IDS CERTIFICATE COMPANY
SEMIANNUAL REPORT
TO SHAREHOLDER
June 30, 1999
Report Number C-100
IDSC Reports
September 28, 1999
<PAGE>
IDS CERTIFICATE COMPANY
SEMIANNUAL REPORT TO SHAREHOLDER
June 30, 1999
TABLE OF CONTENTS
Page
Balance Sheet 2-3
Statement of Operations 4-5
Statement of Comprehensive Income 6
Statement of Stockholder's Equity 7
Statement of Cash Flows 8
Notes to Financial Statements 9-20
Reports Incorporated by Reference 20
Investment Securities Owned 21-34
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
IDS CERTIFICATE COMPANY
BALANCE SHEET Unaudited
June 30, 1999
($ thousands)
- ---------------------------------------------------------------------------------------------
ASSETS
Qualified Assets (note 2)
Investments in unaffiliated issuers (notes 3 and 4):
Cash and cash equivalents $13,645
Held-to-maturity securities 487,150
Available-for-sale securities 2,678,832
First mortgage loans on real estate 385,480
Certificate loans - secured by certificate reserves 30,493
Investments in and advances to affiliates 418
--------------
Total investments 3,596,018
--------------
Receivables:
Dividends and interest 43,119
Investment securities sold 2,985
--------------
Total receivables 46,104
--------------
Other (note 9) 123,335
--------------
Total qualified assets 3,765,457
--------------
Other Assets
Receivable from Parent for federal income taxes 782
Deferred federal income taxes 20,004
Deferred distribution fees and other 13,808
--------------
Total other assets 34,594
--------------
Total assets $3,800,051
==============
See notes to financial statements.
<PAGE>
IDS CERTIFICATE COMPANY
BALANCE SHEET Unaudited
June 30, 1999
($ thousands)
- ---------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Certificate Reserves (note 5):
Installment certificates:
Reserves to mature $285,373
Additional credits and accrued interest 12,899
Advance payments and accrued interest 851
Other 55
Fully paid certificates:
Reserves to mature 3,102,249
Additional credits and accrued interest 151,305
Due to unlocated certificate holders 320
--------------
Total certificate reserves 3,553,052
--------------
Accounts Payable and Accrued Liabilities:
Due to Parent (note 7A) 736
Due to affiliates (notes 7B, 7C, 7D and 7E) 672
Payable for investment securities purchased 2,552
Accounts payable, accrued expenses and other (note 9) 63,748
--------------
Total accounts payable and accrued liabilities 67,708
--------------
Total liabilities 3,620,760
--------------
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 3,006
Appropriated for additional interest on advance payments 10
Unappropriated 57,226
Accumulated other comprehensive loss-net of tax (note 1) (26,295)
--------------
Total stockholder's equity 179,291
--------------
Total liabilities and stockholder's equity $3,800,051
==============
See notes to financial statements.
<PAGE>
IDS CERTIFICATE COMPANY
STATEMENT OF OPERATIONS Unaudited
Six Months Ended June 30, 1999
($ thousands)
- ---------------------------------------------------------------------------------------------
Investment Income:
Interest income from investments:
Bonds and notes:
Unaffiliated issuers $91,989
Mortgage loans on real estate:
Unaffiliated 13,496
Certificate loans 851
Dividends 17,837
Other 986
--------------
Total investment income 125,159
--------------
Investment Expenses:
Parent and affiliated company fees (note 7):
Distribution 15,319
Investment advisory and services 4,339
Transfer agency 1,819
Depositary 123
Options (note 9) 14,352
Reverse repurchase agreements 606
Interest rate swap agreements (note 9) 1,146
Other 148
--------------
Total investment expenses 37,852
--------------
Net investment income before provision
for certificate reserves and income tax expense $87,307
--------------
See notes to financial statements.
<PAGE>
IDS CERTIFICATE COMPANY
STATEMENT OF OPERATIONS (Continued) Unaudited
Six Months Ended June 30, 1999
($ thousands)
- ---------------------------------------------------------------------------------------------
Provision for Certificate Reserves (notes 5 and 9):
According to the terms of the certificates:
Provision for certificate reserves $5,491
Interest on additional credits 458
Interest on advance payments 17
Additional credits/interest authorized by IDSC:
On fully paid certificates 58,185
On installment certificates 4,507
--------------
Total provision for certificate reserves before reserve recoveries 68,658
Reserve recoveries from terminations prior to maturity (426)
--------------
Net provision for certificate reserves 68,232
--------------
Net investment income before income tax expense 19,075
Income tax expense (note 8) 2,156
--------------
Net investment income 16,919
--------------
Realized gain on investments - net:
Securities of unaffiliated issuers 1,508
Income tax expense (note 8) 528
--------------
Net realized gain on investments 980
--------------
Net income $17,899
==============
See notes to financial statements.
<PAGE>
IDS CERTIFICATE COMPANY
STATEMENT OF COMPREHENSIVE INCOME Unaudited
Six Months Ended June 30, 1999
($ thousands)
- ---------------------------------------------------------------------------------------------
Net Income $17,899
--------------
Other Comprehensive Loss (note 1):
Unrealized losses on available-for-sale securities
Unrealized holding losses arising during period (53,646)
Income tax benefit 18,776
--------------
Net unrealized holding losses arising during period (34,870)
Reclassification adjustment for gains included in net income (1,185)
Income tax expense 414
--------------
Net reclassification adjustment for gains included in net income (771)
--------------
Net Other Comprehensive Loss (35,641)
--------------
Total Comprehensive Loss ($17,742)
==============
See notes to financial statements.
<PAGE>
IDS CERTIFICATE COMPANY
STATEMENT OF STOCKHOLDER'S EQUITY Unaudited
Six Months Ended June 30, 1999
($ 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 $3,710
Transferred to unappropriated retained earnings (704)
--------------
Balance at end of period $3,006
==============
Appropriated for additional interest on advance payments (note 5C):
Balance at beginning and end of period $10
==============
Unappropriated (note 6):
Balance at beginning of period $63,623
Net income 17,899
Transferred from appropriated retained earnings 704
Cash dividends declared (25,000)
--------------
Balance at end of period $57,226
==============
Accumulated Other Comprehensive Income(Loss)-net of tax (note 1):
Balance at beginning of period $9,346
Net other comprehensive loss (35,641)
--------------
Balance at end of period ($26,295)
==============
Total Stockholder's Equity $179,291
==============
See notes to financial statements.
<PAGE>
IDS CERTIFICATE COMPANY
STATEMENT OF CASH FLOWS Unaudited
Six Months Ended June 30, 1999
($ thousands)
- ---------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $17,899
Adjustments to reconcile net income to net
cash provided by operating activities:
Net provision for certificate reserves 68,232
Interest income added to certificate loans (521)
Amortization of premiums/discounts-net 14,496
Provision for deferred federal income taxes 281
Net realized gain on investments before income taxes (1,508)
Decrease in dividends and interest receivable 3,460
Decrease in deferred distribution fees 1,982
Decrease in other assets 1,083
Decrease in other liabilities (23,585)
--------------
Net cash provided by operating activities 81,819
--------------
Cash flows from investing activities:
Maturity and redemption of investments:
Held-to-maturity securities 107,591
Available-for-sale securities 253,104
Other investments 32,851
Sale of investments:
Held-to-maturity securities -
Available-for-sale securities 37,031
Certificate loan payments 2,270
Purchase of investments:
Held-to-maturity securities (1,856)
Available-for-sale securities (311,580)
Other investments (76,737)
Certificate loan fundings (2,012)
--------------
Net cash provided by investing activities 40,662
--------------
Cash flows from financing activities:
Payments from certificate owners 706,376
Proceeds from reverse repurchase agreements 98,500
Certificate maturities and cash surrenders (649,212)
Payments under reverse repurchase agreements (239,500)
Dividends paid (25,000)
--------------
Net cash used in financing activities (108,836)
--------------
Net increase in cash and cash equivalents 13,645
Cash and cash equivalents beginning of period -
---------------
Cash and cash equivalents end of period $13,645
==============
Supplemental disclosures including non-cash transactions:
Cash paid for income taxes $10,518
Certificate maturities and surrenders through loan reductions 2,113
See notes to financial statements.
</TABLE>
<PAGE>
IDS CERTIFICATE COMPANY
Notes to Financial Statements ($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 20 years. Within their specified maturity, most certificates
have interest rate terms of one to 36 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.
Comprehensive Income
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income," requires the
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
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, comprehensive income consists of net
income and unrealized gains or losses on available-for-sale securities net of
taxes.
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
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
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.
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 subsidiary for any tax benefits
recorded.
Accounting developments
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use." This SOP, which was effective Jan. 1,
1999, requires the capitalization of certain costs incurred to develop or obtain
software for internal use. Software utilized by IDSC is owned by Parent and will
be capitalized on Parent's financial statements. As a result, the new rule has
not had a material impact on IDSC's results of operations or financial
condition.
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities," which would
have been effective Jan. 1, 2000. In June 1999, the FASB issued SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities-Deferral of the
Effective Date of FASB Statement No. 133." This Statement amends SFAS No. 133
deferring its effective date to Jan. 1, 2001. SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
It requires that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair value.
The accounting for changes in the fair value of a derivative depends on the
intended use of the derivative and the resulting designation. The ultimate
financial impact of the new rule will be measured based on the derivatives in
place at adoption and cannot be estimated at this time.
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 $3,501,577 at June 30, 1999. IDSC had qualified assets of
$3,803,359 at June 30, 1999, excluding net unrealized depreciation on
available-for-sale securities of $40,454 and payable for securities purchased of
$2,552.
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
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, 1999 were deposited as follows:
<TABLE>
<CAPTION>
Required
Deposits deposits Excess
------------------------------------------
<S> <C> <C> <C>
Deposits to
meet certificate
liability
requirements:
States $364 $326 $38
Central Depositary 3,692,728 3,467,522 225,206
------------------------------------------
Total $3,693,092 $3,467,848 $225,244
==========================================
</TABLE>
The assets on deposit consisted of securities having a deposit value of
$3,250,639, mortgage loans of $385,480 and other assets of $56,973.
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 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 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, 1999:
<TABLE>
<CAPTION>
Gross Gross
Amortized Fair unrealized unrealized
Cost Value gains losses
--------------------------------------------------------
<S> <C> <C> <C> <C>
HELD TO MATURITY
U.S. Government and
agencies obligations $364 $368 $4 $-
Mortgage-backed
securities 19,149 19,193 230 186
Corporate debt
securities 93,289 95,573 2,404 120
Stated maturity
preferred stock 374,348 386,476 12,224 96
--------------------------------------------------------
Total $487,150 $501,610 $14,862 $402
========================================================
</TABLE>
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Gross Gross
Amortized Fair unrealized unrealized
Cost Value gains losses
--------------------------------------------------------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE
Mortgage-backed
securities $802,156 $803,100 $6,111 $5,167
State and municipal
obligations 27,905 28,583 678 -
Corporate debt
securities 1,722,047 1,678,395 7,701 51,353
Stated maturity
preferred stock 63,169 63,822 717 64
Perpetual preferred
stock 104,009 104,932 1,340 417
--------------------------------------------------------
Total $2,719,286 $2,678,832 $16,547 $57,001
========================================================
</TABLE>
At June 30, 1999, there were no securities classified as trading securities.
During the six months ended June 30, 1999, debt securities classified as
available for sale were sold with proceeds of $38,213 and gross realized gains
on such sales of $1,182.
During the six months ended June 30, 1999, there were no sales of or transfers
from securities classified as held to maturity.
B) At June 30, 1999, investments in securities with fixed maturities comprised
83% 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 37 %
Aa/AA 1
Aa/A 2
A/A 13
A/BBB 4
Baa/BBB 32
Below investment grade 11
--------------
Total 100 %
==============
Of the securities rated Aaa/AAA, 72% are U.S. Government Agency mortgage-backed
securities that are not rated by a public rating agency. Approximately 16% of
securities with fixed maturities, other than U.S. Government Agency
mortgage-backed securities, are rated by Parent's internal analysts. No one
issuer, other than U.S. Government mortgage-backed securities, 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.
<PAGE>
Notes to Financial Statements (continued)
- -------------------------------------------------------------------------------
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, 1999, IDSC's recorded investment in impaired mortgage loans was $268
and the reserve for loss on that amount was $161. During the first six months of
1999, the average recorded investment in impaired mortgage loans was $284
IDSC recognized $13 of interest income related to impaired mortgage loans for
the six months ended June 30, 1999.
During the six months ended June 30, 1999, the reserve for loss on mortgage
loans was reduced by $100.
At June 30, 1999, commitments for fundings of first mortgage loans, at market
interest rates, aggregated $6,245. 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, 1999, approximately 10% of IDSC's invested assets were first
mortgage loans on real estate. A summary of first mortgage loans by region and
type of real estate is as follows:
Region
West North Central 19 %
South Atlantic 19
East North Central 17
Mountain 16
West South Central 12
Pacific 7
New England 5
Middle Atlantic 5
----------
Total 100 %
==========
Property Type
Office buildings 29 %
Retail/shopping centers 26
Apartments 18
Industrial buildings 14
Other 13
----------
Total 100 %
==========
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
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, 1999 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 $19,611 3.50% .50%
Without guaranteed rates (A) 265,762 - 2.75
Additional credits and accrued interest 12,899 3.16 -
Advance payments and accrued interest (C) 851 3.20 .80
Other 55 - -
Fully paid certificates:
Reserves to mature:
With guaranteed rates 137,260 3.21 .97
Without guaranteed rates (A) and (D) 2,964,989 - 3.83
Additional credits and accrued interest 151,305 3.17 -
Due to unlocated certificate holders 320 - -
------------
Total $3,553,052
============
</TABLE>
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, 1999, $3,006 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 3.20%. IDSC has increased the rate of accrual
to 4.00% through April 30, 2000. An appropriation of retained earnings amounting
to $10 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, 1999 were $579,518 and $168,307,
respectively.
6. Dividend restriction
Certain series of installment certificates outstanding provide that cash
dividends may be paid by IDSC only in calendar years for which additional
credits of at least one-half of 1% on such series of certificates have been
authorized by IDSC. This restriction has been removed for 1999 and 2000 by
IDSC's declaration of additional credits in excess of this requirement.
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
7. Fees paid to Parent, affiliated companies and directors ($ not in thousands)
A) The basis of computing fees paid or payable to Parent for investment
advisory, joint facilities, technology support and treasury 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. 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
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, Inc. may be lowered. For the promotion of the
seven-month term IDS Flexible Savings Certificate which occurred March 10, 1999
to June 8, 1999, 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 the daily average balance of the certificate reserve maintained
during the sixth through the 10th year, respectively.
Effective April 30, 1997, fees on the IDS Cash Reserve and IDS 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 0.25% of the reserves maintained
for these certificates at the beginning of the second and subsequent quarters
from issue date.
Fees on the IDS Future Value Certificate were paid at the rate of 5% of the
purchase price at time of issuance. Effective May 1, 1997, the IDS Future Value
Certificate is no longer being offered for sale.
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Fees on the American Express 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 IDS 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.
Effective April 28, 1999, fees on the IDS Stock Market and IDS Market Strategy
Certificates are paid at a rate of 0.90% and fees on the American Express Stock
Market Certificate are paid at a rate of 1.00%. For certificates sold from April
30, 1997 to April 27, 1999, fees were paid at a rate of 0.70%. For certificates
sold prior to April 30, 1997, fees were paid at a rate of 1.25%. Fees are paid
on the purchase price on the first day of the certificates' term and on 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 paid at the end of each quarter from date of issuance on
certificates with a six-, 12-, 24- 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.
F) During the six months ended June 30, 1999, IDSC paid $17,000 for regular
compensation to directors not employed by Parent. During the same period, no
other fees were paid to directors, members of an advisory board, officers, or
persons of whom any officer or director of IDSC are affiliated persons other
than as described above.
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
8. Income taxes
The federal income tax rate applicable to income of IDSC for the six months
ended June 30, 1999 was based on the effective tax rate expected to be
applicable for the full fiscal year ending Dec. 31, 1999.
A reconciliation of the statutory federal income tax rate and the expected
federal income tax rate at Dec. 31, 1999 is:
Rate
- -----------------------------------------------------------------
Statutory federal income tax rate 35.0%
Tax-exempt interest (0.6)
Dividend exclusion (21.4)
- -----------------------------------------------------------------
Expected federal income tax rate 13.0%
- -----------------------------------------------------------------
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, 1999, IDSC's counterparties to the
purchased call options are eight major broker/dealers rated A or better by
nationally recognized rating agencies.
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.
IDSC's holdings of derivative financial instruments were as follows at June 30,
1999:
<TABLE>
<CAPTION>
Notional Total
or contract Carrying Fair credit
amount value value exposure
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Purchased call options $485 $123,335 $102,285 $102,285
- -----------------------------------------------------------------------------------------------------------
Liabilities:
Written call options $485 $61,422 $62,605 $-
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
The fair values of derivative financial instruments are based on market values,
dealer quotes or pricing models. The options expire in 1999 and 2000.
Interest rate floors and swaps, and options are used to manage IDSC's exposure
to changing interest rates. These instruments are used primarily to protect the
margin between the rate earned on investments and the interest rate credited to
related investment certificate owners.
During April of 1999, $500,000 notional amount of interest rate floors and swaps
expired. The interest rate floors were reset monthly and IDSC earned interest on
the notional amount to the extent the U.S. Treasury securities at "constant
maturity" for a period of one year was below the reference rates specified in
the floor agreements. These reference rates ranged from 4.6% to 4.7%. The cost
of interest rate floors was amortized over the terms of the agreements on a
straight line basis and was included in other qualified assets. The
amortization, net of any interest earned, is included in investment expenses or
other investment income, as appropriate.
The interest rate swaps were reset monthly. IDSC paid a fixed rate on the
notional amount ranging from 5.46% to 6.72% and received a floating rate on the
notional amount tied to the U.S. Treasury securities at "constant maturity" for
a period of one year. There was no cost carried on the balance sheet. Interest
earned and interest expensed under the agreements is shown net in investment
expenses or other investment income, as appropriate.
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.
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 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. Changes in the
intrinsic value of these options are recognized currently in provision for
certificate reserves.
10. Year 2000
The Year 2000 issue is the result of computer programs having been written using
two digits rather that 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 Parent and are utilized by multiple subsidiaries
and affiliates of Parent. IDSC is heavily dependent upon Parent's computer
systems and has significant interactions with systems of third parties.
A comprehensive review of 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 have been taken to
resolve potential problems including modification to existing software and the
purchase of new software. As of June 30, 1999, Parent had completed at least 99
percent of its program of corrective measures on its internal systems and
applications, including Year 2000 compliance testing.
Parent continues to evaluate the Year 2000 readiness of third parties whose
system failures could have an impact on IDSC's operations. The failure of third
parties to resolve their own Year 2000 issues in a timely manner could result in
a material financial risk to IDSC or Parent.
Parent's Year 2000 project includes establishing Year 2000 contingency plans for
all key business units. Business continuation plans, which address business
continuation in the event of a system disruption, are in place for all key
business units. These plans have been amended to include specific Year 2000
considerations and will continue to be refined throughout 1999 as additional
information related to potential Year 2000 exposure is gathered.
Reports Incorporated by Reference
The report on Form 10-K for IDSC for the fiscal year ended Dec. 31, 1998, as
filed with the Securities and Exchange Commission, and the report on Form 10-Q
for IDSC for the quarterly period ended June 30, 1999 as filed with the
Securities and Exchange Commission, are hereby incorporated in this semiannual
report by reference.
<PAGE>
<TABLE>
<CAPTION>
IDS CERTIFICATE COMPANY
Investments in Securities of Unaffiliated Issuers Schedule I
($ in thousands)
Bal Held at
06/30/1999
Principal Amt
of Bonds & Notes Cost Value at
or (Notes 06/30/1999
Issuer Name and Issue Title # of Shares a & c) (Note a)
BONDS AND NOTES
<S> <C> <C> <C> <C> <C> <C><C><C>
United States Government-
Direct Obligations
US TREASURY BOND 6.875% 2000 165 165 167
US TREASURY BOND 5.625% 2000 200 199 201
Total U.S. Government - Direct Obligations 365 364 368
Other Bonds and Notes
United States Government Agencies
FHLMC-GNMA 40 D CMO 6.500% 2011 3,992 3,988 3,986 (f)
GNMA ARM #8377 6.625% 2018 627 626 641 (f)
GNMA ARM #8251 6.625% 2017 57 57 58 (f)
GNMA ARM #8365 6.875% 2018 1,413 1,413 1,446 (f)
GNMA ARM #8274 6.125% 2017 1,949 1,948 1,980 (f)
GNMA ARM #8293 6.125% 2017 444 444 451 (f)
GNMA ARM #8283 6.125% 2017 252 251 256 (f)
GNMA ARM #8353 6.875% 2018 852 847 872 (f)
GNMA ARM #8341 6.875% 2018 118 117 120 (f)
GNMA ARM #8240 6.625% 2017 646 638 660 (f)
GNMA ARM #8440 6.125% 2018 730 730 742 (f)
GNMA ARM #8206 6.375% 2017 967 967 982 (f)
GNMA ARM #8428 6.125% 2018 269 269 273 (f)
GNMA ARM #8157 6.375% 2023 3,937 4,005 3,999 (f)
GNMA ARM #8638 6.875% 2025 5,997 6,047 6,101 (f)
FNMA 30 YR #27880 9.000% 2016 27 28 29 (f)
FNMA 15 YR #34543 9.250% 2001 34 34 36 (f)
FNMA 30 YR #36225 9.000% 2016 95 96 100 (f)
FNMA 30 YR #040877 9.000% 2017 42 43 45 (f)
FNMA 30 YR #51617 10.000% 2017 88 88 95 (f)
FNMA 30 YR #52185 10.000% 2017 56 57 61 (f)
FNMA 15 YR #13705 11.000% 2000 11 12 12 (f)
FNMA 15 YR #18275 11.000% 2000 3 3 3 (f)
FNMA 15 YR #18745 11.000% 2000 1 1 1 (f)
FNMA 15 YR #2469 11.000% 2000 5 5 5 (f)
FNMA 15 YR #13157 11.000% 2000 5 5 6 (f)
FNMA 15 YR #13548 11.000% 2000 14 14 15 (f)
FNMA 15 YR #64520 11.000% 2001 18 18 19 (f)
FNMA 15 YR #64523 11.000% 2000 15 15 16 (f)
FNMA 15 YR #19070 11.000% 2000 2 2 2 (f)
FNMA 15 YR #19261 11.000% 2000 4 4 5 (f)
<PAGE>
Bal Held at
06/30/1999
Principal Amt
of Bonds & Notes Cost Value at
or (Notes 06/30/1999
Issuer Name and Issue Title # of Shares a & c) (Note a)
FNMA 15 YR #22569 11.000% 2000 5 5 5 (f)
FNMA 15 YR #22271 11.000% 2000 17 17 18 (f)
FNMA 15 YR #22674 11.000% 2000 12 12 12 (f)
FNMA 15 YR #22405 11.000% 2000 9 9 9 (f)
FNMA 15 YR #25899 11.000% 2001 4 4 5 (f)
FNMA 15 YR #58405 11.000% 2003 21 21 22 (f)
FNMA 15 YR #70299 10.750% 2001 67 68 71 (f)
FNMA 15 YR #66458 10.000% 2004 2,094 2,101 2,164
FNMA 15 YR 70694 MEG 9.500% 2005 910 917 959
FNMA 15 6.0 #50973 6.000% 2009 27,261 26,719 26,440 (f)
FNMA 10YR #303115 6.500% 2004 8,423 8,101 8,311 (f)
FNMA 15YR #124848 8.000% 2008 6,729 6,710 6,930 (f)
FNMA 15YR #303445 5.500% 2009 14,987 14,449 14,177 (f)
FNMA #73227 MULT-FAM 6.700% 2005 2,291 2,311 2,308 (f)
FNMA 15YR 190534 6.000% 2018 13,930 13,713 13,528
FNMA 15 YR #A250857 7.000% 2012 12,365 12,337 12,422 (f)
FNMA 15YR #250671 7.500% 2011 12,132 12,163 12,319 (f)
FNMA 15 YR #313561 8.000% 2012 12,134 12,365 12,512 (f)
FNMA 15YR #252381 5.500% 2014 24,651 23,958 23,308 (f)
FNMA 15YR 5.5 252344 5.500% 2014 26,612 25,919 25,164 (f)
FNMA 15YR 6% #323290 6.000% 2013 27,599 27,396 26,681 (f)
FNMA 15YR #252259 5.500% 2014 30,306 29,735 28,657 (f)
FNMA 15YR #303779 6.000% 2011 26,915 26,445 26,053 (f)
FNMA 7.0 15YR 250670 7.000% 2011 4,026 4,055 4,048 (f)
FNMA 15YR #313522 7.000% 2012 24,292 24,431 24,405 (f)
FNMA 15YR #367005 7.000% 2012 8,721 8,674 8,761 (f)
FNMA 15YR #313042 7.000% 2011 9,187 9,225 9,235 (f)
FNMA 92 203 E CMO 6.250% 2005 1,816 1,811 1,814 (f)
FANNIEMAE GR TRST 6.610% 2018 6,985 6,984 6,972 (f)
FNMA 97-2C CMO 7.000% 2020 27,064 27,074 27,238 (f)
FN 98 50 CLASS PA 6.000% 2012 15,000 15,037 14,849 (f)
FNMA 98-8 A SEQ CMO 6.500% 2024 7,205 7,207 7,148 (f)
FNMA 97-74 G SEQ CMO 6.500% 2024 6,759 6,732 6,709 (f)
FNMA 96-10 C CMO SEQ 6.500% 2023 5,826 5,629 5,762 (f)
FNMA 97-17 CMO 7.000% 2022 27,862 27,692 27,959 (f)
FN 97 11 K SEQ CM0 7.125% 2023 3,146 3,154 3,149 (f)
FNMA ARM #70007 6.266% 2017 1,381 1,381 1,413 (f)
FNMA ARM #70009 6.594% 2018 2,016 2,016 2,042 (f)
FNMA ARM #70117 6.612% 2017 414 414 424 (f)
FNMA ARM #79384 7.790% 2019 693 693 709 (f)
FNMA ARM #70202 6.803% 2019 1,465 1,465 1,506 (f)
FNMA ARM #92069 7.278% 2018 1,780 1,780 1,824 (f)
FNMA ARM #93787 6.926% 2019 1,518 1,518 1,560 (f)
FNMA ARM #97822 6.855% 2020 188 188 192 (f)
FNMA ARM#88879 3X3 7.807% 2019 1,586 1,587 1,651 (f)
FNMA ARM#105989 3X3 7.616% 2020 1,074 1,074 1,118 (f)
FNMA ARM #249907 7.000% 2024 6,288 6,380 6,489 (f)
FNMA ARM#89125 SEMI 6.251% 2019 4,373 4,462 4,400 (f)
<PAGE>
Bal Held at
06/30/1999
Principal Amt
of Bonds & Notes Cost Value at
or (Notes 06/30/1999
Issuer Name and Issue Title # of Shares a & c) (Note a)
FNMA ARM #303259 6.849% 2025 4,132 4,241 4,254 (f)
FNMA ARM#190726 SEMI 6.669% 2033 7,478 7,626 7,674 (f)
FHLMC CTF SER B-77 8.125% 2007 39 39 39 (f)
FHLMC 15 YR #200035 9.000% 2001 94 94 98 (f)
FHLMC 15 YR #200064 8.000% 2002 156 153 159 (f)
FHLMC 15 YR #212119 9.500% 2001 49 49 51 (f)
FHLMC 15 YR #218648 9.500% 2002 17 17 18 (f)
FHLMC 15 YR #200048 9.000% 2001 249 247 258
FHLMC 15YR #380025 9.500% 2003 308 307 325
FHLMC 15 YR #219679 9.500% 2003 247 246 260 (f)
FHLMC 15 YR #200022 10.500% 2000 23 24 25 (f)
FHLMC 15 YR #219757 11.000% 2003 425 435 449
FHLMC 15 YR #502175 10.500% 2004 57 58 61 (f)
FHLMC LOANS #885005 9.500% 2002 610 609 643 (f)
FHLMC 15 YR #885009 9.500% 2003 1,434 1,429 1,510
FHLMC LOANS #885008 10.000% 2003 1,130 1,133 1,192 (f)
FHLMC GOLD E00151 7.500% 2017 3,864 3,970 3,929 (f)
FHLMC 15YR #G10336 7.500% 2010 3,558 3,503 3,618 (f)
FHLMC 15YR #G10344 G 7.500% 2010 7,746 7,711 7,877 (f)
FHLMC 15YR #10342 7.000% 2010 13,269 12,953 13,339 (f)
FHLMC 5YR BLN #G5025 7.500% 2000 6,335 6,341 6,410 (f)
FHLMC 15YR G10364 7.000% 2010 10,855 10,800 10,913 (f)
FHLM 15 6.5 #G10369 6.500% 2010 26,533 26,238 26,228 (f)
FHLMC 15 #G10350 GLD 6.500% 2010 15,190 15,159 15,004 (f)
FHLMC 15YR #E00383 7.000% 2010 10,378 10,361 10,433 (f)
FHLMC 15YR GOLD 6.500% 2010 13,011 12,953 12,852 (f)
FH GD 15YR #E00426 6.500% 2011 6,133 6,078 6,061 (f)
FH15YR #G10439 GOLD 6.500% 2011 3,141 3,068 3,105 (f)
FHLMC 15YR G10627 6.500% 2011 20,454 20,166 20,219 (f)
FHLMC 15YR G10665 GD 7.000% 2012 49,935 49,820 50,200 (f)
FHLMC T-009 A2 HEL 6.430% 2013 9,417 9,417 9,428 (f)
FHLMC 15YR 11.000% 2003 506 516 534 (f)
FHLMC GOLD E00484 6.500% 2012 5,470 5,347 5,403 (f)
FHLMC GOLD #E00476 6.500% 2012 12,811 12,518 12,655 (f)
FHLMC15YR E00388GOLD 7.000% 2010 6,793 6,702 6,840 (f)
FHLMC 2149 CLASS DK 6.000% 2026 19,822 19,348 19,040 (f)
FHLMC ARM #840035 7.150% 2019 641 641 662 (f)
FHLMC ARM #840045 6.361% 2019 2,454 2,454 2,530 (f)
FHLMC ARM #605050 7.306% 2018 287 287 293 (f)
FHLMC ARM #605041 7.504% 2019 223 223 229 (f)
FHLMC ARM #605048 6.881% 2018 947 947 967 (f)
FHLMC ARM #605079 6.956% 2018 914 914 938 (f)
FHLMC ARM #605175 6.821% 2019 2,363 2,363 2,428 (f)
FHLMC ARM #605352 6.823% 2018 1,565 1,565 1,599 (f)
FHLMC ARM #605433 6.586% 2017 917 917 940 (f)
FHLMC ARM #605432 6.997% 2017 400 400 409 (f)
FHLMC ARM #405185 6.453% 2018 947 947 966 (f)
FHLMC ARM #405249 7.066% 2018 1,075 1,075 1,101 (f)
<PAGE>
Bal Held at
06/30/1999
Principal Amt
of Bonds & Notes Cost Value at
or (Notes 06/30/1999
Issuer Name and Issue Title # of Shares a & c) (Note a)
FHLMC ARM #630074 7.250% 2018 365 365 370 (f)
FHLMC ARM #605854 6.614% 2019 1,676 1,676 1,730 (f)
FHLMC ARM #630048 6.875% 2018 11 11 11 (f)
FHLMC ARM #405092 6.589% 2019 641 641 654 (f)
FHLMC ARM #840072 6.754% 2019 1,155 1,155 1,184 (f)
FHLMC ARM #605454 6.943% 2017 2,792 2,792 2,842 (f)
FHLMC ARM #405437 7.525% 2019 215 215 219 (f)
FHLMC ARM #405455 7.156% 2019 537 537 550 (f)
FHLMC ARM #405243 6.678% 2019 522 522 534 (f)
FHLMC ARM #606025 6.675% 2019 3,336 3,336 3,378 (f)
FHLMC ARM #606024 6.451% 2019 986 986 999 (f)
FHLMC ARM #405517 7.000% 2019 62 63 64 (f)
FHLMC ARM#605853 7.091% 2019 2,044 2,044 2,098 (f)
FHLMC ARM #405014 6.871% 2019 494 494 506 (f)
FHLMC ARM #401587 7.375% 2018 1,391 1,391 1,418 (f)
FHLMC ARM 840031 7.103% 2019 196 196 200 (f)
FHLMC ARM #840036 7.396% 2019 746 746 763 (f)
FHLMC ARM #405615 6.900% 2019 683 683 698 (f)
FHLMC ARM #405360 6.832% 2019 548 548 562 (f)
FHLMC ARM #606151 6.804% 2019 2,948 2,948 3,033 (f)
FHLMC ARM #635054 7.286% 2020 145 145 149 (f)
FHLMC ARM #405675 7.255% 2020 779 779 801 (f)
FHLMC ARM #405692 7.479% 2020 1,256 1,256 1,290 (f)
FHLMC ARM #606301 7.168% 2020 3,408 3,408 3,529 (f)
FHLMC ARM #405744 7.476% 2020 740 740 760 (f)
FHLMC ARM#865008 3X3 8.445% 2018 4,190 4,190 4,250 (f)
FHLMC ARM #845154 7.219% 2022 1,657 1,704 1,716 (f)
FHLMC ARM #845654 7.295% 2024 5,611 5,686 5,758 (f)
FHLMC ARM #350190 7.000% 2022 2,751 2,827 2,828 (f)
FHLMC ARM #845523 7.343% 2023 2,924 3,002 3,007 (f)
FHLMC ARM #845733 6.864% 2024 10,675 10,848 10,956 (f)
FHLMC ARM #845730 7.225% 2024 11,567 11,923 11,948 (f)
FHLMC ARM #845973 7.225% 2024 3,396 3,396 3,499 (f)
FHLMC ARM #845999 6.871% 2027 11,665 11,762 11,949 (f)
FHLMC ARM #846072 6.963% 2022 3,061 3,134 3,134 (f)
FHLMC ARM#846107LIB 7.284% 2025 3,355 3,428 3,471 (f)
FHLMC ARM#785363 3X1 6.842% 2025 2,356 2,386 2,429 (f)
FHLMC ARM #606903 6.250% 2022 344 347 346 (f)
FHLMC ARM#785615 3X1 6.681% 2026 6,207 6,175 6,290 (f)
FHLMC ARM#785634 3X1 6.757% 2026 5,873 5,891 6,009 (f)
FHLMC ARM#785619 3X1 6.614% 2026 2,612 2,625 2,674 (f)
FHLMC ARM#785672 3X1 6.728% 2026 2,973 2,985 3,052 (f)
Total United States Government Agencies 826,173 821,305 822,293
<PAGE>
Bal Held at
06/30/1999
Principal Amt
of Bonds & Notes Cost Value at
or (Notes 06/30/1999
Issuer Name and Issue Title # of Shares a & c) (Note a)
Municipal Bonds
California
CAL HSG 95-O TAX MUN 7.740% 2016 10,645 10,645 10,867 (b) (f)
CAL HSG FIN 1996-M 7.890% 2016 7,355 7,355 7,490 (b) (f)
Illinois
CHICAGO IL SAN DIST 9.250% 2000 1,000 1,011 1,029 (b) (f)
*CHIC IL GAS SPY SRC 7.500% 2015 4,500 4,500 4,678 (b) (f)
New York
NEW YORK CITY NT GO 7.750% 2000 335 335 339 (b) (f)
NEW YORK PWR AUTH 9.500% 2001 95 97 98 (b) (f)
Pennsylvania
WY VALLEY PA SWR 5.125% 2007 115 115 116 (b) (f)
Texas
AUSTIN TX UTILITY 10.750% 2015 3,735 3,847 3,966 (b) (f)
Total Municipal Bonds 27,780 27,905 28,583
Public Utility
AES CORP SNR SUB NTS 8.375% 2007 5,000 4,980 4,700 (b) (d) (f)
ALLIED WASTE 7.375% 2004 800 799 760 (f)
AVON ENERGY 6.730% 2002 4,750 4,750 4,751 (b) (d) (f)
BAROID CORP 8.000% 2003 5,000 4,991 5,238
BARRETT RESOURCES 7.550% 2007 3,000 3,003 2,961 (f)
CMS ENERGY 7.375% 2000 4,700 4,698 4,712 (f)
CSW INVESTMENTS 144A 6.950% 2001 10,000 9,994 10,083 (b) (d) (f)
CAL ENERGY CO INC 9.500% 2006 4,000 4,026 4,455 (f)
SPPC 99-1A ABS 6.400% 2011 8,000 7,996 7,803 (f)
CALPINE CORP 7.750% 2009 3,500 3,498 3,325 (f)
CINERGY CORP 6.125% 2004 4,000 3,994 3,902 (d) (f)
CONOCO INC GLOBAL 5.900% 2004 7,500 7,490 7,338 (f)
CROSS TIMBERS OIL CO 8.750% 2009 3,000 3,000 2,888 (f)
CYTEC INDUSTRIES INC 6.500% 2003 10,500 10,492 9,810 (f)
DETROIT EDISON 6.280% 2000 7,000 6,988 7,021 (f)
ENRON CORP 6.625% 2003 5,000 5,025 4,958 (f)
ENRON CORP 6.450% 2001 10,000 10,000 10,010 (f)
INTERMEDIA COMM 9.500% 2009 3,000 2,986 2,910 (f)
JERSEY CENTRAL P&L 6.040% 2000 5,000 5,000 5,007
KN ENERGY INC 6.450% 2003 8,000 7,989 7,745 (f)
KANSAS CITY P&L 7.340% 1999 10,000 10,000 10,047
MCN INV`T CORP MTN 6.890% 2002 9,000 9,025 9,012 (f)
MEDIAONE GROUP INC 6.850% 2002 15,500 15,496 15,564 (f)
NEW PARK RESOURCES 8.625% 2007 2,500 2,526 2,378 (f)
<PAGE>
Bal Held at
06/30/1999
Principal Amt
of Bonds & Notes Cost Value at
or (Notes 06/30/1999
Issuer Name and Issue Title # of Shares a & c) (Note a)
NIAGARA MHWK PWR 7.375% 2003 3,000 3,088 3,077 (f)
NORAM ENERGY CORP 7.500% 2000 5,000 4,993 5,054 (f)
NORCEN ENERGY RES 6.800% 2002 10,000 9,988 9,860 (f)
NOVACOR CHEMICALS 6.500% 2000 10,000 9,990 9,944 (f)
OCCIDENTAL PETROLEUM 6.410% 2000 5,000 4,986 5,004 (f)
PUBLIC SERV E&G CAP 6.800% 2002 10,000 10,022 9,981 (d) (f)
PUB SERVICE ELEC GAS 6.740% 2001 12,000 12,000 12,041 (d) (f)
PACIFIC GAS TRANS 6.640% 2000 5,000 5,000 5,022 (f)
PAGING NETWORK 10.000% 2008 2,000 2,000 1,460 (f)
PRAXAIR INC 6.750% 2003 5,000 4,838 5,022 (f)
QWEST COMMUNICATION 7.250% 2008 3,000 3,000 2,940 (f)
REPUBLIC SERVICES 6.625% 2004 5,000 4,974 4,951 (f)
SALTON SEA CL A 6.690% 2000 1,439 1,439 1,441 (f)
SANTA FE SNYDER 8.050% 2004 2,000 1,975 1,993 (f)
SMITH INT`L INC 7.240% 2001 10,000 10,000 10,092 (b) (d) (f)
TELEPORT COMM 9.875% 2006 4,000 4,072 4,540 (f)
TEXAS UTILITIES 6.370% 2000 10,000 10,000 10,043 (f)
TOSCO CORP 7.000% 2000 5,000 4,998 5,037 (f)
USX CORP 7.200% 2004 13,000 13,299 13,014 (f)
USA WASTE SERVICES 6.500% 2002 10,000 9,997 9,969 (f)
WILLIAMS CO INC 6.500% 2002 12,000 11,993 11,967 (f)
Total Public Utility 291,215 291,398 289,830
Finance
AG CAP FND SR.NT FLT 5.930% 2004 20,000 19,984 18,850 (b) (d) (f)
AT&T CAPITAL CORP 6.900% 2002 15,000 14,933 14,851 (f)
ADVANTA MTG 98-1 A2 6.250% 2014 5,000 5,000 4,997 (f)
AERCO LDT S-1A CL C1 6.338% 2023 13,478 13,339 12,871 (f)
O`N`E` LOAN TRUST 97 6.220% 2007 25,000 25,000 25,000 (b) (d) (f)
ALLIANCE INV CBO FLT 6.400% 2006 19,000 19,000 18,240 (d) (f)
ATHENA CBO LIMIT FLT 5.811% 2010 10,000 9,967 10,063 (d) (f)
BANK OF AMERICA GBL 6.625% 2004 5,000 4,990 4,955 (f)
BANKAMERICA CORP 9.750% 2000 10,000 10,064 10,357
BANPONCE FIN CORP 6.580% 2003 5,000 4,988 4,960 (f)
BISTRO TRST 1997-100 6.350% 2002 7,000 6,988 6,876 (d) (f)
BISTRO TRT 98-1000 6.580% 2001 14,000 14,000 13,622 (d) (f)
CAITHNESS COSO 6.800% 2001 2,000 2,000 1,985 (d) (f)
CA INF BK SDG E1 A2 6.040% 2002 890 890 893 (f)
CAPITAL ONE BANK 7.350% 2000 5,000 4,999 5,054 (f)
CAPITAL ONE BANK 6.375% 2003 5,500 5,487 5,378 (f)
CARAVELLE INV B FLTG 6.558% 2005 17,500 17,500 16,975 (f)
CARCO AUTO 97-1 6.689% 2004 12,000 12,000 12,021 (f)
CCMSC 1997-2 CLSS A1 6.450% 2004 4,273 4,274 4,268 (f)
CHASE 1999-AS2A H1 6.500% 2029 10,000 10,025 9,791 (f)
COMMERCIAL CREDIT 8.250% 2001 9,000 8,953 9,378 (f)
CONTI FINANCIAL CORP 8.375% 2003 5,000 4,991 4,150 (f)
CONTI MTG HEL TRTA-6 6.690% 2016 10,000 10,000 10,022 (f)
<PAGE>
Bal Held at
06/30/1999
Principal Amt
of Bonds & Notes Cost Value at
or (Notes 06/30/1999
Issuer Name and Issue Title # of Shares a & c) (Note a)
CONTI 98-1 CLASS A5 6.430% 2016 10,000 9,999 9,955 (f)
DUKE REALTY 7.300% 2003 7,500 7,494 7,549 (f)
ECH FUNDING 98-1 A-2 6.479% 2010 19,000 19,000 16,554 (d) (f)
EQCC 97-3 A6 ABS HEL 6.610% 2021 5,000 5,009 5,006 (f)
ELAN PHARMACEUTICAL 8.430% 2002 10,000 10,000 10,000 (b) (d) (f)
FDIC 96-1C CLASS 1A 6.750% 2026 3,723 3,722 3,709 (f)
FMAC LLC 98-D CL A-1 6.111% 2019 4,696 4,716 4,613 (d) (f)
FINOVA CAP C MTN 6.190% 2000 3,000 3,014 2,992 (f)
FBMS 93-2 CL B1 CMO 7.500% 2033 6,112 6,254 6,065 (f)
FIRST DOMINION CBO 1 6.260% 2013 19,000 19,000 17,329 (d) (f)
FULB 97-C1 A-1 MBS 7.150% 2004 8,864 8,991 8,969 (f)
FULB 97-C2 CLASS A1 6.479% 2004 7,983 8,013 7,961 (f)
FIRST USA DEP NT 6.375% 2000 5,000 4,995 5,036 (f)
FIRSTPLUS 98-A-A NIM 8.500% 2023 6,090 6,063 4,263 (f)
GATX CAPITAL CORP 6.500% 2000 5,000 5,000 5,011 (f)
GATX CAP CORP MTN 6.360% 2002 5,000 4,952 4,887 (f)
GMAC 96-C1 COMM MBS 6.790% 2003 4,094 4,104 4,124 (f)
GMAC 97-C2 A CMBS 6.451% 2004 4,646 4,662 4,620 (f)
GS-96PROTECT LIFE A1 7.020% 2027 5,519 5,609 5,511 (f)
GREAT WESTERN FINL 6.375% 2000 3,000 2,998 3,001 (f)
GREENTREE EQ 96-B 7.700% 2018 7,424 7,526 7,152 (f)
GREENPOINT BANK 6.700% 2002 9,250 9,279 9,191 (f)
HELLER FINANCIAL 6.500% 2000 8,000 8,000 8,053 (f)
HELLER FINANCIAL 6.440% 2002 5,000 4,985 4,988 (f)
HOMESIDE LENDING 6.875% 2002 10,000 9,998 10,062 (f)
HOUSEHOLD FIN MTN 7.100% 2002 10,000 9,995 10,184 (f)
INDOSUEZ CAP B-2 CLO 6.350% 2010 16,500 16,500 16,005 (d) (f)
IROQUOIS TRUST 97-1A 7.000% 2006 10,000 10,004 10,000 (d) (f)
IROQUOIS TRUST 97-2A 6.752% 2007 15,000 14,989 15,021 (d) (f)
KEYCORP SENIOR 7.430% 2000 4,000 3,999 4,047 (f)
LBCMT 98-C1 A-1 CMBS 6.330% 2004 3,539 3,554 3,503 (f)
LBCMT 98-C4 A1A CMBS 5.870% 2006 4,840 4,862 4,697 (f)
LONG ISL SAV BK 7.000% 2002 5,000 4,993 4,997 (f)
MBNA AMER BANK NA 7.540% 2001 10,000 9,997 10,169
MBNA CORP 6.500% 2000 5,000 4,999 5,005 (f)
ML CBO14 98-E&P-1 FL 6.460% 2010 11,000 11,000 7,018 (b) (d) (f)
MARGARETTEN FIN'L 6.750% 2000 15,250 15,290 15,351 (f)
MERCHANDISE MART LLC 6.380% 1999 15,000 15,000 15,000 (b) (d) (f)
ML CLO 98 PILG-3 6.500% 2010 7,500 7,450 7,097 (f)
ML CBO 98 AIG-2 B-1 6.360% 2010 6,500 6,475 5,909 (f)
ML CBO 98 SER 1 B1 6.220% 2009 10,500 10,477 9,647 (f)
MONEYSTORE 97-A A6 7.210% 2021 4,000 4,000 4,052 (f)
JPMS 96-C2 CL A 6.470% 2027 2,821 2,836 2,791 (f)
JPM 98-C6 A1 CMBS 6.373% 2030 3,464 3,478 3,434 (f)
JPMC 99-C7 A1 CMBS 6.180% 2035 9,921 9,970 9,653 (f)
MS CAP 1996-WFI MBS 7.220% 2028 10,000 10,108 10,312 (f)
MS CAP 1 1997-XL A-1 6.590% 2030 14,281 14,335 14,322 (f)
MS CAPI 97-ALIC A1 A 6.300% 2000 5,760 5,760 5,761 (f)
<PAGE>
Bal Held at
06/30/1999
Principal Amt
of Bonds & Notes Cost Value at
or (Notes 06/30/1999
Issuer Name and Issue Title # of Shares a & c) (Note a)
MS CAP 98-WF1 CMBS 6.250% 2007 2,357 2,366 2,312 (f)
MCF 96-MC2 CLS A1 6.758% 2004 8,841 8,890 8,893 (f)
NORWEST FINANCIAL 7.250% 2000 4,500 4,499 4,551
ORIX CR ALL 144A MTN 6.640% 2002 16,000 16,000 15,703 (d) (f)
PAMCOIII CLO 98-1 B2 6.350% 2010 19,000 19,000 18,430 (d) (f)
BANK POPULAR N.A. 6.625% 2002 12,000 11,992 11,868 (f)
PROVIDENT BANK 6.125% 2000 5,000 4,996 4,990
PROVIDIAN 97-4-A CRD 6.250% 2007 10,500 10,487 10,491 (f)
PROVIDIAN BANK 6.700% 2003 13,000 12,993 12,795 (f)
PHMS 1993-39 A8 SUPP 6.500% 2008 7,957 7,807 7,897 (f)
RFMSI 1998-S23 CL A1 6.000% 2028 14,044 14,111 13,901 (f)
RASC 99-KS1 AI4 ABS 6.390% 2027 5,000 4,983 4,862 (f)
SASCO 98-C3 CLASS B 5.673% 2001 4,961 4,935 4,950 (d) (f)
SL CMBS 97-C1 CLS A 6.875% 2004 14,136 14,233 14,215 (d) (f)
SBMS VII 91-1 B1 9.700% 2006 323 323 322 (f)
SANWA BUS CREDIT MTN 7.250% 2001 10,000 9,996 10,093 (b) (d) (f)
SAXON 98-1 AF3 HEL 6.450% 2024 2,000 1,999 2,004 (f)
SAXON 95-1 BA2 ARM 6.961% 2025 1,342 1,361 1,353 (f)
SOMERS CBO FLT 5.975% 2012 11,000 10,930 11,028 (b) (d) (f)
TCW GEM II 144A FLT 6.439% 2012 25,000 23,829 12,750 (b) (d) (f)
TRANS OCEAN CRP 144A 6.670% 2007 9,211 9,172 9,171 (d) (f)
UCFC 97-B CL A-4 ABS 6.940% 2023 7,000 6,995 7,049 (f)
UNIFRAX INVESTMENT 10.500% 2003 5,000 5,026 5,100 (f)
VAN KAMPEN CLOII LMT 6.232% 2008 5,000 5,000 4,613 (d) (f)
VANDERBILT 98-A A2 6.140% 2006 3,000 3,000 3,005 (f)
WAYLAND FUND 7.790% 2004 5,000 5,000 5,000 (b) (d) (f)
WELLSFORD RESID PROP 7.250% 2000 5,000 4,992 5,060 (f)
ICI INVESTMENTS EMTN 6.750% 2002 10,000 10,060 9,862 (f)
Total Finance 848,645 847,801 818,401
Industrial
AAF MCQUAY 8.875% 2003 10,000 10,101 9,600 (f)
AGCO CORP 8.500% 2006 5,000 4,971 4,725 (f)
AK STEEL CORP 9.125% 2006 3,000 3,057 3,090 (f)
ADELPHIA COMM CORP 7.875% 2009 1,600 1,600 1,488 (f)
ADVANCED LIGHTING 8.000% 2008 2,000 2,015 1,800 (b) (d) (f)
AMER AIRLINES LESSEE 6.400% 2008 2,375 2,375 2,375 (b) (d) (f)
AMER AIRLINES LESSEE 6.400% 2008 2,122 2,122 2,122 (b) (d) (f)
AMER AIRLINES LESSEE 6.400% 2008 2,289 2,289 2,289 (b) (d) (f)
AMER AIRLINES LESSEE 6.400% 2008 2,555 2,555 2,555 (b) (d) (f)
AMER AIRLINES LESSEE 6.400% 2008 719 719 719 (b) (d) (f)
AMER AIRLINES LESSEE 6.400% 2008 718 718 718 (b) (d) (f)
AMER AXLE & MFG INC 9.750% 2009 2,000 1,985 2,005 (f)
AMERICAN STANDARD 7.375% 2008 2,000 1,894 1,872 (f)
AMERICAN STANDARD 7.375% 2005 1,000 981 960 (f)
AMERISERVE FOOD SER 10.125% 2007 4,000 4,107 3,400 (f)
ANTENNA TV SA 9.000% 2007 5,000 4,915 4,500 (f)
<PAGE>
Bal Held at
06/30/1999
Principal Amt
of Bonds & Notes Cost Value at
or (Notes 06/30/1999
Issuer Name and Issue Title # of Shares a & c) (Note a)
AON CORP 6.900% 2004 3,000 2,996 3,026 (f)
APPLIED MATERIALS 6.650% 2000 5,000 5,000 5,023 (f)
ARGO-TECH CORP 8.625% 2007 2,000 2,000 1,850 (f)
AVIATION SALES 8.125% 2008 2,000 1,995 1,905 (f)
BECKMAN INSTRUMENTS 7.100% 2003 5,000 5,000 4,943 (f)
A.H. BELO 6.875% 2002 17,885 18,215 17,946 (f)
BLACK & DECKER 7.500% 2003 10,000 10,268 10,239 (f)
BOYD GAMING CORP 9.250% 2003 5,000 4,986 5,100 (f)
BURLINGTON NORTHERN 6.375% 2005 5,000 4,998 4,911
CSX CORP 7.050% 2002 10,000 9,996 10,133 (f)
CABLE & WIRELESS COM 6.375% 2003 6,000 5,979 5,903 (f)
REYNOLDS METALS CAN 6.625% 2002 15,600 15,683 15,472 (f)
CANANDAIGUA BRANDS 8.500% 2009 1,000 1,000 972 (f)
CAPSTAR HOTEL 8.750% 2007 3,000 2,996 2,812 (f)
CHARTER COMM HLDGS 8.250% 2007 2,000 1,995 1,920 (d) (f)
CHIQUITA BRANDS INTL 10.250% 2006 3,000 2,986 3,052 (f)
CHRYSLER FINANCE 7.590% 2000 5,000 5,000 5,073 (f)
CINCINNATI MILACRON 7.875% 2000 5,000 5,025 5,031 (f)
CINEMARK USA INC 8.500% 2008 2,000 1,996 1,900 (f)
COLTEC INDUSTRIES 7.500% 2008 2,000 1,997 2,005 (f)
COMCAST CABLE 8.125% 2004 10,000 9,993 10,514 (f)
COMDISCO CORP 5.950% 2002 10,000 9,999 9,842 (f)
CONTAINER CORP AMER 9.750% 2003 4,000 3,984 4,200 (f)
CONT'L CABLEVISION 8.300% 2006 4,000 3,990 4,268 (d)
COX ENTERPRISES 144A 6.625% 2002 25,000 24,942 24,956 (b) (d) (f)
CROWN CORK & SEAL 6.750% 2003 14,950 14,999 14,840 (f)
DR HORTON 8.000% 2009 2,000 1,989 1,890 (f)
DAYTON HUDSON 6.400% 2003 10,000 9,982 10,012 (f)
DAYTON HUDSON CO 6.800% 2001 5,000 5,000 5,059 (f)
DIAGEO CAPITAL PLC 6.625% 2004 6,000 5,994 6,010 (f)
DOMAN INDUSTRIES LTD 9.250% 2007 3,000 3,013 1,860 (f)
DOMINO`S INC 10.375% 2009 2,000 2,014 2,040 (f)
DURA OPERATING CO 9.000% 2009 3,000 3,044 2,895 (d) (f)
BERGEN BRUNSWIG(DUR) 7.000% 2006 20,000 20,025 19,937 (f)
ERAC USA 144A 6.950% 2004 9,000 9,103 9,006 (d) (f)
ENTERPRIS RENT-A-CAR 8.750% 1999 5,000 5,000 5,061 (d)
EMMIS COMM CORP 8.125% 2009 2,000 2,019 1,915 (d) (f)
EXIDE CORP 10.000% 2005 3,000 3,029 2,993 (f)
EXTENDICARE HLTH SER 9.350% 2007 1,000 1,000 750 (f)
EYE CARE CENTERS 9.040% 2008 2,000 2,000 1,660 (f)
FEDDERS N. AMERICA 9.375% 2007 3,000 3,015 3,030 (f)
FEDERAL-MOGUL 8.800% 2007 4,000 3,990 4,030 (f)
FORD MOTOR CREDIT 6.375% 2000 10,000 10,037 10,048
FORD MOTOR CR MTN 7.060% 2001 5,000 4,992 5,081 (f)
FURON COMPANY 8.125% 2008 2,000 2,000 1,880 (f)
GATC 6.320% 2000 10,000 9,995 10,003 (f)
GENESIS HEALTHCARE 9.250% 2006 5,000 5,000 4,050 (f)
GIANT INDUSTRIES 9.000% 2007 5,000 5,000 4,575 (f)
<PAGE>
Bal Held at
06/30/1999
Principal Amt
of Bonds & Notes Cost Value at
or (Notes 06/30/1999
Issuer Name and Issue Title # of Shares a & c) (Note a)
GRAHAM PACKAGING FLT 8.655% 2008 1,500 1,500 1,365 (f)
HAYES WHEELS INT'L 9.125% 2007 3,000 3,006 3,023 (f)
HAYES WHEELS INT`L 9.125% 2007 1,000 1,000 1,008 (f)
HERITAGE MEDIA 8.750% 2006 4,500 4,567 4,826 (f)
HOWMET INC* 10.000% 2003 3,000 3,153 3,285 (f)
ITT CORP 6.250% 2000 5,000 4,948 4,944 (f)
ISPMEX 144A LIQUID 10.125% 2003 4,189 4,189 4,022 (d) (f)
INTEGON CORP 9.500% 2001 2,000 1,989 2,124
INT`L GAME TECH 144A 7.875% 2004 2,000 1,981 1,965 (d) (f)
INT`L SHIPHOLDING 7.750% 2007 2,000 1,991 1,820 (f)
INTERPOOL INC 6.625% 2003 12,500 12,488 11,321 (f)
JONES APPAREL 144A 7.500% 2004 3,000 2,993 3,008 (d) (f)
JONES APPAREL 144A 7.875% 2006 2,000 1,993 2,006 (d) (f)
K-III COMM PUT/96 8.500% 2006 5,000 4,984 5,144 (f)
KAUFMAN & BROAD HOME 7.750% 2004 3,000 2,981 3,000 (f)
KROGER CO 8.150% 2006 4,000 4,004 4,207 (f)
LTV CORPORATION 8.200% 2007 5,000 4,973 4,700 (d) (f)
LAMAR ADVERTISING 8.625% 2007 5,000 5,006 5,025 (f)
LGETT&PLATT MTN SERD 7.185% 2002 10,000 9,968 10,144 (d) (f)
MJD COMMUNICATIONS 9.248% 2008 3,000 3,000 2,996 (f)
MARK IV 7.500% 2007 3,000 2,986 2,775 (d) (f)
MAXXIM MEDICAL 10.500% 2006 4,000 4,027 4,300 (f)
FRED MEYERS INC 7.150% 2003 5,000 4,993 5,039 (f)
MULTICARE CO 9.000% 2007 4,000 4,012 2,800 (f)
MURRIN-MURRIN 144A 8.813% 2005 1,600 1,600 1,440 (b) (d) (f)
MURRIN-MURRIN 144A 8.813% 2005 2,400 2,400 2,160 (b) (d) (f)
NCI BUILDING SYSTEMS 9.250% 2009 2,000 2,030 2,000 (d) (f)
NEWS AMER HLDGS 7.500% 2000 10,000 9,992 10,086 (f)
NORFOLK SOUTHERN 6.950% 2002 15,000 15,139 15,162 (f)
NORTEK INC 9.125% 2007 2,500 2,521 2,494 (f)
OFFSHORE LOGISTICS 7.875% 2008 2,000 2,004 1,900 (f)
ORANGE PLC 8.000% 2008 1,000 1,041 958 (f)
OUTDOOR SYSTEMS INC 9.375% 2006 5,000 5,000 5,313 (f)
PARACELSUS HEALTH 10.000% 2006 5,000 5,048 3,900 (f)
PARAMOUNT COMMUN 5.875% 2000 5,350 5,309 5,327 (f)
PARK-OHIO INDUSTRIES 9.250% 2007 1,000 1,004 993 (d) (f)
PENNEY J.C. & CO 7.250% 2002 10,000 9,997 10,154 (f)
PILLOWTEX CORP 9.000% 2007 4,000 4,055 3,860 (f)
PRINTPACK INC 9.875% 2004 2,500 2,500 2,500 (f)
QUAKER OATS 6.940% 2003 1,500 1,503 1,511 (f)
QUAKER OATS 6.470% 2000 10,000 10,009 10,020 (f)
RITE AID CORP 6.700% 2001 5,000 4,999 4,989 (f)
ROLLINS TRUCK 6.875% 2001 5,000 4,999 5,002 (f)
RYDER SYSTEM 7.910% 2000 5,000 5,007 5,055 (f)
RYERSON TULL 8.500% 2001 5,000 5,000 5,100 (f)
S C INTERNATIONAL 9.250% 2007 5,000 5,022 5,113 (f)
SCOTSMAN GROUP INC 8.625% 2007 3,500 3,492 3,535 (f)
SEA CONTAINERS LTD 7.875% 2008 2,000 2,000 1,955 (f)
<PAGE>
Bal Held at
06/30/1999
Principal Amt
of Bonds & Notes Cost Value at
or (Notes 06/30/1999
Issuer Name and Issue Title # of Shares a & c) (Note a)
SHOWBOAT INC 9.250% 2008 4,000 3,809 4,135
SMITHFIELD FOODS INC 7.625% 2008 2,000 1,994 1,810 (f)
STENA AB 10.500% 2005 3,000 3,000 3,019
SUPERVALU INC 7.250% 1999 8,000 7,999 8,003 (f)
SUPERVALU INC 6.500% 2000 5,000 4,999 5,025 (f)
TEEKAY SHIPPING CORP 8.320% 2008 3,000 3,026 2,846 (f)
TELEWEST PLC 9.625% 2006 2,000 2,000 2,055
TENET HEALTHCARE CO 8.625% 2003 7,000 6,985 7,071 (f)
TITAN WHEEL INT`L IN 8.750% 2007 4,100 4,083 3,823 (f)
TRICO MARINE SERVICE 8.500% 2005 3,000 2,987 2,700 (f)
TYCO INT`L P/C 6.250% 2003 10,000 9,961 9,812 (f)
TYSON FOODS 6.410% 2000 10,000 10,002 10,044 (f)
US INDUSTRIES 144A 7.125% 2003 6,000 5,983 5,933 (d) (f)
UNION TANK CAR 6.500% 2008 5,307 5,299 5,279 (f)
UNITED AIR 1991A-1 9.200% 2008 4,137 3,922 4,622
US HOME CORP 7.750% 2005 1,500 1,497 1,451 (f)
UNITED STATIONERS 8.375% 2008 1,000 1,000 963 (f)
VIACOM INC 6.750% 2003 5,000 4,997 4,971
WCI STEEL INC 10.000% 2004 2,000 2,009 2,035 (d) (f)
WESTINGHOUSE AIR 9.375% 2005 2,250 2,306 2,295 (b) (d) (f)
WESTPOINT STEVENS 7.875% 2005 4,000 4,098 3,915 (f)
WHITMAN CORP 6.250% 2000 5,000 4,985 5,013 (f)
AMER AIRLINES LESSE 6.400% 2008 1,187 1,187 1,187 (b) (d) (f)
AMER AIRLINES LESSE 6.400% 2008 1,187 1,187 1,187 (b) (d) (f)
AMER AIRLINES LESSE 6.400% 2008 1,187 1,187 1,187 (b) (d) (f)
AMER AIRLINES LESSE 6.400% 2008 743 743 743 (b) (d) (f)
AMER AIRLINES LESSE 6.400% 2008 745 745 745 (b) (d) (f)
AMER AIRLINES LESSE 6.400% 2008 862 862 862 (b) (d) (f)
AMER AIRLINES LESSE 6.400% 2008 862 862 862 (b) (d) (f)
AMER AIRLINES LESSE 6.400% 2008 863 863 863 (b) (d) (f)
WORLD COLOR PRESS 8.375% 2008 3,000 3,000 2,933 (f)
WYMAM GORDON CO 8.000% 2007 1,000 994 948 (f)
ASTRON CBO LTD FLT 6.595% 2010 17,500 17,500 16,187 (d) (f)
Total Industrial 675,372 676,137 665,737
Total Other Bonds and Notes 2,669,185 2,664,546 2,624,844
TOTAL BONDS AND NOTES 2,669,550 2,664,910 2,625,212
<PAGE>
Bal Held at
06/30/1999
Principal Amt
of Bonds & Notes Cost Value at
or (Notes 06/30/1999
Issuer Name and Issue Title # of Shares a & c) (Note a)
PREFERRED STOCK
Public Utility
ALLTEL 7.75 $100 PAR 7.750% 2005 15 1,552 1,558 (d)
AMERICAN WTRWRKS $25 8.500% 2000 800 20,000 20,800 (b) (d)
AMERITECH NZ A $100 7.040% 2001 40 4,088 4,135 (d) (f)
APPALACHIAN PWR $100 6.850% 2004 30 3,003 3,088
APPALACHIAN PWR $100 5.900% 2008 10 997 1,038 (f)
APPALACHIAN PWR $100 5.920% 2008 11 1,091 1,144
ATLANTIC CITY EL 100 7.800% 2006 90 8,990 9,456
AVISTA CORP 6.950% 2007 58 5,764 6,027
BELL ATLANTIC NZ144A 7.080% 2001 25 2,600 2,652 (d) (f)
BELL ATL NZ$100 144A 5.800% 2004 100 10,000 10,375 (d)
BOSTON EDISON $100 8.000% 2001 90 9,000 9,602
CENTRAL ILL LT $100 5.850% 2008 65 6,507 6,606
CON EDISON $100 SR J 6.125% 2002 150 15,025 15,440
DUKE ENERGY $100 V 6.400% 2002 30 3,000 3,004
DUKE ENRGY $100 SR U 6.300% 2001 30 3,000 3,009
DUKE ENRGY $100 SR T 6.200% 2000 30 3,000 3,015
DUKE ENRGY 1992D $25 6.200% 2001 200 5,002 5,012
DUKE ENRGY 1992C $25 6.100% 2000 250 6,252 6,297
DUKE ENRGY 1992B $25 5.950% 1999 15 375 378 (f)
EASTERN EDISON $100 6.625% 2008 210 20,926 21,932
ENTERGY LA INC PFD 8.000% 2001 70 7,000 7,149
GREEN MTN PWR CL-D/3 8.625% 2000 28 2,800 2,827 (b) (d)
INDIANA MICH POWER 6.300% 2009 52 5,222 5,366
IND MICH POWER $100 6.250% 2009 20 2,005 2,048 (f)
INDIANA MICHIGAN PWR 5.900% 2009 32 3,131 3,282
JERSEY CENTRAL P&L 8.650% 2005 110 11,237 11,620
KEYSPAN CORP PFD 7.950% 2000 274 6,857 7,148
LOUISVILLE G&E PFD 5.875% 2008 12 1,197 1,271 (f)
MAINE YANKEE $100 7.480% 2001 17 1,719 1,718
MIDAMERICAN ENERGY 7.800% 2006 73 7,552 7,797
MN P & L 144A $100 7.125% 2002 50 4,985 5,069 (b) (d)
MN P&L 144A 6.70 6.700% 2002 100 10,000 10,337 (b) (d)
NO IND PUB SERV $100 8.850% 2003 21 2,103 2,115 (b) (d)
NO IND PUB SERV $100 6.500% 2002 115 11,811 11,769 (f)
NORTHWEST NAT GA 100 6.950% 2002 170 17,078 18,041
OHIO POWER CO $100 5.900% 2009 36 3,538 3,652
OHI PWR CO $100 6.020% 2008 10 991 1,023
OHIO PWR CO $100 6.350% 2008 5 505 523
OTTER TAIL PWR $100 6.300% 2007 180 18,000 18,664
PECO ENERGY 6.120% 2003 160 16,006 16,140
PACIFIC GAS & ELEC 6.300% 2009 120 2,964 3,125 (f)
PACIFIC GAS & ELEC 6.57P% 2007 717 18,020 18,700
PACIFICORP $100 PAR 7.700% 2001 150 15,000 15,872
POTOMAC ELEC PWR $50 6.800% 2007 161 7,959 8,392
<PAGE>
Bal Held at
06/30/1999
Principal Amt
of Bonds & Notes Cost Value at
or (Notes 06/30/1999
Issuer Name and Issue Title # of Shares a & c) (Note a)
PRAXAIR INC 7.480% 2000 70 7,022 7,149
PUBLIC SER ELEC & GA 5.97% 2008 6 612 591 (f)
ROCHESTER G&E $100 6.60% 2009 53 5,185 5,476
ROCHESTER G & E $100 7.650% 1999 20 2,000 2,027
SAN DIEGO G&E $25 1.7625% 2008 60 1,576 1,614 (f)
SO CA EDISON $100 6.050% 2008 45 4,500 4,595 (f)
SO CA EDISON $100 6.450% 2002 220 22,172 22,565
SO INDIANA G&E 100 6.500% 2002 75 7,500 7,733 (b) (d)
TXU ELECTRIC CO 6.375% 2008 54 5,424 5,494
TXU ELECTRIC CO 6.980% 2008 50 5,000 5,175
UBS PRIVATE SER H 5.04% 2002 15 15,000 15,019 (b) (d) (f)
VIRGINIA ELEC & PWR 5.580% 2000 18 1,755 1,770 (f)
VIRGINIA ELEC & PWR 6.350% 2000 201 20,137 20,573
Total Public Utility 5,852 405,735 417,997
Finance
ABN AMRO NA FRAP 5.94% 15 15,000 15,307 (d) (f)
CHASE MANHAT FRAP 4.96% 150 7,500 7,388 (f)
CITIGROUP FRAP 5.86% 5.86% 150 7,782 7,747 (f)
COMERICA FRAP 6.84% 150 7,797 7,706 (f)
EURO AMER BANK FRAP 5.84% 10 10,000 10,125 (f)
FLEET FIN 6.59% FRAP 6.59% 130 6,662 6,679 (f)
MORGAN STANLEY GROUP 5.91% 100 5,000 4,994 (f)
PNC BK FRAP SERF 6.05% 440 22,160 22,495 (f)
WELLS FRGO FRAP SERH 6.59% 432 22,108 22,491 (f)
Total Finance 1,577 104,009 104,932
Industrial
NORTHBROOK HLDG 1000 6.600% 2001 10 10,000 10,055 (b) (d) (f)
WHIRLPOOL FIN $100 B 6.550% 2008 180 18,093 18,484 (d)
WHIRLPL FINL PFD144A 6.090% 2002 37 3,689 3,762 (b) (d) (f)
Total Industrial 227 31,782 32,301
TOTAL PREFERRED STOCK 7,656 541,526 555,230
TOTAL Investments in Securities of Unaffiliated Issuers 3,206,436 3,180,442
TOTAL Reserve for Possible Losses on Corporate Issues 0 0
3,206,436 3,180,442
<PAGE>
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 $3,205,864.
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 28, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Attn: Document Control - EDGAR
Washington, D.C. 20549-1004
RE: IDS Certificate Company
1999 Semi-Annual Report
Ladies and Gentlemen:
On behalf of the above-referenced registrant, I am filing electronically the
1999 Semiannual Report for the six-month period ended June 30, 1999.
This report is being filed with the Commission consistently with 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,
/s/Bruce A. Kohn
Bruce A. Kohn
Vice President and General Counsel
BK/lal
