<PAGE>
PAGE 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 83 (File No. 2-10700) X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 33 (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)
It is proposed that this filing will become effective (check
appropriate box)
immediately upon filing pursuant to paragraph (b)
X on Jan. 29, 1996 pursuant to paragraph (b) of rule 485
60 days after filing pursuant to paragraph (a)(i)
on (date) pursuant to paragraph (a)(i) of rule 485
75 days after filing pursuant to paragraph (a)(ii)
on (date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
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,
1995 was filed on or about Jan. 22, 1996.
<PAGE>
PAGE 2
Cross reference sheet showing the location in its 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 PART B
Section Section in
Item No. in Prospectus Item No. Statement of Additional Information
<S> <C> <C> <C>
1 Cover page of prospectus 10 Cover page of SAI
2(a) Sales charge and Fund expenses 11 Table of Contents
(b) The Fund in brief
(c) The Fund in brief 12 NA
3(a) Financial highlights 13(a) Additional Investment Policies; all
(b) NA appendices except Dollar-Cost Averaging
(c) Performance (b) Additional Investment Policies
(d) Financial highlights (c) Additional Investment Policies
(d) Portfolio Transactions
4(a) The Fund in brief; Investment policies and
risks; How the Fund is organized 14(a) Directors and officers of the Fund;**
(b) Investment policies and risks Directors and officers
(c) Investment policies and risks (b) Directors and Officers
(c) Directors and Officers
5(a) Directors and officers; Directors and
officers of the Fund (listing) 15(a) NA
(b)(i) Investment manager and transfer agent; (b) NA
About American Express Financial (c) Directors and Officers
Corporation -- General Information
(b)(ii) Investment manager and transfer agent 16(a)(i) How the Fund is organized; About American
(b)(iii) Investment manager and transfer agent Express Financial Corporation**
(c) Portfolio manager (a)(ii) Agreements: Investment Management Services
(d) Investment manager and transfer agent Agreement, Plan and Supplemental
(e) Investment manager and transfer agent Agreement of Distribution
(f) Distributor (a)(iii) Agreements: Investment Management Services Agreement
(g) Investment manager and transfer agent; (b) Agreements: Investment Management Services Agreement
About American Express Financial (c) NA
Corporation -- General Information (d) Agreements: Administrative Services
Agreement, Shareholder Service Agreement
5A(a) * (e) NA
(b) * (f) Agreements: Distribution Agreement
(g) NA
6(a) Shares; Voting rights (h) Custodian; Independent Auditors
(b) NA (i) Agreements: Transfer Agency Agreement; Custodian
(c) NA
(d) Voting rights 17(a) Portfolio Transactions
(e) Cover page; Special shareholder services (b) Brokerage Commissions Paid to Brokers Affiliated
(f) Dividends and capital gains distributions; with American Express Financial Corporation
Reinvestments (c) Portfolio Transactions
(g) Taxes (d) Portfolio Transactions
(h) Alternative sales arrangements; Special (e) Portfolio Transactions
considerations regarding master/feeder
structure 18(a) Shares; Voting rights**
(b) NA
7(a) Distributor
(b) Valuing Fund shares 19(a) Investing in the Fund
(c) How to purchase, exchange or redeem shares (b) Valuing Fund Shares; Investing in the Fund
(d) How to purchase shares (c) NA
(e) NA
(f) Distributor 20 Taxes
8(a) How to redeem shares 21(a) Agreements: Distribution Agreement
(b) NA (b) Agreements: Distribution Agreement
(c) How to purchase shares: Three ways to invest (c) NA
(d) How to purchase, exchange or redeem shares:
Redemption policies -- "Important..." 22(a) Performance Information (for money market
funds only)
9 None (b) Performance Information (for all funds except
money market funds)
23 Financial Statements
*Designates information is located in annual report.
**Designates location in prospectus.
/TABLE
<PAGE>
PAGE 3
IDS Selective Fund
Prospectus
January 29, 1996
The goals of IDS Selective Fund, Inc. are current income and the
preservation of capital by investing in investment-grade bonds.
This prospectus contains facts that can help you decide if the Fund
is the right investment for you. Read it before you invest and
keep it for future reference.
Additional facts about the Fund are in a Statement of Additional
Information (SAI), filed with the Securities and Exchange
Commission. The SAI, dated January 29, 1996, is incorporated here
by reference. For a free copy, contact American Express
Shareholder Service.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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. INVESTMENTS IN THE FUND
INVOLVE INVESTMENT RISK INCLUDING POSSIBLE LOSS OF PRINCIPAL.
American Express Shareholder Service
P.O. Box 534
Minneapolis, MN
55440-0534
612-671-3733
TTY: 800-846-4852
<PAGE>
PAGE 4
The Fund in brief
Goals
Types of Fund investments and their risks
Proposed conversion to master/feeder structure
Manager and distributor
Portfolio manager
Alternative purchase arrangements
Sales charge and Fund expenses
Performance
Financial highlights
Total returns
Yield
Investment policies and risks
Facts about investments and their risks
Valuing Fund shares
How to purchase, exchange or redeem shares
Alternative purchase arrangements
How to purchase shares
How to exchange shares
How to redeem shares
Reductions and waivers of the sales charge
Special shareholder services
Services
Quick telephone reference
Distributions and taxes
Dividend and capital gain distributions
Reinvestments
Taxes
How to determine the correct TIN
How the Fund is organized
Shares
Voting rights
Shareholder meetings
Special considerations regarding master/feeder structure
Board members and officers
Investment manager and transfer agent
Distributor
About American Express Financial Corporation
General information
Appendices
Description of investment-grade corporate bond ratings
Descriptions of derivative instruments
<PAGE>
PAGE 5
The Fund in brief
Goals
IDS Selective Fund (the Fund) seeks to provide shareholders with
current income and preservation of capital by investing in
investment-grade bonds. Because any investment involves risk,
achieving this goal cannot be guaranteed. Only shareholders can
change the goals.
Types of Fund investments and their risks
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.
Proposed conversion to master/feeder structure
Subject to certain contingencies, the Fund intends to invest all of
its assets in the Quality Income Portfolio (the Portfolio) of
Income Trust (the Trust) rather than directly investing in and
managing its own portfolio of securities. The Portfolio will have
the same investment objective as the Fund. The Fund anticipates
this conversion will occur in early 1996.
Manager and distributor
The Fund is managed by American Express Financial Corporation
(AEFC), a provider of financial services since 1894. AEFC
currently manages more than $47 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 AEFC.
After the Fund converts to the master/feeder structure, the
Portfolio in which the Fund invests will be managed by AEFC with
the same portfolio manager.
Portfolio manager
Ray Goodner joined AEFC 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 and also
has served as portfolio manager of IDS Global Bond Fund since 1989.
Alternative purchase arrangements
The Fund offers its shares in three classes. Class A shares are
subject to a sales charge at the time of purchase. Class B shares
are subject to a contingent deferred sales charge (CDSC) on<PAGE>
PAGE 6
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.
Sales charge and Fund expenses
Shareholder transaction expenses are incurred directly by an
investor on the purchase or redemption of Fund shares. Fund
operating expenses are paid out of Fund assets for each class of
shares. Operating expenses are reflected in the Fund's daily share
price and dividends, and are not charged directly to shareholder
accounts.
Shareholder transaction expenses
Class A Class B Class Y
Maximum sales charge on purchases*
(as a percentage of offering price).......5% 0% 0%
Maximum deferred sales charge
imposed on redemptions (as a
percentage of original purchase price)....0% 5% 0%
Annual Fund operating expenses**
(% of average daily net assets):
Class A Class B Class Y
Management fee .51% .51% .51%
12b-1 fee .00% .75% .00%
Other expenses*** .40% .41% .22%
Total .91% 1.67% .73%
*This charge may be reduced depending on your total investments in
IDS funds. See "Reductions of the sales charge."
**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 based on actual annualized expenses for the
period from March 20, 1995 to November 30, 1995.
***Other expenses include an administrative services fee, a
shareholder services fee for Class A and Class B, a transfer agency
fee and other non-advisory 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:
1 year 3 years 5 years 10 years
Class A $59 $78 $ 98 $157
Class B $67 $93 $111 $178**
Class B* $17 $53 $ 91 $178**
Class Y $ 7 $23 $ 41 $ 91
*Assuming Class B shares are not redeemed at the end of the period.
**Based on conversion of Class B shares to Class A shares after
eight years.
<PAGE>
PAGE 7
This example does not represent actual expenses, past or future.
Actual expenses may be higher or lower than those shown. Expense
information in this table for Class A shares has been restated to
reflect estimates of Fund expenses from changes in fees approved by
shareholders in November 1994. 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.
Performance
Financial highlights
<TABLE>
<CAPTION>
Performance
Financial highlights
IDS Selective Fund, Inc.
Fiscal year ended Nov. 30,
Per share income and capital changes*
Class A
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $8.57 $9.77 $9.20 $8.93 $8.41 $8.69 $8.44 $8.27 $9.03 $8.24
beginning of year
Income from investment operations:
Net investment income .59 .60 .63 .66 .69 .70 .72 .74 .77 .81
Net gains (losses) 1.08 (1.05) .69 .27 .52 (.30) .27 .17 (.71) .79
(both realized
and unrealized)
Total from investment 1.67 (.45) 1.32 .93 1.21 .40 .99 .91 .06 1.60
operations
Less distributions:
Dividends from net (.58) (.60) (.64) (.66) (.69) (.68) (.74) (.74) (.77) (.81)
investment income
Distributions from (.13) (.15) (.11) -- -- -- -- -- (.05) --
realized gains
Total distributions (.71) (.75) (.75) (.66) (.69) (.68) (.74) (.74) (.82) (.81)
Net asset value, $9.53 $8.57 $9.77 $9.20 $8.93 $8.41 $8.69 $8.44 $8.27 $9.03
end of year
Ratios/supplemental data
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
Net assets, end of $1,490 $1,402 $1,737 $1,541 $1,403 $1,196 $1,167 $1,081 $1,101 $1,181
year (in millions)
Ratio of expenses to .85% .72% .72% .74% .77% .76% .77% .74% .75% .66%
average daily net assets
Ratio of net income 6.59% 6.53% 6.57% 7.32% 7.94% 8.58% 8.42% 8.67% 8.80% 9.29%
to average
daily net assets
Portfolio turnover rate 26% 30% 30% 62% 59% 54% 79% 86% 74% 108%
(excluding short-term
securities)
Total return** 20.3% (4.7%) 14.8% 10.8% 15.0% 4.8% 12.3% 11.3% 0.6% 20.2%
*For a share outstanding throughout the year. Rounded to the nearest cent.
**Total return does not reflect payment of a sales charge.
/TABLE
<PAGE>
PAGE 8
<TABLE><CAPTION>
IDS Selective Fund, Inc.
Performance
Financial highlights
Fiscal period ended Nov. 30,
Per share income and capital changes*
Class B** Class Y**
1995 1995
<S> <C> <C>
Net asset value, $8.78 $8.78
beginning of period
Income from investment operations:
Net investment income .40 .46
Net gains .75 .75
(both realized
and unrealized)
Total from investment 1.15 1.21
operations
Less distributions:
Dividends from net (.40) (.46)
investment income
Net asset value, $9.53 $9.53
end of period
Ratios/supplemental data
1995 1995
Net assets, end of $72 $142
period (in millions)
Ratio of expenses to 1.67%+ .73%+
average daily net assets
Ratio of net income 5.68%+ 6.64%+
to average
daily net assets
Portfolio turnover rate 26% 26%
(excluding short-term
securities)
Total return*** 13.1% 13.8%
*For a share outstanding throughout the period. Rounded to the nearest cent.
**Inception date was March 20, 1995 for Class B and Class Y.
***Total return does not reflect payment of a sales charge.
+Adjusted to an annual basis.
</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.
Total returns
Total return is the sum of all of your returns for a given period,
assuming you reinvest all distributions. It is calculated by
taking the total value of shares you own at the end of the period
(including shares acquired by reinvestment), less the price of
shares you purchased at the beginning of the period.
Average annual total return is the annually compounded rate of
return over a given time period (usually two or more years). It is
the total return for the period converted to an equivalent annual
figure.
<PAGE>
PAGE 9
Average annual total returns as of Nov. 30, 1995
Purchase 1 year 5 years 10 years
made ago ago ago
Selective:
Class A +14.24% +9.73% +9.69%
Lehman
Aggregate
Bond Index +18.05% +9.45% +9.78%
Cumulative total returns as of Nov. 30, 1995
Purchase 1 year 5 years 10 years
made ago ago ago
Selective:
Class A +14.24% +59.08% +152.16%
Lehman
Aggregate
Bond Index +18.05% +57.05% +154.21%
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. Total returns for Class A,
Class B and Class Y for the period from March 20, 1995 to Nov. 30,
1995 were +7.95%, +8.09% and +13.76%, respectively. March 20, 1995
was the inception date for Class B and Class Y. Total return for
Class A is shown for comparative purposes. The performance of
Class B and Class Y will vary from the performance of Class A based
on differences in sales charges and fees. Past performance for
Class Y for the periods prior to March 20, 1995 may be calculated
based on the performance of Class A, adjusted to reflect
differences in sales charges although not other differences in
expenses.
For purposes of calculation, information about the Fund assumes:
o a sales charge of 5% for Class A shares
o redemption at the end of the period and deduction of the
applicable contingent deferred sales charge for Class B
shares
o no sales charge for Class Y shares
o no adjustments for taxes an investor may have paid on the
reinvested income and capital gains
o a period of widely fluctuating securities prices. Returns
shown should not be considered a representation of the Fund's
future performance.
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. The index reflects reinvestment of all
distributions and changes in market prices, but excludes brokerage
commissions or other fees.
<PAGE>
PAGE 10
Yield
Yield is the net investment income earned per share for a specified
time period, divided by the offering price at the end of the
period. The Fund's annualized yield for the 30-day period ended
Nov. 30, 1995, was 5.43% for Class A, 4.96% for Class B and 5.89%
for Class Y. The Fund calculates this 30-day annualized yield by
dividing:
o net investment income per share deemed earned during a 30-day
period by
o the public offering price per share on the last day of the
period, and
o 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.
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.
Subject to certain contingencies, the Fund intends in early 1996 to
achieve its investment objective by investing all of its assets in
the Portfolio of the Trust, which is a separate investment company.
The Portfolio has the same investment objectives, policies and
restrictions as the Fund. The board of the Fund believes that by
investing all of its assets in the Portfolio, the Fund will be in a
position to realize directly or indirectly certain economies of
scale inherent in managing a larger asset base. When the Fund
converts to the master/feeder structure, the policies described
below will apply to both the Fund and the Portfolio.
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.
<PAGE>
PAGE 11
Facts about investments and their risks
Debt securities: The price of bonds generally falls as interest
rates increase, and rises as interest rates decrease. The price of
bonds also fluctuates if the credit rating is upgraded or
downgraded. The Fund does not invest in securities considered by
the investment 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
when the Fund's investment manager believes it is advantageous to
do so. For a description of investment-grade corporate bonds
ratings, please see Appendix A to this prospectus.
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.
Foreign investments: Securities of foreign companies and
governments may be traded in the United States, but often they are
traded only on foreign markets. Frequently, there is less
information about foreign companies and less government supervision
of foreign markets. Foreign investments are subject to political
and economic risks of the countries in which the investments are
made, including the possibility of seizure or nationalization of
companies, imposition of withholding taxes on income, establishment
of exchange controls or adoption of other restrictions that might
affect an investment adversely. If an investment is made in a
foreign market, the local currency may be purchased using a forward
contract in which the price of the foreign currency in U.S. dollars
is established on the date the trade is made, but delivery of the
currency is not made until the securities are received. As long as
the Fund holds foreign currencies or securities valued in foreign
currencies, the value of those assets will be affected by changes
in the value of the currencies relative to the U.S. dollar.
Because of the limited trading volume in some foreign markets,
efforts to buy or sell a security may change the price of the
security, and it may be difficult to complete the transaction. The
Fund may invest up to 25% of its total assets in foreign
investments.
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. <PAGE>
PAGE 12
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. The Fund is not limited as
to the percentage of its assets that may be invested in permissible
investments, including derivatives, except as otherwise explicitly
provided in this prospectus or the SAI. For descriptions of these
and other types of derivative instruments, see Appendix B to this
prospectus and the SAI.
Securities and derivative instruments that are illiquid: A
security or derivative instrument is illiquid if it cannot be sold
quickly in the normal course of business. Some investments cannot
be resold to the U.S. public because of their terms or government
regulations. 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
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.
Money market instruments: Short-term debt securities rated in the
top two grades or the equivalent are used to meet daily cash needs
and at various times to hold assets until better investment
opportunities arise. Generally less than 25% of the Fund's total
assets are in these money market instruments. However, for
temporary defensive purposes these investments could exceed that
amount for a limited period of time.
The investment policies described above may be changed by the
board.
Lending portfolio securities: The Fund may lend its securities to
earn income so long as borrowers provide collateral equal to the
market value of the loans. The risks are that borrowers will not
provide collateral when required or return securities when due.
Unless a majority of the outstanding voting securities approve
otherwise, loans may not exceed 30% of the Fund's net assets.
<PAGE>
PAGE 13
Valuing Fund shares
The public offering price is the net asset value (NAV) plus the
sales charge for Class A. It is the NAV for Class B and Class Y.
The NAV is the value of a single Fund share. The NAV usually
changes daily, and is calculated at the close of business, normally
3 p.m. Central time, each business day (any day the New York Stock
Exchange is open). NAV generally declines as interest rates
increase and rises as interest rates decline.
To establish the net assets, all securities are valued as of the
close of each business day. In valuing assets:
o Securities (except bonds) and assets with available market
values are valued on that basis.
o Securities maturing in 60 days or less are valued at
amortized cost.
o Bonds and assets without readily available market values are
valued according to methods selected in good faith by the
board.
How to purchase, exchange or redeem shares
Alternative purchase arrangements
The Fund offers three different classes of shares - Class A, Class
B and Class Y. The primary differences among the classes are in
the sales charge structures and in their ongoing expenses. These
differences are summarized in the table below. You may choose the
class that best suits your circumstances and objectives.
<TABLE> <CAPTION>
Sales charge and
distribution
(12b-1) fee Service fee Other information
<S> <C> <C> <C>
Class A Maximum initial 0.175% of average Initial sales charge
sales charge of daily net assets waived or reduced
5%; no 12b-1 fee for certain purchases
Class B No initial sales 0.175% of average Shares convert to
charge; maximum CDSC daily net assets Class A after eight
of 5% declines to 0% years; CDSC waived in
after six years; 12b-1 certain circumstances
fee of 0.75% of average
daily net assets
Class Y None None Available only to
certain qualifying
institutional
investors
</TABLE>
<PAGE>
PAGE 14
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.
Considerations in determining whether to purchase Class A or Class
B shares - You should consider the information below in determining
whether to purchase Class A or Class B shares. The sales charges
and distribution fee (included in "Ongoing expenses") are
structured so that you will have approximately the same total
return at the end of eight years regardless of which class you
chose.
Sales charges on purchase or redemption
If you purchase Class A If you purchase Class B
shares shares
o You will not have all o All of your money is
of your purchase price invested in shares of
invested. Part of your stock. However, you will
purchase price will go pay a sales charge if you
to pay the sales charge. redeem your shares within
You will not pay a sales six years of purchase.
charge when you redeem
your shares.
o You will be able to o No reductions of the
take advantage of sales charge are
reductions in the sales available for large
charge. purchases.
If 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.
Ongoing expenses
If you purchase Class A If you purchase Class B
shares shares
o Your shares will have o The distribution and
a lower expense ratio transfer agency fees for
than Class B shares Class B will cause your
because Class A does not shares to have a higher
pay a distribution fee expense ratio and to pay
and the transfer agency lower dividends than
<PAGE>
PAGE 15
fee for Class A is lower Class A shares. After
than the fee for Class B. eight years, Class B
As a result, Class A shares shares will convert to
will pay higher dividends Class A shares and will
than Class B shares. no longer 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.
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:
o Qualified employee benefit plans* if the plan:
- uses a daily transfer recordkeeping service offering
participants daily access to IDS funds and has
- at least $10 million in plan assets or
- 500 or more participants; or
- does not use daily transfer recordkeeping and has
- at least $3 million invested in funds of the IDS MUTUAL
FUND GROUP or
- 500 or more participants.
o Trust companies or similar institutions, and charitable
organizations that meet the definition in Section 501(c)(3)
of the Internal Revenue Code.* These must have at least $10
million invested in funds of the IDS MUTUAL FUND GROUP.
o Nonqualified deferred compensation plans* whose
participants are included in a qualified employee benefit
plan described above.
* Eligibility must be determined in advance by American Express
Financial Advisors. To do so, contact your financial advisor.
How to purchase 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.
Important: When opening an account, you must provide AEFC with
your correct Taxpayer Identification Number (Social Security or
Employer Identification number). See "Distributions and taxes."<PAGE>
PAGE 16
When you purchase shares for a new or existing account, the price
you pay per share is determined at the close of business on the day
your investment is received and accepted at the Minneapolis
headquarters.
Purchase policies:
o Investments must be received and accepted in the Minneapolis
headquarters on a business day before 3 p.m. Central time to
be included in your account that day and to receive that day's
share price. Otherwise your purchase will be processed the
next business day and you will pay the next day's share price.
o The minimums allowed for investment may change from time to
time.
o Wire orders can be accepted only on days when your bank, AEFC,
the Fund and Norwest Bank Minneapolis are open for business.
o Wire purchases are completed when wired payment is received
and the Fund accepts the purchase.
o AEFC and the Fund are not responsible for any delays that
occur in wiring funds, including delays in processing by the
bank.
o You must pay any fee the bank charges for wiring.
o The Fund reserves the right to reject any application for any
reason.
o If your application does not specify which class of shares you
are purchasing, it will be assumed that you are investing in
Class A shares.
<TABLE><CAPTION>
Three ways to invest
<S> <C> <C>
1
By regular account Send your check and application Minimum amounts
(or your name and account number Initial investment: $2,000
if you have an established account) Additional
to: investments: $ 100
American Express Financial Advisors Inc. Account balances: $ 300*
P.O. Box 74 Qualified retirement
Minneapolis, MN 55440-0074 accounts: none
Your financial advisor will help
you with this process.
2
By scheduled Contact your financial advisor Minimum amounts
investment plan to set up one of the following Initial investment: $100
scheduled plans: Additional
investments: $100/mo.
o automatic payroll deduction Account balances: none
(on active plans of
o bank authorization monthly payments)
o direct deposit of
Social Security check
o other plan approved by the Fund<PAGE>
PAGE 17
3
By wire If you have an established account, If this information is not
you may wire money to: included, the order may be
rejected and all money
Norwest Bank Minneapolis received by the Fund, less
Routing No. 091000019 any costs the Fund or AEFC
Minneapolis, MN incurs, will be returned
Attn: Domestic Wire Dept. promptly.
Give these instructions: Minimum amounts
Credit IDS Account #00-30-015 Each wire investment: $1,000
for 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.
</TABLE>
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 redemption 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 redeem shares
You can redeem your shares at any time. American Express
Shareholder Service will mail payment within seven days after
receiving your request.
When you redeem shares, the amount you receive may be more or less
than the amount you invested. Your shares will be redeemed at net
asset value, minus any applicable sales charge, at the close of
business on the day your request is accepted at the Minneapolis
headquarters. If your request arrives after the close of business,
the price per share will be the net asset value, minus any
applicable sales charge, at the close of business on the next
business day.
A redemption is a taxable transaction. If your proceeds from your
redemption are more or less than the cost of your shares, you will
have a gain or loss, which can affect your tax liability.
Redeeming shares held in an IRA or qualified retirement account may
subject you to certain federal taxes, penalties and reporting
requirements. Consult your tax advisor.<PAGE>
PAGE 18
<TABLE><CAPTION>
Two ways to request an exchange or redemption of shares
<S> <C>
1
By letter Include in your letter:
o the name of the fund(s)
o the class of shares to be exchanged or redeemed
o your account number(s) (for exchanges, both funds must be registered in the same
ownership)
o your Taxpayer Identification Number (TIN)
o the dollar amount or number of shares you want to exchange or redeem
o signature of all registered account owners
o for redemptions, indicate how you want your money delivered to you
o any paper certificates of shares you hold
Regular mail:
American Express Shareholder Service
Attn: Redemptions
P.O. Box 534
Minneapolis, MN 55440-0534
Express mail:
American Express Shareholder Service
Attn: Redemptions
733 Marquette Ave.
Minneapolis, MN 55402
2
By phone
American Express Telephone o The Fund and AEFC will honor any telephone exchange or redemption request believed to be
Transaction Service: authentic and will use reasonable procedures to confirm that they are. This includes
800-437-3133 or asking identifying questions and tape recording calls. If reasonable
612-671-3800 procedures are not followed, the Fund or AEFC will be liable for any loss resulting from
fraudulent requests.
o Phone exchange and redemption privileges automatically apply to all accounts except
custodial, corporate or qualified retirement accounts unless you request these privileges
NOT apply by writing American Express Shareholder Service. Each registered owner must sign
the request.
o AEFC answers phone requests promptly, but you may experience delays when call volume is
high. If you are unable to get through, use mail procedure as an alternative.
o Acting on your instructions, your financial advisor may conduct telephone transactions on
your behalf.
o Phone privileges may be modified or discontinued at any time.
Minimum amount
Redemption: $100
Maximum amount
Redemption: $50,000
</TABLE>
Exchange policies:
o You may make up to three exchanges within any 30-day period,
with each limited to $300,000. These limits do not apply to
scheduled exchange programs and certain employee benefit plans or
other arrangements through which one shareholder represents the
interests of several. Exceptions may be allowed with pre-approval
of the Fund.
o Exchanges must be made into the same class of shares of the new
fund.
o If your exchange creates a new account, it must satisfy the
minimum investment amount for new purchases.
o Once we receive your exchange request, you cannot cancel it.
<PAGE>
PAGE 19
o Shares of the new fund may not be used on the same day for
another exchange.
o If your shares are pledged as collateral, the exchange will be
delayed until written approval is obtained from the secured party.
o AEFC and the Fund reserve the right to reject any exchange,
limit the amount, or modify or discontinue the exchange privilege,
to prevent abuse or adverse effects on the Fund and its
shareholders. For example, if exchanges are too numerous or too
large, they may disrupt the Fund's investment strategies or
increase its costs.
Redemption policies:
o A "change of mind" option allows you to change your mind after
requesting a redemption and to use all or part of the proceeds to
purchase new shares in the same class from which you redeemed. If
you reinvest in Class A, you will purchase the new shares at net
asset value rather than the offering price on the date of a new
purchase. If you reinvest in Class B, any CDSC you paid on the
amount you are reinvesting also will be reinvested. To take
advantage of this option, send a written request within 30 days of
the date your redemption request was received. Include your
account number and mention this option. This privilege may be
limited or withdrawn at any time, and it may have tax consequences.
o A telephone redemption request will not be allowed within 30
days of a phoned-in address change.
Important: If you request a redemption of shares you recently
purchased by a check or money order that is not guaranteed, the
Fund will wait for your check to clear. It may take up to 10 days
from the date of purchase before a check is mailed to you. (A
check may be mailed earlier if your bank provides evidence
satisfactory to the Fund and AEFC that your check has cleared.)
<TABLE><CAPTION>
Three ways to receive payment when you redeem shares
<S> <C>
1
By regular or express mail o Mailed to the address on record.
o Payable to names listed on the account.
NOTE: The express mail delivery charges
you pay will vary depending on the
courier you select.
2
By wire o Minimum wire redemption: $1,000.
o Request that money be wired to your bank.
o Bank account must be in the same
ownership as the IDS fund account.
NOTE: Pre-authorization required. For
instructions, contact your financial
advisor or American Express Shareholder Service.
<PAGE>
PAGE 20
3
By scheduled payout plan o Minimum payment: $50.
o 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.
o Purchasing new shares while under a payout
plan may be disadvantageous because of
the sales charges.
</TABLE>
Reductions and waivers of the sales charge
Class A - initial sales charge alternative
On purchases of Class A shares, you pay a 5% sales charge on the
first $50,000 of your total investment and less on investments
after the first $50,000:
Total investment Sales charge as a
percent of:*
Public Net
offering amount
price invested
Up to $50,000 5.0% 5.26%
Next $50,000 4.5 4.71
Next $400,000 3.8 3.95
Next $500,000 2.0 2.04
$1,000,000 or more 0.0 0.00
* To calculate the actual sales charge on an investment greater
than $50,000 and less than $1,000,000, amounts for each applicable
increment must be totaled. See the SAI.
Reductions of the sales charge on Class A shares
Your sales charge may be reduced, depending on the totals of:
o the amount you are investing in this Fund now,
o the amount of your existing investment in this Fund, if any, and
o the amount you and your 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:
o IDS Tax-Free Money Fund and Class A shares of IDS Cash
Management Fund do not carry sales charges. However, you may count
investments in these funds if you acquired shares in them by
exchanging shares from IDS funds that carry sales charges.
o IRA purchases or other employee benefit plan purchases made
through a payroll deduction plan or through a plan sponsored by an
employer, association of employers, employee organization or other <PAGE>
PAGE 21
similar entity, may be added together to reduce sales charges for
all shares purchased through that plan.
o If you intend to invest $1 million over a period of 13 months,
you can reduce the sales charges in Class A by filing a letter of
intent.
For more details, see the SAI.
Waivers of the sales charge for Class A shares
Sales charges do not apply to:
o Current or retired board members, officers or employees of the
Fund or AEFC or its subsidiaries, their spouses and unmarried
children under 21.
o Current or retired American Express financial advisors, their
spouses and unmarried children under 21.
o Qualified employee benefit plans* using a daily transfer
recordkeeping system offering participants daily access to IDS
funds.
(Participants in certain qualified plans for which the initial
sales charge is waived may be subject to a deferred sales charge of
up to 4% on certain redemptions. For more information, see the
SAI.)
o Shareholders who have at least $1 million invested in funds of
the IDS MUTUAL FUND GROUP. If the investment is redeemed in the
first year after purchase, a CDSC of 1% will be charged on the
redemption.
o 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 has a
recordkeeping, trustee, investment management or investment
servicing relationship.
Send the Fund a written request along with your payment, indicating
the amount of the redemption and the date on which it occurred.
o Purchases made with dividend or capital gain distributions from
another fund in the IDS MUTUAL FUND GROUP that has a sales charge.
o Purchases made through American Express Strategic Portfolio
Service (total amount of all investments made in the Strategic
Portfolio Service must be at least $50,000).
<PAGE>
PAGE 22
o Purchases made under the University of Texas System ORP.
*Eligibility must be determined in advance by American Express
Financial Advisors. To do so, contact your financial advisor.
Class B - contingent deferred sales charge alternative
Where a CDSC is imposed on a redemption, it is based on the amount
of the redemption and the number of calendar years, including the
year of purchase, between purchase and redemption. The following
table shows the declining scale of percentages that apply to
redemptions during each year after a purchase:
If a redemption is The percentage rate
made during the for the CDSC is:
First year 5%
Second year 4%
Third year 4%
Fourth year 3%
Fifth year 2%
Sixth year 1%
Seventh year 0%
If the amount you are redeeming reduces the current net asset value
of your investment in Class B shares below the total dollar amount
of all your purchase payments during the last six years (including
the year in which your redemption is made), the CDSC is based on
the lower of the redeemed purchase payments or market value.
The following example illustrates how the CDSC is applied. Assume
you had invested $10,000 in Class B shares and that your investment
had appreciated in value to $12,000 after 15 months, including
reinvested dividend and capital gain distributions. You could
redeem any amount up to $2,000 without paying a CDSC ($12,000
current value less $10,000 purchase amount). If you redeemed
$2,500, the CDSC would apply only to the $500 that represented part
of your original purchase price. The CDSC rate would be 4% because
a redemption after 15 months would take place during the second
year after purchase.
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.
<PAGE>
PAGE 23
Waivers of the contingent deferred sales charge
The CDSC on Class B shares will be waived on redemptions of shares:
o In the event of the shareholder's death,
o Purchased by any board member, officer or employee of a fund or
AEFC or its subsidiaries,
o Held in a trusteed employee benefit plan,
o Held in IRAs or certain qualified plans for which American
Express Trust Company acts as custodian, such as Keogh plans, tax-
sheltered custodial accounts or corporate pension plans, provided
that the shareholder is:
- at least 59-1/2 years old, and
- taking a retirement distribution (if the redemption is part
of a transfer to an IRA or qualified plan in a product
distributed by 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.
For investors in Class A shares who have over $1 million invested
in one year, the 1% CDSC on redemption of those shares will be
waived in the same circumstances described for Class B.
Special shareholder services
Services
To help you track and evaluate the performance of your investments,
AEFC provides these services:
Quarterly statements listing all of your holdings and transactions
during the previous three months.
Yearly tax statements featuring average-cost-basis reporting of
capital gains or losses if you redeem your shares along with
distribution information - which simplifies tax calculations.
A personalized mutual fund progress report detailing returns on
your initial investment and cash-flow activity in your account. It
calculates a total return to reflect your individual history in
owning Fund shares. This report is available from your financial
advisor.
Quick telephone reference
American Express Telephone Transaction Service
Redemptions and exchanges, dividend payments or reinvestments and
automatic payment arrangements
National/Minnesota: 800-437-3133
Mpls./St. Paul area: 671-3800<PAGE>
PAGE 24
American Express Shareholder Service
Fund performance, objectives and account inquiries
612-671-3733
TTY Service
For the hearing impaired
800-846-4852
American Express Infoline
Automated account information (TouchToneR phones only), including
current Fund prices and performance, account values and recent
account transactions
National/Minnesota: 800-272-4445
Mpls./St. Paul area: 671-1630
Distributions and taxes
As a shareholder you are entitled to your share of the Fund's net
income and any net gains realized on its investments. The Fund
distributes dividends and capital gain distributions to qualify as
a regulated investment company and to avoid paying corporate income
and excise taxes. Dividend and capital gain distributions will
have tax consequences you should know about.
Dividend and capital gain distributions
The Fund's income from dividends and interest is distributed to you
monthly as dividends. Short-term capital gains are distributed at
the end of the calendar year and included in net investment income.
The Fund realizes long-term capital gains whenever it sells
securities held for more than one year for a higher price than it
paid for them. Net realized long-term capital gains, if any, are
distributed at the end of the calendar year as capital gain
distributions. Before they're distributed, net long-term 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 for each class will be calculated at the same time, in
the same manner and will be the same amount prior to deduction of
expenses. Expenses attributable solely to a class of shares will
be paid exclusively by that class. 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.
Reinvestments
Dividends and capital gain distributions are automatically
reinvested in additional shares in the same class of the Fund,
unless:
<PAGE>
PAGE 25
o you request the Fund in writing or by phone to pay
distributions to you in cash, or
o you direct the Fund to invest your distributions in 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 declares them regardless of whether you take them in
cash or reinvest them.
Each January, you will receive a tax statement showing the kinds
and total amount of all distributions you received during the
previous year. You must report distributions on your tax returns,
even if they are reinvested in additional shares.
Buying a dividend creates a tax liability. This means buying
shares shortly before a 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 AEFC.
<PAGE>
PAGE 26
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:
o a $50 penalty for each failure to supply your correct TIN
o a civil penalty of $500 if you make a false statement that
results in no backup withholding
o criminal penalties for falsifying information
You also could be subject to backup withholding because you failed
to report interest or dividends on your tax return as required.
How to determine the correct TIN
Use the Social Security or
For this type of account: Employer Identification number
of:
Individual or joint account The individual or individuals
listed on the account
Custodian account of a minor The 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, pension The legal entity (not the
trust or estate personal representative or
trustee, unless no legal entity
is designated in the account
title)
Sole proprietorship The owner
Partnership The partnership
Corporate The corporation
Association, club or 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.
<PAGE>
PAGE 27
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
one cent per share. Both full and fractional shares can be issued.
The Fund no longer issues stock certificates.
Voting rights
As a shareholder, you have voting rights over the Fund's management
and fundamental policies. You are entitled to one vote for each
share you own. Shares of the Fund have cumulative voting rights.
Each class has exclusive voting rights with respect to the
provisions of the Fund's distribution plan that pertain to a
particular class and other matters for which separate class voting
is appropriate under applicable law.
Shareholder meetings
The Fund does not hold annual shareholder meetings. However, the
board members may call meetings at their discretion, or on demand
by holders of 10% or more of the outstanding shares, to elect or
remove board members.
Special considerations regarding master/feeder structure
An investor in the Fund should be aware that, subject to certain
contingencies, the Fund intends to achieve its investment objective
in early 1996 by investing its assets in the Portfolio of the
Trust, which has an identical investment objective to the Fund.
This arrangement is commonly known as a master/feeder structure.
The Trust is a separate investment company. Therefore, the Fund's
interest in securities owned by the Portfolio will be indirect.
The board has considered the advantages and disadvantages of
investing the assets of the Fund in the Portfolio. The board
believes that this approach offers opportunities for economies of
scale. In determining to convert to a master/feeder structure, the
board considered whether the aggregate of the fees of the Fund and
the Portfolio will be more or less than if the Fund invested
directly in the securities to be held by the Portfolio. The board <PAGE>
PAGE 28
negotiated certain expense reimbursement arrangements with AEFC to
mitigate the impact of increases in aggregate costs, and believes
that any additional costs not covered by such arrangements will be
outweighed by the anticipated benefits to the Fund and its
shareholders of conversion to a master/feeder structure.
The investment objective, policies and restrictions of the
Portfolio are described under the captions "Investment policies and
risks" and "Facts about investments and their risks."
To date, AEFC has sponsored and advised only traditionally
structured funds that invest directly in a portfolio of securities
and retain their own investment manager. Funds that invest all
their assets in interests in a separate investment company are a
relatively new development in the mutual fund industry and may be
subject to additional regulations and risks.
In addition to selling units to the Fund, the Portfolio may sell
units to other affiliated and non-affiliated mutual funds and to
institutional investors. Such investors will invest in the
Portfolio on the same terms and conditions and will pay a
proportionate share of the Portfolio's expenses. However, the
other investors investing in the Portfolio are not required to sell
their shares at the same price as the Fund due to variations in
sales commissions and other operating expenses. Therefore,
investors in the Fund should be aware that these differences may
result in differences in returns experienced by investors in the
different funds that invest in the same Portfolio.
The Fund may withdraw (completely redeem) all its assets from the
Portfolio at any time if the board determines that it is in the
best interest of the Fund to do so. In the event the Fund
withdraws all of its assets from the Portfolio, the board would
consider what action might be taken, including investing all assets
of the Fund in another pooled investment entity or retaining an
investment advisor to manage the Fund's assets in accordance with
its investment objective. The investment objective of the Fund and
its Portfolio can only be changed with the approval of a majority
of the outstanding voting securities. If the objective of the
Portfolio changes and shareholders of the Fund do not approve a
parallel change in the Fund's investment objective, the Fund would
seek an alternative investment vehicle for the Fund or retain an
investment advisor on its behalf.
Investors in the Fund should be aware that smaller funds investing
in the Portfolio may be adversely affected by the actions of larger
funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may experience
higher prorated operating expenses, thereby producing lower
returns. Additionally, the Portfolio may become less diverse,
resulting in increased portfolio risk, and experience decreasing
economies of scale. Institutional investors in the Portfolio that
have a greater pro rata ownership than the Fund could have <PAGE>
PAGE 29
effective voting control over the operation of the Portfolio.
Certain changes in the Portfolio's fundamental objectives, policies
and restrictions could require the Fund to redeem its interest in
the Portfolio. Any such withdrawal could result in a distribution
of in-kind portfolio securities (as opposed to cash distribution).
If securities are distributed, the Fund could incur brokerage, tax
or other charges in converting the securities to cash. In
addition, a distribution in kind may result in a less diversified
portfolio of investments or adversely affect the liquidity of the
Fund.
Wherever the Fund, as an investor in the Portfolio, is requested to
vote on matters pertaining to the Portfolio, the Fund will hold a
meeting of Fund shareholders. The Fund will vote its units in the
Portfolio for or against such matters proportionately to the
instructions to vote for or against such matters received from Fund
shareholders. The Fund will vote shares for which it receives no
voting instructions in the same proportion as the shares for which
it receives voting instructions. See "Investment manager and
transfer agent" for a complete description of the management and
other expenses associated with the Fund's investment in the
Portfolio.
Board members and officers
Shareholders elect a board that oversees the operations of the Fund
and chooses its officers. Its officers are responsible for day-to-
day business decisions based on policies set by the board. The
board has named an executive committee that has authority to act on
its behalf between meetings. The board members also serve on the
boards of all of the other funds in the IDS MUTUAL FUND GROUP,
except for Mr. Dudley, who is a board member of all publicly
offered funds.
Board members and officers of the Fund
President and interested board member
William R. Pearce
President of all funds in the IDS MUTUAL FUND GROUP.
Independent board members
Lynne V. Cheney
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.
<PAGE>
PAGE 30
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 board members who are officers and/or employees of AEFC
William H. Dudley
Executive vice president, AEFC.
David R. Hubers
President and chief executive officer, AEFC.
John R. Thomas
Senior vice president, AEFC.
Officers who also are officers and/or employees of AEFC
Peter J. Anderson
Vice president of all funds in the IDS MUTUAL FUND GROUP.
Melinda S. Urion
Treasurer of all funds in the IDS MUTUAL FUND GROUP.
Other officer
Leslie L. Ogg
Vice president, general counsel and secretary of all funds in the
IDS MUTUAL FUND GROUP.
Refer to the SAI for the board members' and officers' biographies.
<PAGE>
PAGE 31
Investment manager and transfer agent
The Fund pays AEFC for managing its portfolio, providing
administrative services and serving as transfer agent (handling
shareholder accounts).
Under its Investment Management Services Agreement, AEFC determines
which securities will be purchased, held or sold (subject to the
direction and control of the board). Under the current agreement,
effective March 20, 1995, the Fund pays AEFC a fee for these
services based on the average daily net assets of the Fund, as
follows:
Assets Annual rate
(billions) at each asset level
First $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
Upon the implementation of the new fund structure, AEFC will
provide these services to the Portfolio at the same annual rate
currently paid by the Fund.
For the fiscal year ended Nov. 30, 1995, under the current and
prior agreements, the Fund paid AEFC a total investment management
fee of 0.51% 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 AEFC 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, AEFC
maintains shareholder accounts and records. The Fund pays AEFC an
annual fee per shareholder account for this service as follows:
o Class A $15.50
o Class B $16.50
o Class Y $15.50
Distributor
The Fund has an exclusive distribution agreement with American
Express Financial Advisors, a wholly owned subsidiary of AEFC.
Financial advisors representing American Express Financial Advisors
provide information to investors about individual investment
programs, the Fund and its operations, new account applications,
and exchange and redemption requests. The cost of these services
is paid partially by the Fund's sales charges.
<PAGE>
PAGE 32
Persons who buy Class A shares pay a sales charge at the time of
purchase. Prior to March 20, 1995, the date when the Fund began
offering more than one class of shares, the Fund paid an account-
based distribution fee. That fee is part of Class A's total
expenses shown below and was 0.01% of average daily net assets for
the fiscal year ended Nov. 30, 1995. Persons who buy Class B
shares are subject to a contingent deferred sales charge on a
redemption in the first six years and pay an asset-based sales
charge (also known as a 12b-1 plan) of 0.75% of the Fund's average
daily net assets. For the fiscal period from March 20, 1995 to
Nov. 30, 1995, the asset-based sales charge paid by Class B
shareholders was 0.75% of average daily net assets. Class Y shares
are sold without a sales charge and without an asset-based sales
charge.
Financial advisors may receive different compensation for selling
Class A, Class B and Class Y shares. Portions of the sales charge
also may be paid to securities dealers who have sold the Fund's
shares or to banks and other financial institutions. The amounts
of those payments range from 0.8% to 4% of the Fund's offering
price depending on the monthly sales volume.
Under a Shareholder Service Agreement, the Fund also pays a fee for
service provided to shareholders by financial advisors and other
servicing agents. The fee is calculated at a rate of 0.175% of the
Fund's average daily net assets attributable to Class A and Class B
shares.
Total expenses paid by the Fund's Class A shares for the fiscal
year ended Nov. 30, 1995, restated to reflect current agreements,
were 0.91% of its average daily net assets. Annualized expenses
for Class B and Class Y were 1.67% and 0.73%, respectively, based
on the period from March 20, 1995 (the inception date for Class B
and Class Y) to Nov. 30, 1995.
Total fees and expenses (excluding taxes and brokerage commissions)
cannot exceed the most restrictive applicable state expense
limitation.
About American Express Financial Corporation
General information
The AEFC family of companies offers not only mutual funds but also
insurance, annuities, investment certificates and a broad range of
financial management services.
Besides managing investments for all publicly offered funds in the
IDS MUTUAL FUND GROUP, AEFC also manages investments for itself and
its subsidiaries, IDS Certificate Company and IDS Life Insurance
Company. Total assets under management on Nov. 30, 1995 were more
than $127 billion.
<PAGE>
PAGE 33
American Express Financial Advisors serves individuals and
businesses through its nationwide network of more than 175 offices
and more than 7,800 advisors.
Other AEFC subsidiaries provide investment management and related
services for pension, profit sharing, employee savings and
endowment funds of businesses and institutions.
AEFC is located at IDS Tower 10, Minneapolis, MN 55440-0010. It is
a wholly owned subsidiary of American Express Company (American
Express), a financial services company with headquarters at
American Express Tower, World Financial Center, New York, NY 10285.
The Fund may pay brokerage commissions to broker-dealer affiliates
of American Express and AEFC.
<PAGE>
PAGE 34
Appendix A
Description of investment-grade corporate bond ratings
Bond 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 and Baa. Ratings by Standard & Poor's Corporation are
AAA, AA, A and BBB. The following is a compilation of the two
agencies' rating descriptions. For further information, see the
SAI.
Aaa/AAA - Judged to be of the best quality and carry the smallest
degree of investment risk. Interest and principal are secure.
Aa/AA - 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.
A - Considered upper-medium grade. Protection for interest and
principal is deemed adequate but may be susceptible to future
impairment.
Baa/BBB - Considered medium-grade obligations. Protection for
interest and principal is adequate over the short-term; however,
these obligations may have certain speculative characteristics.
Non-rated securities will be considered for investment when they
possess a risk comparable to that of rated securities consistent
with the Fund's objectives and policies. When assessing the risk
involved in each non-rated security, the Fund will consider the
financial condition of the issuer or the protection afforded by the
terms of the security.
Definitions of zero-coupon and pay-in-kind securities
A zero-coupon security is a security that is sold at a deep
discount from its face value and makes no periodic interest
payments. The buyer of such a security receives a rate of return
by gradual appreciation of the security, which is redeemed at face
value on the maturity date.
A pay-in-kind security is a security in which the issuer has the
option to make interest payments in cash or in additional
securities. The securities issued as interest usually have the
same terms, including maturity date, as the pay-in-kind securities.
<PAGE>
PAGE 35
Appendix B
Descriptions of derivative instruments
What follows are brief descriptions of derivative instruments the
Fund may use. At various times the Fund may use some or all of
these instruments and is not limited to these instruments. It may
use other similar types of instruments if they are consistent with
the Fund's investment goal and policies. For more information on
these instruments, see the SAI.
Options and futures contracts. An option is an agreement to buy or
sell an instrument at a set price during a certain period of time.
A futures contract is an agreement to buy 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
securities include interests in pools of assets such as motor
vehicle installment sale contracts, installment loan contracts,
leases on various types of real and personal property, receivables
from revolving credit (credit card) agreements or other categories
of receivables. Mortgage-backed securities include 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. The
non-mortgage related asset-backed securities do not have the
benefit of a security interest in the related collateral. 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.
Inverse floaters. Inverse floaters are created by underwriters
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. As
interest rates go down, the holders of the inverse floaters receive
<PAGE>
PAGE 36
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.
Structured products. Structured products are over-the-counter
financial instruments created specifically to meet the needs of one
or a small number of investors. The instrument may consist of a
warrant, an option or a forward contract embedded in a note or any
of a wide variety of debt, equity and/or currency combinations.
Risks of structured products include the inability to close such
instruments, rapid changes in the market and defaults by other
parties.<PAGE>
PAGE 37
STATEMENT OF ADDITIONAL INFORMATION
FOR
IDS SELECTIVE FUND
Jan. 29, 1996
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 Jan. 29, 1996, and it is to be used with the
prospectus dated Jan. 29, 1996, and the Annual Report for the
fiscal year ended Nov. 30, 1995.
<PAGE>
PAGE 38
TABLE OF CONTENTS
Goals and Investment Policies........................See Prospectus
Additional Investment Policies................................p. 3
Portfolio Transactions........................................p. 6
Brokerage Commissions Paid to Brokers Affiliated with
American Express Financial Corporation........................p. 9
Performance Information.......................................p. 9
Valuing Fund Shares...........................................p. 11
Investing in the Fund.........................................p. 13
Redeeming Shares..............................................p. 17
Pay-out Plans.................................................p. 18
Taxes.........................................................p. 19
Agreements....................................................p. 20
Board Members and Officers....................................p. 23
Custodian.....................................................p. 28
Independent Auditors..........................................p. 28
Financial Statements..............................See Annual Report
Prospectus....................................................p. 28
Appendix A: Description of Bond Ratings......................p. 29
Appendix B: Foreign Currency Transactions....................p. 32
Appendix C: Options and Interest Rate Futures Contracts......p. 37
Appendix D: Mortgage-Backed Securities.......................p. 43
Appendix E: Dollar-Cost Averaging............................p. 44
<PAGE>
PAGE 39
ADDITIONAL INVESTMENT POLICIES
Subject to certain contingencies, the Fund intends in early 1996 to
achieve its goals by investing all of its assets in Quality Income
Portfolio (the "Portfolio") of the Income Trust (the "Trust"), a
separate investment company, rather than by directly investing in
and managing its own portfolio of securities. The Portfolio has
the same investment objectives, policies and restrictions as the
Fund.
Fundamental investment restrictions adopted by a Fund or Portfolio
cannot be changed without the approval of a majority of the
outstanding voting securities of the Fund or Portfolio, as defined
in the Investment Company Act of 1940. Whenever a Fund is
requested to vote on a change in the investment restrictions of the
corresponding Portfolio, the Fund will hold a meeting of Fund
shareholders and will cast the Fund's vote as instructed by the
shareholders.
These are investment policies in addition to those presented in the
prospectus. The policies below are fundamental policies of the
Fund and the Portfolio and may be changed only with shareholder
approval. Unless holders of a majority of the outstanding voting
securities agree to make the change, the Fund will not:
'Act as an underwriter (sell securities for others). However,
under the securities laws, the Fund may be deemed to be an
underwriter when it purchases securities directly from the issuer
and later resells them.
'Borrow money or property, except as a temporary measure for
extraordinary or emergency purposes, in an amount not exceeding
one-third of the market value of its total assets (including
borrowings) less liabilities (other than borrowings) immediately
after the borrowing. The Fund has not borrowed in the past and has
no present intention to borrow.
'Make cash loans if the total commitment amount exceeds 5% of the
Fund's total assets.
'Concentrate in any one industry. According to the present
interpretation by the Securities and Exchange Commission (SEC),
this means no more than 25% of the Fund's total assets, based on
current market value at time of purchase, can be invested in any
one industry.
'Purchase more than 10% of the outstanding voting securities of an
issuer.
'Invest more than 5% of its total assets in securities of any one
company, government or political subdivision thereof, except the
limitation will not apply to investments in securities issued by<PAGE>
PAGE 40
the U.S. government, its agencies or instrumentalities, and except
that up to 25% of the Fund's total assets may be invested without
regard to this 5% limitation.
'Buy or sell real estate, unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent
the Fund from investing in securities or other instruments backed
by real estate or securities of companies engaged in the real
estate business or real estate investment trusts. For purposes of
this policy, real estate includes real estate limited partnerships.
'Buy or sell physical commodities unless acquired as a result of
ownership of securities or other instruments, except this shall not
prevent the Fund from buying or selling options and futures
contracts or from investing in securities or other instruments
backed by, or whose value is derived from, physical commodities.
'Make a loan of any part of its assets to American Express
Financial Corporation (AEFC), to the board members and officers of
AEFC or to its own board members and officers.
'Purchase securities of an issuer if the board members and officers
of the Fund and of AEFC hold more than a certain percentage of the
issuer's outstanding securities. If the holdings of all board
members and officers of the Fund and of AEFC who own more than 0.5%
of an issuer's securities are added together, and if in total they
own more than 5%, the Fund will not purchase securities of that
issuer.
'Lend Fund securities in excess of 30% of its net assets. The
current policy of the Fund's board is to make these loans, either
long- or short-term, to broker-dealers. In making 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. 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.
'Issue senior securities, except this restriction shall not be
deemed to prohibit the Fund from borrowing from banks, using
options or futures contracts, lending its securities or entering
into repurchase agreements.
Unless changed by the board, the Fund will not:
'Buy on margin or sell short, except it may enter into interest
rate futures contracts.
<PAGE>
PAGE 41
'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.
'Invest in a company to control or manage it.
'Invest in exploration or development programs, such as oil, gas or
mineral leases.
'Invest more than 5% of its net assets in warrants. Under one
state's law no more than 2% of the Fund's net assets may be
invested in warrants not listed on the New York or American Stock
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. For purposes of complying
with Ohio law, the Fund will not invest more than 15% of its total
assets in a combination of illiquid securities, 144A securities and
securities of companies, including any predecessor, that have a
record of less than three years continuous operations.
In determining the liquidity of Rule 144A securities, which are
unregistered securities offered to qualified institutional buyers,
and interest-only and principal-only fixed mortgage-backed
securities (IOs and POs) issued by the U.S. government or its
agencies and instrumentalities, the investment manager, under
guidelines established by the board, will consider any relevant
factors including the frequency of trades, the number of dealers
willing to purchase or sell the security and the nature of
marketplace trades.
In determining the liquidity of commercial paper issued in
transactions not involving a public offering under Section 4(2) of
the Securities Act of 1933, the investment manager, under
guidelines established by the board, will evaluate relevant
factors, such as the issuer and the size and nature of its
commercial paper programs, the willingness and ability of the
issuer or dealer to repurchase the paper, and the nature of the
clearance and settlement procedures for the paper.<PAGE>
PAGE 42
The Fund may make contracts to purchase securities for a fixed
price at a future date beyond normal settlement time (when-issued
securities or forward commitments). Under normal market
conditions, the Fund does not intend to commit more than 5% of its
total assets to these practices. The Fund does not pay for the
securities or receive dividends or interest on them until the
contractual settlement date. The Fund will designate cash or
liquid high-grade debt securities at least equal in value to its
commitments to purchase the securities. When-issued securities or
forward commitments are subject to market fluctuations and they may
affect the Fund's total assets the same as owned securities.
The Fund may maintain a portion of its assets in cash and cash-
equivalent investments. The cash-equivalent investments the Fund
may use are short-term U.S. and Canadian government securities and
negotiable certificates of deposit, non-negotiable fixed-time
deposits, bankers' acceptances and letters of credit of banks or
savings and loan associations having capital, surplus and undivided
profits (as of the date of its most recently published annual
financial statements) in excess of $100 million (or the equivalent
in the instance of a foreign branch of a U.S. bank) at the date of
investment. Any cash-equivalent investments in foreign securities
will be subject to the limitations on foreign investments described
in the prospectus. The Fund also may purchase short-term corporate
notes and obligations rated in the top two classifications by
Moody's Investors Service, Inc. (Moody's) or Standard & Poor's
Corporation (S&P) or the equivalent and may use repurchase
agreements with broker-dealers registered under the Securities
Exchange Act of 1934 and with commercial banks. A risk of a
repurchase agreement is that if the seller seeks the protection of
the bankruptcy laws, the Fund's ability to liquidate the security
involved could be impaired.
Notwithstanding any of the Fund's other investment policies, the
Fund may invest its assets in an open-end management investment
company having substantially the same investment objectives,
policies and restrictions as the Fund for the purpose of having
those assets managed as part of a combined pool.
For a description of bond ratings, see Appendix A. For a
discussion about foreign currency transactions, see Appendix B.
For a discussion on options and interest rate futures contracts,
see Appendix C. For a discussion on mortgage-backed securities,
see Appendix D.
PORTFOLIO TRANSACTIONS
Subject to policies set by the board, AEFC is authorized to
determine, consistent with the Fund's investment goal and policies,
which securities will be purchased, held or sold. In determining
where the buy and sell orders are to be placed, AEFC has been
directed to use its best efforts to obtain the best available price
and most favorable execution except where otherwise authorized by
the board.<PAGE>
PAGE 43
AEFC has a strict Code of Ethics that prohibits its affiliated
personnel from engaging in personal investment activities that
compete with or attempt to take advantage of planned portfolio
transactions for any fund in the IDS MUTUAL FUND GROUP. AEFC
carefully monitors compliance with its Code of Ethics.
Normally, the Fund's securities are traded on a principal rather
than an agency basis. In other words, AEFC 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. AEFC 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 has adopted a
policy authorizing AEFC to do so to the extent authorized by law,
if AEFC determines, in good faith, that such commission is
reasonable in relation to the value of the brokerage or research
services provided by a broker or dealer, viewed either in the light
of that transaction or AEFC's overall responsibilities to the funds
in the IDS MUTUAL FUND GROUP and other funds for which it acts as
investment advisor.
Research provided by brokers supplements AEFC's own research
activities. Such services include economic data on, and analysis
of, U.S. and foreign economies; information on specific industries;
information about specific companies, including earnings estimates;
purchase recommendations for stocks and bonds; portfolio strategy
services; political, economic, business and industry trend
assessments; historical statistical information; market data
services providing information on specific issues and prices; and
technical analysis of various aspects of the securities markets,
including technical charts. Research services may take the form of
written reports, computer software or personal contact by telephone
or at seminars or other meetings. AEFC has obtained, and in the
future may obtain, computer hardware from brokers, including but
not limited to personal computers that will be used exclusively for
investment decision-making purposes, which include the research,
portfolio management and trading functions and other services to
the extent permitted under an interpretation by the SEC.
When paying a commission that might not otherwise be charged or a
commission in excess of the amount another broker might charge,
AEFC must follow procedures authorized by the board. To date,
three procedures have been authorized. One procedure permits AEFC
to direct an order to buy or sell a security traded on a national
securities exchange to a specific broker for research services it
has provided. The second procedure permits AEFC, in order to
obtain research, to direct an order on an agency basis to buy or
sell a security traded in the over-the-counter market to a firm<PAGE>
PAGE 44
that does not make a market in that security. The commission paid
generally includes compensation for research services. The third
procedure permits AEFC, in order to obtain research and brokerage
services, to cause the Fund to pay a commission in excess of the
amount another broker might have charged. AEFC has advised the
Fund it is necessary to do business with a number of brokerage
firms on a continuing basis to obtain such services as the handling
of large orders, the willingness of a broker to risk its own money
by taking a position in a security, and the specialized handling of
a particular group of securities that only certain brokers may be
able to offer. As a result of this arrangement, some portfolio
transactions may not be effected at the lowest commission, but AEFC
believes it may obtain better overall execution. AEFC has assured
the Fund that under all three procedures the amount of commission
paid will be reasonable and competitive in relation to the value of
the brokerage services performed or research provided.
All other transactions shall be placed on the basis of obtaining
the best available price and the most favorable execution. In so
doing, if in the professional opinion of the person responsible for
selecting the broker or dealer, several firms can execute the
transaction on the same basis, consideration will be given by such
person to those firms offering research services. Such services
may be used by AEFC in providing advice to all the funds in the IDS
MUTUAL FUND GROUP even though it is not possible to relate the
benefits to any particular fund or account.
Each investment decision made for the Fund is made independently
from any decision made for another fund in the IDS MUTUAL FUND
GROUP or other account advised by AEFC or any of its subsidiaries.
When the Fund buys or sells the same security as another fund or
account, AEFC carries out the purchase or sale in a way the Fund
agrees in advance is fair. Although sharing in large transactions
may adversely affect the price or volume purchased or sold by the
Fund, the Fund hopes to gain an overall advantage in execution.
AEFC has assured the Fund it will continue to seek ways to reduce
brokerage costs.
On a periodic basis, AEFC makes a comprehensive review of the
broker-dealers and the overall reasonableness of their commissions.
The review evaluates execution, operational efficiency and research
services.
The Fund paid total brokerage commissions of $8,745 for the fiscal
year ended Nov. 30, 1995, $54,600 for fiscal year 1994, and $7,120
for fiscal year 1993. Substantially all firms through whom
transactions were executed provide research services.
No transactions were directed to brokers because of research
services they provided to the Fund.
<PAGE>
PAGE 45
As of the fiscal year ended Nov. 30, 1995, 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
BankAmerica $9,410,754
First Chicago 8,658,953
Merrill Lynch 699,217
Solomon Brothers 13,993,502
The portfolio turnover rate was 26% in the fiscal year ended Nov.
30, 1995, and 30% in fiscal year 1994.
BROKERAGE COMMISSIONS PAID TO BROKERS AFFILIATED WITH AMERICAN
EXPRESS FINANCIAL CORPORATION
Affiliates of American Express Company (American Express) (of which
AEFC is a wholly owned subsidiary) may engage in brokerage and
other securities transactions on behalf of the Fund according to
procedures adopted by the Fund's board and to the extent consistent
with applicable provisions of the federal securities laws. AEFC
will use an American Express affiliate only if (i) AEFC determines
that the Fund will receive prices and executions at least as
favorable as those offered by qualified independent brokers
performing similar brokerage and other services for the Fund and
(ii) the affiliate charges the Fund commission rates consistent
with those the affiliate charges comparable unaffiliated customers
in similar transactions and if such use is consistent with terms of
the Investment Management Services Agreement.
AEFC may direct brokerage to compensate an affiliate. AEFC will
receive research on South Africa from New Africa Advisors, a
wholly-owned subsidiary of Sloan Financial Group. AEFC owns 100%
of IDS Capital Holdings Inc. which in turn owns 40% of Sloan
Financial Group. New Africa Advisors will send research to AEFC
and in turn AEFC will direct trades to a particular broker. The
broker will have an agreement to pay New Africa Advisors. All
transactions will be on a best execution basis. Compensation
received will be reasonable for the services rendered.
No brokerage commissions were paid to brokers affiliated with AEFC
for the three most recent fiscal years.
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
the methods used by the Fund to compute performance follows below.
<PAGE>
PAGE 46
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.
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
<PAGE>
PAGE 47
The Fund's annualized yield was 5.43% for Class A, 4.96% for Class
B and 5.89% for Class Y for the 30-day period ended Nov. 30, 1995.
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 5.71% for Class A, 5.27% for
Class B and 6.19% for Class Y for the 30-day period ended Nov. 30,
1995.
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.
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 Dec. 1, 1995, 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 $1,493,571,723 divided by 156,460,478 equals $9.55
Class B 71,886,420 7,530,528 9.55
Class Y 141,912,279 14,864,594 9.55
</TABLE>
In determining net assets before shareholder transactions, the
Fund's securities are valued as follows as of the close of business
of the New York Stock Exchange (the Exchange):
<PAGE>
PAGE 48
'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 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.
'Short-term securities maturing more than 60 days from the
valuation date are valued at the readily available market price or
approximate market value based on current interest rates. Short-
term securities maturing in 60 days or less that originally had
maturities of more than 60 days at acquisition date are valued at
amortized cost using the market value on the 61st day before
maturity. Short-term securities maturing in 60 days or less at
acquisition date are valued at amortized cost. Amortized cost is
an approximation of market value determined by systematically
increasing the carrying value of a security if acquired at a
discount, or reducing the carrying value if acquired at a premium,
so that the carrying value is equal to maturity value on the
maturity date.
'Securities without a readily available market price, 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 <PAGE>
PAGE 49
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, AEFC 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, 1995, was determined
by dividing the net asset value of one share, $9.55, by 0.95 (1.00-
0.05 for a maximum 5% sales charge) for a public offering price of
$10.05. 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:
Within each increment,
sales charge as a
percentage of:
Public Net
Amount of Investment Offering Price Amount Invested
First $ 50,000 5.0% 5.26%
Next 50,000 4.5 4.71
Next 400,000 3.8 3.95
Next 500,000 2.0 2.04
$1,000,000 or more 0.0 0.00
Sales charges on an investment greater than $50,000 and less than
$1,000,000 are calculated for each increment separately and then
totaled. The resulting total sales charge, expressed as a
percentage of the public offering price and of the net amount
invested, will vary depending on the proportion of the investment
at different sales charge levels.
For example, compare an investment of $60,000 with an investment of
$85,000. The $60,000 investment is composed of $50,000 that incurs
a sales charge of $2,500 (5.0% x $50,000) and $10,000 that incurs a
sales charge of $450 (4.5% x $10,000). The total sales charge of
$2,950 is 4.92% of the public offering price and 5.17% of the net
amount invested.<PAGE>
PAGE 50
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>
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 999,999 3.80-2.00 3.95-2.04
$1,000,000 or more 0.00 0.00
</TABLE>
The initial sales charge is waived for certain qualified plans that
meet the requirements described in the prospectus. Participants in
these qualified plans may be subject to a deferred sales charge on
certain redemptions. The deferred sales charge on certain
redemptions will be waived if the redemption is a result of a
participant's death, disability, retirement, attaining age 59 1/2,
loans or hardship withdrawals. The deferred sales charge varies
depending on the number of participants in the qualified plan and
total plan assets as follows:
Deferred Sales Charge
Number of Participants
Total Plan Assets 1-99 100 or more
Less than $1 million 4% 0%
$1 million or more 0% 0%
_________________________________________________________
Class A - Reducing the Sales Charge
Sales charges are based on the total amount of your investments in
the Fund. The amount of all prior investments plus any new
purchase is referred to as your "total amount invested." For
example, suppose you have made an investment of $20,000 and later
decide to invest $40,000 more. Your total amount invested would be
$60,000. As a result, $10,000 of your $40,000 investment qualifies
for the lower 4.5% sales charge that applies to investments of more
than $50,000 and up to $100,000.
<PAGE>
PAGE 51
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 board members, officers
or employees of the Fund or AEFC or its subsidiaries and deceased
advisors.
The total amount invested also includes any investment you or your
immediate family already have in the other publicly offered funds
in the IDS MUTUAL FUND GROUP where the investment is subject to a
sales charge. For example, suppose you already have an investment
of $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 (LOI)
If you intend to invest $1 million over a period of 13 months, you
can reduce the sales charges in Class A by filing a LOI. The
agreement can start at any time and will remain in effect for 13
months. Your investment will be charged normal sales charges until
you have invested $1 million. At that time, your account will be
credited with the sales charges previously paid. Class A
investments made prior to signing a LOI may be used to reach the $1
million total, excluding Cash Management Fund and Tax-Free Money
Fund. However, we will not adjust for sales charges on investments
made prior to the signing of the LOI. If you do not invest $1
million by the end of 13 months, there is no penalty, you'll just
miss out on the sales charge adjustment. A LOI is not an option
(absolute right) to buy shares.
Here's an example. You file a LOI to invest $1 million and make an
investment of $100,000 at that time. You pay the normal 5% sales
charge on the first $50,000 and 4.5% sales charge on the next
$50,000 of this investment. Let's say you make a second investment
of $900,000 (bringing the total up to $1 million) one month before
the 13-month period is up. On the date that you bring your total
to $1 million, AEFC makes an adjustment to your account. The
adjustment is made by crediting your account with additional
shares, in an amount equivalent to the sales charge previously
paid.
<PAGE>
PAGE 52
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).<PAGE>
PAGE 53
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 goals are 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 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 (the 1940 Act), 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.
The Fund has elected to be governed by Rule 18f-1 under the 1940
Act, which obligates the Fund to redeem shares in cash, with
respect to any one shareholder during any 90-day period, up to the
lesser of $250,000 or 1% of the net assets of the Fund at the
beginning of the period. Although redemptions in excess of this
limitation would normally be paid in cash, the Fund reserves the
right to make these payments in whole or in part in securities or
other assets in case of an emergency, or if the payment of a
redemption in cash would be detrimental to the existing
shareholders of the Fund as determined by the board. In these
circumstances, the securities distributed would be valued as set
forth in the prospectus. Should the Fund distribute securities, a
shareholder may incur brokerage fees or other transaction costs in
converting the securities to cash.
<PAGE>
PAGE 54
PAY-OUT PLANS
You can use any of several pay-out plans to redeem your investment
in regular installments. If you redeem Class B shares you may be
subject to a contingent deferred sales charge as discussed in the
prospectus. While the plans differ on how the pay-out is figured,
they all are based on the redemption of your investment. Net
investment income dividends and any capital gain distributions will
automatically be reinvested, unless you elect to receive them in
cash. If you are redeeming a tax-qualified plan account for which
American Express Trust Company acts as custodian, you can elect to
receive your dividends and other distributions in cash when
permitted by law. If you redeem an IRA or a qualified retirement
account, certain restrictions, federal tax penalties and special
federal income tax reporting requirements may apply. You should
consult your tax advisor about this complex area of the tax law.
Applications for a systematic investment in a class of the Fund
subject to a sales charge normally will not be accepted while a
pay-out plan for any of those funds is in effect. Occasional
investments, however, may be accepted.
To start any of these plans, please write 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 AEFC can handle efficiently and at a
reasonable cost. If you need a more irregular schedule of
payments, it may be necessary for you to make a series of
individual redemptions, in which case you'll have to send in a
separate redemption request for each pay-out. The Fund reserves
the right to change or stop any pay-out plan and to stop making
such plans available.
Plan #1: Pay-out for a fixed period of time
If you choose this plan, a varying number of shares will be
redeemed at regular intervals during the time period you choose.
This plan is designed to end in complete redemption of all shares
in your account by the end of the fixed period.
Plan #2: Redemption of a fixed number of shares
If you choose this plan, a fixed number of shares will be redeemed
for each payment and that amount will be sent to you. The length
of time these payments continue is based on the number of shares in
your account.
<PAGE>
PAGE 55
Plan #3: Redemption of a fixed dollar amount
If you decide on a fixed dollar amount, whatever number of shares
is necessary to make the payment will be redeemed in regular
installments until the account is closed.
Plan #4: Redemption of a percentage of net asset value
Payments are made based on a fixed percentage of the net asset
value of the shares in the account computed on the day of each
payment. Percentages range from 0.25% to 0.75%. For example, if
you are on this plan and arrange to take 0.5% each month, you will
get $50 if the value of your account is $10,000 on the payment
date.
TAXES
If you buy shares in the Fund and then exchange into another fund,
it is considered a sale and subsequent purchase of shares. Under
the tax laws, if this exchange is done within 91 days, any sales
charge waived on Class A shares on a subsequent purchase of shares
applies to the new shares acquired in the exchange. Therefore, you
cannot create a tax loss or reduce a tax gain attributable to the
sales charge when exchanging shares within 91 days.
Retirement Accounts
If you have a nonqualified investment in the Fund and you wish to
move part or all of those shares to an IRA or qualified retirement
account in the Fund, you can do so without paying a sales charge.
However, this type of exchange is considered a 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.
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, 1995, none 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
<PAGE>
PAGE 56
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
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 AEFC.
For its services, AEFC 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
On Nov. 30, 1995, the daily rate applied to the Fund's net assets
was equal to 0.510% 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 the prior and current
agreements, the total amount paid was $7,840,014 for the fiscal
year ended Nov. 30, 1995, $8,228,895 for fiscal year 1994, and
$8,932,798 for fiscal year 1993.
<PAGE>
PAGE 57
Under the current Agreement, the Fund also pays taxes, brokerage
commissions and nonadvisory expenses, which include custodian fees;
audit and certain legal fees; fidelity bond premiums; registration
fees for shares; Fund office expenses; consultants' fees;
compensation of board members, officers and employees; corporate
filing fees; organizational expenses; expenses incurred in
connection with lending securities of the Fund; and expenses
properly payable by the Fund, approved by the board. Under the
prior and current agreements, the Fund paid nonadvisory expenses of
$731,046 for the fiscal year ended Nov. 30, 1995, $734,701 for
fiscal year 1994, and $778,877 for fiscal year 1993.
Administrative Services Agreement
The Fund has an Administrative Services Agreement with AEFC. Under
this agreement, the Fund pays AEFC for providing administration and
accounting services. The fee is calculated as follows:
Assets Annual rate
(billions) each asset level
First $1.0 0.050%
Next 1.0 0.045
Next 1.0 0.040
Next 3.0 0.035
Next 3.0 0.030
Over 9.0 0.025
On Nov. 30, 1995, the daily rate applied to the Fund's net assets
was equal to 0.048% on an annual basis. The fee is calculated for
each calendar day on the basis of net assets as of the close of
business two business days prior to the day for which the
calculation is made. Under the agreement, the Fund paid fees of
$532,177 for the fiscal period ended Nov. 30, 1995.
Transfer Agency Agreement
The Fund has a Transfer Agency Agreement with AEFC. This agreement
governs AEFC's responsibility for administering and/or performing
transfer agent functions, for acting as service agent in connection
with dividend and distribution functions and for performing
shareholder account administration agent functions in connection
with the issuance, exchange and redemption or repurchase of the
Fund's shares. Under the agreement, AEFC will earn a fee from the
Fund determined by multiplying the number of shareholder accounts
at the end of the day by a rate determined for each class per year
and dividing by the number of days in the year. The rate for Class
A and Class Y is $15.50 per year and for Class B is $16.50 per
year. The fees paid to AEFC may be changed from time to time upon
agreement of the parties without shareholder approval. Under the
agreement, the Fund paid fees of $1,720,171 for the fiscal year
ended Nov. 30, 1995.
<PAGE>
PAGE 58
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 $3,880,191 for the
fiscal year ended Nov. 30, 1995. After paying commissions to
personal financial advisors, and other expenses, the amount
retained was $776,038. The amounts were $3,861,526 and $1,385,907
for fiscal year 1994, and $7,381,370 and $2,611,931 for fiscal year
1993.
Additional information about commissions and compensation for the
fiscal year ended Nov. 30, 1995, is contained in the following
table:
<TABLE> <CAPTION>
(1) (2) (3) (4) (5)
Net Compensation
Name of Underwriting on Redemption
Principal Discounts and and Brokerage Other
Underwriter Commissions Repurchases Commissions Compensation
<S> <C> <C> <C> <C>
AEFC None None None* $369,089**
American
Express
Financial
Advisors $3,880,191 None None None
</TABLE>
*For further information see "Brokerage Commissions Paid to Brokers
Affiliated with AEFC."
**Distribution fees paid pursuant to the Plan and 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.
<PAGE>
PAGE 59
The Plan must be approved annually by the board, including a
majority of the disinterested board members, if it is to continue
for more than a year. At least quarterly, the board must review
written reports concerning the amounts expended under the Plan and
the purposes for which such expenditures were made. The Plan and
any agreement related to it may be terminated at any time by vote
of a majority of board members who are not interested persons of
the Fund and have no direct or indirect financial interest in the
operation of the Plan or in any agreement related to the Plan, or
by vote of a majority of the outstanding voting securities of the
Fund 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 without shareholder approval,
and all material amendments to the Plan must be approved by a
majority of the board members, including a majority of the board
members who are not interested persons of the Fund and who do not
have a financial interest in the operation of the Plan or any
agreement related to it. The selection and nomination of
disinterested board members is the responsibility of the other
disinterested board members. No board member who is not an
interested person, has any direct or indirect financial interest in
the operation of the Plan or any related agreement. For the fiscal
year ended Nov. 30, 1995, under the prior and current agreements,
the Fund paid fees of $177,140.
Total fees and expenses
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,
AEFC will assume all expenses in excess of the limitation. AEFC
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 AEFC for expenses it assumes. The Fund
paid total fees and nonadvisory expenses of $12,966,820 for the
fiscal year ended Nov. 30, 1995.
BOARD MEMBERS AND OFFICERS
The following is a list of the Fund's board members who, except for
Mr. Dudley, also are board members of all other funds in the IDS
MUTUAL FUND GROUP. Mr. Dudley is a board member of all publicly
offered funds. All shares have cumulative voting rights with
respect to the election of board members.
<PAGE>
PAGE 60
Lynne V. Cheney'
Born in 1941.
American Enterprise Institute
for Public Policy Research (AEI)
1150 17th St., N.W.
Washington, D.C.
Distinguished Fellow AEI. Former Chair of National Endowment of
the Humanities. Director, The Reader's Digest Association Inc.,
Lockheed-Martin, the Interpublic Group of Companies, Inc.
(advertising), and FPL Group, Inc. (holding company for Florida
Power and Light).
William H. Dudley**
Born in 1932.
2900 IDS Tower
Minneapolis, MN
Executive vice president and director of AEFC.
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. (architectural
engineering) and Public Oversight Board of the American Institute
of Certified Public Accountants.
David R. Hubers+**
Born in 1943.
2900 IDS Tower
Minneapolis, MN
President, chief executive officer and director of AEFC.
Previously, senior vice president, finance and chief financial
officer of AEFC.
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
<PAGE>
PAGE 61
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).
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
<PAGE>
PAGE 62
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 AEFC.
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.
Valspar Corporation
Suite 1700
Foshay Tower
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, board member,
employee and/or shareholder of AEFC or American Express.
The board also has appointed officers who are responsible for day-
to-day business decisions based on policies it has established.
In addition to Mr. Pearce, who is president, the Fund's other
officers are:
Leslie L. Ogg
Born in 1938.
901 S. Marquette Ave.
Minneapolis, MN
Vice president, general counsel and secretary of all funds in the
IDS MUTUAL FUND GROUP.
<PAGE>
PAGE 63
Officers who also are officers and/or employees of AEFC
Peter J. Anderson
Born in 1942.
IDS Tower 10
Minneapolis, MN
Vice president-investments of all funds in the IDS MUTUAL FUND
GROUP. Director and senior vice president-investments of AEFC.
Melinda S. Urion
Born in 1953.
IDS Tower 10
Minneapolis, MN
Treasurer of all funds in the IDS MUTUAL FUND GROUP. Director,
senior vice president and chief financial officer of AEFC.
Director, executive vice president and controller of IDS Life
Insurance Company.
Members of the board who are not officers of the Fund or of AEFC
receive an annual fee of $1,700. They also receive attendance and
other fees, the cost of which the Fund shares with the other funds
in the IDS MUTUAL FUND GROUP. These fees include attendance of
meetings of the Board, $1,000; meetings of the Contracts Committee,
$750; meetings of the Audit, Executive or Investment Review
Committees, $500; meetings of the Personnel Committee, $300; out-
of-state, $500; and Chair of the Contracts Committee, $5,000.
Expenses for attending those meetings are also reimbursed. Upon
retirement, or earlier if for approved reasons, the independent
board members receive monthly payments equal to 1/2 of the annual
fee divided by 12 for as many months as the board member served on
the board up to 120 months or until the date of death. There are
no death benefits and the plan is not funded.
During the fiscal year ended Nov. 30, 1995, the members of the
board, for attending up to 27 meetings, received the following
compensation:
<TABLE><CAPTION>
Compensation Table
Pension or Estimated
Aggregate Retirement annual Total cash
compensation benefits benefit compensation
from the accrued as upon from the IDS
Board member Fund Fund expenses retirement MUTUAL FUND GROUP
<S> <C> <C> <C> <C>
Lynne V. Cheney $2,320 $ 440 $1,000 $70,000
Robert F. Froehlke 2,347 1,476 1,000 71,100
Heinz F. Hutter 2,255 736 483 67,500
Anne P. Jones 2,346 393 1,000 71,000
Donald M. Kendall 2,192 1,111 1,000 65,000
Melvin R. Laird 2,346 887 1,000 71,000
Lewis W. Lehr 2,326 246 975 70,200
Edson W. Spencer 2,403 254 533 73,500
Wheelock Whitney 2,322 682 1,000 70,100
C. Angus Wurtele 2,216 726 992 66,000
</TABLE>
On Nov. 30, 1995, the Fund's board members and officers as a group
owned less than 1% of the outstanding shares. During the fiscal <PAGE>
PAGE 64
year ended Nov. 30, 1995, no board member or officer earned more
than $60,000 from this Fund. All board members and officers as a
group earned $44,287, including $6,951 of retirement plan benefits,
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, 1995, 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 1995 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.
PROSPECTUS
The prospectus for IDS Selective Fund dated Jan. 29, 1996, is
hereby incorporated in this SAI by reference.
<PAGE>
PAGE 65
APPENDIX A
DESCRIPTION OF BOND RATINGS
These ratings concern the quality of the issuing corporation. They
are not an opinion of the market value of the security. Such
ratings are opinions on whether the principal and interest will be
repaid when due. A security's rating may change which could affect
its price.
Ratings by Moody's Investors Service, Inc. are Aaa, Aa, A, Baa, Ba,
B, Caa, Ca, and C.
Bonds rated:
Aaa are judged to be of the best quality. They carry the smallest
degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the fundamentally
strong position of such issues.
Aaa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risk
appear somewhat larger than the Aaa securities.
A possess many favorable investment attributes and are to be
considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to
impairment some time in the future.
Baa are considered as medium-grade obligations (i.e., they are
neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well.
Ba are judged to have speculative elements; their future cannot be
considered as well-assured. Often the protection of interest and
principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be
small.<PAGE>
PAGE 66
Caa are of poor standing. Such issues may be in default or there
may be present elements of danger with respect to principal or
interest.
Ca represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked shortcomings.
C are the lowest rated class of bonds, and issues so rated can be
regarded as having extremely poor prospects of ever attaining any
real investment standing.
Ratings by Standard & Poor's Corporation are AAA, AA, A, BBB, BB,
B, CCC, CC, C and D.
AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only in small degree.
A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in
higher-rated categories.
BBB is regarded as having adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than in higher-rated
categories.
BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties
or exposure to adverse business, financial, or economic conditions
which could lead to inadequate capacity to meet timely interest and
principal payments. The BB rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied
BBB- rating.
B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions will likely
impair capacity or willingness to pay interest and repay principal.
The B rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied BB or BB- rating.
CCC has a currently identifiable vulnerability to default, and is
dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of
principal. In the event of adverse business, financial, or
economic conditions, it is not likely to have the capacity to pay <PAGE>
PAGE 67
interest and repay principal. The CCC rating category is also used
for debt subordinated to senior debt that is assigned an actual or
implied B or B- rating.
CC typically is applied to debt subordinated to senior debt that is
assigned an actual or implied CCC rating.
C typically is applied to debt subordinated to senior debt that is
assigned an actual or implied CCC- rating. The C rating may be
used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued.
D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the due
date, even if the applicable grace period has not expired, unless
S&P believes that such payments will be made during such grace
period. The D rating also will be used upon the filing of a
bankruptcy petition if debt service payments are jeopardized.
Non-rated securities will be considered for investment when they
possess a risk comparable to that of rated securities consistent
with the Fund's objectives and policies. When assessing the risk
involved in each non-rated security, the Fund will consider the
financial condition of the issuer or the protection afforded by the
terms of the security.
<PAGE>
PAGE 68
APPENDIX B
FOREIGN CURRENCY TRANSACTIONS
Since investments in foreign countries usually involve currencies
of foreign countries, and since the Fund may hold cash and cash-
equivalent investments in foreign currencies, the value of the
Fund's assets as measured in U.S. dollars may be affected favorably
or unfavorably by changes in currency exchange rates and exchange
control regulations. Also, the Fund may incur costs in connection
with conversions between various currencies.
Spot Rates and Forward Contracts. The Fund conducts its foreign
currency exchange transactions either at the spot (cash) rate
prevailing in the foreign currency exchange market or by entering
into forward currency exchange contracts (forward contracts) as a
hedge against fluctuations in future foreign exchange rates. A
forward contract involves an obligation to buy or sell a specific
currency at a future date, which may be any fixed number of days
from the contract date, at a price set at the time of the contract.
These contracts are traded in the interbank market conducted
directly between currency traders (usually large commercial banks)
and their customers. A forward contract generally has no deposit
requirements. No commissions are charged at any stage for trades.
The Fund may enter into forward contracts to settle a security
transaction or handle dividend and interest collection. When the
Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency or has been notified of a
dividend or interest payment, it may desire to lock in the price of
the security or the amount of the payment in dollars. By entering
into a forward contract, the Fund will be able to protect itself
against a possible loss resulting from an adverse change in the
relationship between different currencies from the date the
security is purchased or sold to the date on which payment is made
or received or when the dividend or interest is actually received.
The Fund also may enter into forward contracts when management of
the Fund believes the currency of a particular foreign country may
suffer a substantial decline against another currency. It may
enter into a forward contract to sell, for a fixed amount of
dollars, the amount of foreign currency approximating the value of
some or all of the Fund's securities denominated in such foreign
currency. The precise matching of forward contract amounts and the
value of securities involved generally will not be possible since
the future value of such securities in foreign currencies more than
likely will change between the date the forward contract is entered
into and the date it matures. The projection of short-term
currency market movements is extremely difficult and successful
execution of a short-term hedging strategy is highly uncertain.
The Fund will not enter into such forward contracts or maintain a
net exposure to such contracts when consummating the contracts
would obligate the Fund to deliver an amount of foreign currency in
excess of the value of the Fund's securities or other assets
denominated in that currency.<PAGE>
PAGE 69
The Fund will designate cash or securities in an amount equal to
the value of the Fund's total assets committed to consummating
forward contracts entered into under the second circumstance set
forth above. If the value of the securities declines, additional
cash or securities will be designated on a daily basis so that the
value of the cash or securities will equal the amount of the Fund's
commitments on such contracts.
At maturity of a forward contract, the Fund may either sell the
security and make delivery of the foreign currency or retain the
security and terminate its contractual obligation to deliver the
foreign currency by purchasing an offsetting contract with the same
currency trader obligating it to buy, on the same maturity date,
the same amount of foreign currency.
If the Fund retains the security and engages in an offsetting
transaction, the Fund will incur a gain or a loss (as described
below) to the extent there has been movement in forward contract
prices. If the Fund engages in an offsetting transaction, it may
subsequently enter into a new forward contract to sell the foreign
currency. Should forward prices decline between the date the Fund
enters into a forward contract for selling foreign currency and the
date it enters into an offsetting contract for purchasing the
foreign currency, the Fund will realize a gain to the extent that
the price of the currency it has agreed to sell exceeds the price
of the currency it has agreed to buy. Should forward prices
increase, the Fund will suffer a loss to the extent the price of
the currency it has agreed to buy exceeds the price of the currency
it has agreed to sell.
It is impossible to forecast what the market value of securities
will be at the expiration of a contract. Accordingly, it may be
necessary for the Fund to buy additional foreign currency on the
spot market (and bear the expense of such purchase) if the market
value of the security is less than the amount of foreign currency
the Fund is obligated to deliver and a decision is made to sell the
security and make delivery of the foreign currency. Conversely, it
may be necessary to sell on the spot market some of the foreign
currency received on the sale of the portfolio security if its
market value exceeds the amount of foreign currency the Fund is
obligated to deliver.
The Fund's dealing in forward contracts will be limited to the
transactions described above. This method of protecting the value
of the Fund's securities against a decline in the value of a
currency does not eliminate fluctuations in the underlying prices
of the securities. It simply establishes a rate of exchange that
can be achieved at some point in time. Although such forward
contracts tend to minimize the risk of loss due to a decline in
value of hedged currency, they tend to limit any potential gain
that might result should the value of such currency increase.
<PAGE>
PAGE 70
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
conversion, they do realize a profit based on the difference
(spread) between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign
currency to the Fund at one rate, while offering a lesser rate of
exchange should the Fund desire to resell that currency to the
dealer.
Options on Foreign Currencies. The Fund may buy put and write
covered call options on foreign currencies for hedging purposes.
For example, a decline in the dollar value of a foreign currency in
which securities are denominated will reduce the dollar value of
such securities, even if their value in the foreign currency
remains constant. In order to protect against such diminutions in
the value of securities, the Fund may buy put options on the
foreign currency. If the value of the currency does decline, the
Fund will have the right to sell such currency for a fixed amount
in dollars and will thereby offset, in whole or in part, the
adverse effect on its portfolio which otherwise would have
resulted.
As in the case of other types of options, however, the benefit to
the Fund derived from purchases of foreign currency options will be
reduced by the amount of the premium and related transaction costs.
In addition, where currency exchange rates do not move in the
direction or to the extent anticipated, the Fund could sustain
losses on transactions in foreign currency options which would
require it to forego a portion or all of the benefits of
advantageous changes in such rates.
The Fund may write options on foreign currencies for the same types
of hedging purposes. For example, when the Fund anticipates a
decline in the dollar value of foreign-denominated securities due
to adverse fluctuations in exchange rates it could, instead of
purchasing a put option, write a call option on the relevant
currency. If the expected decline occurs, the option will most
likely not be exercised and the diminution in value of securities
will be fully or partially offset by the amount of the premium
received.
As in the case of other types of options, however, the writing of a
foreign currency option will constitute only a partial hedge up to
the amount of the premium, and only if rates move in the expected
direction. If this does not occur, the option may be exercised and
the Fund would be required to buy or sell the underlying currency
at a loss which may not be offset by the amount of the premium.
Through the writing of options on foreign currencies, the Fund also
may be required to forego all or a portion of the benefits which
might otherwise have been obtained from favorable movements on
exchange rates.<PAGE>
PAGE 71
All options written on foreign currencies will be covered. An
option written on foreign currencies is covered if the Fund holds
currency sufficient to cover the option or has an absolute and
immediate right to acquire that currency without additional cash
consideration upon conversion of assets denominated in that
currency or exchange of other currency held in its portfolio. An
option writer could lose amounts substantially in excess of its
initial investments, due to the margin and collateral requirements
associated with such positions.
Options on foreign currencies are traded through financial
institutions acting as market-makers, although foreign currency
options also are traded on certain national securities exchanges,
such as the Philadelphia Stock Exchange and the Chicago Board
Options Exchange, subject to SEC regulation. In an over-the-
counter trading environment, many of the protections afforded to
exchange participants will not be available. For example, there
are no daily price fluctuation limits, and adverse market movements
could therefore continue to an unlimited extent over a period of
time. Although the purchaser of an option cannot lose more than
the amount of the premium plus related transaction costs, this
entire amount could be lost.
Foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the Options
Clearing Corporation (OCC), thereby reducing the risk of
counterparty default. Further, a liquid secondary market in
options traded on a national securities exchange may be more
readily available than in the over-the-counter market, potentially
permitting the Fund to liquidate open positions at a profit prior
to exercise or expiration, or to limit losses in the event of
adverse market movements.
The purchase and sale of exchange-traded foreign currency options,
however, is subject to the risks of availability of a liquid
secondary market described above, as well as the risks regarding
adverse market movements, margining of options written, the nature
of the foreign currency market, possible intervention by
governmental authorities and the effects of other political and
economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-
counter market. For example, exercise and settlement of such
options must be made exclusively through the OCC, which has
established banking relationships in certain foreign countries for
the purpose. As a result, the OCC may, if it determines that
foreign governmental restrictions or taxes would prevent the
orderly settlement of foreign currency option exercises, or would
result in undue burdens on OCC or its clearing member, impose
special procedures on exercise and settlement, such as technical
changes in the mechanics of delivery of currency, the fixing of
dollar settlement prices or prohibitions on exercise.
<PAGE>
PAGE 72
Foreign Currency Futures and Related Options. The Fund may enter
into currency futures contracts to sell currencies. It also may
buy put options and write covered call options on currency futures.
Currency futures contracts are similar to currency forward
contracts, except that they are traded on exchanges (and have
margin requirements) and are standardized as to contract size and
delivery date. Most currency futures call for payment of delivery
in U.S. dollars. The Fund may use currency futures for the same
purposes as currency forward contracts, subject to Commodity
Futures Trading Commission (CFTC) limitations. All futures
contracts are aggregated for purposes of the percentage
limitations.
Currency futures and options on futures values can be expected to
correlate with exchange rates, but will not reflect other factors
that may affect the values of the Fund's investments. A currency
hedge, for example, should protect a Yen-denominated bond against a
decline in the Yen, but will not protect the Fund against price
decline if the issuer's creditworthiness deteriorates. Because the
value of the Fund's investments denominated in foreign currency
will change in response to many factors other than exchange rates,
it may not be possible to match the amount of a forward contract to
the value of the Fund's investments denominated in that currency
over time.
The Fund will hold securities or other options or futures positions
whose values are expected to offset its obligations. The Fund will
not enter into an option or futures position that exposes the Fund
to an obligation to another party unless it owns either (i) an
offsetting position in securities or (ii) cash, receivables and
short-term debt securities with a value sufficient to cover its
potential obligations.
<PAGE>
PAGE 73
APPENDIX C
OPTIONS AND INTEREST RATE FUTURES CONTRACTS
The Fund may buy or write options traded on any U.S. or foreign
exchange or in the over-the-counter market. The Fund may enter
into interest rate futures contracts 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. 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 <PAGE>
PAGE 74
market. It is anticipated the trading technique will be utilized
only to effect a transaction when the price of the security plus
the option price will be as good or better than the price at which
the security could be bought or sold directly. When the option is
purchased, the Fund pays a premium and a commission. It then pays
a second commission on the purchase or sale of the underlying
security when the option is exercised. For record-keeping and tax
purposes, the price obtained on the purchase of the underlying
security will be the combination of the exercise price, the premium
and both commissions. When using options as a trading technique,
commissions on the option will be set as if only the underlying
securities were traded.
Put and call options also may be held by the Fund for investment
purposes. Options permit the Fund to experience the change in the
value of a security with a relatively small initial cash
investment. The risk the Fund assumes when it buys an option is
the loss of the premium. To be beneficial to the Fund, the price
of the underlying security must change within the time set by the
option contract. Furthermore, the change must be sufficient to
cover the premium paid, the commissions paid both in the
acquisition of the option and in a closing transaction or in the
exercise of the option and subsequent sale (in the case of a call)
or purchase (in the case of a put) of the underlying security.
Even then the price change in the underlying security does not
ensure a profit since prices in the option market may not reflect
such a change.
Writing covered options. The Fund will write covered options when
it feels it is appropriate and will follow these guidelines:
'Underlying securities will continue to be bought or sold solely on
the basis of investment considerations consistent with the Fund's
goal.
'All options written by the Fund will be covered. For covered call
options if a decision is made to sell the security, 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.
<PAGE>
PAGE 75
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.
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, Chicago Board
Options 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 <PAGE>
PAGE 76
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.
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 on futures contracts give
the holder a right to buy or sell futures contracts in the future.
Unlike a futures contract, which requires the parties to the
contract to buy and sell a security on a set date, an option on a
futures contract merely entitles its holder to decide on or before
a future date (within nine months of the date of issue) whether to
enter into such a contract. If the holder decides not to enter
into the contract, all that is lost is the amount (premium) paid
for the option. 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.
<PAGE>
PAGE 77
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.
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 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 will depend on whether
such option is a section 1256 contract . If the option is a non-
equity option, the Fund will either make a 1256(d) election and
treat the option as a mixed straddle or mark to market the option
at fiscal year end and treat the gain/loss as 40% short-term and
60% long-term. Certain provisions of the Internal Revenue Code may
<PAGE>
PAGE 78
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.
The IRS has ruled publicly that an exchange-traded call option is a
security for purposes of the 50%-of-assets test and that its issuer
is the issuer of the underlying security, not the writer of the
option, for purposes of the diversification requirements. In order
to avoid realizing a gain within the three-month period, the Fund
may be required to defer closing out a contract beyond the time
when it might otherwise be advantageous to do so. The Fund also
may be restricted in purchasing put options for the purpose of
hedging underlying securities because of applying the short sale
holding period rules with respect to such underlying securities.
Accounting for futures contracts will be according to generally
accepted accounting principles. Initial margin deposits will be
recognized as assets due from a broker (the Fund's agent in
acquiring the futures position). During the period the futures
contract is open, changes in value of the contract will be
recognized as unrealized gains or losses by marking to market on a
daily basis to reflect the market value of the contract at the end
of each day's trading. Variation margin payments will be made or
received depending upon whether gains or losses are incurred. All
contracts and options will be valued at the last-quoted sales price
on their primary exchange.
<PAGE>
PAGE 79
APPENDIX D
MORTGAGE-BACKED SECURITIES
A mortgage pass-through certificate is one that represents an
interest in a pool, or group, of mortgage loans assembled by the
Government National Mortgage Association (GNMA), Federal Home Loan
Mortgage Corporation (FHLMC), Federal National Mortgage Association
(FNMA) or non-governmental entities. In pass-through certificates,
both principal and interest payments, including prepayments, are
passed through to the holder of the certificate. Prepayments on
underlying mortgages result in a loss of anticipated interest, and
the actual yield (or total return) to the Fund, which is influenced
by both stated interest rates and market conditions, may be
different than the quoted yield on certificates. Some U.S.
government securities may be purchased on a when-issued basis,
which means that it may take as long as 45 days after the purchase
before the securities are delivered to the Fund.
Stripped Mortgage-Backed Securities. The Fund may invest in
stripped mortgage-backed securities. Generally, there are two
classes of stripped mortgage-backed securities: Interest Only (IO)
and Principal Only (PO). IOs entitle the holder to receive
distributions consisting of all or a portion of the interest on the
underlying pool of mortgage loans or mortgage-backed securities.
POs entitle the holder to receive distributions consisting of all
or a portion of the principal of the underlying pool of mortgage
loans or mortgage-backed securities. The cash flows and yields on
IOs and POs are extremely sensitive to the rate of principal
payments (including prepayments) on the underlying mortgage loans
or mortgage-backed securities. A rapid rate of principal payments
may adversely affect the yield to maturity of IOs. A slow rate of
principal payments may adversely affect the yield to maturity of
POs. If prepayments of principal on an IO are greater than
anticipated, an investor may incur substantial losses. If
prepayments of principal are slower than anticipated, the yield on
a PO will be affected more severely than would be the case with a
traditional mortgage-backed security.
Mortgage-Backed Security Spread Options. The Fund may purchase
mortgage-backed security (MBS) put spread options and write covered
MBS call spread options. MBS spread options are based upon the
changes in the price spread between a specified mortgage-backed
security and a like-duration Treasury security. MBS spread options
are traded in the OTC market and are of short duration, typically
one to two months. The Fund would buy or sell covered MBS call
spread options in situations where mortgage-backed securities are
expected to underperform like-duration Treasury securities.<PAGE>
PAGE 80
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
___________________________________________________________________
Regular Market Price Shares
Investment of a Share Acquired
$100 $6.00 16.7
100 4.00 25.0
100 4.00 25.0
100 6.00 16.7
100 5.00 20.0
$500 $25.00 103.4
Average market price of a share over 5 periods:
$5.00 ($25.00 divided by 5).
The average price you paid for each share:
$4.84 ($500 divided by 103.4).<PAGE>
PAGE 81
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, 1995, and the
related statement of operations for the year then ended and the
statements of changes in net assets for each of the years in the
two-year period ended November 30, 1995, and the financial
highlights for each of the years in the ten-year period ended
November 30, 1995. These financial statements and the financial
highlights are the responsibility of fund management. Our
responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements and the financial highlights are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Investment securities held in custody are
confirmed to us by the custodian. As to securities purchased 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, 1995, and the results of its
operations for the year then ended and the changes in its net
assets for each of the years in the two-year period ended November
30, 1995, and the financial highlights for the periods stated in
the first paragraph above, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
January 5, 1996<PAGE>
PAGE 82
<TABLE>
<CAPTION>
Statement of assets and liabilities
IDS Selective Fund, Inc.
Nov. 30, 1995
______________________________________________________________________________________________________________
Assets
______________________________________________________________________________________________________________
<S> <C>
Investments in securities, at value (Note 1)
(identified cost $1,577,445,592) $1,704,527,689
Dividends and accrued interest receivable 25,165,945
Unrealized appreciation on foreign currency contracts held, at value (Notes 1 and 7) 304,273
U.S. government securities held as collateral (Note 5) 101,344,419
_____________________________________________________________________________________________________________
Total assets 1,831,342,326
_____________________________________________________________________________________________________________
Liabilities
____________________________________________________________________________________________________________
Disbursements in excess of cash on demand deposit 2,637,754
Dividends payable to shareholders 839,673
Payable for investment securities purchased 9,972,000
Payable upon return of securities loaned (Note 5) 113,650,169
Accrued investment management services fee 47,253
Accrued distribution fee 2,893
Accrued service fee 14,850
Accrued transfer agency fee 8,693
Accrued administrative services fee 4,445
Other accrued expenses 318,555
_____________________________________________________________________________________________________________
Total liabilities 127,496,285
_____________________________________________________________________________________________________________
Net assets applicable to outstanding capital stock $1,703,846,041
_____________________________________________________________________________________________________________
Represented by
_____________________________________________________________________________________________________________
Capital stock -- authorized 10,000,000,000 shares of $.01 par value $ 1,788,556
Additional paid-in capital 1,564,600,147
Undistributed net investment income 2,530,909
Accumulated net realized gain (Note 1) 7,530,072
Unrealized appreciation of investments and on translation
of assets and liabilities in foreign currencies (Note 7) 127,396,357
_____________________________________________________________________________________________________________
Total -- representing net assets applicable to outstanding capital stock $1,703,846,041
_____________________________________________________________________________________________________________
Net assets applicable to outstanding shares: Class A $1,490,495,781
Class B $ 71,739,925
Class Y $ 141,610,335
Net asset value per share of outstanding capital stock: Class A shares 156,460,478 $ 9.53
Class B shares 7,530,528 $ 9.53
Class Y shares 14,864,594 $ 9.53
See accompanying notes to financial statements. <PAGE>
PAGE 83
Financial statements
Statement of operations
IDS Selective Fund, Inc.
Year ended Nov. 30, 1995
_____________________________________________________________________________________________________________
Investment income
_____________________________________________________________________________________________________________
Income:
Interest $112,694,319
Dividends 186,975
_____________________________________________________________________________________________________________
Total income 112,881,294
_____________________________________________________________________________________________________________
Expenses (Note 2):
Investment management services fee 7,840,014
Distribution fee
Class A 191,949
Class B 177,140
Transfer agency fee 1,718,092
Incremental transfer agency fee - Class B 2,079
Service fee
Class A 1,733,052
Class B 41,271
Administrative services fee 532,177
Compensation of directors 31,068
Compensation of officers 13,219
Custodian fees 171,801
Postage 138,514
Registration fees 163,000
Reports to shareholders 153,745
Audit fees 35,000
Administrative 11,072
Other 26,435
_____________________________________________________________________________________________________________
Total expenses 12,979,628
Earnings credit on cash balances (Note 2) (12,808)
_____________________________________________________________________________________________________________
Total net expenses 12,966,820
_____________________________________________________________________________________________________________
Investment income -- net 99,914,474
_____________________________________________________________________________________________________________
Realized and unrealized gain (loss) -- net
_____________________________________________________________________________________________________________
Net realized gain on security and foreign currency transactions
(including gain of $60,129 from foreign currency transactions) (Note 3) 7,691,662
Net realized loss on closed option contracts written (Note 8) (46,720)
_____________________________________________________________________________________________________________
Net realized gain on investments and foreign currency 7,644,942
Net change in unrealized appreciation or depreciation of investments
and on translation of assets and liabilities in foreign currencies (Note 7) 173,013,840
_____________________________________________________________________________________________________________
Net gain on investments and foreign currency 180,658,782
_____________________________________________________________________________________________________________
Net increase in net assets resulting from operations $280,573,256
_____________________________________________________________________________________________________________
See accompanying notes to financial statements.
/TABLE
<PAGE>
PAGE 84
<TABLE>
<CAPTION>
Financial statements
Statements of changes in net assets
IDS Selective Fund, Inc.
Year ended Nov. 30,
_____________________________________________________________________________________________________________
Operations and distributions 1995 1994
_____________________________________________________________________________________________________________
<S> <C> <C>
Investment income -- net $ 99,914,474 $ 102,344,658
Net realized gains on investments and foreign currency 7,644,942 21,139,491
Net change in unrealized appreciation or depreciation of investments 173,013,840 (202,860,707)
and on translation of assets and liabilities in foreign currencies
_____________________________________________________________________________________________________________
Net increase (decrease) in net assets resulting from operations 280,573,256 (79,376,558)
_____________________________________________________________________________________________________________
Distributions to shareholders from:
Net investment income
Class A (91,687,959) (102,415,375)
Class B (1,325,265) --
Class Y (5,767,587) --
Excess distribution of net investment income
Class A -- (378,787)
Net realized gains
Class A (20,000,191) (26,487,582)
Excess distribution of realized gains (Note 1)
Class A -- (42,963)
_____________________________________________________________________________________________________________
Total distributions (118,781,002) (129,324,707)
_____________________________________________________________________________________________________________
Capital share transactions (Note 4)
_____________________________________________________________________________________________________________
Proceeds from sales
Class A shares (Note 2) 207,511,368 196,126,624
Class B shares 74,256,461 --
Class Y shares 146,334,859 --
Reinvestment of distributions at net asset value
Class A shares 83,864,001 99,112,296
Class B shares 1,205,720 --
Class Y shares 5,694,035 --
Payments for redemptions
Class A shares (352,508,286) (421,007,405)
Class B shares (Note 2) (6,231,036) --
Class Y shares (20,194,720) --
_____________________________________________________________________________________________________________
Increase (decrease) in net assets from capital share transactions 139,932,402 (125,768,485)
_____________________________________________________________________________________________________________
Total increase (decrease) in net assets 301,724,656 (334,469,750)
Net assets at beginning of year 1,402,121,385 1,736,591,135
_____________________________________________________________________________________________________________
Net assets at end of year
(including undistributed net investment income of
$2,530,909 and $(378,787)) $1,703,846,041 $1,402,121,385
_____________________________________________________________________________________________________________
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 85
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.
The Fund offers Class A, Class B and Class Y shares. Class A shares
are sold with a front-end sales charge. Class B shares, which the
Fund began offering on March 20, 1995, may be subject to a
contingent deferred sales charge. Class B shares automatically
convert to Class A after eight years. Class Y shares, which the
Fund also began offering on March 20, 1995, have no sales charge
and are offered only to qualifying institutional investors.
All classes of shares have identical voting, dividend, liquidation
and other rights, and the same terms and conditions, except that
the level of distribution fee, transfer agency fee and service fee
(class specific expenses) differs among classes. Income, expenses
(other than class specific expenses) and realized and unrealized
gains or losses on investments are allocated to each class of
shares based upon its relative net assets.
Significant accounting policies followed by the Fund are summarized
below:
Valuation of securities
All securities are valued at the close of each business day.
Securities traded on national securities exchanges or included in
national market systems are valued at the last quoted sales price;
securities for which market quotations are not readily available,
including illiquid securities, are valued at fair value according
to methods selected in good faith by the board of directors.
Determination of fair value involves, among other things, reference
to market indexes, matrixes and data from independent brokers.
Short-term securities maturing in more than 60 days from the
valuation date are valued at the market price or approximate market
value based on current interest rates; those maturing in 60 days or
less are valued at amortized cost.
Option transactions
In order to produce incremental earnings, protect gains, and
facilitate buying and selling of securities for investment
purposes, the Fund may buy or write options traded on any U.S. or
foreign exchange or in the over-the-counter market where the
completion of the obligation is dependent upon the credit standing
of the other party. The Fund also may buy and sell put and call <PAGE>
PAGE 86
options and write covered call options on portfolio securities and
may write cash-secured put options. The risk in writing a call
option is that the Fund gives up the opportunity of profit if the
market price of the security increases. The risk in writing a put
option is that the Fund may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying
an option is that the Fund pays a premium whether or not the option
is exercised. The Fund also has the additional risk of not being
able to enter into a closing transaction if a liquid secondary
market does not exist.
Option contracts are valued daily at the closing prices on their
primary exchanges and unrealized appreciation or depreciation is
recorded. The Fund will realize a gain or loss upon expiration or
closing of the option transaction. When an option is exercised, the
proceeds on sales for a written call option, the purchase cost for
a written put option or the cost of a security for a purchased put
or call option is adjusted by the amount of premium received or
paid.
Futures transactions
In order to gain exposure to or protect itself from changes in the
market, the Fund may buy and sell futures contracts traded on any
U.S. or foreign exchange. The Fund also may buy or write put and
call options on these futures contracts. Risks of entering into
futures contracts and related options include the possibility that
there may be an illiquid market and that a change in the value of
the contract or option may not correlate with changes in the value
of the underlying securities.
Upon entering into a futures contract, the Fund is required to
deposit either cash or securities in an amount (initial margin)
equal to a certain percentage of the contract value. Subsequent
payments (variation margin) are made or received by the Fund each
day. The variation margin payments are equal to the daily changes
in the contract value and are recorded as unrealized gains and
losses. The Fund recognizes a realized gain or loss when the
contract is closed or expires.
Foreign currency translations and
foreign currency contracts
Securities and other assets and liabilities denominated in foreign
currencies are translated daily into U.S. dollars at the closing
rate of exchange. Foreign currency amounts related to the purchase
or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in
foreign exchange rates on realized and unrealized security gains or
losses is reflected as a component of such gains or losses. In the
statement of operations, net realized gains or losses from foreign
currency transactions may arise from sales of foreign currency, <PAGE>
PAGE 87
closed forward contracts, exchange gains or losses realized between
the trade date and settlement dates on securities transactions, and
other translation gains or losses on dividends, interest income and
foreign withholding taxes.
The Fund may enter into forward foreign currency exchange contracts
for operational purposes and to protect against adverse exchange
rate fluctuation. The net U.S. dollar value of foreign currency
underlying all contractual commitments held by the Fund and the
resulting unrealized appreciation or depreciation are determined
using foreign currency exchange rates from an independent pricing
service. The Fund is subject to the credit risk that the other
party will not complete the obligations of the contract.
Federal taxes
Since the Fund's policy is to comply with all sections of the
Internal Revenue Code applicable to regulated investment companies
and to distribute all of its taxable income to shareholders, no
provision for income or excise taxes is required.
Net investment income (loss) and net realized gains (losses) may
differ for financial statement and tax purposes primarily because
of the deferral of losses on certain futures contracts, the
recognition of certain foreign currency gains (losses) as ordinary
income (loss) for tax purposes, and losses deferred due to "wash
sale" transactions. The character of distributions made during the
year from net investment income or net realized gains may differ
from their ultimate characterization for federal income tax
purposes. The effect on dividend distributions of certain book-to-
tax differences is presented as "excess distributions" in the
statement of changes in net assets. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are
distributed may differ from the year that the income or realized
gains (losses) were recorded by the Fund.
On the statement of assets and liabilities, as a result of
permanent book-to-tax differences, undistributed net investment
income has been increased by $1,776,033 and accumulated net
realized gain has been decreased by $1,776,033.
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<PAGE>
PAGE 88
date. For U.S. dollar denominated bonds, interest income includes
level-yield amortization of premium and discount. For foreign
bonds, except for issue discount, the Fund does not amortize
premium and discount.
___________________________________________________________________
2. Expenses and sales charges
Under terms of a prior agreement that ended March 19, 1995, the
Fund paid AEFC a fee for managing its investments, recordkeeping
and other specified services. The fee was a percentage of the
Fund's average daily net assets consisting of a group asset charge
in reducing percentages from 0.46% to 0.32% annually on the
combined net assets of all non-money market funds in the IDS MUTUAL
FUND GROUP and an individual annual asset charge of 0.13% of
average daily net assets.
Also under the terms of a prior agreement, the Fund paid AEFC a
distribution fee at an annual rate of $6 per shareholder account
and a transfer agency fee at an annual rate of $15.50 per
shareholder account.
Effective March 20, 1995, when the Fund began offering multiple
classes of shares, the Fund entered into agreements with AEFC for
managing it's portfolio, providing administrative services and
serving as transfer agent as follows: Under its Investment
Management Services Agreement, AEFC determines which securities
will be purchased, held or sold. The management fee is a percentage
of the Fund's average daily net assets in reducing percentages from
0.52% to 0.395% annually.
Under an Administrative Services Agreement, the Fund pays AEFC for
administration and accounting services at a percentage of the
Fund's average daily net assets in reducing percentages from 0.05%
to 0.025% annually.
Under a separate Transfer Agency Agreement, AEFC maintains
shareholder accounts and records. The Fund pays AEFC an annual fee
per shareholder account for this service as follows:
o Class A $15.50
o Class B $16.50
o Class Y $15.50
Also effective March 20, 1995, the Fund entered into agreements
with American Express Financial Advisors Inc. for distribution and
shareholder servicing-related services as follows: Under a Plan and
Agreement of Distribution, the Fund pays a distribution fee at an
annual rate of 0.75% of the Fund's average daily net assets
attributable to Class B shares for distribution-related services.
Under a Shareholder Service Agreement, the Fund pays a fee for
service provided to shareholders by financial advisors and other <PAGE>
PAGE 89
servicing agents. The fee is calculated at a rate of 0.175% of the
Fund's average daily net assets attributable to Class A and Class B
shares.
AEFC will assume and pay any expenses (except taxes and brokerage
commissions) that exceed the most restrictive applicable state
expense limitation.
Sales charges received by American Express Financial Advisors Inc.
for distributing Fund shares were $3,869,488 for Class A and
$10,703 for Class B for the year ended Nov. 30, 1995.
During the year ended Nov. 30, 1995, the Fund's custodian and
transfer agency fees were reduced by $12,808 as a result of
earnings credits from overnight cash balances.
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 $6,951 for the year ended Nov. 30, 1995.
___________________________________________________________________
3. Securities transactions
Cost of purchases and proceeds from sales of securities (other than
short-term obligations) aggregated $663,127,751 and $358,130,085,
respectively, for the year ended Nov. 30, 1995. Realized gains and
losses are determined on an identified cost basis.
___________________________________________________________________
4. Capital share transactions
Transactions in shares of capital stock for the years indicated are
as follows:
<TABLE><CAPTION>
Year ended Nov. 30, 1995 Year ended
11/30/94
Class A Class B* Class Y* Class A
________________________________________________________________________________________
<S> <C> <C> <C> <C>
Sold 23,080,473 8,072,716 16,445,854 21,519,839
Issued for reinvested 9,414,149 129,691 618,114 10,813,989
distributions
Redeemed (39,632,200) (671,879) (2,199,374) (46,537,712)
_________________________________________________________________________________________
Net increase (decrease) (7,137,578) 7,530,528 14,864,594 (14,203,884)
_________________________________________________________________________________________
*Inception date was March 20, 1995.
<PAGE>
PAGE 90
___________________________________________________________________
5. Lending of portfolio securities
At Nov. 30, 1995, securities valued at $112,466,340 were on loan to
brokers. For collateral, the Fund received $12,305,750 in cash and
U.S. government securities valued at $100,344,419. Income from
securities lending amounted to $214,506 for the year ended Nov. 30,
1995. The risks to the Fund of securities lending are that the
borrower may not provide additional collateral when required or
return the securities when due.
___________________________________________________________________
6. Illiquid Securities
At Nov. 30, 1995, investments in securities included issues that
are illiquid. The Fund currently limits investments in illiquid
securities to 10% of the net assets, at market value, at the time
of purchase. The aggregate value of such securities at Nov. 30,
1995 was $8,175,257 representing 0.5% of the net assets. Pursuant
to guidelines adopted by the Fund's board of directors, certain
unregistered securities are determined to be liquid and are not
included within the 10% limitation specified above.
___________________________________________________________________
7. Foreign currency contract
At Nov. 30, 1995, the Fund had entered into one foreign currency
exchange contract that obligates the Fund to deliver currency at a
specified future date. The unrealized appreciation and/or
depreciation on this contract is included in the accompanying
financial statements. The terms of the open contract are as
follows:
</TABLE>
<TABLE><CAPTION>
Currency to be Currency to be Unrealized
Exchange date delivered received appreciation
______________________________________________________________________________
<S> <C> <C> <C>
Feb. 12, 1996 22,567,167 $15,963,194 $304,273
Deutsche Mark U.S. Dollar
</TABLE>
___________________________________________________________________
8. Option contracts written
The number of contracts and premium amounts associated with
covered call option contracts written is as follows:
Fiscal year ended Nov. 30, 1995
_____________________________
Contracts Premium
___________________________________________
Balance Nov. 30, 1994 -- $ --
Opened 800 619,220
Closed (800) (619,220)
___________________________________________
Balance Nov. 30, 1995 -- $ --
<PAGE>
PAGE 91
___________________________________________________________________
9. Financial highlights
"Financial highlights" showing per share data and selected
information is presented on pages 7 and 8 of the prospectus.<PAGE>
PAGE 92
<TABLE>
<CAPTION>
Investments in securities
IDS Selective Fund, Inc. (Percentages represent value of
Nov. 30, 1995 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Bonds (94.9%)
_____________________________________________________________________________________________________________________________
Issuer Coupon Maturity Principal Value(a)
rate year amount
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
U.S. government obligations (32.4%)
U.S. Treasury 6.875% 1999 $ 60,000,000 (b) $ 62,699,400
7.25 1996-04 42,000,000 43,708,980
7.50 2001-16 143,300,000 162,442,950
8.00 2021 35,000,000 (b) 42,710,150
8.625 1997 50,745,000 53,387,292
Resolution Funding Corp
Zero Coupon 7.61 2017 79,000,000 (c) 19,638,610
7.89 2016 70,900,000 (b,c) 18,911,502
7.98 2016 47,000,000 (c) 12,494,480
8.11 2016 35,073,000 (c) 9,025,686
8.12 2004 7,899,000 (c) 4,764,519
8.18 2005 13,000,000 (c) 7,231,510
8.19 2014 48,000,000 (c) 14,953,440
8.20 2005 38,048,000 (c) 21,862,761
8.27 2014 10,000,000 (c) 3,016,700
8.35 2006 48,000,000 (c) 25,711,680
8.94 2006 25,000,000 (c) 13,594,500
8.95 2006 68,000,000 (c) 35,345,040
_____________
Total 551,499,200
_____________________________________________________________________________________________________________________________
Mortgage-backed securities (10.8%)
Federal Home Loan Mtge Corp 7.50 2024 19,396,175 19,747,634
8.00 2016-25 13,907,684 14,311,795
8.50 2017-22 12,567,105 13,075,767
9.00 2020-21 7,202,398 7,530,859
Collateralized Mtge Obligation 8.50 2019 11,168,731 11,265,117
Federal Housing Admin 7.43 2024 9,327,094 9,609,822
Federal Natl Mtge Assn 6.50 2023 13,670,900 13,389,017
10.00 2002 148 156
Collateralized Mtge Obligation 8.00 2021 13,219,009 13,536,530
8.50 2019 5,130,888 5,346,334
Principal Only 9.50 2018 1,715,073 (e) 1,372,058
9.89 2020 2,629,671 (e) 2,198,983
Trust Series Z 6.00 2024 18,876,409 (d) 15,464,876
Govt Natl Mtge Assn 8.00 1922-24 37,436,004 38,757,869
9.00 1924-25 10,968,374 11,575,035
Collateralized Mtge Obligation Trust 7.75 2012 2,526,810 2,567,820
Prudential Bache
Collateralized Mtge Obligation 7.965 2019 4,061,637 4,188,320
WestAm
Collateralized Mtge Obligation 8.95 2018 123,406 122,695
______________
Total 184,060,531
_____________________________________________________________________________________________________________________________
Financial (10.1%)
Banks and savings & loans (3.5%)
BankAmerica
Sub Nts 7.50 2002 8,810,000 9,410,754
Boatmen's Bancshares
Sub Nts 9.25 2001 8,950,000 10,360,788
See accompanying notes to investments in securities.<PAGE>
PAGE 93
First Bank System 6.875 2007 8,550,000 8,753,319
First Chicago
Sr Nts 9.00 1999 7,900,000 8,658,953
NCNB
Sub Nts 9.125 2001 10,000,000 11,433,600
Standard Credit Card 8.625 2002 10,000,000 10,417,188
______________
Total 59,034,602
_____________________________________________________________________________________________________________________________
Financial services (5.5%)
Aristar
Sr Deb 8.875 1998 10,520,000 11,225,261
Beneficial 9.125 1998 10,000,000 10,676,500
General Electric Capital
Reset Nt 8.65 2018 15,000,000 (f) 15,173,100
General Motors Acceptance 5.95 1998 8,000,000 8,010,800
7.00 2000 14,300,000 14,810,224
Greyhound Financial 7.95 1999 9,600,000 10,184,160
Salomon 7.75 2000 5,000,000 5,200,550
8.91 1998 8,400,000 8,792,952
SunAmerica 9.95 2012 8,000,000 10,039,360
______________
Total 94,112,907
_____________________________________________________________________________________________________________________________
Insurance (1.1%)
Berkley (WR) 8.70 2022 10,000,000 11,556,000
Nationwide Trust
Credit Sensitive Nt 9.875 2025 6,500,000 (g) 7,560,475
_____________
Total 19,116,475
_____________________________________________________________________________________________________________________________
Industrial (11.5%)
Aerospace & defense (0.7%)
United Technologies 8.875 2019 10,000,000 12,366,100
_____________________________________________________________________________________________________________________________
Automotive & related (1.1%)
Ford Capital 9.00 1996 9,700,000 9,851,029
General Motors 8.875 2003 7,050,000 8,038,763
____________
Total 17,889,792
_____________________________________________________________________________________________________________________________
Beverages & tobacco (0.6%)
Philip Morris 8.10 1996 10,000,000 10,166,300
_____________________________________________________________________________________________________________________________
Chemicals (0.7%)
Dow Chemical 8.85 2021 10,000,000 12,068,400
_____________________________________________________________________________________________________________________________
Ecological services & equipment (0.5%)
Browning-Ferris Inds 9.25 % 2021 7,000,000 8,887,270
____________________________________________________________________________________________________________________________
Electronics (0.3%)
Harris 10.375 2018 3,900,000 4,374,084
_____________________________________________________________________________________________________________________________
Energy (2.3%)
PDV Amer 7.875 2003 16,500,000 15,693,810
Texaco Capital
Gtd Deb 7.50 2043 12,000,000 12,786,960
USX 9.375 2022 9,200,000 10,787,920
______________
Total 39,268,690
_____________________________________________________________________________________________________________________________
Energy Equipment and Services (0.5%)
Foster Wheeler 6.75 2005 8,000,000 8,045,520
_____________________________________________________________________________________________________________________________
Health care (0.8%)
Schering-Plough
Zero Coupon 7.31 1996 15,000,000 (c,g) 14,197,800
<PAGE>
PAGE 94
_____________________________________________________________________________________________________________________________
Industrial equipment & services (1.3%)
Case 7.25 2005 10,000,000 10,428,400
Deere 8.95 2019 10,000,000 12,048,000
_____________
Total 22,476,400
_____________________________________________________________________________________________________________________________
Media (1.4%)
Tele-communications
Sr Deb 7.875 2013 5,000,000 5,015,750
9.875 2022 5,000,000 5,980,950
Time Warner Entertainment 8.375 2033 12,000,000 12,671,520
_____________
Total 23,668,220
_____________________________________________________________________________________________________________________________
Paper & packaging (1.3%)
Georgia-Pacific
8.625 2025 10,000,000 11,032,000
Credit Sensitive Nt 9.85 1997 10,000,000 10,528,400
_____________
21,560,400
_____________________________________________________________________________________________________________________________
Transportation (1.1%)
AMR 9.75 2021 2,500,000 2,945,550
10.00 2021 8,000,000 9,614,480
10.20 2020 5,000,000 6,106,450
______________
Total 18,666,480
_____________________________________________________________________________________________________________________________
Utilities (11.8%)
Electric (8.8%)
Arizona Public Service
1st Mtge 8.75 2024 5,000,000 5,753,600
Sale Lease-Backed Obligation 8.00 2015 9,000,000 9,495,270
Cajun Electric Power Cooperative
Mtge Trust 8.92 2019 4,960,000 5,532,930
Commonwealth Edison 6.50 2000 9,000,000 9,066,780
8.375 2023 10,000,000 10,762,400
Long Island Lighting 9.625 2024 10,000,000 10,280,200
Ohio Edison 8.75 2022 11,000,000 12,433,850
Public Service Electric & Gas
1st Mtge 8.50 2022 13,720,000 14,627,852
RGS Funding
Sale Lease-Backed Obligation 9.82 2022 9,941,260 12,721,133
Salton Sea Funding 7.84 2010 10,000,000 (g) 10,359,800
San Diego Gas & Electric
1st Mtge 9.625 2020 9,950,000 11,877,912
Southern California Edison
1st Mtge 8.875 2023 21,000,000 21,856,170
Texas Utilities Electric
1st Mtge 9.75 2021 13,000,000 15,136,290
______________
Total 149,904,187
_____________________________________________________________________________________________________________________________
Telephone (3.0%)
BellSouth Telecommunications 7.00 1995 10,000,000 10,317,800
GTE 10.25 2020 2,000,000 2,357,480
GTE South
1st Mtge 9.375 2030 13,975,000 14,698,905
New York Tel 9.375 2031 7,000,000 8,232,630
Pacific Bell 8.50 2031 15,000,000 16,230,600
______________
Total 51,837,415
_____________________________________________________________________________________________________________________________
Foreign (17.2%)(h)
ABN Amro Bank
(U.S. Dollar) 7.75 2023 12,000,000 12,844,560
Alcan Aluminum
(U.S. Dollar) 8.875 2022 9,600,000 11,052,288
<PAGE>
PAGE 95
Austria Republic Euro
(U.S. Dollar) 10.00 1998 5,000,000 5,455,450
Bank of China
(U.S. Dollar) 8.25 2014 7,100,000 6,999,890
Bundes Republic
(U.S. Dollar) 7.50 2004 20,000,000 15,022,200
City of Helsinki
Sr Nts
(U.S.Dollar) 8.00 2006 2,000,000 (i) 1,967,500
8.65 2006 1,500,000 (i) 1,500,525
8.75 2006 1,500,000 (i) 1,511,175
9.00 2007 1,650,000 (i) 1,669,057
9.15 2006 1,500,000 (i) 1,527,000
Euratom Euro
(U.S. Dollar) 7.75 1997 6,100,000 6,233,407
Government of Australia
(U.S. Dollar) 6.686 2004 6,600,000 5,159,550
Guang Dong Enterprise
(U.S. Dollar) 8.75 2003 15,000,000 (g) 14,193,000
Intl Bank Reconstruction & Development
(U.S. Dollar) 12.375 2002 6,000,000 8,148,840
Intl Finance Euro
(U.S. Dollar) 8.25 1996 8,000,000 8,110,000
Japan Finance
(U.S. Dollar) 9.25 1998 25,950,000 28,232,043
KFW Intl Finance
(U.S. Dollar) 8.50 1999 10,000,000 10,979,700
Kingdom of Denmark Euro
(U.S. Dollar) 7.25 1996 8,000,000 8,088,720
Korea Electric Power
(U.S. Dollar) 7.75 2013 14,000,000 14,653,800
8.00 2002 9,000,000 9,742,050
Magna Intl
(U.S. Dollar) 5.00 2002 2,500,000 2,559,375
Peoples Republic China
(U.S. Dollar) 6.50 2004 7,000,000 (b) 6,834,450
Petronas
(U.S. Dollar) 7.75 2015 10,000,000 (g) 10,715,400
Poland
(U.S. Dollar) 3.25 2014 11,500,000 (f) 7,424,688
Province of Quebec
(U.S. Dollar) 11.00 2015 6,550,000 7,934,539
Republic of Columbia
(U.S. Dollar) 7.25 2004 13,400,000 12,956,594
Republic of Italy
(U.S. Dollar) 6.875 2023 23,200,000 22,082,456
Rodamco
(U.S. Dollar) 7.30 2005 10,000,000 10,521,400
Telekom Malaysia
(U.S. Dollar) 7.875 2025 10,000,000 (g) 10,873,100
Tokyo Electric Power Euro
(U.S. Dollar) 6.125 2003 21,500,000 21,297,685
United Kingdom Treasury
(U.S. Dollar) 12.248 2003 4,400,000 6,976,376
______________
Total 293,266,818
_____________________________________________________________________________________________________________________________
Total bonds
(Cost: $1,489,385,046) $1,616,467,591
_____________________________________________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 96
<TABLE>
<CAPTION>
Short-term securities (5.1%)
_____________________________________________________________________________________________________________________________
Issuer Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C>
U.S. government agency (0.1%)
Federal Home Loan Mtge Disc Note
12-20-95 5.70% $2,200,000 $ 2,193,416
_____________________________________________________________________________________________________________________________
Commercial paper (5.0%)
Avco Financial Services
12-08-95 5.74 4,600,000 4,594,893
01-24-96 5.75 4,800,000 4,758,960
CAFCO
12-22-95 5.75 6,000,000 5,979,980
Commerzbank U.S. Finance
12-20-95 5.76 5,800,000 5,782,460
Exxon Asset Management
01-10-96 5.73 4,500,000 (j) 4,471,600
Lincoln Natl
12-01-95 5.75 2,100,000 (j) 2,100,000
12-21-95 5.76 4,800,000 (j) 4,784,720
Merrill Lynch
12-08-95 5.78 700,000 699,217
Motorola
12-28-95 5.75 1,400,000 1,393,994
Natl Bank Detroit Canada
12-13-95 5.75 4,800,000 4,790,848
Pfizer
12-07-95 5.74 4,100,000 (j) 4,096,105
Reed Elsevier
01-02-96 5.78 5,700,000 (j) 5,670,917
SAFECO Credit
01-30-96 5.76 900,000 891,003
Siemens
12-15-95 5.73 4,800,000 4,789,360
12-28-95 5.75 1,600,000 1,593,148
Toyota Motor Credit
12-01-95 5.73 1,900,000 1,900,000
12-15-95 5.75 6,900,000 6,884,651
12-18-95 5.76 5,600,000 5,584,847
Wachovia Bank
12-07-95 5.75 9,500,000 9,499,998
12-12-95 5.75 5,600,000 5,599,981
_____________
Total 85,866,682
_______________________________________________________________________________________________________________________________
Total short-term securities
(Cost: $88,060,546) $ 88,060,098
_____________________________________________________________________________________________________________________________
Total investments in securities
(Cost: $1,577,445,592)(k) $1,704,527,689
<PAGE>
PAGE 97
_____________________________________________________________________________________________________________________________
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 to reflect current market conditions; rate shown is the effective rate on Nov. 30, 1995.
(g) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended.
This security has been determined to be liquid under guidelines established by the board of directors.
(h) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated in the
currency indicated.
(i) Identifies issues considered to be illiquid, (see Note 6 to the financial statements). Information concerning such
security holdings at Nov. 30, 1995, is as follows:
Security Acquisition Cost
date
City of Helsinki 02-07-95 $1,859,160
City of Helsinki 02-07-95 1,462,155
City of Helsinki 02-07-95 1,472,805
City of Helsinki 02-07-95 1,638,450
City of Helsinki 02-07-95 1,497,750
(j) Commercial paper sold within terms of a private placement memorandum, exempt from registration
under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers
in that program or other "accredited investors." This security has been determined to be liquid
under guidelines established by the board of directors.
(k) On Nov. 30, 1995, the cost of securities for federal income tax purposes was $1,575,054,413
and the aggregate gross unrealized appreciation and depreciation
based on that cost was:
Unrealized appreciation $131,511,677
Unrealized depreciation (2,038,401)
____________________________________________________________________________________________
Net unrealized appreciation $129,473,276
____________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 98
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) FINANCIAL STATEMENTS:
List of financial statements filed as part of this Post-
Effective Amendment to the Registration Statement:
o Independent Auditors' Report dated January 5, 1996
o Statement of Assets and Liabilities, November 30, 1995
o Statement of Operations, Year ended November 30, 1995
o Statement of Changes in Net Assets, for the two-year
period ended November 30, 1994 and November 30, 1995
o Notes to Financial Statements
o Investments in Securities, November 30, 1995
o 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 and Services Agreement between
Registrant and American Express Financial Corporation, dated
March 20, 1995, filed electronically as Exhibit 5 to
Registrant's Post-Effective Amendment No. 81 to Registration
Statement No. 2-10700 is incorporated herein by reference.
6. Form of Distribution Agreement between Registrant and
American Express Financial Advisors Inc., dated March 20,
1995, filed electronically as Exhibit 6 to Registrant's Post-
Effective Amendment No. 81 to Registration Statement No. 2-
10700 is incorporated herein by reference.
7. All employees are eligible to participate in a profit sharing
plan. Entry into the plan is Jan. 1 or July 1. The
Registrant contributes each year an amount up to 15 percent
of their annual salaries, the maximum deductible amount
permitted under Section 404(a) of the Internal Revenue Code.
8. Form of Custodian Agreement between Registrant and First
National Bank of Minneapolis, dated July 23, 1986, is filed
electronically herewith.
<PAGE>
PAGE 99
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 the Registrant and
American Express Financial Corporation, dated March 20, 1995,
filed electronically as Exhibit 9(b) to Registrant's Post-
Effective Amendment No. 81 to Registration Statement No. 2-
10700 is incorporated herein by reference.
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, filed electronically as Exhibit 9(d) to Registrant's
Post-Effective Amendment No. 81 to Registration Statement No.
2-10700 is incorporated herein by reference.
9(e). Form of Administrative Services Agreement between Registrant
and American Express Financial Corporation, dated March 20,
1995, filed electronically as Exhibit 9(e) to Registrant's
Post-Effective Amendment No. 81 to Registration Statement No.
2-10700 is incorporated herein by reference.
10. Opinion and consent of counsel as to the legality of the
securities being registered is filed with Registrant's most
recent 24f-2 Notice.
11. Independent Auditors' Consent is filed electronically
herewith.
12. None.
13. Not Applicable.
14. Forms of Keogh, IRA and other retirement plans, filed as
Exhibits 14(a) through 14(n) to IDS Growth Fund, Inc., Post
Effective Amendment No. 34 to Registration Statement No. 2-
38355, are incorporated herein by reference.
15. Form of Plan and Agreement of Distribution between Registrant
and American Express Financial Advisors Inc., dated March 20,
1995, filed electronically as Exhibit 15 to Registrant's
Post-Effective Amendment No. 81 to Registration Statement No.
2-10700 is incorporated herein by reference.
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.
<PAGE>
PAGE 100
18. Copy of Plan pursuant to Rule 18f-3 under the 1940 Act, filed
electronically as Exhibit 18 to Registrant's Post-Effective
Amendment No. 82 to Registration Statement No. 2-10700, is
incorporated herein by reference.
19(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.
19(b). Officers' Power of Attorney to sign Amendments to this
Registration Statement, dated November 1, 1995, is filed
electronically herewith as Exhibit 19(b).
Item 25. Persons Controlled by or Under Common Control with
Registrant
None.
Item 26. Number of Holders of Securities
(1) (2)
Number of Record
Holders as of
Title of Class January 22, 1996
Common Stock 86,458
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 <PAGE>
PAGE 101
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 102
<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-
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
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 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
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
<PAGE>
PAGE 2
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Timothy V. Bechtold, Vice President--Risk Management Products
American Express Financial Advisors IDS Tower 10 Vice President-Risk
Minneapolis, MN 55440 Management Products
IDS Life Insurance Company Vice President-Risk
Management Products
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--Technology and Development
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Technology and
Development
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, 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
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
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-American
Express Securities Services
<PAGE>
PAGE 3
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
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 Insurance Agency of Nevada Inc. Vice President--North
Central Region
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 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
Kenneth J. Ciak, Vice President and General Manager--IDS Property Casualty
AMEX Assurance Co. Director and President
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
Colleen Curran, 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 and Chief
Legal Counsel
Alan R. Dakay, Vice President--Institutional Products Group
American Centurion Life Assurance Co. IDS Tower 10 Director and Vice Chairman
Minneapolis, MN 55440 and President, Financial
Institutions Division
American Enterprise Life Insurance Co. Director and President
<PAGE>
PAGE 4
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
IDS Life Insurance Company Vice President -
Institutional Insurance
American Express Financial Advisors Vice President -
Institutional Products
Group 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, Senior Vice President and Technology Advisor
American Express Financial Advisors IDS Tower 10 Senior Vice President and
Minneapolis, MN 55440 Technology Advisor
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
American Express Insurance Agency of Nevada Inc. Director and Vice President
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 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
<PAGE>
PAGE 5
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
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
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
Morris Goodwin Jr., Vice President and Corporate Treasurer
American Centurion Life Assurance Co. Vice President and
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 Insurance Agency of Nevada Inc. Vice President and
Treasurer
American Express Minnesota Foundation Vice President and
Treasurer
American Express Service Corporation Vice President and
Treasurer
American Express Tax & Business Vice President and
Services Inc. Treasurer
American Partners Life Insurance Co. Vice President and
Treasurer<PAGE>
PAGE 6
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
AMEX Assurance Co. Vice President and
Treasurer
IDS Advisory Group Inc. Vice President and
Treasurer
IDS Aircraft Services Corporation Vice President and
Treasurer
IDS Cable Corporation Director, Vice President
and Treasurer
IDS Cable II Corporation Director, 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 Futures Corp. Director
IDS Futures III Corp. Director
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 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
IDS Life Variable Annuity Funds A&B Vice President and
Treasurer
IDS Management Corporation Director, Vice President
and Treasurer
IDS Partnership Services Corporation Director, 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 Director, Vice President
and Treasurer
IDS Sales Support Inc. Director, Vice President
and Treasurer
<PAGE>
PAGE 7
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
IDS Securities Corporation Vice President and
Treasurer
Investors Syndicate Development Corp. Vice President and
Treasurer
National Computer Systems, Inc. 11000 Prairie Lakes Drive Director
Minneapolis, MN 55440
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
AMEX Assurance Co. Vice President-Investments
IDS Certificate Company Vice President-Investments
IDS Life Insurance Company Vice President-Investments
IDS Life Series Fund, Inc. Vice President-Investments
IDS Life Variable Annuity Funds A and B Vice President-Investments
IDS Property Casualty Insurance Company Vice President-Investment
Officer
Investors Syndicate Development Corp. Director and Vice
President-Investments
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
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
<PAGE>
PAGE 8
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Darryl G. Horsman, Vice President--Product Development and Technology, American Express
Institutional Retirement Services
American Express Trust Company IDS Tower 10 Director and 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 Chief
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
AMEX Assurance Co. Director
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
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 9
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 Centurion Life Assurance Co. Director
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 Express Insurance Agency of Nevada Inc. Director and President
American Partners Life Insurance Co. Director and Chairman of
the Board
AMEX Assurance 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 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 and B Director and 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
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
IDS Property Casualty Insurance Company Director
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 10
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Edward Labenski, Jr.., 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 Centurion Life Assurance Co. Director and
Vice President-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 11
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Peter A. Lefferts, Director and Senior Vice President--Corporate Strategy and Development
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Corporate Strategy and
Development
American Express Service Corporation Director
American Express Trust Company Director
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
Jonathan S. Linen, Director
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 12
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
American Express Tax and Business Director
Services Inc.
AMEX Assurance Co. Director
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
Mary Owens Neal, Vice President--Mature Market Segment
American Express Financial Advisors Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Mature Market Segment<PAGE>
PAGE 13
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Robert J. Neis, Vice President--Technology Services
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Technology Services
James R. Palmer, Vice President--Insurance Operations
American Express Financial Advisors IDS Tower 10 Vice President-Taxes
Minneapolis, MN 55440
IDS Aircraft Services Corp. Vice President
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
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
James M. Punch, Vice President--Geographic Service Teams
American Express Financial Advisors IDS Tower 10 Vice President-Geographic
Minneapolis, MN 55440 Services Teams
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
<PAGE>
PAGE 14
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
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
IDS Fund Management Limited Director
IDS International, Inc. Director
Robert A. Rudell, Vice President--American Express Institutional Retirement Services
American Express Financial Advisors IDS Tower 10 Vice President-American
Minneapolis, MN 55440 Express Institutional
Services
American Express Trust Company Director and Chairman of
the Board
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
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 Insurance Agency of Nevada Inc. Vice President-
New England Region
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 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
<PAGE>
PAGE 15
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Stuart A. Sedlacek, Vice President--Assured Assets
American Centurion Life Assurance Co. Director and Chairman
and President
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
American Partners Life Insurance Co. Director and President
IDS Certificate Company Director and President
IDS Life Insurance Company Director and Executive
Vice President, Assured
Assets
Investors Syndicate Development Corp. Director and 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
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
AMEX Assurance Co. Vice President
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
<PAGE>
PAGE 16
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
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
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
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
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
Melinda S. Urion, Director, Senior Vice President and Chief Financial Officer
American Enterprise Life IDS Tower 10 Vice President and
Insurance Company Minneapolis, MN 55440 Controller
American Express Financial Advisors Senior Vice President and
Chief Financial Officer
American Partners Life Insurance Co. Director and Vice President
IDS Life Insurance Company Director, Executive Vice
President and Controller
IDS Life Series Fund, Inc. Vice President and
Controller
<PAGE>
PAGE 17
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
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 Vice Chairman
IDS International, Inc. Senior Vice President
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 Insurance Agency of Nevada Inc. Vice President-Southeast
Region
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 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--Tax Research and Audit
American Express Financial Advisors IDS Tower 10 Vice President-Tax Research
Minneapolis, MN 55440 and Audit
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
James M. Weiss, Vice President and Senior Portfolio Manager
American Express Financial Advisors Inc. Vice President and Senior
Portfolio Manager
IDS Advisory Group Inc. Executive Vice President
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
<PAGE>
PAGE 18
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
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
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 Fund Management Limited Director
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 Insurance Agency of Nevada Inc. Vice President-
North Region
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 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 19
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
Peter J. Anderson Senior Vice President- Vice
IDS Tower 10 Investments President--
Minneapolis, MN 55440 Investments
Ward D. Armstrong Vice President- None
IDS Tower 10 Sales and Marketing,
Minneapolis, MN 55440 American Express
Institutional Retirement
Services
Alvan D. Arthur Group Vice President- None
Suite 105 Central California/
2710 S. Gateway Oaks Dr. Western Nevada
Sacramento, CA 95833
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
<PAGE>
PAGE 20
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Timothy V. Bechtold Vice President-Risk None
IDS Tower 10 Management Products
Minneapolis, MN 55440
John D. Begley Group Vice President- None
Suite 100 Ohio/Indiana
7760 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
Suite 200 Greater Pennsylvania
3500 Market Street
Camp Hill, PA 17011
Alan F. Bignall Vice President- None
IDS Tower 10 Technology and
Minneapolis, MN 55440 Development
Brent L. Bisson Group Vice President- None
Ste 900 E. Westside Twr Los Angeles Metro
11835 West Olympic Blvd.
Los Angeles, CA 90064
John C. Boeder Vice President- None
IDS Tower 10 Mature Market Group
Minneapolis, MN 55440
Walter K. Booker Group Vice President- None
Suite 200 New Jersey
3500 Market Street
Camp Hill, NJ 17011
Bruce J. Bordelon Group Vice President- None
Galleria One Suite 1900 Gulf States
Galleria Blvd.
Metairie, LA 70001
Charles R. Branch Group Vice President- None
Suite 200 Northwest
West 111 North River Dr
Spokane, WA 99201
Karl J. Breyer Senior Vice President- None
IDS Tower 10 Corporate Affairs and
Minneapolis, MN 55440 Special Counsel
<PAGE>
PAGE 21
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Harold E. Burke Vice President None
IDS Tower 10 and Assistant
Minneapolis, MN 55440 General Counsel
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
IDS Tower 10 Field Management
Minneapolis, MN 55440
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
290 Woodcliff Drive Upstate New York
Fairport, NY 14450
Henry J. Cormier Group Vice President- None
Commerce Center One Connecticut
333 East River Drive
East Hartford, CT 06108
John M. Crawford Group Vice President- None
Suite 200 Arkansas/Springfield/Memphis
10800 Financial Ctr Pkwy
Little Rock, AR 72211
Kevin F. Crowe Group Vice President- None
Suite 312 Carolinas/Eastern Georgia
7300 Carmel Executive Pk
Charlotte, NC 28226
Colleen Curran Vice President and None
IDS Tower 10 Assistant General Counsel
Minneapolis, MN 55440
Alan R. Dakay Vice President- None
IDS Tower 10 Institutional Products
Minneapolis, MN 55440 Group<PAGE>
PAGE 22
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Regenia David Vice President- None
IDS Tower 10 Systems Services
Minneapolis, MN 55440
Scott M. DiGiammarino Group Vice President- None
Suite 500 Washington/Baltimore
8045 Leesburg Pike
Vienna, VA 22182
Bradford L. Drew Group Vice President- None
Two Datran Center Eastern Florida
Penthouse One B
9130 S. Dadeland Blvd.
Miami, FL 33156
William H. Dudley Director and Executive Director
IDS Tower 10 Vice President-
Minneapolis MN 55440 Investment Operations
Roger S. Edgar Senior Vice President None
IDS Tower 10 and Technology Advisor
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
One Old Mill Nebraska/Iowa/Dakotas
101 South 108th Avenue
Omaha, NE 68154
Louise P. Evenson Group Vice President- None
Suite 200 San Francisco Bay Area
1333 N. California Blvd.
Walnut Creek, CA 94596
Gordon M. Fines Vice President- None
IDS Tower 10 Mutual Fund Equity
Minneapolis MN 55440 Investments
<PAGE>
PAGE 23
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Douglas L. Forsberg Group Vice President- None
Suite 100 Portland/Eugene
7931 N. E. Halsey
Portland, OR 97213
William P. Fritz Group Vice President- None
Suite 160 Northern Missouri
12855 Flushing Meadows Dr
St. Louis, MO 63131
Carl W. Gans Group Vice President- None
8500 Tower Suite 1770 Twin City Metro
8500 Normandale Lake Blvd.
Bloomington, MN 55437
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
Suite 1736 Hawaii
1585 Kapiolani Blvd.
Honolulu, HI 96814
David A. Hammer Vice President None
IDS Tower 10 and Marketing
Minneapolis, MN 55440 Controller
Teresa A. Hanratty Group Vice President- None
Suites 6&7 Northern New England
169 South River Road
Bedford, NH 03110
John R. Hantz Group Vice President- None
Suite 107 Detroit Metro
17177 N. Laurel Park
Livonia, MI 48154
<PAGE>
PAGE 24
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Robert L. Harden Group Vice President- None
Two Constitution Plaza Boston Metro
Boston, MA 02129
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
Suite 150 North Texas
801 E. Campbell Road
Richardson, TX 75081
James G. Hirsh Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
David J. Hockenberry Group Vice President- None
30 Burton Hills Blvd. Eastern Tennessee
Suite 175
Nashville, TN 37215
Kevin P. Howe Vice President- None
IDS Tower 10 Government and
Minneapolis, MN 55440 Customer Relations and
Chief Compliance Officer
David R. Hubers Chairman, Chief Director
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
James E. Kaarre Vice President- None
IDS Tower 10 Marketing Information
Minneapolis, MN 55440
Linda B. Keene Vice President- None
IDS Tower 10 Market Development
Minneapolis, MN 55440
G. Michael Kennedy Vice President-Investment None
IDS Tower 10 Services and Investment
Minneapolis, MN 55440 Research
<PAGE>
PAGE 25
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
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
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
Ste 108 Trestle Bridge V Greater Michigan
5136 Lovers Lane
Kalamazoo, MI 49002
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
Suite 680 Chicago Metro
8585 Broadway
Merrillville, IN 48410
Edward Labenski Jr. 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
<PAGE>
PAGE 26
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Richard J. Lazarchic Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Peter A. Lefferts Senior Vice President- None
IDS Tower 10 Corporate Strategy and
Minneapolis, MN 55440 Development
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
Suite 650 Pittsburgh Metro
5700 Corporate Drive
Pittsburgh, PA 15237
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
Union Plaza Suite 900 Kansas/Oklahoma
3030 Northwest Expressway
Oklahoma City, OK 73112
<PAGE>
PAGE 27
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Pamela J. Moret Vice President- None
IDS Tower 10 Corporate Communications
Minneapolis, MN 55440
Alan D. Morgenstern Group Vice President- None
Suite 200 At Large
3500 Market Street
Camp Hill, NJ 17011
Barry J. Murphy Senior Vice President- None
IDS Tower 10 Client Service
Minneapolis, MN 55440
Mary Owens Neal Vice President- None
IDS Tower 10 Mature Market Segment
Minneapolis, MN 55440
Robert J. Neis Vice President- None
IDS Tower 10 Technology Services
Minneapolis, MN 55440
Ronald E. Newton Group Vice President- None
319 Southbridge St. Rhode Island/Central
Auburn, MA 01501 Massachusetts
Thomas V. Nicolosi Group Vice President- None
Suite 220 New York Metro Area
500 Mamaroneck Avenue
Harrison, NY 10528
James R. Palmer Vice President- None
IDS Tower 10 Taxes
Minneapolis, MN 55440
Carla P. Pavone Vice President- None
IDS Tower 10 Specialty Service Teams
Minneapolis, MN 55440 and Emerging Business
Susan B. Plimpton Vice President- None
IDS Tower 10 Segmentation Development
Minneapolis, MN 55440 and Support
Larry M. Post Group Vice President- None
One Tower Bridge Philadelphia Metro
100 Front Street 8th Fl
West Conshohocken, PA 19428
Ronald W. Powell Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
<PAGE>
PAGE 28
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
James M. Punch Vice President- None
IDS Tower 10 Geographical Service
Minneapolis, MN 55440 Teams
Frederick C. Quirsfeld Vice President-Taxable None
IDS Tower 10 Mutual Fund Investments
Minneapolis, MN 55440
R. Daniel Richardson Group Vice President- None
Suite 800 Southern Texas
Arboretum Plaza One
9442 Capital of Texas Hwy N.
Austin, TX 78759
Roger B. Rogos Group Vice President- None
One Sarasota Tower Western Florida
Suite 700
Two N. Tamiami Trail
Sarasota, FL 34236
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
Suite 201 S IDS Ctr Wisconsin/Upper Michigan
1400 Lombardi Avenue
Green Bay, WI 54304
Robert A. Rudell Vice President- None
IDS Tower 10 American Express
Minneapolis, MN 55440 Institutional Retirement
Services
John P. Ryan Vice President and None
IDS Tower 10 General Auditor
Minneapolis, MN 55440
Erven Samsel Senior Vice President- None
45 Braintree Hill Park Field Management
Suite 402
Braintree, MA 02184
Russell L. Scalfano Group Vice President- None
Suite 201 Illinois/Indiana/Kentucky
101 Plaza East Blvd.
Evansville, IN 47715
<PAGE>
PAGE 29
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
William G. Scholz Group Vice President- None
Suite 205 Arizona/Las Vegas
7333 E Doubletree Ranch Rd
Scottsdale, AZ 85258
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
Julian W. Sloter Group Vice President- None
Ste 1700 Orlando FinCtr Orlando/Jacksonville
800 North Magnolia Ave.
Orlando, FL 32803
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
466 Westdale Mall Eastern Iowa Area
Cedar Rapids, IA 52404
Bridget Sperl Vice President- None
IDS Tower 10 Human Resources
Minneapolis, MN 55440 Management Services
Paul J. Stanislaw Group Vice President- None
Suite 1100 Southern California
Two Park Plaza
Irvine, CA 92714
Lois A. Stilwell Group Vice President- None
Suite 433 Outstate Minnesota Area/
9900 East Bren Road North Dakota/Western Wisconsin
Minnetonka, MN 55343
<PAGE>
PAGE 30
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
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
Suite 425 Seattle/Tacoma
101 Elliott Avenue West
Seattle, WA 98119
John R. Thomas Senior Vice President- Director
IDS Tower 10 Information and
Minneapolis, MN 55440 Technology
Melinda S. Urion Senior Vice President Treasurer
IDS Tower 10 and Chief Financial
Minneapolis, MN 55440 Officer
Peter S. Velardi Group Vice President- None
Suite 180 Atlanta/Birmingham
1200 Ashwood Parkway
Atlanta, GA 30338
Charles F. Wachendorfer Group Vice President- None
Suite 100 Denver/Salt Lake City/
Stanford Plaza II Albuquerque
7979 East Tufts Ave Pkwy
Denver, CO 80237
Wesley W. Wadman Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Norman Weaver Jr. Senior Vice President- None
1010 Main St Suite 2B Field Management
Huntington Beach, CA 92648
Michael L. Weiner Vice President- None
IDS Tower 10 Tax Research and Audit
Minneapolis, MN 55440
James M. Weiss Vice President-Senior None
IDS Tower 10 Portfolio Manager
Minneapolis, MN 55440
<PAGE>
PAGE 31
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
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
Suite 200 Cleveland Metro
28601 Chagrin Blvd.
Woodmere, OH 44122
Eric S. Williams Group Vice President- None
Suite 250 Virginia
3951 Westerre Parkway
Richmond, VA 23233
Edwin M. Wistrand Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
Michael R. Woodward Senior Vice President- None
32 Ellicott St Ste 100 Field Management
Batavia, NY 14020
Item 29(c). Not applicable.
Item 30. Location of Accounts and Records
American Express Financial Corporation
IDS Tower 10
Minneapolis, MN 55440
Item 31. Management Services: Not Applicable.
Item 32. Undertakings
(a) Not Applicable.
(b) Not Applicable.
(c) The Registrant undertakes to furnish each person to
whom a prospectus is delivered with a copy of the
Registrant's latest annual report to shareholders,
upon request and without charge.
<PAGE>
PAGE 103
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 25th day of January,
1996.
IDS SELECTIVE FUND
by /s/ Melinda S. Urion**
Melinda S. Urion, Treasurer
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 25th day
of January, 1996.
Signatures Capacity
/s/ William R. Pearce** President, Principal
William R. Pearce Executive Officer and
Director
/s/ Lynne V. Cheney*
Lynne V. Cheney Director
/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
/s/ Anne P. Jones* Director
Anne P. Jones<PAGE>
PAGE 104
Signatures Capacity
/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*
C. Angus Wurtele Director
*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:
Leslie L. Ogg
**Signed pursuant to Officers' Power of Attorney dated November 1,
1995, filed electronically herewith by:
Leslie L. Ogg
<PAGE>
PAGE 105
CONTENTS OF THIS
POST-EFFECTIVE AMENDMENT NO. 83
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.
Financial Statements.
Part C.
Other information.
Exhibits.
The signatures.
<PAGE>
PAGE 1
IDS SELECTIVE FUND, INC.
Registration Number 2-10700/811-499
EXHIBIT INDEX
Exhibit 8 Custodian Agreement
Exhibit 11 Independent Auditors' Consent
Exhibit 17 Financial Data Schedules
Exhibit 19(b) Officers' Power of Attorney, dated Nov. 1, 1995
<PAGE>
PAGE 1
CUSTODIAN AGREEMENT
THIS CUSTODIAN AGREEMENT dated July 23, 1986, between IDS Selective
Fund, Inc., a Minnesota Corporation (hereinafter also called the
"Corporation") and First National Bank of Minneapolis, a
corporation organized under the laws of the United States of
America with its principal place of business at Minneapolis,
Minnesota (hereinafter also called 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 l. 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 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 hereinbefore 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
Assistant Secretary of the Corporation as having been duly adopted <PAGE>
PAGE 2
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 hereinbefore 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
hereinabove 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 and
cash.
The Custodian also may enter into arrangements for the custody of
"Foreign Securities" and cash entrusted to its care through
"Eligible Foreign Custodian," as those terms are defined by Rule
17f-5 under the Investment Company Act of 1940 (the "Act"), or such
other entity as permitted by the Securities and Exchange Commission
(the "SEC") (such Eligible Foreign Custodians, collectively,
"Foreign Custodial Agents") provided, if required by the SEC, that
the Board has given its prior approval to the use of, and
Custodian's contract with, each Foreign Custodial Agent by
resolution, and a certified copy of such resolution has been
provided to the Custodian. To the extent the provisions of this
Agreement are consistent with the requirements of the Act, rules,
orders or no-action letters of the SEC, they shall apply to all
such foreign custodianships. To the extent such provisions are
inconsistent with or additional requirements are established by the
Act or such rules, orders or no-action letters, the requirements of
the Act or such rules, orders or no-action letters 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.
All subcustodians of the Custodian (such subcustodians,
collectively, the "Subcustodians"), including all Foreign Custodial
Agents, shall be subject to the instructions of the Custodian and
not to those of the Corporation and shall act solely as agent of
the Custodian.
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 and cause any Subcustodians
to open and maintain such account or accounts, subject only to
checks, drafts or directives by the Custodian or such Subcustodian
pursuant to the terms of this Agreement. The Custodian or such
Subcustodian shall hold in such account or accounts, subject to the
provisions hereof, all cash received by it from or for the account
<PAGE>
PAGE 3
of the Corporation. The Custodian or such Subcustodian shall make
payments of cash to or for the account of the Corporation from such
cash only:
(a) for the purchase of securities for the portfolio of the
Corporation upon the receipt of such securities by the
Custodian or such Subcustodian;
(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; or
(h) upon the termination of this Agreement.
Before making any such payment for the purposes permitted under the
terms of items (a), (b), (c), (d), (e), (f) or (g) of paragraph (1)
of this section, the Custodian shall receive and may rely upon a
custodian order directing such payment and stating that the payment
is for such a purpose permitted under these items (a), (b), (c),
(d), (e), (f) or (g) and that in respect to item (g), a copy of a
resolution of the Board of Directors or of the Executive Committee
of the Board of Directors of the Corporation signed by an officer
of the Corporation and certified by its Secretary or an Assistant
Secretary, specifying the amount of such payment, setting forth the
purpose to be a proper corporate purpose, and naming the person or
persons to whom such payment is made. Notwithstanding the above,
for the purposes permitted under items (a) or (f) of paragraph (1)
of this section, the Custodian may rely upon a facsimile order.
(2) The Custodian is hereby appointed the attorney-in-fact of the
Corporation to endorse and collect all checks, drafts or other
orders for the payment of money received by the Custodian for the
account of the Corporation and drawn on or to the order of the
Corporation and to deposit same to the account of the Corporation
pursuant to this Agreement.<PAGE>
PAGE 4
(3) Subject to the prior authorization provisions of Section 3 of
this Agreement, the Corporation authorizes the Custodian to
establish and maintain in each country or other jurisdiction in
which the principal trading market for any Foreign Securities is
located, or in which any Foreign Securities are to be presented for
payment, an account or accounts which may include nostro accounts
with Custodian branches and omnibus accounts of Custodian at
Foreign Custodial Agents for receipt of cash in such currencies as
directed by custodian order. For purposes of this Agreement, cash
so held in any such account shall be evidenced by separate book
entries maintained by Custodian and shall be deemed to be cash held
by Custodian. Cash received or credited by Custodian or any
Custodian branch or any Foreign Custodial Agent in a currency other
than United States dollars shall be maintained in such currency and
shall not be converted or remitted except in accordance with the
custodian order, except as permitted by Section 7.
Section 5. Receipt of Securities
Except as permitted by the second paragraph of this section, the
Custodian shall, and shall cause any Subcustodians to, hold in a
separate account or accounts, and physically segregated at all
times from those of any other persons, firms or corporations,
pursuant to the provisions hereof, all securities and cash received
for the account of the Corporation. The Custodian shall, and shall
cause any Subcustodians to, 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 such Subcustodian, or in bearer form,
as appropriate.
Subject to such rules, regulations or guidelines as the SEC 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 SEC under the Securities Exchange Act of 1934,
or such other person as may be permitted by the SEC, 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.
<PAGE>
PAGE 5
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 any Subcustodian 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
merger, consolidation, reorganization, recapitalization or
readjustment, or otherwise;
(e) for the purpose of exchanging interim receipts or temporary
certificates for permanent certificates;
(f) upon conversion of such securities pursuant to their terms
into other securities;
(g) upon exercise of subscription, purchase or other similar
rights represented by such securities;
(h) 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, a
Subcustodian, 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 this section (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 <PAGE>
PAGE 6
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 a
Subcustodian to:
(a) present for payment all coupons and other income items held by
the Custodian or such Subcustodian 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 such
Subcustodian 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 other than Foreign
Securities;
(d) collect and hold for the account of the Corporation all stock
dividends, rights and similar securities issued with respect
to any securities;
(e) ascertain all interest and cash dividends to be paid to
security holders with respect to any securities other than
Foreign Securities;
(f) collect and hold all interest and cash dividends for the
account of the Corporation;
(g) present for exchange securities converted pursuant to their
terms into other securities;
(h) exchange interim receipts or temporary securities for
definitive securities;
(i) execute in the name of the Corporation such ownership and
other certificates as may be required to obtain payments in
respect thereto, provided that the Corporation shall have
furnished to the Custodian or such Subcustodian any
information necessary in connection with such certificates;
and
(j) convert interest and dividends received with respect to
Foreign Securities into United States dollars whenever it is
practicable to do so through customary banking channels,
including the Custodian's own banking facilities.
<PAGE>
PAGE 7
Section 8. Settlement Procedures
Settlement procedures for transactions in Foreign Securities,
including receipts and payments of cash held in any nostro account
or omnibus account, shall be carried out in accordance with
instructions in the operational manual provided by the Custodian
(the "Operational Manual"). It is understood that such settlement
procedures may vary, as provided in the Operational Manual, from
securities market to securities market, to reflect particular
settlement practices in such markets.
With respect to any transaction involving Foreign Securities, the
Custodian or any Subcustodian in its discretion may cause the
Corporation to be credited on the contractual settlement date with
proceeds of any sale or exchange of Foreign Securities and to be
debited on the contractual settlement date for the cost of Foreign
Securities purchased or acquired. The Custodian may reverse any
such credit or debit if the transaction with respect to which such
credit or debit was made fails to settle within a reasonable
period, determined by the Custodian in its discretion, after the
contractual settlement date except that if any Foreign Securities
delivered pursuant to this section are returned by the recipient
thereof, the Custodian may cause any such credits and debits to be
reversed at any time. With respect to any transactions as to which
the Custodian does not determine so to credit or debit the
Corporation, the proceeds from the sale or exchange of Foreign
Securities will be credited and the cost of such Foreign Securities
purchased or acquired will be debited on the date such proceeds or
Foreign Securities are received by the Custodian.
Notwithstanding the preceding paragraph, settlement, payment and
delivery for Foreign Securities may be effected in accordance with
the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market
in which the transaction occurs, including, without limitation,
delivering Foreign Securities to the purchaser thereof or to a
dealer therefor against a receipt with the exception of receiving
later payment for such Foreign Securities from such purchaser or
dealer.
Section 9. Records
The Custodian hereby agrees that it shall create, maintain, and
retain all records relating to its activities and obligations under
this Agreement in such manner as will meet their obligations under
this Agreement and the obligations of the Corporation under the
Act, particularly Section 31 thereof and Rules 31a-1 and 31a-2
thereunder and Section 17(f) thereof and the rules thereunder, and
applicable federal, state and foreign tax laws and other laws or
administrative rules or procedures, in each case as currently in
effect, which may be applicable to the Corporation. All records so
maintained in connection with the performance of its duties under
this Agreement shall remain the property of the Corporation and, in
<PAGE>
PAGE 8
the event of termination of this Agreement, shall be delivered in
accordance with the provisions of this Agreement.
(a) With respect to securities and cash held by the Custodian's
branches, such securities and cash may be placed in an omnibus
account for the customers of the Custodian, and the Custodian
shall maintain separate book entry records for each such
omnibus account.
(b) With respect to securities and cash deposited by the Custodian
with a Foreign Custodial Agent, the Custodian shall indemnify
on its books as belonging to the Corporation the securities
and cash shown on the Custodian's account on the books of such
Foreign Custodial Agent.
(c) With respect to securities and cash deposited with a
securities depository or clearing agency, incorporated or
organized under the laws of a country other than the United
States, which operates the central system for handling of
securities or equivalent book-entries in that country or which
operates a transnational system for the central handling or
securities or equivalent book-entries (on "Eligible Foreign
Securities Depository"), the Custodian shall cause the
securities and cash shown on the account on the books of the
Eligible Foreign Securities Depository to be identified as
belonging to the Custodian as agent for the Corporation.
The Custodian hereby agrees that the books and records of the
Custodian (including any Custodian branch) pertaining to its
actions under this Agreement shall be open to the physical, on-
premises inspection and audit by the independent accountant (the
"Accountant") employed by, or other representatives of, the
Corporation, and, upon the request of the Accountant, confirmation
of the contents of those records shall be provided by the
Custodian. The Custodian shall use its best efforts to cause any
Foreign Custodial Agent to afford access to the Accountant to the
books and records of such Foreign Custodial Agent with respect to
securities and cash held by such Foreign Custodial Agent for the
Corporation. the Custodian also agrees to furnish the Accountant
with such reports of the Custodian's (including any Custodian
branches') auditors as they relate to the services provided under
this Agreement and as are necessary for the Accountant to conduct
its examination of the books and records pertaining to affairs of
the Corporation, and the Custodian shall use its best efforts to
obtain and furnish similar reports of any Foreign Custodial Agent
holding securities and cash for the Corporation.
Section 10. Registration of Securities
Securities which are ordinarily held in registered form may be
registered in the name of the Custodian's nominee or, as to any
securities in the physical possession of an entity other than the
Custodian, in the name of such entity's nominee. The Corporation <PAGE>
PAGE 9
agrees to hold any such nominee harmless from any liability as a
holder of record of such securities. The Custodian may without
notice to the Corporation cause any such securities to cease to be
registered in the name of any such nominee and to be registered in
the name of the Corporation. In the event that any security
registered in the name of the Custodian's nominee or held by any
Subcustodians and registered in the name of such Subcustodian's
nominee is called for partial redemption by the issuer of such
security, the Custodian may allot, or cause to be allotted, the
called portion to the respective beneficial holders of such class
of security in any manner the Custodian deems to be fair and
equitable.
Section 11. Transfer Taxes
The Corporation shall pay or reimburse the Custodian and any
Subcustodian for any transfer taxes payable upon transfers of
securities made hereunder, including transfers resulting from the
termination of this Agreement. The Custodian shall, and shall use
its best efforts to cause any Subcustodian to, 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 12. Voting and Other Action
Neither the Custodian or any Subcustodian nor any nominee of the
Custodian or such Subcustodian shall vote any of the securities
held hereunder by or for the account of the Corporation. The
Custodian shall, and shall use its best efforts to cause any
Subcustodian to, promptly deliver to the Corporation all notices,
proxies and proxy soliciting materials with relation to such
securities, such proxies to be executed by the registered holder of
such securities (if registered otherwise than in the name of the
Corporation), but without indicating the manner in which such
proxies are to be voted.
The Custodian shall, and shall use its best efforts to cause any
Subcustodian to, 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 or such Subcustodian from
issuers of the securities being held for the Corporation. With
respect to tender or exchange offers, the Custodian shall, and
shall use its best efforts to cause any Subcustodian to, transmit
promptly to the Corporation all written information received by the
Custodian or such Subcustodian from issuers of the securities whose
tender or exchange is sought and from the party (or his agents)
making the tender or exchange offer.
<PAGE>
PAGE 10
Section 13. 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 14. Security Interest, Liens and Transfers of Beneficial
Ownership
The securities and cash held by the Custodian hereunder shall not
be subject to any right, change, security interest, lien or claim
of any kind in favor of the Custodian or its creditors, except a
claim of payment for their safe custody or administration, and
beneficial ownership of such securities and cash shall be freely
transferable without the payment of money or value other than for
safe custody or administration. Any agreement the Custodian shall
enter into with any Subcustodian, including any Foreign Custodial
Agent, shall contain a provision which is substantially identical
to the foregoing.
In the event that there shall be asserted any attachment or lien on
or against any securities or cash held in any omnibus account or
nostro account referred to in this Agreement which results from any
claim against the Custodian (including any branch) or any such
account, which is not directly related to transactions in
securities or cash for the Corporation, the Custodian will use its
best efforts promptly to discharge such attachment or lien. If the
Custodian shall not have discharged such attachment or lien within
five business days, it shall notify the Corporation of the
existence of the attachment or lien. If the attachment or lien is
not discharged on the date required for delivery or payment with
respect to any securities or cash in accordance with the provisions
of the Operation Manual:<PAGE>
PAGE 11
(a) in the case of such securities, at the option of the
Corporation, the Custodian shall either immediately transfer
to the Corporation a like amount of such securities (provided
the same shall be reasonably available) or immediately
transfer an amount in United States dollars equal to the
market value of such securities, valued in accordance with
such procedures as may be mutually agreed to by the parties
thereto;
(b) in the case of cash, the Custodian shall immediately transfer
to the Corporation an equal amount of cash in United States
dollars.
Section 15. Compensation
For its services hereunder the Custodian shall be paid such
compensation and out-of-pocket or incidental expenses at such times
as may from time to time be agreed on in writing by the parties
hereto in a Custodian Fee Agreement.
Section 16. Standard of Care
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 the
Custodian, any Subcustodian, or any nominee thereof from all taxes,
charges, expenses, assessments, claims and liabilities (including
counsel fees) incurred or assessed against any such entity in
connection with the performance of this Agreement, except such as
may arise from such entity's own negligent action, negligent
failure to act or willful misconduct. The 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 the Custodian
resulting from orders or instructions of the Corporation, or in the
event that the Custodian or any nominee thereof 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 such entity'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 <PAGE>
PAGE 12
failure to enforce effectively such rights as it may have against
any securities depository or from use of a Subcustodian, unless
such loss or damage arises by reason of any negligence, mis-
feasance, or willful misconduct of officers or employees of the
Custodian, or from its failure to enforce effectively such rights
as it may have against such Subcustodian. Anything in the
foregoing to the contrary notwithstanding, the Custodian shall
exercise, in the performance of its obligations undertaken or
reasonably assumed with respect to this Agreement, including the
recommendation to the Board of Foreign Custodial Agents, reasonable
care, for which the Custodian shall be responsible to the same
extent as if it were performing such duties directly and holding
such securities and cash in Minnesota, United States of America.
The Custodian shall be indemnified and held harmless by the
Corporation from and against any loss or liability for any action
taken or omitted to be taken hereunder in good faith upon custodian
order and may rely on the genuineness of all such orders and
documents as it in good faith believes to have been validly
executed. The Custodian shall be responsible for the securities
and cash held by or deposited with any Subcustodian to the same
extent as if such securities and cash were directly held by or
deposited with the Custodian. The Custodian hereby agrees that it
shall indemnify and hold the Corporation harmless from and against
any loss which shall occur as a result of the failure of a foreign
Custodial Agent holding the securities and cash to exercise
reasonable care with respect to the safekeeping of such securities
and cash to the extent that the Custodian would be required to
indemnify and hold the Corporation harmless if the Custodian were
itself holding such securities and cash in Minnesota. It is also
understood that the Custodian shall not have liability for loss
except by reason of the Custodian's negligence, fraud or willful
misconduct, or by reason of negligence, fraud or willful misconduct
of any Subcustodian holding such securities or cash for the
Corporation.
The Custodian warrants that the established procedures to be
followed by any Subcustodian, in the opinion of the Custodian after
due inquiry, afford protection for such securities and cash at
least equal to that afforded by the Custodian's established
procedures with respect to similar securities and cash held by the
Custodian (including its securities depositories) in Minnesota.
However, the Custodian shall have no liability for any loss or
liability occasioned by delay in the actual receipt by it or any
Subcustodian of notice of any payment, redemption, or other
transaction regarding securities unless such delay is a result of
its own negligence, fraud, or willful misconduct.
The Custodian shall not be responsible for any loss of the
Corporation, or to take any action with respect to any attachment
or lien on any omnibus account or nostro account, except as
provided in Section 14 of this Agreement, in such loss, attachment
or lien arises by reason of any cause or circumstances beyond the
control of the Custodian, including acts of civil or military <PAGE>
PAGE 13
authority, expropriation, national emergency, acts of God,
insurrection, war, riots, or failure of transportation,
communication or power supply, or the failure of any person, firm
or corporation (other than the Custodian or any Subcustodian acting
on behalf of the Custodian) to perform any obligation if such
failure results in any such loss.
Section 17. Insurance
The Custodian represents and warrants that it presently maintains
and shall maintain for the duration of this Agreement a bankers'
blanket bond (the "Bond") which provides standard fidelity and non-
negligent loss coverage with respect to securities and cash which
may be held by the Custodian and securities and cash which may be
held by any Subcustodian which may be utilized by the Custodian
pursuant to this Agreement. The Custodian agrees that, if at any
time the Custodian for any reason discontinues such coverage, it
shall immediately notify the Corporation in writing. The Custodian
represents that only the named insured on the Bond, which includes
the Custodian but not any of its customers, is directly protected
against loss. The Custodian represents that while it might resist
a claim of one of its customers to recover for a loss not covered
by the Bond, as a practical matter, where a claim is brought and a
loss is possibly covered by the Bond, the Custodian would give
notice of the claim to its insurer, and the insurer would normally
determine whether to defend the claim against the Custodian or to
pay the claim on behalf of the Custodian.
The Custodian also represents that it does not intend to obtain any
insurance for the benefit of the Corporation which protects against
the imposition of the proceeds of sale of any securities or against
confiscation, expropriation or nationalization of any securities or
the assets of the issuer of such securities by a government or any
foreign country in which the issuer of such securities is organized
or in which securities are held for safekeeping either by the
Custodian or any Subcustodian in such country. The Custodian
represents that it has discussed the availability of expropriation
insurance with the Corporation. The Custodian also represents that
it has advised the Corporation as to its understanding of the
position of the Staff of the SEC that any investment company
investing in securities of foreign issuers has the responsibility
for reviewing the possibility of the imposition of exchange control
restrictions which would affect the liquidity of such investment
company's assets and the possibility of exposure to political risk,
including the appropriateness of insuring against such risk. The
Custodian represents that the Corporation has acknowledged that it
has the responsibility to review the possibility of such risks and
what, if any, action should be taken.
Section 18. 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 <PAGE>
PAGE 14
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,
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 hereinbefore 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 19. 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 <PAGE>
PAGE 15
provisions hereof being intended to be and being for the sole and
exclusive benefit of the parties hereto and their respective
successors and assigns.
This Agreement shall be governed by the laws of the State of
Minnesota.
Attest: IDS SELECTIVE FUND, INC.
______________________________ By _______________________________
William C. Herber Leslie L. Ogg
Secretary Vice President
FIRST NATIONAL BANK OF MINNEAPOLIS
By ________________________________
By ________________________________
<PAGE>
PAGE 1
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.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
January , 1996
[ARTICLE] 6
[SERIES]
[NUMBER] 1
[NAME] IDS SELECTIVE FUND CLASS A
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] NOV-30-1995
[PERIOD-END] NOV-30-1995
[INVESTMENTS-AT-COST] 1577445592
[INVESTMENTS-AT-VALUE] 1704527689
[RECEIVABLES] 25470218
[ASSETS-OTHER] 101344419
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 1831342326
[PAYABLE-FOR-SECURITIES] 9972000
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 117524285
[TOTAL-LIABILITIES] 127496285
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 1566388703
[SHARES-COMMON-STOCK] 156460478
[SHARES-COMMON-PRIOR] 163598056
[ACCUMULATED-NII-CURRENT] 2530909
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 7530072
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 127396357
[NET-ASSETS] 1703846041
[DIVIDEND-INCOME] 186975
[INTEREST-INCOME] 112694319
[OTHER-INCOME] 0
[EXPENSES-NET] (12966820)
[NET-INVESTMENT-INCOME] 99914474
[REALIZED-GAINS-CURRENT] 7644942
[APPREC-INCREASE-CURRENT] 173013840
[NET-CHANGE-FROM-OPS] 280573256
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (91687959)
[DISTRIBUTIONS-OF-GAINS] (20000191)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 23080473
[NUMBER-OF-SHARES-REDEEMED] (39632200)
[SHARES-REINVESTED] 9414149
[NET-CHANGE-IN-ASSETS] 301724656
[ACCUMULATED-NII-PRIOR] 102344658
[ACCUMULATED-GAINS-PRIOR] 21139491
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 7840014
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 12966820
[AVERAGE-NET-ASSETS] 1409179186
[PER-SHARE-NAV-BEGIN] 8.57
[PER-SHARE-NII] .59
[PER-SHARE-GAIN-APPREC] 1.08
[PER-SHARE-DIVIDEND] (.58)
[PER-SHARE-DISTRIBUTIONS] (.13)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 9.53
[EXPENSE-RATIO] .85
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[SERIES]
[NUMBER] 2
[NAME] IDS SELECTIVE FUND CLASS B
<TABLE>
<S> <C>
[PERIOD-TYPE] OTHER
[FISCAL-YEAR-END] NOV-30-1995
[PERIOD-START] MAR-20-1995
[PERIOD-END] NOV-30-1995
[INVESTMENTS-AT-COST] 1577445592
[INVESTMENTS-AT-VALUE] 1704527689
[RECEIVABLES] 25470218
[ASSETS-OTHER] 101344419
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 1831342326
[PAYABLE-FOR-SECURITIES] 9972000
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 117524285
[TOTAL-LIABILITIES] 127496285
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 1566388703
[SHARES-COMMON-STOCK] 7530528
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 2530909
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 7530072
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 127396357
[NET-ASSETS] 1703846041
[DIVIDEND-INCOME] 186975
[INTEREST-INCOME] 112694319
[OTHER-INCOME] 0
[EXPENSES-NET] (12966820)
[NET-INVESTMENT-INCOME] 99914474
[REALIZED-GAINS-CURRENT] 7644942
[APPREC-INCREASE-CURRENT] 173013840
[NET-CHANGE-FROM-OPS] 280573256
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (1325265)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 8072716
[NUMBER-OF-SHARES-REDEEMED] (671879)
[SHARES-REINVESTED] 129691
[NET-CHANGE-IN-ASSETS] 301724656
[ACCUMULATED-NII-PRIOR] 102344658
[ACCUMULATED-GAINS-PRIOR] 21139491
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 7840014
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 12966820
[AVERAGE-NET-ASSETS] 33643928
[PER-SHARE-NAV-BEGIN] 8.78
[PER-SHARE-NII] .40
[PER-SHARE-GAIN-APPREC] .75
[PER-SHARE-DIVIDEND] (.40)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 9.53
[EXPENSE-RATIO] 1.67
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[SERIES]
[NUMBER] 3
[NAME] IDS SELECTIVE FUND CLASS Y
<TABLE>
<S> <C>
[PERIOD-TYPE] OTHER
[FISCAL-YEAR-END] NOV-30-1995
[PERIOD-START] MAR-20-1995
[PERIOD-END] NOV-30-1995
[INVESTMENTS-AT-COST] 1577445592
[INVESTMENTS-AT-VALUE] 1704527689
[RECEIVABLES] 25470218
[ASSETS-OTHER] 101344419
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 1831342326
[PAYABLE-FOR-SECURITIES] 9972000
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 117524285
[TOTAL-LIABILITIES] 127496285
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 1566388703
[SHARES-COMMON-STOCK] 14864594
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 2530909
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 7530072
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 127396357
[NET-ASSETS] 1703846041
[DIVIDEND-INCOME] 186975
[INTEREST-INCOME] 112694319
[OTHER-INCOME] 0
[EXPENSES-NET] (12966820)
[NET-INVESTMENT-INCOME] 99914474
[REALIZED-GAINS-CURRENT] 7644942
[APPREC-INCREASE-CURRENT] 173013840
[NET-CHANGE-FROM-OPS] 280573256
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (5767587)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 16445854
[NUMBER-OF-SHARES-REDEEMED] (2199374)
[SHARES-REINVESTED] 618114
[NET-CHANGE-IN-ASSETS] 301724656
[ACCUMULATED-NII-PRIOR] 102344658
[ACCUMULATED-GAINS-PRIOR] 21139491
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 7840014
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 12966820
[AVERAGE-NET-ASSETS] 123662756
[PER-SHARE-NAV-BEGIN] 8.78
[PER-SHARE-NII] .46
[PER-SHARE-GAIN-APPREC] .75
[PER-SHARE-DIVIDEND] (.46)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 9.53
[EXPENSE-RATIO] .73
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
PAGE 1
OFFICERS POWER OF ATTORNEY
City of Minneapolis
State of Minnesota
Each of the undersigned, as officers of the below listed
open-end, diversified investment companies that previously have
filed registration statements and amendments thereto pursuant to
the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 with the Securities and Exchange Commission:
1933 Act 1940 Act
Reg. Number Reg. Number
IDS Bond Fund, Inc. 2-51586 811-2503
IDS California Tax-Exempt Trust 33-5103 811-4646
IDS Discovery Fund, Inc. 2-72174 811-3178
IDS Equity Select Fund, Inc. 2-13188 811-772
IDS Extra Income Fund, Inc. 2-86637 811-3848
IDS Federal Income Fund, Inc. 2-96512 811-4260
IDS Global Series, Inc. 33-25824 811-5696
IDS Growth Fund, Inc. 2-38355 811-2111
IDS High Yield Tax-Exempt Fund, Inc. 2-63552 811-2901
IDS International Fund, Inc. 2-92309 811-4075
IDS Investment Series, Inc. 2-11328 811-54
IDS Life Investment Series, Inc. 2-73115 811-3218
IDS Life Managed Fund, Inc. 2-96367 811-4252
IDS Life Moneyshare Fund, Inc. 2-72584 811-3190
IDS Life Special Income Fund, Inc. 2-73113 811-3219
IDS Managed Retirement Fund, Inc. 2-93801 811-4133
IDS Market Advantage Series, Inc. 33-30770 811-5897
IDS Money Market Series, Inc. 2-54516 811-2591
IDS New Dimensions Fund, Inc. 2-28529 811-1629
IDS Precious Metals Fund, Inc. 2-93745 811-4132
IDS Progressive Fund, Inc. 2-30059 811-1714
IDS Selective Fund, Inc. 2-10700 811-499
IDS Special Tax-Exempt Series Trust 33-5102 811-4647
IDS Stock Fund, Inc. 2-11358 811-498
IDS Strategy Fund, Inc. 2-89288 811-3956
IDS Tax-Exempt Bond Fund, Inc. 2-57328 811-2686
IDS Tax-Free Money Fund, Inc. 2-66868 811-3003
IDS Utilities Income Fund, Inc. 33-20872 811-5522
hereby constitutes and appoints William R. Pearce and Leslie L. Ogg
or either one of them, as her or his attorney-in-fact and agent, to
sign for her or him in her or his name, place and stead, as an
officer, any and all further amendments to said registration
statements filed pursuant to said Acts and any rules and
regulations thereunder, and to file such amendments with all
exhibits thereto and other documents in connection therewith with <PAGE>
PAGE 2
the Securities and Exchange Commission, granting to either of them
the full power and authority to do and perform each and every act
required and necessary to be done in connection therewith.
Dated the 1st day of November, 1995.
/s/ William R. Pearce
William R. Pearce
/s/ Melinda S. Urion
Melinda S. Urion
