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1997 ANNUAL REPORT
IDS
International
Fund
(prospectus enclosed)
(icon of) three flags
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 annual report includes a prospectus that describes in detail the Fund's
objective, investment policies, risks, sales charges, fees and other matters of
interest. Please read the prospectus carefully before you invest or send money.)
AMERICAN EXPRESS Financial Advisors
Distributed by American Express Financial Advisors Inc.
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(icon of) three flags
A world of
opportunity
There's a new recognition among investors that the stock market extends beyond
Wall Street. Opportunity abounds in other markets, from Tokyo, London and
Frankfurt to Singapore, Mexico and Hong Kong. Ignoring these opportunities may
mean missing out on tremendous world economic growth in the years ahead.
International Fund focuses on finding the markets that offer the greatest
current potential to investors. With about two-thirds of the world's stock
market value currently based outside of the United States, American investors
now have an even greater opportunity to diversify their portfolios beyond our
boundaries.
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Contents
(icon of) one open book inside of another
The purpose of this annual report is to tell investors how the Fund performed.
The prospectus, which is bound into the middle of this annual report, describes
the Fund in detail.
1997 annual report
From the chairman 4
From the portfolio manager 4
The Fund's ten largest holdings 6
Making the most of the Fund 7
The Fund's long-term performance 8
Independent auditors' report 9
Financial statements 10
Notes to financial statements 13
Investments in securities 29
IDS mutual funds 34
Federal income tax information 38
1997 prospectus
The Fund in brief 3p
Goal 3p
Investment policies and risks 3p
Manager and distributor 3p
Portfolio manager 3p
Alternative purchase arrangements 4p
Sales charge and Fund expenses 5p
Performance 7p
Financial highlights 7p
Total returns 9p
Investment policies and risks 11p
Facts about investments and their risks 12p
Alternative investment option 16p
Valuing Fund shares 16p
How to purchase, exchange or redeem shares 17p
Alternative purchase arrangements 17p
How to purchase shares 20p
How to exchange shares 23p
How to redeem shares 23p
Reductions and waivers of the sales charge 28p
Special shareholder services 33p
Services 33p
Quick telephone reference 33p
Distributions and taxes 34p
Dividend and capital gain distributions 34p
Reinvestments 35p
Taxes 36p
How to determine the correct TIN 38p
How the Fund is organized 39p
Shares 39p
Voting rights 39p
Shareholder meetings 39p
Board members and officers 39p
Investment manager 41p
Administrator and transfer agent 42p
Distributor 43p
About American Express Financial Corporation 45p
General information 45p
Appendix 46p
Descriptions of derivative instruments 46p
(This annual report is not part of the prospectus.)
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To our shareholders
From the chairman
If you're an experienced investor, you know that the past few years have
been unusually strong ones in many financial markets. Perhaps just as
important, history shows that bull markets don't last forever. Though
they're often unpredictable, declines -- whether they're brief or
long-lasting, moderate or substantial -- are always a possibility. We saw
evidence of that in late October, when declines in certain Asian markets
spawned a sharp drop in several financial markets worldwide, including the
U.S.
That fact reinforces the need for investors to review periodically their
long-term goals and examine whether their investment program remains on
track to achieving them. Your quarterly investment statements are one part
of that monitoring process. The other is a meeting with your American
Express financial advisor. That becomes even more important if there's a
major change in your financial situation or in the financial markets.
William R. Pearce
(picture of) William R. Pearce
Chairman of the board
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From the portfolio manager
Thanks to improved performance last spring and summer, IDS International
Fund produced positive results for the past fiscal year. For the 12 months
-- November 1996 through October 1997 -- the Fund's Class A shares
generated a total return of 5.9%. (The Fund paid a capital gain to
shareholders in December 1996, which reduced its net asset value by the
same amount at that time.)
After a strong start, the next several months of the period were something
of a struggle. The dominant factor was an ongoing decline in the value of
key foreign currencies, especially in Europe and Japan, which eroded the
solid gains of a number of investments in those areas. (Currency declines
have a negative effect on returns for U.S.-based investors because the
values of foreign investments must be converted into dollars. Ultimately,
a decline in the foreign currency reduces the value of the investment in
U.S. dollars.)
A performance pick-up
Currency was less of a problem over the spring and summer, and, combined
with generally good securities performance, the Fund recorded substantial
appreciation in those months. A severe worldwide stock sell-off in late
October, sparked initially by currency declines in Southeast Asia, erased
some of the gains, however.
Over the last several weeks of the period, I made the following changes in
geographical allocation. Southeast Asia was substantially reduced,
although I did retain investments in Hong Kong and Singapore, where
fundamentals seemed more secure. Lack of governmental initiatives to
improve the economy in Japan resulted in a lower weighting in that
country. Proceeds from stock sales in Asia were channeled into certain
stocks in continental Europe, which is undergoing major restructuring.
Lastly, I initiated positions in Canada.
Despite the potential of a lingering hangover effect from the global
market downturn last October, the investment fundamentals remain favorable
in many parts of the world: Inflation is under control in most countries;
corporate restructurings are boosting earnings in Europe; and several
emerging markets continue to enjoy rapid economic growth. Ultimately, I
believe our patience will prove rewarding.
Peter Lamaison
(picture of) Peter Lamaison
Portfolio manager
(This annual report is not part of the prospectus.)
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Class A
12-month performance
(All figures per share)
Net asset value (NAV)
Oct. 31, 1997 $10.57
Oct. 31, 1996 $10.65
Decrease $ 0.08
Distributions
Nov. 1, 1996 - Oct. 31, 1997
From income $ 0.24
From capital gains $ 0.45
Total distributions $ 0.69
Total return* +5.9%**
Class B
12-month performance
(All figures per share)
Net asset value (NAV)
Oct. 31, 1997 $10.50
Oct. 31, 1996 $10.58
Decrease $ 0.08
Distributions
Nov. 1, 1996 - Oct. 31, 1997
From income $ 0.16
From capital gains $ 0.45
Total distributions $ 0.61
Total return* +5.1%**
Class Y
12-month performance
(All figures per share)
Net asset value (NAV)
Oct. 31, 1997 $10.59
Oct. 31, 1996 $10.67
Decrease $ 0.08
Distributions
Nov. 1, 1996 - Oct. 31, 1997
From income $ 0.26
From capital gains $ 0.45
Total distributions $ 0.71
Total return* +6.0%**
* The prospectus discusses the effect of sales charges, if any, on the
various classes.
** The total return is a hypothetical investment in the Fund with all
distributions reinvested.
(This annual report is not part of the prospectus.)
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The Fund's ten largest holdings
Percent Value
(of Fund's net assets) (as of Oct. 31, 1997)
Philips Electronics (Netherlands) 5.39% $71,604,430
ENI (Italy) 2.75 36,526,910
Novartis (Switzerland) 2.72 36,210,946
Ericsson (Sweden) 2.70 35,890,975
Rhone-Poulenc (France) 2.66 35,344,449
Telecom Italia RISP (Italy) 2.54 33,871,191
Credito Italiano (Italy) 2.18 29,013,651
Banque Nationale de Paris (France) 2.15 28,562,910
Accor (France) 1.76 23,386,712
BG (United Kingdom) 1.72 22,834,519
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The ten holdings listed here make up 26.57% of the Fund's net assets
(This annual report is not part of the prospectus.)
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Making the most of the Fund
Build your assets systematically
One of the best ways to invest in the Fund is by dollar-cost averaging --
a time-tested strategy that can make market fluctuations work for you. To
dollar-cost average, simply invest a fixed amount of money regularly.
You'll automatically buy more shares when the Fund's share price is low,
fewer shares when it is high.
Using this strategy does not ensure a profit or avoid a loss if the market
declines, and requires that you be able to keep on investing on a regular
basis, even when the price of your shares falls or the market declines.
Investing in this manner can be an effective way to accumulate shares to
meet your long-term goals.
How dollar cost averaging works
Month Amount Per-share Number of shares purchased
invested market price
Jan $100 $20 5.00 XXXXX
Feb 100 18 5.56 XXXXXx
March 100 17 5.88 XXXXXx
April 100 15 6.67 XXXXXXx
May 100 16 6.25 XXXXXXx
June 100 18 5.56 XXXXXx
July 100 17 5.88 XXXXXx
Aug 100 19 5.26 XXXXXx
Sept 100 21 4.76 XXXXx
Oct 100 20 5.00 XXXXX
(footnote to table) By investing an equal number of dollars each month....
(arrow in table pointing to April) you automatically buy more shares when the
per share market price is low....
(arrow pointing to Sept) and fewer shares when the per share market price
is high.
You have paid an average price of only $17.91 per share over the 10
months, while the average market price actually was $18.10.
(This annual report is not part of the prospectus.)
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The Fund's long-term performance
Three ways to benefit from a mutual fund:
oyour shares increase in value when the Fund's
investments do well
oyou receive capital gains when the gains on
investments sold by the Fund exceed losses
oyou receive income when the Fund's stock dividends, interest and
short-term gains exceed its expenses.
All three make up your total return. And you potentially can increase your
investment if, like most investors, you reinvest your dividends and
capital gain distributions to buy additional shares of the Fund or another
fund.
How $10,000 has grown in IDS International Fund
$30,000
$21,021
International Fund
Class A
$20,000 MSCI World Index
Lipper International
Fund Index
$10,000
MSCI EAFE
$9,500 Index
'87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97
Average annual total return
(as of Oct. 31, 1997)
Since
1 year inception 5 years 10 years
Class A +0.61% --% +9.28% +7.70%
Class B +1.12% +8.38%* --% --%
Class Y +6.03% +10.73%* --% --%
*Inception date was March 20, 1995.
Assumes: oHolding period from 11/1/87 to 10/31/97. oReturns do not reflect
taxes payable on distributions. oReinvestment of all income and capital
gain distributions for the Fund, with a value of $7,537. Also see
"Performance" in the Fund's current prospectus.
The Morgan Stanley Capital International World Index (MSCI World Index),
compiled from a composite of over 1,500 companies listed on the stock
exchanges of North America, Europe, Australia, New Zealand and the Far
East, is widely recognized by investors as the measurement index for
portfolios of global securities.
Morgan Stanley Capital International EAFE Index (MSCI EAFE Index),
compiled from a composite of securities markets of Europe, Australia and
the Far East, is widely recognized by investors in foreign markets as the
measurement index for portfolios of non-North American securities.
Lipper International Fund Index, published by Lipper Analytical Services,
Inc., includes 10 funds that are generally similar to the Fund, although
some funds in the index may have somewhat different investment policies or
objectives.
On the graph above you can see how the Fund's total return compared to
three widely cited performance indexes, the MSCI World Index, MSCI EAFE
Index and the Lipper International Fund Index. In comparing International
Fund (Class A) to the three indexes, you should take into account the fact
that the Fund's performance reflects the maximum sales charge of 5%, while
such charges are not reflected in the performance of the indexes.
Your investment and return values fluctuate so that your shares, when
redeemed, may be worth more or less than the original cost. Average annual
total return figures reflect the impact of the applicable sales charge up
to a maximum of 5%. This was a period of widely fluctuating security
prices. Past performance is no guarantee of future results.
(This annual report is not part of the prospectus.)
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The financial statements contained in Post-Effective Amendment #26 to
Registration statement No. 2-92309 filed on or about Dec. 23, 1997, are
incorporated herein by reference.
<PAGE>
IDS mutual funds
Global/International funds
Funds in this group seek capital growth and/or income by investing primarily in
foreign securities. Foreign investments may be subject to currency fluctuations
and political and economic risks of the countries in which the investments are
made. They are high risk mutual funds with a potential for high reward.
IDS Emerging Markets Fund
Invests in a Portfolio comprised primarily of stocks of companies in developing
countries throughout the world that are believed to offer growth potential.
Seeks to provide long-term growth of capital.
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IDS Global Growth Fund
Invests in a Portfolio comprised primarily of stocks of companies throughout the
world that are positioned to meet market needs in a changing world economy.
These companies offer above-average potential for long-term growth.
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IDS International Fund
Invests primarily in common stocks of foreign companies that offer potential for
superior growth. The Fund may invest up to 20% of its assets in the U.S. market.
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IDS Global Balanced Fund
Invests in stocks and bonds in, for the most part, major markets throughout the
world, including the U.S. Seeks to provide a balance of growth of capital and
current income.
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IDS Global Bond Fund
Invests in a Portfolio comprised primarily of debt securities of U.S. and
foreign issuers to seek high total return through income and growth of capital.
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Growth funds
Funds in this group seek capital growth, primarily from common stocks. They are
high risk mutual funds with a potential for high reward.
(This annual report is not part of the prospectus.)
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IDS Precious Metals Fund
Invests primarily in the securities of foreign or domestic companies that
explore for, mine and process or distribute gold and other precious metals. A
highly aggressive and speculative fund that seeks long-term growth of capital.
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IDS Discovery Fund
Invests in small- and medium-size, growth-oriented companies emphasizing
technological innovation and productivity enhancement. Buys and holds larger
growth-oriented stocks.
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IDS Small Company Index Fund
Invests in all or a representative group of the equity securities comprising the
S&P SmallCap 600 Index, as it strives to provide long-term capital appreciation.
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IDS Strategy Aggressive Fund
Invests primarily in common stocks of companies that are selected for their
potential for above-average growth. Above-average means that their growth
potential is better, in the opinion of the portfolio's investment manager, than
the Standard & Poor's Corporation (S&P) 500 Stock Index.
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IDS Research Opportunities Fund
Invests in a Portfolio comprised primarily of equity securities of companies
included in the S&P 500 Index that are believed to have strong growth potential.
The Portfolio is managed using a research methodology by the Research Department
of AEFC. Goal is long-term appreciation.
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IDS Growth Fund
Invests in a Portfolio comprised primarily of companies that have above-average
potential for long-term growth as a result of new management, marketing
opportunities or technological superiority.
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IDS New Dimensions Fund
Invests in a Portfolio comprised primarily of companies with
significant growth potential due to superiority in
technology, marketing or management. The Fund frequently
changes its industry mix.
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(This annual report is not part of the prospectus.)
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IDS Progressive Fund
Invests primarily in undervalued common stocks. The Fund holds stocks for the
long term with the goal of capital growth.
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Growth & income funds
These funds focus on securities of medium to large, well-established companies
that offer long-term growth of capital and reasonable income from dividends and
interest. Foreign investments may be subject to currency fluctuations and
political and economic risks of the countries in which the investments are made.
IDS Equity Select Fund
Invests primarily in a combination of moderate growth stocks, higher-yielding
equities and bonds. Seeks growth of capital and income.
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IDS Blue Chip Advantage Fund
Invests in selected stocks from a major market index. Securities purchased are
those recommended by our research analysts as the best from each industry
represented on the index. Offers potential for long-term growth as well as
dividend income.
(icon of) ribbon
IDS Managed Allocation Fund
Invests in a Portfolio comprised primarily of U.S. equity securities, U.S. and
foreign debt securities, foreign equity securities and money market instruments.
The Fund provides diversification among these major investment categories and
has a target mix that represents the way the Fund's investments will be
allocated over the long term. Seeks maximum total return.
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IDS Stock Fund
Invests in a Portfolio comprised primarily of common stock of companies
representing many sectors of the economy. Seeks current income and growth of
capital.
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IDS Equity Value Fund
Invests primarily in undervalued common stocks that offer potential for growth
of capital and income.
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(This annual report is not part of the prospectus.)
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IDS Utilities Income Fund
Invests primarily in the stocks of public utility companies to seek high current
income and growth of income and capital with reduced volatility.
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IDS Diversified Equity Income Fund
Invests in a Portfolio comprised primarily in high-yielding common stocks to
seek high current income and, secondarily, to benefit from the growth potential
offered by stock investments.
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IDS Mutual
Invests in a Portfolio which seeks to balance between common stocks and senior
securities (preferred stocks and bonds). Seeks a balance of growth of capital
and current income.
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Income funds
The funds in this group invest their assets primarily in corporate bonds or
government securities to seek interest income. Secondary objective is capital
growth. Risk varies by bond quality.
IDS Extra Income Fund
Invests in a Portfolio comprised mainly of long-term, high-yielding corporate
fixed-income securities in the lower rated, higher risk bond categories to seek
high current income. Secondary objective is capital growth.
(icon of) two coins
IDS Bond Fund
Invests mainly in corporate bonds, at least 50% in the higher rated, lower risk
bond categories, or the equivalent, and in government bonds.
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IDS Selective Fund
Invests in a Portfolio comprised primarily of high-quality corporate bonds and
other highly rated debt instruments including government securities and
short-term investments. Seeks current income and preservation of capital.
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(This annual report is not part of the prospectus.)
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IDS Federal Income Fund
Invests in a Portfolio comprised primarily of securities issued or guaranteed as
to the timely payment of principal and interest by the U.S. government, its
agencies and instrumentalities. Seeks a high level of current income and safety
of principal consistent with its type of investments.
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Tax-exempt income funds
These funds provide tax-free income by investing in municipal bonds. The income
is generally free from federal income tax, but a portion of the income may be
subject to state and local taxes. Risk varies by bond quality.
IDS Tax-Exempt Bond Fund
Invests mainly in bonds and notes of state or local government units, with at
least 75% in the four highest rated, lowest risk bond categories.
(icon of) shield with Greek column
IDS Insured Tax-Exempt Fund
Invests primarily in municipal securities that are insured as to the timely
payment of principal and interest. The insurance feature minimizes credit risk
of the Fund but does not guarantee the market value of the Fund's shares.
(icon of) shield with star
IDS State Tax-Exempt Funds
(CA, MA, MI, MN, NY, OH)
Invests primarily in high- and medium-grade municipal securities to provide
income to residents of each respective state that is exempt from federal, state
and local income taxes. (New York is the only state that is exempt at the local
level.)
(icon of) shield with U.S. enclosed
IDS High Yield Tax-Exempt Fund
Invests in a Portfolio comprised primarily of medium- and lower-quality
municipal bonds and notes. Lower-quality securities generally involve greater
risk of principal and income.
(icon of) shield with basket of apples enclosed
IDS Intermediate Tax-Exempt Fund
Invests in mainly investment-grade bonds and other debt securities with
intermediate-term maturities issued by state and local government units. Goal is
to seek a high level of current income exempt from federal taxes.
(icon of) shield with tree enclosed
(This annual report is not part of the prospectus.)
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Money market funds
These money market funds have three main goals: conservation of capital,
constant liquidity and the highest possible current income consistent with these
objectives. An investment in these funds is neither insured nor guaranteed by
the U.S. government, and there can be no assurance that these funds will be able
to maintain a stable net asset value of $1.00 per share. Very limited risk.
IDS Cash Management Fund
Invests in such money market securities as high quality commercial paper,
bankers' acceptances, certificates of deposit (CDs) and other bank securities.
(icon of) piggy bank
IDS Tax-Free Money Fund
Invests primarily in short-term bonds and notes issued by state and local
governments to seek high current income exempt from federal income taxes.
(icon of) shield with piggy bank enclosed
For more complete information about any of these funds, including charges and
expenses, you can obtain a prospectus by contacting your financial advisor or
writing to American Express Shareholder Service, P.O. Box 534, Minneapolis, MN
55440-0534. Read it carefully before you invest or send money.
(This annual report is not part of the prospectus.)
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Federal income tax information
IDS International Fund, Inc.
The Fund is required by the Internal Revenue Code of 1986 to tell its
shareholders about the tax treatment of the dividends it pays during its
fiscal year. The dividends listed below were reported to you on a Form
1099-DIV, Dividends and Distributions, last January. Shareholders should
consult a tax adviser on how to report distributions for state and local
purposes.
IDS International Fund, Inc.
Fiscal year ended Oct. 31, 1997
Class A
Income distribution
taxable as dividend income, 0.05% qualifying for deduction for
corporations.
Payable date Per share
Dec. 30, 1996 $0.24262
Capital gain distribution
taxable as long-term capital gain.
Payable date Per share
Dec. 30, 1996 $0.44556
Total distributions $0.68818
The distributions of $0.68818 per share, payable Dec. 30, 1996, consisted
of $0.16514 derived from net investment income, $0.07748 from net
short-term capital gains (a total of $0.24262 taxable as dividend income)
and $0.44556 from net long-term capital gains.
Class B
Income distribution
taxable as dividend income, 0.05% qualifying for deduction for
corporations.
Payable date Per share
Dec. 30, 1996 $0.16412
Capital gain distribution
taxable as long-term capital gain.
Payable date Per share
Dec. 30, 1996 $0.44556
Total distributions $0.60968
The distributions of $0.60968 per share, payable Dec. 30, 1996, consisted
of $0.08664 from net investment income, $0.07748 from net short-term
capital capital gains (a total of $0.16412 taxable as dividend income) and
$0.44556 from net long-term capital gains.
Class Y
Income distribution
taxable as dividend income, 0.05% qualifying for deduction for
corporations.
Payable date Per share
Dec. 30, 1996 $0.26125
Capital gain distribution
taxable as long-term capital gain.
Payable date Per share
Dec. 30, 1996 $0.44556
Total distributions $0.70681
The distributions of $0.70681 per share, payable Dec. 30, 1996, consisted
of $0.18377 derived from net investment income, $0.07748 from net
short-term capital gains (a total of $0.26125 taxable as dividend income)
and $0.44556 from net long-term capital gains.
(This annual report is not part of the prospectus.)
<PAGE>
Quick telephone reference
American Express Redemptions and exchanges, National/Minnesota
Financial Advisors dividend payments or 800-437-3133
Telephone Transaction reinvestments and automatic
Service payment arrangements Mpls./St. Paul area:
671-3800
TTY Service For the hearing impaired 800-846-4852
American Express Automated account information 800-862-7919
Financial Advisors (TouchTone(R) phones only),
Easy Access Line including current fund prices
and performance, account values
and recent account transactions
AMERICAN EXPRESS Financial Advisors
IDS International Fund
IDS Tower 10
Minneapolis, MN 55440-0010
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STATEMENT OF DIFFERENCES
Difference Description
1) The layout is different 1) Some of the layout in the
throughout the annual report. annual report to
shareholders is in two
columns.
2) Headings. 2) The headings in the
annual report are
placed in a blue strip
at the top of the page.
3) There are pictures, icons 3) Each picture, icon and
and graphs throughout the graph is described in
annual report. parentheses.
4) Footnotes for charts and 4) The footnotes for each
graphs are described at chart or graph are typed
the left margin. below the description of
the chart or graph.
