<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 27 (File No. 2-93801)
and/or
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 28 (File No. 811-4133)
------------------------
IDS MANAGED RETIREMENT FUND, INC.
IDS Tower 10, Minneapolis, Minnesota 55440-0010
Leslie L. Ogg--901 S. Marquette Ave., 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 Nov. 28, 1997 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(i)
/ / on (date) pursuant to paragraph (a)(i)
/ / 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.
------------------------
IDS MANAGED ALLOCATION FUND, A SERIES OF THE REGISTRANT, HAS ADOPTED A
MASTER/FEEDER OPERATING STRUCTURE. THIS POST-EFFECTIVE AMENDMENT INCLUDES A
SIGNATURE PAGE FOR GROWTH AND INCOME TRUST, THE MASTER FUND.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Cross reference sheet showing the location in its prospectus and the
Statement of Additional Information of the information called for by the items
enumerated in Parts A and B of Form N-1A.
Negative answers omitted from prospectus are so indicated.
PART A
<TABLE>
<CAPTION>
ITEM NO. SECTION IN PROSPECTUS
- ---------- ------------------------------------------------------------------------------------------
<S> <C>
1 Cover page of prospectus
2(a) Sales charge and Fund expenses
(b) The Fund in brief
(c) The Fund in brief
3(a) Financial highlights
(b) NA
(c) Performance
(d) Financial highlights
4(a) The Fund in brief; Investment policies and risks; How the Fund and Portfolio are organized
(b) Investment policies and risks
(c) Investment policies and risks
5(a) Board members and officers; Board members and officers of the Fund (listing)
(b)(i) Investment manager; About American Express Financial Corporation--General Information
(b)(ii) Investment manager
(b)(iii) Investment manager
(c) Portfolio manager
(d) Administrator and transfer agent
(e) Administrator and transfer agent
(f) Distributor
(g) Investment manager; About American Express Financial Corporation--General Information
5A(a) *
(b) *
6(a) Shares; Voting rights
(b) NA
(c) NA
(d) Voting rights
(e) Cover page; Special shareholder services
(f) Dividends and capital gains distributions; Reinvestments
(g) Taxes
(h) Alternative sales arrangements; Special considerations regarding master/feeder structure
7(a) Distributor
(b) Valuing Fund shares
(c) How to purchase, exchange or redeem shares
(d) How to purchase shares
(e) NA
(f) Distributor
(g) Alternative purchase arrangements; Reductions and waivers of the sales charge
8(a) How to redeem shares
(b) NA
(c) How to purchase shares: Three ways to invest
(d) How to purchase, exchange or redeem shares: Redemption policies--"Important............. "
9 None
</TABLE>
<PAGE>
PART B
<TABLE>
<CAPTION>
ITEM NO. SECTION IN STATEMENT OF ADDITIONAL INFORMATION
- ---------- ------------------------------------------------------------------------------------------
<S> <C>
10 Cover page of SAI
11 Table of Contents
12 NA
13(a) Additional Investment Policies; all appendices except Dollar-Cost Averaging
(b) Additional Investment Policies
(c) Additional Investment Policies
(d) Security Transactions
14(a) Board members and officers of the Fund;** Board members and officers
(b) Board members and Officers
(c) Board members and Officers
15(a) NA
(b) Principal Holders of Securities, if applicable
(c) Board members and Officers
16(a)(i) How the Fund and Portfolio are organized; About American Express Financial Corporation**
(a)(ii) Agreements: Investment Management Services Agreement, Plan and Agreement of Distribution
(a)(iii) Agreements: Investment Management Services Agreement
(b) Agreements: Investment Management Services Agreement
(c) NA
(d) Agreements: Administrative Services Agreement, Shareholder Service Agreement
(e) NA
(f) Agreements: Distribution Agreement
(g) NA
(h) Custodian; Independent Auditors
(i) Agreements: Transfer Agency Agreement; Custodian
17(a) Security Transactions
(b) Brokerage Commissions Paid to Brokers Affiliated with American Express Financial
Corporation
(c) Security Transactions
(d) Security Transactions
(e) Security Transactions
18(a) Shares; Voting rights**
(b) NA
19(a) Investing in the Fund
(b) Valuing Fund Shares; Investing in the Fund
(c) NA
20 Taxes
21(a) Agreements: Distribution Agreement
(b) NA
(c) NA
22(a) Performance Information (for money market funds only)
(b) Performance Information (for all funds except money market funds)
23 Financial Statements
</TABLE>
- ------------------------
* Designates information is located in annual report.
** Designates location in prospectus.
<PAGE>
IDS
MANAGED ALLOCATION
FUND
Prospectus/Nov. 28, 1997
The goal of IDS Managed Allocation Fund, a part of IDS Managed Retirement
Fund, Inc., is to maximize total return through a combination of growth of
capital and current income.
THE FUND SEEKS TO ACHIEVE ITS GOAL BY INVESTING ALL OF ITS ASSETS IN TOTAL
RETURN PORTFOLIO OF GROWTH AND INCOME TRUST. THE PORTFOLIO IS MANAGED BY
AMERICAN EXPRESS FINANCIAL CORPORATION AND HAS THE SAME GOAL AS THE FUND.
THIS ARRANGEMENT IS COMMONLY KNOWN AS A MASTER/FEEDER STRUCTURE.
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 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:
- - is not a bank deposit
- - is not federally insured
- - is not endorsed by any bank or government agency
- - is not guaranteed to achieve its goal
American Express Shareholder Service
P.O. Box 534 Minneapolis, MN 55440-0534 800-862-7919 TTY: 800-846-4852
Web site address: http://www.americanexpress.com/advisors
<PAGE>
TABLE OF CONTENTS
THE FUND IN BRIEF 3P
Goal 3P
Investment policies and risks 3P
Structure of the Fund 3P
Manager and distributor 4P
Portfolio management team 4P
Alternative purchase arrangements 5P
SALES CHARGE AND FUND EXPENSES 6P
PERFORMANCE 8P
Financial highlights 8P
Total return 10P
INVESTMENT POLICIES AND RISKS 12P
Facts about investments and their risks 12P
Valuing Fund shares 16P
HOW TO PURCHASE, EXCHANGE OR REDEEM SHARES 18P
Alternative purchase arrangements 18P
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 AND PORTFOLIO ARE ORGANIZED 39P
Shares 39P
Voting rights 39P
Shareholder meetings 39P
Special considerations regarding
master/feeder structure 40P
Board members and officers 42P
Investment manager 44P
Administrator and transfer agent 44P
Distributor 45P
ABOUT AMERICAN EXPRESS FINANCIAL CORPORATION 46P
General information 46P
APPENDICES 47P
Descriptions of corporate bond ratings 47P
Descriptions of derivative instruments 49P
2P
<PAGE>
- ------------------------------
The Fund in brief
GOAL
IDS Managed Allocation Fund (the Fund) seeks to provide
shareholders maximum total return through a combination of growth
of capital and current income. It does so by investing all of its
assets in Total Return Portfolio (the Portfolio) of Growth and
Income Trust (the Trust) rather than by directly investing in and
managing its own portfolio of securities. Both the Fund and the
Portfolio are diversified investment companies that have the same
goal. Because any investment involves risk, achieving this goal
cannot be guaranteed. The goal can be changed only by holders of
a majority of outstanding securities.
The Fund may withdraw its assets from the Portfolio at any time
if the board determines that it is in the best interests of the
Fund to do so. In that event, the Fund would consider what action
should be taken, including whether to retain an investment
advisor to manage the Fund's assets directly or to reinvest all
of the Fund's assets in another pooled investment entity.
INVESTMENT POLICIES AND RISKS
Both the Fund and the Portfolio have the same investment
policies. Accordingly, the Portfolio invests in U.S. equity
securities, U.S. and foreign debt securities, foreign equity
securities and money market instruments. The Portfolio provides
diversification among these major investment categories. The
Portfolio has a target mix that represents the way the
investments will be allocated over the long term. This mix will
vary over short-term periods based on the management team's
outlook for the different markets. The Portfolio may also use
derivative instruments. Some of the Portfolio's investments may
be considered speculative and involve additional investment
risks. For further information, refer to the later section in the
prospectus titled "Investment policies and risks."
STRUCTURE OF THE FUND
This Fund uses what is commonly known as a master/ feeder
structure. This means that the Fund (the feeder fund) invests all
of its assets in the Portfolio (the master fund). The Portfolio
invests in and manages the securities and has the same goal and
3P
<PAGE>
The Fund in brief
investment policies as the Fund. This structure is described in
more detail in the section captioned "Special considerations
regarding master/feeder structure." Here is an illustration of
the structure:
Investors buy shares in the Fund
:
:
The Fund invests in the Portfolio
:
:
The Portfolio invests in securities,
such as stocks or bonds
MANAGER AND DISTRIBUTOR
The Portfolio is managed by American Express Financial
Corporation (AEFC), a provider of financial services since 1894.
AEFC currently manages more than $70 billion in assets for the
IDS MUTUAL FUND GROUP. Shares of the Fund are sold through
American Express Financial Advisors Inc. (AEFA), a wholly owned
subsidiary of AEFC.
PORTFOLIO MANAGEMENT TEAM
To determine the appropriate allocation of assets in the
Portfolio, an asset allocation team has been established. As
portfolio manager, Steve Merrell leads this team. In addition to
Steve, the team is comprised of Peter Anderson, Fred Quirsfeld
and Peter Lamaison.
Steve Merrell has served as portfolio manager for the Portfolio
since September 1997 and as fixed income securities specialist
since December 1995. He joined AEFC in 1991 and has managed IDS
Life Special Income Fund since that time. Steve serves as vice
president and senior portfolio manager.
Peter Anderson advises the portfolio manager on domestic equities
for the Portfolio. He joined AEFC in 1982. He was president of
American Express Asset Management Group Inc. from 1985 to 1993
and has been chairman of the board since 1993.
Frederick Quirsfeld advises the portfolio manager on domestic
fixed income securities for the Portfolio. He joined AEFC in
1985. He serves as vice president and senior portfolio manager
and has managed IDS Bond Fund since 1985.
4P
<PAGE>
Peter Lamaison advises the portfolio manager on international
equities for the Portfolio. He joined AEFC in 1981 and has since
served as president, chief executive officer and chief investment
officer of American Express Asset Management International Inc.
Day-to-day management for the various asset classes held by the
Portfolio is the responsibility of the following managers:
Guru Baliga has served as U.S. equities specialist for the assets
of this Portfolio since December 1995. He joined AEFC in 1991 and
serves as vice president and senior portfolio manager. He became
portfolio manager of IDS Blue Chip Advantage Fund in 1994. He
also is portfolio manager of Aggressive Growth Portfolio, IDS
Small Company Index Fund and American Express Asset Management
Group accounts.
Mark Hays and John O'Brien, the "London Team," provide portfolio
management for the international equities portion of the
Portfolio. Mark joined AEFC in 1984, and John joined AEFC in
1988.
In addition to serving as portfolio manager for the team, Steve
Merrell provides day-to-day portfolio management for the fixed
income portion of the Portfolio.
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.
5P
<PAGE>
- ---------------------------
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 and include expenses charged by both the Fund and the
Portfolio. Operating expenses are reflected in the Fund's daily
share price and dividends, and are not charged directly to
shareholder accounts.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
CLASS A CLASS B CLASS Y
<S> <C> <C> <C>
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%
- ----------------------------------------------------
<CAPTION>
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS):
CLASS A CLASS B CLASS Y
<S> <C> <C> <C>
Management fee**....................... 0.47% 0.47% 0.47%
12b-1 fee.............................. 0.00% 0.75% 0.00%
Other expenses***...................... 0.37% 0.38% 0.30%
Total****.............................. 0.84% 1.60% 0.77%
</TABLE>
* This charge may be reduced depending on your total
investments in IDS funds. See "Reductions of the
sales charge."
** The management fee is paid by the Trust on behalf
of the Portfolio. It includes the impact of a
performance fee that decreased the management fee
by 0.02% in fiscal year 1997.
*** Other expenses include an administrative services
fee, a shareholder services fee, a transfer agency
fee and other non-advisory expenses. Class Y
expenses have been restated to reflect the 0.10%
shareholder services fee effective on May 9, 1997.
**** The Fund changed to a master/feeder structure on
May 13, 1996. The board considered whether the
aggregate expenses of the Fund and the Portfolio
would be more or less than if the Fund invested
directly in the type of securities being held by
the Portfolio. AEFC has agreed to pay the small
additional costs required to use a master/feeder
structure to manage the investment portfolio
during the first year of its operation and half of
such costs in the second year. These additional
costs may be more than offset in subsequent years
if the assets being managed increase.
6P
<PAGE>
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:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 58 $ 75 $ 94 $ 149
Class B $ 66 $ 91 $ 107 $ 170**
Class B* $ 16 $ 51 $ 87 $ 170**
Class Y $ 8 $ 25 $ 43 $ 96
</TABLE>
* 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.
7P
<PAGE>
- -------------------------------------------
Performance
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FISCAL PERIOD ENDED SEPT. 30,
PER SHARE INCOME AND CAPITAL CHANGES(a)
CLASS A
1997 1996(b) 1995 1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $12.20 $12.19 $11.29 $12.16 $11.91 $11.08 $9.01 $10.05 $7.48 $6.82 $6.95
beginning of period
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .32 .24 .21 .13 .17 .21 .20 .27 .26 .16 .13
(loss)
Net gains (losses) 1.97 .58 1.65 .03 1.07 2.04 2.45 (.39) 2.51 .66 (.13)
(both realized and
unrealized)
Total from investment 2.29 .82 1.86 .16 1.24 2.25 2.65 (.12) 2.77 .82 --
operations
LESS DISTRIBUTIONS:
Dividends from net (.32) (.23) (.16) (.12) (.19) (.21) (.27) (.25) (.20) (.16) (.13)
investment income
Distributions from (1.49) (.58) (.80) (.90) (.80) (1.20) (.31) (.67) -- -- --
realized gains
Excess distributions -- -- -- (.01) -- (.01) -- -- -- -- --
of realized gains
Total distributions (1.81) (.81) (.96) (1.03) (.99) (1.42) (.58) (.92) (.20) (.16) (.13)
Net asset value, end $12.68 $12.20 $12.19 $11.29 $12.16 $11.91 $11.08 $9.01 $10.05 $7.48 $6.82
of period
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
CLASS A
1997 1996(b) 1995 1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net assets, end of $2,639 $2,523 $2,602 $2,252 $1,845 $1,425 $1,007 $715 $700 $644 $673
period (in millions)
Ratio of expenses to .84% .80%(d) .83% .85% .83% .85% .90% .90% .92% .88% .88%
average daily net
assets(c)
Ratio of net income 2.55% 2.29%(d) 1.85% 1.13% 1.46% 1.94% 1.98% 2.94% 2.82% 2.07% 1.83%
(loss) to average
daily net assets
Portfolio turnover 99% 142% 90% 66% 61% 46% 81% 78% 73% 102% 87%
rate (excluding
short-term securities)
for the underlying
Portfolio
Total return(e) 20.8% 7.1% 18.0% 1.0% 11.2% 22.3% 30.9% (1.2%) 37.3% 12.0% (0.3%)
Average brokerage $.0339 $.0303 -- -- -- -- -- -- -- -- --
commission rate for
the underlying
Portfolio(f)
</TABLE>
(a)For a share outstanding throughout the period. Rounded to the nearest cent.
(b)The Fund's fiscal year-end was changed from Nov. 30 to Sept. 30, effective
1996.
(c)Effective fiscal year 1996, expense ratio is based on total expenses of the
Fund before reduction of earnings credits on cash balances.
(d)Adjusted to an annual basis.
(e)Total return does not reflect payment of a sales charge.
(f)Effective fiscal year 1996, the Fund is required to disclose an average
brokerage commission rate per share for security trades on which commissions are
charged. The comparability of this information may be affected by the fact that
commission rates per share vary significantly among foreign countries.
8P
<PAGE>
<TABLE>
<CAPTION>
FISCAL PERIOD ENDED SEPT. 30,
PER SHARE INCOME AND CAPITAL CHANGES(a)
CLASS B CLASS Y
1997 1996(b) 1995(c) 1997 1996(b) 1995(c)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.15 $12.16 $10.41 $12.20 $12.19 $10.41
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .23 .15 .11 .33 .26 .16
Net gains (losses) (both realized and 1.97 .57 1.74 1.97 .58 1.76
unrealized)
Total from investment operations 2.20 .72 1.85 2.30 .84 1.92
LESS DISTRIBUTIONS:
Dividends from net investment income (.23) (.15) (.10) (.33) (.25) (.14)
Distributions from realized gains (1.49) (.58) -- (1.49) (.58) --
Total distributions (1.72) (.73) (.10) (1.82) (.83) (.14)
Net asset value, end of period $12.63 $12.15 $12.16 $12.68 $12.20 $12.19
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
CLASS B CLASS Y
1997 1996(b) 1995(c) 1997 1996(b) 1995(c)
<S> <C> <C> <C> <C> <C> <C>
Net assets, end of period (in millions) $241 $163 $75 $118 $113 $115
Ratio of expenses to average daily net 1.60% 1.57%(e) 1.58%(e) .71% .63%(e) .65%(e)
assets(d)
Ratio of net income (loss) to average daily 1.82% 1.61%(e) .94%(e) 2.69% 2.45%(e) 1.95%(e)
net assets
Portfolio turnover rate (excluding short-term 99% 142% 90% 99% 142% 90%
securities) for the underlying Portfolio
Total return(f) 19.9% 6.5% 17.7% 20.9% 7.3% 18.4%
Average brokerage commission rate for the $.0339 $.0303 -- $.0339 $.0303 --
underlying Portfolio(g)
</TABLE>
(a)For a share outstanding throughout the period. Rounded to the nearest cent.
(b)The Fund's fiscal year-end was changed from Nov. 30 to Sept. 30, effective
1996.
(c)Inception date was March 20, 1995 for Class B and Class Y.
(d)Effective fiscal year 1996, expense ratio is based on total expenses of the
Fund before reduction of earnings credits on cash balances.
(e)Adjusted to an annual basis.
(f)Total return does not reflect payment of a sales charge.
(g)Effective fiscal year 1996, the Fund is required to disclose an average
brokerage commission rate per share for security trades on which commissions are
charged. The comparability of this information may be affected by the fact that
commission rates per share vary significantly among foreign countries.
The information in these tables has been audited 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.
9P
<PAGE>
Performance
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.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
AS OF SEPT. 30, 1997
1 YEAR SINCE 5 YEARS
PURCHASE MADE AGO INCEPTION AGO 10 YEARS AGO
<S> <C> <C> <C> <C>
Managed Allocation:
Class A +14.75% -- % +11.56% +11.31%
Class B +15.87% +16.19%* --% --%
Class Y +20.94% +18.52%* --% --%
S&P 500 +40.43% +31.28%** +20.73% +14.73%
Lipper Flexible
Portfolio Fund Index +23.55% +19.51%** +13.47% +12.39%***
</TABLE>
* Inception date was March 20, 1995.
** Measurement period started April 1, 1995.
*** Inception date was Dec. 31, 1987.
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURNS
AS OF SEPT. 30, 1997
1 YEAR SINCE 5 YEARS 10 YEARS
PURCHASE MADE AGO INCEPTION AGO AGO
<S> <C> <C> <C> <C>
Managed Allocation:
Class A +14.75% --% +72.82% +192.19%
Class B +15.87% +46.28%* --% --%
Class Y +20.94% +53.81%* --% --%
S&P 500 +40.43% +99.51%** +156.52% +295.09%
Lipper Flexible
Portfolio Fund Index +23.55% +56.15%** +88.08% +213.04%***
</TABLE>
* Inception date was March 20, 1995.
** Measurement period started April 1, 1995.
*** Inception date was Dec. 31, 1987.
10P
<PAGE>
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. 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.
For purposes of calculation, information about the Fund assumes:
- a sales charge of 5% for Class A shares
- redemption at the end of the period and deduction of the
applicable contingent deferred sales charge for Class B
shares
- no sales charge for Class Y shares
- no adjustments for taxes an investor may have paid on the
reinvested income and capital gains
- a period of widely fluctuating securities prices. Returns
shown should not be considered a representation of the Fund's
future performance.
Standard & Poor's 500 Stock Index (S&P 500), an unmanaged list of
common stocks, is frequently used as a general measure of market
performance. The index reflects reinvestment of all distributions
and changes in market prices, but excludes brokerage commissions
or other fees.
Lipper Flexible Portfolio 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.
11P
<PAGE>
- ------------------------------
Investment policies and risks
The policies described below apply both to the Fund and the
Portfolio. The Portfolio allocates its investments generally
among four asset classes (each of which has its own particular
risk attributes): U.S. equities, U.S. and foreign debt
securities, foreign equity securities and cash. It may use
derivative instruments and make investments not in these classes.
The portion to be invested in each class is determined by the
investment management team based on its judgment as to which mix
of assets will provide the most favorable total return. That mix,
called the Market mix, may be reset periodically, and is expected
to be reset at least once every 12 to 18 months.
Day-to-day, the asset mix will vary from the Market mix but will
remain within the ranges described below.
RANGE MARKET MIX
U.S. equity securities 25-75% 39%
U.S. and foreign debt securities 10-50 40
foreign equity securities 10-50 21
cash 0-30 0
No more than 15% of the Portfolio's total assets will be invested
in below investment-grade debt securities and no more than 50%
will be invested in foreign securities. The Portfolio seeks to
reduce its overall risk by diversification but its performance
will be affected by many factors.
The various types of investments the investment manager uses to
achieve investment performance are described in more detail in
the next section and in the SAI.
FACTS ABOUT INVESTMENTS AND THEIR RISKS
COMMON STOCKS: Stock prices are subject to market fluctuations.
Stocks of larger, established companies that pay dividends may be
less volatile than the stock market as a whole.
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
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<PAGE>
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 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 price of bonds below investment grade may react
more to the ability of the issuing company to pay interest and
principal when due than to changes in interest rates. These bonds
have greater price fluctuations, are more likely to experience a
default and sometimes are referred to as junk bonds. Reduced
market liquidity for these bonds may occasionally make it more
difficult to value them. In valuing bonds, the Portfolio relies
both on independent rating agencies and on the investment
manager's credit analysis. Securities that are subsequently
downgraded in quality may continue to be held by the Portfolio
and will be sold only when the investment manager believes it is
advantageous to do so.
<TABLE>
<CAPTION>
BOND RATINGS AND HOLDINGS FOR FISCAL 1997
PERCENT OF
NET ASSETS IN
S&P RATING PROTECTION OF UNRATED
PERCENT OF (OR MOODY'S PRINCIPAL AND SECURITIES
NET ASSETS EQUIVALENT) INTEREST ASSESSED BY AEFC
<S> <C> <C> <C>
6.27% AAA Highest quality 0.16%
0.74 AA High quality --
0.79 A Upper medium grade 0.01
2.77 BBB Medium grade 0.03
2.84 BB Moderately speculative 0.36
2.49 B Speculative 0.25
0.73 CCC Highly speculative 0.05
-- CC Poor quality --
-- C Lowest quality --
-- D In default --
2.88 Unrated Unrated securities 2.02
</TABLE>
(See the Appendix to this prospectus describing corporate bond
ratings for further information.)
DEBT SECURITIES SOLD AT A DEEP DISCOUNT: Some bonds are sold at
deep discounts because they do not pay interest until maturity.
They include zero coupon bonds and PIK (pay-in-kind) bonds.
Because such securities do not pay current cash income, the
market value of these securities may be subject to greater
volatility than other debt securities. To comply with tax laws,
the Portfolio has to recognize a
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Investment policies and risks
computed amount of interest income and pay dividends to
shareholders even though no cash has been received. In some
instances, the Portfolio may have to sell securities to have
sufficient cash to pay the dividends.
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 Portfolio 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 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. The Portfolio may invest up
to 50% of its total assets in foreign investments.
TECHNOLOGY SECTOR: Stocks of companies that have, or are likely
to develop, products, processes or services that will provide or
benefit significantly from technological advances and
improvements are subject to volatility and price fluctuations as
the technology market sector increases or decreases in favor with
the investing public. Technology-based issues are exposed to
risks associated with economic conditions in that market sector.
Due to competition, a less
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<PAGE>
diversified product line and other factors, companies that
develop and/or rely on technology could become increasingly
sensitive to down swings in the economy.
DERIVATIVE INSTRUMENTS: The investment 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 investment 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 Portfolio 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 Portfolio will
designate cash or appropriate liquid assets to cover its
portfolio obligations. No more than 5% of the Portfolio'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 Portfolio's assets at risk to 5%. The Portfolio 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.
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<PAGE>
Investment policies and risks
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 investment 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 Portfolio's net assets will be held in securities
and other instruments that are illiquid.
MONEY MARKET INSTRUMENTS: The Portfolio may invest up to 30% of
its total assets in short-term debt securities rated in the top
two grades or the equivalent to meet daily cash needs and if the
investment manager decides that asset category is most
appropriate.
The investment policies described above may be changed by the
boards.
LENDING PORTFOLIO SECURITIES: The Portfolio 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
Portfolio's net assets.
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).
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<PAGE>
To establish the net assets, all securities held by the Portfolio
are valued as of the close of each business day. In valuing
assets:
- Securities and assets with available market values are
valued on that basis
- Securities maturing in 60 days or less are valued at
amortized cost
- Assets without readily available market values are valued
according to methods selected in good faith by the board
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<PAGE>
- ---------------------------
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.
SALES CHARGE AND
DISTRIBUTION OTHER
(12b-1) FEE SERVICE FEE INFORMATION
-----------------------------------------------------------
CLASS A Maximum initial 0.175% of Initial sales
sales charge of average daily charge waived or
5%; no 12b-1 fee net assets reduced for
certain
purchases
-----------------------------------------------------------
CLASS B No initial sales 0.175% of Shares convert
charge; maximum average daily to Class A in
CDSC of 5% net assets the ninth year
declines to 0% of ownership;
after six years; CDSC waived in
12b-1 fee of certain
0.75% of average circumstances
daily net assets
-----------------------------------------------------------
CLASS Y None 0.10% of average Available only
daily net assets to certain
qualifying
institutional
investors
CONVERSION OF CLASS B SHARES TO CLASS A SHARES -- During the
ninth calendar year of owning your Class B shares, Class B shares
will convert to Class A shares and will no longer be subject to a
distribution fee. Class B shares that convert to Class A shares
are not subject to a sales charge. Class B shares purchased
through reinvested dividends and distributions also will convert
to Class A shares in the same proportion as the other Class B
shares. This means more of your money will be put to work for
you.
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<PAGE>
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 SHARES IF YOU PURCHASE CLASS B SHARES
- You will not have all of - All of your money is
your purchase price invested. invested in shares of stock.
Part of your purchase price However, you will pay a sales
will go to pay the sales charge if you redeem your
charge. You will not pay a shares within six years of
sales charge when you redeem purchase.
your shares.
- You will be able to take - No reductions of the sales
advantage of reductions in charge are available for
the sales charge. large 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 SHARES IF YOU PURCHASE CLASS B SHARES
- Your shares will have a - The distribution and
lower expense ratio than transfer agency fees for
Class B shares because Class Class B will cause your
A does not pay a distribution shares to have a higher
fee and the transfer agency expense ratio and to pay
fee for Class A is lower than lower dividends than Class A
the fee for Class B. As a shares. In the ninth year of
result, Class A shares will ownership, Class B shares
pay higher dividends than will convert to Class A
Class B shares. shares and you 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.
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<PAGE>
How to purchase, exchange or redeem 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 a
distribution fee. The following investors are eligible to
purchase Class Y shares:
- 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
-- at least $3 million invested in funds of the
IDS MUTUAL FUND GROUP or
-- 500 or more participants.
- 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.
- Nonqualified deferred compensation plans* whose participants
are included in a qualified employee benefit plan described
above.
* Eligibility must be determined in advance by AEFA. To do so,
contact your financial advisor.
HOW TO PURCHASE SHARES
If you are investing in this Fund for the first time, you will
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 your correct
Taxpayer Identification Number (Social Security or Employer
Identification number). See "Distributions and taxes."
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<PAGE>
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:
- 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.
- The minimums allowed for investment may change from time to
time.
- Wire orders can be accepted only on days when your bank,
AEFC, the Fund and Norwest Bank Minneapolis are open for
business.
- Wire purchases are completed when wired payment is received
and the Fund accepts the purchase.
- AEFC and the Fund are not responsible for any delays that
occur in wiring funds, including delays in processing by the
bank.
- You must pay any fee the bank charges for wiring.
- The Fund reserves the right to reject any application for
any reason.
- 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.
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<PAGE>
How to purchase, exchange or redeem shares
THREE WAYS TO INVEST
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------
Send your check and MINIMUM AMOUNTS
1 application (or your Initial
BY REGULAR name and account number investment: $2,000
ACCOUNT if you have an Additional
established account) investments: $100
to: Account balances: $300*
American Express Qualified retirement
Financial Advisors Inc. accounts: none
P.O. Box 74
Minneapolis, MN
55440-0074
Your financial advisor
will help you with this
process.
- --------------------------------------------------------------
Contact your financial MINIMUM AMOUNTS
2 advisor to set up one Initial investment: $100
BY SCHEDULED of the following Additional
INVESTMENT scheduled plans: investments: $100/each
PLAN - automatic payroll payment
deduction Account balances: none
- bank authorization (on active plans of
- direct deposit of monthly payments)
Social Security check If account balance is
- other plan approved by below $2,000, frequency
the Fund of payments must be at
least monthly.
- --------------------------------------------------------------
If you have an If this information is
3 established account, not included, the order
BY WIRE you may wire money to: may be rejected and all
Norwest Bank money received by the
Minneapolis Fund, less any costs the
Routing No. 091000019 Fund or AEFC incurs,
Minneapolis, MN will be returned
Attn: Domestic Wire promptly.
Dept. MINIMUM AMOUNTS
Give these Each wire
instructions: investment: $1,000
Credit IDS Account
#00-30-015 for personal
account # (your account
number) for (your
name).
</TABLE>
* 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 do not do so within 30 days, your
shares can be redeemed and the proceeds mailed to you.
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<PAGE>
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 on any other fund, including fees and
expenses, read that fund's prospectus carefully.
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.
For tax purposes, an exchange represents a redemption and
purchase and may result in a gain or loss. However, you cannot
use the sales charge imposed on the purchase of Class A shares to
create or increase 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 the 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.
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<PAGE>
How to purchase, exchange or redeem shares
TWO WAYS TO REQUEST AN EXCHANGE OR REDEMPTION OF SHARES
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------
Include in your letter: REGULAR MAIL:
1 - the name of the American Express
BY LETTER fund(s) Shareholder Service
- the class of shares to Attn: Redemptions
be exchanged or P.O. Box 534
redeemed Minneapolis, MN
- your account number(s) 55440-0534
(for exchanges, both EXPRESS MAIL:
funds must be American Express
registered in the same Shareholder Service
ownership) Attn: Redemptions
- your Taxpayer 733 Marquette Ave.
Identification Number Minneapolis, MN 55402
(TIN)
- the dollar amount or
number of shares you
want to exchange or
redeem
- signature of all
registered account
owners
- for redemptions,
indicate how you want
your money delivered to
you
- any paper certificates
of shares you hold
- --------------------------------------------------------------
- The Fund and AEFC will Each registered owner
2 honor any telephone must sign the request.
BY PHONE exchange or redemption - AEFC answers phone
American request believed to be requests promptly, but
Express authentic and will use you may experience
Financial reasonable procedures delays when call volume
Advisors to confirm that they is high. If you are
Telephone are. This includes unable to get through,
Transaction asking identifying use mail procedure as
Service: questions and tape an alternative.
800-437-3133 recording calls. If - Acting on your
or reasonable procedures instructions, your
612-671-3800 are not followed, the financial advisor may
Fund or AEFC will be conduct telephone
liable for any loss transactions on your
resulting from behalf.
fraudulent requests. - Phone privileges may
- Phone exchange and be modified or
redemption privileges discontinued at any
automatically apply to time.
all accounts except MINIMUM AMOUNT
custodial, corporate or Redemption: $100
qualified retirement MAXIMUM AMOUNT
accounts unless you Redemption: $50,000
request these
privileges NOT apply by
writing American
Express Shareholder
Service.
</TABLE>
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<PAGE>
EXCHANGE POLICIES:
- 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.
- Exchanges must be made into the same class of shares of the
new fund.
- If your exchange creates a new account, it must satisfy the
minimum investment amount for new purchases.
- Once we receive your exchange request, you cannot cancel it.
- Shares of the new fund may not be used on the same day for
another exchange.
- If your shares are pledged as collateral, the exchange will
be delayed until written approval is obtained from the
secured party.
- 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.
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<PAGE>
How to purchase, exchange or redeem shares
REDEMPTION POLICIES:
- 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.
- 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
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.)
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<PAGE>
THREE WAYS TO RECEIVE PAYMENT WHEN YOU REDEEM SHARES
<TABLE>
<S> <C>
- --------------------------------------------------------------
1 - Mailed to the address on record.
BY REGULAR - Payable to names listed on the account.
OR EXPRESS NOTE: You will be charged a fee if you request
MAIL express mail delivery.
- --------------------------------------------------------------
2 - Minimum wire redemption: $1,000.
BY WIRE - Request that money be wired to your bank.
- 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 - Minimum payment: $50.
BY SCHEDULED - Contact your financial advisor or American
PAYOUT PLAN Express Shareholder Service to set up regular
payments to you on a monthly, bimonthly,
quarterly, semiannual or annual basis.
- Purchasing new shares while under a payout plan
may be disadvantageous because of the sales
charges.
</TABLE>
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<PAGE>
How to purchase, exchange or redeem shares
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:
<TABLE>
<CAPTION>
TOTAL INVESTMENT SALES CHARGE AS A PERCENTAGE OF:*
PUBLIC OFFERING NET AMOUNT
PRICE INVESTED
<S> <C> <C>
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
</TABLE>
* 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:
- the amount you are investing in this Fund now,
- the amount of your existing investment in this Fund, if any,
and
- 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:
- 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.
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<PAGE>
- 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.
- 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:
- Current or retired board members, officers or employees of
the Fund or AEFC or its subsidiaries, their spouses and
unmarried children under 21.
- Current or retired American Express financial advisors,
their spouses and unmarried children under 21.
- Investors who have a business relationship with a newly
associated financial advisor who joined AEFA from another
investment firm provided that (1) the purchase is made within
six months of the advisor's appointment date with AEFA, (2)
the purchase is made with proceeds of a redemption of shares
that were sponsored by the financial advisor's previous
broker-dealer, and (3) the proceeds must be the result of a
redemption of an equal or greater value where a sales load
was previously assessed.
- 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.)
- 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. The CDSC will be waived only in
the circumstances described for waivers for Class B shares.
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<PAGE>
How to purchase, exchange or redeem shares
- Purchases made within 30 days after a redemption of shares
(up to the amount redeemed):
-- of a product distributed by AEFA 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.
- Purchases made with dividend or capital gain distributions
from the same class of another fund in the IDS MUTUAL FUND
GROUP that has a sales charge.
- Purchases made through or under a "wrap fee" product
sponsored by AEFA (total amount of all investments must be
$50,000); the University of Texas System ORP; or a segregated
separate account offered by Nationwide Life Insurance Company
or Nationwide Life and Annuity Insurance Company.
- Purchases made with the proceeds from IDS Life Real Estate
Variable Annuity surrenders through December 31, 1997.
* Eligibility must be determined in advance by AEFA. To do
so, contact your financial advisor.
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<PAGE>
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:
<TABLE>
<CAPTION>
IF A REDEMPTION IS THE PERCENTAGE RATE FOR
MADE DURING THE THE CDSC IS:
<S> <C>
First year 5%
Second year 4%
Third year 4%
Fourth year 3%
Fifth year 2%
Sixth year 1%
Seventh year 0%
</TABLE>
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.
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
31P
<PAGE>
How to purchase, exchange or redeem shares
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:
- In the event of the shareholder's death,
- Purchased by any board member, officer or employee of a fund
or AEFC or its subsidiaries,
- Held in a trusteed employee benefit plan,
- 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 AEFA, or a custodian-to-custodian transfer to a product not
distributed by AEFA, the CDSC will not be waived), or
-- redeeming under an approved substantially equal periodic
payment arrangement.
32P
<PAGE>
- ---------------------------
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.
QUICK TELEPHONE REFERENCE
<TABLE>
<S> <C> <C>
AMERICAN Redemptions and exchanges, dividend National/Minnesota:
EXPRESS payments or reinvestments and automatic 800-437-3133
FINANCIAL payment arrangements Mpls./St. Paul area:
ADVISORS 671-3800
TELEPHONE
TRANSACTION
SERVICE
- --------------------------------------------------------------------------------
TTY SERVICE For the hearing impaired 800-846-4852
- --------------------------------------------------------------------------------
AMERICAN Automated account information 800-862-7919
EXPRESS (TouchTone-Registered Trademark- phones
FINANCIAL only), including current Fund prices and
ADVISORS EASY performance, account values and recent
ACCESS LINE account transactions
- --------------------------------------------------------------------------------
</TABLE>
33P
<PAGE>
- ---------------------------
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 Portfolio allocates investment income from dividends and
interest and net realized capital gains or losses, if any, to the
Fund. The Fund deducts direct and allocated expenses from the
investment income. The Fund's net investment income is
distributed to you at the end of each calendar quarter as
DIVIDENDS. Capital gains are realized when a security is sold for
a higher price than was paid for it. Short-term capital gains are
distributed at the end of the calendar year and are included in
net investment income. Long-term capital gains are realized when
a security is held for more than one year. 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. These long-term capital gains will be subject to
differing tax rates depending on the holding period of the
underlying investments. Before they are distributed, both net
investment income and net long-term capital gains are included in
the value of each share. After they are 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.
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<PAGE>
REINVESTMENTS
Dividends and capital gain distributions are automatically
reinvested in additional shares in the same class of the Fund,
unless:
- you request the Fund in writing or by phone to pay
distributions to you in cash, or
- you direct the Fund to invest your distributions in the same
class of another publicly available IDS fund for which you
have previously opened an account.
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. Prior to reinvestment, no interest
will accrue on amounts represented by uncashed distribution or
redemption checks.
35P
<PAGE>
Distributions and taxes
TAXES
The Fund has received a Private Letter Ruling from the Internal
Revenue Service stating that, for purposes of the Internal
Revenue Code, the Fund will be regarded as directly holding its
allocable share of the income and gain realized by the Portfolio.
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.
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.
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 short term (for shares held
for one year or less) or long term (for shares held for more than
one year). Long-term capital gains will be taxed at rates that
vary depending upon the holding period. Long-term capital gains
are divided into two holding periods: 1) shares held more than
one year but not more than 18 months and 2) shares held more than
18 months.
36P
<PAGE>
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.
If you do not 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:
- a $50 penalty for each failure to supply your correct TIN
- a civil penalty of $500 if you make a false statement that
results in no backup withholding
- 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.
37P
<PAGE>
Distributions and taxes
HOW TO DETERMINE THE CORRECT TIN
<TABLE>
<CAPTION>
USE THE SOCIAL SECURITY OR
FOR THIS TYPE OF EMPLOYER IDENTIFICATION
ACCOUNT: NUMBER OF:
<S> <C>
- ------------------------------------------------------
Individual or joint The individual or first
account person listed on the account
- ------------------------------------------------------
Custodian account of a The minor
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, The legal entity
pension trust or estate (not the 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
- ------------------------------------------------------
</TABLE>
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.
38P
<PAGE>
- ---------------------------
How the Fund and Portfolio are 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.
39P
<PAGE>
How the Fund and Portfolio are organized
SPECIAL CONSIDERATIONS REGARDING
MASTER/FEEDER STRUCTURE
The Fund pursues its goal by investing its assets in a master
fund called the Portfolio. This means that the Fund does not
invest directly in securities; rather the Portfolio invests in
and manages its portfolio of securities. The Portfolio is a
separate investment company, but it has the same goal and
investment policies as the Fund. The goal and investment policies
of the Portfolio are described under the captions "Investment
policies and risks" and "Facts about investments and their
risks." Additional information on investment policies may be
found in the SAI.
BOARD CONSIDERATIONS: The board considered the advantages and
disadvantages of investing the Fund's assets in the Portfolio.
The board believes that the master/feeder structure can be in the
best interest of the Fund and its shareholders since it offers
the opportunity for economies of scale. The Fund may redeem all
of its assets from the Portfolio at any time. Should the board
determine that it is in the best interest of the Fund and its
shareholders to terminate its investment in the Portfolio, it
would consider hiring an investment advisor to manage the Fund's
assets, or other appropriate options. The Fund would terminate
its investment if the Portfolio changed its goal, investment
policies or restrictions without the same change being approved
by the Fund.
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<PAGE>
OTHER FEEDERS: The Portfolio sells securities to other affiliated
mutual funds and may sell securities to non-affiliated investment
companies and institutional accounts (known as feeders). These
feeders buy the Portfolio's securities on the same terms and
conditions as the Fund and pay their proportionate share of the
Portfolio's expenses. However, their operating costs and sales
charges are different from those of the Fund. Therefore, the
investment returns for other feeders are different from the
returns of the Fund. Information about other feeders may be
obtained by calling American Express Financial Advisors at
1-800-AXP-SERV.
Each feeder that invests in the Portfolio is different and
activities of its investors may adversely affect all other
feeders, including the Fund. For example, if one feeder decides
to terminate its investment in the Portfolio, the Portfolio may
elect to redeem in cash or in kind. If cash is used, the
Portfolio will incur brokerage, taxes and other costs in selling
securities to raise the cash. This may result in less investment
diversification if entire investment positions are sold, and it
also may result in less liquidity among the remaining assets. If
in-kind distribution is made, a smaller pool of assets remains
that may affect brokerage rates and investment options. In both
cases, expenses may rise since there are fewer assets to cover
the costs of managing those assets.
41P
<PAGE>
How the Fund and Portfolio are organized
SHAREHOLDER MEETINGS: Whenever the Portfolio proposes to change a
fundamental investment policy or to take any other action
requiring approval of its security holders, the Fund will hold a
shareholder meeting. The Fund will vote for or against the
Portfolio's proposals in proportion to the vote it receives for
or against the same proposals from its shareholders.
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. Board members and officers
serve 47 IDS and IDS Life funds and 15 Master Trust portfolios,
except for William H. Dudley, who does not serve the nine IDS
Life funds. The board members also serve as members of the board
of the Trust which manages the investments of the Portfolio and
other accounts. Should any conflict of interest arise between the
interests of the shareholders of the Fund and those of the other
accounts, the board will follow written procedures to address the
conflict.
42P
<PAGE>
INDEPENDENT BOARD MEMBERS AND OFFICERS
<TABLE>
<S> <C>
Chairman of WILLIAM R. PEARCE*
the board Chairman of the board, Board Services Corporation
(provides administrative services to boards including
the boards of the IDS and IDS Life funds and Master
Trust portfolios).
H. BREWSTER ATWATER, JR.
Former chairman and chief executive officer, General
Mills, Inc.
LYNNE V. CHENEY
Distinguished fellow, American Enterprise Institute for
Public Policy Research.
HEINZ F. HUTTER
Former president and chief operating officer, Cargill,
Inc.
ANNE P. JONES
Attorney and telecommunications consultant.
ALAN K. SIMPSON
Former United States senator for Wyoming.
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.
OFFICER
Vice president, LESLIE L. OGG*
general counsel President, treasurer and corporate secretary of Board
and secretary Services Corporation.
BOARD MEMBERS AND OFFICERS ASSOCIATED WITH AEFC
President JOHN R. THOMAS*
Senior vice president, AEFC.
WILLIAM H. DUDLEY*
Senior advisor to the chief executive officer, AEFC.
DAVID R. HUBERS*
President and chief executive officer, AEFC.
OFFICERS ASSOCIATED WITH AEFC
Vice president PETER J. ANDERSON*
Senior vice president, AEFC.
Treasurer MELINDA S. URION*
Senior vice president and chief financial officer, AEFC.
</TABLE>
Refer to the SAI for the board members' and officers' biographies.
* Interested persons as defined by the Investment Company Act of 1940.
43P
<PAGE>
How the Fund and Portfolio are organized
INVESTMENT MANAGER
The Portfolio pays AEFC for managing its assets. The Fund pays
its proportionate share of the fee. Under the Investment
Management Services Agreement, AEFC is paid a fee for these
services based on the average daily net assets of the Portfolio,
as follows:
<TABLE>
<CAPTION>
ANNUAL RATE
ASSETS AT EACH ASSET
(BILLIONS) LEVEL
<S> <C>
First $0.50 0.530%
Next 0.50 0.505
Next 1.0 0.480
Next 1.0 0.455
Next 3.0 0.430
Over 6.0 0.400
</TABLE>
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 Flexible Portfolio Fund Index. The
maximum adjustment is 0.08% of the Portfolio's average daily net
assets on an annual basis.
For the fiscal year ended Sept. 30, 1997, the Portfolio paid AEFC
a total investment management fee of 0.47% of its average daily
net assets. Under the Agreement, the Portfolio 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 0.04% and decreasing to 0.02% as assets increase.
The second agreement, the Transfer Agency Agreement, has an
annual fee per shareholder account as follows:
- Class A $15
- Class B $16
- Class Y $15
44P
<PAGE>
DISTRIBUTOR
The Fund has an exclusive distribution agreement with American
Express Financial Advisors, a wholly owned subsidiary of AEFC.
Financial advisors representing AEFA 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
years and pay an asset-based sales charge (also known as a 12b-1
fee) 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 average daily net assets for Class A and Class B shares and
0.10% for Class Y shares.
Total expenses paid by the Fund's Class A shares for the fiscal
year ended Sept. 30, 1997, were 0.84% of its average daily net
assets. Expenses for Class B and Class Y were 1.60% and 0.71%,
respectively.
45P
<PAGE>
- ------------------------------
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 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 Sept. 30,
1997, were more than $171 billion.
AEFA serves individuals and businesses through its nationwide
network of more than 175 offices and more than 8,500 advisors.
Other AEFC subsidiaries provide investment management and related
services for pension, profit sharing, employee savings and
endowment funds of businesses and institutions.
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 Portfolio may pay brokerage commissions
to broker-dealer affiliates of AEFC.
46P
<PAGE>
- ---------------------------
Appendix A
DESCRIPTION OF CORPORATE BOND RATINGS
Bond 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. Ratings by Moody's Investors Service, Inc. are
Aaa, Aa, A, Baa, Ba, B, Caa, Ca and C. Ratings by Standard &
Poor's Corporation are AAA, AA, A, BBB, BB, B, CCC, CC, C and D.
The following is a compilation of the two agencies' rating
descriptions. For further information, see the SAI.
<TABLE>
<C> <S>
AAA/AAA Judged to be of the best quality and carry the
smallest degree of investment risk. Interest and
principal are secure.
AA/AA Judged to be high-grade although margins of
protection for interest and principal may not be
quite as good as Aaa or AAA rated securities.
A Considered upper-medium grade. Protection for
interest and principal is deemed adequate but
may be susceptible to future impairment.
BAA/BBB Considered medium-grade obligations. Protection
for interest and principal is adequate over the
short-term; however, these obligations may have
certain speculative characteristics.
BA/BB Considered to have speculative elements. The
protection of interest and principal payments
may be very moderate.
B Lack characteristics of more desirable
investments. There may be small assurance over
any long period of time of the payment of
interest and principal.
CAA/CCC Are of poor standing. Such issues may be in
default or there may be risk with respect to
principal or interest.
CA/CC Represent obligations that are highly
speculative. Such issues are often in default or
have other marked shortcomings.
C Are obligations with a higher degree of
speculation. These securities have major risk
exposures to default.
D Are in payment default. The D rating is used
when interest payments or principal payments are
not made on the due date.
</TABLE>
47P
<PAGE>
Appendix A
NON-RATED SECURITIES will be considered for investment when they
possess a risk comparable to that of rated securities consistent
with the Portfolio's objectives and policies. When assessing the
risk involved in each non-rated security, the Portfolio will
consider the financial condition of the issuer or the protection
afforded by the terms of the security.
DEFINITIONS OF ZERO-COUPON AND PAY-IN-KIND SECURITIES
A ZERO-COUPON SECURITY is a security that is sold at a deep
discount from its face value and makes no periodic interest
payments. The buyer of such a security receives a rate of return
by gradual appreciation of the security, which is redeemed at
face value on the maturity date.
A PAY-IN-KIND SECURITY is a security in which the issuer has the
option to make interest payments in cash or in additional
securities. The securities issued as interest usually have the
same terms, including maturity date, as the pay-in-kind
securities.
48P
<PAGE>
- ---------------------------
Appendix B
DESCRIPTIONS OF DERIVATIVE INSTRUMENTS
What follows are brief descriptions of derivative instruments the
Portfolio may use. At various times the Portfolio 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 Portfolio'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 Portfolio 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 Portfolio's
investments against price fluctuations or to increase market
exposure.
ASSET-BACKED AND MORTGAGE-BACKED SECURITIES -- Asset-backed
securities include interests in pools of assets such as motor
vehicle installment sale contracts, installment loan contracts,
leases on various types of real and personal property,
receivables from revolving credit (credit card) agreements or
other categories of receivables. Mortgage-backed securities
include collateralized mortgage obligations and stripped
mortgage-backed securities. Interest and principal payments
depend on payment of the underlying loans or mortgages. The value
of these securities may also be affected by changes in interest
rates, the market's perception of the issuers and the
creditworthiness of the parties involved. The non-mortgage
related asset-backed securities do not have the benefit of a
security interest in the related collateral. Stripped mortgage-
backed securities include interest only (IO) and principal only
(PO) securities. Cash flows and yields on IOs and POs are
extremely sensitive to the rate of principal payments on the
underlying mortgage loans or mortgage-backed securities.
49P
<PAGE>
Appendix B
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.
INVERSE FLOATERS -- Inverse floaters are created by underwriters
using the interest payment on securities. A portion of the
interest received is paid to holders of instruments based on
current interest rates for short-term securities. The remainder,
minus a servicing fee, is paid to holders of inverse floaters. As
interest rates go down, the holders of the inverse floaters
receive more income and an increase in the price for the inverse
floaters. As interest rates go up, the holders of the inverse
floaters receive less income and a decrease in the price for the
inverse floaters.
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.
50P
<PAGE>
- --------------------------------------------------------------------------------
IDS MANAGED ALLOCATION FUND
IDS Tower 10
Minneapolis, MN 55440-0010
Distributed by
American Express
Financial Advisors Inc.
[PRINTED WITH SOY INK LOGO] S-6141 M (11/97)
<PAGE>
IDS MANAGED RETIREMENT FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
FOR
IDS MANAGED ALLOCATION FUND
Nov. 28, 1997
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 Nov. 28, 1997, and it is to be used with the prospectus dated
Nov. 28, 1997, and the Annual Report for the fiscal year ended Sept. 30, 1997.
S-6141-20 L (11/97)
[RECYCLED PAPER WITH A MINIMUM OF 10% POST-CONSUMER WASTE]
<PAGE>
IDS MANAGED ALLOCATION FUND
TABLE OF CONTENTS
<TABLE>
<S> <C>
Goal and Investment Policies.................................... See Prospectus
Additional Investment Policies........................... 3
Security Transactions.................................... 6
Brokerage Commissions Paid to Brokers Affiliated with
American Express Financial Corporation................... 9
Performance Information.................................. 9
Valuing Fund Shares...................................... 11
Investing in the Fund.................................... 12
Redeeming Shares......................................... 16
Pay-out Plans............................................ 17
Taxes.................................................... 18
Agreements............................................... 19
Organizational Information............................... 23
Board Members and Officers............................... 23
Compensation for Fund and Portfolio Board Members........ 27
Independent Auditors..................................... 28
Financial Statements......................................... See Annual Report
Prospectus............................................... 28
Appendix A: Foreign Currency Transactions................ 29
Appendix B: Options and Futures Contracts................ 34
Appendix C: Mortgage-Backed Securities................... 40
Appendix D: Dollar-Cost Averaging........................ 41
</TABLE>
2
<PAGE>
IDS MANAGED ALLOCATION FUND
ADDITIONAL INVESTMENT POLICIES
IDS Managed Allocation Fund (the Fund) pursues its goal by investing all of its
assets in Total Return Portfolio (the Portfolio) of Growth and Income Trust (the
Trust), a separate investment company, rather than by directly investing in and
managing its own portfolio of securities. The Portfolio has the same investment
objectives, policies and restrictions as the Fund.
Fundamental investment policies adopted by the Fund or Portfolio cannot be
changed without the approval of a majority of the outstanding voting securities
of the Fund or Portfolio, respectively, as defined in the Investment Company Act
of 1940, as amended (the 1940 Act). Whenever the Fund is requested to vote on a
change in the investment policies of the corresponding Portfolio, the Fund will
hold a meeting of Fund shareholders and will cast the Fund's vote as instructed
by the shareholders.
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.
These are investment policies in addition to those presented in the prospectus.
The policies below are fundamental policies that apply to both the Fund and the
Portfolio and may be changed only with shareholder/unitholder approval. Unless
holders of a majority of the outstanding voting securities agree to make the
change, the Fund and Portfolio will not:
'Act as an underwriter (sell securities for others). However, under the
securities laws, the Portfolio 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 Portfolio and Fund have not borrowed in the
past and have no present intention to borrow.
'Make cash loans if the total commitment amount exceeds 5% of the Portfolio'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
Portfolio'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.
3
<PAGE>
IDS MANAGED ALLOCATION FUND
'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 Portfolio'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 Portfolio 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 Portfolio
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.
'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,
the Portfolio and of 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, the Portfolio 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 Portfolio will
not purchase securities of that issuer.
'Lend Portfolio securities in excess of 30% of its net assets. The current
policy of the Portfolio's board is to make these loans, either long- or
short-term, to broker-dealers. In making loans, the Portfolio receives 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 Portfolio 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 Portfolio 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 this restriction shall not be deemed to
prohibit the Portfolio from borrowing from banks, using options or futures
contracts, lending its securities or entering into repurchase agreements.
Unless changed by the board, the Fund and Portfolio will not:
'Buy on margin or sell short, except the Portfolio may make margin payments in
connection with transactions in futures contracts.
4
<PAGE>
IDS MANAGED ALLOCATION FUND
'Pledge or mortgage its assets beyond 15% of total assets. If the Portfolio were
ever to do so, valuation of the pledged or mortgaged assets would be based on
market values. For purposes of this policy, collateral arrangements for margin
deposits on a futures contract are not deemed to be a pledge of assets.
'Invest more than 5% of its total assets in securities of companies, including
any predecessors, that have a record of less than three years continuous
operations.
'Invest more than 10% of its total assets in securities of investment companies.
'Invest in a company to control or manage it.
'Invest in exploration or development programs, such as oil, gas or mineral
leases.
'Invest more than 5% of its net assets in warrants.
'Invest more than 10% of the Portfolio'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, 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 Portfolio 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 Portfolio does not intend to
commit more than 5% of its total assets to these practices. The Portfolio does
not pay for the securities or receive dividends or interest on them until the
contractual settlement date. The Portfolio 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 Portfolio's total assets
the same as owned securities.
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IDS MANAGED ALLOCATION FUND
The Portfolio may maintain a portion of its assets in cash and cash-equivalent
investments. The cash-equivalent investments the Portfolio may use are
short-term U.S. and Canadian government securities and negotiable certificates
of deposit, non-negotiable fixed-time deposits, bankers' 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. Any
cash-equivalent investments in foreign securities will be subject to the
limitations on foreign investments described in the prospectus. The Portfolio
also may purchase short-term corporate notes and obligations rated in the top
two classifications by Moody's Investors Service, Inc. (Moody's) or Standard &
Poor's Corporation (S&P) or the equivalent and may use repurchase agreements
with broker-dealers registered under the Securities Exchange Act of 1934 and
with commercial banks. A risk of a repurchase agreement is that if the seller
seeks the protection of bankruptcy laws, the Portfolio's ability to liquidate
the security involved could be impaired.
The Portfolio may invest in foreign securities that are traded in the form of
American Depositary Receipts (ADRs). ADRs are receipts typically issued by a
U.S. bank or trust company evidencing ownership of the underlying securities of
foreign issuers. European Depositary Receipts (EDRs) and Global Depositary
Receipts (GDRs) are receipts typically issued by foreign banks or trust
companies, evidencing ownership of underlying securities issued by either a
foreign or U.S. issuer. Generally Depositary Receipts in registered form are
designed for use in the U.S. securities market and Depositary Receipts in bearer
form are designed for use in securities markets outside the U.S. Depositary
Receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. Depositary Receipts also
involve the risks of other investments in foreign securities.
For a discussion about foreign currency transactions, see Appendix A. For a
discussion on options and futures contracts, see Appendix B. For a discussion on
mortgage-backed securities, see Appendix C.
SECURITY TRANSACTIONS
Subject to policies set by the board, AEFC is authorized to determine,
consistent with the Fund's and Portfolio'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 has been directed to use its 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 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.
6
<PAGE>
IDS MANAGED ALLOCATION FUND
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 or trust for which it
acts as investment manager. AEFC carefully monitors compliance with its Code of
Ethics.
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 to do so to the extent authorized by
law, if AEFC 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 with respect to the Fund and other funds and trusts in the IDS
MUTUAL FUND GROUP for which it acts as investment advisor.
Research provided by brokers supplements AEFC's own research activities. Such
services include economic data on, and analysis of, U.S. and foreign economies;
information on specific industries; 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 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 must follow procedures
authorized by the board. To date, three procedures have been authorized. One
procedure permits AEFC 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, 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, in order to obtain research and brokerage
services, to cause the Portfolio to pay a commission in excess of the amount
another broker might have charged. AEFC has advised the Portfolio 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 believes it
may obtain better overall
7
<PAGE>
IDS MANAGED ALLOCATION FUND
execution. AEFC has represented 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 Portfolio is made independently from any
decision made for another portfolio, fund, or other account advised by AEFC or
any of its subsidiaries. When the Portfolio buys or sells the same security as
another portfolio, fund or account, AEFC 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 Portfolio, the
Portfolio 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 makes a comprehensive review of the broker-dealers and
the overall reasonableness of their commissions. The review evaluates execution,
operational efficiency and research services.
The Portfolio paid total brokerage commissions of $5,860,957 for the fiscal year
ended Sept. 30, 1997, $7,372,053 for the fiscal period ended 1996, and
$6,065,452 for the fiscal year ended 1995. Substantially all firms through whom
transactions were executed provide research services.
In fiscal year 1997, transactions amounting to $10,089,000, on which $15,510 in
commissions were imputed or paid, were specifically directed to firms in
exchange for research services.
As of the fiscal year ended Sept. 30, 1997, the Portfolio 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:
<TABLE>
<CAPTION>
Value of Securities
owned at
Name of Issuer End of Fiscal Year
- ------------------------------------------------------------------
<S> <C>
Bank of America $40,217,180
Goldman Sachs 26,352,041
Morgan Stanley 12,965,672
Travelers Group 7,780,500
</TABLE>
8
<PAGE>
IDS MANAGED ALLOCATION FUND
The portfolio turnover rate was 99% in the fiscal year ended Sept. 30, 1997, and
142% in fiscal period ended Sept. 30, 1996. Higher turnover rates may result in
higher brokerage expenses.
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 Portfolio according to procedures adopted by the
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 Portfolio will receive prices and executions at least as
favorable as those offered by qualified independent brokers performing similar
brokerage and other services for the Portfolio and (ii) the affiliate charges
the Portfolio 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.
Information about brokerage commissions paid by the Portfolio for the last three
fiscal years to brokers affiliated with AEFC is contained in the following
table:
<TABLE>
<CAPTION>
For the
Fiscal For the
Period Fiscal Year
Ended Sept. Ended Nov.
For Fiscal Year Ended Sept. 30, 1997 30, 1996 30, 1995
- --------------------------------------------------------------------------------------------------------------------
Percent of
Aggregate Aggregate Aggregate Aggregate
Dollar Dollar Amount Dollar Dollar
Amount of Percent of of Transactions Amount of Amount of
Commissions Aggregate Involving Commissions Commissions
Nature of Paid to Brokerage Payment of Paid to Paid to
Broker Affiliation Broker Commissions Commissions Broker Broker
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
American Express
Investment Services Inc. (1) $ 314,054 5.36% 10.86% $ 481,354 $ 220,073
</TABLE>
(1) Wholly-owned subsidiary of AEFC.
PERFORMANCE INFORMATION
The Fund may quote various performance figures to illustrate past performance.
Average annual total returns quotations used by the Fund are based on
standardized methods of
9
<PAGE>
IDS MANAGED ALLOCATION FUND
computing performance as required by the SEC. 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:
n
P(1+T) = 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)
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, Morningstar, 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.
10
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IDS MANAGED ALLOCATION FUND
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 Oct. 1, 1997, the
first business day following the end of the fiscal period, the computation
looked like this:
<TABLE>
<CAPTION>
NET ASSETS BEFORE SHARES OUTSTANDING AT NET ASSET VALUE
SHAREHOLDER TRANSACTIONS END OF PREVIOUS DAY OF ONE SHARE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A $2,652,867,523 divided by 208,068,041 equals $12.75
Class B 242,441,765 19,104,946 12.69
Class Y 118,832,435 9,320,191 12.75
</TABLE>
In determining net assets before shareholder transactions, the Portfolio'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.
'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 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.
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<PAGE>
IDS MANAGED ALLOCATION FUND
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 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 Portfolio. 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 adjusted for the sales charge for Class A. For
Class B and Class Y, there is 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 Oct. 1, 1997, was determined by
dividing the net asset value of one share, $12.75, by 0.95 (1.00-0.05 for a
maximum 5% sales charge) for a public offering price of $13.42. The sales charge
is paid to American Express Financial Advisors Inc. (AEFA) by the person buying
the shares.
Class A - Calculation of the Sales Charge
Sales charges are determined as follows:
<TABLE>
<CAPTION>
Within each increment,
sales charge as a percentage of:
--------------------------------------
Public Offering Net
Amount of Investment Price Amount Invested
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
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
</TABLE>
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IDS MANAGED ALLOCATION FUND
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.
<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%
Next 50,000 to 100,000 5.00-4.50 5.26-4.71
Next 100,000 to 500,000 4.50-3.80 4.71-3.95
Next 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
<TABLE>
<CAPTION>
Number of
Participants
-----------------
Total Plan Assets 1-99 100 or more
- -------------------------------------------------------------------------------
<S> <C> <C>
Less than $1 million 4% 0%
$1 million or more 0% 0%
</TABLE>
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IDS MANAGED ALLOCATION FUND
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 group. (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.
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.
14
<PAGE>
IDS MANAGED ALLOCATION FUND
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 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 D.
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 the same class of another fund in the IDS MUTUAL FUND GROUP 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;
15
<PAGE>
IDS MANAGED ALLOCATION FUND
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 that fund's prospectus. You will receive a
confirmation that the automatic directed dividend service has been set up for
your account.
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 Portfolio's securities is not reasonably practicable or it is
not reasonably practicable for the Portfolio to determine the fair value of its
net assets, or
'The SEC, under the provisions of the 1940 Act 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 the 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
16
<PAGE>
IDS MANAGED ALLOCATION FUND
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.
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 American Express Shareholder Service,
P.O. Box 534, Minneapolis, MN 55440-0534, or call American Express Financial
Advisors Telephone Transaction Service at 800-437-3133 (National/Minnesota) or
612-671-3800 (Mpls./St. Paul). 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.
17
<PAGE>
IDS MANAGED ALLOCATION FUND
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 redemption and subsequent purchase of shares. Under the tax laws,
if this exchange is done within 91 days, any sales 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 redemption 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
18
<PAGE>
IDS MANAGED ALLOCATION FUND
received from domestic (U.S.) securities. For the fiscal year ended Sept. 30,
1997, 10.61% of the Fund's net investment income dividends qualified for the
corporate deduction.
Capital gain distributions, if any, received by corporate shareholders should be
treated as long-term capital gains regardless of how long they owned their
shares. Capital gain distributions, if any, received by individuals should be
treated as long-term if held for more than one year; however, recent tax laws
have divided long-term capital gains into two holding periods: (1) shares held
more than one year but not more than 18 months and (2) shares held more than 18
months. 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
Nov. 30 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.
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 Trust, on behalf of the Portfolio, has an Investment Management Services
Agreement with AEFC. For its services, AEFC is paid a fee based on the following
schedule. The Fund pays its proportionate share of the fee.
<TABLE>
<CAPTION>
Assets Annual rate at
(billions) each asset level
- -------------------- ---------------------
<S> <C> <C>
First $ 0.50 0.530%
Next 0.50 0.505
Next 1.0 0.480
Next 1.0 0.455
Next 3.0 0.430
Over 6.0 0.400
</TABLE>
19
<PAGE>
IDS MANAGED ALLOCATION FUND
On Sept. 30, 1997, the daily rate applied to the Portfolio's net assets was
equal to 0.484% 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 Flexible Portfolio 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 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 0.08% 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 decreased the fee by $532,639 for
the fiscal year ended Sept. 30, 1997.
The management fee is paid monthly. Under the agreement, the total amount paid
was $13,358,064 for the fiscal year ended Sept. 30, 1997, $9,405,244 for fiscal
period ended Sept. 30, 1996, and $11,056,179 for fiscal year ended Nov. 30,
1995.
Under the agreement, the Portfolio also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees; audit and certain legal
fees; fidelity bond premiums; registration fees for shares; office expenses;
consultants' fees; compensation of board members, Portfolio officers and
employees; corporate filing fees; organizational expenses; expenses incurred in
connection with lending securities of the Portfolio; and expenses properly
payable by the Portfolio, approved by the board. Under the agreement,
nonadvisory expenses paid by the Fund and Portfolio were $1,051,745 for the
20
<PAGE>
IDS MANAGED ALLOCATION FUND
fiscal year ended Sept. 30, 1997, $1,324,636 for fiscal period ended Sept. 30,
1996, and $1,586,796 for fiscal year ended Nov. 30, 1995.
In this section, prior to May 13, 1996, the fees and expenses described were
paid directly by the Fund. After that date, the management fees were paid
directly by the Portfolio.
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:
<TABLE>
<CAPTION>
Assets Annual rate at
(billions) each asset level
- ---------------------- ----------------
<S> <C> <C>
First $ 0.50 0.040%
Next 0.50 0.035
Next 1.0 0.030
Next 1.0 0.025
Next 3.0 0.020
Over 6.0 0.020
</TABLE>
On Sept. 30, 1997, the daily rate applied to the Fund's net assets was equal to
0.031% 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. Under the agreement, the Fund paid fees
of $897,986 for the fiscal year ended Sept. 30, 1997.
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 $3,537,704 for the fiscal year ended Sept. 30,
1997.
21
<PAGE>
IDS MANAGED ALLOCATION FUND
Distribution Agreement
Under a Distribution Agreement, sales charges deducted for distributing Fund
shares are paid to AEFA daily. These charges amounted to $4,674,729 for the
fiscal year ended Sept. 30, 1997. After paying commissions to personal financial
advisors, and other expenses, the amount retained was $757,348. The amounts were
$5,051,936 and $693,556 for fiscal period ended Sept. 30, 1996, and $7,341,893
and $1,448,083 for fiscal year ended Nov. 30, 1995.
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 average
daily net assets for Class A and Class B and 0.10% for Class Y.
Plan and Agreement of Distribution
For Class B shares, to help AEFA defray the cost of distribution and servicing,
not covered by the sales charges received under the Distribution Agreement, the
Fund and AEFA 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, AEFA 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 AEFA. 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. 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 Sept. 30, 1997, under the agreement, the
Fund paid fees of $1,493,192.
22
<PAGE>
IDS MANAGED ALLOCATION FUND
Custodian Agreement
The Trust'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 Fund also retains the custodian pursuant to 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
Portfolio 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 Portfolio's sub-custodian agreement.
TOTAL FEES AND EXPENSES
The Fund paid total fees and nonadvisory expenses, net of earnings credits of
$25,118,345 for the fiscal year ended Sept. 30, 1997.
ORGANIZATIONAL INFORMATION
IDS Managed Retirement Fund, Inc., of which IDS Managed Allocation Fund is a
part, is an open-end management investment company, as defined in the Investment
Company Act of 1940. It was incorporated on Oct. 9, 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. They serve 15 Master Trust
portfolios and 47 IDS and IDS Life funds (except for William H. Dudley, who does
not serve on the nine IDS Life fund boards).
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
Former chairman and chief executive officer, General Mills, Inc. Director, Merck
& Co., Inc. and Darden Restaurants, Inc.
23
<PAGE>
IDS MANAGED ALLOCATION FUND
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, Union Pacific
Resources, and FPL Group, Inc. (holding company for Florida Power and Light).
WILLIAM H. DUDLEY**
Born in 1932
2900 IDS Tower
Minneapolis, MN
Senior advisor to the chief executive officer of AEFC.
DAVID R. HUBERS+**
Born in 1943
2900 IDS Tower
Minneapolis, MN
President and chief executive officer of AEFC since August 1993, 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.
24
<PAGE>
IDS MANAGED ALLOCATION FUND
WILLIAM R. PEARCE+*
Born in 1927
901 S. Marquette Ave.
Minneapolis, MN
Chairman of the board, Board Services Corporation (provides administrative
services to boards). Director, trustee and officer of registered investment
companies whose boards are served by the company. Former vice chairman of the
board, Cargill, Incorporated (commodity merchants and processors).
ALAN K. SIMPSON'
Born in 1931
1201 Sunshine Ave.
Cody, WY
Former three-term United States Senator for Wyoming. Former Assistant Republican
Leader, U.S. Senate. Director, PacifiCorp (electric power).
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 of AEFC.
WHEELOCK WHITNEY+
Born in 1926
1900 Foshay Tower
821 Marquette Ave.
Minneapolis, MN
Chairman, Whitney Management Company (manages family assets).
25
<PAGE>
IDS MANAGED ALLOCATION FUND
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.
In addition to Mr. Pearce, who is chairman of the board and Mr. Thomas, who is
President, the Fund's other officers are:
LESLIE L. OGG
Born in 1938
901 S. Marquette Ave.
Minneapolis, MN
President, treasurer and corporate secretary of Board Services Corporation. Vice
president, general counsel and secretary for the Fund.
Officers who also are officers and/or employees of AEFC:
PETER J. ANDERSON
Born in 1942
IDS Tower 10
Minneapolis, MN
Director and senior vice president-investments of AEFC. Vice
president-investments for the Fund.
26
<PAGE>
IDS MANAGED ALLOCATION FUND
MELINDA S. URION
Born in 1953
IDS Tower 10
Minneapolis, MN
Director, senior vice president and chief financial officer of AEFC. Director,
executive vice president and controller of IDS Life Insurance Company. Treasurer
for the Fund.
COMPENSATION FOR FUND AND PORTFOLIO BOARD MEMBERS
Members of the Fund board who are not officers of the Fund or AEFC receive an
annual fee of $400 and the chair of the Contracts Committee receives an
additional $86. 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 Personnel Committee
$25 and for traveling from out-of-state $4. Expenses for attending meetings are
reimbursed.
Members of the Portfolio board who are not officers of the Portfolio or of AEFC
receive an annual fee of $1,600 and the chair of the Contracts Committee
receives an additional $86. 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 and Personnel
Committee $25 and for traveling from out-of-state $16. Expenses for attending
meetings are reimbursed.
During the fiscal year ended Sept. 30, 1997, the independent members of the Fund
and Portfolio boards, for attending up to 32 meetings, received the following
compensation:
Compensation Table
<TABLE>
<CAPTION>
Total cash
Pension or compensation from
Retirement the IDS MUTUAL
Aggregate Aggregate benefits accrued as Estimated annual FUND GROUP and
compensation from compensation from Fund or Portfolio benefit upon Preferred Master
Board member the Fund the Portfolio expenses retirement Trust Group
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
H. Brewster Atwater, $ 1,154 $ 2,266 $ 0 $ 0 $ 90,300
Jr. (Part of year)
Lynne V. Cheney 1,213 2,472 0 0 95,800
Robert F. Froehlke 1,354 2,566 0 0 103,000
Heinz F. Hutter 1,429 2,641 0 0 107,200
Anne P. Jones 1,446 2,729 0 0 110,000
Melvin R. Laird 1,229 2,488 0 0 97,000
Alan K. Simpson (Part 1,195 2,454 0 0 94,600
of year)
Edson W. Spencer 1,365 2,277 0 0 100,700
Wheelock Whitney 1,479 2,691 0 0 110,400
C. Angus Wurtele 1,504 2,716 0 0 111,600
</TABLE>
On Sept. 30, 1997, the Fund's board members and officers as a group owned less
than 1% of the outstanding shares of any class.
27
<PAGE>
IDS MANAGED ALLOCATION FUND
INDEPENDENT AUDITORS
The Fund's and corresponding Portfolio's financial statements contained in the
Annual Report to shareholders for the fiscal year ended Sept. 30, 1997, 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 Annual Report to shareholders for the fiscal year ended Sept.
30, 1997, pursuant to Section 30(d) of the 1940 Act 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 Managed Allocation Fund dated Nov. 28, 1997, is hereby
incorporated in this SAI by reference.
28
<PAGE>
IDS MANAGED ALLOCATION FUND
APPENDIX A
FOREIGN CURRENCY TRANSACTIONS
Since investments in foreign countries usually involve currencies of foreign
countries, and since the Portfolio may hold cash and cash-equivalent investments
in foreign currencies, the value of the Portfolio'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 Portfolio may incur costs in
connection with conversions between various currencies.
SPOT RATES AND FORWARD CONTRACTS. The Portfolio 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 Portfolio may enter into forward contracts to settle a security transaction
or handle dividend and interest collection. When the Portfolio 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 Portfolio 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 Portfolio also may enter into forward contracts when management of the
Portfolio 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 Portfolio'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 Portfolio will not enter into such forward contracts or maintain a net
exposure to such contracts when consummating the contracts would obligate the
Portfolio to deliver an amount of foreign currency in excess of the value of the
Portfolio's securities or other assets denominated in that currency.
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The Portfolio will designate cash or securities in an amount equal to the value
of the Portfolio'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
Portfolio's commitments on such contracts.
At maturity of a forward contract, the Portfolio 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 Portfolio retains the security and engages in an offsetting transaction,
the Portfolio will incur a gain or a loss (as described below) to the extent
there has been movement in forward contract prices. If the Portfolio 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
Portfolio enters into a forward contract for selling foreign currency and the
date it enters into an offsetting contract for purchasing the foreign currency,
the Portfolio 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 Portfolio 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 Portfolio 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 Portfolio 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 Portfolio is obligated to deliver.
The Portfolio's dealing in forward contracts will be limited to the transactions
described above. This method of protecting the value of the Portfolio'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 Portfolio 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 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
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selling various currencies. Thus, a dealer may offer to sell a foreign currency
to the Portfolio at one rate, while offering a lesser rate of exchange should
the Portfolio desire to resell that currency to the dealer.
OPTIONS ON FOREIGN CURRENCIES. The Portfolio 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 Portfolio may buy put options on the foreign currency.
If the value of the currency does decline, the Portfolio 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 Portfolio
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
Portfolio 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 Portfolio may write options on foreign currencies for the same types of
hedging purposes. For example, when the Portfolio 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 Portfolio 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 Portfolio
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 Portfolio holds currency sufficient to
cover the option or has an absolute and 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
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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 Portfolio 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 Portfolio 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
delivery date. Most currency futures call for payment of delivery in U.S.
dollars. The Portfolio 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 Portfolio's investments. A currency hedge, for example, should protect a
Yen-denominated bond against a decline in the Yen, but will not protect the
Portfolio against price decline if the issuer's creditworthiness deteriorates.
Because the value of the Portfolio'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
Portfolio's investments denominated in that currency over time.
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The Portfolio will hold securities or other options or futures positions whose
values are expected to offset its obligations. The Portfolio will not enter into
an option or futures position that exposes the Portfolio 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.
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APPENDIX B
OPTIONS AND FUTURES CONTRACTS
The Portfolio may buy or write options traded on any U.S. or foreign exchange or
in the over-the-counter market. The Portfolio may enter into interest rate
futures contracts and stock index futures contracts traded on any U.S. or
foreign exchange. The Portfolio 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 Portfolio 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 and futures contracts may benefit the Portfolio and its shareholders by
improving the Portfolio'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
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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 Portfolio
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 Portfolio for investment purposes.
Options permit the Portfolio to experience the change in the value of a security
with a relatively small initial cash investment.
The risk the Portfolio assumes when it buys an option is the loss of the
premium. To be beneficial to the Portfolio, 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 Portfolio will write covered options when it feels
it is appropriate and will follow these guidelines:
'Underlying securities will continue to be bought or sold solely on the basis of
investment considerations consistent with the Fund's goal.
'All options written by the Portfolio will be covered. For covered call options
if a decision is made to sell the security, or for put options if a decision is
made to buy the security, the Portfolio will attempt to terminate the option
contract through a closing purchase transaction.
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 Portfolio.
The premium received upon writing the option is added to the proceeds received
from the sale of the security. The Portfolio will recognize a capital gain or
loss based upon the difference between the proceeds and the security's basis.
Premiums received from writing outstanding options are included as a deferred
credit in the Statement of Assets and Liabilities and adjusted daily to the
current market value.
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Options on many securities are listed on options exchanges. If the Portfolio
writes listed options, it will follow the rules of the options exchange. 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
ask prices.
Options on certain securities are not actively traded on any exchange, but may
be entered into directly with a dealer. When the Portfolio writes such an
option, the Custodian will segregate assets as appropriate to cover the option.
These options may be more difficult to close. If the Portfolio is unable to
effect a closing purchase transaction, it will not be able to sell the
underlying security until the call written by the Portfolio expires or is
exercised.
FUTURES CONTRACTS. A futures contract is an agreement between two parties to buy
and sell a security for a set price on a future date. Futures contracts trade in
a manner similar to the way a stock trades on a stock exchange and the commodity
exchanges, through their clearing corporations, guarantee performance of the
contracts. Futures contracts are commodity contracts listed on commodity
exchanges. They include contracts based on U.S. Treasury bonds and on Standard &
Poor's 500 Index (S&P 500 Index). 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 Portfolio 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 Portfolio will
gain $500 X (154-150) or $2,000. If the Portfolio 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 Portfolio
will lose $500 X (152-150) or $1,000.
Generally, a futures contract is terminated by entering into an offsetting
transaction. An offsetting transaction is effected by the Portfolio taking an
opposite position. At the time a futures contract is made, a good faith deposit
called initial margin is set up within a segregated account at the Portfolio's
custodian bank. Daily thereafter, the futures contract is valued and the payment
of variation margin is required so that each day the Portfolio would pay out
cash in an amount equal to any decline in the contract's value or receive cash
equal to any increase. At the time a futures contract is closed out, a nominal
commission is paid, which is generally lower than the commission on a comparable
transaction in the cash markets.
The purpose of a futures contract is to allow the Portfolio to gain rapid
exposure to or protect itself from changes in the market without actually buying
or selling securities. For example, if the Portfolio owned long-term bonds and
interest rates were expected to increase,
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it might enter into futures contracts to sell securities which would have much
the same effect as selling some of the long-term bonds it owned. If interest
rates did increase, the value of the debt securities in the portfolio would
decline, but the value of the Portfolio's futures contracts would increase at
approximately the same rate, thereby keeping the net asset value of the
Portfolio from declining as much as it otherwise would have. If, on the other
hand, the Portfolio held cash reserves and interest rates were expected to
decline, the Portfolio might enter into interest rate futures contracts for the
purchase of securities. If short-term rates were higher than long-term rates,
the ability to continue holding these cash reserves would have a very beneficial
impact on the Portfolio's earnings. Even if short-term rates were not higher,
the Portfolio would still benefit from the income earned by holding these
short-term investments. At the same time, by entering into futures contracts for
the purchase of securities, the Portfolio could take advantage of the
anticipated rise in the value of long-term bonds without actually buying them
until the market had stabilized. At that time, the futures contracts could be
liquidated and the Portfolio's cash reserves could then be used to buy long-term
bonds on the cash market. The Portfolio could accomplish similar results by
selling bonds with long maturities and investing in bonds with short maturities
when interest rates are expected to increase or by buying bonds with long
maturities and selling bonds with short maturities when interest rates are
expected to decline. But by using futures contracts as an investment tool, given
the greater liquidity in the futures market than in the cash market, it might be
possible to accomplish the same result more easily and more quickly.
RISKS OF TRANSACTIONS IN FUTURES CONTRACTS
The Portfolio may elect to close some or all of its contracts prior to
expiration. Although the Portfolio 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 Portfolio 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 owned by the Portfolio. 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.
Another risk in employing futures contracts to protect against the price
volatility of securities is that the prices of securities subject to futures
contracts may not correlate perfectly with the behavior of the cash prices of
the Portfolio's securities. The correlation may be distorted because the futures
market is dominated by short-term traders seeking to profit from the difference
between a contract or security price and their cost of borrowed funds. Such
distortions are generally minor and would diminish as the contract approached
maturity.
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In addition, the Portfolio's investment manager could be incorrect in its
expectations as to the direction or extent of various interest rate or market
movements or the time span within which the movements take place. For example,
if the Portfolio sold futures contracts for the sale of securities in
anticipation of an increase in interest rates, and interest rates declined
instead, the Portfolio would lose money on the sale.
OPTIONS ON FUTURES CONTRACTS. Options on futures contracts give the holder a
right to buy or sell futures contracts in the future. Unlike a futures contract,
which requires the parties to the contract to buy and sell a security on a set
date, an option on a futures contract merely entitles its holder to decide on or
before a future date (within nine months of the date of issue) whether to enter
into such a contract. If the holder decides not to enter into the contract, all
that is lost is the amount (premium) paid for the option. Further, because the
value of the option is fixed at the point of sale, there are no daily payments
of cash to reflect the change in the value of the underlying contract. However,
since an option gives the buyer the right to enter into a contract at a set
price for a fixed period of time, its value does change daily and that change is
reflected in the net asset value of the Fund.
The risk the Portfolio assumes when it buys an option is the loss of the premium
paid for the option. The risk involved in writing options on futures contracts
the Portfolio owns, or on securities held in its portfolio, is that there could
be an increase in the market value of such contracts or securities. If that
occurred, the option would be exercised and the asset sold at a lower price than
the cash market price. To some extent, the risk of not realizing a gain could be
reduced by entering into a closing transaction. The Portfolio could enter into a
closing transaction by purchasing an option with the same terms as the one it
had previously sold. The cost to close the option and terminate the Portfolio's
obligation, however, might be more or less than the premium received when it
originally wrote the option. Further, the Portfolio might not be able to close
the option because of insufficient activity in the options market. Purchasing
options also limits the use of monies that might otherwise be available for
long-term investments.
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 portfolio
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.
TAX TREATMENT. As permitted under federal income tax laws, the Portfolio 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 Portfolio being required to defer
recognizing losses incurred by entering into futures contracts and losses on
underlying securities identified as being hedged against.
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 Portfolio will either
make a 1256(d) election and treat
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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 Portfolio'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 Portfolio may be required to defer closing out a
contract beyond the time when it might otherwise be advantageous to do so. The
Portfolio 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 Portfolio'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.
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APPENDIX C
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 Portfolio, 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 Portfolio.
Stripped Mortgage-Backed Securities.The Portfolio 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 Portfolio 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 Portfolio would buy or sell covered
MBS call spread options in situations where mortgage-backed securities are
expected to underperform like-duration Treasury securities.
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APPENDIX D
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 technique 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 on a regular basis through changing market conditions,
including times when the price of their shares falls or the market declines, to
accumulate shares in a fund to meet long-term goals.
DOLLAR-COST AVERAGING
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
PRICE
REGULAR OF A SHARES
INVESTMENT SHARE ACQUIRED
<S> <C> <C>
------------------------------------------
$ 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
</TABLE>
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).
41
<PAGE>
- ------------------------------------
Independent auditors' report
THE BOARD AND SHAREHOLDERS
IDS MANAGED RETIREMENT FUND, INC.:
We have audited the accompanying statement of assets and
liabilities of IDS Managed Allocation Fund (a series of IDS
Managed Retirement Fund, Inc.) as of September 30, 1997, and
the related statement of operations for the year then ended
and the statements of changes in net assets for the year
ended September 30, 1997 and the ten-month period ended
September 30, 1996, and the financial highlights for the year
ended September 30, 1997 and the ten-month period ended
September 30, 1996 and for each of the years in the nine-year
period ended November 30, 1995. These financial statements
and the financial highlights are the responsibility of fund
management. Our responsibility is to express an opinion on
these financial statements and the financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about
whether the financial statements and the financial highlights
are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of IDS Managed Allocation Fund at September 30,
1997, and the results of its operations, changes in its net
assets and the financial highlights for the periods stated in
the first paragraph above, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
November 7, 1997
(THIS ANNUAL REPORT IS NOT PART OF THE PROSPECTUS.) 9
<PAGE>
- ------------------------------------
Financial statements
STATEMENT OF ASSETS AND LIABILITIES
IDS MANAGED ALLOCATION FUND
SEPT. 30, 1997
<TABLE>
<CAPTION>
ASSETS
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Investment in Total Return Portfolio (Note 1) $2,998,493,480
---------------
Total assets 2,998,493,480
---------------
---------------
LIABILITIES
- --------------------------------------------------------------------------
Accrued distribution fee 4,937
Accrued service fee 14,101
Accrued transfer agency fee 9,400
Accrued administrative services fee 2,529
Other accrued expenses 168,600
---------------
Total liabilities 199,567
---------------
Net assets applicable to outstanding capital stock $2,998,293,913
---------------
---------------
REPRESENTED BY
- --------------------------------------------------------------------------
Capital stock -- $.01 par value (Note 1) $ 2,364,932
Additional paid-in capital 2,315,617,412
Undistributed net investment income 71,009
Accumulated net realized gain (loss) 337,881,864
Unrealized appreciation (depreciation) on investments and on translation
of assets and liabilities in foreign currencies 342,358,696
---------------
Total -- representing net assets applicable to outstanding capital stock $2,998,293,913
---------------
---------------
Net assets applicable to outstanding shares: Class A $2,638,890,578
Class B $ 241,201,931
Class Y $ 118,201,404
Net asset value per share of outstanding capital
stock: Class A shares 208,068,041 $ 12.68
Class B shares 19,104,946 $ 12.63
Class Y shares 9,320,191 $ 12.68
</TABLE>
See accompanying notes to financial statements.
10 (THIS ANNUAL REPORT IS NOT PART OF THE PROSPECTUS.)
<PAGE>
STATEMENT OF OPERATIONS
IDS MANAGED ALLOCATION FUND
YEAR ENDED SEPT. 30, 1997
<TABLE>
<CAPTION>
INVESTMENT INCOME
- --------------------------------------------------------------------------
<S> <C>
Income:
Dividends $ 35,477,450
Interest 62,824,744
Less: Foreign taxes withheld (1,467,695)
-------------
Total income 96,834,499
-------------
Expenses (Note 2):
Expenses allocated from Total Return Portfolio 14,119,283
Distribution fee -- Class B 1,493,192
Transfer agency fee 3,514,153
Incremental transfer agency fee -- Class B 23,551
Service fee
Class A 4,389,530
Class B 346,382
Class Y 46,928
Administrative services fees and expenses 897,986
Compensation of board members 11,845
Compensation of officers 7,045
Postage 211,222
Registration fees 134,350
Reports to shareholders 132,166
Audit fees 9,625
Other 7,192
-------------
Total expenses 25,344,450
Earnings credits on cash balances (Note 2) (226,105)
-------------
Total net expenses 25,118,345
-------------
Investment income (loss) -- net 71,716,154
-------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
- --------------------------------------------------------------------------
Net realized gain (loss) on:
Security transactions 347,472,704
Financial futures contracts (2,231,292)
Foreign currency transactions 402,840
Option contracts written (85,119)
-------------
Net realized gain (loss) on investments 345,559,133
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 122,452,877
-------------
Net gain (loss) on investments and foreign currencies 468,012,010
-------------
Net increase (decrease) in net assets resulting from operations $539,728,164
-------------
-------------
</TABLE>
See accompanying notes to financial statements.
(THIS ANNUAL REPORT IS NOT PART OF THE PROSPECTUS.) 11
<PAGE>
Financial statements
STATEMENTS OF CHANGES IN NET ASSETS
IDS MANAGED ALLOCATION FUND
<TABLE>
<CAPTION>
OPERATIONS AND DISTRIBUTIONS SEPT. 30, 1997 SEPT. 30, 1996
- ------------------------------------------------------------------------------------
Ten-month
Year ended period ended
<S> <C> <C>
Investment income (loss) -- net $ 71,716,154 $ 53,050,579
Net realized gain (loss) on investments 345,559,133 319,044,841
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 122,452,877 (180,937,833)
-------------- ---------------
Net increase (decrease) in net assets resulting from operations 539,728,164 191,157,587
-------------- ---------------
Distributions to shareholders from:
Net investment income
Class A (65,540,801) (47,854,778)
Class B (3,907,527) (1,808,151)
Class Y (3,162,775) (2,284,060)
Net realized gain
Class A (292,030,274) (123,949,698)
Class B (20,916,577) (3,984,417)
Class Y (13,571,619) (5,524,806)
-------------- ---------------
Total distributions (399,129,573) (185,405,910)
-------------- ---------------
CAPITAL SHARE TRANSACTIONS (NOTE 3)
- --------------------------------------------------------------------------
Proceeds from sales
Class A shares (Note 2) 196,359,438 255,329,365
Class B shares 78,101,366 99,960,524
Class Y shares 32,047,202 31,094,078
Reinvestment of distributions at net asset value
Class A shares 354,268,365 170,362,163
Class B shares 24,680,194 5,759,750
Class Y shares 16,734,394 7,808,866
Payments for redemptions
Class A shares (558,247,028) (507,852,195)
Class B shares (Note 2) (35,890,509) (20,560,821)
Class Y shares (48,656,445) (40,841,448)
-------------- ---------------
Increase (decrease) in net assets from capital share transactions 59,396,977 1,060,282
-------------- ---------------
Total increase (decrease) in net assets 199,995,568 6,811,959
Net assets at beginning of period 2,798,298,345 2,791,486,386
-------------- ---------------
Net assets at end of period 2,998,293,913 2,798,298,345
-------------- ---------------
Undistributed net investment income $ 71,009 $ 338,844
-------------- ---------------
-------------- ---------------
</TABLE>
See accompanying notes to financial statements.
12 (THIS ANNUAL REPORT IS NOT PART OF THE PROSPECTUS.)
<PAGE>
- ----------------------------------------
Notes to financial statements
IDS MANAGED ALLOCATION FUND
- --------------------------------------------------------------------------
1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
IDS Managed Allocation Fund is a series of IDS Managed
Retirement Fund, Inc. and is registered under the Investment
Company Act of 1940 (as amended) as a diversified, open-end
management investment company. IDS Managed Retirement Fund,
Inc. has 10 billion authorized shares of capital stock that
can be allocated among the separate series as designated by
the board. The Fund offers Class A, Class B and Class Y
shares. Class A shares are sold with a front-end sales
charge. Class B shares may be subject to a contingent
deferred sales charge and such shares automatically convert
to Class A shares during the ninth calendar year of
ownership. Class Y shares have no sales charge and are
offered only to qualifying institutional investors.
All classes of shares have identical voting, dividend,
liquidation and other rights, and the same terms and
conditions, except that the level of distribution fee,
transfer agency fee and service fee (class specific expenses)
differs among classes. Income, expenses (other than class
specific expenses) and realized and unrealized gains or
losses on investments are allocated to each class of shares
based upon its relative net assets.
INVESTMENT IN TOTAL RETURN PORTFOLIO
Effective May 13, 1996, the Fund began investing all of its
assets in Total Return Portfolio (the Portfolio), a series of
Growth and Income Trust, an open-end investment company that
has the same objectives as the Fund. This was accomplished by
transferring the Fund's assets to the Portfolio in return for
a proportionate ownership interest in the Portfolio. Total
Return Portfolio seeks to provide shareholders maximum total
return through a combination of growth of capital and current
income.
The Fund records daily its share of the Portfolio's income,
expenses and realized and unrealized gains and losses. The
financial statements of the Portfolio are included elsewhere
in this report and should be read in conjunction with the
Fund's financial statements.
The Fund records its investment in the Portfolio at the value
that is equal to the Fund's proportionate ownership interest
in the net assets of the Portfolio.
(THIS ANNUAL REPORT IS NOT PART OF THE PROSPECTUS.) 13
<PAGE>
Notes to financial statements
IDS MANAGED ALLOCATION FUND
The percentage of the Portfolio owned by the Fund at Sept.
30, 1997 was 99.98%. Valuation of securities held by the
Portfolio is discussed in Note 1 of the Portfolio's "Notes to
financial statements," which are included elsewhere in this
report.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of increase and
decrease in net assets from operations during the period.
Actual results could differ from those estimates.
FEDERAL TAXES
Since the Fund's policy is to comply with all sections of the
Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to the
shareholders, no provision for income or excise taxes is
required.
Net investment income (loss) and net realized gains (losses)
allocated from the Portfolio may differ for financial
statement and tax purposes primarily because of the deferral
of losses on certain futures contracts, the recognition of
certain foreign currency gains (losses) as ordinary income
(loss) for tax purposes, and losses deferred due to "wash
sale" transactions. The character of distributions made
during the year from net investment income or net realized
gains may differ from their ultimate characterization for
federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are
distributed may differ from the year that the income or
realized gains (losses) were recorded by the Fund.
On the statement of assets and liabilities, as a result of
permanent book-to-tax differences, undistributed net
investment income has been increased by $627,114 and
accumulated net realized gain has been decreased by $627,114.
14 (THIS ANNUAL REPORT IS NOT PART OF THE PROSPECTUS.)
<PAGE>
DIVIDENDS TO SHAREHOLDERS
Dividends declared and paid each calendar quarter from net
investment income are reinvested in additional shares of the
Fund at net asset value or payable in cash. Capital gains,
when available, are distributed along with the last income
dividend of the calendar year.
- -------------------------------------------------------------------
2
EXPENSES AND SALES CHARGES
In addition to the expenses allocated from the Portfolio, the
Fund accrues its own expenses as follows:
Effective March 20, 1995, the Fund entered into agreements
with American Express Financial Corporation (AEFC) for
providing administrative services and serving as transfer
agent. Under its Administrative Services Agreement, the Fund
pays AEFC a fee for administration and accounting services at
a percentage of the Fund's average daily net assets in
reducing percentages from 0.04% to 0.02% annually. Additional
administrative service expenses paid by the Fund are office
expenses, consultants' fees and compensation of officers and
employees. Under this agreement, the Fund also pays taxes,
audit and certain legal fees, registration fees for shares,
compensation of board members, corporate filing fees,
organizational expenses and any other expenses properly
payable by the Fund and approved by the board.
Under a separate Transfer Agency Agreement, AEFC maintains
shareholder accounts and records. The Fund pays AEFC an
annual fee per shareholder account for this service as
follows:
- Class A $15
- Class B $16
- Class Y $15
Also effective March 20, 1995, the Fund entered into
agreements with American Express Financial Advisors Inc. for
distribution and shareholder servicing-related services.
Under a Plan and Agreement of Distribution, the Fund pays a
distribution fee at an annual rate of 0.75% of the Fund's
average daily net assets attributable to Class B shares for
distribution-related services.
(THIS ANNUAL REPORT IS NOT PART OF THE PROSPECTUS.) 15
<PAGE>
Notes to financial statements
IDS MANAGED ALLOCATION FUND
Under a 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 and commencing on May 9, 1997,
the fee is calculated at a rate of 0.10% of the Fund's
average daily net assets attributable to Class Y shares.
Sales charges received by American Express Financial Advisors
Inc. for distributing Fund shares were $4,504,516 for Class A
and $170,213 for Class B for the year ended Sept. 30, 1997.
During the year ended Sept. 30, 1997, the Fund's transfer
agency fees were reduced by $226,105 as a result of earnings
credits from overnight cash balances.
- -------------------------------------------------------------------
3
CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods
indicated are as follows:
<TABLE>
<CAPTION>
Year ended Sept. 30, 1997
Class A Class B Class Y
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Sold 16,320,731 6,502,486 2,643,368
Issued for reinvested distributions 31,097,328 2,176,773 1,468,689
Redeemed (46,167,773) (2,976,311) (4,038,230)
- ------------------------------------------------------------------------------
Net increase (decrease) 1,250,286 5,702,948 73,827
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Ten months ended Sept. 30, 1996
Class A Class B Class Y
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Sold 21,638,843 8,496,240 2,625,252
Issued for reinvested distributions 14,606,625 494,566 669,065
Redeemed (42,955,266) (1,743,550) (3,458,284)
- ------------------------------------------------------------------------------
Net increase (decrease) (6,709,798) 7,247,256 (163,967)
- ------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
4
CHANGE OF FUND'S FISCAL YEAR
The By-Laws of the Fund were amended on Jan. 11, 1996,
changing it's fiscal year end from Nov. 30 to Sept. 30,
effective 1996.
- -------------------------------------------------------------------
5
FINANCIAL HIGHLIGHTS
"Financial highlights" showing per share data and selected
information is presented on pages 8 and 9 of the prospectus.
16 (THIS ANNUAL REPORT IS NOT PART OF THE PROSPECTUS.)
<PAGE>
- ------------------------------------
Independent auditors' report
THE BOARD OF TRUSTEES AND UNITHOLDERS
GROWTH AND INCOME TRUST:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments in
securities, of Total Return Portfolio (a series of Growth and
Income Trust) as of September 30, 1997, the related statement
of operations for the year then ended and the statements of
changes in net assets for the year ended September 30, 1997
and for the period from May 13, 1996 (commencement of
operations) to September 30, 1996. These financial statements
are the responsibility of portfolio management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. Investment securities held in custody
are confirmed to us by the custodian. As to securities
purchased and sold but not received or delivered, and
securities on loan we request confirmations from brokers, and
where replies are not received, we carry out other
appropriate auditing procedures. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of Total Return Portfolio at September 30, 1997, and
the results of its operations and the changes in its net
assets for the periods stated in the first paragraph above,
in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
November 7, 1997
(THIS ANNUAL REPORT IS NOT PART OF THE PROSPECTUS.) 17
<PAGE>
- ------------------------------------
Financial statements
STATEMENT OF ASSETS AND LIABILITIES
TOTAL RETURN PORTFOLIO
SEPT. 30, 1997
<TABLE>
<CAPTION>
ASSETS
- -------------------------------------------------------------------
<S> <C>
Investments in securities, at value (Note 1)
Investments in securities of unaffiliated issuers
(identified cost $2,719,395,032) $3,069,531,804
Investments in securities of affiliated issuer
(identified cost $13,079,176) 5,857,500
Dividends and accrued interest receivable 11,942,366
Receivable for investment securities sold 52,365,358
Unrealized appreciation on foreign currency
contracts held, at value (Notes 1 and 4) 26,245
U.S. government securities held as collateral
(Note 5) 6,121,325
---------------
Total assets 3,145,844,598
---------------
LIABILITIES
- -------------------------------------------------------------------
Disbursements in excess of cash on demand deposit
(includes bank overdraft of $48,564,468) 49,525,597
Payable for investment securities purchased 44,986,177
Unrealized depreciation on foreign currency
contracts held, at value (Notes 1 and 4) 112,220
Payable upon return of securities loaned (Note 5) 51,943,360
Accrued investment management services fee 39,715
Other accrued expenses 30,883
---------------
Total liabilities 146,637,952
---------------
Net assets $2,999,206,646
---------------
---------------
</TABLE>
See accompanying notes to financial statements.
18 (THIS ANNUAL REPORT IS NOT PART OF THE PROSPECTUS.)
<PAGE>
STATEMENT OF OPERATIONS
TOTAL RETURN PORTFOLIO
YEAR ENDED SEPT. 30, 1997
<TABLE>
<CAPTION>
INVESTMENT INCOME
- --------------------------------------------------------------------------
<S> <C>
Income:
Dividends $ 35,485,471
Interest 62,794,083
Less: Foreign taxes withheld (1,468,029)
-------------
Total income 96,811,525
-------------
Expenses (Note 2):
Investment management services fee 13,358,064
Compensation of board members 27,806
Custodian fees 670,730
Audit fees 28,875
Other 50,741
-------------
Total expenses 14,136,216
Earnings credits on cash balances (Note 2) (13,747)
-------------
Total net expenses 14,122,469
-------------
Investment income (loss) -- net 82,689,056
-------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
- --------------------------------------------------------------------------
Net realized gain (loss) on:
Security transactions (including loss of $1,184,513
on sale of affiliated issuers) (Note 3) 347,541,692
Financial futures contracts (2,231,806)
Foreign currency transactions 402,716
Option contracts written (Note 7) (85,138)
-------------
Net realized gain (loss) on investments 345,627,464
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 122,489,698
-------------
Net gain (loss) on investments and foreign currencies 468,117,162
-------------
Net increase (decrease) in net assets resulting from operations $550,806,218
-------------
-------------
</TABLE>
See accompanying notes to financial statements.
(THIS ANNUAL REPORT IS NOT PART OF THE PROSPECTUS.) 19
<PAGE>
Financial statements
STATEMENT OF CHANGES IN NET ASSETS
TOTAL RETURN PORTFOLIO
<TABLE>
<CAPTION>
OPERATIONS
- --------------------------------------------------------------------------
For the period from
Year ended May 13, 1996* to
Sept. 30, 1997 Sept. 30, 1996
<S> <C> <C>
Investment income (loss) -- net $ 82,689,056 $ 31,175,277
Net realized gain (loss) on investments 345,627,464 26,015,535
Net change in unrealized appreciation
(depreciation) of investments and on translation
of assets and liabilities in foreign currencies 122,489,698 75,342,945
--------------- -------------------
Net increase (decrease) in net assets resulting from
operations 550,806,218 132,533,757
Net contributions (withdrawals) from partners (350,789,437) 2,666,631,108
--------------- -------------------
Total increase (decrease) in net assets 200,016,781 2,799,164,865
Net assets at beginning of period (Note 1) 2,799,189,865 25,000
--------------- -------------------
Net assets at end of period $ 2,999,206,646 $ 2,799,189,865
--------------- -------------------
--------------- -------------------
</TABLE>
* Commencement of operations
See accompanying notes to financial statements.
20 (THIS ANNUAL REPORT IS NOT PART OF THE PROSPECTUS.)
<PAGE>
- ----------------------------------------
Notes to financial statements
TOTAL RETURN PORTFOLIO
- --------------------------------------------------------------------------
1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Total Return Portfolio (the Portfolio) is a series of Growth
and Income Trust (the Trust) and is registered under the
Investment Company Act of 1940 (as amended) as a diversified,
open-end management investment company. Total Return
Portfolio seeks to provide maximum total return through a
combination of growth of capital and current income by
investing in U.S. equity securities, U.S. and foreign debt
securities, foreign equity securities and money market
instruments. The Declaration of Trust permits the Trustees to
issue non-transferable interests in the Portfolio. On April
15, 1996, American Express Financial Corporation (AEFC)
contributed $25,000 to the Portfolio. Operations did not
formally commence until May 13, 1996, at which time, an
existing fund transferred its assets to the Portfolio in
return for an ownership percentage of the Portfolio.
Significant accounting polices followed by the Portfolio are
summarized below:
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of increase and
decrease in net assets from operations during the period.
Actual results could differ from those estimates.
VALUATION OF SECURITIES
All securities are valued at the close of each business day.
Securities traded on national securities exchanges or
included in national market systems are valued at the last
quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price deemed
best to reflect fair value as quoted by dealers who make
markets in these securities or by an independent pricing
service. Securities for which market quotations are not
readily available are valued at fair value according to
methods selected in good faith by the board. Short-term
securities maturing in more than 60 days from the valuation
date are valued at the market price or
(THIS ANNUAL REPORT IS NOT PART OF THE PROSPECTUS.) 21
<PAGE>
Notes to financial statements
TOTAL RETURN PORTFOLIO
approximate market value based on current interest rates;
those maturing in 60 days or less are valued at amortized
cost.
OPTION TRANSACTIONS
In order to produce incremental earnings, protect gains and
facilitate buying and selling of securities for investment
purposes, the Portfolio may buy and write options traded on
any U.S. or foreign exchange or in the over-the-counter
market where the completion of the obligation is dependent
upon the credit standing of the other party. The Portfolio
also may buy and sell put and call options and write covered
call options on portfolio securities and may write
cash-secured put options. The risk in writing a call option
is that the Portfolio gives up the opportunity of profit if
the market price of the security increases. The risk in
writing a put option is that the Portfolio may incur a loss
if the market price of the security decreases and the option
is exercised. The risk in buying an option is that the
Portfolio pays a premium whether or not the option is
exercised. The Portfolio also has the additional risk of not
being able to enter into a closing transaction if a liquid
secondary market does not exist.
Option contracts are valued daily at the closing prices on
their primary exchanges and unrealized appreciation or
depreciation is recorded. The Portfolio will realize a gain
or loss upon expiration or closing of the option transaction.
When an option is exercised, the proceeds on sales for a
written call option, the purchase cost for a written put
option or the cost of a security for a purchased put or call
option is adjusted by the amount of premium received or paid.
FUTURES TRANSACTIONS
In order to gain exposure to or protect itself from changes
in the market, the Portfolio may buy and sell financial
futures contracts traded on any U.S. or foreign exchange. The
Portfolio also may buy and write put and call options on
these futures contracts. Risks of entering into futures
contracts and related options include the possibility that
there may be an illiquid market and that a change in the
value of the contract or option may not correlate with
changes in the value of the underlying securities.
22 (THIS ANNUAL REPORT IS NOT PART OF THE PROSPECTUS.)
<PAGE>
Upon entering into a futures contract, the Portfolio is
required to deposit either cash or securities in an amount
(initial margin) equal to a certain percentage of the
contract value. Subsequent payments (variation margin) are
made or received by the Portfolio each day. The variation
margin payments are equal to the daily changes in the
contract value and are recorded as unrealized gains and
losses. The Portfolio recognizes a realized gain or loss when
the contract is closed or expires.
FOREIGN CURRENCY TRANSLATIONS
AND FOREIGN CURRENCY CONTRACTS
Securities and other assets and liabilities denominated in
foreign currencies are translated daily into U.S. dollars at
the closing rate of exchange. Foreign currency amounts
related to the purchase or sale of securities and income and
expenses are translated at the exchange rate on the
transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is
reflected as a component of such gains or losses. In the
statement of operations, net realized gains or losses from
foreign currency transactions may arise from sales of foreign
currency, closed forward contracts, exchange gains or losses
realized between the trade date and settlement dates on
securities transactions, and other translation gains or
losses on dividends, interest income and foreign withholding
taxes.
The Portfolio may enter into forward foreign currency
exchange contracts for operational purposes and to protect
against adverse exchange rate fluctuation. The net U.S.
dollar value of foreign currency underlying all contractual
commitments held by the Portfolio and the resulting
unrealized appreciation or depreciation are determined using
foreign currency exchange rates from an independent pricing
service. The Portfolio is subject to the credit risk that the
other party will not complete the obligations of the
contract.
ILLIQUID SECURITIES
Investments in securities included issues that are illiquid.
The Portfolio currently limits investments in illiquid
securities to 10% of the net assets, at market value, at the
time of purchase. The aggregate value of such securities at
Sept. 30, 1997 was $9,395,750 representing 0.31% of the net
assets. Pursuant to
(THIS ANNUAL REPORT IS NOT PART OF THE PROSPECTUS.) 23
<PAGE>
Notes to financial statements
TOTAL RETURN PORTFOLIO
guidelines adopted by the board, certain unregistered
securities are determined to be liquid and are not included
within the 10% limitation specified above.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS
Delivery and payment for securities that have been purchased
by the Portfolio on a forward-commitment or when-issued basis
can take place one month or more after the transaction date.
During this period, such securities are subject to market
fluctuations, and they may affect the Portfolio's net assets
the same as owned securities. The Portfolio designates cash
or liquid high-grade debt securities at least equal to the
amount of its commitment. As of Sept. 30, 1997, the Portfolio
had entered into outstanding when-issued or
forward-commitments of $1,996,219.
FEDERAL TAXES
For federal income tax purposes the Portfolio qualifies as a
partnership and each investor in the Portfolio is treated as
the owner of its proportionate share of the net assets,
income, expenses and realized and unrealized gains and losses
of the Portfolio. Accordingly, as a "pass-through" entity,
the Portfolio does not pay any income dividends or capital
gain distributions.
OTHER
Security transactions are accounted for on the date
securities are purchased or sold. Dividend income is
recognized on the ex-dividend date and interest income,
including level-yield amortization of premium and discount,
is accrued daily.
- -------------------------------------------------------------------
2
FEES AND EXPENSES
The Trust, on behalf of the Portfolio, has entered into an
Investment Management Services Agreement with AEFC for
managing its portfolio. Under this agreement, AEFC determines
which securities will be purchased, held or sold. The
management fee is a percentage of the Portfolio's average
daily net assets in reducing percentages from 0.53% to 0.40%
annually. The fees may be increased or decreased by a
performance adjustment based on a comparison of the
performance of Class A shares of IDS Managed Allocation Fund
to the Lipper Flexible Portfolio Fund Index. The maximum
adjustment is 0.08% of the
24 (THIS ANNUAL REPORT IS NOT PART OF THE PROSPECTUS.)
<PAGE>
Portfolio's average daily net assets on an annual basis. The
adjustment decreased the fee by $532,639 for the year ended
Sept. 30, 1997.
Under the agreement, the Trust also pays taxes, brokerage
commissions and nonadvisory expenses, which include custodian
fees, audit and certain legal fees, fidelity bond premiums,
registration fees for units, office expenses, consultants'
fees, compensation of trustees, corporate filing fees,
expenses incurred in connection with lending securities of
the Portfolio and any other expenses properly payable by the
Trust or Portfolio and approved by the board.
During the year ended Sept. 30, 1997, the Portfolio's
custodian fees were reduced by $13,747 as a result of
earnings credits from overnight cash balances.
Pursuant to a Placement Agency Agreement, American Express
Financial Advisors Inc. acts as placement agent of the units
of the Trust.
- -------------------------------------------------------------------
3
SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities
(other than short-term obligations) aggregated $2,436,278,174
and $3,296,916,611, respectively, for the year ended Sept.
30, 1997. For the same period, the portfolio turnover rate
was 99%. Realized gains and losses are determined on an
identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC
were $314,054 for the year ended Sept. 30, 1997.
- -------------------------------------------------------------------
4
FOREIGN CURRENCY CONTRACTS
At Sept. 30, 1997, the Portfolio had entered into foreign
currency exchange contracts that obligate the Portfolio to
deliver currencies at specified future dates. The unrealized
appreciation and/or depreciation on these contracts is
included in the accompanying
(THIS ANNUAL REPORT IS NOT PART OF THE PROSPECTUS.) 25
<PAGE>
Notes to financial statements
TOTAL RETURN PORTFOLIO
financial statements. See Summary of significant accounting
policies. The terms of the open contracts are as follows:
<TABLE>
<CAPTION>
Currency to be Currency to be Unrealized Unrealized
Exchange date delivered received appreciation depreciation
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Oct. 1, 1997 3,203,097 4,431,421 $ 4,010 $ --
U.S. Dollar Canadian Dollar
Oct. 1, 1997 79,117,881 654,527 -- 965
Japanese Yen U.S. Dollar
Oct. 1, 1997 10,512,617 310,565 5,851 --
Philippine Peso U.S. Dollar
Oct. 1, 1997 71,785,743 593,026 -- 1,720
Japanese Yen U.S. Dollar
Oct. 2, 1997 1,438,498 1,986,810 -- 604
U.S. Dollar Canadian Dollar
Oct. 2, 1997 6,806,050 196,877 -- 399
Philippine Peso U.S. Dollar
Oct. 2, 1997 17,340,065 2,282,188 -- 3,942
Swedish Krona U.S. Dollar
Oct. 3, 1997 2,593,840 4,196,471 15,200 --
British Pound U.S. Dollar
Oct. 3, 1997 10,293,311 297,637 -- 1,720
Philippine Peso U.S. Dollar
Oct. 31, 1997 1,755,783 10,423,469 1,184 --
U.S. Dollar French Franc
Oct. 31, 1997 1,294,930 7,638,661 -- 7,367
U.S. Dollar French Franc
Nov. 28, 1997 3,987,828,460 33,220,000 -- 95,503
Japanese Yen U.S. Dollar
----- ------
Total $ 26,245 $ 112,220
</TABLE>
- --------------------------------------------------------------------------------
5
LENDING OF PORTFOLIO SECURITIES
At Sept. 30, 1997, securities valued at $50,899,294 were on
loan to brokers. For collateral, the Portfolio received
$45,822,035 in cash and government securities valued at
$6,121,325. Income from securities lending amounted to
$506,611 for the year Sept. 30, 1997. The risks to the
Portfolio of securities lending are that the borrower may not
provide additional collateral when required or return the
securities when due.
- -------------------------------------------------------------------
6
INTEREST RATE FUTURES CONTRACTS
At Sept. 30, 1997, investments in securities included
securities valued at $12,250,800 that were pledged as
collateral to cover initial margin deposits on 150 open sale
contracts. The market value of the open sale contracts at
Sept. 30, 1997 was $16,518,750 with a net unrealized loss of
$228,094. See Summary of significant accounting policies.
26 (THIS ANNUAL REPORT IS NOT PART OF THE PROSPECTUS.)
<PAGE>
- -------------------------------------------------------------------
7
OPTION CONTRACTS WRITTEN
The number of contracts and premium amounts associated with
option contracts written is as follows:
<TABLE>
<CAPTION>
Year ended Sept 30, 1997
Calls
---------------------------
Contracts Premium
- --------------------------------------------------------------------
<S> <C> <C>
Balance Sept. 30, 1996 -- $ --
Opened 49,000 107,800
Closed or expired (49,000) (107,800)
Exercised -- --
- --------------------------------------------------------------------
Balance Sept. 30, 1997 -- $ --
- --------------------------------------------------------------------
</TABLE>
See Summary of significant accounting policies.
(THIS ANNUAL REPORT IS NOT PART OF THE PROSPECTUS.) 27
<PAGE>
- ------------------------------------
Investments in securities
TOTAL RETURN PORTFOLIO (Percentages represent
SEPT. 30, 1997 value of investments
compared to net assets)
Investments in securities of unaffiliated issuers
COMMON STOCKS (59.8%)
- ---------------------------------------
<TABLE>
<CAPTION>
ISSUER SHARES VALUE(a)
<S> <C> <C>
AEROSPACE & DEFENSE (2.0%)
Boeing 234,132 $ 12,745,561
Lockheed Martin 140,000 14,927,500
Northrop Grumman 65,000 7,889,375
Raytheon 181,200 10,713,450
Rockwell Intl 180,000 11,328,750
United Technologies 50,000 4,050,000
TOTAL 61,654,636
AUTOMOTIVE & RELATED (1.3%)
Chrysler 458,800 16,889,575
Dana 75,000 3,703,125
Ford Motor 188,100 8,511,525
General Motors 100,700 6,740,606
Goodyear Tire & Rubber 50,000 3,437,500
TOTAL 39,282,331
BANKS AND SAVINGS & LOANS (4.3%)
BankAmerica 356,100 26,106,581
BankBoston 225,000 19,898,437
Citicorp 85,000 11,384,687
Credicorp 65,000(h) 1,235,000
First Union 550,928 27,580,833
KeyCorp 345,800 22,001,525
Mellon Bank 61,400 3,361,650
Norwest 49,800 3,050,250
Washington Mutual 229,700 16,021,575
TOTAL 130,640,538
BEVERAGES & TOBACCO (1.9%)
Coca-Cola 539,300 32,863,594
Panamerican Beverages Cl A 50,000 1,953,125
Philip Morris 550,000 22,859,375
TOTAL 57,676,094
BUILDING MATERIALS & CONSTRUCTION (0.6%)
Georgia Pacific 25,000 2,609,375
Masco 75,000 3,435,937
Sherwin-Williams 74,700 2,198,981
Tyco Intl 69,100 5,670,519
Weyerhaeuser 50,000 2,968,750
TOTAL 16,883,562
CHEMICALS (0.5%)
Du Pont (EI) de Nemours 200,000 12,312,500
Praxair 40,000 2,047,500
TOTAL 14,360,000
COMMUNICATIONS EQUIPMENT & SERVICES (0.5%)
Motorola 175,000 12,578,125
Tellabs 50,000(b) 2,575,000
TOTAL 15,153,125
COMPUTERS & OFFICE EQUIPMENT (3.9%)
Cisco Systems 101,900(b) 7,445,069
Compaq Computer 194,000(b) 14,501,500
Computer Associates Intl 165,500 11,884,969
First Data 350,000 13,146,875
Hewlett-Packard 150,000 10,434,375
Intl Business Machines 175,000 18,539,062
</TABLE>
- ---------------------------------------
<TABLE>
<CAPTION>
ISSUER SHARES VALUE(a)
<S> <C> <C>
Microsoft 173,400(b) $ 22,942,987
Oracle 348,675(b) 12,704,845
Parametric Technology 50,000(b) 2,206,250
Seagate Technology 65,000(b) 2,348,125
TOTAL 116,154,057
ELECTRONICS (1.2%)
AMP 175,000 9,373,438
Intel 264,000 24,370,500
LSI Logic 52,500(b) 1,686,563
TOTAL 35,430,501
ENERGY (1.8%)
Anadarko Petroleum 100,000 7,181,250
Mobil 250,000 18,500,000
Phillips Petroleum 100,000 5,162,500
Unocal 535,000 23,138,750
TOTAL 53,982,500
ENERGY EQUIPMENT & SERVICES (0.2%)
Baker Hughes 150,000 6,562,500
FINANCIAL SERVICES (0.5%)
Providian Financial 219,000 8,691,562
Travelers Group 114,000 7,780,500
TOTAL 16,472,062
FOOD (1.6%)
ConAgra 50,000 3,300,000
CPC Intl 185,000 17,135,625
Quaker Oats 175,000 8,815,625
Sara Lee 300,000 15,450,000
Ralston-Purina Group 30,000 2,655,000
TOTAL 47,356,250
FURNITURE & APPLIANCES (0.3%)
Maytag 225,000 7,678,125
HEALTH CARE (5.2%)
ALZA 128,100(b) 3,714,900
Amgen 116,000(b) 5,560,750
Baxter Intl 85,000 4,441,250
Boston Scientific 91,400(b) 5,044,137
Bristol-Myers Squibb 262,400 21,713,600
Guidant 109,600 6,137,600
Johnson & Johnson 369,000 21,263,625
Lilly (Eli) 154,100 18,559,419
Medtronic 202,600 9,522,200
Merck & Co 253,600 25,344,150
Perkin-Elmer 25,000 1,826,562
Pfizer 263,200 15,808,450
Schering-Plough 285,000 14,677,500
Warner-Lambert 25,000 3,373,438
TOTAL 156,987,581
HEALTH CARE SERVICES (0.8%)
Service Corp Intl 368,400 11,857,875
Tenet Healthcare 200,000(b) 5,825,000
United Healthcare 100,000 5,000,000
TOTAL 22,682,875
</TABLE>
See accompanying notes to investments in securities.
28 (THIS ANNUAL REPORT IS NOT PART OF THE PROSPECTUS.)
<PAGE>
Investments in securities of unaffiliated issuers
COMMON STOCKS (CONTINUED)
- ---------------------------------------
<TABLE>
<CAPTION>
ISSUER SHARES VALUE(a)
<S> <C> <C>
HOUSEHOLD PRODUCTS (1.7%)
Colgate-Palmolive 160,000 $ 11,150,000
Gillette 231,800 20,007,238
Procter & Gamble 287,600 19,862,375
TOTAL 51,019,613
INDUSTRIAL EQUIPMENT & SERVICES (0.3%)
Case 50,000 3,331,250
Deere & Co 62,300 3,348,625
Illinois Tool Works 55,000 2,750,000
TOTAL 9,429,875
INSURANCE (0.9%)
Aon 102,850 5,438,194
SunAmerica 150,000 5,878,125
UNUM 350,000 15,968,750
TOTAL 27,285,069
MEDIA (0.1%)
Clear Channel Communications 25,000(b) 1,621,875
CS Wireless Systems 2,255(b,l) --
TOTAL 1,621,875
METALS (0.7%)
Aluminum Co of America 255,800 20,975,600
Bar Technologies
with warrants 3,000(b) 150,000
TOTAL 21,125,600
MULTI-INDUSTRY CONGLOMERATES (2.6%)
Dover 50,000 3,393,750
Eastman Kodak 64,000 4,156,000
Emerson Electric 87,600 5,047,950
General Electric 529,600 36,045,900
General Signal 73,200 3,165,900
Minnesota Mining & Mfg 58,300 5,392,750
Textron 50,000 3,250,000
Westinghouse Electric 398,000 10,770,875
Xerox 62,500 5,261,719
TOTAL 76,484,844
PAPER & PACKAGING (0.8%)
Bemis 218,150 9,762,213
Intl Paper 50,000 2,753,125
Tenneco 225,000 10,771,875
TOTAL 23,287,213
RESTAURANTS & LODGING (0.3%)
Hilton Hotels 280,000 9,432,500
RETAIL (2.3%)
American Stores 430,000 10,481,250
AutoZone 190,000(b) 5,700,000
Dayton Hudson 170,000 10,189,375
Jostens 150,000 4,068,750
Kroger 270,000(b) 8,150,625
Rite Aid 188,500 10,449,969
Wal-Mart Stores 566,700 20,755,388
TOTAL 69,795,357
</TABLE>
- ---------------------------------------
<TABLE>
<CAPTION>
ISSUER SHARES VALUE(a)
<S> <C> <C>
TRANSPORTATION (0.1%)
CSX 50,000 $ 2,925,000
UTILITIES -- ELECTRIC (0.4%)
FPL Group 50,000 2,562,500
Southern Co 375,000 8,460,938
TOTAL 11,023,438
UTILITIES -- GAS (0.2%)
Sonat 132,400 6,735,850
UTILITIES -- TELEPHONE (2.0%)
AirTouch Communications 350,000(b) 12,403,125
Ameritech 130,000 8,645,000
BellSouth 210,000 9,712,500
GTE 270,000 12,251,250
U S WEST Communications Group 200,000 7,700,000
WorldCom 267,000(b) 9,445,125
TOTAL 60,157,000
FOREIGN (20.8%)(o)
ARGENTINA (0.1%)
Telefonica de Argentina ADR 44,000(h) 1,611,500
AUSTRALIA (0.9%)
Broken Hill Proprietary 63,895 745,861
M.I.M. Holdings 2,621,088(b) 3,215,684
Pasminco 3,807,000(b) 6,356,468
Westpac Banking 1,124,000(h) 7,098,895
WMC Limited 746,891 3,513,480
Woodside Petroleum 686,000 6,559,656
TOTAL 27,490,044
AUSTRIA (0.1%)
Boehler-Uddeholm 43,600 3,664,750
BRAZIL (0.2%)
Centrais Eletricas Brasileiras ADR 102,000(b,h) 2,672,003
Telecomunicacoes Brasileiras-Telebras ADR 33,000 4,248,750
TOTAL 6,920,753
CANADA (0.9%)
Air Canada 98,600(b) 963,344
Northern Telecom 118,800 12,347,775
Petro-Canada 262,500(b) 4,777,908
Toronto-Dominion Bank 237,557 8,089,299
TOTAL 26,178,326
CHILE (--%)
Cia de Telecomunicaciones de Chile ADR 40,000(h) 1,295,000
FINLAND (0.3%)
Nokia Cl A 104,000(b) 9,890,249
</TABLE>
See accompanying notes to investments in securities.
(THIS ANNUAL REPORT IS NOT PART OF THE PROSPECTUS.) 29
<PAGE>
Investments in securities
TOTAL RETURN PORTFOLIO (Percentages represent
SEPT. 30, 1997 value of investments
compared to net assets)
Investments in securities of unaffiliated issuers
COMMON STOCKS (CONTINUED)
- ---------------------------------------
<TABLE>
<CAPTION>
ISSUER SHARES VALUE(a)
<S> <C> <C>
FRANCE (2.2%)
Accor 61,732 $ 11,404,393
Banque Nationale de Paris 282,450 14,230,454
Lafarge 137,115(b) 10,049,068
Michelin Cl B 150,489(h) 8,548,421
SGS-Thomson Microelectronics 39,471(b) 3,719,129
Societe Elf Acquitaine 62,700(b) 8,370,357
Total Petroleum 81,000(b) 9,270,562
TOTAL 65,592,384
GERMANY (1.2%)
Henkel KGaA 235,966 13,303,265
Hoechst 238,050 10,564,130
SGL Carbon 62,200 9,136,445
Teva Pharmaceutical Inds ADR 27,500 1,533,125
TOTAL 34,536,965
HONG KONG (1.3%)
Cheung Kong Holdings 1,048,000(b) 11,782,889
China Merchants Holdings Intl 1,100,000(b) 2,544,585
HSBC Holdings 386,800 12,946,653
Hutchison Whampoa 569,000 5,606,907
New World Development 1,184,000 7,160,920
TOTAL 40,041,954
ITALY (2.0%)
Credito Italiano 4,590,000(b,h) 12,417,979
ENI 2,468,420 15,544,260
Istituto Bancario San Paolo di Torino 1,008,710(b,h) 7,994,179
Telecom Italia 4,513,766 23,982,606
TOTAL 59,939,024
JAPAN (2.5%)
Casio Computer 742,000(b,h) 6,639,271
DDI 800(b) 4,016,570
Eisai 215,000(b) 3,847,556
Fujikura 770,000(b,h) 5,505,468
Kurita Water Inds 210,000(b) 4,193,040
Mitsubishi Motor 702,000(b) 3,605,965
Mitsumi Electric 287,000(b,h) 6,063,380
NEC 900,000(b) 10,961,060
Sanwa Bank 180,000(b,h) 2,207,125
Sony 100,000(b) 9,444,905
Sumitomo Bank 137,000(b) 2,065,783
Sumitomo Realty & Development 1,325,000(b) 10,483,636
Tokyo Electron 120,000(b) 7,327,258
TOTAL 76,361,017
MALAYSIA (--%)
Tenaga Nasional Berhad 481,000(b) 1,297,295
</TABLE>
- ---------------------------------------
<TABLE>
<CAPTION>
ISSUER SHARES VALUE(a)
<S> <C> <C>
MEXICO (0.1%)
Fomento Economico Mexicano Cl B 242,000 $ 2,090,396
Telefonos de Mexico ADR Cl L 32,000 1,656,000
TOTAL 3,746,396
NETHERLANDS (3.2%)
Akzo Nobel 44,040(b) 7,527,013
Baan 43,656(b) 3,148,216
ING Groep 270,520 12,425,513
Philips Electronics 378,930(b) 32,067,849
Royal Dutch Petroleum 350,000 19,425,000
Royal Dutch Petroleum 158,816(b) 8,890,950
Vendex 193,000(b) 11,444,796
TOTAL 94,929,337
PERU (--%)
Telefonica del Peru ADR 24,000(b) 567,000
PHILIPPINES (0.1%)
Philippine Long Distance Telephone ADR 56,900 1,543,413
RUSSIA (0.2%)
Lukoil Holding ADR 35,000(b,h) 3,410,225
Mosenergo ADR 80,000(b,c) 3,888,800
TOTAL 7,299,025
SINGAPORE (0.5%)
City Developments 687,000(b) 4,446,747
Keppel Land 950,000(b) 2,397,515
Keppel Land with Warrants 303,000(b) 215,933
Oversea-Chinese Banking 451,440(b) 3,128,646
United Overseas Bank 398,000(b) 2,940,438
TOTAL 13,129,279
SPAIN (0.3%)
Telefonica de Espana 310,050 9,742,945
SWEDEN (0.6%)
ABB AB Cl B 95,192 1,342,871
Ericcson Cl B 336,274 16,159,985
TOTAL 17,502,856
SWITZERLAND (1.4%)
Credit Suisse Group 66,069(b) 8,927,015
Novartis 10,530(b) 16,146,531
Roche Holding 1,778 15,771,299
TOTAL 40,844,845
TAIWAN (0.1%)
Compal Electronics 366,000(b) 1,304,858
Nan Ya Plastics 549,450(b) 1,315,530
TOTAL 2,620,388
</TABLE>
See accompanying notes to investments in securities.
30 (THIS ANNUAL REPORT IS NOT PART OF THE PROSPECTUS.)
<PAGE>
Investments in securities of unaffiliated issuers
COMMON STOCKS (CONTINUED)
- ---------------------------------------
<TABLE>
<CAPTION>
ISSUER SHARES VALUE(a)
<S> <C> <C>
UNITED KINGDOM (2.6%)
BG 2,300,578(b) $ 9,994,449
British Airways 192,920 2,110,038
British Telecommunications 974,995 6,436,051
Glaxo Wellcome 360,700 8,108,264
Great Universal Stores 622,700(b) 6,931,157
Johnson Matthey 445,179(b) 4,854,737
Lloyds TSB Group 362,283(b) 4,873,461
NFC 2,065,378 4,910,829
Shell Transport & Trading 1,811,685(b) 13,244,122
SmithKline Beecham 728,320(b) 7,061,892
Unilever 335,140(b) 9,797,314
TOTAL 78,322,314
TOTAL COMMON STOCKS OF UNAFFILIATED ISSUERS
(COST: $1,472,274,975) $1,794,347,030
</TABLE>
PREFERRED STOCKS AND OTHER (1.7%)
- ---------------------------------------
<TABLE>
<CAPTION>
ISSUER SHARES VALUE(a)
<S> <C> <C>
BNP
Warrants 58,000 $ 996,440
Pasminco
Rights 1,087,714(o) 228,991
Paxson Communications
12.5% Pay-in-kind Exchangeable 19,700(i) 2,186,700
Unifi Communications
Warrants 3,000 60,000
UNUM
$2.34 Cv 550,000 46,612,500
TOTAL PREFERRED STOCKS AND OTHER
(COST: $34,528,494) $ 50,084,631
</TABLE>
BONDS (15.4%)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ISSUER COUPON MATURITY PRINCIPAL VALUE(a)
RATE YEAR AMOUNT
<S> <C> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS (1.7%)
U.S. Treasury 6.75 % 2000 $ 32,000,000(m) $ 32,670,720
6.25 2023 9,700,000 9,420,834
TIPS 3.375 2007 8,103,920(k) 7,949,378
TOTAL 50,040,932
MORTGAGE-BACKED SECURITIES (1.8%)
Federal Home Loan Mtge 7.50 2025 25,511,531 26,004,159
8.50 2026 4,318,236 4,518,386
8.50 2027 2,228,880 2,332,188
Federal Natl Mtge Assn 7.50 2024 17,046,013 17,412,502
Structured Asset Securities Corp 6.76 2028 2,500,000 2,519,923
TOTAL 52,787,158
AEROSPACE & DEFENSE (0.3%)
Alliant Techsystems 11.75 2003 2,000,000 2,220,000
L-3 Communications 10.375 2007 1,035,000(c) 1,120,388
Newport News Shipbuilding 8.625 2006 800,000 836,000
Northrop-Grumman 7.75 2016 5,000,000 5,319,900
TOTAL 9,496,288
AIRLINES (0.2%)
Northwest Airlines Cl B 8.07 2015 3,965,851 4,203,960
Northwest Airlines Cl C 8.97 2015 1,964,615 2,106,500
TOTAL 6,310,460
BANKS AND SAVINGS & LOANS (0.2%)
First Nationwide Holdings 10.625 2003 1,960,000 2,165,800
GreenPoint Financial 9.10 2027 1,300,000(c) 1,374,906
U.S. Trust Capital 8.41 2027 1,500,000(c) 1,567,815
Washington Mutual 8.375 2027 1,500,000(c) 1,570,200
TOTAL 6,678,721
BUILDING MATERIALS & CONSTRUCTION (0.2%)
AAF McQuay 8.875 2003 2,535,000 2,528,663
Southdown 10.00 2006 2,350,000 2,573,250
TOTAL 5,101,913
</TABLE>
See accompanying notes to investments in securities.
(THIS ANNUAL REPORT IS NOT PART OF THE PROSPECTUS.) 31
<PAGE>
Investments in securities
TOTAL RETURN PORTFOLIO (Percentages represent
SEPT. 30, 1997 value of investments
compared to net assets)
Investments in securities of unaffiliated issuers
BONDS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ISSUER COUPON MATURITY PRINCIPAL VALUE(a)
RATE YEAR AMOUNT
<S> <C> <C> <C> <C>
COMMUNICATIONS EQUIPMENT & SERVICES (0.6%)
Intl Cable Telephone Cv 7.25 % 2005 $ 14,500,000 $ 15,913,750
Unifi Communications 14.00 2004 3,000,000 2,970,000
TOTAL 18,883,750
ELECTRONICS (0.1%)
Thomas & Betts 6.50 2006 4,500,000 4,398,300
ENERGY (--%)
Forcenergy 9.50 2006 1,000,000 1,050,000
ENERGY EQUIPMENT & SERVICES (0.2%)
Cliff Drilling 10.25 2003 3,000,000(c) 3,262,500
DI Industries 8.875 2007 1,500,000 1,541,250
TOTAL 4,803,750
FINANCIAL SERVICES (0.1%)
Airplanes Cl D 10.875 2019 2,750,000 3,141,875
FOOD (0.1%)
Ameriserve Food 10.125 2007 1,750,000(c) 1,828,750
FURNITURE & APPLIANCES (0.2%)
Interface 9.50 2005 2,500,000 2,653,125
Lifestyle Furniture 10.875 2006 3,250,000 3,648,125
TOTAL 6,301,250
HEALTH CARE (0.2%)
Lilly (Eli) 6.77 2036 5,000,000 4,898,900
HEALTH CARE SERVICES (0.4%)
Manor Care 7.50 2006 7,000,000 7,298,130
Owens & Minor 10.875 2006 1,200,000 1,323,000
Vencor 8.625 2007 4,000,000(c) 4,080,000
TOTAL 12,701,130
HOUSEHOLD PRODUCTS (0.1%)
Revlon Worldwide
Zero Coupon 6.43 1998 3,000,000(e) 2,955,000
INDUSTRIAL EQUIPMENT & SERVICES (0.1%)
AGCO 8.50 2006 2,800,000 2,912,000
INSURANCE (0.8%)
American United Life 7.75 2026 5,000,000(p) 4,921,000
Executive Risk Capital Trust 8.675 2027 1,500,000 1,590,540
Metropolitan Life Insurance 7.80 2025 4,800,000(c) 4,921,584
Minnesota Mutual Life 8.25 2025 4,500,000(c) 4,931,685
Nationwide Trust 9.875 2025 5,000,000(c) 5,701,300
Zurich Capital Trust 8.38 2037 1,875,000(c) 2,008,894
TOTAL 24,075,003
LEISURE TIME & ENTERTAINMENT (0.7%)
Icon Fitness
Zero Coupon 15.91 2001 2,700,000(f) 1,464,750
Plitt Theatres 10.875 2004 5,000,000 5,362,500
Speedway Motorsports 8.50 2007 2,000,000(c) 2,020,000
Time Warner 9.15 2023 10,000,000 11,653,400
TOTAL 20,500,650
</TABLE>
See accompanying notes to investments in securities.
32 (THIS ANNUAL REPORT IS NOT PART OF THE PROSPECTUS.)
<PAGE>
Investments in securities of unaffiliated issuers
BONDS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ISSUER COUPON MATURITY PRINCIPAL VALUE(a)
RATE YEAR AMOUNT
<S> <C> <C> <C> <C>
MEDIA (0.9%)
Cablevision Systems 10.50 % 2016 $ 3,000,000 $ 3,397,500
CS Wireless Systems
Zero Coupon 11.38 2001 3,855,000(f) 1,040,850
Heritage Media Services 8.75 2006 5,000,000 5,393,750
Lamar Advertising 9.625 2006 800,000 846,000
MDC Communications 10.50 2006 1,000,000 1,081,250
News America Holdings 10.125 2012 2,175,000 2,535,419
TCI Communications 8.75 2015 5,000,000 5,508,750
Univision Network Holdings 7.00 2002 7,500,000 7,696,875
TOTAL 27,500,394
METALS (0.2%)
Bar Technologies 13.50 2001 3,000,000(c) 3,225,000
EnviroSource 9.75 2003 530,000 535,300
EnviroSource Series B 9.75 2003 1,300,000 1,313,000
TOTAL 5,073,300
MULTI-INDUSTRY CONGLOMERATES (0.2%)
Pierce Leahy 11.125 2006 488,000(c) 552,660
Prime Succession 10.75 2004 1,275,000 1,418,438
USI American Holdings 7.25 2006 3,000,000 2,966,070
TOTAL 4,937,168
PAPER & PACKAGING (0.2%)
Gaylord Container 9.75 2007 1,300,000(c) 1,322,750
Owens-Illinois 7.85 2004 2,000,000 2,070,400
Silgan Holdings 9.00 2009 2,050,000 2,111,500
Stone Container 12.25 2002 1,000,000 1,041,250
TOTAL 6,545,900
RETAIL (0.6%)
Dayton Hudson 8.50 2022 2,500,000 2,684,375
Kroger 8.15 2006 5,000,000 5,443,750
Wal-Mart Stores 7.00 2006 9,342,863(c) 9,519,629
TOTAL 17,647,754
TEXTILES & APPAREL (0.1%)
Dominion Textiles 9.25 2006 3,500,000 3,657,500
TRANSPORTATION (0.1%)
Enterprise Rent-A-Car 6.95 2006 3,000,000(c) 3,001,122
UTILITIES -- ELECTRIC (0.6%)
Cleveland Electric Illuminating 7.19 2000 3,000,000(c) 3,031,350
CMS Energy 8.125 2002 2,900,000 2,963,597
El Paso Electric 7.75 2001 5,000,000 5,113,250
Public Service Electric & Gas 6.75 2016 7,365,000 7,235,302
TOTAL 18,343,499
UTILITIES -- GAS (0.2%)
Columbia Gas Systems 7.32 2010 5,043,000 5,119,401
</TABLE>
See accompanying notes to investments in securities.
(THIS ANNUAL REPORT IS NOT PART OF THE PROSPECTUS.) 33
<PAGE>
Investments in securities
TOTAL RETURN PORTFOLIO (Percentages represent
SEPT. 30, 1997 value of investments
compared to net assets)
Investments in securities of unaffiliated issuers
BONDS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ISSUER COUPON MATURITY PRINCIPAL VALUE(a)
RATE YEAR AMOUNT
<S> <C> <C> <C> <C>
UTILITIES -- TELEPHONE (0.3%)
Geotek Communications Cv 12.00 % 2001 $ 2,485,000(p) $ 2,112,250
Omnipoint 11.625 2006 5,000,000 5,225,000
Worldcom 7.75 2007 3,000,000 3,164,760
TOTAL 10,502,010
MISCELLANEOUS (0.5%)
Adams Outdoor Advertising 10.75 2006 3,900,000 4,280,250
BTI Telecom 10.50 2007 1,600,000 1,648,000
New Jersey Economic Development 7.425 2029 3,000,000 3,152,850
Outsourcing Solutions 11.00 2006 1,075,000 1,191,906
PLD Telekom
Zero Coupon 16.19 1998 3,000,000(f) 2,827,500
PTC Intl Finance 10.75 2007 2,000,000(c) 1,310,000
Transamerican Energy 11.50 2002 900,000(c) 900,000
Transamerican Energy
Zero Coupon 13.00 2002 1,300,000(c,f) 1,033,500
TOTAL 16,344,006
FOREIGN (3.5%)(o)
Alfa Bank
(U.S. Dollar) 11.22 1997 1,000,000(g) 1,000,000
Alfa-Russia Finance
(U.S. Dollar) 10.375 2000 4,000,000 3,978,400
Australis Media
(U.S. Dollar) Zero Coupon 5.30 2003 5,000,000(e) 4,100,000
Avto Bank
(U.S. Dollar) 10.98 1997 2,000,000(c,g) 2,000,000
Cia Latino Americana
(U.S. Dollar) 11.625 2004 1,150,000(c) 1,226,188
City of Moscow
(U.S. Dollar) 9.50 2000 3,000,000(c) 3,097,500
(U.S. Dollar) Zero Coupon 10.96 1997 2,000,000(e) 1,931,400
Copel
(U.S. Dollar) 9.75 2005 2,000,000(c) 2,062,500
Corporacion Andina De Fomento
(U.S. Dollar) 7.10 2003 6,500,000 6,604,715
Dao Heng Bank
(U.S. Dollar) 7.75 2007 2,500,000(c) 2,522,600
DGS Intl
(U.S. Dollar) 10.00 2007 2,400,000(c) 2,460,000
Espiritu Santo-Escelsa
(U.S. Dollar) 10.00 2007 3,000,000(c) 3,015,000
FSW Intl
(U.S. Dollar) 12.50 2006 2,250,000 2,221,875
Govt of Argentina
(U.S. Dollar) 9.75 2027 2,500,000 2,512,500
Govt of Ecuador
(U.S. Dollar) 6.69 2015 3,280,680 2,378,493
Govt of Poland PDI Euro
(U.S. Dollar) 4.00 2014 4,150,000 3,636,438
Govt of Russia- IAN Bonds
(U.S. Dollar) 6.60 2049 2,500,000 2,062,500
Govt of Russia
(U.S. Dollar) Zero Coupon 10.82 2020 2,675,000(e,j) 1,989,531
Greater Beijing First
(U.S. Dollar) 9.25 2004 1,200,000(c) 1,172,256
(U.S. Dollar) 9.50 2007 1,400,000(c) 1,354,668
</TABLE>
See accompanying notes to investments in securities.
34 (THIS ANNUAL REPORT IS NOT PART OF THE PROSPECTUS.)
<PAGE>
Investments in securities of unaffiliated issuers
BONDS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ISSUER COUPON MATURITY PRINCIPAL VALUE(a)
RATE YEAR AMOUNT
<S> <C> <C> <C> <C>
Grupo Iusacell
(U.S. Dollar) 10.00 % 2004 $ 1,000,000(c) $ 1,036,250
Grupo Televisa
(U.S. Dollar) 11.375 2003 2,750,000 3,059,375
Guangdong Enterprises
(U.S. Dollar) 8.875 2007 2,200,000(c) 2,241,118
Hutchinson Whampoa
(U.S. Dollar) 7.50 2027 1,650,000(c) 1,632,295
Hyundai Semiconductor
(U.S. Dollar) 8.625 2007 5,000,000(c) 5,164,850
Imexsa Export Trust
(U.S. Dollar) 10.125 2003 3,000,000(c) 3,202,500
Jasmine Submarine Telecom
(U.S. Dollar) 8.48 2011 3,700,000(c) 3,656,340
Mexican Cetes
(Mexican Peso) Zero Coupon 23.32 1998 12,775,000(e) 1,446,641
Ministry Finance Russia
(U.S. Dollar) 9.25 2001 850,000(c) 882,938
(U.S. Dollar) 10.00 2007 2,500,000(c) 2,650,000
Petrozuata Finance
(U.S. Dollar) 7.63 2009 2,000,000(c) 2,061,720
(U.S. Dollar) 8.22 2017 3,000,000(c) 3,171,750
Philippine Long Distance Telephone
(U.S. Dollar) 7.85 2007 1,250,000(c) 1,196,338
(U.S. Dollar) 8.35 2017 1,000,000(c) 937,250
Pindo Deli Finance
(U.S. Dollar) 10.75 2007 1,300,000(c) 1,316,250
Province of Mendoza
(U.S. Dollar) 10.00 2007 2,000,000(c) 2,045,000
Republic of Panama
(U.S. Dollar) 7.875 2002 1,000,000(c) 1,001,840
Rogers Cantel
(U.S. Dollar) 9.375 2008 2,800,000 3,003,000
Southern Peru
(U.S. Dollar) 7.90 2007 1,000,000(c) 1,035,310
Tjiwi Kimia Finance
(U.S. Dollar) 10.00 2004 2,900,000(c) 2,863,750
Veninfotel
(U.S. Dollar) Cv Pay-in-kind 10.00 2002 2,250,000(i,p) 2,362,500
Veritas Holdings
(U.S. Dollar) 9.625 2003 2,000,000(c) 2,145,000
Zhuhai Highway
(U.S. Dollar) 12.00 2008 5,000,000(c) 5,712,500
TOTAL 105,151,079
TOTAL BONDS
(COST: $450,114,681) 462,688,963
</TABLE>
See accompanying notes to investments in securities.
(THIS ANNUAL REPORT IS NOT PART OF THE PROSPECTUS.) 35
<PAGE>
Investments in securities
TOTAL RETURN PORTFOLIO (Percentages represent
SEPT. 30, 1997 value of investments
compared to net assets)
Investments in securities of unaffiliated issuers
SHORT-TERM SECURITIES (25.4%)
- ---------------------------------------
<TABLE>
<CAPTION>
ISSUER ANNUALIZED AMOUNT VALUE(a)
YIELD ON PAYABLE AT
DATE OF MATURITY
PURCHASE
<S> <C> <C> <C>
U.S. GOVERNMENT AGENCIES (1.7%)
Federal Home Loan Mtge Corp Disc Nt
10-07-97 5.46% $11,200,000 $ 11,189,864
10-10-97 5.43 8,000,000 7,989,180
10-15-97 5.42 4,300,000 4,290,970
Federal Natl Mtge Assn
10-17-97 5.46 12,500,000 12,469,722
11-07-97 5.47 15,265,000 15,179,573
TOTAL 51,119,309
COMMERCIAL PAPER (23.0%)
ABB Treasury Center USA
11-21-97 5.58 6,000,000(d) 5,950,779
12-01-97 5.59 5,000,000(d) 4,951,347
A.I. Credit
10-09-97 5.66 10,000,000 9,987,250
10-21-97 5.55 8,000,000 7,974,470
Albertson's
10-23-97 5.54 10,800,000 10,763,568
American General Finance
10-23-97 5.55 6,700,000 6,677,440
10-30-97 5.54 10,000,000 9,955,614
11-04-97 5.55 19,800,000 19,696,963
Ameritech Capital Funding
10-20-97 5.65 10,000,000 9,969,737
Associates Corp North America
11-05-97 5.55 15,000,000 14,919,646
Avco Financial Services
10-14-97 5.65 10,000,000 9,976,744
11-25-97 5.58 11,500,000 11,399,435
12-03-97 5.59 7,100,000 7,028,685
Barclays U.S. Funding
10-28-97 5.53 15,000,000 14,938,125
BHP Finance
11-10-97 5.58 17,500,000 17,392,083
BellSouth Telecommunications
10-29-97 5.55 14,900,000 14,836,029
Beneficial
10-22-97 5.55 7,000,000 6,975,247
CAFCO
11-05-97 5.56 9,400,000(d) 9,349,462
Campbell Soup
10-23-97 5.53 19,800,000(d) 19,733,450
11-18-97 5.54 7,000,000(d) 6,946,862
Cargill Global
10-17-97 5.55 8,200,000(d) 8,179,956
11-07-97 5.59 2,600,000(d) 2,584,526
11-18-97 5.49 1,800,000(d) 1,786,336
CIT Group Holdings
10-16-97 5.55 15,000,000 14,965,500
11-04-97 5.54 4,400,000 4,377,103
Commercial Credit
11-06-97 5.58 7,100,000 7,058,198
11-07-97 5.54 16,000,000 15,909,391
Commerzbank U.S. Finance
10-29-97 5.55 14,300,000 14,238,494
</TABLE>
- ---------------------------------------
<TABLE>
<CAPTION>
ISSUER ANNUALIZED AMOUNT VALUE(a)
YIELD ON PAYABLE AT
DATE OF MATURITY
PURCHASE
<S> <C> <C> <C>
CPC Intl
10-20-97 5.56% $ 5,000,000(d) $ 4,983,546
Deutsche Bank Financial
10-20-97 5.53 16,600,000 16,551,814
10-29-97 5.53 13,000,000 12,944,389
Fleet Funding
10-10-97 5.54 9,538,000(d) 9,524,885
Ford Motor Credit
10-10-97 5.54 9,100,000 9,086,205
10-06-97 5.53 17,000,000 16,986,990
Gannett
10-15-97 5.53 9,300,000(d) 9,280,108
11-06-97 5.54 13,200,000 13,127,400
Gateway Fuel
10-30-97 5.53 12,000,000 11,946,833
General Electric Capital
11-12-97 5.58 11,400,000 11,326,318
Goldman Sachs Group
10-03-97 5.52 4,500,000 4,498,622
11-13-97 5.55 10,300,000 10,232,212
11-14-97 5.55 11,700,000 11,621,207
Household Finance
10-24-97 5.54 15,000,000 14,947,196
Kredietbank North America Finance
10-27-97 5.53 15,000,000 14,940,362
Metlife Funding
10-08-97 5.54 14,400,000 14,383,551
10-16-97 5.53 16,889,000 16,850,296
10-17-97 5.55 15,000,000 14,960,548
Morgan Stanley Group
10-08-97 5.55 3,700,000 3,695,564
10-22-97 5.55 9,300,000 9,270,108
NBD Bank Canada
10-31-97 5.56 4,300,000 4,280,148
Nestle Capital
10-06-97 5.53 16,900,000 16,887,067
New Center Asset Trust
10-17-97 5.54 2,000,000 1,995,102
Paccar Financial
10-28-97 5.54 6,200,000 6,174,332
10-17-97 5.56 500,000 498,767
Pitney Bowes Credit
10-20-97 5.75 4,200,000 4,186,394
Reed Elsevier
10-07-97 5.57 10,400,000(d) 10,389,026
10-29-97 5.55 5,500,000(d) 5,476,387
11-05-97 5.56 9,600,000(d) 9,545,703
SBC Communications Capital
10-23-97 5.55 10,000,000(d) 9,966,389
10-28-97 5.55 10,000,000(d) 9,953,032
11-05-97 5.56 9,600,000(d) 9,548,387
11-07-97 5.56 8,500,000(d) 8,451,689
12-12-97 5.60 8,000,000(d) 7,908,345
Southern California Gas
11-20-97 5.57 5,800,000(d) 5,754,107
Toyota Motor Credit
11-03-97 5.56 4,600,000 4,575,003
</TABLE>
See accompanying notes to investments in securities.
36 (THIS ANNUAL REPORT IS NOT PART OF THE PROSPECTUS.)
<PAGE>
Investments in securities of unaffiliated issuers
SHORT-TERM SECURITES (CONTINUED)
- ---------------------------------------
<TABLE>
<CAPTION>
ISSUER ANNUALIZED AMOUNT VALUE(a)
YIELD ON PAYABLE AT
DATE OF MATURITY
PURCHASE
<S> <C> <C> <C>
UBS Finance (Delaware)
10-06-97 5.53% $18,600,000 $ 18,585,766
USAA Capital
10-22-97 5.53 4,600,000 4,585,215
11-03-97 5.56 18,000,000 17,903,929
12-02-97 5.58 13,000,000 12,871,463
TOTAL 689,216,845
LETTERS OF CREDIT (0.7%)
Bank of America-
AES Barbers Point
10-17-97 5.53 4,700,000 4,688,532
Bank of America-
Formosa Plastics
11-21-97 5.58 9,500,000 9,422,067
Student Loan Marketing Assn-
Nebraska Higher Education
10-30-97 5.56 8,000,000 7,964,427
TOTAL 22,075,026
TOTAL SHORT-TERM SECURITIES
(COST: $762,476,882) 762,411,180
</TABLE>
- ---------------------------------------
<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS IN SECURITIES OF UNAFFILIATED ISSUERS
(COST: $2,719,395,032) $3,069,531,804
Investments in securities of affiliated issuer (n)
</TABLE>
COMMON STOCK (0.2%)
- ---------------------------------------
<TABLE>
<CAPTION>
ISSUER SHARES VALUE(a)
<S> <C> <C>
China North Inds 16,500,000(b,o) $ 5,857,500
TOTAL INVESTMENTS IN SECURITIES OF AFFILIATED ISSUER
(COST: $13,079,176) $ 5,857,500
TOTAL INVESTMENTS IN SECURITIES
(COST: $2,732,474,208)(q) $ 3,075,389,304
---------------
---------------
</TABLE>
See accompanying notes to investments in securities.
(THIS ANNUAL REPORT IS NOT PART OF THE PROSPECTUS.) 37
<PAGE>
Investment in securities
TOTAL RETURN PORTFOLIO
SEPT. 30, 1997
NOTES TO INVESTMENTS IN SECURITIES
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing.
(c) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security has
been determined to be liquid under guidelines established by the board.
(d) Commercial paper sold within terms of a private placement memorandum, exempt
from registration under Section 4(2) of the Securities Act of 1933, as amended,
and may be sold only to dealers in that program or other "accredited investors."
This security has been determined to be liquid under guidelines established by
the board.
(e) For zero coupon bonds, the interest rate disclosed represents the annualized
effective yield on the date of acquisition.
(f) For those zero coupon bonds that become coupon paying at a future date, the
interest rate disclosed represents the annualized effective yield from the date
of acquisition to interest reset date disclosed.
(g) Interest rate varies either based on a predetermined schedule or to reflect
current market conditions; rate shown is the effective rate on Sept. 30, 1997.
(h) Security is partially or fully on loan. See Note 5 to the financial
statements.
(i) Pay-in-kind securities are securities in which the issuer has the option to
make interest or dividend payments in cash or in additional securities. The
securities issued as interest or dividends usually have the same terms,
including maturity date, as the pay-in-kind securities.
(j) At Sept. 30, 1997, the cost of securities purchased, including interest
purchased, on a when-issued basis was $1,996,219.
(k) U.S. Treasury inflation-protection securities (TIPS) are securities in which
the principal amount is adjusted for inflation and the semi-annual interest
payments equal a fixed percentage of the inflation-adjusted principal amount.
(l) Negligible market value.
(m) Partially pledged as initial deposit on the following open interest rate
futures contracts (see Note 6 to the financial statements):
<TABLE>
<CAPTION>
NOTIONAL
TYPE OF SECURITY AMOUNT
<S> <C>
SALE CONTRACTS
U.S. Treasury Note Dec. 97 10-year notes $15,000,000
</TABLE>
(n) Investments representing 5% or more of the outstanding voting securities of
the issuer. Transactions with companies that are or were affiliates during the
year ended Sept. 30, 1997 are as follows:
<TABLE>
<CAPTION>
Beginning Purchase Sales Ending Dividend
Issuer cost cost cost cost income
<S> <C> <C> <C> <C> <C>
China North
Inds. $18,789,176 $-- $5,710,000 $13,079,176 $--
</TABLE>
38 (THIS ANNUAL REPORT IS NOT PART OF THE PROSPECTUS.)
<PAGE>
(o) Foreign security values are stated in U.S. dollars. For debt securities,
principal amounts are denominated in the currency indicated.
(p) Identifies issues considered to be illiquid as to their marketability (see
Note 1 to the financial statements). Information concerning such security
holdings at Sept. 30, 1997, is as follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY DATES COST
<S> <C> <C>
American United Life*
7.75% 2026 2/13/96 $5,000,000
Geotek Communications
12.00% 2001 Cv 3/4/96 2,485,000
Veninfotel
10.00% 2002
(U.S. Dollar) Cv Pay-in-kind 03/05/97 thru 07/23/97 2,250,000
</TABLE>
*Represents a security sold under Rule 144A, which is exempt from registration
under the Securities Act of 1933, as amended.
(q) At Sept. 30, 1997, the cost of securities for federal income tax purpose was
$2,733,620,229 and the aggregate gross unrealized appreciation and depreciation
based on that cost was:
<TABLE>
<S> <C>
Unrealized appreciation................. $374,712,999
Unrealized depreciation................. (32,943,924)
- ---------------------------------------------------------
Net unrealized appreciation............. $341,769,075
- ---------------------------------------------------------
</TABLE>
(THIS ANNUAL REPORT IS NOT PART OF THE PROSPECTUS.) 39
<PAGE>
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:
For IDS Managed Allocation Fund:
- Independent auditors' report dated, November 7, 1997
- Statement of assets and liabilities, Sept. 30, 1997
- Statement of operations, year ended Sept. 30, 1997
- Statements of changes in net assets, for the ten month period ended Sept.
30, 1996 and the year ended Sept. 30, 1997
- Notes to financial statements
For Total Return Portfolio:
- Independent auditors' report dated, November 7, 1997
- Statement of assets and liabilities, Sept. 30, 1997
- Statement of operations, period from May 13, 1996 to Sept. 30, 1996 and
the year ended Sept. 30, 1997
- Statement of changes in net assets, for the two-year period from May 13,
1996 to Sept. 30, 1996 and Sept. 30, 1997
- Notes to financial statements
- Investments in Securities, Sept. 30, 1997
- Notes to Investments in Securities
(b) EXHIBITS:
<TABLE>
<S> <C>
1. Copy of Articles of Incorporation, as amended December 13, 1988, filed
electronically as Exhibit 1 to Registrant's Post-Effective Amendment
No. 9 to Registration Statement No. 2-93801, is incorporated herein by
reference.
2. Copy of By-laws, as amended January 10, 1996, filed electronically, as
Exhibit 2 to Registrant's Post-Effective Amendment No. 25 to
Registration Statement No. 2-93801, is incorporated herein by
reference.
3. Not Applicable.
4. Form of Stock Certificate for common stock, filed as Exhibit No. 4 to
Registration Statement No. 2-93801, is incorporated herein by
reference.
5. Copy of Investment Management Services Agreement between Registrant
and American Express Financial Corporation, dated March 20, 1995,
filed electronically as Exhibit 5 to Registrant's Post-Effective
Amendment No. 26 to Registration Statement No. 2-93801, is
incorporated herein by reference. The agreement was assumed by the
Portfolio when the Fund adopted the master/feeder structure.
6. Copy of Distribution Agreement between Registrant and American Express
Financial Advisors Inc., dated March 20, 1995, filed electronically as
Exhibit 6 to Registrant's Post-Effective Amendment No. 26 to
Registration Statement No. 2-93801, is incorporated herein by
reference.
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.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
8(a). Copy of Custodian Agreement between Registrant and American Express
Trust Company, dated March 20, 1995, filed electronically as Exhibit
8(a) to Registrant's Post-Effective Amendment No. 26 to Registration
Statement No. 2-93801, is incorporated herein by reference.
8(b). Copy of Addendum to the Custodian Agreement between IDS Managed
Retirement Fund, Inc., American Express Trust Company and American
Express Financial Corporation dated May 13, 1996, filed electronically
as Exhibit 8(b) to Registrant's Post-Effective Amendment No. 26 to
Registration Statement No. 2-93801, is incorporated herein by
reference.
8(c). Copy of Custody Agreement between Morgan Stanley Trust Company and IDS
Bank and Trust dated May, 1993, filed electronically as Exhibit 8(c)
to Registrant's Post-Effective Amendment No. 26 to Registration
Statement No. 2-93801, is incorporated herein by reference.
9(a). Copy of Transfer Agency Agreement between Registrant and American
Express Financial Corporation, dated March 20, 1995, filed
electronically as Exhibit 9(a) to Registrant's Post-Effective
Amendment No. 26 to Registration Statement No. 2-93801, is
incorporated herein by reference.
9(b). Copy of Shareholder Service Agreement between Registrant and American
Express Financial Advisors Inc., dated March 20, 1995, filed
electronically as Exhibit 9(b) to Registrant's Post-Effective
Amendment No. 26 to Registration Statement No. 2-93801, is
incorporated herein by reference.
9(c). Copy of Administrative Services Agreement between Registrant and
American Express Financial Corporation, dated March 20, 1995, filed
electronically as Exhibit 9(c) to Registrant's Post-Effective
Amendment No. 26 to Registration Statement No. 2-93801, is
incorporated herein by reference.
9(d). Copy of Agreement and Declaration of Unitholders between IDS Managed
Retirement Fund, Inc. and Strategist Growth and Income Fund, Inc.
dated May 13, 1996, filed electronically as Exhibit 9(d) to
Registrant's Post-Effective Amendment No. 26 to Registration Statement
No. 2-93801, is incorporated herein by reference.
9(g). Copy of the Class Y Shareholder Service Agreement between IDS Managed
Retirement Fund, Inc. and American Express Financial Advisors Inc.,
dated May 9, 1997, is filed electronically herewith.
10. Copy of opinion and consent of counsel as to the legality of the
securities being registered is filed electronically herewith.
11. Independent Auditors' Consent, to be filed electronically herewith.
12. None.
13. Letter of IDS/American Express Inc. as sole shareholder, filed as
Exhibit 13 to Pre-Effective Amendment No. 1 to Registration Statement
No. 2-93801, is incorporated herein by reference.
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. 19 to Registration Statement No. 2-54516, 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, filed
electronically as Exhibit 15 to Registrant's Post-Effective Amendment
No. 26 to Registration Statement No. 2-93801, is incorporated herein
by reference.
16. Schedule for computation of each performance quotation provided in the
Registration Statement in response to Item 22(b), filed as Exhibit 16
to Post-Effective Amendment No. 16 to Registration Statement No.
2-93801, is incorporated herein by reference.
17. Financial Data Schedule, to be filed electronically herewith.
18. Copy of Plan pursuant to Rule 18f-3 under the 1940 Act, filed
electronically as Exhibit 18 to Post-Effective Amendment No. 22 to
Registration Statement No. 2-93801, is incorporated herein by
reference.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
19(a). Directors' Power of Attorney, dated January 8, 1997 is filed
electronically herewith.
19(b). Officers' Power of Attorney, dated November 1, 1995, to sign
amendments to this Registration Statement, filed electronically as
Exhibit 19(b) to Registrant's Post-Effective Amendment No. 23, is
incorporated herein by reference.
19(c). Trustees Power of Attorney, dated January 8, 1997 is filed
electronically herewith.
19(d). Officers' Power of Attorney, dated April 11, 1996, to sign amendments
to this Registration Statement, filed electronically as Exhibit 19(d)
to Registrant's Post-Effective Amendment No. 25, is incorporated
herein by reference.
</TABLE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
<TABLE>
<CAPTION>
(2)
NUMBER OF
RECORD
(1) HOLDERS AS OF
TITLE OF NOVEMBER 6,
CLASS 1997
---------- -------------
<S> <C>
Class A....................... 184,876
Class B....................... 26,440
Class Y....................... 14,953
</TABLE>
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 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 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>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, IDS Managed Retirement Fund,
Inc., certifies that it meets the requirements for the effectiveness of this
Amendment to its 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 25th day of
November, 1997.
IDS MANAGED RETIREMENT FUND, INC.
By /s/ WILLIAM R. PEARCE**
------------------------------------------
William R. Pearce,
CHIEF EXECUTIVE OFFICER
By /s/ MATTHEW N. KARSTETTER
------------------------------------------
Matthew N. Karstetter,
TREASURER
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 indicated on the 25th day of November, 1997.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
- ---------------------------------------- --------------------------------------
<C> <S>
/s/ WILLIAM R. PEARCE* Chairman of the Board
- ----------------------------------------
William R. Pearce
/s/ JOHN R. THOMAS* Director
- ----------------------------------------
John R. Thomas
/s/ H. BREWSTER ATWATER, JR.* Director
- ----------------------------------------
H. Brewster Atwater, Jr.
/s/ LYNNE V. CHENEY* Director
- ----------------------------------------
Lynne V. Cheney
/s/ WILLIAM H. DUDLEY* Director
- ----------------------------------------
William H. Dudley
/s/ DAVID R. HUBERS* Director
- ----------------------------------------
David R. Hubers
/s/ HEINZ F. HUTTER* Director
- ----------------------------------------
Heinz F. Hutter
/s/ ANNE P. JONES* Director
- ----------------------------------------
Anne P. Jones
/s/ ALAN K. SIMPSON* Director
- ----------------------------------------
Alan K. Simpson
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
- ---------------------------------------- --------------------------------------
<C> <S>
/s/ EDSON W. SPENCER* Director
- ----------------------------------------
Edson W. Spencer
/s/ WHEELOCK WHITNEY* Director
- ----------------------------------------
Wheelock Whitney
/s/ C. ANGUS WURTELE* Director
- ----------------------------------------
C. Angus Wurtele
*Signed pursuant to Directors' Power of Attorney, dated January 8, 1997, filed
electronically herewith by:
/s/ LESLIE L. OGG
- ----------------------------------------
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.
23 to Registration Statement No. 2-93801 by:
/s/ LESLIE L. OGG
- ----------------------------------------
Leslie L. Ogg
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, GROWTH AND INCOME TRUST consents to the filing
of this Amendment to the Registration Statement of IDS Managed Retirement Fund,
Inc. signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Minneapolis and State of Minnesota on the 25th day of November, 1997.
GROWTH AND INCOME TRUST
By /s/ WILLIAM R. PEARCE**
------------------------------------------
William R. Pearce
CHIEF EXECUTIVE OFFICER
By /s/ MATTHEW N. KARSTETTER
------------------------------------------
Matthew N. Karstetter,
TREASURER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities indicated on the 25th day of November, 1997.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
- ---------------------------------------- --------------------------------------
<C> <S>
/s/ WILLIAM R. PEARCE* Chairman of the Board
- ----------------------------------------
William R. Pearce
/s/ JOHN R. THOMAS* Trustee
- ----------------------------------------
John R. Thomas
/s/ H. BREWSTER ATWATER, JR.* Trustee
- ----------------------------------------
H. Brewster Atwater, Jr.
/s/ LYNNE V. CHENEY* Trustee
- ----------------------------------------
Lynne V. Cheney
/s/ WILLIAM H. DUDLEY* Trustee
- ----------------------------------------
William H. Dudley
/s/ DAVID R. HUBERS* Trustee
- ----------------------------------------
David R. Hubers
/s/ HEINZ F. HUTTER* Trustee
- ----------------------------------------
Heinz F. Hutter
/s/ ANNE P. JONES* Trustee
- ----------------------------------------
Anne P. Jones
/s/ ALAN K. SIMPSON* Trustee
- ----------------------------------------
Alan K. Simpson
/s/ EDSON W. SPENCER* Trustee
- ----------------------------------------
Edson W. Spencer
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
- ---------------------------------------- --------------------------------------
<C> <S>
/s/ WHEELOCK WHITNEY* Trustee
- ----------------------------------------
Wheelock Whitney
/s/ C. ANGUS WURTELE* Trustee
- ----------------------------------------
C. Angus Wurtele
*Signed pursuant to Trustees Power of Attorney dated January 8, 1997 is filed
electronically as Exhibit 19(c) herewith by:
/s/ LESLIE L. OGG
- ----------------------------------------
Leslie L. Ogg
**Signed pursuant to Officers' Power of Attorney dated April 11, 1996, filed
electronically as Exhibit 19(d) to Registrant's Post-Effective Amendment No.
25 to Registration Statement No. 2-93801 by:
/s/ LESLIE L. OGG
- ----------------------------------------
Leslie L. Ogg
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<S> <C>
Exhibit 9(g): Copy of the Class Y Shareholder Service Agreement, dated May 9,
1997.
Exhibit 10: Copy of Opinion and Consent of Counsel.
Exhibit 11: Independent Auditor's Consent.
Exhibit 17: Financial Data Schedules.
Exhibit 19(a): Directors' Power of Attorney, dated January 8, 1997.
Exhibit 19(c): Trustees' Power of Attorney, dated January 8, 1997.
</TABLE>
<PAGE>
CLASS Y SHAREHOLDER SERVICE AGREEMENT
This agreement is between IDS Managed Retirement Fund, Inc. (the Fund) and
American Express Financial Advisors Inc. (AEFA), the principal underwriter of
the Fund, for services to be provided to shareholders of Class Y of the Fund
by AEFA and other servicing agents.
AEFA represents that shareholders consider personal service a significant
factor in their satisfaction with their investment. AEFA represents that fees
paid by the Fund will be used to help shareholders thoughtfully consider
their investment goals and objectively monitor how well the goals are being
achieved.
The Fund agrees to pay AEFA 0.10 percent of the net asset value of Class Y.
The Fund agrees to pay AEFA in cash within five (5) business days after the
last day of each month.
AEFA agrees to provide the Fund annually a budget covering its expected costs
and a quarterly report of its actual expenditures. AEFA 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.
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 AEFA. 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 AEFA.
Approved as of this 9th day of May, 1997.
IDS MANAGED RETIREMENT FUND, INC. AMERICAN EXPRESS
IDS Managed Allocation Fund FINANCIAL ADVISORS INC.
/s/ Leslie L. Ogg /s/ Ward D. Armstrong
- -------------------------------- ---------------------------
Leslie L. Ogg Ward D. Armstrong
Vice President Vice President
<PAGE>
November 24, 1997
IDS Managed Retirement Fund, Inc.
IDS Tower 10
Minneapolis, Minnesota 55440-0010
Gentlemen:
I have examined the Articles of Incorporation and the By-Laws of the Company
and all necessary certificates, permits, minute books, documents and records
of the Company, and the applicable statutes of the State of Minnesota, and it
is my opinion:
(a) That the Company is a corporation duly organized and existing under the
laws of the State of Minnesota with an authorized capital stock of
10,000,000,000 shares, all of $.01 par value, that such shares may be
issued as full or fractional shares;
(b) That all such authorized shares are, under the laws of the State of
Minnesota, redeemable as provided in the Articles of Incorporation of
the Company and upon redemption shall have the status of authorized
shares and unissued shares;
(c) That the Company registered on December 28, 1984 an indefinite number of
shares pursuant to Rule 24f-2; and
(d) That shares which were sold at not less than their par value and in
accordance with applicable federal and state securities laws were
legally issued, fully paid and nonassessable.
I hereby consent that the foregoing opinion may be used in connection with
this Post-Effective Amendment.
Very truly yours,
/s/ Leslie L. Ogg
Leslie L. Ogg
Attorney at Law
901 S. Marquette Ave. Suite 2810
Minneapolis, Minnesota 55402-3268
LLO/kw
<PAGE>
Independent auditors' consent
- --------------------------------------------------------------------------------
The board and shareholders
IDS Managed Allocation Fund:
The board of trustees and unitholders
Growth and Income Trust:
Total Return Portfolio
We consent to the use of our reports 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.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
November 25, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> IDS MANAGED ALLOCATION FUND CLASS A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 2998493480
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2998493480
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 199567
<TOTAL-LIABILITIES> 199567
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2317982344
<SHARES-COMMON-STOCK> 208068041
<SHARES-COMMON-PRIOR> 206817755
<ACCUMULATED-NII-CURRENT> 71009
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 337881864
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 342358696
<NET-ASSETS> 2638890578
<DIVIDEND-INCOME> 34009755
<INTEREST-INCOME> 62824744
<OTHER-INCOME> 0
<EXPENSES-NET> 25118345
<NET-INVESTMENT-INCOME> 71716154
<REALIZED-GAINS-CURRENT> 345559133
<APPREC-INCREASE-CURRENT> 122452877
<NET-CHANGE-FROM-OPS> 539728164
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 65540801
<DISTRIBUTIONS-OF-GAINS> 292030274
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 16320731
<NUMBER-OF-SHARES-REDEEMED> 46167773
<SHARES-REINVESTED> 31097328
<NET-CHANGE-IN-ASSETS> 199995568
<ACCUMULATED-NII-PRIOR> 338844
<ACCUMULATED-GAINS-PRIOR> 319468315
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 14119283
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 25344450
<AVERAGE-NET-ASSETS> 2547134394
<PER-SHARE-NAV-BEGIN> 12.20
<PER-SHARE-NII> 0.32
<PER-SHARE-GAIN-APPREC> 1.97
<PER-SHARE-DIVIDEND> 0.32
<PER-SHARE-DISTRIBUTIONS> 1.49
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.68
<EXPENSE-RATIO> 0.84
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> IDS MANAGED ALLOCATION FUND CLASS B
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 2998493480
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2998493480
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 199567
<TOTAL-LIABILITIES> 199567
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2317982344
<SHARES-COMMON-STOCK> 19104946
<SHARES-COMMON-PRIOR> 13401998
<ACCUMULATED-NII-CURRENT> 71009
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 337881864
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 342358696
<NET-ASSETS> 241201931
<DIVIDEND-INCOME> 34009755
<INTEREST-INCOME> 62824744
<OTHER-INCOME> 0
<EXPENSES-NET> 25118345
<NET-INVESTMENT-INCOME> 71716154
<REALIZED-GAINS-CURRENT> 345559133
<APPREC-INCREASE-CURRENT> 122452877
<NET-CHANGE-FROM-OPS> 539728164
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3907527
<DISTRIBUTIONS-OF-GAINS> 20916577
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6502486
<NUMBER-OF-SHARES-REDEEMED> 2976311
<SHARES-REINVESTED> 2176773
<NET-CHANGE-IN-ASSETS> 199995568
<ACCUMULATED-NII-PRIOR> 338844
<ACCUMULATED-GAINS-PRIOR> 319468315
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 14119283
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 25344450
<AVERAGE-NET-ASSETS> 199210661
<PER-SHARE-NAV-BEGIN> 12.15
<PER-SHARE-NII> 0.23
<PER-SHARE-GAIN-APPREC> 1.97
<PER-SHARE-DIVIDEND> 0.23
<PER-SHARE-DISTRIBUTIONS> 1.49
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.63
<EXPENSE-RATIO> 1.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> IDS MANAGED ALLOCATION FUND CLASS Y
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 2998493480
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2998493480
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 199567
<TOTAL-LIABILITIES> 199567
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2317982344
<SHARES-COMMON-STOCK> 9320191
<SHARES-COMMON-PRIOR> 9246364
<ACCUMULATED-NII-CURRENT> 71009
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 337881864
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 342358696
<NET-ASSETS> 118201404
<DIVIDEND-INCOME> 34009755
<INTEREST-INCOME> 62824744
<OTHER-INCOME> 0
<EXPENSES-NET> 25118345
<NET-INVESTMENT-INCOME> 71716154
<REALIZED-GAINS-CURRENT> 345559133
<APPREC-INCREASE-CURRENT> 122452877
<NET-CHANGE-FROM-OPS> 539728164
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3162775
<DISTRIBUTIONS-OF-GAINS> 13571619
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2643368
<NUMBER-OF-SHARES-REDEEMED> 4038230
<SHARES-REINVESTED> 1468689
<NET-CHANGE-IN-ASSETS> 199995568
<ACCUMULATED-NII-PRIOR> 338844
<ACCUMULATED-GAINS-PRIOR> 319468315
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 14119283
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 25344450
<AVERAGE-NET-ASSETS> 115117347
<PER-SHARE-NAV-BEGIN> 12.20
<PER-SHARE-NII> 0.33
<PER-SHARE-GAIN-APPREC> 1.97
<PER-SHARE-DIVIDEND> 0.33
<PER-SHARE-DISTRIBUTIONS> 1.49
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.68
<EXPENSE-RATIO> 0.71
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> TOTAL RETURN PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 2732474208
<INVESTMENTS-AT-VALUE> 3075389304
<RECEIVABLES> 64307724
<ASSETS-OTHER> 6147570
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3145844598
<PAYABLE-FOR-SECURITIES> 44986177
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 101651775
<TOTAL-LIABILITIES> 146637952
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2999206646
<DIVIDEND-INCOME> 34017442
<INTEREST-INCOME> 62794083
<OTHER-INCOME> 0
<EXPENSES-NET> 14122469
<NET-INVESTMENT-INCOME> 82689056
<REALIZED-GAINS-CURRENT> 345627464
<APPREC-INCREASE-CURRENT> 122489698
<NET-CHANGE-FROM-OPS> 550806218
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 200016781
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 13358064
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 14136216
<AVERAGE-NET-ASSETS> 2862841487
<PER-SHARE-NAV-BEGIN> 0.00
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 0.00
<EXPENSE-RATIO> 0.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
DIRECTORS/TRUSTEES POWER OF ATTORNEY
City of Minneapolis
State of Minnesota
Each of the undersigned, as directors and trustees of the below listed
open-end, diversified investment companies that previously have filed
registration statements and amendments thereto pursuant to the requirements
of the Securities Act of 1933 and the Investment Company Act of 1940 with the
Securities and Exchange Commission:
1933 Act 1940 Act
Reg. Number Reg. Number
----------- -----------
IDS Bond Fund, Inc. 2-51586 811-2503
IDS California Tax-Exempt Trust 33-5103 811-4646
IDS Discovery Fund, Inc. 2-72174 811-3178
IDS Equity Select Fund, Inc. 2-13188 811-772
IDS Extra Income Fund, Inc. 2-86637 811-3848
IDS Federal Income Fund, Inc. 2-96512 811-4260
IDS Global Series, Inc. 33-25824 811-5696
IDS Growth Fund, Inc. 2-38355 811-2111
IDS High Yield Tax-Exempt Fund, Inc. 2-63552 811-2901
IDS International Fund, Inc. 2-92309 811-4075
IDS Investment Series, Inc. 2-11328 811-54
IDS Managed Retirement Fund, Inc. 2-93801 811-4133
IDS Market Advantage Series, Inc. 33-30770 811-5897
IDS Money Market Series, Inc. 2-54516 811-2591
IDS New Dimensions Fund, Inc. 2-28529 811-1629
IDS Precious Metals Fund, Inc. 2-93745 811-4132
IDS Progressive Fund, Inc. 2-30059 811-1714
IDS Selective Fund, Inc. 2-10700 811-499
IDS Special Tax-Exempt Series Trust 33-5102 811-4647
IDS Stock Fund, Inc. 2-11358 811-498
IDS Strategy Fund, Inc. 2-89288 811-3956
IDS Tax-Exempt Bond Fund, Inc. 2-57328 811-2686
IDS Tax-Free Money Fund, Inc. 2-66868 811-3003
IDS Utilities Income Fund, Inc. 33-20872 811-5522
hereby constitutes and appoints William R. Pearce and Leslie L. Ogg or either
one of them, as her or his attorney-in-fact and agent, to sign for her or him
in her or his name, place and stead any and all further amendments to said
registration statements filed pursuant to said Acts and any rules and
-1-
<PAGE>
regulations thereunder, and to file such amendments with all exhibits thereto
and other documents in connection therewith with the Securities and Exchange
Commission, granting to either of them the full power and authority to do and
perform each and every act required and necessary to be done in connection
therewith.
Dated the 8th day of January, 1997.
/s/ H. Brewster Atwater, Jr. /s/ Melvin R. Laird
- ------------------------------------ ------------------------------------
H. Brewster Atwater, Jr. Melvin R. Laird
/s/ Lynne V. Cheney /s/ William R. Pearce
- ------------------------------------ ------------------------------------
Lynne V. Cheney William R. Pearce
/s/ William H. Dudley /s/ Alan K. Simpson
- ------------------------------------ ------------------------------------
William H. Dudley Alan K. Simpson
/s/ Robert F. Froehlke /s/ Edson W. Spencer
- ------------------------------------ ------------------------------------
Robert F. Froehlke Edson W. Spencer
/s/ David R. Hubers /s/ John R. Thomas
- ------------------------------------ ------------------------------------
David R. Hubers John R. Thomas
/s/ Heinz F. Hutter /s/ Wheelock Whitney
- ------------------------------------ ------------------------------------
Heinz F. Hutter Wheelock Whitney
/s/ Anne P. Jones /s/ C. Angus Wurtele
- ------------------------------------ ------------------------------------
Anne P. Jones C. Angus Wurtele
-2-
<PAGE>
TRUSTEES POWER OF ATTORNEY
City of Minneapolis
State of Minnesota
Each of the undersigned, as trustees of the below listed open-end,
diversified investment companies that previously have filed registration
statements and amendments thereto pursuant to the requirements of the
Investment Company Act of 1940 with the Securities and Exchange Commission:
1940 Act
Reg. Number
-----------
Growth Trust 811-07395
Growth and Income Trust 811-07393
Income Trust 811-07307
Tax-Free Income Trust 811-07397
World Trust 811-07399
hereby constitutes and appoints William R. Pearce and Leslie L. Ogg or either
one of them, as her or his attorney-in-fact and agent, to sign for her or him
in her or his name, place and stead any and all further amendments to said
registration statements filed pursuant to said Act and any rules and
regulations thereunder, and to file such amendments with all exhibits thereto
and other documents in connection therewith with the Securities and Exchange
Commission, granting to either of them the full power and authority to do and
perform each and every act required and necessary to be done in connection
therewith.
Dated the 8th day of January, 1997.
/s/ H. Brewster Atwater, Jr. /s/ Melvin R. Laird
- ------------------------------------ ------------------------------------
H. Brewster Atwater, Jr. Melvin R. Laird
/s/ Lynne V. Cheney /s/ William R. Pearce
- ------------------------------------ ------------------------------------
Lynne V. Cheney William R. Pearce
/s/ William H. Dudley /s/ Alan K. Simpson
- ------------------------------------ ------------------------------------
William H. Dudley Alan K. Simpson
/s/ Robert F. Froehlke /s/ Edson W. Spencer
- ------------------------------------ ------------------------------------
Robert F. Froehlke Edson W. Spencer
/s/ David R. Hubers /s/ John R. Thomas
- ------------------------------------ ------------------------------------
David R. Hubers John R. Thomas
/s/ Heinz F. Hutter /s/ Wheelock Whitney
- ------------------------------------ ------------------------------------
Heinz F. Hutter Wheelock Whitney
/s/ Anne P. Jones /s/ C. Angus Wurtele
- ------------------------------------ ------------------------------------
Anne P. Jones C. Angus Wurtele
