IDS
International
Fund
1998 ANNUAL REPORT
(PROSPECTUS ENCLOSED)
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The goal of IDS International Fund, Inc. is long-term capital growth. 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 strategy, 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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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.
IDS INTERNATIONAL Fund (This annual report is not part of the prospectus.)
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Table of Contents
1998 ANNUAL REPORT
The purpose of this annual report is to tell investors how the Fund performed.
From the Chairman 4
From the Portfolio Manager 4
Fund Facts 6
The 10 Largest Holdings 7
Making the Most of the Fund 8
The Fund's Long-term Performance 9
Independent Auditors' Report 10
Financial Statements 11
Notes to Financial Statements 14
Investments in Securities 21
Federal Income Tax Information 27
1998 prospectus
The prosptectus, which is bound into the middle of this annual report, describes
the fund in detail.
The Fund 3p
Goal 3p
Investment Strategy 3p
Risks 4p
Past Performance 6p
Fees and Expenses 8p
Management 9p
Buying and Selling Shares 9p
Valuing Fund Shares 9p
Investment Options 10p
Purchasing Shares 11p
Sales Charges 14p
Exchanging/Selling Shares 18p
Distributions and Taxes 22p
Personalized Shareholder Information 24p
About the Company 25p
Quick Telephone Reference 27p
Financial Highlights 28p
(This annual report is not part of the prospectus.) ANNUAL REPORT -- 1998
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From the Chairman
If you're an experienced investor, you know that the past 12 months was a highly
volatile period in many financial markets. But history tells us that substantial
market moves are nothing new. Though they're often unpredictable, declines --
whether they're brief or long-lasting, moderate or substantial -- are always a
possibility.
The potential for such volatility 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.
(picture of) William R. Pearce
William R. Pearce
Chairman of the board
From the Portfolio Manager
Steep downturns in worldwide financial markets late in the fiscal year turned
what had been a highly productive period into a moderately positive one for IDS
International Fund. In the end, the Fund's Class A shares generated a total
return of 5.54% for the November 1997 through October 1998 period.
As far as market performance and investor sentiment were concerned, the 12
months were split into two distinct periods. From the beginning of the period in
November until mid-July, stocks in the U.S. and, even more so, Europe rose
substantially. For the record, the U.S. was up about 29%, while continental
Europe (excluding the United Kingdom) had gained a remarkable 44%. Asian
markets, on the other hand, continued to suffer from severe economic woes that
had set in prior to the start of the Fund's fiscal year. To the Fund's benefit,
exposure to those markets, including Japan, was very modest.
(picture of) Peter Lamaison
Peter Lamaison
Portfolio manager
IDS INTERNATIONAL Fund (This annual report is not part of the prospectus.)
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The surge in Europe resulted mainly from investors' realization that companies
in that part of the world were reaping great benefits from a substantial
corporate restructuring effort, which in turn made for a much-brighter earnings
outlook. The Fund was well-positioned for the upturn in Europe as the great bulk
of the portfolio (more than 80% at times) was concentrated in that region, with
varying portions in France, Germany, the United Kingdom, Italy and Switzerland.
A DOUBLE BLOW
The good news was not to last, however. With investors still wondering how much
negative effect Asia's problems might eventually have on other markets, in late
July Russia, already on unsteady economic ground, suddenly was forced to devalue
its currency. The move immediately sent shock waves through financial markets
around the world. And just as the investment community was trying to adjust to
that development, only weeks later it was confronted by the news that heavy
losses in speculative investments made by so-called hedge funds could ultimately
cause banks to greatly curtail corporate lending activities.
It was all too much for many investors to bear, and their indiscriminate
stock-selling drove down stock markets worldwide. To provide some cushion
against the downturn, I raised the level of cash reserves in the Fund, but that
couldn't prevent considerable erosion of the Fund's value during August and
September. The period did end on an encouraging note, however, as most major
markets bounced back strongly in October, which put the Fund back in positive
territory for the fiscal year.
Although my optimistic outlook of some months ago has been somewhat tempered, I
do expect ongoing growth in Europe, where the vast majority of the portfolio
remains invested. While markets and currencies may well continue to be volatile,
I believe the positive investment fundamentals will ultimately win out and
reward international investors.
Peter Lamaison
(This annual report is not part of the prospectus.) ANNUAL REPORT -- 1998
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Fund Facts
Class A -- 12-month performance
(All figures per share)
Net asset value (NAV)
Oct. 31, 1998 $10.70
Oct. 31, 1997 $10.57
Increase $ 0.13
Distributions -- Nov. 1, 1997 - Oct. 31, 1998
From income $ 0.12
From capital gains $ 0.32
Total distributions $ 0.44
Total return* +5.54%**
Class B -- 12-month performance
(All figures per share)
Net asset value (NAV)
Oct. 31, 1998 $10.62
Oct. 31, 1997 $10.50
Increase $ 0.12
Distributions -- Nov. 1, 1997 - Oct. 31, 1998
From income $ 0.03
From capital gains $ 0.32
Total distributions $ 0.35
Total return* +4.71%**
Class Y -- 12-month performance
(All figures per share)
Net asset value (NAV)
Oct. 31, 1998 $10.70
Oct. 31, 1997 $10.59
Increase $ 0.11
Distributions -- Nov. 1, 1997 - Oct. 31, 1998
From income $ 0.13
From capital gains $ 0.32
Total distributions $ 0.45
Total return* +5.59%**
* 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.
IDS INTERNATIONAL Fund (This annual report is not part of the prospectus.)
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The 10 Largest Holdings
Percent Value
(of net assets) (as of Oct. 31, 1998)
Telecom Italia (Italy) 5.81% $72,056,161
Mannesmann (Germany) 5.48 68,001,777
Novartis (Switzerland) 4.01 49,743,239
Credito Italiano (Italy) 3.53 43,797,436
Banque Natl de Paris (France) 3.43 42,582,885
General Electric (United Kingdom) 3.31 41,018,130
Henkel KGaA (Germany) 3.24 40,199,574
Orange (United Kingdom) 3.10 38,472,894
Total Petroleum Cl B (France) 2.70 33,521,194
Argentaria (Spain) 2.64 32,737,760
Note: Certain foreign investment risks include: changes in currency exchange
rates, adverse political or economic order or lack of similar regulatory
requirements followed by U.S. companies.
For further detail about these holdings, please refer to the section entitled
"Investments in securities" herein.
(icon of) pie chart
The 10 holdings listed here make up 37.25% of net assets
(This annual report is not part of the prospectus.) ANNUAL REPORT -- 1998
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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. The chart below shows how dollar-cost averaging works. In these
three hypothetical scenarios, you will see six months of share price
fluctuations.
This strategy does not ensure a profit or avoid a loss if the market declines.
But, if you can continue to invest regularly through changing market conditions
even when the price of your shares fall or the market declines, it can be an
effective way to accumulate shares to meet your long-term goals.
How dollar-cost averaging works
Jan Feb Mar Apr May Jun
$15 $16 $18 $20
$10 $10 $12 $14
$ 5
Accumulated shares* Average market Your average
price per share cost per share
42.25 $15 $14.20
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Jan Feb Mar Apr May Jun
$15
$10 $10 $8 $8 $10
$ 5 $5 $5
Accumulated shares* Average market Your average
price per share cost per share
85.0 $7.66 $7.05
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Jan Feb Mar Apr May Jun
$15
$10 $10 $8 $6 $7
$ 5 $4 $4
Accumulated shares* Average market Your average
price per share cost per share
103.5 $6.50 $5.80
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$100 invested per month. Total invested: $600
*Shares purchased is determined by dividing the amount invested per month by the
current share price.
THREE WAYS TO BENEFIT FROM A MUTUAL FUND:
o your shares increase in value when the Fund's investments do well
o you receive capital gains when the gains on investments sold by the Fund
exceed losses
o you receive income when the Fund's stock dividends, interest and short-term
gains exceed its expenses.
All three make up your total return. 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.
IDS INTERNATIONAL FUND (This annual report is not part of the prospectus.)
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The Fund's Long-term Performance
How $10,000 has grown in IDS International Fund
$30,000
Lipper International
Fund Index
$20,000
$18,872
International Fund Class A
$10,000
$9,500 MSCI
EAFE Index
'88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98
Average annual total return (as of Oct. 31, 1998)
1 year Since inception (B&Y) 5 years 10 years
Class A +0.26% --% +4.96% +6.56%
Class B +0.70% +7.63%* --% --%
Class Y +5.59% +9.29%* --% --%
* Inception date was March 20, 1995.
Assumes: Holding period from 11/1/88 to 10/31/98. Returns do not reflect taxes
payable on distributions. Reinvestment of all income and capital gain
distributions for the Fund, with a value of $7,143. Also see "Past Performance"
in the Fund's current prospectus.
On the graph above you can see how the Fund's total return compared to two
widely cited performance indexes, the MSCI EAFE Index and the Lipper
International Fund Index. In comparing International Fund (Class A) to the two
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.
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.
(This annual report is not part of the prospectus.) ANNUAL REPORT -- 1998
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The financial statements contained in Post-Effective Amendment #28 to
Registration statement No. 2-92309 filed on or about Dec. 24, 1998, are
incorporated herein by reference.
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Federal Income Tax Information
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 Form 1099-DIV,
Dividends and Distributions, last January. Shareholders should consult a tax
advisor on how to report distributions for state and local purposes.
IDS International Fund, Inc.
Fiscal year ended Oct. 31, 1998
Class A
Income distribution taxable as dividend income, none qualifying for deduction
for corporations.
Payable date Per share
Dec. 29, 1997 $0.12381
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 29, 1997 $0.31505
Total distributions $0.43886
The long-term capital gains distribution is divided into two rate categories:
28% - $0.00000 and 20% - $0.31505.
Class B
Income distribution taxable as dividend income, none qualifying for deduction
for corporations.
Payable date Per share
Dec. 29, 1997 $0.03713
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 29, 1997 $0.31505
Total distributions $0.35218
The long-term capital gains distribution is divided into two rate categories:
28% - $0.00000 and 20% - $0.31505.
Class Y
Income distribution taxable as dividend income, none qualifying for deduction
for corporations.
Payable date Per share
Dec. 29, 1997 $0.13627
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 29, 1997 $0.31505
Total distributions $0.45132
The long-term capital gains distribution is divided into two rate categories:
28% - $0.00000 and 20% - $0.31505.
IDS INTERNATIONAL FUND (This annual report is not part of the prospectus.)
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Bulk Rate
U.S. POSTAGE
PAID
Permit No. 85
Spencer, IA
S-6140 M (12/98)
IDS International Fund
IDS Tower 10
Minneapolis, MN 55440-0010
AMERICAN
EXPRESS
Financial
Advisors
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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.
