SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM S-1
POST-EFFECTIVE AMENDMENT NUMBER 20 TO
REGISTRATION STATEMENT NO. 2-95577
IDS FLEXIBLE SAVINGS CERTIFICATE
UNDER
THE SECURITIES ACT OF 1933
IDS CERTIFICATE COMPANY
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(Exact name of registrant as specified in charter)
DELAWARE
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(State or other jurisdiction of incorporation or organization)
6725
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(Primary Standard Industrial Classification Code Number)
41-6009975
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(I.R.S. Employer Identification No.)
IDS Tower 10, Minneapolis, MN 55440-0010, (612) 671-3131
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(Address, including zip code, and telephone
number, including area code, of
registrant's principal executive
offices)
Bruce A. Kohn, IDS Tower 10, Minneapolis, MN 55440-0010 (612) 671-2221
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(Name, address, including zip code, and telephone number, including area code,
of agent for service)
<PAGE>
Explanatory Note
The first prospectus contained in Part I of the Registration Statement will be
used, with minor variations, in connection with the following Registration
Statements No. 2-68296, No. 2-76193, No. 33-3562, No. 333-9611 and No.33-22503.
In each case, the first several pages of the prospectuses vary to describe the
unique attributes of each certificate. The balance of the prospectus is almost
identical for all certificates.
<PAGE>
IDS Flexible Savings Certificate
Prospectus
April 28, 1998
Earn competitive rates guaranteed by IDS Certificate Company for the term you
choose.
IDS Flexible Savings Certificates are issued by IDS Certificate Company (IDSC).
You may purchase this certificate by selecting a term of six, 12, 18, 24, 30 or
36 months and an initial investment of at least $1,000 but not more than $1
million (unless you receive prior authorization from IDSC to invest more). Your
principal and interest are guaranteed by IDSC. IDSC guarantees a fixed rate of
interest depending upon the term you select. You may make additional investments
during the term subject to certain limitations. You may invest in successive
terms up to a total of 20 years from the issue date of the certificate. Your
interest rate will be determined as described in "About the certificate."
As is the case with other investment companies, 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.
This certificate is backed by IDSC's investments on deposit rather than
guaranteed or insured by the government or someone else. See "Invested and
guaranteed by IDSC" and "Regulated by government" under "How your money is used
and protected."
IDS Certificate Company is not a bank or financial institution, and the
securities it offers are not deposits or obligations of, backed or guaranteed or
endorsed by any bank or financial institution nor are they insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board or any other
agency.
This prospectus describes terms and conditions of your IDS Flexible Savings
Certificate. It contains facts that can help you decide if the certificate is
the right investment for you. Read the prospectus before you invest and keep it
for future reference. No one has the authority to change the terms and
conditions of the IDS Flexible Savings Certificate as described in the
prospectus, or to bind IDSC by any statement not in it.
IDS Certificate Company
IDS Tower 10
Minneapolis, MN 55440-0010
800-437-3133 (toll free) or (612) 671-3800
(Minneapolis/St. Paul area)
TTY numbers:
800-846-4293 (toll free) or (612) 671-1630
(Minneapolis/St. Paul area)
<PAGE>
An American Express company
Web site address: http://www.americanexpress.com/advisors
Where to get information about IDSC
IDS Certificate Company is subject to the reporting requirements of the
Securities Exchange Act of 1934. Reports and other information on IDSC are filed
with the Securities and Exchange Commission (SEC) and are available on the SEC
Internet web site (http://www.sec.gov). Copies can be obtained from the Public
Reference Section of the SEC, 450 5th St., N.W., Room 1024, Washington, D.C.
20549, at prescribed rates. Or you can inspect and copy information in person at
the SEC's Public Reference Section and at the following regional offices:
Northeast Regional Office
7 World Trade Center
Suite 1300
New York, NY 10048
Midwest Regional Office
500 West Madison St.
Suite 1400
Chicago, IL 60661
Pacific Regional Office
5670 Wilshire Blvd.
11th Floor
Los Angeles, CA 90036
Initial interest rates
IDSC guarantees a fixed rate of interest for each term. For the initial term,
the rate will be within a specified range of certain average certificates of
deposit interest rates, as published in the most recent BANK RATE MONITOR Top 25
Market AverageTM, North Palm Beach, FL 33408, as explained under "About the
certificate."
<PAGE>
Here are the interest rates in effect on the date of this prospectus, April 28,
1998:
<TABLE>
<CAPTION>
<S> <C> <C>
Simple Effective
interest annualized
Term rate* yield**
- ------------------------------------ ----------------------------------- -----------------------------------
6-month
- ------------------------------------ ----------------------------------- -----------------------------------
12-month
- ------------------------------------ ----------------------------------- -----------------------------------
18-month
- ------------------------------------ ----------------------------------- -----------------------------------
24-month
- ------------------------------------ ----------------------------------- -----------------------------------
30-month
- ------------------------------------ ----------------------------------- -----------------------------------
- ------------------------------------ ----------------------------------- -----------------------------------
36-month
- ------------------------------------ ----------------------------------- -----------------------------------
</TABLE>
* These are the rates for investments under $100,000. Rates may depend on the
factors described in "Rates for new purchases" and "Promotions and pricing
flexibility" under "About the certificate."
** Assuming monthly compounding.
These rates may or may not be in effect when you apply to purchase your
certificate. Rates for future terms are set at the discretion of IDSC and may
also differ from the rates shown here.
We reserve the right to issue other securities with different terms.
<PAGE>
Contents
Table of contents
About the certificate p
Investment amounts and terms p
Face amount and principal p
Value at maturity p
Receiving cash during the term p
Interest p
Rates for new purchases p
Promotions and pricing flexibility p
Additional investments p
How to invest and withdraw funds p
Buying your certificate p
Two ways to make investments p
Full and partial withdrawals p
When your certificate term ends p
Transfers to other accounts p
Two ways to request a withdrawal or transfer p
Three ways to receive payment when you withdraw funds p
Retirement plans: special policies p
Withdrawal at death p
Transfer of ownership p
For more information p
Taxes on your earnings p
Retirement accounts p
Gifts to minors p
How to determine the correct TIN p
Foreign investors p
Trusts p
How your money is used and protected p
Invested and guaranteed by IDSC p
Regulated by government p
Backed by our investments p
Investment policies p
Certain investment considerations p
<PAGE>
How your money is managed p
Relationship between IDSC and American
Express Financial Corporation p
About American Express Service Corporation p
Capital structure and certificates issued p
Investment management and services p
Distribution p
Transfer Agent p
Employment of other American Express affiliates p
Directors and officers p
Auditors p
IDS Certificates p
Appendix p
Annual financial information p
Summary of selected financial information p
Management's discussion and analysis of financial
condition and results of operations p
Report of independent auditors p
Financial statements p
Notes to financial statements p
<PAGE>
About the certificate
Investment amounts and terms
You may purchase the IDS Flexible Savings Certificate with a single payment of
at least $1,000 payable in U.S. currency. Unless you receive prior
authorization, your total amount paid in over the life of the certificate, less
withdrawals, cannot exceed $1 million.
After determining the amount you wish to invest, you select a term of six, 12,
18, 24, 30 or 36 months for which IDSC will guarantee an interest rate.
Generally, you will be able to select any of the terms offered. But if your
certificate is nearing its 20-year maturity, you will not be allowed to select a
term that would carry the certificate past its maturity date.
The certificate may be used as an investment for your Individual Retirement
Account (IRA), 401(k) plan account or other qualified retirement plan account.
If so used, the amount of your contribution (investment) will be subject to any
limitations of the plan and applicable federal law.
Face amount and principal
The face amount of the certificate is the amount of your initial investment, and
will remain the same over the life of the certificate. Any investment or
withdrawal within 15 days of the end of a term will be added on or deducted to
determine principal for the new term. A withdrawal at any other time is taken
first from interest credited to your investment during that term. The principal
is the amount that is reinvested at the beginning of each subsequent term, and
is calculated as follows:
Principal equals Face amount (initial investment)
plus At the end of a term, interest credited to your account during the term
minus Any interest paid to you in cash plus Any additional investments to your
certificate minus Any withdrawals, fees and applicable penalties.
Principal may change during a term as described in "Add-on feature" and "Full
and partial withdrawals."
<PAGE>
For example: Assume your initial investment (face amount) of $5,000 has earned
$75 of interest during the term. You have not taken any interest as cash, or
made any withdrawals. You have invested an additional $2,500 prior to the
beginning of the next term. Your principal for the next term will equal:
$5,000.00 Face amount (initial investment)
plus $75.00 Interest credited to your account
minus ($0.00) Interest paid to you in cash
plus $2,500.00 Additional investment to your certificate
minus ($0.00) Withdrawals and applicable penalties or fees
============
$7,575.00 Principal at the beginning of the next term.
Value at maturity
You may continue to invest for successive terms for up to a total of 20 years.
Your certificate matures at 20 years from its issue date. At maturity, you will
receive a distribution for the value of your certificate, which will be the
total of your purchase price, plus additional investments and any credited
interest not paid to you in cash, less any withdrawals and penalties. Some fees
may apply as described in "How to invest and withdraw funds."
Receiving cash during the term
If you need your money before your certificate term ends, you may withdraw part
or all of its value at any time, less any penalties that apply. Procedures for
withdrawing money, as well as conditions under which penalties apply, are
described in "How to invest and withdraw funds."
Interest
Your investments earn interest from the date they are credited to your account.
Interest is compounded and credited at the end of each certificate month (on the
monthly anniversary of the issue date).
IDSC declares and guarantees a fixed rate of interest for each term during the
life of your certificate. We calculate the amount of interest you earn each
certificate month by:
applying the interest rate then in effect to your balance each day;
adding these daily amounts to get a monthly total; and
subtracting interest accrued on any amount you withdraw during the
certificate month.
<PAGE>
Interest is calculated on a 30-day month and 360-day year basis.
Rates for new purchases
When your application is accepted and we have received your initial investment,
we will send you a confirmation of your purchase showing the rate that your
investment will earn. IDSC guarantees that when rates for new purchases take
effect, the rates will be within a range based on the average interest rates
then published in the BANK RATE MONITOR Top 25 Market AverageTM (the BRM
Average).
In the case of the six-, 12-, 24- and 30-month terms IDSC guarantees that, for
purchases of certificates for less than $100,000, your rate for your initial
term will be 10 basis points (.10%) below to 90 basis points (.90%) above such
rates for comparable length certificates of deposit (CDs). In the case of these
terms, for purchases of certificates for $100,000 or more, IDSC guarantees that
your rate for your initial term will be within a range of five-105 basis points
above such rates for comparable length certificates of deposit.
In the case of the 18-month term, because the BRM Average doesn't typically
publish rates for comparable length certificates of deposit, IDSC guarantees
that, for purchases of certificates for less than $100,000, the rate for your
initial term will be within a range of zero-100 basis points above the rates for
the 12-month certificates of deposit. In the case of the 18-month term, for
purchases of certificates of $100,000 or more, IDSC guarantees that your rate
for your initial term will be within a range of 15-115 basis points above the
rates for the 12-month certificates of deposit.
In the case of the 36-month term, because the BRM Average doesn't typically
publish rates for comparable length certificates of deposit, IDSC guarantees
that, for purchases of certificates for less than $100,000, the rate for your
initial term will be within zero-100 basis points above the rates for the
30-month certificate of deposit. In the case of the 36-month term, for purchases
of certificates of $100,000 or more, IDSC guarantees that your rate for your
initial term will be within 15-115 basis points above the rates for the 30-month
certificates of deposit. For example, if the rate most recently published in the
BRM Average with respect to the 30-month certificate of deposit is 4.80% our
rates in effect for that week for 36-month terms would be between 4.80% and
5.80% for purchases for less than $100,000.
However, IDSC guarantees that, for persons who have received a special
promotional coupon from IDSC for purchase of a Flexible Savings Certificate with
an initial term of six, 12, 24 or 30 months and have satisfied any requirement
stated in the coupon, when rates for new purchases take effect, the rate for the
initial term will be within a range from 100 basis points (1%) to 200 basis
points above the average interest rate published for comparable length CDs in
the BRM Average. Similarly, IDSC guarantees that, for persons who have received
a special promotional coupon from IDSC for purchase of a Flexible Savings
Certificate with an initial term of 18 or 36 months and have satisfied the
<PAGE>
conditions in the coupon, when rates for new purchases take effect, the rate for
an initial term of 18 or 36 months will be within a range from 100 basis points
(1%) to 200 basis points above the average interest rate published for 12-month
CDs or 30-month CDs, respectively, in the BRM Average. For example, the coupon
may require that you make a minimum investment and that you are not an existing
client of American Express Financial Corporation (AEFC), American Express
Financial Advisors Inc., or another subsidiary of AEFC. AEFC will select persons
to receive the coupon based on a business strategy to build relationships with
new clients in selected market segments who AEFC believes meet threshold
requirements for such factors as household income and home values. From time to
time coupons may be sent only to persons who both fit this strategy and live in
particular parts of the country or are affiliated with particular organizations
such as an automobile club.
From time to time, for your initial term, IDSC may offer certificates with
different terms than those described above. Such terms may be from seven, 11,
13, 19, 25, 31 or 37 months. For these terms, IDSC guarantees that, for
purchases of certificates for less than $100,000, your rate for your initial
term will be within a range of 50-150 basis points above the rates published in
the BRM Average for the certificates of deposit specified above that have the
maturity that is closest to the term of the IDS certificate in question. If two
different BRM Averages have the closest maturities, we will use the longest
maturity that is shorter than the term of the IDS certificate in question. For
purchases of certificates of $100,000 or more, the range for your initial term
will be 65-165 basis points above the same rate. For example, in the case of a
seven-month term, IDSC guarantees that, for purchases of certificates less than
$100,000, your rate for your initial term will be within a range of 50-150 basis
points above the rates for the six-month certificates of deposit, and for
purchases of certificates for $100,000 or more, your rate for your initial term
will be within a range of 65-165 basis points above the rates for the six-month
certificates of deposit. Purchase of a certificate in one of these special
offers may result in a later term of less than six months in order to permit
your certificate to mature 20 years from its issue date. IDSC may limit the
offering of these certificates to persons who have received a coupon as a
promotion, based on a business strategy to build relationships with new clients
in related market segments or persons who AEFC believes meet threshold
requirements for such factors as household income and home values or persons who
fit this strategy and live in particular areas of the country or are affiliated
with particular organizations. IDSC may also offer different rates or terms to
new clients, existing clients, or to individuals who have purchased other
products or used other services of American Express Company or its subsidiaries,
and may offer some terms only in selected distribution channels. We also may
offer different rates based on your amount invested, your geographic location
and whether the certificate is purchased for an IRA or for a qualified
retirement account.
The BANK RATE MONITOR is a weekly magazine published in North Palm Beach, FL
33408, by Advertising News Service Inc., an independent national news
organization that collects and disseminates information about bank products and
interest rates. Advertising News Service Inc. has no connection with IDSC, AEFC
or any of their affiliates.
<PAGE>
The BRM Average is an index of rates and annual effective yields offered on
various length certificates of deposit by large banks and thrifts in 25
metropolitan areas. The frequency of compounding varies among the banks and
thrifts. Certificates of deposit in the BRM Average are government insured
fixed-rate time deposits.
The BANK RATE MONITOR is available in your local library. To obtain information
on current BRM Average rates, call the Client Service Organization at the
telephone numbers listed on the back cover between 8 a.m. and 6 p.m. your local
time.
Rates for new purchases are reviewed and may change weekly. Normally, the rate
you receive will be the higher of:
the rate in effect for your chosen term on the date of your application; or
the rate in effect on the date your application is accepted by IDSC.
However, if your application bears a date more than seven days before its
receipt by IDSC, the rate you receive will be the higher of:
the rate in effect on the date your application is accepted by IDSC; or
the rate in effect seven days before receipt.
Except for specific promotions, IDSC guarantees an initial rate 25 basis points
above the rate offered to the general public on this IDS certificate if it is
purchased by using the CD transfer service offered by American Express Financial
Advisors Inc. to help you transfer money from a bank or thrift CD account into
IDSC investments. To be eligible for this rate, you must transfer at least
$10,000 from a CD account to IDSC to purchase one or more IDS Cash Reserve
Certificates and/or IDS Flexible Saving Certificates, and this rate will only
apply to those certificates.
Except for specific promotions, IDSC guarantees active or retired AEFC
employees, IDSC's directors, American Express financial advisors, their
immediate families and any U.S. employee of any affiliated company of IDSC an
initial rate 75 basis points above the rate offered to the general public,
reflecting the lower distribution costs associated with such sales.
Promotions and pricing flexibility
From time to time, IDSC may sponsor or participate in promotions involving one
or more of the certificates and their respective terms. For example, we may
offer different rates to new clients, to existing clients, or to individuals who
have purchased other products or used other services of American Express Company
or its subsidiaries.
<PAGE>
We also may offer different rates based on your amount invested, geographic
location and whether the certificate is purchased for an IRA or a qualified
retirement account.
These promotions will generally be for a specified period of time. If we offer a
promotion, the rates for new purchases will be within the range of rates
described under "Rates for new purchases."
Rates for future terms: Interest on your certificate for future terms may be
greater or less than the rates you receive during your first term. In setting
future interest rates, a primary consideration will be the prevailing investment
climate, including certificate of deposit yields as reflected in the BRM
Average. Nevertheless, we have complete discretion as to what interest rate
shall be declared beyond the initial term. At least six days in advance of each
term, we will send you notice of the rate that your certificate will earn for
that term. If the BRM Average is no longer publicly available or feasible to
use, IDSC may use another, similar index as a guide for setting rates.
Performance: From February 1993 through February 1998, IDS Flexible Savings
Certificate one year yields were generally higher than average bank and thrift
one year certificate of deposit yields and Super NOW accounts, as measured by
the BRM Average (prior to Jan. 13, 1993, yields were measured by the BRM
National IndexTM, an average of CD yields in 10 cities).
Yields from February 1993 through February 1998
6% _________IDS Flexible Savings Certificate - 1 year
4% .........Certificate of Deposit - 1 year
2%
Two lines comparing the yields for one-year IDS Flexible
Savings Certificate against those of one-year certificates of
deposit with Flexible's yield generally above the CD's
`93 `94 `95 `96 `97 `98
The graph compares past yields and should not be considered a prediction of
future performance.
Additional investments
You may make investments within 15 calendar days after the end of a term (the
grace period). Investments added to your certificate during the grace period
will increase the principal balance for purposes of the 25% add-on feature
described below and the 10% withdrawal feature described under "Full and partial
withdrawals." Additional
<PAGE>
investments may be in any amount so long as your total investment, less
withdrawals, does not exceed $1 million (unless you receive prior authorization
from IDSC to invest more). You will earn interest on additional investments from
the date we accept them. IDSC will send a confirmation of additional
investments.
Add-on feature: You may also add to your certificate during the term. These
additional investments may not exceed 25% of the certificate's principal balance
at the end of the grace period. This principal includes the balance at the end
of the previous term, plus or minus any deposits or withdrawals during the grace
period.
Any add-on or withdrawal during the grace period will change the principal
amount used to determine the amount available for the 25% add-on feature.
For example, suppose your original balance is $9,000. During the grace period,
you add $1,000. At any time during the current term, you could add up to 25% of
principal ($9,000 + $1,000 = $10,000), or $2,500 to your certificate.
The interest rate for these additional investments is the rate then in effect
for your account. If your additional investment increases the principal of your
certificate so that your certificate's principal has exceeded a break point for
a higher interest rate, the certificate will earn this higher interest rate for
the remainder of the term, from the date the additional investment is accepted.
How to invest and withdraw funds
Buying your certificate
Your American Express financial advisor will help you fill out and submit an
application to open an account with us and purchase a certificate. We will
process the application at our corporate offices in Minneapolis. When your
application is accepted and we have received your initial investment, we will
send you a confirmation of your purchase, indicating your account number and
applicable rate of interest for your first term, as described under "Rates for
new purchases." See "Purchase policies" below.
Important: When opening an account, you must provide IDSC with your correct
Taxpayer Identification Number (Social Security or Employer Identification
Number). See "Taxes on your earnings."
Purchase policies:
Investments must be received and accepted in the Minneapolis headquarters on a
business day before 3 p.m. Central time to be included in your account that day.
Otherwise your purchase will be processed the next business day.
<PAGE>
You have 15 days from the date of purchase to cancel your investment
without penalty by either writing or calling the Client Service
Organization at the address or phone number on the back of this prospectus.
If you decide to cancel your certificate within this 15-day period, you
will not earn any interest.
If you purchase a certificate with a personal check or other
non-guaranteed funds, AEFC will wait one day for the process of converting
your check to federal funds (e.g., monies of member banks within the
Federal Reserve Bank) before your purchase will be accepted and you begin
earning interest.
IDSC has complete discretion to determine whether to accept an application
and sell a certificate.
A number of special policies apply to purchases, withdrawals and exchanges
within IRAs, 401(k) plans and other qualified retirement plans. See "Retirement
plans: special policies."
Two ways to make investments
1
By mail
Send your check along with your name and account number to:
Regular mail: Express mail:
American Express American Express
Financial Advisors Inc. Financial Advisors Inc.
Client Service Organization Client Service Organization
IDS Tower 10 733 Marquette Ave.
Minneapolis, MN 55440-0010 Minneapolis, MN 55440-0010
2
By wire
For investment into an established account, you may wire money to:
Norwest Bank Minneapolis
Routing No. 091000019
Minneapolis, MN
Attn: Domestic Wire Dept.
Give these instructions: Credit Account #00-30-015 for personal account # (your
account number) for (your name).
<PAGE>
If this information is not included, the order may be rejected and all money
received, less any costs IDSC incurs, will be returned promptly.
Minimum amount you may wire: $1,000.
Wire orders can be accepted only on days when your bank, AEFC, IDSC and
Norwest Bank Minneapolis are open for business.
Wire purchases are completed when wired payment is received and we accept
the purchase.
Bank wire purchases are not sent until the next business day.
Wire investments must be received and accepted in the Minneapolis
headquarters on a business day before 3 p.m. Central time to be credited
that day. Otherwise your purchase will be processed the next business day.
IDSC, AEFC and its other subsidiaries are not responsible for any delays
that occur in wiring funds, including delays in processing by the bank.
You must pay any fee the bank charges for wiring.
Full and partial withdrawals
You may withdraw your certificate for its full value or make a partial
withdrawal of $100 or more at any time. If you purchase this certificate for an
IRA, 401(k) or other retirement plan account, early withdrawals or cash payments
of interest taken prematurely may be subject to IRS penalty taxes.
If your withdrawal request is received in the Minneapolis headquarters on a
business day before 3 p.m. Central time, it will be processed that day and
payment will be sent the next business day. Otherwise, your request will be
processed one business day later.
Full and partial withdrawals of principal are subject to penalties,
described below.
Interest payments in cash may be sent to you at the end of each certificate
month, quarter, or on a semiannual or annual basis.
If a withdrawal reduces your account value to a point where we pay a lower
interest rate, you will earn the lower rate from the date of the
withdrawal.
<PAGE>
You may not otherwise make a partial withdrawal if it would reduce your
certificate balance to less than $1,000. If you request such a withdrawal,
we will contact you for revised instructions.
Scheduled partial withdrawals may be made monthly, quarterly, semiannually,
annually and at term end.
Withdrawals before the end of the certificate month will result in loss of
accrued interest on the amount withdrawn. You'll get the best result by timing a
withdrawal at the end of the certificate month.
Penalties for early withdrawal during a term: When you request a full or partial
withdrawal, we pay the amount you request:
first from interest credited during the current term;
then from the principal of your certificate.
Any additional investments or withdrawals during a term are added to or deducted
from the principal and are used in determining any withdrawal charges.
Withdrawal penalties: For withdrawals during the term of more than the interest
credited that term and over 10% of the certificate's principal, a 2% withdrawal
penalty will be deducted from the account's remaining balance.
For example, assume you invest $20,000 in a certificate and select a two-year
term. A little over a year later assume you have earned $1,600 in interest. The
following demonstrates how the withdrawal charge is deducted:
When you withdraw a specific amount of money, we would have to withdraw somewhat
more from your account to cover the withdrawal charge. For instance, suppose you
request a $5,000 check. The first $1,600 paid to you is interest earned that
term, the next $2,000 is 10% of principal, and not subject to the withdrawal
penalty, and the remaining $1,400 paid to you is principal over the 10% limit.
We would send you a check for $5,000 and deduct a withdrawal charge of $28.00
($1,400 x 2%) from the remaining balance of your certificate account. Your new
balance would be $16,572 ($21,600 - $5,028).
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Total investments $20,000.00
Interest credited $ 1,600.00
-----------
Total balance $21,600.00
Requested check $5,000.00
Credited interest withdrawn ($1,600.00)
10 percent of principal -- not subject to penalty ($2,000.00)
-----------
Remaining portion of requested withdrawal - subject to penalty $1,400.00
Withdrawal penalty percent 2.00%
Actual withdrawal penalty $ 28.00
Balance prior to withdrawal $21,600.00
Requested withdrawal check ($5,000.00)
Withdrawal penalty ($ 28.00)
-------------
Total balance after withdrawal $16,572.00
</TABLE>
Additionally, if you withdraw during a certificate month, you will not earn
interest for the month on the amount withdrawn.
Penalty exceptions: There is never a penalty for withdrawal of interest. In
addition, you may withdraw up to 10% of your principal during the term without a
withdrawal penalty. The principal available for the 10% no-penalty withdrawal
feature is the balance in the certificate at the beginning of the term plus or
minus any deposits or withdrawals made during the grace period.
The following example demonstrates how this feature works:
Suppose your certificate balance is $1,000. During the grace period you add
$500, bringing the principal to $1,500. At any time during the term you could
withdraw up to $150 of principal with no penalty.
Any additional investments or withdrawals following the grace period will not
change the principal amount used to determine the amount available for the 10%
no-penalty withdrawal feature.
The 2% penalty is waived upon death of the certificate owner. We will also waive
withdrawal penalties on withdrawals for IRA certificate accounts for your
required distributions. See "Retirement plans: special policies" below.
For more information on withdrawal charges, talk with your American Express
financial advisor or call the Client Service Organization at the number on the
back cover.
<PAGE>
When your certificate term ends
Shortly before the end of the term you have selected for your certificate, we
will send you a notice indicating the interest rate that will apply to the
certificate for the new term. When your certificate term ends we will
automatically renew your certificate for the standard term (six, 12, 24, 30 or
36 month) nearest in length to your initial term. If your initial term is
equidistant from two standard terms, we will automatically renew your
certificate to the term with the longest maturity that is shorter than your
initial term. If you wish to select a different term, you must notify us in
writing before the end of the grace period. You will not be allowed to select a
term that would carry the certificate past its maturity date.
The interest rates that will apply to your new term will be those in effect on
the day the new term begins. We will send you a confirmation showing the rate of
interest that will apply to the new term you have selected. This rate of
interest will not be changed during that term.
If you want to withdraw your certificate without a withdrawal charge, you must
notify us within 15 calendar days following the end of a term. However, you will
lose any interest accrued since the end of the term.
You may also add to your investment within the 15 calendar days following the
end of your term. See "Additional investments" under "About the certificate."
Other full and partial withdrawal policies:
If you request a partial or full withdrawal of a certificate recently
purchased or added to by a check or money order that is not guaranteed, we
will wait for your check to clear. Please expect a minimum of 10 days from
the date of your payment before IDSC mails a check to you. A check may be
mailed earlier if the bank provides evidence that your check has cleared.
If your certificate is pledged as collateral, any withdrawal will be
delayed until we get approval from the secured party.
Any payments to you may be delayed under applicable rules, regulations or
orders of the SEC.
Transfers to other accounts
You may transfer part or all of your certificate to any other IDS certificate or
into another new or existing American Express Financial Advisors Inc. account
that has the same ownership (subject to any terms and conditions that may
apply).
<PAGE>
Two ways to request a withdrawal or transfer
1
By phone
Call the Client Service Organization at the telephone numbers listed on the
back cover between 8 a.m. and 6 p.m. your local time.
Maximum phone request: $50,000.
Transfers into an American Express Financial Advisors Inc. account with the
same ownership.
A telephone withdrawal request will not be allowed within 30 days of a
phoned-in address change.
We will honor any telephone request believed to be authentic and will use
reasonable procedures to confirm that it is. This includes asking
identifying questions and tape recording telephone calls. If reasonable
procedures are not followed, IDSC or AEFC will be liable for any loss
resulting from fraudulent requests.
You may request that telephone withdrawals not be authorized from your account
by writing the Client Service Organization.
2
By mail
Send your name, account number and request for a withdrawal or transfer to:
Regular mail:
American Express Financial Advisors Inc.
Client Service Organization
IDS Tower 10
Minneapolis, MN 55440-0010
Express mail:
American Express Financial Advisors Inc.
Client Service Organization
733 Marquette Ave.
Minneapolis, MN 55440-0010
<PAGE>
Written requests are required for:
Transactions over $50,000.
Pension plans and custodial accounts where the minor has reached the age at
which custodianship should terminate.
Transfers to another American Express Financial Advisors Inc. account with
different ownership (all current registered owners must sign the request).
Three ways to receive payment when you withdraw funds
1
By regular or express mail
Mailed to address on record; please allow seven days for mailing.
Payable to name(s) you requested.
You will be charged a fee if you request express mail delivery. We will
deduct the fee from your remaining certificate balance, provided that
balance would not be less than $1,000. If the balance would be less than
$1,000, the fee is deducted from the proceeds of the withdrawal.
2
By wire
Minimum wire withdrawal: $1,000.
Request that money be wired to your bank.
Bank account must be in same ownership as IDSC account.
Pre-authorization required. Complete the bank wire authorization section
in the application or use a form supplied by your American Express
financial advisor. All registered owners must sign.
A service fee, if any, may be deducted from your balance (for partial
withdrawals) or from the proceeds of a full withdrawal.
<PAGE>
3
By electronic transfer
Available only for pre-authorized scheduled partial withdrawals and other
full or partial withdrawals.
No charge.
Deposited electronically in your bank account.
Allow two to five business days from request to deposit.
Retirement plans: special policies
If the certificate is purchased for a 401(k) plan or other qualified
retirement plan account, the terms and conditions of the certificate apply
to the plan as the owner of this certificate. However, the terms of the
plan, as interpreted by the plan trustee or administrator, will determine
how a participant's individual account under the plan is administered.
These terms may differ from the terms of the certificate.
If your certificate is held in a Custodial Retirement Plan (or Keogh
plan), special rules may apply at maturity. If no other investment
instructions are provided directing how to handle your certificate at
maturity, the full value of the certificate will automatically transfer to
a new or existing cash management account according to rules outlined in
the Custodial Retirement Plan document.
The annual custodial fee for IRA or non-401(k) qualified retirement plans
may be deducted from your certificate account. It may reduce the amount
payable at maturity or the amount received upon an early withdrawal.
Retirement plan withdrawals may be subject to withdrawal penalties or loss
of interest even if they are not subject to federal tax penalties.
We will waive withdrawal penalties on withdrawals for IRA certificate
accounts for your required distributions.
If you withdraw all funds from your last account in an IRA at American
Express Trust Company, a termination fee will apply as set out in Your
Guide to IRAs, the IRS disclosure information received when you opened your
account.
The IRA termination fee will be waived if a withdrawal occurs after you
have reached age 70 1/2 or upon the owner's death.
<PAGE>
Withdrawal at death
If a certificate is surrendered upon the client's death, any applicable
surrender charge will be waived. In addition, if an IRA termination fee is
applicable, it will also be waived.
Transfer of ownership
While this certificate is not negotiable, IDSC will transfer ownership upon
written notification to our Client Service Organization. However, if you have
purchased your certificate for an IRA, 401(k) plan or other qualified retirement
plan, you may be unable to transfer or assign the certificate without losing the
account's favorable tax status. Please consult your tax advisor.
For more information
For information on purchases, withdrawals, exchanges, transfers of ownership,
proper instructions and other service questions regarding your certificate,
please consult your American Express financial advisor or call the Client
Service Organization at the telephone numbers listed on the back cover.
Taxes on your earnings
Interest on your certificate is taxable when credited to your account. Each
calendar year we provide the certificate account owner and the IRS with reports
of all earnings over $10 (Form 1099). Withdrawals are reported to the
certificate account owner and the IRS on Form 1099-B, Proceeds from Broker
Transactions.
Retirement accounts
If you are using the certificate as an investment for an IRA, 401(k) plan
account or other qualified retirement plan account, income tax rules for your
IRA or qualified plan apply. Generally, you will pay no income taxes on your
investment's earnings -- and, in many cases, on part or all of the investment
itself -- until you begin to make withdrawals.
IDSC will withhold federal income taxes of 10% on IRA withdrawals unless you
tell us not to. IDSC is required to withhold federal income taxes of 20% on most
other qualified plan distributions, unless the distribution is directly rolled
over to another qualified plan or IRA.
Withdrawals from retirement accounts are generally subject to a penalty tax of
10% by the IRS if you make them before age 59 1/2, unless you are disabled or if
they are made by your beneficiary in the event of your death. Other exceptions
may also apply. Also, withdrawals of principal during a certificate month may be
subject to the certificate's provision for loss of interest.
<PAGE>
Consult your tax advisor to see how these rules apply to you before you request
a distribution from your plan or IRA.
Gifts to minors
The certificate may be given to a minor under either the Uniform Gifts or
Uniform Transfers to Minors Act (UGMA/UTMA), whichever applies in your state.
UGMAs/UTMAs are irrevocable. Generally, under federal tax laws, income over
$1,200 on property owned by children under age 14 will be taxed at the parents'
marginal tax rate, while income on property owned by children 14 or older will
be taxed at the child's rate.
Your Taxpayer Identification Number (TIN) and backup withholding: As with any
financial account you open, you must list your current and correct Taxpayer
Identification Number (TIN) -- either your Social Security or Employer
Identification Number. The TIN must be certified under penalties of perjury on
your application when you open an account.
If you don't provide the TIN, or the TIN you report is incorrect, you could be
subject to backup withholding of 31% of your interest earnings. You could also
be subject to further penalties, such as:
a $50 penalty for each failure to supply your correct TIN;
a civil penalty of $500 if you make a false statement that results in no
backup withholding; and
criminal penalties for falsifying information.
You could also be subject to backup withholding because you failed to report
interest on your tax return as required.
<PAGE>
To help you determine the correct TIN to use on various types of accounts,
please use this chart:
How to determine the correct TIN
<TABLE>
<CAPTION>
<S> <C>
For this type of account: Use the Social Security or 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 trust or estate The legal entity
(not the personal representative or trustee, unless
no legal entity is designated in the account title)
- ------------------------------------------------------ -----------------------------------------------------
- ------------------------------------------------------ -----------------------------------------------------
Sole proprietorship The owner
- ------------------------------------------------------ -----------------------------------------------------
- ------------------------------------------------------ -----------------------------------------------------
Partnership The partnership
- ------------------------------------------------------ -----------------------------------------------------
- ------------------------------------------------------ -----------------------------------------------------
Corporate The corporation
- ------------------------------------------------------ -----------------------------------------------------
- ------------------------------------------------------ -----------------------------------------------------
Association, club or tax-exempt organization The organization
- ------------------------------------------------------ -----------------------------------------------------
</TABLE>
For details on TIN requirements, ask your financial advisor or local American
Express Financial Advisors Inc. office for federal Form W-9, "Request for
Taxpayer Identification Number and Certification."
<PAGE>
Foreign investors
If you are not a citizen or resident of the United States, you must supply IDSC
with Form W-8, Certificate of Foreign Status when you purchase your certificate,
and you must resupply it every three years. You must also supply both a current
mailing address and an address of foreign residency, if different. IDSC will not
accept purchases of certificates by nonresident aliens without an appropriately
certified Form W-8 (or approved substitute). Also, if you do not supply Form W-8
you will be subject to backup withholding on interest payments and withdrawals.
Interest on the certificate is "portfolio interest" as defined in U.S. Internal
Revenue Code Section 871(h) if earned by a nonresident alien. Even though your
interest income is not taxed by the U.S. government, it will be reported at year
end to you and to the U.S. government on a Form 1042S, Foreign Person's U.S.
Source Income Subject to Withholding. The United States participates in various
tax treaties with foreign countries, which provide for sharing of tax
information.
Estate tax: If you are a nonresident alien and you die while owning a
certificate, then, depending on the circumstances, IDSC generally will not act
on instructions with regard to the certificate unless IDSC first receives, at a
minimum, a statement from persons IDSC believes are knowledgeable about your
estate. The statement must be in a form satisfactory to IDSC and must tell us
that, on your date of death, your estate did not include any property in the
United States for U.S. estate tax purposes. In other cases, we generally will
not take action regarding your certificate until we receive a transfer
certificate from the IRS or evidence satisfactory to IDSC that the estate is
being administered by an executor or administrator appointed, qualified and
acting within the United States. In general, a transfer certificate requires the
opening of an estate in the United States and provides assurance that the IRS
will not claim your certificate to satisfy estate taxes.
Important: The information in this prospectus is a brief and selective summary
of certain federal tax rules that apply to this certificate and is given on the
basis of current law and practice. Tax matters are highly individual and
complex. Investors should consult a qualified tax advisor regarding their own
position.
Trusts
If the investor is a trust, the policies and procedures described above will
apply with regard to each grantor who is a nonresident alien.
<PAGE>
How your money is used and protected
Invested and guaranteed by IDSC
The IDS Flexible Savings Certificate is issued and guaranteed by IDSC, a wholly
owned subsidiary of AEFC. We are by far the largest issuer of face amount
certificates in the United States, with total assets of more than $____ billion
and a net worth in excess of $____ million on Dec. 31, 1997.
We back our certificates by investing the money received and keeping the
invested assets on deposit. Our investments generate interest and dividends, out
of which we pay:
interest to certificate owners; and
various expenses, including taxes, fees to AEFC for advisory and other
services and distribution fees to American Express Financial Advisors Inc.
and American Express Service Corporation (AESC).
For a review of significant events relating to our business, see "Management's
discussion and analysis of financial condition and results of operations." Our
certificates are not rated by a national rating agency.
Most banks and thrifts offer investments known as certificates of deposit (CDs)
that are similar to our certificates in many ways. Early withdrawals of bank CDs
often result in penalties. Banks and thrifts generally have federal deposit
insurance for their deposits and lend much of the money deposited to
individuals, businesses and other enterprises. Other financial institutions and
some insurance companies may offer investments with comparable combinations of
safety and return on investment.
Regulated by government
Because the IDS Flexible Savings Certificate is a security, its offer and sale
are subject to regulation under federal and state securities laws. (It is a
face-amount certificate -- not a bank product, an equity investment, a form of
life insurance or an investment trust.)
The federal Investment Company Act of 1940 requires us to keep investments on
deposit in a segregated custodial account to protect all of our outstanding
certificates. These investments back the entire value of your certificate
account. Their amortized cost must exceed the required carrying value of the
outstanding certificates by at least $250,000. As of Dec. 31, 1997, the
amortized cost of these investments exceeded the required carrying value of our
outstanding certificates by more than $___ million.
<PAGE>
Backed by our investments
Our investments are varied and of high quality. This was the composition of our
portfolio as of Dec. 31, 1997:
Type of investment Net amount invested
Government agency bonds Corporate and other bonds Preferred stocks Mortgages
Municipal bonds Cash and cash equivalents
As of Dec. 31, 1997 about __% of our securities portfolio (including bonds and
preferred stocks) is rated investment grade. For additional information
regarding securities ratings, please refer to Note 3B in the financial
statements.
Most of our investments are on deposit with American Express Trust Company,
Minneapolis, although we also maintain separate deposits as required by certain
states. American Express Trust Company is a wholly owned subsidiary of AEFC.
Copies of our Dec. 31, 1997 schedule of Investments in Securities of
Unaffiliated Issuers are available upon request. For comments regarding the
valuation, carrying values and unrealized appreciation (depreciation) of
investment securities, see Notes 1, 2 and 3 to the financial statements.
Investment policies
In deciding how to diversify the portfolio -- among what types of investments in
what amounts -- the officers and directors of IDSC use their best judgment,
subject to applicable law. The following policies currently govern our
investment decisions:
Debt securities-
Most of our investments are in debt securities as referenced in the table in
"Backed by our investments" under "How your money is used and protected."
Purchasing securities on margin -
We will not purchase any securities on margin or participate on a joint basis or
a joint-and-several basis in any trading account in securities.
Commodities -
We have not and do not intend to purchase or sell commodities or commodity
contracts except to the extent that transactions described in "Financial
transactions including hedges" in this section may be considered commodity
contracts.
<PAGE>
Underwriting -
We do not intend to engage in the public distribution of securities issued by
others. However, if we purchase unregistered securities and later resell them,
we may be considered an underwriter under federal securities laws.
Borrowing money -
From time to time we have established a line of credit if management believed
borrowing was necessary or desirable. We may pledge some of our assets as
security. We may occasionally use repurchase agreements as a way to borrow
money. Under these agreements, we sell debt securities to our lender, and
repurchase them at the sales price plus an agreed-upon interest rate within a
specified period of time.
Real estate -
We may invest in limited partnership interests in limited partnerships that
either directly, or indirectly through other limited partnerships, invest in
real estate. We may invest directly in real estate. We also invest in mortgage
loans.
Lending securities -
We may lend some of our securities to broker-dealers and receive cash equal to
the market value of the securities as collateral. We invest this cash in
short-term securities. If the market value of the securities goes up, the
borrower pays us additional cash. During the course of the loan, the borrower
makes cash payments to us equal to all interest, dividends and other
distributions paid on the loaned securities. We will try to vote these
securities if a major event affecting our investment is under consideration.
When-issued securities-
Some of our investments in debt securities are purchased on a when-issued basis.
It may take as long as 45 days or more before these securities are issued and
delivered to us. We generally do not pay for these securities or start earning
on them until delivery. We have established procedures to ensure that sufficient
cash is available to meet when-issued commitments.
Financial transactions including hedges-
We buy or sell various types of options contracts for hedging purposes or as a
trading technique to facilitate securities purchases or sales. We buy interest
rate caps for hedging purposes. These pay us a return if interest rates rise
above a specified level. If interest rates do not rise above a specified level,
the interest rate caps do not pay us a return. IDSC may enter into other
financial transactions, including futures and other derivatives, for the purpose
of managing the interest rate exposures associated with IDSC's assets or
liabilities. We do not use derivatives for speculative purposes.
<PAGE>
Illiquid securities -
A security is illiquid if it cannot be sold in the normal course of business
within seven days at approximately its current market value. Some investments
cannot be resold to the U.S. public because of their terms or government
regulations. All securities, however can be sold in private sales, and many may
be sold to other institutions and qualified buyers or on foreign markets. IDSC's
investment advisor 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 15% of
IDSC's investment portfolio will be held in securities that are illiquid. In
valuing its investment portfolio to determine this 15% limit, IDSC will use
statutory accounting under an SEC order. This means that, for this purpose, the
portfolio will be valued in accordance with applicable Minnesota law governing
investments of life insurance companies, rather than generally accepted
accounting principles.
Restrictions -
There are no restrictions on concentration of investments in any particular
industry or group of industries or on rates of portfolio turnover.
Certain investment considerations
The price of bonds generally falls as interest rates increase, and rises as
interest rates decrease. The price of a bond also fluctuates if its credit
rating is upgraded or downgraded. The price of bonds below investment grade may
react more to the ability of a company to pay interest and principal when due
than to changes in interest rates. They have greater price fluctuations, are
more likely to experience a default, and sometimes are referred to as junk
bonds. Reduced market liquidity for these bonds may occasionally make it more
difficult to value them. In valuing bonds, IDSC relies both on independent
rating agencies and the investment manager's credit analysis. Under normal
circumstances, at least 85% of the securities in IDSC's Portfolio will be rated
investment grade, or in the opinion of IDSC's investment advisor will be the
equivalent of investment grade. Under normal circumstances, IDSC will not
purchase any security rated below B- by Moody's Investors Service, Inc. or
Standard & Poor's Corporation. Securities that are subsequently downgraded in
quality may continue to be held by IDSC and will be sold only when IDSC believes
it is advantageous to do so.
As of Dec. 31, 1997, IDSC held about __% of its investment portfolio (including
bonds, preferred stocks, mortgages and cash equivalents) in investments rated
below investment grade.
When-issued securities are subject to market fluctuations and they may affect
IDSC's investment portfolio the same as owned securities.
<PAGE>
Derivatives are financial instruments whose performance is derived, at least in
part, from the performance of an underlying asset, security or index. A small
change in the value of the underlying asset, security or index may cause a
sizable gain or loss in the fair value of the derivative.
How your money is managed
Relationship between IDSC and American Express Financial Corporation
IDSC was originally organized as Investors Syndicate of America, Inc., a
Minnesota corporation, on Oct. 15, 1940, and began business as an issuer of face
amount investment certificates on Jan. 1, 1941. The company became a Delaware
corporation on Dec. 31, 1977, and changed its name to IDS Certificate Company on
April 2, 1984.
Before IDSC was created, AEFC (formerly known as IDS Financial Corporation), our
parent company, had issued similar certificates since 1894. As of Jan. 1, 1995,
IDS Financial Corporation changed its name to AEFC. IDSC and AEFC have never
failed to meet their certificate payments.
During its many years in operation, AEFC has become a leading manager of
investments in mortgages and securities. As of Dec. 31, 1997, AEFC managed
investments, including its own, of more than $___ billion. American Express
Financial Advisors Inc., a wholly owned subsidiary of AEFC, provides a broad
range of financial planning services for individuals and businesses through its
nationwide network of more than 175 offices and more than 7,800 financial
advisors. American Express Financial Advisors' financial planning services are
comprehensive, beginning with a detailed written analysis that's tailored to
your needs. Your analysis may address one or all of these six essential areas:
financial position, protection planning, investment planning, income tax
planning, retirement planning and estate planning.
AEFC itself is a wholly owned subsidiary of American Express Company, a
financial services company with executive offices at American Express Tower,
World Financial Center, New York, NY 10285. American Express Company is a
financial services company engaged through subsidiaries in other businesses
including:
travel related services (including American Express(R) Card and Travelers
Cheque operations through American Express Travel Related Services Company,
Inc. and its subsidiaries); and
international banking services (through American Express Bank Ltd. and its
subsidiaries including American Express Bank International).
<PAGE>
About AESC
AESC is a wholly-owned subsidiary of American Express Travel Related Services
Inc., which in turn is a wholly-owned subsidiary of American Express Company.
Capital structure and certificates issued
IDSC has authorized, issued and has outstanding 150,000 shares of common stock,
par value of $10 per share. AEFC owns all of the outstanding shares.
As of the fiscal year ended Dec. 31, 1997, IDSC had issued (in face amount)
$__________ of installment certificates and $__________ of single payment
certificates. As of Dec. 31, 1997, IDSC had issued (in face amount) $__________
of installment certificates and $__________ of single payment certificates since
its inception in 1941.
Investment management and services
Under an Investment Advisory and Services Agreement, AEFC acts as our investment
advisor and is responsible for:
providing investment research;
making specific investment recommendations; and
executing purchase and sale orders according to our policy of obtaining
the best price and execution.
All these activities are subject to direction and control by our board of
directors and officers. Our agreement with AEFC requires annual renewal by our
board, including a majority of directors who are not interested persons of AEFC
or IDSC as defined in the federal Investment Company Act of 1940.
For its services, we pay AEFC a monthly fee, equal on an annual basis to a
percentage of the total book value of certain assets (included assets).
<PAGE>
Advisory and services fee computation:
Included assets Percentage of total book value
First $250 million 0.75%
Next 250 million 0.65
Next 250 million 0.55
Next 250 million 0.50
Any amount over 1 billion 0.45
Included assets are all assets of IDSC except mortgage loans, real estate, and
any other asset on which we pay an outside advisory or service fee.
Advisory and services fee for the past three years:
Percentage of
Year Total fees included assets
1997 $ %
1996 $16,989,093 0.50
1995 $16,742,458 0.50
Estimated advisory and services fees for 1998 are $__________.
Other expenses payable by IDSC: The Investment Advisory and Services Agreement
provides that we will pay:
costs incurred by us in connection with real estate and mortgages;
taxes;
depository and custodian fees;
brokerage commissions;
fees and expenses for services not covered by other agreements and
provided to us at our request, or by requirement, by attorneys, auditors,
examiners and professional consultants who are not officers or employees of
AEFC;
fees and expenses of our directors who are not officers or employees of
AEFC;
provision for certificate reserves (interest accrued on certificate owner
accounts); and
expenses of customer settlements not attributable to sales function.
<PAGE>
Distribution
Under a Distribution Agreement with American Express Financial Advisors Inc. we
pay for the distribution of this certificate as follows:
0.20% of the initial payment on the issue date of the certificate; and
0.20% of the certificate's reserve at the beginning of the second and
subsequent quarters from issue date.
This fee is not assessed to your certificate account.
Under a Distribution Agreement with AESC, for certificates sold through American
Express Financial Direct, we pay AESC for the distribution of this certificate
as follows:
0.20% of the initial payment of the issue date of the certificate; and
0.20% of the certificate's reserve at the beginning of the second and
subsequent quarters from issue date.
For certificates paying a special promotional coupon rate described in "Rates
for new purchases" under "About the certificate," American Express Financial
Advisors Inc. waives its distribution fee.
Total distribution fees paid to American Express Financial Advisors Inc. for all
series of certificates amounted to $________ during the year ended Dec. 31,
1997. We expect to pay American Express Financial Advisors Inc. distribution
fees amounting to $________ during 1998.
See Note 1 to Financial statements regarding deferral of distribution fee
expense.
American Express Financial Advisors Inc. pays commissions to its financial
advisors and pays other selling expenses in connection with services to us. Our
board of directors, including a majority of directors who are not interested
persons of American Express Financial Advisors Inc. or IDSC, approved this
distribution agreement.
Transfer Agent
Under a Transfer Agency Agreement American Express Client Service Corporation
(AECSC) maintains certificate owner accounts and records. IDSC pays AECSC a
monthly fee of one-twelfth of $10.353 per certificate owner account for this
service.
<PAGE>
Employment of other American Express affiliates
AEFC may employ an affiliate of American Express Company as executing broker for
our portfolio transactions only if:
we receive prices and executions at least as favorable as those offered by
qualified independent brokers performing similar services;
the affiliate charges us commissions consistent with those charged to
comparable unaffiliated customers for similar transactions; and
the affiliate's employment is consistent with the terms of the current
Investment Advisory and Services Agreement and federal securities laws.
Directors and officers
IDSC's directors, chairman, president and controller are elected annually for a
term of one year. The other executive officers are appointed by the president.
We paid a total of $______ during 1997 to directors not employed by AEFC.
Board of directors
David R. Hubers*
Born in 1943. Director since 1987.
President and chief executive officer of AEFC since 1993. Senior vice president
and chief financial officer of AEFC from 1984 to 1993.
Charles W. Johnson
Born in 1929. Director since 1989.
Director, Communications Holdings, Inc. Former vice president and group
executive, Industrial Systems, with Honeywell, Inc. Retired 1989.
Richard W. Kling*
Born in 1940. Director since 1996.
Chairman of the board of directors since 1996. Director of IDS Life Insurance
Company since 1984; president since 1994. Executive vice president of Marketing
and Products of AEFC from 1988 to 1994. Senior vice president of AEFC since
1994. Director of IDS Life Series Fund, Inc. and member of the board of managers
of IDS Life Variable Annuity Funds A and B.
<PAGE>
Edward Landes
Born in 1919. Director since 1984.
Development consultant. Director of IDS Life Insurance Company of New York.
Director of Endowment Development, YMCA of Metropolitan Minneapolis. Vice
president for Financial Development, YMCA of Metropolitan Minneapolis from 1985
through 1995. Former sales manager - Supplies Division and district manager -
Data Processing Division of IBM Corporation. Retired 1983.
John V. Luck, Ph.D.
Born in 1926. Director since 1987.
Former senior vice president - Science and Technology with General Mills, Inc.
Employed with General Mills, Inc. since 1968. Retired 1988.
James A. Mitchell*
Born in 1941. Director since 1994.
Chairman of the board of directors from 1994 to 1996. Executive vice president -
Marketing and Products of AEFC since 1994. Senior vice president - Insurance
Operations of AEFC and president and chief executive officer of IDS Life
Insurance Company from 1986 to 1994.
Harrison Randolph
Born in 1916. Director since 1968.
Engineering, manufacturing and management consultant since 1978.
Gordon H. Ritz
Born in 1926. Director since 1968.
Director, Mid-America Publishing and Atrix International, Inc. Former president,
Com Rad Broadcasting Corp. Former director, Sunstar Foods.
Stuart A. Sedlacek*
Born in 1957. Director since 1994.
President since 1994. Vice president - Assured Assets of AEFC since 1994. Vice
president and portfolio manager from 1988 to 1993. Executive vice president -
Assured Assets of IDS Life Insurance Company since 1994.
*"Interested Person" of IDSC as that term is defined in Investment Company Act
of 1940.
<PAGE>
Executive officers
Stuart A. Sedlacek
Born in 1957. President since 1994.
Timothy S. Meehan
Born in 1957. Secretary since 1995.
Secretary of AEFC and American Express Financial Advisors Inc. since 1995.
Senior counsel to AEFC since 1995. Counsel from 1990 to 1995.
Lorraine R. Hart
Born in 1951. Vice president - Investments since 1994.
Vice president - Insurance Investments of AEFC since 1989. Vice president -
Investments of IDS Life Insurance Company since 1992.
Jay C. Hatlestad
Born in 1957. Vice president and controller of IDSC since 1994. Manager of
Investment Accounting of IDS Life Insurance Company from 1986 to 1994.
Bruce A. Kohn
Born in 1951. Vice president and general counsel since 1993. Senior counsel to
AEFC since 1996. Counsel to AEFC from 1992 to 1996. Associate counsel from 1987
to 1992.
F. Dale Simmons
Born in 1937. Vice president - Real Estate Loan Management since 1993. Vice
president of AEFC since 1992. Senior portfolio manager of AEFC since 1989.
Assistant vice president from 1987 to 1992.
The officers and directors as a group beneficially own less than 1% of the
common stock of American Express Company.
IDSC has provisions in its bylaws relating to the indemnification of its
officers and directors against liability, as permitted by law. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers or persons controlling the registrant pursuant
to the foregoing provisions, the registrant has been informed that in the
opinion of the SEC such indemnification is against public policy as expressed in
the Act and is therefore unenforceable.
<PAGE>
Auditors
A firm of independent auditors audits our financial statements at the close of
each fiscal year (Dec. 31). Copies of our annual financial statements (audited)
and semiannual financial statements (unaudited) are available to any certificate
owner upon request.
Ernst & Young LLP, Minneapolis, has audited the financial statements for each of
the years in the three-year period ended Dec. 31, 1997. These statements are
included in this prospectus. Ernst & Young LLP is also the auditor for American
Express Company, the parent company of AEFC and IDSC.
IDS Certificates
Other certificates issued by IDSC: Your American Express financial advisor can
give you more information on five other certificates issued by IDSC. These
certificates offer a wide range of investment terms and features.
IDS Cash Reserve Certificate - A single payment certificate that permits
additional investments on which IDSC guarantees interest in advance for a
three-month term.
IDS Installment Certificate - An installment payment certificate that declares
interest in advance for a three-month period and offers bonuses in the third
through sixth years for regular investments.
IDS Preferred Investors Certificate - A single payment certificate that combines
a competitive fixed rate of return with IDSC's guarantee of principal for large
investments of $250,000 to $5 million.
IDS Staggered Stock Market Certificate - A certificate that pays interest linked
to one-year stock market performance for a series of one-year terms starting
every month or at other intervals the client selects.
IDS Stock Market Certificate - A single payment certificate that calculates all
or part of your interest based on stock market performance, as measured by a
broad market index, with IDSC's guarantee of return of principal.
<PAGE>
Appendix
Description of 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, Baa, Ba, B, Caa, Ca and C. Ratings by Standard & Poor's
Corporation are AAA, AA, A, BBB, BB, B, CCC, CC, C and D.
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.
Ba/BB - Considered to have speculative elements. The protection of interest and
principal payments may be very moderate.
B - Lack characteristics of more desirable investments. There may be small
assurance over any long period of time of the payment of interest and principal.
Caa/CCC - Are of poor standing. Such issues may be in default or there may be
risk with respect to principal or interest.
Ca/CC - Represent obligations that are highly speculative. Such issues are often
in default or have other marked shortcomings.
C - Are obligations with a higher degree of speculation. These securities have
major risk exposures to default.
D - Are in payment default. The D rating is used when interest payments or
principal payments are not made on the due date.
Non-rated securities will be considered for investment. When assessing each
non-rated security, IDSC will consider the financial condition of the issuer or
the protection afforded by the terms of the security.
<PAGE>
(Back Cover)
Quick telephone reference
Client Service Organization
Withdrawals, transfers, inquiries
National/Minnesota: 800-437-3133
Mpls./St. Paul area: 612-671-3800
TTY Service
For the hearing impaired
800-846-4293
American Express Easy Access Line
Account value, cash transaction information, current rate information (automated
response, Touchtone(R) phones only)
National/Minnesota: 800-862-7919
Mpls./St. Paul area: 800-862-7919
IDS Flexible Savings Certificate
IDS Tower 10
Minneapolis, MN 55440-0010
Distributed by American Express Financial Advisors Inc.
<PAGE>
IDS Flexible Savings Certificate
Prospectus
April 28, 1998
Earn competitive rates guaranteed by IDS Certificate Company for the term you
choose.
IDS Flexible Savings Certificates are issued by IDS Certificate Company (IDSC).
You may purchase this certificate by selecting a term of six, 12, 18, 24, 30 or
36 months and an initial investment of at least $1,000 but not more than $1
million (unless you receive prior authorization from IDSC to invest more). Your
principal and interest are guaranteed by IDSC. IDSC guarantees a fixed rate of
interest depending upon the term you select. You may make additional investments
during the term subject to certain limitations. You may invest in successive
terms up to a total of 20 years from the issue date of the certificate. Your
interest rate will be determined as described in "About the certificate."
As is the case with other investment companies, 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.
This certificate is backed by IDSC's investments on deposit rather than
guaranteed or insured by the government or someone else. See "Invested and
guaranteed by IDSC" and "Regulated by government" under "How your money is used
and protected."
IDS Certificate Company is not a bank or financial institution, and the
securities it offers are not deposits or obligations of, backed or guaranteed or
endorsed by any bank or financial institution nor are they insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board or any other
agency.
This prospectus describes terms and conditions of your IDS Flexible Savings
Certificate. It contains facts that can help you decide if the certificate is
the right investment for you. Read the prospectus before you invest and keep it
for future reference. No one has the authority to change the terms and
conditions of the IDS Flexible Savings Certificate as described in the
prospectus, or to bind IDSC by any statement not in it.
IDS Certificate Company
IDS Tower 10
Minneapolis, MN 55440-0010
800-297-7378 (toll free)
Distributor:
American Express Service Corporation
IDS Tower 10
Minneapolis, MN 55440-0010
<PAGE>
TTY numbers:
800-710-5260 (toll free) (612) 671-7066
An American Express company
Where to get information about IDSC
IDS Certificate Company is subject to the reporting requirements of the
Securities Exchange Act of 1934. Reports and other information on IDSC are filed
with the Securities and Exchange Commission (SEC) and are available on the SEC
Internet web site (http://www.sec.gov). Copies can be obtained from the Public
Reference Section of the SEC, 450 5th St., N.W., Room 1024, Washington, D.C.
20549, at prescribed rates. Or you can inspect and copy information in person at
the SEC's Public Reference Section and at the following regional offices:
Northeast Regional Office
7 World Trade Center
Suite 1300
New York, NY 10048
Midwest Regional Office
500 West Madison St.
Suite 1400
Chicago, IL 60661
Pacific Regional Office
5670 Wilshire Blvd.
11th Floor
Los Angeles, CA 90036
Initial interest rates
IDSC guarantees a fixed rate of interest for each term. For the initial term,
the rate will be within a specified range of certain average certificates of
deposit interest rates, as published in the most recent BANK RATE MONITOR Top 25
Market AverageTM, North Palm Beach, FL 33408, as explained under "About the
certificate."
<PAGE>
Here are the interest rates in effect on the date of this prospectus, April 28,
1998:
<TABLE>
<CAPTION>
<S> <C> <C>
Simple Effective
interest annualized
Term rate* yield**
- ------------------------------------ ----------------------------------- -----------------------------------
6-month
- ------------------------------------ ----------------------------------- -----------------------------------
12-month
- ------------------------------------ ----------------------------------- -----------------------------------
18-month
- ------------------------------------ ----------------------------------- -----------------------------------
24-month
- ------------------------------------ ----------------------------------- -----------------------------------
30-month
- ------------------------------------ ----------------------------------- -----------------------------------
- ------------------------------------ ----------------------------------- -----------------------------------
36-month
- ------------------------------------ ----------------------------------- -----------------------------------
</TABLE>
* These are the rates for investments under $100,000. Rates may depend on the
factors described in "Rates for new purchases" and "Promotions and pricing
flexibility" under "About the certificate."
** Assuming monthly compounding.
These rates may or may not be in effect when you apply to purchase your
certificate. Rates for future terms are set at the discretion of IDSC and may
also differ from the rates shown here.
We reserve the right to issue other securities with different terms.
<PAGE>
Contents
Table of contents
About the certificate p
Investment amounts and terms p
Face amount and principal p
Value at maturity p
Receiving cash during the term p
Interest p
Rates for new purchases p
Promotions and pricing flexibility p
Additional investments p
How to invest your funds p
When your certificate term ends p
Three ways to receive payment when you withdraw funds p
Retirement plans: special policies p
Taxes on your earnings p
Retirement accounts p
Gifts to minors p
How to determine the correct TIN p
Foreign investors p
Trusts p
How your money is used and protected p
Invested and guaranteed by IDSC p
Regulated by government p
Backed by our investments p
Investment policies p
Certain investment considerations p
<PAGE>
How your money is managed p
Relationship between IDSC and American
Express Financial Corporation p
About American Express Service Corporation p
Capital structure and certificates issued p
Investment management and services p
Distribution p
About American Express Service Corporation p
Transfer Agent p
Employment of other American Express affiliates p
Directors and officers p
Auditors p
IDS Certificates
Appendix p
Annual financial information p
Summary of selected financial information p
Management's discussion and analysis of financial
condition and results of operations p
Report of independent auditors p
Financial statements p
Notes to financial statements p
<PAGE>
About the certificate
Investment amounts and terms
You may purchase the IDS Flexible Savings Certificate with a single payment of
at least $1,000 payable in U.S. currency. Unless you receive prior
authorization, your total amount paid in over the life of the certificate, less
withdrawals, cannot exceed $1 million.
After determining the amount you wish to invest, you select a term of six, 12,
18, 24, 30 or 36 months for which IDSC will guarantee an interest rate.
Generally, you will be able to select any of the terms offered. But if your
certificate is nearing its 20-year maturity, you will not be allowed to select a
term that would carry the certificate past its maturity date.
The certificate may be used as an investment for your Individual Retirement
Account (IRA), 401(k) plan account or other qualified retirement plan account.
If so used, the amount of your contribution (investment) will be subject to any
limitations of the plan and applicable federal law.
Face amount and principal
The face amount of the certificate is the amount of your initial investment, and
will remain the same over the life of the certificate. Any investment or
withdrawal within 15 days of the end of a term will be added on or deducted to
determine principal for the new term. A withdrawal at any other time is taken
first from interest credited to your investment during that term. The principal
is the amount that is reinvested at the beginning of each subsequent term, and
is calculated as follows:
Principal equals Face amount (initial investment)
plus At the end of a term, interest credited to your account during the term
minus Any interest paid to you in cash plus Any additional investments to your
certificate minus Any withdrawals, fees and applicable penalties.
Principal may change during a term as described in "Add-on feature" and "Full
and partial withdrawals."
<PAGE>
For example: Assume your initial investment (face amount) of $5,000 has earned
$75 of interest during the term. You have not taken any interest as cash, or
made any withdrawals. You have invested an additional $2,500 prior to the
beginning of the next term. Your principal for the next term will equal:
$5,000.00 Face amount (initial investment)
plus $75.00 Interest credited to your account
minus ($0.00) Interest paid to you in cash
plus $2,500.00 Additional investment to your certificate
minus ($0.00) Withdrawals and applicable penalties or fees
============
$7,575.00 Principal at the beginning of the next term.
Value at maturity
You may continue to invest for successive terms for up to a total of 20 years.
Your certificate matures at 20 years from its issue date. At maturity, you will
receive a distribution for the value of your certificate, which will be the
total of your purchase price, plus additional investments and any credited
interest not paid to you in cash, less any withdrawals and penalties. Some fees
may apply as described in the service document.
Receiving cash during the term
If you need your money before your certificate term ends, you may withdraw part
or all of its value at any time, less any penalties that apply. Procedures for
withdrawing money, as well as conditions under which penalties apply, are
described in the service document.
Interest
Your investments earn interest from the date they are credited to your account.
Interest is compounded and credited at the end of each certificate month (on the
monthly anniversary of the issue date).
IDSC declares and guarantees a fixed rate of interest for each term during the
life of your certificate. We calculate the amount of interest you earn each
certificate month by:
applying the interest rate then in effect to your balance each day;
adding these daily amounts to get a monthly total; and
subtracting interest accrued on any amount you withdraw during the
certificate month.
<PAGE>
Interest is calculated on a 30-day month and 360-day year basis.
Rates for new purchases
When your application is accepted and we have received your initial investment,
we will send you a confirmation of your purchase showing the rate that your
investment will earn. IDSC guarantees that when rates for new purchases take
effect, the rates will be within a range based on the average interest rates
then published in the BANK RATE MONITOR Top 25 Market AverageTM (the BRM
Average).
In the case of the six-, 12-, 24- and 30-month terms IDSC guarantees that, for
purchases of certificates for less than $100,000, your rate for your initial
term will be 10 basis points (.10%) below to 90 basis points (.90%) above such
rates for comparable length certificates of deposit (CDs). In the case of these
terms, for purchases of certificates for $100,000 or more, IDSC guarantees that
your rate for your initial term will be within a range of five-105 basis points
above such rates for comparable length certificates of deposit.
In the case of the 18-month term, because the BRM Average doesn't typically
publish rates for comparable length certificates of deposit, IDSC guarantees
that, for purchases of certificates for less than $100,000, the rate for your
initial term will be within a range of zero-100 basis points above the rates for
the 12-month certificates of deposit. In the case of the 18-month term, for
purchases of certificates of $100,000 or more, IDSC guarantees that your rate
for your initial term will be within a range of 15-115 basis points above the
rates for the 12-month certificates of deposit.
In the case of the 36-month term, because the BRM Average doesn't typically
publish rates for comparable length certificates of deposit, IDSC guarantees
that, for purchases of certificates for less than $100,000, the rate for your
initial term will be within zero-100 basis points above the rates for the
30-month certificate of deposit. In the case of the 36-month term, for purchases
of certificates of $100,000 or more, IDSC guarantees that your rate for your
initial term will be within 15-115 basis points above the rates for the 30-month
certificates of deposit. For example, if the rate most recently published in the
BRM Average with respect to the 30-month certificate of deposit is 4.80% our
rates in effect for that week for 36-month terms would be between 4.80% and
5.80% for purchases for less than $100,000.
However, IDSC guarantees that, for persons who have received a special
promotional coupon from IDSC for purchase of a Flexible Savings Certificate with
an initial term of six, 12, 24 or 30 months and have satisfied any requirement
stated in the coupon, when rates for new purchases take effect, the rate for the
initial term will be within a range from 100 basis points (1%) to 200 basis
points above the average interest rate published for comparable length CDs in
the BRM Average. Similarly, IDSC guarantees that, for persons who have received
a special promotional coupon from IDSC for purchase of a Flexible Savings
Certificate with an initial term of 18 or 36 months and have satisfied the
<PAGE>
conditions in the coupon, when rates for new purchases take effect, the rate for
an initial term of 18 or 36 months will be within a range from 100 basis points
(1%) to 200 basis points above the average interest rate published for 12-month
CDs or 30-month CDs, respectively, in the BRM Average. For example, the coupon
may require that you make a minimum investment and that you are not an existing
client of American Express Financial Corporation (AEFC), American Express
Financial Advisors Inc., or another subsidiary of AEFC. AEFC will select persons
to receive the coupon based on a business strategy to build relationships with
new clients in selected market segments who AEFC believes meet threshold
requirements for such factors as household income and home values. From time to
time coupons may be sent only to persons who both fit this strategy and live in
particular parts of the country or are affiliated with particular organizations
such as an automobile club.
From time to time, for your initial term, IDSC may offer certificates with
different terms than those described above. Such terms may be from seven, 11,
13, 19, 25, 31 or 37 months. For these terms, IDSC guarantees that, for
purchases of certificates for less than $100,000, your rate for your initial
term will be within a range of 50-150 basis points above the rates published in
the BRM Average for the certificates of deposit specified above that have the
maturity that is closest to the term of the IDS certificate in question. If two
different BRM Averages have the closest maturities, we will use the longest
maturity that is shorter than the term of the IDS certificate in question. For
purchases of certificates of $100,000 or more, the range for your initial term
will be 65-165 basis points above the same rate. For example, in the case of a
seven-month term, IDSC guarantees that, for purchases of certificates less than
$100,000, your rate for your initial term will be within a range of 50-150 basis
points above the rates for the six-month certificates of deposit, and for
purchases of certificates for $100,000 or more, your rate for your initial term
will be within a range of 65-165 basis points above the rates for the six-month
certificates of deposit. Purchase of a certificate in one of these special
offers may result in a later term of less than six months in order to permit
your certificate to mature 20 years from its issue date. IDSC may limit the
offering of these certificates to persons who have received a coupon as a
promotion, based on a business strategy to build relationships with new clients
in related market segments or persons who AEFC believes meet threshold
requirements for such factors as household income and home values or persons who
fit this strategy and live in particular areas of the country or are affiliated
with particular organizations. IDSC may also offer different rates or terms to
new clients, existing clients, or to individuals who have purchased other
products or used other services of American Express Company or its subsidiaries,
and may offer some terms only in selected distribution channels. We also may
offer different rates based on your amount invested, your geographic location
and whether the certificate is purchased for an IRA or for a qualified
retirement account.
The BANK RATE MONITOR is a weekly magazine published in North Palm Beach, FL
33408, by Advertising News Service Inc., an independent national news
organization that collects and disseminates information about bank products and
interest rates. Advertising News Service Inc. has no connection with IDSC, AEFC
or any of their affiliates.
<PAGE>
The BRM Average is an index of rates and annual effective yields offered on
various length certificates of deposit by large banks and thrifts in 25
metropolitan areas. The frequency of compounding varies among the banks and
thrifts. Certificates of deposit in the BRM Average are government insured
fixed-rate time deposits.
The BANK RATE MONITOR is available in your local library. To obtain information
on current BRM Average rates, call American Express Financial Direct (AEFD) at
the telephone numbers listed on the back cover between 8 a.m. and 6 p.m. your
local time.
Rates for new purchases are reviewed and may change weekly. Normally, the rate
you receive will be the higher of:
the rate in effect for your chosen term on the date of your application; or
the rate in effect on the date your application is accepted by IDSC.
However, if your application bears a date more than seven days before its
receipt by IDSC, the rate you receive will be the higher of:
the rate in effect on the date your application is accepted by IDSC; or
the rate in effect seven days before receipt.
Except for specific promotions, IDSC guarantees an initial rate 25 basis points
above the rate offered to the general public on this IDS certificate if it is
purchased by using the CD transfer service offered by American Express Financial
Advisors Inc. to help you transfer money from a bank or thrift CD account into
IDSC investments. To be eligible for this rate, you must transfer at least
$10,000 from a CD account to IDSC to purchase one or more IDS Cash Reserve
Certificates and/or IDS Flexible Saving Certificates, and this rate will only
apply to those certificates.
Except for specific promotions, IDSC guarantees active or retired AEFC
employees, IDSC's directors, American Express financial advisors, their
immediate families and any U.S. employee of any affiliated company of IDSC an
initial rate 75 basis points above the rate offered to the general public,
reflecting the lower distribution costs associated with such sales.
Promotions and pricing flexibility
From time to time, IDSC may sponsor or participate in promotions involving one
or more of the certificates and their respective terms. For example, we may
offer different rates to new clients, to existing clients, or to individuals who
have purchased other products or used other services of American Express Company
or its subsidiaries.
<PAGE>
We also may offer different rates based on your amount invested, geographic
location and whether the certificate is purchased for an IRA or a qualified
retirement account.
These promotions will generally be for a specified period of time. If we offer a
promotion, the rates for new purchases will be within the range of rates
described under "Rates for new purchases."
Rates for future terms: Interest on your certificate for future terms may be
greater or less than the rates you receive during your first term. In setting
future interest rates, a primary consideration will be the prevailing investment
climate, including certificate of deposit yields as reflected in the BRM
Average. Nevertheless, we have complete discretion as to what interest rate
shall be declared beyond the initial term. At least six days in advance of each
term, we will send you notice of the rate that your certificate will earn for
that term. If the BRM Average is no longer publicly available or feasible to
use, IDSC may use another, similar index as a guide for setting rates.
Performance: From February 1993 through February 1998, IDS Flexible Savings
Certificate one year yields were generally higher than average bank and thrift
one year certificate of deposit yields and Super NOW accounts, as measured by
the BRM Average (prior to Jan. 13, 1993, yields were measured by the BRM
National IndexTM, an average of CD yields in 10 cities).
Yields from February 1993 through February 1998
6% _________IDS Flexible Savings Certificate - 1 year
4% .........Certificate of Deposit - 1 year
2%
Two lines comparing the yields for one-year IDS Flexible
Savings Certificate against those of one-year certificates of
deposit with Flexible's yield generally above the CD's
`93 `94 `95 `96 `97 `98
The graph compares past yields and should not be considered a prediction of
future performance.
<PAGE>
Additional investments
You may make investments within 15 calendar days after the end of a term (the
grace period). Investments added to your certificate during the grace period
will increase the principal balance for purposes of the 25% add-on feature
described below and the 10% withdrawal feature described under "Full and partial
withdrawals." Additional investments may be in any amount so long as your total
investment, less withdrawals, does not exceed $1 million (unless you receive
prior authorization from IDSC to invest more). You will earn interest on
additional investments from the date we accept them. IDSC will send a
confirmation of additional investments.
Add-on feature: You may also add to your certificate during the term. These
additional investments may not exceed 25% of the certificate's principal balance
at the end of the grace period. This principal includes the balance at the end
of the previous term, plus or minus any deposits or withdrawals during the grace
period.
Any add-on or withdrawal during the grace period will change the principal
amount used to determine the amount available for the 25% add-on feature.
For example, suppose your original balance is $9,000. During the grace period,
you add $1,000. At any time during the current term, you could add up to 25% of
principal ($9,000 + $1,000 = $10,000), or $2,500 to your certificate.
The interest rate for these additional investments is the rate then in effect
for your account. If your additional investment increases the principal of your
certificate so that your certificate's principal has exceeded a break point for
a higher interest rate, the certificate will earn this higher interest rate for
the remainder of the term, from the date the additional investment is accepted.
How to invest your funds
Buying your certificate
To open an account with us and purchase a certificate, fill out and submit an
application. We will process the application at our corporate offices in
Minneapolis. When your application is accepted and we have received your initial
investment, we will send you a confirmation of your purchase, indicating your
account number and applicable rate of interest for your first term, as described
under "Rates for new purchases." See "Purchase policies" below.
Important: When opening an account, you must provide IDSC with your correct
Taxpayer Identification Number (Social Security or Employer Identification
Number). See "Taxes on your earnings."
<PAGE>
Penalties for early withdrawal during a term: When you request a full or partial
withdrawal, we pay the amount you request:
first from interest credited during the current term;
then from the principal of your certificate.
Any additional investments or withdrawals during a term are added to or deducted
from the principal and are used in determining any withdrawal charges.
Withdrawal penalties: For withdrawals during the term of more than the interest
credited that term and over 10% of the certificate's principal, a 2% withdrawal
penalty will be deducted from the account's remaining balance.
For example, assume you invest $20,000 in a certificate and select a two-year
term. A little over a year later assume you have earned $1,600 in interest. The
following demonstrates how the withdrawal charge is deducted:
When you withdraw a specific amount of money, we would have to withdraw somewhat
more from your account to cover the withdrawal charge. For instance, suppose you
request a $5,000 check. The first $1,600 paid to you is interest earned that
term, the next $2,000 is 10% of principal, and not subject to the withdrawal
penalty, and the remaining $1,400 paid to you is principal over the 10% limit.
We would send you a check for $5,000 and deduct a withdrawal charge of $28.00
($1,400 x 2%) from the remaining balance of your certificate account. Your new
balance would be $16,572 ($21,600 - $5,028).
<TABLE>
<CAPTION>
<S> <C>
Total investments $20,000.00
Interest credited $ 1,600.00
-----------
Total balance $21,600.00
Requested check $5,000.00
Credited interest withdrawn ($1,600.00)
10 percent of principal -- not subject to penalty ($2,000.00)
-----------
Remaining portion of requested withdrawal - subject to penalty $1,400.00
Withdrawal penalty percent 2.00%
Actual withdrawal penalty $ 28.00
Balance prior to withdrawal $21,600.00
Requested withdrawal check ($5,000.00)
Withdrawal penalty ($ 28.00)
-------------
Total balance after withdrawal $16,572.00
</TABLE>
<PAGE>
Additionally, if you withdraw during a certificate month, you will not earn
interest for the month on the amount withdrawn.
Penalty exceptions: There is never a penalty for withdrawal of interest. In
addition, you may withdraw up to 10% of your principal during the term without a
withdrawal penalty. The principal available for the 10% no-penalty withdrawal
feature is the balance in the certificate at the beginning of the term plus or
minus any deposits or withdrawals made during the grace period.
The following example demonstrates how this feature works:
Suppose your certificate balance is $1,000. During the grace period you add
$500, bringing the principal to $1,500. At any time during the term you could
withdraw up to $150 of principal with no penalty.
Any additional investments or withdrawals following the grace period will not
change the principal amount used to determine the amount available for the 10%
no-penalty withdrawal feature.
The 2% penalty is waived upon death of the certificate owner. We will also waive
withdrawal penalties on withdrawals for IRA certificate accounts for your
required distributions. See "Retirement plans: special policies" below.
For more information on withdrawal charges, talk with your American Express
financial advisor or call the Client Service Organization at the number on the
back cover.
When your certificate term ends
Shortly before the end of the term you have selected for your certificate, we
will send you a notice indicating the interest rate that will apply to the
certificate for the new term. When your certificate term ends we will
automatically renew your certificate for the standard term (six, 12, 24, 30 or
36 month) nearest in length to your initial term. If your initial term is
equidistant from two standard terms, we will automatically renew your
certificate to the term with the longest maturity that is shorter than your
initial term. If you wish to select a different term, you must notify us in
writing before the end of the grace period. You will not be allowed to select a
term that would carry the certificate past its maturity date.
The interest rates that will apply to your new term will be those in effect on
the day the new term begins. We will send you a confirmation showing the rate of
interest that will apply to the new term you have selected. This rate of
interest will not be changed during that term.
<PAGE>
If you want to withdraw your certificate without a withdrawal charge, you must
notify us within 15 calendar days following the end of a term. However, you will
lose any interest accrued since the end of the term.
You may also add to your investment within the 15 calendar days following the
end of your term. See "Additional investments" under "About the certificate."
Other full and partial withdrawal policies:
If you request a partial or full withdrawal of a certificate recently
purchased or added to by a check or money order that is not guaranteed, we
will wait for your check to clear. Please expect a minimum of 10 days from
the date of your payment before IDSC mails a check to you. A check may be
mailed earlier if the bank provides evidence that your check has cleared.
If your certificate is pledged as collateral, any withdrawal will be
delayed until we get approval from the secured party.
Any payments to you may be delayed under applicable rules, regulations or
orders of the SEC.
Retirement plans: special policies
If the certificate is purchased for a 401(k) plan or other qualified
retirement plan account, the terms and conditions of the certificate apply
to the plan as the owner of this certificate. However, the terms of the
plan, as interpreted by the plan trustee or administrator, will determine
how a participant's individual account under the plan is administered.
These terms may differ from the terms of the certificate.
If your certificate is held in a Custodial Retirement Plan (or Keogh
plan), special rules may apply at maturity. If no other investment
instructions are provided directing how to handle your certificate at
maturity, the full value of the certificate will automatically transfer to
a new or existing cash management account according to rules outlined in
the Custodial Retirement Plan document.
The annual custodial fee for IRA or non-401(k) qualified retirement plans
may be deducted from your certificate account. It may reduce the amount
payable at maturity or the amount received upon an early withdrawal.
Retirement plan withdrawals may be subject to withdrawal penalties or loss
of interest even if they are not subject to federal tax penalties.
We will waive withdrawal penalties on withdrawals for IRA certificate
accounts for your required distributions.
<PAGE>
If you withdraw all funds from your last account in an IRA at American
Express Trust Company, a termination fee will apply as set out in Your
Guide to IRAs, the IRS disclosure information received when you opened your
account.
The IRA termination fee will be waived if a withdrawal occurs after you
have reached age 70 1/2 or upon the owner's death.
Withdrawal at death
If a certificate is surrendered upon the client's death, any applicable
surrender charge will be waived. In addition, if an IRA termination fee is
applicable, it will also be waived.
Taxes on your earnings
Interest on your certificate is taxable when credited to your account. Each
calendar year we provide the certificate account owner and the IRS with reports
of all earnings over $10 (Form 1099). Withdrawals are reported to the
certificate account owner and the IRS on Form 1099-B, Proceeds from Broker
Transactions.
Retirement accounts
If you are using the certificate as an investment for an IRA, 401(k) plan
account or other qualified retirement plan account, income tax rules for your
IRA or qualified plan apply. Generally, you will pay no income taxes on your
investment's earnings -- and, in many cases, on part or all of the investment
itself -- until you begin to make withdrawals.
IDSC will withhold federal income taxes of 10% on IRA withdrawals unless you
tell us not to. IDSC is required to withhold federal income taxes of 20% on most
other qualified plan distributions, unless the distribution is directly rolled
over to another qualified plan or IRA.
Withdrawals from retirement accounts are generally subject to a penalty tax of
10% by the IRS if you make them before age 59 1/2, unless you are disabled or if
they are made by your beneficiary in the event of your death. Other exceptions
may also apply. Also, withdrawals of principal during a certificate month may be
subject to the certificate's provision for loss of interest.
Consult your tax advisor to see how these rules apply to you before you request
a distribution from your plan or IRA.
<PAGE>
Gifts to minors
The certificate may be given to a minor under either the Uniform Gifts or
Uniform Transfers to Minors Act (UGMA/UTMA), whichever applies in your state.
UGMAs/UTMAs are irrevocable. Generally, under federal tax laws, income over
$1,200 on property owned by children under age 14 will be taxed at the parents'
marginal tax rate, while income on property owned by children 14 or older will
be taxed at the child's rate.
Your Taxpayer Identification Number (TIN) and backup withholding: As with any
financial account you open, you must list your current and correct Taxpayer
Identification Number (TIN) -- either your Social Security or Employer
Identification Number. The TIN must be certified under penalties of perjury on
your application when you open an account.
If you don't provide the TIN, or the TIN you report is incorrect, you could be
subject to backup withholding of 31% of your interest earnings. You could also
be subject to further penalties, such as:
a $50 penalty for each failure to supply your correct TIN;
a civil penalty of $500 if you make a false statement that results in no
backup withholding; and
criminal penalties for falsifying information.
You could also be subject to backup withholding because you failed to report
interest on your tax return as required.
To help you determine the correct TIN to use on various types of accounts,
please use this chart:
How to determine the correct TIN
<TABLE>
<CAPTION>
<S> <C>
For this type of account: Use the Social Security or 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)
- ------------------------------------------------------ -----------------------------------------------------
<PAGE>
- ------------------------------------------------------ -----------------------------------------------------
A living trust The grantor-trustee
(the person who puts the money into the trust)
- ------------------------------------------------------ -----------------------------------------------------
- ------------------------------------------------------ -----------------------------------------------------
An irrevocable trust, pension trust or estate The legal entity
(not the personal representative or trustee, unless
no legal entity is designated in the account title)
- ------------------------------------------------------ -----------------------------------------------------
- ------------------------------------------------------ -----------------------------------------------------
Sole proprietorship The owner
- ------------------------------------------------------ -----------------------------------------------------
- ------------------------------------------------------ -----------------------------------------------------
Partnership The partnership
- ------------------------------------------------------ -----------------------------------------------------
- ------------------------------------------------------ -----------------------------------------------------
Corporate The corporation
- ------------------------------------------------------ -----------------------------------------------------
- ------------------------------------------------------ -----------------------------------------------------
Association, club or tax-exempt organization The organization
- ------------------------------------------------------ -----------------------------------------------------
</TABLE>
For details on TIN requirements, call 800-297-7378 or ask your financial
consultant for federal Form W-9, "Request for Taxpayer Identification Number and
Certification."
Foreign investors
If you are not a citizen or resident of the United States, you must supply IDSC
with Form W-8, Certificate of Foreign Status when you purchase your certificate,
and you must resupply it every three years. You must also supply both a current
mailing address and an address of foreign residency, if different. IDSC will not
accept purchases of certificates by nonresident aliens without an appropriately
certified Form W-8 (or approved substitute). Also, if you do not supply Form W-8
you will be subject to backup withholding on interest payments and withdrawals.
Interest on the certificate is "portfolio interest" as defined in U.S. Internal
Revenue Code Section 871(h) if earned by a nonresident alien. Even though your
interest income is not taxed by the U.S. government, it will be reported at year
end to you and to the U.S. government on a Form 1042S, Foreign Person's U.S.
Source Income Subject to Withholding. The United States participates in various
tax treaties with foreign countries, which provide for sharing of tax
information.
<PAGE>
Estate tax: If you are a nonresident alien and you die while owning a
certificate, then, depending on the circumstances, IDSC generally will not act
on instructions with regard to the certificate unless IDSC first receives, at a
minimum, a statement from persons IDSC believes are knowledgeable about your
estate. The statement must be in a form satisfactory to IDSC and must tell us
that, on your date of death, your estate did not include any property in the
United States for U.S. estate tax purposes. In other cases, we generally will
not take action regarding your certificate until we receive a transfer
certificate from the IRS or evidence satisfactory to IDSC that the estate is
being administered by an executor or administrator appointed, qualified and
acting within the United States. In general, a transfer certificate requires the
opening of an estate in the United States and provides assurance that the IRS
will not claim your certificate to satisfy estate taxes.
Important: The information in this prospectus is a brief and selective summary
of certain federal tax rules that apply to this certificate and is given on the
basis of current law and practice. Tax matters are highly individual and
complex. Investors should consult a qualified tax advisor regarding their own
position.
Trusts
If the investor is a trust, the policies and procedures described above will
apply with regard to each grantor who is a nonresident alien.
How your money is used and protected
Invested and guaranteed by IDSC
The IDS Flexible Savings Certificate is issued and guaranteed by IDSC, a wholly
owned subsidiary of AEFC. We are by far the largest issuer of face amount
certificates in the United States, with total assets of more than $____ billion
and a net worth in excess of $____ million on Dec. 31, 1997.
We back our certificates by investing the money received and keeping the
invested assets on deposit. Our investments generate interest and dividends, out
of which we pay:
interest to certificate owners; and
various expenses, including taxes, fees to AEFC for advisory and other
services and distribution fees to American Express Financial Advisors Inc.
and American Express Service Corporation (AESC).
For a review of significant events relating to our business, see "Management's
discussion and analysis of financial condition and results of operations." Our
certificates are not rated by a national rating agency.
<PAGE>
Most banks and thrifts offer investments known as certificates of deposit (CDs)
that are similar to our certificates in many ways. Early withdrawals of bank CDs
often result in penalties. Banks and thrifts generally have federal deposit
insurance for their deposits and lend much of the money deposited to
individuals, businesses and other enterprises. Other financial institutions and
some insurance companies may offer investments with comparable combinations of
safety and return on investment.
Regulated by government
Because the IDS Flexible Savings Certificate is a security, its offer and sale
are subject to regulation under federal and state securities laws. (It is a
face-amount certificate -- not a bank product, an equity investment, a form of
life insurance or an investment trust.)
The federal Investment Company Act of 1940 requires us to keep investments on
deposit in a segregated custodial account to protect all of our outstanding
certificates. These investments back the entire value of your certificate
account. Their amortized cost must exceed the required carrying value of the
outstanding certificates by at least $250,000. As of Dec. 31, 1997, the
amortized cost of these investments exceeded the required carrying value of our
outstanding certificates by more than $___ million.
Backed by our investments
Our investments are varied and of high quality. This was the composition of our
portfolio as of Dec. 31, 1997:
Type of investment Net amount invested
Government agency bonds Corporate and other bonds Preferred stocks Mortgages
Municipal bonds Cash and cash equivalents
As of Dec. 31, 1997 about __% of our securities portfolio (including bonds and
preferred stocks) is rated investment grade. For additional information
regarding securities ratings, please refer to Note 3B in the financial
statements.
Most of our investments are on deposit with American Express Trust Company,
Minneapolis, although we also maintain separate deposits as required by certain
states. American Express Trust Company is a wholly owned subsidiary of AEFC.
Copies of our Dec. 31, 1997 schedule of Investments in Securities of
Unaffiliated Issuers are available upon request. For comments regarding the
valuation, carrying values and unrealized appreciation (depreciation) of
investment securities, see Notes 1, 2 and 3 to the financial statements.
<PAGE>
Investment policies
In deciding how to diversify the portfolio -- among what types of investments in
what amounts -- the officers and directors of IDSC use their best judgment,
subject to applicable law. The following policies currently govern our
investment decisions:
Debt securities-
Most of our investments are in debt securities as referenced in the table in
"Backed by our investments" under "How your money is used and protected."
Purchasing securities on margin -
We will not purchase any securities on margin or participate on a joint basis or
a joint-and-several basis in any trading account in securities.
Commodities -
We have not and do not intend to purchase or sell commodities or commodity
contracts except to the extent that transactions described in "Financial
transactions including hedges" in this section may be considered commodity
contracts.
Underwriting -
We do not intend to engage in the public distribution of securities issued by
others. However, if we purchase unregistered securities and later resell them,
we may be considered an underwriter under federal securities laws.
Borrowing money -
From time to time we have established a line of credit if management believed
borrowing was necessary or desirable. We may pledge some of our assets as
security. We may occasionally use repurchase agreements as a way to borrow
money. Under these agreements, we sell debt securities to our lender, and
repurchase them at the sales price plus an agreed-upon interest rate within a
specified period of time.
Real estate -
We may invest in limited partnership interests in limited partnerships that
either directly, or indirectly through other limited partnerships, invest in
real estate. We may invest directly in real estate. We also invest in mortgage
loans.
Lending securities -
We may lend some of our securities to broker-dealers and receive cash equal to
the market value of the securities as collateral. We invest this cash in
short-term securities. If the market value of the securities goes up, the
borrower pays us additional cash. During the course of the loan, the borrower
makes cash payments to us equal to all interest, dividends and other
distributions paid on the loaned securities. We will try to vote these
securities if a major event affecting our investment is under consideration.
<PAGE>
When-issued securities-
Some of our investments in debt securities are purchased on a when-issued basis.
It may take as long as 45 days or more before these securities are issued and
delivered to us. We generally do not pay for these securities or start earning
on them until delivery. We have established procedures to ensure that sufficient
cash is available to meet when-issued commitments.
Financial transactions including hedges-
We buy or sell various types of options contracts for hedging purposes or as a
trading technique to facilitate securities purchases or sales. We buy interest
rate caps for hedging purposes. These pay us a return if interest rates rise
above a specified level. If interest rates do not rise above a specified level,
the interest rate caps do not pay us a return. IDSC may enter into other
financial transactions, including futures and other derivatives, for the purpose
of managing the interest rate exposures associated with IDSC's assets or
liabilities. We do not use derivatives for speculative purposes.
Illiquid securities -
A security is illiquid if it cannot be sold in the normal course of business
within seven days at approximately its current market value. Some investments
cannot be resold to the U.S. public because of their terms or government
regulations. All securities, however can be sold in private sales, and many may
be sold to other institutions and qualified buyers or on foreign markets. IDSC's
investment advisor 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 15% of
IDSC's investment portfolio will be held in securities that are illiquid. In
valuing its investment portfolio to determine this 15% limit, IDSC will use
statutory accounting under an SEC order. This means that, for this purpose, the
portfolio will be valued in accordance with applicable Minnesota law governing
investments of life insurance companies, rather than generally accepted
accounting principles.
Restrictions -
There are no restrictions on concentration of investments in any particular
industry or group of industries or on rates of portfolio turnover.
Certain investment considerations
The price of bonds generally falls as interest rates increase, and rises as
interest rates decrease. The price of a bond also fluctuates if its credit
rating is upgraded or downgraded. The price of bonds below investment grade may
react more to the ability of a company to pay interest and principal when due
than to changes in interest rates. They have greater price fluctuations, are
more likely to experience a default, and sometimes are referred to as junk
bonds. Reduced market liquidity for these bonds may occasionally make it more
difficult to value them. In valuing bonds, IDSC relies both on independent
rating agencies and the investment manager's credit analysis. Under normal
<PAGE>
circumstances, at least 85% of the securities in IDSC's Portfolio will be rated
investment grade, or in the opinion of IDSC's investment advisor will be the
equivalent of investment grade. Under normal circumstances, IDSC will not
purchase any security rated below B- by Moody's Investors Service, Inc. or
Standard & Poor's Corporation. Securities that are subsequently downgraded in
quality may continue to be held by IDSC and will be sold only when IDSC believes
it is advantageous to do so.
As of Dec. 31, 1997, IDSC held about __% of its investment portfolio (including
bonds, preferred stocks, mortgages and cash equivalents) in investments rated
below investment grade.
When-issued securities are subject to market fluctuations and they may affect
IDSC's investment portfolio the same as owned securities.
Derivatives are financial instruments whose performance is derived, at least in
part, from the performance of an underlying asset, security or index. A small
change in the value of the underlying asset, security or index may cause a
sizable gain or loss in the fair value of the derivative.
How your money is managed
Relationship between IDSC and American Express Financial Corporation
IDSC was originally organized as Investors Syndicate of America, Inc., a
Minnesota corporation, on Oct. 15, 1940, and began business as an issuer of face
amount investment certificates on Jan. 1, 1941. The company became a Delaware
corporation on Dec. 31, 1977, and changed its name to IDS Certificate Company on
April 2, 1984.
Before IDSC was created, AEFC (formerly known as IDS Financial Corporation), our
parent company, had issued similar certificates since 1894. As of Jan. 1, 1995,
IDS Financial Corporation changed its name to AEFC. IDSC and AEFC have never
failed to meet their certificate payments.
During its many years in operation, AEFC has become a leading manager of
investments in mortgages and securities. As of Dec. 31, 1997, AEFC managed
investments, including its own, of more than $___ billion.
AEFC itself is a wholly owned subsidiary of American Express Company, a
financial services company with executive offices at American Express Tower,
World Financial Center, New York, NY 10285. American Express Company is a
financial services company engaged through subsidiaries in other businesses
including:
<PAGE>
travel related services (including American Express(R) Card and Travelers
Cheque operations through American Express Travel Related Services Company,
Inc. and its subsidiaries); and
international banking services (through American Express Bank Ltd. and its
subsidiaries)
About AESC
AESC is a wholly owned subsidiary of American Express Travel Related Services
Inc., which in turn is a wholly-owned subsidiary of American Express Company.
Capital structure and certificates issued
IDSC has authorized, issued and has outstanding 150,000 shares of common stock,
par value of $10 per share. AEFC owns all of the outstanding shares.
As of the fiscal year ended Dec. 31, 1997, IDSC had issued (in face amount)
$__________ of installment certificates and $__________ of single payment
certificates. As of Dec. 31, 1997, IDSC had issued (in face amount) $__________
of installment certificates and $__________ of single payment certificates since
its inception in 1941.
Investment management and services
Under an Investment Advisory and Services Agreement, AEFC acts as our investment
advisor and is responsible for:
providing investment research;
making specific investment recommendations; and
executing purchase and sale orders according to our policy of obtaining
the best price and execution.
All these activities are subject to direction and control by our board of
directors and officers. Our agreement with AEFC requires annual renewal by our
board, including a majority of directors who are not interested persons of AEFC
or IDSC as defined in the federal Investment Company Act of 1940.
For its services, we pay AEFC a monthly fee, equal on an annual basis to a
percentage of the total book value of certain assets (included assets).
<PAGE>
Advisory and services fee computation:
Included assets Percentage of total book value
First $250 million 0.75%
Next 250 million 0.65
Next 250 million 0.55
Next 250 million 0.50
Any amount over 1 billion 0.45
Included assets are all assets of IDSC except mortgage loans, real estate, and
any other asset on which we pay an outside advisory or service fee.
Advisory and services fee for the past three years:
Percentage of
Year Total fees included assets
1997 $ %
1996 $16,989,093 0.50
1995 $16,472,458 0.50
Estimated advisory and services fees for 1998 are $__________.
Other expenses payable by IDSC: The Investment Advisory and Services Agreement
provides that we will pay:
costs incurred by us in connection with real estate and mortgages;
taxes;
depository and custodian fees;
brokerage commissions;
fees and expenses for services not covered by other agreements and
provided to us at our request, or by requirement, by attorneys, auditors,
examiners and professional consultants who are not officers or employees of
AEFC;
fees and expenses of our directors who are not officers or employees of
AEFC;
provision for certificate reserves (interest accrued on certificate owner
accounts); and
expenses of customer settlements not attributable to sales function.
<PAGE>
Distribution
Under a Distribution Agreement with AESC, for certificates sold through AEFD, we
pay AESC for the distribution of this certificate as follows:
0.20% of the initial payment on the issue date of the certificate; and
0.20% of the certificate's reserve at the beginning of the second and
subsequent quarters from issue date.
Under a Distribution Agreement with American Express Financial Advisors Inc., a
wholly-owned subsidiary of AEFC, we pay for the distribution of this certificate
by American Express Financial Advisors Inc. as follows:
0.20% of the initial payment on the issue date of the certificate; and
0.20% of the certificate's reserve at the beginning of the second and
subsequent quarters from issue date.
This fee is not assessed to your certificate account.
AEFD is a channel for direct marketing of financial services to American Express
card members and others.
Total distribution fees paid to American Express Financial Advisors Inc. for all
series of certificates amounted to $________ during the year ended Dec. 31,
199_. We expect to pay American Express Financial Advisors Inc. distribution
fees amounting to $________ during 1998.
See Note 1 to Financial statements regarding deferral of distribution fee
expense.
American Express Financial Advisors Inc. and AESC pay other selling expenses in
connection with services to us. Our board of directors, including a majority of
directors who are not interested persons of American Express Financial Advisors
Inc., AESC or IDSC, approved this distribution agreement.
Transfer Agent
Under a Transfer Agency Agreement American Express Client Service Corporation
(AECSC) maintains certificate owner accounts and records. IDSC pays AECSC a
monthly fee of one-twelfth of $10.353 per certificate owner account for this
service.
<PAGE>
Employment of other American Express affiliates
AEFC may employ an affiliate of American Express Company as executing broker for
our portfolio transactions only if:
we receive prices and executions at least as favorable as those offered by
qualified independent brokers performing similar services;
the affiliate charges us commissions consistent with those charged to
comparable unaffiliated customers for similar transactions; and
the affiliate's employment is consistent with the terms of the current
Investment Advisory and Services Agreement and federal securities laws.
Directors and officers
IDSC's directors, chairman, president and controller are elected annually for a
term of one year. The other executive officers are appointed by the president.
We paid a total of $______ during 1997 to directors not employed by AEFC.
Board of directors
David R. Hubers*
Born in 1943. Director since 1987.
President and chief executive officer of AEFC since 1993. Senior vice president
and chief financial officer of AEFC from 1984 to 1993.
Charles W. Johnson
Born in 1929. Director since 1989.
Director, Communications Holdings, Inc. Former vice president and group
executive, Industrial Systems, with Honeywell, Inc. Retired 1989.
Richard W. Kling*
Born in 1940. Director since 1996.
Chairman of the board of directors since 1996. Director of IDS Life Insurance
Company since 1984; president since 1994. Executive vice president of Marketing
and Products of AEFC from 1988 to 1994. Senior vice president of AEFC since
1994. Director of IDS Life Series Fund, Inc. and member of the board of managers
of IDS Life Variable Annuity Funds A and B.
<PAGE>
Edward Landes
Born in 1919. Director since 1984.
Development consultant. Director of IDS Life Insurance Company of New York.
Director of Endowment Development, YMCA of Metropolitan Minneapolis. Vice
president for Financial Development, YMCA of Metropolitan Minneapolis from 1985
through 1995. Former sales manager - Supplies Division and district manager -
Data Processing Division of IBM Corporation. Retired 1983.
John V. Luck, Ph.D.
Born in 1926. Director since 1987.
Former senior vice president - Science and Technology with General Mills, Inc.
Employed with General Mills, Inc. since 1968. Retired 1988.
James A. Mitchell*
Born in 1941. Director since 1994.
Chairman of the board of directors from 1994 to 1996. Executive vice president -
Marketing and Products of AEFC since 1994. Senior vice president - Insurance
Operations of AEFC and president and chief executive officer of IDS Life
Insurance Company from 1986 to 1994.
Harrison Randolph
Born in 1916. Director since 1968.
Engineering, manufacturing and management consultant since 1978.
Gordon H. Ritz
Born in 1926. Director since 1968.
Director, Mid-America Publishing and Atrix International, Inc. Former president,
Com Rad Broadcasting Corp. Former director, Sunstar Foods.
Stuart A. Sedlacek*
Born in 1957. Director since 1994.
President since 1994. Vice president - Assured Assets of AEFC since 1994. Vice
president and portfolio manager from 1988 to 1993. Executive vice president -
Assured Assets of IDS Life Insurance Company since 1994.
* "Interested Person" of IDSC as that term is defined in Investment Company Act
of 1940.
Executive officers
Stuart A. Sedlacek
Born in 1957. President since 1994.
<PAGE>
Timothy S. Meehan
Born in 1957. Secretary since 1995.
Secretary of AEFC and American Express Financial Advisors Inc. since 1995.
Senior counsel to AEFC since 1995. Counsel from 1990 to 1995.
Lorraine R. Hart
Born in 1951. Vice president - Investments since 1994.
Vice president - Insurance Investments of AEFC since 1989. Vice president -
Investments of IDS Life Insurance Company since 1992.
Jay C. Hatlestad
Born in 1957. Vice president and controller of IDSC since 1994. Manager of
Investment Accounting of IDS Life Insurance Company from 1986 to 1994.
Bruce A. Kohn
Born in 1951. Vice president and general counsel since 1993. Senior counsel to
AEFC since 1996. Counsel to AEFC from 1992 to 1996. Associate counsel from 1987
to 1992.
F. Dale Simmons
Born in 1937. Vice president - Real Estate Loan Management since 1993. Vice
president of AEFC since 1992. Senior portfolio manager of AEFC since 1989.
Assistant vice president from 1987 to 1992.
The officers and directors as a group beneficially own less than 1% of the
common stock of American Express Company.
IDSC has provisions in its bylaws relating to the indemnification of its
officers and directors against liability, as permitted by law. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers or persons controlling the registrant pursuant
to the foregoing provisions, the registrant has been informed that in the
opinion of the SEC such indemnification is against public policy as expressed in
the Act and is therefore unenforceable.
Auditors
A firm of independent auditors audits our financial statements at the close of
each fiscal year (Dec. 31). Copies of our annual financial statements (audited)
and semiannual financial statements (unaudited) are available to any certificate
owner upon request.
Ernst & Young LLP, Minneapolis, has audited the financial statements for each of
the years in the three-year period ended Dec. 31, 1997. These statements are
included in this prospectus. Ernst & Young LLP is also the auditor for American
Express Company, the parent company of AEFC and IDSC.
<PAGE>
IDS Certificates
Other certificates issued by IDSC and offered through AEFD:
IDS Cash Reserve Certificate - A single payment certificate that permits
additional investments on which IDSC guarantees interest in advance for a
three-month term.
IDS Installment Certificate - An installment payment certificate that declares
interest in advance for a three-month period and offers bonuses in the third
through sixth years for regular investments.
IDS Staggered Stock Market Certificate - A certificate that pays interest linked
to one-year stock market performance for a series of one-year terms starting
every month or at other intervals the client selects.
IDS Preferred Investors Certificate - A single payment certificate that combines
a competitive fixed rate of return with IDSC's guarantee of principal for large
investments of $250,000 to $5 million.
IDS Stock Market Certificate - A single payment certificate that calculates all
or part of your interest based on stock market performance, as measured by a
broad market index, with IDSC's guarantee of return of principal.
<PAGE>
Appendix
Description of 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, Baa, Ba, B, Caa, Ca and C. Ratings by Standard & Poor's
Corporation are AAA, AA, A, BBB, BB, B, CCC, CC, C and D.
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.
Ba/BB - Considered to have speculative elements. The protection of interest and
principal payments may be very moderate.
B - Lack characteristics of more desirable investments. There may be small
assurance over any long period of time of the payment of interest and principal.
Caa/CCC - Are of poor standing. Such issues may be in default or there may be
risk with respect to principal or interest.
Ca/CC - Represent obligations that are highly speculative. Such issues are often
in default or have other marked shortcomings.
C - Are obligations with a higher degree of speculation. These securities have
major risk exposures to default.
D - Are in payment default. The D rating is used when interest payments or
principal payments are not made on the due date.
Non-rated securities will be considered for investment. When assessing each
non-rated security, IDSC will consider the financial condition of the issuer or
the protection afforded by the terms of the security.
<PAGE>
(Back Cover)
Quick telephone reference
American Express Financial Direct Service Team
Withdrawals, transfers, inquiries
National: 800-297-7378
TTY Service
For the hearing impaired
800-710-5260
Distributed by American Express Financial Direct
IDS Flexible Savings Certificate
IDS Tower 10
Minneapolis, MN 55440-0010
<PAGE>
IDS Cash Reserve Certificate
Prospectus
April 28, 1998
Earn attractive rates with ready access to your cash reserves.
IDS Cash Reserve Certificates are issued by IDS Certificate Company (IDSC). You
can purchase this certificate with an initial investment of at least $1,000 or
monthly investments of at least $50. Your principal and interest are guaranteed
by IDSC. Your certificate earns a fixed rate of interest, declared every three
months. Investments in the certificate may continue for successive three-month
terms up to a total of 20 years from the issue date of the certificate. Unless
you receive prior authorization from IDSC, your total investment, excluding
interest earned, cannot exceed $1 million. Your interest rate will be determined
as described in "About the certificate."
As is the case with other investment companies, 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.
This certificate is backed by IDSC's investments on deposit rather than
guaranteed or insured by the government or someone else. See "Invested and
guaranteed by IDSC" and "Regulated by government" under "How your money is used
and protected."
IDS Certificate Company is not a bank or financial institution, and the
securities it offers are not deposits or obligations of, backed or guaranteed or
endorsed by any bank or financial institution nor are they insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board or any other
agency.
This prospectus describes terms and conditions of your IDS Cash Reserve
Certificate. It contains facts that can help you decide if the certificate is
the right investment for you. Read the prospectus before you invest and keep it
for future reference. No one has the authority to change the terms and
conditions of the IDS Cash Reserve Certificate as described in the prospectus,
or to bind IDSC by any statement not in it.
IDS Certificate Company
IDS Tower 10
Minneapolis, MN 55440-0010
800-297-7378 (toll free)
<PAGE>
Distributor:
American Express Service Corporation
IDS Tower 10
Minneapolis, MN 55440-0010
TTY numbers:
800-710-5260 (toll free)
<PAGE>
An American Express company
Where to get information about IDSC
IDS Certificate Company is subject to the reporting requirements of the
Securities Exchange Act of 1934. Reports and other information on IDSC are filed
with the Securities and Exchange Commission (SEC) and are available on the SEC
Internet web site (http://www.sec.gov). Copies can be obtained from the Public
Reference Section of the SEC, 450 5th St., N.W., Room 1024, Washington, D.C.
20549, at prescribed rates. Or you can inspect and copy information in person at
the SEC's Public Reference Section and at the following regional offices:
Northeast Regional Office
7 World Trade Center
Suite 1300
New York, NY 10048
Midwest Regional Office
500 West Madison St.
Suite 1400
Chicago, IL 60661
Pacific Regional Office
5670 Wilshire Blvd.
11th Floor
Los Angeles, CA 90036
Initial interest rates
IDSC guarantees a fixed interest rate for each three-month term during the life
of the certificate. For your initial term, IDSC guarantees that when the rate
for new purchases takes effect, the rate will be within a specified range of the
average rate for three-month certificates of deposit as published in the most
recent BANK RATE MONITOR Top 25 Market AverageTM, North Palm Beach, FL 33408, as
explained under "About the certificate."
<PAGE>
Here are the interest rates in effect on the date of this prospectus, April 28,
1998:
<TABLE>
<CAPTION>
<S> <C> <C>
Investment Simple Effective
amount interest rate* annualized yield**
- ------------------------------------ ----------------------------------- -----------------------------------
$50 to $999
- ------------------------------------ ----------------------------------- -----------------------------------
$1,000 to $24,999
- ------------------------------------ ----------------------------------- -----------------------------------
$25,000 or more
- ------------------------------------ ----------------------------------- -----------------------------------
</TABLE>
* Rates may depend on factors described in "Rates for new purchases" under
"About the certificate."
** Assuming monthly compounding.
These rates may or may not be in effect when you apply to purchase your
certificate. Rates for later three-month terms are set at the discretion of IDSC
and may also differ from the rates shown here.
We reserve the right to issue other securities with different terms.
<PAGE>
Contents
Table of contents
About the certificate p
Investment amounts and terms p
Face amount and principal p
Value at maturity p
Receiving cash during the term p
Interest p
Rates for new purchases p
Promotions and pricing flexibility p
Additional investments p
How to invest your funds p
Buying your certificate p
When your certificate term ends p
Three ways to receive payment when you withdraw funds p
Retirement plans: special policies p
Taxes on your earnings p
Retirement accounts p
Gifts to minors p
How to determine the correct TIN p
Foreign investors p
Trusts p
How your money is used and protected p
Invested and guaranteed by IDSC p
Regulated by government p
Backed by our investments p
Investment policies p
Certain investment considerations p
How your money is managed p
Relationship between IDSC and American
Express Financial Corporation p
About American Express Service Corporation p
Capital structure and certificates issued p
Investment management and services p
Distribution p
Transfer Agent p
About American Express Service Corporation p
Employment of other American Express affiliates p
Directors and officers p
<PAGE>
Auditors p
IDS Certificates p
Appendix p
Annual financial information p
Summary of selected financial information p
Management's discussion and analysis of financial
condition and results of operations p
Report of independent auditors p
Financial statements p
Notes to financial statements p
<PAGE>
About the certificate
Investment amounts and terms
You may purchase the IDS Cash Reserve Certificate with an initial investment of
at least $1,000 or monthly investments of at least $50 through scheduled bank
authorization or payroll deduction. Your total investments over the life of the
certificate may not exceed $1 million unless you receive prior authorization
from IDSC.
The certificate may be used as an investment for your Individual Retirement
Account (IRA), 401(k) plan account or other qualified retirement plan account. A
minimum investment of $50 per month is required for these types of accounts. If
so used, the amount of your contribution (investment) will be subject to any
limitations of the plan and applicable federal law.
Face amount and principal
The face amount of the certificate is the amount of your initial investment, and
will remain the same over the life of the certificate.
The principal is the amount that is reinvested at the beginning of each
subsequent term, and is calculated as follows:
Principal equals Face amount (initial investment)
plus At the end of a term, interest credited to your account during the term
minus Any interest paid to you in cash plus Any additional investments to your
certificate minus Any withdrawals, fees and applicable penalties.
For example: Assume your initial investment (face amount) of $5,000 has earned
$75 of interest during the term. You have not taken any interest as cash, or
made any withdrawals. You have invested an additional $2,500 at the beginning of
the next term. Your principal for the next term will equal:
$5,000.00 Face amount (initial investment)
plus $75.00 Interest credited to your account
minus ($0.00) Interest paid to you in cash
plus $2,500.00 Additional investment to your certificate
minus ($0.00) Withdrawals and applicable penalties or fees
=============
$7,575.00 Principal at the beginning of the next term.
Value at maturity
Your certificate matures 20 years from its issue date. At maturity, the value of
your certificate will be the total of your actual investment, plus credited
interest not paid to
<PAGE>
you in cash, less withdrawals, penalties and fees. When your certificate
matures, you will receive a distribution for your principal, plus any credited
interest, less any withdrawals, penalties and fees. Bank authorizations will
automatically be stopped at maturity or full withdrawal.
Receiving cash during the term
If you need your money before your certificate term ends, you may withdraw part
or all of its value at any time, less any penalties that apply. Procedures for
withdrawing money, as well as conditions under which penalties apply, are
described in the service document.
Interest
Your investments earn interest from the date they are credited to your account.
Interest is compounded and credited at the end of each certificate month (on the
monthly anniversary of the issue date).
IDSC declares and guarantees a fixed rate of interest for each three month term
during the life of your certificate. We calculate the amount of interest you
earn each certificate month by:
applying the interest rate then in effect to your balance each day;
adding these daily amounts to get a monthly total; and
subtracting interest accrued on any amount you withdraw during the
certificate month.
Interest is calculated on a 30-day month and 360-day year basis.
Rates for new purchases
When your application is accepted, and we have received your initial investment,
we will send you a confirmation showing the rate that your investment will earn
for the first term. For accounts of $1,000 to $24,999.99 IDSC guarantees that
this rate will be within a range from 20 basis points (0.20%) below to 80 basis
points (0.80%) above the average interest rate published for three-month CDs in
the BANK RATE MONITOR Top 25 Market AverageTM (the BRM Average). For example, if
the average rate most recently published is 4.00%, our rate in effect for that
week for amounts of $1,000 to $24,999.99 would be between 3.80% to 4.80%. For
accounts of $25,000 or more, this rate will be within a range from 0 basis
points (0.0%) below to 100 basis points (1.00%) above the same index rate. For
accounts of less than $1,000, this rate will be within a range of 125 basis
points (1.25%) below to 25 basis points (0.25%) below this average interest
rate.
<PAGE>
The BANK RATE MONITOR is a weekly magazine published in North Palm Beach, FL
33408, by Advertising News Service Inc., an independent national news
organization that collects and disseminates information about bank products and
interest rates. Advertising News Service Inc. has no connection with IDSC,
American Express Financial Corporation (AEFC), or any of their affiliates.
The BRM Average is an index of rates and annual effective yields offered on
various length certificates of deposit by large banks and thrifts in 25
metropolitan areas. The frequency of compounding varies among the banks and
thrifts. Certificates of deposit in the BRM Average are government insured
fixed-rate time deposits.
The BANK RATE MONITOR may be available in your local library. To obtain
information on the current BRM Average rates, call American Express Financial
Direct (AEFD) at the telephone numbers listed on the back cover between 8 a.m.
and 6 p.m. your local time.
Rates for new purchases are reviewed and may change weekly. Normally, the rate
you receive will be the higher of:
the rate in effect on the date of your application; or
the rate in effect on the date your application is accepted by IDSC.
However if your application bears a date more than seven days before its receipt
by IDSC, the rate you receive will be the higher of:
the rate in effect on the date your application is accepted by IDSC; or
the rate in effect seven days prior to receipt.
Except for specific promotions, IDSC guarantees an initial rate 25 basis points
above the rate offered to the general public on this IDS certificate if it is
purchased by using the CD transfer service offered by American Express Financial
Advisors Inc. to help you transfer money from a bank or thrift CD account to
American Express Financial Advisors Inc. investments. To be eligible for this
rate, you must transfer at least $10,000 from a CD account to IDSC to purchase
one or more IDS Cash Reserve Certificates and/or IDS Flexible Savings
Certificates, and this rate will only apply to those certificates.
<PAGE>
Promotions and pricing flexibility
From time to time, IDSC may sponsor or participate in promotions involving one
or more of the certificates and their respective terms. For example, we may
offer different rates to new clients, to existing clients, or to individuals who
purchase or use other products or services offered by American Express Company
or its affiliates. Rates also may vary depending on the amount you invest, your
geographic location and whether the certificate is purchased for an IRA or
qualified retirement plan account.
These promotions will generally be for a specified period of time. If we offer a
promotion, the rates for new purchases will be within the range of rates
described under "Rates for new purchases," above.
Rates for future terms: Interest on your certificate for future three-month
terms may be greater or less than the rates you receive during the first three
months. In setting future rates, a primary consideration will be the prevailing
investment climate, including three-month CD rates as reflected in the BRM
Average. Nevertheless, we have complete discretion as to what interest shall be
declared beyond the initial three-month term. If the BRM Average is no longer
publicly available or feasible to use, IDSC may use another similar index as a
guide for setting rates.
Performance: From February 199__ through February 199__, IDS Cash Reserve yields
were generally higher than average bank and thrift three-month CD yields, as
measured by the BRM Average (prior to January 13, 1993, yields were measured by
the BRM National Index, an average of CD yields in 10 cities).
Yields from February 199__ through February 199__
4% _________IDS Cash Reserve Certificate
3% .........Certificate of Deposit - Three Month
2% ---------Money Market Deposit Account
Three lines comparing the yields for IDS Cash Reserve
Certificate versus money market deposit accounts and
three-month certificates of deposit, with IDS Cash Reserve's
line generally above the other two.
`92 `93 `94 `95 `96 `97
This graph compares past yields offered on IDS Cash Reserve Certificate to those
of three-month CDs and money market deposit accounts and should not be
considered a prediction of future performance.
<PAGE>
How to invest your funds
Buying your certificate
Fill out and submit an application to open an account with us and purchase a
certificate. We will process the application at our corporate offices in
Minneapolis. When your application is accepted and we have received your initial
investment, we will send you a confirmation of your purchase, indicating your
account number and applicable rate of interest for your first term, as described
under "Rates for new purchases." See "Purchase policies" below.
Additional investments
You may make additional investments at any time. Additional investments must be
at least $50 and your total investment, less withdrawals, may not exceed $1
million (unless you receive prior authorization from IDSC to invest more). You
will earn interest on additional investments from the date we accept them. IDSC
will send a confirmation of additional investments.
Important: When opening an account, you must provide IDSC with your correct
Taxpayer Identification Number (Social Security or Employer Identification
Number). See "Taxes on your earnings."
When your certificate term ends
Shortly before the end of your certificate's term we will send you a notice
indicating the interest rate that will apply to the new term. Unless you tell us
otherwise, your certificate will automatically continue for another term. The
interest rate that will apply to your new term will be the rate in effect on the
day the new term begins. This rate of interest will not be changed during that
term unless your certificate's principal falls below a break point for a lower
interest rate.
Other full and partial withdrawal policies:
If you request a partial or full withdrawal of a certificate recently
purchased or added to by a check or money order that is not guaranteed, we
will wait for your check to clear. Please expect a minimum of 10 days from
the date of your payment before IDSC mails a check to you. A check may be
mailed earlier if the bank provides evidence that your check has cleared.
If your certificate is pledged as collateral, any withdrawal will be
delayed until we get approval from the secured party.
<PAGE>
Any payments to you may be delayed under applicable rules, regulations or
orders of the SEC.
Retirement plans: special policies
If the certificate is purchased for a 401(k) plan or other qualified
retirement plan account, the terms and conditions of the certificate apply
to the plan as the owner of this certificate. However, the terms of the
plan, as interpreted by the plan trustee or administrator, will determine
how a participant's individual account under the plan is administered.
These terms may differ from the terms of the certificate.
If your certificate is held in a Custodial Retirement Plan (or Keogh
plan), special rules may apply at maturity. If no other investment
instructions are provided directing how to handle your certificate at
maturity, the full value of the certificate will automatically transfer to
a new or existing cash management account according to the rules outlined
in the Custodial Retirement Plan document.
The annual custodial fee for IRA or non-401(k) qualified retirement plans
may be deducted from your certificate account. It may reduce the amount
payable at maturity or the amount received upon an early withdrawal.
Retirement plan withdrawals may be subject to withdrawal penalties or loss
of interest even if they are not subject to federal tax penalties.
If you withdraw all funds from your last account in an IRA at American
Express Trust Company, a termination fee will apply as set out in Your
Guide to IRAs, the IRS disclosure information received when you opened your
account.
The IRA termination fee will be waived if a withdrawal occurs after you
have reached age 70 1/2 or upon the owner's death.
Taxes on your earnings
Interest on your certificate is taxable when credited to your account. Each
calendar year we provide the certificate account owner and the IRS with reports
of all earnings over $10 (Form 1099). Withdrawals are reported to the
certificate account owner and the IRS on Form 1099-B, Proceeds from Broker
Transactions.
Retirement accounts
If you are using the certificate as an investment for an IRA, 401(k) plan
account or other qualified retirement plan account, income tax rules for your
IRA or qualified plan apply. Generally, you will pay no income taxes on your
investment's earnings -- and, in many cases, on part or all of the investment
itself -- until you begin to make withdrawals.
<PAGE>
IDSC will withhold federal income taxes of 10% on IRA withdrawals unless you
tell us not to. IDSC is required to withhold federal income taxes of 20% on most
other qualified plan distributions, unless the distribution is directly rolled
over to another qualified plan or IRA.
Withdrawals from retirement accounts are generally subject to a penalty tax of
10% by the IRS if you make them before age 59 1/2, unless you are disabled or if
they are made by your beneficiary in the event of your death. Other exceptions
may also apply. Also, withdrawals of principal during a certificate month may be
subject to the certificate's provision for loss of interest.
Consult your tax advisor to see how these rules apply to you before you request
a distribution from your plan or IRA.
Gifts to minors
The certificate may be given to a minor under either the Uniform Gifts or
Uniform Transfers to Minors Act (UGMA/UTMA), whichever applies in your state.
UGMAs/UTMAs are irrevocable. Generally, under federal tax laws, income over
$1,200 on property owned by children under age 14 will be taxed at the parents'
marginal tax rate, while income on property owned by children 14 or older will
be taxed at the child's rate.
Your Taxpayer Identification Number (TIN) and backup withholding: As with any
financial account you open, you must list your current and correct Taxpayer
Identification Number (TIN) -- either your Social Security or Employer
Identification Number. The TIN must be certified under penalties of perjury on
your application when you open an account.
If you don't provide the TIN, or the TIN you report is incorrect, you could be
subject to backup withholding of 31% of your interest earnings. You could also
be subject to further penalties, such as:
a $50 penalty for each failure to supply your correct TIN;
a civil penalty of $500 if you make a false statement that results in no
backup withholding; and
criminal penalties for falsifying information.
You could also be subject to backup withholding because you failed to report
interest on your tax return as required.
<PAGE>
To help you determine the correct TIN to use on various types of accounts,
please use this chart:
How to determine the correct TIN
<TABLE>
<CAPTION>
<S> <C>
For this type of account: Use the Social Security or 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 trust or estate The legal entity
(not the personal representative or trustee, unless
no legal entity is designated in the account title)
- ------------------------------------------------------ -----------------------------------------------------
- ------------------------------------------------------ -----------------------------------------------------
Sole proprietorship The owner
- ------------------------------------------------------ -----------------------------------------------------
- ------------------------------------------------------ -----------------------------------------------------
Partnership The partnership
- ------------------------------------------------------ -----------------------------------------------------
- ------------------------------------------------------ -----------------------------------------------------
Corporate The corporation
- ------------------------------------------------------ -----------------------------------------------------
- ------------------------------------------------------ -----------------------------------------------------
Association, club or tax-exempt organization The organization
- ------------------------------------------------------ -----------------------------------------------------
</TABLE>
For details on TIN requirements, call 800-297-7378 or ask your financial
consultant for federal Form W-9, "Request for Taxpayer Identification Number and
Certification."
Foreign investors
If you are not a citizen or resident of the United States, you must supply AEFD
with Form W-8, Certificate of Foreign Status when you purchase your certificate,
and you must resupply it every three years. You must also supply both a current
mailing address
<PAGE>
and an address of foreign residency, if different. IDSC will not accept
purchases of certificates by nonresident aliens without an appropriately
certified Form W-8 (or approved substitute). Also, if you do not supply Form W-8
you will be subject to backup withholding on interest payments and withdrawals.
Interest on the certificate is "portfolio interest" as defined in U.S. Internal
Revenue Code Section 871(h) if earned by a nonresident alien. Even though your
interest income is not taxed by the U.S. government, it will be reported at year
end to you and to the U.S. government on a Form 1042S, Foreign Person's U.S.
Source Income Subject to Withholding. The United States participates in various
tax treaties with foreign countries, which provide for sharing of tax
information.
Estate tax: If you are a nonresident alien and you die while owning a
certificate, then, depending on the circumstances, IDSC generally will not act
on instructions with regard to the certificate unless IDSC first receives, at a
minimum, a statement from persons IDSC believes are knowledgeable about your
estate. The statement must be in a form satisfactory to IDSC and must tell us
that, on your date of death, your estate did not include any property in the
United States for U.S. estate tax purposes. In other cases, we generally will
not take action regarding your certificate until we receive a transfer
certificate from the IRS or evidence satisfactory to IDSC that the estate is
being administered by an executor or administrator appointed, qualified and
acting within the United States. In general, a transfer certificate requires the
opening of an estate in the United States and provides assurance that the IRS
will not claim your certificate to satisfy estate taxes.
Important: The information in this prospectus is a brief and selective summary
of certain federal tax rules that apply to this certificate and is given on the
basis of current law and practice. Tax matters are highly individual and
complex. Investors should consult a qualified tax advisor regarding their own
position.
Trusts
If the investor is a trust, the policies and procedures described above will
apply with regard to each grantor who is a nonresident alien.
How your money is used and protected
Invested and guaranteed by IDSC
The IDS Cash Reserve Certificate is issued and guaranteed by IDSC, a wholly
owned subsidiary of AEFC. We are by far the largest issuer of face amount
certificates in the United States, with total assets of more than $____ billion
and a net worth in excess of $____ million on Dec. 31, 199_.
<PAGE>
We back our certificates by investing the money received and keeping the
invested assets on deposit. Our investments generate interest and dividends, out
of which we pay:
interest to certificate owners; and
various expenses, including taxes, fees to AEFC for advisory and other
services and distribution fees to American Express Financial Advisors Inc.
and American Express Service Corporation (AESC).
For a review of significant events relating to our business, see "Management's
discussion and analysis of financial condition and results of operations." Our
certificates are not rated by a national rating agency.
Most banks and thrifts offer investments known as certificates of deposit (CDs)
that are similar to our certificates in many ways. Early withdrawals of bank CDs
often result in penalties. Banks and thrifts generally have federal deposit
insurance for their deposits and lend much of the money deposited to
individuals, businesses and other enterprises. Other financial institutions and
some insurance companies may offer investments with comparable combinations of
safety and return on investment.
Regulated by government
Because the IDS Cash Reserve Certificate is a security, its offer and sale are
subject to regulation under federal and state securities laws. (It is a
face-amount certificate -- not a bank product, an equity investment, a form of
life insurance or an investment trust.)
The federal Investment Company Act of 1940 requires us to keep investments on
deposit in a segregated custodial account to protect all of our outstanding
certificates. These investments back the entire value of your certificate
account. Their amortized cost must exceed the required carrying value of the
outstanding certificates by at least $250,000. As of Dec. 31, 1997, the
amortized cost of these investments exceeded the required carrying value of our
outstanding certificates by more than $___ million.
Backed by our investments
Our investments are varied and of high quality. This was the composition of our
portfolio as of Dec. 31, 1997:
<PAGE>
Type of investment Net amount invested
Government agency bonds Corporate and other bonds Preferred stocks Mortgages
Municipal bonds Cash and cash equivalents
As of Dec. 31, 1997 about __% of our securities portfolio (including bonds and
preferred stocks) is rated investment grade. For additional information
regarding securities ratings, please refer to Note 3B in the financial
statements.
Most of our investments are on deposit with American Express Trust Company,
Minneapolis, although we also maintain separate deposits as required by certain
states. American Express Trust Company is a wholly owned subsidiary of AEFC.
Copies of our Dec. 31, 1997 schedule of Investments in Securities of
Unaffiliated Issuers are available upon request. For comments regarding the
valuation, carrying values and unrealized appreciation (depreciation) of
investment securities, see Notes 1, 2 and 3 to the financial statements.
Investment policies
In deciding how to diversify the portfolio -- among what types of investments in
what amounts -- the officers and directors of IDSC use their best judgment,
subject to applicable law. The following policies currently govern our
investment decisions:
Debt securities-
Most of our investments are in debt securities as referenced in the table in
"Backed by our investments" under "How your money is used and protected."
Purchasing securities on margin -
We will not purchase any securities on margin or participate on a joint basis or
a joint-and-several basis in any trading account in securities.
Commodities -
We have not and do not intend to purchase or sell commodities or commodity
contracts except to the extent that transactions described in "Financial
transactions including hedges" in this section may be considered commodity
contracts.
Underwriting -
We do not intend to engage in the public distribution of securities issued by
others. However, if we purchase unregistered securities and later resell them,
we may be considered an underwriter under federal securities laws.
<PAGE>
Borrowing money -
From time to time we have established a line of credit if management believed
borrowing was necessary or desirable. We may pledge some of our assets as
security. We may occasionally use repurchase agreements as a way to borrow
money. Under these agreements, we sell debt securities to our lender, and
repurchase them at the sales price plus an agreed-upon interest rate within a
specified period of time.
Real estate -
We may invest in limited partnership interests in limited partnerships that
either directly, or indirectly through other limited partnerships, invest in
real estate. We may invest directly in real estate. We also invest in mortgage
loans.
Lending securities -
We may lend some of our securities to broker-dealers and receive cash equal to
the market value of the securities as collateral. We invest this cash in
short-term securities. If the market value of the securities goes up, the
borrower pays us additional cash. During the course of the loan, the borrower
makes cash payments to us equal to all interest, dividends and other
distributions paid on the loaned securities. We will try to vote these
securities if a major event affecting our investment is under consideration.
When-issued securities-
Some of our investments in debt securities are purchased on a when-issued basis.
It may take as long as 45 days or more before these securities are issued and
delivered to us. We generally do not pay for these securities or start earning
on them until delivery. We have established procedures to ensure that sufficient
cash is available to meet when-issued commitments.
Financial transactions including hedges-
We buy or sell various types of options contracts for hedging purposes or as a
trading technique to facilitate securities purchases or sales. We buy interest
rate caps for hedging purposes. These pay us a return if interest rates rise
above a specified level. If interest rates do not rise above a specified level,
the interest rate caps do not pay us a return. IDSC may enter into other
financial transactions, including futures and other derivatives, for the purpose
of managing the interest rate exposures associated with [IDSC's/the Issuer's]
assets or liabilities. We do not use derivatives for speculative purposes.
Illiquid securities -
A security is illiquid if it cannot be sold in the normal course of business
within seven days at approximately its current market value. Some investments
cannot be resold to the U.S. public because of their terms or government
regulations. All securities, however can be sold in private sales, and many may
be sold to other institutions and qualified buyers or on foreign markets. IDSC's
investment advisor 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 15% of
<PAGE>
IDSC's investment portfolio will be held in securities that are illiquid. In
valuing its investment portfolio to determine this 15% limit, IDSC will use
statutory accounting under an SEC order. This means that, for this purpose, the
portfolio will be valued in accordance with applicable Minnesota law governing
investments of life insurance companies, rather than generally accepted
accounting principles.
Restrictions -
There are no restrictions on concentration of investments in any particular
industry or group of industries or on rates of portfolio turnover.
Certain investment considerations
The price of bonds generally falls as interest rates increase, and rises as
interest rates decrease. The price of a bond also fluctuates if its credit
rating is upgraded or downgraded. The price of bonds below investment grade may
react more to the ability of a company to pay interest and principal when due
than to changes in interest rates. They have greater price fluctuations, are
more likely to experience a default, and sometimes are referred to as junk
bonds. Reduced market liquidity for these bonds may occasionally make it more
difficult to value them. In valuing bonds, IDSC relies both on independent
rating agencies and the investment manager's credit analysis. Under normal
circumstances, at least 85% of the securities in IDSC's Portfolio will be rated
investment grade, or in the opinion of IDSC's investment advisor will be the
equivalent of investment grade. Under normal circumstances, IDSC will not
purchase any security rated below B- by Moody's Investors Service, Inc. or
Standard & Poor's Corporation. Securities that are subsequently downgraded in
quality may continue to be held by IDSC and will be sold only when IDSC believes
it is advantageous to do so.
As of Dec. 31, 1997, IDSC held about __% of its investment portfolio (including
bonds, preferred stocks, mortgages and cash equivalents) in investments rated
below investment grade.
When-issued securities are subject to market fluctuations and they may affect
IDSC's investment portfolio the same as owned securities.
Derivatives are financial instruments whose performance is derived, at least in
part, from the performance of an underlying asset, security or index. A small
change in the value of the underlying asset, security or index may cause a
sizable gain or loss in the fair value of the derivative.
How your money is managed
Relationship between IDSC and American Express Financial Corporation
IDSC was originally organized as Investors Syndicate of America, Inc., a
Minnesota corporation, on Oct. 15, 1940, and began business as an issuer of face
amount investment
<PAGE>
certificates on Jan. 1, 1941. The company became a Delaware corporation on Dec.
31, 1977, and changed its name to IDS Certificate Company on April 2, 1984.
Before IDSC was created, AEFC (formerly known as IDS Financial Corporation), our
parent company, had issued similar certificates since 1894. As of Jan. 1, 1995,
IDS Financial Corporation changed its name to AEFC. IDSC and AEFC have never
failed to meet their certificate payments.
During its many years in operation, AEFC has become a leading manager of
investments in mortgages and securities. As of Dec. 31, 1997, AEFC managed
investments, including its own, of more than $___ billion.
AEFC itself is a wholly owned subsidiary of American Express Company, a
financial services company with executive offices at American Express Tower,
World Financial Center, New York, NY 10285. American Express Company is a
financial services company engaged through subsidiaries in other businesses
including:
travel related services (including American Express(R) Card and Travelers
Cheque operations through American Express Travel Related Services Company,
Inc. and its subsidiaries); and
international banking services (through American Express Bank Ltd. and its
subsidiaries including American Express Bank International).
About AESC
AESC is a wholly-owned subsidiary of American Express Travel Related Services
Inc., which in turn is a wholly-owned subsidiary of American Express Company.
Capital structure and certificates issued
IDSC has authorized, issued and has outstanding 150,000 shares of common stock,
par value of $10 per share. AEFC owns all of the outstanding shares.
As of Dec. 31, 1997, IDSC had issued (in face amount) $__________ of installment
certificates and $__________ of single payment certificates. As of Dec. 31,
1997, IDSC had issued (in face amount) $__________ of installment certificates
and $__________ of single payment certificates since its inception in 1941.
Investment management and services
Under an Investment Advisory and Services Agreement, AEFC acts as our investment
advisor and is responsible for:
<PAGE>
providing investment research;
making specific investment recommendations; and
executing purchase and sale orders according to our policy of obtaining
the best price and execution.
All these activities are subject to direction and control by our board of
directors and officers. Our agreement with AEFC requires annual renewal by our
board, including a majority of directors who are not interested persons of AEFC
or IDSC as defined in the federal Investment Company Act of 1940.
For its services, we pay AEFC a monthly fee, equal on an annual basis to a
percentage of the total book value of certain assets (included assets).
Advisory and services fee computation:
Included assets Percentage of total book value
First $250 million 0.75%
Next 250 million 0.65
Next 250 million 0.55
Next 250 million 0.50
Any amount over 1 billion 0.45
Included assets are all assets of IDSC except mortgage loans, real estate, and
any other asset on which we pay an outside advisory or service fee.
Advisory and services fee for the past three years:
Percentage of
Year Total fees included assets
1997 $
1996 $16,989,093
1995 $16,472,458
Estimated advisory and services fees for 1997 are $__________.
Other expenses payable by IDSC: The Investment Advisory and Services Agreement
provides that we will pay:
costs incurred by us in connection with real estate and mortgages;
taxes;
<PAGE>
depository and custodian fees;
brokerage commissions;
fees and expenses for services not covered by other agreements and
provided to us at our request, or by requirement, by attorneys, auditors,
examiners and professional consultants who are not officers or employees of
AEFC;
fees and expenses of our directors who are not officers or employees of
AEFC;
provision for certificate reserves (interest accrued on certificate owner
accounts); and
expenses of customer settlements not attributable to sales function.
Distribution
Under a Distribution Agreement with AESC, for certificates sold through AEFD, we
pay AESC for the distribution of this certificate as follows:
0.20% of the initial payment on the issue date of the certificate; and
0.20% of the certificate's reserve at the beginning of the second and
subsequent quarters from issue date.
Under a Distribution Agreement with American Express Financial Advisors Inc., a
wholly-owned subsidiary of AEFC, we pay for the distribution of this certificate
by American Express Financial Advisors Inc. as follows:
0.20% of the initial payment of the issue date of the certificate; and
0.20% of the certificates reserve at the beginning of the second and
subsequent quarters from the issue date.
This fee is not assessed to your certificate account.
AEFD is a channel for direct marketing of financial services to American Express
card members and others.
Total distribution fees paid to American Express Financial Advisors Inc. for all
series of certificates amounted to $__________ during the year ended Dec. 31,
1997. We expect to pay American Express Financial Advisors Inc. distribution
fees amounting to $__________ during 1998.
See Note 1 to Financial statements regarding deferral of distribution fee
expense.
<PAGE>
American Express Financial Advisors Inc. pays and AESC pay other selling
expenses in connection with services to us. Our board of directors, including a
majority of directors who are not interested persons of American Express
Financial Advisors Inc., AESC or IDSC, approved this distribution agreement.
Transfer Agent
Under a Transfer Agency Agreement American Express Client Service Corporation
(AECSC) maintains certificate owner accounts and records. IDSC pays AESC a
monthly fee of one-twelfth of $10.353 per certificate owner account for this
service.
Employment of other American Express affiliates
AEFC may employ an affiliate of American Express Company as executing broker for
our portfolio transactions only if:
we receive prices and executions at least as favorable as those offered by
qualified independent brokers performing similar services;
the affiliate charges us commissions consistent with those charged to
comparable unaffiliated customers for similar transactions; and
the affiliate's employment is consistent with the terms of the current
Investment Advisory and Services Agreement and federal securities laws.
Directors and officers
IDSC's directors, chairman, president and controller are elected annually for a
term of one year. The other executive officers are appointed by the president.
We paid a total of $______ during 1997 to directors not employed by AEFC.
Board of directors
David R. Hubers*
Born in 1943. Director since 1987.
President and chief executive officer of AEFC since 1993. Senior vice president
and chief financial officer of AEFC from 1984 to 1993.
Charles W. Johnson
Born in 1929. Director since 1989.
Director, Communications Holdings, Inc. Former vice president and group
executive, Industrial Systems, with Honeywell, Inc. Retired 1989.
<PAGE>
Richard W. Kling*
Born in 1940. Director since 1996.
Chairman of the board of directors since 1996. Director of IDS Life Insurance
Company since 1984; president since 1994. Executive vice president of Marketing
and Products of AEFC from 1988 to 1994. Senior vice president of AEFC since
1994. Director of IDS Life Series Fund, Inc. and member of the board of managers
of IDS Life Variable Annuity Funds A and B.
Edward Landes
Born in 1919. Director since 1984.
Development consultant. Director of IDS Life Insurance Company of New York.
Director of Endowment Development, YMCA of Metropolitan Minneapolis. Vice
president for Financial Development, YMCA of Metropolitan Minneapolis from 1985
through 1995. Former sales manager - Supplies Division and district manager -
Data Processing Division of IBM Corporation. Retired 1983.
John V. Luck, Ph.D.
Born in 1926. Director since 1987.
Former senior vice president - Science and Technology with General Mills, Inc.
Employed with General Mills, Inc. since 1968. Retired 1988.
James A. Mitchell*
Born in 1941. Director since 1994.
Chairman of the board of directors from 1994 to 1996. Executive vice president -
Marketing and Products of AEFC since 1994. Senior vice president - Insurance
Operations of AEFC and president and chief executive officer of IDS Life
Insurance Company from 1986 to 1994.
Harrison Randolph
Born in 1916. Director since 1968.
Engineering, manufacturing and management consultant since 1978.
Gordon H. Ritz
Born in 1926. Director since 1968.
Director, Mid-America Publishing and Atrix International, Inc. Former president,
Com Rad Broadcasting Corp. Former director, Sunstar Foods.
Stuart A. Sedlacek*
Born in 1957. Director since 1994.
President since 1994. Vice president - Assured Assets of AEFC since 1994. Vice
president and portfolio manager from 1988 to 1993. Executive vice president -
Assured Assets of IDS Life Insurance Company since 1994.
* "Interested Person" of IDSC as that term is defined in Investment Company Act
of 1940.
<PAGE>
Executive officers
Stuart A. Sedlacek
Born in 1957. President since 1994.
Timothy S. Meehan
Born in 1957. Secretary since 1995.
Secretary of AEFC and American Express Financial Advisors Inc. since 1995.
Senior counsel to AEFC since 1995. Counsel from 1990 to 1995.
Lorraine R. Hart
Born in 1951. Vice president - Investments since 1994.
Vice president - Insurance Investments of AEFC since 1989. Vice president -
Investments of IDS Life Insurance Company since 1992.
Jay C. Hatlestad
Born in 1957. Vice president and controller of IDSC since 1994. Manager of
Investment Accounting of IDS Life Insurance Company from 1986 to 1994.
Bruce A. Kohn
Born in 1951. Vice president and general counsel since 1993. Senior counsel to
AEFC since 1996. Counsel to AEFC from 1992 to 1996. Associate counsel from 1987
to 1992.
F. Dale Simmons
Born in 1937. Vice president - Real Estate Loan Management since 1993. Vice
president of AEFC since 1992. Senior portfolio manager of AEFC since 1989.
Assistant vice president from 1987 to 1992.
The officers and directors as a group beneficially own less than 1% of the
common stock of American Express Company.
The Issuer has provisions in its bylaws relating to the indemnification of its
officers and directors against liability, as permitted by law. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers or persons controlling the registrant pursuant
to the foregoing provisions, the registrant has been informed that in the
opinion of the SEC such indemnification is against public policy as expressed in
the Act and is therefore unenforceable.
Auditors
A firm of independent auditors audits our financial statements at the close of
each fiscal year (Dec. 31). Copies of our annual financial statements (audited)
and semiannual financial statements (unaudited) are available to any certificate
owner upon request.
<PAGE>
Ernst & Young LLP, Minneapolis, has audited the financial statements for each of
the years in the three-year period ended Dec. 31, 1997. These statements are
included in this prospectus. Ernst & Young LLP is also the auditor for American
Express Company, the parent company of AEFC and IDSC.
IDS Certificates
Other certificates issued by IDSC and offered through AEFD: Your American
Express financial advisor can give you more information on five other
certificates issued by IDSC. These certificates offer a wide range of investment
terms and features.
IDS Flexible Savings Certificate - A single payment certificate that permits
additional investments and on which IDSC guarantees interest in advance for a
term of six, 12, 18, 24, 30 or 36 months.
IDS Installment Certificate - An installment payment certificate that declares
interest in advance for a three-month period and offers bonuses in the third
through sixth years for regular investments.
IDS Preferred Investors Certificate - A single payment certificate that combines
a competitive fixed rate of return with IDSC's guarantee of principal for large
investments of $250,000 to $5 million.
IDS Staggered Stock Market Certificate - A certificate that pays interest linked
to one-year stock market performance for a series of one-year terms starting
every month or at other intervals the client selects.
IDS Stock Market Certificate - A single payment certificate that calculates all
or part of your interest based on stock market performance, as measured by a
broad market index, with IDSC's guarantee of return of principal.
<PAGE>
Appendix
Description of 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, Baa, Ba, B, Caa, Ca and C. Ratings by Standard & Poor's
Corporation are AAA, AA, A, BBB, BB, B, CCC, CC, C and D.
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.
Ba/BB - Considered to have speculative elements. The protection of interest and
principal payments may be very moderate.
B - Lack characteristics of more desirable investments. There may be small
assurance over any long period of time of the payment of interest and principal.
Caa/CCC - Are of poor standing. Such issues may be in default or there may be
risk with respect to principal or interest.
Ca/CC - Represent obligations that are highly speculative. Such issues are often
in default or have other marked shortcomings.
C - Are obligations with a higher degree of speculation. These securities have
major risk exposures to default.
D - Are in payment default. The D rating is used when interest payments or
principal payments are not made on the due date.
Non-rated securities will be considered for investment. When assessing each
non-rated security, IDSC will consider the financial condition of the issuer or
the protection afforded by the terms of the security.
<PAGE>
(Back Cover)
Quick telephone reference
American Express Financial Direct Service Team
Withdrawals, transfers, inquiries
National: 800-297-7378
TTY Service
For the hearing impaired
800-710-5260
Distributed by American Express Financial Direct
IDS Flexible Savings Certificate
IDS Tower 10
Minneapolis, MN 55440-0010
<PAGE>
IDS Installment Certificate
Prospectus
April 28, 1998
Earn attractive rates while you build your savings.
IDS Installment Certificates are issued by IDS Certificate Company (IDSC). You
can purchase this certificate with monthly investments of at least $50 but not
more than $5,000 (unless you receive prior authorization from IDSC to invest
more). Your principal is guaranteed by IDSC. Your certificate earns interest,
which is declared every three months, guaranteed for a three-month period and
compounded monthly. In addition, you may receive bonus interest payments if you
make regular investments for specified periods. Your certificate matures 10
years from its issue date.
As is the case with other investment companies, 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.
This certificate is backed by IDSC's investments on deposit rather than
guaranteed or insured by the government or someone else. See "Invested and
guaranteed by IDSC" and "Regulated by government" under "How your money is used
and protected."
IDS Certificate Company is not a bank or financial institution, and the
securities it offers are not deposits or obligations of, backed or guaranteed or
endorsed by any bank or financial institution nor are they insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board or any other
agency.
This prospectus describes terms and conditions of your IDS Installment
Certificate. It contains facts that can help you decide if the certificate is
the right investment for you. Read the prospectus before you invest and keep it
for future reference. No one has the authority to change the terms and
conditions of the IDS Installment Certificate as described in the prospectus, or
to bind IDSC by any statement not in it.
IDS Certificate Company
IDS Tower 10
Minneapolis, MN 55440-0010
800-297-7378 (toll free)
Distribution:
American Express Service Corporation
IDS Tower 10
Minneapolis, MN 55440-0010
<PAGE>
TTY numbers:
800-710-5260 (toll free) (612) 671-7066
An American Express company
Where to get information about IDSC
IDS Certificate Company is subject to the reporting requirements of the
Securities Exchange Act of 1934. Reports and other information on IDSC are filed
with the Securities and Exchange Commission (SEC) and are available on the SEC
Internet web site (http://www.sec.gov). Copies can be obtained from the Public
Reference Section of the SEC, 450 5th St., N.W., Room 1024, Washington, D.C.
20549, at prescribed rates. Or you can inspect and copy information in person at
the SEC's Public Reference Section and at the following regional offices:
Northeast Regional Office
7 World Trade Center
Suite 1300
New York, NY 10048
Midwest Regional Office
500 West Madison St.
Suite 1400
Chicago, IL 60661
Pacific Regional Office
5670 Wilshire Blvd.
11th Floor
Los Angeles, CA 90036
Initial interest rates
IDSC guarantees a fixed rate of interest for each three-month period during the
life of your certificate. The rate for your first three months will be within a
specified range of the average rate for bank money market accounts published in
the most recent BANK RATE MONITOR Top 25 Market AverageTM, North Palm Beach, FL
33408, as explained under "About the certificate," below.
Here are the interest rates in effect on the date of this prospectus, April 28,
1997:
- --------------------------------------------------------------------------------
Simple interest rate ________%
- --------------------------------------------------------------------------------
Effective annualized yield* ________%
- --------------------------------------------------------------------------------
*Assuming monthly compounding.
<PAGE>
These rates may or may not be in effect when you apply to purchase your
certificate. Rates for later three-month periods are set at the discretion of
IDSC and may also differ from the rates shown here.
We reserve the right to issue other securities with different terms.
<PAGE>
Contents
Table of contents
About the certificate p
Investment amounts p
Face amount and principal p
Value at maturity p
Receiving cash during the term p
Interest p
Rates for new purchases p
Bonus payments p
Calculating your bonus p
How to invest your funds p
Three ways to receive payment when you withdraw funds p
Retirement plans: special policies p
Taxes on your earnings p
Retirement accounts p
Gifts to minors p
How to determine the correct TIN p
Foreign investors p
Trusts p
How your money is used and protected p
Invested and guaranteed by IDSC p
Regulated by government p
Backed by our investments p
Investment policies p
Certain investment considerations p
How your money is managed p
Relationship between IDSC and American
Express Financial Corporation p
About American Express Service Corporation p
Capital structure and certificates issued p
Investment management and services p
Distribution p
Transfer Agent p
About American Express Service Corporation p
Employment of other American Express affiliates p
Directors and officers p
Auditors p
IDS Certificates p
<PAGE>
Appendix p
Annual financial information p
Summary of selected financial information p
Management's discussion and analysis of financial
condition and results of operations p
Report of independent auditors p
Financial statements p
Notes to financial statements p
<PAGE>
About the certificate
Investment amounts
IDSC offers the IDS Installment Certificate for scheduled monthly purchase
payment installments of at least $50 but not more than $5,000 payable in U.S.
currency. You may also make additional lump-sum investments in any amount, as
long as these investments plus your scheduled payments over the life of the
certificate do not total more than $600,000.
The certificate may be used as an investment for your Individual Retirement
Account (IRA), 401(k) plan account or other qualified retirement plan account.
If so used, the amount of your contribution (investment) will be subject to any
limitations of the plan and applicable federal law.
Face amount and principal
The face amount of your certificate is the total of your scheduled monthly
investments during its 10-year life. The minimum face amount is $6,000 or the
total of 120 monthly investments of $50 each. Your maximum face amount cannot
exceed $600,000. Your principal is the amount you actually invest over the life
of the certificate, less any withdrawals of your investments, and penalties and
fees. It is guaranteed by IDSC.
Value at maturity
Your certificate matures 10 years from its issue date. At maturity, you will
receive a distribution for the value of your certificate, which will be the
total of your actual investments, plus credited interest not paid to you in cash
and any bonus payments, less withdrawals, penalties and fees.
Receiving cash during the term
If you need your money before your certificate term ends, you may withdraw part
or all of its value at any time, less any penalties that apply. Procedures for
withdrawing money, as well as conditions under which penalties apply, are
described in the service document.
Interest
Your investments earn interest from the date they are credited to your account.
Interest is compounded and credited at the end of each certificate month (on the
monthly anniversary of the issue date).
<PAGE>
IDSC declares and guarantees a fixed rate of interest for each three month term
during the life of your certificate. We calculate the amount of interest you
earn each certificate month by:
applying the interest rate then in effect to your balance each day;
adding these daily amounts to get a monthly total; and
subtracting interest accrued on any amount you withdraw during the
certificate month.
Interest is calculated on a 30-day month and 360-day year basis.
Rates for new purchases
When your application is accepted, and we have received your initial investment,
we will send you a confirmation showing the rate that your investment will earn
for the first three-month period. IDSC guarantees that this rate will be within
a range from 25 basis points (0.25%) below to 75 basis points (0.75%) above the
average interest rate for bank money market deposit accounts published in the
BANK RATE MONITOR Top 25 Market AverageTM (the BRM Average) on the first day of
the period the rate is declared for. For example, if the average rate most
recently published is 2.75%, our rate in effect for a one-week period beginning
on the Wednesday after that publication would be between 2.50 and 3.50%.
(Bank money market deposit accounts are government insured.)
The BANK RATE MONITOR is a weekly magazine published in North Palm Beach, FL
33408, by Advertising News Service Inc., an independent national news
organization that collects and disseminates information about bank products and
interest rates. Advertising News Service Inc. has no connection with IDSC,
American Express Financial Corporation (AEFC), or any of their affiliates.
The BRM Average is an index of rates and annual effective yields offered on
various length certificates of deposit by large banks and thrifts in 25
metropolitan areas. The frequency of compounding varies among the banks and
thrifts. Certificates of deposit in the BRM average are government insured
fixed-rate time deposits.
The BANK RATE MONITOR may be available in your local library. To obtain
information on the current BRM Average rates, call American Express Financial
Direct (AEFD) at the telephone numbers listed on the back cover between 8 a.m.
and 6 p.m. your local time.
<PAGE>
Rates for new purchases are reviewed and may change weekly. Normally, the rate
you receive will be the higher of:
the rate in effect on the date of your application; or
the rate in effect on the date your application is accepted by IDSC.
However, if your application bears a date more than seven days before its
receipt by IDSC, the rate you receive will be the higher of:
the rate in effect on the date your application is accepted by IDSC; or
the rate in effect seven days prior to receipt.
Active or retired American Express employees, IDSC directors, American Express
financial advisors, their immediate families and any U.S. employee of any
affiliated company of IDSC are guaranteed an initial rate 75 basis points above
the rate offered to the general public, reflecting the lower distribution costs
associated with such sales.
Rates for future periods: Interest on your certificate for future three-month
periods may be greater or less than the rates you receive during the first three
months. In setting future interest rates, a primary consideration will be the
prevailing investment climate, including bank money market deposit account
average rates as reflected in the BRM Average. Nevertheless, we have complete
discretion as to what interest shall be declared beyond the initial three-month
period. At least six days in advance of each three-month period, we will send
you notice of the rate that your certificate will earn for that period. If the
BRM Average is no longer publicly available or feasible to use, IDSC may use
another, similar index as a guide for setting rates.
Promotions and pricing flexibility:
From time to time, IDSC may sponsor or participate in promotions involving one
or more of the certificates and their respective terms. For example, we may
offer different rates to new clients, to existing clients, or to individuals who
purchase or use products or services offered by American Express Company or its
affiliates.
We also may offer different rates based on your amount invested, maturity
selected, geographic location and whether the certificate is purchased for an
IRA or a qualified retirement account.
These promotions will generally be for a specified period of time. If we offer a
promotion, rates will be within the range of rates described under "Rates for
new purchases," above.
<PAGE>
Performance: From February 199__ through February 199__, IDS Installment
certificate yields were generally higher than average bank money market deposit
accounts and Super Now accounts, as measured by the BRM Average (prior to Jan.
13, 1993, yields were measured by the BRM National IndexTM, an average of CD
yields in 10 cities).
Yields from February 199__ through February 199__
4% _________IDS Installment Certificate
3% .........Money Market Deposit Account
2% ---------Super NOW Account
Three lines comparing the yields for IDS Installment
Certificate against those of money market and Super NOW
accounts with Installment's yield generally above the other
two lines.
`92 `93 `94 `95 `96 `97
The graph compares past yields and should not be considered a prediction of
future performance. The Installment Certificate's yields reflect its former
policy, in effect through April 1992, of compounding interest rates each
calendar quarter. Monthly compounding is reflected from February 199__ through
February 199__.
Bonus payments
If you meet our requirements for your investments, IDSC will pay you a monthly
bonus for a period of time. Your bonus will be a percentage of your weighted
average monthly investment (WAMI). This percentage may increase from time to
time if you continue to meet our requirements, including maintaining a minimum
balance. These requirements are set out in the table below. All the periods of
12 months mentioned in the table must begin and end on the date we issue your
certificate or an annual anniversary of that date.
<PAGE>
To be eligible for this bonus for You must meet these requirements:
12 months:
5% annualized bonus payment on your During a 12-month period, you must make
WAMI one or more payments totaling at least
$600. In a subsequent 12-month period, you
must make payments totaling at least an
additional $600 for a total principal
amount invested of $1,200, not including
interest. The two 12-month periods do not
have to be consecutive. Further the first
12-month period does not have to be the
year beginning with your first investment.
This bonus may be earned in any
certificate year from your second through
your ninth year.
8% annualized bonus payment on your During a 12-month period subsequent to
WAMI your qualification for the 5% annualized
bonus payments, you must make one or
more payments
totaling at least $600 for a total
principal amount invested of $1,800, not
including interest. This bonus may be
earned in any certificate year from your
third through your ninth certificate year.
10% annualized bonus payment on During a 12-month period subsequent to
your WAMI your qualification for the 8% annualized
bonus payments, you must make one or more
payments
totaling at least $600 for a total
principal amount invested of $2,400, not
including interest. This bonus may be
earned in any certificate year from your
fourth through your ninth certificate
year.
20% annualized bonus payment on During a 12-month period subsequent to
your WAMI your qualification for the 10% annualized
bonus payments, you must make one or more
payments
totaling at least $600 for a total
principal amount invested of $3,000, not
including interest. This bonus may be
earned in any certificate year from your
fifth through your ninth certificate year.
The rate in the remaining years following attainment of the 20% bonus is
comparable to a fixed rate investment. It may be obtained as soon as your
seventh certificate year or as late as your tenth certificate year.
Bonus payments are credited to your account at the end of each certificate
month. They immediately become part of your balance and begin to earn interest.
<PAGE>
The illustrations below show the cumulative effect of bonus payments on a
hypothetical investment. Suppose you invest $100 per month, receive interest at
a constant rate of 2.96% (an effective annual yield of 3.00%, assuming a Jan. 1
purchase) and make no additional lump-sum investments and no withdrawals. (The
rate and yield are for illustration only and may not be in effect when you
purchase your certificate.) Your interest, balance and average annual yield
would increase as follows:
<TABLE>
<CAPTION>
<S> <C>
Installment Certificate Example
$8,000 ***Amount Paid In
.......Interest
$6,000 -----Bonus
$4,000
$2,000 Graph shows the effect of cumulative interest and bonus earned on an
account from zero through 72 months
6 12 18 24 30 36 42 48 54 60 66 72
</TABLE>
Installment Certificate example
<TABLE>
<CAPTION>
Without bonus Added by bonus Total with bonus
Cumulative Cumulative Balance Cumulative Cumulative Balance Average
investments interest on bonus interest annual
investments on bonus yield*
- -------------- ------------ ------------- ------------ ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1st year end $1,200.00 $ 19.42 $1,219.42 $ 0.00 $ 0.00 $1,219.42 3.00%
- -------------- ------------ ------------- ------------ ------------- ------------ ------------- ------------
2nd year end 2,400.00 75.42 2,475.42 0.00 0.00 2,475.42 3.00
- -------------- ------------ ------------- ------------ ------------- ------------ ------------- ------------
3rd year end 3,600.00 169.11 3,769.11 60.00 0.97 3,830.08 4.06
- -------------- ------------ ------------- ------------ ------------- ------------ ------------- ------------
4th year end 4,800.00 301.62 5,101.00 156.00 4.35 5,261.97 4.54
- -------------- ------------ ------------- ------------ ------------- ------------ ------------- ------------
5th year end 6,000.00 474.11 6,474.11 276.00 11.10 6,761.21 4.72
- -------------- ------------ ------------- ------------ ------------- ------------ ------------- ------------
- -------------- ------------ ------------- ------------ ------------- ------------ ------------- ------------
6th year end 7,200.00 687.78 7,887.78 516.00 23.60 8,427.38 5.18
- -------------- ------------ ------------- ------------ ------------- ------------ ------------- ------------
</TABLE>
* Average from date of issue to end of year indicated.
Important: The increase in yield that you receive from bonus payments may be
more or less than in the example, depending upon interest rates during the six
years following issue of your certificate. If actual interest rates are higher
than in the example, the effect of the bonus will be less. For example, at a
7.00% interest rate, bonus payments would raise the certificate's average annual
yield from issue through year six by 2.06%, compared to 2.18% (5.18 - 3.00) in
the example. If actual interest rates are lower than in the example, the
increase in the average annual yield would be somewhat more than 2.18%.
<PAGE>
Calculating your bonus
To determine your bonus we:
first calculate your average monthly investment over the life of your
certificate, weighting it to reflect the amount of time each dollar has
been invested (your weighted average monthly investment). Money invested
early is given more weight than money invested later.
then calculate your monthly bonus as a specified percentage of your
weighted average monthly investment.
Here is an example to illustrate the two calculations: Suppose you make 24
consecutive monthly investments - $100 per month for the first six months and
$150 per month thereafter (a total of $3300).
Calculating your bonus
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- --------------------------- -------------------------- -------------------------- --------------------------
Month Investment Months Held Weighted
Value
- --------------------------- -------------------------- -------------------------- --------------------------
1 100 x 24 = $2,400
2 100 23 2,300
3 100 22 2,200
4 100 21 2,100
5 100 20 2,000
6 100 19 1,900
7... 150 18... 2,700
24 150 1 150
- --------------------------- -------------------------- -------------------------- --------------------------
Sum $3,300 Total amount 300 $38,550
invested over 24 months
- --------------------------- -------------------------- -------------------------- --------------------------
</TABLE>
1. Calculate the weighted value of each month's investment.
Multiply the amount invested ($100) by the number of months it is held - 24
months for the first $100, 23 months for the second, etc.
Example: Amount invested in month 1 is $100. The investment will be held 24
months. $100 x 24 months = $2,400 monthly weighted value.
2. Add the weighted values:
$2,400 + $2,300 + $2,200 + ...$150 = $38,550 is the total weighted value of
the investment.
<PAGE>
3. Add the number of months held:
24 + 23 + 22 + ...1 = 300.
300 is the total number of months the investment is held.
4. Divide the total weighted value of the investment (step 2) by the total
number of months the investment is held (step 3):
$38,550 / 300 = $128.50 is your weighted average monthly investment (WAMI)
at the end of 24 months.
5. Multiply your WAMI by the applicable bonus percentage (5% in the third
year):
5% of $128.50 = $6.43. $6.43 is your bonus payment each month in year
three, a total of $77 for the year.
Here is another example: Suppose you make one investment of $600 in the first
month then your next investment is $600 in the 24th month (a total of $1,200).
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- --------------------------- -------------------------- -------------------------- --------------------------
Month Investment Months Held Weighted
Value
- --------------------------- -------------------------- -------------------------- --------------------------
1 600 x 24 = $14,400
2 0 23 0
3 0 22 0
4 0 21 0
5 0 20 0
6 0 19 0
7... 0 18 0
24 600 1 600
- --------------------------- -------------------------- -------------------------- --------------------------
Sum $1,200 Total amount 300 $15,000
invested over 24 months
- --------------------------- -------------------------- -------------------------- --------------------------
</TABLE>
1. Calculate the weighted value of each month's investment.
Multiply the amount invested ($600) by the number of months it is held.
Example: Amount invested in month 1 is $600. The investment will be held 24
months. $600 x 24 months = $14,400 monthly weighted value.
2. Add the weighted values:
$14,400 + 0 + $600 = $15,000.
$15,000 is the total weighted value of the investment.
<PAGE>
3. Add the number of months held:
24 + 23 + 22 + ...1 = 300.
300 is the total number of months the investment is held.
4. Divide the total weighted value of the investment (step 2) by the total
number of months the investment is held (step 3):
$15,000 / 300 = $50 is your weighted average monthly investment (WAMI) at
the end of 24 months.
5. Multiply your WAMI by the applicable bonus percentage (5% in the third
year):
5% of $50 = $2.50. $2.50 is your bonus payment each month in year three, a
total of $30 for the year.
This procedure is repeated in months 36, 48 and 60 to calculate your weighted
average monthly investment from issue through years three, four and five,
respectively assuming you maintain your regular monthly payments. These weighted
averages are then multiplied by the applicable percentages - 8%, 10% and 20% to
determine monthly bonus payments for years four, five and six, respectively.
Effect of partial withdrawals: If you withdraw part of your principal, you will
not receive credit toward a bonus for the sum(s) you withdraw or at all, since
you would not qualify for the bonus for the year if the value drops below the
required amount at the required time. In effect, you reduce the size of the
bonus you are eligible to receive. This is because removing principal will
reduce the weighted value of your investment. The weighted value will decrease
in proportion to the amount of principal you withdraw. Using the example above,
if you withdrew $1,000 of the principal before the end of the 24th month, your
total investment would decrease by 30.3% ($1,000/3,300=.303); therefore the
reduction factor you will use to figure out the amount of your reduced bonus is
.303.
To figure out how much your bonus will be, follow these steps:
1. Multiply the original total weighted value (see original example) of your
investment by the reduction factor calculated above.
$38,550 x .303 = $11,680.65.
<PAGE>
2. Subtract the number calculated in Step 1 from the original total weighted
value of your investment.
$38,550 - 11,680.65 = $26,869.35.
The new weighted value of your investment after making the $1,000
withdrawal is $26,869.35.
3. Divide the new weighted value of your investment by the total number of
months held (300 in this example).
$26,869/300 = $89.56.
Your new weighted average monthly investment (WAMI) is $89.56.
4. Multiply the new WAMI by the applicable bonus percentage. In this example,
5% is the bonus because that is the amount on the third year bonus.
$89.56 x .05 = $4.48, or $53.76 total bonus for the year.
Withdrawals may also affect your eligibility for bonus payments in the third
through sixth years. To remain eligible your balance at the end of a relevant 12
month period must be at least equal to the amount set out in the table under
"Bonus payments" above. You will become ineligible if withdrawals reduce your
balance below this level at the end of a relevant 12-month period.
Other eligibility policies: If you have not made the required minimum
investments specified earlier, you may not receive bonus payments in the year
bonuses would otherwise be paid. But you may become eligible during the next
bonus period by making the required investments in the next year. For example,
assume that you make the required investments for the first 24 months and
receive bonus payments in the third year. But during the third year, you make
payments of only $400, so the total principal invested is $1,600 instead of the
required $1,800. In that case, you would not receive the bonus payments that
would normally be made in the fourth year. However, if you make all your regular
monthly investments in the fourth year, and your account principal balance
reaches the required equivalent of 36 investments of $50 per month ($1,800 at
the end of the fourth year), then you would qualify for 8% bonus payments in
year five, based on the new weighted average monthly investment.
Interest rate from years seven through 10: This may be as soon as year seven or
as late as year ten. A rate will be declared during the next month in which you
receive a bonus payment and will be guaranteed by IDSC for a three-month period
starting in the next month. Thereafter, the rate will be declared every three
months and guaranteed for three-month periods.
<PAGE>
How to invest your funds
Buying your certificate
Fill out and submit an application to open an account with us and purchase a
certificate. We will process the application at our corporate offices in
Minneapolis. When your application is accepted and we have received your initial
investment, we will send you a confirmation of your purchase, indicating your
account number and showing the rate of interest for your first three months as
described under "Rates for new purchases," above. See "Purchase policies" below.
Important: When opening an account, you must provide IDSC with your correct
Taxpayer Identification Number (Social Security or Employer Identification
Number). See "Taxes on your earnings." Once your account is set up, there are
several convenient ways to make monthly investments.
Penalties for early withdrawal: If you withdraw money within three years after
the certificate was purchased, you will pay a penalty of 2% of the principal
withdrawn. The 2% penalty is waived upon death of the certificate owner. We also
will waive withdrawal penalties on withdrawals for IRA certificate accounts for
your required distributions. See "Retirement plans: special policies" below.
When you request a full or partial withdrawal, we pay the amount you request:
first from interest and bonus payments credited to your account;
then from the principal of your certificate.
For example, suppose this is your balance at the end of the second year:
<TABLE>
<CAPTION>
<S> <C>
Total investments $ 7,200.00
Interest and bonus credited $ 488.61
Total balance $ 7,688.61
If you request a $1,000 check, we would withdraw funds in this order:
Credited interest and bonus $ 488.61
Withdrawal of principal $ 511.39
Total requested withdrawal $ 1,000.00
<PAGE>
In addition, we would have to withdraw funds to cover the full withdrawal
penalty:
Principal withdrawn $ 511.39
Withdrawal penalty % 2%
Withdrawal penalty $ 10.23
The total transaction would be:
Beginning balance $ 7,688.61
Credited interest and bonus withdrawn $ (488.61)
Principal withdrawn $ (511.39)
Withdrawal penalty (also from principal) $ (10.23)
Remaining balance $ 6,678.38
</TABLE>
Loss of Interest: If you make a withdrawal at any time other than the last day
of the certificate month, you will lose interest accrued on the withdrawal
amount since the end of the last certificate month.
Other full and partial withdrawal policies:
If you request a partial or full withdrawal of a certificate recently
purchased or added to by a check or money order that is not guaranteed, we
will wait for your check to clear. Please expect a minimum of 10 days from
the date of your payment before IDSC mails a check to you. A check may be
mailed earlier if the bank provides evidence that your check has cleared.
If your certificate is pledged as collateral, any withdrawal will be
delayed until we get approval from the secured party.
Any payments to you may be delayed under applicable rules, regulations or
orders of the SEC.
Retirement plans: special policies
If the certificate is purchased for a 401(k) plan or other qualified
retirement plan account, the terms and conditions of the certificate apply
to the plan as the owner of this certificate. However, the terms of the
plan, as interpreted by the plan trustee or administrator, will determine
how a participant's individual account under the plan is administered.
These terms may differ from the terms of the certificate.
If your certificate is held in a Custodial Retirement Plan (or Keogh
plan), special rules may apply at maturity. If no other investment
instructions are provided directing how to handle your certificate at
maturity, the full value of the certificate will
<PAGE>
automatically transfer to a new or existing cash management account
according to rules outlined in the Custodial Retirement Plan document.
The annual custodial fee for IRA or non-401(k) qualified retirement plans
may be deducted from your certificate account. It may reduce the amount
payable at maturity or the amount received upon an early withdrawal.
Retirement plan withdrawals may be subject to withdrawal penalties or loss
of interest even if they are not subject to federal tax penalties.
We will waive withdrawal penalties on withdrawals for IRA certificate
accounts for your required distributions.
If you withdraw all funds from your last account in an IRA at American
Express Trust Company, a termination fee will apply as set out in Your
Guide to IRAs, the IRS disclosure information received when you opened your
account.
The IRA termination fee will be waived if a withdrawal occurs after you
have reached age 70 1/2 or upon the owner's death.
Withdrawal at death
If a certificate is surrendered upon the client's death, any applicable
surrender charge will be waived. In addition, if an IRA termination fee is
applicable, it will also be waived.
Taxes on your earnings
The bonus payments and interest on your certificate, including interest on bonus
payments, are taxable when credited to your account. Each calendar year we
provide the certificate account owner and the IRS with reports of all earnings
over $10 (Form 1099). Withdrawals are reported to the certificate account owner
and the IRS on Form 1099-B, Proceeds from Broker Transactions.
Retirement accounts
If you are using the certificate as an investment for an IRA, 401(k) plan
account or other qualified retirement plan account, income tax rules for your
IRA or qualified plan apply. Generally, you will pay no income taxes on your
investment's earnings -- and, in many cases, on part or all of the investment
itself -- until you begin to make withdrawals.
IDSC will withhold federal income taxes of 10% on IRA withdrawals unless you
tell us not to. IDSC is required to withhold federal income taxes of 20% on most
other qualified plan distributions, unless the distribution is directly rolled
over to another qualified plan or IRA.
<PAGE>
Withdrawals from retirement accounts are generally subject to a penalty tax of
10% by the IRS if you make them before age 59 1/2, unless you are disabled or if
they are made by your beneficiary in the event of your death. Other exceptions
may also apply.
Consult your tax advisor to see how these rules apply to you before you request
a distribution from your plan or IRA.
Gifts to minors
The certificate may be given to a minor under either the Uniform Gifts or
Uniform Transfers to Minors Act (UGMA/UTMA), whichever applies in your state.
UGMAs/UTMAs are irrevocable. Generally, under federal tax laws, income over
$1,200 on property owned by children under age 14 will be taxed at the parents'
marginal tax rate, while income on property owned by children 14 or older will
be taxed at the child's rate.
Your Taxpayer Identification Number (TIN) and backup withholding: As with any
financial account you open, you must list your current and correct Taxpayer
Identification Number (TIN) -- either your Social Security or Employer
Identification Number. The TIN must be certified under penalties of perjury on
your application when you open an account.
If you don't provide the TIN, or the TIN you report is incorrect, you could be
subject to backup withholding of 31% of your interest earnings. You could also
be subject to further penalties, such as:
a $50 penalty for each failure to supply your correct TIN;
a civil penalty of $500 if you make a false statement that results in no
backup withholding; and
criminal penalties for falsifying information.
You could also be subject to backup withholding because you failed to report
interest on your tax return as required.
To help you determine the correct TIN to use on various types of accounts,
please use this chart:
<PAGE>
How to determine the correct TIN
<TABLE>
<CAPTION>
<S> <C>
For this type of account: Use the Social Security or 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 trust or estate The legal entity
(not the personal representative or trustee, unless
no legal entity is designated in the account title)
- ------------------------------------------------------ -----------------------------------------------------
- ------------------------------------------------------ -----------------------------------------------------
Sole proprietorship The owner
- ------------------------------------------------------ -----------------------------------------------------
- ------------------------------------------------------ -----------------------------------------------------
Partnership The partnership
- ------------------------------------------------------ -----------------------------------------------------
- ------------------------------------------------------ -----------------------------------------------------
Corporate The corporation
- ------------------------------------------------------ -----------------------------------------------------
- ------------------------------------------------------ -----------------------------------------------------
Association, club or tax-exempt organization The organization
- ------------------------------------------------------ -----------------------------------------------------
</TABLE>
For details on TIN requirements, call 800-297-7378 or ask your financial
consultant for federal Form W-9, "Request for Taxpayer Identification Number and
Certification."
Foreign investors
If you are not a citizen or resident of the United States, you must supply IDSC
with Form W-8, Certificate of Foreign Status when you purchase your certificate,
and you must resupply it every three years. You must also supply both a current
mailing address and an address of foreign residency, if different. IDSC will not
accept purchases of certificates
<PAGE>
by nonresident aliens without an appropriately certified Form W-8 (or approved
substitute). Also, if you do not supply Form W-8 you will be subject to backup
withholding on interest payments and withdrawals.
Interest on the certificate is "portfolio interest" as defined in U.S. Internal
Revenue Code Section 871(h) if earned by a nonresident alien. Even though your
interest income is not taxed by the U.S. government, it will be reported at year
end to you and to the U.S. government on a Form 1042S, Foreign Person's U.S.
Source Income Subject to Withholding. The United States participates in various
tax treaties with foreign countries, which provide for sharing of tax
information.
Estate tax: If you are a nonresident alien and you die while owning a
certificate, then, depending on the circumstances, IDSC generally will not act
on instructions with regard to the certificate unless IDSC first receives, at a
minimum, a statement from persons IDSC believes are knowledgeable about your
estate. The statement must be in a form satisfactory to IDSC and must tell us
that, on your date of death, your estate did not include any property in the
United States for U.S. estate tax purposes. In other cases, we generally will
not take action regarding your certificate until we receive a transfer
certificate from the IRS or evidence satisfactory to IDSC that the estate is
being administered by an executor or administrator appointed, qualified and
acting within the United States. In general, a transfer certificate requires the
opening of an estate in the United States and provides assurance that the IRS
will not claim your certificate to satisfy estate taxes.
Important: The information in this prospectus is a brief and selective summary
of certain federal tax rules that apply to this certificate and is given on the
basis of current law and practice. Tax matters are highly individual and
complex. Investors should consult a qualified tax advisor regarding their own
position.
Trusts
If the investor is a trust, the policies and procedures described above will
apply with regard to each grantor who is a nonresident alien.
How your money is used and protected
Invested and guaranteed by IDSC
The IDS Installment Certificate is issued and guaranteed by IDSC, a wholly owned
subsidiary of AEFC. We are by far the largest issuer of face amount certificates
in the United States, with total assets of more than $____ billion and a net
worth in excess of $____ million on Dec. 31, 1997.
<PAGE>
We back our certificates by investing the money received and keeping the
invested assets on deposit. Our investments generate interest and dividends, out
of which we pay:
interest to certificate owners; and
various expenses, including taxes, fees to AEFC for advisory and other
services and distribution fees to American Express Financial Advisors Inc.
and American Express Service Corporation (AESC).
For a review of significant events relating to our business, see "Management's
discussion and analysis of financial condition and results of operations." Our
certificates are not rated by a national rating agency.
Most banks and thrifts offer investments known as certificates of deposit (CDs)
that are similar to our certificates in many ways. Early withdrawals of bank CDs
often result in penalties. Banks and thrifts generally have federal deposit
insurance for their deposits and lend much of the money deposited to
individuals, businesses and other enterprises. Other financial institutions and
some insurance companies may offer investments with comparable combinations of
safety and return on investment.
Regulated by government
Because the IDS Installment Certificate is a security, its offer and sale are
subject to regulation under federal and state securities laws. (It is a
face-amount certificate -- not a bank product, an equity investment, a form of
life insurance or an investment trust.)
The federal Investment Company Act of 1940 requires us to keep investments on
deposit in a segregated custodial account to protect all of our outstanding
certificates. These investments back the entire value of your certificate
account. Their amortized cost must exceed the required carrying value of the
outstanding certificates by at least $250,000. As of Dec. 31, 1997, the
amortized cost of these investments exceeded the required carrying value of our
outstanding certificates by more than $___ million.
<PAGE>
Backed by our investments
Our investments are varied and of high quality. This was the composition of our
portfolio as of Dec. 31, 1997:
Type of investment Net amount invested
Government agency bonds Corporate and other bonds Preferred stocks Mortgages
Municipal bonds Cash and cash equivalents
As of Dec. 31, 1997 about __% of our securities portfolio (including bonds and
preferred stocks) is rated investment grade. For additional information
regarding securities ratings, please refer to Note 3B in the financial
statements.
Most of our investments are on deposit with American Express Trust Company,
Minneapolis, although we also maintain separate deposits as required by certain
states. American Express Trust Company is a wholly owned subsidiary of AEFC.
Copies of our Dec. 31, 1997 schedule of Investments in Securities of
Unaffiliated Issuers are available upon request. For comments regarding the
valuation, carrying values and unrealized appreciation (depreciation) of
investment securities, see Notes 1, 2 and 3 to the financial statements.
Investment policies
In deciding how to diversify the portfolio -- among what types of investments in
what amounts -- the officers and directors of IDSC use their best judgment,
subject to applicable law. The following policies currently govern our
investment decisions:
Debt securities-
Most of our investments are in debt securities as referenced in the table in
"Backed by our investments" under "How your money is used and protected."
Purchasing securities on margin -
We will not purchase any securities on margin or participate on a joint basis or
a joint-and-several basis in any trading account in securities.
Commodities -
We have not and do not intend to purchase or sell commodities or commodity
contracts except to the extent that transactions described in "Financial
transactions including hedges" in this section may be considered commodity
contracts.
<PAGE>
Underwriting -
We do not intend to engage in the public distribution of securities issued by
others. However, if we purchase unregistered securities and later resell them,
we may be considered an underwriter under federal securities laws.
Borrowing money -
From time to time we have established a line of credit if management believed
borrowing was necessary or desirable. We may pledge some of our assets as
security. We may occasionally use repurchase agreements as a way to borrow
money. Under these agreements, we sell debt securities to our lender, and
repurchase them at the sales price plus an agreed-upon interest rate within a
specified period of time.
Real estate -
We may invest in limited partnership interests in limited partnerships that
either directly, or indirectly through other limited partnerships, invest in
real estate. We may invest directly in real estate. We also invest in mortgage
loans.
Lending securities -
We may lend some of our securities to broker-dealers and receive cash equal to
the market value of the securities as collateral. We invest this cash in
short-term securities. If the market value of the securities goes up, the
borrower pays us additional cash. During the course of the loan, the borrower
makes cash payments to us equal to all interest, dividends and other
distributions paid on the loaned securities. We will try to vote these
securities if a major event affecting our investment is under consideration.
When-issued securities-
Some of our investments in debt securities are purchased on a when-issued basis.
It may take as long as 45 days or more before these securities are issued and
delivered to us. We generally do not pay for these securities or start earning
on them until delivery. We have established procedures to ensure that sufficient
cash is available to meet when-issued commitments.
Financial transactions including hedges-
We buy or sell various types of options contracts for hedging purposes or as a
trading technique to facilitate securities purchases or sales. We buy interest
rate caps for hedging purposes. These pay us a return if interest rates rise
above a specified level. If interest rates do not rise above a specified level,
the interest rate caps do not pay us a return. IDSC may enter into other
financial transactions, including futures and other derivatives, for the purpose
of managing the interest rate exposures associated with IDSC's assets or
liabilities. We do not use derivatives for speculative purposes.
Illiquid securities -
A security is illiquid if it cannot be sold in the normal course of business
within seven days at approximately its current market value. Some investments
cannot be resold to the
<PAGE>
U.S. public because of their terms or government regulations. All securities,
however can be sold in private sales, and many may be sold to other institutions
and qualified buyers or on foreign markets. IDSC's investment advisor 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 15% of IDSC's investment portfolio
will be held in securities that are illiquid. In valuing its investment
portfolio to determine this 15% limit, IDSC will use statutory accounting under
an SEC order. This means that, for this purpose, the portfolio will be valued in
accordance with applicable Minnesota law governing investments of life insurance
companies, rather than generally accepted accounting principles.
Restrictions -
There are no restrictions on concentration of investments in any particular
industry or group of industries or on rates of portfolio turnover.
Certain investment considerations
The price of bonds generally falls as interest rates increase, and rises as
interest rates decrease. The price of a bond also fluctuates if its credit
rating is upgraded or downgraded. The price of bonds below investment grade may
react more to the ability of a company to pay interest and principal when due
than to changes in interest rates. They have greater price fluctuations, are
more likely to experience a default, and sometimes are referred to as junk
bonds. Reduced market liquidity for these bonds may occasionally make it more
difficult to value them. In valuing bonds, IDSC relies both on independent
rating agencies and the investment manager's credit analysis. Under normal
circumstances, at least 85% of the securities in IDSC's Portfolio will be rated
investment grade, or in the opinion of IDSC's investment advisor will be the
equivalent of investment grade. Under normal circumstances, IDSC will not
purchase any security rated below B- by Moody's Investors Service, Inc. or
Standard & Poor's Corporation. Securities that are subsequently downgraded in
quality may continue to be held by IDSC and will be sold only when IDSC believes
it is advantageous to do so.
As of Dec. 31, 1997, IDSC held about __% of its investment portfolio (including
bonds, preferred stocks, mortgages and cash equivalents) in investments rated
below investment grade.
When-issued securities are subject to market fluctuations and they may affect
IDSC's investment portfolio the same as owned securities.
Derivatives are financial instruments whose performance is derived, at least in
part, from the performance of an underlying asset, security or index. A small
change in the value of the underlying asset, security or index may cause a
sizable gain or loss in the fair value of the derivative.
<PAGE>
How your money is managed
Relationship between IDSC and American Express Financial Corporation
IDSC was originally organized as Investors Syndicate of America, Inc., a
Minnesota corporation, on Oct. 15, 1940, and began business as an issuer of face
amount investment certificates on Jan. 1, 1941. The company became a Delaware
corporation on Dec. 31, 1977, and changed its name to IDS Certificate Company on
April 2, 1984.
Before IDSC was created, AEFC (formerly known as IDS Financial Corporation), our
parent company, had issued similar certificates since 1894. As of Jan. 1, 1995,
IDS Financial Corporation changed its name to AEFC. IDSC and AEFC have never
failed to meet their certificate payments.
During its many years in operation, AEFC has become a leading manager of
investments in mortgages and securities. As of Dec. 31, 199_, AEFC managed
investments, including its own, of more than $___ billion.
AEFC itself is a wholly owned subsidiary of American Express Company, a
financial services company with executive offices at American Express Tower,
World Financial Center, New York, NY 10285. American Express Company is a
financial services company engaged through subsidiaries in other businesses
including:
travel related services (including American Express(R) Card and Travelers
Cheque operations through American Express Travel Related Services Company,
Inc. and its subsidiaries); and
international banking services (through American Express Bank Ltd. and its
subsidiaries).
About AESC
AESC is a wholly-owned subsidiary of American Express Travel Related Services
Inc., which in turn is a wholly-owned subsidiary of American Express Company.
Capital structure and certificates issued
IDSC has authorized, issued and has outstanding 150,000 shares of common stock,
par value of $10 per share. AEFC owns all of the outstanding shares.
<PAGE>
As of Dec. 31, 1997, IDSC had issued (in face amount) $__________ of installment
certificates and $__________ of single payment certificates. As of Dec. 31,
1997, IDSC had issued (in face amount) $__________ of installment certificates
and $__________ of single payment certificates since its inception in 1941.
Investment management and services
Under an Investment Advisory and Services Agreement, AEFC acts as our investment
advisor and is responsible for:
providing investment research;
making specific investment recommendations; and
executing purchase and sale orders according to our policy of obtaining the
best price and execution.
All these activities are subject to direction and control by our board of
directors and officers. Our agreement with AEFC requires annual renewal by our
board, including a majority of directors who are not interested persons of AEFC
or IDSC as defined in the federal Investment Company Act of 1940.
For its services, we pay AEFC a monthly fee, equal on an annual basis to a
percentage of the total book value of certain assets (included assets).
Advisory and services fee computation:
Included assets Percentage of total book value
First $250 million 0.75%
Next 250 million 0.65
Next 250 million 0.55
Next 250 million 0.50
Any amount over 1 billion 0.45
Included assets are all assets of IDSC except mortgage loans, real estate, and
any other asset on which we pay an outside advisory or service fee.
<PAGE>
Advisory and services fee for the past three years:
Percentage of
Year Total fees included assets
1997 $ %
1996 $16,989,093 0.50
1995 $16,472,458 0.50
Estimated advisory and services fees for 1998 are $__________.
Other expenses payable by IDSC: The Investment Advisory and Services Agreement
provides that we will pay:
costs incurred by us in connection with real estate and mortgages;
taxes;
depository and custodian fees;
brokerage commissions;
fees and expenses for services not covered by other agreements and
provided to us at our request, or by requirement, by attorneys, auditors,
examiners and professional consultants who are not officers or employees of
AEFC;
fees and expenses of our directors who are not officers or employees of
AEFC;
provision for certificate reserves (interest accrued on certificate owner
accounts); and
expenses of customer settlements not attributable to sales function.
Distribution
Under a Distribution Agreement with AESC, for certificates sold through AEFD, we
pay AESC a fee every month of 2.5% of all payments received during the month.
This fee is paid on all payments received on or after issue of your certificate
until the certificate's maturity date.
Under a Distribution Agreement with American Express Financial Advisors Inc., a
wholly-owned subsidiary of AEFC, we pay a fee every month of 2.5% of all
payments received during the month. This fee is paid on all payments received on
or after issue of your certificate until the certificate's maturity date.
<PAGE>
This fee is not assessed to your certificate account.
AEFD is a channel for direct marketing of financial services to American Express
card members and others.
Total distribution fees paid to American Express Financial Advisors Inc. for all
series of certificates amounted to $________ during the year ended Dec. 31,
1997. We expect to pay American Express Financial Advisors Inc. distribution
fees amounting to $________ during 1998.
See Note 1 to Financial statements regarding deferral of distribution fee
expense.
American Express Financial Advisors Inc. and AESC pay other selling expenses in
connection with services to us. Our board of directors, including a majority of
directors who are not interested persons of American Express Financial Advisors
Inc., AESC or IDSC, approved this distribution agreement.
Transfer Agent
Under a Transfer Agency Agreement American Express Client Service Corporation
(AESC) maintains certificate owner accounts and records. IDSC pays AESC a
monthly fee of one-twelfth of $10.353 per certificate owner account for this
service.
Employment of other American Express affiliates
AEFC may employ an affiliate of American Express Company as executing broker for
our portfolio transactions only if:
we receive prices and executions at least as favorable as those offered by
qualified independent brokers performing similar services;
the affiliate charges us commissions consistent with those charged to
comparable unaffiliated customers for similar transactions; and
the affiliate's employment is consistent with the terms of the current
Investment Advisory and Services Agreement and federal securities laws.
Directors and officers
IDSC's directors, chairman, president and controller are elected annually for a
term of one year. The other executive officers are appointed by the president.
We paid a total of $______ during 1997 to directors not employed by AEFC.
<PAGE>
Board of directors
David R. Hubers*
Born in 1943. Director since 1987.
President and chief executive officer of AEFC since 1993. Senior vice president
and chief financial officer of AEFC from 1984 to 1993.
Charles W. Johnson
Born in 1929. Director since 1989.
Director, Communications Holdings, Inc. Former vice president and group
executive, Industrial Systems, with Honeywell, Inc. Retired 1989.
Richard W. Kling*
Born in 1940. Director since 1996.
Chairman of the board of directors since 1996. Director of IDS Life Insurance
Company since 1984; president since 1994. Executive vice president of Marketing
and Products of AEFC from 1988 to 1994. Senior vice president of AEFC since
1994. Director of IDS Life Series Fund, Inc. and member of the board of managers
of IDS Life Variable Annuity Funds A and B.
Edward Landes
Born in 1919. Director since 1984.
Development consultant. Director of IDS Life Insurance Company of New York.
Director of Endowment Development, YMCA of Metropolitan Minneapolis. Vice
president for Financial Development, YMCA of Metropolitan Minneapolis from 1985
through 1995. Former sales manager - Supplies Division and district manager -
Data Processing Division of IBM Corporation. Retired 1983.
John V. Luck, Ph.D.
Born in 1926. Director since 1987.
Former senior vice president - Science and Technology with General Mills, Inc.
Employed with General Mills, Inc. since 1968. Retired 1988.
James A. Mitchell*
Born in 1941. Director since 1994.
Chairman of the board of directors from 1994 to 1996. Executive vice president -
Marketing and Products of AEFC since 1994. Senior vice president - Insurance
Operations of AEFC and president and chief executive officer of IDS Life
Insurance Company from 1986 to 1994.
Harrison Randolph
Born in 1916. Director since 1968.
Engineering, manufacturing and management consultant since 1978.
<PAGE>
Gordon H. Ritz
Born in 1926. Director since 1968.
Director, Mid-America Publishing and Atrix International, Inc. Former president,
Com Rad Broadcasting Corp. Former director, Sunstar Foods.
Stuart A. Sedlacek*
Born in 1957. Director since 1994.
President since 1994. Vice president - Assured Assets of AEFC since 1994. Vice
president and portfolio manager from 1988 to 1993. Executive vice president -
Assured Assets of IDS Life Insurance Company since 1994.
* "Interested Person" of IDSC as that term is defined in Investment Company Act
of 1940.
Executive officers
Stuart A. Sedlacek
Born in 1957. President since 1994.
Timothy S. Meehan
Born in 1957. Secretary since 1995.
Secretary of AEFC and American Express Financial Advisors Inc. since 1995.
Senior counsel to AEFC since 1995. Counsel from 1990 to 1995.
Lorraine R. Hart
Born in 1951. Vice president - Investments since 1994.
Vice president - Insurance Investments of AEFC since 1989. Vice president -
Investments of IDS Life Insurance Company since 1992.
Jay C. Hatlestad
Born in 1957. Vice president and controller of IDSC since 1994. Manager of
Investment Accounting of IDS Life Insurance Company from 1986 to 1994.
Bruce A. Kohn
Born in 1951. Vice president and general counsel since 1993. Senior counsel to
AEFC since 1996. Counsel to AEFC from 1992 to 1996. Associate counsel from 1987
to 1992.
F. Dale Simmons
Born in 1937. Vice president - Real Estate Loan Management since 1993. Vice
president of AEFC since 1992. Senior portfolio manager of AEFC since 1989.
Assistant vice president from 1987 to 1992.
The officers and directors as a group beneficially own less than 1% of the
common stock of American Express Company.
<PAGE>
IDSC has provisions in its bylaws relating to the indemnification of its
officers and directors against liability, as permitted by law. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers or persons controlling the registrant pursuant
to the foregoing provisions, the registrant has been informed that in the
opinion of the SEC such indemnification is against public policy as expressed in
the Act and is therefore unenforceable.
Auditors
A firm of independent auditors audits our financial statements at the close of
each fiscal year (Dec. 31). Copies of our annual financial statements (audited)
and semiannual financial statements (unaudited) are available to any certificate
owner upon request.
Ernst & Young LLP, Minneapolis, has audited the financial statements for each of
the years in the three-year period ended Dec. 31, 199_. These statements are
included in this prospectus. Ernst & Young LLP is also the auditor for American
Express Company, the parent company of AEFC and IDSC.
IDS Certificates
Other certificates issued by IDSC and offered through AEFD: Your American
Express financial advisor can give you more information on five other
certificates issued by IDSC. These certificates offer a wide range of investment
terms and features.
IDS Cash Reserve Certificate - A single payment certificate that permits
additional investments on which IDSC guarantees interest in advance for a
three-month term.
IDS Flexible Savings Certificate - A single payment certificate that permits
additional investments and on which IDSC guarantees interest in advance for a
term of six, 12, 18, 24, 30 or 36 months.
IDS Preferred Investors Certificate - A single payment certificate that combines
a competitive fixed rate of return with IDSC's guarantee of principal for large
investments of $250,000 to $5 million.
IDS Staggered Stock Market Certificate - A certificate that pays interest linked
to one-year stock market performance for a series of one-year terms starting
every month or at other intervals the client selects.
IDS Stock Market Certificate - A single payment certificate that calculates all
or part of your interest based on stock market performance, as measured by a
broad market index, with IDSC's guarantee of return of principal.
<PAGE>
Appendix
Description of 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, Baa, Ba, B, Caa, Ca and C. Ratings by Standard & Poor's
Corporation are AAA, AA, A, BBB, BB, B, CCC, CC, C and D.
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.
Ba/BB - Considered to have speculative elements. The protection of interest and
principal payments may be very moderate.
B - Lack characteristics of more desirable investments. There may be small
assurance over any long period of time of the payment of interest and principal.
Caa/CCC - Are of poor standing. Such issues may be in default or there may be
risk with respect to principal or interest.
Ca/CC - Represent obligations that are highly speculative. Such issues are often
in default or have other marked shortcomings.
C - Are obligations with a higher degree of speculation. These securities have
major risk exposures to default.
D - Are in payment default. The D rating is used when interest payments or
principal payments are not made on the due date.
Non-rated securities will be considered for investment. When assessing each
non-rated security, IDSC will consider the financial condition of the issuer or
the protection afforded by the terms of the security.
<PAGE>
(Back Cover)
American Express Financial Direct Service Team
Withdrawals, transfers, inquiries
National: 800-297-7378
TTY Service
For the hearing impaired
800-710-5260
Distributed by American Express Financial Direct
IDS Installment Certificate
IDS Tower 10
Minneapolis, MN 55440-0010
<PAGE>
IDS Preferred Investors Certificate
Prospectus
April 28, 1998
Combines a competitive fixed rate of return with principal guaranteed by IDS
Certificate Company.
IDS Preferred Investors Certificates are issued by IDS Certificate Company
(IDSC). You may purchase this certificate by selecting a term of one, two,
three, six, 12, 24, or 36 months and an initial investment of at least $250,000
but not more than $5 million (unless you receive prior authorization from IDSC
to invest more). Your principal and interest are guaranteed by IDSC. IDSC
guarantees a fixed rate of interest depending upon the term you select. You may
invest in successive terms up to a total of 20 years from the issue date of the
certificate. Your interest rate will be determined as described in "About the
certificate."
As is the case with other investment companies, 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.
This certificate is backed by IDSC's investments on deposit rather than
guaranteed or insured by the government or someone else. See "Invested and
guaranteed by IDSC" and "Regulated by government" under "How your money is used
and protected."
IDS Certificate Company is not a bank or financial institution, and the
securities it offers are not deposits or obligations of, backed or guaranteed or
endorsed by any bank or financial institution nor are they insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board or any other
agency.
This prospectus describes terms and conditions of your IDS Preferred Investors
Certificate. It contains facts that can help you decide if the certificate is
the right investment for you. Read the prospectus before you invest and keep it
for future reference. No one has the authority to change the terms and
conditions of the IDS Preferred Investors Certificate as described in the
prospectus, or to bind IDSC by any statement not in it.
IDS Certificate Company
IDS Tower 10
Minneapolis, MN 55440-0010
800-297-7378 (toll free)
<PAGE>
Distributor:
American Express Service Corporation
IDS Tower 10
Minneapolis, MN 55440-0010
TTY numbers:
800-710-5260 (toll free) (612) 671-7066
An American Express company
<PAGE>
Where to get information about IDSC
IDS Certificate Company is subject to the reporting requirements of the
Securities Exchange Act of 1934. Reports and other information on IDSC are filed
with the Securities and Exchange Commission (SEC) and are available on the SEC
Internet web site (http://www.sec.gov). Copies can be obtained from the Public
Reference Section of the SEC, 450 5th St., N.W., Room 1024, Washington, D.C.
20549, at prescribed rates. Or you can inspect and copy information in person at
the SEC's Public Reference Section and at the following regional offices:
Northeast Regional Office
7 World Trade Center
Suite 1300
New York, NY 10048
Midwest Regional Office
500 West Madison St.
Suite 1400
Chicago, IL 60661
Pacific Regional Office
5670 Wilshire Blvd.
11th Floor
Los Angeles, CA 90036
Initial interest rates
IDSC guarantees a fixed rate of interest for each term. For the initial term,
the rate will be within a specified range of certain average interest rates,
generally referred to as the London Interbank Offered Rates (LIBOR), as
explained under "About the certificate."
<PAGE>
Here are the interest rates in effect on the date of this prospectus, April 28,
1997:
<TABLE>
<CAPTION>
<S> <C> <C>
Simple Effective
interest annualized
Term rate* yield**
- ------------------------------------ ----------------------------------- -----------------------------------
1-month
- ------------------------------------ ----------------------------------- -----------------------------------
2-month
- ------------------------------------ ----------------------------------- -----------------------------------
6-month
- ------------------------------------ ----------------------------------- -----------------------------------
12-month
- ------------------------------------ ----------------------------------- -----------------------------------
24-month
- ------------------------------------ ----------------------------------- -----------------------------------
- ------------------------------------ ----------------------------------- -----------------------------------
36-month
- ------------------------------------ ----------------------------------- -----------------------------------
</TABLE>
* These are the rates for investments of $250,000. Rates may depend on the
factors described in "Rates for new purchases" and "Promotions and pricing
flexibility" under "About the certificate."
** Assuming monthly compounding for 12 months and a $250,000 purchase.
These rates may or may not be in effect when you apply to purchase your
certificate. Rates for future terms are set at the discretion of IDSC and may
also differ from the rates shown here.
We reserve the right to issue other securities with different terms.
<PAGE>
Contents
Table of contents
About the certificate p
Investment amounts and terms p
Face amount and principal p
Value at maturity p
Receiving cash during the term p
Interest p
Rates for new purchases p
Promotions and pricing flexibility p
Additional investments p
How to invest your funds p
Buying your certificate p
When your certificate term ends p
Three ways to receive payment when you withdraw funds p
Retirement plans: special policies p
For more information p
Taxes on your earnings p
Retirement accounts p
Gifts to minors p
How to determine the correct TIN p
Foreign investors p
Trusts p
How your money is used and protected p
Invested and guaranteed by IDSC p
Regulated by government p
Backed by our investments p
Investment policies p
Certain investment considerations p
<PAGE>
How your money is managed p
Relationship between IDSC and American
Express Financial Corporation p
About American Express Service Corporation p
Capital structure and certificates issued p
Investment management and services p
Distribution p
Transfer Agent p
About American Express Service Corporation p
Employment of other American Express affiliates p
Directors and officers p
Auditors p
IDS Certificates p
Appendix p
Annual financial information p
Summary of selected financial information p
Management's discussion and analysis of financial
condition and results of operations p
Report of independent auditors p
Financial statements p
Notes to financial statements p
<PAGE>
About the certificate
Investment amounts and terms
You may purchase the IDS Preferred Investors Certificate with a single payment
of at least $250,000 payable in U.S. currency. As its name suggests, this
certificate is designed to offer attractive interest rates to investors with a
large amount to invest. Unless you receive prior authorization, your total
amount paid in over the life of the certificate, less withdrawals, cannot exceed
$5 million.
After determining the amount you wish to invest, you select a term of one, two,
three, six, 12, 24 or 36 months for which IDSC will guarantee an interest rate.
Generally, you will be able to select any of the terms offered. But if your
certificate is nearing its 20-year maturity, you will not be allowed to select a
term that would carry the certificate past its maturity date.
The certificate may be used as an investment for your Individual Retirement
Account (IRA), 401(k) plan account or other qualified retirement plan account.
If so used, the amount of your contribution (investment) will be subject to any
limitations of the plan and applicable federal law.
Face amount and principal
The face amount of the certificate is the amount of your initial investment, and
will remain the same over the life of the certificate. Any investment or
withdrawal within 15 days of the end of a term will be added on or deducted to
determine principal for the new term. The principal is the amount that is
reinvested at the beginning of each subsequent term, and is calculated as
follows:
Principal equals Face amount (initial investment)
plus At the end of a term, interest credited to your account during the term
minus Any interest paid to you in cash plus Any additional investments to your
certificate minus Any withdrawals, fees and applicable penalties.
Principal may change during a term as described in "Full and partial
withdrawals."
<PAGE>
For example: Assume your initial investment (face amount) of $500,000 has earned
$7,500 of interest during the term. You have not taken any interest as cash, or
made any withdrawals. You have invested an additional $250,000 at the beginning
of the next term. Your principal for the next term will equal:
$500,000.00 Face amount (initial investment)
plus $7,500.00 Interest credited to your account
minus ($0.00) Interest paid to you in cash
plus $250,000.00 Additional investment to your certificate made in
the current term's grace period
minus ($0.00) Withdrawals and applicable penalties or fees
$757,500.00 Principal at the beginning of the next term.
Value at maturity
You may continue to invest for successive terms for up to a total of 20 years.
Your certificate matures at 20 years from its issue date. At maturity, you will
receive a distribution for the value of your certificate, which will be the
total of your purchase price, plus additional investments and any credited
interest not paid to you in cash, less any withdrawals and penalties. Some fees
may apply as described in "How to invest and withdraw funds."
Receiving cash during the term
If you need your money before your certificate term ends, you may withdraw part
or all of its value at any time, less any penalties that apply. Procedures for
withdrawing money, as well as conditions under which penalties apply, are
described in the service document.
Interest
Your investments earn interest from the date they are credited to your account.
Interest is compounded and credited at the end of each certificate month (on the
monthly anniversary of the issue date).
IDSC declares and guarantees a fixed rate of interest for each term during the
life of your certificate. We calculate the amount of interest you earn each
certificate month by:
applying the interest rate then in effect to your balance each day;
<PAGE>
adding these daily amounts to get a monthly total; and
subtracting interest accrued on any amount you withdraw during the
certificate month.
Interest is calculated on a 30-day month and 360-day year basis.
Rates for new purchases
When your application is accepted and we have received your initial investment,
we will send you a confirmation of your purchase showing the rate that your
investment will earn. IDSC guarantees that the rate in effect for your initial
term will be within a 100 basis point (1%) range tied to certain average
interest rates for comparable length dollar deposits available on an interbank
basis in the London market, and generally referred to as the London Interbank
Offered Rates (LIBOR). For investments of $1 million or more, initial rates for
specific terms are determined as follows:
1 month Within a range of 50 basis points below to 50 basis points above
the one-month LIBOR rate.
2 months Within a range of 50 basis points below to 50 basis points above the
one-month LIBOR rate. (A two-month LIBOR rate is not published.)
3 months Within a range of 50 basis points below to 50 basis points above the
three-month LIBOR rate.
6 months Within a range of 50 basis points below to 50 basis points above the
six-month LIBOR rate.
12 months Within a range of 50 basis points below to 50 basis points above the
12-month LIBOR rate.
24 months Within a range of 25 basis points below to 75 basis points above the
12-month LIBOR rate. (A 24-month LIBOR rate is not published.)
36 months Within a range of 25 basis points below to 75 basis points above the
12-month LIBOR rate. (A 36-month LIBOR rate is not published.)
<PAGE>
For investments from $500,000 to $999,999, initial rates for specific terms are
determined as follows:
1 month Within a range of 75 basis points below to 25 basis points above the
one-month LIBOR rate.
2 months Within a range of 75 basis points below to 25 basis points above the
one-month LIBOR rate. (A two-month LIBOR rate is not published.)
3 months Within a range of 75 basis points below to 25 basis points above the
three-month LIBOR rate.
6 months Within a range of 75 basis points below to 25 basis points above the
six-month LIBOR rate.
12 months Within a range of 75 basis points below to 25 basis points above the
12-month LIBOR rate.
24 months Within a range of 50 basis points below to 50 basis points above the
12-month LIBOR rate. (A 24-month LIBOR rate is not published.)
36 months Within a range of 50 basis points below to 50 basis points above the
12-month LIBOR rate. (A 36-month LIBOR rate is not published.)
For investments of $250,000 to $499,999, initial rates for specific terms are
determined as follows:
1 month Within a range of 125 basis points below to 25 basis points below the
one-month LIBOR rate.
2 months Within a range of 125 basis points below to 25 basis points below the
one-month LIBOR rate. (A two-month LIBOR rate is not published.)
3 months Within a range of 125 basis points below to 25 basis points below the
three-month LIBOR rate.
6 months Within a range of 125 basis points below to 25 basis points below the
six-month LIBOR rate.
12 months Within a range of 125 basis points below to 25 basis points below the
12-month LIBOR rate.
<PAGE>
24 months Within a range of 100 basis points below to zero basis points below
the 12-month LIBOR rate. (A 24-month LIBOR rate is not published.)
36 months Within a range of 100 basis points below to zero basis points below
the 12-month LIBOR rate. (A 36-month LIBOR rate is not published.)
Although the minimum investment is $250,000, in the event that your investment
is less than the minimum, the range of initial rates for any given term will be
100 basis points less than the corresponding range of rates for an investment of
$250,000.
For example, if the LIBOR rate published on the date rates are determined with
respect to a six-month certificate is 6.50%, the rate declared on a six-month
IDS Preferred Investors Certificate between $500,000 and $999,999 would be
between 5.75% and 6.75%. If the LIBOR rate published for a given date with
respect to 12-month deposits is 7.00%, IDSC's rates in effect for that date for
the 24- and 36-month IDS Preferred Investors Certificates between $500,000 and
$999,999 would be between 6.50% and 7.50%. When your application is accepted,
you will be sent a confirmation showing the rate that your investment will earn
for the first term.
LIBOR is the interbank-offered rates for dollar deposits at which major
commercial banks will lend for specific terms in the London market. Generally,
LIBOR rates quoted by major London banks will be the same. However, market
conditions, including movements in the U.S. prime rate and the internal funding
position of each bank, may result in minor differences in the rates offered by
different banks. LIBOR is a generally accepted and widely quoted interest-rate
benchmark. The average LIBOR rate used by IDSC is published in The Wall Street
Journal.
Rates for new purchases are reviewed and may change daily. The rate that is in
effect for your chosen term will be the higher of:
the rate in effect for your chosen term on the date your application is
accepted at IDSC's corporate office or;
the rate in effect for your chosen term on the business day preceding the
date your application is accepted at IDSC's corporate office.
The interest rates printed in the front of this prospectus may or may not be in
effect on the date your application to invest is accepted. Rates for new
purchases may vary depending on the amount you invest, but will always be within
the 100 basis point range described above.
<PAGE>
Interest rates for the term you have selected will not change once the term has
begun, unless a withdrawal reduces your account value to a point where we pay a
lower interest rate, as described in "Full and partial withdrawals" under "How
to invest and withdraw funds."
Promotions and pricing flexibility
From time to time, IDSC may sponsor or participate in promotions involving one
or more of the certificates and their respective terms. For example, we may
offer different rates to new clients, to existing clients, or to individuals who
have purchased other products or used other services of American Express Company
or its subsidiaries or affiliates.
We also may offer different rates based on your amount invested, geographic
location and whether the certificate is purchased for an IRA or a qualified
retirement account.
These promotions will generally be for a specified period of time. If we offer a
promotion, the rates for new purchases will be within the range of rates
described under "Rates for new purchases."
Rates for future terms: Interest on your certificate for future terms may be
greater or less than the rates you receive during your first term. In setting
future interest rates, a primary consideration will be the prevailing investment
climate, including the LIBOR rates. Nevertheless, we have complete discretion as
to what interest rate shall be declared beyond the initial term. If LIBOR is no
longer publicly available or feasible to use, IDSC may use another, similar
index as a guide for setting rates.
Additional investments
You may make investments within 15 calendar days after the end of a term (the
grace period). About one week before the end of the term you have selected for
your certificate, we will send you a notice indicating your term end date.
Otherwise, to find out your term end date and/or the current interest rate,
contact your financial consultant at the telephone numbers listed on the back
cover. The interest rate for your next term can be obtained by calling this
number after 12:00 noon Central time on the business day preceding your renewal
date. Your confirmation will show the applicable rate. However, unless you
receive prior approval from IDSC your investment may not bring the aggregate net
investment of any one or more certificates held by you (excluding any interest
added during the life of the certificate and less withdrawals) over $5 million.
<PAGE>
How to invest your funds
Buying your certificate
Fill out and submit an application to open an account with us and purchase a
certificate. We will process the application at our corporate offices in
Minneapolis. When your application is accepted and we have received your initial
investment, we will send you a confirmation of your purchase, indicating your
account number and applicable rate of interest for your first term, as described
under "Rates for new purchases." See "Purchase policies" below.
Important: When opening an account, you must provide IDSC with your correct
Taxpayer Identification Number (Social Security or Employer Identification
Number). See "Taxes on your earnings."
Penalties for early withdrawal during a term: When you request a full or partial
withdrawal, we pay the amount you request:
first from interest credited during the current term
then from the principal of your certificate.
Any withdrawals, (other than of interest credited) during a term are deducted
from the principal and are used in determining any withdrawal charges.
Withdrawal penalties: For withdrawals during the term of more than the interest
credited that term, a 2% withdrawal penalty will be deducted from the account's
remaining balance.
For example, assume you invest $1 million in a certificate and select a two-year
term. Four months later assume you have earned $27,000 in interest. The
following demonstrates how the withdrawal charge is deducted:
When you withdraw a specific amount of money in excess of the interest credited,
we would have to withdraw somewhat more from your account to cover the
withdrawal charge. For instance, suppose you request a $100,000 check on a $1
million investment. The first $27,000 paid to you is interest earned that term,
and the remaining $73,000 paid to you is principal. We would send you a check
for $100,000 and deduct a withdrawal charge of $1,460 (2% of $73,000) from the
remaining balance of your certificate.
Your new balance would be $925,540.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Total investments $1,000,000.00
Interest credited $27,000.00
---------------
Total balance $1,027,000.00
Requested check $100,000.00
Credited interest withdrawn ($27,000.00)
Withdrawal charge percent 2%
Actual withdrawal charge $1,460.00
Balance prior to withdrawal $1,027,000.00
Requested withdrawal check ($100,000.00)
Withdrawal charge ($1,460.00)
-----------------
Total balance after withdrawal $925,540.00
</TABLE>
Additionally if you make a withdrawal during a certificate month, you will lose
the entire amount of accrued but uncredited interest for the month on the amount
withdrawn. Reducing your amount below $1 million would also cause it to earn
interest at a lower rate.
For more information on withdrawal charges, talk with your American Express
financial advisor or call the Client Service Organization at the number on the
back cover.
When your certificate term ends
About one week before the end of the term you have selected for your
certificate, we will send you a notice indicating your term end date. Otherwise
to find out your term end date and/or the current interest rates, contact the
Client Service Organization at the telephone number listed on the back cover.
The interest rate for your next term can be obtained by calling this number
after 12:00 noon Central time on the business day preceding your renewal date.
When your certificate term ends we will automatically renew your certificate for
the same term unless you notify us otherwise.
If you wish to select a different term, you must notify us either by telephone
or in writing before the end of the grace period. You will not be allowed to
select a term that would carry the certificate past its maturity date.
The interest rates that will apply to your new term will be those in effect on
the day the new term begins. We will send you a confirmation showing the rate of
interest that will apply to the new term you have selected. This rate of
interest will not be changed during that term.
<PAGE>
If you want to withdraw your certificate without a withdrawal charge, you must
notify us within 15 calendar days following the end of a term.
You may also add to your investment within the 15 calendar days following the
end of your term. See "Additional investments" under "About the certificate."
Other full and partial withdrawal policies:
If you request a partial or full withdrawal of a certificate recently
purchased or added to by a check or money order that is not guaranteed, we
will wait for your check to clear. Please expect a minimum of 10 days from
the date of your payment before IDSC mails a check to you. A check may be
mailed earlier if the bank provides evidence that your check has cleared.
If your certificate is pledged as collateral, any withdrawal will be
delayed until we get approval from the secured party.
Any payments to you may be delayed under applicable rules, regulations or
orders of the SEC.
Retirement plans: special policies
If the certificate is purchased for a 401(k) plan or other qualified
retirement plan account, the terms and conditions of the certificate apply
to the plan as the owner of this certificate. However, the terms of the
plan, as interpreted by the plan trustee or administrator, will determine
how a participant's individual account under the plan is administered.
These terms may differ from the terms of the certificate.
If your certificate is held in a Custodial Retirement Plan (or Keogh
plan), special rules may apply at maturity. If no other investment
instructions are provided directing how to handle your certificate at
maturity, the full value of the certificate will automatically transfer to
a new or existing cash management account according to rules outlined in
the Custodial Retirement Plan document.
The annual custodial fee for IRA or non-401(k) qualified retirement plans
may be deducted from your certificate account. It may reduce the amount
payable at maturity or the amount received upon an early withdrawal.
<PAGE>
Retirement plan withdrawals may be subject to withdrawal penalties or loss
of interest even if they are not subject to federal tax penalties.
We will waive withdrawal penalties on withdrawals for IRA certificate
accounts for your required distributions.
If you withdraw all funds from your last account in an IRA at American
Express Trust Company, a termination fee will apply as set out in Your
Guide to IRAs, the IRS disclosure information received when you opened your
account.
The IRA termination fee will be waived if a withdrawal occurs after you
have reached age 70 1/2 or upon the owner's death.
Withdrawal at death
If a certificate is surrendered upon the client's death, any applicable
surrender charge will be waived. In addition, if an IRA termination fee is
applicable, it will also be waived.
Taxes on your earnings
Interest on your certificate is taxable when credited to your account. Each
calendar year we provide the certificate account owner and the IRS with reports
of all earnings over $10 (Form 1099). Withdrawals are reported to the
certificate account owner and the IRS on Form 1099-B, Proceeds from Broker
Transactions.
Retirement accounts
If you are using the certificate as an investment for an IRA, 401(k) plan
account or other qualified retirement plan account, income tax rules for your
IRA or qualified plan apply. Generally, you will pay no income taxes on your
investment's earnings -- and, in many cases, on part or all of the investment
itself -- until you begin to make withdrawals.
IDSC will withhold federal income taxes of 10% on IRA withdrawals unless you
tell us not to. IDSC is required to withhold federal income taxes of 20% on most
other qualified plan distributions, unless the distribution is directly rolled
over to another qualified plan or IRA.
<PAGE>
Withdrawals from retirement accounts are generally subject to a penalty tax of
10% by the IRS if you make them before age 59 1/2, unless you are disabled or if
they are made by your beneficiary in the event of your death. Other exceptions
may also apply. Also, withdrawals of principal during a certificate month may be
subject to the certificate's provision for loss of interest.
Consult your tax advisor to see how these rules apply to you before you request
a distribution from your plan or IRA.
Gifts to minors
The certificate may be given to a minor under either the Uniform Gifts or
Uniform Transfers to Minors Act (UGMA/UTMA), whichever applies in your state.
UGMAs/UTMAs are irrevocable. Generally, under federal tax laws, income over
$1,200 on property owned by children under age 14 will be taxed at the parents'
marginal tax rate, while income on property owned by children 14 or older will
be taxed at the child's rate.
Your Taxpayer Identification Number (TIN) and backup withholding: As with any
financial account you open, you must list your current and correct Taxpayer
Identification Number (TIN) -- either your Social Security or Employer
Identification Number. The TIN must be certified under penalties of perjury on
your application when you open an account.
If you don't provide the TIN, or the TIN you report is incorrect, you could be
subject to backup withholding of 31% of your interest earnings. You could also
be subject to further penalties, such as:
a $50 penalty for each failure to supply your correct TIN;
a civil penalty of $500 if you make a false statement that results in no
backup withholding; and
criminal penalties for falsifying information.
You could also be subject to backup withholding because you failed to report
interest on your tax return as required.
<PAGE>
To help you determine the correct TIN to use on various types of accounts,
please use this chart:
How to determine the correct TIN
<TABLE>
<CAPTION>
<S> <C>
For this type of account: Use the Social Security or 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 trust or estate The legal entity
(not the personal representative or trustee, unless
no legal entity is designated in the account title)
- ------------------------------------------------------ -----------------------------------------------------
- ------------------------------------------------------ -----------------------------------------------------
Sole proprietorship The owner
- ------------------------------------------------------ -----------------------------------------------------
- ------------------------------------------------------ -----------------------------------------------------
Partnership The partnership
- ------------------------------------------------------ -----------------------------------------------------
- ------------------------------------------------------ -----------------------------------------------------
Corporate The corporation
- ------------------------------------------------------ -----------------------------------------------------
- ------------------------------------------------------ -----------------------------------------------------
Association, club or tax-exempt organization The organization
- ------------------------------------------------------ -----------------------------------------------------
</TABLE>
For details on TIN requirements, call 800-297-7378 or ask your financial
consultant for federal Form W-9, "Request for Taxpayer Identification Number and
Certification."
<PAGE>
Foreign investors
If you are not a citizen or resident of the United States, you must supply IDSC
with Form W-8, Certificate of Foreign Status when you purchase your certificate,
and you must resupply it every three years. You must also supply both a current
mailing address and an address of foreign residency, if different. IDSC will not
accept purchases of certificates by nonresident aliens without an appropriately
certified Form W-8 (or approved substitute). Also, if you do not supply Form W-8
you will be subject to backup withholding on interest payments and withdrawals.
Interest on the certificate is "portfolio interest" as defined in U.S. Internal
Revenue Code Section 871(h) if earned by a nonresident alien. Even though your
interest income is not taxed by the U.S. government, it will be reported at year
end to you and to the U.S. government on a Form 1042S, Foreign Person's U.S.
Source Income Subject to Withholding. The United States participates in various
tax treaties with foreign countries, which provide for sharing of tax
information.
Estate tax: If you are a nonresident alien and you die while owning a
certificate, then, depending on the circumstances, IDSC generally will not act
on instructions with regard to the certificate unless IDSC first receives, at a
minimum, a statement from persons IDSC believes are knowledgeable about your
estate. The statement must be in a form satisfactory to IDSC and must tell us
that, on your date of death, your estate did not include any property in the
United States for U.S. estate tax purposes. In other cases, we generally will
not take action regarding your certificate until we receive a transfer
certificate from the IRS or evidence satisfactory to IDSC that the estate is
being administered by an executor or administrator appointed, qualified and
acting within the United States. In general, a transfer certificate requires the
opening of an estate in the United States and provides assurance that the IRS
will not claim your certificate to satisfy estate taxes.
Important: The information in this prospectus is a brief and selective summary
of certain federal tax rules that apply to this certificate and is given on the
basis of current law and practice. Tax matters are highly individual and
complex. Investors should consult a qualified tax advisor regarding their own
position.
Trusts
If the investor is a trust, the policies and procedures described above will
apply with regard to each grantor who is a nonresident alien.
<PAGE>
How your money is used and protected
Invested and guaranteed by IDSC
The IDS Preferred Investors Certificate is issued and guaranteed by IDSC, a
wholly owned subsidiary of American Express Financial Corporation (AEFC). We are
by far the largest issuer of face amount certificates in the United States, with
total assets of more than $____ billion and a net worth in excess of $____
million on Dec. 31, 199_.
We back our certificates by investing the money received and keeping the
invested assets on deposit. Our investments generate interest and dividends, out
of which we pay:
interest to certificate owners; and
various expenses, including taxes, fees to AEFC for advisory and other
services and distribution fees to American Express Financial Advisors Inc.
and American Express Service Corporation (AESC).
For a review of significant events relating to our business, see "Management's
discussion and analysis of financial condition and results of operations." Our
certificates are not rated by a national rating agency.
Most banks and thrifts offer investments known as certificates of deposit (CDs)
that are similar to our certificates in many ways. Early withdrawals of bank CDs
often result in penalties. Banks and thrifts generally have federal deposit
insurance for their deposits and lend much of the money deposited to
individuals, businesses and other enterprises. Other financial institutions and
some insurance companies may offer investments with comparable combinations of
safety and return on investment.
Regulated by government
Because the IDS Preferred Investors Certificate is a security, its offer and
sale are subject to regulation under federal and state securities laws. (It is a
face-amount certificate -- not a bank product, an equity investment, a form of
life insurance or an investment trust.)
The federal Investment Company Act of 1940 requires us to keep investments on
deposit in a segregated custodial account to protect all of our outstanding
certificates. These investments back the entire value of your certificate
account. Their amortized cost must exceed the required carrying value of the
outstanding certificates by at least $250,000. As of Dec. 31, 199_, the
amortized cost of these investments exceeded the required carrying value of our
outstanding certificates by more than $___ million.
<PAGE>
Backed by our investments
Our investments are varied and of high quality. This was the composition of our
portfolio as of Dec. 31, 1997:
Type of investment Net amount invested
Government agency bonds Corporate and other bonds Preferred stocks Mortgages
Municipal bonds Cash and cash equivalents
As of Dec. 31, 1997 about __% of our securities portfolio (including bonds and
preferred stocks) is rated investment grade. For additional information
regarding securities ratings, please refer to Note 3B in the financial
statements.
Most of our investments are on deposit with American Express Trust Company,
Minneapolis, although we also maintain separate deposits as required by certain
states. American Express Trust Company is a wholly owned subsidiary of AEFC.
Copies of our Dec. 31, 199_ schedule of Investments in Securities of
Unaffiliated Issuers are available upon request. For comments regarding the
valuation, carrying values and unrealized appreciation (depreciation) of
investment securities, see Notes 1, 2 and 3 to the financial statements.
Investment policies
In deciding how to diversify the portfolio -- among what types of investments in
what amounts -- the officers and directors of IDSC use their best judgment,
subject to applicable law. The following policies currently govern our
investment decisions:
Debt securities-
Most of our investments are in debt securities as referenced in the table in
"Backed by our investments" under "How your money is used and protected."
Purchasing securities on margin -
We will not purchase any securities on margin or participate on a joint basis or
a joint-and-several basis in any trading account in securities.
Commodities -
We have not and do not intend to purchase or sell commodities or commodity
contracts except to the extent that transactions described in "Financial
transactions including hedges" in this section may be considered commodity
contracts.
<PAGE>
Underwriting -
We do not intend to engage in the public distribution of securities issued by
others. However, if we purchase unregistered securities and later resell them,
we may be considered an underwriter under federal securities laws.
Borrowing money -
From time to time we have established a line of credit if management believed
borrowing was necessary or desirable. We may pledge some of our assets as
security. We may occasionally use repurchase agreements as a way to borrow
money. Under these agreements, we sell debt securities to our lender, and
repurchase them at the sales price plus an agreed-upon interest rate within a
specified period of time.
Real estate -
We may invest in limited partnership interests in limited partnerships that
either directly, or indirectly through other limited partnerships, invest in
real estate. We may invest directly in real estate. We also invest in mortgage
loans.
Lending securities -
We may lend some of our securities to broker-dealers and receive cash equal to
the market value of the securities as collateral. We invest this cash in
short-term securities. If the market value of the securities goes up, the
borrower pays us additional cash. During the course of the loan, the borrower
makes cash payments to us equal to all interest, dividends and other
distributions paid on the loaned securities. We will try to vote these
securities if a major event affecting our investment is under consideration.
When-issued securities-
Some of our investments in debt securities are purchased on a when-issued basis.
It may take as long as 45 days or more before these securities are issued and
delivered to us. We generally do not pay for these securities or start earning
on them until delivery. We have established procedures to ensure that sufficient
cash is available to meet when-issued commitments.
Financial transactions including hedges-
We buy or sell various types of options contracts for hedging purposes or as a
trading technique to facilitate securities purchases or sales. We buy interest
rate caps for hedging purposes. These pay us a return if interest rates rise
above a specified level. If interest rates do not rise above a specified level,
the interest rate caps do not pay us a return. IDSC may enter into other
financial transactions, including futures and other derivatives, for the purpose
of managing the interest rate exposures associated with IDSC's assets or
liabilities. We do not use derivatives for speculative purposes.
<PAGE>
Illiquid securities -
A security is illiquid if it cannot be sold in the normal course of business
within seven days at approximately its current market value. Some investments
cannot be resold to the U.S. public because of their terms or government
regulations. All securities, however can be sold in private sales, and many may
be sold to other institutions and qualified buyers or on foreign markets. IDSC's
investment advisor 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 15% of
IDSC's investment portfolio will be held in securities that are illiquid. In
valuing its investment portfolio to determine this 15% limit, IDSC will use
statutory accounting under an SEC order. This means that, for this purpose, the
portfolio will be valued in accordance with applicable Minnesota law governing
investments of life insurance companies, rather than generally accepted
accounting principles.
Restrictions -
There are no restrictions on concentration of investments in any particular
industry or group of industries or on rates of portfolio turnover.
Certain investment considerations
The price of bonds generally falls as interest rates increase, and rises as
interest rates decrease. The price of a bond also fluctuates if its credit
rating is upgraded or downgraded. The price of bonds below investment grade may
react more to the ability of a company to pay interest and principal when due
than to changes in interest rates. They have greater price fluctuations, are
more likely to experience a default, and sometimes are referred to as junk
bonds. Reduced market liquidity for these bonds may occasionally make it more
difficult to value them. In valuing bonds, IDSC relies both on independent
rating agencies and the investment manager's credit analysis. Under normal
circumstances, at least 85% of the securities in IDSC's Portfolio will be rated
investment grade, or in the opinion of IDSC's investment advisor will be the
equivalent of investment grade. Under normal circumstances, IDSC will not
purchase any security rated below B- by Moody's Investors Service, Inc. or
Standard & Poor's Corporation. Securities that are subsequently downgraded in
quality may continue to be held by IDSC and will be sold only when IDSC believes
it is advantageous to do so.
As of Dec. 31, 1997, IDSC held about __% of its investment portfolio (including
bonds, preferred stocks, mortgages and cash equivalents) in investments rated
below investment grade.
When-issued securities are subject to market fluctuations and they may affect
IDSC's investment portfolio the same as owned securities.
<PAGE>
Derivatives are financial instruments whose performance is derived, at least in
part, from the performance of an underlying asset, security or index. A small
change in the value of the underlying asset, security or index may cause a
sizable gain or loss in the fair value of the derivative.
How your money is managed
Relationship between IDSC and American Express Financial Corporation
IDSC was originally organized as Investors Syndicate of America, Inc., a
Minnesota corporation, on Oct. 15, 1940, and began business as an issuer of face
amount investment certificates on Jan. 1, 1941. The company became a Delaware
corporation on Dec. 31, 1977, and changed its name to IDS Certificate Company on
April 2, 1984.
Before IDSC was created, AEFC (formerly known as IDS Financial Corporation), our
parent company, had issued similar certificates since 1894. As of Jan. 1, 1995,
IDS Financial Corporation changed its name to AEFC. IDSC and AEFC have never
failed to meet their certificate payments.
During its many years in operation, AEFC has become a leading manager of
investments in mortgages and securities. As of Dec. 31, 1997, AEFC managed
investments, including its own, of more than $___ billion.
AEFC itself is a wholly owned subsidiary of American Express Company, a
financial services company with executive offices at American Express Tower,
World Financial Center, New York, NY 10285. American Express Company is a
financial services company engaged through subsidiaries in other businesses
including:
travel related services (including American Express(R) Card and Travelers
Cheque operations through American Express Travel Related Services Company,
Inc. and its subsidiaries); and
international banking services (through American Express Bank Ltd. and its
subsidiaries including American Express Bank International).
About AESC
AESC is a wholly-owned subsidiary of American Express Travel Related Services
Inc., which in turn is a wholly-owned subsidiary of American Express Company.
Capital structure and certificates issued
IDSC has authorized, issued and has outstanding 150,000 shares of common stock,
par value of $10 per share. AEFC owns all of the outstanding shares.
<PAGE>
As of Dec. 31, 1997, IDSC had issued (in face amount) $__________ of installment
certificates and $__________ of single payment certificates. As of Dec. 31,
1997, IDSC had issued (in face amount) $__________ of installment certificates
and $__________ of single payment certificates since its inception in 1941.
Investment management and services
Under an Investment Advisory and Services Agreement, AEFC acts as our investment
advisor and is responsible for:
providing investment research;
making specific investment recommendations; and
executing purchase and sale orders according to our policy of obtaining
the best price and execution.
All these activities are subject to direction and control by our board of
directors and officers. Our agreement with AEFC requires annual renewal by our
board, including a majority of directors who are not interested persons of AEFC
or [IDSC/the Issuer] as defined in the federal Investment Company Act of 1940.
For its services, we pay AEFC a monthly fee, equal on an annual basis to a
percentage of the total book value of certain assets (included assets).
Advisory and services fee computation:
Included assets Percentage of total book value
First $250 million 0.75%
Next 250 million 0.65
Next 250 million 0.55
Next 250 million 0.50
Any amount over 1 billion 0.45
Included assets are all assets of IDSC except mortgage loans, real estate, and
any other asset on which we pay an outside advisory or service fee.
<PAGE>
Advisory and services fee for the past three years:
Percentage of
Year Total fees included assets
1997 $
1996 $16,989,093
1995 $16,472,458
Estimated advisory and services fees for 1997 are $__________.
Other expenses payable by IDSC: The Investment Advisory and Services Agreement
provides that we will pay:
costs incurred by us in connection with real estate and mortgages;
taxes;
depository and custodian fees;
brokerage commissions;
fees and expenses for services not covered by other agreements and
provided to us at our request, or by requirement, by attorneys, auditors,
examiners and professional consultants who are not officers or employees of
AEFC;
fees and expenses of our directors who are not officers or employees of
AEFC;
provision for certificate reserves (interest accrued on certificate owner
accounts); and
expenses of customer settlements not attributable to sales function.
Distribution
Under a Distribution Agreement with AESC, for certificates sold through AEFD we
pay AESC for the distribution of this certificate as follows:
0.165% of the initial payment on the issue date of the certificate, and
0.165% of the certificate's reserve at the beginning of the second and
subsequent quarters from issue date.
<PAGE>
Under a Distribution Agreement with American Express Financial Advisors Inc., a
wholly-owned subsidiary of AEFC, we pay for the distribution of this certificate
by American Express Financial Advisors Inc. as follows:
0.165% of the initial payment on the issue date of the certificate; and
0.165% of the certificate's reserve at the beginning of the second and
subsequent quarters from issue date.
This fee is not assessed to your certificate account.
AEFD is a channel for direct marketing of financial services to American Express
card members and others.
Total distribution fees paid to American Express Financial Advisors Inc. for all
series of certificates amounted to $________ during the year ended Dec. 31,
1997. We expect to pay American Express Financial Advisors Inc. distribution
fees amounting to $________ during 1998.
See Note 1 to Financial statements regarding deferral of distribution fee
expense.
American Express Financial Advisors Inc. pays commissions to its financial
advisors and pays other selling expenses in connection with services to us. Our
board of directors, including a majority of directors who are not interested
persons of American Express Financial Advisors Inc. or IDSC, approved this
distribution agreement.
Transfer Agent
Under a Transfer Agency Agreement American Express Client Service Corporation
(AECSC) maintains certificate owner accounts and records. IDSC pays AECSC a
monthly fee of one-twelfth of $10.353 per certificate owner account for this
service.
Employment of other American Express affiliates
AEFC may employ an affiliate of American Express Company as executing broker for
our portfolio transactions only if:
we receive prices and executions at least as favorable as those offered by
qualified independent brokers performing similar services;
the affiliate charges us commissions consistent with those charged to
comparable unaffiliated customers for similar transactions; and
<PAGE>
the affiliate's employment is consistent with the terms of the current
Investment Advisory and Services Agreement and federal securities laws.
Directors and officers
IDSC's directors, chairman, president and controller are elected annually for a
term of one year. The other executive officers are appointed by the president.
We paid a total of $______ during 1997 to directors not employed by AEFC.
Board of directors
David R. Hubers*
Born in 1943. Director since 1987.
President and chief executive officer of AEFC since 1993. Senior vice president
and chief financial officer of AEFC from 1984 to 1993.
Charles W. Johnson
Born in 1929. Director since 1989.
Director, Communications Holdings, Inc. Former vice president and group
executive, Industrial Systems, with Honeywell, Inc. Retired 1989.
Richard W. Kling*
Born in 1940. Director since 1996.
Chairman of the board of directors since 1996. Director of IDS Life Insurance
Company since 1984; president since 1994. Executive vice president of Marketing
and Products of AEFC from 1988 to 1994. Senior vice president of AEFC since
1994. Director of IDS Life Series Fund, Inc. and member of the board of managers
of IDS Life Variable Annuity Funds A and B.
Edward Landes
Born in 1919. Director since 1984.
Development consultant. Director of IDS Life Insurance Company of New York.
Director of Endowment Development, YMCA of Metropolitan Minneapolis. Vice
president for Financial Development, YMCA of Metropolitan Minneapolis from 1985
through 1995. Former sales manager - Supplies Division and district manager -
Data Processing Division of IBM Corporation. Retired 1983.
John V. Luck, Ph.D.
Born in 1926. Director since 1987.
Former senior vice president - Science and Technology with General Mills, Inc.
Employed with General Mills, Inc. since 1968. Retired 1988.
<PAGE>
James A. Mitchell*
Born in 1941. Director since 1994.
Chairman of the board of directors from 1994 to 1996. Executive vice president -
Marketing and Products of AEFC since 1994. Senior vice president - Insurance
Operations of AEFC and president and chief executive officer of IDS Life
Insurance Company from 1986 to 1994.
Harrison Randolph
Born in 1916. Director since 1968.
Engineering, manufacturing and management consultant since 1978.
Gordon H. Ritz
Born in 1926. Director since 1968.
Director, Mid-America Publishing and Atrix International, Inc. Former president,
Com Rad Broadcasting Corp. Former director, Sunstar Foods.
Stuart A. Sedlacek*
Born in 1957. Director since 1994.
President since 1994. Vice president - Assured Assets of AEFC since 1994. Vice
president and portfolio manager from 1988 to 1993. Executive vice president -
Assured Assets of IDS Life Insurance Company since 1994.
* "Interested Person" of IDSC as that term is defined in Investment Company Act
of 1940.
Executive officers
Stuart A. Sedlacek
Born in 1957. President since 1994.
Timothy S. Meehan
Born in 1957. Secretary since 1995.
Secretary of AEFC and American Express Financial Advisors Inc. since 1995.
Senior counsel to AEFC since 1995. Counsel from 1990 to 1995.
Lorraine R. Hart
Born in 1951. Vice president - Investments since 1994.
Vice president - Insurance Investments of AEFC since 1989. Vice president -
Investments of IDS Life Insurance Company since 1992.
Jay C. Hatlestad
Born in 1957. Vice president and controller of IDSC since 1994. Manager of
Investment Accounting of IDS Life Insurance Company from 1986 to 1994.
<PAGE>
Bruce A. Kohn
Born in 1951. Vice president and general counsel since 1993. Senior counsel to
AEFC since 1996. Counsel to AEFC from 1992 to 1996. Associate counsel from 1987
to 1992.
F. Dale Simmons
Born in 1937. Vice president - Real Estate Loan Management since 1993. Vice
president of AEFC since 1992. Senior portfolio manager of AEFC since 1989.
Assistant vice president from 1987 to 1992.
The officers and directors as a group beneficially own less than 1% of the
common stock of American Express Company.
IDSC has provisions in its bylaws relating to the indemnification of its
officers and directors against liability, as permitted by law. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers or persons controlling the registrant pursuant
to the foregoing provisions, the registrant has been informed that in the
opinion of the SEC such indemnification is against public policy as expressed in
the Act and is therefore unenforceable.
Auditors
A firm of independent auditors audits our financial statements at the close of
each fiscal year (Dec. 31). Copies of our annual financial statements (audited)
and semiannual financial statements (unaudited) are available to any certificate
owner upon request.
Ernst & Young LLP, Minneapolis, has audited the financial statements for each of
the years in the three-year period ended Dec. 31, 1997. These statements are
included in this prospectus. Ernst & Young LLP is also the auditor for American
Express Company, the parent company of AEFC and IDSC.
IDS Certificates
Other certificates issued by IDSC and offered through AEFD: Your American
Express financial advisor can give you more information on five other
certificates issued by IDSC. These certificates offer a wide range of investment
terms and features.
IDS Cash Reserve Certificate - A single payment certificate that permits
additional investments on which IDSC guarantees interest in advance for a
three-month term.
IDS Flexible Savings Certificate - A single payment certificate that permits
additional investments and on which IDSC guarantees interest in advance for a
term of six, 12, 18, 24, 30 or 36 months.
IDS Installment Certificate - An installment payment certificate that declares
interest in advance for a three-month period and offers bonuses in the third
through sixth years for regular investments.
IDS Staggered Stock Market Certificate - A certificate that pays interest linked
to one-year stock market performance for a series of one-year terms starting
every month or at other intervals the client selects.
IDS Stock Market Certificate - A single payment certificate that calculates all
or part of your interest based on stock market performance, as measured by a
broad market index, with IDSC's guarantee of return of principal.
<PAGE>
Appendix
Description of 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, Baa, Ba, B, Caa, Ca and C. Ratings by Standard & Poor's
Corporation are AAA, AA, A, BBB, BB, B, CCC, CC, C and D.
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.
Ba/BB - Considered to have speculative elements. The protection of interest and
principal payments may be very moderate.
B - Lack characteristics of more desirable investments. There may be small
assurance over any long period of time of the payment of interest and principal.
Caa/CCC - Are of poor standing. Such issues may be in default or there may be
risk with respect to principal or interest.
Ca/CC - Represent obligations that are highly speculative. Such issues are often
in default or have other marked shortcomings.
C - Are obligations with a higher degree of speculation. These securities have
major risk exposures to default.
D - Are in payment default. The D rating is used when interest payments or
principal payments are not made on the due date.
Non-rated securities will be considered for investment. When assessing each
non-rated security, IDSC will consider the financial condition of the issuer or
the protection afforded by the terms of the security.
<PAGE>
(Back cover)
Quick telephone reference
American Express Financial Direct Service Team
Withdrawals, transfers, inquiries
National: 800-297-7378
TTY Service
For the hearing impaired
800-710-5260
Distributed by American Express Financial Direct
IDS Preferred Investors Certificate
IDS Tower 10
Minneapolis, MN 55440-0010
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item
Number
Item 13. Other Expenses of Issuance and Distribution.
The expenses in connection with the issuance and
distribution of the securities being registered are to be
borne by the registrant.
Item 14. Indemnification of Directors and Officers.
The By-Laws of IDS Certificate Company provide that
it shall indemnify any person who was or is a party or is
threatened to be made a party, by reason of the fact that he
was or is a director, officer, employee or agent of the
company, or is or was serving at the direction of the company,
or any predecessor corporation as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, to any threatened, pending
or completed action, suit or proceeding, wherever brought, to
the fullest extent permitted by the laws of the state of
Delaware, as now existing or hereafter amended.
The By-Laws further provide that indemnification
questions applicable to a corporation which has been merged
into the company relating to causes of action arising prior to
the date of such merger shall be governed exclusively by the
applicable laws of the state of incorporation and by the
by-laws of such merged corporation then in effect. See also
Item 17.
Item 15. Recent Sales of Unregistered Securities.
(a) Securities Sold
1994 IDS Special Deposits 18,013,424.38
1995 IDS Special Deposits 56,855,953.53
1996 IDS Special Deposits* 41,064,486.74
1997 American Express Special Deposits 182,788,631.00
*Renamed American Express Special Deposits in April, 1996.
(b) Underwriters and other purchasers
American Express Special Deposits are marketed by American Express Bank Ltd.
(AEB), an affiliate of IDS Certificate Company, to private banking clients of
AEB in the United Kingdom and Hong Kong.
(c) Consideration
All American Express Special Deposits were sold for cash. The aggregate offering
price was the same as the amount sold in the table above. Aggregate marketing
fees to AEB were $88,686.14 in 1994, and $172,633.41 in 1995, $301,946.44 in
1996 and $592,068.70 in 1997.
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(d) Exemption from registration claimed
American Express Special Deposits are marketed, pursuant to the exemption in
Regulation S under the Securities Act of 1933, by AEB in the United Kingdom and
Hong Kong to persons who are not U.S. persons, as defined in Regulation S.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits
1. (a) Copy of Distribution Agreement dated November 18, 1988, between
Registrant and IDS Financial Services Inc., filed electronically
as Exhibit 1(a) to the Registration Statement for the American
Express International Investment Certificate (now called, the IDS
Investors Certificate), is incorporated herein by reference.
(b) Copy of Distribution Agreement dated March 29, 1996 between
Registrant and American Express Service Corporation filed
electronically as Exhibit 1(b) to Post-Effective Amendment No. 17
to Registration Statement No. 2-95577 is incorporated herein by
reference.
2. Not Applicable.
3. (a) Certificate of Incorporation, dated December 31, 1977, filed
electronically as Exhibit 3(a) to Post-Effective Amendment No. 2
to Registration Statement No. 2-95577, is incorporated herein by
reference.
(b) Certificate of Amendment, dated February 9, l984, filed
electronically as Exhibit 3(b) to Post-Effective Amendment No. 2
to Registration Statement No. 2-95577, is incorporated herein by
reference.
(c) By-Laws, dated December 31, 1977, filed electronically as Exhibit
3(c) to Post-Effective Amendment No. 2 to Registration Statement
No. 2-95577, are incorporated herein by reference.
4. Not Applicable.
5. An opinion and consent of counsel as to the legality of the securities
being registered will be filed with a subsequent Post-Effective
Amendment to Registration Statement No. 2-55252.
6. through 9. -- None.
10. (a) Investment Advisory and Services Agreement between Registrant and
IDS/American Express Inc., dated January 12, 1984, filed
electronically as Exhibit 10(a) to Post- Effective Amendment No.
2 to Registration Statement No. 2-95577, is incorporated herein
by reference.
(b) Depository and Custodial Agreement, between IDS Certificate
Company and IDS Trust Company dated September 30, 1985, filed
electronically as Exhibit 10(b) to Post-Effective Amendment No. 2
to Registration Statement No. 2-95577, is incorporated herein by
reference.
(c) Foreign Deposit Agreement dated November 21, 1990, between
Registrant and IDS Bank & Trust, filed electronically as Exhibit
10(h) to Post-Effective Amendment No. 5 to Registration Statement
No. 33-26844, is incorporated herein by reference.
(d) Selling Agent Agreement dated June 1, 1990, between American
Express Bank International and IDS Financial Services Inc. for
the American Express Investors and American Express Stock Market
Certificates, filed electronically as Exhibit 1(c) to the
Post-Effective Amendment No. 5 to Registration Statement No.
33-26844, is incorporated herein by reference.
(e) Marketing Agreement dated October 10, 1991, between Registrant
and American Express Bank Ltd., filed electronically as Exhibit
1(d) to Post-Effective Amendment No. 31 to Registration Statement
2-55252, is incorporated herein by reference.
(f) Amendment to the Selling Agent Agreement dated December 12, 1994
between IDS Financial Services Inc. and American Express Bank
International, filed electronically as Exhibit 1(d) to
Post-Effective Amendment No. 13 to Registration Statement No.
2-95577, is incorporated herein by reference.
(g) Selling Agent Agreement dated December 12, 1994 between IDS
Financial Services Inc. and Coutts & Co. (USA) International
filed electronically as Exhibit 1(e) to Post-Effective Amendment
No. 13 to Registration Statement No. 2-95577, is incorporated
herein by reference.
(h) Consulting Agreement dated December 12, 1994 between IDS
Financial Services Inc. and Coutts & Co. (USA) filed
electronically as Exhibit 1(f) to Post-Effective Amendment No. 13
to Registration Statement No. 2-95577, is incorporated herein by
reference.
(i) Letter amendment dated January 9, 1997 to the Marketing Agreement
dated October 10, 1991, between Registrant and American Express
Bank Ltd., filed electronically as Exhibit 10(j) to
Post-Effective Amendment No. 40 to Registration Statement
2-55252, is incorporated herein by reference.
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(j) Form of Letter amendment dated April 7, 1997 to the Selling Agent
Agreement dated June 1, 1990, between American Express Financial
Advisors Inc. and American Express Bank International, filed
electronically as Exhibit 10(j) to Post-Effective Amendment No.
14 to Registration Statement 33-26844, is incorporated herein by
reference.
11. through 23. -- None.
24. (a) Officers' Power of Attorney, dated May 17, 1994 filed
electronically as Exhibit 25(a) to Post-Effective Amendment No.
13 to Registration Statement No. 2-95577, is incorporated herein
by reference.
(b) Directors' Power of Attorney, dated February 29, 1996 filed
electronically as Exhibit 25(b) to Post-Effective Amendment No.
17 to Registration Statement No. 2-95577 is incorporated herein
by reference.
25. through 27. None.
(b) The financial statement schedules for IDS Certificate Company will be filed
with a subsequent Post-Effective Amendment 42 to Registration Statement No.
2-55252 for Series D-1 Investment Certificate.
Item 17. Undertakings.
Without limiting or restricting any liability on the part of the other,
American Express Financial Advisors Inc., (formerly IDS Financial Services
Inc.) as underwriter, will assume any actionable civil liability which may
arise under the Federal Securities Act of 1933, the Federal Securities
Exchange Act of 1934 or the Federal Investment Company Act of 1940, in
addition to any such liability arising at law or in equity, out of any
untrue statement of a material fact made by its agents in the due course of
their business in selling or offering for sale, or soliciting applications
for, securities issued by the Company or any omission on the part of its
agents to state a material fact necessary in order to make the statements
so made, in the light of the circumstances in which they were made, not
misleading (no such untrue statements or omissions, however, being admitted
or contemplated), but such liability shall be subject to the conditions and
limitations described in said Acts. American Express Financial Advisors
Inc. will also assume any liability of the Company for any amount or
amounts which the Company legally may be compelled to pay to any purchaser
under said Acts because of any untrue statements of a material fact, or any
omission to state a material fact, on the part of the agents of American
Express Financial Advisors Inc. to the extent of any actual loss to, or
expense of, the Company in connection therewith. The By-Laws of the
Registrant contain a provision relating to Indemnification of Officers and
Directors as permitted by applicable law.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this amendment to this 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 15th day of January, 1998.
IDS CERTIFICATE COMPANY
By /s/ Stuart A. Sedlacek*
Stuart A. Sedlacek, President
Pursuant to the requirements of the Securities Act of 1933, this amendment has
been signed below by the following persons in the following capacities on 15th
day of January, 1998.
Signature Capacity
/s/ Stuart A. Sedlacek* ** President and Director
Stuart A. Sedlacek (Principal Executive Officer)
_____________________________ Vice President and Treasurer
Jeffrey S. Horton (Principal Financial Officer)
/s/ Jay C. Hatlestad* Vice President and Controller
Jay C. Hatlestad (Principal Accounting Officer)
/s/ David R. Hubers** Director
David R. Hubers
/s/ Charles W. Johnson** Director
Charles W. Johnson
/s/ Richard W. Kling** Chairman of the Board of Directors
Richard W. Kling and Director
/s/ Edward Landes** Director
Edward Landes
/s/ John V. Luck** Director
John V. Luck
/s/ James A. Mitchell** Director
James A. Mitchell
/s/ Harrison Randolph** Director
Harrison Randolph
/s/ Gordon H. Ritz** Director
Gordon H. Ritz
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*Signed pursuant to Officers' Power of Attorney dated May 17, 1994 filed
electronically as Exhibit 25(a) to Post-Effective Amendment No. 13 to
Registration Statement No. 2-95577, incorporated herein by reference.
- ----------------------.
Bruce A. Kohn
**Signed pursuant to Directors' Power of Attorney dated February 29, 1996 filed
electronically as Exhibit 25(b) to Post-Effective Amendment No. 17 to
Registration Statement No. 2-95577, incorporated herein by reference.
- -------------------------.
Bruce A. Kohn
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CONTENTS OF THIS POST-EFFECTIVE AMENDMENT NO. 20 TO REGISTRATION STATEMENT NO.
2-95577
Cover Page
Explanatory Note
Prospectus
Part II Information
Signatures
