<PAGE>
PAGE 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 25 (File No. 2-92309)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 27 (File No. 811-4075)
IDS INTERNATIONAL FUND, INC.
IDS Tower 10, Minneapolis, Minnesota 55440-0010
Leslie L. Ogg - 901 S. Marquette Avenue, Suite 2810,
Minneapolis, MN 55402-3268
(612) 330-9283
Approximate Date of Proposed Public Offering:
It is proposed that this filing will become effective (check
appropriate box)
immediately upon filing pursuant to paragraph (b)
X on Dec. 30, 1996 pursuant to paragraph (b) of Rule 485
60 days after filing pursuant to paragraph (a)(i)
on (date) pursuant to paragraph (a)(i) of Rule 485
75 days after filing pursuant to paragraph (a)(ii)
on (date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
The Registrant has registered an indefinite number or amount of
securities under the Securities Act of 1933 pursuant to Section
24-f of the Investment Company Act of 1940. Registrant's Rule
24f-2 Notice for its most recent fiscal year ended October 31,
1996, will be filed on or about December 20, 1996.
<PAGE>
PAGE 2
Cross reference sheet showing location in the prospectus and the
statement of additional information of the information called for
by the items enumerated in Part A and B of Form N-1A.
Negative answers omitted from prospectus are so indicated.
<TABLE><CAPTION>
PART A PART B
Section Section in
Item No. in Prospectus Item No. Statement of Additional Information
<C> <C> <C> <C>
1 Cover page of prospectus 10 Cover page of SAI
2(a) Sales charge and fund expenses 11 Table of Contents
(b) The Fund in brief
(c) The Fund in brief 12 NA
3(a) Financial highlights 13(a) Additional Investment Policies; all
(b) NA appendices except Dollar-Cost Averaging
(c) Performance (b) Additional Investment Policies
(d) Financial highlights (c) Additional Investment Policies
(d) Security Transactions
4(a) The Fund in brief; Investment policies and
risks; How the Fund is organized 14(a) Board members and officers of the fund;**
(b) Investment policies and risks Board members and officers
(c) Investment policies and risks (b) Board members and Officers
(c) Board members and Officers
5(a) Board members and officers; Board members
and officers of the fund (listing) 15(a) NA
5(b)(i) Investment manager; (b) NA
About American Express Financial (c) Board members and Officers
Corporation -- General Information
(b)(ii) Investment manager 16(a)(i) How the fund is organized; About American
(b)(iii) Investment manager Express Financial Corporation**
(c) Portfolio manager (a)(ii) Agreements: Investment Management Services
(d) Administrator and transfer agent Agreement, Plan and Supplemental
(e) Administrator and transfer agent Agreement of Distribution
(f) Distributor (a)(iii) Agreements: Investment Management Services Agreement
(g) Investment manager; (b) Agreements: Investment Management Services Agreement
About American Express Financial (c) NA
Corporation -- General Information (d) Agreements: Administrative Services
Agreement, Shareholder Service Agreement
5A(a) * (e) NA
(b) * (f) Agreements: Distribution Agreement
(g) NA
6(a) Shares; Voting rights (h) Custodian; Independent Auditors
(b) NA (i) Agreements: Transfer Agency Agreement; Custodian
(c) NA
(d) Voting rights 17(a) Security Transactions
(e) Cover page; Special shareholder services (b) Brokerage Commissions Paid to Brokers Affiliated
(f) Dividends and capital gains distributions; with American Express Financial Corporation
Reinvestments (c) Security Transactions
(g) Taxes (d) Security Transactions
(h) Alternative purchase arrangements (e) Security Transactions
7(a) Distributor 18(a) Shares; Voting rights**
(b) Key terms; Valuing assets (b) NA
(c) How to buy, exchange or sell shares
(d) How to buy shares 19(a) Investing in the Fund
(e) NA (b) Valuing Fund Shares; Investing in the Fund
(f) Distributor (c) NA
8(a) How to sell shares 20 Taxes
(b) NA
(c) How to buy shares: Three ways to invest 21(a) Agreements: Distribution Agreement
(d) How to buy, exchange or sell shares: (b) Agreements: Distribution Agreement
Redemption policies -- "Important..." (c) NA
9 None 22(a) Performance Information (for money market
funds only)
(b) Performance Information (for all funds except
money market funds)
23 Financial Statements
*Designates information is located in annual report.
**Designates location in prospectus.
/TABLE
<PAGE>
PAGE 3
IDS International Fund
Prospectus
Dec. 30, 1996
The goal of IDS International Fund, Inc. is long-term growth of
capital. The Fund invests primarily in common stocks and
securities convertible into common stocks of foreign issuers.
This prospectus contains facts that can help you decide if the Fund
is the right investment for you. Read it before you invest and
keep it for future reference.
Additional facts about the Fund are in a Statement of Additional
Information (SAI), filed with the Securities and Exchange
Commission (SEC) and available for reference, along with other
related materials, on the SEC Internet web site
(http://www.sec.gov). The SAI is incorporated here by reference.
For a free copy, contact American Express Shareholder Service.
Like all mutual fund shares, these securities have not been
approved or disapproved by the Securities and Exchange Commission
or any state securities commission, nor has the Securities and
Exchange Commission or any state securities commission passed upon
the accuracy or adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
Please note that the Fund:
o is not a bank deposit
o is not federally insured
o is not endorsed by any bank or government agency
o is not guaranteed to achieve its goal
American Express Shareholder Service
P.O. Box 534
Minneapolis, MN
55440-0534
612-671-3733
TTY: 800-846-4852
<PAGE>
PAGE 4
Table of contents
The Fund in brief
Goal
Investment policies and risks
Manager and distributor
Portfolio manager
Alternative purchase arrangements
Sales charge and Fund expenses
Performance
Financial highlights
Total returns
Investment policies and risks
Facts about investments and their risks
Alternative investment option
Valuing Fund shares
How to purchase, exchange or redeem shares
Alternative purchase arrangements
How to purchase shares
How to exchange shares
How to redeem shares
Reductions and waivers of the sales charge
Special shareholder services
Services
Quick telephone reference
Distributions and taxes
Dividend and capital gain distributions
Reinvestments
Taxes
How to determine the correct TIN
How the Fund is organized
Shares
Voting rights
Shareholder meetings
Board members and officers
Investment manager
Administrator and transfer agent
Distributor
About American Express Financial Corporation
General information
Appendix
Descriptions of derivative instruments
<PAGE>
PAGE 5
The Fund in brief
Goal
IDS International Fund (the Fund) seeks to provide shareholders
with long-term growth of capital.
Because any investment involves risk, achieving this goal cannot be
guaranteed. Only shareholders can change the goal.
Investment policies and risks
The Fund is a diversified mutual fund that invests primarily in
common stocks and securities convertible into common stocks of
foreign issuers. It also may invest in preferred stocks, debt
securities, derivative instruments and money market instruments.
Risks arising from investments in foreign securities include
fluctuations in currency exchange rates, adverse political and
economic developments and lack of comparable regulatory
requirements applicable to U.S. companies. You should invest in
the Fund only if you are willing to assume such risks.
Manager and distributor
The Fund is managed by American Express Financial Corporation
(AEFC), a provider of financial services since 1894. AEFC
currently manages more than $56 billion in assets for the IDS
MUTUAL FUND GROUP. Shares of the Fund are sold through American
Express Financial Advisors Inc., a wholly owned subsidiary of AEFC.
Portfolio manager
Paul Hopkins joined AEFC in 1992 and serves as chief investment
officer and executive vice president of IDS International, Inc. He
became portfolio manager of this Fund in 1994. He also serves as
portfolio manager of IDS Life International Equity Fund and is a
member of the portfolio management team for Total Return Portfolio.
Prior to joining AEFC, he had been a director of international
equities for Banker's Trust.
Alternative purchase arrangements
The Fund offers its shares in three classes. Class A shares are
subject to a sales charge at the time of purchase. Class B shares
are subject to a contingent deferred sales charge (CDSC) on
redemptions made within six years of purchase and an annual
distribution (12b-1) fee. Class Y shares are sold without a sales
charge to qualifying institutional investors.
Sales charge and Fund expenses
Shareholder transaction expenses are incurred directly by an
investor on the purchase or redemption of Fund shares. Fund
operating expenses are paid out of Fund assets for each class of
shares. Operating expenses are reflected in the Fund's daily share
price and dividends, and are not charged directly to shareholder
accounts. <PAGE>
PAGE 6
Shareholder transaction expenses
Class A Class B Class Y
Maximum sales charge on purchases*
(as a percentage of offering price).......5% 0% 0%
Maximum deferred sales charge
imposed on redemptions (as a
percentage of original purchase price)....0% 5% 0%
Annual Fund operating expenses
(as a percentage of average daily net assets):
Class A Class B Class Y
Management fee 0.75% 0.75% 0.75%
12b-1 fee 0.00% 0.75% 0.00%
Other expenses** 0.56% 0.57% 0.38%
Total 1.31% 2.07% 1.13%
*This charge may be reduced depending on your total investments in
IDS funds. See "Reductions of the sales charge."
**Other expenses include an administrative services fee, a
shareholder services fee for Class A and Class B, a transfer agency
fee and other non-advisory expenses.
Example: Suppose for each year for the next 10 years, Fund
expenses are as above and annual return is 5%. If you sold your
shares at the end of the following years, for each $1,000 invested,
you would pay total expenses of:
1 year 3 years 5 years 10 years
Class A $63 $ 89 $118 $200
Class B $71 $105 $131 $221 **
Class B* $21 $ 65 $111 $221 **
Class Y $12 $ 36 $ 62 $138
*Assuming Class B shares are not redeemed at the end of the period.
**Based on conversion of Class B shares to Class A shares after
eight years.
This example does not represent actual expenses, past or future.
Actual expenses may be higher or lower than those shown. Because
Class B pays annual distribution (12b-1) fees, long-term
shareholders of Class B may indirectly pay an equivalent of more
than a 6.25% sales charge, the maximum permitted by the National
Association of Securities Dealers.
<PAGE>
PAGE 7
Performance
Financial highlights
<TABLE>
<CAPTION> Fiscal period ended Oct. 31,
Per share income and capital changes*
Class A
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $ 9.97 $10.84 $10.00 $ 7.94 $8.60 $8.99 $9.30 $8.66 $7.45 $8.33
beginning of period
Income from investment operations:
Net investment income .09 .10 .05 .04 .05 .07 .15 .06 .10 .06
Net gains (losses) .88 (.31) 1.04 2.22 (.58) .42 .51 .60 1.20 .38
(both realized
and unrealized)
Total from investment .97 (.21) 1.09 2.26 (.53) .49 .66 .66 1.30 .44
operations
Less distributions:
Dividends from net (.15) -- (.09) -- (.05) (.16) (.10) (.02) (.05) (.02)
investment income
Distributions from (.14) (.64) (.16) (.19) (.08) (.72) (.87) -- (.04) (1.30)
realized gains
Excess distribution -- (.02) -- (.01) -- -- -- -- -- --
of realized gains
Total distributions (.29) (.66) (.25) (.20) (.13) (.88) (.97) (.02) (.09) (1.32)
Net asset value, $10.65 $9.97 $10.84 $10.00 $7.94 $8.60 $8.99 $9.30 $8.66 $7.45
end of period
Ratios/supplemental data
Class A
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
Net assets, end of period $916 $768 $796 $440 $219 $232 $215 $198 $231 $225
(in millions)
Ratio of expenses to 1.31% 1.39% 1.33% 1.47% 1.45% 1.35% 1.35% 1.41% 1.33% 1.16%
average daily net assets#
Ratio of net income .95% 1.03% .68% .83% .65% .83% 1.67% .50% .96% .56%
to average daily net assets
Portfolio turnover rate 62% 52% 58% 63% 94% 66% 98% 95% 87% 134%
(excluding short-term
securities)
Total return** 9.9% (1.7%) 11.0% 29.2% (6.4%) 6.3% 7.1% 7.6% 17.6% 4.9%
Average brokerage $0.0188 -- -- -- -- -- -- -- -- --
commission rate##
*For a share outstanding throughout the period. Rounded to the nearest cent.
**Total return does not reflect payment of a sales charge.
#Effective fiscal year 1997, expense ratio is based on total expenses of the Fund before reduction of earnings
credits on cash balances.
##Effective fiscal year 1997, the Fund is required to disclose an average brokerage commission rate. The rate
is calculated by dividing the total brokerage commissions paid on applicable purchases and sales of portfolio
securities for the period by the total number of related shares purchased and sold.
</TABLE>
<PAGE>
PAGE 8
Financial highlights
<TABLE>
<CAPTION>
Fiscal period ended Oct. 31,
Per share income and capital changes*
Class B Class Y
1996 1995** 1996 1995**
<S> <C> <C> <C> <C>
Net asset value, $ 9.92 $8.92 $ 9.98 $8.92
beginning of period
Income from investment operations:
Net investment income .03 .04 .06 .10
Net gains (both realized .87 .96 .93 .96
and unrealized)
Total from investment .90 1.00 .99 1.06
operations
Less distributions:
Dividends from net (.10) -- (.17) --
investment income
Distributions from (.14) -- (.14) --
realized gains
Total distributions (.24) -- (.31) --
Net asset value, $10.58 $9.92 $10.67 $9.98
end of period
Ratios/supplemental data
Class B Class Y
1996 1995** 1996 1995**
Net assets, end of period $404 $354 $77 $58
(in millions)
Ratio of expenses to 2.07% 2.21%+ 1.13% 1.26%+
average daily net assets#
Ratio of net income .15% .69%+ 1.13% 1.67%+
to average daily net assets
Portfolio turnover rate 62% 52% 62% 52%
(excluding short-term
securities)
Total return++ 9.1% 11.2% 10.1% 11.9%
Average brokerage $0.0188 -- $0.0188 --
commission rate##
*For a share outstanding throughout the period. Rounded to the nearest cent.
**Inception date was March 20, 1995 for Class B and Class Y.
+Adjusted to an annual basis.
++Total return does not reflect payment of a sales charge.
#Effective fiscal year 1997, expense ratio is based on total expenses of the
Fund before reduction of earnings credits on cash balances.
##Effective fiscal year 1997, the Fund is required to disclose an average
brokerage commission rate. The rate is calculated by dividing the total brokerage
commissions paid on applicable purchases and sales of portfolio securities for
the period by the total number of related shares purchased and sold.
</TABLE>
The information in these tables have been auditted by KPMG Peat
Marwick LLP, independent auditors. The independent auditors' report
and additional information about the performance of the Fund are
contained in the Fund's annual report which, if not included with
this prospectus, may be obtained without charge.
<PAGE>
PAGE 9
Total returns
Total return is the sum of all of your returns for a given period,
assuming you reinvest all distributions. It is calculated by
taking the total value of shares you own at the end of the period
(including shares acquired by reinvestment), less the price of
shares you purchased at the beginning of the period.
Average annual total return is the annually compounded rate of
return over a given time period (usually two or more years). It is
the total return for the period converted to an equivalent annual
figure.
Average annual total returns as of Oct. 31, 1996
Purchase 1 year Since 5 years 10 years
made ago inception ago ago
International:
Class A + 4.39% --% +6.63% +7.61%
Class B* + 5.06% +10.26% --% --%
Class Y* +10.08% +13.59% --% --%
MSCI World Index +16.83% +15.69%** +11.10% +11.44%
Lipper International
Fund Index +12.65% +13.07%** + 9.74% +10.26%
*Inception date was March 20, 1995.
**Measurement period started April 1, 1995.
Cumulative total returns as of Oct. 31, 1996
Purchase 1 year Since 5 years 10 years
made ago inception ago ago
International:
Class A + 4.39% --% +37.88% +108.27%
Class B* + 5.06% +17.27% --% --%
Class Y* +10.08% +23.16% --% --%
MSCI World Index +16.83% +26.94%** +69.25% +195.44%
Lipper International
Fund Index +12.65% +22.24%** +59.13% +165.59%
*Inception date was March 20, 1995.
**Measurement period started April 1, 1995.
These examples show total returns from hypothetical investments in
Class A, Class B and Class Y shares of the Fund. These returns are
compared to those of popular indexes for the same periods. The
performance of Class B and Class Y will vary from the performance
of Class A based on differences in sales charges and fees. March
20, 1995 was the inception date for Class B and Class Y. Past
performance for Class Y for the periods prior to March 20, 1995 may
be calculated based on the performance of Class A, adjusted to
reflect differences in sales charges although not for other
differences in expenses.
<PAGE>
PAGE 10
For purposes of calculation, information about the Fund assumes:
o a sales charge of 5% for Class A shares
o redemption at the end of the period and deduction of the
applicable contingent deferred sales charge for Class B shares
o no sales charge for Class Y shares
o no adjustments for taxes an investor may have paid on the
reinvested income and capital gains
o a period of widely fluctuating securities prices. Returns
shown should not be considered a representation of the Fund's
future performance.
The Morgan Stanley Capital International World Index (MSCI World
Index), an unmanaged index compiled from a composite of over 1,500
companies listed on the stock exchanges of North America, Europe,
Australasia, New Zealand and the Far East, is widely recognized by
investors as the measurement index for portfolios of global
securities. The index reflects reinvestment of all distributions
and changes in market prices, but excludes brokerage commissions or
other fees.
Lipper International Fund Index, an unmanaged index published by
Lipper Analytical Services, Inc., includes 30 funds that are
generally similar to the Fund, although some funds in the index may
have somewhat different investment policies or objectives.
Investment policies and risks
Under normal market conditions, at least 65% of the Fund's total
assets will be invested in common stocks or securities convertible
into common stocks of issuers domiciled in at least three foreign
countries. The Fund will invest in securities that, in the opinion
of the portfolio manager, have a potential for superior growth,
that is, growth that is better than the MSCI World Index.
The percentage of the Fund's total assets invested in particular
countries or regions of the world will change according to their
political stability and economic condition.
Investments in U.S. issuers generally will constitute less than 20%
of the Fund's total assets. If, however, investments in foreign
securities appear to be relatively unattractive in the judgment of
the Fund's investment manager because of current or anticipated
adverse political or economic conditions, as a temporary defensive
strategy, the Fund may invest any portion of its assets in
securities of U.S. issuers appearing to offer opportunities for
superior growth. The Fund also may invest in preferred stocks,
debt securities, derivative instruments and money market
instruments.
The various types of investments the portfolio manager uses to
achieve investment performance are described in more detail in the
next section and in the SAI.
<PAGE>
PAGE 11
Facts about investments and their risks
Common stocks: Stock prices are subject to market fluctuations.
Stocks of foreign companies may be subject to abrupt or erratic
price movements. While many of the Fund's investments are in
established companies having adequate financial reserves, some
investments involve substantial risk and may be considered
speculative.
Preferred stocks: If a company earns a profit, it generally must
pay its preferred stockholders a dividend at a pre-established
rate.
Convertible securities: These securities generally are preferred
stocks or bonds that can be exchanged for other securities, usually
common stock, at prestated prices. When the trading price of the
common stock makes the exchange likely, convertible securities
trade more like common stock.
Debt securities: The Fund may invest in investment-grade bonds in
the U.S. market. The price of bonds generally falls as interest
rates increase, and rises as interest rates decrease. The price of
bonds also fluctuates if the credit rating is upgraded or
downgraded. The Fund also may invest in bonds issued or guaranteed
by countries that are members of the Organization for Economic
Cooperation and Development (OECD) or bonds issued or guaranteed by
international agencies (such as the World Bank or the European
Investment Bank) if the portfolio managers believe they have a
greater potential for capital appreciation than equity securities.
These bonds will not be purchased unless, in the judgment of the
portfolio managers, they are comparable in quality to bonds rated
AA by Standard & Poor's Corporation. Securities that are
subsequently downgraded in quality may continue to be held by the
Fund and will be sold only when the investment manager believes it
is advantageous to do so.
Foreign investments: Securities of foreign companies and
governments may be traded in the United States, but often they are
traded only on foreign markets. Frequently, there is less
information about foreign companies and less government supervision
of foreign markets. Foreign investments are subject to currency
fluctuations and political and economic risks of the countries in
which the investments are made, including the possibility of
seizure or nationalization of companies, imposition of withholding
taxes on income, establishment of exchange controls or adoption of
other restrictions that might affect an investment adversely. If
an investment is made in a foreign market, the local currency may
be purchased using a forward contract in which the price of the
foreign currency in U.S. dollars is established on the date the
trade is made, but delivery of the currency is not made until the
securities are received. As long as the Fund holds foreign
currencies or securities valued in foreign currencies, the value of
those assets will be affected by changes in the value of the
currencies relative to the U.S. dollar. Because of the limited
trading volume in some foreign markets, efforts to buy or sell a
<PAGE>
PAGE 12
security may change the price of the security, and it may be
difficult to complete the transaction. The limited liquidity and
price fluctuations in emerging markets could make investments in
developing countries more volatile.
Derivative instruments: The portfolio manager may use derivative
instruments in addition to securities to achieve investment
performance. Derivative instruments include futures, options and
forward contracts. Such instruments may be used to maintain cash
reserves while remaining fully invested, to offset anticipated
declines in values of investments, to facilitate trading, to reduce
transaction costs or to pursue higher investment returns.
Derivative instruments are characterized by requiring little or no
initial payment and a daily change in price based on or derived
from a security, a currency, a group of securities or currencies,
or an index. A number of strategies or combination of instruments
can be used to achieve the desired investment performance
characteristics. A small change in the value of the underlying
security, currency or index will cause a sizable gain or loss in
the price of the derivative instrument. Derivative instruments
allow the portfolio manager to change the investment performance
characteristics very quickly and at lower costs. Risks include
losses of premiums, rapid changes in prices, defaults by other
parties and inability to close such instruments. The Fund will use
derivative instruments only to achieve the same investment
performance characteristics it could achieve by directly holding
those securities and currencies permitted under the investment
policies. The Fund will designate cash or appropriate liquid
assets to cover its portfolio obligations. No more than 5% of the
Fund's net assets can be used at any one time for good faith
deposits on futures and premiums for options on futures that do not
offset existing investment positions. This does not, however,
limit the portion of the Fund's assets at risk to 5%. The Fund is
not limited as to the percentage of its assets that may be invested
in permissible investments, including derivatives, except as
otherwise explicitly provided in this prospectus or the SAI. For
descriptions of these and other types of derivative instruments,
see the Appendix to this prospectus and the SAI.
Securities and other instruments that are illiquid: A security or
other instrument is illiquid if it cannot be sold quickly in the
normal course of business. Some investments cannot be resold to
the U.S. public because of their terms or government regulations.
Securities and instruments, however, can be sold in private sales,
and many may be sold to other institutions and qualified buyers or
on foreign markets. The portfolio manager will follow guidelines
established by the board and consider relevant factors such as the
nature of the security and the number of likely buyers when
determining whether a security is illiquid. No more than 10% of
the Fund's net assets will be held in securities and other
instruments that are illiquid.
Money market instruments: Short-term debt securities rated in the
top two grades or the equivalent are used to meet daily cash needs
and at various times to hold assets until better investment
opportunities arise. Generally, less than 25% of the Fund's total <PAGE>
PAGE 13
assets are in these money market instruments. However, for
temporary defensive purposes these investments could exceed that
amount for a limited period of time.
The investment policies described above may be changed by the
board.
Lending portfolio securities: The Fund may lend its securities to
earn income so long as borrowers provide collateral equal to the
market value of the loans. The risks are that borrowers will not
provide collateral when required or return securities when due.
Unless a majority of the outstanding voting securities approve
otherwise, loans may not exceed 30% of the Fund's net assets.
Alternative investment option
In the future, the board of the Fund may determine for operating
efficiencies to use a master/feeder structure. Under that
structure, the Fund's assets would be invested in an investment
company with the same goal as the Fund, rather than invested
directly in a portfolio of securities.
Valuing Fund shares
The public offering price is the net asset value (NAV) adjusted for
the sales charge for Class A. It is the NAV for Class B and
Class Y.
The NAV is the value of a single Fund share. The NAV usually
changes daily, and is calculated at the close of business, normally
3 p.m. Central time, each business day (any day the New York Stock
Exchange is open).
To establish the net assets, all securities are valued as of the
close of each business day. In valuing assets:
o Securities (except bonds) and assets with available market
values are valued on that basis.
o Securities maturing in 60 days or less are valued at amortized
cost.
o Bonds and assets without readily available market values are
valued according to methods selected in good faith by the
board.
o Assets and liabilities denominated in foreign currencies are
translated daily into U.S. dollars at a rate of exchange set
as near to the close of the day as practicable.
<PAGE>
PAGE 14
How to purchase, exchange or redeem shares
Alternative purchase arrangements
The Fund offers three different classes of shares - Class A, Class
B and Class Y. The primary differences among the classes are in
the sales charge structures and in their ongoing expenses. These
differences are summarized in the table below. You may choose the
class that best suits your circumstances and objectives.
<TABLE><CAPTION>
Sales charge and
distribution
(12b-1) fee Service fee Other information
<S> <C> <C> <C>
Class A Maximum initial 0.175% of average Initial sales charge
sales charge of daily net assets waived or reduced
5%; no 12b-1 fee for certain purchases
Class B No initial sales 0.175% of average Shares convert to
charge; maximum CDSC daily net assets Class A after eight
of 5% declines to 0% years; CDSC waived in
after six years; 12b-1 certain circumstances
fee of 0.75% of average
daily net assets
Class Y None None Available only to
certain qualifying
institutional
investors
</TABLE>
Conversion of Class B shares to Class A shares - Eight calendar
years after Class B shares are purchased, Class B shares will
convert to Class A shares and will no longer be subject to a
distribution fee. The conversion will be on the basis of relative
net asset values of the two classes, without the imposition of any
sales charge. Class B shares purchased through reinvested
dividends and distributions will convert to Class A shares in the
same pro rata portion as other Class B shares.
Considerations in determining whether to purchase Class A or Class
B shares - You should consider the information below in determining
whether to purchase Class A or Class B shares. The distribution
fee (included in "Ongoing expenses") and sales charges are
structured so that you will have approximately the same total
return at the end of eight years regardless of which class you
chose.
Sales charges on purchase or redemption
If you purchase Class A If you purchase Class B
shares shares
o You will not have all o All of your money is
of your purchase price invested in shares of
invested. Part of your stock. However, you will
<PAGE>
PAGE 15
purchase price will go pay a sales charge if you
to pay the sales charge. redeem your shares within
You will not pay a sales six years of purchase.
charge when you redeem
your shares.
o You will be able to o No reductions of the
take advantage of sales charge are
reductions in the sales available for large
charge. purchases.
If your investments in IDS funds that are subject to a sales charge
total $250,000 or more, you are better off paying the reduced sales
charge in Class A than paying the higher fees in Class B. If you
qualify for a waiver of the sales charge, you should purchase Class
A shares.
Ongoing expenses
If you purchase Class A If you purchase Class B
shares shares
o Your shares will have o The distribution and
a lower expense ratio transfer agency fees for
than Class B shares Class B will cause your
because Class A does not shares to have a higher
pay a distribution fee expense ratio and to pay
and the transfer agency lower dividends than
fee for Class A is lower Class A shares. After
than the fee for Class B. eight years, Class B
As a result, Class A shares shares will convert to
will pay higher dividends Class A shares and you
than Class B shares. will no longer be
subject to higher fees.
You should consider how long you plan to hold your shares and
whether the accumulated higher fees and CDSC on Class B shares
prior to conversion would be less than the initial sales charge on
Class A shares. Also consider to what extent the difference would
be offset by the lower expenses on Class A shares. To help you in
this analysis, the example in the "Sales charge and Fund expenses"
section of the prospectus illustrates the charges applicable to
each class of shares.
Class Y shares - Class Y shares are offered to certain
institutional investors. Class Y shares are sold without a front-
end sales charge or a CDSC and are not subject to either a service
fee or a distribution fee. The following investors are eligible to
purchase Class Y shares:
o Qualified employee benefit plans* if the plan:
- uses a daily transfer recordkeeping service offering
participants daily access to IDS funds and has
- at least $10 million in plan assets or
- 500 or more participants; or
- does not use daily transfer recordkeeping and has
<PAGE>
PAGE 16
- at least $3 million invested in funds of the IDS MUTUAL
FUND GROUP or
- 500 or more participants.
o Trust companies or similar institutions, and charitable
organizations that meet the definition in Section 501(c)(3) of
the Internal Revenue Code.* These must have at least $10
million invested in funds of the IDS MUTUAL FUND GROUP.
o Nonqualified deferred compensation plans* whose participants
are included in a qualified employee benefit plan described
above.
* Eligibility must be determined in advance by American Express
Financial Advisors. To do so, contact your financial advisor.
How to purchase shares
If you're investing in this Fund for the first time, you'll need to
set up an account. Your financial advisor will help you fill out
and submit an application. Once your account is set up, you can
choose among several convenient ways to invest.
Important: When opening an account, you must provide AEFC with
your correct Taxpayer Identification Number (Social Security or
Employer Identification number). See "Distributions and taxes."
When you purchase shares for a new or existing account, the price
you pay per share is determined at the close of business on the day
your investment is received and accepted at the Minneapolis
headquarters.
Purchase policies:
o Investments must be received and accepted in the Minneapolis
headquarters on a business day before 3 p.m. Central time to
be included in your account that day and to receive that day's
share price. Otherwise, your purchase will be processed the
next business day and you will pay the next day's share price.
o The minimums allowed for investment may change from time to
time.
o Wire orders can be accepted only on days when your bank, AEFC,
the Fund and Norwest Bank Minneapolis are open for business.
o Wire purchases are completed when wired payment is received
and the Fund accepts the purchase.
o AEFC and the Fund are not responsible for any delays that
occur in wiring funds, including delays in processing by the
bank.
o You must pay any fee the bank charges for wiring.
o The Fund reserves the right to reject any application for any
reason.<PAGE>
PAGE 17
o If your application does not specify which class of shares you
are purchasing, it will be assumed that you are investing in
Class A shares.
<TABLE><CAPTION>
Three ways to invest
<S> <C> <C>
1
By regular account Send your check and application Minimum amounts
(or your name and account number Initial investment: $2,000
if you have an established account) Additional
to: investments: $ 100
American Express Financial Advisors Inc. Account balances: $ 300*
P.O. Box 74 Qualified retirement
Minneapolis, MN 55440-0074 accounts: none
Your financial advisor will help
you with this process.
2
By scheduled Contact your financial advisor Minimum amounts
investment plan to set up one of the following Initial investment: $100
scheduled plans: Additional
investments: $100/mo.
o automatic payroll deduction Account balances: none
(on active plans of
o bank authorization monthly payments)
o direct deposit of
Social Security check
o other plan approved by the Fund
3
By wire If you have an established account, If this information is not
you may wire money to: included, the order may be
rejected and all money
Norwest Bank Minneapolis received by the Fund, less
Routing No. 091000019 any costs the Fund or AEFC
Minneapolis, MN incurs, will be returned
Attn: Domestic Wire Dept. promptly.
Give these instructions: Minimum amounts
Credit IDS Account #00-30-015 Each wire investment: $1,000
for personal account # (your
account number) for (your name).
*If your account balance falls below $300, you will be asked in writing to bring it up to $300 or
establish a scheduled investment plan. If you don't do so within 30 days, your shares can be redeemed and
the proceeds mailed to you.
</TABLE>
How to exchange shares
You can exchange your shares of the Fund at no charge for shares of
the same class of any other publicly offered fund in the IDS MUTUAL
FUND GROUP available in your state. Exchanges into IDS Tax-Free
Money Fund must be made from Class A shares. For complete
information, including fees and expenses, read the prospectus
carefully before exchanging into a new fund.
If your exchange request arrives at the Minneapolis headquarters
before the close of business, your shares will be redeemed at the
net asset value set for that day. The proceeds will be used to
purchase new fund shares the same day. Otherwise, your exchange
will take place the next business day at that day's net asset
value.
<PAGE>
PAGE 18
For tax purposes, an exchange represents a redemption and purchase
and may result in a gain or loss. However, you cannot create a tax
loss (or reduce a taxable gain) by exchanging from the Fund within
91 days of your purchase. For further explanation, see the SAI.
How to redeem shares
You can redeem your shares at any time. American Express
Shareholder Service will mail payment within seven days after
receiving your request.
When you redeem shares, the amount you receive may be more or less
than the amount you invested. Your shares will be redeemed at net
asset value, minus any applicable sales charge, at the close of
business on the day your request is accepted at the Minneapolis
headquarters. If your request arrives after the close of business,
the price per share will be the net asset value, minus any
applicable sales charge, at the close of business on the next
business day.
A redemption is a taxable transaction. If your proceeds from your
redemption are more or less than the cost of your shares, you will
have a gain or loss, which can affect your tax liability.
Redeeming shares held in an IRA or qualified retirement account may
subject you to certain federal taxes, penalties and reporting
requirements. Consult your tax advisor.
<TABLE><CAPTION>
Two ways to request an exchange or redemption of shares
<S> <C>
1
By letter Include in your letter:
o the name of the fund(s)
o the class of shares to be exchanged or redeemed
o your account number(s) (for exchanges, both funds must be registered in the same
ownership)
o your Taxpayer Identification Number (TIN)
o the dollar amount or number of shares you want to exchange or redeem
o signature of all registered account owners
o for redemptions, indicate how you want your money delivered to you
o any paper certificates of shares you hold
Regular mail:
American Express Shareholder Service
Attn: Redemptions
P.O. Box 534
Minneapolis, MN 55440-0534
Express mail:
American Express Shareholder Service
Attn: Redemptions
733 Marquette Ave.
Minneapolis, MN 55402
2
By phone
American Express Telephone o The Fund and AEFC will honor any telephone exchange or redemption request believed to be
Transaction Service: authentic and will use reasonable procedures to confirm that they are. This includes
800-437-3133 or asking identifying questions and tape recording calls. If reasonable
612-671-3800 procedures are not followed, the Fund or AEFC will be liable for any loss resulting from
fraudulent requests.
o Phone exchange and redemption privileges automatically apply to all accounts except
custodial, corporate or qualified retirement accounts unless you request these privileges
NOT apply by writing American Express Shareholder Service. Each registered owner must sign
the request.
o AEFC answers phone requests promptly, but you may experience delays when call volume is
high. If you are unable to get through, use mail procedure as an alternative.
o Acting on your instructions, your financial advisor may conduct telephone transactions
on your behalf.<PAGE>
PAGE 19
o Phone privileges may be modified or discontinued at any time.
Minimum amount
Redemption: $100
Maximum amount
Redemption: $50,000
</TABLE>
Exchange policies:
o You may make up to three exchanges within any 30-day period,
with each limited to $300,000. These limits do not apply to
scheduled exchange programs and certain employee benefit plans or
other arrangements through which one shareholder represents the
interests of several. Exceptions may be allowed with pre-approval
of the Fund.
o Exchanges must be made into the same class of shares of the new
fund.
o If your exchange creates a new account, it must satisfy the
minimum investment amount for new purchases.
o Once we receive your exchange request, you cannot cancel it.
o Shares of the new fund may not be used on the same day for
another exchange.
o If your shares are pledged as collateral, the exchange will be
delayed until written approval is obtained from the secured party.
o AEFC and the Fund reserve the right to reject any exchange,
limit the amount, or modify or discontinue the exchange privilege,
to prevent abuse or adverse effects on the Fund and its
shareholders. For example, if exchanges are too numerous or too
large, they may disrupt the Fund's investment strategies or
increase its costs.
Redemption policies:
o A "change of mind" option allows you to change your mind after
requesting a redemption and to use all or part of the proceeds to
purchase new shares in the same account from which you redeemed.
If you reinvest in Class A, you will purchase the new shares at net
asset value rather than the offering price on the date of a new
purchase. If you reinvest in Class B, any CDSC you paid on the
amount you are reinvesting also will be reinvested. To take
advantage of this option, send a written request within 30 days of
the date your redemption request was received. Include your
account number and mention this option. This privilege may be
limited or withdrawn at any time, and it may have tax consequences.
o A telephone redemption request will not be allowed within 30
days of a phoned-in address change.
Important: If you request a redemption of shares you recently
purchased by a check or money order that is not guaranteed, the
Fund will wait for your check to clear. It may take up to 10 days <PAGE>
PAGE 20
from the date of purchase before a check is mailed to you. (A
check may be mailed earlier if your bank provides evidence
satisfactory to the Fund and AEFC that your check has cleared.)
<TABLE><CAPTION>
Three ways to receive payment when you redeem shares
<S> <C>
1
By regular or express mail o Mailed to the address on record.
o Payable to names listed on the account.
NOTE: The express mail delivery charges
you pay will vary depending on the
courier you select.
2
By wire o Minimum wire redemption: $1,000.
o Request that money be wired to your bank.
o Bank account must be in the same
ownership as the IDS fund account.
NOTE: Pre-authorization required. For
instructions, contact your financial
advisor or American Express Shareholder Service.
3
By scheduled payout plan o Minimum payment: $50.
o Contact your financial advisor or American Express
Shareholder Service to set up regular
payments to you on a monthly, bimonthly,
quarterly, semiannual or annual basis.
o Purchasing new shares while under a payout
plan may be disadvantageous because of
the sales charges.
</TABLE>
Reductions and waivers of the sales charge
Class A - initial sales charge alternative
On purchases of Class A shares, you pay a 5% sales charge on the
first $50,000 of your total investment and less on investments
after the first $50,000:
Total investment Sales charge as a
percent of:*
Public Net
offering amount
price invested
Up to $50,000 5.0% 5.26%
Next $50,000 4.5 4.71
Next $400,000 3.8 3.95
Next $500,000 2.0 2.04
$1,000,000 or more 0.0 0.00
* To calculate the actual sales charge on an investment greater
than $50,000 and less than $1,000,000, amounts for each applicable
increment must be totaled. See the SAI.
Reductions of the sales charge on Class A shares
Your sales charge may be reduced, depending on the totals of:
o the amount you are investing in this Fund now,
<PAGE>
PAGE 21
o the amount of your existing investment in this Fund, if any, and
o the amount you and your primary household group are investing or
have in other funds in the IDS MUTUAL FUND GROUP that carry a sales
charge. (The primary household group consists of accounts in any
ownership for spouses or domestic partners and their unmarried
children under 21. Domestic partners are individuals who maintain
a shared primary residence and have joint property or other
insurable interests.)
Other policies that affect your sales charge:
o IDS Tax-Free Money Fund and Class A shares of IDS Cash
Management Fund do not carry sales charges. However, you may count
investments in these funds if you acquired shares in them by
exchanging shares from IDS funds that carry sales charges.
o IRA purchases or other employee benefit plan purchases made
through a payroll deduction plan or through a plan sponsored by an
employer, association of employers, employee organization or other
similar entity, may be added together to reduce sales charges for
all shares purchased through that plan.
o If you intend to invest $1 million over a period of 13 months,
you can reduce the sales charges in Class A by filing a letter of
intent.
For more details, see the SAI.
Waivers of the sales charge for Class A shares
Sales charges do not apply to:
o Current or retired board members, officers or employees of the
Fund or AEFC or its subsidiaries, their spouses and unmarried
children under 21.
o Current or retired American Express financial advisors, their
spouses and unmarried children under 21.
o Qualified employee benefit plans* using a daily transfer
recordkeeping system offering participants daily access to IDS
funds.
(Participants in certain qualified plans for which the initial
sales charge is waived may be subject to a deferred sales charge of
up to 4% on certain redemptions. For more information, see the
SAI.)
o Shareholders who have at least $1 million invested in funds of
the IDS MUTUAL FUND GROUP. If the investment is redeemed in the
first year after purchase, a CDSC of 1% will be charged on the
redemption.
o Purchases made within 30 days after a redemption of shares (up
to the amount redeemed):
- of a product distributed by American Express Financial
<PAGE>
PAGE 22
Advisors in a qualified plan subject to a deferred sales
charge or
- in a qualified plan where American Express Trust Company has a
recordkeeping, trustee, investment management or investment
servicing relationship.
Send the Fund a written request along with your payment, indicating
the amount of the redemption and the date on which it occurred.
o Purchases made with dividend or capital gain distributions from
another fund in the IDS MUTUAL FUND GROUP that has a sales charge.
o Purchases made through American Express Strategic Portfolio
Service (total amount of all investments made in the Strategic
Portfolio Service must be at least $50,000).
o Purchases made under the University of Texas System ORP.
*Eligibility must be determined in advance by American Express
Financial Advisors. To do so, contact your financial advisor.
Class B - contingent deferred sales charge alternative
Where a CDSC is imposed on a redemption, it is based on the amount
of the redemption and the number of calendar years, including the
year of purchase, between purchase and redemption. The following
table shows the declining scale of percentages that apply to
redemptions during each year after a purchase:
If a redemption is The percentage rate
made during the for the CDSC is:
First year 5%
Second year 4%
Third year 4%
Fourth year 3%
Fifth year 2%
Sixth year 1%
Seventh year 0%
If the amount you are redeeming reduces the current net asset value
of your investment in Class B shares below the total dollar amount
of all your purchase payments during the last six years (including
the year in which your redemption is made), the CDSC is based on
the lower of the redeemed purchase payments or market value.
The following example illustrates how the CDSC is applied. Assume
you had invested $10,000 in Class B shares and that your investment
had appreciated in value to $12,000 after 15 months, including
reinvested dividend and capital gain distributions. You could
redeem any amount up to $2,000 without paying a CDSC ($12,000
current value less $10,000 purchase amount). If you redeemed
$2,500, the CDSC would apply only to the $500 that represented part
of your original purchase price. The CDSC rate would be 4% because
a redemption after 15 months would take place during the second
year after purchase.
<PAGE>
PAGE 23
Because the CDSC is imposed only on redemptions that reduce the
total of your purchase payments, you never have to pay a CDSC on
any amount you redeem that represents appreciation in the value of
your shares, income earned by your shares or capital gains. In
addition, when determining the rate of any CDSC, your redemption
will be made from the oldest purchase payment you made. Of course,
once a purchase payment is considered to have been redeemed, the
next amount redeemed is the next oldest purchase payment. By
redeeming the oldest purchase payments first, lower CDSCs are
imposed than would otherwise be the case.
Waivers of the contingent deferred sales charge
The CDSC on Class B shares will be waived on redemptions of shares:
o In the event of the shareholder's death,
o Purchased by any board member, officer or employee of a fund or
AEFC or its subsidiaries,
o Held in a trusteed employee benefit plan,
o Held in IRAs or certain qualified plans for which American
Express Trust Company acts as custodian, such as Keogh plans, tax-
sheltered custodial accounts or corporate pension plans, provided
that the shareholder is:
- at least 59-1/2 years old, and
- taking a retirement distribution (if the redemption is part
of a transfer to an IRA or qualified plan in a product
distributed by American Express Financial Advisors, or a
custodian-to-custodian transfer to a product not distributed
by American Express Financial Advisors, the CDSC will not be
waived), or
- redeeming under an approved substantially equal periodic
payment arrangement.
For investors in Class A shares who have over $1 million invested
in one year, the 1% CDSC on redemption of those shares will be
waived in the same circumstances described for Class B.
Special shareholder services
Services
To help you track and evaluate the performance of your investments,
AEFC provides these services:
Quarterly statements listing all of your holdings and transactions
during the previous three months.
Yearly tax statements featuring average-cost-basis reporting of
capital gains or losses if you redeem your shares along with
distribution information - which simplifies tax calculations.
A personalized mutual fund progress report detailing returns on
your initial investment and cash-flow activity in your account. It
calculates a total return to reflect your individual history in
owning Fund shares. This report is available from your financial
advisor.
<PAGE>
PAGE 24
Quick telephone reference
American Express Telephone Transaction Service
Redemptions and exchanges, dividend payments or reinvestments and
automatic payment arrangements
National/Minnesota: 800-437-3133
Mpls./St. Paul area: 671-3800
American Express Shareholder Service
Fund performance, objectives and account inquiries
612-671-3733
TTY Service
For the hearing impaired
800-846-4852
American Express Infoline
Automated account information (TouchToneR phones only), including
current Fund prices and performance, account values and recent
account transactions
National/Minnesota: 800-272-4445
Mpls./St. Paul area: 671-1630
Distributions and taxes
As a shareholder you are entitled to your share of the Fund's net
income and any net gains realized on its investments. The Fund
distributes dividends and capital gain distributions to qualify as
a regulated investment company and to avoid paying corporate income
and excise taxes. Dividend and capital gain distributions will
have tax consequences you should know about.
Dividend and capital gain distributions
The Fund's net investment income from dividends and interest is
distributed to you by the end of the calendar year as dividends.
Short-term capital gains are included in net investment income.
Long-term capital gains are realized whenever a security held for
more than one year is sold for a higher price. The Fund will
offset any net realized capital gains by any available capital loss
carryovers. Net realized long-term capital gains, if any, are
distributed at the end of the calendar year as capital gain
distributions. Before they're distributed, both net investment
income and net long-term capital gains are included in the value of
each share. After they're distributed, the value of each share
drops by the per-share amount of the distribution. (If your
distributions are reinvested, the total value of your holdings will
not change.)
Dividends for each class will be calculated at the same time, in
the same manner and will be the same amount prior to deduction of
expenses. Expenses attributable solely to a class of shares will
be paid exclusively by that class. Class B shareholders will
receive lower per share dividends than Class A and Class Y
shareholders because expenses for Class B are higher than for Class
<PAGE>
PAGE 25
A or Class Y. Class A shareholders will receive lower per share
dividends than Class Y shareholders because expenses for Class A
are higher than for Class Y.
Reinvestments
Dividends and capital gain distributions are automatically
reinvested in additional shares in the same class of the Fund,
unless:
o you request the Fund in writing or by phone to pay
distributions to you in cash, or
o you direct the Fund to invest your distributions in any
publicly available IDS fund for which you've previously opened
an account. You pay no sales charge on shares purchased
through reinvestment from this Fund into any IDS fund.
The reinvestment price is the net asset value at close of business
on the day the distribution is paid. (Your quarterly statement
will confirm the amount invested and the number of shares
purchased.)
If you choose cash distributions, you will receive only those
declared after your request has been processed.
If the U.S. Postal Service cannot deliver the checks for the cash
distributions, we will reinvest the checks into your account at the
then-current net asset value and make future distributions in the
form of additional shares.
Taxes
Distributions are subject to federal income tax and also may be
subject to state and local taxes. Distributions are taxable in the
year the Fund declares them regardless of whether you take them in
cash or reinvest them.
Income received by the Fund may be subject to foreign tax and
withholding. Tax conventions between certain countries and the
U.S. may reduce or eliminate such taxes. You may be entitled to
claim foreign tax credits or deductions subject to provisions and
limitations of the Internal Revenue Code. The Fund will notify you
if such credit or deduction is available.
Each January, you will receive a tax statement showing the kinds
and total amount of all distributions you received during the
previous year. You must report distributions on your tax returns,
even if they are reinvested in additional shares.
Buying a dividend creates a tax liability. This means buying
shares shortly before a net investment income or a capital gain
distribution. You pay the full pre-distribution price for the
shares, then receive a portion of your investment back as a
distribution, which is taxable.
<PAGE>
PAGE 26
Redemptions and exchanges subject you to a tax on any capital gain.
If you sell shares for more than their cost, the difference is a
capital gain. Your gain may be either short term (for shares held
for one year or less) or long term (for shares held for more than
one year).
Your Taxpayer Identification Number (TIN) is important. As with
any financial account you open, you must list your current and
correct Taxpayer Identification Number (TIN) -- either your Social
Security or Employer Identification number. The TIN must be
certified under penalties of perjury on your application when you
open an account at AEFC.
If you don't provide the TIN, or the TIN you report is incorrect,
you could be subject to backup withholding of 31% of taxable
distributions and proceeds from certain sales and exchanges. You
also could be subject to further penalties, such as:
o a $50 penalty for each failure to supply your correct TIN
o a civil penalty of $500 if you make a false statement that
results in no backup withholding
o criminal penalties for falsifying information
You also could be subject to backup withholding because you failed
to report interest or dividends on your tax return as required.
How to determine the correct TIN
Use the Social Security or
For this type of account: Employer Identification number
of:
Individual or joint account The individual or individuals
listed on the account
Custodian account of a minor The minor
(Uniform Gifts/Transfers to
Minors Act)
A living trust The grantor-trustee (the person
who puts the money into the
trust)
An irrevocable trust, pension The legal entity (not the
trust or estate personal representative or
trustee, unless no legal entity
is designated in the account
title)
Sole proprietorship The owner
Partnership The partnership
Corporate The corporation
Association, club or The organization
tax-exempt organization
<PAGE>
PAGE 27
For details on TIN requirements, ask your financial advisor or
local American Express Financial Advisors office for federal Form
W-9, "Request for Taxpayer Identification Number and
Certification."
Important: This information is a brief and selective summary of
certain federal tax rules that apply to this Fund. Tax matters are
highly individual and complex, and you should consult a qualified
tax advisor about your personal situation.
How the Fund is organized
Shares
The Fund is owned by its shareholders. The Fund issues shares in
three classes - Class A, Class B and Class Y. Each class has
different sales arrangements and bears different expenses. Each
class represents interests in the assets of the Fund. Par value is
one cent per share. Both full and fractional shares can be issued.
The Fund no longer issues stock certificates.
Voting rights
As a shareholder, you have voting rights over the Fund's management
and fundamental policies. You are entitled to one vote for each
share you own. Shares of the Fund have cumulative voting rights.
Each class has exclusive voting rights with respect to the
provisions of the Fund's distribution plan that pertain to a
particular class and other matters for which separate class voting
is appropriate under applicable law.
Shareholder meetings
The Fund does not hold annual shareholder meetings. However, the
board members may call meetings at their discretion, or on demand
by holders of 10% or more of the outstanding shares, to elect or
remove board members.
Board members and officers
Shareholders elect a board that oversees the operations of the Fund
and chooses its officers. Its officers are responsible for day-to-
day business decisions based on policies set by the board. The
board has named an executive committee that has authority to act on
its behalf between meetings. The board members serve on the boards
of all 47 funds in the IDS MUTUAL FUND GROUP, except for Mr.
Dudley. Mr. Dudley is a board member of all IDS funds except the
life funds.
Board members and officers of the Fund
President and interested board member
William R. Pearce
President of all funds in the IDS MUTUAL FUND GROUP.
<PAGE>
PAGE 28
Independent board members
H. Brewster Atwater, Jr.
Retired chairman and chief executive officer, General Mills, Inc.
Lynne V. Cheney
Distinguished fellow, American Enterprise Institute for Public
Policy Research.
Robert F. Froehlke
Former president of all funds in the IDS MUTUAL FUND GROUP.
Heinz F. Hutter
Former president and chief operating officer, Cargill, Inc.
Anne P. Jones
Attorney and telecommunications consultant.
Melvin R. Laird
Senior counsellor for national and international affairs, The
Reader's Digest Association, Inc.
Edson W. Spencer
Former chairman and chief executive officer, Honeywell, Inc.
Wheelock Whitney
Chairman, Whitney Management Company.
C. Angus Wurtele
Chairman of the board, The Valspar Corporation.
Interested board members who are officers and/or employees of AEFC
William H. Dudley
Executive vice president, AEFC.
David R. Hubers
President and chief executive officer, AEFC.
John R. Thomas
Senior vice president, AEFC.
Officers who also are officers and/or employees of AEFC
Peter J. Anderson
Vice president of all funds in the IDS MUTUAL FUND GROUP.
Melinda S. Urion
Treasurer of all funds in the IDS MUTUAL FUND GROUP.
Other officer
Leslie L. Ogg
Vice president, general counsel and secretary of all funds in the
IDS MUTUAL FUND GROUP.
Refer to the SAI for the board members' and officers' biographies.
<PAGE>
PAGE 29
Investment manager
The Fund pays AEFC for managing its assets. In turn, AEFC has an
Advisory Agreement with IDS International, Inc., a wholly owned
subsidiary. Under its agreement, IDS International is paid a fee
equal to 0.35% of the Fund's average daily net assets.
Under the current agreement, effective March 20, 1995, the Fund
pays AEFC a fee based on the average daily net assets of the Fund,
as follows:
Assets Annual rate
(billions) at each asset level
First $0.25 0.800%
Next 0.25 0.775
Next 0.25 0.750
Next 0.25 0.725
Next 1.0 0.700
Over 2.0 0.675
This fee may be increased or decreased by a performance adjustment
based on a comparison of performance of Class A shares of the Fund
to the Lipper International Fund Index. The maximum adjustment is
0.12% of the Fund's average daily net assets on an annual basis.
For the fiscal year ended Oct. 31, 1996, the Fund paid AEFC a total
investment management fee of 0.75% of its average daily net assets.
Under the Agreement, the Fund also pays taxes, brokerage
commissions and nonadvisory expenses.
Administrator and transfer agent
The Fund pays AEFC for shareholder accounting and transfer agent
services under two agreements. The first agreement, the
Administrative Services Agreement, has a declining annual rate
beginning at 0.06% and decreasing to 0.035% as assets increase.
The second agreement, the Transfer Agency Agreement, has an annual
fee per shareholder account as follows:
o Class A $15
o Class B $16
o Class Y $15
Distributor
The Fund has an exclusive distribution agreement with American
Express Financial Advisors, a wholly owned subsidiary of AEFC.
Financial advisors representing American Express Financial Advisors
provide information to investors about individual investment
programs, the Fund and its operations, new account applications,
and exchange and redemption requests. The cost of these services
is paid partially by the Fund's sales charges.
Persons who buy Class A shares pay a sales charge at the time of
purchase. Persons who buy Class B shares are subject to a
contingent deferred sales charge on a redemption in the first six
<PAGE>
PAGE 30
years and pay an asset-based sales charge (also known as a 12b-1
plan) of 0.75% of the Fund's average daily net assets. Class Y
shares are sold without a sales charge and without an asset-based
sales charge.
Financial advisors may receive different compensation for selling
Class A, Class B and Class Y shares. Portions of the sales charge
also may be paid to securities dealers who have sold the Fund's
shares or to banks and other financial institutions. The amounts
of those payments range from 0.8% to 4% of the Fund's offering
price depending on the monthly sales volume.
Under a Shareholder Service Agreement, the Fund also pays a fee for
service provided to shareholders by financial advisors and other
servicing agents. The fee is calculated at a rate of 0.175% of the
Fund's average daily net assets attributable to Class A and Class B
shares.
Total expenses paid by the Fund's Class A shares for the fiscal
year ended Oct. 31, 1996, were 1.31% of its average daily net
assets. Expenses for Class B and Class Y were 2.07% and 1.13%,
respectively.
Total fees and expenses (excluding taxes and brokerage commissions)
cannot exceed the most restrictive applicable state expense
limitation.
The expense ratio of the Fund may be higher than that of a fund
investing exclusively in domestic securities because the expenses
of the Fund, such as the investment management fee and the
custodial costs, are higher. The expense ratio generally is not
higher, however, than that of funds with similar investment goals
and policies.
About American Express Financial Corporation
General information
The AEFC family of companies offers not only mutual funds but also
insurance, annuities, investment certificates and a broad range of
financial management services.
Besides managing investments for all publicly offered funds in the
IDS MUTUAL FUND GROUP, AEFC also manages investments for itself and
its subsidiaries, IDS Certificate Company and IDS Life Insurance
Company. Total assets under management on Oct. 31, 1996 were more
than $145 billion.
American Express Financial Advisors serves individuals and
businesses through its nationwide network of more than 175 offices
and more than 7,900 advisors.
Other AEFC subsidiaries provide investment management and related
services for pension, profit sharing, employee savings and
endowment funds of businesses and institutions.
<PAGE>
PAGE 31
AEFC is located at IDS Tower 10, Minneapolis, MN 55440-0010. It is
a wholly owned subsidiary of American Express Company (American
Express), a financial services company with headquarters at
American Express Tower, World Financial Center, New York, NY 10285.
The Fund may pay brokerage commissions to broker-dealer affiliates
of AEFC.
<PAGE>
PAGE 32
Appendix
Descriptions of derivative instruments
What follows are brief descriptions of derivative instruments the
Fund may use. At various times the Fund may use some or all of
these instruments and is not limited to these instruments. It may
use other similar types of instruments if they are consistent with
the Fund's investment goal and policies. For more information on
these instruments, see the SAI.
Options and futures contracts. An option is an agreement to buy or
sell an instrument at a set price during a certain period of time.
A futures contract is an agreement to buy or sell an instrument for
a set price on a future date. The Fund may buy and sell options
and futures contracts to manage its exposure to changing interest
rates, security prices and currency exchange rates. Options and
futures may be used to hedge the Fund's investments against price
fluctuations or to increase market exposure.
Indexed securities. The value of indexed securities is linked to
currencies, interest rates, commodities, indexes or other financial
indicators. Most indexed securities are short- to intermediate-
term fixed income securities whose values at maturity or interest
rates rise or fall according to the change in one or more specified
underlying instruments. Indexed securities may be more volatile
than the underlying instrument itself.
Structured products. Structured products are over-the-counter
financial instruments created specifically to meet the needs of one
or a small number of investors. The instrument may consist of a
warrant, an option or a forward contract embedded in a note or any
of a wide variety of debt, equity and/or currency combinations.
Risks of structured products include the inability to close such
instruments, rapid changes in the market and defaults by other
parties.
<PAGE>
PAGE 33
STATEMENT OF ADDITIONAL INFORMATION
FOR
IDS INTERNATIONAL FUND
Dec. 30, 1996
This Statement of Additional Information (SAI) is not a prospectus.
It should be read together with the prospectus and the financial
statements contained in the Annual Report which may be obtained
from your American Express financial advisor or by writing to
American Express Shareholder Service, P.O. Box 534, Minneapolis, MN
55440-0534.
This SAI is dated Dec. 30, 1996, and it is to be used with the
prospectus dated Dec. 30, 1996, and the Annual Report for the
fiscal year ended Oct. 31, 1996.
<PAGE>
PAGE 34
TABLE OF CONTENTS
Goal and Investment Policies......................See Prospectus
Additional Investment Policies................................p. 3
Security Transactions.........................................p. 6
Brokerage Commissions Paid to Brokers Affiliated with
American Express Financial Corporation........................p. 9
Performance Information.......................................p. 9
Valuing Fund Shares...........................................p. 10
Investing in the Fund.........................................p. 11
Redeeming Shares..............................................p. 16
Pay-out Plans.................................................p. 16
Taxes.........................................................p. 17
Agreements....................................................p. 19
Organizational Information....................................p. 23
Board Members and Officers....................................p. 23
Custodian.....................................................p. 27
Independent Auditors..........................................p. 27
Financial Statements..............................See Annual Report
Prospectus....................................................p. 27
Appendix A: Description of the Four Highest Bond Ratings.....p. 28
Appendix B: Foreign Currency Transactions....................p. 30
Appendix C: Options and Stock Index Futures Contracts........p. 35
Appendix D: Mortgage-Backed Securities.......................p. 42
Appendix E: Dollar-Cost Averaging............................p. 43
<PAGE>
PAGE 35
ADDITIONAL INVESTMENT POLICIES
These are investment policies in addition to those presented in the
prospectus. Unless holders of a majority of the outstanding voting
securities agree to make the change the Fund will not:
'Act as an underwriter (sell securities for others). However,
under the securities laws, the Fund may be deemed to be an
underwriter when it purchases securities directly from the issuer
and later resells them.
'Borrow money or property, except as a temporary measure for
extraordinary or emergency purposes, in an amount not exceeding
one-third of the market value of its total assets (including
borrowings) less liabilities (other than borrowings) immediately
after the borrowing. The Fund has not borrowed in the past and has
no present intention to borrow.
'Make cash loans if the total commitment amount exceeds 5% of the
Fund's total assets.
'Concentrate in any one industry. According to the present
interpretation by the Securities and Exchange Commission (SEC),
this means no more than 25% of the Fund's total assets, based on
current market value at time of purchase, can be invested in any
one industry.
'Purchase more than 10% of the outstanding voting securities of an
issuer.
'Invest more than 5% of its total assets in securities of any one
company, government or political subdivision thereof, except the
limitation will not apply to investments in securities issued by
the U.S. government, its agencies or instrumentalities, and except
that up to 25% of the Fund's total assets may be invested without
regard to this 5% limitation.
'Buy or sell real estate, unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent
the Fund from investing in securities or other instruments backed
by real estate or securities of companies engaged in the real
estate business or real estate investment trusts. For purposes of
this policy, real estate includes real estate limited partnerships.
'Buy or sell physical commodities unless acquired as a result of
ownership of securities or other instruments, except this shall not
prevent the Fund from buying or selling options and futures
contracts or from investing in securities or other instruments
backed by, or whose value is derived from, physical commodities.
'Invest in securities of investment companies except by purchase in
the open market where the dealer's or sponsor's profit is the
regular commission. The investment manager may wish to invest in
another investment company if, for example, that is the only way to
invest in a foreign market. If any such investment is ever made,
<PAGE>
PAGE 36
not more than 10% of the Fund's net assets will be so invested. To
the extent the Fund were to make such investments, the shareholder
may be subject to duplicate advisory, administrative and
distribution fees. Under one state's law, the Fund is limited to
investments in the open market where no commission or profit to a
sponsor or a dealer results from the purchase other than the
customary broker's commission, or when the purchase is part of a
plan or merger, consolidation, reorganization or acquisition.
'Make a loan of any part of its assets to American Express
Financial Corporation (AEFC), to the board members and officers of
AEFC or to its own board members and officers.
'Purchase securities of an issuer if the board members and officers
of the Fund and of American Express Financial Corporation (AEFC)
hold more than a certain percentage of the issuer's outstanding
securities. If the holdings of all board members and officers of
the Fund and of AEFC who own more than 0.5% of an issuer's
securities are added together, and if in total they own more than
5%, the Fund will not purchase securities of that issuer.
'Lend Fund securities in excess of 30% of its net assets. The
current policy of the Fund's board is to make these loans, either
long- or short-term, to broker-dealers. In making loans, the Fund
gets the market price in cash, U.S. government securities, letters
of credit or such other collateral as may be permitted by
regulatory agencies and approved by the board. If the market price
of the loaned securities goes up, the Fund will get additional
collateral on a daily basis. The risks are that the borrower may
not provide additional collateral when required or return the
securities when due. During the existence of the loan, the Fund
receives cash payments equivalent to all interest or other
distributions paid on the loaned securities. A loan will not be
made unless the investment manager believes the opportunity for
additional income outweighs the risks.
'Issue senior securities, except to the extent that borrowing from
banks and using options, foreign currency forward contracts or
future contracts (as discussed elsewhere in the Fund's prospectus
and SAI) may be deemed to constitute issuing a senior security.
Unless changed by the board, the Fund will not:
'Buy on margin or sell short, but it may make margin payments in
connection with transactions in stock index futures contracts.
'Pledge or mortgage its assets beyond 15% of total assets. If the
Fund were ever to do so, valuation of the pledged or mortgaged
assets would be based on market values. For purposes of this
restriction, collateral arrangements for margin deposits on futures
contracts are not deemed to be a pledge of assets.
'Invest more than 5% of its total assets in securities of domestic
or foreign companies, including any predecessors, that have a
record of less than three years continuous operations.
'Invest in a company to control or manage it.
<PAGE>
PAGE 37
'Invest in exploration or development programs, such as oil, gas or
mineral leases.
'Invest more than 5% of its net assets in warrants. Under one
state's law no more than 2% of the Fund's net assets may be
invested in warrants not listed on the New York or American Stock
Exchange.
'Invest more than 10% of the Fund's net assets in securities and
derivative instruments that are illiquid. For purposes of this
policy illiquid securities include some privately placed
securities, public securities and Rule 144A securities that for one
reason or another may no longer have a readily available market,
loans and loan participations, repurchase agreements with
maturities greater than seven days, non-negotiable fixed-time
deposits and over-the-counter options.
In determining the liquidity of Rule 144A securities, which are
unregistered securities offered to qualified institutional buyers,
and interest-only and principal-only fixed mortgage-backed
securities (IOs and POs) issued by the U.S. government or its
agencies and instrumentalities, the investment manager, under
guidelines established by the board, will consider any relevant
factors including the frequency of trades, the number of dealers
willing to purchase or sell the security and the nature of
marketplace trades.
In determining the liquidity of commercial paper issued in
transactions not involving a public offering under Section 4(2) of
the Securities Act of 1933, the investment manager, under
guidelines established by the board, will evaluate relevant factors
such as the issuer and the size and nature of its commercial paper
programs, the willingness and ability of the issuer or dealer to
repurchase the paper, and the nature of the clearance and
settlement procedures for the paper.
The Fund may make contracts to purchase securities for a fixed
price at a future date beyond normal settlement time (when-issued
securities or forward commitments). Under normal market
conditions, the Fund does not intend to commit more than 5% of its
total assets to these practices. The Fund does not pay for the
securities or receive dividends or interest on them until the
contractual settlement date. The Fund will designate cash or
liquid high-grade debt securities at least equal in value to its
commitments to purchase the securities. When-issued securities or
forward commitments are subject to market fluctuations and they may
affect the Fund's total assets the same as owned securities.
The Fund may maintain a portion of its assets in cash and cash-
equivalent investments. The cash-equivalent investments the Fund
may use are short-term investments in repurchase agreements with
broker-dealers registered under the Securities Exchange Act of 1934
and with U.S. banks, in high-grade notes and obligations (rated Aaa
and Aa by Moody's Investors Service, Inc. (Moody's) or AAA and AA
by Standard & Poor's Corporation (S&P) or the equivalent) of U.S.
banks (including their branches located outside of the United
States and U.S. branches of foreign banks) and corporations. A
<PAGE>
PAGE 38
risk of a repurchase agreement is that if the seller seeks the
protection of the bankruptcy laws, the Fund's ability to liquidate
the security involved could be impaired. It also may invest in
short-term obligations or currencies of the U.S. government (and
its agencies and instrumentalities) and of the Canadian and United
Kingdom governments.
Bank obligations include negotiable certificates of deposit (CDs),
non-negotiable fixed-time deposits, banker's acceptances and
letters of credit of banks or savings and loan associations having
capital, surplus and undivided profits (as of the date of its most
recently published annual financial statements) in excess of $100
million (or the equivalent in the instance of a foreign branch of a
U.S. bank) at the date of investment.
On a day-to-day basis, the Fund may maintain a portion of its
assets in currencies of countries other than the United States,
Canada and the United Kingdom. As a temporary investment, during
periods of weak or declining market values for the securities the
Fund invests in, any portion of its assets may be converted to cash
(in foreign currencies or U.S. dollars) or to the kinds of short-
term debt securities discussed in the previous paragraphs.
Notwithstanding any of the Fund's other investment policies, the
Fund may invest its assets in an open-end management investment
company having substantially the same investment objectives,
policies and restrictions as the Fund for the purpose of having
those assets managed as part of a combined pool.
For a description of the four highest bond ratings, see Appendix A.
For a discussion about foreign currency transactions, see Appendix
B. For a discussion on options and stock index futures contracts,
see Appendix C. For a discussion on mortgage-backed securities,
see Appendix D.
SECURITY TRANSACTIONS
Subject to policies set by the board, AEFC and IDS International,
Inc. (International) are authorized to determine, consistent with
the Fund's investment goal and policies, which securities will be
purchased, held or sold. In determining where the buy and sell
orders are to be placed, AEFC and International have been directed
to use their best efforts to obtain the best available price and
the most favorable execution except where otherwise authorized by
the board. In selecting broker-dealers to execute transactions,
AEFC and International may consider the price of the security,
including commission or mark-up, the size and difficulty of the
order, the reliability, integrity, financial soundness and general
operation and execution capabilities of the broker, the broker's
expertise in particular markets, and research services provided by
the broker.
AEFC has a strict Code of Ethics that prohibits its affiliated
personnel from engaging in personal investment activities that
compete with or attempt to take advantage of planned portfolio
transactions for any fund in the IDS MUTUAL FUND GROUP. AEFC
carefully monitors compliance with its Code of Ethics.
<PAGE>
PAGE 39
On occasion, it may be desirable to compensate a broker for
research services or for brokerage services by paying a commission
that might not otherwise be charged or a commission in excess of
the amount another broker might charge. The board has adopted a
policy authorizing AEFC and International to do so to the extent
authorized by law, if AEFC or International determines, in good
faith, that such commission is reasonable in relation to the value
of the brokerage or research services provided by a broker or
dealer, viewed either in the light of that transaction or AEFC's
overall responsibilities to the funds in the IDS MUTUAL FUND GROUP
and other funds for which it acts as investment advisor.
Research provided by brokers supplements AEFC and International's
own research activities. Such services include economic data on,
and analysis of, the global economy, specific countries, and
industries within countries; information about specific companies,
including earnings estimates; purchase recommendations for stocks
and bonds; portfolio strategy services; political, economic,
business and industry trend assessments; historical statistical
information; market data services providing information on specific
issues and prices; and technical analysis of various aspects of the
international securities markets, including technical charts.
Research services may take the form of written reports, computer
software or personal contact by telephone or at seminars or other
meetings. AEFC has obtained and, in the future, may obtain
computer hardware from brokers, including but not limited to
personal computers that will be used exclusively for investment
decision-making purposes, which include the research, portfolio
management and trading functions and other services to the extent
permitted under an interpretation by the SEC.
When paying a commission that might not otherwise be charged or a
commission in excess of the amount another broker might charge,
AEFC and International must follow procedures authorized by the
board. To date, three procedures have been authorized. One
procedure permits AEFC or International to direct an order to buy
or sell a security traded on a national securities exchange to a
specific broker for research services it has provided. The second
procedure permits AEFC or International, in order to obtain
research, to direct an order on an agency basis to buy or sell a
security traded in the over-the-counter market to a firm that does
not make a market in that security. The commission paid generally
includes compensation for research services. The third procedure
permits AEFC or International, in order to obtain research and
brokerage services, to cause the Fund to pay a commission in excess
of the amount another broker might have charged. AEFC and
International have advised the Fund it is necessary to do business
with a number of brokerage firms on a continuing basis to obtain
such services as the handling of large orders, the willingness of a
broker to risk its own money by taking a position in a security,
and the specialized handling of a particular group of securities
that only certain brokers may be able to offer. As a result of
this arrangement, some portfolio transactions may not be effected
at the lowest commission, but AEFC and International believe it may
obtain better overall execution. AEFC and International have
<PAGE>
PAGE 40
assured the Fund that under all three procedures the amount of
commission paid will be reasonable and competitive in relation to
the value of the brokerage services performed or research provided.
All other transactions shall be placed on the basis of obtaining
the best available price and the most favorable execution. In so
doing, if in the professional opinion of the person responsible for
selecting the broker or dealer, several firms can execute the
transaction on the same basis, consideration will be given by such
person to those firms offering research services. Such services
may be used by AEFC in providing advice to all the funds in the IDS
MUTUAL FUND GROUP even though it is not possible to relate the
benefits to any particular fund or account.
Each investment decision made for the Fund is made independently
from any decision made for another fund in the IDS MUTUAL FUND
GROUP or other account advised by International, AEFC or any of its
subsidiaries. When the Fund buys or sells the same security as
another fund or account, AEFC or International carries out the
purchase or sale in a way the Fund agrees in advance is fair.
Although sharing in large transactions may adversely affect the
price or volume purchased or sold by the Fund, the Fund hopes to
gain an overall advantage in execution. AEFC has assured the Fund
it will continue to seek ways to reduce brokerage costs.
On a periodic basis, AEFC and International make a comprehensive
review of their broker-dealers and the overall reasonableness of
their commissions. The review evaluates execution, operational
efficiency and research services.
The Fund paid total brokerage commissions of $1,326,870 for the
fiscal year ended Oct. 31, 1996, $2,116,769 for fiscal year 1995,
and $2,255,563 for fiscal year 1994. Substantially all firms
through whom transactions were executed provide research services.
No transactions were directed to brokers because of research
services they provided to the Fund.
As of the fiscal year ended Oct. 31, 1996, the Fund held securities
of its regular brokers or dealers or of the parent of those brokers
or dealers that derived more than 15% of gross revenue from
securities-related activities as presented below:
Value of Securities
Owned at End of
Name of Issuer Fiscal Year
Goldman Sachs Group $ 4,981,806
Merrill Lynch 1,898,864
Morgan Stanley Group 14,963,804
The portfolio turnover rate was 62% in the fiscal year ended Oct.
31, 1996, and 52% in fiscal year 1995.
<PAGE>
PAGE 41
BROKERAGE COMMISSIONS PAID TO BROKERS AFFILIATED WITH AMERICAN
EXPRESS FINANCIAL CORPORATION
Affiliates of American Express Company (American Express) (of which
AEFC is a wholly owned subsidiary) may engage in brokerage and
other securities transactions on behalf of the Fund according to
procedures adopted by the Fund's board and to the extent consistent
with applicable provisions of the federal securities laws. AEFC
will use an American Express affiliate only if (i) AEFC determines
that the Fund will receive prices and executions at least as
favorable as those offered by qualified independent brokers
performing similar brokerage and other services for the Fund and
(ii) the affiliate charges the Fund commission rates consistent
with those the affiliate charges comparable unaffiliated customers
in similar transactions and if such use is consistent with terms of
the Investment Management Services Agreement.
AEFC may direct brokerage to compensate an affiliate. AEFC will
receive research on South Africa from New Africa Advisors, a
wholly-owned subsidiary of Sloan Financial Group. AEFC owns 100%
of IDS Capital Holdings Inc. which in turn owns 40% of Sloan
Financial Group. New Africa Advisors will send research to AEFC
and in turn AEFC will direct trades to a particular broker. The
broker will have an agreement to pay New Africa Advisors. All
transactions will be on a best execution basis. Compensation
received will be reasonable for the services rendered.
No brokerage commissions were paid to brokers affiliated with AEFC
for the three most recent fiscal years.
PERFORMANCE INFORMATION
The Fund may quote various performance figures to illustrate past
performance. An explanation of the methods used by the Fund to
compute performance follows below.
Average annual total return
The Fund may calculate average annual total return for a class for
certain periods by finding the average annual compounded rates of
return over the period that would equate the initial amount
invested to the ending redeemable value, according to the following
formula:
P(1+T)n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment, made at the beginning of a period, at the
end of the period (or fractional portion thereof)
<PAGE>
PAGE 42
Aggregate total return
The Fund may calculate aggregate total return for a class for
certain periods representing the cumulative change in the value of
an investment in the Fund over a specified period of time according
to the following formula:
ERV - P
P
where: P = a hypothetical initial payment of $1,000
ERV = ending redeemable value of a hypothetical $1,000
payment, made at the beginning of a period, at the
end of the period (or fractional portion thereof)
In its sales material and other communications, the Fund may quote,
compare or refer to rankings, yields or returns as published by
independent statistical services or publishers and publications
such as The Bank Rate Monitor National Index, Barron's, Business
Week, Donoghue's Money Market Fund Report, Financial Services Week,
Financial Times, Financial World, Forbes, Fortune, Global Investor,
Institutional Investor, Investor's Daily, Kiplinger's Personal
Finance, Lipper Analytical Services, Money, Mutual Fund Forecaster,
Newsweek, The New York Times, Personal Investor, Stanger Report,
Sylvia Porter's Personal Finance, USA Today, U.S. News and World
Report, The Wall Street Journal and Wiesenberger Investment
Companies Service.
VALUING FUND SHARES
The value of an individual share for each class is determined by
using the net asset value before shareholder transactions for the
day. On Nov. 1, 1996, the first business day following the end of
the fiscal year, the computation looked like this:
<TABLE><CAPTION>
Net assets before Shares outstanding Net asset value
shareholder transactions at end of previous day of one share
<S> <C> <C> <C>
Class A $919,261,493 divided by 85,992,656 equals $10.69
Class B 405,765,105 38,207,637 10.62
Class Y 77,107,909 7,199,618 10.71
</TABLE>
In determining net assets before shareholder transactions, the
Fund's securities are valued as follows as of the close of business
of the New York Stock Exchange (the Exchange):
'Securities, except bonds other than convertibles, traded on a
securities exchange for which a last-quoted sales price is readily
available are valued at the last-quoted sales price on the exchange
where such security is primarily traded.
'Securities traded on a securities exchange for which a last-quoted
sales price is not readily available are valued at the mean of the
closing bid and asked prices, looking first to the bid and asked
prices on the exchange where the security is primarily traded and,
if none exist, to the over-the-counter market.
'Securities included in the NASDAQ National Market System are
valued at the last-quoted sales price in this market.<PAGE>
PAGE 43
'Securities included in the NASDAQ National Market System for which
a last-quoted sales price is not readily available, and other
securities traded over-the-counter but not included in the NASDAQ
National Market System are valued at the mean of the closing bid
and asked prices.
'Futures and options traded on major exchanges are valued at the
last-quoted sales price on their primary exchange.
'Foreign securities traded outside the United States are generally
valued as of the time their trading is complete, which is usually
different from the close of the Exchange. Foreign securities
quoted in foreign currencies are translated into U.S. dollars at
the current rate of exchange. Occasionally, events affecting the
value of such securities may occur between such times and the close
of the Exchange that will not be reflected in the computation of
the Fund's net asset value. If events materially affecting the
value of such securities occur during such period, these securities
will be valued at their fair value according to procedures decided
upon in good faith by the Fund's board.
'Short-term securities maturing more than 60 days from the
valuation date are valued at the readily available market price or
approximate market value based on current interest rates. Short-
term securities maturing in 60 days or less that originally had
maturities of more than 60 days at acquisition date are valued at
amortized cost using the market value on the 61st day before
maturity. Short-term securities maturing in 60 days or less at
acquisition date are valued at amortized cost. Amortized cost is
an approximation of market value determined by systematically
increasing the carrying value of a security if acquired at a
discount, or reducing the carrying value if acquired at a premium,
so that the carrying value is equal to maturity value on the
maturity date.
'Securities without a readily available market price, bonds other
than convertibles and other assets are valued at fair value as
determined in good faith by the board. The board is responsible
for selecting methods it believes provide fair value. When
possible, bonds are valued by a pricing service independent from
the Fund. If a valuation of a bond is not available from a pricing
service, the bond will be valued by a dealer knowledgeable about
the bond if such a dealer is available.
The Exchange, AEFC and the Fund will be closed on the following
holidays: New Year's Day, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day.
INVESTING IN THE FUND
Sales Charge
Shares of the Fund are sold at the public offering price determined
at the close of business on the day an application is accepted.
The public offering price is the net asset value of one share plus
a sales charge, if applicable. For Class B and Class Y, there is
<PAGE>
PAGE 44
no initial sales charge so the public offering price is the same as
the net asset value. For Class A, the public offering price for an
investment of less than $50,000, made Nov. 1, 1996, was determined
by dividing the net asset value of one share, $10.69, by 0.95
(1.00-0.05 for a maximum 5% sales charge) for a public offering
price of $11.25. The sales charge is paid to American Express
Financial Advisors by the person buying the shares.
Class A - Calculation of the Sales Charge
Sales charges are determined as follows:
Within each increment,
sales charge as a
percentage of:
Public Net
Amount of Investment Offering Price Amount Invested
First $ 50,000 5.0% 5.26%
Next 50,000 4.5 4.71
Next 400,000 3.8 3.95
Next 500,000 2.0 2.04
$1,000,000 or more 0.0 0.00
Sales charges on an investment greater than $50,000 and less than
$1,000,000 are calculated for each increment separately and then
totaled. The resulting total sales charge, expressed as a
percentage of the public offering price and of the net amount
invested, will vary depending on the proportion of the investment
at different sales charge levels.
For example, compare an investment of $60,000 with an investment of
$85,000. The $60,000 investment is composed of $50,000 that incurs
a sales charge of $2,500 (5.0% x $50,000) and $10,000 that incurs a
sales charge of $450 (4.5% x $10,000). The total sales charge of
$2,950 is 4.92% of the public offering price and 5.17% of the net
amount invested.
In the case of the $85,000 investment, the first $50,000 also
incurs a sales charge of $2,500 (5.0% x $50,000) and $35,000 incurs
a sales charge of $1,575 (4.5% x $35,000). The total sales charge
of $4,075 is 4.79% of the public offering price and 5.04% of the
net amount invested.
The following table shows the range of sales charges as a
percentage of the public offering price and of the net amount
invested on total investments at each applicable level.
<PAGE>
PAGE 45
<TABLE><CAPTION>
On total investment, sales
charge as a percentage of
Public Net
Offering Price Amount Invested
Amount of Investment ranges from:
<S> <C> <C> <C>
First $ 50,000 5.00% 5.26%
More than 50,000 to 100,000 5.00-4.50 5.26-4.71
More than 100,000 to 500,000 4.50-3.80 4.71-3.95
More than 500,000 to 999,999 3.80-2.00 3.95-2.04
$1,000,000 or more 0.00 0.00
</TABLE>
The initial sales charge is waived for certain qualified plans that
meet the requirements described in the prospectus. Participants in
these qualified plans may be subject to a deferred sales charge on
certain redemptions. The deferred sales charge on certain
redemptions will be waived if the redemption is a result of a
participant's death, disability, retirement, attaining age 59 1/2,
loans or hardship withdrawals. The deferred sales charge varies
depending on the number of participants in the qualified plan and
total plan assets as follows:
Deferred Sales Charge
Number of Participants
Total Plan Assets 1-99 100 or more
Less than $1 million 4% 0%
$1 million or more 0% 0%
_________________________________________________________
Class A - Reducing the Sales Charge
Sales charges are based on the total amount of your investments in
the Fund. The amount of all prior investments plus any new
purchase is referred to as your "total amount invested." For
example, suppose you have made an investment of $20,000 and later
decide to invest $40,000 more. Your total amount invested would be
$60,000. As a result, $10,000 of your $40,000 investment qualifies
for the lower 4.5% sales charge that applies to investments of more
than $50,000 and up to $100,000.
The total amount invested includes any shares held in the Fund in
the name of a member of your primary household. (The primary
household group consists of accounts in any ownership for spouses
or domestic partners and their unmarried children under 21.
Domestic partners are individuals who maintain a shared primary
residence and have joint property or other insurable interests.)
For instance, if your spouse already has invested $20,000 and you
want to invest $40,000, your total amount invested will be $60,000
and therefore you will pay the lower charge of 4.5% on $10,000 of
the $40,000.
<PAGE>
PAGE 46
Until a spouse remarries, the sales charge is waived for spouses
and unmarried children under 21 of deceased board members, officers
or employees of the Fund or AEFC or its subsidiaries and deceased
advisors.
The total amount invested also includes any investment you or your
immediate family already have in the other publicly offered funds
in the IDS MUTUAL FUND GROUP where the investment is subject to a
sales charge. For example, suppose you already have an investment
of $30,000 in another IDS Fund. If you invest $40,000 more in this
Fund, your total amount invested in the funds will be $70,000 and
therefore $20,000 of your $40,000 investment will incur a 4.5%
sales charge.
Finally, Individual Retirement Account (IRA) purchases, or other
employee benefit plan purchases made through a payroll deduction
plan or through a plan sponsored by an employer, association of
employers, employee organization or other similar entity, may be
added together to reduce sales charges for shares purchased through
that plan.
Class A - Letter of Intent (LOI)
If you intend to invest $1 million over a period of 13 months, you
can reduce the sales charges in Class A by filing a LOI. The
agreement can start at any time and will remain in effect for 13
months. Your investment will be charged normal sales charges until
you have invested $1 million. At that time, your account will be
credited with the sales charges previously paid. Class A
investments made prior to signing an LOI may be used to reach the
$1 million total, excluding Cash Management Fund and Tax-Free Money
Fund. However, we will not adjust for sales charges on investments
made prior to the signing of the LOI. If you do not invest $1
million by the end of 13 months, there is no penalty, you'll just
miss out on the sales charge adjustment. A LOI is not an option
(absolute right) to buy shares.
Here's an example. You file a LOI to invest $1 million and make an
investment of $100,000 at that time. You pay the normal 5% sales
charge on the first $50,000 and 4.5% sales charge on the next
$50,000 of this investment. Let's say you make a second investment
of $900,000 (bringing the total up to $1 million) one month before
the 13-month period is up. On the date that you bring your total
to $1 million, AEFC makes an adjustment to your account. The
adjustment is made by crediting your account with additional
shares, in an amount equivalent to the sales charge previously
paid.
Systematic Investment Programs
After you make your initial investment of $2,000 or more, you can
arrange to make additional payments of $100 or more on a regular
basis. These minimums do not apply to all systematic investment
programs. You decide how often to make payments - monthly,
quarterly, or semiannually. You are not obligated to make any
payments. You can omit payments or discontinue the investment
program altogether. The Fund also can change the program or end it
<PAGE>
PAGE 47
at any time. If there is no obligation, why do it? Putting money
aside is an important part of financial planning. With a
systematic investment program, you have a goal to work for.
How does this work? Your regular investment amount will purchase
more shares when the net asset value per share decreases, and fewer
shares when the net asset value per share increases. Each purchase
is a separate transaction. After each purchase your new shares
will be added to your account. Shares bought through these
programs are exactly the same as any other fund shares. They can
be bought and sold at any time. A systematic investment program is
not an option or an absolute right to buy shares.
The systematic investment program itself cannot ensure a profit,
nor can it protect against a loss in a declining market. If you
decide to discontinue the program and redeem your shares when their
net asset value is less than what you paid for them, you will incur
a loss.
For a discussion on dollar-cost averaging, see Appendix E.
Automatic Directed Dividends
Dividends, including capital gain distributions, paid by another
fund in the IDS MUTUAL FUND GROUP subject to a sales charge, may be
used to automatically purchase shares in the same class of this
Fund without paying a sales charge. Dividends may be directed to
existing accounts only. Dividends declared by a fund are exchanged
to this Fund the following day. Dividends can be exchanged into
one fund but cannot be split to make purchases in two or more
funds. Automatic directed dividends are available between accounts
of any ownership except:
Between a non-custodial account and an IRA, or 401(k) plan account
or other qualified retirement account of which American Express
Trust Company acts as custodian;
Between two American Express Trust Company custodial accounts with
different owners (for example, you may not exchange dividends from
your IRA to the IRA of your spouse);
Between different kinds of custodial accounts with the same
ownership (for example, you may not exchange dividends from your
IRA to your 401(k) plan account, although you may exchange
dividends from one IRA to another IRA).
Dividends may be directed from accounts established under the
Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors
Act (UTMA) only into other UGMA or UTMA accounts with identical
ownership.
The Fund's investment goal is described in its prospectus along
with other information, including fees and expense ratios. Before
exchanging dividends into another fund, you should read its
prospectus. You will receive a confirmation that the automatic
directed dividend service has been set up for your account.
<PAGE>
PAGE 48
REDEEMING SHARES
You have a right to redeem your shares at any time. For an
explanation of redemption procedures, please see the prospectus.
During an emergency, the board can suspend the computation of net
asset value, stop accepting payments for purchase of shares or
suspend the duty of the Fund to redeem shares for more than seven
days. Such emergency situations would occur if:
'The Exchange closes for reasons other than the usual weekend and
holiday closings or trading on the Exchange is restricted, or
'Disposal of the Fund's securities is not reasonably practicable or
it is not reasonably practicable for the Fund to determine the fair
value of its net assets, or
'The SEC, under the provisions of the Investment Company Act of
1940 (the 1940 Act), as amended, declares a period of emergency to
exist.
Should the Fund stop selling shares, the board may make a deduction
from the value of the assets held by the Fund to cover the cost of
future liquidations of the assets so as to distribute fairly these
costs among all shareholders.
The Fund has elected to be governed by Rule 18f-1 under the 1940
Act, which obligates the Fund to redeem shares in cash, with
respect to any one shareholder during any 90-day period, up to
lesser of $250,000 or 1% of the net assets of the Fund at the
beginning of the period. Although redemptions in excess of this
limitation would normally be paid in cash, the Fund reserves the
right to make these payments in whole or in part in securities or
other assets in case of an emergency, or if the payment of a
redemption in cash would be detrimental to the existing
shareholders of the Fund as determined by the board. In these
circumstances, the securities distributed would be valued as set
forth in the prospectus. Should the Fund distribute securities, a
shareholder may incur brokerage fees or other transaction costs in
converting the securities to cash.
PAY-OUT PLANS
You can use any of several pay-out plans to redeem your investment
in regular installments. If you redeem Class B shares you may be
subject to a contingent deferred sales charge as discussed in the
prospectus. While the plans differ on how the pay-out is figured,
they all are based on the redemption of your investment. Net
investment income dividends and any capital gain distributions will
automatically be reinvested, unless you elect to receive them in
cash. If you are redeeming a tax-qualified plan account for which
American Express Trust Company acts as custodian, you can elect to
receive your dividends and other distributions in cash when
permitted by law. If you redeem an IRA or a qualified retirement
account, certain restrictions, federal tax penalties and special
federal income tax reporting requirements may apply. You should
consult your tax advisor about this complex area of the tax law.
<PAGE>
PAGE 49
Applications for a systematic investment in a class of the Fund
subject to a sales charge normally will not be accepted while a
pay-out plan for any of those funds is in effect. Occasional
investments, however, may be accepted.
To start any of these plans, please write or call American Express
Shareholder Service, P.O. Box 534, Minneapolis, MN 55440-0534,
612-671-3733. Your authorization must be received in the
Minneapolis headquarters at least five days before the date you
want your payments to begin. The initial payment must be at least
$50. Payments will be made on a monthly, bimonthly, quarterly,
semiannual or annual basis. Your choice is effective until you
change or cancel it.
The following pay-out plans are designed to take care of the needs
of most shareholders in a way AEFC can handle efficiently and at a
reasonable cost. If you need a more irregular schedule of
payments, it may be necessary for you to make a series of
individual redemptions, in which case you'll have to send in a
separate redemption request for each pay-out. The Fund reserves
the right to change or stop any pay-out plan and to stop making
such plans available.
Plan #1: Pay-out for a fixed period of time
If you choose this plan, a varying number of shares will be
redeemed at regular intervals during the time period you choose.
This plan is designed to end in complete redemption of all shares
in your account by the end of the fixed period.
Plan #2: Redemption of a fixed number of shares
If you choose this plan, a fixed number of shares will be redeemed
for each payment and that amount will be sent to you. The length
of time these payments continue is based on the number of shares in
your account.
Plan #3: Redemption of a fixed dollar amount
If you decide on a fixed dollar amount, whatever number of shares
is necessary to make the payment will be redeemed in regular
installments until the account is closed.
Plan #4: Redemption of a percentage of net asset value
Payments are made based on a fixed percentage of the net asset
value of the shares in the account computed on the day of each
payment. Percentages range from 0.25% to 0.75%. For example, if
you are on this plan and arrange to take 0.5% each month, you will
get $50 if the value of your account is $10,000 on the payment
date.
TAXES
If you buy shares in the Fund and then exchange into another fund,
it is considered a sale and subsequent purchase of shares. Under
the tax laws, if this exchange is done within 91 days, any sales
<PAGE>
PAGE 50
charge waived on Class A shares on a subsequent purchase of shares
applies to the new shares acquired in the exchange. Therefore, you
cannot create a tax loss or reduce a tax gain attributable to the
sales charge when exchanging shares within 91 days.
Retirement Accounts
If you have a nonqualified investment in the Fund and you wish to
move part or all of those shares to an IRA or qualified retirement
account in the Fund, you can do so without paying a sales charge.
However, this type of exchange is considered a sale of shares and
may result in a gain or loss for tax purposes. In addition, this
type of exchange may result in an excess contribution under IRA or
qualified plan regulations if the amount exchanged plus the amount
of the initial sales charge applied to the amount exchanged exceeds
annual contribution limitations. For example: If you were to
exchange $2,000 in Class A shares from a nonqualified account to an
IRA without considering the 5% ($100) initial sales charge
applicable to that $2,000, you may be deemed to have exceeded
current IRA annual contribution limitations. You should consult
your tax advisor for further details about this complex subject.
Net investment income dividends received should be treated as
dividend income for federal income tax purposes. Corporate
shareholders are generally entitled to a deduction equal to 70% of
that portion of the Fund's dividend that is attributable to
dividends the Fund received from domestic (U.S.) securities. For
the fiscal year ended Oct. 31, 1996, none of the Fund's net
investment income dividends qualified for the corporate deduction.
Capital gain distributions received by individual and corporate
shareholders, if any, should be treated as long-term capital gains
regardless of how long they owned their shares. Short-term capital
gains earned by the Fund are paid to shareholders as part of their
ordinary income dividend and are taxable.
Under federal tax law and an election made by the Fund under
federal tax regulations, by the end of a calendar year the Fund
must declare and pay dividends representing 98% of ordinary income
for that calendar year and 98% of net capital gains (both long-term
and short-term) for the 12-month period ending Oct. 31 of that
calendar year. The Fund is subject to an excise tax equal to 4% of
the excess, if any, of the amount required to be distributed over
the amount actually distributed. The Fund intends to comply with
federal tax law and avoid any excise tax.
The Fund may be subject to U.S. taxes resulting from holdings in a
passive foreign investment company (PFIC). A foreign corporation
is a PFIC when 75% or more of its gross income for the taxable year
is passive income or if 50% or more of the average value of its
assets consists of assets that produce or could produce passive
income.
Income earned by the Fund may give rise to foreign taxes imposed
and withheld in foreign countries. Tax conventions between certain
countries and the United States may reduce or eliminate such taxes.
If more than 50% of the Fund's total assets at the close of its <PAGE>
PAGE 51
fiscal year consist of securities of foreign corporations, the Fund
will be eligible to file an election with the Internal Revenue
Service under which shareholders of the Fund would be required to
include their pro rata portions of foreign taxes withheld by
foreign countries as gross income in their federal income tax
returns. These pro rata portions of foreign taxes withheld may be
taken as a credit or deduction in computing federal income taxes.
If the election is filed, the Fund will report to its shareholders
the amount per share of such foreign taxes withheld and the amount
of foreign tax credit or deduction available for federal income tax
purposes.
This is a brief summary that relates to federal income taxation
only. Shareholders should consult their tax advisor as to the
application of federal, state and local income tax laws to Fund
distributions.
AGREEMENTS
Investment Management Services Agreement
The Fund has an Investment Management Services Agreement with AEFC.
For its services, AEFC is paid a fee based on the following
schedule:
Assets Annual rate at
(billions) each asset level
First $0.25 0.800%
Next 0.25 0.775
Next 0.25 0.750
Next 0.25 0.725
Next 1.0 0.700
Over 2.0 0.675
On Oct. 31, 1996, the daily rate applied to the Fund's net assets
was equal to 0.745% on an annual basis. The fee is calculated for
each calendar day on the basis of net assets as of the close of
business two business days prior to the day for which the
calculation is made.
Before the fee based on the asset charge is paid, it is adjusted
for investment performance. The adjustment, determined monthly,
will be calculated using the percentage point difference between
the change in the net asset value of one Class A share of the Fund
and the change in the Lipper International Fund Index (Index). The
performance of one Class A share of the Fund is measured by
computing the percentage difference between the opening and closing
net asset value of one Class A share of the Fund, as of the last
business day of the period selected for comparison, adjusted for
dividend or capital gain distributions which are treated as
reinvested at the end of the month during which the distribution
was made. The performance of the Index for the same period is
established by measuring the percentage difference between the
beginning and ending Index for the comparison period. The
performance is adjusted for dividend or capital gain distributions
(on the securities which comprise the Index), which are treated as <PAGE>
PAGE 52
reinvested at the end of the month during which the distribution
was made. One percentage point will be subtracted from the
calculation to help assure that incentive adjustments are
attributable to AEFC's management abilities rather than random
fluctuations and the result multiplied by 0.01%. That number will
be multiplied times the Fund's average net assets for the
comparison period and then divided by the number of months in the
comparison period to determine the monthly adjustment.
Where the Fund's Class A share performance exceeds that of the
Index, the base fee will be increased. Where the performance of
the Index exceeds the performance of Class A shares, the base fee
will be decreased. The maximum monthly increase or decrease will
be 0.12% of the Fund's average net assets on an annual basis.
The 12 month comparison period rolls over with each succeeding
month, so that it always equals 12 months, ending with the month
for which the performance adjustment is being computed. The
adjustment increased the fee by $36,902 for the fiscal year ended
Oct. 31, 1996.
The management fee is paid monthly. Under the agreement, the total
amount paid was $10,066,559 for the fiscal year ended Oct. 31,
1996, $7,749,440 for fiscal year 1995, and $5,036,058 for fiscal
year 1994.
Under the agreement, the Fund also pays taxes, brokerage
commissions and nonadvisory expenses, which include custodian fees;
audit and certain legal fees; fidelity bond premiums; registration
fees for shares; Fund office expenses; consultants' fees;
compensation of board members, officers and employees; corporate
filing fees; organizational expenses; expenses incurred in
connection with lending securities of the Fund; and expenses
properly payable by the Fund, approved by the board. Under the
agreement, the Fund paid nonadvisory expenses of $1,556,870 for the
fiscal year ended Oct. 31, 1996, $1,856,330 for fiscal year 1995,
and $1,242,572 for fiscal year 1994.
Administrative Services Agreement
The Fund has an Administrative Services Agreement with AEFC. Under
this agreement, the Fund pays AEFC for providing administration and
accounting services. The fee is calculated as follows:
Assets Annual rate
(billions) each asset level
First $0.25 0.060%
Next 0.25 0.055
Next 0.25 0.050
Next 0.25 0.045
Next 1.0 0.040
Over 2.0 0.035
On Oct. 31, 1996, the daily rate applied to the Fund's net assets
was equal to 0.049% on an annual basis. The fee is calculated for
each calendar day on the basis of net assets as of the close of <PAGE>
PAGE 53
business two business days prior to the day for which the
calculation is made. Under the agreement, the Fund paid fees of
$662,450 for the fiscal period ended Oct. 31, 1996.
Transfer Agency Agreement
The Fund has a Transfer Agency Agreement with AEFC. This agreement
governs AEFC's responsibility for administering and/or performing
transfer agent functions, for acting as service agent in connection
with dividend and distribution functions and for performing
shareholder account administration agent functions in connection
with the issuance, exchange and redemption or repurchase of the
Fund's shares. Under the agreement, AEFC will earn a fee from the
Fund determined by multiplying the number of shareholder accounts
at the end of the day by a rate determined for each class per year
and dividing by the number of days in the year. The rate for Class
A and Class Y is $15 per year and for Class B is $16 per year. The
fees paid to AEFC may be changed from time to time upon agreement
of the parties without shareholder approval. Under the agreement,
the Fund paid fees of $3,057,473 for the fiscal year ended Oct. 31,
1996.
Distribution Agreement
Under a Distribution Agreement, sales charges deducted for
distributing Fund shares are paid to American Express Financial
Advisors daily. These charges amounted to $3,740,785 for the
fiscal year ended Oct. 31, 1996. After paying commissions to
personal financial advisors, and other expenses, the amount
retained was $46,224. The amounts were $3,593,579 and $763,778 for
fiscal year 1995, and $6,319,421 and $2,176,594 for fiscal year
1994.
<TABLE><CAPTION>
Additional information about commissions and compensation for the
fiscal year ended Oct. 31, 1996, is contained in the following
table:
<S> <C> <C> <C> <C>
(1) (2) (3) (4) (5)
Net Compensation
Name of Underwriting on Redemption
Principal Discounts and and Brokerage Other
Underwriter Commissions Repurchases Commissions Compensation
AEFC None None None $2,906,663*
American
Express
Financial
Advisors $3,740,785 None None None
</TABLE>
*Distribution fees paid pursuant to the Plan and Agreement of
Distribution.
<PAGE>
PAGE 54
Shareholder Service Agreement
The Fund pays a fee for service provided to shareholders by
financial advisors and other servicing agents. The fee is
calculated at a rate of 0.175% of the Fund's average daily net
assets attributable to Class A and Class B shares.
Plan and Agreement of Distribution
For Class B shares, to help American Express Financial Advisors
defray the cost of distribution and servicing, not covered by the
sales charges received under the Distribution Agreement, the Fund
and American Express Financial Advisors entered into a Plan and
Agreement of Distribution (Plan). These costs cover almost all
aspects of distributing the Fund's shares except compensation to
the sales force. A substantial portion of the costs are not
specifically identified to any one fund in the IDS MUTUAL FUND
GROUP. Under the Plan, American Express Financial Advisors is paid
a fee at an annual rate of 0.75% of the Fund's average daily net
assets attributable to Class B shares.
The Plan must be approved annually by the board, including a
majority of the disinterested board members, if it is to continue
for more than a year. At least quarterly, the board must review
written reports concerning the amounts expended under the Plan and
the purposes for which such expenditures were made. The Plan and
any agreement related to it may be terminated at any time by vote
of a majority of board members who are not interested persons of
the Fund and have no direct or indirect financial interest in the
operation of the Plan or in any agreement related to the Plan, or
by vote of a majority of the outstanding voting securities of the
Fund's Class B shares or by American Express Financial Advisors.
The Plan (or any agreement related to it) will terminate in the
event of its assignment, as that term is defined in the 1940 Act,
as amended. The Plan may not be amended to increase the amount to
be spent for distribution without shareholder approval, and all
material amendments to the Plan must be approved by a majority of
the board members, including a majority of the board members who
are not interested persons of the Fund and who do not have a
financial interest in the operation of the Plan or any agreement
related to it. The selection and nomination of disinterested board
members is the responsibility of the other disinterested board
members. No board member who is not an interested person, has any
direct or indirect financial interest in the operation of the Plan
or any related agreement. For the fiscal year ended Oct. 31, 1996,
under the agreement, the Fund paid fees of $2,906,663.
Total fees and expenses
Total fees and nonadvisory expenses cannot exceed the most
restrictive applicable state limitation. Currently, the most
restrictive applicable state expense limitation, subject to
exclusion of certain expenses, is 2.5% of the first $30 million of
the Fund's average daily net assets, 2% of the next $70 million and
1.5% of average daily net assets over $100 million, on an annual
basis. At the end of each month, if the fees and expenses of the
<PAGE>
PAGE 55
Fund exceed this limitation for the Fund's fiscal year in progress,
AEFC will assume all expenses in excess of the limitation. AEFC
then may bill the Fund for such expenses in subsequent months up to
the end of that fiscal year, but not after that date. No interest
charges are assessed by AEFC for expenses it assumes. The Fund
paid total fees and nonadvisory expenses of $20,446,841 for the
fiscal year ended Oct. 31, 1996.
ORGANIZATIONAL INFORMATION
The Fund is a diversified, open-end management investment company,
as defined in the Investment Company Act of 1940. It was
incorporated on July 18, 1984 in Minnesota. The Fund headquarters
are at 901 S. Marquette Ave., Suite 2810, Minneapolis, MN 55402-
3268.
BOARD MEMBERS AND OFFICERS
The following is a list of the Fund's board members who, except for
Mr. Dudley, are also board members and officers of all other funds
in the IDS MUTUAL FUND GROUP. Mr. Dudley is a board member of all
IDS funds except the nine life funds. All shares have cumulative
voting rights with respect to the election of board members.
H. Brewster Atwater, Jr.
Born in 1931
4900 IDS Tower
Minneapolis, MN
Retired chairman and chief executive officer, General Mills, Inc.
Director, Merck & Co., Inc. and Darden Restaurants, Inc.
Lynne V. Cheney'
Born in 1941
American Enterprise Institute
for Public Policy Research (AEI)
1150 17th St., N.W.
Washington, D.C.
Distinguished Fellow AEI. Former Chair of National Endowment of
the Humanities. Director, The Reader's Digest Association Inc.,
Lockheed-Martin, the Interpublic Group of Companies, Inc.
(advertising), and FPL Group, Inc. (holding company for Florida
Power and Light).
William H. Dudley**
Born in 1932
2900 IDS Tower
Minneapolis, MN
Executive vice president and director of AEFC.
<PAGE>
PAGE 56
Robert F. Froehlke+
Born in 1922
1201 Yale Place
Minneapolis, MN
Former president of all funds in the IDS MUTUAL FUND GROUP.
Director, the ICI Mutual Insurance Co., Institute for Defense
Analyses, Marshall Erdman and Associates, Inc. (architectural
engineering) and Public Oversight Board of the American Institute
of Certified Public Accountants.
David R. Hubers+**
Born in 1943
2900 IDS Tower
Minneapolis, MN
President, chief executive officer and director of AEFC.
Previously, senior vice president, finance and chief financial
officer of AEFC.
Heinz F. Hutter+'
Born in 1929
P.O. Box 2187
Minneapolis, MN
Former president and chief operating officer, Cargill, Incorporated
(commodity merchants and processors).
Anne P. Jones
Born in 1935
5716 Bent Branch Rd.
Bethesda, MD
Attorney and telecommunications consultant. Former partner, law
firm of Sutherland, Asbill & Brennan. Director, Motorola, Inc. and
C-Cor Electronics, Inc.
Melvin R. Laird
Born in 1922
Reader's Digest Association, Inc.
1730 Rhode Island Ave., N.W.
Washington, D.C.
Senior counsellor for national and international affairs, The
Reader's Digest Association, Inc. Former nine-term congressman,
secretary of defense and presidential counsellor. Director, Martin
Marietta Corp., Metropolitan Life Insurance Co., The Reader's
Digest Association, Inc., Science Applications International Corp.,
Wallace Reader's Digest Funds and Public Oversight Board (SEC
Practice Section, American Institute of Certified Public
Accountants).
<PAGE>
PAGE 57
William R. Pearce+*
Born in 1927
901 S. Marquette Ave.
Minneapolis, MN
President of all funds in the IDS MUTUAL FUND GROUP since June
1993. Former vice chairman of the board, Cargill, Incorporated
(commodity merchants and processors).
Edson W. Spencer+
Born in 1926
4900 IDS Center
80 S. 8th St.
Minneapolis, MN
President, Spencer Associates Inc. (consulting). Former chairman
of the board and chief executive officer, Honeywell Inc. Director,
Boise Cascade Corporation (forest products). Member of
International Advisory Council of NEC (Japan).
John R. Thomas**
Born in 1937
2900 IDS Tower
Minneapolis, MN
Senior vice president and director of AEFC.
Wheelock Whitney+
Born in 1926
1900 Foshay Tower
821 Marquette Ave.
Minneapolis, MN
Chairman, Whitney Management Company (manages family assets).
C. Angus Wurtele'
Born in 1934
Valspar Corporation
Suite 1700
Foshay Tower
Minneapolis, MN
Chairman of the board and retired chief executive officer, The
Valspar Corporation (paints). Director, Bemis Corporation
(packaging), Donaldson Company (air cleaners & mufflers) and
General Mills, Inc. (consumer foods).
+ Member of executive committee.
' Member of joint audit committee.
* Interested person by reason of being an officer and employee of
the Fund.
**Interested person by reason of being an officer, board member,
employee and/or shareholder of AEFC or American Express.
The board also has appointed officers who are responsible for day-
to-day business decisions based on policies it has established.
<PAGE>
PAGE 58
In addition to Mr. Pearce, who is president, the Fund's other
officers are:
Leslie L. Ogg
Born in 1938
901 S. Marquette Ave.
Minneapolis, MN
Vice president, general counsel and secretary of all funds in the
IDS MUTUAL FUND GROUP.
Officers who also are officers and/or employees of AEFC
Peter J. Anderson
Born in 1942
IDS Tower 10
Minneapolis, MN
Vice president-investments of all funds in the IDS MUTUAL FUND
GROUP. Director and senior vice president-investments of AEFC.
Melinda S. Urion
Born in 1953
IDS Tower 10
Minneapolis, MN
Treasurer of all funds in the IDS MUTUAL FUND GROUP. Director,
senior vice president and chief financial officer of AEFC.
Director and executive vice president and controller of IDS Life
Insurance Company.
Members of the board who are not officers of the Fund or of AEFC
receive an annual fee of $1,000 and the chair of the Contracts
Committee receives an additional $90. Board members receive a $50
per day attendance fee for board meetings. The attendance fee for
meetings of the Contracts and Investment review Committees is $50;
for meetings of the Audit Committee and Personal Committee $25 and
for traveling from out-of-state $8. Expenses for attending
meetings are reimbursed.
During the fiscal year ended Oct. 31, 1996, the members of the
board, for attending up to 25 meetings, received the following
compensation:
<TABLE><CAPTION>
Compensation Table
<S> <C> <C> <C> <C>
Pension or Estimated
Aggregate Retirement annual Total cash
compensation benefits benefit compensation
from the accrued as upon from the IDS
Board member Fund Fund expenses* retirement MUTUAL FUND GROUP
Lynne V. Cheney $1,637 $ 511 $650 $74,500
Robert F. Froehlke 1,677 2,142 650 76,800
Heinz F. Hutter 1,698 775 314 77,300
Anne P. Jones 1,701 506 650 77,400
Donald M. Kendall 841 475 650 36,000
(part of year)
Melvin R. Laird 1,770 1,461 650 80,600
Lewis W. Lehr 858 -- 634 36,700
(part of year)
Edson W. Spencer 1,842 550 347 83,300
Wheelock Whitney 1,654 933 650 75,200
C. Angus Wurtele 1,641 856 645 75,300
/TABLE
<PAGE>
PAGE 59
On Oct. 31, 1996, the Fund's board members and officers as a group
owned less than 1% of the outstanding shares. During the fiscal
year ended Oct. 31, 1996, no board member or officer earned more
than $60,000 from this Fund. All board members and officers as a
group earned $33,215, including $8,209 of retirement plan benefits,
from this Fund.
* The Fund had a retirement plan for its independent board members.
The plan was terminated April 30, 1996.
CUSTODIAN
The Fund's securities and cash are held by American Express Trust
Company, 1200 Northstar Center West, 625 Marquette Ave.,
Minneapolis, MN 55402-2307, through a custodian agreement. The
custodian is permitted to deposit some or all of its securities in
central depository systems as allowed by federal law. For its
services, the Fund pays the custodian a maintenance charge and a
charge per transaction in addition to reimbursing the custodian's
out-of-pocket expenses.
The custodian has entered into a sub-custodian arrangement with the
Morgan Stanley Trust Company (Morgan Stanley), One Pierrepont
Plaza, Eighth Floor, Brooklyn, NY 11201-2775. As part of this
arrangement, securities purchased outside the United States are
maintained in the custody of various foreign branches of Morgan
Stanley or in such other financial institutions as may be permitted
by law and by the Fund's sub-custodian agreement.
INDEPENDENT AUDITORS
The financial statements contained in the Annual Report to
shareholders for the fiscal year ended Oct. 31, 1996, were audited
by independent auditors, KPMG Peat Marwick LLP, 4200 Norwest
Center, 90 S. Seventh St., Minneapolis, MN 55402-3900. The
independent auditors also provide other accounting and tax-related
services as requested by the Fund.
FINANCIAL STATEMENTS
The Independent Auditors' Report and the Financial Statements,
including Notes to the Financial Statements and the Schedule of
Investments in Securities, contained in the 1996 Annual Report to
shareholders, pursuant to Section 30(d) of the Investment Company
Act of 1940, as amended, are hereby incorporated in this SAI by
reference. No other portion of the Annual Report, however, is
incorporated by reference.
PROSPECTUS
The prospectus for IDS International Fund dated Dec. 30, 1996, is
hereby incorporated in this SAI by reference.
<PAGE>
PAGE 60
APPENDIX A
DESCRIPTION OF THE FOUR HIGHEST BOND RATINGS
These ratings concern the quality of the issuing corporation. They
are not an opinion of the market value of the security. Such
ratings are opinions on whether the principal and interest will be
repaid when due. A security's rating may change which could affect
its price.
The four highest ratings by Moody's Investors Service, Inc. are
Aaa, Aa, A, and Baa.
Bonds rated:
Aaa are judged to be of the best quality. They carry the smallest
degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the fundamentally
strong position of such issues.
Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risk
appear somewhat larger than the Aaa securities.
A possess many favorable investment attributes and is to be
considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to
impairment some time in the future.
Baa are considered as medium-grade obligations (i.e., they are
neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well.
The four highest ratings by Standard & Poor's Corporation are AAA,
AA, A, and BBB.
AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only in small degree.
<PAGE>
PAGE 61
A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in
higher-rated categories.
BBB is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than in higher-rated
categories.
<PAGE>
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APPENDIX B
FOREIGN CURRENCY TRANSACTIONS
Since investments in foreign countries usually involve currencies
of foreign countries, and since the Fund may hold cash and cash-
equivalent investments in foreign currencies, the value of the
Fund's assets as measured in U.S. dollars may be affected favorably
or unfavorably by changes in currency exchange rates and exchange
control regulations. Also, the Fund may incur costs in connection
with conversions between various currencies.
Spot Rates and Forward Contracts. The Fund conducts its foreign
currency exchange transactions either at the spot (cash) rate
prevailing in the foreign currency exchange market or by entering
into forward currency exchange contracts (forward contracts) as a
hedge against fluctuations in future foreign exchange rates. A
forward contract involves an obligation to buy or sell a specific
currency at a future date, which may be any fixed number of days
from the contract date, at a price set at the time of the contract.
These contracts are traded in the interbank market conducted
directly between currency traders (usually large commercial banks)
and their customers. A forward contract generally has no deposit
requirements. No commissions are charged at any stage for trades.
The Fund may enter into forward contracts to settle a security
transaction or handle dividend and interest collection. When the
Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency or has been notified of a
dividend or interest payment, it may desire to lock in the price of
the security or the amount of the payment in dollars. By entering
into a forward contract, the Fund will be able to protect itself
against a possible loss resulting from an adverse change in the
relationship between different currencies from the date the
security is purchased or sold to the date on which payment is made
or received or when the dividend or interest is actually received.
The Fund also may enter into forward contracts when management of
the Fund believes the currency of a particular foreign country may
suffer a substantial decline against another currency. It may
enter into a forward contract to sell, for a fixed amount of
dollars, the amount of foreign currency approximating the value of
some or all of the Fund's securities denominated in such foreign
currency. The precise matching of forward contract amounts and the
value of securities involved generally will not be possible since
the future value of such securities in foreign currencies more than
likely will change between the date the forward contract is entered
into and the date it matures. The projection of short-term
currency market movements is extremely difficult and successful
execution of a short-term hedging strategy is highly uncertain.
The Fund will not enter into such forward contracts or maintain a
net exposure to such contracts when consummating the contracts
would obligate the Fund to deliver an amount of foreign currency in
excess of the value of the Fund's securities or other assets
denominated in that currency.
<PAGE>
PAGE 63
The Fund will designate cash or securities in an amount equal to
the value of the Fund's total assets committed to consummating
forward contracts entered into under the second circumstance set
forth above. If the value of the securities declines, additional
cash or securities will be designated on a daily basis so that the
value of the cash or securities will equal the amount of the Fund's
commitments on such contracts.
At maturity of a forward contract, the Fund may either sell the
security and make delivery of the foreign currency or retain the
security and terminate its contractual obligation to deliver the
foreign currency by purchasing an offsetting contract with the same
currency trader obligating it to buy, on the same maturity date,
the same amount of foreign currency.
If the Fund retains the security and engages in an offsetting
transaction, the Fund will incur a gain or a loss (as described
below) to the extent there has been movement in forward contract
prices. If the Fund engages in an offsetting transaction, it may
subsequently enter into a new forward contract to sell the foreign
currency. Should forward prices decline between the date the Fund
enters into a forward contract for selling foreign currency and the
date it enters into an offsetting contract for purchasing the
foreign currency, the Fund will realize a gain to the extent that
the price of the currency it has agreed to sell exceeds the price
of the currency it has agreed to buy. Should forward prices
increase, the Fund will suffer a loss to the extent the price of
the currency it has agreed to buy exceeds the price of the currency
it has agreed to sell.
It is impossible to forecast what the market value of securities
will be at the expiration of a contract. Accordingly, it may be
necessary for the Fund to buy additional foreign currency on the
spot market (and bear the expense of such purchase) if the market
value of the security is less than the amount of foreign currency
the Fund is obligated to deliver and a decision is made to sell the
security and make delivery of the foreign currency. Conversely, it
may be necessary to sell on the spot market some of the foreign
currency received on the sale of the portfolio security if its
market value exceeds the amount of foreign currency the Fund is
obligated to deliver.
The Fund's dealing in forward contracts will be limited to the
transactions described above. This method of protecting the value
of the Fund's securities against a decline in the value of a
currency does not eliminate fluctuations in the underlying prices
of the securities. It simply establishes a rate of exchange that
can be achieved at some point in time. Although such forward
contracts tend to minimize the risk of loss due to a decline in
value of hedged currency, they tend to limit any potential gain
that might result should the value of such currency increase.
Although the Fund values its assets each business day in terms of
U.S. dollars, it does not intend to convert its foreign currencies
into U.S. dollars on a daily basis. It will do so from time to
<PAGE>
PAGE 64
time, and shareholders should be aware of currency conversion
costs. Although foreign exchange dealers do not charge a fee for
conversion, they do realize a profit based on the difference
(spread) between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign
currency to the Fund at one rate, while offering a lesser rate of
exchange should the Fund desire to resell that currency to the
dealer.
Options on Foreign Currencies. The Fund may buy put and write
covered call options on foreign currencies for hedging purposes.
For example, a decline in the dollar value of a foreign currency in
which securities are denominated will reduce the dollar value of
such securities, even if their value in the foreign currency
remains constant. In order to protect against such diminutions in
the value of securities, the Fund may buy put options on the
foreign currency. If the value of the currency does decline, the
Fund will have the right to sell such currency for a fixed amount
in dollars and will thereby offset, in whole or in part, the
adverse effect on its portfolio which otherwise would have
resulted.
As in the case of other types of options, however, the benefit to
the Fund derived from purchases of foreign currency options will be
reduced by the amount of the premium and related transaction costs.
In addition, where currency exchange rates do not move in the
direction or to the extent anticipated, the Fund could sustain
losses on transactions in foreign currency options which would
require it to forego a portion or all of the benefits of
advantageous changes in such rates.
The Fund may write options on foreign currencies for the same types
of hedging purposes. For example, when the Fund anticipates a
decline in the dollar value of foreign-denominated securities due
to adverse fluctuations in exchange rates it could, instead of
purchasing a put option, write a call option on the relevant
currency. If the expected decline occurs, the option will most
likely not be exercised and the diminution in value of securities
will be fully or partially offset by the amount of the premium
received.
As in the case of other types of options, however, the writing of a
foreign currency option will constitute only a partial hedge up to
the amount of the premium, and only if rates move in the expected
direction. If this does not occur, the option may be exercised and
the Fund would be required to buy or sell the underlying currency
at a loss which may not be offset by the amount of the premium.
Through the writing of options on foreign currencies, the Fund also
may be required to forego all or a portion of the benefits which
might otherwise have been obtained from favorable movements on
exchange rates.
All options written on foreign currencies will be covered. An
option written on foreign currencies is covered if the Fund holds
currency sufficient to cover the option or has an absolute and
<PAGE>
PAGE 65
immediate right to acquire that currency without additional cash
consideration upon conversion of assets denominated in that
currency or exchange of other currency held in its portfolio. An
option writer could lose amounts substantially in excess of its
initial investments, due to the margin and collateral requirements
associated with such positions.
Options on foreign currencies are traded through financial
institutions acting as market-makers, although foreign currency
options also are traded on certain national securities exchanges,
such as the Philadelphia Stock Exchange and the Chicago Board
Options Exchange, subject to SEC regulation. In an over-the-
counter trading environment, many of the protections afforded to
exchange participants will not be available. For example, there
are no daily price fluctuation limits, and adverse market movements
could therefore continue to an unlimited extent over a period of
time. Although the purchaser of an option cannot lose more than
the amount of the premium plus related transaction costs, this
entire amount could be lost.
Foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the Options
Clearing Corporation (OCC), thereby reducing the risk of
counterparty default. Further, a liquid secondary market in
options traded on a national securities exchange may be more
readily available than in the over-the-counter market, potentially
permitting the Fund to liquidate open positions at a profit prior
to exercise or expiration, or to limit losses in the event of
adverse market movements.
The purchase and sale of exchange-traded foreign currency options,
however, is subject to the risks of availability of a liquid
secondary market described above, as well as the risks regarding
adverse market movements, margining of options written, the nature
of the foreign currency market, possible intervention by
governmental authorities and the effects of other political and
economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-
counter market. For example, exercise and settlement of such
options must be made exclusively through the OCC, which has
established banking relationships in certain foreign countries for
the purpose. As a result, the OCC may, if it determines that
foreign governmental restrictions or taxes would prevent the
orderly settlement of foreign currency option exercises, or would
result in undue burdens on OCC or its clearing member, impose
special procedures on exercise and settlement, such as technical
changes in the mechanics of delivery of currency, the fixing of
dollar settlement prices or prohibitions on exercise.
Foreign Currency Futures and Related Options. The Fund may enter
into currency futures contracts to sell currencies. It also may
buy put options and write covered call options on currency futures.
Currency futures contracts are similar to currency forward
contracts, except that they are traded on exchanges (and have
margin requirements) and are standardized as to contract size and
<PAGE>
PAGE 66
delivery date. Most currency futures call for payment of delivery
in U.S. dollars. The Fund may use currency futures for the same
purposes as currency forward contracts, subject to Commodity
Futures Trading Commission (CFTC) limitations. All futures
contracts are aggregated for purposes of the percentage
limitations.
Currency futures and options on futures values can be expected to
correlate with exchange rates, but will not reflect other factors
that may affect the values of the Fund's investments. A currency
hedge, for example, should protect a Yen-denominated bond against a
decline in the Yen, but will not protect the Fund against price
decline if the issuer's creditworthiness deteriorates. Because the
value of the Fund's investments denominated in foreign currency
will change in response to many factors other than exchange rates,
it may not be possible to match the amount of a forward contract to
the value of the Fund's investments denominated in that currency
over time.
The Fund will hold securities or other options or futures positions
whose values are expected to offset its obligations. The Fund will
not enter into an option or futures position that exposes the Fund
to an obligation to another party unless it owns either (i) an
offsetting position in securities or (ii) cash, receivables and
short-term debt securities with a value sufficient to cover its
potential obligations.
<PAGE>
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APPENDIX C
OPTIONS AND STOCK INDEX FUTURES CONTRACTS
The Fund may buy or write options traded on any U.S. or foreign
exchange or in the over-the-counter market. The Fund may enter
into stock index futures contracts traded on any U.S. or foreign
exchange. The Fund also may buy or write put and call options on
these futures and on stock indexes. Options in the over-the-
counter market will be purchased only when the investment manager
believes a liquid secondary market exists for the options and only
from dealers and institutions the investment manager believes
present a minimal credit risk. Some options are exercisable only
on a specific date. In that case, or if a liquid secondary market
does not exist, the Fund could be required to buy or sell
securities at disadvantageous prices, thereby incurring losses.
OPTIONS. An option is a contract. A person who buys a call option
for a security has the right to buy the security at a set price for
the length of the contract. A person who sells a call option is
called a writer. The writer of a call option agrees to sell the
security at the set price when the buyer wants to exercise the
option, no matter what the market price of the security is at that
time. A person who buys a put option has the right to sell a
security at a set price for the length of the contract. A person
who writes a put option agrees to buy the security at the set price
if the purchaser wants to exercise the option, no matter what the
market price of the security is at that time. An option is covered
if the writer owns the security (in the case of a call) or sets
aside the cash or securities of equivalent value (in the case of a
put) that would be required upon exercise.
The price paid by the buyer for an option is called a premium. In
addition the buyer generally pays a broker a commission. The
writer receives a premium, less another commission, at the time the
option is written. The cash received is retained by the writer
whether or not the option is exercised. A writer of a call option
may have to sell the security for a below-market price if the
market price rises above the exercise price. A writer of a put
option may have to pay an above-market price for the security if
its market price decreases below the exercise price. The risk of
the writer is potentially unlimited, unless the option is covered.
Options can be used to produce incremental earnings, protect gains
and facilitate buying and selling securities for investment
purposes. The use of options may benefit the Fund and its
shareholders by improving the Fund's liquidity and by helping to
stabilize the value of its net assets.
Buying options. Put and call options may be used as a trading
technique to facilitate buying and selling securities for
investment reasons. Options are used as a trading technique to
take advantage of any disparity between the price of the underlying
security in the securities market and its price on the options
market. It is anticipated the trading technique will be utilized
only to effect a transaction when the price of the security plus <PAGE>
PAGE 68
the option price will be as good or better than the price at which
the security could be bought or sold directly. When the option is
purchased, the Fund pays a premium and a commission. It then pays
a second commission on the purchase or sale of the underlying
security when the option is exercised. For record keeping and tax
purposes, the price obtained on the purchase of the underlying
security will be the combination of the exercise price, the premium
and both commissions. When using options as a trading technique,
commissions on the option will be set as if only the underlying
securities were traded.
Put and call options also may be held by the Fund for investment
purposes. Options permit the Fund to experience the change in the
value of a security with a relatively small initial cash
investment.
The risk the Fund assumes when it buys an option is the loss of the
premium. To be beneficial to the Fund, the price of the underlying
security must change within the time set by the option contract.
Furthermore, the change must be sufficient to cover the premium
paid, the commissions paid both in the acquisition of the option
and in a closing transaction or in the exercise of the option and
sale (in the case of a call) or purchase (in the case of a put) of
the underlying security. Even then the price change in the
underlying security does not ensure a profit since prices in the
option market may not reflect such a change.
Writing covered options. The Fund will write covered options when
it feels it is appropriate and will follow these guidelines:
'All options written by the Fund will be covered. For covered call
options if a decision is made to sell the security, the Fund will
attempt to terminate the option contract through a closing purchase
transaction.
'The Fund will deal only in standard option contracts traded on
national securities exchanges or those that may be quoted on NASDAQ
(a system of price quotations developed by the National Association
of Securities Dealers, Inc.)
'The Fund will write options only as permitted under federal or
state laws or regulations, such as those that limit the amount of
total assets subject to the options. While no limit has been set
by the Fund, it will conform to the requirements of those states.
For example, California limits the writing of options to 50% of the
assets of a fund.
Net premiums on call options closed or premiums on expired call
options are treated as short-term capital gains. Since the Fund is
taxed as a regulated investment company under the Internal Revenue
Code, any gains on options and other securities held less than
three months must be limited to less than 30% of its annual gross
income.
If a covered call option is exercised, the security is sold by the
Fund. The premium received upon writing the option is added to the
proceeds received from the sale of the security. The Fund will
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PAGE 69
recognize a capital gain or loss based upon the difference between
the proceeds and the security's basis. Premiums received from
writing outstanding call options are included as a deferred credit
in the Statement of Assets and Liabilities and adjusted daily to
the current market value.
Options are valued at the close of the New York Stock Exchange. An
option listed on a national exchange, CBOE or NASDAQ will be valued
at the last-quoted sales price or, if such a price is not readily
available, at the mean of the last bid and asked prices.
STOCK INDEX FUTURES CONTRACTS. Stock index futures contracts are
commodity contracts listed on commodity exchanges. They currently
include contracts on the Standard & Poor's 500 Stock Index (S&P 500
Index) and other broad stock market indexes such as the New York
Stock Exchange Composite Stock Index and the Value Line Composite
Stock Index, as well as narrower sub-indexes such as the S&P 100
Energy Stock Index and the New York Stock Exchange Utilities Stock
Index. A stock index assigns relative values to common stocks
included in the index and the index fluctuates with the value of
the common stocks so included.
A futures contract is a legal agreement between a buyer or seller
and the clearinghouse of a futures exchange in which the parties
agree to make a cash settlement on a specified future date in an
amount determined by the stock index on the last trading day of the
contract. The amount is a specified dollar amount (usually $100 or
$500) multiplied by the difference between the index value on the
last trading day and the value on the day the contract was struck.
For example, the S&P 500 Index consists of 500 selected common
stocks, most of which are listed on the New York Stock Exchange.
The S&P 500 Index assigns relative weightings to the common stocks
included in the Index, and the Index fluctuates with changes in the
market values of those stocks. In the case of S&P 500 Index
futures contracts, the specified multiple is $500. Thus, if the
value of the S&P 500 Index were 150, the value of one contract
would be $75,000 (150 x $500). Unlike other futures contracts, a
stock index futures contract specifies that no delivery of the
actual stocks making up the index will take place. Instead,
settlement in cash must occur upon the termination of the contract.
For example, excluding any transaction costs, if the Fund enters
into one futures contract to buy the S&P 500 Index at a specified
future date at a contract value of 150 and the S&P 500 Index is at
154 on that future date, the Fund will gain $500 x (154-150) or
$2,000. If the Fund enters into one futures contract to sell the
S&P 500 Index at a specified future date at a contract value of 150
and the S&P 500 Index is at 152 on that future date, the Fund will
lose $500 x (152-150) or $1,000.
Unlike the purchase or sale of an equity security, no price would
be paid or received by the Fund upon entering into futures
contracts. However, the Fund would be required to deposit with its
custodian, in a segregated account in the name of the futures
broker, an amount of cash or U.S. Treasury bills equal to <PAGE>
PAGE 70
approximately 5% of the contract value. This amount is known as
initial margin. The nature of initial margin in futures
transactions is different from that of margin in security
transactions in that futures contract margin does not involve
borrowing funds by the Fund to finance the transactions. Rather,
the initial margin is in the nature of a performance bond or good-
faith deposit on the contract that is returned to the Fund upon
termination of the contract, assuming all contractual obligations
have been satisfied.
Subsequent payments, called variation margin, to and from the
broker would be made on a daily basis as the price of the
underlying stock index fluctuates, making the long and short
positions in the contract more or less valuable, a process known as
marking to market. For example, when the Fund enters into a
contract in which it benefits from a rise in the value of an index
and the price of the underlying stock index has risen, the Fund
will receive from the broker a variation margin payment equal to
that increase in value. Conversely, if the price of the underlying
stock index declines, the Fund would be required to make a
variation margin payment to the broker equal to the decline in
value.
How the Fund Would Use Stock Index Futures Contracts. The Fund
intends to use stock index futures contracts and related options
for hedging and not for speculation. Hedging permits the Fund to
gain rapid exposure to or protect itself from changes in the
market. For example, the Fund may find itself with a high cash
position at the beginning of a market rally. Conventional
procedures of purchasing a number of individual issues entail the
lapse of time and the possibility of missing a significant market
movement. By using futures contracts, the Fund can obtain
immediate exposure to the market and benefit from the beginning
stages of a rally. The buying program can then proceed and once it
is completed (or as it proceeds), the contracts can be closed.
Conversely, in the early stages of a market decline, market
exposure can be promptly offset by entering into stock index
futures contracts to sell units of an index and individual stocks
can be sold over a longer period under cover of the resulting short
contract position.
The Fund may enter into contracts with respect to any stock index
or sub-index. To hedge the Fund's portfolio successfully, however,
the Fund must enter into contracts with respect to indexes or sub-
indexes whose movements will have a significant correlation with
movements in the prices of the Fund's securities.
Special Risks of Transactions in Stock Index Futures Contracts
1. Liquidity. The Fund may elect to close some or all of its
contracts prior to expiration. The purpose of making such a move
would be to reduce or eliminate the hedge position held by the
Fund. The Fund may close its positions by taking opposite
positions. Final determinations of variation margin are then made,
additional cash as required is paid by or to the Fund, and the Fund
realizes a gain or a loss.
<PAGE>
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Positions in stock index futures contracts may be closed only on an
exchange or board of trade providing a secondary market for such
futures contracts. For example, futures contracts transactions can
currently be entered into with respect to the S&P 500 Stock Index
on the Chicago Mercantile Exchange, the New York Stock Exchange
Composite Stock Index on the New York Futures Exchange and the
Value Line Composite Stock Index on the Kansas City Board of Trade.
Although the Fund intends to enter into futures contracts only on
exchanges or boards of trade where there appears to be an active
secondary market, there is no assurance that a liquid secondary
market will exist for any particular contract at any particular
time. In such event, it may not be possible to close a futures
contract position, and in the event of adverse price movements, the
Fund would have to make daily cash payments of variation margin.
Such price movements, however, will be offset all or in part by the
price movements of the securities subject to the hedge. Of course,
there is no guarantee the price of the securities will correlate
with the price movements in the futures contract and thus provide
an offset to losses on a futures contract.
2. Hedging Risks. There are several risks in using stock index
futures contracts as a hedging device. One risk arises because the
prices of futures contracts may not correlate perfectly with
movements in the underlying stock index due to certain market
distortions. First, all participants in the futures market are
subject to initial margin and variation margin requirements.
Rather than making additional variation margin payments, investors
may close the contracts through offsetting transactions which could
distort the normal relationship between the index and futures
markets. Second, the margin requirements in the futures market are
lower than margin requirements in the securities market, and as a
result the futures market may attract more speculators than does
the securities market. Increased participation by speculators in
the futures market also may cause temporary price distortions.
Because of price distortion in the futures market and because of
imperfect correlation between movements in stock indexes and
movements in prices of futures contracts, even a correct forecast
of general market trends may not result in a successful hedging
transaction over a short period.
Another risk arises because of imperfect correlation between
movements in the value of the futures contracts and movements in
the value of securities subject to the hedge. If this occurred,
the Fund could lose money on the contracts and also experience a
decline in the value of its portfolio securities. While this could
occur, the investment manager believes that over time the value of
the Fund's portfolio will tend to move in the same direction as the
market indexes and will attempt to reduce this risk, to the extent
possible, by entering into futures contracts on indexes whose
movements it believes will have a significant correlation with
movements in the value of the Fund's securities sought to be
hedged. It also is possible that if the Fund has hedged against a
decline in the value of the stocks held in its portfolio and stock
prices increase instead, the Fund will lose part or all of the
benefit of the increased value of its stock which it has hedged
because it will have offsetting losses in its futures positions.
In addition, in such situations, if the Fund has insufficient cash,
<PAGE>
PAGE 72
it may have to sell securities to meet daily variation margin
requirements. Such sales of securities may be, but will not
necessarily be, at increased prices which reflect the rising
market. The Fund may have to sell securities at a time when it may
be disadvantageous to do so.
OPTIONS ON STOCK INDEX FUTURES CONTRACTS. Options on stock index
futures contracts are similar to options on stock except that
options on futures contracts give the purchaser the right, in
return for the premium paid, to assume a position in a stock index
futures contract (a long position if the option is a call and a
short position if the option is a put) at a specified exercise
price at any time during the period of the option. If the option
is closed instead of exercised, the holder of the option receives
an amount that represents the amount by which the market price of
the contract exceeds (in the case of a call) or is less than (in
the case of a put) the exercise price of the option on the futures
contract. If the option does not appreciate in value prior to the
exercise date, the Fund will suffer a loss of the premium paid.
OPTIONS ON STOCK INDEXES. Options on stock indexes are securities
traded on national securities exchanges. An option on a stock
index is similar to an option on a futures contract except all
settlements are in cash. A fund exercising a put, for example,
would receive the difference between the exercise price and the
current index level. Such options would be used in the same manner
as options on futures contracts.
SPECIAL RISKS OF TRANSACTIONS IN OPTIONS ON STOCK INDEX FUTURES
CONTRACTS AND OPTIONS ON STOCK INDEXES. As with options on stocks,
the holder of an option on a futures contract or on a stock index
may terminate a position by selling an option covering the same
contract or index and having the same exercise price and expiration
date. The ability to establish and close out positions on such
options will be subject to the development and maintenance of a
liquid secondary market. The Fund will not purchase options unless
the market for such options has developed sufficiently, so that the
risks in connection with options are not greater than the risks in
connection with stock index futures contracts transactions
themselves. Compared to using futures contracts, purchasing
options involves less risk to the Fund because the maximum amount
at risk is the premium paid for the options (plus transaction
costs). There may be circumstances, however, when using an option
would result in a greater loss to the Fund than using a futures
contract, such as when there is no movement in the level of the
stock index.
TAX TREATMENT. As permitted under federal income tax laws, the
Fund intends to identify futures contracts as mixed straddles and
not mark them to market, that is, not treat them as having been
sold at the end of the year at market value. Such an election may
result in the Fund being required to defer recognizing losses
incurred by entering into futures contracts and losses on
underlying securities identified as being hedged against.
<PAGE>
PAGE 73
Federal income tax treatment of gains or losses from transactions
in options on futures contracts and indexes will depend on whether
such option is a section 1256 contract. If the option is a non-
equity option, the Fund will either make a 1256(d) election and
treat the option as a mixed straddle or mark to market the option
at fiscal year end and treat the gain/loss as 40% short-term and
60% long-term. Certain provisions of the Internal Revenue Code may
also limit the Fund's ability to engage in futures contracts and
related options transactions. For example, at the close of each
quarter of the Fund's taxable year, at least 50% of the value of
its assets must consist of cash, government securities and other
securities, subject to certain diversification requirements. Less
than 30% of its gross income must be derived from sales of
securities held less than three months.
The IRS has ruled publicly that an exchange-traded call option is a
security for purposes of the 50%-of-assets test and that its issuer
is the issuer of the underlying security, not the writer of the
option, for purposes of the diversification requirements. In order
to avoid realizing a gain within the three-month period, the Fund
may be required to defer closing out a contract beyond the time
when it might otherwise be advantageous to do so. The Fund also
may be restricted in purchasing put options for the purpose of
hedging underlying securities because of applying the short sale
holding period rules with respect to such underlying securities.
Accounting for futures contracts will be according to generally
accepted accounting principles. Initial margin deposits will be
recognized as assets due from a broker (the Fund's agent in
acquiring the futures position). During the period the futures
contract is open, changes in value of the contract will be
recognized as unrealized gains or losses by marking to market on a
daily basis to reflect the market value of the contract at the end
of each day's trading. Variation margin payments will be made or
received depending upon whether gains or losses are incurred. All
contracts and options will be valued at the last-quoted sales price
on their primary exchange.
<PAGE>
PAGE 74
APPENDIX D
MORTGAGE-BACKED SECURITIES
A mortgage pass-through certificate is one that represents an
interest in a pool, or group, of mortgage loans assembled by the
Government National Mortgage Association (GNMA), Federal Home Loan
Mortgage Corporation (FHLMC), Federal National Mortgage Association
(FNMA) or non-governmental entities. In pass-through certificates,
both principal and interest payments, including prepayments, are
passed through to the holder of the certificate. Prepayments on
underlying mortgages result in a loss of anticipated interest, and
the actual yield (or total return) to the Fund, which is influenced
by both stated interest rates and market conditions, may be
different than the quoted yield on certificates. Some U.S.
government securities may be purchased on a when-issued basis,
which means that it may take as long as 45 days after the purchase
before the securities are delivered to the Fund.
Stripped Mortgage-Backed Securities. The Fund may invest in
stripped mortgage-backed securities. Generally, there are two
classes of stripped mortgage-backed securities: Interest Only (IO)
and Principal Only (PO). IOs entitle the holder to receive
distributions consisting of all or a portion of the interest on the
underlying pool of mortgage loans or mortgage-backed securities.
POs entitle the holder to receive distributions consisting of all
or a portion of the principal of the underlying pool of mortgage
loans or mortgage-backed securities. The cash flows and yields on
IOs and POs are extremely sensitive to the rate of principal
payments (including prepayments) on the underlying mortgage loans
or mortgage-backed securities. A rapid rate of principal payments
may adversely affect the yield to maturity of IOs. A slow rate of
principal payments may adversely affect the yield to maturity of
POs. On an IO, if prepayments of principal are greater than
anticipated, an investor may incur substantial losses. If
prepayments of principal are slower than anticipated, the yield on
a PO will be affected more severely than would be the case with a
traditional mortgage-backed security.
Mortgage-Backed Security Spread Options. The Fund may purchase
mortgage-backed security (MBS) put spread options and write covered
MBS call spread options. MBS spread options are based upon the
changes in the price spread between a specified mortgage-backed
security and a like-duration Treasury security. MBS spread options
are traded in the OTC market and are of short duration, typically
one to two months. The Fund would buy or sell covered MBS call
spread options in situations where mortgage-backed securities are
expected to underperform like-duration Treasury securities.
<PAGE>
PAGE 75
APPENDIX E
DOLLAR-COST AVERAGING
A technique that works well for many investors is one that
eliminates random buy and sell decisions. One such system is
dollar-cost averaging. Dollar-cost averaging involves building a
portfolio through the investment of fixed amounts of money on a
regular basis regardless of the price or market condition. This
may enable an investor to smooth out the effects of the volatility
of the financial markets. By using this strategy, more shares will
be purchased when the price is low and less when the price is high.
As the accompanying chart illustrates, dollar-cost averaging tends
to keep the average price paid for the shares lower than the
average market price of shares purchased, although there is no
guarantee.
While this does not ensure a profit and does not protect against a
loss if the market declines, it is an effective way for many
shareholders who can continue investing through changing market
conditions to accumulate shares in a fund to meet long-term goals.
Dollar-cost averaging
___________________________________________________________________
Regular Market Price Shares
Investment of a Share Acquired
$100 $6.00 16.7
100 4.00 25.0
100 4.00 25.0
100 6.00 16.7
100 5.00 20.0
$500 $25.00 103.4
Average market price of a share over 5 periods:
$5.00 ($25.00 divided by 5).
The average price you paid for each share:
$4.84 ($500 divided by 103.4).
<PAGE>
<PAGE>
PAGE 76
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS:
List of financial statements filed as part of this Post-
Effective Amendment to the Registration Statement:
- Independent Auditors' Report dated December 6, 1996
- Statement of Assets and Liabilities, October 31, 1996
- Statement of Operations, Year ended October 31, 1996
- Statements of Changes in Net Assets, for the two-year period
ended October 31, 1995 and October 31, 1996
- Notes to Financial Statements
- Investments in Securities, October 31, 1996
- Notes to Investments in Securities
1. Copy of Articles of Incorporation amended June 12, 1987, filed
as Exhibit 1 to Post-Effective No. 5 to this Registration
Statement, is herein incorporated by reference.
2. Copy of By-laws, as amended January 12, 1989, filed
electronically as Exhibit 2 to Post-Effective Amendment No. 9
to this Registration Statement, is herein incorporated by
reference.
3. Not Applicable.
4. Form of Stock certificate for common stock filed as Exhibit
No. 4 to original Registration Statement No. 2-92309, is
herein incorporated by reference.
5(a). Copy of Investment Management Services Agreement between
Registrant and American Express Financial Corporation, dated
March 20, 1995, is filed electronically herewith.
5(b). Copy of Investment Advisory Agreement between IDS Financial
Corporation and IDS International Inc., filed as Exhibit 5(b)
to Post-Effective Amendment No. 2 to this Registration
Statement is herein incorporated by reference. Attachment to
Investment Advisory Agreement, dated October 27, 1989, filed
electronically as attached to Exhibit 5(b) to Post-Effective
Amendment No. 9 to this Registration Statement, is herein
incorporated by reference.
6. Copy of Distribution Agreement between Registrant and American
Express Financial Advisors Inc., dated March 20, 1995, is
filed electronically herewith.
7. All employees are eligible to participate in a profit sharing
plan. Entry into the plan is Jan. 1 or July 1. The
Registrant contributes each year an amount up to 15 percent of
their annual salaries, the maximum deductible amount permitted
under Section 404(a) of the Internal Revenue Code.
<PAGE>
PAGE 77
8(a). Copy of Custodian Agreement between Registrant and American
Express Trust Company, dated March 20, 1995, is filed
electronically herewith.
8(b). Copy of Custody Agreement between Morgan Stanley Trust
Company and IDS Bank and Trust dated May, 1993, is filed
electronically herewith.
9(a). Copy of Transfer Agency Agreement between Registrant and
American Express Financial Corporation, dated March 20, 1995,
is filed electronically herewith.
9(b). Copy of License Agreement, dated January 25, 1988, between
Registrant and IDS Financial Corporation, filed electronically
as Exhibit 9(b) to Post-Effective Amendment No. 9 to this
Registration Statement, is herein incorporated by reference.
9(c). Copy of Shareholder Service Agreement between Registrant and
American Express Financial Advisors Inc., dated March 20,
1995, is filed electronically herewith.
9(d). Copy of Administrative Services Agreement between Registrant
and American Express Financial Corporation, dated March 20,
1995, is filed electronically herewith.
9(e). Copy of Agreement and Plan of Reorganization, dated Sept. 8,
1994, between IDS Strategy Fund, Inc. and IDS International
Fund, Inc., filed electronically as Exhibit 4 to Registrant's
Pre-Effective Amendment No. 1 on Form N-14, is incorporated
herein by reference.
10. Opinion and consent of counsel as to the legality of the
securities being registered is filed with Registrant's most
recent 24f-2 Notice.
11. Independent Auditors' Consent, is filed electronically
herewith.
12. None.
13. Not Applicable.
14. Forms of Keogh, IRA and other retirement plans, filed as
Exhibits 14(a)through 14(n) to IDS Growth Fund, Inc., Post-
Effective Amendment No. 34 to Registration Statement No. 2-
38355, are incorporated herein by reference.
15. Copy of Plan and Agreement of Distribution between Registrant
and American Express Financial Advisors Inc., dated March 20,
1995, is filed electronically herewith.
16. Copy of Schedule for computation of each performance quotation
provided in the Registration Statement in response to Item 22,
filed as Exhibit 16 to Post-Effective Amendment No. 15, to
Registration Statement No. 2-92309, is herein incorporated by
reference.
<PAGE>
PAGE 78
17. Financial Data Schedule, is filed electronically herewith.
18. Copy of Plan pursuant to Rule 18f-3 under the 1940 Act is
filed electronically as Exhibit 18 to Registrant's Post-
Effective Amendment No. 22 to Registration Statement No. 2-
92309, is incorporated herein by reference.
19(a). Directors' Power of Attorney to sign Amendments to this
Registration Statement, dated Nov. 10, 1994, filed
electronically as Exhibit 18(a) to Registrant's Post-Effective
Amendment No. 20, is incorporated herein by reference.
19(b). Officers' Power of Attorney to sign Amendments to this
Registration Statement, dated Nov. 1, 1995, filed
electronically as Exhibit 19(b) to Registrant's Post-Effective
Amendment No. 24 to Registration Statement No. 2-92309, is
incorporated herein by reference.
Item 25. Persons Controlled by or Under Common Control with
Registrant
None.
Item 26. Number of Holders of Securities
(1) (2)
Number of Record
Holders as of
Title of Class Dec. 12, 1996
IDS International
Common Stock
Class A 118,324
Class B 66,995
Class Y 14,331
Item 27. Indemnification
The Articles of Incorporation of the registrant provide that the
Fund shall indemnify any person who was or is a party or is
threatened to be made a party, by reason of the fact that she or he
is or was a director, officer, employee or agent of the Fund, or is
or was serving at the request of the Fund as a director, officer,
employee or agent of another company, partnership, joint venture,
trust or other enterprise, to any threatened, pending or completed
action, suit or proceeding, wherever brought, and the Fund may
purchase liability insurance and advance legal expenses, all to the
fullest extent permitted by the laws of the State of Minnesota, as
now existing or hereafter amended. The By-laws of the registrant
provide that present or former directors or officers of the Fund
made or threatened to be made a party to or involved (including as
a witness) in an actual or threatened action, suit or proceeding
shall be indemnified by the Fund to the full extent authorized by
the Minnesota Business Corporation Act, all as more fully set forth
in the By-laws filed as an exhibit to this registration statement.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing <PAGE>
PAGE 79
provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
Any indemnification hereunder shall not be exclusive of any other
rights of indemnification to which the directors, officers,
employees or agents might otherwise be entitled. No
indemnification shall be made in violation of the Investment
Company Act of 1940.
<PAGE>
PAGE 80
<PAGE>
PAGE 1<PAGE>
Item 29(c). Not applicable.
Item 30. Location of Accounts and Records
American Express Financial Corporation
IDS Tower 10
Minneapolis, MN 55440
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
(a) Not Applicable.
(b) Not Applicable.
(c) The Registrant undertakes to furnish each person
to whom a prospectus is delivered with a copy of
the Registrant's latest annual report to
shareholders, upon request and without charge.
<PAGE>
PAGE 81
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, IDS International
Fund, Inc. certifies that it meets all of the requirements for
effectiveness of this Post-Effective Amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Amendment to its Registration Statement to
be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Minneapolis and State of Minnesota on
the 20th day of December, 1996.
IDS INTERNATIONAL FUND, INC.
By
Melinda S. Urion, Treasurer
By /s/ William R. Pearce**
William R. Pearce, President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by
the following persons in the capacities and on the 20th day of
December, 1996.
Signature Capacity
/s/ William R. Pearce** President, Principal
William R. Pearce Executive Officer and
Director
Director
H. Brewster Atwater, Jr.
/s/ Lynne V. Cheney* Director
Lynne V. Cheney
/s/ William H. Dudley* Director
William H. Dudley
/s/ Robert F. Froehlke* Director
Robert F. Froehlke
/s/ David R. Hubers* Director
David R. Hubers
/s/ Heinz F. Hutter* Director
Heinz F. Hutter
<PAGE>
PAGE 82
Signature Capacity
/s/ Anne P. Jones* Director
Anne P. Jones
/s/ Melvin R. Laird* Director
Melvin R. Laird
/s/ Edson W. Spencer* Director
Edson W. Spencer
/s/ John R. Thomas* Director
John R. Thomas
/s/ Wheelock Whitney* Director
Wheelock Whitney
/s/ C. Angus Wurtele* Director
C. Angus Wurtele
*Signed pursuant to Directors' Power of Attorney dated November 10,
1994, filed electronically as Exhibit 18(a) to Registrant's Post-
Effective Amendment No. 20, by:
Leslie L. Ogg
**Signed pursuant to Officers' Power of Attorney dated November 1,
1995, filed electronically as Exhibit 19(b) to Registrant's Post-
Effective Amendment No. 24 to Registration Statement No. 2-92309
by:
Leslie L. Ogg
<PAGE>
PAGE 83
CONTENTS OF THIS POST-EFFECTIVE AMENDMENT NO. 25 TO
REGISTRATION STATEMENT No. 2-92309
This Post-Effective Amendment comprises the following papers and
documents:
The facing sheet.
Cross reference sheet.
Part A.
The prospectus.
Part B.
Statement of Additional Information.
Financial Statements.
Part C.
Other information.
The signatures.
<PAGE>
PAGE 1
IDS International Fund, Inc.
File No. 2-92309/811-4075
EXHIBIT INDEX
Exhibit 5(a): Copy of Investment Management Services Agreement.
Exhibit 6: Copy of Distribution Agreement.
Exhibit 8(a): Copy of Custodian Agreement.
Exhibit 8(b): Copy of Custody Agreement.
Exhibit 9(a): Copy of Transfer Agency Agreement.
Exhibit 9(c): Copy of Shareholder Service Agreement.
Exhibit 9(d): Copy of Administrative Services Agreement.
Exhibit 11: Independent Auditors' Consent.
Exhibit 15: Copy of Plan and Agreement of Distribution.
Exhibit 17: Financial Data Schedule.
<PAGE>
PAGE 1
INVESTMENT MANAGEMENT SERVICES AGREEMENT
AGREEMENT made the 20th day of March, 1995, by and between IDS
International Fund, Inc. (the "Fund"), a Minnesota corporation, and
American Express Financial Corporation, a Delaware corporation.
Part One: INVESTMENT MANAGEMENT AND OTHER SERVICES
(1) The Fund hereby retains American Express Financial
Corporation, and American Express Financial Corporation hereby
agrees, for the period of this Agreement and under the terms and
conditions hereinafter set forth, to furnish the Fund continuously
with suggested investment planning; to determine, consistent with
the Fund's investment objectives and policies, which securities in
American Express Financial Corporation's discretion shall be
purchased, held or sold and to execute or cause the execution of
purchase or sell orders; to prepare and make available to the Fund
all necessary research and statistical data in connection
therewith; to furnish all services of whatever nature required in
connection with the management of the Fund as provided under this
Agreement; and to pay such expenses as may be provided for in Part
Three; subject always to the direction and control of the Board of
Directors (the "Board"), the Executive Committee and the authorized
officers of the Fund. American Express Financial Corporation
agrees to maintain an adequate organization of competent persons to
provide the services and to perform the functions herein mentioned.
American Express Financial Corporation agrees to meet with any
persons at such times as the Board deems appropriate for the
purpose of reviewing American Express Financial Corporation's
performance under this Agreement.
(2) American Express Financial Corporation agrees that the
investment planning and investment decisions will be in accordance
with general investment policies of the Fund as disclosed to
American Express Financial Corporation from time to time by the
Fund and as set forth in its prospectuses and registration
statements filed with the United States Securities and Exchange
Commission (the "SEC").
(3) American Express Financial Corporation agrees that it
will maintain all required records, memoranda, instructions or
authorizations relating to the acquisition or disposition of
securities for the Fund.
(4) The Fund agrees that it will furnish to American Express
Financial Corporation any information that the latter may
reasonably request with respect to the services performed or to be
performed by American Express Financial Corporation under this
Agreement.
(5) American Express Financial Corporation is authorized to
select the brokers or dealers that will execute the purchases and
sales of portfolio securities for the Fund and is directed to use
its best efforts to obtain the best available price and most
favorable execution, except as prescribed herein. Subject to prior
authorization by the Fund's Board of appropriate policies and <PAGE>
PAGE 2
procedures, and subject to termination at any time by the Board,
American Express Financial Corporation may also be authorized to
effect individual securities transactions at commission rates in
excess of the minimum commission rates available, to the extent
authorized by law, if American Express Financial Corporation
determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of
either that particular transaction or American Express Financial
Corporation's overall responsibilities with respect to the Fund and
other funds for which it acts as investment adviser.
(6) It is understood and agreed that in furnishing the Fund
with the services as herein provided, neither American Express
Financial Corporation, nor any officer, director or agent thereof
shall be held liable to the Fund or its creditors or shareholders
for errors of judgment or for anything except willful misfeasance,
bad faith, or gross negligence in the performance of its duties, or
reckless disregard of its obligations and duties under the terms of
this Agreement. It is further understood and agreed that American
Express Financial Corporation may rely upon information furnished
to it reasonably believed to be accurate and reliable.
Part Two: COMPENSATION TO INVESTMENT MANAGER
(1) The Fund agrees to pay to American Express Financial
Corporation, and American Express Financial Corporation covenants
and agrees to accept from the Fund in full payment for the services
furnished, a fee composed of an asset charge and a performance
incentive adjustment.
(a) The asset charge
(i) The asset charge for each calendar day of each year shall
be equal to the total of 1/365th (1/366th in each leap year) of the
amount computed in accordance with paragraph (ii) below. The
computation shall be made for each day on the basis of net assets
as of the close of business of the full business day two
(2) business days prior to the day for which the computation is
being made. In the case of the suspension of the computation of
net asset value, the asset charge for each day during such
suspension shall be computed as of the close of business on the
last full business day on which the net assets were computed. Net
assets as of the close of a full business day shall include all
transactions in shares of the Fund recorded on the books of the
Fund for that day.
<PAGE>
PAGE 3
(ii) The asset charge shall be based on the net assets of the
Fund as set forth in the following table.
Asset Charge
Assets Annual Rate at
(Billions) Each Asset Level
First $0.25 0.800%
Next $0.25 0.775
Next $0.25 0.750
Next $0.25 0.725
Next $1 0.700
Over $2 0.675
(b) The performance incentive adjustment
(i) The performance incentive adjustment, determined
monthly, shall be computed by measuring the percentage point
difference between the performance of one Class A share of the Fund
and the performance of the Lipper International Fund Index (the
"Index"). The performance of one Class A share of the Fund shall
be measured by computing the percentage difference, carried to two
decimal places, between the opening net asset value of one share of
the Fund and the closing net asset value of such share as of the
last business day of the period selected for comparison, adjusted
for vidends or capital gain distributions treated as reinvested at
the end of the month during which the distribution was made but
without adjustment for expenses related to a particular class of
shares. The performance of the Index will then be established by
measuring the percentage difference, carried to two decimal places,
between the beginning and ending Index for the comparison period,
with dividends or capital gain distributions on the securities
which comprise the Index being treated as reinvested at the end of
the month during which the distribution was made.
(ii) In computing the adjustment, one percentage point shall
be deducted from the difference, as determined in (b)(i) above.
The result shall be converted to a decimal value (e.g., 2.38% to
0.0238), multiplied by .01 and then multiplied by the Fund's
average net assets for the comparison period. This product next
shall be divided by 12 to put the adjustment on a monthly basis.
Where the performance of the Fund exceeds the Index, the amount so
determined shall be an increase in fees as computed under
paragraph (a). Where Fund performance is exceeded by the Index,
the amount so determined shall be a decrease in such fees. The
percentage point difference between the performance of the Fund and
that of the Index, as determined above, is limited to a maximum of
0.0012 per year.
(iii) The 12 month comparison period will roll over with each
succeeding month, so that it always equals 12 months, ending with
the month for which the performance adjustment is being computed.
(iv) If the Index ceases to be published for a period of
more than 90 days, changes in any material respect or otherwise
becomes impracticable to use for purposes of the adjustment, no
adjustment will be made under this paragraph (b) until such time as
the Board approves a substitute index.<PAGE>
PAGE 4
(2) The fee shall be paid on a monthly basis and, in the
event of the termination of this Agreement, the fee accrued shall
be prorated on the basis of the number of days that this Agreement
is in effect during the month with respect to which such payment is
made.
(3) The fee provided for hereunder shall be paid in cash by
the Fund to American Express Financial Corporation within five
business days after the last day of each month.
Part Three: ALLOCATION OF EXPENSES
(1) The Fund agrees to pay:
(a) Fees payable to American Express Financial Corporation
for its services under the terms of this Agreement.
(b) Taxes.
(c) Brokerage commissions and charges in connection with
the purchase and sale of assets.
(d) Custodian fees and charges.
(e) Fees and charges of its independent certified public
accountants for services the Fund requests.
(f) Premium on the bond required by Rule 17g-1 under the
Investment Company Act of 1940.
(g) Fees and expenses of attorneys (i) it employs in
matters not involving the assertion of a claim by a third party
against the Fund, its directors and officers, (ii) it employs in
conjunction with a claim asserted by the Board against American
Express Financial Corporation, except that American Express
Financial Corporation shall reimburse the Fund for such fees and
expenses if it is ultimately determined by a court of competent
jurisdiction, or American Express Financial Corporation agrees,
that it is liable in whole or in part to the Fund, and (iii) it
employs to assert a claim against a third party.
(h) Fees paid for the qualification and registration for
public sale of the securities of the Fund under the laws of the
United States and of the several states in which such securities
shall be offered for sale.
(i) Fees of consultants employed by the Fund.
(j) Directors, officers and employees expenses which shall
include fees, salaries, memberships, dues, travel, seminars,
pension, profit sharing, and all other benefits paid to or provided
for directors, officers and employees, directors and officers
liability insurance, errors and omissions liability insurance,
worker's compensation insurance and other expenses applicable to
the directors, officers and employees, except the Fund will not pay
any fees or expenses of any person who is an officer or employee of
American Express Financial Corporation or its affiliates.
<PAGE>
PAGE 5
(k) Filing fees and charges incurred by the Fund in
connection with filing any amendment to its articles of
incorporation, or incurred in filing any other document with the
State of Minnesota or its political subdivisions.
(l) Organizational expenses of the Fund.
(m) Expenses incurred in connection with lending portfolio
securities of the Fund.
(n) Expenses properly payable by the Fund, approved by the
Board.
(2) American Express Financial Corporation agrees to pay
all expenses associated with the services it provides under the
terms of this Agreement. Further, American Express Financial
Corporation agrees that if, at the end of any month, the expenses
of the Fund under this Agreement and any other agreement between
the Fund and American Express Financial Corporation, but excluding
those expenses set forth in (1)(b) and (1)(c) of this Part Three,
exceed the most restrictive applicable state expenses limitation,
the Fund shall not pay those expenses set forth in (1)(a) and (d)
through (n) of this Part Three to the extent necessary to keep the
Fund's expenses from exceeding the limitation, it being understood
that American Express Financial Corporation will assume all unpaid
expenses and bill the Fund for them in subsequent months but in no
event can the accumulation of unpaid expenses or billing be carried
past the end of the Fund's fiscal year.
Part Four: MISCELLANEOUS
(1) American Express Financial Corporation shall be deemed
to be an independent contractor and, except as expressly provided
or authorized in this Agreement, shall have no authority to act for
or represent the Fund.
(2) A "full business day" shall be as defined in the
By-laws.
(3) The Fund recognizes that American Express Financial
Corporation now renders and may continue to render investment
advice and other services to other investment companies and persons
which may or may not have investment policies and investments
similar to those of the Fund and that American Express Financial
Corporation manages its own investments and/or those of its
subsidiaries. American Express Financial Corporation shall be free
to render such investment advice and other services and the Fund
hereby consents thereto.
(4) Neither this Agreement nor any transaction had pursuant
hereto shall be invalidated or in any way affected by the fact that
directors, officers, agents and/or shareholders of the Fund are or
may be interested in American Express Financial Corporation or any
successor or assignee thereof, as directors, officers, stockholders
or otherwise; that directors, officers, stockholders or agents of
American Express Financial Corporation are or may be interested in
the Fund as directors, officers, shareholders, or otherwise; or
that American Express Financial Corporation or any successor or <PAGE>
PAGE 6
assignee, is or may be interested in the Fund as shareholder or
otherwise, provided, however, that neither American Express
Financial Corporation, nor any officer, director or employee
thereof or of the Fund, shall sell to or buy from the Fund any
property or security other than shares issued by the Fund, except
in accordance with applicable regulations or orders of the SEC.
(5) Any notice under this Agreement shall be given in
writing, addressed, and delivered, or mailed postpaid, to the party
to this Agreement entitled to receive such, at such party's
principal place of business in Minneapolis, Minnesota, or to such
other address as either party may designate in writing mailed to
the other.
(6) American Express Financial Corporation agrees that no
officer, director or employee of American Express Financial
Corporation will deal for or on behalf of the Fund with himself as
principal or agent, or with any corporation or partnership in which
he may have a financial interest, except that this shall not
prohibit:
(a) Officers, directors or employees of American Express
Financial Corporation from having a financial interest in the Fund
or in American Express Financial Corporation.
(b) The purchase of securities for the Fund, or the sale of
securities owned by the Fund, through a security broker or dealer,
one or more of whose partners, officers, directors or employees is
an officer, director or employee of American Express Financial
Corporation, provided such transactions are handled in the capacity
of broker only and provided commissions charged do not exceed
customary brokerage charges for such services.
(c) Transactions with the Fund by a broker-dealer affiliate
of American Express Financial Corporation as may be allowed by
rule or order of the SEC, and if made pursuant to procedures
adopted by the Fund's Board.
(7) American Express Financial Corporation agrees that,
except as herein otherwise expressly provided or as may be
permitted consistent with the use of a broker-dealer affiliate of
American Express Financial Corporation under applicable provisions
of the federal securities laws, neither it nor any of its officers,
directors or employees shall at any time during the period of this
Agreement, make, accept or receive, directly or indirectly, any
fees, profits or emoluments of any character in connection with the
purchase or sale of securities (except shares issued by the Fund)
or other assets by or for the Fund.
Part Five: RENEWAL AND TERMINATION
(1) This Agreement shall continue in effect until March 19,
1997, or until a new agreement is approved by a vote of the
majority of the outstanding shares of the Fund and by vote of the
Fund's Board, including the vote required by (b) of this paragraph,
and if no new agreement is so approved, this Agreement shall
continue from year to year thereafter unless and until terminated
by either party as hereinafter provided, except that such <PAGE>
PAGE 7
continuance shall be specifically approved at least annually (a) by
the Board of the Fund or by a vote of the majority of the
outstanding shares of the Fund and (b) by the vote of a majority of
the directors who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval. As used in this paragraph,
the term "interested person" shall have the same meaning as set
forth in the Investment Company Act of 1940, as amended (the "1940
Act").
(2) This Agreement may be terminated by either the Fund or
American Express Financial Corporation at any time by giving the
other party 60 days' written notice of such intention to terminate,
provided that any termination shall be made without the payment of
any penalty, and provided further that termination may be effected
either by the Board of the Fund or by a vote of the majority of the
outstanding voting shares of the Fund. The vote of the majority of
the outstanding voting shares of the Fund for the purpose of this
Part Five shall be the vote at a shareholders' regular meeting, or
a special meeting duly called for the purpose, of 67% or more of
the Fund's shares present at such meeting if the holders of more
than 50% of the outstanding voting shares are present or
represented by proxy, or more than 50% of the outstanding voting
shares of the Fund, whichever is less.
(3) This Agreement shall terminate in the event of its
assignment, the term "assignment" for this purpose having the same
meaning as set forth in the 1940 Act.
IN WITNESS THEREOF, the parties hereto have executed the
foregoing Agreement as of the day and year first above written.
IDS INTERNATIONAL FUND, INC.
By /s/ Leslie L. Ogg
Leslie L. Ogg
Vice President
AMERICAN EXPRESS FINANCIAL CORPORATION
By /s/ Janis E. Miller
Vice President
<PAGE>
PAGE 1
DISTRIBUTION AGREEMENT
Agreement made as of the 20th day of March, 1995, by and between
IDS International Fund, Inc. (the "Fund"), a Minnesota corporation,
for and on behalf of each class of the Fund and American Express
Financial Advisors Inc., a Delaware corporation.
Part One: DISTRIBUTION OF SECURITIES
(1) The Fund covenants and agrees that, during the term of this
agreement and any renewal or extension, American Express Financial
Advisors shall have the exclusive right to act as principal
underwriter for the Fund and to offer for sale and to distribute
either directly or through any affiliate any and all shares of each
class of capital stock issued or to be issued by the Fund.
(2) American Express Financial Advisors hereby covenants and
agrees to act as the principal underwriter of each class of capital
shares issued and to be issued by the Fund during the period of
this agreement and agrees during such period to offer for sale such
shares as long as such shares remain available for sale, unless
American Express Financial Advisors is unable or unwilling to make
such offer for sale or sales or solicitations therefor legally
because of any federal, state, provincial or governmental law, rule
or agency or for any financial reason.
(3) With respect to the offering for sale and sale of shares of
each class to be issued by the Fund, it is mutually understood and
agreed that such shares are to be sold on the following terms:
(a) All sales shall be made by means of an application, and
every application shall be subject to acceptance or rejection by
the Fund at its principal place of business. Shares are to be sold
for cash, payable at the time the application and payment for such
shares are received at the principal place of business of the Fund.
(b) No shares shall be sold at less than the asset value
(computed in the manner provided by the currently effective
prospectus or Statement of Additional Information and the
Investment Company Act of 1940, and rules thereunder). The number
of shares or fractional shares to be acquired by each applicant
shall be determined by dividing the amount of each accepted
application by the public offering price of one share of the
capital stock of the appropriate class as of the close of business
on the day when the application, together with payment, is received
by the Fund at its principal place of business. The computation as
to the number of shares and fractional shares shall be carried to
three decimal points of one share with the computation being
carried to the nearest 1/1000th of a share. If the day of receipt
of the application and payment is not a full business day, then the
asset value of the share for use in such computation shall be
determined as of the close of business on the next succeeding full
business day. In the event of a period of emergency, the
computation of the asset value for the purpose of determining the
number of shares or fractional shares to be acquired by the
applicant may be deferred until the close of business on the first
full business day following the termination of the period of
<PAGE>
PAGE 2
emergency. A period of emergency shall have the definition given
thereto in the Investment Company Act of 1940, and rules
thereunder.
(4) The Fund agrees to make prompt and reasonable effort to do
any and all things necessary, in the opinion of American Express
Financial Advisors, to have and to keep the Fund and the shares
properly registered or qualified in all appropriate jurisdictions
and, as to shares, in such amounts as American Express Financial
Advisors may from time to time designate in order that the Fund's
shares may be offered or sold in such jurisdictions.
(5) The Fund agrees that it will furnish American Express
Financial Advisors with information with respect to the affairs and
accounts of the Fund, and in such form, as American Express
Financial Advisors may from time to time reasonably require and
further agrees that American Express Financial Advisors, at all
reasonable times, shall be permitted to inspect the books and
records of the Fund.
(6) American Express Financial Advisors or its agents may prepare
or cause to be prepared from time to time circulars, sales
literature, broadcast material, publicity data and other
advertising material to be used in the sales of shares issued by
the Fund, including material which may be deemed to be a prospectus
under rules promulgated by the Securities and Exchange Commission
(each separate promotional piece is referred to as an "Item of
Soliciting Material"). At its option, American Express Financial
Advisors may submit any Item of Soliciting Material to the Fund for
its prior approval. Unless a particular Item of Soliciting
Material is approved in writing by the Fund prior to its use,
American Express Financial Advisors agrees to indemnify the Fund
and its directors and officers against any and all claims, demands,
liabilities and expenses which the Fund or such persons may incur
arising out of or based upon the use of any Item of Soliciting
Material. The term "expenses" includes amounts paid in
satisfaction of judgments or in settlements. The foregoing right
of indemnification shall be in addition to any other rights to
which the Fund or any director or officer may be entitled as a
matter of law. Notwithstanding the foregoing, such indemnification
shall not be deemed to abrogate or diminish in any way any right or
claim American Express Financial Advisors may have against the Fund
or its officers or directors in connection with the Fund's
registration statement, prospectus, Statement of Additional
Information or other information furnished by or caused to be
furnished by the Fund.
(7) American Express Financial Advisors agrees to submit to the
Fund each application for shares immediately after the receipt of
such application and payment therefor by American Express Financial
Advisors at its principal place or business.
(8) American Express Financial Advisors agrees to cause to be
delivered to each person submitting an application a prospectus or
circular to be furnished by the Fund in the form required by the
applicable federal laws or by the acts or statutes of any
applicable state, province or country.
<PAGE>
PAGE 3
(9) The Fund shall have the right to extend to shareholders of
each class the right to use the proceeds of any cash dividend paid
by the Fund to that shareholder to purchase shares of the same
class at the net asset value at the close of business upon the day
of purchase, to the extent set forth in the currently effective
prospectus or Statement of Additional Information.
(10) Shares of each class issued by the Fund may be offered and
sold at their asset value to the shareholders of the same class of
other funds in the IDS MUTUAL FUND GROUP who wish to exchange their
investments in shares of the other funds in the IDS MUTUAL FUND
GROUP to investments in shares of the Fund, to the extent set forth
in the currently effective prospectus or Statement of Additional
Information, such asset value to be computed as of the close of
business on the day of sale of such shares of the Fund.
(11) American Express Financial Advisors and the Fund agree to use
their best efforts to conform with all applicable state and federal
laws and regulations relating to any rights or obligations under
the term of this agreement.
Part Two: ALLOCATION OF EXPENSES
Except as provided by any other agreements between the parties,
American Express Financial Advisors covenants and agrees that
during the period of this agreement it will pay or cause or be paid
all expenses incurred by American Express Financial Advisors, or
any of its affiliates, in the offering for sale or sale of each
class of the Fund's shares.
Part Three: COMPENSATION
(1) It is covenanted and agreed that American Express Financial
Advisors shall be paid:
(i) for a class of shares imposing a front-end sales charge, by
the purchasers of Fund shares in an amount equal to the difference
between the total amount received upon each sale of shares issued
by the Fund and the asset value of such shares at the time of such
sale; and
(ii) for a class of shares imposing a deferred sales charge, by
owners of Fund shares at the time the sales charge is imposed in an
amount equal to any deferred sales charge, as described in the
Fund's prospectus.
Such sums as are received by the Fund shall be received as Agent
for American Express Financial Advisors and shall be remitted to
American Express Financial Advisors daily as soon as practicable
after receipt.
(2) The asset value of any share of each class of the Fund shall
be determined in the manner provided by the classes currently
effective prospectus and Statement of Additional Information and
the Investment Company Act of 1940, and rules thereunder.
<PAGE>
PAGE 4
Part Four: MISCELLANEOUS
(1) American Express Financial Advisors shall be deemed to be an
independent contractor and, except as expressly provided or
authorized in this agreement, shall have no authority to act for or
represent the Fund.
(2) American Express Financial Advisors shall be free to render
to others services similar to those rendered under this agreement.
(3) Neither this agreement nor any transaction had pursuant
hereto shall be invalidated or in any way affected by the fact that
directors, officers, agents and/or shareholders of the Fund are or
may be interested in American Express Financial Advisors as
directors, officers, shareholders or otherwise; that directors,
officers, shareholders or agents of American Express Financial
Advisors are or may be interested in the Fund as directors,
officers, shareholders or otherwise; or that American Express
Financial Advisors is or may be interested in the Fund as
shareholder or otherwise, provided, however, that neither American
Express Financial Advisors nor any officer or director of American
Express Financial Advisors or any officers or directors of the Fund
shall sell to or buy from the Fund any property or security other
than a security issued by the Fund, except in accordance with a
rule, regulation or order of the federal Securities and Exchange
Commission.
(4) For the purposes of this agreement, a "business day" shall
have the same meaning as is given to the term in the By-laws of the
Fund.
(5) Any notice under this agreement shall be given in writing,
addressed and delivered, or mailed postpaid, to the parties to this
agreement at each company's principal place of business in
Minneapolis, Minnesota, or to such other address as either party
may designate in writing mailed to the other.
(6) American Express Financial Advisors agrees that no officer,
director or employee of American Express Financial Advisors will
deal for or on behalf of the Fund with himself as principal or
agent, or with any corporation or partnership in which he may have
a financial interest, except that this shall not prohibit:
(a) Officers, directors and employees of American Express
Financial Advisors from having a financial interest in the Fund or
in American Express Financial Advisors.
(b) The purchase of securities for the Fund, or the sale of
securities owned by the Fund, through a security broker or dealer,
one or more of whose partners, officers, directors or employees is
an officer, director or employee of American Express Financial
Advisors, provided such transactions are handled in the capacity of
broker only and provided commissions charged do not exceed
customary brokerage charges for such services.
<PAGE>
PAGE 5
(c) Transactions with the Fund by a broker-dealer affiliate of
American Express Financial Advisors if allowed by rule or order of
the Securities and Exchange Commission and if made pursuant to
procedures adopted by the Fund's Board of Directors.
(7) American Express Financial Advisors agrees that, except as
otherwise provided in this agreement, or as may be permitted
consistent with the use of a broker-dealer affiliate of American
Express Financial Advisors under applicable provisions of the
federal securities laws, neither it nor any of its officers,
directors or employees shall at any time during the period of this
agreement make, accept or receive, directly or indirectly, any
fees, profits or emoluments of any character in connection with the
purchase or sale of securities (except securities issued by the
Fund) or other assets by or for the Fund.
Part Five: TERMINATION
(1) This agreement shall continue from year to year unless and
until terminated by American Express Financial Advisors or the
Fund, except that such continuance shall be specifically approved
at least annually by a vote of a majority of the Board of Directors
who are not parties to this agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of
voting on such approval, and by a majority of the Board of
Directors or by vote of a majority of the outstanding voting
securities of the Fund. As used in this paragraph, the term
"interested person" shall have the meaning as set forth in the
Investment Company Act of 1940, as amended.
(2) This agreement may be terminated by American Express
Financial Advisors or the Fund at any time by giving the other
party sixty (60) days written notice of such intention to
terminate.
(3) This agreement shall terminate in the event of its
assignment, the term "assignment" for this purpose having the same
meaning as set forth in the Investment Company Act of 1940, as
amended.
IN WITNESS WHEREOF, The parties hereto have executed the foregoing
agreement on the date and year first above written.
IDS INTERNATIONAL FUND, INC.
By /s/ Leslie L. Ogg
Leslie L. Ogg
Vice President
AMERICAN EXPRESS FINANCIAL ADVISORS INC.
By /s/ Janis E. Miller
Vice President
<PAGE>
PAGE 1
CUSTODIAN AGREEMENT
THIS CUSTODIAN AGREEMENT dated March 20, 1995, between IDS
International Fund, Inc., a Minnesota Corporation (the
"Corporation") and American Express Trust Company, a corporation
organized under the laws of the State of Minnesota with its
principal place of business at Minneapolis, Minnesota (the
"Custodian").
WHEREAS, the Corporation desires that its securities and cash be
hereafter held and administered by Custodian pursuant to the terms
of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein
made, the Corporation and the Custodian agree as follows:
Section 1. Definitions
The word "securities" as used herein shall be construed to include,
without being limited to, shares, stocks, treasury stocks,
including any stocks of this Corporation, notes, bonds, debentures,
evidences of indebtedness, options to buy or sell stocks or stock
indexes, certificates of interest or participation in any profit-
sharing agreements, collateral trust certificates, preorganization
certificates or subscriptions, transferable shares, investment
contracts, voting trust certificates, certificates of deposit for a
security, fractional or undivided interests in oil, gas or other
mineral rights, or any certificates of interest or participation
in, temporary or interim certificates for, receipts for, guarantees
of, or warrants or rights to subscribe to or purchase any of the
foregoing, acceptances and other obligations and any evidence of
any right or interest in or to any cash, property or assets and any
interest or instrument commonly known as a security. In addition,
for the purpose of this Custodian Agreement, the word "securities"
also shall include other instruments in which the Corporation may
invest including currency forward contracts and commodities such as
interest rate or index futures contracts, margin deposits on such
contracts or options on such contracts.
The words "custodian order" shall mean a request or direction,
including a computer printout, directed to the Custodian and signed
in the name of the Corporation by any two individuals designated in
the current certified list referred to in Section 2.
The word "facsimile" shall mean an exact copy or likeness which is
electronically transmitted for instant reproduction.
Section 2. Names, Titles and Signatures of Authorized Persons
The Corporation will certify to the Custodian the names and
signatures of its present officers and other designated persons
authorized on behalf of the Corporation to direct the Custodian by
custodian order as herein before defined. The Corporation agrees
that whenever any change occurs in this list it will file with the
Custodian a copy of a resolution certified by the Secretary or an <PAGE>
PAGE 2
Assistant Secretary of the Corporation as having been duly adopted
by the Board of Directors or the Executive Committee of the Board
of Directors of the Corporation designating those persons currently
authorized on behalf of the Corporation to direct the Custodian by
custodian order, as herein before defined, and upon such filing (to
be accompanied by the filing of specimen signatures of the
designated persons) the persons so designated in said resolution
shall constitute the current certified list. The Custodian is
authorized to rely and act upon the names and signatures of the
individuals as they appear in the most recent certified list from
the Corporation which has been delivered to the Custodian as herein
above provided.
Section 3. Use of Subcustodians
The Custodian may make arrangements, where appropriate, with other
banks having not less than two million dollars aggregate capital,
surplus and undivided profits for the custody of securities. Any
such bank selected by the Custodian to act as subcustodian shall be
deemed to be the agent of the Custodian.
The Custodian also may enter into arrangements for the custody of
securities entrusted to its care through foreign branches of United
States banks; through foreign banks, banking institutions or trust
companies; through foreign subsidiaries of United States banks or
bank holding companies, or through foreign securities depositories
or clearing agencies (hereinafter also called, collectively, the
"Foreign Subcustodian" or indirectly through an agent, established
under the first paragraph of this section, if and to the extent
permitted by Section 17(f) of the Investment Company Act of 1940
and the rules promulgated by the Securities and Exchange Commission
thereunder, any order issued by the Securities and Exchange
Commission, or any "no-action" letter received from the staff of
the Securities and Exchange Commission. To the extent the existing
provisions of the Custodian Agreement are consistent with the
requirements of such Section, rules, order or no-action letter,
they shall apply to all such foreign custodianships. To the extent
such provisions are inconsistent with or additional requirements
are established by such Section, rules, order or no-action letter,
the requirements of such Section, rules, order or no-action letter
will prevail and the parties will adhere to such requirements;
provided, however, in the absence of notification from the
Corporation of any changes or additions to such requirements, the
Custodian shall have no duty or responsibility to inquire as to any
such changes or additions.
Section 4. Receipt and Disbursement of Money
(1) The Custodian shall open and maintain a separate account or
accounts in the name of the Corporation or cause its agent to open
and maintain such account or accounts subject only to checks,
drafts or directives by the Custodian pursuant to the terms of this
Agreement. The Custodian or its agent shall hold in such account
or accounts, subject to the provisions hereof, all cash received by
<PAGE>
PAGE 3
it from or for the account of the Corporation. The Custodian or
its agent shall make payments of cash to or for the account of the
Corporation from such cash only:
(a) for the purchase of securities for the portfolio of the
Corporation upon the receipt of such securities by the
Custodian or its agent unless otherwise instructed on
behalf of the Corporation;
(b) for the purchase or redemption of shares of capital stock
of the Corporation;
(c) for the payment of interest, dividends, taxes, management
fees, or operating expenses (including, without limitation
thereto, fees for legal, accounting and auditing services);
(d) for payment of distribution fees, commissions, or
redemption fees, if any;
(e) for payments in connection with the conversion, exchange or
surrender of securities owned or subscribed to by the
Corporation held by or to be delivered to the Custodian;
(f) for payments in connection with the return of securities
loaned by the Corporation upon receipt of such securities
or the reduction of collateral upon receipt of proper
notice;
(g) for payments for other proper corporate purposes;
(h) or upon the termination of this Agreement.
Before making any such payment for the purposes permitted under the
terms of items (a), (b), (c), (d), (e), (f) or (g) of paragraph (1)
of this section, the Custodian shall receive and may rely upon a
custodian order directing such payment and stating that the payment
is for such a purpose permitted under these items (a), (b), (c),
(d), (e), (f) or (g) and that in respect to item (g), a copy of a
resolution of the Board of Directors or of the Executive Committee
of the Board of Directors of the Corporation signed by an officer
of the Corporation and certified by its Secretary or an Assistant
Secretary, specifying the amount of such payment, setting forth the
purpose to be a proper corporate purpose, and naming the person or
persons to whom such payment is made. Notwithstanding the above,
for the purposes permitted under items (a) or (f) of paragraph (1)
of this section, the Custodian may rely upon a facsimile order.
(2) The Custodian is hereby appointed the attorney-in-fact of the
Corporation to endorse and collect all checks, drafts or other
orders for the payment of money received by the Custodian for the
account of the Corporation and drawn on or to the order of the
Corporation and to deposit same to the account of the Corporation
pursuant to this Agreement.
<PAGE>
PAGE 4
Section 5. Receipt of Securities
Except as permitted by the second paragraph of this section, the
Custodian or its agent shall hold in a separate account or
accounts, and physically segregated at all times from those of any
other persons, firms or corporations, pursuant to the provisions
hereof, all securities received by it for the account of the
Corporation. The Custodian shall record and maintain a record of
all certificate numbers. Securities so received shall be held in
the name of the Corporation, in the name of an exclusive nominee
duly appointed by the Custodian or in bearer form, as appropriate.
Subject to such rules, regulations or guidelines as the Securities
and Exchange Commission may adopt, the Custodian may deposit all or
any part of the securities owned by the Corporation in a securities
depository which includes any system for the central handling of
securities established by a national securities exchange or a
national securities association registered with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, or
such other person as may be permitted by the Commission, pursuant
to which system all securities of any particular class or series of
any issuer deposited within the system are treated as fungible and
may be transferred or pledged by bookkeeping entry without physical
delivery of such securities.
All securities are to be held or disposed of by the Custodian for,
and subject at all times to the instructions of, the Corporation
pursuant to the terms of this Agreement. The Custodian shall have
no power or authority to assign, hypothecate, pledge or otherwise
dispose of any such securities, except pursuant to the directive of
the Corporation and only for the account of the Corporation as set
forth in Section 6 of this Agreement.
Section 6. Transfer Exchange, Delivery, etc. of Securities
The Custodian shall have sole power to release or deliver any
securities of the Corporation held by it pursuant to this
Agreement. The Custodian agrees to transfer, exchange or deliver
securities held by it or its agent hereunder only:
(a) for sales of such securities for the account of the
Corporation, upon receipt of payment therefor;
(b) when such securities are called, redeemed, retired or
otherwise become payable;
(c) for examination upon the sale of any such securities in
accordance with "street delivery" custom which would include
delivery against interim receipts or other proper delivery
receipts;
(d) in exchange for or upon conversion into other securities
alone or other securities and cash whether pursuant to any
plan of
(e) merger, consolidation, reorganization, recapitalization or
readjustment, or otherwise;<PAGE>
PAGE 5
(f) for the purpose of exchanging interim receipts or temporary
certificates for permanent certificates;
(g) upon conversion of such securities pursuant to their terms
into other securities;
(h) upon exercise of subscription, purchase or other similar
rights represented by such securities; for loans of such
securities by the Corporation upon receipt of collateral; or
(i) for other proper corporate purposes.
As to any deliveries made by the Custodian pursuant to items (a),
(b), (c), (d), (e), (f), (g) and (h), securities or cash received
in exchange therefore shall be delivered to the Custodian, its
agent, or to a securities depository. Before making any such
transfer, exchange or delivery, the Custodian shall receive a
custodian order or a facsimile from the Corporation requesting such
transfer, exchange or delivery and stating that it is for a purpose
permitted under Section 6 (whenever a facsimile is utilized, the
Corporation will also deliver an original signed custodian order)
and, in respect to item (i), a copy of a resolution of the Board of
Directors or of the Executive Committee of the Board of Directors
of the Corporation signed by an officer of the Corporation and
certified by its Secretary or an Assistant Secretary, specifying
the securities, setting forth the purpose for which such payment,
transfer, exchange or delivery is to be made, declaring such
purpose to be a proper corporate purpose, and naming the person or
persons to whom such transfer, exchange or delivery of such
securities shall be made.
Section 7. Custodian's Acts Without Instructions
Unless and until the Custodian receives a contrary custodian order
from the Corporation, the Custodian shall or shall cause its agent
to:
(a) present for payment all coupons and other income items held
by the Custodian or its agent for the account of the
Corporation which call for payment upon presentation and hold
all cash received by it upon such payment for the account of
the Corporation;
(b) present for payment all securities held by it or its agent
which mature or when called, redeemed, retired or otherwise
become payable;
(c) ascertain all stock dividends, rights and similar securities
to be issued with respect to any securities held by the
Custodian or its agent hereunder, and to collect and hold for
the account of the Corporation all such securities; and
(d) ascertain all interest and cash dividends to be paid to
security holders with respect to any securities held by the
Custodian or its agent, and to collect and hold such interest
and cash dividends for the account of the Corporation.
<PAGE>
PAGE 6
Section 8. Voting and Other Action
Neither the Custodian nor any nominee of the Custodian shall vote
any of the securities held hereunder by or for the account of the
Corporation. The Custodian shall promptly deliver to the
Corporation all notices, proxies and proxy soliciting materials
with relation to such securities, such proxies to be executed by
the registered holder of such securities (if registered otherwise
than in the name of the Corporation), but without indicating the
manner in which such proxies are to be voted.
Custodian shall transmit promptly to the Corporation all written
information (including, without limitation, pendency of calls and
maturities of securities and expirations of rights in connection
therewith) received by the Custodian from issuers of the securities
being held for the Corporation. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Corporation
all written information received by the Custodian from issuers of
the securities whose tender or exchange is sought and from the
party (or his agents) making the tender or exchange offer.
Section 9. Transfer Taxes
The Corporation shall pay or reimburse the Custodian for any
transfer taxes payable upon transfers of securities made hereunder,
including transfers resulting from the termination of this
Agreement. The Custodian shall execute such certificates in
connection with securities delivered to it under this Agreement as
may be required, under any applicable law or regulation, to exempt
from taxation any transfers and/or deliveries of any such
securities which may be entitled to such exemption.
Section 10. Custodian's Reports
The Custodian shall furnish the Corporation as of the close of
business each day a statement showing all transactions and entries
for the account of the Corporation. The books and records of the
Custodian pertaining to its actions as Custodian under this
Agreement and securities held hereunder by the Custodian shall be
open to inspection and audit by officers of the Corporation,
internal auditors employed by the Corporation's investment adviser,
and independent auditors employed by the Corporation. The
Custodian shall furnish the Corporation in such form as may
reasonably be requested by the Corporation a report, including a
list of the securities held by it in custody for the account of the
Corporation, identification of any subcustodian, and identification
of such securities held by such subcustodian, as of the close of
business of the last business day of each month, which shall be
certified by a duly authorized officer of the Custodian. It is
further understood that additional reports may from time to time be
requested by the Corporation. Should any report ever be filed with
any governmental authority pertaining to lost or stolen securities,
the Custodian will concurrently provide the Corporation with a copy
of that report.
<PAGE>
PAGE 7
The Custodian also shall furnish such reports on its systems of
internal accounting control as the Corporation may reasonably
request from time to time.
Section 11. Concerning Custodian
For its services hereunder the Custodian shall be paid such
compensation at such times as may from time to time be agreed on in
writing by the parties hereto in a Custodian Fee Agreement.
The Custodian shall not be liable for any action taken in good
faith upon any custodian order or facsimile herein described or
certified copy of any resolution of the Board of Directors or of
the Executive Committee of the Board of Directors of the
Corporation, and may rely on the genuineness of any such document
which it may in good faith believe to have been validly executed.
The Corporation agrees to indemnify and hold harmless Custodian and
its nominee from all taxes, charges, expenses, assessments, claims
and liabilities (including counsel fees) incurred or assessed
against it or its nominee in connection with the performance of
this Agreement, except such as may arise from the Custodian's or
its nominee's own negligent action, negligent failure to act or
willful misconduct. Custodian is authorized to charge any account
of the Corporation for such items. In the event of any advance of
cash for any purpose made by Custodian resulting from orders or
instructions of the Corporation, or in the event that Custodian or
its nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with the
performance of this Agreement, except such as may arise from its or
its nominee's own negligent action, negligent failure to act or
willful misconduct, any property at any time held for the account
of the Corporation shall be security therefor.
The Custodian shall maintain a standard of care equivalent to that
which would be required of a bailee for hire and shall not be
liable for any loss or damage to the Corporation resulting from
participation in a securities depository unless such loss or damage
arises by reason of any negligence, misfeasance, or willful
misconduct of officers or employees of the Custodian, or from its
failure to enforce effectively such rights as it may have against
any securities depository or from use of an agent, unless such loss
or damage arises by reason of any negligence, misfeasance, or
willful misconduct of officers or employees of the Custodian, or
from its failure to enforce effectively such rights as it may have
against any agent.
Section 12. Termination and Amendment of Agreement
The Corporation and the Custodian mutually may agree from time to
time in writing to amend, to add to, or to delete from any
provision of this Agreement.
<PAGE>
PAGE 8
The Custodian may terminate this Agreement by giving the
Corporation ninety days' written notice of such termination by
registered mail addressed to the Corporation at its principal place
of business.
The Corporation may terminate this Agreement at any time by written
notice thereof delivered, together with a copy of the resolution of
the Board of Directors authorizing such termination and certified
by the Secretary of the Corporation, by registered mail to the
Custodian.
Upon such termination of this Agreement, assets of the Corporation
held by the Custodian shall be delivered by the Custodian to a
successor custodian, if one has been appointed by the Corporation,
upon receipt by the Custodian of a copy of the resolution of the
Board of Directors of the Corporation certified by the Secretary,
showing appointment of the successor custodian, and provided that
such successor custodian is a bank or trust company, organized
under the laws of the United States or of any State of the United
States, having not less than two million dollars aggregate capital,
surplus and undivided profits. Upon the termination of this
Agreement as a part of the transfer of assets, either to a
successor custodian or otherwise, the Custodian will deliver
securities held by it hereunder, when so authorized and directed by
resolution of the Board of Directors of the Corporation, to a duly
appointed agent of the successor custodian or to the appropriate
transfer agents for transfer of registration and delivery as
directed. Delivery of assets on termination of this Agreement
shall be effected in a reasonable, expeditious and orderly manner;
and in order to accomplish an orderly transition from the Custodian
to the successor custodian, the Custodian shall continue to act as
such under this Agreement as to assets in its possession or
control. Termination as to each security shall become effective
upon delivery to the successor custodian, its agent, or to a
transfer agent for a specific security for the account of the
successor custodian, and such delivery shall constitute effective
delivery by the Custodian to the successor under this Agreement.
In addition to the means of termination herein before authorized,
this Agreement may be terminated at any time by the vote of a
majority of the outstanding shares of the Corporation and after
written notice of such action to the Custodian.
Section 13. General
Nothing expressed or mentioned in or to be implied from any
provision of this Agreement is intended to, or shall be construed
to give any person or corporation other than the parties hereto,
any legal or equitable right, remedy or claim under or in respect
of this Agreement, or any covenant, condition or provision herein
contained, this Agreement and all of the covenants, conditions and
provisions hereof being intended to be and being for the sole and
exclusive benefit of the parties hereto and their respective
successors and assigns.
<PAGE>
PAGE 9
This Agreement shall be governed by the laws of the State of
Minnesota.
This Agreement supersedes all prior agreements between the parties.
IDS INTERNATIONAL FUND, INC.
By: /s/ Leslie L. Ogg
Leslie L. Ogg
Vice President
AMERICAN EXPRESS TRUST COMPANY
By: /s/ Chan Patel
Vice President
<PAGE>
PAGE 1
CUSTODY AGREEMENT
This Custody Agreement is dated May, 1993 between MORGAN STANLEY
TRUST COMPANY, a New York State chartered trust company (the
"Custodian"), and IDS Bank & Trust (the "Customer").
1. The Customer hereby appoints the Custodian as a custodian of
securities and other property owned or under the control of the
Customer which are delivered to the Custodian, or any Subcustodian
as appointed below, from time to time to be held in custody for the
benefit of the Customer. The Customer instructs the Custodian to
establish on the books and records of the Custodian an account (the
"Account") in the name of the Customer. The Custodian shall record
in the Account and shall have general responsibility for the
safekeeping of all securities ("Securities"), cash and other
property (all such Securities, cash and other Property being
collectively the "Property") of the Customer so delivered for
custody. It is understood that the specific procedures the
Custodian will use in carrying out its responsibilities under this
Agreement are set forth in the procedures manual (the "Procedures
Manual") prepared by the Custodian and delivered to the Customer,
as such Procedures Manual may be amended from time to time by the
Custodian by 90 days prior written notice to the Customer (unless
the Customer agrees to a shorter period). The Customer acknowledges
that the Procedures Manual constitutes an integral part of this
Agreement.
2. The Property may be held in custody and deposit accounts that
have been established by the Custodian with one or more domestic or
foreign banks, or through the facilities of one or more clearing
agencies or central securities depositories, as listed on Exhibit A
hereto (the "Subcustodians"), as such Exhibit may be amended from
time to time by the Custodian by written notice to the Customer.
The Custodian shall deliver to the Customer such information as is
necessary or appropriate for the Customer to determine that the
Customer is in compliance with Rule 17f-5 promulgated under the
Investment Company Act of 1940, as amended. The Custodian may hold
Property for all of its customers with a Subcustodian in a single
account that is identified-as belonging to the Custodian for the
benefit of its customers. Any Subcustodian may hold Property in a
securities depository and may utilize a clearing agency. The
Customer agrees that the Property may be physically held outside
the United States. The Custodian shall not be liable for any loss
resulting directly from the physical presence of any Property in a
foreign country (and not by virtue of the actions of the Custodian
or any Subcustodian) including, but not limited to, losses
resulting from nationalization, expropriation, exchange controls or
acts of war or terrorism. Except as provided in the previous
sentence, the liability of the Custodian for losses incurred by the
Customer in respect of Securities shall not be affected by the
Custodian's use of Subcustodians.
<PAGE>
PAGE 2
3. With respect to Property held by a Subcustodian pursuant to
Section 2:
(a) The Custodian will identify on its books as belonging to the
Customer any Property held by a Subcustodian for the Custodian's
account;
(b) The Custodian will hold Property through a Subcustodian only
if (i) such Subcustodian and any securities depository or
clearing agency in which such Subcustodian holds Property, or any
of their creditors, may not assert any right, charge security
interest, lien, encumbrance or other claim of any kind to such
Property except a claim of payment for its safe custody or
administration and (ii) beneficial ownership of such Property may
be freely transferred without the payment of money or value other
than for safe custody or administration;
(c) The Custodian shall require that Property held by the
Subcustodian for the Custodian's account be identified on the
Subcustodian's books as separate from any property held by the
Subcustodian other than property of the Custodian's customers and
as held solely for the benefit of customers of the Custodian; and
(d) In the event that the Subcustodian holds Property in a
securities depository or clearing agency, such Subcustodian will
be required by its agreement with the Custodian to identify on
its books such Property as being held for the account of the
Custodian as a custodian for its customers.
4. The Custodian shall allow the Customer's accountants reasonable
access to the Custodian's records relating to the Property held by
the Custodian as such accountants may reasonably require in
connection with their examination of the Customer's affairs. The
Custodian shall also obtain from any Subcustodian (and will require
each Subcustodian to use reasonable efforts to obtain from any
securities depository or clearing agency in which it deposits
Property) an undertaking, to the extent consistent with local
practice and the laws of the jurisdiction or jurisdictions to which
such Subcustodian, securities depository or clearing agency is
subject, to permit independent public accountants such reasonable
access to the records of such Subcustodian, securities depository
or clearing agency as may be reasonably required in connection with
the examination of the Customer's affairs or to take such other
action as the Custodian in its judgment may deem sufficient to
ensure such reasonable access.
5. The Custodian shall provide such reports and other information
to the Customer and to such persons as the Customer directs as the
Custodian and the Customer may agree from time to time, including
such reports which are described in the Procedures Manual.
<PAGE>
PAGE 3
6. The Custodian shall make or cause any Subcustodian to make
payments from monies being held in the Account only:
(a) upon the purchase of Securities and then, to the extent
consistent with practice in the jurisdiction in which settlement
occurs, upon the delivery of such Securities;
(b) for payments to be made in connection with the conversion,
exchange or surrender of Securities;
(c) upon a request of the Customer that the Custodian return
monies being held in the Account;
(d) upon a request of the Customer that monies be exchanged for
or used to purchase monies denominated in a different currency
and then only upon receipt of such exchanged or purchased monies;
(e) as provided in Section 8 and 12 hereof;
(f) upon termination of this Custody Agreement as hereinafter set
forth; and
(g) for any other purpose upon receipt of explicit instructions
of the Customer accompanied by evidence reasonably acceptable to
the Custodian as to the authorization of such payment.
Except as provided in the last two sentences of this Section 6 and
as provided in Section 8, all payments pursuant to this Section 6
will be made only upon receipt by the Custodian of Authorized
Instructions (as hereinafter defined) from the Customer which shall
specify the purpose for which the payment is to be made. In the
event that it is not possible to make a payment in accordance with
Authorized Instructions of the Customer, the Custodian shall
proceed in accordance with the procedures set forth in the
Procedures Manual. Any payment pursuant to subsection (f) of this
Section 6 will be made in accordance with Section 16.
7. The Custodian shall make or cause any Subcustodian to make
transfers, exchanges or deliveries of Securities only:
(a) upon sale of such Securities and then, to the extent
consistent with practice in the jurisdiction in which settlement
occurs, upon receipt of payment therefor;
(b) upon exercise of conversion, subscription, purchase, exchange
or other similar rights pertaining to such Securities and, if
applicable to such exercise and if consistent with practice in
the applicable jurisdiction, only on receipt of substitute or
additional securities to be received upon such exercise;
(c) as provided in Section 8 hereof;
(d) upon the termination of this Custody Agreement as hereinafter
set forth; and
<PAGE>
PAGE 4
(e) for any other purpose upon receipt of explicit instructions
of the Customer accompanied by evidence reasonably acceptable to
the Custodian as to the authorization of such transfer, exchange
or delivery.
Except as provided in the last two sentences of this Section 7 and
as provided in Section 8, all transfers, exchanges or deliveries of
Securities pursuant to this Section 7 will be made only upon
receipt by the Custodian of Authorized Instructions of the Customer
which shall specify the purpose for which the transfer, exchange or
delivery is to be made. In the event that it is not possible to
transfer Securities in accordance with Authorized Instructions of
the Customer, the Custodian shall proceed in accordance with the
procedures set forth in the Procedures Manual. Any transfer or
delivery pursuant to subsection (d) of this Section 7 will be made
in accordance with Section 16.
8. In the absence of Authorized Instructions from the Customer to
the contrary, the Custodian may, and may authorize any Subcustodian
to:
(a) make payments to itself or others for expenses of handling
Property or other similar items relating to its duties under this
Agreement, provided that all such payments shall be accounted for
to the Customer;
(b) receive and collect all income and principal with respect to
Securities and to credit cash receipts to the Account;
(c) exchange Securities when the exchange is purely ministerial
(including, without limitation, the exchange of interim receipts
or temporary securities for securities in definitive form and the
exchange of warrants, or other documents of entitlement to
securities, for the securities themselves);
(d) surrender Securities at maturity or when called for
redemption upon receiving payment therefor;
(e) execute in the Customer's name such ownership and other
certificates as may be required to obtain the payment of income
from Securities:
(f) pay or cause to be paid, from the Account, any and all taxes
and levies in the nature of taxes imposed on Property by any
governmental authority in connection with custody of and
transactions in such Property;
(g) endorse for collection, in the name of the Customer, checks,
drafts and other negotiable instruments; and
(h) in general, attend to all nondiscretionary details in
connection with the custody, sale, purchase, transfer and other
dealings with the Property.
<PAGE>
PAGE 5
9. "Authorized Instructions" of the Customer shall mean
instructions received by telecopy, tested telex, electronic link or
other electronic means or by such other means as may be agreed in
writing in advance between the Customer and the Custodian. The
Custodian shall be entitled to act, and shall have no liability for
acting, in accordance with the terms of this Agreement or upon any
instructions, notice, request, consent, certificate or other
instrument or paper believed by it to be genuine and to have been
properly executed by one or more persons which the Customer has
previously identified to the Custodian as authorized to act on the
Customer's behalf.
10. Securities which must be held in registered form may be
registered in the name of the Custodian's nominee or, in the case
of Securities in the custody of an entity other than the Custodian,
in the name of such entity's nominee. The Customer agrees to hold
the Custodian and Subcustodians and any such nominee harmless from
any liability arising out of any such person acting as a holder of
record of such Securities. The Custodian may without notice to the
Customer cause any Securities to cease to be registered in the name
of any such nominee and to be registered in the name of the
Customer.
11. All cash received by the Custodian for the Account shall be
held by the Custodian as a short-term credit balance in favor of
the Customer and, if the Custodian and the Customer have agreed in
writing in advance that such credit balances shall bear interest,
the Customer shall earn interest at the rates and times as agreed
between the Custodian and the Customer. The Customer understands
that any such credit balances will not be accompanied by the
benefit of any governmental insurance.
12. From time to time, the Custodian may arrange or extend short-
term credit for the Customer which is (i) necessary in connection
with payment and clearance of securities and foreign exchange
transactions or (ii) pursuant to an agreed schedule, as and if set
forth in the Procedures Manual, of credits for dividends and
interest payments on Securities. All such extensions of credit
shall be repayable by the Customer on demand. The Custodian shall
be entitled to charge the Customer interest for any such credit
extension at rates to be agreed upon from time to time. In addition
to any other remedies available, the Custodian shall be entitled to
a right of set-off against the Property to satisfy the repayment of
such credit extensions and the payment of accrued interest thereon.
The Custodian may act as the Customer's agent or act as a principal
in foreign exchange transactions at such rates as are agreed from
time to time between the Customer and the Custodian.
13. The Customer represents that (i) the execution, delivery and
performance of this Agreement (including, without limitation, the
ability to obtain the short-term extensions of credit in accordance
with Section 12) are within the Customer's power and authority and
have been duly authorized by all requisite action (corporate or
otherwise) and (ii) this Agreement and each extension of short-term
credit extended or arranged for the benefit of the Customer in
accordance with Section 12 will at all times constitute a legal,
valid and binding obligation of the Customer and be enforceable
<PAGE>
PAGE 6
against the Customer in accordance with their respective terms,
except as may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights in general and
subject to the effect of general principles of equity (regardless
of whether considered in a proceeding in equity or at law).
The Custodian represents that the execution, delivery and
performance of this Agreement is within the Custodian's power and
authority and has been duly authorized by all requisite action of
the Custodian. This Agreement constitutes the legal, valid and
binding obligation of the Custodian enforceable against the
Custodian in accordance with its terms, except as may be limited by
bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights in general and subject to the
effect of general principles of equity (regardless of whether
considered in a proceeding in equity or at law).
14. The Custodian shall be responsible for the performance of only
such duties as are set forth in this Agreement or the Procedures
Manual or contained in Authorized Instructions given to the
Custodian which are not contrary to the provisions of any relevant
law or regulation. The Custodian shall not be liable to the
Customer or to any other person for any action taken or omitted to
be taken by it in connection with this Agreement in the absence of
negligence or willful misconduct on the part of the Custodian. Upon
Custodian, the Customer agrees to deliver to the Custodian a duly
executed power of attorney, in form and substance satisfactory to
the Custodian, authorizing the Custodian to take any action or
execute any instrument on behalf of the Customer as necessary or
advisable to accomplish the purposes of this Agreement.
15. The Customer agrees to pay to the Custodian from time to time
such compensation for its services pursuant to this Agreement as
may be mutually agreed upon from time to time and the Custodian's
out-of-pocket or incidental expenses. The Customer hereby agrees to
hold the Custodian harmless from any liability or loss resulting
from any taxes or other governmental charges, and any expenses
related thereto, which may be imposed or assessed with respect to
the Account or any Property held therein. The Custodian is and any
Subcustodians are authorized to charge the Account for such items
and the Custodian shall have a lien, charge and security interest
on any and all Property for any amount owing to the Custodian from
time to time under this Agreement. Except as set forth in the
previous sentence, or otherwise permitted pursuant to the terms of
this agreement, the Custodian shall not pledge, assign, hypothecate
or otherwise encumber Property without Authorized Instructions; it
being understood that a Subcustodian will generally retain a lien
against securities which the Subcustodian has purchased for the
Account but for which the Customer has not yet paid. If the
Customer is a U.S. person as defined in Rule 902 promulgated by the
Securities and Exchange Commission pursuant to the Securities Act
of 1933, as amended (the "Act"), the Customer recognizes that, in
connection with the Customer's election from time to time to
participate in distributions of securities (whether pursuant to
rights offerings, warrant subscriptions, mergers, reorganizations
or otherwise) which have not been registered pursuant to the Act,
the Custodian may inform the issuer and its agents that the acquire
<PAGE>
PAGE 7
of the securities is a U.S. person. The Custodian shall not be
responsible to the Customer for the consequences of any issuer's or
agent's refusal to permit the Customer to acquire such securities,
and the Customer shall hold the Custodian harmless from liability
to the issuer and its agents in connection with any such election
by the Customer.
16. This Agreement may be terminated by the Customer or the
Custodian by 90 days written notice to the other, sent by
registered mail. If notice of termination is given, the Customer
shall, within 60 days following the giving of such notice, deliver
to the Custodian a statement in writing specifying the successor
custodian or other person to whom the Custodian shall transfer the
Property. In either event the Custodian, subject to the
satisfaction of any lien it may have, will transfer the Property to
the person so specified. If the Custodian does not receive such
statement the Custodian, at its election, may transfer the Property
to a bank or trust company established under the laws of the United
States or any state thereof to be held and disposed of pursuant to
the provisions of this Agreement or may continue to hold the
Property until such a statement is delivered to the Custodian. In
such event the Custodian shall be entitled to fair compensation for
its services during such period as the Custodian remains in
possession of any Property and the provisions of this Agreement
relating to the duties and obligations of the Custodian shall
remain in full force and effect; provided, however, that the
Custodian shall no longer settle any transactions in securities for
the Account.
17. The Custodian, its agents and employees will maintain the
confidentiality of information concerning the Property held in the
Account, including in dealings with affiliates of the Custodian. In
the event the Custodian or any Subcustodian is requested or
required to disclose any confidential information concerning the
Property, the Custodian shall to the extent practicable and legally
permissible, promptly notify the Customer of such request or
requirement so that the Customer may seek a protective order or
waive the Custodian's or such Subcustodian's compliance with this
Section 17. In the absence of such a waiver, if the Custodian or
such Subcustodian is compelled, in the opinion of its counsel, to
disclose any confidential information, the Custodian or such
Subcustodian may disclose such information to such persons as, in
the opinion of counsel, is so required.
18. Any notice or other communication from the Customer to the
Custodian, unless otherwise provided by this Agreement, shall be
sent by certified or registered mail to Morgan Stanley Trust
Company, One Pierrepont Plaza, Brooklyn, New York, 11201,
Attention: President, and any notice from the Custodian to the
Customer is to be mailed postage prepaid, addressed to the Customer
at the address appearing below, or as it may hereafter be changed
on the Custodian's records in accordance with notice from the
Customer.
<PAGE>
PAGE 8
19. The Custodian may assign all of its rights and obligations
hereunder to any other entity which is qualified to act as
custodian under the terms of this Agreement and majority-owned,
directly or indirectly, by Morgan Stanley Group Inc., and upon the
assumption of the rights and obligations hereunder by such entity,
such entity shall succeed to all of the rights and obligations of,
and be substituted for, the Custodian hereunder as if such entity
had been originally named as custodian herein. The Custodian shall
give prompt written notice to the Customer upon the effectiveness
of any such assignment.
This Agreement shall bind the successors and assigns of the
Customer and the Custodian and shall be governed by the laws of the
State of New York applicable to contracts executed in and to be
performed in that state.
________________________
By /s/ Mark Ellis
Name: Mark Ellis
Title: Vice President
Address for record: IDS Trust
1200 Northstar West
P.O. Box 534
Minneapolis, MN 55440-0534
________________________
Accepted:
MORGAN STANLEY TRUST COMPANY
By /s/ David P. Roccato
Authorized Signature
Roccato
<PAGE>
PAGE 1
TRANSFER AGENCY AGREEMENT
AGREEMENT dated as of March 20, 1995, between IDS International
Fund, Inc. (the "Fund"), a Minnesota corporation, and American
Express Financial Corporation (the "Transfer Agent"), a Delaware
corporation.
In consideration of the mutual promises set forth below, the Fund
and the Transfer Agent agree as follows:
1. Appointment of the Transfer Agent. The Fund hereby appoints the
Transfer Agent, as transfer agent for its shares and as shareholder
servicing agent for the Fund, and the Transfer Agent accepts such
appointment and agrees to perform the duties set forth below.
2. Compensation. The Fund will compensate the Transfer Agent for
the performance of its obligations as set forth in Schedule A.
Schedule A does not include out-of-pocket disbursements of the
Transfer Agent for which the Transfer Agent shall be entitled to
bill the Fund separately.
The Transfer Agent will bill the Fund monthly. The fee provided
for hereunder shall be paid in cash by the Fund to American Express
Financial Corporation within five (5) business days after the last
day of each month.
Out-of-pocket disbursements shall include, but shall not be limited
to, the items specified in Schedule B. Reimbursement by the Fund
for expenses incurred by the Transfer Agent in any month shall be
made as soon as practicable after the receipt of an itemized bill
from the Transfer Agent.
Any compensation jointly agreed to hereunder may be adjusted from
time to time by attaching to this Agreement a revised Schedule A,
dated and signed by an officer of each party.
3. Documents. The Fund will furnish from time to time such
certificates, documents or opinions as the Transfer Agent deems to
be appropriate or necessary for the proper performance of its
duties.
4. Representations of the Fund and the Transfer Agent.
(a) The Fund represents to the Transfer Agent that all outstanding
shares are validly issued, fully paid and non-assessable by the
Fund. When shares are hereafter issued in accordance with the
terms of the Fund's Articles of Incorporation and its prospectus,
such shares shall be validly issued, fully paid and non-assessable
by the Fund.
(b) The Transfer Agent represents that it is registered under
Section 17A(c) of the Securities Exchange Act of 1934. The
Transfer Agent agrees to maintain the necessary facilities,
equipment and personnel to perform its duties and obligations under
this agreement and to comply with all applicable laws.
<PAGE>
PAGE 2
5. Duties of the Transfer Agent. The Transfer Agent shall be
responsible, separately and through its subsidiaries or affiliates,
for the following functions:
(a) Sale of Fund Shares.
(1) On receipt of an application and payment, wired instructions
and payment, or payment identified as being for the account of a
shareholder, the Transfer Agent will deposit the payment, prepare
and present the necessary report to the Custodian and record the
purchase of shares in a timely fashion in accordance with the terms
of the prospectus. All shares shall be held in book entry form and
no certificate shall be issued unless the Fund is permitted to do
so by the prospectus and the purchaser so requests.
(2) On receipt of notice that payment was dishonored, the Transfer
Agent shall stop redemptions of all shares owned by the purchaser
related to that payment, place a stop payment on any checks that
have been issued to redeem shares of the purchaser and take such
other action as it deems appropriate.
(b) Redemption of Fund Shares. On receipt of instructions to redeem
shares in accordance with the terms of the Fund's prospectus, the
Transfer Agent will record the redemption of shares of the Fund,
prepare and present the necessary report to the Custodian and pay
the proceeds of the redemption to the shareholder, an authorized
agent or legal representative upon the receipt of the monies from
the Custodian.
(c) Transfer or Other Change Pertaining to Fund Shares. On receipt
of instructions or forms acceptable to the Transfer Agent to
transfer the shares to the name of a new owner, change the name or
address of the present owner or take other legal action, the
Transfer Agent will take such action as is requested.
(d) Exchange of Fund Shares. On receipt of instructions to exchange
the shares of the Fund for the shares of another fund in the IDS
MUTUAL FUND GROUP or other American Express Financial Corporation
product in accordance with the terms of the prospectus, the
Transfer Agent will process the exchange in the same manner as a
redemption and sale of shares.
(e) Right to Seek Assurance. The Transfer Agent may refuse to
transfer, exchange or redeem shares of the Fund or take any action
requested by a shareholder until it is satisfied that the requested
transaction or action is legally authorized or until it is
satisfied there is no basis for any claims adverse to the
transaction or action. It may rely on the provisions of the
Uniform Act for the Simplification of Fiduciary Security Transfers
or the Uniform Commercial Code. The Fund shall indemnify the
Transfer Agent for any act done or omitted to be done in reliance
on such laws or for refusing to transfer, exchange or redeem shares
or taking any requested action if it acts on a good faith belief
that the transaction or action is illegal or unauthorized.
(f) Shareholder Records, Reports and Services.
<PAGE>
PAGE 3
(1) The Transfer Agent shall maintain all shareholder accounts,
which shall contain all required tax, legally imposed and
regulatory information; shall provide shareholders, and file with
federal and state agencies, all required tax and other reports
pertaining to shareholder accounts; shall prepare shareholder
mailing lists; shall cause to be printed and mailed all required
prospectuses, annual reports, semiannual reports, statements of
additional information (upon request), proxies and other mailings
to shareholders; and shall cause proxies to be tabulated.
(2) The Transfer Agent shall respond to all valid inquiries related
to its duties under this Agreement.
(3) The Transfer Agent shall create and maintain all records in
accordance with all applicable laws, rules and regulations,
including, but not limited to, the records required by Section
31(a) of the Investment Company Act of 1940.
(g) Dividends and Distributions. The Transfer Agent shall prepare
and present the necessary report to the Custodian and shall cause
to be prepared and transmitted the payment of income dividends and
capital gains distributions or cause to be recorded the investment
of such dividends and distributions in additional shares of the
Fund or as directed by instructions or forms acceptable to the
Transfer Agent.
(h) Confirmations and Statements. The Transfer Agent shall confirm
each transaction either at the time of the transaction or through
periodic reports as may be legally permitted.
(i) Lost or Stolen Checks. The Transfer Agent will replace lost or
stolen checks issued to shareholders upon receipt of proper
notification and will maintain any stop payment orders against the
lost or stolen checks as it is economically desirable to do.
(j) Reports to Fund. The Transfer Agent will provide reports
pertaining to the services provided under this Agreement as the
Fund may request to ascertain the quality and level of services
being provided or as required by law.
(k) Other Duties. The Transfer Agent may perform other duties for
additional compensation if agreed to in writing by the parties to
this Agreement.
6. Ownership and Confidentiality of Records. The Transfer Agent
agrees that all records prepared or maintained by it relating to
the services to be performed by it under the terms of this
Agreement are the property of the Fund and may be inspected by the
Fund or any person retained by the Fund at reasonable times. The
Fund and Transfer Agent agree to protect the confidentiality of
those records.
7. Action by Board and Opinion of Fund's Counsel. The Transfer
Agent may rely on resolutions of the Board of Directors or the
Executive Committee of the Board of Directors and on opinion of
counsel for the Fund.
<PAGE>
PAGE 4
8. Duty of Care. It is understood and agreed that, in furnishing
the Fund with the services as herein provided, neither the Transfer
Agent, nor any officer, director or agent thereof shall be held
liable for any loss arising out of or in connection with their
actions under this Agreement so long as they act in good faith and
with due diligence, and are not negligent or guilty of any willful
misconduct. It is further understood and agreed that the Transfer
Agent may rely upon information furnished to it reasonably believed
to be accurate and reliable. In the event the Transfer Agent is
unable to perform its obligations under the terms of this Agreement
because of an act of God, strike or equipment or transmission
failure reasonably beyond its control, the Transfer Agent shall not
be liable for any damages resulting from such failure.
9. Term and Termination. This Agreement shall become effective on
the date first set forth above (the "Effective Date") and shall
continue in effect from year to year thereafter as the parties may
mutually agree; provided that either party may terminate this
Agreement by giving the other party notice in writing specifying
the date of such termination, which shall be not less than 60 days
after the date of receipt of such notice. In the event such notice
is given by the Fund, it shall be accompanied by a vote of the
Board of Directors, certified by the Secretary, electing to
terminate this Agreement and designating a successor transfer agent
or transfer agents. Upon such termination and at the expense of
the Fund, the Transfer Agent will deliver to such successor a
certified list of shareholders of the Fund (with name, address and
taxpayer identification or Social Security number), a historical
record of the account of each shareholder and the status thereof,
and all other relevant books, records, correspondence, and other
data established or maintained by the Transfer Agent under this
Agreement in the form reasonably acceptable to the Fund, and will
cooperate in the transfer of such duties and responsibilities,
including provisions for assistance from the Transfer Agent's
personnel in the establishment of books, records and other data by
such successor or successors.
10. Amendment. This Agreement may not be amended or modified in any
manner except by a written agreement executed by both parties.
11. Subcontracting. The Fund agrees that the Transfer Agent may
subcontract for certain of the services described under this
Agreement with the understanding that there shall be no diminution
in the quality or level of the services and that the Transfer Agent
remains fully responsible for the services. Except for
out-of-pocket expenses identified in Schedule B, the Transfer Agent
shall bear the cost of subcontracting such services, unless
otherwise agreed by the parties.
12. Miscellaneous.
(a) This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable
without the written consent of the other party.
(b) This Agreement shall be governed by the laws of the State of
Minnesota.<PAGE>
PAGE 5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers as of the day and year
written above.
IDS INTERNATIONAL FUND, INC.
By: /s/ Leslie L. Ogg
Leslie L. Ogg
Vice President
AMERICAN EXPRESS FINANCIAL CORPORATION
By: /s/ Janis E. Miller
Vice President
<PAGE>
PAGE 6
Schedule A
IDS INTERNATIONAL FUND, INC.
TRANSFER AGENT FEE
Effective the 20th day of March, 1995, the Annual Per Account Fee
accrued daily and payable monthly is revised as follows:
CLASS FEE
A $ 15
B 16
Y 15
<PAGE>
PAGE 7
Schedule B
OUT-OF-POCKET EXPENSES
The Fund shall reimburse the Transfer Agent monthly for the
following out-of-pocket expenses:
o typesetting, printing, paper, envelopes, postage and return
postage for proxy soliciting material, and proxy tabulation costs
o printing, paper, envelopes and postage for dividend notices,
dividend checks, records of account, purchase confirmations,
exchange confirmations and exchange prospectuses, redemption
confirmations, redemption checks, confirmations on changes of
address and any other communication required to be sent to
shareholders
o typesetting, printing, paper, envelopes and postage for
prospectuses, annual and semiannual reports, statements of
additional information, supplements for prospectuses and statements
of additional information and other required mailings to
shareholders
o stop orders
o outgoing wire charges
o other expenses incurred at the request or with the consent of the
Fund
<PAGE>
PAGE 1
Shareholder Service Agreement
This agreement is between IDS International Fund, Inc. (the "Fund")
and American Express Financial Advisors Inc., the principal
underwriter of the Fund, for services to be provided to
shareholders by personal financial advisors and other servicing
agents. It is effective on the first day the Fund offers multiple
classes of shares.
American Express Financial Advisors represents that shareholders
consider their financial advisor or servicing agent a significant
factor in their satisfaction with their investment and, to help
retain financial advisors or servicing agents, it is necessary for
the Fund to pay annual servicing fees to financial advisors and
other servicing agents.
American Express Financial Advisors represents that fees paid to
financial advisors will be used by financial advisors to help
shareholders thoughtfully consider their investment goals and
objectively monitor how well the goals are being achieved. As
principal underwriter, American Express Financial Advisors will use
its best efforts to assure that other distributors provide
comparable services to shareholders for the servicing fees
received.
American Express Financial Advisors agrees to monitor the services
provided by financial advisors and servicing agents, to measure the
level and quality of services provided, to provide training and
support to financial advisors and servicing agents and to devise
methods for rewarding financial advisors and servicing agents who
achieve an exemplary level and quality of services.
The Fund agrees to pay American Express financial advisors and
other servicing agents 0.15 percent of the net asset value for each
shareholder account assigned to a financial advisor or servicing
agent that holds either Class A or Class B shares. In addition,
the Fund agrees to pay American Express Financial Advisors' costs
to monitor, measure, train and support services provided by
financial advisors or servicing agents up to 0.025 percent of the
net asset value for each shareholder account assigned to a
financial advisor or servicing agent that holds either Class A or
Class B shares. The Fund agrees to pay American Express Financial
Advisors in cash within five (5) business days after the last day
of each month.
American Express Financial Advisors agrees to provide the Fund,
prior to the beginning of the calendar year, a budget covering its
expected costs to monitor, measure, train and support services and
a quarterly report of its actual expenditures. American Express
Financial Advisors agrees to meet with representatives of the Fund
at their request to provide information as may be reasonably
necessary to evaluate its performance under the terms of this
agreement.
American Express Financial Advisors agrees that if, at the end of
any month, the expenses of the Fund, including fees under this
agreement and any other agreement between the Fund and American <PAGE>
PAGE 2
Express Financial Advisors or American Express Financial
Corporation, but excluding taxes, brokerage commissions and charges
in connection with the purchase and sale of assets exceed the most
restrictive applicable state expense limitation for the Fund's
current fiscal year, the Fund shall not pay fees and expenses under
this agreement to the extent necessary to keep the Fund's expenses
from exceeding the limitation, it being understood that American
Express Financial Advisors will assume all unpaid expenses and bill
the Fund for them in subsequent months but in no event can the
accumulation of unpaid expenses or billing be carried past the end
of the Fund's fiscal year.
This agreement shall continue in effect for a period of more than
one year so long as it is reapproved at least annually at a meeting
called for the purpose of voting on the agreement by a vote, in
person, of the members of the Board who are not interested persons
of the Fund and have no financial interest in the operation of the
agreement, and of all the members of the Board.
This agreement may be terminated at any time without payment of any
penalty by a vote of a majority of the members of the Board who are
not interested persons of the Fund and have no financial interest
in the operation of the agreement or by American Express Financial
Advisors. The agreement will terminate automatically in the event
of its assignment as that term is defined in the Investment Company
Act of 1940. This agreement may be amended at any time provided
the amendment is approved in the same manner the agreement was
initially approved and the amendment is agreed to by American
Express Financial Advisors.
Approved this 20th day of March, 1995.
IDS INTERNATIONAL FUND, INC.
/s/ Leslie L. Ogg
Leslie L. Ogg
Vice President
AMERICAN EXPRESS FINANCIAL ADVISORS INC.
/s/ Janis E. Miller
Vice President
<PAGE>
PAGE 1
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT made the 20th day of March, 1995, by and between IDS
International Fund, Inc. (the "Fund"), a Minnesota corporation, and
American Express Financial Corporation, a Delaware corporation.
Part One: SERVICES
(1) The Fund hereby retains American Express Financial Corporation,
and American Express Financial Corporation hereby agrees, for the
period of this Agreement and under the terms and conditions
hereinafter set forth, to furnish the Fund continuously with all
administrative, accounting, clerical, statistical, correspondence,
corporate and all other services of whatever nature required in
connection with the administration of the Fund as provided under
this Agreement; and to pay such expenses as may be provided for in
Part Three hereof; subject always to the direction and control of
the Board of Directors, the Executive Committee and the authorized
officers of the Fund. American Express Financial Corporation
agrees to maintain an adequate organization of competent persons to
provide the services and to perform the functions herein mentioned.
American Express Financial Corporation agrees to meet with any
persons at such times as the Board of Directors deems appropriate
for the purpose of reviewing American Express Financial
Corporation's performance under this Agreement.
(2) The Fund agrees that it will furnish to American Express
Financial Corporation any information that the latter may
reasonably request with respect to the services performed or to be
performed by American Express Financial Corporation under this
Agreement.
(3) It is understood and agreed that in furnishing the Fund with
the services as herein provided, neither American Express Financial
Corporation, nor any officer, director or agent thereof shall be
held liable to the Fund or its creditors or shareholders for errors
of judgment or for anything except willful misfeasance, bad faith,
or gross negligence in the performance of its duties, or reckless
disregard of its obligations and duties under the terms of this
Agreement. It is further understood and agreed that American
Express Financial Corporation may rely upon information furnished
to it reasonably believed to be accurate and reliable.
Part Two: COMPENSATION FOR SERVICES
(1) The Fund agrees to pay to American Express Financial
Corporation, and American Express Financial Corporation covenants
and agrees to accept from the Fund in full payment for the services
furnished, based on the net assets of the Fund as set forth in the
following table:
<PAGE>
PAGE 2
Assets Annual Rate At
(Billions) Each Asset Level
First $0.25 0.060%
Next 0.25 0.055
Next 0.25 0.050
Next 0.25 0.045
Next $1 0.040
Over $2 0.035
The administrative fee for each calendar day of each year shall be
equal to 1/365th (1/366th in each leap year) of the total amount
computed. The computation shall be made for each such day on the
basis of net assets as of the close of business of the full
business day two (2) business days prior to the day for which the
computation is being made. In the case of the suspension of the
computation of net asset value, the administrative fee for each day
during such suspension shall be computed as of the close of
business on the last full business day on which the net assets were
computed. As used herein, "net assets" as of the close of a full
business day shall include all transactions in shares of the Fund
recorded on the books of the Fund for that day.
(2) The administrative fee shall be paid on a monthly basis and, in
the event of the termination of this Agreement, the administrative
fee accrued shall be prorated on the basis of the number of days
that this Agreement is in effect during the month with respect to
which such payment is made.
(3) The administrative fee provided for hereunder shall be paid in
cash by the Fund to American Express Financial Corporation within
five (5) business days after the last day of each month.
Part Three: ALLOCATION OF EXPENSES
(1) The Fund agrees to pay:
(a) Administrative fees payable to American Express Financial
Corporation for its services under the terms of this Agreement.
(b) Taxes.
(c) Fees and charges of its independent certified public
accountants for services the Fund requests.
(d) Fees and expenses of attorneys (i) it employs in matters not
involving the assertion of a claim by a third party against the
Fund, its directors and officers, (ii) it employs in conjunction
with a claim asserted by the Board of Directors against American
Express Financial Corporation, except that American Express
Financial Corporation shall reimburse the Fund for such fees and
expenses if it is ultimately determined by a court of competent
jurisdiction, or American Express Financial Corporation agrees,
that it is liable in whole or in part to the Fund, and (iii) it
employs to assert a claim against a third party.
<PAGE>
PAGE 3
(e) Fees paid for the qualification and registration for public
sale of the securities of the Fund under the laws of the United
States and of the several states in which such securities shall be
offered for sale.
(f) Office expenses which shall include a charge for occupancy,
insurance on the premises, furniture and equipment, telephone,
telegraph, electronic information services, books, periodicals,
published services, and office supplies used by the Fund, equal to
the cost of such incurred by American Express Financial
Corporation.
(g) Fees of consultants employed by the Fund.
(h) Directors, officers and employees expenses which shall include
fees, salaries, memberships, dues, travel, seminars, pension,
profit sharing, and all other benefits paid to or provided for
directors, officers and employees, directors and officers liability
insurance, errors and omissions liability insurance, worker's
compensation insurance and other expenses applicable to the
directors, officers and employees, except the Fund will not pay any
fees or expenses of any person who is an officer or employee of
American Express Financial Corporation or its affiliates.
(i) Filing fees and charges incurred by the Fund in connection with
filing any amendment to its articles of incorporation, or incurred
in filing any other document with the State of Minnesota or its
political subdivisions.
(j) Organizational expenses of the Fund.
(k) One-half of the Investment Company Institute membership dues
charged jointly to the IDS MUTUAL FUND GROUP and American Express
Financial Corporation.
(l) Expenses properly payable by the Fund, approved by the Board of
Directors.
(2) American Express Financial Corporation agrees to pay all
expenses associated with the services it provides under the terms
of this Agreement. Further, American Express Financial Corporation
agrees that if, at the end of any month, the expenses of the Fund
under this Agreement and any other agreement between the Fund and
American Express Financial Corporation, but excluding those
expenses set forth in (1)(b) of this Part Three, exceed the most
restrictive applicable state expenses limitation, the Fund shall
not pay those expenses set forth in (1)(a) and (c) through (m) of
this Part Three to the extent necessary to keep the Fund's expenses
from exceeding the limitation, it being understood that American
Express Financial Corporation will assume all unpaid expenses and
bill the Fund for them in subsequent months but in no event can the
accumulation of unpaid expenses or billing be carried past the end
of the Fund's fiscal year.
<PAGE>
PAGE 4
Part Four: MISCELLANEOUS
(1) American Express Financial Corporation shall be deemed to be an
independent contractor and, except as expressly provided or
authorized in this Agreement, shall have no authority to act for or
represent the Fund.
(2) A "full business day" shall be as defined in the By-laws.
(3) The Fund recognizes that American Express Financial Corporation
now renders and may continue to render investment advice and other
services to other investment companies and persons which may or may
not have investment policies and investments similar to those of
the Fund and that American Express Financial Corporation manages
its own investments and/or those of its subsidiaries. American
Express Financial Corporation shall be free to render such
investment advice and other services and the Fund hereby consents
thereto.
(4) Neither this Agreement nor any transaction had pursuant hereto
shall be invalidated or in anyway affected by the fact that
directors, officers, agents and/or shareholders of the Fund are or
may be interested in American Express Financial Corporation or any
successor or assignee thereof, as directors, officers, stockholders
or otherwise; that directors, officers, stockholders or agents of
American Express Financial Corporation are or may be interested in
the Fund as directors, officers, shareholders, or otherwise; or
that American Express Financial Corporation or any successor or
assignee, is or may be interested in the Fund as shareholder or
otherwise, provided, however, that neither American Express
Financial Corporation, nor any officer, director or employee
thereof or of the Fund, shall sell to or buy from the Fund any
property or security other than shares issued by the Fund, except
in accordance with applicable regulations or orders of the United
States Securities and Exchange Commission.
(5) Any notice under this Agreement shall be given in writing,
addressed, and delivered, or mailed postpaid, to the party to this
Agreement entitled to receive such, at such party's principal place
of business in Minneapolis, Minnesota, or to such other address as
either party may designate in writing mailed to the other.
(6) American Express Financial Corporation agrees that no officer,
director or employee of American Express Financial Corporation will
deal for or on behalf of the Fund with himself as principal or
agent, or with any corporation or partnership in which he may have
a financial interest, except that this shall not prohibit officers,
directors or employees of American Express Financial Corporation
from having a financial interest in the Fund or in American Express
Financial Corporation.
(7) The Fund agrees that American Express Financial Corporation may
subcontract for certain of the services described under this
Agreement with the understanding that there shall be no diminution
in the quality or level of the services and that American Express
Financial Corporation remains fully responsible for the services.
<PAGE>
PAGE 5
(8) This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable
without the written consent of the other party. This Agreement
shall be governed by the laws of the State of Minnesota.
Part Five: RENEWAL AND TERMINATION
(1) This Agreement shall become effective on the date first set
forth above (the "Effective Date") and shall continue in effect
from year to year thereafter as the parties may mutually agree;
provided that either party may terminate this Agreement by giving
the other party notice in writing specifying the date of such
termination, which shall be not less than 60 days after the date of
receipt of such notice.
(2) This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties.
IN WITNESS THEREOF, the parties hereto have executed the foregoing
Agreement as of the day and year first above written.
IDS INTERNATIONAL FUND, INC.
By: /s/ Leslie L. Ogg
Leslie L. Ogg
Vice President
AMERICAN EXPRESS FINANCIAL CORPORATION
By: /s/ Janis E. Miller
Vice President
<PAGE>
PAGE 1
INDEPENDENT AUDITORS' CONSENT
___________________________________________________________________
The Board and Shareholders
IDS International Fund, Inc.:
We consent to the use of our report incorporated herein by
reference and to the references to our Firm under the headings
"Financial highlights" in Part A and "INDEPENDENT AUDITORS" in Part
B of the Registration Statement.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
December , 1996
<PAGE>
PAGE 1
Plan and Agreement of Distribution
This plan and agreement is between IDS International Fund, Inc.
(the "Fund") and American Express Financial Advisors Inc., the
principal underwriter of the Fund, for distribution services to the
Fund. It is effective on the first day the Fund offers multiple
classes of shares.
The plan and agreement has been approved by members of the Board of
Directors (the "Board") of the Fund who are not interested persons
of the Fund and have no direct or indirect financial interest in
the operation of the plan or any related agreement, and all of the
members of the Board, in person, at a meeting called for the
purpose of voting on the plan and agreement.
The plan and agreement provides that:
1. The Fund will reimburse American Express Financial Advisors for
all sales and promotional expenses attributable to the sale of
Class B shares, including sales commissions, business and employee
expenses charged to distribution of Class B shares, and corporate
overhead appropriately allocated to the sale of Class B shares.
2. The amount of the reimbursement shall be equal on an annual
basis to 0.75% of the average daily net assets of the Fund
attributable to Class B shares. The amount so determined shall be
paid to American Express Financial Advisors in cash within five (5)
business days after the last day of each month. American Express
Financial Advisors agrees that if, at the end of any month, the
expenses of the Fund, including fees under this agreement and any
other agreement between the Fund and American Express Financial
Advisors or American Express Financial Corporation, but excluding
taxes, brokerage commissions and charges in connection with the
purchase and sale of assets exceed the most restrictive applicable
state expense limitation for the Fund's current fiscal year, the
Fund shall not pay fees and expenses under this agreement to the
extent necessary to keep the Fund's expenses from exceeding the
limitation, it being understood that American Express Financial
Advisors will assume all unpaid expenses and bill the Fund for them
in subsequent months, but in no event can the accumulation of
unpaid expenses or billing be carried past the end of the Fund's
fiscal year.
3. For each purchase of Class B shares, after eight years the
Class B shares will be converted to Class A shares and those assets
will no longer be included in determining the reimbursement amount.
4. The Fund understands that if a shareholder redeems Class B
shares before they are converted to Class A shares, American
Express Financial Advisors will impose a sales charge directly on
the redemption proceeds to cover those expenses it has previously
incurred on the sale of those shares.
5. American Express Financial Advisors agrees to provide at least
quarterly an analysis of distribution expenses and to meet with
representatives of the Fund as reasonably requested to provide
additional information.<PAGE>
PAGE 2
6. The plan and agreement shall continue in effect for a period of
more than one year provided it is reapproved at least annually in
the same manner in which it was initially approved.
7. The plan and agreement may not be amended to increase
materially the amount that may be paid by the Fund without the
approval of a least a majority of the outstanding shares of Class
B. Any other amendment must be approved in the manner in which the
plan and agreement was initially approved.
8. This agreement may be terminated at any time without payment of
any penalty by a vote of a majority of the members of the Board who
are not interested persons of the Fund and have no financial
interest in the operation of the plan and agreement, or by vote of
a majority of the outstanding Class B shares, or by American
Express Financial Advisors. The plan and agreement will terminate
automatically in the event of its assignment as that term is
defined in the Investment Company Act of 1940.
Approved this 20th day of March, 1995.
IDS INTERNATIONAL FUND, INC.
/s/ Leslie L. Ogg
Leslie L. Ogg
Vice President
AMERICAN EXPRESS FINANCIAL ADVISORS INC.
/s/ Janis E. Miller
Vice President
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> IDS INTERNATIONAL FUND CLASS A
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 1415040402
<INVESTMENTS-AT-VALUE> 1507185469
<RECEIVABLES> 10419668
<ASSETS-OTHER> 4656332
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