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. 28 (File No. 2-93801)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 29 (File No. 811-4133)
IDS MANANGED 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. 27, 1998 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>
<TABLE>
<CAPTION>
Cross reference sheet showing the location in the prospectus and Statement of
Additional Information of the information called for by items enumerated in
Parts A and B of Form N-1A.
Negative answers omitted are so indicated.
PART A
<S> <C>
Item No. Section in Prospectus
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
(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) Dividend and capital gain distributions; Reinvestments
(g) Taxes
(h) Alternative purchase 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
PART B
Item No. Section in Statement of Additional Information
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**; 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 Agreement; Independent Auditors
(i) Agreements: Transfer Agency Agreement; Custodian Agreement
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) Redeeming Shares
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
* Designates information is located in annual report.
** Designates location in prospectus.
</TABLE>
<PAGE>
IDS Managed Allocation Fund
Prospectus
Nov. 27, 1998
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:
o is not a bank deposit
o is not federally insured
o is not endorsed by any bank or government agency
o is not guaranteed to achieve its goal
American Express Shareholder Service
P.O. Box 534
Minneapolis, MN
55440-0534
800-862-7919
TTY: 800-846-4852
Web site address: http://www.americanexpress.com/advisors
<PAGE>
Table of contents
The Fund in brief
Goal
Investment policies and risks
Structure of the Fund
Manager and distributor
Portfolio manager
Alternative purchase arrangements
Sales charge and Fund expenses
Performance
Financial highlights
Total returns
Investment policies and risks
Facts about investments and their risks
Valuing Fund shares
How to purchase, exchange or redeem shares
Alternative purchase arrangements
How to purchase shares
How to exchange shares
How to redeem shares
Reductions and waivers of the sales charge
Special shareholder services
Services
Quick telephone reference
Distributions and taxes
Dividend and capital gain distributions
Reinvestments
Taxes
How to determine the correct TIN
How the Fund and Portfolio are organized
Shares
Voting rights
Shareholder meetings
Special considerations regarding master/feeder structure
Board members and officers
Investment manager
Administrator and transfer agent
Distributor
About American Express Financial Corporation
General information
Year 2000
Appendices
Description of corporate bond ratings
Descriptions of derivative instruments
<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 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
<PAGE>
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 $74
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
Day-to-day portfolio management for the various asset classes held by the
Portfolio is the responsibility of the following team of portfolio managers led
by Steve Merrell:
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.
James Johnson began managing the U.S. equity portion of the Portfolio in July
1998. He also provides quantitative analysis for the Portfolio's tactical asset
allocation decisions. He joined AEFC in 1994 as an equity quantitative analyst
for American Express Asset Management Group. He has managed the focused research
product for American Express Asset Management Group since 1996. Prior to joining
AEFC, he served as an equity quantitative analyst at Piper Capital Management,
Inc.
Ian King and John O'Brien, the "London Team," provide portfolio management for
the international equities portion of the Portfolio. Ian joined AEFC in 1995 and
serves as portfolio manager for Emerging Markets Portfolio. Prior to joining
AEFC he was director of Lehman Brothers Global Asset Management Ltd. from 1992
to 1995. John joined AEFC in 1988 and serves as vice president and portfolio
manager for American Express Asset Management International Inc. He is manager
of World Growth Portfolio and IDS Life Series Fund, International Equity
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.
<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%
Annual Fund and allocated Portfolio operating expenses (as a percentage of
average daily net assets):
Class A Class B Class Y
Management fee** 0.44% 0.44% 0.44%
12b-1 fee 0.00% 0.00% 0.00%
Other expenses*** 0.36% 0.37% 0.28%
Total 0.80% 1.56% 0.72%
</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 0.05% in fiscal year 1998.
*** Other expenses include an administrative services fee, a shareholder
services fee, a transfer agency fee and other nonadvisory expenses.
Example: Suppose for each year for the next 10 years, Fund expenses are as above
and annual return is 5%. If you sold your shares at the end of the following
years, for each $1,000 invested, you would pay total expenses of:
1 year 3 years 5 years 10 years
Class A $58 $78 $92 $144
Class B $66 $89 $105 $166**
Class B* $16 $49 $85 $166**
Class Y $7 $23 $40 $90
<PAGE>
*Assuming Class B shares are not redeemed at the end of the period.
**Based on conversion of Class B shares to Class A shares in the ninth year.
This example does not represent actual expenses, past or future. Actual expenses
may be higher or lower than those shown. Because Class B pays annual
distribution (12b-1) fees, long-term shareholders of Class B may indirectly pay
an equivalent of more than a 6.25% sales charge, the maximum permitted by the
National Association of Securities Dealers.
<PAGE>
<TABLE>
<CAPTION>
Performance
Financial highlights
Fiscal period ended Sept. 30,
Per share income and capital changes(a)
Class A
1998 1997 1996b 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $12.68 $12.20 $12.19 $11.29 $12.16 $11.91 $11.08 $9.01 $10.05 $7.48 $6.82
beginning of period
Income from investment operations:
Net investment income (loss).37 .32 .24 .21 .13 .17 .21 .20 .27 .26 .16
Net gains (losses) (both (.79) 1.97 .58 1.65 .03 1.07 2.04 2.45 (.39) 2.51 .66
realized and unrealized)
Total from investment (.42) 2.29 .82 1.86 .16 1.24 2.25 2.65 (.12) 2.77 .82
operations
Less distributions:
Dividends from net (.37) (.32) (.23) (.16) (.12) (.19) (.21) (.27) (.25) (.20) (.16)
investment income
Distributions from (1.55) (1.49) (.58) (.80) (.90) (.80) (1.20) (.31) (.67) -- --
realized gains
Excess distributions of -- -- -- -- (.01) -- (.01) -- -- -- --
realized gains
Total distributions (1.92) (1.81) (.81) (.96) (1.03) (.99) (1.42) (.58) (.92) (.20) (.16)
Net asset value, $10.34 $12.68 $12.20 $12.19 $11.29 $12.16 $11.91 $11.08 $9.01 $10.05 $7.48
end of period
Ratios/supplemental data
Class A
1998 1997 1996b 1995 1994 1993 1992 1991 1990 1989 1988
Net assets, end of $2,233 $2,639 $2,523 $2,602 $2,252 $1,845 $1,425 $1,007 $715 $700 $644
period (in millions)
Ratio of expenses to .80% .84% .80%d .83% .85% .83% .85% .90% .90% .92% .88%
average daily net assets(c)
Ratio of net income 3.13% 2.55% 2.29% d 1.85% 1.13% 1.46% 1.94% 1.98% 2.94% 2.82% 2.07%
(loss) to average
daily net assets
Portfolio turnover rate 122% 99% 142% 90% 66% 61% 46% 81% 78% 73% 102%
(exluding short-term
securities)
Total return(e) (3.7%) 20.8% 7.1% 18.0% 1.0% 11.2% 22.3% 30.9% (1.2%) 37.3% 12.0%
Average brokerage $.0128 $.0339 $.0303 -- -- -- -- -- -- -- --
commission rate(f)
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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Fiscal period ended Sept. 30,
Per share income and capital changes(a)
Class B Class Y
1998 1997 1996b 1995c 1998 1997 1996b 1995c
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $12.63 $12.15 $12.16 $10.41 $12.68 $12.20 $12.19 $10.41
beginning of period
Income from investment operations:
Net investment income (loss) .29 .23 .15 .11 .38 .33 .26 .16
Net gains (losses) (both (.79) 1.97 .57 1.74 (.79) 1.97 .58 1.76
realized and unrealized)
Total from investment (.50) 2.20 .72 1.85 (.41) 2.30 .84 1.92
operations
Less distributions:
Dividends from net (.29) (.23) (.15) (.10) (.38) (.33) (.25) (.14)
investment income
Distributions from (1.55) (1.49) (.58) -- (1.55) (1.49) (.58) --
realized gains
Total distributions (1.84) (1.72) (.73) (.10) (1.93) (1.82) (.83) (.14)
Net asset value, $10.29 $12.63 $12.15 $12.16 $10.34 $12.68 $12.20 $12.19
end of period
Ratios/supplemental data
Class B Class Y
1998 1997 1996b 1995c 1998 1997 1996b 1995c
Net assets, end of $251 $241 $163 $75 $95 $118 $113 $115
period (in millions)
Ratio of expenses to 1.56% 1.60% 1.57%e 1.58%e .72% .71% .63%e .65%e
average daily net assets(d)
Ratio of net income (loss) to 2.40% 1.82% 1.61%e .94%e 3.20% 2.69% 2.45%e 1.95%e
average daily net assets
Portfolio turnover rate 122% 99% 142% 90% 122% 99% 142% 90%
(excluding short-term
securities)
Total return( (4.5%) 19.9% 6.5% 17.7% (3.7%) 20.9% 7.3% 18.4%
Average brokerage $.0128 $.0339 $.0303 -- $.0128 $.0339 $.0303 --
commission rate(g)
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.
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.
</TABLE>
<PAGE>
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, 1998
Purchase 1 year Since 5 years 10 years
made ago inception ago ago
- ----------------------------------- ----------------- ------------------ ------------------ -----------------
<S> <C> <C> <C> <C>
IDS Managed Allocation:
Class A -8.55% --% +7.10% +12.92%
Class B -7.72% +10.12%* --% --%
Class Y -3.65% +11.77%* --% --%
S&P 500 +9.06% +24.67%** +19.90% +17.26%
Lipper Flexible +3.81% +14.73%** +11.25% +11.67%
Portfolio Fund Index
*Inception date was March 20, 1995.
**Measurement period started April 1, 1995.
Cumulative total returns as of Sept. 30, 1998
Purchase 1 year Since 5 years 10 years
made ago inception ago ago
- ----------------------------------- ----------------- ------------------ ------------------ -----------------
IDS Managed Allocation:
Class A -8.55% --% +40.93% +236.99%
Class B -7.72% +40.61%* --% --%
Class Y -3.65% +48.16%* --% --%
S&P 500 +9.06% +117.87%** +147.82% +391.64%
Lipper Flexible +3.81% +61.75%** +70.38% +201.67%
Portfolio Fund Index
*Inception date was March 20, 1995.
**Measurement period started April 1, 1995.
</TABLE>
<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:
o a sales charge of 5% for Class A shares
o redemption at the end of the period and deduction of the applicable
contingent deferred sales charge for Class B shares
o no sales charge for Class Y shares
o no adjustments for taxes an investor may have paid on the reinvested income
and capital gains
o a period of widely fluctuating securities prices. Returns shown should not
be considered a representation of the Fund's future performance.
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.
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. Each of these asset classes
may include subcategories. For example, U.S. equities may include both large
capitalization and small capitalization companies. Foreign securities may
include both developed and emerging markets. The Portfolio may use derivative
instruments and make investments not in these classes. The portion to be
invested in each class is determined by the portfolio manager based on his
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.
<PAGE>
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% 50%
U.S. and foreign debt securities 10-50 25
foreign equity securities 10-50 25
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.
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 diversified product line and other factors, companies that develop and/or
rely on technology could become increasingly sensitive to down swings in the
economy.
Convertible securities: These securities generally are preferred stocks or bonds
that can be exchanged for other securities, usually common stock, at prestated
prices. When the trading price of the common stock makes the exchange likely,
convertible securities trade more like common stock.
Debt securities: The 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
<PAGE>
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 1998
S&P rating Protection of Percent of net assets
Percent of (or Moody's principal and in unrated securities
net assets equivalent) interest assessed by AEFC
<S> <C> <C> <C> <C>
6.20% AAA Highest quality 0.24%
0.75 AA High quality -
1.69 A Upper medium grade -
5.29 BBB Medium grade 0.23
6.31 BB Moderately speculative 0.18
4.78 B Speculative 0.34
0.74 CCC Highly speculative 0.52
- CC Poor quality -
- C Lowest quality -
0.03 D In default -
2.74 Unrated Unrated securities 1.23
</TABLE>
(See the Appendix to this prospectus describing 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 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: There are risks when investing in securities of foreign
companies and governments in addition to those assumed when investing in
domestic securities. These risks are classified as country risk, currency risk,
and custody risk. Each can adversely affect the value of an investment. Country
risk includes the political, economic, and other conditions of a country. These
conditions include lack of publicly available information, less government
oversight, the possibility of government-imposed restrictions, even the
nationalization of assets. Currency risk results from the constantly changing
exchange rate between local currency and the U.S. dollar. Whenever the Portfolio
holds securities valued in local currency or holds the currency, changes in the
exchange rate add or subtract from the asset value of the Portfolio. Custody
risk refers to the process of clearing and settling trades. It also covers
holding securities with local agents and depositories. Low trading volumes and
volatile prices in less developed markets make trades harder to complete and
settle. Local agents are held only to the standard of care of the local market.
Governments or trade groups may compel local agents to hold securities in
designated depositories that are not subject to independent
<PAGE>
evaluation. The less developed a country's securities market is, the greater the
likelihood of problems occurring. The risks of foreign investments are managed
carefully but the Portfolio cannot guarantee against losses that might result
from them. 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.
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.
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.
<PAGE>
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).
To establish the net assets, all securities held by the Portfolio are valued as
of the close of each business day. In valuing assets:
o Securities and assets with available market values are valued on that basis
o Securities maturing in 60 days or less are valued at amortized cost
o Assets without readily available market values are valued according to
methods selected in good faith by the board
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.
<PAGE>
<TABLE>
<CAPTION>
Sales charge and
distribution
(12b-1) fee Service fee Other information
<S> <C> <C> <C>
Class A Maximum initial sales 0.175% of average daily net Initial sales charge
charge of 5%; no 12b-1 fee assets waived or reduced for
certain purchases
Class B No initial sales charge; 0.175% of average daily net Shares convert to Class A
maximum CDSC of 5% assets in the ninth year of
declines to 0% after six ownership; CDSC waived in
years; 12b-1 fee of 0.75% certain circumstances
of average daily net assets
Class Y None 0.10% of average daily net Available only to certain
assets qualifying institutional
investors
</TABLE>
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.
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
o You will not have all of your purchase price invested. Part of your
purchase price will go to pay the sales charge. You will not pay a sales
charge when you redeem your shares.
o You will be able to take advantage of reductions in the sales charge.
<PAGE>
If you purchase Class B shares
o All of your money is invested in shares of stock. However, you will pay a
sales charge if you redeem your shares within six years of purchase.
o No reductions of the sales charge are available for 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
o Your shares will have a lower expense ratio than Class B shares because
Class A does not pay a distribution fee and the transfer agency fee for
Class A is lower than the fee for Class B. As a result, Class A shares will
pay higher dividends than Class B shares.
If you purchase Class B shares
o The distribution and transfer agency fees for Class B will cause your
shares to have a higher expense ratio and to pay lower dividends than Class
A shares. In the ninth year of ownership, Class B shares will convert to
Class A 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.
<PAGE>
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:
o Qualified employee benefit plans* if the plan:
- uses a daily transfer recordkeeping service offering participants
daily access to IDS funds and has
- at least $10 million in plan assets or
- 500 or more participants; or
- does not use daily transfer recordkeeping and has
- at least $3 million invested in funds of the IDS MUTUAL FUND
GROUP or
- 500 or more participants.
o Trust companies or similar institutions, and charitable organizations that
meet the definition in Section 501(c)(3) of the Internal Revenue Code.*
These organizations must have at least $10 million invested in funds of the
IDS MUTUAL FUND GROUP.
o Nonqualified deferred compensation plans* whose participants are included
in a qualified employee benefit plan described above.
* Eligibility must be determined in advance by 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."
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.
<PAGE>
Purchase policies:
o Investments must be received and accepted in the Minneapolis headquarters
on a business day before 3 p.m. Central time to be included in your account
that day and to receive that day's share price. Otherwise, your purchase
will be processed the next business day and you will pay the next day's
share price.
o The minimums allowed for investment may change from time to time.
o Wire orders can be accepted only on days when your bank, American Express
Client Service Corporation (AECSC), the Fund and Norwest Bank Minneapolis
are open for business.
o Wire purchases are completed when wired payment is received and the Fund
accepts the purchase.
o AECSC and the Fund are not responsible for any delays that occur in wiring
funds, including delays in processing by the bank.
o You must pay any fee the bank charges for wiring.
o The Fund reserves the right to reject any application for any reason.
o If your application does not specify which class of shares you are
purchasing, it will be assumed that you are investing in Class A shares.
Three ways to invest
1 By regular account
Send your check and application (or your name and account number if you have an
established account) to:
American Express Financial Advisors Inc.
P.O. Box 74
Minneapolis, MN 55440-0074
Your financial advisor will help you with this process.
Minimum amounts
Initial investment: $ 2,000
Additional investments: $ 100
Account balances: $ 300*
Qualified retirement accounts: none
<PAGE>
2 By scheduled investment plan
Contact your financial advisor to set up one of the following scheduled plans:
o automatic payroll deduction
o bank authorization
o direct deposit of Social Security check
o other plan approved by the Fund
Minimum amounts
Initial investment: $ 100
Additional investments: $ 100/each payment for nonqualified accounts
$ 50/each payment for qualified accounts
Account balances: none
(on active plans of monthly payments)
If account balance is below $2,000, frequency of payments must be at least
monthly.
3 By wire
If you have an established account, you may wire money to:
Norwest Bank Minnesota
Routing Transit No. 091000019
Give these instructions: Credit American Express Financial Advisors #0000030015
for personal account # (your account number) for (your name).
If this information is not included, the order may be rejected and all money
received by the Fund, less any costs the Fund or AECSC incurs, will be returned
promptly.
Minimum amounts
Each wire investment: $ 1,000
*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. If
you are in a "wrap-fee" program sponsored by AEFA and your wrap program balance
falls below the required program minimum or is terminated, your shares will be
redeemed and the proceeds mailed to you.
<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.
<PAGE>
Two ways to request an exchange or redemption of shares
1 By letter
Include in your letter:
o the name of the fund(s)
o the class of shares to be exchanged or redeemed
o your account number(s) (for exchanges, both funds must be registered in the
same ownership)
o your Taxpayer Identification Number (TIN)
o the dollar amount or number of shares you want to exchange or redeem
o signature of all registered account owners
o for redemptions, indicate how you want your money delivered to you
o any paper certificates of shares you hold
Regular mail:
American Express Shareholder Service
Attn: Redemptions
P.O. Box 534
Minneapolis, MN 55440-0534
Express mail:
American Express Shareholder Service
Attn: Redemptions
733 Marquette Ave.
Minneapolis, MN 55402
2 By phone
American Express Financial Advisors Telephone Transaction Service:
800-437-3133 or
612-671-3800
o The Fund and AECSC will honor any telephone exchange or redemption request
believed to be authentic and will use reasonable procedures to confirm that
they are. This includes asking identifying questions and tape recording
calls. If reasonable procedures are followed, the Fund or AECSC will not be
liable for any loss resulting from fraudulent requests.
o Phone exchange and redemption privileges automatically apply to all
accounts except custodial, corporate or qualified retirement accounts
unless you request these privileges NOT apply by writing American Express
Shareholder Service. Each registered owner must sign the request.
<PAGE>
o AECSC answers phone requests promptly, but you may experience delays when
call volume is high. If you are unable to get through, use mail procedure
as an alternative.
o Acting on your instructions, your financial advisor may conduct telephone
transactions on your behalf.
o Phone privileges may be modified or discontinued at any time.
Minimum amount
Redemption: $100
Maximum amount
Redemption: $50,000
Exchange policies:
o You may make up to three exchanges within any 30-day period, with each
limited to $300,000. These limits do not apply to scheduled exchange
programs and certain employee benefit plans or other arrangements through
which one shareholder represents the interests of several. Exceptions may
be allowed with pre-approval of the Fund.
o Exchanges must be made into the same class of shares of the new fund.
o If your exchange creates a new account, it must satisfy the minimum
investment amount for new purchases.
o Once we receive your exchange request, you cannot cancel it.
o Shares of the new fund may not be used on the same day for another
exchange.
o If your shares are pledged as collateral, the exchange will be delayed
until written approval is obtained from the secured party.
o AECSC 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.
<PAGE>
Redemption policies:
o A "change of mind" option allows you to change your mind after requesting a
redemption and to use all or part of the proceeds to purchase new shares in
the same account from which you redeemed. If you reinvest in Class A, you
will purchase the new shares at net asset value rather than the offering
price on the date of a new purchase. If you reinvest in Class B, any CDSC
you paid on the amount you are reinvesting also will be reinvested. To take
advantage of this option, send a written request within 30 days of the date
your redemption request was received. Include your account number and
mention this option. This privilege may be limited or withdrawn at any
time, and it may have tax consequences.
o A telephone redemption request will not be allowed within 30 days of a
phoned-in address change.
Important: If you request a redemption of shares you recently purchased by a
check or money order that is not guaranteed, the Fund will wait for your check
to clear. It may take up to 10 days 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 AECSC that your check has cleared.)
Three ways to receive payment when you redeem shares
1 By regular or express mail
o Mailed to the address on record
o Payable to names listed on the account
NOTE: You will be charged a fee if you request express mail delivery.
2 By wire
o Minimum wire redemption: $1,000
o Request that money be wired to your bank
o Bank account must be in the same ownership as the IDS fund account
NOTE: Pre-authorization required. For instructions, contact your financial
advisor or American Express Shareholder Service.
<PAGE>
3 By scheduled payout plan
o Minimum payment: $50
o Contact your financial advisor or American Express Shareholder Service to
set up regular payments to you on a monthly, bimonthly, quarterly,
semiannual or annual basis
o Purchasing new shares while under a payout plan may be disadvantageous
because of the sales charges
Reductions and waivers of the sales charge
Class A - initial sales charge alternative
On purchases of Class A shares, you pay a 5% sales charge on the first $50,000
of your total investment and less on investments after the first $50,000:
Total investment Sales charge as a
percentage of:*
Public Net
offering amount
price invested
Up to $50,000 5.0% 5.26%
Next $50,000 4.5 4.71
Next $400,000 3.8 3.95
Next $500,000 2.0 2.04
$1,000,000 or more 0.0 0.00
* To calculate the actual sales charge on an investment greater than $50,000 and
less than $1,000,000, amounts for each applicable increment must be totaled. See
the SAI.
Reductions of the sales charge on Class A shares Your sales charge may be
reduced, depending on the totals of:
o the amount you are investing in this Fund now;
o the amount of your existing investment in this Fund, if any; and
o the amount you and your primary household group are investing or have
in other funds in the IDS MUTUAL FUND GROUP that carry a sales charge.
(The primary household group consists of accounts in any ownership for
spouses or domestic partners and their unmarried children under 21.
Domestic partners are individuals who maintain a shared primary
residence and have joint property or other insurable interests.)
<PAGE>
Other policies that affect your sales charge:
o IDS Tax-Free Money Fund and Class A shares of IDS Cash Management Fund
do not carry sales charges. However, you may count investments in these
funds if you acquired shares in them by exchanging shares from IDS
funds that carry sales charges.
o IRA purchases or other employee benefit plan purchases made through a
payroll deduction plan or through a plan sponsored by an employer,
association of employers, employee organization or other similar
entity, may be added together to reduce sales charges for all shares
purchased through that plan.
o If you intend to invest $1 million over a period of 13 months, you can
reduce the sales charges in Class A by filing a letter of intent.
For more details, see the SAI.
Waivers of the sales charge for Class A shares Sales charges do not apply to:
o Current or retired board members, officers or employees of the Fund or
AEFC or its subsidiaries, their spouses and unmarried children under
21.
o Current or retired American Express financial advisors, their spouses
and unmarried children under 21.
o 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 are the result of a
redemption of an equal or greater value where a sales load was
previously assessed.
o Qualified employee benefit plans* using a daily transfer recordkeeping
system offering participants daily access to IDS funds.
(Participants in certain qualified plans for which the initial sales charge is
waived may be subject to a deferred sales charge of up to 4% on certain
redemptions. For more information, see the SAI.)
o Shareholders who have at least $1 million invested in funds of the IDS
MUTUAL FUND GROUP. If the investment is redeemed in the first year
after purchase, a CDSC of 1% will be charged on the redemption. The
CDSC will be waived only in the circumstances described for waivers for
Class B shares.
<PAGE>
o 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 or account where American Express Trust Company
has a recordkeeping, trustee, investment management or investment
servicing relationship.
Send the Fund a written request along with your payment, indicating the amount
of the redemption and the date on which it occurred.
o Purchases made with dividend or capital gain distributions from the same
class of another fund in the IDS MUTUAL FUND GROUP that has a sales charge.
o Purchases made through or under a "wrap fee" product sponsored by AEFA
(total amount of all investments must be $50,000); the University of
Massachusetts After-Tax Savings Program; the University of Texas System
ORP; a segregated separate account offered by Nationwide Life Insurance
Company or Nationwide Life and Annuity Insurance Company; or a subsidiary
of AEFC offering Personal Trust Services' Asset-Based pricing alternative.
o Purchases made with the proceeds from IDS Life Real Estate Variable Annuity
surrenders.
* Eligibility must be determined in advance by AEFA. To do so, contact your
financial advisor.
Class B - contingent deferred sales charge alternative
Where a CDSC is imposed on a redemption, it is based on the amount of the
redemption and the number of calendar years, including the year of purchase,
between purchase and redemption. The following table shows the declining scale
of percentages that apply to redemptions during each year after a purchase:
If a redemption is The percentage rate
made during the for the CDSC is:
First year 5%
Second year 4%
Third year 4%
Fourth year 3%
Fifth year 2%
Sixth year 1%
Seventh year 0%
<PAGE>
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 gains. In addition, when determining the rate of any CDSC,
your redemption will be made from the oldest purchase payment you made. Of
course, once a purchase payment is considered to have been redeemed, the next
amount redeemed is the next oldest purchase payment. By redeeming the oldest
purchase payments first, lower CDSCs are imposed than would otherwise be the
case.
Waivers of the contingent deferred sales charge The CDSC on Class B shares will
be waived on redemptions of shares:
o In the event of the shareholder's death,
o Held in a trusteed employee benefit plan,
o Held in IRAs or certain qualified plans for which American Express Trust
Company acts as custodian, such as Keogh plans, tax-sheltered custodial
accounts or corporate pension plans, provided that the shareholder is:
- at least 59-1/2 years old, and
- taking a retirement distribution (if the redemption is part of a
transfer to an IRA or qualified plan in a product distributed by 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.
<PAGE>
Special shareholder services
Services
To help you track and evaluate the performance of your investments, AECSC
provides these services:
Quarterly statements featuring: (1) a list of all your holdings and transactions
during the previous three months and (2) personalized mutual fund performance
information about your specific account.
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
American Express Financial Advisors Telephone Transaction Service
Redemptions and exchanges, dividend payments or reinvestments and automatic
payment arrangements
National/Minnesota: 800-437-3133
Mpls./St. Paul area: 612-671-3800
TTY Service
For the hearing impaired
800-846-4852
American Express Financial Advisors Easy Access Line
Automated account information (TouchTone(R) phones only), including current Fund
prices and performance, account values and recent account transactions
800-862-7919
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.
<PAGE>
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. 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.
Reinvestments
Dividends and capital gain distributions are automatically reinvested in
additional shares in the same class of the Fund, unless:
o you request the Fund in writing or by phone to pay distributions to you in
cash, or
o you direct the Fund to invest your distributions in 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 cash only for distributions
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.
<PAGE>
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).
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:
o a $50 penalty for each failure to supply your correct TIN
o a civil penalty of $500 if you make a false statement that results in no
backup withholding
o criminal penalties for falsifying information
You also could be subject to backup withholding because you failed to report
interest or dividends on your tax return as required.
<PAGE>
How to determine the correct TIN
<TABLE>
<CAPTION>
Use the Social Security or
For this type of account: Employer Identification number of:
<S> <C>
Individual or joint account The individual or one of the individuals listed on
the joint account
Custodian account of a minor The minor
(Uniform Gifts/Transfers to Minors Act)
A living trust The grantor-trustee (the
person who puts the
money into the trust)
An irrevocable trust, The legal entity (not the personal representative
pension trust or estate 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 tax-exempt organization The 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.
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.
<PAGE>
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.
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.
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.
<PAGE>
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.
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.
Independent board members and officers
Chairman of the board
William R. Pearce*
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.
Retired chairman and chief executive officer, General Mills, Inc.
Lynne V. Cheney
Distinguished fellow, American Enterprise Institute for Public Policy Research.
Heinz F. Hutter
Retired president and chief operating officer, Cargill, Inc.
<PAGE>
Anne P. Jones
Attorney and telecommunications consultant.
Alan K. Simpson
Former United States senator for Wyoming.
Edson W. Spencer
Retired 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, general counsel and secretary
Leslie L. Ogg*
President of Board 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.
<PAGE>
Vice president
Frederick C. Quirsfeld*
Vice president, AEFC.
Refer to the SAI for the board members' and officers' biographies.
* Interested person as defined by the Investment Company Act of 1940.
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:
Assets Annual rate
(billions) at each asset level
First $0.50 0.530%
Next 0.50 0.505
Next 1.00 0.480
Next 1.00 0.455
Next 3.00 0.430
Over 6.00 0.400
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, 1998, the Portfolio paid AEFC a total
investment management fee of 0.44% of its average daily net assets. Under the
Agreement, the Portfolio also pays taxes, brokerage commissions and nonadvisory
expenses.
Administrator and transfer agent
Under an Administrative Services Agreement, the Fund pays AEFC for
administration and accounting services at an annual rate of 0.04% decreasing in
gradual percentages to 0.02% as assets increase.
<PAGE>
Under a separate Transfer Agency Agreement, AECSC maintains shareholder accounts
and records. The Fund pays AECSC an annual fee per shareholder account for this
service as follows:
o Class A $15
o Class B $16
o Class Y $15
Distributor
The Fund has an exclusive distribution agreement with AEFA. 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, 1998, were 0.80% of its average daily net assets. Expenses for Class B and
Class Y were 1.56% and 0.72%, respectively.
<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, 1998, were more than $188 billion.
AEFA serves individuals and businesses through its nationwide network of more
than 180 offices and more than 8,900 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.
Year 2000
The Year 2000 issue is the result of computer programs having been written using
two digits rather than four to define a year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than 2000. This could result in the failure of major systems or miscalculations,
which would have a material impact on the operations of the Fund. The Fund has
no computer systems of its own but is dependent upon the systems maintained by
AEFC and certain other third parties.
A comprehensive review of AEFC's computer systems and business processes has
been conducted to identify the major systems that could be affected by the Year
2000 issue. Steps are being taken to resolve any potential problems including
modification of existing software and the purchase of new software. These
measures are scheduled to be completed and tested on a timely basis. AEFC's goal
is to complete internal remediation and testing of each of its critical systems
by the end of 1998 and to continue compliance efforts through 1999. The Year
2000 readiness of other third parties whose system failures could have an impact
on the Fund's operations currently is being evaluated. The companies or
governments in which the Fund invests also may be adversely affected by Year
2000 issues. This may affect the value of the Fund's investments. The potential
materiality of any impact is not known at this time.
<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.
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.
<PAGE>
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.
<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.
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.
<PAGE>
Structured products - Structured products are over-the-counter financial
instruments created specifically to meet the needs of one or a small number of
investors. The instrument may consist of a warrant, an option or a forward
contract embedded in a note or any of a wide variety of debt, equity and/or
currency combinations. Risks of structured products include the inability to
close such instruments, rapid changes in the market and defaults by other
parties.
<PAGE>
IDS MANAGED RETIREMENT FUND, INC
STATEMENT OF ADDITIONAL INFORMATION
FOR
IDS MANAGED ALLOCATION FUND
Nov. 27, 1998
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. 27, 1998, and it is to be used with the prospectus dated
Nov. 27, 1998, and the Annual Report for the fiscal year ended Sept. 30, 1998.
<PAGE>
TABLE OF CONTENTS
Goal and Investment Policies......................................See Prospectus
Additional Investment Policies..............................................p. 4
Security Transactions.......................................................p. 8
Brokerage Commissions Paid to Brokers Affiliated with
American Express Financial Corporation.....................................p. 10
Performance Information....................................................p. 11
Valuing Fund Shares........................................................p. 12
Investing in the Fund......................................................p. 14
Redeeming Shares...........................................................p. 18
Pay-out Plans..............................................................p. 19
Taxes......................................................................p. 20
Agreements.................................................................p. 21
Organizational Information.................................................p. 25
Board Members and Officers.................................................p. 29
Compensation for Fund and Portfolio Board Members..........................p. 29
Independent Auditors.......................................................p. 30
Financial Statements...........................................See Annual Report
Prospectus.................................................................p. 30
Appendix A: Foreign Currency Transactions.................................p. 31
Appendix B: Investing in Foreign Securities...............................p. 36
Appendix C: Options and Futures Contracts.................................p. 37
Appendix D: Mortgage-Backed Securities....................................p. 43
Appendix E: Dollar-Cost Averaging.........................................p. 44
<PAGE>
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.
<PAGE>
`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.
<PAGE>
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.
`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.
The Portfolio has no current intention to invest in securities of other
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.
<PAGE>
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.
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 investing in foreign securities, see Appendix B. For a discussion
on options and futures contracts, see Appendix C.
For a discussion on mortgage-backed securities, see Appendix D.
<PAGE>
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.
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
<PAGE>
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 execution. AEFC has represented 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 $5,108,612 for the fiscal year
ended Sept. 30, 1998, $5,860,957 for fiscal year ended 1997, and $7,372,053 for
fiscal period ended Sept. 30, 1996. Substantially all firms through whom
transactions were executed provide research services.
In fiscal year 1998, transactions amounting to $21,698,000, on which $20,762 in
commissions were imputed or paid, were specifically directed to firms in
exchange for research services.
<PAGE>
As of the fiscal year ended Sept. 30, 1998, 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:
Value of Securities owned at
Name of Issuer End of Fiscal Year
- -------------- ------------------
Bank of America $24,578,805
Chase Manhattan 2,123,575
First Chicago 13,706,849
Goldman Sachs 22,457,676
Lehman Brothers 1,110,225
Merrill Lynch 1,672,338
Morgan Stanley 5,292,488
NationsBank 13,995,599
Schwab (Charles) 1,397,813
Travelers Group 8,804,999
The portfolio turnover rate was 122% in the fiscal year ended Sept. 30, 1998,
and 99% in fiscal year 1997. 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.
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:
<PAGE>
<TABLE>
<CAPTION>
For the Fiscal Year Ended Sept. 30,
For the
----------------------------------------------- -------------- Fiscal Period
Ended Sept.
1998 1997 30, 1996
----------------------------------------------- -------------- --------------
Percent of
Aggregate
Dollar Amount
Aggregate Percent of of Aggregate Aggregate
Dollar Amount Aggregate Transactions Dollar Amount Dollar Amount
Nature of Brokerage Involving of of
Broker of Commissions Commissions Payment of Commissions Commissions
Affiliation Paid to Broker Commissions Paid to Broker Paid to Broker
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
American (1) $148,878 2.91% 5.34% $314,054 $481,354
Express
Investment
Services Inc.
(1) Wholly-owned subsidiary of AEFC.
</TABLE>
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 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:
P (1 + T)n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment,
made at the beginning of a period, at the end of the period
(or fractional portion thereof)
<PAGE>
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.
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, 1998, the
first business day following the end of the fiscal year, the computation looked
like this:
<TABLE>
<CAPTION>
Net assets Shares
before outstanding at Net asset value
shareholder the end of of one share
transactions previous day
----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Class A $2,195,120,574 divided by 215,842,731 equals $10.17
Class B 246,804,172 24,387,764 10.12
Class Y 93,493,308 9,193,049 10.17
</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 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.
<PAGE>
`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. 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.
<PAGE>
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, 1998, was determined by
dividing the net asset value of one share, $10.17, by 0.95 (1.00-0.05 for a
maximum 5% sales charge) for a public offering price of $10.71. 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:
Within each increment,
sales charge as a percentage of:
-------------------------------------------------------
Public Net
Amount of Investment Offering Price Amount Invested
- -------------------- -------------- ---------------
First $ 50,000 5.0% 5.26%
Next 50,000 4.5 4.71
Next 400,000 3.8 3.95
Next 500,000 2.0 2.04
$1,000,000 or more 0.0 0.00
Sales charges on an investment greater than $50,000 and less than $1,000,000 are
calculated for each increment separately and then totaled. The resulting total
sales charge, expressed as a percentage of the public offering price and of the
net amount invested, will vary depending on the proportion of the investment at
different sales charge levels.
For example, compare an investment of $60,000 with an investment of $85,000. The
$60,000 investment is composed of $50,000 that incurs a sales charge of $2,500
(5.0% x $50,000) and $10,000 that incurs a sales charge of $450 (4.5% x
$10,000). The total sales charge of $2,950 is 4.92% of the public offering price
and 5.17% of the net amount invested.
In the case of the $85,000 investment, the first $50,000 also incurs a sales
charge of $2,500 (5.0% x $50,000) and $35,000 incurs a sales charge of $1,575
(4.5% x $35,000). The total sales charge of $4,075 is 4.79% of the public
offering price and 5.04% of the net amount invested.
<PAGE>
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
Number of Participants
Total Plan Assets 1-99 100 or more
- ----------------- ---- -----------
Less than $1 million 4% 0%
$1 million or more 0% 0%
Class A - Reducing the Sales Charge
Sales charges are based on the total amount of your investments in the Fund. The
amount of all prior investments plus any new purchase is referred to as your
"total amount invested." For example, suppose you have made an investment of
$20,000 and later decide to invest $40,000 more. Your total amount invested
would be $60,000. As a result, $10,000 of your $40,000 investment qualifies for
the lower 4.5% sales charge that applies to investments of more than $50,000 and
up to $100,000.
The total amount invested includes any shares held in the Fund in the name of a
member of your primary household 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
<PAGE>
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 a LOI may be used to reach the $1 million
total, excluding Cash Management Fund and Tax-Free Money Fund. However, we will
not adjust for sales charges on investments made prior to the signing of the
LOI. If you do not invest $1 million by the end of 13 months, there is no
penalty, you'll just miss out on the sales charge adjustment. A LOI is not an
option (absolute right) to buy shares.
Here's an example. You file a LOI to invest $1 million and make an investment of
$100,000 at that time. You pay the normal 5% sales charge on the first $50,000
and 4.5% sales charge on the next $50,000 of this investment. Let's say you make
a second investment of $900,000 (bringing the total up to $1 million) one month
before the 13-month period is up. On the date that you bring your total to $1
million, AEFC makes an adjustment to your account. The adjustment is made by
crediting your account with additional shares, in an amount equivalent to the
sales charge previously paid.
<PAGE>
Systematic Investment Programs
After you make your initial investment of $100 or more, you must make additional
payments of $100 or more on at least a monthly basis until your balance reaches
$2,000. 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 E.
Automatic Directed Dividends
Dividends, including capital gain distributions, paid by another fund in the IDS
MUTUAL FUND GROUP subject to a sales charge, may be used to automatically
purchase shares in the same class of this Fund without paying a sales charge.
Dividends may be directed to existing accounts only. Dividends declared by a
fund are exchanged to this Fund the following day. Dividends can be exchanged
into 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;
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);
<PAGE>
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
prospectus. Should the Fund distribute securities, a shareholder may incur
brokerage fees or other transaction costs in converting the securities to cash.
<PAGE>
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.
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.
<PAGE>
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 received from domestic (U.S.) securities. For
the fiscal year ended Sept. 30, 1998, 15% of the Fund's net investment income
dividends qualified for the corporate deduction.
<PAGE>
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. 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. Each class of the Fund pays its proportionate share of the fee.
Assets Annual rate at
(billions) each asset level
- --------- ----------------
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
On Sept. 30, 1998, the daily rate applied to the Portfolio's net assets was
equal to 0.489% 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.
<PAGE>
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 the Fund's Class A share, 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 $1,363,906 for
the fiscal year ended Sept. 30, 1998.
The management fee is paid monthly. Under the agreement, the total amount paid
was $12,897,457 for the fiscal year ended Sept. 30, 1998, $13,358,064 for fiscal
year 1997, and $9,405,244 for fiscal period ended Sept. 30, 1996.
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, the
nonadvisory expenses, net of earnings credits, paid by the Fund and Portfolio
were $977,549 for the fiscal year ended Sept. 30, 1998, $1,051,745 for fiscal
year 1997, and $1,324,636 for fiscal period ended Sept. 30, 1996.
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 by the
Portfolio.
<PAGE>
Administrative Services Agreement
The Fund has an Administrative Services Agreement with AEFC. Under this
agreement, the Fund pays AEFC for providing administration and accounting
services. The fee is calculated as follows:
Assets Annual rate
(billions) each asset level
- --------- ----------------
First $0.50 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
On Sept. 30, 1998, the daily rate applied to the Fund's net assets was equal to
0.032% 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 $920,953 for the fiscal year ended Sept. 30, 1998.
Transfer Agency Agreement
The Fund has a Transfer Agency Agreement with American Express Client Service
Corporation (AECSC). This agreement governs AECSC'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, AECSC 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 AECSC may be changed from time to time upon agreement of the parties
without shareholder approval. Under the agreement, the Fund paid fees of
$3,313,019 for the fiscal year ended Sept. 30, 1998.
Distribution Agreement
Under a Distribution Agreement, sales charges deducted for distributing Fund
shares are paid to AEFA daily. These charges amounted to $3,793,568 for the
fiscal year ended Sept. 30, 1998. After paying commissions to personal financial
advisors, and other expenses, the amount retained was $648,271. The amounts were
$4,674,729 and $757,348 for fiscal year 1997, and $5,051,936 and $693,556 for
fiscal period ended Sept. 30, 1996.
<PAGE>
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, 1998, under the agreement, the
Fund paid fees of $1,971,009.
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.
<PAGE>
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 other financial institutions as 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
$25,070,729 for the fiscal year ended Sept. 30, 1998.
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 1940 Act.
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
Retired chairman and chief executive officer, General Mills, Inc. Director,
Merck & Co., Inc. and Darden Restaurants, Inc.
Lynne V. Cheney'
Born in 1941
American Enterprise Institute
for Public Policy Research (AEI)
1150 17th St., N.W. Washington, D.C.
Distinguished Fellow AEI. Former Chair of National Endowment of the Humanities.
Director, The Reader's Digest Association Inc., Lockheed-Martin and Union
Pacific Resources.
<PAGE>
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, chief executive officer and director of AEFC.
Heinz F. Hutter+
Born in 1929
P.O. Box 2187
Minneapolis, MN
Retired 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. (electronics), C-Cor
Electronics, Inc., and Amnex, Inc. (communications).
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. Retired vice chairman of the
board, Cargill, Incorporated (commodity merchants and processors).
<PAGE>
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) and Biogen
(pharmaceuticals).
Edson W. Spencer+
Born in 1926
4900 IDS Center
80 S. 8th St.
Minneapolis, MN
President, Spencer Associates Inc. (consulting). Retired 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).
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).
<PAGE>
+ 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 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.
Frederick C. Quirsfeld
Born in 1947
IDS Tower 10
Minneapolis, MN
Vice president - taxable mutual fund investments of AEFC. Vice president - fixed
income investments for the Fund.
<PAGE>
COMPENSATION FOR FUND AND PORTFOLIO BOARD MEMBERS
Members of the Fund board who are not officers of the Fund or of AEFC receive an
annual fee of $600 and the chair of the Contracts Committee receives an
additional fee of $83. 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 $6. 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 $1,100 and the chair of the Contracts Committee
receives an additional $83. Board members receive a $50 per day attendance fee
for board meetings. The attendance fee for meetings of the Contracts and
Investment Review Committee is $50; for meetings of the Audit and Personnel
Committee $25 and for traveling from out-of-state $11. Expenses for attending
meeting are reimbursed.
During the fiscal year ended Sept. 30, 1998, the independent members of the Fund
and Portfolio boards, for attending up to 26 meetings, received the following
compensation:
<TABLE>
<CAPTION>
Compensation Table
Total cash
Pension or compensation
Retirement from the IDS
benefits MUTUAL FUND
Aggregate Aggregate accrued as Estimated GROUP and
compensation compensation Fund or annual benefit Preferred
Board member from the Fund from the Portfolio upon retirement Master Trust
Portfolio expenses Group
- ------------------------ ---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
H. Brewster Atwater, Jr. $1,350 $2,025 $0 $0 $98,500
Lynne V. Cheney 1,232 1,951 0 0 92,400
Robert F. Froehlke 342 542 0 0 24,900
Heinz F. Hutter 1,400 2,075 0 0 101,500
Anne P. Jones 1,309 2,021 0 0 96,900
Melvin R. Laird 162 274 0 0 12,200
Alan K. Simpson 1,103 1,810 0 0 84,400
Edson W. Spencer 1,592 2,267 0 0 113,000
Wheelock Whitney 1,450 2,125 0 0 104,500
C. Angus Wurtele 1,500 2,175 0 0 107,500
</TABLE>
On Sept. 30, 1998, the Fund's board members and officers as a group owned less
than 1% of the outstanding shares of any class.
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, 1998 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.
<PAGE>
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, 1998 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. 27, 1998, is hereby
incorporated in this SAI by reference.
<PAGE>
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.
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 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 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.
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.
<PAGE>
APPENDIX B
Investing in Foreign Securities
Investors should recognize that investing in foreign securities involves certain
special considerations, including those set forth below and those described in
the prospectus, which are not typically associated with investing in United
States securities. Foreign companies are not generally subject to uniform
accounting and auditing and financial reporting standards comparable to those
applicable to domestic companies. Additionally, many foreign stock markets,
while growing in volume of trading activity, have substantially less volume than
the New York Stock Exchange, and securities of some foreign companies are less
liquid and more volatile than securities of domestic companies. Similarly,
volume and liquidity in most foreign bond markets are less than the volume and
liquidity in the United States and at times, volatility of price can be greater
than in the United States. Further, foreign markets have different clearance,
settlement, registration and communication procedures and in certain markets
there have been times when settlements have been unable to keep pace with the
volume of securities transactions making it difficult to conduct such
transactions. Delays in such procedures could result in temporary periods when
assets of the Portfolio are uninvested and no return is earned thereon. The
inability of the Portfolio is to make intended security purchases due to such
problems could cause the Portfolio to miss attractive investment opportunities.
Payment for securities without delivery may be required in certain foreign
markets and, when participating in new issues, some foreign countries require
payment to be made in advance of issuance (at the time of issuance, the market
value of the security may be more or less than the purchase price). Some foreign
markets also have compulsory depositories (i.e., the Portfolio does not have a
choice as to where the securities are held). Fixed commissions on some foreign
stock exchanges are generally higher than negotiated commissions on U.S.
exchanges, although the Portfolio will endeavor to achieve the most favorable
net results on their portfolio transactions. Further, the Portfolio may
encounter difficulties or be unable to pursue legal remedies and obtain
judgments in foreign courts. There is generally less government supervision and
regulation of business and industry practices, stock exchanges, brokers and
listed companies than in the United States. It may be more difficult for the
Portfolios' agents to keep currently informed about corporate actions such as
stock dividends or other matters which may affect the prices of portfolio
securities. Communications between the United States and foreign countries may
be less reliable than within the United States, thus increasing the risk of
delays or loss of certificates for portfolio securities. In addition, with
respect to certain foreign countries, there is the possibility of
nationalization, expropriation, the imposition of withholding or confiscatory
taxes, political, social, or economic instability, diplomatic developments which
could affect United States investments in those countries, or other unforeseen
actions by regulatory bodies (such as changes to settlement or custody
procedures). Investments in foreign securities may also entail certain risks,
such as possible currency blockages or transfer restrictions, and the difficulty
of enforcing rights in other countries.
<PAGE>
APPENDIX C
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 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.
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.
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 market.
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, 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.
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 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.
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.
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.
<PAGE>
APPENDIX D
MORTGAGE-BACKED SECURITIES
A mortgage pass-through certificate is one that represents an interest in a
pool, or group, of mortgage loans assembled by the Government National Mortgage
Association (GNMA), Federal Home Loan Mortgage Corporation (FHLMC), Federal
National Mortgage Association (FNMA) or non-governmental entities. In
pass-through certificates, both principal and interest payments, including
prepayments, are passed through to the holder of the certificate. Prepayments on
underlying mortgages result in a loss of anticipated interest, and the actual
yield (or total return) to the 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.
<PAGE>
APPENDIX E
DOLLAR-COST AVERAGING
A technique that works well for many investors is one that eliminates random buy
and sell decisions. One such system is dollar-cost averaging. Dollar-cost
averaging involves building a portfolio through the investment of fixed amounts
of money on a regular basis regardless of the price or market condition. This
may enable an investor to smooth out the effects of the volatility of the
financial markets. By using this strategy, more shares will be purchased when
the price is low and less when the price is high. As the accompanying chart
illustrates, dollar-cost averaging tends to keep the average price paid for the
shares lower than the average market price of shares purchased, although there
is no guarantee.
While this 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
- ----------------------------------------- --------------------------------------
Regular Market Price Shares
Investment of a Share Acquired
- ----------------------------------------- --------------------------------------
$100 $6.00 16.7
100 4.00 25.0
100 4.00 25.0
100 6.00 16.7
100 5.00 20.0
$500 $25.00 103.4
Average market price of a share over 5 periods: $5.00 ($25.00 divided by 5).
The average price you paid for each share: $4.84 ($500 divided by 103.4).
<PAGE>
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, 1998, and the related statement of operations for the year
then ended and the statements of changes in net assets for each of the
years in the two-year period ended September 30, 1998 and the financial
highlights for the two-year period ended September 30, 1998, the ten-month
period ended September 30, 1996 and each of the years in the eight-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, 1998, 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.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
November 6, 1998
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statement of assets and liabilities
IDS Managed Allocation Fund
Sept. 30, 1998
Assets
<S> <C>
Investment in Total Return Portfolio (Note 1) $2,579,106,409
--------------
Liabilities
Accrued distribution fee 5,247
Accrued service fee 12,400
Accrued transfer agency fee 8,679
Accrued administrative services fee 2,281
Other accrued expenses 58,809
------
Total liabilities 87,416
------
Net assets applicable to outstanding capital stock $2,579,018,993
==============
Represented by
Capital stock-- $.01 par value (Note 1) $ 2,494,235
Additional paid-in capital 2,438,177,700
Undistributed net investment income 2,337,028
Accumulated net realized gain (loss) 241,077,235
Unrealized appreciation (depreciation) on investments and on translation of
assets and liabilities in foreign currencies (105,067,205)
------------
Total-- representing net assets applicable to outstanding capital stock $2,579,018,993
==============
Net assets applicable to outstanding shares: Class A $2,232,877,769
Class B $ 251,040,737
Class Y $ 95,100,487
Net asset value per share of outstanding capital stock: Class A shares 215,842,731 $ 10.34
Class B shares 24,387,764 $ 10.29
Class Y shares 9,193,049 $ 10.34
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
IDS Managed Allocation Fund
Year ended Sept. 30, 1998
Investment income
Income:
<S> <C>
Dividends $ 29,449,534
Interest 86,437,157
Less foreign taxes withheld (685,870)
--------
Total income 115,200,821
-----------
Expenses (Note 2):
Expenses allocated from Total Return Portfolio 13,842,832
Distribution fee -- Class B 1,971,009
Transfer agency fee 3,285,577
Incremental transfer agency fee-- Class B 27,442
Service fee
Class A 4,420,478
Class B 456,715
Class Y 117,062
Administrative services fees and expenses 920,953
Compensation of board members 11,440
Postage 189,417
Registration fees 68,523
Report to shareholders 23,450
Audit fees 9,750
Other 3,373
-----
Total expenses 25,348,021
Earnings credits on cash balances (Note 2) (277,292)
--------
Total net expenses 25,070,729
----------
Investment income (loss) -- net 90,130,092
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions 280,596,070
Financial futures contracts (9,064,355)
Foreign currency transactions 2,480,648
Options contracts written (7,955,967)
----------
Net realized gain (loss) on investments 266,056,396
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (447,425,901)
------------
Net gain (loss) on investments and foreign currencies (181,369,505)
------------
Net increase (decrease) in net assets resulting from operations $(91,239,413)
============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statements of changes in net assets
IDS Managed Allocation Fund
Year ended Sept. 30,
Operations and distributions
1998 1997
<S> <C> <C>
Investment income (loss)-- net $ 90,130,092 $ 71,716,154
Net realized gain (loss) on investments 266,056,396 345,559,133
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (447,425,901) 122,452,877
------------ -----------
Net increase (decrease) in net assets resulting from operations (91,239,413) 539,728,164
----------- -----------
Distributions to shareholders from:
Net investment income
Class A (79,898,680) (65,540,801)
Class B (6,541,547) (3,907,527)
Class Y (3,760,874) (3,162,775)
Net realized gain
Class A (314,653,758) (292,030,274)
Class B (30,968,697) (20,916,577)
Class Y (14,757,922) (13,571,619)
Excess distributions of net investment income
Class A (124,284) --
Class B (14,043) --
Class Y (5,293) --
------ ---
Total Distributions (450,725,098) (399,129,573)
------------ ------------
Capital share transactions (Note 3)
Proceeds from sales
Class A shares (Note 2) 140,890,845 196,359,438
Class B shares 64,808,657 78,101,366
Class Y shares 26,541,231 32,047,202
Reinvestment of distributions at net asset value
Class A shares 390,187,799 354,268,365
Class B shares 37,296,108 24,680,194
Class Y shares 18,087,773 16,734,394
Payments for redemptions
Class A shares (466,079,730) (558,247,028)
Class B shares (Note 2) (42,813,659) (35,890,509)
Class Y shares (46,229,433) (48,656,445)
----------- -----------
Increase (decrease) in net assets from capital share transactions 122,689,591 59,396,977
----------- ----------
Total increase (decrease) in net assets (419,274,920) 199,995,568
Net assets at beginning of year 2,998,293,913 2,798,298,345
------------- -------------
Net assets at end of year $2,579,018,993 $2,998,293,913
============== ==============
Undistributed net investment income $ 2,337,028 $ 71,009
-------------- --------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to financial statements
IDS Managed Allocation Fund
1
Summary of
significant
accounting policies
The 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. The Fund 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. The percentage of the Portfolio owned by the Fund at Sept. 30,
1998 was 99.97%. 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 $2,480,648 and accumulated net realized gain has been
decreased $2,480,648.
Dividends to shareholders
Dividends from net investment income, declared and paid each calendar
quarter, 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 an agreement with American
Express Financial Corporation (AEFC) for providing administrative services.
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, American Express Client Service
Corporation (AECSC) maintains shareholder accounts and records. The Fund
pays AECSC an annual fee per shareholder account for this service as
follows:
oClass A $15
oClass B $16
oClass 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.
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 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 $3,527,055 for Class A and $266,513 for Class
B for the year ended Sept. 30, 1998.
During the year ended Sept. 30, 1998, the Fund's transfer agency fees were
reduced by $277,292 as a result of earnings credits from overnight cash
balances.
3
Capital share
transactions
Transactions in shares of capital stock for the years indicated are as
follows:
Year ended Sept. 30, 1998
Class A Class B Class Y
Sold 12,019,432 5,553,683 2,273,079
Issued for reinvested
distributions 35,728,238 3,440,868 1,698,051
Redeemed (39,972,980) (3,711,733) (4,098,272)
Net increase (decrease) 7,774,690 5,282,818 (127,142)
Year ended Sept. 30, 1997
Class A Class B Class Y
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
4
Financial
highlights
"Financial highlights" showing per share data and selected information is
presented on pages 8 and 9 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, 1998,
the related statement of operations for the year then ended and the
statements of changes in net assets for each of the years in the two-year
period ended September 30, 1998. 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, 1998, 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.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
November 6, 1998
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statement of assets and liabilities
Total Return Portfolio
Sept. 30, 1998
Assets
Investments in securities, at value (Note 1):
<S> <C>
Investments in securities of unaffiliated issuers (identified cost $2,714,032,407) $2,630,213,076
Investments in securities of affiliated issuer (identified cost $23,098,325) 7,887,350
---------
Total investments in securities (identified cost $2,737,130,732) 2,638,100,426
Cash in bank on demand deposit 2,949,386
Dividends and accrued interest receivable 22,799,267
Receivable for investment securities sold 80,588,427
Receivable from investment advisor 212,906
U.S. government securities held as collateral for securities loaned (Note 5) 14,322,267
Unrealized appreciation on foreign currency contracts held, at value (Notes 1 and 4) 298,516
-------
Total assets 2,759,271,195
-------------
Liabilities
Payable for investment securities purchased 79,772,919
Unrealized depreciation on foreign currency contracts held, at value (Notes 1 and 4) 12,631
Payable upon return of securities loaned (Note 5) 86,751,567
Accrued investment management services fee 35,209
Options contracts written, at value
(premium received $6,263,389) (Note 6) 12,701,874
Other accrued expenses 185,240
-------
Total liabilities 179,459,440
-----------
Net assets $2,579,811,755
==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
Total Return Portfolio
Year ended Sept. 30, 1998
Investment income
Income:
<S> <C>
Dividends (includes $917,855 from affiliates) $ 29,457,073
Interest 86,437,471
Less foreign taxes withheld (686,048)
--------
Total income 115,208,496
-----------
Expenses (Note 2):
Investment management services fee 12,897,457
Compensation of board members 17,264
Custodian fees 859,639
Audit fees 29,250
Other 54,439
------
Total expenses 13,858,049
Earnings credits on cash balances (Note 2) (11,704)
-------
Total net expenses 13,846,345
----------
Investment income (loss) -- net 101,362,151
-----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 280,655,670
Financial futures contracts (9,066,534)
Foreign currency transactions 2,480,965
Options contracts written (Note 6) (7,958,194)
----------
Net realized gain (loss) on investments 266,111,907
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (447,531,928)
------------
Net gain (loss) on investments and foreign currencies (181,420,021)
------------
Net increase (decrease) in net assets resulting from operations $ (80,057,870)
=============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statements of changes in net assets
Total Return Portfolio
Year ended Sept. 30,
Operations
1998 1997
<S> <C> <C>
Investment income (loss)-- net $ 101,362,151 $ 82,689,056
Net realized gain (loss) on investments 266,111,907 345,627,464
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (447,531,928) 122,489,698
------------ -----------
Net increase (decrease) in net assets resulting from operations (80,057,870) 550,806,218
Net contributions (withdrawals) from partners (339,337,021) (350,789,437)
------------ ------------
Total increase (decrease) in net assets (419,394,891) 200,016,781
Net assets at beginning of year 2,999,206,646 2,799,189,865
------------- -------------
Net assets at end of year $2,579,811,755 $2,999,206,646
============== ==============
See accompanying notes to financial statements.
</TABLE>
<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.
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 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.
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, if any, may
arise from sales of foreign currency, closed forward contracts, exchange
gains or losses realized between the trade date and settlement date 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
At Sept. 30, 1998, investments in securities included issues that are
illiquid. The Portfolio currently limits investments in illiquid securities
to 10% of net assets, at market value, at the time of purchase. The
aggregate value of such securities at Sept. 30, 1998 was $8,905,156
representing 0.35% of net assets. Pursuant to 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, 1998, the Portfolio had entered
into outstanding when-issued or forward-commitments of $9,968,800.
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 Portfolio's average daily net assets on an annual basis. The
adjustment decreased the fee by $1,363,906 for the year ended Sept. 30,
1998.
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, 1998, the Portfolio's custodian fees were
reduced by $11,704 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 $3,043,695,649 and $3,052,730,306,
respectively, for the year ended Sept. 30, 1998. For the same period, the
portfolio turnover rate was 122%. Realized gains and losses are determined
on an identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC were $148,878
for the year ended Sept. 30, 1998.
<PAGE>
<TABLE>
<CAPTION>
4
Foreign currency
contracts
At Sept. 30, 1998, 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 financial statements. See
"Summary of significant accounting policies." The terms of the open
contracts are as follows:
Currency to Currency to Unrealized Unrealized
Exchange date be delivered be received appreciation depreciation
<S> <C> <C> <C> <C>
Oct. 1, 1998 1,568,707 921,522 $ -- $ 2,027
U.S. Dollar British Pound
Oct. 1, 1998 42,323,220 309,899 77 --
Japanese Yen U.S. Dollar
Oct. 1, 1998 36,019,683 269,407 5,729 --
Japanese Yen U.S. Dollar
Oct. 1, 1998 116,563,149,371 418,614 -- 1,388
Turkish Lira U.S. Dollar
Oct. 2, 1998 51,970,157 381,572 1,132 --
Japanese Yen U.S. Dollar
Oct. 2, 1998 9,377,875,000 33,831 40 --
Turkish Lira U.S. Dollar
Oct. 6, 1998 402,314 2,352,694 -- 2,044
U.S. Dollar South African Rand
Oct. 6, 1998 403,404 2,374,438 566 --
U.S. Dollar South African Rand
Oct. 6, 1998 355,774 210,704 -- 62
Singapore Dollar U.S. Dollar
Oct. 30, 1998 8,368,239 1,491,931 -- 2,451
French Franc U.S. Dollar
Oct. 30, 1998 3,840,921 681,244 -- 4,659
French Franc U.S. Dollar
Nov. 30, 1998 308,820,778 2,301,472 21,768 --
Japanese Yen U.S. Dollar
Nov. 30, 1998 1,541,702,750 11,650,000 269,204
Japanese Yen U.S. Dollar
------- ------
Total $298,516 $12,631
</TABLE>
<PAGE>
5
Lending of
portfolio securities
At Sept. 30, 1998, securities valued at $84,207,508 were on loan to
brokers. For collateral, the Portfolio received $72,429,300 in cash and
U.S. government securities valued at $14,322,267. Income from securities
lending amounted to $658,567 for the year ended Sept. 30, 1998. 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
Options contracts
written
The number of contracts and premium amounts associated with options
contracts written is as follows:
Year ended Sept. 30, 1998
Puts Calls
Contracts Premium Contracts Premium
Balance Sept. 30, 1997 -- $ -- -- $ --
Opened 8,750 14,423,300 3,800 811,073
Closed (3,200) (6,815,481) -- --
Exercised (2,500) (1,016,216) (2,800) (651,578)
Expired (1,300) (328,214) (1,000) (159,495)
Balance Sept. 30, 1998 1,750 $ 6,263,389 -- $ --
See "Summary of significant accounting policies."
<PAGE>
Investments in securities
Total Return Portfolio
Sept. 30, 1998
(Percentages represent
value of investments
compared to net assets)
Common stocks (47.2%)
Issuer Shares Value(a)
Aerospace & defense (0.5%)
AlliedSignal 155,900 $5,514,962
Goodrich (BF) 109,700 3,585,819
Lockheed Martin 21,900 2,207,794
Raytheon Cl B 50,200 2,707,663
Total 14,016,238
Airlines (0.2%)
AMR 92,000(b) 5,100,250
Southwest Airlines 47,750 955,000
Total 6,055,250
Automotive & related (1.1%)
Chrysler 18,000 861,750
Dana 148,800 5,552,100
Ford Motor 351,600 16,503,225
General Motors 52,800 2,887,500
Otosan Otomobil Sanayii 2,931,500(b,c) 665,456
Tata Engineering &
Locomotive GDR 532,000(c) 1,635,900
Total 28,105,931
Banks and savings & loans (6.2%)
Akbank T.A.S. ADR 300,000(b,c) 840,000
Argentaria 420,688(b,c) 8,373,164
Banc One 270,800(c) 11,542,850
Banca Intesa 1,927,827(b,c) 8,117,116
BankAmerica 227,700 13,690,462
Banque Natl de Paris 244,103(b,c) 13,077,403
Bayerische Vereinsbank 174,944(c) 12,885,483
BIG Bank Gdanski GDR 88,000(b,c) 1,102,200
Chase Manhattan 49,100 2,123,575
Credito Italiano 2,562,534(b,c) 10,680,898
First Chicago NBD 200,100 13,706,849
First Union 44,800 2,293,200
Instituto Bancario
San Paolo di Torino 627,034(b,c) 7,882,319
Natl Bank of Greece 110,000(c,h) 2,959,000
NationsBank 261,600 13,995,599
Nordbanken Holding 573,688(b,c) 3,293,887
Norwest 77,200 2,764,725
Thai Farmers Bank 724,000(b,c) 485,732
Toronto-Dominion Bank 232,057(c) 6,197,348
UBS 36,193 7,079,955
Wachovia 118,300 10,085,075
Washington Mutual 112,200 3,786,750
Yapi Kredit Finance 313,250,000(b,c) 3,555,388
Zagrebacka Banka 76,000(c) 633,916
Total 161,152,894
Beverages & tobacco (1.3%)
Coca-Cola 337,500 $19,448,437
Fomento Economico
Mexicano ADR 288,400(c,j) 5,659,850
Panamerican Beverages Cl A 50,000(c) 890,625
PepsiCo 150,900 4,442,119
Philip Morris 41,900 1,930,019
Total 32,371,050
Building materials & construction (0.2%)
Daiwa House Inds 305,000(c) 2,768,577
Empresas ICA Sociedad
Controladora 290,200(c) 1,704,925
Singapore Technologies
Engineering 1,836,000(b,c) 1,762,009
Total 6,235,511
Chemicals (1.1%)
Air Products & Chemicals 183,600 5,462,100
Du Pont (EI) de Nemours 108,500(c) 6,089,562
Engelhard 63,100 1,116,081
Henkel KGaA 164,886(c) 12,495,177
Waste Management 66,265(b) 3,184,862
Total 28,347,782
Communications equipment & services (1.0%)
Andrew Corp 70,800(b) 938,100
Ascend Communications 44,200(b) 2,011,100
China Telecom 1,418,000(b,c) 2,232,499
Lucent Technologies 129,500 8,943,594
Motorola 47,700 2,036,194
Newbridge Networks 58,800(b) 1,057,845
NICE-Systems ADR 85,000(b,c) 1,253,750
Northern Telecom 120,720(c) 3,863,040
Tellabs 90,400(b) 3,599,050
Vimpel-Communications ADR 57,000(b,c) 299,250
Total 26,234,422
Computers & office equipment (4.5%)
Apple Computer 76,300(h) 2,908,938
Automatic Data Processing 95,800 7,161,050
Cisco Systems 162,900(b) 10,069,255
Compaq Computer 172,700 5,461,638
Computer Associates Intl 63,000 2,331,000
Computer Sciences 21,600 1,177,200
Dell Computer 91,400(b) 6,009,550
Electronic Data Systems 76,800 2,548,800
EMC 108,100(b) 6,181,969
First Data 84,900 1,995,150
Formula Systems ADR 56,500(c) $1,130,000
General Instrument 52,300(b) 1,130,988
Hewlett-Packard 171,100 9,057,606
Intl Business Machines 133,200 17,049,599
Microsoft 260,300(b) 28,649,268
Oracle 120,300(b) 3,503,738
Parametric Technology 225,200(b) 2,266,075
Persetel Q Data Holdings 320,000 2,662,240
Seagate Technology 53,100(b) 1,330,819
Sun Microsystems 37,900 1,887,894
Synnex Technology Intl 265,319(b) 866,426
Total 115,379,203
Electronics (1.0%)
Celestica 63,000(c) 794,829
Compal Electronics 512,400(b,c) 1,517,114
Fujikura 390,000(b,c) 1,438,905
Intel 195,700 16,781,274
Matsushita Communication
Industrial 54,000(c) 1,936,970
Rohm 17,000(b,c) 1,617,803
Samsung Electronics GDR 135,436(b,c) 1,858,859
Total 25,945,754
Energy (2.8%)
Amoco 38,400 2,068,800
Chevron 84,400 7,094,875
Exxon 234,800 16,480,025
Hellenic Petroleum 422,000(c) 3,593,541
Lukoil Holding ADR 72,840(c,h) 883,185
Mobil 60,700 4,609,406
MOL Magyar Olaj-es
Gazipari GDR 69,500(c) 1,336,138
Petro-Canada 442,500(c) 5,553,726
Royal Dutch Petroleum 445,100(c) 21,197,888
Total Petroleum Cl B 77,094(b,c) 9,719,695
Total 72,537,279
Energy equipment & services (0.4%)
Halliburton 151,300 4,321,506
Sasol 173,000 793,222
Schlumberger 119,600(c) 6,017,376
Total 11,132,104
Financial services (1.5%)
Associates First Capital Cl A43,700 2,851,425
Fannie Mae 186,000 11,950,499
Household Intl 176,100 $6,603,750
Lehman Brothers Holdings 39,300 1,110,225
Merrill Lynch & Co 35,300 1,672,338
Morgan Stanley, Dean Witter,
Discover & Co 53,400 2,299,538
Schwab (Charles) 35,500 1,397,813
Sumitomo Realty &
Development 506,000(b,c) 926,031
Travelers Group 234,800 8,804,999
Total 37,616,618
Food (1.5%)
Bestfoods 212,000 10,268,750
General Mills 174,000 12,180,000
Sara Lee 185,900 10,038,600
Sysco 248,000 5,843,500
Total 38,330,850
Health care (5.2%)
ALZA 33,100(b) 1,435,713
American Home Products 42,400 2,220,700
Amgen 43,400(b) 3,279,413
Baxter Intl 95,900 5,706,050
Boston Scientific 32,500(b) 1,669,688
Bristol-Myers Squibb 185,200 19,237,649
EGIS 78,000(b,c) 1,392,538
Guidant 92,900 6,897,825
Johnson & Johnson 53,000 4,147,250
Lilly (Eli) 63,800 4,996,338
Medtronic 41,200 2,384,450
Merck & Co 95,000 12,308,438
Novartis 7,924(b,c) 12,739,255
Pfizer 154,700 16,388,530
Pharmacia & Upjohn 34,400 1,726,450
Schering-Plough 165,400 17,129,237
SmithKline Beecham 378,270(b,c) 4,176,895
Takeda Chemical Inds 85,000(c) 2,271,149
Warner-Lambert 189,200 14,284,600
Total 134,392,168
Health care services (0.4%)
Aetna 41,100 2,856,450
Service Corp Intl 100,100 3,190,688
Tenet Healthcare 97,100(b) 2,791,625
United Healthcare 66,300 2,320,500
Total 11,159,263
Household products (0.5%)
Newell 31,900 1,469,394
Procter & Gamble 90,500 6,419,844
Rhone-Poulenc Cl A 32,886(b,c) 1,380,087
Unilever 457,369(b,c) 3,907,303
Total 13,176,628
Industrial equipment & services (0.7%)
Illinois Tool Works 31,400 1,711,300
Ingersoll-Rand 48,000 1,821,000
Mannesmann 151,161(b,c) 13,849,295
NACCO Inds Cl A 9,000 900,000
Total 18,281,595
Insurance (1.1%)
American General 137,100 8,757,262
American Intl Group 38,850 2,991,450
Aon 25,600 1,651,200
ING Groep 77,283(b,c) 3,483,856
Lincoln Natl 80,900 6,654,025
UNUM 85,400 4,243,313
Total 27,781,106
Leisure time & entertainment (0.6%)
Accor 30,807(b,c) 6,464,199
Disney (Walt) 189,300 4,791,656
Mattel 157,300 4,404,400
Total 15,660,255
Media (0.8%)
CBS 120,200 2,914,850
Clear Channel
Communications 30,500(b) 1,448,750
Gannett 38,100 2,040,731
Grupo Televisa 207,300(b,c) 4,003,481
Knight-Ridder 81,200 3,613,400
Sony 22,000(b,c) 1,528,349
Time Warner 70,500 6,173,157
Total 21,722,718
Metals (0.6%)
Aluminum Co of America 52,102 3,699,242
Companhia Vale do
Rio Doce 200,000(c) 2,950,000
Compania de Minas
Buenaventura ADR 242,209(c) 2,815,680
Reynolds Metals 130,000 $6,605,625
Total 16,070,547
Multi-industry conglomerates (3.3%)
Bombardier Cl B 260,000(b,c) 2,837,200
Cendant 225,600(b) 2,622,600
China Merchants
Holdings Intl 2,328,000(b,c) 1,381,901
China North Inds 16,500,000(b,c,j)2,227,500
Cosco Pacific Limited 3,284,000(c) 1,366,801
Eastman Kodak 69,600 5,380,950
Emerson Electric 171,400 10,669,650
General Electric 338,400 26,923,950
General Electric PLC 1,463,901(b,c) 10,770,212
Shanghai Industrial
Holdings 1,158,000(b,c,h)2,316,347
Tyco Intl 155,700(c) 8,602,425
Viag 6,941 4,771,561
Williams 1,030,892(c) 6,116,592
Total 85,987,689
Paper & packaging (0.5%)
Fort James 172,500 5,660,156
Owens-Illinois 141,400(b) 3,535,000
Tenneco 141,100 4,638,663
Total 13,833,819
Restaurants & lodging (0.2%)
Marriott Intl Cl A 72,900 1,740,488
Wendy's Intl 99,700 2,212,093
Total 3,952,581
Retail (2.6%)
Albertson's 202,100 10,938,663
Consolidated Stores 50,000(b) 981,250
Costco Cos 32,000(b) 1,516,000
CVS 144,500 6,330,906
Dayton Hudson 131,100 4,686,825
Great Universal Stores 731,755(b) 8,167,264
Home Depot 146,200 5,774,900
K mart 131,300 1,567,394
Kroger 152,100(b) 7,605,000
Meyer (Fred) 44,200(b) 1,718,275
Rite Aid 138,000 4,899,000
Wal-Mart Stores 256,100 13,989,462
Total 68,174,939
Textiles & apparel (--%)
Reliance Industries 67,540(c) $364,716
Transportation (0.3%)
Burlington Northern
Santa Fe 141,000 4,512,000
Strintzis Lines 700,000 3,454,850
Total 7,966,850
Utilities -- electric (1.3%)
Baltimore Gas & Electric 246,800 8,236,950
Carolina Power & Light 93,400 4,313,913
DTE Energy 91,700 4,143,694
Duke Energy 42,500 2,812,969
FirstEnergy 57,300 1,779,881
PECO Energy 98,900 3,616,031
Southern Co 51,200 1,507,200
Suez Lyonnaise des Eaux 44,064(c) 7,506,884
Total 33,917,522
Utilities -- gas (0.5%)
Enron 238,900 12,616,906
Utilities -- telephone (5.0%)
AirTouch Communications 111,400(b) 6,349,800
Ameritech 142,400 6,746,200
AT&T 200,800 11,734,250
Bell Atlantic 44,900 2,174,844
BellSouth 128,500 9,669,625
Compania Anonima Nacional
Telefonos de
Venezuela ADR 255,000(c) 4,335,000
Compania de Telecomunicaciones
de Chile ADR 244,548(c) 4,676,981
GTE 24,900 1,369,500
Mahanagar Telephone
Nigam 195,952(b,c) 2,322,031
MCI WorldCom 207,275 10,130,566
Orange 1,072,464(c) 10,018,959
Rostelecom ADR 98,300(c,h) 196,600
SBC Communications 256,300 11,389,331
Telecom Italia 1,534,921(b,c) 7,341,527
Telecom Italia (New) 2,016,420(c) 13,895,553
Telecomunicacoes
Brasileiras 51,900(c) 3,655,706
Telefonica de Argentina ADR 91,100(c) 2,681,756
U S WEST Communications
Group 253,500 13,292,906
Vodafone 593,398(c) 6,920,623
Total 128,901,758
Total common stocks
(Cost: $1,232,424,614) $1,217,421,946
Preferred stocks & other (0.2%)
Issuer Shares Value(a)
Banca Intesa
Warrants 1,927,827(c) $1,594,120
Bar Technologies
Warrants 3,000 165,000
Bell Technology
Warrants 3,410 34,100
Concentric Network
Warrants 3,800 342,000
General Electric
Warrants 22,983 29,598
KMC Telecom Holdings
Warrants 3,000 15,000
Nakornthai Strip Mill 2,722,298(c) 3
Paxson Communications
12.50% Pay-in-kind
Exchangeable 23,820(i) 2,262,900
Poland Telecom
Warrants 5,500(c) 220,000
Unifi Communications
Warrants 3,000 30
Versatel
Warrants 5,500 55,000
Total preferred stocks & other
(Cost: $3,838,596) $4,717,751
<PAGE>
<TABLE>
<CAPTION>
Bonds (36.2%)
Issuer Coupon Principal Value(a)
rate amount
Government obligations (10.6%)
Argentine Republic
(U.S. Dollar)
<S> <C> <C> <C>
03-31-23 5.75% $3,180,000(c) $2,136,563
City of Moscow
(U.S. Dollar) Zero Coupon
12-31-98 21.80 6,153,151(c,f) 623,930
Govt of Ecuador
(U.S. Dollar)
02-28-25 3.50 2,400,000(c) 1,010,000
Govt of Germany
(Deutsche Mark) Zero Coupon
10-16-98 1.74 12,000,000(c,f) 7,174,393
Govt of Russia
(Russian Ruble)
09-27-00 2.31 19,002,914(c) 43,639
12-15-20 6.63 20,300,000(c) 1,268,750
(Russian Ruble) Zero Coupon
05-05-99 -- 28,554,000(c,f) 178,183
(U.S. Dollar)
06-10-03 11.75 6,250,000(c,d) 1,285,155
07-24-05 8.75 16,575,000(c,d) 3,397,874
06-24-28 12.75 2,480,000(c,d) 472,750
12-29-49 6.63 14,543,878(c) 1,236,230
Province of Mendoza
(U.S. Dollar)
09-04-07 10.00 2,000,000(c,d) 1,448,340
Republic of Argentina
(Argentine Peso)
07-10-02 8.75 25,900,000(c,d) 17,612,000
02-12-07 11.75 15,000,000(c) 10,312,500
Republic of Korea
(U.S. Dollar)
04-15-08 8.88 8,950,000(c,h) 7,688,739
Republic of Panama
(U.S. Dollar)
02-13-02 7.88 1,000,000(c,d) 897,500
United Mexican States
(U.S. Dollar)
12-31-19 6.25 28,000,000(c) 20,387,499
05-15-26 11.50 6,750,000(c) 6,517,969
U.S. Treasury
11-30-99 5.63 3,500,000 3,543,120
04-30-00 6.75 32,000,000 33,100,480
06-30-02 6.25 8,000,000 8,511,200
03-31-03 5.50 1,500,000 1,572,900
08-15-04 7.25 20,000,000 22,942,400
08-15-05 6.50 12,500,000 14,096,750
05-15-08 5.63% $12,500,000(h) $13,690,000
08-15-23 6.25 9,700,000 11,111,641
08-15-27 6.38 20,000,000 23,592,200
11-15-27 6.13 50,000,000(h) 57,642,999
Total 273,495,704
Mortgage-backed securities (3.6%)
Federal Home Loan Mtge Corp
03-01-13 5.50 10,584,449 10,539,168
12-01-25 7.50 18,758,146 19,338,147
07-01-28 6.00 10,000,000 9,987,500
09-01-28 6.00 9,790,907 9,783,627
Federal Natl Mtge Assn
05-01-24 7.50 13,240,997 13,673,316
03-01-25 6.00 10,000,000(n) 9,968,800
09-01-28 6.50 9,980,064 10,151,421
Federal Natl Mtge Assn
Collateralized Mtge Obligation
05-18-26 5.00 9,593,000 9,358,229
Total 92,800,208
Aerospace & defense (0.3%)
K&F Inds
Sr Sub Nts Series B
10-15-07 9.25 1,000,000 986,250
L-3 Communications
Sr Sub Nts Series B
05-01-07 10.38 1,035,000 1,130,738
Newport News Shipbuilding
Sr Nts
12-01-06 8.63 800,000 844,000
Northrop-Grumman
03-01-16 7.75 5,000,000 5,458,400
Total 8,419,388
Automotive & related (0.1%)
MSX Intl
Company Guaranty
01-15-08 11.38 2,450,000 2,477,563
Banks and savings & loans (1.5%)
Alfa-Russia Finance
(U.S. Dollar) Medium-term Nts Bank Guaranty
07-28-00 10.38 4,000,000(c) 440,000
Corp Andina de Fomento
(U.S. Dollar)
02-01-03 7.10 6,500,000(c) 6,614,790
Dao Heng Bank
(U.S. Dollar) Sub Nts
01-24-07 7.75% $2,500,000(c,d) $1,723,130
Greenpoint Capital
Company Guaranty
06-01-27 9.10 1,300,000 1,532,999
Provident Cos
03-15-38 7.41 11,000,000 11,843,920
Union Planters Bank
Sub Nts
03-15-18 6.50 10,000,000 10,466,100
US Capital
02-01-27 8.41 1,500,000(d) 1,639,095
Washington Mutual Capital
Company Guaranty
06-01-27 8.38 1,500,000(d) 1,651,635
Wilshire Financial Services
Series B
08-15-04 13.00 4,000,000 3,705,000
Total 39,616,669
Building materials & construction (0.1%)
Southdown
Sr Sub Nts Series B
03-01-06 10.00 2,350,000 2,540,938
Chemicals (0.1%)
Polymer Group
Company Guaranty Series B
03-01-08 8.75 4,000,000 3,780,000
Commercial finance (0.2%)
Netia Holdings
(U.S. Dollar) Company Guaranty Series B
11-01-07 10.25 6,000,000(c) 4,552,500
Communications equipment & services (1.5%)
American Cellular
Sr Nts
05-15-08 10.50 4,500,000(d) 4,365,000
IXC Communications
Sr Sub Nts
04-15-08 9.00 2,000,000 1,990,000
KMC Telecom Holdings
Zero Coupon Sr Disc Nts
02-15-08 12.68 3,000,000(g) 1,380,000
Level 3 Communications
Sr Nts
05-01-08 9.13 4,500,000 4,252,500
MJD Communications
05-01-08 9.50 1,000,000(d) 1,007,500
NTL
Zero Coupon
04-01-08 9.78 6,000,000(d,g) 4,896,286
RCN
Zero Coupon Sr Disc Nts Series B
02-15-08 9.80 4,800,000(g) 2,496,000
TCI Telecommunications
Sr Nts
02-15-28 7.13 1,400,000 1,530,067
Telehub Communications
Zero Coupon
07-31-05 13.88 2,500,000(d,g) 1,450,000
US West Capital Funding
Company Guaranty
07-15-28 6.88 9,250,000 9,753,477
Versatel Telecom
(U.S. Dollar) Sr Nts
05-15-08 13.25 5,500,000(c,d) 5,225,000
Total 38,345,830
Computers & office equipment (0.3%)
Concentric Network
Sr Nts
12-15-07 12.75 3,800,000 3,515,000
Globix
Sr Nts
05-01-05 13.00 3,410,000 2,762,100
PSINet
Sr Nts Series B
02-15-05 10.00 1,005,000 1,010,025
Total 7,287,125
Electronics (0.3%)
Hyundai Semiconductor
(U.S. Dollar) Sr Nts
05-15-07 8.63 4,500,000(c,d) 3,280,725
Thomas & Betts
01-15-06 6.50 4,500,000 4,774,725
Total 8,055,450
Energy (1.2%)
Forcenergy
Sr Sub Nts
11-01-06 9.50 1,000,000 732,500
Lodestar Holdings
(U.S. Dollar) Sr Nts
05-15-05 11.50 5,000,000(c,d) 4,087,500
R & B Falcon
04-15-08 6.95 5,000,000 5,172,150
Roil
(U.S. Dollar)
12-05-02 12.78 9,140,000(c,d) 2,102,200
Transamerica Energy
06-15-02 11.50 600,000 360,000
Zero Coupon
06-15-07 13.26 1,300,000(g) 650,000
Union Pacific Resources
05-15-28 7.15 7,500,000 7,249,125
USX
03-01-08 6.85 10,000,000 10,399,500
Total 30,752,975
Energy equipment & services (0.2%)
Cliffs Drilling
Company Guaranty Series D
05-15-03 10.25 3,000,000 3,183,750
DI Inds
Sr Nts
07-01-07 8.88 1,500,000 1,170,000
Total 4,353,750
Financial services (1.4%)
Airplanes GPA Cl D
(U.S. Dollar) Series 1
03-15-19 10.88 2,750,000(c) 3,143,250
Arcadia Financial
Sr Nts
03-15-07 11.50 1,825,000 1,298,031
Beneficial
Medium-term Nts
02-18-13 6.25 10,000,000 10,420,800
Providian Natl Bank
Sr Nts
03-15-03 6.70 10,000,000 10,419,100
SASCO
02-25-28 6.76 2,500,000 2,552,475
Tjiwi Kimia Finance Mauritius
(U.S. Dollar) Company Guaranty
08-01-04 10.00 2,900,000(c) 1,218,000
Wilmington Trust
05-01-08 6.63 6,300,000 6,749,001
Total 35,800,657
Food (0.1%)
Ameriserve Food Distributions
Company Guaranty
07-15-07 10.13 1,750,000 1,559,688
Daya Guna
(U.S. Dollar) Company Guaranty
06-01-07 10.00 2,400,000(c,d) 1,416,000
Total 2,975,688
Furniture & appliances (0.2%)
Interface
Sr Sub Nts Series B
11-15-05 9.50 2,500,000 2,587,500
Lifestyle Furnishings
Company Guaranty
08-01-06 10.88 3,250,000 3,489,688
Total 6,077,188
Health care (0.6%)
Baxter Intl
02-15-28 6.63 10,000,000 10,626,700
Lilly (Eli)
01-01-36 6.77 5,000,000 5,521,750
Total 16,148,450
Health care services (1.1%)
Abbey Healthcare Group
Sr Sub Nts
11-01-02 9.50 250,000 231,250
Fountain View
Sr Sub Nts
04-15-08 11.25 2,150,000(d) 1,916,188
Magellan Health Services
Sr Sub Nts
02-15-08 9.00 2,500,000(d) 2,153,125
Manor Care
Sr Nts
06-15-06 7.50 7,000,000 7,683,830
Owens & Minor
Company Guaranty Sr Sub Nts
06-01-06 10.88% $3,200,000 $3,360,000
Oxford Health Plans
Sr Nts
05-15-05 11.00 1,125,000(d) 992,813
Service Corp Intl
03-15-20 6.30 11,850,000 12,365,711
Total 28,702,917
Household products (0.2%)
Revlon Consumer Products
Sr Nts
02-01-06 8.13 5,000,000 4,950,000
Industrial equipment & services (0.3%)
AGCO
Sr Sub Nts
03-15-06 8.50 1,025,000 1,004,500
Alliance Imaging
Sr Sub Nts
12-15-05 9.63 5,000,000 4,993,750
Jorgensen (Earle M)
Sr Nts
04-01-05 9.50 1,225,000 1,084,125
Total 7,082,375
Insurance (1.1%)
American United Life Insurance
03-30-26 7.75 5,000,000(k) 5,527,050
Executive Risk Capital
Company Guaranty Series B
02-01-27 8.68 1,500,000 1,727,160
Metropolitan Life Insurance
11-01-25 7.80 4,800,000(d) 5,555,664
Minnesota Mutual Life
09-15-25 8.25 4,500,000(d) 5,541,975
Nationwide CSN Trust
02-15-25 9.88 5,000,000(d) 6,362,049
Veritas Holdings
(U.S. Dollar) Sr Nts
12-15-03 9.63 1,273,000(c) 1,328,694
Zurich Capital
(U.S. Dollar) Company Guaranty
06-01-37 8.38 1,875,000(c,d) 2,113,688
Total 28,156,280
Leisure time & entertainment (1.6%)
Icon Health & Fitness
Zero Coupon Sr Disc Nts Series B
11-15-06 15.91 10,500,000(g) 525,000
Loews Cineplex Entertainment
Sr Sub Nts
08-01-08 8.88 4,500,000 4,477,500
Mirage Resorts
02-01-08 6.75 8,750,000 8,858,763
SFX Entertainment
Company Guaranty Series B
02-01-08 9.13 945,000 897,750
Speedway Motorsports
08-15-07 8.50 2,000,000 2,085,000
Time Warner
02-01-24 7.57 11,875,000 13,187,068
Sr Nts
01-15-28 6.95 5,000,000 5,218,150
Venetian Casino/LV Sands
Company Guaranty
11-15-04 12.25 3,940,000 3,634,650
11-15-05 10.00 3,000,000 2,580,000
Total 41,463,881
Media (1.1%)
Australis Media
(U.S. Dollar)
11-01-00 14.00 454,044(c) 347,438
(U.S. Dollar) Zero Coupon
05-15-03 15.75 5,040,885(c,g) 75,613
CSC Holdings
Sr Sub Debs
05-15-16 10.50 3,000,000 3,390,000
Globo Communicacoes Participacoes
(U.S. Dollar) Sr Nts
12-05-08 10.63 7,000,000(c,d) 3,639,020
Grupo Televisa
(U.S. Dollar) Sr Nts Series A
05-15-03 11.38 2,750,000(c) 2,550,625
Heritage Media
Sr Sub Nts
02-15-06 8.75 5,000,000 5,237,499
Lamar Advertising
Company Guaranty
12-01-06 9.63 800,000 856,000
Liberty Group Operating
Company Guaranty
02-01-08 9.38 3,750,000 3,604,688
MDC Communications
(U.S. Dollar) Sr Sub Nts
12-01-06 10.50 1,000,000(c) 1,023,750
News America Holdings
10-15-12 10.13 2,175,000 2,585,401
TCI Communications
08-01-15 8.75 1,700,000 2,115,735
Veninfotel
(U.S. Dollar) Cv Pay-in-kind
03-01-02 10.00 2,250,000(c,d,i,k) 3,375,000
Total 28,800,769
Metals (0.6%)
Bar Technologies
Company Guaranty
04-01-01 13.50 3,000,000(d) 3,210,000
EnviroSource
Sr Nts
06-15-03 9.75 530,000 489,588
Sr Nts Series B
06-15-03 9.75 1,300,000 1,200,875
Grupo Minero Mexico
(U.S. Dollar) Company Guaranty Series A
04-01-08 8.25 5,000,000(c) 3,899,999
Imexsa Export Trust
(U.S. Dollar)
05-31-03 10.13 2,882,928(c,d) 2,364,001
NSM Steel
Company Guaranty
02-01-06 12.00 4,350,000 2,175,000
02-01-08 12.25 4,300,000 2,279,000
Southern Peru Copper
(U.S. Dollar)
05-30-07 7.90 1,000,000(c) 1,031,380
Total 16,649,843
Miscellaneous (1.7%)
Adams Outdoor Advertising
Sr Nts
03-15-06 10.75 3,900,000 4,104,750
Chattem
Company Guaranty Series B
04-01-08 8.88 2,200,000 2,134,000
CTI Holdings
(U.S. Dollar) Zero Coupon Sr Nts
04-15-08 11.59 3,800,000(c,g) 1,638,750
Delphes 2
(U.S. Dollar)
05-05-09 7.75 3,700,000(c) 3,515,000
FCB/NC Capital
Company Guaranty
03-01-28 8.05% $4,625,000 $4,834,143
Great Central Mines
(U.S. Dollar) Sr Nts
04-01-08 8.88 2,500,000(c) 2,343,750
Guangdong Enterprises
(U.S. Dollar) Sr Nts
05-22-07 8.88 2,200,000(c,d) 1,204,588
IPC Magazines Group
(British Pound)
03-15-08 15.90 1,875,000(c,d) 2,518,271
03-15-08 17.76 2,000,000(c,d) 1,530,090
Jasmine Submarine Telecom
(U.S. Dollar) Sr Nts
05-30-11 8.48 1,247,480(c,d) 860,761
Michael Petroleum
Sr Nts
04-01-05 11.50 1,250,000(d) 1,131,250
Outsourcing Solutions
Sr Sub Nts Series B
11-01-06 11.00 1,075,000 1,014,531
Packaged Ice
Company Guaranty Series B
02-01-05 9.75 6,475,000 6,135,062
Pindo Deli Finance Mauritius
(U.S. Dollar) Company Guaranty
10-01-07 10.75 1,300,000(c) 546,000
PLD Telekom
(U.S. Dollar)
06-01-04 14.00 3,000,000(c) 2,520,000
Poland Telecom Finance
(U.S. Dollar) Company Guaranty
12-01-07 14.00 5,500,000(c,d) 5,334,999
PTC Intl Finance
(U.S. Dollar) Zero Coupon Company Guaranty
07-01-07 10.75 2,000,000(c,g) 1,347,500
Purina Mills
Sr Sub Nts
03-15-10 9.00 1,475,000 1,471,313
Total 44,184,758
Multi-industry conglomerates (0.4%)
American Eco
Company Guaranty
05-15-08 9.63 4,400,000(d) 3,817,000
Hutchison Whampo Finance
(U.S. Dollar) Company Guaranty
08-01-27 7.50 1,650,000(c,d) 1,117,413
(U.S. Dollar) Company Guaranty Series B
08-01-17 7.45% $1,000,000(c,d) $716,060
Pierce Leahy
Sr Sub Nts
07-15-06 11.13 488,000(d) 535,580
Prime Succession
Sr Sub Nts
08-15-04 10.75 1,275,000 1,265,438
USI American Holdings
Sr Nts Series B
12-01-06 7.25 3,000,000 3,222,750
Total 10,674,241
Municipal bonds (0.1%)
New Jersey Economic Development
Authority State Pension Funding
Revenue Bond (MBIA Insured)
02-15-29 7.43 3,000,000(m) 3,555,600
Paper & packaging (0.6%)
Doman Inds
(U.S. Dollar) Sr Nts Series B
11-15-07 9.25 2,300,000(c) 1,656,000
Gaylord Container
Sr Nts
06-15-07 9.75 1,300,000 1,066,000
Sr Nts Series B
06-15-07 9.38 9,000,000 7,222,500
Owens-Illinois
Sr Nts
05-15-04 7.85 2,000,000 2,118,320
Silgan Holdings
06-01-09 9.00 2,050,000 1,952,625
Stone Container
Sr Sub Deb
04-01-02 12.25 1,000,000 975,000
Total 14,990,445
Restaurants & lodging (0.5%)
Extended Stay America
Sr Sub Nts
03-15-08 9.15 4,750,000 4,108,750
MGM Grand
02-06-08 6.88 10,000,000(h) 9,603,700
Total 13,712,450
Retail (1.3%)
Amazon.com
Zero Coupon Sr Disc Nts
05-01-08 10.00 4,850,000(d,g) 2,685,688
CEX Holdings
Sr Sub Nts
06-01-08 9.63 3,000,000(d) 2,865,000
Dayton Hudson
12-01-22 8.50% $2,500,000 $2,819,250
Great Atlantic & Pacific Tea
04-15-07 7.75 10,000,000 10,455,600
Kroger
Sr Nts
07-15-06 8.15 5,000,000 5,723,150
Wal-Mart CRAVE Trust
07-17-06 7.00 8,566,801(d) 9,062,476
Total 33,611,164
Textiles & apparel (0.2%)
Pillowtex
Company Guaranty Sr Sub Nts Series B
12-15-07 9.00 2,500,000 2,462,500
Texon Intl
(Deutsche Mark) Sr Nts
02-01-08 3.11 4,000,000(c) 1,868,320
Total 4,330,820
Transportation (0.7%)
Enterprise Rent-A-Car USA Finance
02-15-08 6.80 10,000,000 10,186,500
Company Guaranty Medium-term Nts
01-15-06 6.95 3,000,000(d) 3,198,966
Greater Beijing
(U.S. Dollar) Sr Nts
06-15-04 9.75 1,200,000(c,d) 456,000
06-15-07 10.00 1,400,000(c,d) 490,000
Zhuhai Highway
(U.S. Dollar) Sub Nts
07-01-08 12.00 5,000,000(c,d) 2,650,000
Total 16,981,466
Utilities -- electric (1.2%)
Cleveland Electric Illuminating
07-01-00 7.19 3,000,000 3,094,680
CMS Energy
Sr Nts
05-15-02 8.13 2,900,000 3,087,485
Comp Paranaense De Energ
(U.S. Dollar)
05-02-05 9.75 2,000,000(c,d) 1,324,160
El Paso Electric
1st Mtge Series B
05-01-01 7.75 5,000,000 5,257,550
Espirito Santo - Escelsa
(U.S. Dollar)
07-15-07 10.00 3,000,000(c) 1,643,640
Korea Electric Power
(U.S. Dollar)
02-01-27 7.00 12,500,000(c) 8,230,250
Public Service Electric & Gas
1st & Ref Mtge (AMBAC Insured)
01-01-16 6.75% $7,365,000(m) $7,781,344
Total 30,419,109
Utilities -- gas (0.2%)
Columbia Gas System
Series E
11-28-10 7.32 5,043,000 5,727,789
Utilities -- telephone (0.9%)
Geotek Communications
Cv Sr Sub Nts
02-15-01 12.00 2,485,000(b,k) 3,106
Grupo Iusacell
(U.S. Dollar)
07-15-04 10.00 1,000,000(c) 765,000
Intermedia Communications
Sr Nts Series B
11-01-07 8.88 1,600,000 1,624,000
06-01-08 8.60 5,000,000 4,962,500
McLeod USA
Sr Nts
03-15-08 8.38 2,300,000 2,271,250
MetroNet Communications
(U.S. Dollar) Zero Coupon Sr Disc Nts
06-15-08 4.92 3,800,000(c,f) 2,099,500
Omnipoint Communications
Sr Nts
08-15-06 11.63 5,000,000 3,600,000
Philippine Long Distance Telephone
(U.S. Dollar) Medium-term Nts Series E
03-06-07 7.85 1,250,000(c,d) 924,038
03-06-17 8.35 1,000,000(c,d) 654,780
Rogers Cantel
(U.S. Dollar)
06-01-08 9.38 2,800,000(c) 2,849,000
WorldCom
04-01-07 7.75 3,000,000 3,452,940
Total 23,206,114
Total bonds
(Cost: $1,013,237,964) $934,680,104
Options purchased (--%)
Issuer Shares Exercise Expiration Value(a)
price date
Call
Russell 2000 175,000 $438 Dec. 1998 $78,138
Total options purchased
(Cost: $6,263,389) $78,138
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
Short-term securities (18.7%)(l)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agency (3.6%)
Federal Home Loan Mtge Corp Disc Nts
10-02-98 5.43% $4,000,000 $3,999,398
10-02-98 5.47 400,000 399,939
10-07-98 5.46 2,900,000 2,897,373
10-14-98 5.44 24,700,000 24,651,655
10-30-98 5.45 10,000,000 9,956,339
10-30-98 5.45 22,600,000 22,501,326
11-30-98 5.16 13,000,000 12,885,369
11-30-98 5.17 13,900,000 13,779,174
Total 91,070,573
Commercial paper (14.7%)
American General
11-10-98 5.56 10,000,000(e) 9,937,193
Barclays U.S. Funding
10-01-98 5.57 8,100,000 8,100,000
BBV Finance (Delaware)
10-22-98 5.55 11,000,000 10,962,279
CAFCO
10-07-98 5.56 5,000,000(e) 4,995,400
12-08-98 5.42 4,900,000(e) 4,850,412
Commerzbank U.S. Finance
11-18-98 5.56 10,000,000 9,887,032
Consolidated Natural Gas
10-19-98 5.50 13,600,000 13,562,804
CXC
10-20-98 5.58 12,700,000(e) 12,659,274
Delaware Funding
10-08-98 5.57 3,671,000(e) 3,667,053
Deutsche Bank Financial
10-19-98 5.57 20,500,000 20,437,859
10-21-98 5.56 15,000,000 14,949,572
10-23-98 5.56 5,100,000 5,082,827
Ford Motor Credit
10-01-98 5.55 15,000,000 15,000,000
10-09-98 5.54 11,000,000 10,986,531
10-14-98 5.55 6,100,000 6,085,793
General Electric Capital
11-18-98 5.59 5,000,000 4,961,977
General Electric Capital Services
10-29-98 5.54 7,700,000 7,667,001
11-09-98 5.22 16,300,000 16,208,353
Glaxo Wellcome
10-27-98 5.54 6,200,000(e) 6,175,283
Goldman Sachs Group
10-13-98 5.56 19,700,000 19,663,687
10-15-98 5.55 2,800,000 2,793,989
GTE Funding
10-26-98 5.32 4,200,000 4,184,542
Heinz (HJ)
10-08-98 5.56 9,000,000 8,990,340
10-16-98 5.53 5,600,000 5,587,190
Household Finance
11-02-98 5.53 15,600,000 15,523,732
11-03-98 5.52 10,000,000 9,949,767
Intl Lease Finance
10-22-98 5.57 10,100,000 10,064,225
Kredietbank North America Finance
10-05-98 5.57 16,000,000 15,987,600
Morgan Stanley, Dean Witter, Discover & Co
10-14-98 5.55 3,000,000 2,992,950
Motorola
11-24-98 5.24 3,500,000 3,472,700
Natl Rural Utilities
10-27-98 5.58 19,000,000 18,879,178
Natl Rural Utilities Finance
10-14-98 5.57 12,000,000 11,971,285
New Center Asset Trust
10-13-98 5.55 15,000,000 14,972,450
Reed Elsevier
11-02-98 5.58 12,400,000(e)12,303,205
UBS Finance (Delaware)
10-19-98 5.55 10,000,000 9,972,450
USAA Capital
10-21-98 5.57 9,300,000 9,267,724
Xerox
10-05-98 5.53 1,500,000 1,499,082
Xerox Credit
10-05-98 5.53 15,000,000 14,990,833
Total 379,243,572
Letter of credit (0.4%)
Bank of America-
AES Hawaii
10-08-98 5.52 10,900,000 10,888,342
Total short-term securities
(Cost: $481,366,169) $481,202,487
Total investments in securities
(Cost: $2,737,130,732)(o) $2,638,100,426
See accompanying notes to investments in securities.
<PAGE>
<TABLE>
<CAPTION>
Investments in securities
Total Return Portfolio
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing. For long-term debt securities, item identified is in
default as to payment of interest and/or principal.
(c) Foreign security values are stated in U.S. dollars. For debt securities,
principal amounts are denominated in the currency indicated. As of Sept. 30,
1998, the value of foreign securities represented 21.8% of net assets.
(d) 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.
(e) 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.
(f) For zero coupon bonds, the interest rate disclosed represents the annualized
effective yield on the date of acquisition.
(g) 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.
(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) 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, 1998 are as follows:
Issuer Beginning Purchase Sales Ending Dividend Value(a)
cost cost cost cost income
<S> <C> <C> <C> <C> <C> <C>
China North Inds $13,079,176 $ -- $-- $13,079,176 $825,000 $2,227,500
Fomento Economico
Mexicano ADR -- 10,019,149 -- 10,019,149 92,855 5,659,850
Total $13,079,176 $10,019,149 $-- $23,098,325 $917,855 $7,887,350
</TABLE>
<PAGE>
(k) 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, 1998, is as follows:
Security Acquisition Cost
dates
American United Life Insurance*
7.75% 2026 02-13-96 $5,000,000
Geotek Communications
12.00% 2001 Cv Sr Sub Nts 03-04-96 2,485,000
Veninfotel
(U.S. Dollar) Cv Pay-in-kind 10.00% 2002 03-05-97 through 07-23-97 2,250,000
*Represents a security sold under Rule 144A, which is exempt from registration
under the Securities Act of 1933, as amended.
(l) At Sept 30, 1998, cash or short-term securities were designated to cover
open put options written as follows:
Issuer Shares Exercise Expiration Value(a)
price date
Russell 2000 175,000 $438 Dec. 1998 $12,701,874
(m) The following abbreviations are used in portfolio descriptions to identify
the insurer of the issue:
AMBAC -- American Municipal Bond Association Corporation
MBIA -- Municipal Bond Investors Assurance
(n) At Sept. 30, 1998, the cost of securities purchased, including interest
purchased, on a when-issued basis was $9,886,510.
(o) At Sept. 30, 1998, the cost of securities for federal income tax purpose was
$2,742,575,277 and the aggregate gross unrealized appreciation and depreciation
based on that cost was:
Unrealized appreciation ...................................$ 178,187,664
Unrealized depreciation ....................................(282,662,515)
Net unrealized depreciation ...............................$(104,474,851)
<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:
o Independent Auditors' Report, dated November 6, 1998
o Statement of Assets and Liabilities, Sept. 30, 1998
o Statement of Operations, year ended Sept. 30, 1998
o Statements of Changes in Net Assets, for the two years ended Sept. 30,
1997 and Sept. 30, 1998
o Notes to Financial Statements
For Total Return Portfolio:
o Independent Auditors' Report, dated November 6, 1998
o Statement of Assets and Liabilities, Sept. 30, 1998
o Statement of Operations, year ended Sept. 30, 1998
o Statement of Changes in Net Assets, for the two years ended Sept. 30,
1997 and Sept. 30, 1998
o Notes to Financial Statements
o Investments in Securities, Sept. 30, 1998
o Notes to Investments in Securities
(b) EXHIBITS:
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 Port-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.
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.
<PAGE>
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.
8(d). Copy of Custodian Agreement Amendment between IDS International Fund,
Inc. and American Express Trust Company, dated October 9, 1997, filed
electronically on or about December 23, 1997 as Exhibit 8(c) to IDS
International Fund, Inc.'s Post-Effective Amendment No. 26 to
Registration Statement No. 2-92309, is incorporated herein by
reference. Registrant's Custodian Agreement Amendment differed from
the one incorporated by reference only by the fact that Registrant is
on executing party.
9(a). Copy of Transfer Agency Agreement between Registrant and American
Express Client Service Corporation, dated January 1, 1998, is filed
electronically herewith.
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, filed as Exhibit 9(g) to Registrant's
Post-Effective Amendment No. 27 to Registration Statement No. 2-93801,
is incorporated herein by reference.
9(h). Copy of License Agreement between Registrant and IDS Financial
Corporation Dated January 25, 1988, is filed electronically herewith.
10. Opinion and consent of counsel as to the legality of the securities
being registered is filed electronically herewith.
11. Independent Auditors' Consent is 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 is filed electronically herewith.
<PAGE>
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.
19(a). Directors' Power of Attorney to sign Amendments to this Registration
Statement, dated January 7, 1998 is filed electronically herewith.
19(b). Officers' Power of Attorney to sign Amendments to this Registration
Statement, 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 to sign Amendments to this Registration
Statement, dated January 7, 1998 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.
Item 25. Persons Controlled by or Under Common Control with Registrant.
None.
Item 26. Number of Holders of Securities.
(1) (2)
Number of Record
Holders as of
Title of Class November 13, 1998
Class A 165,380
Class B 28,113
Class Y 11,894
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>
<TABLE>
<CAPTION>
Item 28. Business and Other Connections of Investment Adviser (American Express
Financial Corporation)
Directors and officers of American Express Financial Corporation who are directors and/or
officers of one or more other companies:
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Name and Title Other company(s) Address Title within other
company(s)
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
Ronald G. Abrahamson, American Express Client IDS Tower 10 Director and Vice President
Vice President Service Corporation Minneapolis, MN 55440
American Express Financial Vice President
Advisors Inc.
Public Employee Payment Director and Vice President
Company
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Douglas A. Alger, American Express Financial IDS Tower 10 Senior Vice President
Senior Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Peter J. Anderson, Advisory Capital IDS Tower 10 Director
Director and Senior Vice Strategies Group Inc. Minneapolis, MN 55440
President
American Express Asset Director and Chairman of
Management Group Inc. the Board
American Express Asset Director, Chairman of the
Management International, Board and Executive Vice
Inc. President
American Express Financial Senior Vice President
Advisors Inc.
IDS Capital Holdings Inc. Director and President
IDS Futures Corporation Director
NCM Capital Management 2 Mutual Plaza Director
Group, Inc. 501 Willard Street
Durham, NC 27701
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Ward D. Armstrong, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
American Express Service Vice President
Corporation
American Express Trust Director and Chairman of
Company the Board
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
John M. Baker, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
American Express Trust Senior Vice President
Company
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Gurudutt Baliga, American Express Asset IDS Tower 10 Senior Vice President and
Vice President Management Group Inc. Minneapolis, MN 55440 Chief Investment Officer
American Express Financial Vice President
Advisors Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Joseph M. Barsky III, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Timothy V. Bechtold, American Centurion Life IDS Tower 10 Director
Vice President Assurance Company Minneapolis, MN 55440
American Express Financial Vice President
Advisors Inc.
IDS Life Insurance Company Executive Vice President
IDS Life Insurance Company P.O. Box 5144 Director and President
of New York Albany, NY 12205
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
John C. Boeder, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
IDS Life Insurance Company P.O. Box 5144 Director
of New York Albany, NY 12205
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Douglas W. Brewers, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Karl J. Breyer, American Express Financial IDS Tower 10 Corporate Senior Vice
Director, Corporate Senior Advisors Inc. Minneapolis, MN 55440 President
Vice President
American Express Minnesota Director
Foundation
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Cynthia M. Carlson, American Enterprise IDS Tower 10 Director, President and
Vice President Investment Services Inc. Minneapolis, MN 55440 Chief Executive Officer
American Express Financial Vice President
Advisors Inc.
American Express Service Vice President
Corporation
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Mark W. Carter, American Express Financial IDS Tower 10 Senior Vice President and
Senior Vice President and Advisors Inc. Minneapolis, MN 55440 Chief Marketing Officer
Chief Marketing Officer
IDS Life Insurance Company Executive Vice President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
James E. Choat, American Enterprise Life IDS Tower 10 Director, President and
Director and Senior Vice Insurance Company Minneapolis, MN 55440 Chief Executive Officer
President
American Express Financial Senior Vice President
Advisors Inc.
American Express Insurance Vice President
Agency of Idaho Inc.
American Express Insurance Vice President
Agency of Nevada Inc.
American Express Insurance Vice President
Agency of Oregon Inc.
American Express Property Vice President
Casualty Insurance Agency
of Kentucky Inc.
American Express Property Vice President
Casualty Insurance Agency
of Maryland Inc.
American Express Property Vice President
Casualty Insurance Agency
of Pennsylvania Inc.
IDS Insurance Agency of Vice President
Alabama Inc.
IDS Insurance Agency of Vice President
Arkansas Inc.
IDS Insurance Agency of Vice President
Massachusetts Inc.
IDS Insurance Agency of Vice President
New Mexico Inc.
IDS Insurance Agency of Vice President
North Carolina Inc.
IDS Insurance Agency of Vice President
Ohio Inc.
IDS Insurance Agency of Vice President
Wyoming Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Kenneth J. Ciak, AMEX Assurance Company IDS Tower 10 Director and President
Vice President and General Minneapolis, MN 55440
Manager
American Express Financial Vice President and General
Advisors Inc. Manager
IDS Property Casualty 1 WEG Blvd. Director and President
Insurance Company DePere, WI 54115
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Paul A. Connolly, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Colleen Curran, American Express Financial IDS Tower 10 Vice President and
Vice President and Assistant Advisors Inc. Minneapolis, MN 55440 Assistant General Counsel
General Counsel
American Express Service Vice President and Chief
Corporation Legal Counsel
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Luz Maria Davis American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Douglas K. Dunning, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Gordon L. Eid, American Express Financial IDS Tower 10 Senior Vice President,
Director, Senior Vice Advisors Inc. Minneapolis, MN 55440 General Counsel and Chief
President, General Counsel Compliance Officer
and Chief Compliance Officer
American Express Insurance Director and Vice President
Agency of Arizona Inc.
American Express Insurance Director and Vice President
Agency of Idaho Inc.
American Express Insurance Director and Vice President
Agency of Nevada Inc.
American Express Insurance Director and Vice President
Agency of Oregon Inc.
American Express Property Director and Vice President
Casualty Insurance Agency
of Kentucky Inc.
American Express Property Director and Vice President
Casualty Insurance Agency
of Maryland Inc.
American Express Property Director and Vice President
Casualty Insurance Agency
of Pennsylvania Inc.
IDS Insurance Agency of Director and Vice President
Alabama Inc.
IDS Insurance Agency of Director and Vice President
Arkansas Inc.
IDS Insurance Agency of Director and Vice President
Massachusetts Inc.
IDS Insurance Agency of Director and Vice President
New Mexico Inc.
IDS Insurance Agency of Director and Vice President
North Carolina Inc.
IDS Insurance Agency of Director and Vice President
Ohio Inc.
IDS Insurance Agency of Director and Vice President
Wyoming Inc.
IDS Real Estate Services, Vice President
Inc.
Investors Syndicate Director
Development Corp.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Robert M. Elconin, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
IDS Life Insurance Company Vice President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Gordon M. Fines, American Express Asset IDS Tower 10 Senior Vice President and
Vice President Management Group Inc. Minneapolis, MN 55440 Chief Investment Officer
American Express Financial Vice President
Advisors Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Douglas L. Forsberg, American Centurion Life IDS Tower 10 Director
Vice President Assurance Company Minneapolis, MN 55440
American Express Financial Vice President
Advisors Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Jeffrey P. Fox, American Enterprise Life IDS Tower 10 Vice President and
Vice President and Corporate Insurance Company Minneapolis, MN 55440 Controller
Controller
American Express Financial Vice President and
Advisors Inc. Corporate Controller
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Harvey Golub, American Express Company American Express Tower Chairman and Chief
Director World Financial Center Executive Officer
New York, NY 10285
American Express Travel Chairman and Chief
Related Services Company, Executive Officer
Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
David A. Hammer, American Express Financial IDS Tower 10 Vice President and
Vice President and Marketing Advisors Inc. Minneapolis, MN 55440 Marketing Controller
Controller
IDS Plan Services of Director and Vice President
California, Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Lorraine R. Hart, AMEX Assurance Company IDS Tower 10 Vice President
Vice President Minneapolis, MN 55440
American Enterprise Life Vice President
Insurance Company
American Express Financial Vice President
Advisors Inc.
American Partners Life Director and Vice
Insurance Company President
IDS Certificate Company Vice President
IDS Life Insurance Company Vice President
IDS Life Series Fund, Inc. Vice President
IDS Life Variable Annuity Vice President
Funds A and B
Investors Syndicate Director and Vice
Development Corp. President
IDS Life Insurance Company P.O. Box 5144 Investment Officer
of New York Albany, NY 12205
IDS Property Casualty 1 WEG Blvd. Vice President
Insurance Company DePere, WI 54115
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Scott A. Hawkinson, American Express Financial IDS Tower 10 Vice President and
Vice President and Controller Advisors Inc. Minneapolis, MN 55440 Controller
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Janis K. Heaney, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
James G. Hirsh, American Express Financial IDS Tower 10 Vice President and
Vice President and Assistant Advisors Inc. Minneapolis, MN 55440 Assistant General Counsel
General Counsel
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Darryl G. Horsman, American Express Trust IDS Tower 10 Director and President
Vice President Company Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Jeffrey S. Horton, AMEX Assurance Company IDS Tower 10 Vice President, Treasurer
Vice President and Corporate Minneapolis, MN 55440 and Assistant Secretary
Treasurer
American Centurion Life Vice President and
Assurance Company Treasurer
American Enterprise Vice President and
Investment Services Inc. Treasurer
American Enterprise Life Vice President and
Insurance Company Treasurer
American Express Asset Vice President and
Management Group Inc. Treasurer
American Express Asset Vice President and
Management International Treasurer
Inc.
American Express Client Vice President and
Service Corporation Treasurer
American Express Vice President and
Corporation Treasurer
American Express Financial Vice President and
Advisors Inc. Treasurer
American Express Insurance Vice President and
Agency of Arizona Inc. Treasurer
American Express Insurance Vice President and
Agency of Idaho Inc. Treasurer
American Express Insurance Vice President and
Agency of Nevada Inc. Treasurer
American Express Insurance Vice President and
Agency of Oregon Inc. Treasurer
American Express Minnesota Vice President and
Foundation Treasurer
American Express Property Vice President and
Casualty Insurance Agency Treasurer
of Kentucky Inc.
American Express Property Vice President and
Casualty Insurance Agency Treasurer
of Maryland Inc.
American Express Property Vice President and
Casualty Insurance Agency Treasurer
of Pennsylvania Inc.
American Express Partners Vice President and
Life Insurance Company Treasurer
IDS Cable Corporation Director, Vice President
and Treasurer
IDS Cable II Corporation Director, Vice President
and Treasurer
IDS Capital Holdings Inc. Vice President, Treasurer
and Assistant Secretary
IDS Certificate Company Vice President and
Treasurer
IDS Insurance Agency of Vice President and
Alabama Inc. Treasurer
IDS Insurance Agency of Vice President and
Arkansas Inc. Treasurer
IDS Insurance Agency of Vice President and
Massachusetts Inc. Treasurer
IDS Insurance Agency of Vice President and
New Mexico Inc. Treasurer
IDS Insurance Agency of Vice President and
North Carolina Inc. Treasurer
IDS Insurance Agency of Vice President and
Ohio Inc. Treasurer
IDS Insurance Agency of Vice President and
Wyoming Inc. Treasurer
IDS Life Insurance Company Vice President, Treasurer
and Assistant Secretary
IDS Life Insurance Company P.O. Box 5144 Vice President and
of New York Albany, NY 12205 Treasurer
IDS Life Series Fund Inc. Vice President and
Treasurer
IDS Life Variable Annuity Vice President and
Funds A & B Treasurer
IDS Management Corporation Director, Vice President
and Treasurer
IDS Partnership Services Vice President and
Corporation Treasurer
IDS Plan Services of Vice President and
California, Inc. Treasurer
IDS Real Estate Services, Vice President and
Inc. Treasurer
IDS Realty Corporation Vice President and
Treasurer
IDS Sales Support Inc. Vice President and
Treasurer
IDS Securities Corporation Vice President and
Treasurer
Investors Syndicate Vice President and
Development Corp. Treasurer
IDS Property Casualty 1 WEG Blvd. Vice President, Treasurer
Insurance Company DePere, WI 54115 and Assistant Secretary
Public Employee Payment Vice President and
Company Treasurer
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
David R. Hubers, AMEX Assurance Company IDS Tower 10 Director
Director, President and Chief Minneapolis, MN 55440
Executive Officer
American Express Financial Chairman, President and
Advisors Inc. Chief Executive Officer
American Express Service Director and President
Corporation
IDS Certificate Company Director
IDS Life Insurance Company Director
IDS Plan Services of Director and President
California, Inc.
IDS Property Casualty 1 WEG Blvd. Director
Insurance Company DePere, WI 54115
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Martin G. Hurwitz, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
James M. Jensen, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
IDS Life Insurance Company Vice President
IDS Life Series Fund, Inc. Director
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Marietta L. Johns, American Express Financial IDS Tower 10 Senior Vice President
Director and Senior Vice Advisors Inc. Minneapolis, MN 55440
President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Nancy E. Jones, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
American Express Service Vice President
Corporation
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Ora J. Kaine, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Matthew N. Karstetter, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Linda B. Keene, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
G. Michael Kennedy, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Susan D. Kinder, American Express Financial IDS Tower 10 Senior Vice President
Director and Senior Vice Advisors Inc. Minneapolis, MN 55440
President
IDS Securities Corporation Director
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Brian C. Kleinberg, American Enterprise IDS Tower 10 Director
Executive Vice President Investment Services Inc. Minneapolis, MN 55440
American Express Financial Executive Vice President
Advisors Inc.
American Express Service Director
Corporation
AMEX Assurance Company Director and Chairman of
the Board
American Partners Life Executive Vice President
Insurance Company
IDS Property Casualty 1 WEG Blvd. Director and Chairman of
Insurance Company DePere, WI 54115 the Board
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Richard W. Kling, AMEX Assurance Company IDS Tower 10 Director
Director and Senior Vice Minneapolis, MN 55440
President
American Centurion Life Director
Assurance Company
American Enterprise Life Director and Chairman of
Insurance Company the Board
American Express Director and President
Corporation
American Express Financial Senior Vice President
Advisors Inc.
American Express Insurance Director and President
Agency of Arizona Inc.
American Express Insurance Director and President
Agency of Idaho Inc.
American Express Insurance Director and President
Agency of Nevada Inc.
American Express Insurance Director and President
Agency of Oregon Inc.
American Express Property Director and President
Casualty Insurance Agency
of Kentucky Inc.
American Express Property Director and President
Casualty Insurance Agency
of Maryland Inc.
American Express Property Director and President
Casualty Insurance Agency
of Pennsylvania Inc.
American Express Service Vice President
Corporation
American Partners Life Director and Chairman of
Insurance Company the Board
IDS Certificate Company Director and Chairman of
the Board
IDS Insurance Agency of Director and President
Alabama Inc.
IDS Insurance Agency of Director and President
Arkansas Inc.
IDS Insurance Agency of Director and President
Massachusetts Inc.
IDS Insurance Agency of Director and President
New Mexico Inc.
IDS Insurance Agency of Director and President
North Carolina Inc.
IDS Insurance Agency of Director and President
Ohio Inc.
IDS Insurance Agency of Director and President
Wyoming Inc.
IDS Life Insurance Company Director and President
IDS Life Series Fund, Inc. Director and President
IDS Life Variable Annuity Manager, Chairman of the
Funds A and B Board and President
IDS Property Casualty 1 WEG Blvd. Director
Insurance Company DePere, WI 54115
IDS Life Insurance Company P.O. Box 5144 Director, Chairman of the
of New York Albany, NY 12205 Board and President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Paul F. Kolkman, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
IDS Life Insurance Company Director and Executive
Vice President
IDS Life Series Fund, Inc. Vice President and Chief
Actuary
IDS Property Casualty 1 WEG Blvd. Director
Insurance Company DePere, WI 54115
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Claire Kolmodin, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Steve C. Kumagai, American Express Financial IDS Tower 10 Director and Senior Vice
Director and Senior Vice Advisors Inc. Minneapolis, MN 55440 President
President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Kurt A. Larson, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Lori J. Larson, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Daniel E. Laufenberg, American Express Financial IDS Tower 10 Vice President and Chief
Vice President and Chief U.S. Advisors Inc. Minneapolis, MN 55440 U.S. Economist
Economist
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Peter A. Lefferts, American Express Financial IDS Tower 10 Senior Vice President
Director and Senior Vice Advisors Inc. Minneapolis, MN 55440
President
American Express Trust Director
Company
IDS Plan Services of Director
California, Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Douglas A. Lennick, American Express Financial IDS Tower 10 Director and Executive
Director and Executive Vice Advisors Inc. Minneapolis, MN 55440 Vice President
President
IDS Securities Corporation Director, President and
Chief Executive Officer
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Jonathan S. Linen, IDS Tower 10
Director Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Mary J. Malevich, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Fred A. Mandell, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Sarah A. Mealey, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Paula R. Meyer, American Enterprise Life IDS Tower 10 Vice President
Vice President Insurance Company Minneapolis, MN 55440
American Express Director
Corporation
American Express Financial Vice President
Advisors Inc.
American Partners Life Director and President
Insurance Company
IDS Certificate Company Director and President
IDS Life Insurance Company Director and Executive
Vice President
Investors Syndicate Director, Chairman of the
Development Corporation Board and President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
William P. Miller, Advisory Capital IDS Tower 10 Vice President
Vice President and Senior Strategies Group Inc. Minneapolis, MN 55440
Portfolio Manager
American Express Asset Senior Vice President and
Management Group Inc. Chief Investment Officer
American Express Financial Vice President and Senior
Advisors Inc. Portfolio Manager
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
James A. Mitchell, AMEX Assurance Company IDS Tower 10 Director
Director and Executive Vice Minneapolis, MN 55440
President
American Enterprise Director
Investment Services Inc.
American Express Financial Executive Vice President
Advisors Inc.
American Express Service Director and Senior Vice
Corporation President
American Express Tax and Director
Business Services Inc.
IDS Certificate Company Director
IDS Life Insurance Company Director, Chairman of the
Board and Chief Executive
Officer
IDS Plan Services of Director
California, Inc.
IDS Property Casualty 1 WEG Blvd. Director
Insurance Company DePere, WI 54115
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Pamela J. Moret, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
American Express Trust Vice President
Company
IDS Life Insurance Company Executive Vice President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Barry J. Murphy, American Express Client IDS Tower 10 Director and President
Director and Senior Vice Service Corporation Minneapolis, MN 55440
President
American Express Financial Senior Vice President
Advisors Inc.
IDS Life Insurance Company Director and Executive
Vice President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Mary Owens Neal, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Michael J. O'Keefe, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
James R. Palmer, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
IDS Life Insurance Company Vice President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Carla P. Pavone, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
Public Employee Payment Director and President
Company
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Thomas P. Perrine, American Express Financial IDS Tower 10 Senior Vice President
Senior Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Susan B. Plimpton, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Ronald W. Powell, American Express Financial IDS Tower 10 Vice President and
Vice President and Assistant Advisors Inc. Minneapolis, MN 55440 Assistant General Counsel
General Counsel
IDS Cable Corporation Vice President and
Assistant Secretary
IDS Cable II Corporation Vice President and
Assistant Secretary
IDS Management Corporation Vice President and
Assistant Secretary
IDS Partnership Services Vice President and
Corporation Assistant Secretary
IDS Plan Services of Vice President and
California, Inc. Assistant Secretary
IDS Realty Corporation Vice President and
Assistant Secretary
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
James M. Punch, American Express Financial IDS Tower 10 Vice President and Project
Vice President and Project Advisors Inc. Minneapolis, MN 55440 Manager
Manager
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Frederick C. Quirsfeld, American Express Asset IDS Tower 10 Senior Vice President and
Senior Vice President Management Group Inc. Minneapolis, MN 55440 Senior Portfolio Manager
American Express Financial Senior Vice President
Advisors Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Rollyn C. Renstrom, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
ReBecca K. Roloff, American Express Financial IDS Tower 10 Senior Vice President
Senior Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Stephen W. Roszell, Advisory Capital IDS Tower 10 Director
Senior Vice President Strategies Group Inc. Minneapolis, MN 55440
American Express Asset Director, President and
Management Group Inc. Chief Executive Officer
American Express Asset Director
Management International,
Inc.
American Express Asset Director
Management Ltd.
American Express Financial Senior Vice President
Advisors Inc.
American Express Trust Director
Company
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Erven A. Samsel, American Express Financial IDS Tower 10 Senior Vice President
Director and Senior Vice Advisors Inc. Minneapolis, MN 55440
President
American Express Insurance Vice President
Agency of Idaho Inc.
American Express Insurance Vice President
Agency of Nevada Inc.
American Express Insurance Vice President
Agency of Oregon Inc.
American Express Property Vice President
Casualty Insurance Agency
of Kentucky Inc.
American Express Property Vice President
Casualty Insurance Agency
of Maryland Inc.
American Express Property Vice President
Casualty Insurance Agency
of Pennsylvania Inc.
IDS Insurance Agency of Vice President
Alabama Inc.
IDS Insurance Agency of Vice President
Arkansas Inc.
IDS Insurance Agency of Vice President
Massachusetts Inc.
IDS Insurance Agency of Vice President
New Mexico Inc.
IDS Insurance Agency of Vice President
North Carolina Inc.
IDS Insurance Agency of Vice President
Ohio Inc.
IDS Insurance Agency of Vice President
Wyoming Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Stuart A. Sedlacek, American Enterprise Life IDS Tower 10 Executive Vice President
Senior Vice President and Insurance Company Minneapolis, MN 55440
Chief Financial Officer
American Express Financial Senior Vice President and
Advisors Inc. Chief Financial Officer
American Express Trust Director
Company
American Partners Life Director and Vice President
Insurance Agency
IDS Certificate Company Director and President
IDS Life Insurance Company Executive Vice President
and Controller
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Donald K. Shanks, AMEX Assurance Company IDS Tower 10 Senior Vice President
Vice President Minneapolis, MN 55440
American Express Financial Vice President
Advisors Inc.
IDS Property Casualty 1 WEG Blvd. Senior Vice President
Insurance Company DePere, WI 54115
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
F. Dale Simmons, AMEX Assurance Company IDS Tower 10 Vice President
Vice President Minneapolis, MN 55440
American Enterprise Life Vice President
Insurance
American Express Financial Vice President
Advisors Inc.
American Partners Life Vice President
Insurance Company
IDS Certificate Company Vice President
IDS Life Insurance Company Vice President
IDS Partnership Services Director and Vice President
Corporation
IDS Real Estate Services Chairman of the Board and
Inc. President
IDS Realty Corporation Director and Vice President
IDS Life Insurance Company P.O. Box 5144 Vice President and
of New York Albany, NY 12205 Assistant Treasurer
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Judy P. Skoglund, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Bridget Sperl, American Express Client IDS Tower 10 Vice President
Vice President Service Corporation Minneapolis, MN 55440
American Express Financial Vice President
Advisors Inc.
Public Employee Payment Director and President
Company
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Lisa A. Steffes, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
William A. Stoltzmann, American Enterprise Life IDS Tower 10 Director, Vice President,
Vice President and Assistant Insurance Company Minneapolis, MN 55440 General Counsel and
General Counsel Secretary
American Express Director, Vice President
Corporation and Secretary
American Express Financial Vice President and
Advisors Inc. Assistant General Counsel
American Partners Life Director, Vice President,
Insurance Company General Counsel and
Secretary
IDS Life Insurance Company Vice President, General
Counsel and Secretary
IDS Life Series Fund Inc. General Counsel and
Assistant Secretary
IDS Life Variable Annuity General Counsel and
Funds A & B Assistant Secretary
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
James J. Strauss, American Express Financial IDS Tower 10 Vice President and General
Vice President and General Advisors Inc. Minneapolis, MN 55440 Auditor
Auditor
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Jeffrey J. Stremcha, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Barbara Stroup Stewart, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Wesley W. Wadman, American Express Asset IDS Tower 10 Executive Vice President
Vice President Management Group Inc. Minneapolis, MN 55440
American Express Asset Director and Senior Vice
Management International, President
Inc.
American Express Asset Director and Vice Chairman
Management Ltd.
American Express Financial Vice President
Advisors Inc.
IDS Fund Management Limited Director and Vice Chairman
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Norman Weaver Jr., American Express Financial IDS Tower 10 Senior Vice President
Director and Senior Vice Advisors Inc. Minneapolis, MN 55440
President
American Express Insurance Vice President
Agency of Arizona Inc.
American Express Insurance Vice President
Agency of Idaho Inc.
American Express Insurance Vice President
Agency of Nevada Inc.
American Express Insurance Vice President
Agency of Oregon Inc.
American Express Property Vice President
Casualty Insurance Agency
of Kentucky Inc.
American Express Property Vice President
Casualty Insurance Agency
of Maryland Inc.
American Express Property Vice President
Casualty Insurance Agency
of Pennsylvania Inc.
IDS Insurance Agency of Vice President
Alabama Inc.
IDS Insurance Agency of Vice President
Arkansas Inc.
IDS Insurance Agency of Vice President
Massachusetts Inc.
IDS Insurance Agency of Vice President
New Mexico Inc.
IDS Insurance Agency of Vice President
North Carolina Inc.
IDS Insurance Agency of Vice President
Ohio Inc.
IDS Insurance Agency of Vice President
Wyoming Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Michael L. Weiner, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
IDS Capital Holdings Inc. Vice President
IDS Futures Brokerage Group Vice President
IDS Futures Corporation Vice President, Treasurer
and Secretary
IDS Sales Support Inc. Director, Vice President
and Assistant Treasurer
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Lawrence J. Welte, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Jeffry F. Welter, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Edwin M. Wistrand, American Express Financial IDS Tower 10 Vice President and
Vice President and Assistant Advisors Inc. Minneapolis, MN 55440 Assistant General Counsel
General Counsel
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Michael D. Wolf, American Express Asset IDS Tower 10 Executive Vice President
Vice President Management Group Inc. Minneapolis, MN 55440 and Senior Portfolio
Manager
American Express Financial Vice President
Advisors Inc.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Michael R. Woodward, American Express Financial IDS Tower 10 Senior Vice President
Director and Senior Vice Advisors Inc. Minneapolis, MN 55440
President
American Express Insurance Vice President
Agency of Idaho Inc.
American Express Insurance Vice President
Agency of Nevada Inc.
American Express Insurance Vice President
Agency of Oregon Inc.
American Express Property Vice President
Casualty Insurance Agency
of Kentucky Inc.
American Express Property Vice President
Casualty Insurance Agency
of Maryland Inc.
American Express Property Vice President
Casualty Insurance Agency
of Pennsylvania Inc.
IDS Insurance Agency of Vice President
Alabama Inc.
IDS Insurance Agency of Vice President
Arkansas Inc.
IDS Insurance Agency of Vice President
Massachusetts Inc.
IDS Insurance Agency of Vice President
New Mexico Inc.
IDS Insurance Agency of Vice President
North Carolina Inc.
IDS Insurance Agency of Vice President
Ohio Inc.
IDS Insurance Agency of Vice President
Wyoming Inc.
IDS Life Insurance Company P.O. Box 5144 Director
of New York Albany, NY 12205
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Item 29. Principal Underwriters.
(a) American Express Financial Advisors acts as principal underwriter for the following investment
companies:
IDS Bond Fund, Inc.; IDS California Tax-Exempt Trust; IDS Discovery Fund, Inc.; IDS Equity
Select Fund, Inc.; IDS Extra Income Fund, Inc.; IDS Federal Income Fund, Inc.; IDS Global
Series, Inc.; IDS Growth Fund, Inc.; IDS High Yield Tax-Exempt Fund, Inc.; IDS International
Fund, Inc.; IDS Investment Series, Inc.; IDS Managed Retirement Fund, Inc.; IDS Market
Advantage Series, Inc.; IDS Money Market Series, Inc.; IDS New Dimensions Fund, Inc.; IDS
Precious Metals Fund, Inc.; IDS Progressive Fund, Inc.; IDS Selective Fund, Inc.; IDS Special
Tax-Exempt Series Trust; IDS Stock Fund, Inc.; IDS Strategy Fund, Inc.; IDS Tax-Exempt Bond
Fund, Inc.; IDS Tax-Free Money Fund, Inc.; IDS Utilities Income Fund, Inc., Growth Trust;
Growth and Income Trust; Income Trust, Tax-Free Income Trust, World Trust and IDS Certificate
Company.
(b) As to each director, officer or partner of the principal underwriter:
Name and Principal Business Address Position and Offices with Offices with Registrant
Underwriter
- ---------------------------------------------- ---------------------------------- ----------------------------
<S> <C> <C>
Ronald G. Abrahamson Vice President-Service Quality None
IDS Tower 10 and Reengineering
Minneapolis, MN 55440
Douglas A. Alger Senior Vice President-Human None
IDS Tower 10 Resources
Minneapolis, MN 55440
Peter J. Anderson Senior Vice President-Investment Vice President
IDS Tower 10 Operations
Minneapolis, MN 55440
Ward D. Armstrong Vice President-American Express None
IDS Tower 10 Retirement Services
Minneapolis, MN 55440
John M. Baker Vice President-Plan Sponsor None
IDS Tower 10 Services
Minneapolis, MN 55440
Gurudutt Balgia Vice President-Structured None
IDS Tower 10 Products
Minneapolis, MN 55440
Joseph M. Barsky III Vice President-Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
Timothy V. Bechtold Vice President-Risk Management None
IDS Tower 10 Products
Minneapolis, MN 55440
John D. Begley Group Vice President-Ohio/Indiana None
Suite 100
7760 Olentangy River Rd.
Columbus, OH 43235
Brent L. Bisson Group Vice President-Los Angeles None
Suite 900, E. Westside Twr Metro
11835 West Olympic Blvd.
Los Angeles, CA 90064
John C. Boeder Vice President-Mature Market None
IDS Tower 10 Group
Minneapolis, MN 55440
Walter K. Booker Group Vice President-New Jersey None
Suite 200, 3500 Market Street
Camp Hill, NJ 17011
Bruce J. Bordelon Group Vice President-Gulf States None
Galleria One Suite 1900
Galleria Blvd.
Metairie, LA 70001
Charles R. Branch Group Vice President-Northwest None
Suite 200
West 111 North River Dr.
Spokane, WA 99201
Douglas W. Brewers Vice President-Sales Support None
IDS Tower 10
Minneapolis, MN 55440
Karl J. Breyer Corporate Senior Vice President None
IDS Tower 10
Minneapolis, MN 55440
Cynthia M. Carlson Vice President-American Express None
IDS Tower 10 Securities Services
Minneapolis, MN 55440
Mark W. Carter Senior Vice President and Chief None
IDS Tower 10 Marketing Officer
Minneapolis, MN 55440
James E. Choat Senior Vice None
IDS Tower 10 President-Institutional Products
Minneapolis, MN 55440 Group
Kenneth J. Ciak Vice President and General None
IDS Property Casualty Manager-IDS Property Casualty
1400 Lombardi Avenue
Green Bay, WI 54304
Paul A. Connolly Vice President-Advisor Staffing, None
IDS Tower 10 Training and Support
Minneapolis, MN 55440
Roger C. Corea Group Vice President-Upstate New None
290 Woodcliff Drive York
Fairport, NY 14450
Henry J. Cormier Group Vice President-Connecticut None
Commerce Center One
333 East River Drive
East Hartford, CT 06108
John M. Crawford Group Vice President-Arkansas/ None
Suite 200 Springfield/Memphis
10800 Financial Ctr Pkwy
Little Rock, AR 72211
Kevin F. Crowe Group Vice None
Suite 312 President-Carolinas/Eastern
7300 Carmel Executive Pk Georgia
Charlotte, NC 28226
Colleen Curran Vice President and Assistant None
IDS Tower 10 General Counsel
Minneapolis, MN 55440
Luz Maria Davis Vice President-Communications None
IDS Tower 10
Minneapolis, MN 55440
Scott M. DiGiammarino Group Vice None
Suite 500, 8045 Leesburg Pike President-Washington/Baltimore
Vienna, VA 22182
Bradford L. Drew Group Vice President-Eastern None
Two Datran Center Florida
Penthouse One B
9130 S. Dadeland Blvd.
Miami, FL 33156
Douglas K. Dunning Vice President-Assured Assets None
IDS Tower 10 Product Development and
Minneapolis, MN 55440 Management
James P. Egge Group Vice President-Western None
4305 South Louise, Suite 202 Iowa, Nebraska, Dakotas
Sioux Falls, SD 57103
Gordon L. Eid Senior Vice President, General None
IDS Tower 10 Counsel and Chief Compliance
Minneapolis, MN 55440 Officer
Robert M. Elconin Vice President-Government None
IDS Tower 10 Relations
Minneapolis, MN 55440
Phillip W. Evans Group Vice President-Rocky None
Suite 600 Mountain
6985 Union Park Center
Midvale, UT 84047-4177
Louise P. Evenson Group Vice President-San None
Suite 200 Francisco Bay Area
1333 N. California Blvd.
Walnut Creek, CA 94596
Gordon M. Fines Vice President-Mutual Fund None
IDS Tower 10 Equity Investments
Minneapolis, MN 55440
Douglas L. Forsberg Vice President-Institutional None
IDS Tower 10 Products Group
Minneapolis, MN 55440
Jeffrey P. Fox Vice President and Corporate None
IDS Tower 10 Controller
Minneapolis, MN 55440
William P. Fritz Group Vice President-Gateway None
Suite 160
12855 Flushing Meadows Dr
St. Louis, MO 63131
Carl W. Gans Group Vice President-Twin City None
8500 Tower Suite 1770 Metro
8500 Normandale Lake Blvd.
Bloomington, MN 55437
David A. Hammer Vice President and Marketing None
IDS Tower 10 Controller
Minneapolis, MN 55440
Teresa A. Hanratty Group Vice President-Northern None
Suites 6&7 New England
169 South River Road
Bedford, NH 03110
Robert L. Harden Group Vice President-Boston Metro None
Two Constitution Plaza
Boston, MA 02129
Lorraine R. Hart Vice President-Insurance None
IDS Tower 10 Investments
Minneapolis, MN 55440
Scott A. Hawkinson Vice President and None
IDS Tower 10 Controller-Private Client Group
Minneapolis, MN 55440
Brian M. Heath Group Vice President-North Texas None
Suite 150
801 E. Campbell Road
Richardson, TX 75081
Janis K. Heaney Vice President-Incentive None
IDS Tower 10 Management
Minneapolis, MN 55440
James G. Hirsh Vice President and Assistant None
IDS Tower 10 General Counsel
Minneapolis, MN 55440
Jon E. Hjelm Group Vice President-Rhode None
319 Southbridge Street Island/Central-Western
Auburn, MA 01501 Massachusetts
David J. Hockenberry Group Vice President-Eastern None
30 Burton Hills Blvd. Tennessee
Suite 175
Nashville, TN 37215
Jeffrey S. Horton Vice President and Treasurer None
IDS Tower 10
Minneapolis, MN 55440
David R. Hubers Chairman, President and Chief Board member
IDS Tower 10 Executive Officer
Minneapolis, MN 55440
Martin G. Hurwitz Vice President-Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
James M. Jensen Vice President-Insurance Product None
IDS Tower 10 Development and Management
Minneapolis, MN 55440
Marietta L. Johns Senior Vice President-Field None
IDS Tower 10 Management
Minneapolis, MN 55440
Nancy E. Jones Vice President-Business None
IDS Tower 10 Development
Minneapolis, MN 55440
Ora J. Kaine Vice President-Financial None
IDS Tower 10 Advisory Services
Minneapolis, MN 55440
Matthew N. Karstetter Vice President-Investment None
IDS Tower 10 Accounting
Minneapolis, MN 55440
Linda B. Keene Vice President-Market Development None
IDS Tower 10
Minneapolis, MN 55440
G. Michael Kennedy Vice President-Investment None
IDS Tower 10 Services and Investment Research
Minneapolis, MN 55440
Susan D. Kinder Senior Vice None
IDS Tower 10 President-Distribution Services
Minneapolis, MN 55440
Brian C. Kleinberg Executive Vice None
IDS Tower 10 President-Financial Direct
Minneapolis, MN 55440
Richard W. Kling Senior Vice President-Products None
IDS Tower 10
Minneapolis, MN 55440
Paul F. Kolkman Vice President-Actuarial Finance None
IDS Tower 10
Minneapolis, MN 55440
Claire Kolmodin Vice President-Service Quality None
IDS Tower 10
Minneapolis, MN 55440
David S. Kreager Group Vice President-Greater None
Suite 108 Michigan
Trestle Bridge V
5136 Lovers Lane
Kalamazoo, MI 49002
Steven C. Kumagai Director and Senior Vice None
IDS Tower 10 President-Field Management and
Minneapolis, MN 55440 Business Systems
Mitre Kutanovski Group Vice President-Chicago None
Suite 680 Metro
8585 Broadway
Merrillville, IN 48410
Kurt A. Larson Vice President-Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
Lori J. Larson Vice President-Brokerage and None
IDS Tower 10 Direct Services
Minneapolis, MN 55440
Daniel E. Laufenberg Vice President and Chief U.S. None
IDS Tower 10 Economist
Minneapolis, MN 55440
Peter A. Lefferts Senior Vice President-Corporate None
IDS Tower 10 Strategy and Development
Minneapolis, MN 55440
Douglas A. Lennick Director and Executive Vice None
IDS Tower 10 President-Private Client Group
Minneapolis, MN 55440
Mary J. Malevich Vice President-Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
Fred A. Mandell Vice President-Field Marketing None
IDS Tower 10 Readiness
Minneapolis, MN 55440
Daniel E. Martin Group Vice President-Pittsburgh None
Suite 650 Metro
5700 Corporate Drive
Pittsburgh, PA 15237
Sarah A. Mealey Vice President-Mutual Funds None
IDS Tower 10
Minneapolis, MN 55440
Paula R. Meyer Vice President-Assured Assets None
IDS Tower 10
Minneapolis, MN 55440
William P. Miller Vice President and Senior None
IDS Tower 10 Portfolio Manager
Minneapolis, MN 55440
James A. Mitchell Executive Vice None
IDS Tower 10 President-Marketing and Products
Minneapolis, MN 55440
Pamela J. Moret Vice President-Variable Assets None
IDS Tower 10
Minneapolis, MN 55440
Alan D. Morgenstern Group Vice President-Central None
Suite 200 California/Western Nevada
3500 Market Street
Camp Hill, NJ 17011
Barry J. Murphy Senior Vice President-Client None
IDS Tower 10 Service
Minneapolis, MN 55440
Mary Owens Neal Vice President-Mature Market None
IDS Tower 10 Segment
Minneapolis, MN 55440
Thomas V. Nicolosi Group Vice President-New York None
Suite 220 Metro Area
500 Mamaroneck Avenue
Harrison, NY 10528
Michael J. O'Keefe Vice President-Advisory Business None
IDS Tower 10 Systems
Minneapolis, MN 55440
James R. Palmer Vice President-Taxes None
IDS Tower 10
Minneapolis, MN 55440
Marc A. Parker Group Vice None
10200 SW Greenburg Road President-Portland/Eugene
Suite 110
Portland OR 97223
Carla P. Pavone Vice President-Compensation and None
IDS Tower 10 Field Administration
Minneapolis, MN 55440
Thomas P. Perrine Senior Vice President-Group None
IDS Tower 10 Relationship Leader/AXP
Minneapolis, MN 55440 Technologies Financial Services
Susan B. Plimpton Vice President-Marketing Services None
IDS Tower 10
Minneapolis, MN 55440
Larry M. Post Group Vice None
One Tower Bridge President-Philadelphia Metro
100 Front Street 8th Fl
West Conshohocken, PA 19428
Ronald W. Powell Vice President and Assistant None
IDS Tower 10 General Counsel
Minneapolis, MN 55440
Diana R. Prost Group Vice None
3030 N.W. Expressway President-Kansas/Oklahoma
Suite 900
Oklahoma City, OK 73112
James M. Punch Vice President and Project None
IDS Tower 10 Manager-Platform I Value Enhanced
Minneapolis, MN 55440
Frederick C. Quirsfeld Senior Vice President-Fixed None
IDS Tower 10 Income
Minneapolis, MN 55440
Rollyn C. Renstrom Vice President-Corporate None
IDS Tower 10 Planning and Analysis
Minneapolis, MN 55440
R. Daniel Richardson III Group Vice President-Southern None
Suite 800 Texas
Arboretum Plaza One
9442 Capital of Texas Hwy N.
Austin, TX 78759
ReBecca K. Roloff Senior Vice President-Field None
IDS Tower 10 Management and Financial
Minneapolis, MN 55440 Advisory Service
Stephen W. Roszell Senior Vice None
IDS Tower 10 President-Institutional
Minneapolis, MN 55440
Max G. Roth Group Vice None
Suite 201 S IDS Ctr President-Wisconsin/Upper
1400 Lombardi Avenue Michigan
Green Bay, WI 54304
Erven A. Samsel Senior Vice President-Field None
45 Braintree Hill Park Management
Suite 402
Braintree, MA 02184
Russell L. Scalfano Group Vice None
Suite 201 President-Illinois/Indiana/Kentucky
101 Plaza East Blvd.
Evansville, IN 47715
William G. Scholz Group Vice President-Arizona/Las None
Suite 205 Vegas
7333 E Doubletree Ranch Rd
Scottsdale, AZ 85258
Stuart A. Sedlacek Senior Vice President and Chief None
IDS Tower 10 Financial Officer
Minneapolis, MN 55440
Donald K. Shanks Vice President-Property Casualty None
IDS Tower 10
Minneapolis, MN 55440
F. Dale Simmons Vice President-Senior Portfolio None
IDS Tower 10 Manager, Insurance Investments
Minneapolis, MN 55440
Judy P. Skoglund Vice President-Quality and None
IDS Tower 10 Service Support
Minneapolis, MN 55440
James B. Solberg Group Vice President-Eastern None
466 Westdale Mall Iowa Area
Cedar Rapids, IA 52404
Bridget Sperl Vice President-Geographic None
IDS Tower 10 Service Teams
Minneapolis, MN 55440
Paul J. Stanislaw Group Vice President-Southern None
Suite 1100 California
Two Park Plaza
Irvine, CA 92714
Lisa A. Steffes Vice President-Cardmember None
IDS Tower 10 Initiatives
Minneapolis, MN 55440
Lois A. Stilwell Group Vice President-Outstate None
Suite 433 Minnesota Area/ North
9900 East Bren Road Dakota/Western Wisconsin
Minnetonka, MN 55343
William A. Stoltzmann Vice President and Assistant None
IDS Tower 10 General Counsel
Minneapolis, MN 55440
James J. Strauss Vice President and General None
IDS Tower 10 Auditor
Minneapolis, MN 55440
Jeffrey J. Stremcha Vice President-Information None
IDS Tower 10 Resource Management/ISD
Minneapolis, MN 55440
Barbara Stroup Stewart Vice President-Channel None
IDS Tower 10 Development
Minneapolis, MN 55440
Craig P. Taucher Group Vice None
Suite 150 President-Orlando/Jacksonville
4190 Belfort Road
Jacksonville, FL 32216
Neil G. Taylor Group Vice None
Suite 425 President-Seattle/Tacoma/Hawaii
101 Elliott Avenue West
Seattle, WA 98119
Peter S. Velardi Group Vice None
Suite 180 President-Atlanta/Birmingham
1200 Ashwood Parkway
Atlanta, GA 30338
Charles F. Wachendorfer Group Vice President-Detroit None
8115 East Jefferson Avenue Metro
Detroit, MI 48214
Wesley W. Wadman Vice President-Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
Donald F. Weaver Group Vice President-Greater None
3500 Market Street, Suite 200 Pennsylvania
Camp Hill, PA 17011
Norman Weaver Jr. Senior Vice President-Field None
1010 Main St. Suite 2B Management
Huntington Beach, CA 92648
Michael L. Weiner Vice President-Tax Research and None
IDS Tower 10 Audit
Minneapolis, MN 55440
Lawrence J. Welte Vice President-Investment None
IDS Tower 10 Administration
Minneapolis, MN 55440
Jeffry M. Welter Vice President-Equity and Fixed None
IDS Tower 10 Income Trading
Minneapolis, MN 55440
Thomas L. White Group Vice President-Cleveland None
Suite 200 Metro
28601 Chagrin Blvd.
Woodmere, OH 44122
Eric S. Williams Group Vice President-Virginia None
Suite 250
3951 Westerre Parkway
Richmond, VA 23233
William J. Williams Group Vice President-Western None
Two North Tamiami Trail Florida
Suite 702
Sarasota, FL 34236
Edwin M. Wistrand Vice President and Assistant None
IDS Tower 10 General Counsel
Minneapolis, MN 55440
Michael D. Wolf Vice President-Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
Michael R. Woodward Senior Vice President-Field None
32 Ellicott St Management
Suite 100
Batavia, NY 14020
</TABLE>
<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, 1998.
IDS MANAGED RETIREMENT FUND, INC.
By /s/ William R. Pearce**
William R. Pearce, Chief Executive Officer
By /s/ Stuart A. Sedlacek***
Stuart A. Sedlacek, 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, 1998.
Signature Capacity
/s/ William R. Pearce** Chairman of the Board
William R. Pearce
/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
/s/ Edson W. Spencer* Director
Edson W. Spencer
/s/ John R. Thomas* Director
John R. Thomas
/s/ Wheelock Whitney* Director
Wheelock Whitney
/s/ C. Angus Wurtele* Director
C. Angus Wurtele
<PAGE>
*Signed pursuant to Directors' Power of Attorney, dated January 7, 1998, filed
electronically as Exhibit 19(a) to Registrant's Post-Effective Amendment No. 28
to Registration Statement No. 2-93801 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
***Signed pursuant to Officer's Power of Attorney, dated November 24, 1998, by:
/s/ Leslie L. Ogg
Leslie L. Ogg
<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, 1998.
GROWTH AND INCOME TRUST
By /s/ William R. Pearce**
William R. Pearce
Chief Executive Officer
By /s/ Stuart A. Sedlacek***
Stuart A. Sedlacek
Acting 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, 1998.
Signature Capacity
/s/ William R. Pearce** Chairman of the Board
William R. Pearce
/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
/s/ John R. Thomas* Trustee
John R. Thomas
/s/ Wheelock Whitney Trustee
Wheelock Whitney
/s/ C. Angus Wurtele* Trustee
C. Angus Wurtele
<PAGE>
*Signed pursuant to trustees Power of Attorney dated January 7, 1998, filed
electronically as Exhibit 19(c) herewith as Exhibit 19(c) to Registrant's
Post-Effective Amendment No. 28 to Registration Statement 2-93801 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
***Signed pursuant to Officer's Power of Attorney, dated November 24, 1998, by:
/s/ Leslie L. Ogg
Leslie L. Ogg
<PAGE>
CONTENTS OF THIS POST-EFFECTIVE AMENDMENT NO. 28
TO REGISTRATION STATEMENT NO. 2-93801
This Post-Effective Amendment comprises the following papers and documents:
The facing sheet.
Cross reference sheet.
Part A.
The prospectus.
Part B.
Statement of Additional Information.
Part C.
Other information.
Exhibits.
The signatures.
EXHIBIT INDEX
Exhibit 9(a): Copy of the Transfer Agency Agreement, dated January 1, 1998.
Exhibit 9(h): Copy of License Agreement, dated January 25, 1988.
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 7, 1998.
Exhibit 19(c): Trustees' Power of Attorney, dated January 7, 1998.
TRANSFER AGENCY AGREEMENT
AGREEMENT dated as of January 1, 1998, between IDS Managed Retirement Fund, Inc.
(the "Company"), a Minnesota corporation, on behalf of its underlying series
fund (the "Fund"), and American Express Client Service Corporation (the
"Transfer Agent"), a Minnesota corporation.
In consideration of the mutual promises set forth below, the Company and the
Transfer Agent agree as follows:
1. Appointment of the Transfer Agent. The Company hereby appoints the Transfer
Agent, as transfer agent for its shares and as shareholder servicing agent
for the Company, and the Transfer Agent accepts such appointment and agrees
to perform the duties set forth below.
2. Compensation. The Company will compensate the Transfer Agent for the
performance of its obligations as set forth in Schedule A. Schedule A does
not include out-of-pocket disbursements of the Transfer Agent for which the
Transfer Agent shall be entitled to bill the Company separately.
The Transfer Agent will bill the Company monthly. The fee provided for
hereunder shall be paid in cash by the Company to the Transfer Agent within
five (5) business days after the last day of each month.
Out-of-pocket disbursements shall include, but shall not be limited to, the
items specified in Schedule B. Reimbursement by the Company for expenses
incurred by the Transfer Agent in any month shall be made as soon as
practicable after the receipt of an itemized bill from the Transfer Agent.
Any compensation jointly agreed to hereunder may be adjusted from time to
time by attaching to this Agreement a revised Schedule A, dated and signed
by an officer of each party.
3. Documents. The Company will furnish from time to time such certificates,
documents or opinions as the Transfer Agent deems to be appropriate or
necessary for the proper performance of its duties.
4. Representations of the Company and the Transfer Agent.
(a) The Company represents to the Transfer Agent that all outstanding
shares are validly issued, fully paid and non-assessable by the
Company. When shares are hereafter issued in accordance with the terms
of the Company's Articles of Incorporation and its By-laws, such
shares shall be validly issued, fully paid and non-assessable by the
Company.
(b) The Transfer Agent represents that it is registered under Section
17A(c) of the Securities Exchange Act of 1934. The Transfer Agent
agrees to maintain the necessary facilities, equipment and personnel
to perform its duties and obligations under this agreement and to
comply with all applicable laws.
5. Duties of the Transfer Agent. The Transfer Agent shall be responsible,
separately and through its subsidiaries or affiliates, for the following
functions:
(a) Sale of Fund Shares.
(1) On receipt of an application and payment, wired instructions and
payment, or payment identified as being for the account of a
shareholder, the Transfer Agent will deposit the payment, prepare
and present the necessary report to the Custodian and record the
purchase of shares in a timely fashion in accordance with the
terms of the Fund's prospectus. All shares shall be held in book
entry form and no certificate shall be issued unless the Fund is
permitted to do so by its prospectus and the purchaser so
requests.
(2) On receipt of notice that payment was dishonored, the Transfer
Agent shall stop redemptions of all shares owned by the purchaser
related to that payment, place a stop payment on any checks that
have been issued to redeem shares of the purchaser and take such
other action as it deems appropriate.
<PAGE>
(b) Redemption of Fund Shares. On receipt of instructions to redeem shares
in accordance with the terms of the Fund's prospectus, the Transfer
Agent will record the redemption of shares of the Fund, prepare and
present the necessary report to the Custodian and pay the proceeds of
the redemption to the shareholder, an authorized agent or legal
representative upon the receipt of the monies from the Custodian.
(c) Transfer or Other Change Pertaining to Fund Shares. On receipt of
instructions or forms acceptable to the Transfer Agent to transfer the
shares to the name of a new owner, change the name or address of the
present owner or take other legal action, the Transfer Agent will take
such action as is requested.
(d) Exchange of Fund Shares. On receipt of instructions to exchange the
shares of the Fund for the shares of another fund in the IDS MUTUAL
FUND GROUP or other American Express Financial Corporation product in
accordance with the terms of the prospectus, the Transfer Agent will
process the exchange in the same manner as a redemption and sale of
shares.
(e) Right to Seek Assurance. The Transfer Agent may refuse to transfer,
exchange or redeem shares of the Fund or take any action requested by
a shareholder until it is satisfied that the requested transaction or
action is legally authorized or until it is satisfied there is no
basis for any claims adverse to the transaction or action. It may rely
on the provisions of the Uniform Act for the Simplification of
Fiduciary Security Transfers or the Uniform Commercial Code. The
Company shall indemnify the Transfer Agent for any act done or omitted
to be done in reliance on such laws or for refusing to transfer,
exchange or redeem shares or taking any requested action if it acts on
a good faith belief that the transaction or action is illegal or
unauthorized.
(f) Shareholder Records, Reports and Services.
(1) The Transfer Agent shall maintain all shareholder accounts, which
shall contain all required tax, legally imposed and regulatory
information; shall provide shareholders, and file with federal
and state agencies, all required tax and other reports pertaining
to shareholder accounts; shall prepare shareholder mailing lists;
shall cause to be printed and mailed all required prospectuses,
annual reports, semiannual reports, statements of additional
information (upon request), proxies and other mailings to
shareholders; and shall cause proxies to be tabulated.
(2) The Transfer Agent shall respond to all valid inquiries related
to its duties under this Agreement.
(3) The Transfer Agent shall create and maintain all records in
accordance with all applicable laws, rules and regulations,
including, but not limited to, the records required by Section
31(a) of the Investment Company Act of 1940.
(g) Dividends and Distributions. The Transfer Agent shall prepare and
present the necessary report to the Custodian and shall cause to be
prepared and transmitted the payment of income dividends and capital
gains distributions or cause to be recorded the investment of such
dividends and distributions in additional shares of the Fund or as
directed by instructions or forms acceptable to the Transfer Agent.
(h) Confirmations and Statements. The Transfer Agent shall confirm each
transaction either at the time of the transaction or through periodic
reports as may be legally permitted.
(i) Lost or Stolen Checks. The Transfer Agent will replace lost or stolen
checks issued to shareholders upon receipt of proper notification and
will maintain any stop payment orders against the lost or stolen
checks as it is economically desirable to do.
(j) Reports to Company. The Transfer Agent will provide reports pertaining
to the services provided under this Agreement as the Company may
request to ascertain the quality and level of services being provided
or as required by law.
(k) Other Duties. The Transfer Agent may perform other duties for
additional compensation if agreed to in writing by the parties to this
Agreement.
<PAGE>
6. Ownership and Confidentiality of Records. The Transfer Agent agrees that
all records prepared or maintained by it relating to the services to be
performed by it under the terms of this Agreement are the property of the
Company and may be inspected by the Company or any person retained by the
Company at reasonable times. The Company and Transfer Agent agree to
protect the confidentiality of those records.
7. Action by Board and Opinion of Counsel. The Transfer Agent may rely on
resolutions of the Board of Directors (the "Board") or the Executive
Committee of the Board and on opinion of counsel for the Company.
8. Duty of Care. It is understood and agreed that, in furnishing the Company
with the services as herein provided, neither the Transfer Agent, nor any
officer, director or agent thereof shall be held liable for any loss
arising out of or in connection with their actions under this Agreement so
long as they act in good faith and with due diligence, and are not
negligent or guilty of any willful misconduct. It is further understood and
agreed that the Transfer Agent may rely upon information furnished to it
reasonably believed to be accurate and reliable. In the event the Transfer
Agent is unable to perform its obligations under the terms of this
Agreement because of an act of God, strike or equipment or transmission
failure reasonably beyond its control, the Transfer Agent shall not be
liable for any damages resulting from such failure.
9. Term and Termination. This Agreement shall become effective on the date
first set forth above (the "Effective Date") and shall continue in effect
from year to year thereafter as the parties may mutually agree; provided
that either party may terminate this Agreement by giving the other party
notice in writing specifying the date of such termination, which shall be
not less than 60 days after the date of receipt of such notice. In the
event such notice is given by the Company, it shall be accompanied by a
vote of the Board, certified by the Secretary, electing to terminate this
Agreement and designating a successor transfer agent or transfer agents.
Upon such termination and at the expense of the Company, the Transfer Agent
will deliver to such successor a certified list of shareholders of the Fund
(with name, address and taxpayer identification or Social Security number),
a historical record of the account of each shareholder and the status
thereof, and all other relevant books, records, correspondence, and other
data established or maintained by the Transfer Agent under this Agreement
in the form reasonably acceptable to the Company, and will cooperate in the
transfer of such duties and responsibilities, including provisions for
assistance from the Transfer Agent's personnel in the establishment of
books, records and other data by such successor or successors.
10. Amendment. This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties.
11. Subcontracting. The Company agrees that the Transfer Agent may subcontract
for certain of the services described under this Agreement with the
understanding that there shall be no diminution in the quality or level of
the services and that the Transfer Agent remains fully responsible for the
services. Except for out-of-pocket expenses identified in Schedule B, the
Transfer Agent shall bear the cost of subcontracting such services, unless
otherwise agreed by the parties.
12. Miscellaneous.
(a) This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable without the
written consent of the other party.
(b) This Agreement shall be governed by the laws of the State of
Minnesota.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers as of the day and year written above.
IDS MANAGED RETIREMENT FUND, INC.
IDS Managed Allocation Fund
By: /s/ Leslie L. Ogg
Leslie L. Ogg
Vice President
AMERICAN EXPRESS CLIENT SERVICE CORPORATION
By: /s/ Barry J. Murphy
Barry J. Murphy
President
<PAGE>
Schedule A
IDS MANAGED RETIREMENT FUND, INC.
FEE
The annual per account fee for services under this agreement, accrued daily and
payable monthly, is as follows:
Class A Class B Class Y
IDS Managed Allocation Fund $15.00 $16.00 $15.00
<PAGE>
Schedule B
OUT-OF-POCKET EXPENSES
The Company shall reimburse the Transfer Agent monthly for the following
out-of-pocket expenses:
o typesetting, printing, paper, envelopes, postage and return postage for
proxy soliciting material, and proxy tabulation costs
o printing, paper, envelopes and postage for dividend notices, dividend
checks, records of account, purchase confirmations, exchange confirmations
and exchange prospectuses, redemption confirmations, redemption checks,
confirmations on changes of address and any other communication required to
be sent to shareholders
o typesetting, printing, paper, envelopes and postage for prospectuses,
annual and semiannual reports, statements of additional information,
supplements for prospectuses and statements of additional information and
other required mailings to shareholders
o stop orders
o outgoing wire charges
o other expenses incurred at the request or with the consent of the Company
LICENSE AGREEMENT
IDS Financial Corporation
IDS Tower 10
Minneapolis, MN 55440
Dear Sirs:
Each of the Funds named below hereby acknowledges that IDS Financial Corporation
is the owner of the trade name and marks "IDS" listed below, and any predecessor
names and marks.
IDS Financial Corporation hereby grants to each Fund the non-exclusive right to
use such marks for the purpose of offering, selling and distributing any and all
shares issued or to be issued by each Fund. This license shall continue with
respect to each Fund for as long as IDS Financial Corporation continues to act
as the investment manager for that Fund and the Fund uses such marks in
accordance with policies and procedures established by IDS Financial
Corporation.
IDS Financial Corporation and each Fund agree that in the conduct of its
respective business and activities and its rendering of services under such
marks it shall adhere to the highest ethical and business standards in the
mutual fund field and shall do nothing to bring disrepute to, nor to in any
manner damage, the good trade name and marks "IDS".
Trade Name
IDS
Mark Registration
"IDS" 881,460
"IDS" 881,461
"IDS" Application Serial Number 73/673,985
Sincerely yours,
IDS Bond Fund, Inc.
IDS California Tax-Exempt Fund
IDS Cash Management Fund, Inc.
IDS Discovery Fund, Inc.
IDS Equity Plus Fund, Inc.
IDS Extra Income Fund, Inc.
IDS Federal Income Fund, Inc.
IDS Growth Fund, Inc.
IDS High Yield Tax-Exempt Fund, Inc.
IDS Insured Tax-Exempt Fund
IDS International Fund, Inc.
IDS Managed Retirement Fund, Inc.
<PAGE>
License Agreement
Page 2
IDS Massachusetts Tax-Exempt Fund
IDS Michigan Tax-Exempt Fund
IDS Minnesota Tax-Exempt Fund
IDS Mutual, Inc.
IDS New Dimensions Fund, Inc.
IDS New York Tax-Exempt Fund, Inc.
IDS Ohio Tax-Exempt Fund
IDS Precious Metals Fund, Inc.
IDS Progressive Fund, Inc.
IDS Selective Fund, Inc.
IDS Stock Fund, Inc.
IDS Strategy Fund, Inc.
IDS Tax-Exempt Bond Fund, Inc.
IDS Tax-Free Money Fund, Inc.
IDS Life Capital Resource Fund, Inc.
IDS Life Managed Fund, Inc.
IDS Life Moneyshare Fund, Inc.
IDS Life Special Income Fund, Inc.
By:/s/ Robert F. Froehlke
Robert F. Froehlke
President of each of the
above-named funds
Date: 1-25-88
Accepted and agreed to:
IDS Financial Corporation
By:/s/ John R. Thomas
John R. Thomas
Sr. Vice President
Opinion of Counsel
November 24, 1998
IDS Managed Retirement Fund, Inc.
IDS Tower 10
Minneapolis, MN 55440-0010
Gentlemen:
I have examined the Articled of Incorporation and the By-Laws of IDS Managed
Retirement Fund, Inc. (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 that the shares sold in
accordance with applicable federal state securities laws will be legally issued,
fully paid, and nonassessable.
This opinion may be used in connection with the Post-Effective Amendment.
Sincerely,
/s/ Leslie L. Ogg
Leslie L. Ogg
Attorney at Law
901 S. Marquette Ave., Suite 2810
Minneapolis, Minnesota 55401-3268
Independent auditors' consent
The board and shareholders
Strategist Growth and Income Fund, Inc.:
Strategist Balanced Fund
Strategist Equity Fund
Strategist Equity Income Fund
Strategist Total Return Fund
The board of trustees and unitholders Growth and Income Trust:
Balanced Portfolio
Equity Portfolio
Equity Income Portfolio
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, 1998
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<NAME> IDS MANAGED ALLOCATION FUND CLASS A
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<NAME> IDS MANAGED ALLOCATION FUND CLASS B
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<NAME> IDS MANAGED ALLOCATION FUND CLASS Y
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<NAME> TOTAL RETURN PORTFOLIO
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</TABLE>
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
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.
<PAGE>
Dated the 7th day of January, 1998.
/s/ H. Brewster Atwater, Jr. /s/ William R. Pearce
H. Brewster Atwater, Jr. William R. Pearce
/s/ Lynne V. Cheney /s/ Alan K. Simpson
Lynne V. Cheney Alan K. Simpson
/s/ William H. Dudley /s/ Edson W. Spencer
William H. Dudley 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
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 7th day of January, 1998.
/s/ H. Brewster Atwater, Jr. /s/ William R. Pearce
H. Brewster Atwater, Jr. William R. Pearce
/s/ Lynne V. Cheney /s/ Alan K. Simpson
Lynne V. Cheney Alan K. Simpson
/s/ William H. Dudley /s/ Edson W. Spencer
William H. Dudley 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
