issuing corporation. They are not an
opinion of the market value of the security. Such ratings are opinions on
whether the principal and interest will be repaid when due. A security's rating
may change which could affect its price. Ratings by Moody's Investors Service,
Inc. are Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C and D. Ratings by Standard & Poor's
Corporation are AAA, AA, A, BBB, BB, B, CCC, CC, C and D.
Bonds rated Aaa and AAA are judged to be of the best quality and carry the
smallest degree of investment risk. Capacity to pay interest and repay
principal is extremely strong. Prices are responsive only to interest rate
fluctuations.
Bonds rated Aa and AA also are judged to be high-grade although margins of
protection for interest and principal may not be quite as good as Aaa or AAA
rated securities. Long-term risk may appear greater than the Aaa or AAA group.
Prices are primarily responsive to interest rate fluctuations.
Bonds rated A are considered upper-medium grade. Protection for interest and
principal is deemed adequate but susceptible to future impairment. The market
prices of such obligations move primarily with interest rate fluctuations but
also with changing economic or trade conditions.
Bonds rated Baa and BBB are considered medium-grade obligations. Protection for
interest and principal is adequate over the short-term; however, these
obligations have certain speculative characteristics. They are susceptible to
changing economic conditions and require constant review. Such bonds are more
responsive to business and trade conditions than to interest rate fluctuations.
Bonds rated Ba and BB are considered to have speculative elements. Their future
cannot be considered well assured. The protection of interest and principal
payments may be very moderate and not well safeguarded during future good and
bad times. Uncertainty of position characterizes these bonds.
Bonds rated B or lower lack characteristics of the desirable investments. There
may be small assurance over any long period of time of the payment of interest
and principal or of the maintenance of other contract terms. Some of these
bonds are of poor standing and may be in default or have other marked
short-comings.
Bonds rated Caa and CCC are of poor standing. Such issues may be in default or
there may be elements of danger with respect to principal or interest.
-38-
<PAGE>
Bonds rated Ca and CC represent obligations that are highly speculative. Such
issues are often in default or have other marked shortcomings.
Bonds rated C are obligations with a higher degree of speculation. These
securities have major risk exposures to default.
Bonds rated D are in payment default. The D rating is used when interest
payments or principal payments are not made on the due date.
-39-
<PAGE>
APPENDIX E
DOLLAR-COST AVERAGING
A technique that works well for many investors is one that eliminates random buy
and sell decisions. One such system is dollar-cost averaging. Dollar-cost
averaging involves building a portfolio through the investment of fixed amounts
of money on a regular basis regardless of the price or market condition. This
may enable an investor to smooth out the effects of the volatility of the
financial markets. By using this strategy, more shares will be purchased when
the price is low and less when the price is high. As the accompanying chart
illustrates, dollar-cost averaging tends to keep the average price paid for the
shares lower than the average market price of shares purchased, although there
is no guarantee.
While this does not ensure a profit and does not protect against a loss if the
market declines, it is an effective way for many shareholders who can continue
investing through changing market conditions to accumulate shares in a fund to
meet long term goals.
DOLLAR-COST AVERAGING
<TABLE>
<CAPTION>
- --------------------------------------------------------
REGULAR MARKET PRICE SHARES
INVESTMENT OF A SHARE ACQUIRED
- --------------------------------------------------------
<S> <C> <C>
$100 $ 6.00 16.7
100 4.00 25.0
100 4.00 25.0
100 6.00 16.7
100 5.00 20.0
$500 $25.00 103.4
AVERAGE MARKET PRICE OF A SHARE OVER 5 PERIODS: $5.00 ($25.00 DIVIDED BY 5).
THE AVERAGE PRICE YOU PAID FOR EACH SHARE: $4.84 ($500 DIVIDED BY 103.4).
</TABLE>
-40-
<PAGE>
Independent auditors' report
______________________________________________________________________________
The board of directors and shareholders
IDS Selective Fund, Inc.:
We have audited the accompanying statement of assets
and liabilities, including the schedule of investments
in securities, of IDS Selective Fund, Inc. as of
November 30, 1994, 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 November 30, 1994, and the
financial highlights for each of the years in the ten-
year period ended November 30, 1994. These financial
statements and the financial highlights are the
responsibility of fund management. Our responsibility
is to express an opinion on these financial statements
and the financial highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain
reasonable assurance about whether the financial
statements and the financial highlights are free of
material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and
disclosures in the financial statements. Investment
securities held in custody are confirmed to us by the
custodian. As to securities purchased and sold but not
received or delivered and securities on loan, we
request confirmations from brokers, and where replies
are not received, we carry out other appropriate
auditing procedures. An audit also includes assessing
the accounting principles used and significant
estimates made by management, as well as evaluating
the overall financial statement presentation. We
believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the
financial position of IDS Selective Fund, Inc. at
November 30, 1994, 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 November 30, 1994, and the financial highlights
for the periods stated in the first paragraph above,
in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
January 6, 1995
<PAGE>
Financial statements
<TABLE>
<CAPTION>
Statement of assets and liabilities
IDS Selective Fund, Inc.
Nov. 30, 1994
_____________________________________________________________________________________________________________
Assets
_____________________________________________________________________________________________________________
<S> <C>
Investments in securities, at value (Note 1)
(identified cost $1,432,581,097) $1,386,963,614
Receivable for investment securities sold 3,288,075
Dividends and accrued interest receivable 21,230,727
U.S. government securities held as collateral (Note 5) 88,272,347
_____________________________________________________________________________________________________________
Total assets 1,499,754,763
_____________________________________________________________________________________________________________
Liabilities
_____________________________________________________________________________________________________________
Disbursements in excess of cash on demand deposit 2,944,562
Dividends payable to shareholders 509,448
Payable for investments securities purchased 247,215
Payable upon return of securities loaned (Note 5) 92,712,347
Accrued investment management and services fee 605,040
Accrued distribution fee 53,098
Accrued transfer agency fee 135,807
Other accrued expenses 425,861
_____________________________________________________________________________________________________________
Total liabilities 97,633,378
_____________________________________________________________________________________________________________
Net assets applicable to outstanding capital stock $1,402,121,385
_____________________________________________________________________________________________________________
Represented by
_____________________________________________________________________________________________________________
Capital stock -- authorized 10,000,000,000 shares of $.01 par value;
outstanding 163,598,056 shares $ 1,635,981
Additional paid-in capital 1,424,820,320
Excess of distributions over net investment income (378,787)
Accumulated net realized gain (Note 1) 21,661,354
Unrealized depreciation (45,617,483)
_____________________________________________________________________________________________________________
Total -- representing net assets applicable to outstanding capital stock $1,402,121,385
_____________________________________________________________________________________________________________
Net asset value per share of outstanding capital stock $ 8.57
_____________________________________________________________________________________________________________
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Financial statements
<TABLE>
<CAPTION>
Statement of operations
IDS Selective Fund, Inc.
Year ended Nov. 30, 1994
_____________________________________________________________________________________________________________
<S> <C>
Investment income
_____________________________________________________________________________________________________________
Income:
Interest $113,274,171
Dividends 423,122
_____________________________________________________________________________________________________________
Total income 113,697,293
_____________________________________________________________________________________________________________
Expenses (Note 2):
Investment management and services fee 8,228,895
Distribution fee 672,430
Transfer agency fee 1,716,609
Compensation of directors 41,237
Compensation of officers 19,507
Custodian fees 185,757
Postage 209,669
Registration fees 138,295
Reports to shareholders 43,810
Audit fees 32,000
Administrative 24,710
Other 39,716
_____________________________________________________________________________________________________________
Total expenses 11,352,635
_____________________________________________________________________________________________________________
Investment income -- net 102,344,658
_____________________________________________________________________________________________________________
Realized and unrealized gain (loss) -- net
_____________________________________________________________________________________________________________
Net realized gain on security and foreign currency transactions
(including loss of $284,219 from foreign currency transactions) (Note 3) 22,554,343
Net realized loss on closed interest rate futures contracts (1,635,288)
Net realized gain on closed or expired option contracts written (Note 4) 220,436
_____________________________________________________________________________________________________________
Net realized gain on investments and foreign currency 21,139,491
Net change in unrealized appreciation or depreciation (202,860,707)
_____________________________________________________________________________________________________________
Net loss on investments and foreign currency (181,721,216)
_____________________________________________________________________________________________________________
Net decrease in net assets resulting from operations $(79,376,558)
_____________________________________________________________________________________________________________
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Financial statements
<TABLE>
<CAPTION>
Statements of changes in net assets
IDS Selective Fund, Inc.
Year ended Nov. 30,
_____________________________________________________________________________________________________________
Operations and distributions 1994 1993
_____________________________________________________________________________________________________________
<S> <C> <C>
Investment income -- net $ 102,344,658 $ 109,885,488
Net realized gain on investments and foreign currency 21,139,491 27,637,411
Net change in unrealized appreciation or depreciation (202,860,707) 89,408,374
_____________________________________________________________________________________________________________
Net increase (decrease) in net assets resulting from operations (79,376,558) 226,931,273
_____________________________________________________________________________________________________________
Distributions to shareholders from:
Net investment income (102,415,375) (110,889,838)
Excess distribution of net investment income (378,787) --
Net realized gain (26,487,582) (18,273,614)
Excess distribution of realized gain (Note 1) (42,963) (473,077)
_____________________________________________________________________________________________________________
Total distributions (129,324,707) (129,636,529)
_____________________________________________________________________________________________________________
Capital share transactions
_____________________________________________________________________________________________________________
Proceeds from sales of
21,519,839 and 29,056,630 shares (Note 2) 196,126,624 280,546,936
Net asset value of 10,813,989 and 10,006,921 shares
issued in reinvestment of distributions 99,112,296 95,735,511
Payments for redemptions of
46,537,712 and 28,767,588 shares (421,007,405) (277,656,557)
_____________________________________________________________________________________________________________
Increase (decrease) in net assets from capital share transactions
representing net reduction of
14,203,884 and net addition of 10,295,963 shares (125,768,485) 98,625,890
_____________________________________________________________________________________________________________
Total increase (decrease) in net assets (334,469,750) 195,920,634
Net assets at beginning of year 1,736,591,135 1,540,670,501
_____________________________________________________________________________________________________________
Net assets at end of year
(including undistributed net investment income of
$(378,787) and $70,717) $1,402,121,385 $1,736,591,135
_____________________________________________________________________________________________________________
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to financial statements
IDS Selective Fund, Inc.
_________________________________________________________________________
1. Summary of significant accounting policies
The fund is registered under the Investment
Company Act of 1940 (as amended) as a
diversified, open-end management investment
company. 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 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.
Options transactions
In order to produce incremental earnings, protect
gains, and facilitate buying and selling of
securities for investment purposes, the fund may
buy or write options traded on any U.S. or
foreign exchange or in the over-the-counter
market where the completion of the obligation is
dependent upon the credit standing of the other
party. The fund also may buy and sell put and
call options and write covered call options on
portfolio securities and may write cash-secured
put options. The risk in writing a call option is
that the fund gives up the opportunity of profit
if the market price of the security increases.
The risk in writing a put option is that the fund
may incur a loss if the market price of the
security decreases and the option is exercised.
The risk in buying an option is that the fund
pays a premium whether or not the option is
exercised. The fund also has the additional risk
of not being able to enter into a closing
transaction if a liquid secondary market does not
exist.
<PAGE>
Option contracts are valued daily at the closing
prices on their primary exchanges and unrealized
appreciation or depreciation is recorded. The
fund will realize a gain or loss upon expiration
or closing of the option transaction. When
options on debt securities or futures are
exercised, the fund will realize a gain or loss.
When other options are exercised, the proceeds on
sales for a written call option, the purchase
cost for a written put option or the cost of a
security for a purchased put or call option is
adjusted by the amount of premium received or
paid.
Futures transactions
In order to gain exposure to or protect itself
from changes in the market, the fund may buy and
sell interest rate futures contracts traded on
any U.S. or foreign exchange. The fund also may
buy or write put and call options on these
futures contracts. Risks of entering into futures
contracts and related options include the
possibility that there may be an illiquid market
and that a change in the value of the contract or
option may not correlate with changes in the
value of the underlying securities.
Upon entering into a futures contract, the fund
is required to deposit either cash or securities
in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent
payments (variation margin) are made or received
by the fund each day. The variation margin
payments are equal to the daily changes in the
contract value and are recorded as unrealized
gains and losses. The fund recognizes a realized
gain or loss when the contract is closed or
expires.
<PAGE>
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.
<PAGE>
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.
Dividends to shareholders
Dividends from net investment income, declared
daily and payable monthly, are reinvested in
additional shares of the fund at net asset value
or payable in cash. Capital gains, when
available, are distributed along with the last
income dividend of the calendar year.
Other
Security transactions are accounted for on the
date securities are purchased or sold. Dividend
income is recognized on the ex-dividend date. For
U.S. dollar denominated bonds, interest income
includes level-yield amortization of premium and
discount. For foreign bonds, except for original
issue discount, the fund does not amortize
premium and discount.
<PAGE>
__________________________________________________________________________
2. Expenses and sales charges
Under terms of an agreement dated Nov. 14, 1991,
the fund pays American Express Financial
Corporation a fee for managing its investments,
recordkeeping and other specified services. The
fee is 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 0.13% of
average daily net assets.
The fund also pays American Express Financial
Corporation a distribution fee at an annual rate
of $6 per shareholder account and a transfer
agency fee at an annual rate of $15.50 per
shareholder account. The transfer agency fee is
reduced by earnings on monies pending shareholder
redemptions.
American Express Financial Corporation will
assume and pay any expenses (except taxes and
brokerage commissions) that exceed the most
restrictive applicable state expense limitation.
Sales charges by American Express Financial
Advisors Inc. for distributing fund shares were
$3,861,526 for the year ended Nov. 30, 1994.
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 $17,255 for the year
ended Nov. 30, 1994.
__________________________________________________________________________
3. Securities transactions
Cost of purchases and proceeds from sales of
securities (other than short-term obligations)
aggregated $403,947,741 and $717,092,406,
respectively, for the year ended Nov. 30, 1994.
Realized gains and losses are determined on an
identified cost basis.
<PAGE>
__________________________________________________________________________
4. Option contracts written
The number of contracts and premium amounts
associated with option contracts written is as
follows:
Year ended Nov. 30, 1994
_____________________________________________
Puts Calls
_____________________________________________
Contracts Premium Contracts Premium
__________________________________________________________
Balance Nov. 30, 1993 -- $ -- -- $ --
Opened 1,050 859,840 1,200 1,275,975
Closed (650) (618,890) (1,100) (1,239,175)
Expired (400) (240,950) (100) (36,800)
___________________________________________________________
Balance Nov. 30, 1994 -- $ -- -- $ --
_________________________________________________________________________
5. Lending of portfolio securities
At Nov. 30, 1994, securities valued at
$89,332,600 were on loan to brokers. For
collateral, the fund received $4,440,000 in cash
and U.S. government securities valued at
$88,272,347. Income from securities lending
amounted to $183,217 for the year ended Nov. 30,
1994. 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. Financial highlights
"Financial highlights" showing per share data and
selected information is presented on page 5 of
the prospectus.
<PAGE>
Investments in securities
<TABLE>
<CAPTION>
IDS Selective Fund, Inc. (Percentages represent value of
Nov. 30, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Bonds (80.3%)
_____________________________________________________________________________________________________________________________
Issuer Coupon Maturity Principal Value(a)
rate year amount
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
U.S. government obligations (24.3%)
U.S. Treasury 6.875% 1999 $50,000,000 (b) $ 48,287,500
7.25 1996 30,000,000 29,928,597
7.50 2016 9,450,000 8,881,015
7.75 1995 35,000,000 35,136,500
8.00 2021 35,000,000 (b) 34,730,147
8.625 1997 50,745,000 52,047,619
Resolution Funding Corp
Zero Coupon 7.61 2017 79,000,000 (c) 12,534,930
Zero Coupon 7.89 2016 85,900,000 (b,c) 15,076,300
Zero Coupon 7.98 2016 32,000,000 (c) 5,512,960
Zero Coupon 8.11 2016 35,073,000 (c) 5,798,970
Zero Coupon 8.12 2004 7,899,000 (b,c) 3,682,592
Zero Coupon 8.18 2005 13,000,000 (c) 5,414,759
Zero Coupon 8.19 2014 48,000,000 (c) 9,933,110
Zero Coupon 8.20 2005 38,048,000 (c) 16,664,259
Zero Coupon 8.27 2014 10,000,000 (c) 1,993,399
Zero Coupon 8.35 2006 48,000,000 (c) 19,266,715
Zero Coupon 8.94 2006 25,000,000 (c) 10,226,998
Zero Coupon 8.95 2006 68,000,000 (c) 26,160,946
_____________
Total 341,277,316
_____________________________________________________________________________________________________________________________
Mortgage-backed securities (8.9%)
Federal Home Loan Bank 8.00 2014 5,000,000 4,775,000
Federal Home Loan Mtge Corp
8.00 1994-17 14,493 13,836
8.50 1994-17 626,039 614,692
8.50 1994-19 389,537 382,477
8.50 1994-22 13,066,222 12,874,312
9.00 1994-20 5,357,334 5,392,491
9.00 2021 3,069,373 3,100,067
Collateralized Mtge Obligation 8.50 2019 12,000,000 12,088,680
Federal Housing Admin 7.43 2024 9,469,816 8,901,627
Federal Natl Mtge Assn 6.50 1994-23 14,413,070 12,656,506
Collateralized Mtge Obligation 8.00 2021 12,125,090 11,348,599
8.50 2019 8,305,000 8,254,755
Principal Only 9.50 2018 2,022,791 (e) 1,352,741
Principal Only 9.89 2020 2,629,671 (e) 1,761,327
Trust Series Z 6.00 2024 17,692,020 (d) 9,788,906
See accompanying notes to investments in securities.
<PAGE>
<S> <C> <C> <C> <C>
Govt Natl Mtge Assn 8.00 1994-24 17,381,477 16,572,152
8.00 1994-22 2,317,398 2,209,495
8.00 1994-23 4,730,952 4,510,667
Collateralized Mtge Obligation Trust 7.75 2012 3,924,695 3,866,649
Prudential Bache
Collateralized Mtge Obligation 7.965 2019 4,291,428 3,957,125
WestAm
Collateralized Mtge Obligation 8.95 2018 140,407 132,533
______________
Total 124,554,637
_____________________________________________________________________________________________________________________________
Financial (10.8%)
Banks and savings & loans (3.6%)
BankAmerica
Sub Nts 7.50 2002 8,810,000 8,259,375
Boatmen's Bancshares
Sub Nts 9.25 2001 8,950,000 9,263,250
First Chicago
Sr Nts 9.00 1999 7,900,000 8,067,875
First Security
Sub Nts 7.50 2002 15,000,000 13,987,500
NCNB
Sub Nts 9.125 2001 10,000,000 10,237,500
______________
Total 49,815,500
_____________________________________________________________________________________________________________________________
Financial services (6.5%)
Amer General Finance 6.35 1995 9,500,000 9,500,000
Aristar
Sr Deb 8.875 1998 10,520,000 10,677,800
Beneficial 9.125 1998 10,000,000 10,287,500
General Electric Capital
Reset Nt 8.65 1996 15,000,000 (f) 15,262,500
General Motors Acceptance 5.95 1998 8,000,000 7,370,000
7.00 2000 14,300,000 13,281,125
Goldman Sachs Group LP 7.125 2003 8,400,000 (g) 7,476,000
Greyhound Financial 7.95 1999 9,600,000 9,468,000
SunAmerica 9.95 2012 8,000,000 8,480,000
______________
Total 91,802,925
_____________________________________________________________________________________________________________________________
Insurance (0.7%)
Berkley (WR) 8.70 2022 10,000,000 9,687,500
USLICO
Cv 8.50 2014 600,000 598,500
_____________
Total 10,286,000
_____________________________________________________________________________________________________________________________
Industrial (10.0%)
Aerospace & defense (0.7%)
United Technologies 8.875 2019 10,000,000 10,075,000
_____________________________________________________________________________________________________________________________
Automotive & related (1.2%)
Ford Capital
Gtd Nts 9.00 1996 9,700,000 9,869,750
General Motors 8.875 2003 7,050,000 7,094,062
____________
Total 16,963,812
_____________________________________________________________________________________________________________________________
<PAGE>
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Beverages & tobacco (0.7%)
Philip Morris 8.10 1996 10,000,000 10,075,000
_____________________________________________________________________________________________________________________________
Chemicals (0.7%)
Dow Chemical 8.85 2021 10,000,000 9,875,000
_____________________________________________________________________________________________________________________________
Ecological services & equipment (0.5%)
Browning-Ferris Inds 9.25 % 2021 7,000,000 7,201,250
____________________________________________________________________________________________________________________________
Electronics (0.3%)
Harris 10.375 2018 3,900,000 4,216,875
_____________________________________________________________________________________________________________________________
Energy (2.7%)
PDV Amer 7.875 2003 16,500,000 13,571,250
Texaco Capital
Gtd Deb 7.50 2043 12,000,000 10,170,000
USX 9.125 2013 5,000,000 4,825,000
9.375 2022 9,200,000 8,935,500
______________
Total 37,501,750
_____________________________________________________________________________________________________________________________
Health care (0.9%)
Schering-Plough
Zero Coupon 7.31 1996 15,000,000 (c,g) 12,956,250
_____________________________________________________________________________________________________________________________
Industrial equipment & services (0.8%)
Deere 8.95 2019 10,000,000 10,487,500
_____________________________________________________________________________________________________________________________
Media (0.7%)
Time Warner Entertainment 8.375 2033 12,000,000 9,885,000
_____________________________________________________________________________________________________________________________
Paper & packaging (0.8%)
Georgia-Pacific
Credit Sensitive Nts 9.85 1997 10,000,000 10,250,000
_____________________________________________________________________________________________________________________________
Transportation (1.1%)
AMR 9.75 2021 2,500,000 2,368,750
10.00 2021 8,000,000 7,760,000
10.20 2020 5,000,000 4,937,500
______________
Total 15,066,250
_____________________________________________________________________________________________________________________________
Utilities (10.0%)
Electric (7.3%)
Arizona Public Service
1st Mtge 8.75 2024 5,000,000 4,731,250
Sale Lease-Backed Obligation 8.00 2015 9,000,000 7,953,750
Cajun Electric Power Cooperative
Mtge Trust 8.92 2019 4,960,000 5,127,400
Commonwealth Edison 6.50 2000 9,000,000 8,223,750
Long Island Lighting 9.625 2024 4,600,000 4,163,000
Ohio Edison 8.75 2022 11,000,000 10,697,500
Public Service Electric & Gas
1st Mtge 8.50 2022 13,859,000 13,044,784
RGS Funding
Sale Lease-Backed Obligation 9.82 2022 9,942,468 10,228,314
<PAGE>
<S> <C> <C> <C> <C>
San Diego Gas & Electric
1st Mtge 9.625 2020 9,950,000 10,559,438
Southern California Edison
1st Mtge 8.875 2023 13,000,000 12,496,250
Texas Utilities Electric 10.35 2018 1,500,000 1,561,875
1st Mtge 9.75 2021 7,000,000 7,157,500
1st Mtge 9.875 2019 6,000,000 6,420,000
______________
Total 102,364,811
_____________________________________________________________________________________________________________________________
Gas (1.0%)
Williams Companies 7.50 1999 15,000,000 14,512,500
_____________________________________________________________________________________________________________________________
Telephone (1.7%)
GTE 10.25 2020 2,000,000 2,202,500
GTE South
1st Mtge 9.375 2030 13,975,000 14,044,875
New York Tel 9.375 2031 7,000,000 7,332,500
______________
Total 23,579,875
_____________________________________________________________________________________________________________________________
Foreign (15.2%)(h)
ABN Amro Bank
(U.S. Dollar) 7.75 2023 12,000,000 10,620,000
Alcan Aluminium
(U.S. Dollar) 8.875 2022 9,600,000 9,312,000
Austria Republic Euro
(U.S. Dollar) 10.00 1998 5,000,000 5,258,000
Euratom Euro
(U.S. Dollar) 7.75 1997 6,100,000 6,092,375
Guang Dong Enterprise
(U.S. Dollar) 8.75 2003 15,000,000 (g) 13,443,750
Hanson Inds Cv
(British Pound) 9.50 2006 1,200,000 1,942,992
Hydro-Quebec
(Canadian Dollar) 9.50 2030 10,000,000 10,387,500
Intl Finance Euro
(U.S. Dollar) 8.25 1996 8,000,000 8,038,400
Intl Bank Reconstruction & Development
(U.S. Dollar) 12.375 2002 6,000,000 7,500,000
Japan Finance
(U.S. Dollar) 9.25 1998 25,950,000 27,052,875
KFW Intl Finance
(U.S. Dollar) 8.50 1999 10,000,000 10,175,000
Kingdom of Denmark Euro
(U.S. Dollar) 7.25 1996 8,000,000 7,924,320
Korea Electric Power
(U.S. Dollar) 6.375 2003 9,000,000 7,661,250
7.75 2013 5,000,000 4,337,500
8.00 2002 9,000,000 8,595,000
Province of Quebec
(U.S. Dollar) 11.00 2015 16,150,000 18,209,125
Republic of Columbia
(U.S. Dollar) 7.25 2004 13,400,000 11,323,000
Republic of Italy
(U.S. Dollar) 6.875 2023 22,000,000 17,132,500
<PAGE>
<S> <C> <C> <C> <C>
Roche Holdings
(U.S. Dollar) 2.75 2000 12,000,000 9,195,000
Tokyo Electric Power Euro
(U.S. Dollar) 6.125 2003 21,500,000 18,624,375
______________
Total 212,824,962
_____________________________________________________________________________________________________________________________
Total bonds
(Cost: $1,170,797,535) $1,125,572,213
_____________________________________________________________________________________________________________________________
<CAPTION>
Preferred stocks (0.4%)
_____________________________________________________________________________________________________________________________
Issuer Shares Value(a)
_____________________________________________________________________________________________________________________________
<S> <C> <C>
First Chicago
2.875% Cm Cv 60,000 $ 2,790,000
Sonoco Products
2.25% Cv 51,200 2,470,400
_____________________________________________________________________________________________________________________________
Total preferred stocks
(Cost: $5,559,300) $ 5,260,400
_____________________________________________________________________________________________________________________________
Options purchased (--%)
Issuer Number Exercise Expiration Value(a)
of contracts price date
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
March Treasury Bond Futures 500 $94 Feb. 1995 $ 242,185
_____________________________________________________________________________________________________________________________
Total options purchased
(Cost: $323,815) $ 242,185
_____________________________________________________________________________________________________________________________
Short-term securities (18.3%)
_____________________________________________________________________________________________________________________________
Issuer Annualized Amount Value(a)
yield on payable
date of at
purchase maturity
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C>
U.S. government agencies (0.9%)
Federal Home Loan Bank Disc Note
12-27-94 5.45% $ 7,000,000 $ 6,972,599
Federal Natl Mtge Assn Disc Notes
12-06-94 4.95 2,600,000 2,598,220
12-22-94 5.43 3,400,000 3,389,270
______________
Total 12,960,089
_____________________________________________________________________________________________________________________________
Certificate of deposit (0.4%)
Natl Bank of Detroit
12-08-94 5.16 5,000,000 4,994,328
_____________________________________________________________________________________________________________________________
<PAGE>
<S> <C> <C> <C> <C>
Commercial paper (16.4%)
Amer General Finance
01-12-95 5.54 5,700,000 5,661,169
Amgen
12-02-94 4.86 5,000,000 4,999,255
AT&T
02-15-95 5.87 5,200,000 5,132,154
Avco Financial Services
01-26-95 5.89 9,500,000 9,413,846
Banc One Diversified Services
12-06-94 5.15 6,500,000 6,494,901
01-12-95 5.51 4,500,000 4,469,344
Beneficial
12-12-94 5.25 7,800,000 7,786,897
12-28-94 5.53 5,100,000 5,078,962
Campbell Soup
12-22-94 5.25 2,600,000 (i) 2,592,083
Chevron Oil Finance
12-01-94 4.93 8,600,000 8,600,000
CIT Group Holdings
01-18-95 5.78 6,000,000 5,951,089
Colgate Palmolive
12-09-94 5.19 5,200,000 (i) 5,194,026
12-09-94 5.32 9,200,000 (i) 9,189,164
Consolidated Rail
12-13-94 5.19 5,800,000 (i) 5,790,024
Corporate Asset Funding
12-15-94 5.52 6,000,000 5,987,167
12-30-94 5.53 5,000,000 4,977,847
01-19-95 5.81 6,000,000 5,953,042
Eiger Capital
01-18-95 5.77 4,100,000 (i) 4,068,731
Fleet Funding
01-11-95 5.66 6,800,000 (i) 6,753,674
01-12-95 5.53 2,200,000 (i) 2,184,672
Ford Motor Credit
12-19-94 5.55 5,500,000 5,484,820
01-24-95 5.83 6,400,000 6,340,940
General Mills
12-20-94 5.52 9,400,000 9,372,763
Household Finance
01-20-95 5.82 4,000,000 3,967,944
01-27-95 5.78 4,500,000 4,457,933
Kredietbank North Amer Finance
02-28-95 5.97 10,800,000 10,669,590
Lilly (Eli)
12-13-94 5.50 5,000,000 4,990,867
02-01-95 5.85 7,500,000 7,419,937
Merrill Lynch
01-13-95 5.79 6,000,000 5,958,792
Metlife
12-08-94 5.17 5,300,000 5,294,693
Mobile Australia Finance
(Delaware)
12-06-94 5.02 5,200,000 (i) 5,196,389
Morgan Stanley
01-05-95 5.74 7,500,000 7,458,437
<PAGE>
<S> <C> <C> <C> <C>
Pfizer
12-21-94 5.53 9,000,000 8,972,500
Reed Elsevier
01-09-95 5.75 3,600,000 (i) 3,577,770
SmithKline Beecham
12-05-94 5.07 3,200,000 3,198,204
Southern California Gas
02-10-95 5.85 2,200,000 2,173,160
Southwestern Bell Capital
12-01-94 4.88 6,500,000 (i) 6,500,000
01-23-95 5.84 4,700,000 (i) 4,658,143
Sysco
01-20-95 5.81 3,400,000 (i) 3,372,847
USAA Capital
12-14-94 5.19 4,600,000 4,590,623
_____________
Total 229,934,399
_______________________________________________________________________________________________________________________________
Letter of credit (0.6%)
Bank of Amer-
AES Barbers Point
12-01-94 4.94 8,000,000 8,000,000
_____________________________________________________________________________________________________________________________
Total short-term securities
(Cost: $255,900,447) $ 255,888,816
_____________________________________________________________________________________________________________________________
Total investments in securities
(Cost: $1,432,581,097)(j) $1,386,963,614
_____________________________________________________________________________________________________________________________
Notes to investments in securities
_____________________________________________________________________________________________________________________________
(a) Securities are valued by procedures described in Note 1 to the financial statements.
(b) Security is partially or fully on loan. See Note 5 to the financial statements.
(c) For zero coupon bonds, the interest rate disclosed represents the annualized effective yield on the date of acquisition.
(d) 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.
(e) Principal only represents securities that entitle holders to receive only principal payments on the underlying mortgages.
The yield to maturity of a principal only is sensitive to the rate of principal payments on the underlying mortgage assets.
A slow (rapid) rate of principal repayments may have an adverse (positive) effect on yield to maturity. Interest rate
disclosed represents current yield based upon the current cost basis and estimated timing of future cash flows.
(f) Interest rate varies, rate shown is the effective rate on Nov. 30, 1994.
(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) 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.
(j) On Nov. 30, 1994, the cost of securities for federal income tax purposes was $1,430,918,060
and the aggregate gross unrealized appreciation and depreciation based on that cost was:
<CAPTION>
<S> <C>
Unrealized appreciation $ 15,022,806
Unrealized depreciation (58,977,252)
____________________________________________________________________________________________
Net unrealized depreciation $(43,954,446)
____________________________________________________________________________________________
</TABLE>
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<C> <C> <S>
(a) FINANCIAL STATEMENTS:
List of financial statements filed as part of this Post-Effective Amendment to the
Registration Statement:
- Independent Auditors' Report dated January 6, 1995
- Statement of Assets and Liabilities, November 30, 1994
- Statement of Operations, Year ended November 30, 1994
- Statement of Changes in Net Assets, for the two-year period ended November 30,
1993 and November 30, 1994
- Notes to Financial Statements
- Investments in Securities, November 30, 1994
- Notes to Investments in Securities
(b) EXHIBITS:
1. Articles of Incorporation, as amended October 17, 1988, filed electronically
as Exhibit 1 to Registrant's Post-Effective Amendment No. 69 to Registration
Statement No. 2-10700, is incorporated herein by reference.
2. By-laws, as amended January 12, 1989, filed electronically as Exhibit 2 to
Registrant's Post-Effective Amendment No. 69 to Registration Statement No.
2-10700, is incorporated herein by reference.
3. Not Applicable.
4. Stock certificate, filed as Exhibit 3 to Registrant's Form N-1Q for the
calendar quarter ended September 30, 1979, is incorporated herein by
reference.
5. Form of Investment Management Services Agreement between Registrant and
American Express Financial Corporation, dated March 20, 1995, is filed
electronically herewith.
6. Form of Distribution Agreement between Registrant and American Express
Financial Advisors Inc., dated March 20, 1995, is filed electronically
herewith.
7. All employees are eligible to participate in a profit sharing plan. Entry into
the plan is Jan. 1 or July 1. The Registrant contributes each year an amount
up to 15 percent of their annual salaries, the maximum deductible amount
permitted under Section 404(a) of the Internal Revenue Code.
8. Form of Custodian Agreement between Registrant and American Express Trust
Company, dated March 20, 1995, is filed electronically herewith.
9.(a) Plan and Agreement of Merger dated April 10, 1986, filed as Exhibit 9 to
Registrant's Post-Effective Amendment No. 62 to Registration Statement No.
2-10700, is incorporated herein by reference.
9.(b) Form of Transfer Agency Agreement between Registrant and American Express
Financial Corporation, dated March 20, 1995, is filed electronically herewith.
9.(c) Copy of License Agreement, dated January 25, 1988, between IDS Financial
Corporation and Registrant, filed electronically as Exhibit 9(c) to
Registrant's Post Effective Amendment No. 69 to Registration Statement No.
2-10700, is incorporated herein by reference.
9.(d) Form of Shareholder Service Agreement between Registrant and American Express
Financial Advisors Inc., dated March 20, 1995, is filed electronically
herewith.
9.(e) Form of Administrative Services Agreement between Registrant and American
Express Financial Corporation, dated March 20, 1995, is filed electronically
herewith.
10. Not Applicable.
11. Independent Auditors' Consent is filed electronically herewith.
12. None.
13. Not Applicable.
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <C> <S>
14. Forms of Keogh, IRA and other retirement plans, filed as Exhibits 14(a)
through 14(n) to IDS Growth Fund, Inc., Post Effective Amendment No. 34 to
Registration Statement No. 2-38355, are incorporated herein by reference.
15. Form of Plan and Agreement of Distribution between Registrant and American
Express Financial Advisors Inc., dated March 20, 1995, is filed electronically
herewith.
16. Copy of Schedule for computation of each performance quotation provided in the
Registration Statement in response to Item 22(b), filed as Exhibit 16 to
Post-Effective Amendment No. 75 to Registrant's Registration Statement No.
2-10700, is incorporated herein by reference.
17. Financial Data Schedule is filed electronically herewith.
18.(a) Directors' Power of Attorney to sign Amendments to this Registration
Statement, dated Nov. 10, 1994, filed electronically as Exhibit 18(a) to
Registrant's Post-Effective Amendment No. 79, is incorporated herein by
reference.
18.(b) Officers' Power of Attorney to sign Amendments to this Registration Statement,
dated June 1, 1993, filed concurrently as Exhibit 17(b) to Post-Effective
Amendment No. 76 to Registration Statement No. 2-10700, is incorporated herein
by reference.
</TABLE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
(1) (2)
NUMBER OF
RECORD
HOLDERS AS OF
JANUARY 23,
TITLE OF CLASS 1995
- -------------- -------------
<S> <C>
Common Stock 79,834
</TABLE>
II-2
<PAGE>
Item 27. Indemnification
The Articles of Incorporation of the registrant provide that the
Fund shall indemnify any person who was or is a party or is
threatened to be made a party, by reason of the fact that she or he
is or was a director, officer, employee or agent of the Fund, or is
or was serving at the request of the Fund as a director, officer,
employee or agent of another company, partnership, joint venture,
trust or other enterprise, to any threatened, pending or completed
action, suit or proceeding, wherever brought, and the Fund may
purchase liability insurance and advance legal expenses, all to the
fullest extent permitted by the laws of the State of Minnesota, as
now existing or hereafter amended. The By-laws of the registrant
provide that present or former directors or officers of the Fund
made or threatened to be made a party to or involved (including as
a witness) in an actual or threatened action, suit or proceeding
shall be indemnified by the Fund to the full extent authorized by
the Minnesota Business Corporation Act, all as more fully set forth
in the By-laws filed as an exhibit to this registration statement.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
Any indemnification hereunder shall not be exclusive of any other
rights of indemnification to which the directors, officers,
employees or agents might otherwise be entitled. No
indemnification shall be made in violation of the Investment
Company Act of 1940.
<PAGE>
<PAGE>
PAGE 1
<TABLE><CAPTION>
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)
Directors and officers of American Express Financial Corporation who are directors and/or
officers of one or more other companies:
<S> <C> <C>
Ronald G. Abrahamson, Vice President--Service Quality and Reengineering
American Express Financial Advisors IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Service Quality
and Reengineering
American Express Service Corporation Vice President
Douglas A. Alger, Vice President--Total Compensation
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Total Compensation
Jerome R. Amundson, Vice President and Controller--Investment Accounting
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Controller-Investment
Accounting
Peter J. Anderson, Director and Senior Vice President--Investments
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Investments
IDS Advisory Group Inc. Director and Chairman
of the Board
IDS Capital Holdings Inc. Director and President
IDS Fund Management Limited Director
IDS International, Inc. Director, Chairman of the
Board and Executive Vice
President
IDS Securities Corporation Executive Vice President-
Investments
NCM Capital Management Group, Inc. 2 Mutual Plaza Director
501 Willard Street
Durham, NC 27701
Ward D. Armstrong, Vice President-Sales and Marketing, American Express Institutional Services
American Express Financial Advisors IDS Tower 10 Vice President-Sales and
Minneapolis, MN 55440 Marketing, American
Express Institutional
Services
Kent L. Ashton, Vice President--Financial Education Services
American Express Financial Advisors IDS Tower 10 Vice President-Financial
Minneapolis, MN 55440 Education Services
<PAGE>
PAGE 2
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Joseph M. Barsky III, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager
IDS Advisory Group Inc. Vice President
Robert C. Basten, Vice President--Tax and Business Services
American Express Financial Advisors IDS Tower 10 Vice President-Tax
Minneapolis, MN 55440 and Business Services
American Express Tax & Business Director, President and
Services Inc. Chief Executive Officer
Timothy V. Bechtold, Vice President--Insurance Product Development
American Express Financial Advisors IDS Tower 10 Vice President-Insurance
Minneapolis, MN 55440 Product Development
IDS Life Insurance Company Vice President-Insurance
Product Development
Carl E. Beihl, Vice President--Strategic Technology Planning
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Strategic Technology
Planning
Alan F. Bignall, Vice President--Financial Planning Systems
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Financial Planning
Systems
American Express Service Corporation Vice President
John C. Boeder, Vice President--Mature Market Group
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Mature Market Group
IDS Life Insurance Company of New York Box 5144 Director
Albany, NY 12205
Karl J. Breyer, Director and Senior Vice President--Corporate Affairs and General Counsel
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Corporate Affairs and
Special Counsel
American Express Minnesota Foundation Director
IDS Aircraft Services Corporation Director and President
<PAGE>
PAGE 3
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Harold E. Burke, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
American Express Service Corporation Vice President
Daniel J. Candura, Vice President--Marketing Support
American Express Financial Advisors IDS Tower 10 Vice President-Marketing
Minneapolis, MN 55440 Support
Cynthia M. Carlson, Vice President--American Express Securities Services
American Enterprise Investment IDS Tower 10 Director, President and
Services Inc. Minneapolis, MN 55440 Chief Executive Officer
American Express Financial Advisors Vice President-IDS
Securities Services
Orison Y. Chaffee III, Vice President--Field Real Estate
American Express Financial Advisors IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Real Estate
James E. Choat, Director and Senior Vice President--Field Management
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Field Management
American Express Minnesota Foundation Director
American Express Service Corporation Vice President
IDS Insurance Agency of Alabama Inc. Vice President--North
Central Region
IDS Insurance Agency of Arkansas Inc. Vice President--North
Central Region
IDS Insurance Agency of Massachusetts Inc. Vice President--North
Central Region
IDS Insurance Agency of Nevada Inc. Vice President--North
Central Region
IDS Insurance Agency of New Mexico Inc. Vice President--North
Central Region
IDS Insurance Agency of North Carolina Inc. Vice President--North
Central Region
IDS Insurance Agency of Ohio Inc. Vice President--North
Central Region
IDS Insurance Agency of Wyoming Inc. Vice President-- North
Central Region
IDS Property Casualty Insurance Co. Director
<PAGE>
PAGE 4
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Kenneth J. Ciak, Vice President and General Manager--IDS Property Casualty
American Express Financial Advisors IDS Tower 10 Vice President and General
Minneapolis, MN 55440 Manager-IDS Property
Casualty
IDS Property Casualty Insurance Co. I WEG Blvd. Director and President
DePere, Wisconsin 54115
Alan R. Dakay, Vice President--Institutional Insurance Marketing
American Enterprise Life Insurance Co. IDS Tower 10 Director and President
Minneapolis, MN 55440
American Express Financial Advisors Vice President -
Institutional Insurance
Marketing
American Partners Life Insurance Co. Director and President
IDS Life Insurance Company Vice President -
Institutional Insurance
Marketing
Regenia David, Vice President--Systems Services
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Systems Services
William H. Dudley, Director and Executive Vice President--Investment Operations
American Express Financial Advisors IDS Tower 10 Director and Executive
Minneapolis, MN 55440 Vice President-
Investment Operations
IDS Advisory Group Inc. Director
IDS Capital Holdings Inc. Director
IDS Futures Corporation Director
IDS Futures III Corporation Director
IDS International, Inc. Director
IDS Securities Corporation Director, Chairman of the
Board, President and
Chief Executive Officer
Roger S. Edgar, Director and Senior Vice President--Information Systems
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Information Systems
<PAGE>
PAGE 5
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Gordon L. Eid, Director, Senior Vice President and Deputy General Counsel
American Express Financial Advisors IDS Tower 10 Senior Vice President and
Minneapolis, MN 55440 General Counsel
IDS Insurance Agency of Alabama Inc. Director and Vice President
IDS Insurance Agency of Arkansas Inc. Director and Vice President
IDS Insurance Agency of Massachusetts Inc. Director and Vice President
IDS Insurance Agency of Nevada Inc. Director and Vice President
IDS Insurance Agency of New Mexico Inc. Director and Vice President
IDS Insurance Agency of North Carolina Inc. Director and Vice President
IDS Insurance Agency of Ohio Inc. Director and Vice President
IDS Insurance Agency of Wyoming Inc. Director and Vice President
IDS Real Estate Services, Inc. Vice President
Investors Syndicate Development Corp. Director
Robert M. Elconin, Vice President--Government Relations
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Government Relations
IDS Life Insurance Company Vice President
Mark A. Ernst, Vice President--Retail Services
American Enterprise Investment IDS Tower 10 Director
Services Inc. Minneapolis, MN 55440
American Express Financial Advisors Vice President-
Retail Services
American Express Tax & Business Director and Chairman of
Services Inc. the Board
Gordon M. Fines, Vice President--Mutual Fund Equity Investments
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Mutual Fund Equity
Investments
IDS Advisory Group Inc. Executive Vice President
IDS International, Inc. Vice President and
Portfolio Manager
<PAGE>
PAGE 6
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Louis C. Fornetti, Director, Senior Vice President and Chief Financial Officer
American Enterprise Investment IDS Tower 10 Vice President
Services Inc. Minneapolis, MN 55440
American Express Financial Advisors Senior Vice President and
Chief Financial Officer
American Express Tax & Business Director
Services Inc.
American Express Trust Company Director
IDS Cable Corporation Director
IDS Cable II Corporation Director
IDS Capital Holdings Inc. Senior Vice President
IDS Certificate Company Vice President
IDS Insurance Agency of Alabama Inc. Vice President
IDS Insurance Agency of Arkansas Inc. Vice President
IDS Insurance Agency of Massachusetts Inc. Vice President
IDS Insurance Agency of Nevada Inc. Vice President
IDS Insurance Agency of New Mexico Inc. Vice President
IDS Insurance Agency of North Carolina Inc. Vice President
IDS Insurance Agency of Ohio Inc. Vice President
IDS Insurance Agency of Wyoming Inc. Vice President
IDS Life Insurance Company Director
IDS Life Series Fund, Inc. Vice President
IDS Life Variable Annuity Funds A&B Vice President
IDS Property Casualty Insurance Co. Director and Vice President
IDS Real Estate Services, Inc. Vice President
IDS Sales Support Inc. Director
IDS Securities Corporation Vice President
Investors Syndicate Development Corp. Vice President
Robert G. Gilbert, Vice President--Real Estate
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Real Estate
John J. Golden, Vice President--Field Compensation Development
American Express Financial Advisors IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Compensation Development
Harvey Golub, Director
American Express Company American Express Tower Chairman and Chief
World Financial Center Executive Officer
New York, New York 10285
American Express Travel Chairman and Chief
Related Services Company, Inc. Executive Officer
National Computer Systems, Inc. 11000 Prairie Lakes Drive Director
Minneapolis, MN 55440
<PAGE>
PAGE 7
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Morris Goodwin Jr., Vice President and Corporate Treasurer
American Enterprise Investment IDS Tower 10 Vice President and
Services Inc. Minneapolis, MN 55440 Treasurer
American Enterprise Life Insurance Vice President and
Company Treasurer
American Express Financial Advisors Vice President and
Corporate Treasurer
American Express Minnesota Foundation Director, Vice President
and Treasurer
American Express Service Corporation Vice President and
Treasurer
American Express Tax & Business Vice President and
Services Inc. Treasurer
IDS Advisory Group Inc. Vice President and
Treasurer
IDS Aircraft Services Corporation Vice President and
Treasurer
IDS Cable Corporation Vice President and
Treasurer
IDS Cable II Corporation Vice President and
Treasurer
IDS Capital Holdings Inc. Vice President and
Treasurer
IDS Certificate Company Vice President and
Treasurer
IDS Deposit Corp. Director, President
and Treasurer
IDS Insurance Agency of Alabama Inc. Vice President and
Treasurer
IDS Insurance Agency of Arkansas Inc. Vice President and
Treasurer
IDS Insurance Agency of Massachusetts Inc. Vice President and
Treasurer
IDS Insurance Agency of Nevada Inc. Vice President and
Treasurer
IDS Insurance Agency of New Mexico Inc. Vice President and
Treasurer
IDS Insurance Agency of North Carolina Inc. Vice President and
Treasurer
IDS Insurance Agency of Ohio Inc. Vice President and
Treasurer
IDS Insurance Agency of Wyoming Inc. Vice President and
Treasurer
IDS International, Inc. Vice President and
Treasurer
IDS Life Insurance Company Vice President and
Treasurer
IDS Life Series Fund, Inc. Vice President and
Treasurer
<PAGE>
PAGE 8
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
IDS Life Variable Annuity Funds A&B Vice President and
Treasurer
IDS Management Corporation Vice President and
Treasurer
IDS Partnership Services Corporation Vice President and
Treasurer
IDS Plan Services of California, Inc. Vice President and
Treasurer
IDS Property Casualty Insurance Co. Vice President and
Treasurer
IDS Real Estate Services, Inc Vice President and
Treasurer
IDS Realty Corporation Vice President and
Treasurer
IDS Sales Support Inc. Director, Vice President
and Treasurer
IDS Securities Corporation Vice President and
Treasurer
Investors Syndicate Development Corp. Vice President and
Treasurer
NCM Capital Management Group, Inc. 2 Mutual Plaza Director
501 Willard Street
Durham, NC 27701
Sloan Financial Group, Inc. Director
Suzanne Graf, Vice President--Systems Services
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Systems Services
David A. Hammer, Vice President and Marketing Controller
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Marketing Controller
IDS Plan Services of California, Inc. Director and Vice President
Lorraine R. Hart, Vice President--Insurance Investments
American Enterprise Life IDS Tower 10 Vice President-Investments
Insurance Company Minneapolis, MN 55440
American Express Financial Advisors Vice President-Insurance
Investments
American Partners Life Insurance Co. Director and Vice
President-Investments
IDS Certificate Company Vice President-Investments
IDS Life Insurance Company Vice President-Investments
IDS Property Casualty Insurance Company Vice President-Investment
Officer
Investors Syndicate Development Corp. Vice President-Investments
<PAGE>
PAGE 9
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Scott A. Hawkinson, Vice President--Assured Assets Product Development and Management
American Express Financial Advisors IDS Tower 10 Vice President-Assured
Minneapolis, MN 55440 Assets Product
Development & Management
Raymond E. Hirsch, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager
IDS Advisory Group Inc. Vice President
James G. Hirsh, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
IDS Securities Corporation Director, Vice President
and General Counsel
Darryl G. Horsman, Vice President--Product Development and Technology, American Express
Institutional Services
American Express Trust Company IDS Tower 10 Vice President
Minneapolis, MN 55440
Kevin P. Howe, Vice President--Government and Customer Relations and Chief Compliance Officer
American Enterprise Investment IDS Tower 10 Vice President and
Services Inc. Minneapolis, MN 55440 Compliance Officer
American Express Financial Advisors Vice President-
Government and
Customer Relations
American Express Service Corporation Vice President
IDS Securities Corporation Vice President and Chief
Compliance Officer
David R. Hubers, Director, President and Chief Executive Officer
American Express Financial Advisors IDS Tower 10 Chairman, Chief Executive
Minneapolis, MN 55440 Officer and President
American Express Service Corporation Director and President
IDS Aircraft Services Corporation Director
IDS Certificate Company Director
IDS Life Insurance Company Director
IDS Plan Services of California, Inc. Director and President
IDS Property Casualty Insurance Co. Director
Marietta L. Johns, Director and Senior Vice President--Field Management
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Field Management
<PAGE>
PAGE 10
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Douglas R. Jordal, Vice President--Taxes
American Express Financial Advisors IDS Tower 10 Vice President-Taxes
Minneapolis, MN 55440
IDS Aircraft Services Corporation Vice President
Craig A. Junkins, Vice President--IDS 1994 Implementation Planning and Financial Planning
Development
American Express Financial Advisors IDS Tower 10 Vice President-IDS 1994
Minneapolis, MN 55440 Implementation Planning
and Financial Planning
Development
American Express Service Corporation Vice President
James E. Kaarre, Vice President--Marketing Information
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Marketing Information
Linda B. Keene, Vice President--Market Development
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Market Development
G. Michael Kennedy, Vice President--Investment Services and Investment Research
American Express Financial Advisors IDS Tower 10 Vice President-Investment
Minneapolis, MN 55440 Services and Investment
Research
Susan D. Kinder, Director and Senior Vice President--Human Resources
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Human Resources
American Express Minnesota Foundation Director
American Express Service Corporation Vice President
<PAGE>
PAGE 11
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Richard W. Kling, Director and Senior Vice President--Risk Management Products
American Enterprise Life Insurance Co. IDS Tower 10 Director and Chairman of
Minneapolis, MN 55440 the Board
American Express Financial Advisors Senior Vice President-
Risk Management Products
American Partners Life Insurance Co. Director and Chairman of
the Board
IDS Insurance Agency of Alabama Inc. Director and President
IDS Insurance Agency of Arkansas Inc. Director and President
IDS Insurance Agency of Massachusetts Inc. Director and President
IDS Insurance Agency of Nevada Inc. Director and President
IDS Insurance Agency of New Mexico Inc. Director and President
IDS Insurance Agency of North Carolina Inc. Director and President
IDS Insurance Agency of Ohio Inc. Director and President
IDS Insurance Agency of Wyoming Inc. Director and President
IDS Life Insurance Company Director and President
IDS Life Series Fund, Inc. Director and President
IDS Life Variable Annuity Funds A&B Member of Board of
Managers, Chairman of the
Board and President
IDS Property Casualty Insurance Co. Director and Chairman of
the Board
IDS Life Insurance Company P.O. Box 5144 Director, Chairman of the
of New York Albany, NY 12205 Board and President
Harold D. Knutson, Vice President--System Services
American Express Financial Advisors IDS Tower 10 Vice President--
Minneapolis, MN 55440 System Services
Paul F. Kolkman, Vice President--Actuarial Finance
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Actuarial Finance
IDS Life Insurance Company Director and Executive
Vice President
IDS Life Series Fund, Inc. Vice President and Chief
Actuary
Claire Kolmodin, Vice President--Service Quality
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Service Quality
Steven C. Kumagai, Director and Senior Vice President--Field Management and Business Systems
American Express Financial Advisors IDS Tower 10 Director and Senior Vice
Minneapolis, MN 55440 President-Field
Management and Business
Systems
American Express Service Corporation Vice President
<PAGE>
PAGE 12
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Edward Labenski, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio
Manager
IDS Advisory Group Inc. Senior Vice President
Kurt A. Larson, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio Manager
Lori J. Larson, Vice President--Variable Assets Product Development
American Express Financial Advisors IDS Tower 10 Vice President-Variable
Minneapolis, MN 55440 Assets Product
Development
IDS Cable Corporation Director and Vice President
IDS Cable II Corporation Director and Vice President
IDS Futures Brokerage Group Assistant Vice President-
General Manager/Director
IDS Futures Corporation Director and Vice President
IDS Futures III Corporation Director and Vice President
IDS Management Corporation Director and Vice President
IDS Partnership Services Corporation Director and Vice President
IDS Realty Corporation Director and Vice President
Ryan R. Larson, Vice President--IPG Product Development
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 IPG Product Development
IDS Life Insurance Company Vice President-
Annuity Product
Development
Daniel E. Laufenberg, Vice President and Chief U.S. Economist
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Chief U.S. Economist
Richard J. Lazarchic, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager
<PAGE>
PAGE 13
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Peter A. Lefferts, Director, Senior Vice President and Chief Marketing Officer
American Express Financial Advisors IDS Tower 10 Senior Vice President and
Minneapolis, MN 55440 Chief Marketing Officer
American Express Trust Company Director and Chairman of
the Board
IDS Life Insurance Company Director and Executive
Vice President-Marketing
IDS Plan Services of California, Inc. Director
Investors Syndicate Development Corp. Director
Douglas A. Lennick, Director and Executive Vice President--Private Client Group
American Express Financial Advisors IDS Tower 10 Director and Executive
Minneapolis, MN 55440 Vice President-Private
Client Group
American Express Service Corporation Vice President
Mary J. Malevich, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio
Manager
IDS International, Inc. Vice President and
Portfolio Manager
Fred A. Mandell, Vice President--Field Marketing Readiness
American Express Financial Advisors IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Marketing Readiness
William J. McKinney, Vice President--Field Management Support
American Express Financial Advisors IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Management Support
Thomas W. Medcalf, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager
William C. Melton, Vice President-International Research and Chief International Economist
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 International Research
and Chief International
Economist
<PAGE>
PAGE 14
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Janis E. Miller, Vice President--Variable Assets
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Variable Assets
IDS Cable Corporation Director and President
IDS Cable II Corporation Director and President
IDS Futures Corporation Director and President
IDS Futures III Corporation Director and President
IDS Life Insurance Company Director and Executive
Vice President-Variable
Assets
IDS Life Series Fund, Inc. Director
IDS Life Variable Annuity Funds A&B Director
IDS Management Corporation Director and President
IDS Partnership Services Corporation Director and President
IDS Realty Corporation Director and President
IDS Life Insurance Company of New York Box 5144 Executive Vice President
Albany, NY 12205
James A. Mitchell, Director and Executive Vice President--Marketing and Products
American Enterprise Investment IDS Tower 10 Director
Services Inc. Minneapolis, MN 55440
American Express Financial Advisors Executive Vice President-
Marketing and Products
IDS Certificate Company Director and Chairman of
the Board
IDS Life Insurance Company Director, Chairman of
the Board and Chief
Executive Officer
IDS Plan Services of California, Inc. Director
IDS Property Casualty Insurance Co. Director
Pamela J. Moret, Vice President--Corporate Communications
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Corporate Communications
American Express Minnesota Foundation Director and President
Barry J. Murphy, Director and Senior Vice President--Client Service
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Client Service
IDS Life Insurance Company Director and Executive
Vice President-Client
Service
<PAGE>
PAGE 15
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Robert J. Neis, Vice President--Information Systems Operations
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Information Systems
Operations
James R. Palmer, Vice President--Insurance Operations
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Insurance Operations
IDS Life Insurance Company Vice President-Taxes
Carla P. Pavone, Vice President--Specialty Service Teams and Emerging Business
American Express Financial Advisors IDS Tower 10 Vice President-Specialty
Minneapolis, MN 55440 Service Teams and
Emerging Business
Judith A. Pennington, Vice President--Field Technology
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Field Technology
George M. Perry, Vice President--Corporate Strategy and Development
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Corporate Strategy
and Development
IDS Property Casualty Insurance Co. Director
Susan B. Plimpton, Vice President--Segmentation Development and Support
American Express Financial Advisors IDS Tower 10 Vice President--
Minneapolis, MN 55440 Segmentation Development
and Support
Ronald W. Powell, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
IDS Cable Corporation Vice President and
Assistant Secretary
IDS Cable II Corporation Vice President and
Assistant Secretary
IDS Management Corporation Vice President and
Assistant Secretary
IDS Partnership Services Corporation Vice President and
Assistant Secretary
IDS Plan Services of California, Inc. Vice President and
Assistant Secretary
IDS Realty Corporation Vice President and
Assistant Secretary
<PAGE>
PAGE 16
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
James M. Punch, Vice President--TransAction Services
American Express Financial Advisors IDS Tower 10 Vice President-Trans
Minneapolis, MN 55440 Action Services
Frederick C. Quirsfeld, Vice President--Taxable Mutual Fund Investments
American Express Financial Advisors IDS Tower 10 Vice President--
Minneapolis, MN 55440 Taxable Mutual Fund
Investments
IDS Advisory Group Inc. Vice President
ReBecca K. Roloff, Vice President--1994 Program Director
American Express Financial Advisors IDS Tower 10 Vice President-1994
Minneapolis, MN 55440 Program Director
Stephen W. Roszell, Vice President--Advisory Institutional Marketing
American Express Financial Advisors IDS Tower 10 Vice President-Advisory
Minneapolis, MN 55440 Institutional Marketing
IDS Advisory Group Inc. President and Chief
Executive Officer
Robert A. Rudell, Vice President--American Express Institutional Services
American Express Financial Advisors IDS Tower 10 Vice President-American
Minneapolis, MN 55440 Express Institutional
Services
American Express Trust Company Director
IDS Sales Support Inc. Director and President
John P. Ryan, Vice President and General Auditor
American Express Financial Advisors IDS Tower 10 Vice President and General
Minneapolis, MN 55440 Auditor
<PAGE>
PAGE 17
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Erven A. Samsel, Director and Senior Vice President--Field Management
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Field Management
American Express Service Corporation Vice President
IDS Insurance Agency of Alabama Inc. Vice President-
New England Region
IDS Insurance Agency of Arkansas Inc. Vice President-
New England Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
New England Region
IDS Insurance Agency of Nevada Inc. Vice President-
New England Region
IDS Insurance Agency of New Mexico Inc. Vice President-
New England Region
IDS Insurance Agency of North Carolina Inc. Vice President-
New England Region
IDS Insurance Agency of Ohio Inc. Vice President-
New England Region
IDS Insurance Agency of Wyoming Inc. Vice President-
New England Region
Stuart A. Sedlacek, Vice President--Assured Assets
American Enterprise Life Insurance Co. IDS Tower 10 Director and Executive
Minneapolis, MN 55440 Vice President, Assured
Assets
American Express Financial Advisors Vice President-
Assured Assets
IDS Certificate Company Director and President
IDS Life Insurance Company Director and Executive
Vice President, Assured
Assets
Investors Syndicate Development Corp. Chairman of the Board
and President
Donald K. Shanks, Vice President--Property Casualty
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Property Casualty
IDS Property Casualty Insurance Co. Senior Vice President
<PAGE>
PAGE 18
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
F. Dale Simmons, Vice President--Senior Portfolio Manager, Insurance Investments
American Enterprise Life Insurance Co. IDS Tower 10 Vice President-Real
Minneapolis, MN 55440 Estate Loan Management
American Express Financial Advisors Vice President-Senior
Portfolio Manager
Insurance Investments
American Partners Life Insurance Co. Vice President-Real
Estate Loan Management
IDS Certificate Company Vice President-Real
Estate Loan Management
IDS Life Insurance Company Vice President-Real
Estate Loan Management
IDS Partnership Services Corporation Vice President
IDS Real Estate Services Inc. Director and Vice President
IDS Realty Corporation Vice President
IDS Life Insurance Company of New York Box 5144 Vice President and
Albany, NY 12205 Assistant Treasurer
Judy P. Skoglund, Vice President--Human Resources and Organization Development
American Express Financial Advisors IDS Tower 10 Vice President-Human
Minneapolis, MN 55440 Resources and
Organization Development
Ben C. Smith, Vice President--Workplace Marketing
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Workplace Marketing
William A. Smith, Vice President and Controller--Private Client Group
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Controller-Private
Client Group
Bridget Sperl, Vice President--Human Resources Management Services
American Express Financial Advisors IDS Tower 10 Vice President-Human
Minneapolis, MN 55440 Resources Management
Services
Jeffrey E. Stiefler, Director
American Express Company American Express Tower Director and President
World Financial Center
New York, NY 10285
<PAGE>
PAGE 19
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
William A. Stoltzmann, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
American Partners Life Insurance Co. Director, Vice President,
General Counsel and
Secretary
IDS Life Insurance Company Vice President, General
Counsel and Secretary
IDS Life Series Fund, Inc. General Counsel and
Assistant Secretary
IDS Life Variable Annuity Funds A&B General Counsel and
Assistant Secretary
American Enterprise Life Insurance P.O. Box 534 Director, Vice President,
Company Minneapolis, MN 55440 General Counsel
and Secretary
James J. Strauss, Vice President--Corporate Planning and Analysis
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Corporate Planning and
Analysis
Jeffrey J. Stremcha, Vice President--Information Resource Management/ISD
American Express Financial Advisors IDS Tower 10 Vice President-Information
Minneapolis, MN 55440 Resource Management/ISD
Fenton R. Talbott, Director
ACUMA Ltd. ACUMA House President and Chief
The Glanty, Egham Executive Officer
Surrey TW 20 9 AT
UK
<PAGE>
PAGE 20
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
John R. Thomas, Director and Senior Vice President--Information and Technology
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Information and
Technology
IDS Bond Fund, Inc. Director
IDS California Tax-Exempt Trust Trustee
IDS Discovery Fund, Inc. Director
IDS Equity Select Fund, Inc. Director
IDS Extra Income Fund, Inc. Director
IDS Federal Income Fund, Inc. Director
IDS Global Series, Inc. Director
IDS Growth Fund, Inc. Director
IDS High Yield Tax-Exempt Fund, Inc. Director
IDS Investment Series, Inc. Director
IDS Managed Retirement Fund, Inc. Director
IDS Market Advantage Series, Inc. Director
IDS Money Market Series, Inc. Director
IDS New Dimensions Fund, Inc. Director
IDS Precious Metals Fund, Inc. Director
IDS Progressive Fund, Inc. Director
IDS Selective Fund, Inc. Director
IDS Special Tax-Exempt Series Trust Trustee
IDS Stock Fund, Inc. Director
IDS Strategy Fund, Inc. Director
IDS Tax-Exempt Bond Fund, Inc. Director
IDS Tax-Free Money Fund, Inc. Director
IDS Utilities Income Fund, Inc. Director
Melinda S. Urion, Vice President and Corporate Controller
American Enterprise Life IDS Tower 10 Vice President and
Insurance Company Minneapolis, MN 55440 Controller
American Express Financial Advisors Vice President and
Corporate Controller
American Partners Life Insurance Co. Director, Vice President,
Controller and Treasurer
IDS Life Insurance Company Director, Executive Vice
President and Controller
IDS Life Series Fund, Inc. Vice President and
Controller
Wesley W. Wadman, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio Manager
IDS Advisory Group Inc. Executive Vice President
IDS Fund Management Limited Director and Chairman
IDS International, Inc. Senior Vice President
<PAGE>
PAGE 21
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Norman Weaver, Jr., Director and Senior Vice President--Field Management
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Field Management
American Express Service Corporation Vice President
IDS Insurance Agency of Alabama Inc. Vice President-
Pacific Region
IDS Insurance Agency of Arkansas Inc. Vice President-
Pacific Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
Pacific Region
IDS Insurance Agency of Nevada Inc. Vice President-
Pacific Region
IDS Insurance Agency of New Mexico Inc. Vice President-
Pacific Region
IDS Insurance Agency of North Carolina Inc. Vice President-
Pacific Region
IDS Insurance Agency of Ohio Inc. Vice President-
Pacific Region
IDS Insurance Agency of Wyoming Inc. Vice President-
Pacific Region
Michael L. Weiner, Vice President--Corporate Tax Operations
American Express Financial Advisors IDS Tower 10 Vice President-Corporate
Minneapolis, MN 55440 Tax Operations
IDS Capital Holdings Inc. Vice President
IDS Futures Brokerage Group Vice President
IDS Futures Corporation Vice President, Treasurer
and Secretary
IDS Futures III Corporation Vice President, Treasurer
and Secretary
Lawrence J. Welte, Vice President--Investment Administration
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Investment Administration
IDS Securities Corporation Director, Executive Vice
President and Chief
Operating Officer
Jeffry F. Welter, Vice President--Equity and Fixed Income Trading
American Express Financial Advisors IDS Tower 10 Vice President-Equity
Minneapolis, MN 55440 and Fixed Income Trading
<PAGE>
PAGE 22
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
William N. Westhoff, Director, Senior Vice President and Global Chief Investment Officer
American Enterprise Life Insurance IDS Tower 10 Director
Company Minneapolis, MN 55440
American Express Financial Advisors Senior Vice President and
Global Chief Investment
Officer
IDS International, Inc. Director
IDS Partnership Services Corporation Director and Vice President
IDS Real Estate Services Inc. Director, Chairman of the
Board and President
IDS Realty Corporation Director and Vice President
Investors Syndicate Development Corp. Director
Edwin M. Wistrand, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
Michael R. Woodward, Director and Senior Vice President--Field Management
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Field Management
American Express Service Corporation Vice President
IDS Insurance Agency of Alabama Inc. Vice President-
North Region
IDS Insurance Agency of Arkansas Inc. Vice President-
North Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
North Region
IDS Insurance Agency of Nevada Inc. Vice President-
North Region
IDS Insurance Agency of New Mexico Inc. Vice President-
North Region
IDS Insurance Agency of North Carolina Inc. Vice President-
North Region
IDS Insurance Agency of Ohio Inc. Vice President-
North Region
IDS Insurance Agency of Wyoming Inc. Vice President-
North Region
IDS Life Insurance Company Box 5144 Director
of New York Albany, NY 12205
</TABLE>
<PAGE>
PAGE 23
Item 29. Principal Underwriters.
(a) American Express Financial Advisors acts as principal
underwriter for the following investment companies:
IDS Bond Fund, Inc.; IDS California Tax-Exempt Trust; IDS
Discovery Fund, Inc.; IDS Equity Select Fund, Inc.; IDS Extra
Income Fund, Inc.; IDS Federal Income Fund, Inc.; IDS Global
Series, Inc.; IDS Growth Fund, Inc.; IDS High Yield Tax-Exempt
Fund, Inc.; IDS International Fund, Inc.; IDS Investment
Series, Inc.; IDS Managed Retirement Fund, Inc.; IDS Market
Advantage Series, Inc.; IDS Money Market Series, Inc.; IDS New
Dimensions Fund, Inc.; IDS Precious Metals Fund, Inc.; IDS
Progressive Fund, Inc.; IDS Selective Fund, Inc.; IDS Special
Tax-Exempt Series Trust; IDS Stock Fund, Inc.; IDS Strategy
Fund, Inc.; IDS Tax-Exempt Bond Fund, Inc.; IDS Tax-Free Money
Fund, Inc.; IDS Utilities Income Fund, Inc. and IDS
Certificate Company.
(b) As to each director, officer or partner of the principal
underwriter:
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Ronald G. Abrahamson Vice President- None
IDS Tower 10 Service Quality and
Minneapolis, MN 55440 Reengineering
Douglas A. Alger Vice President-Total None
IDS Tower 10 Compensation
Minneapolis, MN 55440
Jerome R. Amundson Vice President and None
IDS Tower 10 Controller-Investment
Minneapolis, MN 55440 Accounting
Peter J. Anderson Senior Vice President- None
IDS Tower 10 Investments
Minneapolis, MN 55440
Ward D. Armstrong Vice President- None
IDS Tower 10 Sales and Marketing,
Minneapolis, MN 55440 American Express
Institutional Services
Alvan D. Arthur Group Vice President- None
IDS Tower 10 Central California/
Minneapolis, MN 55440 Western Nevada
Kent L. Ashton Vice President- None
IDS Tower 10 Financial Education
Minneapolis, MN 55440 Services
<PAGE>
PAGE 24
Item 29(b). (Continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Joseph M. Barsky III Vice President-Senior None
IDS Tower 10 Portfolio Manager
Minneapolis, MN 55440
Robert C. Basten Vice President-Tax None
IDS Tower 10 and Business Services
Minneapolis, MN 55440
Timothy V. Bechtold Vice President-Insurance None
IDS Tower 10 Product Development
Minneapolis, MN 55440
John D. Begley Group Vice Presdient- None
Olentangy Valley Center Ohio/Indiana
Suite 300
7870 Olentangy River Rd.
Columbus, OH 43235
Carl E. Beihl Vice President- None
IDS Tower 10 Strategic Technology
Minneapolis, MN 55440 Planning
Jack A. Benjamin Group Vice President- None
Greater Pennsylvania
Alan F. Bignall Vice President- None
IDS Tower 10 Financial Planning
Minneapolis, MN 55440 Systems
Brent L. Bisson Group Vice President- None
Seafirst Financial Los Angeles Metro
Center, Suite 1730
601 W. Riverside Ave.
Spokane, WA 99201
John C. Boeder Vice President- None
IDS Tower 10 Mature Market Group
Minneapolis, MN 55440
Bruce J. Bordelon Group Vice President- None
Gulf States
Charles R. Branch Group Vice President- None
Northwest
Karl J. Breyer Senior Vice President- None
IDS Tower 10 Corporate Affairs and
Minneapolis, MN 55440 Special Counsel
Harold E. Burke Vice President None
IDS Tower 10 and Assistant
Minneapolis, MN 55440 General Counsel<PAGE>
PAGE 25
Item 29(b). (Continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Daniel J. Candura Vice President- None
IDS Tower 10 Marketing Support
Minneapolis, MN 55440
Cynthia M. Carlson Vice President- None
IDS Tower 10 American Express
Minneapolis, MN 55440 Securities Services
Orison Y. Chaffee III Vice President-Field None
IDS Tower 10 Real Estate
Minneapolis, MN 55440
James E. Choat Senior Vice President- None
Suite 124 Field Management
6210 Campbell Rd.
Dallas, TX 75248
Kenneth J. Ciak Vice President and None
IDS Property Casualty General Manager-
1400 Lombardi Avenue IDS Property Casualty
Green Bay, WI 54304
Roger C. Corea Group Vice President- None
345 Woodcliff Drive Upstate New York
Fairport, NY 14450
Henry J. Cormier Group Vice President- None
Connecticut
John M. Crawford Group Vice President- None
Arkansas/Springfield/Memphis
Kevin F. Crowe Group Vice President- None
IDS Tower 10 Carolinas/Eastern Georgia
Minneapolis, MN 55440
Alan R. Dakay Vice President- None
IDS Tower 10 Institutional Insurance
Minneapolis, MN 55440 Marketing
Regenia David Vice President- None
Systems Services
Scott M. Digiammarino Group Vice President- None
Washington/Baltimore
Bradford L. Drew Group Vice President- None
Eastern Florida
<PAGE>
PAGE 26
Item 29(b). (Continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
William H. Dudley Director and Executive Director/
IDS Tower 10 Vice President- Trustee
Minneapolis MN 55440 Investment Operations
Roger S. Edgar Senior Vice President- None
IDS Tower 10 Information Systems
Minneapolis, MN 55440
Gordon L. Eid Senior Vice President None
IDS Tower 10 and General Counsel
Minneapolis, MN 55440
Robert M. Elconin Vice President- None
IDS Tower 10 Government Relations
Minneapolis, MN 55440
Mark A. Ernst Vice President- None
IDS Tower 10 Retail Services
Minneapolis, MN 55440
Joseph Evanovich Jr. Group Vice President- None
Nebraska/Iowa/Dakotas
Louise P. Evenson Group Vice President- None
San Francisco Bay Area
Gordon M. Fines Vice President- None
IDS Tower 10 Mutual Fund Equity
Minneapolis MN 55440 Investments
Louis C. Fornetti Senior Vice President None
IDS Tower 10 and Chief Financial
Minneapolis, MN 55440 Officer
Douglas L. Forsberg Group Vice President- None
IDS Tower 10 Portland/Eugene
Minneapolis, MN 55440
William P. Fritz Group Vice President- None
Northern Missouri
Carl W. Gans Group Vice President- None
IDS Tower 10 Twin City Metro
Minneapolis, MN 55440
Bruce M. Gaurino Group Vice President- None
Hawaii
<PAGE>
PAGE 27
Item 29(b). (Continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Robert G. Gilbert Vice President- None
IDS Tower 10 Real Estate
Minneapolis, MN 55440
John J. Golden Vice President- None
IDS Tower 10 Field Compensation
Minneapolis, MN 55440 Development
Morris Goodwin Jr. Vice President and None
IDS Tower 10 Corporate Treasurer
Minneapolis, MN 55440
Suzanne Graf Vice President- None
IDS Tower 10 Systems Services
Minneapolis, MN 55440
Bruce M. Guarino Group Vice President- None
Hawaii
David A. Hammer Vice President None
IDS Tower 10 and Marketing
Minneapolis, MN 55440 Controller
Teresa A. Hanratty Group Vice President- None
Northern New England
John R. Hantz Group Vice President- None
Detroit Metro
Robert L. Harden Group Vice President- None
Suite 403 Boston Metro
8500 Leesburg Pike
Vienna, VA 22180
Lorraine R. Hart Vice President- None
IDS Tower 10 Insurance Investments
Minneapolis, MN 55440
Scott A. Hawkinson Vice President-Assured None
IDS Tower 10 Assets Product Development
Minneapolis, MN 55440 and Management
Brian M. Heath Group Vice President- None
IDS Tower 10 North Texas
Minneapolis, MN 55440
Raymond E. Hirsch Vice President-Senior None
IDS Tower 10 Portfolio Manager
Minneapolis, MN 55440
<PAGE>
PAGE 28
Item 29(b). (Continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
James G. Hirsh Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
David J. Hockenberry Group Vice President- None
Eastern Tennessee
Kevin P. Howe Vice President- None
IDS Tower 10 Government and
Minneapolis, MN 55440 Customer Relations
David R. Hubers Chairman, Chief None
IDS Tower 10 Executive Officer and
Minneapolis, MN 55440 President
Marietta L. Johns Senior Vice President- None
IDS Tower 10 Field Management
Minneapolis, MN 55440
Douglas R. Jordal Vice President-Taxes None
IDS Tower 10
Minneapolis, MN 55440
Craig A. Junkins Vice President - IDS 1994 None
IDS Tower 10 Implementation Planning
Minneapolis, MN 55440 and Financial Planning
Development
James E. Kaarre Vice President- None
IDS Tower 10 Marketing Information
Minneapolis, MN 55440
Linda B. Keene Vice President- None
Market Development
G. Michael Kennedy Vice President-Investment None
IDS Tower 10 Services and Investment
Minneapolis, MN 55440 Research
Susan D. Kinder Senior Vice President- None
IDS Tower 10 Human Resources
Minneapolis, MN 55440
Richard W. Kling Senior Vice President- None
IDS Tower 10 Risk Management Products
Minneapolis, MN 55440
<PAGE>
PAGE 29
Item 29(b). (Continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Harold D. Knutson Vice President- None
IDS Tower 10 System Services
Minneapolis, MN 55440
Paul F. Kolkman Vice President- None
IDS Tower 10 Actuarial Finance
Minneapolis, MN 55440
Claire Kolmodin Vice President- None
IDS Tower 10 Service Quality
Minneapolis, MN 55440
David S. Kreager Group Vice President- None
IDS Tower 10 Greater Michigan
Minneapolis, MN 55440
Steven C. Kumagai Director and Senior None
IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Management and Business
Systems
Mitre Kutanovski Group Vice President- None
IDS Tower 10 Chicago Metro
Minneapolis, MN 55440
Edward Labenski Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Kurt A. Larson Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Lori J. Larson Vice President- None
IDS Tower 10 Variable Assets Product
Minneapolis, MN 55440 Development
Ryan R. Larson Vice President- None
IDS Tower 10 IPG Product Development
Minneapolis, MN 55440
Daniel E. Laufenberg Vice President and None
IDS Tower 10 Chief U.S. Economist
Minneapolis, MN 55440
Richard J. Lazarchic Vice President- None
IDS Tower 10 Senior Portfolio
MInneapolis, MN 55440 Manager
Peter A. Lefferts Senior Vice President and None
IDS Tower 10 Chief Marketing Officer
Minneapolis, MN 55440<PAGE>
PAGE 30
Item 29(b). (Continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Douglas A. Lennick Director and Executive None
IDS Tower 10 Vice President-Private
Minneapolis, MN 55440 Client Group
Mary J. Malevich Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Fred A. Mandell Vice President- None
IDS Tower 10 Field Marketing Readiness
Minneapolis, MN 55440
Daniel E. Martin Group Vice President- None
Pittsburgh Metro
William J. McKinney Vice President- None
IDS Tower 10 Field Management
Minneapolis, MN 55440 Support
Thomas W. Medcalf Vice President- None
IDS Tower 10 Senior Portfolio Manager
Minneapolis, MN 55440
William C. Melton Vice President- None
IDS Tower 10 International Research
Minneapolis, MN 55440 and Chief International
Economist
Janis E. Miller Vice President- None
IDS Tower 10 Variable Assets
Minneapolis, MN 55440
James A. Mitchell Executive Vice President- None
IDS Tower 10 Marketing and Products
Minneapolis, MN 55440
John P. Moraites Group Vice President- None
Kansas/Oklahoma
Pamela J. Moret Vice President- None
IDS Tower 10 Corporate Communications
Minneapolis, MN 55440
Barry J. Murphy Senior Vice President- None
IDS Tower 10 Client Service
Minneapolis, MN 55440
Robert J. Neis Vice President- None
IDS Tower 10 Information Systems
Minneapolis, MN 55440 Operations<PAGE>
PAGE 31
Item 29(b). (Continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Ronald E. Newton Group Vice President- None
Rhode Island/Central
Massachusetts
Thomas V. Nicolosi Group Vice President- None
New York Metro Area
Vernon F. Palen Region Vice President- None
Suite D-222 Rocky Mountain Region
7100 E. Lincoln Drive
Scottsdale, AZ 85253
James R. Palmer Vice President- None
IDS Tower 10 Insurance Operations
Minneapolis, MN 55440
Carla P. Pavone Vice President- None
IDS Tower 10 Specialty Service Teams
Minneapolis, MN 55440 and Emerging Business
Judith A. Pennington Vice President- None
IDS Tower 10 Field Technology
Minneapolis, MN 55440
George M. Perry Vice President- None
IDS Tower 10 Corporate Strategy
Minneapolis, MN 55440 and Development
Susan B. Plimpton Vice President- None
IDS Tower 10 Segmentation Development
Minneapolis, MN 55440 and Support
Larry M. Post Group Vice President- None
Philadelphia Metro
Ronald W. Powell Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
James M. Punch Vice President- None
IDS Tower 10 TransAction Services
Minneapolis, MN 55440
Frederick C. Quirsfeld Vice President-Taxable None
IDS Tower 10 Mutual Fund Investments
Minneapolis, MN 55440
R. Daniel Richardson Group Vice President- None
Southern Texas
<PAGE>
PAGE 32
Item 29(b). (Continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Roger B. Rogos Group Vice President- None
Suite 15, Parkside Pl. Western Florida
945 Boardman-Canfield Rd
Youngstown, Ohio 44512
ReBecca K. Roloff Vice President-1994 None
IDS Tower 10 Program Director
Minneapolis, MN 55440
Stephen W. Roszell Vice President- None
IDS Tower 10 Advisory Institutional
Minneapolis, MN 55440 Marketing
Max G. Roth Group Vice President- None
Wisconsin/Upper Michigan
Robert A. Rudell Vice President- None
IDS Tower 10 American Express
Minneapolis, MN 55440 Institutional Services
John P. Ryan Vice President and None
IDS Tower 10 General Auditor
Minneapolis, MN 55440
Erven A. Samsel Senior Vice President- None
45 Braintree Hill Park Field Management
Braintree, MA 02184
Russell L. Scalfano Group Vice President- None
Illinois/Indiana/Kentucky
William G. Scholz Group Vice President- None
Arizona/Las Vegas
Stuart A. Sedlacek Vice President- None
IDS Tower 10 Assured Assets
Minneapolis, MN 55440
Donald K. Shanks Vice President- None
IDS Tower 10 Property Casualty
Minneapolis, MN 55440
F. Dale Simmons Vice President-Senior None
IDS Tower 10 Portfolio Manager,
Minneapolis, MN 55440 Insurance Investments
Judy P. Skoglund Vice President- None
IDS Tower 10 Human Resources and
Minneapolis, MN 55440 Organization Development<PAGE>
PAGE 33
Item 29(b). (Continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Julian W. Sloter Group Vice Presidnet- None
9040 Roswell Rd. Orlando/Jacksonville
River Ridge-Suite 600
Atlanta, GA 30350
Ben C. Smith Vice President- None
IDS Tower 10 Workplace Marketing
Minneapolis, MN 55440
William A. Smith Vice President and None
IDS Tower 10 Controller-Private
Minneapolis, MN 55440 Client Group
James B. Solberg Group Vice President- None
IDS Tower 10 Eastern Iowa Area
Minneapolis, MN 55440
Bridget Sperl Vice President- None
IDS Tower 10 Human Resources
Minneapolis, MN 55440 Management Services
Paul J. Stanislaw Group Vice President- None
Southern California
Lois A. Stilwell Group Vice President- None
IDS Tower 10 Outstate Minnesota Area/
Minneapolis, MN 55440 North Dakota/Western Wisconsin
William A. Stoltzmann Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
James J. Strauss Vice President- None
IDS Tower 10 Corporate Planning
Minneapolis, MN 55440 and Analysis
Jeffrey J. Stremcha Vice President-Information None
IDS Tower 10 Resource Management/ISD
Minneapolis, MN 55440
Neil G. Taylor Group Vice President- None
IDS Tower 10 Seattle/Tacoma
Minneapolis, MN 55440
John R. Thomas Senior Vice President- Director/
IDS Tower 10 Information and Trustee
Minneapolis, MN 55440 Technology
Melinda S. Urion Vice President and None
IDS Tower 10 Corporate Controller
Minneapolis, MN 55440<PAGE>
PAGE 34
Item 29(b). (Continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Peter S. Velardi Group Vice President- None
Atlanta/Birmingham
Charles F. Wachendorfer Group Vice President- None
Denver/Salt Lake City/
Albuquerque
Wesley W. Wadman Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Norman Weaver Jr. Senior Vice President- None
Suite 215 Field Management
1501 Westcliff Drive
Newport Beach, CA 92660
Michael L. Weiner Vice President- None
IDS Tower 10 Corporate Tax
Minneapolis, MN 55440 Operations
Lawrence J. Welte Vice President- None
IDS Tower 10 Investment Administration
Minneapolis, MN 55440
Jeffry M. Welter Vice President- None
IDS Tower 10 Equity and Fixed Income
Minneapolis, MN 55440 Trading
William N. Westhoff Senior Vice President and None
IDS Tower 10 Global Chief Investment
Minneapolis, MN 55440 Officer
Thomas L. White Group Vice President- None
Cleveland Metro
Eric S. Williams Group Vice President- None
Virginia
Edwin M. Wistrand Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
Michael R. Woodward Senior Vice President- None
Suite 815 Field Management
8585 Broadway
Merrillville, IN 46410
<PAGE>
PAGE 35
Item 29(c). Not applicable.
Item 30. Location of Accounts and Records
IDS Financial Corporation
IDS Tower 10
Minneapolis, MN 55440
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
(a) Not Applicable.
(b) Not Applicable.
(c) The Registrant undertakes to furnish each person
to whom a prospectus is delivered with a copy of
the Registrant's latest annual report to
shareholders, upon request and without charge.
<PAGE>
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE INVESTMENT
COMPANY ACT OF 1940, THE REGISTRANT, IDS SELECTIVE FUND, CERTIFIES THAT IT MEETS
THE REQUIREMENTS FOR THE EFFECTIVENESS OF THIS AMENDMENT TO ITS REGISTRATION
STATEMENT PURSUANT TO RULE 485(B) UNDER THE SECURITIES ACT OF 1933 AND HAS DULY
CAUSED THIS AMENDMENT TO ITS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF MINNEAPOLIS AND
STATE OF MINNESOTA ON THE 27TH DAY OF FEBRUARY, 1995.
IDS SELECTIVE FUND
BY /S/ WILLIAM R. PEARCE**
------------------------------------
WILLIAM R. PEARCE,
PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities indicated on the 27th day of February, 1995.
SIGNATURE CAPACITY
- ----------------------------------- -------------------------
/s/ WILLIAM R. PEARCE** President, Principal
- ----------------------------------- Executive Officer and
William R. Pearce Director
Treasurer, Principal
/s/ LESLIE L. OGG** Financial Officer and
- ----------------------------------- Principal Accounting
Leslie L. Ogg Officer
/s/ LYNNE V. CHENEY*
- ----------------------------------- Director
Lynne V. Cheney
/s/ WILLIAM H. DUDLEY*
- ----------------------------------- Director
William H. Dudley
/s/ ROBERT F. FROEHLKE*
- ----------------------------------- Director
Robert F. Froehlke
/s/ DAVID R. HUBERS*
- ----------------------------------- Director
David R. Hubers
/s/ HEINZ F. HUTTER*
- ----------------------------------- Director
Heinz F. Hutter
II-3
<PAGE>
SIGNATURE CAPACITY
- ----------------------------------- -------------------------
/s/ ANNE P. JONES*
- ----------------------------------- Director
Anne P. Jones
/s/ DONALD M. KENDALL*
- ----------------------------------- Director
Donald M. Kendall
/s/ MELVIN R. LAIRD*
- ----------------------------------- Director
Melvin R. Laird
/s/ LEWIS W. LEHR*
- ----------------------------------- Director
Lewis W. Lehr
/s/ EDSON W. SPENCER*
- ----------------------------------- Director
Edson W. Spencer
/s/ JOHN R. THOMAS*
- ----------------------------------- Director
John R. Thomas
/s/ WHEELOCK WHITNEY*
- ----------------------------------- Director
Wheelock Whitney
/s/ C. ANGUS WURTELE*
- ----------------------------------- Director
C. Angus Wurtele
*Signed pursuant to Directors' Power of Attorney dated Nov. 10, 1994, filed
electronically as Exhibit 18(a) to Registrant's Post-Effective Amendment No.
79, by:
/s/_LESLIE L. OGG
- -------------------------------------------
Leslie L. Ogg
**Signed pursuant to Officers' Power of Attorney dated June 1, 1993, filed as
Exhibit 17(b) to Registrant's Post-Effective Amendment No. 76 to Registration
Statement No. 2-10700 by:
/s/_LESLIE L. OGG
- -------------------------------------------
Leslie L. Ogg
II-4
<PAGE>
CONTENTS OF THIS
POST-EFFECTIVE AMENDMENT NO. 81
TO REGISTRATION STATEMENT NO. 2-10700
This Post-Effective Amendment comprises the following papers and documents:
The facing sheet.
The cross-reference page.
Part A.
The prospectus.
Part B.
Statement of Additional Information.
Part C.
Financial Statements.
Other information.
Exhibits.
The signatures.
<PAGE>
IDS Selective Fund, Inc.
Registration Number 2-10700/811-499
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
Exhibit 5: Form of Investment Management Services Agreement between
Registrant and American Express Financial Corporation,
dated March 20, 1995.
Exhibit 6: Form of Distribution Agreement between Registrant and
American Express Financial Advisors Inc., dated March 20,
1995.
Exhibit 8: Form of Custodian Agreement between Registrant and American
Express Trust Company, dated March 20, 1995.
Exhibit 9b: Form of Transfer Agency Agreement between Registrant and
American Express Financial Corporation, dated March 20,
1995.
Exhibit 9d: Form of Shareholder Service Agreement between Registrant and
American Express Financial Advisors Inc., dated March 20,
1995.
Exhibit 9e: Form of Administrative Services Agreement between Registrant
and American Express Financial Corporation, dated March 20,
1995.
Exhibit 11: Independent Auditors' Consent.
Exhibit 15: Form of Plan and Agreement of Distribution between
Registrant and American Express Financial Advisors Inc.,
dated March 20, 1995.
Exhibit 17: Financial Data Schedule.
</TABLE>
<PAGE>
FORM OF
INVESTMENT MANAGEMENT SERVICES AGREEMENT
AGREEMENT made the 20th day of March, 1995, by and between IDS Selective
Fund, Inc. (the "Fund"), a Minnesota corporation, and American Express Financial
Corporation, a Delaware corporation.
PART ONE: INVESTMENT MANAGEMENT AND OTHER SERVICES
(1) The Fund hereby retains American Express Financial Corporation, and
American Express Financial Corporation hereby agrees, for the period of
this Agreement and under the terms and conditions hereinafter set forth, to
furnish the Fund continuously with suggested investment planning; to determine,
consistent with the Fund's investment objectives and policies, which securities
in American Express Financial Corporation's discretion shall be purchased, held
or sold and to execute or cause the execution of purchase or sell orders; to
prepare and make available to the Fund all necessary research and statistical
data in connection therewith; to furnish all services of whatever nature
required in connection with the management of the Fund as provided under this
Agreement; and to pay such expenses as may be provided for in Part Three;
subject always to the direction and control of the Board of Directors (the
"Board"), the Executive Committee and the authorized officers of the Fund.
American Express Financial Corporation agrees to maintain an adequate
organization of competent persons to provide the services and to perform the
functions herein mentioned. American Express Financial Corporation agrees to
meet with any persons at such times as the Board deems appropriate for the
purpose of reviewing American Express Financial Corporation's performance under
this Agreement.
(2) American Express Financial Corporation agrees that the investment
planning and investment decisions will be in accordance with general investment
policies of the Fund as disclosed to American Express Financial Corporation
from time to time by the Fund and as set forth in its prospectuses and
registration statements filed with the United States Securities and Exchange
Commission (the "SEC").
(3) American Express Financial Corporation agrees that it will maintain
all required records, memoranda, instructions or authorizations relating to the
acquisition or disposition of securities for the Fund.
(4) The Fund agrees that it will furnish to American Express Financial
Corporation any information that the latter may reasonably request with respect
to the services performed or to be performed by American Express Financial
Corporation under this Agreement.
(5) American Express Financial Corporation is authorized to select the
brokers or dealers that will execute the purchases and sales of portfolio
securities for the Fund and is directed to use its best efforts to obtain the
best available price and most favorable execution, except as prescribed herein.
Subject to prior authorization by the Fund's Board of appropriate policies and
procedures, and subject to termination at any time by the Board, American
Express Financial Corporation may also be authorized to effect individual
securities transactions at commission rates in excess of the minimum commission
rates available, to the extent authorized by law, if American Express Financial
Corporation determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of either that particular
transaction or American Express Financial Corporation's overall responsibilities
with respect to the Fund and other funds for which it acts as investment
adviser.
(6) It is understood and agreed that in furnishing the Fund with the
services as herein provided, neither American Express Financial Corporation, nor
any officer, director or agent thereof shall be held liable to the Fund or its
creditors or shareholders for errors of judgment or for anything except willful
misfeasance, bad faith, or gross negligence in the performance of its duties, or
reckless disregard of its obligations and duties under the terms of this
Agreement. It is further understood and agreed that American Express Financial
Corporation may rely upon information furnished to it reasonably believed to be
accurate and reliable.
PART TWO: COMPENSATION TO INVESTMENT MANAGER
(1) The Fund agrees to pay to American Express Financial Corporation, and
American Express Financial Corporation covenants and agrees to accept from the
Fund in full payment for the services furnished, a fee for each calendar day of
each year equal to the total of 1/365th (1/366th in each leap
<PAGE>
year) of the amount computed as shown below. The computation shall be made for
each day on the basis of net assets as of the close of business of the full
business day two (2) business days prior to the day for which the computation is
being made. In the case of the suspension of the computation of net asset value,
the asset charge for each day during such suspension shall be computed as of the
close of business on the last full business day on which the net assets were
computed. Net assets as of the close of a full business day shall include all
transactions in shares of the Fund recorded on the books of the Fund for that
day.
The asset charge shall be based on the net assets of the Fund as set forth
in the following table.
ASSET CHARGE
<TABLE>
<CAPTION>
ASSETS ANNUAL RATE AT
(BILLIONS) EACH ASSET LEVEL
--------------- ----------------
<S> <C>
First $1 0.520%
Next $1 0.495
Next $1 0.470
Next $3 0.445
Next $3 0.420
Over $9 0.395
</TABLE>
(2) The fee shall be paid on a monthly basis and, in the event of the
termination of this Agreement, the fee accrued shall be prorated on the basis of
the number of days that this Agreement is in effect during the month with
respect to which such payment is made.
(3) The fee provided for hereunder shall be paid in cash by the Fund to
American Express Financial Corporation within five business days after the last
day of each month.
PART THREE: ALLOCATION OF EXPENSES
(1) The Fund agrees to pay:
(a) Fees payable to American Express Financial Corporation for its
services under the terms of this Agreement.
(b) Taxes.
(c) Brokerage commissions and charges in connection with the purchase
and sale of assets.
(d) Custodian fees and charges.
(e) Fees and charges of its independent certified public accountants for
services the Fund requests.
(f) Premium on the bond required by Rule 17g-1 under the Investment
Company Act of 1940.
(g) Fees and expenses of attorneys (i) it employs in matters not
involving the assertion of a claim by a third party against the Fund, its
directors and officers, (ii) it employs in conjunction with a claim asserted
by the Board against American Express Financial Corporation, except that
American Express Financial Corporation shall reimburse the Fund for such
fees and expenses if it is ultimately determined by a court of competent
jurisdiction, or American Express Financial Corporation agrees, that it is
liable in whole or in part to the Fund, and (iii) it employs to assert a claim
against a third party.
(h) Fees paid for the qualification and registration for public sale of
the securities of the Fund under the laws of the United States and of the
several states in which such securities shall be offered for sale.
(i) Fees of consultants employed by the Fund.
<PAGE>
(j) Directors, officers and employees expenses which shall include fees,
salaries, memberships, dues, travel, seminars, pension, profit sharing, and
all other benefits paid to or provided for directors, officers and
employees, directors and officers liability insurance, errors and omissions
liability insurance, worker's compensation insurance and other expenses
applicable to the directors, officers and employees, except the Fund will
not pay any fees or expenses of any person who is an officer or employee of
American Express Financial Corporation or its affiliates.
(k) Filing fees and charges incurred by the Fund in connection with
filing any amendment to its articles of incorporation, or incurred in filing
any other document with the State of Minnesota or its political subdivisions.
(l) Organizational expenses of the Fund.
(m) Expenses incurred in connection with lending portfolio securities of
the Fund.
(n) Expenses properly payable by the Fund, approved by the Board.
(2) American Express Financial Corporation agrees to pay all expenses
associated with the services it provides under the terms of this Agreement.
Further, American Express Financial Corporation agrees that if, at the end of
any month, the expenses of the Fund under this Agreement and any other agreement
between the Fund and American Express Financial Corporation, but excluding those
expenses set forth in (1)(b) and (1)(c) of this Part Three, exceed the most
restrictive applicable state expenses limitation, the Fund shall not pay those
expenses set forth in (1)(a) and (d) through (n) of this Part Three to the
extent necessary to keep the Fund's expenses from exceeding the limitation, it
being understood that American Express Financial Corporation will assume
all unpaid expenses and bill the Fund for them in subsequent months but in no
event can the accumulation of unpaid expenses or billing be carried past the end
of the Fund's fiscal year.
PART FOUR: MISCELLANEOUS
(1) American Express Financial Corporation shall be deemed to be an
independent contractor and, except as expressly provided or authorized in this
Agreement, shall have no authority to act for or represent the Fund.
(2) A "full business day" shall be as defined in the By-laws.
(3) The Fund recognizes that American Express Financial Corporation now
renders and may continue to render investment advice and other services to other
investment companies and persons which may or may not have investment policies
and investments similar to those of the Fund and that American Express Financial
Corporation manages its own investments and/ or those of its subsidiaries.
American Express Financial Corporation shall be free to render such investment
advice and other services and the Fund hereby consents thereto.
(4) Neither this Agreement nor any transaction had pursuant hereto shall
be invalidated or in any way affected by the fact that directors, officers,
agents and/or shareholders of the Fund are or may be interested in American
Express Financial Corporation or any successor or assignee thereof, as
directors, officers, stockholders or otherwise; that directors, officers,
stockholders or agents of American Express Financial Corporation are or may be
interested in the Fund as directors, officers, shareholders, or otherwise; or
that American Express Financial Corporation or any successor or assignee, is or
may be interested in the Fund as shareholder or otherwise, provided, however,
that neither American Express Financial Corporation, nor any officer, director
or employee thereof or of the Fund, shall sell to or buy from the Fund any
property or security other than shares issued by the Fund, except in accordance
with applicable regulations or orders of the SEC.
(5) Any notice under this Agreement shall be given in writing, addressed,
and delivered, or mailed postpaid, to the party to this Agreement entitled to
receive such, at such party's principal place of business in Minneapolis,
Minnesota, or to such other address as either party may designate in writing
mailed to the other.
(6) American Express Financial Corporation agrees that no officer,
director or employee of American Express Financial Corporation will deal for or
on behalf of the Fund with himself as principal or agent, or with any
corporation or partnership in which he may have a financial interest, except
that this shall not prohibit:
(a) Officers, directors or employees of American Express Financial
Corporation from having a financial interest in the Fund or in American Express
Financial Corporation.
<PAGE>
(b) The purchase of securities for the Fund, or the sale of securities
owned by the Fund, through a security broker or dealer, one or more of whose
partners, officers, directors or employees is an officer, director or
employee of American Express Financial Corporation, provided such transactions
are handled in the capacity of broker only and provided commissions charged do
not exceed customary brokerage charges for such services.
(c) Transactions with the Fund by a broker-dealer affiliate of American
Express Financial Corporation as may be allowed by rule or order of the SEC, and
if made pursuant to procedures adopted by the Fund's Board.
(7) American Express Financial Corporation agrees that, except as herein
otherwise expressly provided or as may be permitted consistent with the use of a
broker-dealer affiliate of American Express Financial Corporation under
applicable provisions of the federal securities laws, neither it nor any of its
officers, directors or employees shall at any time during the period of this
Agreement, make, accept or receive, directly or indirectly, any fees, profits or
emoluments of any character in connection with the purchase or sale of
securities (except shares issued by the Fund) or other assets by or for the
Fund.
PART FIVE: RENEWAL AND TERMINATION
(1) This Agreement shall continue in effect until , 199 , or until a new
agreement is approved by a vote of the majority of the outstanding shares of the
Fund and by vote of the Fund's Board, including the vote required by (b) of this
paragraph, and if no new agreement is so approved, this Agreement shall continue
from year to year thereafter unless and until terminated by either party as
hereinafter provided, except that such continuance shall be specifically
approved at least annually (a) by the Board of the Fund or by a vote of the
majority of the outstanding shares of the Fund and (b) by the vote of a majority
of the directors who are not parties to this Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such approval. As used in this paragraph, the term "interested person" shall
have the same meaning as set forth in the Investment Company Act of 1940, as
amended (the "1940 Act").
(2) This Agreement may be terminated by either the Fund or American
Express Financial Corporation at any time by giving the other party 60 days'
written notice of such intention to terminate, provided that any termination
shall be made without the payment of any penalty, and provided further that
termination may be effected either by the Board of the Fund or by a vote of the
majority of the outstanding voting shares of the Fund. The vote of the majority
of the outstanding voting shares of the Fund for the purpose of this Part Five
shall be the vote at a shareholders' regular meeting, or a special meeting duly
called for the purpose, of 67% or more of the Fund's shares present at such
meeting if the holders of more than 50% of the outstanding voting shares are
present or represented by proxy, or more than 50% of the outstanding voting
shares of the Fund, whichever is less.
(3) This Agreement shall terminate in the event of its assignment, the
term "assignment" for this purpose having the same meaning as set forth in the
1940 Act.
IN WITNESS THEREOF, the parties hereto have executed the foregoing
Agreement as of the day and year first above written.
IDS SELECTIVE FUND, INC.
By: -----------------------------
Leslie L. Ogg, Vice President
AMERICAN EXPRESS FINANCIAL CORPORATION
By: -----------------------------
<PAGE>
DISTRIBUTION AGREEMENT
Agreement made as of the 20th day of March, 1995, by and between
IDS Selective Fund, Inc. (the "Fund"), a Minnesota corporation, for
and on behalf of each class of the Fund and American Express
Financial Advisors Inc., a Delaware corporation.
Part One: DISTRIBUTION OF SECURITIES
(1) The Fund covenants and agrees that, during the term of this
agreement and any renewal or extension, American Express Financial
Advisors shall have the exclusive right to act as principal
underwriter for the Fund and to offer for sale and to distribute
either directly or through any affiliate any and all shares of each
class of capital stock issued or to be issued by the Fund.
(2) American Express Financial Advisors hereby covenants and
agrees to act as the principal underwriter of each class of capital
shares issued and to be issued by the Fund during the period of
this agreement and agrees during such period to offer for sale such
shares as long as such shares remain available for sale, unless
American Express Financial Advisors is unable or unwilling to make
such offer for sale or sales or solicitations therefor legally
because of any federal, state, provincial or governmental law, rule
or agency or for any financial reason.
(3) With respect to the offering for sale and sale of shares of
each class to be issued by the Fund, it is mutually understood and
agreed that such shares are to be sold on the following terms:
(a) All sales shall be made by means of an application, and
every application shall be subject to acceptance or rejection by
the Fund at its principal place of business. Shares are to be sold
for cash, payable at the time the application and payment for such
shares are received at the principal place of business of the Fund.
(b) No shares shall be sold at less than the asset value
(computed in the manner provided by the currently effective
prospectus or Statement of Additional Information and the
Investment Company Act of 1940, and rules thereunder). The number
of shares or fractional shares to be acquired by each applicant
shall be determined by dividing the amount of each accepted
application by the public offering price of one share of the
capital stock of the appropriate class as of the close of business
on the day when the application, together with payment, is received
by the Fund at its principal place of business. The computation as
to the number of shares and fractional shares shall be carried to
three decimal points of one share with the computation being
carried to the nearest 1/lOOOth of a share. If the day of receipt
of the application and payment is not a full business day, then the
asset value of the share for use in such computation shall be
determined as of the close of business on the next succeeding full
business day. In the event of a period of emergency, the
computation of the asset value for the purpose of determining the
number of shares or fractional shares to be acquired by the
applicant may be deferred until the close of business on the first
full business day following the termination of the period of
<PAGE>
emergency. A period of emergency shall have the definition given
thereto in the Investment Company Act of 1940, and rules
thereunder.
(4) The Fund agrees to make prompt and reasonable effort to do
any and all things necessary, in the opinion of American Express
Financial Advisors, to have and to keep the Fund and the shares
properly registered or qualified in all appropriate jurisdictions
and, as to shares, in such amounts as American Express Financial
Advisors may from time to time designate in order that the Fund's
shares may be offered or sold in such jurisdictions.
(5) The Fund agrees that it will furnish American Express
Financial Advisors with information with respect to the affairs and
accounts of the Fund, and in such form, as American Express
Financial Advisors may from time to time reasonably require and
further agrees that American Express Financial Advisors, at all
reasonable times, shall be permitted to inspect the books and
records of the Fund.
(6) American Express Financial Advisors or its agents may prepare
or cause to be prepared from time to time circulars, sales
literature, broadcast material, publicity data and other
advertising material to be used in the sales of shares issued by
the Fund, including material which may be deemed to be a prospectus
under rules promulgated by the Securities and Exchange Commission
(each separate promotional piece is referred to as an "Item of
Soliciting Material"). At its option, American Express Financial
Advisors may submit any Item of Soliciting Material to the Fund for
its prior approval. Unless a particular Item of Soliciting
Material is approved in writing by the Fund prior to its use,
American Express Financial Advisors agrees to indemnify the Fund
and its directors and officers against any and all claims, demands,
liabilities and expenses which the Fund or such persons may incur
arising out of or based upon the use of any Item of Soliciting
Material. The term "expenses" includes amounts paid in
satisfaction of judgments or in settlements. The foregoing right
of indemnification shall be in addition to any other rights to
which the Fund or any director or officer may be entitled as a
matter of law. Notwithstanding the foregoing, such indemnification
shall not be deemed to abrogate or diminish in any way any right or
claim American Express Financial Advisors may have against the Fund
or its officers or directors in connection with the Fund's
registration statement, prospectus, Statement of Additional
Information or other information furnished by or caused to be
furnished by the Fund.
(7) American Express Financial Advisors agrees to submit to the
Fund each application for shares immediately after the receipt of
such application and payment therefor by American Express Financial
Advisors at its principal place or business.
(8) American Express Financial Advisors agrees to cause to be
delivered to each person submitting an application a prospectus or
circular to be furnished by the Fund in the form required by the
applicable federal laws or by the acts or statutes of any
applicable state, province or country.
<PAGE>
(9) The Fund shall have the right to extend to shareholders of
each class the right to use the proceeds of any cash dividend paid
by the Fund to that shareholder to purchase shares of the same
class at the net asset value at the close of business upon the day
of purchase, to the extent set forth in the currently effective
prospectus or Statement of Additional Information.
(10) Shares of each class issued by the Fund may be offered and
sold at their asset value to the shareholders of the same class of
other funds in the IDS MUTUAL FUND GROUP who wish to exchange their
investments in shares of the other funds in the IDS MUTUAL FUND
GROUP to investments in shares of the Fund, to the extent set forth
in the currently effective prospectus or Statement of Additional
Information, such asset value to be computed as of the close of
business on the day of sale of such shares of the Fund.
(11) American Express Financial Advisors and the Fund agree to use
their best efforts to conform with all applicable state and federal
laws and regulations relating to any rights or obligations under
the term of this agreement.
Part Two: ALLOCATION OF EXPENSES
Except as provided by any other agreements between the parties,
American Express Financial Advisors covenants and agrees that
during the period of this agreement it will pay or cause or be paid
all expenses incurred by American Express Financial Advisors, or
any of its affiliates, in the offering for sale or sale of each
class of the Fund's shares.
Part Three: COMPENSATION
(1) It is covenanted and agreed that American Express Financial
Advisors shall be paid:
(i) for a class of shares imposing a front-end sales charge,
by the purchasers of Fund shares in an amount equal to the
difference between the total amount received upon each sale of
shares issued by the Fund and the asset value of such shares at the
time of such sale; and
(ii) for a class of shares imposing a deferred sales charge,
by owners of Fund shares at the time the sales charge is imposed in
an amount equal to any deferred sales charge, as described in the
Fund's prospectus.
Such sums as are received by the Fund shall be received as Agent
for American Express Financial Advisors and shall be remitted to
American Express Financial Advisors daily as soon as practicable
after receipt.
(2) The asset value of any share of each class of the Fund shall
be determined in the manner provided by the classes currently
effective prospectus and Statement of Additional Information and
the Investment Company Act of 1940, and rules thereunder.
<PAGE>
Part Four: MISCELLANEOUS
(1) American Express Financial Advisors shall be deemed to be an
independent contractor and, except as expressly provided or
authorized in this agreement, shall have no authority to act for or
represent the Fund.
(2) American Express Financial Advisors shall be free to render
to others services similar to those rendered under this agreement.
(3) Neither this agreement nor any transaction had pursuant
hereto shall be invalidated or in any way affected by the fact that
directors, officers, agents and/or shareholders of the Fund are or
may be interested in American Express Financial Advisors as
directors, officers, shareholders or otherwise; that directors,
officers, shareholders or agents of American Express Financial
Advisors are or may be interested in the Fund as directors,
officers, shareholders or otherwise; or that American Express
Financial Advisors is or may be interested in the Fund as
shareholder or otherwise, provided, however, that neither American
Express Financial Advisors nor any officer or director of American
Express Financial Advisors or any officers or directors of the Fund
shall sell to or buy from the Fund any property or security other
than a security issued by the Fund, except in accordance with a
rule, regulation or order of the federal Securities and Exchange
Commission.
(4) For the purposes of this agreement, a "business day" shall
have the same meaning as is given to the term in the By-laws of the
Fund.
(5) Any notice under this agreement shall be given in writing,
addressed and delivered, or mailed postpaid, to the parties to this
agreement at each company's principal place of business in
Minneapolis, Minnesota, or to such other address as either party
may designate in writing mailed to the other.
(6) American Express Financial Advisors agrees that no officer,
director or employee of American Express Financial Advisors will
deal for or on behalf of the Fund with himself as principal or
agent, or with any corporation or partnership in which he may have
a financial interest, except that this shall not prohibit:
(a) Officers, directors and employees of American Express
Financial Advisors from having a financial interest in the Fund or
in American Express Financial Advisors.
(b) The purchase of securities for the Fund, or the sale of
securities owned by the Fund, through a security broker or dealer,
one or more of whose partners, officers, directors or employees is
an officer, director or employee of American Express Financial
Advisors, provided such transactions are handled in the capacity of
broker only and provided commissions charged do not exceed
customary brokerage charges for such services.
<PAGE>
(c) Transactions with the Fund by a broker-dealer affiliate
of American Express Financial Advisors if allowed by rule or order
of the Securities and Exchange Commission and if made pursuant to
procedures adopted by the Fund's Board of Directors.
(7) American Express Financial Advisors agrees that, except as
otherwise provided in this agreement, or as may be permitted
consistent with the use of a broker-dealer affiliate of American
Express Financial Advisors under applicable provisions of the
federal securities laws, neither it nor any of its officers,
directors or employees shall at any time during the period of this
agreement make, accept or receive, directly or indirectly, any
fees, profits or emoluments of any character in connection with the
purchase or sale of securities (except securities issued by the
Fund) or other assets by or for the Fund.
Part Five: TERMINATION
(1) This agreement shall continue from year to year unless and
until terminated by American Express Financial Advisors or the
Fund, except that such continuance shall be specifically approved
at least annually by a vote of a majority of the Board of Directors
who are not parties to this agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of
voting on such approval, and by a majority of the Board of
Directors or by vote of a majority of the outstanding voting
securities of the Fund. As used in this paragraph, the term
"interested person" shall have the meaning as set forth in the
Investment Company Act of 1940, as amended.
(2) This agreement may be terminated by American Express
Financial Advisors or the Fund at any time by giving the other
party sixty (60) days written notice of such intention to
terminate.
(3) This agreement shall terminate in the event of its
assignment, the term "assignment" for this purpose having the same
meaning as set forth in the Investment Company Act of 1940, as
amended.
IN WITNESS WHEREOF, The parties hereto have executed the foregoing
agreement on the date and year first above written.
IDS SELECTIVE FUND, INC.
By
------------------------------------
Leslie L. Ogg
Vice President
AMERICAN EXPRESS FINANCIAL ADVISORS INC.
By
------------------------------------
Vice President
<PAGE>
CUSTODIAN AGREEMENT
THIS CUSTODIAN AGREEMENT dated March 20, 1995, between IDS
Selective Fund, Inc., a Minnesota Corporation (the "Corporation")
and American Express Trust Company, a corporation organized under
the laws of the State of Minnesota with its principal place of
business at Minneapolis, Minnesota (the "Custodian").
WHEREAS, the Corporation desires that its securities and cash be
hereafter held and administered by Custodian pursuant to the terms
of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein
made, the Corporation and the Custodian agree as follows:
SECTION 1. DEFINITIONS
The word "securities" as used herein shall be construed to include,
without being limited to, shares, stocks, treasury stocks,
including any stocks of this Corporation, notes, bonds, debentures,
evidences of indebtedness, options to buy or sell stocks or stock
indexes, certificates of interest or participation in any profit-
sharing agreements, collateral trust certificates, preorganization
certificates or subscriptions, transferable shares, investment
contracts, voting trust certificates, certificates of deposit for a
security, fractional or undivided interests in oil, gas or other
mineral rights, or any certificates of interest or participation
in, temporary or interim certificates for, receipts for, guarantees
of, or warrants or rights to subscribe to or purchase any of the
foregoing, acceptances and other obligations and any evidence of
any right or interest in or to any cash, property or assets and any
interest or instrument commonly known as a security. In addition,
for the purpose of this Custodian Agreement, the word "securities"
also shall include other instruments in which the Corporation may
invest including currency forward contracts and commodities such as
interest rate or index futures contracts, margin deposits on such
contracts or options on such contracts.
The words "custodian order" shall mean a request or direction,
including a computer printout, directed to the Custodian and signed
in the name of the Corporation by any two individuals designated in
the current certified list referred to in Section 2.
The word "facsimile" shall mean an exact copy or likeness which is
electronically transmitted for instant reproduction.
SECTION 2. NAMES, TITLES AND SIGNATURES OF AUTHORIZED PERSONS
The Corporation will certify to the Custodian the names and
signatures of its present officers and other designated persons
authorized on behalf of the Corporation to direct the Custodian by
custodian order as herein before defined. The Corporation agrees
that whenever any change occurs in this list it will file with the
Custodian a copy of a resolution certified by the Secretary or an
<PAGE>
Assistant Secretary of the Corporation as having been duly adopted
by the Board of Directors or the Executive Committee of the Board
of Directors of the Corporation designating those persons currently
authorized on behalf of the Corporation to direct the Custodian by
custodian order, as herein before defined, and upon such filing (to
be accompanied by the filing of specimen signatures of the
designated persons) the persons so designated in said resolution
shall constitute the current certified list. The Custodian is
authorized to rely and act upon the names and signatures of the
individuals as they appear in the most recent certified list from
the Corporation which has been delivered to the Custodian as herein
above provided.
SECTION 3. USE OF SUBCUSTODIANS
The Custodian may make arrangements, where appropriate, with other
banks having not less than two million dollars aggregate capital,
surplus and undivided profits for the custody of securities. Any
such bank selected by the Custodian to act as subcustodian shall be
deemed to be the agent of the Custodian.
The Custodian also may enter into arrangements for the custody of
securities entrusted to its care through foreign branches of United
States banks; through foreign banks, banking institutions or trust
companies; through foreign subsidiaries of United States banks or
bank holding companies, or through foreign securities depositories
or clearing agencies (hereinafter also called, collectively, the
"Foreign Subcustodian" or indirectly through an agent, established
under the first paragraph of this section, if and to the extent
permitted by Section 17(f) of the Investment Company Act of 1940
and the rules promulgated by the Securities and Exchange Commission
thereunder, any order issued by the Securities and Exchange
Commission, or any "no-action" letter received from the staff of
the Securities and Exchange Commission. To the extent the existing
provisions of the Custodian Agreement are consistent with the
requirements of such Section, rules, order or no-action letter,
they shall apply to all such foreign custodianships. To the extent
such provisions are inconsistent with or additional requirements
are established by such Section, rules, order or no-action letter,
the requirements of such Section, rules, order or no-action letter
will prevail and the parties will adhere to such requirements;
provided, however, in the absence of notification from the
Corporation of any changes or additions to such requirements, the
Custodian shall have no duty or responsibility to inquire as to any
such changes or additions.
SECTION 4. RECEIPT AND DISBURSEMENT OF MONEY
(1) The Custodian shall open and maintain a separate account or
accounts in the name of the Corporation or cause its agent to open
and maintain such account or accounts subject only to checks,
drafts or directives by the Custodian pursuant to the terms of this
Agreement. The Custodian or its agent shall hold in such account
or accounts, subject to the provisions hereof, all cash received by
it from or for the account of the Corporation. The Custodian or
its agent shall make payments of cash to or for the account of the
Corporation from such cash only:
<PAGE>
(a) for the purchase of securities for the portfolio of the
Corporation upon the receipt of such securities by the
Custodian or its agent unless otherwise instructed on
behalf of the Corporation;
(b) for the purchase or redemption of shares of capital
stock of the Corporation;
(c) for the payment of interest, dividends, taxes,
management fees, or operating expenses (including,
without limitation thereto, fees for legal, accounting
and auditing services);
(d) for payment of distribution fees, commissions, or
redemption fees, if any;
(e) for payments in connection with the conversion,
exchange or surrender of securities owned or subscribed
to by the Corporation held by or to be delivered to the
Custodian;
(f) for payments in connection with the return of
securities loaned by the Corporation upon receipt of
such securities or the reduction of collateral upon
receipt of proper notice;
(g) for payments for other proper corporate purposes;
(h) or upon the termination of this Agreement.
Before making any such payment for the purposes permitted under the
terms of items (a), (b), (c), (d), (e), (f) or (g) of paragraph (1)
of this section, the Custodian shall receive and may rely upon a
custodian order directing such payment and stating that the payment
is for such a purpose permitted under these items (a), (b), (c),
(d), (e), (f) or (g) and that in respect to item (g), a copy of a
resolution of the Board of Directors or of the Executive Committee
of the Board of Directors of the Corporation signed by an officer
of the Corporation and certified by its Secretary or an Assistant
Secretary, specifying the amount of such payment, setting forth the
purpose to be a proper corporate purpose, and naming the person or
persons to whom such payment is made. Notwithstanding the above,
for the purposes permitted under items (a) or (f) of paragraph (1)
of this section, the Custodian may rely upon a facsimile order.
(2) The Custodian is hereby appointed the attorney-in-fact of the
Corporation to endorse and collect all checks, drafts or other
orders for the payment of money received by the Custodian for the
account of the Corporation and drawn on or to the order of the
Corporation and to deposit same to the account of the Corporation
pursuant to this Agreement.
SECTION 5. RECEIPT OF SECURITIES
Except as permitted by the second paragraph of this section, the
Custodian or its agent shall hold in a separate account or
accounts, and physically segregated at all times from those of any
other persons, firms or corporations, pursuant to the provisions
<PAGE>
hereof, all securities received by it for the account of the
Corporation. The Custodian shall record and maintain a record of
all certificate numbers. Securities so received shall be held in
the name of the Corporation, in the name of an exclusive nominee
duly appointed by the Custodian or in bearer form, as appropriate.
Subject to such rules, regulations or guidelines as the Securities
and Exchange Commission may adopt, the Custodian may deposit all or
any part of the securities owned by the Corporation in a securities
depository which includes any system for the central handling of
securities established by a national securities exchange or a
national securities association registered with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, or
such other person as may be permitted by the Commission, pursuant
to which system all securities of any particular class or series of
any issuer deposited within the system are treated as fungible and
may be transferred or pledged by bookkeeping entry without physical
delivery of such securities.
All securities are to be held or disposed of by the Custodian for,
and subject at all times to the instructions of, the Corporation
pursuant to the terms of this Agreement. The Custodian shall have
no power or authority to assign, hypothecate, pledge or otherwise
dispose of any such securities, except pursuant to the directive of
the Corporation and only for the account of the Corporation as set
forth in Section 6 of this Agreement.
SECTION 6. TRANSFER EXCHANGE, DELIVERY, ETC. OF SECURITIES
The Custodian shall have sole power to release or deliver any
securities of the Corporation held by it pursuant to this
Agreement. The Custodian agrees to transfer, exchange or deliver
securities held by it or its agent hereunder only:
(a) for sales of such securities for the account of the
Corporation, upon receipt of payment therefor;
(b) when such securities are called, redeemed, retired or
otherwise become payable;
(c) for examination upon the sale of any such securities in
accordance with "street delivery" custom which would include
delivery against interim receipts or other proper delivery
receipts;
(d) in exchange for or upon conversion into other securities
alone or other securities and cash whether pursuant to any
plan of
(e) merger, consolidation, reorganization, recapitalization or
readjustment, or otherwise;
(f) for the purpose of exchanging interim receipts or temporary
certificates for permanent certificates;
(g) upon conversion of such securities pursuant to their terms
into other securities;
<PAGE>
(h) upon exercise of subscription, purchase or other similar
rights represented by such securities; for loans of such
securities by the Corporation upon receipt of collateral; or
(i) for other proper corporate purposes.
As to any deliveries made by the Custodian pursuant to items (a),
(b), (c), (d), (e), (f), (g) and (h), securities or cash received
in exchange therefore shall be delivered to the Custodian, its
agent, or to a securities depository. Before making any such
transfer, exchange or delivery, the Custodian shall receive a
custodian order or a facsimile from the Corporation requesting such
transfer, exchange or delivery and stating that it is for a purpose
permitted under Section 6 (whenever a facsimile is utilized, the
Corporation will also deliver an original signed custodian order)
and, in respect to item (i), a copy of a resolution of the Board of
Directors or of the Executive Committee of the Board of Directors
of the Corporation signed by an officer of the Corporation and
certified by its Secretary or an Assistant Secretary, specifying
the securities, setting forth the purpose for which such payment,
transfer, exchange or delivery is to be made, declaring such
purpose to be a proper corporate purpose, and naming the person or
persons to whom such transfer, exchange or delivery of such
securities shall be made.
SECTION 7. CUSTODIAN'S ACTS WITHOUT INSTRUCTIONS
Unless and until the Custodian receives a contrary custodian order
from the Corporation, the Custodian shall or shall cause its agent
to:
(a) present for payment all coupons and other income items held
by the Custodian or its agent for the account of the
Corporation which call for payment upon presentation and hold
all cash received by it upon such payment for the account of
the Corporation;
(b) present for payment all securities held by it or its agent
which mature or when called, redeemed, retired or otherwise
become payable;
(c) ascertain all stock dividends, rights and similar securities
to be issued with respect to any securities held by the
Custodian or its agent hereunder, and to collect and hold for
the account of the Corporation all such securities; and
(d) ascertain all interest and cash dividends to be paid to
security holders with respect to any securities held by the
Custodian or its agent, and to collect and hold such interest
and cash dividends for the account of the Corporation.
SECTION 8. VOTING AND OTHER ACTION
Neither the Custodian nor any nominee of the Custodian shall vote
any of the securities held hereunder by or for the account of the
Corporation. The Custodian shall promptly deliver to the
Corporation all notices, proxies and proxy soliciting materials
<PAGE>
with relation to such securities, such proxies to be executed by
the registered holder of such securities (if registered otherwise
than in the name of the Corporation), but without indicating the
manner in which such proxies are to be voted.
Custodian shall transmit promptly to the Corporation all written
information (including, without limitation, pendency of calls and
maturities of securities and expirations of rights in connection
therewith) received by the Custodian from issuers of the securities
being held for the Corporation. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Corporation
all written information received by the Custodian from issuers of
the securities whose tender or exchange is sought and from the
party (or his agents) making the tender or exchange offer.
SECTION 9. TRANSFER TAXES
The Corporation shall pay or reimburse the Custodian for any
transfer taxes payable upon transfers of securities made hereunder,
including transfers resulting from the termination of this
Agreement. The Custodian shall execute such certificates in
connection with securities delivered to it under this Agreement as
may be required, under any applicable law or regulation, to exempt
from taxation any transfers and/or deliveries of any such
securities which may be entitled to such exemption.
SECTION 10. CUSTODIAN'S REPORTS
The Custodian shall furnish the Corporation as of the close of
business each day a statement showing all transactions and entries
for the account of the Corporation. The books and records of the
Custodian pertaining to its actions as Custodian under this
Agreement and securities held hereunder by the Custodian shall be
open to inspection and audit by officers of the Corporation,
internal auditors employed by the Corporation's investment adviser,
and independent auditors employed by the Corporation. The
Custodian shall furnish the Corporation in such form as may
reasonably be requested by the Corporation a report, including a
list of the securities held by it in custody for the account of the
Corporation, identification of any subcustodian, and identification
of such securities held by such subcustodian, as of the close of
business of the last business day of each month, which shall be
certified by a duly authorized officer of the Custodian. It is
further understood that additional reports may from time to time be
requested by the Corporation. Should any report ever be filed with
any governmental authority pertaining to lost or stolen securities,
the Custodian will concurrently provide the Corporation with a copy
of that report.
The Custodian also shall furnish such reports on its systems of
internal accounting control as the Corporation may reasonably
request from time to time.
SECTION 11. CONCERNING CUSTODIAN
For its services hereunder the Custodian shall be paid such
compensation at such times as may from time to time be agreed on in
writing by the parties hereto in a Custodian Fee Agreement.
<PAGE>
The Custodian shall not be liable for any action taken in good
faith upon any custodian order or facsimile herein described or
certified copy of any resolution of the Board of Directors or of
the Executive Committee of the Board of Directors of the
Corporation, and may rely on the genuineness of any such document
which it may in good faith believe to have been validly executed.
The Corporation agrees to indemnify and hold harmless Custodian and
its nominee from all taxes, charges, expenses, assessments, claims
and liabilities (including counsel fees) incurred or assessed
against it or its nominee in connection with the performance of
this Agreement, except such as may arise from the Custodian's or
its nominee's own negligent action, negligent failure to act or
willful misconduct. Custodian is authorized to charge any account
of the Corporation for such items. In the event of any advance of
cash for any purpose made by Custodian resulting from orders or
instructions of the Corporation, or in the event that Custodian or
its nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with the
performance of this Agreement, except such as may arise from its or
its nominee's own negligent action, negligent failure to act or
willful misconduct, any property at any time held for the account
of the Corporation shall be security therefor.
The Custodian shall maintain a standard of care equivalent to that
which would be required of a bailee for hire and shall not be
liable for any loss or damage to the Corporation resulting from
participation in a securities depository unless such loss or damage
arises by reason of any negligence, misfeasance, or willful
misconduct of officers or employees of the Custodian, or from its
failure to enforce effectively such rights as it may have against
any securities depository or from use of an agent, unless such loss
or damage arises by reason of any negligence, misfeasance, or
willful misconduct of officers or employees of the Custodian, or
from its failure to enforce effectively such rights as it may have
against any agent.
SECTION 12. TERMINATION AND AMENDMENT OF AGREEMENT
The Corporation and the Custodian mutually may agree from time to
time in writing to amend, to add to, or to delete from any
provision of this Agreement.
The Custodian may terminate this Agreement by giving the
Corporation ninety days' written notice of such termination by
registered mail addressed to the Corporation at its principal place
of business.
The Corporation may terminate this Agreement at any time by written
notice thereof delivered, together with a copy of the resolution of
the Board of Directors authorizing such termination and certified
by the Secretary of the Corporation, by registered mail to the
Custodian.
Upon such termination of this Agreement, assets of the Corporation
held by the Custodian shall be delivered by the Custodian to a
successor custodian, if one has been appointed by the Corporation,
<PAGE>
upon receipt by the Custodian of a copy of the resolution of the
Board of Directors of the Corporation certified by the Secretary,
showing appointment of the successor custodian, and provided that
such successor custodian is a bank or trust company, organized
under the laws of the United States or of any State of the United
States, having not less than two million dollars aggregate capital,
surplus and undivided profits. Upon the termination of this
Agreement as a part of the transfer of assets, either to a
successor custodian or otherwise, the Custodian will deliver
securities held by it hereunder, when so authorized and directed by
resolution of the Board of Directors of the Corporation, to a duly
appointed agent of the successor custodian or to the appropriate
transfer agents for transfer of registration and delivery as
directed. Delivery of assets on termination of this Agreement
shall be effected in a reasonable, expeditious and orderly manner;
and in order to accomplish an orderly transition from the Custodian
to the successor custodian, the Custodian shall continue to act as
such under this Agreement as to assets in its possession or
control. Termination as to each security shall become effective
upon delivery to the successor custodian, its agent, or to a
transfer agent for a specific security for the account of the
successor custodian, and such delivery shall constitute effective
delivery by the Custodian to the successor under this Agreement.
In addition to the means of termination herein before authorized,
this Agreement may be terminated at any time by the vote of a
majority of the outstanding shares of the Corporation and after
written notice of such action to the Custodian.
SECTION 13. GENERAL
Nothing expressed or mentioned in or to be implied from any
provision of this Agreement is intended to, or shall be construed
to give any person or corporation other than the parties hereto,
any legal or equitable right, remedy or claim under or in respect
of this Agreement, or any covenant, condition or provision herein
contained, this Agreement and all of the covenants, conditions and
provisions hereof being intended to be and being for the sole and
exclusive benefit of the parties hereto and their respective
successors and assigns.
<PAGE>
This Agreement shall be governed by the laws of the State of
Minnesota.
This Agreement supersedes all prior agreements between the parties.
IDS SELECTIVE FUND, INC.
By:
----------------------------------
Leslie L. Ogg
Vice President
AMERICAN EXPRESS TRUST COMPANY
By:
----------------------------------
Vice President
<PAGE>
TRANSFER AGENCY AGREEMENT
AGREEMENT dated as of March 20, 1995, between IDS Selective Fund,
Inc. (the "Fund"), a Minnesota corporation, and American Express
Financial Corporation (the "Transfer Agent"), a Delaware
corporation.
In consideration of the mutual promises set forth below, the Fund
and the Transfer Agent agree as follows:
1. Appointment of the Transfer Agent. The Fund hereby appoints the
Transfer Agent, as transfer agent for its shares and as shareholder
servicing agent for the Fund, and the Transfer Agent accepts such
appointment and agrees to perform the duties set forth below.
2. Compensation. The Fund will compensate the Transfer Agent for
the performance of its obligations as set forth in Schedule A.
Schedule A does not include out-of-pocket disbursements of the
Transfer Agent for which the Transfer Agent shall be entitled to
bill the Fund separately.
The Transfer Agent will bill the Fund monthly. The fee provided
for hereunder shall be paid in cash by the Fund to American Express
Financial Corporation within five (5) business days after the last
day of each month.
Out-of-pocket disbursements shall include, but shall not be limited
to, the items specified in Schedule B. Reimbursement by the Fund
for expenses incurred by the Transfer Agent in any month shall be
made as soon as practicable after the receipt of an itemized bill
from the Transfer Agent.
Any compensation jointly agreed to hereunder may be adjusted from
time to time by attaching to this Agreement a revised Schedule A,
dated and signed by an officer of each party.
3. Documents. The Fund will furnish from time to time such
certificates, documents or opinions as the Transfer Agent deems to
be appropriate or necessary for the proper performance of its
duties.
4. Representations of the Fund and the Transfer Agent.
(a) The Fund represents to the Transfer Agent that all outstanding
shares are validly issued, fully paid and non-assessable by the
Fund. When shares are hereafter issued in accordance with the
terms of the Fund's Articles of Incorporation and its prospectus,
such shares shall be validly issued, fully paid and non-assessable
by the Fund.
(b) The Transfer Agent represents that it is registered under
Section 17A(c) of the Securities Exchange Act of 1934. The
Transfer Agent agrees to maintain the necessary facilities,
equipment and personnel to perform its duties and obligations under
this agreement and to comply with all applicable laws.
<PAGE>
5. Duties of the Transfer Agent. The Transfer Agent shall be
responsible, separately and through its subsidiaries or affiliates,
for the following functions:
(a) Sale of Fund Shares.
(1) On receipt of an application and payment, wired instructions
and payment, or payment identified as being for the account of a
shareholder, the Transfer Agent will deposit the payment, prepare
and present the necessary report to the Custodian and record the
purchase of shares in a timely fashion in accordance with the terms
of the prospectus. All shares shall be held in book entry form and
no certificate shall be issued unless the Fund is permitted to do
so by the prospectus and the purchaser so requests.
(2) On receipt of notice that payment was dishonored, the Transfer
Agent shall stop redemptions of all shares owned by the purchaser
related to that payment, place a stop payment on any checks that
have been issued to redeem shares of the purchaser and take such
other action as it deems appropriate.
(b) Redemption of Fund Shares. On receipt of instructions to redeem
shares in accordance with the terms of the Fund's prospectus, the
Transfer Agent will record the redemption of shares of the Fund,
prepare and present the necessary report to the Custodian and pay
the proceeds of the redemption to the shareholder, an authorized
agent or legal representative upon the receipt of the monies from
the Custodian.
(c) Transfer or Other Change Pertaining to Fund Shares. On receipt
of instructions or forms acceptable to the Transfer Agent to
transfer the shares to the name of a new owner, change the name or
address of the present owner or take other legal action, the
Transfer Agent will take such action as is requested.
(d) Exchange of Fund Shares. On receipt of instructions to exchange
the shares of the Fund for the shares of another fund in the IDS
MUTUAL FUND GROUP or other American Express Financial Corporation
product in accordance with the terms of the prospectus, the
Transfer Agent will process the exchange in the same manner as a
redemption and sale of shares.
(e) Right to Seek Assurance. The Transfer Agent may refuse to
transfer, exchange or redeem shares of the Fund or take any action
requested by a shareholder until it is satisfied that the requested
transaction or action is legally authorized or until it is
satisfied there is no basis for any claims adverse to the
transaction or action. It may rely on the provisions of the
Uniform Act for the Simplification of Fiduciary Security Transfers
or the Uniform Commercial Code. The Fund shall indemnify the
Transfer Agent for any act done or omitted to be done in reliance
on such laws or for refusing to transfer, exchange or redeem shares
or taking any requested action if it acts on a good faith belief
that the transaction or action is illegal or unauthorized.
(f) Shareholder Records, Reports and Services.
<PAGE>
(1) The Transfer Agent shall maintain all shareholder accounts,
which shall contain all required tax, legally imposed and
regulatory information; shall provide shareholders, and file with
federal and state agencies, all required tax and other reports
pertaining to shareholder accounts; shall prepare shareholder
mailing lists; shall cause to be printed and mailed all required
prospectuses, annual reports, semiannual reports, statements of
additional information (upon request), proxies and other mailings
to shareholders; and shall cause proxies to be tabulated.
(2) The Transfer Agent shall respond to all valid inquiries related
to its duties under this Agreement.
(3) The Transfer Agent shall create and maintain all records in
accordance with all applicable laws, rules and regulations,
including, but not limited to, the records required by Section
31(a) of the Investment Company Act of 1940.
(g) Dividends and Distributions. The Transfer Agent shall prepare
and present the necessary report to the Custodian and shall cause
to be prepared and transmitted the payment of income dividends and
capital gains distributions or cause to be recorded the investment
of such dividends and distributions in additional shares of the
Fund or as directed by instructions or forms acceptable to the
Transfer Agent.
(h) Confirmations and Statements. The Transfer Agent shall confirm
each transaction either at the time of the transaction or through
periodic reports as may be legally permitted.
(i) Lost or Stolen Checks. The Transfer Agent will replace lost or
stolen checks issued to shareholders upon receipt of proper
notification and will maintain any stop payment orders against the
lost or stolen checks as it is economically desirable to do.
(j) Reports to Fund. The Transfer Agent will provide reports
pertaining to the services provided under this Agreement as the
Fund may request to ascertain the quality and level of services
being provided or as required by law.
(k) Other Duties. The Transfer Agent may perform other duties for
additional compensation if agreed to in writing by the parties to
this Agreement.
6. Ownership and Confidentiality of Records. The Transfer Agent
agrees that all records prepared or maintained by it relating to
the services to be performed by it under the terms of this
Agreement are the property of the Fund and may be inspected by the
Fund or any person retained by the Fund at reasonable times. The
Fund and Transfer Agent agree to protect the confidentiality of
those records.
7. Action by Board and Opinion of Fund's Counsel. The Transfer
Agent may rely on resolutions of the Board of Directors or the
Executive Committee of the Board of Directors and on opinion of
counsel for the Fund.
<PAGE>
8. Duty of Care. It is understood and agreed that, in furnishing
the Fund with the services as herein provided, neither the Transfer
Agent, nor any officer, director or agent thereof shall be held
liable for any loss arising out of or in connection with their
actions under this Agreement so long as they act in good faith and
with due diligence, and are not negligent or guilty of any willful
misconduct. It is further understood and agreed that the Transfer
Agent may rely upon information furnished to it reasonably believed
to be accurate and reliable. In the event the Transfer Agent is
unable to perform its obligations under the terms of this Agreement
because of an act of God, strike or equipment or transmission
failure reasonably beyond its control, the Transfer Agent shall not
be liable for any damages resulting from such failure.
9. Term and Termination. This Agreement shall become effective on
the date first set forth above (the "Effective Date") and shall
continue in effect from year to year thereafter as the parties may
mutually agree; provided that either party may terminate this
Agreement by giving the other party notice in writing specifying
the date of such termination, which shall be not less than 60 days
after the date of receipt of such notice. In the event such notice
is given by the Fund, it shall be accompanied by a vote of the
Board of Directors, certified by the Secretary, electing to
terminate this Agreement and designating a successor transfer agent
or transfer agents. Upon such termination and at the expense of
the Fund, the Transfer Agent will deliver to such successor a
certified list of shareholders of the Fund (with name, address and
taxpayer identification or Social Security number), a historical
record of the account of each shareholder and the status thereof,
and all other relevant books, records, correspondence, and other
data established or maintained by the Transfer Agent under this
Agreement in the form reasonably acceptable to the Fund, and will
cooperate in the transfer of such duties and responsibilities,
including provisions for assistance from the Transfer Agent's
personnel in the establishment of books, records and other data by
such successor or successors.
10. Amendment. This Agreement may not be amended or modified in any
manner except by a written agreement executed by both parties.
11. Subcontracting. The Fund agrees that the Transfer Agent may
subcontract for certain of the services described under this
Agreement with the understanding that there shall be no diminution
in the quality or level of the services and that the Transfer Agent
remains fully responsible for the services. Except for
out-of-pocket expenses identified in Schedule B, the Transfer Agent
shall bear the cost of subcontracting such services, unless
otherwise agreed by the parties.
12. Miscellaneous.
(a) This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable
without the written consent of the other party.
<PAGE>
(b) This Agreement shall be governed by the laws of the State of
Minnesota.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers as of the day and year
written above.
IDS SELECTIVE FUND, INC.
By:
----------------------------------
Leslie L. Ogg
Vice President
AMERICAN EXPRESS FINANCIAL CORPORATION
By:
----------------------------------
Vice President
<PAGE>
SCHEDULE A
IDS SELECTIVE FUND, INC.
TRANSFER AGENT FEE
Effective the 20th day of March, 1995, the Annual Per Account
Fee accrued daily and payable monthly is revised as follows:
CLASS FEE
----- ---
A $ 15.50
B 16.50
Y 15.50
<PAGE>
SCHEDULE B
OUT-OF-POCKET EXPENSES
The Fund shall reimburse the Transfer Agent monthly for the
following out-of-pocket expenses:
- - typesetting, printing, paper, envelopes, postage and return
postage for proxy soliciting material, and proxy tabulation costs
- - printing, paper, envelopes and postage for dividend notices,
dividend checks, records of account, purchase confirmations,
exchange confirmations and exchange prospectuses, redemption
confirmations, redemption checks, confirmations on changes of
address and any other communication required to be sent to
shareholders
- - typesetting, printing, paper, envelopes and postage for
prospectuses, annual and semiannual reports, statements of
additional information, supplements for prospectuses and statements
of additional information and other required mailings to
shareholders
- - stop orders
- - outgoing wire charges
- - other expenses incurred at the request or with the consent of the
Fund
<PAGE>
SHAREHOLDER SERVICE AGREEMENT
This agreement is between IDS Selective Fund, Inc. (the "Fund") and
American Express Financial Advisors Inc., the principal underwriter
of the Fund, for services to be provided to shareholders by
personal financial advisors and other servicing agents. It is
effective on the first day the Fund offers multiple classes of
shares.
American Express Financial Advisors represents that shareholders
consider their financial advisor or servicing agent a significant
factor in their satisfaction with their investment and, to help
retain financial advisors or servicing agents, it is necessary for
the Fund to pay annual servicing fees to financial advisors and
other servicing agents.
American Express Financial Advisors represents that fees paid to
financial advisors will be used by financial advisors to help
shareholders thoughtfully consider their investment goals and
objectively monitor how well the goals are being achieved. As
principal underwriter, American Express Financial Advisors will use
its best efforts to assure that other distributors provide
comparable services to shareholders for the servicing fees
received.
American Express Financial Advisors agrees to monitor the services
provided by financial advisors and servicing agents, to measure the
level and quality of services provided, to provide training and
support to financial advisors and servicing agents and to devise
methods for rewarding financial advisors and servicing agents who
achieve an exemplary level and quality of services.
The Fund agrees to pay American Express financial advisors and
other servicing agents 0.15 percent of the net asset value for each
shareholder account assigned to a financial advisor or servicing
agent that holds either Class A or Class B shares. In addition,
the Fund agrees to pay American Express Financial Advisors' costs
to monitor, measure, train and support services provided by
financial advisors or servicing agents up to 0.025 percent of the
net asset value for each shareholder account assigned to a
financial advisor or servicing agent that holds either Class A or
Class B shares. The Fund agrees to pay American Express Financial
Advisors in cash within five (5) business days after the last day
of each month.
American Express Financial Advisors agrees to provide the Fund,
prior to the beginning of the calendar year, a budget covering its
expected costs to monitor, measure, train and support services and
a quarterly report of its actual expenditures. American Express
Financial Advisors agrees to meet with representatives of the Fund
at their request to provide information as may be reasonably
necessary to evaluate its performance under the terms of this
agreement.
American Express Financial Advisors agrees that if, at the end of
any month, the expenses of the Fund, including fees under this
agreement and any other agreement between the Fund and American
<PAGE>
Express Financial Advisors or American Express Financial
Corporation, but excluding taxes, brokerage commissions and charges
in connection with the purchase and sale of assets exceed the most
restrictive applicable state expense limitation for the Fund's
current fiscal year, the Fund shall not pay fees and expenses under
this agreement to the extent necessary to keep the Fund's expenses
from exceeding the limitation, it being understood that American
Express Financial Advisors will assume all unpaid expenses and bill
the Fund for them in subsequent months but in no event can the
accumulation of unpaid expenses or billing be carried past the end
of the Fund's fiscal year.
This agreement shall continue in effect for a period of more than
one year so long as it is reapproved at least annually at a meeting
called for the purpose of voting on the agreement by a vote, in
person, of the members of the Board who are not interested persons
of the Fund and have no financial interest in the operation of the
agreement, and of all the members of the Board.
This agreement may be terminated at any time without payment of any
penalty by a vote of a majority of the members of the Board who are
not interested persons of the Fund and have no financial interest
in the operation of the agreement or by American Express Financial
Advisors. The agreement will terminate automatically in the event
of its assignment as that term is defined in the Investment Company
Act of 1940. This agreement may be amended at any time provided
the amendment is approved in the same manner the agreement was
initially approved and the amendment is agreed to by American
Express Financial Advisors.
Approved this 20th day of March, 1995.
IDS SELECTIVE FUND, INC.
- ----------------------------------
Leslie L. Ogg
Vice President
AMERICAN EXPRESS FINANCIAL ADVISORS INC.
- ----------------------------------
Vice President
<PAGE>
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT made the 20th day of March, 1995, by and between IDS
Selective Fund, Inc. (the "Fund"), a Minnesota corporation, and
American Express Financial Corporation, a Delaware corporation.
PART ONE: SERVICES
(1) The Fund hereby retains American Express Financial Corporation,
and American Express Financial Corporation hereby agrees, for the
period of this Agreement and under the terms and conditions
hereinafter set forth, to furnish the Fund continuously with all
administrative, accounting, clerical, statistical, correspondence,
corporate and all other services of whatever nature required in
connection with the administration of the Fund as provided under
this Agreement; and to pay such expenses as may be provided for in
Part Three hereof; subject always to the direction and control of
the Board of Directors, the Executive Committee and the authorized
officers of the Fund. American Express Financial Corporation
agrees to maintain an adequate organization of competent persons to
provide the services and to perform the functions herein mentioned.
American Express Financial Corporation agrees to meet with any
persons at such times as the Board of Directors deems appropriate
for the purpose of reviewing American Express Financial
Corporation's performance under this Agreement.
(2) The Fund agrees that it will furnish to American Express
Financial Corporation any information that the latter may
reasonably request with respect to the services performed or to be
performed by American Express Financial Corporation under this
Agreement.
(3) It is understood and agreed that in furnishing the Fund with
the services as herein provided, neither American Express Financial
Corporation, nor any officer, director or agent thereof shall be
held liable to the Fund or its creditors or shareholders for errors
of judgment or for anything except willful misfeasance, bad faith,
or gross negligence in the performance of its duties, or reckless
disregard of its obligations and duties under the terms of this
Agreement. It is further understood and agreed that American
Express Financial Corporation may rely upon information furnished
to it reasonably believed to be accurate and reliable.
PART TWO: COMPENSATION FOR SERVICES
(1) The Fund agrees to pay to American Express Financial
Corporation, and American Express Financial Corporation covenants
and agrees to accept from the Fund in full payment for the services
furnished, based on the net assets of the Fund as set forth in the
following table:
<PAGE>
Assets Annual Rate At
(Billions) Each Asset Level
---------- ----------------
First $1 0.050%
Next 1 0.045
Next 1 0.040
Next 3 0.035
Next 3 0.030
Over 9 0.025
The administrative fee for each calendar day of each year shall be
equal to 1/365th (1/366th in each leap year) of the total amount
computed. The computation shall be made for each such day on the
basis of net assets as of the close of business of the full
business day two (2) business days prior to the day for which the
computation is being made. In the case of the suspension of the
computation of net asset value, the administrative fee for each day
during such suspension shall be computed as of the close of
business on the last full business day on which the net assets were
computed. As used herein, "net assets" as of the close of a full
business day shall include all transactions in shares of the Fund
recorded on the books of the Fund for that day.
(2) The administrative fee shall be paid on a monthly basis and, in
the event of the termination of this Agreement, the administrative
fee accrued shall be prorated on the basis of the number of days
that this Agreement is in effect during the month with respect to
which such payment is made.
(3) The administrative fee provided for hereunder shall be paid in
cash by the Fund to American Express Financial Corporation within
five (5) business days after the last day of each month.
PART THREE: ALLOCATION OF EXPENSES
(1) The Fund agrees to pay:
(a) Administrative fees payable to American Express Financial
Corporation for its services under the terms of this Agreement.
(b) Taxes.
(c) Fees and charges of its independent certified public
accountants for services the Fund requests.
(d) Fees and expenses of attorneys (i) it employs in matters not
involving the assertion of a claim by a third party against the
Fund, its directors and officers, (ii) it employs in conjunction
with a claim asserted by the Board of Directors against American
Express Financial Corporation, except that American Express
Financial Corporation shall reimburse the Fund for such fees and
expenses if it is ultimately determined by a court of competent
jurisdiction, or American Express Financial Corporation agrees,
that it is liable in whole or in part to the Fund, and (iii) it
employs to assert a claim against a third party.
<PAGE>
(e) Fees paid for the qualification and registration for public
sale of the securities of the Fund under the laws of the United
States and of the several states in which such securities shall be
offered for sale.
(f) Office expenses which shall include a charge for occupancy,
insurance on the premises, furniture and equipment, telephone,
telegraph, electronic information services, books, periodicals,
published services, and office supplies used by the Fund, equal to
the cost of such incurred by American Express Financial
Corporation.
(g) Fees of consultants employed by the Fund.
(h) Directors, officers and employees expenses which shall include
fees, salaries, memberships, dues, travel, seminars, pension,
profit sharing, and all other benefits paid to or provided for
directors, officers and employees, directors and officers liability
insurance, errors and omissions liability insurance, worker's
compensation insurance and other expenses applicable to the
directors, officers and employees, except the Fund will not pay any
fees or expenses of any person who is an officer or employee of
American Express Financial Corporation or its affiliates.
(i) Filing fees and charges incurred by the Fund in connection with
filing any amendment to its articles of incorporation, or incurred
in filing any other document with the State of Minnesota or its
political subdivisions.
(j) Organizational expenses of the Fund.
(k) One-half of the Investment Company Institute membership dues
charged jointly to the IDS MUTUAL FUND GROUP and American Express
Financial Corporation.
(l) Expenses properly payable by the Fund, approved by the Board of
Directors.
(2) American Express Financial Corporation agrees to pay all
expenses associated with the services it provides under the terms
of this Agreement. Further, American Express Financial Corporation
agrees that if, at the end of any month, the expenses of the Fund
under this Agreement and any other agreement between the Fund and
American Express Financial Corporation, but excluding those
expenses set forth in (1)(b) of this Part Three, exceed the most
restrictive applicable state expenses limitation, the Fund shall
not pay those expenses set forth in (1)(a) and (c) through (m) of
this Part Three to the extent necessary to keep the Fund's expenses
from exceeding the limitation, it being understood that American
Express Financial Corporation will assume all unpaid expenses and
bill the Fund for them in subsequent months but in no event can the
accumulation of unpaid expenses or billing be carried past the end
of the Fund's fiscal year.
<PAGE>
PART FOUR: MISCELLANEOUS
(1) American Express Financial Corporation shall be deemed to be an
independent contractor and, except as expressly provided or
authorized in this Agreement, shall have no authority to act for or
represent the Fund.
(2) A "full business day" shall be as defined in the By-laws.
(3) The Fund recognizes that American Express Financial Corporation
now renders and may continue to render investment advice and other
services to other investment companies and persons which may or may
not have investment policies and investments similar to those of
the Fund and that American Express Financial Corporation manages
its own investments and/or those of its subsidiaries. American
Express Financial Corporation shall be free to render such
investment advice and other services and the Fund hereby consents
thereto.
(4) Neither this Agreement nor any transaction had pursuant hereto
shall be invalidated or in anyway affected by the fact that
directors, officers, agents and/or shareholders of the Fund are or
may be interested in American Express Financial Corporation or any
successor or assignee thereof, as directors, officers, stockholders
or otherwise; that directors, officers, stockholders or agents of
American Express Financial Corporation are or may be interested in
the Fund as directors, officers, shareholders, or otherwise; or
that American Express Financial Corporation or any successor or
assignee, is or may be interested in the Fund as shareholder or
otherwise, provided, however, that neither American Express
Financial Corporation, nor any officer, director or employee
thereof or of the Fund, shall sell to or buy from the Fund any
property or security other than shares issued by the Fund, except
in accordance with applicable regulations or orders of the United
States Securities and Exchange Commission.
(5) Any notice under this Agreement shall be given in writing,
addressed, and delivered, or mailed postpaid, to the party to this
Agreement entitled to receive such, at such party's principal place
of business in Minneapolis, Minnesota, or to such other address as
either party may designate in writing mailed to the other.
(6) American Express Financial Corporation agrees that no officer,
director or employee of American Express Financial Corporation will
deal for or on behalf of the Fund with himself as principal or
agent, or with any corporation or partnership in which he may have
a financial interest, except that this shall not prohibit officers,
directors or employees of American Express Financial Corporation
from having a financial interest in the Fund or in American Express
Financial Corporation.
(7) The Fund agrees that American Express Financial Corporation may
subcontract for certain of the services described under this
Agreement with the understanding that there shall be no diminution
in the quality or level of the services and that American Express
Financial Corporation remains fully responsible for the services.
<PAGE>
(8) This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable
without the written consent of the other party. This Agreement
shall be governed by the laws of the State of Minnesota.
PART FIVE: RENEWAL AND TERMINATION
(1) This Agreement shall become effective on the date first set
forth above (the "Effective Date") and shall continue in effect
from year to year thereafter as the parties may mutually agree;
provided that either party may terminate this Agreement by giving
the other party notice in writing specifying the date of such
termination, which shall be not less than 60 days after the date of
receipt of such notice.
(2) This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties.
IN WITNESS THEREOF, the parties hereto have executed the foregoing
Agreement as of the day and year first above written.
IDS SELECTIVE FUND, INC.
By:
----------------------------------
Leslie L. Ogg
Vice President
AMERICAN EXPRESS FINANCIAL CORPORATION
By:
----------------------------------
Vice President
<PAGE>
INDEPENDENT AUDITORS' CONSENT
______________________________________________________________________________
The Board of Directors and Shareholders
IDS Selective Fund, Inc.:
We consent to the use of our report incorporated herein by reference and to the
references to our Firm under the headings "Financial highlights" in Part A and
"INDEPENDENT AUDITORS" in Part B of the Registration Statement.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
February 27, 1995
<PAGE>
PLAN AND AGREEMENT OF DISTRIBUTION
This plan and agreement is between IDS Selective Fund, Inc. (the
"Fund") and American Express Financial Advisors Inc., the principal
underwriter of the Fund, for distribution services to the Fund. It
is effective on the first day the Fund offers multiple classes of
shares.
The plan and agreement has been approved by members of the Board of
Directors (the "Board") of the Fund who are not interested persons
of the Fund and have no direct or indirect financial interest in
the operation of the plan or any related agreement, and all of the
members of the Board, in person, at a meeting called for the
purpose of voting on the plan and agreement.
The plan and agreement provides that:
1. The Fund will reimburse American Express Financial Advisors
for all sales and promotional expenses attributable to the sale of
Class B shares, including sales commissions, business and employee
expenses charged to distribution of Class B shares, and corporate
overhead appropriately allocated to the sale of Class B shares.
2. The amount of the reimbursement shall be equal on an annual
basis to 0.75% of the average daily net assets of the Fund
attributable to Class B shares. The amount so determined shall be
paid to American Express Financial Advisors in cash within five (5)
business days after the last day of each month. American Express
Financial Advisors agrees that if, at the end of any month, the
expenses of the Fund, including fees under this agreement and any
other agreement between the Fund and American Express Financial
Advisors or American Express Financial Corporation, but excluding
taxes, brokerage commissions and charges in connection with the
purchase and sale of assets exceed the most restrictive applicable
state expense limitation for the Fund's current fiscal year, the
Fund shall not pay fees and expenses under this agreement to the
extent necessary to keep the Fund's expenses from exceeding the
limitation, it being understood that American Express Financial
Advisors will assume all unpaid expenses and bill the Fund for them
in subsequent months, but in no event can the accumulation of
unpaid expenses or billing be carried past the end of the Fund's
fiscal year.
3. For each purchase of Class B shares, after eight years the
Class B shares will be converted to Class A shares and those assets
will no longer be included in determining the reimbursement amount.
4. The Fund understands that if a shareholder redeems Class B
shares before they are converted to Class A shares, American
Express Financial Advisors will impose a sales charge directly on
the redemption proceeds to cover those expenses it has previously
incurred on the sale of those shares.
5. American Express Financial Advisors agrees to provide at
least quarterly an analysis of distribution expenses and to meet
with representatives of the Fund as reasonably requested to provide
additional information.
<PAGE>
6. The plan and agreement shall continue in effect for a period
of more than one year provided it is reapproved at least annually
in the same manner in which it was initially approved.
7. The plan and agreement may not be amended to increase
materially the amount that may be paid by the Fund without the
approval of a least a majority of the outstanding shares of Class
B. Any other amendment must be approved in the manner in which the
plan and agreement was initially approved.
8. This agreement may be terminated at any time without payment
of any penalty by a vote of a majority of the members of the Board
who are not interested persons of the Fund and have no financial
interest in the operation of the plan and agreement, or by vote of
a majority of the outstanding Class B shares, or by American
Express Financial Advisors. The plan and agreement will terminate
automatically in the event of its assignment as that term is
defined in the Investment Company Act of 1940.
Approved this 20th day of March, 1995.
IDS SELECTIVE FUND, INC.
- ----------------------------------
Leslie L. Ogg
Vice President
AMERICAN EXPRESS FINANCIAL ADVISORS INC.
- ----------------------------------
Vice President
<PAGE>
[ARTICLE] 6
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] NOV-30-1994
[PERIOD-END] NOV-30-1994
[INVESTMENTS-AT-COST] 1432581097
[INVESTMENTS-AT-VALUE] 1386963614
[RECEIVABLES] 24518802
[ASSETS-OTHER] 88272347
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 1499754763
[PAYABLE-FOR-SECURITIES] 247215
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 97386163
[TOTAL-LIABILITIES] 97633378
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 1426456301
[SHARES-COMMON-STOCK] 163598056
[SHARES-COMMON-PRIOR] 177801940
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] (378787)
[ACCUMULATED-NET-GAINS] 21661354
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (45617483)
[NET-ASSETS] 1402121385
[DIVIDEND-INCOME] 423122
[INTEREST-INCOME] 113274171
[OTHER-INCOME] 0
[EXPENSES-NET] 11352635
[NET-INVESTMENT-INCOME] 102344658
[REALIZED-GAINS-CURRENT] 21139491
[APPREC-INCREASE-CURRENT] (202860707)
[NET-CHANGE-FROM-OPS] (79376558)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (102794162)
[DISTRIBUTIONS-OF-GAINS] (26530545)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 21519839
[NUMBER-OF-SHARES-REDEEMED] (46537712)
[SHARES-REINVESTED] 10813989
[NET-CHANGE-IN-ASSETS] (334469750)
[ACCUMULATED-NII-PRIOR] 109885488
[ACCUMULATED-GAINS-PRIOR] 27637411
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 8228895
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 11352635
[AVERAGE-NET-ASSETS] 1567706945
[PER-SHARE-NAV-BEGIN] 9.77
[PER-SHARE-NII] .60
[PER-SHARE-GAIN-APPREC] (1.05)
[PER-SHARE-DIVIDEND] (.60)
[PER-SHARE-DISTRIBUTIONS] (.15)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 8.57
[EXPENSE-RATIO] .72
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
