<PAGE>
IDS CERTIFICATE COMPANY
SEMIANNUAL REPORT
TO SHAREHOLDER
JUNE 30, 1998
Report Number C-100
IDSC Reports
September 17, 1998
<PAGE>
IDS CERTIFICATE COMPANY
SEMIANNUAL REPORT TO SHAREHOLDER
JUNE 30, 1998
TABLE OF CONTENTS
Page
Balance Sheet 2-3
Statement of Operations 4-5
Statement of Stockholder's Equity 6
Statement of Cash Flows 7
Notes to Financial Statements 8-19
Investment Securities Owned 20-31
<PAGE>
IDS CERTIFICATE COMPANY
BALANCE SHEET Unaudited
June 30, 1998
($ thousands)
- --------------------------------------------------------------------------------
ASSETS
Qualified Assets (note 2)
Investments in unaffiliated issuers (notes 3 and 4):
Held-to-maturity securities $681,609
Available-for-sale securities 2,998,746
First mortgage loans on real estate 213,005
Certificate loans - secured by certificate reserves 35,110
Investments in and advances to affiliates 3,900
--------------
Total investments 3,932,370
--------------
Dividends and interest receivable 48,801
Other (note 9) 73,184
--------------
Total qualified assets 4,054,355
--------------
Other Assets
Deferred distribution fees and other 21,306
--------------
Total assets $4,075,661
==============
See notes to financial statements.
<PAGE>
IDS CERTIFICATE COMPANY
BALANCE SHEET Unaudited
June 30, 1998
($ thousands)
- -------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Certificate Reserves (note 5):
Installment certificates:
Reserves to mature $328,746
Additional credits and accrued interest 17,291
Advance payments and accrued interest 919
Other 56
Fully paid certificates:
Reserves to mature 3,089,576
Additional credits and accrued interest 178,930
Due to unlocated certificate holders 359
--------------
Total certificate reserves 3,615,877
--------------
Accounts Payable and Accrued Liabilities:
Due to Parent (note 7A) 791
Due to affiliates (notes 7B, 7C and 7D) 651
Payable for investment securities purchased 33,122
Payable under reverse repurchase agreements 117,000
Accounts payable, accrued expenses and other (note 9) 45,245
--------------
Total accounts payable and accrued liabilities 196,809
--------------
Deferred federal income taxes 12,788
--------------
Total liabilities 3,825,474
--------------
Commitments (note 4)
Stockholder's Equity (notes 5B, 5C, and 6):
Common stock, $10 par - authorized and
issued 150,000 shares 1,500
Additional paid-in capital 143,844
Retained earnings:
Appropriated for predeclared additional credits/interest 4,827
Appropriated for additional interest on advance payments 50
Unappropriated 68,565
Accumulated other comprehensive income-net (note 10) 31,401
--------------
Total stockholder's equity 250,187
--------------
Total liabilities and stockholder's equity $4,075,661
==============
See notes to financial statements.
<PAGE>
IDS CERTIFICATE COMPANY
STATEMENT OF OPERATIONS Unaudited
Six Months Ended June 30, 1998
($ thousands)
- --------------------------------------------------------------------------------
Investment Income:
Interest income from investments:
Bonds and notes:
Unaffiliated issuers $107,581
Mortgage loans on real estate
Unaffiliated 8,368
Certificate loans 981
Dividends 21,611
Other 1,738
--------------
Total investment income 140,279
--------------
Investment Expenses:
Parent and affiliated company fees (note 7):
Distribution 18,061
Investment advisory and services 4,608
Transfer agency 2,005
Depositary 131
Options (note 9) 9,318
Reverse repurchase agreements 2,526
Interest rate floors (note 9) 80
Interest rate swap agreements (note 9) 2,627
Other 128
-------------
Total investment expenses 39,484
-------------
Net investment income before provision
for certificate reserves and income tax benefit $100,795
-------------
See notes to financial statements.
<PAGE>
IDS CERTIFICATE COMPANY
STATEMENT OF OPERATIONS (Continued) Unaudited
Six Months Ended June 30, 1998
($ thousands)
- --------------------------------------------------------------------------------
Provision for Certificate Reserves (notes 5 and 9):
According to the terms of the certificates:
Provision for certificate reserves $4,530
Interest on additional credits 540
Interest on advance payments 22
Additional credits/interest authorized by IDSC:
On fully paid certificates 81,727
On installment certificates 1,075
--------------
Total provision for certificate reserves before reserve recoveries 87,894
Reserve recoveries from terminations prior to maturity (533)
--------------
Net provision for certificate reserves 87,361
--------------
Net investment income before income tax benefit 13,434
Income tax benefit (note 8) 844
--------------
Net investment income 14,278
--------------
Realized gain on investments - net:
Securities of unaffiliated issuers 1,789
Income tax expense (note 8) 626
--------------
Net realized gain on investments 1,163
--------------
Net income - wholly owned subsidiary 128
--------------
Net income $15,569
==============
See notes to financial statements.
<PAGE>
IDS CERTIFICATE COMPANY
STATEMENT OF STOCKHOLDER'S EQUITY Unaudited
Six Months Ended June 30, 1998
($ thousands)
- --------------------------------------------------------------------------------
Common Stock:
Balance at beginning and end of period $1,500
==============
Additional Paid-in-capital:
Balance at beginning and end of period $143,844
==============
Retained Earnings:
Appropriated for predeclared additional credits/interest (note 5B):
Balance at beginning of period $6,375
Transferred to unappropriated retained earnings (1,548)
--------------
Balance at end of period $4,827
==============
Appropriated for additional interest on advance payments (note 5C):
Balance at beginning and end of period $50
==============
Unappropriated (note 6):
Balance at beginning of period $55,948
Net income 15,569
Transferred from appropriated retained earnings 1,548
Cash dividends declared (4,500)
--------------
Balance at end of period $68,565
==============
Other Accumulated Comprehensive Income-net (note 10)
Balance at beginning of period $31,793
Change during period (392)
--------------
Balance at end of period $31,401
==============
Total Stockholder's Equity $250,187
==============
See notes to financial statements.
<PAGE>
IDS CERTIFICATE COMPANY
STATEMENT OF CASH FLOWS Unaudited
Six Months Ended June 30, 1998
($ thousands)
- ------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $15,569
Adjustments to reconcile net income to net
cash provided by operating activities:
Net income of wholly owned subsidiary (128)
Net provision for certificate reserves 87,361
Interest income added to certificate loans (612)
Amortization of premiums/discounts-net 10,236
Provision for deferred federal income taxes (2,176)
Net realized gain on investments before income taxes (1,789)
Decrease in dividends and interest receivable 17
Decrease in deferred distribution fees 2,892
Increase in other assets (3,094)
Decrease in other liabilities 6,370
--------------
Net cash provided by operating activities 114,646
--------------
Cash flows from investing activities: Maturity and redemption of investments:
Held-to-maturity securities 77,973
Available-for-sale securities 241,779
Other investments 43,198
Sale of investments:
Held-to-maturity securities -
Available-for-sale securities 178,616
Certificate loan payments 1,996
Purchase of investments:
Held-to-maturity securities (1,034)
Available-for-sale securities (492,522)
Other investments (37,276)
Certificate loan fundings (1,924)
--------------
Net cash used in investing activities 10,806
--------------
Cash flows from financing activities:
Payments from certificate owners 612,463
Proceeds from reverse repurchase agreements 593,500
Dividend from wholly-owned subsidiary 3,000
Certificate maturities and cash surrenders (831,415)
Payments under reverse repurchase agreements (498,500)
Dividend paid (4,500)
--------------
Net cash provided by financing activities (125,452)
--------------
Net decrease in cash and cash equivalents -
Cash and cash equivalents beginning of period -
---------------
Cash and cash equivalents end of period $ -
===============
Supplemental disclosures including non-cash transactions:
Cash received for income taxes $2,328
Certificate maturities and surrenders through loan reductions 4,068
See notes to financial statements.
<PAGE>
IDS CERTIFICATE COMPANY
Notes to Financial Statements($ in thousands unless indicated otherwise)
(Unaudited)
- --------------------------------------------------------------------------------
1. Nature of business and summary of significant accounting policies
Nature of business
IDS Certificate Company (IDSC) is a wholly owned subsidiary of American Express
Financial Corporation (Parent), which is a wholly owned subsidiary of American
Express Company. IDSC is registered as an investment company under the
Investment Company Act of 1940 ("the 1940 Act") and is in the business of
issuing face-amount investment certificates. The certificates issued by IDSC are
not insured by any government agency. IDSC's certificates are sold primarily by
American Express Financial Advisors Inc.'s (an affiliate) field force operating
in 50 states, the District of Columbia and Puerto Rico. IDSC's Parent acts as
investment advisor for IDSC.
IDSC currently offers nine types of certificates with specified maturities
ranging from ten to twenty years. Within their specified maturity, most
certificates have interest rate terms of one to thirty-six months. In addition,
two types of certificates have interest tied, in whole or in part, to any upward
movement in a broad-based stock market index. Except for two types of
certificates, all of the certificates are available as qualified investments for
Individual Retirement Accounts or 401(k) plans and other qualified retirement
plans.
IDSC's gross income is derived primarily from interest and dividends generated
by its investments. IDSC's net income is determined by deducting from such gross
income its provision for certificate reserves, and other expenses, including
taxes, the fee paid to Parent for investment advisory and other services, and
the distribution fees paid to American Express Financial Advisors Inc.
Described below are certain accounting policies that are important to an
understanding of the accompanying financial statements.
Basis of financial statement presentation
The accompanying financial statements are presented in accordance with generally
accepted accounting principles. IDSC uses the equity method of accounting for
its wholly owned unconsolidated subsidiary, which is the method prescribed by
the Securities and Exchange Commission (SEC) for non-investment company
subsidiaries of issuers of face-amount certificates.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities and the reported amounts of income and
expenses during the six months then ended. Actual results could differ from
those estimates.
Preferred stock dividend income
IDSC recognizes dividend income from cumulative redeemable preferred stocks with
fixed maturity amounts on an accrual basis similar to that used for recognizing
interest income on debt securities. Dividend income from perpetual preferred
stock is recognized on an ex-dividend basis.
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Securities
Cash equivalents are carried at amortized cost, which approximates fair value.
IDSC has defined cash and cash equivalents as cash in banks and highly liquid
investments with a maturity of three months or less at acquisition and are not
interest rate sensitive.
Debt securities that IDSC has both the positive intent and ability to hold to
maturity are carried at amortized cost. Debt securities IDSC does not have the
positive intent to hold to maturity, as well as all marketable equity
securities, are classified as available for sale and carried at fair value.
Unrealized holding gains and losses on securities classified as available for
sale are carried, net of deferred income taxes, as a separate component of
stockholder's equity.
The basis for determining cost in computing realized gains and losses on
securities is specific identification. When there is a decline in value that is
other than temporary, the securities are carried at estimated realizable value
with the amount of adjustment included in income.
First mortgage loans on real estate
Mortgage loans are carried at amortized cost, less reserve for losses, which is
the basis for determining any realized gains or losses.
Impairment is measured as the excess of the loan's recorded investment over its
present value of expected principal and interest payments discounted at the
loan's effective interest rate, or the fair value of collateral. The amount of
the impairment is recorded in a reserve for mortgage loan losses.
The reserve for mortgage loan losses is maintained at a level that management
believes is adequate to absorb estimated losses in the portfolio. The level of
the reserve account is determined based on several factors, including historical
experience, expected future principal and interest payments, estimated
collateral values, and current and anticipated economic and political
conditions. Management regularly evaluates the adequacy of the reserve for
mortgage loan losses.
IDSC generally stops accruing interest on mortgage loans for which interest
payments are delinquent more than three months. Based on management's judgment
as to the ultimate collectibility of principal, interest payments received are
either recognized as income or applied to the recorded investment in the loan.
Certificates
Investment certificates may be purchased either with a lump-sum payment or by
installment payments. Certificate owners are entitled to receive at maturity a
definite sum of money. Payments from certificate owners are credited to
investment certificate reserves. Investment certificate reserves accumulate at
specified percentage rates as declared by IDSC. Reserves also are maintained for
advance payments made by certificate owners, accrued interest thereon, and for
additional credits in excess of minimum guaranteed rates and accrued interest
thereon. On certificates allowing for the deduction of a surrender charge, the
cash surrender values may be less than accumulated investment certificate
reserves prior to maturity dates. Cash surrender values on certificates allowing
for no surrender charge are equal to certificate reserves. The payment
distribution, reserve accumulation rates, cash surrender values, reserve values
and other matters are governed by the 1940 Act.
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Deferred distribution fee expense
On certain series of certificates, distribution fees are deferred and amortized
over the estimated lives of the related certificates, which is approximately 10
years. Upon surrender prior to maturity, unamortized deferred distribution fees
are recognized in expense and any related surrender charges are recognized as a
reduction in provision for certificate reserves.
Federal income taxes
IDSC's taxable income or loss is included in the consolidated federal income tax
return of American Express Company. IDSC provides for income taxes on a separate
return basis, except that, under an agreement between Parent and American
Express Company, tax benefits are recognized for losses to the extent they can
be used in the consolidated return. It is the policy of Parent and its
subsidiaries that Parent will reimburse a a subsidiary for any tax benefits
recorded.
2. Deposit of assets and maintenance of qualified assets
A) Under the provisions of its certificates and the 1940 Act, IDSC was required
to have qualified assets (as that term is defined in Section 28(b) of the 1940
Act) in the amount of $3,578,405 at June 30, 1998. IDSC had qualified assets of
$3,972,924 at June 30, 1998, excluding net unrealized appreciation on
available-for-sale securities of $48,309 and payable for securities purchased of
$33,122.
Qualified assets are valued in accordance with such provisions of Minnesota
Statutes as are applicable to investments of life insurance companies. Qualified
assets for which no provision for valuation is made in such statutes are valued
in accordance with rules, regulations or orders prescribed by the SEC. These
values are the same as financial statement carrying values, except for debt
securities classified as available for sale and all marketable equity
securities, which are carried at fair value in the financial statements but are
valued at amortized cost for qualified asset and deposit maintenance purposes.
B) Pursuant to provisions of the certificates, the 1940 Act, the central
depositary agreement and to requirements of various states, qualified assets of
IDSC at June 30, 1998 were deposited as follows:
<TABLE>
<CAPTION>
Required
Deposits deposits Excess
--------------------------------------------
<S> <C> <C> <C>
Deposits to meet certificate liability requirements:
States $363 $327 $36
Central Depositary 3,744,813 3,537,864 206,949
--------------------------------------------
Total $3,745,176 $3,538,191 $206,985
============================================
The assets on deposit consisted of securities having a deposit value of
$3,493,101, mortgage loans of $209,651 and other assets of $42,424.
</TABLE>
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
American Express Trust Company is the central depositary for IDSC. See note 7C.
3. Investments in securities
A) Fair values of investments in securities represent market prices and
estimated fair values when quoted prices are not available. Estimated fair
values are determined by IDSC using established procedures involving review of
market indexes, price levels of current offerings and comparable issues, price
estimates and market data from independent brokers and financial files. The
procedures are reviewed annually. IDSC's vice president - investments reports to
the board of directors on an annual basis regarding such pricing sources and
procedures to provide assurance that fair value is being achieved.
The following is a summary of securities held to maturity and securities
available for sale at June 30, 1998.
<TABLE>
<CAPTION>
Gross Gross
Amortized Fair realized realized
Cost Value gains losses
----------------------------------------------------------
<S> <C> <C> <C> <C>
HELD TO MATURITY
U.S. Government and
agencies obligations $363 $369 $6 $-
Mortgage-backed
securities 25,971 26,503 532 -
Corporate debt
securities 193,323 198,514 5,191 -
Stated maturity
preferred stock 461,952 484,140 22,217 29
----------------------------------------------------------
Total $681,609 $709,526 $27,946 $29
==========================================================
Gross Gross
Amortized Fair realized realized
Cost Value gains losses
----------------------------------------------------------
AVAILABLE FOR SALE
Mortgage-backed
securities $1,089,733 $1,110,054 $20,834 $513
State and municipal
obligations 32,584 33,834 1,250 -
Corporate debt
securities 1,670,552 1,692,509 25,533 3,576
Stated maturity
preferred stock 63,342 65,375 2,053 20
Perpetual preferred
stock 94,226 96,974 2,766 18
----------------------------------------------------------
Total $2,950,437 $2,998,746 $52,436 $4,127
==========================================================
</TABLE>
<PAGE>
At June 30, 1998, there were no securities classified as trading securities.
During the six months ended June 30, 1998, debt securities classified as
available for sale were sold with proceeds of $176,982 and gross realized gains
on such sales of $2,523 and gross realized losses on such sales of $1,432.
During the six months ended June 30, 1998, there were no sales of or transfers
from securities classified as held to maturity.
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
B) At June 30, 1998, investments in securities with fixed maturities comprised
88% of IDSC's total invested assets. Securities are rated by Moody's and
Standard & Poor's (S&P), or by Parent's internal analysts, using criteria
similar to Moody's and S&P, when a public rating does not exist. A summary of
investments in securities with fixed maturities by rating of investment is as
follows:
Rating
Aaa/AAA 39 %
Aa/AA 1
Aa/A 1
A/A 13
A/BBB 5
Baa/BBB 30
Below investment grade 11
--------------
Total 100 %
==============
Of the securities rated Aaa/AAA, 80% are U.S. Government Agency mortgage-backed
securities that are not rated by a public rating agency. Approximately 9% of
other securities with fixed maturities are rated by Parent's Internal analysts.
No investment in any one issuer is greater than 1% of IDSC's total investment in
securities with fixed maturities.
C) IDSC reserves freedom of action with respect to its acquisition of restricted
securities that offer advantageous and desirable investment opportunities. In a
private negotiation, IDSC may purchase for its portfolio all or part of an issue
of restricted securities. Since IDSC would intend to purchase such securities
for investment and not for distribution, it would not be "acting as a
distributor" if such securities are resold by IDSC at a later date.
The fair values of restricted securities are determined by the board of
directors using the procedures and factors described in note 3A.
In the event IDSC were to be deemed to be a distributor of the restricted
securities, it is possible that IDSC would be required to bear the costs of
registering those securities under the Securities Act of 1933, although in most
cases such costs would be incurred by the issuer of the restricted securities.
4. Investments in first mortgage loans on real estate
At June 30, 1998, IDSC's recorded investment in impaired mortgage loans was $333
and the reserve for loss on that amount was $261. During the first six months of
1998, the average recorded investment in impaired mortgage loans was $348.
IDSC recognized $16 of interest income related to impaired mortgage loans for
the six months ended June 30, 1998.
There were no changes in the reserve for loss on mortgage loans during the six
months ended June 30, 1998.
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
At June 30, 1998, commitments for fundings of first mortgage loans, at market
interest rates, aggregated $48,940. IDSC employs policies and procedures to
ensure the creditworthiness of the borrowers and that funds will be available on
the funding date. IDSC's loan fundings are restricted to 80% or less of the
market value of the real estate at the time of the loan funding.
At June 30, 1998, approximately 5% of IDSC's invested assets were first mortgage
loans on real estate. A summary of first mortgage loans by type of real estate
is as follows:
Region
West North Central 21 %
South Atlantic 20
East North Central 18
Mountain 12
West South Central 10
Middle Atlantic 10
New England 7
Pacific 2
East South Central -
--------------
Total 100 %
==============
Property Type
Retail/shopping centers 27 %
Office buildings 26
Apartments 20
Industrial buildings 17
Other 10
--------------
Total 100 %
==============
5. Certificate reserves
Reserves maintained on outstanding certificates have been computed in accordance
with the provisions of the certificates and Section 28 of the 1940 Act. The
average rates of accumulation on certificate reserves at June 30, 1998 were:
<TABLE>
<CAPTION>
Average Average
Reserve gross additional
balance accumulation credit
at June 30, rate rate
-------------------------------------------
<S> <C> <C> <C>
Installment certificates:
Reserves to mature:
With guaranteed rates $22,638 3.50% 1.35%
Without guaranteed rates (A) 306,108 - 3.00
Additional credits and accrued interest 17,291 3.17 -
Advance payments and accrued interest (C) 919 3.17 1.68
Other 56 - -
Fully paid certificates:
Reserves to mature:
With guaranteed rates 154,740 3.20 1.81
Without guaranteed rates (A) and (D) 2,934,836 - 4.79
Additional credits and accrued interest 178,930 3.19 -
Due to unlocated certificate holders 359 - -
--------------
Total $3,615,877
==============
</TABLE>
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
A) There is no minimum rate of accrual on these reserves. Interest is declared
periodically, quarterly or annually, in accordance with the terms of the
separate series of certificates.
B) On certain series of single payment certificates, additional interest is
predeclared for periods greater than one year. At June 30, 1998, $4,827 of
retained earnings had been appropriated for the predeclared additional interest,
which represents the difference between certificate reserves on these series,
calculated on a statutory basis, and the reserves maintained per books.
C) Certain series of installment certificates guarantee accrual of interest on
advance payments at an average of 3.17%. IDSC has increased the rate of accrual
to 4.85% through April 30, 1999. An appropriation of retained earnings amounting
to $50 has been made, which represents the estimated additional accrual that
will result from the increase granted by IDSC.
D) The IDS Stock Market and IDS Market Strategy Certificates enable the
certificate owner to participate in any relative rise in a major stock market
index without risking loss of principal. Generally the certificates have a term
of 12 months and may continue for up to 14 and 19 successive terms,
respectively. The reserve balances at June 30, 1998 were $478,333 and $19,252,
respectively.
6. Dividend restriction
Certain series of installment certificates outstanding provide that cash
dividends may be paid by IDSC only in calendar years for which additional
credits of at least one-half of 1% on such series of certificates have been
authorized by IDSC. This restriction has been removed for 1998 and 1999 by
IDSC's declaration of additional credits in excess of this requirement.
7. Fees paid to Parent and affiliated companies ($ not in thousands)
A) The basis of computing fees paid or payable to Parent for investment
advisory and other general and administrative services is:
The investment advisory and services agreement with Parent provides for a
graduated scale of fees equal on an annual basis to 0.750% on the first $250
million of total book value of assets of IDSC, 0.650% on the next $250 million,
0.550% on the next $250 million, 0.500% on the next $250 million and 0.107% on
the amount in excess of $1 billion. Effective Jan. 1, 1998, the fee on the
amount in excess of $1 billion was changed from 0.450% to 0.107%. The fee is
payable monthly in an amount equal to one-twelfth of each of the percentages set
forth above. Excluded from assets for purposes of this computation are
first-mortgage loans, real estate and any other asset on which IDSC pays an
outside service fee.
B) The basis of computing fees paid or payable to American Express Financial
Advisors Inc. (an affiliate) for distribution services is:
Fees payable to American Express Financial Advisors Inc. on sales of IDSC's
certificates are based upon terms of agreements giving American Express
Financial Advisors Inc. the exclusive right to distribute the certificates
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
covered under the agreements. The agreements provide for payment of fees
over a period of time.
From time to time, IDSC may sponsor or participate in sales promotions involving
one or more of the certificates and their respective terms. These promotions may
offer a special interest rate to attract new clients or retain existing clients.
To cover the cost of these promotions, distribution fees paid to American
Express Financial Advisors may be lowered. For the promotion of IDSC's 7-month
and 13-month term Flexible Savings certificate which occurred Sept. 10, 1997 to
Nov. 25, 1997, the distribution fee for sales of these certificates was lowered
to 0.067%.
The aggregate fees payable under the agreements per $1,000 face amount of
installment certificates and a summary of the periods over which the fees are
payable are:
<TABLE>
<CAPTION>
Number of
certificate years
Aggregate fees payable over which
------------------------------------------- subsequent
Subsequent years' fees are
Total First year years payable
----------------------------------------------------------
<S> <C> <C> <C> <C>
On sales effective April 30, 1997 $25.00 $2.50 $22.50 9
On sales prior to April 30, 1997(a) 30.00 6.00 24.00 4
</TABLE>
(a) At the end of the sixth through the 10th year, an additional fee of 0.5% is
payable on the daily average balance of the certificate reserve maintained
during the sixth through the 10th year, respectively.
Effective April 30, 1997, fees on Cash Reserve and Flexible Savings certificates
are paid at a rate of 0.20% of the purchase price at the time of issuance and
0.20% of the reserves maintained for these certificates at the beginning of the
second and subsequent quarters from issue date. For certificates sold prior to
April 30, 1997, fees were paid at a rate of 0.25% of the purchase price at the
time of issuance and are paid at a rate of 0.25% of the reserves maintained for
these certificates at the beginning of the second and subsequent quarters from
issue date.
Fees on the Future Value Certificate were paid at the rate of 5% of the purchase
price at time of issuance. Effective May 1, 1997, the Future Value Certificate
is no longer being offered for sale.
Fees on the Investors Certificate are paid at an annualized rate of 1% of the
reserves maintained for the certificates. Fees are paid at the end of each term
on certificates with a one, two or three-month term. Fees are paid each quarter
from date of issuance on certificates with a six, 12, 24 or 36-month term.
Fees on the Preferred Investors Certificate are paid at an annualized rate of
0.66% of the reserves maintained for the certificates. Fees are paid at the end
of each term on certificates with a one, two or three-month term. Fees are paid
each quarter from date of issuance on certificates with a six, 12, 24 or
36-month term.
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Effective April 30, 1997, fees on the Stock Market Certificate are paid at a
rate of 0.70% of the purchase price on the first day of the certificate's term
and 0.70% of the reserves maintained for these certificates at the beginning of
each subsequent term. For certificates sold prior to April 30, 1997, fees were
paid at a rate of 1.25% of the purchase price on the first day of the
certificate's term and are paid at a rate of 1.25% of the reserves maintained
for these certificates at the beginning of each subsequent term.
C) The basis of computing depositary fees paid or payable to American Express
Trust Company (an affiliate) is:
- --------------------------------------------------------------------------------
Maintenance charge per account 5 cents per $1,000 of assets
on deposit
Transaction charge $20 per transaction
Security loan activity:
Depositary Trust Company receive/deliver $20 per transaction
Physical receive/deliver $25 per transaction
Exchange collateral $15 per transaction
- --------------------------------------------------------------------------------
A transaction consists of the receipt or withdrawal of securities and commercial
paper and/or a change in the security position. The charges are payable
quarterly except for maintenance, which is an annual fee.
D) The basis for computing fees paid or payable to American Express Bank Ltd.
(an affiliate) for the distribution of the IDS Special Deposits certificate
on an annualized basis is:
1.25% of the reserves maintained for the certificates on an amount from $100,000
to $249,000, 0.80% on an amount from $250,000 to $499,000, 0.65% on an amount
from $500,000 to $999,000 and 0.50% on an amount $1,000,000 or more. Fees are
paid at the end of each term on certificates with a one, two or three-month
term. Fees are paid at the end of each quarter from date of issuance on
certificates with a six, 12, 24 or 36-month term.
E) The basis of computing transfer agent fees paid or payable to American
Express Client Service Corporation (AECSC) (an affiliate) is:
Under a Transfer Agency Agreement effective Jan. 1, 1998, AECSC maintains
certificate owner accounts and records. IDSC pays AECSC a monthly fee of
one-twelfth of $10.353 per certificate owner account.
8. Income taxes
The federal income tax rate applicable to income of IDSC for the six months
ended June 30, 1998 was based on the effective tax rate expected to be
applicable for the full fiscal year ending Dec. 31, 1998.
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
A reconciliation of the statutory federal income tax rate and the expected
federal income tax rate at Dec. 31, 1998 is:
Rate
- -----------------------------------------------------------------------
Statutory federal income tax rate 35.0%
Tax-exempt interest (1.4)
Dividend exclusion (35.0)
- -----------------------------------------------------------------------
Expected federal income tax rate (1.4)%
- -----------------------------------------------------------------------
9. Derivative financial instruments
IDSC enters into transactions involving derivative financial instruments as an
end user (nontrading). IDSC uses these instruments to manage its exposure to
interest rate risk and equity price risk, including hedging specific
transactions. IDSC manages risk associated with these instruments as described
below.
Market risk is the possibility that the value of the derivative financial
instrument will change due to fluctuations in a factor from which the instrument
derives its value, primarily an interest rate or a major market index. IDSC is
not impacted by market risk related to derivatives held because derivatives are
largely used to manage risk and, therefore, the cash flows and income effects of
the derivatives are inverse to the effects of the underlying hedged
transactions.
Credit risk is the possibility that the counterparty will not fulfill the terms
of the contract. IDSC monitors credit risk related to derivative financial
instruments through established approval procedures, including setting
concentration limits by counterparty, reviewing credit ratings and requiring
collateral where appropriate. At June 30, 1998, IDSC's counterparties to the
interest rate floors and swaps are rated A or better by nationally recognized
rating agencies. The counterparties to the purchased call options are six major
broker/dealers.
The notional or contract amount of a derivative financial instrument is
generally used to calculate the cash flows that are received or paid over the
life of the agreement. Notional amounts do not represent market or credit risk
and are not recorded on the balance sheet.
Credit risk related to derivative financial instruments is measured by the
replacement cost of those contracts at the balance sheet date. The replacement
cost represents the fair value of the instrument, and is determined by market
values, dealer quotes or pricing models.
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
IDSC's holdings of derivative financial instruments were as follows at June 30,
1998.
<TABLE>
<CAPTION>
Notional Total
or contract Carrying Fair credit
amount value value exposure
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Interest rate floors $500,000 $125 $51 $51
Purchased call options 392 73,059 69,627 69,627
- --------------------------------------------------------------------------------------------------------------
Total $500,392 $73,184 $69,678 $69,678
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Liabilities:
Interest rate swaps $500,000 $80 $679 $-
Written call options 391 32,137 39,434 -
- --------------------------------------------------------------------------------------------------------------
Total $500,391 $32,217 $40,113 $-
- --------------------------------------------------------------------------------------------------------------
</TABLE>
The fair values of derivative financial instruments are based on market values,
dealer quotes or pricing models. The interest rate floors and swaps expire in
April of 1999. The options expire in 1998 and 1999.
Interest rate floors and swaps, and options are used to manage IDSC's exposure
to rising interest rates. These instruments are used primarily to protect the
margin between the interest rate earned on investments and the interest rate
credited to related investment certificate owners.
The interest rate floors are reset monthly and IDSC earns interest on the
notional amount to the extent the U.S. Treasury securities at "constant
maturity" for a period of one year exceed the reference rates specified in the
floor agreements. These reference rates range from 4.6% to 4.7%. The cost of
interest rate floors is amortized over the terms of the agreements on a straight
line basis and is included in other qualified assets. The amortization, net of
any interest earned, is included in investment expenses.
The interest rate swaps are reset monthly. IDSC pays a fixed rate on the
notional amount ranging from 5.46% to 6.72% and receives a floating rate on the
notional amount tied to the U.S. Treasury securities at "constant maturity" for
a period of one year. There is no cost carried on the balance sheet. The
carrying amount shown above represents the net interest receivable/payable under
the swap agreements. Interest earned and interest expensed under the agreements
is shown net in investment expenses.
IDSC offers a series of certificates which pays interest based upon the relative
change in a major stock market index between the beginning and end of the
certificates' term. The certificate owners have the option of participating in
the full amount of increase in the index during the term (subject to a specified
maximum) or a lesser percentage of the increase plus a guaranteed minimum rate
of interest. As a means of hedging its obligations under the provisions of these
certificates, IDSC purchases and writes call options on the major market index.
The options are cash settlement options, that is, there is no underlying
securities to deliver at the time the contract is closed out.
Each purchased (written) call option contract confers upon the holder the right
(obligation) to receive (pay) an amount equal to one hundred dollars times the
difference between the level of the major stock market index on the date the
call option is exercised and the strike price of the option.
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
The option contracts are less than one year in term. The premiums paid or
received on these index options are reported in other qualified assets or
liabilities, as as appropriate, and are amortized into investment expenses over
the life of the option. The intrinsic value of these index options is also
reported in other qualified assets or other liabilities, as appropriate. The
unrealized gains and losses related to the changes in the intrinsic value of
these options are recognized currently in provision for certificate reserves.
10. Comprehensive income
Effective Jan. 1, 1998, IDSC adopted Statement of Financial Accounting Standards
(SFAS) No. 130, "Reporting Comprehensive Income." SFAS No. 130 requires the
reporting and display of comprehensive income and its components. Comprehensive
income is defined as the aggregate change in stockholder's equity excluding
changes in ownership interests. For IDSC, it is net income and the unrealized
gains or losses on available-for-sale securities net of taxes. The components of
comprehensive income, net of related tax, for the six months ended June 30,
1998, were as follows:
Net income $15,569
Unrealized losses on available-for-sale securities-net (392)
--------------
Total comprehensive income $15,177
==============
11. Year 2000 issue
The year 2000 issue is the result of computer programs having been written using
two digits rather than four to define a year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than 2000. This could result in the failure of major systems or miscalculations,
which could have a material impact on the operations of IDSC. All of the systems
used by IDSC are maintained by its Parent and are utilized by multiple
subsidiaries and affiliates of the Parent. IDSC's business is heavily dependent
upon the Parent's computer systems, and has significant interactions with
systems of third parties.
A comprehensive review of the Parent's computer systems and business processes,
including those specific to IDSC, has been conducted to identify the major
systems that could be affected by the Year 2000 issue. Steps are being taken to
resolve any potential problems including modification to existing software and
the purchase of new software. These measures are scheduled to be completed and
tested on a timely basis. The Parent's goal is to complete internal remediation
and testing of each system by the end of 1998 and to continue compliance efforts
through 1999.
The Parent is evaluating the Year 2000 readiness of advisors and other third
parties whose system failures could have an impact on IDSC's operations. The
potential materiality of any such impact is not known at this time.
<PAGE>
<TABLE>
<CAPTION>
IDS CERTIFICATE COMPANY
Schedule 1 - Investments of Securities of Unaffiliated Issuers Unaudited
($ in thousands)
<S> <C> <C> <C> <C> <C>
Bal Held at
6/30/98
Principal
Amount of Cost Value at
Bonds (Notes 6/30/98
Issuer Name and Issue Title and Notes a & c) (Note a)
BONDS AND NOTES
United States Government-
Direct Obligations
US TREASURY BOND 6.875% 2000 165 165 169
US TREASURY BOND 5.625% 2000 200 198 200
Total U.S. Government - Direct Obligations 365 363 369
</TABLE>
Other Bonds and Notes
<TABLE>
<CAPTION>
United States Government Agencies
<S> <C> <C> <C> <C> <C> <C>
FHLMC-GNMA 40 D CMO 6.500% 2011 20,458 20,334 20,528 (f)
GNMA ARM #8377 7.000% 2018 826 824 847 (f)
GNMA ARM #8251 7.000% 2017 71 71 73 (f)
GNMA ARM #8365 7.375% 2018 1,837 1,837 1,891 (f)
GNMA ARM #8274 7.000% 2017 2,394 2,392 2,453 (f)
GNMA ARM #8293 7.000% 2017 574 574 589 (f)
GNMA ARM #8283 7.000% 2017 315 314 323 (f)
GNMA ARM #8353 7.375% 2018 1,078 1,072 1,109 (f)
GNMA ARM #8341 7.375% 2018 129 128 133 (f)
GNMA ARM #8240 7.000% 2017 849 839 870 (f)
GNMA ARM #8440 7.000% 2018 921 921 944 (f)
GNMA ARM #8206 6.875% 2017 1,223 1,223 1,253 (f)
GNMA ARM #8428 7.000% 2018 354 354 363 (f)
GNMA ARM #8157 6.875% 2023 5,218 5,308 5,340 (f)
GNMA ARM #8638 7.375% 2025 10,537 10,622 10,828 (f)
FNMA 30 YR #27880 9.000% 2016 83 85 87 (f)
FNMA 15 YR #34543 9.250% 2001 102 102 109 (f)
FNMA 30 YR #36225 9.000% 2016 246 250 260 (f)
FNMA 30 YR #040877 9.000% 2017 132 135 139 (f)
FNMA 30 YR #51617 10.000% 2017 111 112 120 (f)
FNMA 30 YR #52185 10.000% 2017 64 65 70 (f)
FNMA 15 YR #13705 11.000% 2000 19 19 20 (f)
FNMA 15 YR #18275 11.000% 2000 6 6 6 (f)
FNMA 15 YR #18745 11.000% 2000 6 6 6 (f)
FNMA 15 YR #2469 11.000% 2000 12 13 13 (f)
FNMA 15 YR #13157 11.000% 2000 10 10 11 (f)
FNMA 15 YR #13548 11.000% 2000 29 29 31 (f)
FNMA 15 YR #18986 11.000% 2000 7 7 7 (f)
FNMA 15 YR #64520 11.000% 2001 34 35 37 (f)
FNMA 15 YR #64523 11.000% 2000 43 43 45 (f)
FNMA 15 YR #19070 11.000% 2000 5 5 6 (f)
FNMA 15 YR #19261 11.000% 2000 12 13 13 (f)
FNMA 15 YR #22569 11.000% 2000 34 34 36 (f)
FNMA 15 YR #22271 11.000% 2000 28 28 29 (f)
FNMA 15 YR #22674 11.000% 2000 20 20 21 (f)
FNMA 15 YR #22405 11.000% 2000 28 29 30 (f)
FNMA 15 YR #25899 11.000% 2001 11 12 12 (f)
FNMA 15 YR #58405 11.000% 2003 25 26 27 (f)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bal Held at
6/30/98
Principal
Amount of Cost Value at
Bonds (Notes 6/30/98
Issuer Name and Issue Title and Notes a & c) (Note a)
<S> <C> <C> <C> <C> <C> <C>
FNMA 15 YR #70299 10.750% 2001 123 125 131 (f)
FNMA 15 YR #66458 10.000% 2004 3,061 3,078 3,184
FNMA 15 YR 70694 MEG 9.500% 2005 1,431 1,441 1,512
FNMA 15 6.0 #50973 6.000% 2009 33,978 33,275 33,720 (f)
FNMA 10YR #303115 6.500% 2004 12,007 11,397 12,104 (f)
FNMA 15YR #124848 8.000% 2008 10,463 10,435 10,807 (f)
FNMA 7YR 190778 BALN 6.000% 2001 38,829 38,557 38,831 (f)
FNMA 7YR #303448 BLN 6.500% 2002 17,696 17,711 17,801 (f)
FNMA 15YR #303445 5.500% 2009 17,956 17,268 17,428 (f)
FNMA #73227 MULT-FAM 6.700% 2005 2,561 2,586 2,578 (f)
FNMA 15YR 190534 6.000% 2018 17,547 17,276 17,425
FNMA 15 YR #A250857 7.000% 2012 17,292 17,256 17,622 (f)
FNMA 15YR #250671 7.500% 2011 19,098 19,149 19,647 (f)
FNMA 15 YR #313561 8.000% 2012 18,602 18,956 19,198 (f)
FNMA 15YR #303779 6.000% 2011 33,208 32,629 32,876 (f)
FNMA 7.0 15YR 250670 7.000% 2011 5,686 5,729 5,793 (f)
FNMA 15YR #313522 7.000% 2012 33,897 34,088 34,536 (f)
FNMA 15YR #367005 7.000% 2012 12,723 12,656 12,952 (f)
FNMA 15YR #313042 7.000% 2011 12,943 12,995 13,187 (f)
FNMA 93-62 B CMO 6.500% 2017 2,092 2,066 2,087 (f)
FNMA 95 2 T CMO 8.500% 2021 1,697 1,696 1,704 (f)
FNMA 92 203 E CMO 6.250% 2005 5,887 5,833 5,894 (f)
FANNIEMAE GR TRST 6.610% 2018 10,000 9,997 10,088 (f)
FNMA 97-2C CMO 7.000% 2020 32,793 32,810 33,330 (f)
FNMA 98-8 A SEQ CMO 6.500% 2024 9,497 9,500 9,541 (f)
FNMA 97-74 G SEQ CMO 6.500% 2024 9,127 9,090 9,170 (f)
FNMA 96-10 C CMO SEQ 6.500% 2023 7,597 7,339 7,646 (f)
FNMA 97-17 CMO 7.000% 2022 50,000 49,662 50,535 (f)
FN 97 11 K SEQ CM0 7.125% 2023 13,243 13,294 13,361 (f)
FNMA ARM #70007 7.255% 2017 1,801 1,801 1,885 (f)
FNMA ARM #70009 7.278% 2018 2,703 2,703 2,830 (f)
FNMA ARM #70117 7.293% 2017 625 625 654 (f)
FNMA ARM #79384 8.290% 2019 951 951 1,000 (f)
FNMA ARM #70202 7.522% 2019 1,936 1,936 2,015 (f)
FNMA ARM #92069 7.843% 2018 2,311 2,311 2,406 (f)
FNMA ARM #93787 7.671% 2019 2,113 2,113 2,200 (f)
FNMA ARM #97822 7.490% 2020 412 412 431 (f)
FNMA ARM#88879 3X3 7.926% 2019 1,916 1,916 2,004 (f)
FNMA ARM#105989 3X3 8.233% 2020 1,859 1,859 1,956 (f)
FNMA ARM #249907 8.000% 2024 9,906 10,052 10,320 (f)
FNMA ARM#89125 SEMI 7.125% 2019 5,431 5,545 5,608 (f)
FNMA ARM #303259 7.744% 2025 5,673 5,826 5,921 (f)
FNMA ARM#190726 SEMI 7.464% 2033 11,161 11,384 11,551 (f)
FNMA ARM #368121 5X1 6.760% 2025 18,911 19,179 19,123 (f)
FNMA ARM#359161 10X1 6.600% 2026 15,494 15,541 15,397 (f)
FHLMC CTF SER B-77 8.125% 2007 91 91 91 (f)
FHLMC 15 YR #200035 9.000% 2001 190 188 197 (f)
FHLMC 15 YR #200064 8.000% 2002 275 269 281 (f)
FHLMC 15 YR #212119 9.500% 2001 92 92 97 (f)
FHLMC 15 YR #218648 9.500% 2002 33 33 35 (f)
FHLMC 15 YR #200048 9.000% 2001 453 448 470
FHLMC 15YR #380025 9.500% 2003 477 475 504
FHLMC 15 YR #219679 9.500% 2003 393 391 414 (f)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bal Held at
6/30/98
Principal
Amount of Cost Value at
Bonds (Notes 6/30/98
Issuer Name and Issue Title and Notes a & c) (Note a)
<S> <C> <C> <C> <C> <C> <C>
FHLMC 15 YR #200022 10.500% 2000 48 49 51 (f)
FHLMC 15 YR #219757 11.000% 2003 927 964 981
FHLMC 15 YR #502175 10.500% 2004 115 117 122 (f)
FHLMC LOANS #885005 9.500% 2002 1,006 1,001 1,062 (f)
FHLMC 15 YR #885009 9.500% 2003 2,299 2,289 2,427
FHLMC LOANS #885008 10.000% 2003 1,648 1,655 1,742 (f)
FHLMC GOLD E00151 7.500% 2017 5,957 6,121 6,130 (f)
FHLMC 5 YR #G50152 7.000% 1999 174 174 175 (f)
FHLMC 15YR #G10336 7.500% 2010 5,383 5,302 5,540 (f)
FHLMC 15YR #G10344 G 7.500% 2010 12,171 12,114 12,524 (f)
FHLMC 15YR #10342 7.000% 2010 17,980 17,542 18,329 (f)
FHLMC 5YR*G50252 7.500% 2000 15,634 15,676 15,932 (f)
FHLMC 15YR G10364 7.000% 2010 15,254 15,178 15,550 (f)
FHLM 15 6.5 #G10369 6.500% 2010 33,730 33,344 34,015 (f)
FHLMC 15 #G10350 GLD 6.500% 2010 19,043 19,003 19,186 (f)
FHLMC 15YR #E00383 7.000% 2010 15,158 15,135 15,452 (f)
FHLMC 15YR GOLD 6.500% 2010 16,997 16,920 17,124 (f)
FH GD 15YR #E00426 6.500% 2011 7,905 7,835 7,958 (f)
FH15YR #G10439 GOLD 6.500% 2011 4,117 4,022 4,144 (f)
FH GD 7YR BLN N97208 7.000% 2003 10,585 10,686 10,720 (f)
FHLMC 15YR G10627 6.500% 2011 26,473 26,104 26,647 (f)
FHLMC 15YR G10665 GD 7.000% 2012 71,073 70,915 72,451 (f)
FHLMC T-009 AZ HEL 6.430% 2013 10,000 10,000 10,057 (f)
FHLMC 15YR 11.000% 2003 1,185 1,211 1,254 (f)
FHLMC GOLD E00484 6.500% 2012 6,765 6,614 6,816 (f)
FHLMC GOLD #E00476 6.500% 2012 16,229 15,867 16,351 (f)
FHLMC15YR E00388GOLD 7.000% 2010 10,355 10,216 10,556 (f)
FHLMC ARM #840035 7.640% 2019 927 927 962 (f)
FHLMC ARM #840045 7.646% 2019 3,184 3,184 3,319 (f)
FHLMC ARM #605050 7.876% 2018 293 293 305 (f)
FHLMC ARM #605041 7.931% 2019 234 234 244 (f)
FHLMC ARM #605048 7.521% 2018 1,034 1,034 1,077 (f)
FHLMC ARM #605079 7.744% 2018 1,041 1,041 1,091 (f)
FHLMC ARM #605175 7.675% 2019 2,812 2,812 2,925 (f)
FHLMC ARM #605352 7.508% 2018 1,943 1,943 2,039 (f)
FHLMC ARM #605433 7.366% 2017 1,449 1,449 1,520 (f)
FHLMC ARM #605432 7.637% 2017 644 644 671 (f)
FHLMC ARM #405185 7.500% 2018 1,784 1,784 1,871 (f)
FHLMC ARM #405249 7.740% 2018 2,529 2,529 2,633 (f)
FHLMC ARM #630074 7.750% 2018 413 413 421 (f)
FHLMC ARM #605854 7.566% 2019 2,248 2,248 2,339 (f)
FHLMC ARM #630048 7.750% 2018 12 12 12 (f)
FHLMC ARM #405092 7.564% 2019 1,038 1,038 1,080 (f)
FHLMC ARM #840072 7.500% 2019 1,405 1,405 1,459 (f)
FHLMC ARM #605454 7.651% 2017 3,631 3,631 3,814 (f)
FHLMC ARM #405437 7.693% 2019 219 219 228 (f)
FHLMC ARM #405455 7.731% 2019 1,184 1,184 1,233 (f)
FHLMC ARM #405243 7.385% 2019 608 608 637 (f)
FHLMC ARM #606025 7.001% 2019 4,201 4,201 4,384 (f)
FHLMC ARM #606024 6.926% 2019 1,102 1,102 1,148 (f)
FHLMC ARM #405517 7.875% 2019 339 338 353 (f)
FHLMC ARM#605853 7.806% 2019 2,717 2,717 2,828 (f)
FHLMC ARM #405014 7.659% 2019 540 540 562 (f)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bal Held at
6/30/98
Principal
Amount of Cost Value at
Bonds (Notes 6/30/98
Issuer Name and Issue Title and Notes a & c) (Note a)
<S> <C> <C> <C> <C> <C> <C>
FHLMC ARM #401587 7.875% 2018 1,683 1,683 1,753 (f)
FHLMC ARM 840031 7.799% 2019 219 219 228 (f)
FHLMC ARM #840036 7.732% 2019 1,019 1,019 1,061 (f)
FHLMC ARM #405615 7.558% 2019 920 920 957 (f)
FHLMC ARM #405360 7.679% 2019 865 865 900 (f)
FHLMC ARM #606151 7.773% 2019 3,573 3,573 3,720 (f)
FHLMC ARM #635054 8.157% 2020 243 243 251 (f)
FHLMC ARM #405675 7.996% 2020 1,459 1,459 1,522 (f)
FHLMC ARM #405692 8.214% 2020 1,703 1,703 1,791 (f)
FHLMC ARM #606301 7.972% 2020 5,057 5,057 5,270 (f)
FHLMC ARM #405744 8.113% 2020 953 952 1,002 (f)
FHLMC ARM#865008 3X3 8.448% 2018 5,690 5,690 5,836 (f)
FHLMC ARM #845154 7.890% 2022 2,996 3,087 3,062 (f)
FHLMC ARM #845654 8.036% 2024 10,334 10,483 10,792 (f)
FHLMC ARM #350190 7.625% 2022 4,615 4,751 4,810 (f)
FHLMC ARM #845523 7.759% 2023 4,715 4,849 4,815 (f)
FHLMC ARM #845733 7.634% 2024 17,241 17,543 17,979 (f)
FHLMC ARM #845730 7.716% 2024 20,109 20,754 20,538 (f)
FHLMC ARM #845973 7.900% 2024 5,819 5,819 6,076 (f)
FHLMC ARM #845999 7.586% 2027 16,985 17,131 17,672 (f)
FHLMC ARM #846072 7.715% 2022 4,413 4,521 4,559 (f)
FHLMC ARM#846107LIB 8.038% 2025 5,666 5,794 5,818 (f)
FHLMC ARM#785363 3X1 7.961% 2025 4,739 4,801 4,899 (f)
FHLMC ARM #606903 7.099% 2022 1,045 1,054 1,054 (f)
FHLMC ARM#785615 3X1 6.681% 2026 10,958 10,898 11,342 (f)
FHLMC ARM#785634 3X1 6.749% 2026 12,725 12,767 13,011 (f)
FHLMC ARM#785619 3X1 6.628% 2026 5,392 5,421 5,510 (f)
FHLMC ARM#785672 3X1 6.724% 2026 6,756 6,787 6,802 (f)
FHLMC ARM#785601 5X1 6.450% 2026 10,259 10,345 10,319 (f)
Total United States Government Agencies 1,117,985 1,115,704 1,136,557
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Municipal Bonds
California
CAL HSG 95-O TAX MUN 7.740% 2016 10,645 10,645 10,978 (b)(f)
CAL HSG FIN 1996-M 7.890% 2016 8,625 8,625 8,884 (b)(f)
Illinois
CHICAGO IL SAN DIST 9.250% 2000 1,000 1,032 1,078 (b)(f)
*CHIC IL GAS SPY SRC 7.500% 2015 4,500 4,500 4,821 (b)(f)
Minnesota
WEST MN MUNI POWER 10.250% 2015 3,120 3,168 3,223 (b)(f)
New York
NEW YORK CITY NT GO 7.750% 2000 335 335 341 (b)(f)
NEW YORK PWR AUTH 9.500% 2001 180 188 190 (b)(f)
Pennsylvania
WY VALLEY PA SWR 5.125% 2007 125 125 128 (b)(f)
Texas
AUSTIN TX UTILITY 10.750% 2015 3,735 3,966 4,191 (b)(f)
Total Municipal Bonds 32,265 32,584 33,834
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bal Held at
6/30/98
Principal
Amount of Cost Value at
Bonds (Notes 6/30/98
Issuer Name and Issue Title and Notes a & c) (Note a)
<S> <C> <C> <C> <C> <C> <C><C><C>
Public Utility
AES CORP SNR SUB NTS 8.375% 2007 5,000 4,978 5,050 (b)(d)(f)
AVON ENERGY 6.730% 2002 4,750 4,750 4,837 (b)(d)(f)
BAROID CORP 8.000% 2003 5,000 4,989 5,187
BARRETT RESOURCES 7.550% 2007 3,000 3,003 3,134 (f)
BELL ATLANTIC FINL 5.300% 1998 5,000 5,000 4,995 (f)
CMS ENERGY 7.375% 2000 4,700 4,697 4,704 (f)
CSW INVESTMENTS 144A 6.950% 2001 10,000 9,991 10,219 (b)(d)(f)
CABLE & WIRELESS COM 6.375% 2003 6,000 5,974 6,012 (f)
CAL ENERGY CO INC 9.500% 2006 4,000 4,029 4,335 (f)
CROSS TIMBERS OIL CO 8.750% 2009 3,000 3,000 3,008 (f)
CYTEC INDUSTRIES INC 6.500% 2003 10,500 10,490 10,524 (f)
DETROIT EDISON 6.280% 2000 7,000 6,973 7,043 (f)
EL PASO ELEC CO 7.250% 1999 2,000 2,000 2,007 (f)
ENRON CORP 6.625% 2003 5,000 5,030 5,094 (f)
ENRON CORP 6.450% 2001 10,000 10,000 10,104 (f)
HANNA M A 9.000% 1998 5,000 5,007 5,022
INTL SPECIALTY PROD 9.000% 1999 15,000 15,074 15,116
JERSEY CENTRAL P&L 6.040% 2000 5,000 5,000 5,007
KN ENERGY INC 6.450% 2003 8,000 7,987 8,079 (f)
KANSAS CITY P&L 7.340% 1999 10,000 10,000 10,152
MCN INV`T CORP MTN 6.890% 2002 9,000 9,035 9,157 (f)
NEW PARK RESOURCES 8.625% 2007 2,500 2,529 2,544 (f)
NIAGARA MHWK PWR 7.375% 2003 3,000 3,106 3,108 (f)
NORAM ENERGY CORP 7.500% 2000 5,000 4,988 5,112 (f)
NORCEN ENERGY RES 6.800% 2002 10,000 9,984 10,237 (f)
NOVACOR CHEMICALS 6.500% 2000 10,000 9,982 10,060 (f)
OCCIDENTAL PETROLEUM 6.410% 2000 5,000 4,975 5,049 (f)
ORYX ENERGY 8.650% 1999 15,000 15,000 15,183
PDV AMERICA 7.250% 1998 3,000 3,000 3,010 (f)
PUBLIC SERV E&G CAP 6.800% 2002 10,000 10,028 10,136 (f)
PUB SERVICE ELEC GAS 6.740% 2001 12,000 12,000 12,143 (d)(f)
PACIFIC GAS TRANS 6.640% 2000 5,000 5,000 5,051 (f)
PAGING NETWORK 10.000% 2008 2,000 2,000 2,080 (f)
PRAXAIR INC 6.750% 2003 5,000 4,801 5,123 (f)
SALTON SEA CL A 6.690% 2000 3,132 3,132 3,158 (f)
SMITH INT`L INC 7.240% 2001 10,000 10,000 10,239 (b)(d)(f)
TELEPORT COMM 9.875% 2006 4,000 4,073 4,565 (f)
TEXAS UTILITIES 6.370% 2000 10,000 10,000 10,079 (f)
TOSCO CORP 7.000% 2000 5,000 4,997 5,099 (f)
USX CORP 7.200% 2004 13,000 13,353 13,551 (f)
USA WASTE SERVICES 6.500% 2002 10,000 9,997 10,099 (b) (f)
WILLIAMS CO INC 6.500% 2002 12,000 11,991 12,134 (f)
Total Public Utility 291,582 291,943 296,546
Finance
AG CAP FND SR.NT FLT 6.588% 2004 20,000 19,980 20,000 (d)(f)
AT&T CAPITAL CORP 6.900% 2002 15,000 14,905 15,306 (f)
ADVANTA MTG 98-1 A2 6.250% 2014 5,000 5,000 5,001 (f)
ALLIANCE INV CBO FLT 7.080% 2006 19,000 19,000 19,000 (d)(f)
ARISTAR FINL 7.875% 1999 3,000 2,999 3,035 (f)
ARISTAR INC 6.300% 2002 10,000 9,973 10,050 (f)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bal Held at
6/30/98
Principal
Amount of Cost Value at
Bonds (Notes 6/30/98
Issuer Name and Issue Title and Notes a & c) (Note a)
<S> <C> <C> <C> <C> <C> <C><C>
BANKAMERICA CORP 9.750% 2000 10,000 10,186 10,696
BANPONCE FIN CORP 6.580% 2003 5,000 4,986 5,049 (f)
BISTRO TRT 98-1000 6.580% 2001 14,000 13,999 14,049 (d)(f)
CA INF BK SDG E1 A2 6.040% 2002 1,500 1,500 1,507 (f)
CAPITAL ONE BANK 7.350% 2000 5,000 4,998 5,097 (f)
CAPITAL ONE BANK 6.375% 2003 5,500 5,484 5,462 (f)
CARAVELLE INV B FLTG 7.088% 2005 17,500 17,500 17,500 (f)
CARCO AUTO 97-1 6.689% 2004 12,000 12,000 12,068 (f)
CCMSC 1997-2 CLSS A1 6.450% 2004 4,888 4,889 4,944 (f)
COMMERCIAL CREDIT 8.250% 2001 9,000 8,935 9,611 (f)
CONTI FINANCIAL CORP 8.375% 2003 5,000 4,989 5,275 (f)
CONTI MTG HEL TRTA-6 6.690% 2016 10,000 9,999 10,174 (f)
CONTI 98-1 CLASS A5 6.430% 2016 10,000 9,998 10,042 (f)
COUNTRYWIDE FUNDING 8.420% 1999 19,700 19,695 20,016
COUNTRYWIDE HOME MTN 6.380% 2002 7,000 6,998 7,064 (f)
ECH FUNDING 98-1 A-2 7.081% 2010 19,000 19,000 19,000 (d)(f)
EQCC 97-3 A6 ABS HEL 6.610% 2021 5,000 5,013 5,072 (f)
FDIC 96-1C CLASS 1A 6.750% 2026 6,715 6,712 6,782 (f)
FIRST DOMINION CBO 1 6.900% 2013 19,000 19,000 18,952 (d)(f)
FIRST NATIONWIDE 9.125% 2003 4,000 3,891 4,200 (f)
FULB 97-C1 A-1 MBS 7.150% 2004 9,797 9,967 10,174 (f)
FULB 97-C2 CLASS A1 6.479% 2004 9,498 9,540 9,591 (f)
FIRST USA DEP NT 6.375% 2000 5,000 4,992 5,044 (f)
FIRSTAR CORP 7.150% 2000 12,000 12,000 12,019 (f)
FIRSTPLUS 98-A-A NIM 8.500% 2023 6,821 6,791 6,776 (f)
GATX CAPITAL CORP 6.500% 2000 5,000 5,000 5,029 (f)
GATX CAP CORP MTN 6.360% 2002 5,000 4,940 5,023 (f)
GMAC 96-C1 COMM MBS 6.790% 2003 4,716 4,732 4,822 (f)
GMAC 97-C2 A CMBS 6.451% 2004 4,886 4,908 4,975 (f)
GS-96PROTECT LIFE A1 7.020% 2027 7,652 7,757 7,823 (f)
GMAC 7.750% 1999 20,000 19,976 20,215 (f)
GREAT WESTERN FINL 6.375% 2000 3,000 2,995 3,018 (f)
GREENPOINT BANK 6.700% 2002 9,250 9,287 9,360 (f)
HELLER FINANCIAL 8.000% 1998 15,000 14,996 15,132
HELLER FINANCIAL 6.500% 2000 8,000 8,001 8,046 (f)
HELLER FINANCIAL 6.440% 2002 5,000 4,981 5,025 (f)
HOMESIDE LENDING 6.875% 2002 10,000 9,997 10,245 (f)
HOUSEHOLD FIN MTN 7.100% 2002 10,000 9,994 10,338 (f)
INDOSUEZ CAP B-2 CLO 7.131% 2010 16,500 16,500 16,500 (d)(f)
INTL LEASE FINANCE 7.950% 1999 12,000 11,998 12,144 (f)
IROQUOIS TRUST 97-1A 7.000% 2006 10,000 10,005 10,097 (d)(f)
IROQUOIS TRUST 97-2A 6.752% 2007 15,000 14,986 15,146 (d)(f)
KEYCORP SENIOR 7.430% 2000 4,000 3,998 4,095 (f)
LBCMT 98-C1 A-1 CMBS 6.330% 2004 3,908 3,928 3,942 (f)
LONG ISL SAV BK 7.000% 2002 5,000 4,991 5,122 (f)
MBNA AMER BANK NA 7.540% 2001 10,000 9,995 10,356
MBNA CORP 6.500% 2000 5,000 4,999 5,037 (f)
ML CBO14 98-E&P-1 FL 7.088% 2010 11,000 11,000 10,945 (d)(f)
MARGARETTEN FIN'L 6.750% 2000 15,250 15,330 15,436 (f)
MELLON FINANCIAL 6.300% 2000 10,000 9,978 10,070 (f)
MERCHANDISE MART LLC 5.700% 1999 15,000 15,000 15,000 (d)(f)
ML CBO 98 SER 1 B1 6.900% 2009 10,500 10,476 10,474 (f)
MONEYSTORE 97-A 7.210% 2021 4,000 4,000 4,057 (f)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bal Held at
6/30/98
Principal
Amount of Cost Value at
Bonds (Notes 6/30/98
Issuer Name and Issue Title and Notes a & c) (Note a)
<S> <C> <C> <C> <C> <C> <C><C><C>
JPMS 96-C2 CL A 6.470% 2027 3,975 3,997 4,016 (f)
JPM 98-C6 A1 CMBS 6.373% 2030 3,897 3,915 3,933 (f)
MS CAP 1996-WFI MBS 7.220% 2028 10,000 10,119 10,203 (f)
MS CAP 1 1997-XL A-1 6.590% 2030 14,725 14,789 15,073 (f)
MS CAPI 97-ALIC A1 A 6.300% 2000 9,482 9,481 9,534 (f)
MS CAP 98-WF1 CMBS 6.250% 2007 2,473 2,485 2,501 (f)
MCF 96-MC2 CLS A1 6.758% 2004 9,413 9,481 9,648 (f)
NORWEST FINANCIAL 7.250% 2000 4,500 4,496 4,603
ORIX CR ALL 144A MTN 6.640% 2002 16,000 16,000 16,153 (d)(f)
PAMCOIII CLO 98-1 B2 7.000% 2010 19,000 19,000 19,000 (d)(f)
PENSKE TRUCK LEASING 7.750% 1999 3,000 3,020 3,048 (f)
PROVIDENT BANK 6.125% 2000 5,000 4,994 5,018
PROVIDIAN 97-4-A CRD 6.250% 2007 10,500 10,484 10,687 (f)
PROVIDIAN BANK 6.700% 2003 13,000 12,991 13,107 (f)
PHMS 1993-39 A8 SUPP 6.500% 2008 10,056 9,676 10,052 (f)
SL CMBS 97-C1 CLS A 6.875% 2004 16,084 16,218 16,446 (d)(f)
SBMS VII 91-1 B1 9.700% 2006 585 585 585 (f)
SANWA BUS CREDIT MTN 7.250% 2001 10,000 9,994 10,106 (b)(d)(f)
SAXON 98-1 AF3 HEL 6.450% 2024 2,000 1,999 2,013 (f)
SAXON 95-1 BA2 ARM 7.867% 2025 2,038 2,066 2,096 (f)
SEARS ROEBUK ACC 6.500% 2000 5,000 5,010 5,047 (f)
SASCO96-CL1 AIC 5.944% 2028 6,017 6,017 5,990 (f)
TRANS OCEAN CRP 144A 6.670% 2007 10,142 10,093 10,268 (d)(f)
UCFC 95 BA-2 ASSET B 6.600% 2009 2,034 2,035 2,037 (f)
UCFC 95 CA2 ASSET BK 6.575% 2011 4,082 4,086 4,095 (f)
UCFC 97-B CL A-4 ABS 6.940% 2023 7,000 6,993 7,139 (f)
UNIFRAX INVESTMENT 10.500% 2003 5,000 5,033 5,238 (f)
VAN KAMPEN CLOII LMT 6.940% 2008 5,000 5,000 4,994 (d)(f)
VANDERBILT 98-A A2 6.140% 2006 3,000 3,000 3,009 (f)
WAYLAND FUND 7.790% 2004 5,000 5,000 5,000 (b)(d)(f)
WELLSFORD RESID PROP 7.250% 2000 5,000 4,985 5,106 (f)
ICI INVESTMENTS EMTN 6.750% 2002 10,000 10,077 10,170 (f)
Total Finance 792,584 792,786 801,943
Industrial
AAF MCQUAY 8.875% 2003 10,000 10,124 9,887 (f)
AGCO CORP 8.500% 2006 5,000 4,967 5,156 (f)
AK STEEL CORP 9.125% 2006 3,000 3,059 3,142 (f)
ADVANCED LIGHTING 8.000% 2008 2,000 2,017 2,023 (b)(d)(f)
O`N`E` LOAN TRUST 97 7.906% 2007 25,000 25,000 25,000 (d)(f)
AMER AIRLINES LESSEE 6.400% 2008 2,538 2,538 2,538 (b)(d)(f)
AMER AIRLINES LESSEE 6.400% 2008 2,338 2,338 2,338 (b)(d)(f)
AMER AIRLINES LESSEE 6.400% 2008 2,445 2,445 2,445 (b)(d)(f)
AMER AIRLINES LESSEE 6.400% 2008 2,650 2,650 2,650 (b)(d)(f)
AMER AIRLINES LESSEE 6.400% 2008 821 821 821 (b)(d)(f)
AMER AIRLINES LESSEE 6.400% 2008 820 820 820 (b)(d)(f)
AMERICAN STANDARD 10.875% 1999 1,000 1,024 1,046 (f)
AMERISERVE FOOD SER 10.125% 2007 4,000 4,112 4,180 (f)
ANTENNA TV SA 9.000% 2007 5,000 4,908 5,006 (f)
APPLIED MATERIALS 6.650% 2000 5,000 5,000 5,063 (f)
ARGO-TECH CORP 8.625% 2007 2,000 2,000 2,035 (f)
ASTRON CBO LIMITED 7.000% 2010 17,500 17,500 17,456 (d)(f)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bal Held at
6/30/98
Principal
Amount of Cost Value at
Bonds (Notes 6/30/98
Issuer Name and Issue Title and Notes a & c) (Note a)
<S> <C> <C> <C> <C> <C> <C><C><C>
AVIATION SALES 8.125% 2008 2,000 1,995 1,960 (f)
BECKMAN INSTRUMENTS 7.100% 2003 5,000 5,000 5,029 (d)(f)
A.H. BELO 6.875% 2002 5,500 5,491 5,648 (f)
BLACK & DECKER 7.500% 2003 10,000 10,329 10,497 (f)
BOYD GAMING CORP 9.250% 2003 5,000 4,984 5,237 (f)
BISTRO TRST 1997-100 6.350% 2002 7,000 6,985 7,077 (d)(f)
BROWN GROUP 8.600% 1999 5,000 5,000 5,025
BURLINGTON NORTHERN 6.375% 2005 5,000 4,998 5,069
CSX CORP 7.050% 2002 10,000 9,995 10,267 (f)
REYNOLDS METALS CAN 6.625% 2002 19,500 19,634 19,777 (f)
CAPSTAR HOTEL 8.750% 2007 3,000 2,996 3,127 (f)
CHIQUITA BRANDS INTL 10.250% 2006 3,000 2,984 3,262 (f)
CHRYSLER FINANCE 7.700% 1998 10,000 9,998 10,047 (f)
CHRYSLER FINANCE 7.590% 2000 5,000 5,000 5,137 (f)
CINCINNATI MILACRON 7.875% 2000 5,000 5,051 5,083 (f)
CINEMARK USA INC 8.500% 2008 2,000 1,996 2,005 (f)
COLTEC INDUSTRIES 7.500% 2008 2,000 1,997 2,025 (d)(f)
COMCAST CABLE 8.125% 2004 10,000 9,992 10,857 (f)
CONTAINER CORP AMER 9.750% 2003 4,000 3,981 4,310 (f)
CONT'L CABLEVISION 8.300% 2006 4,000 3,989 4,432 (d)
COX COMMUNICATIONS 6.375% 2000 25,000 24,945 25,168 (f)
CROWN CORK & SEAL 6.750% 2003 14,950 15,009 15,253 (f)
DAYTON HUDSON 6.400% 2003 10,000 9,978 10,118 (f)
DAYTON HUDSON CO 6.800% 2001 5,000 5,000 5,099 (f)
DOMAN INDUSTRIES LTD 9.250% 2007 3,000 3,014 3,000 (f)
BERGEN BRUNSWIG(DUR) 7.000% 2006 20,000 20,038 20,206 (f)
ERAC USA 144A 6.950% 2004 9,000 9,121 9,278 (d)(f)
ENTERPRIS RENT-A-CAR 8.750% 1999 5,000 4,999 5,166 (d)
ENTERP RENT-A-CARMTN 6.350% 2001 10,000 9,999 10,068 (d)(f)
EXTENDICARE HLTH SER 9.350% 2007 1,000 1,000 1,030 (f)
EYE CARE CENTERS 9.700% 2008 2,000 2,000 1,975 (d)(f)
FEDDERS N. AMERICA 9.375% 2007 3,000 3,017 2,970 (f)
FEDERAL-MOGUL 8.800% 2007 4,000 3,989 4,295 (f)
FIBERGLASS CAD INC 9.800% 1998 5,000 5,006 5,019 (d)
FORD MOTOR CREDIT 6.375% 2000 10,000 10,064 10,100
FORD MOTOR CR MTN 7.060% 2001 5,000 4,988 5,146 (f)
FURON COMPANY 144A 8.125% 2008 2,000 2,000 2,002 (d)(f)
GATC 6.320% 2000 10,000 9,991 10,029 (f)
GE CAPITAL CORP 8.125% 1999 12,000 12,022 12,158 (f)
GENESIS HEALTHCARE 9.250% 2006 5,000 5,000 5,062 (f)
GIANT INDUSTRIES 9.000% 2007 5,000 5,000 5,125 (f)
GRAHAM PACKAGING FLT 9.250% 2008 1,500 1,500 1,500 (d)(f)
HMH PROPERTIES INC 8.875% 2007 4,000 4,077 4,455 (f)
HAYES WHEELS INT'L 9.125% 2007 3,000 3,007 3,142 (f)
HAYES WHEELS INT`L 9.125% 2007 1,000 1,000 1,048 (f)
HERITAGE MEDIA 8.750% 2006 4,500 4,567 4,815 (f)
HOWMET INC* 10.000% 2003 3,000 3,159 3,334 (f)
ITT CORP 6.250% 2000 5,000 4,913 4,920 (f)
ISPMEX 144A LIQUID 10.125% 2003 5,000 5,000 5,100 (d)(f)
INTEGON CORP 9.500% 2001 2,000 1,986 2,191
INT`L SHIPHOLDING 7.750% 2007 2,000 1,990 1,983 (f)
INTERPOOL INC 6.625% 2003 12,500 12,485 12,329 (b)(d)(f)
K-III COMM PUT/96 8.500% 2006 5,000 4,983 5,106 (f)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bal Held at
6/30/98
Principal
Amount of Cost Value at
Bonds (Notes 6/30/98
Issuer Name and Issue Title and Notes a & c) (Note a)
<S> <C> <C> <C> <C> <C> <C><C>
KAUFMAN & BROAD HOME 7.750% 2004 3,000 2,978 2,993 (f)
KROGER CO 8.150% 2006 4,000 4,004 4,429 (f)
LTV CORPORATION 8.200% 2007 5,000 4,971 4,875 (f)
LA QUINTA MOTOR 9.250% 2003 2,000 2,066 2,075 (f)
LAMAR ADVERTISING 8.625% 2007 5,000 5,007 5,131 (f)
LGETT&PLATT MTN SERD 7.185% 2002 10,000 9,960 10,384 (d)(f)
LIFE STYLE FURN 10.875% 2006 3,000 3,027 3,356 (f)
MJD COMMUNICATIONS 10.000% 2008 3,000 3,000 3,026 (d)(f)
MARK IV 7.500% 2007 3,000 2,985 3,021 (f)
MAXXIM MEDICAL 10.500% 2006 4,000 4,031 4,410 (f)
FRED MEYERS INC 7.150% 2003 5,000 4,991 5,015 (f)
MULTICARE CO 9.000% 2007 4,000 4,014 3,940 (f)
MURRIN-MURRIN 144A 8.843% 2005 4,000 4,000 3,960 (d)(f)
NEWS AMER HLDGS 7.500% 2000 10,000 9,981 10,275 (f)
NORFOLK SOUTHERN 6.950% 2002 15,000 15,183 15,499 (f)
NORTEK INC 9.125% 2007 2,500 2,523 2,556 (f)
OFFSHORE LOGISTICS 7.875% 2008 2,000 2,005 1,990 (f)
OUTDOOR SYSTEMS INC 9.375% 2006 5,000 5,000 5,300 (f)
PARACELSUS HEALTH 10.000% 2006 5,000 5,054 4,975 (f)
PARAMOUNT COMMUN 5.875% 2000 5,350 5,272 5,286 (f)
PARK-OHIO INDUSTRIES 9.250% 2007 1,000 1,004 1,023 (f)
PENNEY J.C. & CO 7.250% 2002 10,000 9,997 10,405 (f)
PHARMERICA INC 144A 8.375% 2008 2,000 2,018 1,995 (d)(f)
PILLOWTEX CORP 9.000% 2007 4,000 4,059 4,120 (f)
BANK POPULAR N.A. 6.625% 2002 12,000 11,990 12,198 (f)
PRINTPACK INC 9.875% 2004 2,500 2,500 2,678 (f)
QUAKER OATS 6.940% 2003 1,500 1,503 1,535 (f)
QUAKER OATS 6.470% 2000 10,000 10,021 10,054 (f)
REPAP WISCONSIN 9.250% 2002 15,000 15,598 15,975 (f)
RITE AID CORP 6.700% 2001 5,000 4,999 5,106 (f)
ROLLINS TRUCK 6.875% 2001 5,000 4,999 5,111 (f)
RYDER SYSTEM 7.910% 2000 5,000 5,018 5,152 (f)
RYERSON TULL 8.500% 2001 5,000 5,000 5,200 (f)
S C INTERNATIONAL 9.250% 2007 5,000 5,024 5,188 (f)
SCOTSMAN GROUP INC 8.625% 2007 3,500 3,491 3,561 (f)
SEA CONTAINERS LTD 7.875% 2008 2,000 2,000 1,975 (f)
SERVICE CORP INTL 6.375% 2000 10,500 10,496 10,580 (f)
SHOP VAC CORP 10.625% 2003 2,000 2,000 2,195 (f)
SHOWBOAT INC 9.250% 2008 4,000 3,797 4,330
SMITHFIELD FOODS INC 7.625% 2008 2,000 1,993 1,978 (d)(f)
STENA AB 10.500% 2005 3,000 3,000 3,278
SUNAMERICA 9.000% 1999 20,000 20,000 20,317
SUPERVALU INC 7.250% 1999 8,000 7,982 8,090 (f)
SUPERVALU INC 6.500% 2000 5,000 4,998 5,052 (f)
TARKETT 9.00 9.000% 2002 3,650 3,718 3,700 (f)
TCW GEM II 144A FLT 7.188% 2012 25,000 23,778 21,469 (d)(f)
TEEKAY SHIPPING CORP 8.320% 2008 3,000 3,029 3,105 (f)
TELEWEST PLC 9.625% 2006 2,000 2,000 2,105
TENET HEALTHCARE CO 8.625% 2003 7,000 6,983 7,394 (f)
TITAN WHEEL INT`L IN 8.750% 2007 4,100 4,081 4,244 (f)
TRICO MARINE SERVICE 8.500% 2005 3,000 2,986 2,918 (d)(f)
TYSON FOODS 6.410% 2000 10,000 10,005 10,095 (f)
UNION TANK CAR 6.500% 2008 6,207 6,197 6,329 (f)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bal Held at
6/30/98
Principal
Amount of Cost Value at
Bonds (Notes 6/30/98
Issuer Name and Issue Title and Notes a & c) (Note a)
<S> <C> <C> <C> <C> <C> <C><C>
UNITED AIR 1991A-1 9.200% 2008 4,309 4,055 4,899
US HOME CORP 7.750% 2005 1,500 1,496 1,470 (f)
US WEST CAP 6.850% 2002 15,500 15,494 16,177 (f)
UNITED STATIONERS 8.375% 2008 1,000 1,000 1,003 (d)(f)
VIACOM INC 6.750% 2003 5,000 4,997 5,095
WALBRO 144A 10.125% 2007 3,000 3,038 2,996 (f)
WHITMAN CORP 6.250% 2000 5,000 4,968 5,027 (f)
AMER AIRLINES LESSE 6.400% 2008 1,248 1,248 1,248 (d)(f)
AMER AIRLINES LESSE 6.400% 2008 1,248 1,248 1,248 (d)(f)
AMER AIRLINES LESSE 6.400% 2008 1,248 1,248 1,248 (d)(f)
AMER AIRLINES LESSE 6.400% 2008 923 923 923 (d)(f)
AMER AIRLINES LESSE 6.400% 2008 924 924 924 (d)(f)
AMER AIRLINES LESSE 6.400% 2008 925 925 925 (d)(f)
AMER AIRLINES LESSE 6.400% 2008 855 855 855 (d)(f)
AMER AIRLINES LESSE 6.400% 2008 853 853 853 (d)(f)
WYMAM GORDON CO 8.000% 2007 1,000 993 1,025 (f)
Total Industrial 778,902 779,146 792,534
Total Other Bonds and Notes 3,013,318 3,012,163 3,061,414
TOTAL BONDS AND NOTES 3,013,683 3,012,526 3,061,783
</TABLE>
<TABLE>
<CAPTION>
Bal Held at
6/30/98 Cost Value at
Number of (Notes 6/30/98
PREFERRED STOCK Shares a & c) (Note a)
<S> <C> <C> <C> <C> <C> <C><C><C>
Public Utility
ALLTEL 7.75 $100 PAR 7.750% 2005 18 1,846 1,851 (d)
AMERICAN WTRWRKS $25 8.500% 2000 800 20,000 20,856 (b)(d)
AMERITECH NZ A $100 7.040% 2001 40 4,134 4,280 (d)(f)
APPALACHIAN PWR $100 6.850% 2004 30 3,003 3,240
APPALACHIAN PWR $100 5.900% 2008 10 997 1,082 (f)
APPALACHIAN PWR $100 5.920% 2008 11 1,090 1,192
ARIZONA PUB SVC $100 10.000% 2001 60 6,194 6,398
ATLANTIC CITY EL 100 7.800% 2006 90 8,989 9,872
ATLANTIC CITY EL 100 8.200% 2000 17 1,649 1,654
BALTIMORE G&E $100 8.625% 2000 19 1,933 1,944
BELL ATLANTIC NZ144A 7.080% 2001 25 2,623 2,652 (d)(f)
BELL ATL NZ$100 144A 5.800% 2004 100 10,000 10,300 (d)
BOSTON EDISON $100 8.000% 2001 90 9,000 9,760
CENTRAL ILL LT $100 5.850% 2008 65 6,509 6,882
COMMONWEALTH EDISON 8.850% 2003 59 5,906 6,025 (b)(d)
COMMWLTH ED $100 PVT 8.200% 2002 53 5,167 5,308 (d)
CON EDISON $100 SR J 6.125% 2002 150 15,032 15,694
CON EDISON 7.2 SER I 7.200% 2007 33 3,271 3,420
DUKE ENERGY $100 V 6.400% 2002 30 3,000 3,217
DUKE ENRGY $100 SR U 6.300% 2001 30 3,000 3,167
DUKE ENRGY $100 SR T 6.200% 2000 30 3,000 3,122
DUKE ENRGY 1992D $25 6.200% 2001 200 5,003 5,188
DUKE ENRGY 1992C $25 6.100% 2000 250 6,259 6,391
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bal Held at
6/30/98 Cost Value at
Number of (Notes 6/30/98
Issuer Name and Issue Title Shares a & c) (Note a)
<S> <C> <C> <C> <C> <C> <C><C><C>
DUKE ENRGY 1992B $25 5.950% 1999 15 376 379 (f)
EASTERN EDISON $100 6.625% 2008 210 20,925 21,551
ENTERGY ARKANSAS $25 9.920% 2002 26 663 684
ENTERGY LA INC PFD 8.000% 2001 70 7,000 7,254
ENTERGY LA $100 7.000% 1999 80 8,000 8,180
GREEN MTN PWR CL-D/3 8.625% 2000 42 4,200 4,240 (b)(d)
HAWAII ELEC $100 8.500% 2005 50 5,116 5,208 (b)(d)
MAUI ELEC $100 8.500% 2005 50 5,094 5,208 (b)(d)
INDIANA MICH POWER 6.300% 2009 52 5,222 5,597
IND MICH POWER $100 6.250% 2009 20 2,006 2,137 (f)
INDIANA MICHIGAN PWR 5.900% 2009 33 3,122 3,417
JERSEY CENTRAL P&L 8.650% 2005 110 11,262 11,744
LOUISVILLE G&E PFD 5.875% 2008 12 1,197 1,249 (f)
MAINE YANKEE $100 7.480% 2001 23 2,280 2,350
MARKETSPAN CORP 7.950% 2000 274 6,874 7,319
MIDAMERICAN ENERGY 7.800% 2006 73 7,566 8,182
MN P & L 144A $100 7.125% 2002 50 4,980 5,052 (b)(d)
MN P&L 144A 6.70 6.700% 2002 100 10,000 10,350 (b)(d)
NJ NATL GAS 100 144A 7.720% 2001 200 20,000 20,350 (d)
NO IND PUB SERV $100 8.850% 2003 26 2,633 2,664 (b)(d)
NO IND PUB SERV $100 6.500% 2002 115 11,902 11,970 (f)
NORTHWEST NAT GA 100 6.950% 2002 170 17,097 18,466
OHIO POWER CO $100 5.900% 2009 36 3,533 3,836
OHI PWR CO $100 6.020% 2008 10 991 1,075
OHIO PWR CO $100 6.350% 2008 5 507 549
OTTER TAIL PWR $100 6.300% 2007 180 18,000 18,866
PECO ENERGY 6.120% 2003 160 16,001 16,671
PACIFIC GAS & ELEC 6.300% 2009 120 2,963 3,140 (f)
PACIFIC GAS & ELEC 6.570% 2007 718 18,052 18,879
PACIFICORP $100 PAR 7.700% 2001 150 15,000 16,444
POTOMAC ELEC PWR $50 6.800% 2007 161 7,952 8,944
PRAXAIR INC 7.480% 2000 70 7,051 7,346
PUB SERV COLO $100 7.500% 2009 173 16,780 17,510 (b)(d)
PUBLIC SER ELEC & GA 5.970% 2008 6 613 668 (f)
ROCHESTER G&E $100 6.600% 2009 53 5,183 5,608
ROCHESTER G & E $100 7.650% 1999 20 2,000 2,037
ROCHESTER G & E $100 7.550% 1998 67 6,700 6,792
SAN DIEGO G&E $25 1.762% 2008 60 1,584 1,737 (f)
SO CA EDISON $100 6.050% 2008 45 4,501 4,694 (f)
SO CA EDISON $100 6.450% 2002 202 20,359 21,198
SO INDIANA G&E 100 6.500% 2002 75 7,500 7,471 (b)(d)
TEXAS UTILITIES 6.375% 2008 54 5,429 5,640
TEXAS UTIL $100 PAR 6.980% 2008 50 5,000 5,460
UBS PRIVATE SER H 5.040% 2002 15 15,000 15,525 (b)(d)(f)
VIRGINIA ELEC & PWR 5.580% 2000 18 1,761 1,782 (f)
VIRGINIA ELEC & PWR 6.350% 2000 201 20,151 20,887
WASHINGTON WTR POWER 6.950% 2007 58 5,765 6,415
Total Public Utility 6,718 493,496 516,220
Finance
ABN AMRO NA FRAP 5.94% 15 15,000 15,583 (d)(f)
CHASE MANHAT FRAP 4.96% 110 5,500 5,569 (f)
COMERICA FRAP 6.84% 150 7,796 7,819 (f)
EURO AMER BANK FRAP 5.84% 10 10,000 10,200 (f)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bal Held at
6/30/98 Cost Value at
Number of (Notes 6/30/98
Issuer Name and Issue Title Shares a & c) (Note a)
<S> <C> <C> <C> <C> <C><C><C>
FLEET FIN 6.59% FRAP 6.59% 130 6,662 6,833 (f)
MORGAN STANLEY GROUP 5.91% 100 5,000 5,200 (f)
PNC BK FRAP SERF 6.05% 440 22,160 22,522 (f)
WELLS FRGO FRAP SERH 6.59% 432 22,107 23,247 (f)
Total Finance 1,387 94,225 96,973
Industrial
NORTHBROOK HLDG 1000 6.600% 2001 10 10,000 10,219 (b)(d)(f)
WHIRLPOOL FIN $100 B 6.550% 2008 180 18,112 19,215 (d)
WHIRLPL FINL PFD144A 6.090% 2002 37 3,686 3,862 (b)(d)(f)
Total Industrial 227 31,798 33,296
TOTAL PREFERRED STOCK 8,332 619,520 646,489
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL Investments in Securities of Unaffiliated Issuers 3,632,046 3,708,272
TOTAL Reserve for Possible Losses on Corporate Issues 0 0
3,632,046 3,708,272
NOTES:
a) See Notes 1 and 3 to the financial statements regarding determination of cost and fair values.
b) In the absence of market quotations, securities are valued by IDS Certificate Company at fair value.
c) Aggregate cost of investment in securities of unaffiliated issuers for federal income tax
purposes was $3,630,794.
d) Securities acquired in private negotiation which may require registration under federal securities
law if they were to be publicly sold. Also see Note 3B to financial statements.
e) Non-income producing securities.
f) Securities classified as available for sale and carried at fair value on the balance sheet. Also
see Notes 1 and 3A to financial statements.
</TABLE>
<PAGE>
September 17, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Attn: Document Control - EDGAR
Washington, D.C. 20549-1004
RE: IDS Certificate Company
1998 Semi-Annual Report
Ladies and Gentlemen:
On behalf of the above-referenced registrant, I am filing electronically the
1998 Semiannual Report for the six-month period ended June 30, 1998.
This report is being filed with the Commission pursuant to the requirements of
Section 30(e) of the Investment Company Act of 1940 and Rule 30b2-1.
If you have any questions, please contact me at (612) 671-2221.
Thank you.
Sincerely,
Bruce A. Kohn
Vice President and General Counsel
BK/lal
