<PAGE>
PAGE 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 15 (File No. 2-97636) X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 15 (File No. 811-4299) X
IDS LIFE SERIES FUND, INC.
___________________________________________________________________
IDS Tower 10, Minneapolis, Minnesota 55440-0010
___________________________________________________________________
(612) 671-3678
___________________________________________________________________
Mary Ellyn Minenko - IDS Tower 10, Minneapolis, MN 55440-0010
___________________________________________________________________
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 October 28, 1994 pursuant to paragraph (b) of rule 485
_____60 days after filing pursuant to paragraph (a)
on (date) pursuant to paragraph (a) of rule 485
Registrant has filed its 24f-2 Notice for the fiscal year ending
April 30, 1994 on or about June 30, 1994.
<PAGE>
PAGE 2
<TABLE>
<CAPTION>
Cross reference sheet for the IDS Life Series Fund with Cross reference sheet for the IDS Life Series Fund with six
five portfolios showing location in the prospectus and portfolios showing location in the prospectus and the
Statement of Additional Information of the information Statement of Additional Information of the information
called for by the items enumerated in Part A and Part B called for by the items enumerated in Part A and Part B
of Form N-1A. of Form N-1A.
Negative answers omitted from Part A or Part B are Negative answers omitted from Part A or Part B
so indicated. are so indicated.
PART A PART B PART A PART B
Page Number Page Number
Page Number in Statement of Page Number in Statement of
Item No. in Prospectus Item No. Additional Information Item No. in Prospectus Item No. Additional Information
<S> <C> <C> <C> <C> <C> <C> <C>
1 3 10 48 1 25 10 99
2 5-6 11 49-50 2 27-28 11 100
3(a) 6-11 12 NA 3(a) 29-33 12 NA
(b) NA 13(a) 51-58,72-95 (b) NA 13(a) 101-110,123-145,147-149
(c) 6-15 (b) 51-58 (c) 29-37 (b) 101-110
(d) 6-11 (c) 51-58 (d) 29-33 (c) 101-110
4(a) 5-6,15-20,21 (d) NA 4(a) 27-28,39-42,44 (d) NA
(b) 15-20 14(a) 21,23** (b) 39-42 14(a) 44,46**
(c) 15-20 (b) 69-70 (c) 39-42 (b) 120-122
5(a) 21,23 (c) 69-70 5(a) 44,46 (c) 120-122
(b) 21,24 15(a) NA (b) 44,47 15(a) NA
(i) 24 (b) NA (i) 47 (b) NA
(ii) 23 (c) 69-70 (ii) 46-47 (c) 120-122
(iii) 23 16(a)(i) 21,24** (iii) 46-47 16(a) 44,47**
(c) 22-23 (ii) 67-68 (c) 45-46 (ii) 119-120
(d) 5-6 (iii)67 (d) 27-28 (iii)119-120
(e) 23 (b) 67-68 (e) 46-47 (b) 119-120
(f) 5 (c) NA (f) 27-28 (c) NA
(g) 23 (d) None (g) 46-47 (d) None
5A(a) * (e) NA 5(A)(a) * (e) NA
5A(b) * (f) NA 5(A)(b) * (f) NA
6(a) 21-22 (g) NA 6(a) 44,45 (g) NA
(b) NA (h) 70-71 (b) NA (h) 122
(c) NA (i) 70 (c) NA (i) 122
(d) NA 17(a) 58-61 (d) NA 17(a) 110-112
(e) 3 (b) 61 (e) 25 (b) 112-113
(f) 21 (c) 58-61 (f) 44 (c) 110-112
(g) 21 (d) None (g) 44 (d) None
7(a) 5 (e) 58-61 7(a) 27-28 (e) 110-112
(b) 15 18(a) 21-22** (b) 37 18(a) 44,45**
(c) 20 (b) NA (c) 43 (b) NA
(d) NA 19(a) 66-67 (d) NA 19(a) 118
(e) NA (b) 64-67 (e) NA (b) 115-118
(f) 5 (c) NA (f) 27-28 (c) NA
8(a) 20 20 NA 8(a) 43 20 NA
(b) NA 21(a) NA (b) NA 21(a) NA
(c) 5-6 (b) NA (c) 27-28 (b) NA
(d) NA (c) NA (d) NA (c) NA
9 None 22(a) 61-64 9 None 22(a) 113-115
(b) 61-64 (b) 113-115
23 150-183 23 150-183
* Designates information is located in annual report.
**Designates page number in prospectus.
/TABLE
<PAGE>
PAGE 3
IDS Life Series Fund
Prospectus
October 28, 1994
IDS Life Series Fund, Inc. (the fund) is a series mutual fund with
five portfolios, each with a different investment objective.
Equity Portfolio is a stock portfolio.
Income Portfolio is a bond portfolio.
Money Market Portfolio is a money market portfolio.
An investment in Money Market Portfolio is neither insured nor
guaranteed by the U.S. government, and there can be no assurance
that the portfolio will be able to maintain a stable net asset
value of $1 per share.
Managed Portfolio is a managed portfolio.
Government Securities Portfolio is a government securities
portfolio.
This prospectus contains information about the fund that you should
know before investing. Read it along with your variable life
insurance policy prospectus before you invest and keep them for
future reference.
Additional facts about the fund are in a Statement of Additional
Information (SAI), filed with the Securities and Exchange
Commission. The SAI, dated October 28, 1994, is incorporated here
by reference. For a free copy, contact IDS Life Series Fund, Inc.
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.
IDS LIFE IS NOT A BANK, AND THE SECURITIES IT OFFERS ARE NOT
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY ANY BANK
NOR ARE THEY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
IDS Life Series Fund, Inc.
IDS Tower 10
Minneapolis, MN 55440-0010
612-671-3733
TTY: 800-285-8846
New York Service:
518-869-8613
<PAGE>
PAGE 4
Table of contents
The fund in brief
Goals and types of portfolio investments
Manager and distributor
Variable accounts
Sales charge
Expenses
Performance
Financial highlights
Total returns
Yield calculations
Key terms
Investment policies and risks
Facts about investments and their risks
Valuing assets
How to invest, transfer or redeem shares
How to invest
How to transfer among subaccounts
Redeeming shares
Distributions and taxes
Dividend and capital gain distributions
Taxes
How the fund is organized
Shares
Voting rights
Shareholder meetings
Portfolio managers
Directors and officers
Investment manager
Investment Advisory Agreement
About IDS
General information
<PAGE>
PAGE 5
The fund in brief
Goals and types of portfolio investments
IDS Life Series Fund is a series mutual fund. It has five
portfolios whose goals and types of investments are as follows:
Equity Portfolio's goal is capital appreciation. The portfolio
invests primarily in U.S. common stocks and securities convertible
into common stock.
Income Portfolio's goal is to maximize current income while
attempting to conserve the value of the investment and to continue
the high level of income for the longest period of time. The
portfolio invests primarily in corporate bonds of the four highest
ratings.
Money Market Portfolio's goal is to provide maximum current income
consistent with liquidity and conservation of capital. The
portfolio invests primarily in high-quality, short-term debt
securities.
Managed Portfolio's goal is to maximize total investment return
through a combination of capital appreciation and current income.
The portfolio invests in common and preferred stocks, convertible
securities, debt securities and money market instruments.
Government Securities Portfolio's goal is to provide a high level
of current income and safety of principal. The portfolio invests
in debt obligations issued or guaranteed by U.S. governmental
units.
Because any investment involves risk, achieving these goals cannot
be guaranteed. Only the portfolio owners can change the goals.
Manager and distributor
The fund is managed by IDS Life Insurance Company (IDS Life), a
subsidiary of IDS Financial Corporation (IDS). IDS has an
agreement with IDS Life to furnish investment advice for funds
managed by IDS Life. IDS Life and IDS Life Insurance Company of
New York (IDS Life of New York) buy fund shares for their variable
accounts used in connection with their variable life insurance
policies. In the future, the fund may offer shares to the owners
of other variable life and variable annuity contracts issued by IDS
Life or by IDS Life of New York.
Variable accounts
You may not buy (nor will you own) shares of the fund directly.
You invest by buying a variable life insurance policy from IDS Life
or IDS Life of New York and allocating your premium payments among
different subaccounts of the variable accounts that invest in the
portfolios.
<PAGE>
PAGE 6
Sales charge
Cost of insurance charges, premium expense charges, surrender
charges, mortality and expense risk fees and other charges under
your policy are described in the variable life insurance policy
prospectus. There is no sales charge for the sale or redemption of
fund shares.
Expenses
The fund pays IDS Life a fee for managing its investment portfolios
and for certain administrative services. The fund also pays
certain nonadvisory expenses. See "Investment manager" under "How
the fund is organized."
Performance
Financial highlights
<TABLE>
<CAPTION>
Equity Portfolio
Financial highlights
The tables below show certain important financial information for evaluating each portfolio's
results.
Fiscal period ended April 30,
Per share income and capital changes*
1994 1993 1992 1991 1990 1989 1988 1987 1986**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $16.87 $16.01 $13.94 $12.77 $12.16 $10.79 $12.05 $9.94 $10.00
Income (loss) from investment operations:
Net investment income .06 .03 .03 .13 .35 .36 .15 .16 .13
Net gains (losses) on
securities (both realized
and unrealized 3.26 1.40 2.90 2.09 .61 1.37 (1.13) 2.17 (.06)
Total from investment
operations 3.32 1.43 2.93 2.22 .96 1.73 (0.98) 2.33 .07
Less distributions:
Dividends from net
investment income (.06) (.03) (.03) (.13) (.35) (.36) (.15) (.16) (.13)
Distributions from
realized gains (2.03) (.54) (.83) (.92) - - (.13) (.06) -
Total distributions (2.09) (.57) (.86) (1.05) (.35) (.36) (.28) (.22) (.13)
Net asset value,
end of period $18.10 $16.87 $16.01 $13.94 $12.77 $12.16 $10.79 $12.05 $9.94
Ratios/supplemental data
1994 1993 1992 1991 1990 1989 1988 1987 1986**
Net assets, end of period
(in thousands) $151,860 $87,742 $55,265 $33,933 $16,355 $11,620 $7,247 $2,984 $211
Ratio of expenses to average
daily net assets .75% .79% .80% .80%+ .80%+ .80%+ 1.10% 1.23% .95%++
Ratio of net income to average
daily net assets .33% .21% .17% 1.03% 2.61% 3.32% 1.21% 1.40% 3.83%++
Portfolio turnover rate
(excluding short-term
securities) 109% 81% 52% 79% 190% 48% 57% 57% 15%
Total return+++ 19.72% 8.92% 21.06% 18.55% 7.84% 16.18% (8.04)% 23.66% .69%***
<PAGE>
PAGE 7
* For a share outstanding throughout the period. Rounded to the nearest cent.
**Commencement of operations. Period from Jan. 20, 1986 to April 30, 1986.
***For the period from Jan. 20, 1986 to April 30, 1986, the annualized total return is 2.50%.
+ Commencing on May 1, 1989, IDS Life voluntarily limited total operating expenses to 0.8% of average daily net assets.
Had IDS Life not done so, the expenses per share and the ratio of expenses to average daily net assets would have been
$.11 and 0.86% and $.13 and 0.90% for the years ended April 30, 1991 and 1990, respectively.
++Adjusted to an annual basis.
+++Total return does not reflect the expenses that apply to the subaccounts or the policies.
</TABLE>
<PAGE>
PAGE 8
<TABLE>
<CAPTION>
Income Portfolio
Financial highlights (continued)
Fiscal period ended April 30,
Per share income and capital changes*
1994 1993 1992 1991 1990 1989 1988 1987 1986**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $10.19 $9.40 $9.19 $8.55 $8.93 $9.05 $9.42 $10.35 $10.00
Income (loss) from investment operations:
Net investment income .71 .76 .73 .75 .75 .70 .68 .74 .35
Net gains (losses) on
securities (both realized
and unrealized) (.48) .80 .21 .64 (.40) (.12) (.37) (.93) .35
Total from investment
operations .23 1.56 .94 1.39 .35 .58 .31 (.19) .70
Less distributions:
Dividends from net
investment income (.71) (.77) (.73) (.75) (.73) (.70) (.68) (.74) (.35)
Net asset value,
end of period $9.71 $10.19 $9.40 $9.19 $8.55 $8.93 $9.05 $9.42 $10.35
Ratios/supplemental data
1994 1993 1992 1991 1990 1989 1988 1987 1986**
Net assets, end of period
(in thousands) $33,770 $22,641 $16,306 $11,949 $8,831 $6,203 $4,456 $2,397 $215
Ratio of expenses to average
daily net assets .80% .80%+ 80%+ .80%+ .80%+ 1.11% 1.13% 1.72% .68%++
Ratio of net income to
average daily net assets 6.83% 7.66% 7.86% 8.41% 8.02% 7.87% 7.50% 6.27% 13.99%++
Portfolio turnover rate (excluding
short-term securities) 60% 47% 75% 55% 60% 99% 64% 38% -
Total return+++ 2.12% 17.17% 10.60% 16.77% 3.75% 6.70% 3.59% (1.58)% 6.98%***
* For a share outstanding throughout the period. Rounded to the nearest cent.
**Commencement of operations. Period from Jan. 20, 1986 to April 30, 1986.
*** For the period from Jan. 20, 1986 to April 30, 1986, the annualized total return is 25.49%.
+ Commencing on May 1, 1989, IDS Life voluntarily limited total operating expenses to 0.8% of average daily net
assets. Had IDS Life not done so, the expenses per share and the ratio of expenses to average daily net assets would
have been $.08 and 0.83%, $.08 and 0.88%, $.08 and 0.93% and $09.and 0.96% for the years ended April 30,
1993, 1992, 1991 and 1990, respectively.
++Adjusted to an annual basis.
+++Total return does not reflect the expenses that apply to the subaccounts or the policies.
</TABLE>
<PAGE>
PAGE 9
<TABLE>
<CAPTION>
Money Market Portfolio
Financial highlights (continued)
Fiscal period ended April 30,
Per share income and capital changes*
1994 1993 1992 1991 1990 1989 1988 1987 1986**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations:
Net investment income .03 .03 .05 .07 .08 .07 .06 .05 .02
Total from investment
operations .03 .03 .05 .07 .08 .07 .06 .05 .02
Less distributions:
Dividends from net
investment income (.03) (.03) (.05) (.07) (.08) (.07) (.06) (.05) (.02)
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Ratios/supplemental data
1994 1993 1992 1991 1990 1989 1988 1987 1986**
Net assets, end of period
(in thousands) $9,557 $8,181 $9,771 $9,596 $6,321 $4,721 $2,748 $1,007 $199
Ratio of expenses to
average daily net assets .60%+ .60%+ .60%+ .60%+ .60%+ 1.10%+ .96% 1.35% .64%++
Ratio of net income to
average daily net assets 2.61% 3.00% 4.60% 7.06% 8.26% 7.38% 5.89% 4.46% 6.01%++
Total return+++ 2.61% 3.04% 4.71% 7.41% 8.61% 7.52% 6.13% 5.38% 1.74%***
* For a share outstanding throughout the period. Rounded to the nearest cent.
**Commencement of operations. Period from Jan. 20, 1986 to April 30, 1986.
***For the period from Jan. 20, 1986 to April 30, 1986, the annualized total return is 6.35%.
+ Commencing on April 5, 1989, IDS Life voluntarily limited total operating expenses to 0.6% of average daily net
assets. Had IDS Life not done so, the expenses per share and the ratio of expenses to average daily net assets would
have been $.01 and 0.71%, $.01 and 0.74%, $.01 and 0.75%, $.01 and 0.86%, $.01 and 0.96% and $.01 and
1.35% for the years ended April 30, 1994, 1993, 1992, 1991, 1990 and 1989, respectively.
++Adjusted to an annual basis.
+++Total return does not reflect the expenses that apply to the subaccounts or the policies.
</TABLE>
<PAGE>
PAGE 10
<TABLE>
<CAPTION>
Managed Portfolio
Financial highlights (continued)
Fiscal period ended April 30,
Per share income and capital changes*
1994 1993 1992 1991 1990 1989 1988 1987 1986**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $13.84 $13.55 $13.29 $12.80 $11.22 $10.42 $11.40 $10.06 $10.00
Income (loss) from investment operation:
Net investment income .42 .44 .48 .57 .57 .61 .42 .40 .18
Net gains (losses) on
securities (both realized
and unrealized) 1.40 1.44 1.87 1.90 1.58 .80 (.84) 1.41 .06
Total from investment
operations 1.82 1.88 2.35 2.47 2.15 1.41 (.42) 1.81 .24
Less distributions:
Dividends from net
investment income (.42) (.44) (.48) (.57) (.57) (.61) (.42) (.40) (.18)
Distributions from
realized gains (1.39) (1.15) (1.61) (1.41) - - (.14) (.07) -
Total distributions (1.81) (1.59) (2.09) (1.98) (.57) (.61) (.56) (.47) (.18)
Net asset value, end of period $13.85 $13.84 $13.55 $13.29 $12.80 $11.22 $10.42 $11.40 $10.06
Ratios/supplemental data
1994 1993 1992 1991 1990 1989 1988 1987 1986**
Net assets, end of period
(in thousands) $160,706 $100,139 $72,366 $51,442 $32,725 $25,807 $21,901 $10,779 $588
Ratio of expenses to
average daily net assets .77% .79% .80% .80%+ .80%+ .72%+ 1.03% 1.30% .68%++
Ratio of net income to
average daily net assets 2.83% 3.15% 3.40% 4.38% 4.54% 5.76% 3.86% 3.53% 6.41%++
Portfolio turnover rate
(excluding short-term
securities) 106% 118% 122% 71% 107% 58% 67% 43% -
Total return+++ 13.30% 14.03% 17.84% 20.18% 19.37% 13.88% (3.57%) 18.32% 2.38%***
* For a share outstanding throughout the period. Rounded to the nearest cent.
**Commencement of operations. Period from Jan. 20, 1986 to April 30, 1986.
***For the period from Jan. 20, 1986 to April 30, 1986, the annualized total return is 8.71%.
+ Commencing on April 5, 1989, IDS Life voluntarily limited total operating expenses to 0.8% of average daily net
assets. Had IDS Life not done so, the expenses per share and the ratio of expenses to average daily net assets would
have been $.11 and 0.81%, $.10 and 0.82% and $.09 and 0.84% for the years ended April 30, 1991, 1990 and
1989 respectively.
++Adjusted to an annual basis.
+++Total return does not reflect the expenses that apply to the subaccounts or the policies.
</TABLE>
<PAGE>
PAGE 11
<TABLE>
<CAPTION>
Government Securities Portfolio
Financial highlights (continued)
Fiscal period ended April 30,
Per share income and capital changes*
1994 1993 1992 1991 1990 1989 1988 1987 1986**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $10.54 $9.69 $9.44 $8.88 $8.97 $9.00 $9.40 $10.32 $10.00
Income (loss) from investment operations:
Net investment income .60 .63 .66 .67 .69 .64 .64 .66 .34
Net gains (losses) on
securities (both realized
and unrealized) (.56) .94 .28 .56 (.09) (.03) (.40) (.92) .32
Total from investment
operations .04 1.57 .94 1.23 .60 .61 .24 (.26) .66
Less distributions:
Dividends from net
investment income (.60) (.63) (.66) (.67) (.69) (.64) (.64) (.66) (.34)
Distributions from
realized gains (.10) (.09) (.03) - - - - - -
Total distributions (.70) (.72) (.69) (.67) (.69) (.64) (.64) (.66) (.34)
Net asset value, end of period $ 9.88 $10.54 $9.69 $9.44 $8.88 $8.97 $9.00 $ 9.40 $10.32
Ratios/supplemental data
1994 1993 1992 1991 1990 1989 1988 1987 1986**
Net assets, end of period
(in thousands) $11,185 $9,619 $7,853 $6,314 $3,184 $2,773 $2,170 $1,230 $309
Ratio of expenses to
average daily net assets .80%+ .80%+ .80%+ .80%+ .80%+ 1.12%+ 1.13% 1.56% .68%++
Ratio of net income to
average daily net assets 5.59% 6.10% 6.79% 7.24% 7.34% 7.19% 7.04% 5.90% 1.47%++
Portfolio turnover rate
(excluding short-term
securities) 32% 15% 11% 18% 18% 14% 13% 43% -
Total return+++ 0.16% 16.58% 10.20% 14.30% 6.50% 7.12% 2.77% (2.73)% 6.60%***
* For a share outstanding throughout the period. Rounded to the nearest cent.
**Commencement of operations. Period from Jan. 20, 1986 to April 30, 1986.
***For the period from Jan. 20, 1986 to April 30, 1986, the annualized total return is 24.09%.
+ Commencing on April 5, 1989, IDS Life voluntarily limited total operating expenses to 0.8% of average daily net
assets. Had IDS Life not done so, the expenses per share and the ratio of expenses to average daily net assets would
have been $.09 and 0.85%, $.09 and 0.88%, $.09 and 0.92%, $.10 and 1.08%, $.11 and 1.12%, and $.11 and
1.21% for the years ended April 30, 1994, 1993, 1992, 1991, 1990 and 1989 respectively.
++Adjusted to an annual basis.
+++Total return does not reflect the expenses that apply to the subaccounts or the policies.
</TABLE>
The information in the preceding tables has been audited by KPMG
Peat Marwick LLP, independent auditors. The independent auditors'
report and additional information about the performance of the fund
is contained in the fund's annual report which, if not included
with this prospectus, may be obtained without charge.
<PAGE>
PAGE 12
Total returns
Average annual total returns as of April 30, 1994
Purchase 1 year 5 years Since
made ago ago inception*
Equity Portfolio +19.72% +15.07% +12.67%
S&P 500 +5.32 +11.25 +13.17
Lipper Growth
and Income Fund
Index +7.76 +10.73 +12.21
Cumulative total returns as of April 30, 1994
Purchase 1 year 5 years Since
made ago ago inception*
Equity Portfolio +19.72% +101.79% +168.42%
S&P 500 +5.32 +70.38 +178.37
Lipper Growth
and Income Fund
Index +7.76 +66.43 +159.48
Average annual total returns as of April 30, 1994
Purchase 1 year 5 years Since
made ago ago inception*
Income Portfolio +2.12% +9.90% +7.77%
Lehman Aggregate
Bond Index +0.83 +9.74 +9.31
Cumulative total returns as of April 30, 1994
Purchase 1 year 5 years Since
made ago ago inception*
Income Portfolio +2.12% +60.36% +85.77%
Lehman Aggregate +0.83 +59.18 +108.95
Bond Index
<PAGE>
PAGE 13
Average annual total returns as of April 30, 1994
Purchase 1 year 5 years Since
made ago ago inception*
Managed Portfolio +13.30% +16.91% +13.76%
S&P 500 +5.32 +11.25 +13.17
Lipper Balanced
Fund Index +4.61 +10.37 +10.49
Cumulative total returns as of April 30, 1994
Purchase 1 year 5 years Since
made ago ago inception*
Managed Portfolio +13.30% +118.41% +190.55%
S&P 500 +5.32 +70.38 +178.37
Lipper Balanced
Fund Index +4.61 +63.77 +128.42
Average annual total returns as of April 30, 1994
Purchase 1 year 5 years Since
made ago ago inception*
Government
Securities Portfolio +0.16% +9.39% +7.27%
Merrill Lynch 1-3
Gov't Index +1.62 +7.98 +7.79
Cumulative total returns as of April 30, 1994
Purchase 1 year 5 years Since
made ago ago inception*
Government
Securities Portfolio +0.16% +56.62% +78.78%
Merrill Lynch 1-3
Gov't Index +1.62 +46.83 +86.06
*Jan. 20, 1986
These examples show total returns from hypothetical investments in
each portfolio. These returns are compared to those of popular
indexes for the same periods. The results do not reflect the
expenses that apply to the subaccounts or the policies. Inclusion
of these charges would reduce total return for all periods shown.
For purposes of calculation, information about each portfolio
assumes the deduction of applicable portfolio expenses, makes no
adjustments for taxes that may have been paid on the reinvested <PAGE>
PAGE 14
income and capital gains, and covers a period of widely fluctuating
securities prices. Returns shown should not be considered a
representation of the fund's future performance.
The portfolio's investments may be different from those in the
indexes. The indexes reflect reinvestment of all distributions and
changes in market prices, but exclude brokerage commissions or
other fees.
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. However, the S&P 500 companies are generally larger
than those in which the fund invests.
Lipper Growth and Income Fund Index, published by Lipper Analytical
Services, Inc., includes 30 funds that are generally similar to
Equity Portfolio, although some funds in the index may have
somewhat different investment policies or objectives.
Lehman Aggregate Bond Index is made up of a representative list of
government and corporate bonds as well as asset-backed securities
and mortgage-backed securities. The index is frequently used as a
general measure of bond market performance. However, the
securities used to create the index may not be representative of
the bonds held in the Income Portfolio.
Merrill Lynch 1-3 Year Government Index is an unmanaged list of all
treasury and agency securities. The index is used here as a
general measure of performance. However, the securities used to
create the index may not be representative of the debt securities
held in the Government Securities Portfolio.
Lipper Balanced Fund Index, published by Lipper Analytical
Services, Inc., includes 10 funds that are generally similar to the
Managed Portfolio, although some funds in the index may have
somewhat different investment policies or objectives.
Yield calculations
Income Portfolio and Government Securities Portfolio may calculate
a 30-day annualized yield by dividing:
o net investment income per share deemed earned during a 30-day
period by
o the net asset value per share on the last day of the period,
and
o converting the result to a yearly equivalent figure.
This yield calculation does not include any surrender charge or
life insurance policy charges, which would reduce the yield quoted.
A portfolio's yield varies from day to day, mainly because share
values and net asset values (which are calculated daily) vary in
response to changes in interest rates. Net investment income
normally changes much less in the short run. Thus, when interest
rates rise and share values fall, yield tends to rise. When<PAGE>
PAGE 15
interest rates fall, yield tends to follow.
Money Market Portfolio calculates annualized simple and compound
yields based on a seven-day period.
Past yields should not be considered an indicator of future yields.
Key terms
Average annual total return - The annually compounded rate of
return over a given time period (usually two or more years) - total
return for the period converted to an equivalent annual figure.
Capital gains or losses - Increase or decrease in value of the
securities the portfolio holds. Gains are realized when securities
that have increased in value are sold. A portfolio also may have
unrealized gains or losses when securities increase or decrease in
value but are not sold.
Close of business - Normally 3 p.m. Central time each business day
(any day the New York Stock Exchange is open).
Distributions - Payments to the subaccounts of two types:
investment income (dividends) and realized net long-term capital
gains (capital gains distributions).
Investment income - Dividends and interest earned on securities
held by the portfolio.
Net asset value (NAV) - Value of a single share held by the
portfolio. It is the total market value of all of a portfolio's
investments and other assets, less any liabilities, divided by the
number of shares outstanding.
The NAV is the price the subaccount receives when it sells shares.
It usually changes from day to day, and is calculated at the close
of business. For the Income and Government Securities Portfolios,
NAV generally declines as interest rates increase and rises as
interest rates decline.
Total return - Sum of all returns for a given period, assuming
reinvestment of all distributions. Calculated by taking the total
value of shares at the end of the period (including shares acquired
by reinvestment), less the price of shares purchased at the
beginning of the period.
Yield - Net investment income earned per share for a specified time
period, divided by the share price at the end of the period.
Investment policies and risks
Equity Portfolio - Under normal market conditions, Equity Portfolio
invests in U.S. common stocks listed on national securities
exchanges that the investment manager believes have potential for
capital appreciation. The companies in which the portfolio invests
may be well-seasoned or relatively new and lesser-known as long as
the investment manager believes the stock is attractive for capital
growth.<PAGE>
PAGE 16
The portfolio also may invest in convertible securities, derivative
instruments, money market instruments and foreign investments.
Neither foreign investments nor derivative instruments will exceed
25% of the portfolio's total assets.
Income Portfolio - Under normal market conditions, Income Portfolio
primarily invests in debt securities. At least 50% of its net
assets are invested in corporate bonds of the four highest ratings,
in other corporate bonds the investment manager believes have the
same investment qualities, and in government bonds.
The portfolio also may invest in corporate bonds with lower
ratings, convertible securities, preferred stocks, derivative
instruments, foreign investments and money market instruments.
Foreign investments are limited to 25% of the portfolio's total
assets. The portfolio does not have a minimum rating requirement
for corporate bonds.
Money Market Portfolio - Under normal market conditions, Money
Market Portfolio invests primarily in high-quality, short-term,
marketable debt securities and other money market instruments. For
a description of money market securities, see Appendix B in the
SAI.
Managed Portfolio - This portfolio invests in common and preferred
stocks, convertible securities, debt securities, derivative
instruments, foreign securities and money market instruments. The
portfolio manager continuously will adjust the mix of investments
subject to the following three net asset limits: 1) up to 75% in
equity securities (stocks), 2) up to 75% in bonds or other debt
securities, and 3) up to 100% in money market instruments. Stocks
and debt securities will be selected for capital appreciation,
income or both. Money market instruments will be selected for
current income and safety of principal.
Of the assets invested in bonds, at least 50% will be in corporate
bonds of the four highest ratings, in other corporate bonds the
investment manager believes have the same investment qualities, and
in government bonds. For the other 50% invested in corporate
bonds, there is no minimum rating requirement. Foreign investments
are limited to 25% of the portfolio's total assets.
Government Securities Portfolio - Under normal market conditions,
Government Securities Portfolio invests in securities that are
issued or guaranteed by a U.S. governmental unit. The portfolio
also may invest in derivative instruments on U.S. government
securities. Shares of this portfolio are not insured or guaranteed
by the U.S. government or by any other person or entity.
The various types of investments the portfolio managers use 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 smaller or foreign companies may be subject to abrupt or<PAGE>
PAGE 17
erratic price movements. Also, small companies often have limited
product lines, smaller markets or fewer financial resources.
Therefore, some of the securities in which a portfolio invests
involve substantial risk and may be considered speculative.
Preferred stocks: If a company earns a profit, it generally must
pay its preferred stockholders a dividend at a pre-established
rate.
Convertible securities: These securities generally are preferred
stocks or bonds that can be exchanged for other securities, usually
common stock, at prestated prices. When the trading price of the
common stock makes the exchange likely, the convertible securities
trade more like common stock.
Investment grade bonds: The price of an investment grade bond
fluctuates as interest rates change or if its credit rating is
upgraded or downgraded.
Debt securities below investment grade: The price of these bonds
may react more to the ability of a company to pay interest and
principal when due than to changes in interest rates. They have
greater price fluctuations, are more likely to experience a
default, and sometimes are referred to as "junk bonds." Reduced
market liquidity for these bonds may occasionally make it more
difficult to value them. In valuing bonds, a portfolio relies both
on independent rating agencies and the investment manager's credit
analysis. Securities that are subsequently downgraded in quality
may continue to be held and will be sold only when the portfolio's
investment manager believes it is advantageous to do so.
Bond ratings of holdings for fiscal year ended
April 30, 1994 for Income Portfolio
<TABLE><CAPTION>
IDS
S&P Rating Protection of Assessment
Percent of (or Moody's principal and of unrated
net assets equivalent) interest securities
<S> <C> <C> <C>
3.10% AAA Highest quality -- %
3.80 AA High quality --
12.70 A Upper medium grade 0.63
26.17 BBB Medium grade 0.32
10.70 BB Moderately speculative --
13.68 B Speculative --
0.17 CCC Highly speculative --
-- CC Poor quality --
-- C Lowest quality --
-- D In default --
1.35 NR Unrated securities 0.40
</TABLE>
<TABLE><CAPTION>
Bond ratings of holdings for fiscal year ended
April 30, 1994 for Managed Portfolio
IDS
S&P Rating Protection of Assessment
Percent of (or Moody's principal and of unrated
net assets equivalent) interest securities
<S> <C> <C> <C>
2.49% AAA Highest quality -- %
1.30 AA High quality --
4.28 A Upper medium grade 0.11
5.21 BBB Medium grade --
4.61 BB Moderately speculative --
5.36 B Speculative 0.08<PAGE>
PAGE 18
0.09 CCC Highly speculative --
-- CC Poor quality --
-- C Lowest quality --
-- D In default --
0.82 NR Unrated securities 0.63
</TABLE>
(See Appendix G to the SAI for further information regarding
ratings.)
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. To
comply with tax laws, a 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, a portfolio
may have to sell securities to have sufficient cash to pay the
dividends.
Mortgage-backed securities: All portfolios except Money Market may
invest in U.S. government securities representing part ownership of
pools of mortgage loans. A pool, or group, of mortgage loans
issued by such lenders as mortgage bankers, commercial banks and
savings and loan associations, is assembled and mortgage pass-
through certificates are offered to investors through securities
dealers. 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 the certificates.
Foreign investments: Securities of foreign companies and
governments may be traded in the United States, but often they are
traded only on foreign markets. Frequently, there is less
information about foreign companies and less government supervision
of foreign markets. Foreign investments are subject to political
and economic risks of the countries in which the investments are
made including the possibility of seizure or nationalization of
companies, imposition of withholding taxes on income, establishment
of exchange controls or adoption of other restrictions that might
affect an investment adversely. If an investment is made in a
foreign market, the local currency must be purchased. This is done
by using a forward contract in which the price of the foreign
currency in U.S. dollars is established on the date the trade is
made, but delivery of the currency is not made until the securities
are received. As long as the portfolio holds foreign currencies or
securities valued in foreign currencies, the price of a portfolio
share will be affected by changes in the value of the currencies
relative to the U.S. dollar. Because of the limited trading volume
in some foreign markets, efforts to buy or sell a security may
change the price of the security, and it may be difficult to
complete the transaction.
Derivative instruments: The portfolio managers 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<PAGE>
PAGE 19
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 a portfolio manager to change the investment performance
characteristics very quickly and at lower costs. Risks include
losses of premiums, rapid changes in prices, defaults by other
parties, and inability to close such instruments. A 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 portfolios' custodian will maintain, in a segregated
account, cash or liquid high-grade debt securities that are marked
to market daily and are at least equal in value to the portfolios'
obligations. No more than 5% of each 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. For further information, see the options and
futures appendixes in the SAI.
Securities and derivative instruments that are illiquid: Illiquid
means the security or derivative instrument 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. All securities and derivative instruments, however,
can be sold in private sales, and many may be sold to other
institutions and qualified buyers or on foreign markets. Each
portfolio manager will follow guidelines established by the board
of directors 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 each
portfolio's net assets will be held in securities and derivative
instruments that are illiquid.
Money market instruments: Short-term debt securities rated in the
top two grades are used to meet daily cash needs and at various
times to hold assets until better investment opportunities arise.
Generally less than 25% of each of Equity, Income, Managed and
Government Securities Portfolio's assets are in these money market
instruments. However, for temporary defensive purposes these
investments could exceed that amount for a limited period of time.
The investment policies described above may be changed by the board
of directors.
Lending portfolio securities: Each 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 shareholders approve otherwise, loans
may not exceed 30% of a portfolio's net assets.
<PAGE>
PAGE 20
Valuing assets
Money Market Portfolio's securities are valued at amortized cost.
In valuing assets of Equity, Income, Managed and Government
Securities Portfolios:
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 Securities and assets without readily available market values
are valued according to methods selected in good faith by the
board of directors.
o Assets and liabilities denominated in foreign currencies are
translated daily into U.S. dollars at a rate of exchange set
as near to the close of the day as practicable.
How to invest, transfer or redeem shares
How to invest
You may invest in the portfolios of the fund only by buying a
variable life insurance policy offered by IDS Life or IDS Life of
New York. Your financial planner will help you fill out and submit
an application. For further information concerning acceptance of
your application, see the variable life insurance policy
prospectus.
How to transfer among subaccounts
You can transfer all or part of your value in a subaccount to one
or more of the other subaccounts. That way, you transfer to a
portfolio with a different investment objective. Please refer to
your variable life insurance policy prospectus for more information
about transfers among subaccounts.
Redeeming shares
The fund will buy (redeem) any shares presented by the subaccounts.
Policy surrender details are described in your variable life
insurance policy prospectus. Payment generally will be made within
seven days of the surrender request. The amount may be more or
less than the amount invested. Shares will be redeemed at net
asset value at the close of business on the day the request is
accepted at the Minneapolis office for IDS Life or at the Albany
office for IDS Life of New York. If the request arrives after the
close of business, the price per share will be the net asset value
at the close of business on the next business day.
Distributions and taxes
The fund distributes to shareholders (the subaccounts) net
investment income and net capital gains. It does so to qualify as
a regulated investment company and to avoid paying corporate income
and excise taxes.
<PAGE>
PAGE 21
Dividend and capital gain distributions
The fund distributes its net investment income (dividends and
interest earned on securities held by the fund, less operating
expenses) to shareholders (the subaccounts) at the end of each
calendar quarter for the Equity and Managed Portfolios. For the
Income, Money Market and Government Securities Portfolios, net
investment income is distributed monthly. Short-term capital gains
distributed are included in net investment income. Net realized
capital gains, if any, from selling securities are distributed at
the end of the calendar year. Before they're distributed, both net
investment income and net capital gains are included in the value
of each share. After they're distributed, the value of each share
drops by the per-share amount of the distribution. (Since the
distributions are reinvested, the total value of the holdings will
not change.) The reinvestment price is the net asset value at
close of business on the day the distribution is paid.
Taxes
The Internal Revenue Service (IRS) has issued final regulations
relating to the diversification requirements under section 817(h)
of the Internal Revenue Code. Each portfolio intends to comply
with these requirements.
Federal income taxation of separate accounts, life insurance
companies and variable life insurance policies is discussed in the
variable life insurance policy prospectus.
How the fund is organized
IDS Life Series Fund, Inc. is a series mutual fund with five
portfolios: Equity Portfolio, Income Portfolio, Money Market
Portfolio, Managed Portfolio and Government Securities Portfolio.
The fund is a diversified, open-end management investment company,
as defined in the Investment Company Act of 1940. It was
incorporated in Minnesota on May 8, 1985. The fund headquarters
are at IDS Tower 10, Minneapolis, MN 55440-0010.
Shares
The fund is owned by the subaccounts, its shareholders. Each of
the five portfolios issues its own series of common stock. All
shares issued by each portfolio are of the same class-capital
stock. Par value is $.001 per share. Both full and fractional
shares can be issued. The shares of each portfolio making up IDS
Life Series Fund, Inc. represent an interest in that portfolio's
assets only (and profits or losses) and, in the event of
liquidation, each share of a portfolio would have the same rights
to dividends and assets as every other share of that portfolio.
Voting rights
For a discussion of the rights of policy owners concerning the
voting of shares held by the subaccounts, please see the variable
life insurance policy prospectus. Each share of a portfolio has
one vote. On an issue affecting a particular portfolio, its shares
vote as a separate series. On some issues, all shares of the fund<PAGE>
PAGE 22
vote together as one series. All shares have cumulative voting
when voting on the election of directors.
The goals of the portfolios can be changed only if the majority of
the outstanding shares agree. The vote of a majority of the
outstanding voting shares means the vote:
o of 67% or more of the voting shares present at such meeting, if
the holders of more than 50% of the outstanding voting shares are
present or represented by proxy; or
o of more than 50% of the outstanding voting shares, whichever is
less.
Shareholder meetings
The fund does not hold annual shareholder meetings. However, the
directors may call meetings at their discretion, or on demand by
holders of 10% or more of the outstanding shares, to elect or
remove directors.
Portfolio managers
Equity Portfolio
Marty Hurwitz joined IDS in 1987 and serves as portfolio manager.
He was appointed to manage this portfolio in July 1993. He also
manages accounts for IDS Advisory Portfolio Management Group, a
division of IDS Financial Services Inc., and serves as co-manager
of IDS Life Funds A and B.
Income Portfolio
Lorraine Hart joined IDS in 1984 and serves as vice president and
investment officer-insurance investments. She has managed this
portfolio since 1991. She also manages the invested asset
portfolios of IDS Life Insurance Company, IDS Life Insurance
Company of New York, and American Enterprise Life Insurance
Company.
Money Market Portfolio
Gregg Syverson joined IDS in 1984 and serves as portfolio manager.
He has managed this portfolio since 1992. He also manages the
short-term investments and debt for IDS, IDS Financial Services,
IDS Life and IDS Certificate Company.
Managed Portfolio
Kurt Winters joined IDS in 1987 and serves as portfolio manager.
He was appointed to manage this portfolio in 1992. He is also on
the growth income team which manages IDS Stock Fund. Prior to
joining the growth income team as associate manager in 1991, he
served as an IDS stock analyst.
Deb Pederson joined IDS in 1986 and serves as portfolio manager.
She has managed the fixed income portfolio of Managed Portfolio
since 1993. She also manages the fixed income portfolio of IDS
Life Managed Fund and the low grade invested assets of IDS Life,
IDS Life of New York and American Enterprise Life Insurance
Company.
<PAGE>
PAGE 23
Government Securities Portfolio
Jim Snyder joined IDS in 1989 and serves as portfolio manager. He
was appointed to manage this portfolio in April 1994. He also
serves as portfolio manager of IDS Strategy, Short-Term Income Fund
and as associate portfolio manager of IDS Federal Income Fund.
Prior to joining IDS, he had been a Quantitative Investment Analyst
at Harris Trust.
Directors and officers
Shareholders elect a board of directors 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.
On April 30, 1994 the fund's directors and officers did not own any
shares of the fund.
Investment manager
The fund pays IDS Life for managing its portfolio, providing
administrative services and serving as transfer agent.
Under its Investment Management and Services Agreement, IDS Life
determines which securities will be purchased, held or sold
(subject to the direction and control of the fund's board of
directors). For these services the fund pays IDS Life a fee based
on the average daily net assets of the portfolios at the following
rates: 0.7% on an annual basis for Equity, Income, Managed and
Government Securities Portfolios and 0.5% for Money Market
Portfolio.
Under the Agreement, the fund also pays taxes, brokerage
commissions and nonadvisory expenses. However, IDS Life has agreed
to a voluntary limit of the annual charge of 0.1% of the average
daily net assets of the fund for these nonadvisory expenses. Total
net fees and expenses incurred after the limitations by each
portfolio amounted to 0.8% of average daily net assets for Equity,
Income, Managed and Government Securities Portfolios and 0.6% for
Money Market Portfolio for the fiscal year ended April 30, 1994.
IDS Life reserves the right to discontinue limiting these
nonadvisory expenses at 0.1%. However, its present intention is to
continue the limit until the time that actual expenses are less
than the limit.
Investment Advisory Agreement
IDS Life and IDS have an Investment Advisory Agreement which calls
for IDS Life to pay IDS a fee for investment advice about the
fund's Portfolios. The fee paid by IDS Life is 0.25% of the fund's
average net assets for the year. IDS also executes purchases and
sales and negotiates brokerage as directed by IDS Life.
Total fees and expenses (excluding taxes and brokerage commissions)
cannot exceed the most restrictive applicable state expense
limitation.<PAGE>
PAGE 24
About IDS
General information
IDS Life Series Fund is managed by IDS Life, a wholly owned
subsidiary of IDS, which itself is a wholly owned subsidiary of the
American Express Company (American Express), a financial services
company headquartered in New York City.
IDS Life is a stock life insurance company organized in 1957 under
the laws of the State of Minnesota and located at IDS Tower 10,
Minneapolis, MN 55440-0010. IDS Life conducts a conventional life
insurance business in the District of Columbia and all states
except New York.
The IDS family of companies offers not only insurance and
annuities, but also mutual funds, investment certificates and a
broad range of financial management services.
IDS has been providing financial services since 1894. Besides
managing investments for all publicly offered funds in the IDS
MUTUAL FUND GROUP, IDS also manages investments for itself and its
subsidiaries, IDS Certificate Company and IDS Life. Total assets
under management on April 30, 1994 were more than $100 billion.
IDS Financial Services Inc., serves individuals and businesses
through its nationwide network of more than 175 offices and more
than 7,500 planners.
Other subsidiaries provide investment management and related
services for pension, profit-sharing, employee savings and
endowment funds of businesses and institutions.<PAGE>
PAGE 25
IDS Life Series Fund
Prospectus
October 28, 1994
IDS Life Series Fund, Inc. (the fund) is a series mutual fund with
six portfolios, each with a different investment objective.
Equity Portfolio is a stock portfolio.
Income Portfolio is a bond portfolio.
Money Market Portfolio is a money market portfolio.
An investment in Money Market Portfolio is neither insured nor
guaranteed by the U.S. Government and there can be no assurance
that the portfolio will be able to maintain a stable net asset
value of $1 per share.
Managed Portfolio is a managed portfolio.
Government Securities Portfolio is a government securities
portfolio.
International Equity Portfolio is an international stock portfolio.
This prospectus contains information about the fund that you should
know before investing. Read it along with your variable life
insurance policy prospectus before you invest and keep them for
future reference.
Additional facts about the fund are in a Statement of Additional
Information (SAI), filed with the Securities and Exchange
Commission (SEC). The SAI, dated October 28, 1994, is incorporated
here by reference. For a free copy, contact IDS Life Series Fund,
Inc.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC
OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SEC OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
IDS LIFE IS NOT A BANK, AND THE SECURITIES IT OFFERS ARE NOT
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY ANY BANK
NOR ARE THEY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
IDS Life Series Fund, Inc.
IDS Tower 10
Minneapolis, MN 55440-0010
612-671-3733
TTY: 800-285-8846
New York Service
518-869-8613
<PAGE>
PAGE 26
Table of contents
The fund in brief
Goals and types of portfolio investments
Manager and distributor
Variable accounts
Sales charge
Expenses
Performance
Financial highlights
Total returns
Yield calculations
Key terms
Investment policies and risks
Facts about investments and their risks
Valuing assets
How to invest, transfer or redeem shares
How to invest
How to transfer among subaccounts
Redeeming shares
Distributions and taxes
Dividend and capital gain distributions
Taxes
How the fund is organized
Shares
Voting rights
Shareholder meetings
Portfolio managers
Directors and officers
Investment manager
Investment advisory agreement
About IDS
General information
<PAGE>
PAGE 27
The fund in brief
Goals and types of portfolio investments
IDS Life Series Fund is a series mutual fund. It has six
portfolios whose goals and types of investments are as follows:
Equity Portfolio's goal is capital appreciation. The portfolio
invests primarily in U.S. common stocks and securities convertible
into common stock.
Income Portfolio's goal is to maximize current income while
attempting to conserve the value of the investment and to continue
the high level of income for the longest period of time. The
portfolio invests primarily in corporate bonds of the four highest
ratings.
Money Market Portfolio's goal is to provide maximum current income
consistent with liquidity and conservation of capital. The
portfolio invests primarily in high-quality, short-term debt
securities.
Managed Portfolio's goal is to maximize total investment return
through a combination of capital appreciation and current income.
The portfolio invests in common and preferred stocks, convertible
securities, debt securities and money market instruments.
Government Securities Portfolio's goal is to provide a high level
of current income and safety of principal. The portfolio invests
in debt obligations issued or guaranteed by U.S. governmental
units.
International Equity Portfolio's goal is capital appreciation and
it invests primarily in common stocks of foreign issuers.
Because any investment involves risk, achieving these goals cannot
be guaranteed. Only the portfolio owners can change the goals.
Manager and distributor
The fund is managed by IDS Life Insurance Company (IDS Life), a
subsidiary of IDS Financial Corporation (IDS). IDS has an
agreement with IDS Life to furnish investment advice for funds
managed by IDS Life. IDS Life and IDS Life Insurance Company of
New York (IDS Life of New York) buy fund shares for their variable
accounts used in connection with their variable life insurance
policies. In the future, the fund may offer shares to the owners
of other variable life and variable annuity contracts issued by IDS
Life or by IDS Life of New York.
Variable accounts
You may not buy (nor will you own) shares of the fund directly.
You invest by buying a variable life insurance policy from IDS Life
or IDS Life of New York and allocating your premium payments among<PAGE>
PAGE 28
different subaccounts of the variable accounts that invest in these
portfolios.
Sales charge
Cost of insurance charges, premium expense charges, surrender
charges, mortality and expense risk fees and other charges under
your policy are described in the variable life insurance policy
prospectus. There is no sales charge for the sale or redemption of
fund shares.
Expenses
The fund pays IDS Life a fee for managing its investment portfolios
and for certain administrative services. The fund also pays
certain nonadvisory expenses. See "Investment manager" under "How
the fund is organized."
<PAGE>
PAGE 29
Performance
Financial highlights
<TABLE>
<CAPTION>
Equity Portfolio
Financial highlights
The tables below show certain important financial information for evaluating each portfolio's results.
Fiscal period ended April 30,
Per share income and capital changes*
1994 1993 1992 1991 1990 1989 1988 1987 1986**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $16.87 $16.01 $13.94 $12.77 $12.16 $10.79 $12.05 $9.94 $10.00
Income (loss) from investment operations:
Net investment income .06 .03 .03 .13 .35 .36 .15 .16 .13
Net gains (losses) on
securities (both realized
and unrealized 3.26 1.40 2.90 2.09 .61 1.37 (1.13) 2.17 (.06)
Total from investment
operations 3.32 1.43 2.93 2.22 .96 1.73 (0.98) 2.33 .07
Less distributions:
Dividends from net
investment income (.06) (.03) (.03) (.13) (.35) (.36) (.15) (.16) (.13)
Distributions from
realized gains (2.03) (.54) (.83) (.92) - - (.13) (.06) -
Total distributions (2.09) (.57) (.86) (1.05) (.35) (.36) (.28) (.22) (.13)
Net asset value,
end of period $18.10 $16.87 $16.01 $13.94 $12.77 $12.16 $10.79 $12.05 $9.94
Ratios/supplemental data
1994 1993 1992 1991 1990 1989 1988 1987 1986**
Net assets, end of period
(in thousands) $151,860 $87,742 $55,265 $33,933 $16,355 $11,620 $7,247 $2,984 $211
Ratio of expenses to average
daily net assets .75% .79% .80% .80%+ .80%+ .80%+ 1.10% 1.23% .95%++
Ratio of net income to average
daily net assets .33% .21% .17% 1.03% 2.61% 3.32% 1.21% 1.40% 3.83%++
Portfolio turnover rate
(excluding short-term
securities) 109% 81% 52% 79% 190% 48% 57% 57% 15%
Total return+++ 19.72% 8.92% 21.06% 18.55% 7.84% 16.18% (8.04)% 23.66% .69%***
* For a share outstanding throughout the period. Rounded to the nearest cent.
**Commencement of operations. Period from Jan. 20, 1986 to April 30, 1986.
***For the period from Jan. 20, 1986 to April 30, 1986, the annualized total return is 2.50%.
+ Commencing on May 1, 1989, IDS Life voluntarily limited total operating expenses to 0.8% of average daily net assets.
Had IDS Life not done so, the expenses per share and the ratio of expenses to average daily net assets would have been
$.11 and 0.86% and $.13 and 0.90% for the years ended April 30, 1991 and 1990, respectively.
++Adjusted to an annual basis.
+++Total return does not reflect the expenses that apply to the subaccounts or the policies.
</TABLE>
<PAGE>
PAGE 30
<TABLE>
<CAPTION>
Income Portfolio
Financial highlights (continued)
Fiscal period ended April 30,
Per share income and capital changes*
1994 1993 1992 1991 1990 1989 1988 1987 1986**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $10.19 $9.40 $9.19 $8.55 $8.93 $9.05 $9.42 $10.35 $10.00
Income (loss) from investment operations:
Net investment income .71 .76 .73 .75 .75 .70 .68 .74 .35
Net gains (losses) on
securities (both realized
and unrealized) (.48) .80 .21 .64 (.40) (.12) (.37) (.93) .35
Total from investment
operations .23 1.56 .94 1.39 .35 .58 .31 (.19) .70
Less distributions:
Dividends from net
investment income (.71) (.77) (.73) (.75) (.73) (.70) (.68) (.74) (.35)
Net asset value,
end of period $9.71 $10.19 $9.40 $9.19 $8.55 $8.93 $9.05 $9.42 $10.35
Ratios/supplemental data
1994 1993 1992 1991 1990 1989 1988 1987 1986**
Net assets, end of period
(in thousands) $33,770 $22,641 $16,306 $11,949 $8,831 $6,203 $4,456 $2,397 $215
Ratio of expenses to average
daily net assets .80% .80%+ 80%+ .80%+ .80%+ 1.11% 1.13% 1.72% .68%++
Ratio of net income to
average daily net assets 6.83% 7.66% 7.86% 8.41% 8.02% 7.87% 7.50% 6.27% 13.99%++
Portfolio turnover rate (excluding
short-term securities) 60% 47% 75% 55% 60% 99% 64% 38% -
Total return+++ 2.12% 17.17% 10.60% 16.77% 3.75% 6.70% 3.59% (1.58)% 6.98%***
* For a share outstanding throughout the period. Rounded to the nearest cent.
**Commencement of operations. Period from Jan. 20, 1986 to April 30, 1986.
*** For the period from Jan. 20, 1986 to April 30, 1986, the annualized total return is 25.49%.
+ Commencing on May 1, 1989, IDS Life voluntarily limited total operating expenses to 0.8% of average daily net
assets. Had IDS Life not done so, the expenses per share and the ratio of expenses to average daily net assets would
have been $.08 and 0.83%, $.08 and 0.88%, $.08 and 0.93% and $09.and 0.96% for the years ended April 30,
1993, 1992, 1991 and 1990, respectively.
++Adjusted to an annual basis.
+++Total return does not reflect the expenses that apply to the subaccounts or the policies.
</TABLE>
<PAGE>
PAGE 31
<TABLE>
<CAPTION>
Money Market Portfolio
Financial highlights (continued)
Fiscal period ended April 30,
Per share income and capital changes*
1994 1993 1992 1991 1990 1989 1988 1987 1986**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations:
Net investment income .03 .03 .05 .07 .08 .07 .06 .05 .02
Total from investment
operations .03 .03 .05 .07 .08 .07 .06 .05 .02
Less distributions:
Dividends from net
investment income (.03) (.03) (.05) (.07) (.08) (.07) (.06) (.05) (.02)
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Ratios/supplemental data
1994 1993 1992 1991 1990 1989 1988 1987 1986**
Net assets, end of period
(in thousands) $9,557 $8,181 $9,771 $9,596 $6,321 $4,721 $2,748 $1,007 $199
Ratio of expenses to
average daily net assets .60%+ .60%+ .60%+ .60%+ .60%+ 1.10%+ .96% 1.35% .64%++
Ratio of net income to
average daily net assets 2.61% 3.00% 4.60% 7.06% 8.26% 7.38% 5.89% 4.46% 6.01%++
Total return+++ 2.61% 3.04% 4.71% 7.41% 8.61% 7.52% 6.13% 5.38% 1.74%***
* For a share outstanding throughout the period. Rounded to the nearest cent.
**Commencement of operations. Period from Jan. 20, 1986 to April 30, 1986.
***For the period from Jan. 20, 1986 to April 30, 1986, the annualized total return is 6.35%.
+ Commencing on April 5, 1989, IDS Life voluntarily limited total operating expenses to 0.6% of average daily net
assets. Had IDS Life not done so, the expenses per share and the ratio of expenses to average daily net assets would
have been $.01 and 0.71%, $.01 and 0.74%, $.01 and 0.75%, $.01 and 0.86%, $.01 and 0.96% and $.01 and
1.35% for the years ended April 30, 1994, 1993, 1992, 1991, 1990 and 1989, respectively.
++Adjusted to an annual basis.
+++Total return does not reflect the expenses that apply to the subaccounts or the policies.
</TABLE>
<PAGE>
PAGE 32
<TABLE>
<CAPTION>
Managed Portfolio
Financial highlights (continued)
Fiscal period ended April 30,
Per share income and capital changes*
1994 1993 1992 1991 1990 1989 1988 1987 1986**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $13.84 $13.55 $13.29 $12.80 $11.22 $10.42 $11.40 $10.06 $10.00
Income (loss) from investment operation:
Net investment income .42 .44 .48 .57 .57 .61 .42 .40 .18
Net gains (losses) on
securities (both realized
and unrealized) 1.40 1.44 1.87 1.90 1.58 .80 (.84) 1.41 .06
Total from investment
operations 1.82 1.88 2.35 2.47 2.15 1.41 (.42) 1.81 .24
Less distributions:
Dividends from net
investment income (.42) (.44) (.48) (.57) (.57) (.61) (.42) (.40) (.18)
Distributions from
realized gains (1.39) (1.15) (1.61) (1.41) - - (.14) (.07) -
Total distributions (1.81) (1.59) (2.09) (1.98) (.57) (.61) (.56) (.47) (.18)
Net asset value, end of period $13.85 $13.84 $13.55 $13.29 $12.80 $11.22 $10.42 $11.40 $10.06
Ratios/supplemental data
1994 1993 1992 1991 1990 1989 1988 1987 1986**
Net assets, end of period
(in thousands) $160,706 $100,139 $72,366 $51,442 $32,725 $25,807 $21,901 $10,779 $588
Ratio of expenses to
average daily net assets .77% .79% .80% .80%+ .80%+ .72%+ 1.03% 1.30% .68%++
Ratio of net income to
average daily net assets 2.83% 3.15% 3.40% 4.38% 4.54% 5.76% 3.86% 3.53% 6.41%++
Portfolio turnover rate
(excluding short-term
securities) 106% 118% 122% 71% 107% 58% 67% 43% -
Total return+++ 13.30% 14.03% 17.84% 20.18% 19.37% 13.88% (3.57%) 18.32% 2.38%***
* For a share outstanding throughout the period. Rounded to the nearest cent.
**Commencement of operations. Period from Jan. 20, 1986 to April 30, 1986.
***For the period from Jan. 20, 1986 to April 30, 1986, the annualized total return is 8.71%.
+ Commencing on April 5, 1989, IDS Life voluntarily limited total operating expenses to 0.8% of average daily net
assets. Had IDS Life not done so, the expenses per share and the ratio of expenses to average daily net assets would
have been $.11 and 0.81%, $.10 and 0.82% and $.09 and 0.84% for the years ended April 30, 1991, 1990 and
1989 respectively.
++Adjusted to an annual basis.
+++Total return does not reflect the expenses that apply to the subaccounts or the policies.
</TABLE>
<PAGE>
PAGE 33
<TABLE>
<CAPTION>
Government Securities Portfolio
Financial highlights (continued)
Fiscal period ended April 30,
Per share income and capital changes*
1994 1993 1992 1991 1990 1989 1988 1987 1986**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $10.54 $9.69 $9.44 $8.88 $8.97 $9.00 $9.40 $10.32 $10.00
Income (loss) from investment operations:
Net investment income .60 .63 .66 .67 .69 .64 .64 .66 .34
Net gains (losses) on
securities (both realized
and unrealized) (.56) .94 .28 .56 (.09) (.03) (.40) (.92) .32
Total from investment
operations .04 1.57 .94 1.23 .60 .61 .24 (.26) .66
Less distributions:
Dividends from net
investment income (.60) (.63) (.66) (.67) (.69) (.64) (.64) (.66) (.34)
Distributions from
realized gains (.10) (.09) (.03) - - - - - -
Total distributions (.70) (.72) (.69) (.67) (.69) (.64) (.64) (.66) (.34)
Net asset value, end of period $ 9.88 $10.54 $9.69 $9.44 $8.88 $8.97 $9.00 $ 9.40 $10.32
Ratios/supplemental data
1994 1993 1992 1991 1990 1989 1988 1987 1986**
Net assets, end of period
(in thousands) $11,185 $9,619 $7,853 $6,314 $3,184 $2,773 $2,170 $1,230 $309
Ratio of expenses to
average daily net assets .80%+ .80%+ .80%+ .80%+ .80%+ 1.12%+ 1.13% 1.56% .68%++
Ratio of net income to
average daily net assets 5.59% 6.10% 6.79% 7.24% 7.34% 7.19% 7.04% 5.90% 1.47%++
Portfolio turnover rate
(excluding short-term
securities) 32% 15% 11% 18% 18% 14% 13% 43% -
Total return+++ 0.16% 16.58% 10.20% 14.30% 6.50% 7.12% 2.77% (2.73)% 6.60%***
* For a share outstanding throughout the period. Rounded to the nearest cent.
**Commencement of operations. Period from Jan. 20, 1986 to April 30, 1986.
***For the period from Jan. 20, 1986 to April 30, 1986, the annualized total return is 24.09%.
+ Commencing on April 5, 1989, IDS Life voluntarily limited total operating expenses to 0.8% of average daily net
assets. Had IDS Life not done so, the expenses per share and the ratio of expenses to average daily net assets would
have been $.09 and 0.85%, $.09 and 0.88%, $.09 and 0.92%, $.10 and 1.08%, $.11 and 1.12%, and $.11 and
1.21% for the years ended April 30, 1994, 1993, 1992, 1991, 1990 and 1989 respectively.
++Adjusted to an annual basis.
+++Total return does not reflect the expenses that apply to the subaccounts or the policies.
</TABLE>
The information in the preceding tables has been audited by KPMG
Peat Marwick LLP, independent auditors. The independent auditors'
report and additional information about the performance of the fund
is contained in the fund's annual report which, if not included
with this prospectus, may be obtained without charge.
<PAGE>
PAGE 34
Total returns
Average annual total returns as of April 30, 1994
Purchase 1 year 5 years Since
made ago ago inception*
Equity Portfolio +19.72% +15.07% +12.67%
S&P 500 +5.32 +11.25 +13.17
Lipper Growth
and Income Fund
Index +7.76 +10.73 +12.21
Cumulative total returns as of April 30, 1994
Purchase 1 year 5 years Since
made ago ago inception*
Equity Portfolio +19.72% +101.79% +168.42%
S&P 500 +5.32 +70.38 +178.37
Lipper Growth
and Income Fund
Index +7.76 +66.43 +159.48
Average annual total returns as of April 30, 1994
Purchase 1 year 5 years Since
made ago ago inception*
Income Portfolio +2.12% +9.90% +7.77%
Lehman Aggregate
Bond Index +0.83 +9.74 +9.31
Cumulative total returns as of April 30, 1994
Purchase 1 year 5 years Since
made ago ago inception*
Income Portfolio +2.12% +60.36% +85.77%
Lehman Aggregate
Bond Index +0.83 +59.18 +108.95
<PAGE>
PAGE 35
Average annual total returns as of April 30, 1994
Purchase 1 year 5 years Since
made ago ago inception*
Managed Portfolio +13.30% +16.91% +13.76%
S&P 500 +5.32 +11.25 +13.17
Lipper Balanced
Fund Index +4.61 +10.37 +10.49
Cumulative total returns as of April 30, 1994
Purchase 1 year 5 years Since
made ago ago inception*
Managed Portfolio +13.30% +118.41% +190.55%
S&P 500 +5.32 +70.38 +178.37
Lipper Balanced
Fund Index +4.61 +63.77 +128.42
Average annual total returns as of April 30, 1994
Purchase 1 year 5 years Since
made ago ago inception*
Government
Securities Portfolio +0.16% +9.39% +7.27%
Merrill Lynch 1-3
Gov't Index +1.62 +7.98 +7.79
Cumulative total returns as of April 30, 1994
Purchase 1 year 5 years Since
made ago ago inception*
Government
Securities Portfolio +0.16% +56.62% +78.78%
Merrill Lynch 1-3
Gov't Index +1.62 +46.83 +86.06
*Jan. 20, 1986
These examples show total returns from hypothetical investments in
each portfolio. These returns are compared to those of popular
indexes for the same periods. The results do not reflect the
expenses that apply to the subaccounts or the policies. Inclusion
of these charges would reduce total return for all periods shown.
For purposes of calculation, information about each portfolio
assumes the deduction of applicable portfolio expenses, makes no<PAGE>
PAGE 36
adjustments for taxes that may have been paid on the reinvested
income and capital gains, and covers a period of widely fluctuating
securities prices. Returns shown should not be considered a
representation of the fund's future performance.
The portfolio's investments may be different from those in the
indexes. The indexes reflect reinvestment of all distributions and
changes in market prices, but exclude brokerage commissions or
other fees.
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. However, the S&P 500 companies are generally larger
than those in which the fund invests.
Lipper Growth and Income Fund Index, published by Lipper Analytical
Services, Inc., includes 30 funds that are generally similar to
Equity Portfolio, although some funds in the index may have
somewhat different investment policies or objectives.
Lehman Aggregate Bond Index is made up of a representative list of
government and corporate bonds as well as asset-backed securities
and mortgage-backed securities. The index is frequently used as a
general measure of bond market performance. However, the
securities used to create the index may not be representative of
the bonds held in the Income Portfolio.
Merrill Lynch 1-3 Year Government Index is an unmanaged list of all
treasury and agency securities. The index is used here as a
general measure of performance. However, the securities used to
create the index may not be representative of the debt securities
held in the Government Securities Portfolio.
Lipper Balanced Fund Index, published by Lipper Analytical
Services, Inc., includes 10 funds that are generally similar to the
Managed Portfolio, although some funds in the index may have
somewhat different investment policies or objectives.
Yield calculations
Income Portfolio and Government Securities Portfolio may calculate
a 30-day annualized yield by dividing:
o net investment income per share deemed earned during a 30-day
period by
o the net asset value per share on the last day of the period,
and
o converting the result to a yearly equivalent figure.
This yield calculation does not include any surrender charge or
life insurance policy charges, which would reduce the yield quoted.
A portfolio's yield varies from day to day, mainly because share
values and net asset values (which are calculated daily) vary in
response to changes in interest rates. Net investment income
normally changes much less in the short run. Thus, when interest<PAGE>
PAGE 37
rates rise and share values fall, yield tends to rise. When
interest rates fall, yield tends to follow.
Money Market Portfolio calculates annualized simple and compound
yields based on a seven-day period.
Past yields should not be considered an indicator of future yields.
Key terms
Average annual total return - The annually compounded rate of
return over a given time period (usually two or more years) - total
return for the period converted to an equivalent annual figure.
Capital gains or losses - Increase or decrease in value of the
securities the portfolio holds. Gains are realized when securities
that have increased in value are sold. A portfolio also may have
unrealized gains or losses when securities increase or decrease in
value but are not sold.
Close of business - Normally 3 p.m. Central time each business day
(any day the New York Stock Exchange is open).
Distributions - Payments to the subaccounts of two types:
investment income (dividends) and realized net long-term capital
gains (capital gains distributions).
Investment income - Dividends and interest earned on securities
held by the portfolio.
Net asset value (NAV) - Value of a single share held by the
portfolio. It is the total market value of all of a portfolio's
investments and other assets, less any liabilities, divided by the
number of shares outstanding.
The NAV is the price the subaccount receives when it sells shares.
It usually changes from day to day, and is calculated at the close
of business. For the Income and Government Securities Portfolios,
NAV generally declines as interest rates increase and rises as
interest rates decline.
Total return - Sum of all returns for a given period, assuming
reinvestment of all distributions. Calculated by taking the total
value of shares at the end of the period (including shares acquired
by reinvestment), less the price of shares purchased at the
beginning of the period.
Yield - Net investment income earned per share for a specified time
period, divided by the share price at the end of the period.
Investment policies and risks
Equity Portfolio - Under normal market conditions, Equity Portfolio
invests in U.S. common stocks listed on national securities
exchanges that the investment manager believes have potential for
capital appreciation. The companies in which the portfolio invests
may be well-seasoned or relatively new and lesser-known as long as<PAGE>
PAGE 38
the investment manager believes the stock is attractive for capital
growth.
The portfolio also may invest in convertible securities, derivative
instruments, money market instruments and foreign investments.
Neither foreign investments nor derivative instruments will exceed
25% of the portfolio's total assets.
Income Portfolio - Under normal market conditions, Income Portfolio
primarily invests in debt securities. At least 50% of its net
assets are invested in corporate bonds of the four highest ratings,
in other corporate bonds the investment manager believes have the
same investment qualities, and in government bonds.
The portfolio also may invest in corporate bonds with lower
ratings, convertible securities, preferred stocks, derivative
instruments, foreign investments and money market instruments.
Foreign investments are limited to 25% of the portfolio's total
assets. The portfolio does not have a minimum rating requirement
for corporate bonds.
Money Market Portfolio - Under normal market conditions, Money
Market Portfolio invests primarily in high-quality, short-term,
marketable debt securities and other money market instruments. For
a description of money market securities, see Appendix B in the
SAI.
Managed Portfolio - This portfolio invests in common and preferred
stocks, convertible securities, debt securities, derivative
instruments, foreign securities and money market instruments. The
portfolio manager continuously will adjust the mix of investments
subject to the following three net asset limits: 1) up to 75% in
equity securities (stocks), 2) up to 75% in bonds or other debt
securities, and 3) up to 100% in money market instruments. Stocks
and debt securities will be selected for capital appreciation,
income or both. Money market instruments will be selected for
current income and safety of principal.
Of the assets invested in bonds, at least 50% will be in corporate
bonds of the four highest ratings, in other corporate bonds the
investment manager believes have the same investment qualities, and
in government bonds. For the other 50% invested in corporate
bonds, there is no minimum rating requirement. Foreign investments
are limited to 25% of the portfolio's total assets.
Government Securities Portfolio - Under normal market conditions,
Government Securities Portfolio invests in securities that are
issued or guaranteed by a U.S. governmental unit. The portfolio
also may invest in derivative instruments on U.S. government
securities. Shares of this portfolio are not insured or guaranteed
by the U.S. government or by any other person or entity.
International Equity Portfolio - Under normal market conditions,
International Equity Portfolio invests at least 80% of its total
assets in foreign equity securities having a potential for superior
growth. Superior means portfolio performance better than the
Morgan Stanley Capital International World Index. <PAGE>
PAGE 39
The various types of investments the portfolio managers use to
achieve investment performance are described in more detail in the
next section and in the SAI.
The Morgan Stanley Capital International World Index, compiled from
a composite of securities listed on the markets of North America,
Europe, Australasia and the Far East is widely recognized by
investors as the measurement index for portfolios that invest in
the major markets of the world.
The portfolio's investments will be primarily in common stocks and
securities convertible into common stocks of foreign issuers.
However, if the investment manager believes they have more
potential for capital growth, the portfolio may invest in bonds
issued or guaranteed either by countries that are members of the
Organization for Economic Cooperation and Development (OECD) or by
international agencies such as the World Bank or the European
Investment Bank. These bonds will not be purchased unless, in the
judgment of the investment manager, they are comparable in quality
to bonds rated AA by Standard & Poor's Corporation (S&P).
The percentage of portfolio assets invested in particular countries
or regions of the world will change according to their political
stability and economic condition. Ordinarily, the portfolio will
invest in companies domiciled in at least three foreign countries.
Normally, investments in U.S. issuers will constitute less than 20%
of the portfolio's investments. However, as a temporary measure,
the portfolio may invest any portion of its assets in securities of
U.S. issuers that appear to have greater potential for superior
growth than foreign securities. U.S. investments would include
common stocks, convertible securities and corporate and government
bonds. The bonds must bear one of the four highest ratings given
by Moody's or S&P or must be of comparable quality. The portfolio
also may invest in money market instruments and derivative
instruments. No more than 5% of the portfolio's total assets may
be invested in options on individual securities.
Facts about investments and their risks
Common stocks: Stock prices are subject to market fluctuations.
Stocks of smaller or foreign companies may be subject to abrupt or
erratic price movements. Also, small companies often have limited
product lines, smaller markets or fewer financial resources.
Therefore, some of the securities in which a portfolio invests
involve substantial risk and may be considered speculative.
Preferred stocks: If a company earns a profit, it generally must
pay its preferred stockholders a dividend at a pre-established
rate.
Convertible securities: These securities generally are preferred
stocks or bonds that can be exchanged for other securities, usually
common stock, at prestated prices. When the trading price of the
common stock makes the exchange likely, the convertible securities
trade more like common stock.
<PAGE>
PAGE 40
Investment grade bonds: The price of an investment grade bond
fluctuates as interest rates change or if its credit rating is
upgraded or downgraded.
Debt securities below investment grade: The price of these bonds
may react more to the ability of a company to pay interest and
principal when due than to changes in interest rates. They have
greater price fluctuations, are more likely to experience a
default, and sometimes are referred to as "junk bonds." Reduced
market liquidity for these bonds may occasionally make it more
difficult to value them. In valuing bonds, a portfolio relies both
on independent rating agencies and the investment manager's credit
analysis. Securities that are subsequently downgraded in quality
may continue to be held and will be sold only when the portfolio's
investment manager believes it is advantageous to do so.
<TABLE>
Bond ratings of holdings for fiscal year ended
April 30, 1994 for Income Portfolio
<CAPTION>
IDS
S&P Rating Protection of Assessment
Percent of (or Moody's principal and of unrated
net assets equivalent) interest securities
<S> <C> <C> <C>
3.10% AAA Highest quality --%
3.80 AA High quality --
12.70 A Upper medium grade 0.63
26.17 BBB Medium grade 0.32
10.70 BB Moderately speculative --
13.68 B Speculative --
0.17 CCC Highly speculative --
-- CC Poor quality --
-- C Lowest quality --
-- D In default --
1.35 NR Unrated securities 0.40
</TABLE><TABLE>
Bond ratings of holdings for fiscal year ended
April 30, 1994 for Managed Portfolio
<CAPTION>
IDS
S&P Rating Protection of Assessment
Percent of (or Moody's principal and of unrated
net assets equivalent) interest securities
<S> <C> <C> <C>
2.49% AAA Highest quality --%
1.30 AA High quality --
4.28 A Upper medium grade 0.11
5.21 BBB Medium grade --
4.61 BB Moderately speculative --
5.36 B Speculative 0.08
0.09 CCC Highly speculative --
-- CC Poor quality --
-- C Lowest quality --
-- D In default --
0.82 NR Unrated securities 0.63
</TABLE>
(See Appendix G to the SAI for further information regarding
ratings.)
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. To
comply with tax laws, a 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, a portfolio<PAGE>
PAGE 41
may have to sell securities to have sufficient cash to pay the
dividends.
Mortgage-backed securities: All portfolios except Money Market may
invest in U.S. government securities representing part ownership of
pools of mortgage loans. A pool, or group, of mortgage loans
issued by such lenders as mortgage bankers, commercial banks and
savings and loan associations, is assembled and mortgage pass-
through certificates are offered to investors through securities
dealers. 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 the certificates.
Foreign investments: Securities of foreign companies and
governments may be traded in the United States, but often they are
traded only on foreign markets. Frequently, there is less
information about foreign companies and less government supervision
of foreign markets. Foreign investments are subject to political
and economic risks of the countries in which the investments are
made including the possibility of seizure or nationalization of
companies, imposition of withholding taxes on income, establishment
of exchange controls or adoption of other restrictions that might
affect an investment adversely. If an investment is made in a
foreign market, the local currency must be purchased. This is done
by using a forward contract in which the price of the foreign
currency in U.S. dollars is established on the date the trade is
made, but delivery of the currency is not made until the securities
are received. As long as the portfolio holds foreign currencies or
securities valued in foreign currencies, the price of a portfolio
share will be affected by changes in the value of the currencies
relative to the U.S. dollar. Because of the limited trading volume
in some foreign markets, efforts to buy or sell a security may
change the price of the security, and it may be difficult to
complete the transaction.
Derivative instruments: The portfolio managers 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 a portfolio manager to change the investment performance
characteristics very quickly and at lower costs. Risks include
losses of premiums, rapid changes in prices, defaults by other<PAGE>
PAGE 42
parties, and inability to close such instruments. A 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 portfolios' custodian will maintain, in a segregated
account, cash or liquid high-grade debt securities that are marked
to market daily and are at least equal in value to the portfolios'
obligations. No more than 5% of each 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. For further information, see the options and
futures appendixes in the SAI.
Securities and derivative instruments that are illiquid: Illiquid
means the security or derivative instrument 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. All securities and derivative instruments, however,
can be sold in private sales, and many may be sold to other
institutions and qualified buyers or on foreign markets. Each
portfolio manager will follow guidelines established by the board
of directors 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 each
portfolio's net assets will be held in securities and derivative
instruments that are illiquid.
Money market instruments: Short-term debt securities rated in the
top two grades are used to meet daily cash needs and at various
times to hold assets until better investment opportunities arise.
Generally less than 25% of each of Equity, Income, Managed,
Government Securities and International Equity Portfolio's assets
are in these money market instruments. However, for temporary
defensive purposes these investments could exceed that amount for a
limited period of time.
Securities of other investment companies: Equity, Income and
International Equity Portfolio may invest in securities of
investment companies by purchase in the open market where the
dealer's or sponsor's profit is the regular commission. If any
such investment is made, not more than 5% of the portfolio's net
assets (10% for International Equity Portfolio) will be so
invested. To the extent the portfolio were to make such
investments, you may be subject to duplicative advisory,
administrative and distribution fees.
The investment policies described above may be changed by the board
of directors.
Lending portfolio securities: Each 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 shareholders approve otherwise, loans
may not exceed 30% of a portfolio's net assets.
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PAGE 43
Valuing assets
Money Market Portfolio's securities are valued at amortized cost.
In valuing assets of Equity, Income, Managed, Government Securities
and International Equity Portfolios:
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 Securities and assets without readily available market values
are valued according to methods selected in good faith by the
board of directors.
o Assets and liabilities denominated in foreign currencies are
translated daily into U.S. dollars at a rate of exchange set
as near to the close of the day as practicable.
How to invest, transfer or redeem shares
How to invest
You may invest in the portfolios of the fund only by buying a
variable life insurance policy offered by IDS Life or IDS Life of
New York. Your financial planner will help you fill out and submit
an application. For further information concerning acceptance of
your application, see the variable life insurance policy
prospectus.
How to transfer among subaccounts
You can transfer all or part of your value in a subaccount to one
or more of the other subaccounts. That way, you transfer to a
portfolio with a different investment objective. Please refer to
your variable life insurance policy prospectus for more information
about transfers among subaccounts.
Redeeming shares
The fund will buy (redeem) any shares presented by the subaccounts.
Policy surrender details are described in your variable life
insurance policy prospectus. Payment generally will be made within
seven days of the surrender request. The amount may be more or
less than the amount invested. Shares will be redeemed at net
asset value at the close of business on the day the request is
accepted at the Minneapolis office for IDS Life or at the Albany
office for IDS Life of New York. If the request arrives after the
close of business, the price per share will be the net asset value
at the close of business on the next business day.
Distributions and taxes
The fund distributes to shareholders (the subaccounts) net
investment income and net capital gains. It does so to qualify as
a regulated investment company and to avoid paying corporate income
and excise taxes. <PAGE>
PAGE 44
Dividend and capital gain distributions
The fund distributes its net investment income (dividends and
interest earned on securities held by the fund, less operating
expenses) to shareholders (the subaccounts) at the end of each
calendar quarter for Equity, Managed and International Equity
Portfolios. For Income, Money Market and Government Securities
Portfolios, net investment income is distributed monthly. Short-
term capital gains distributed are included in net investment
income. Net realized capital gains, if any, from selling
securities are distributed at the end of the calendar year. Before
they're distributed, both net investment income and net capital
gains are included in the value of each share. After they're
distributed, the value of each share drops by the per-share amount
of the distribution. (Since the distributions are reinvested, the
total value of the holdings will not change.) The reinvestment
price is the net asset value at close of business on the day the
distribution is paid.
Taxes
The Internal Revenue Service (IRS) has issued final regulations
relating to the diversification requirements under section 817(h)
of the Internal Revenue Code. Each portfolio intends to comply
with these requirements.
Federal income taxation of separate accounts, life insurance
companies and variable life insurance policies is discussed in the
variable life insurance policy prospectus.
Income received by the International Equity Portfolio may be
subject to foreign tax and withholding. Tax conventions between
certain countries and the United States may reduce or eliminate
these taxes.
How the fund is organized
IDS Life Series Fund, Inc. is a series mutual fund. The fund is a
diversified, open-end management investment company, as defined in
the Investment Company Act of 1940. It was incorporated in
Minnesota on May 8, 1985. The fund headquarters are at IDS Tower
10, Minneapolis, MN 55440-0010.
Shares
The fund is owned by the subaccounts, its shareholders. Each of
the portfolios issues its own series of common stock. All shares
issued by each portfolio are of the same class-capital stock. Par
value is $.001 per share. Both full and fractional shares can be
issued. The shares of each portfolio making up IDS Life Series
Fund, Inc. represent an interest in that portfolio's
assets only (and profits or losses) and, in the event of
liquidation, each share of a portfolio would have the same rights
to dividends and assets as every other share of that portfolio.
<PAGE>
PAGE 45
Voting rights
For a discussion of the rights of policy owners concerning the
voting of shares held by the subaccounts, please see the variable
life insurance policy prospectus. Each share of a portfolio has
one vote. On an issue affecting a particular portfolio, its shares
vote as a separate series. On some issues, all shares of the fund
vote together as one series. All shares have cumulative voting
when voting on the election of directors.
The goals of the portfolios can be changed only if the majority of
the outstanding shares agree. The vote of a majority of the
outstanding voting shares means the vote:
o of 67% or more of the voting shares present at such meeting, if
the holders of more than 50% of the outstanding voting shares are
present or represented by proxy; or
o of more than 50% of the outstanding voting shares, whichever is
less.
Shareholder meetings
The fund does not hold annual shareholder meetings. However, the
directors may call meetings at their discretion, or on demand by
holders of 10% or more of the outstanding shares, to elect or
remove directors.
Portfolio managers
Equity Portfolio
Marty Hurwitz joined IDS in 1987 and serves as portfolio manager.
He was appointed to manage this portfolio in July 1993. He also
manages accounts for IDS Advisory Portfolio Management Group, a
division of IDS Financial Services Inc., and serves as co-manager
of IDS Life Funds A and B.
Income Portfolio
Lorraine Hart joined IDS in 1984 and serves as vice president and
investment officer-insurance investments. She has managed this
portfolio since 1991. She also manages the invested asset
portfolios of IDS Life Insurance Company, IDS Life Insurance
Company of New York, and American Enterprise Life Insurance
Company.
Money Market Portfolio
Gregg Syverson joined IDS in 1984 and serves as portfolio manager.
He has managed this portfolio since 1992. He also manages the
short-term investments and debt for IDS, IDS Financial Services,
IDS Life and IDS Certificate Company.
Managed Portfolio
Kurt Winters joined IDS in 1987 and serves as portfolio manager.
He was appointed to manage this portfolio in 1992. He is also on
the growth income team, which manages IDS Stock Fund. Prior to
joining the growth income team as associate manager in 1991, he
served as an IDS stock analyst.
<PAGE>
PAGE 46
Deb Pederson joined IDS in 1986 and serves as portfolio manager.
She has managed the fixed income portfolio of Managed Portfolio
since 1993. She also manages the fixed income portfolio of IDS
Life Managed Fund and the low grade invested assets of IDS Life,
IDS Life of New York and American Enterprise Life Insurance
Company.
Government Securities Portfolio
Jim Snyder joined IDS in 1989 and serves as portfolio manager. He
was appointed to manage this portfolio in April 1994. He also
serves as portfolio manager of IDS Strategy, Short-Term Income Fund
and as associate portfolio manager of IDS Federal Income Fund.
Prior to joining IDS, he had been a Quantitative Investment Analyst
at Harris Trust.
International Equity Portfolio
Richard Lazarchic joined IDS in 1979 and serves as portfolio
manager. He was associate portfolio manager of IDS Mutual from
1988 through 1989 and served as portfolio manager of IDS Utilities
Income Fund from 1989 through mid 1993 and Diversified Equity
Income Fund from 1990 through mid 1994. He also serves as
portfolio manager of IDS Managed Retirement Fund.
Directors and officers
Shareholders elect a board of directors 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.
On April 30, 1994 the fund's directors and officers did not own any
shares of the fund.
Investment manager
The fund pays IDS Life for managing its portfolio, providing
administrative services and serving as transfer agent.
Under its Investment Management and Services Agreement, IDS Life
determines which securities will be purchased, held or sold
(subject to the direction and control of the fund's board of
directors). For these services the fund pays IDS Life a fee based
on the average daily net assets of the portfolios at the following
rates: 0.7% on an annual basis for Equity, Income, Managed and
Government Securities Portfolios, 0.5% for Money Market Portfolio,
and 0.95% for International Equity Portfolio.
Under the Agreement, the fund also pays taxes, brokerage
commissions and nonadvisory expenses. However, IDS Life has agreed
to a voluntary limit of the annual charge of 0.1% of the average
daily net assets of the fund for these nonadvisory expenses. Total
net fees and expenses incurred after the limitations by each
portfolio amounted to 0.8% of average daily net assets for Equity,
Income, Managed and Government Securities Portfolios and 0.6% for
Money Market Portfolio for the fiscal year ended April 30, 1994.
<PAGE>
PAGE 47
IDS Life reserves the right to discontinue limiting these
nonadvisory expenses at 0.1%. However, its present intention is to
continue the limit until the time that actual expenses are less
than the limit.
Investment Advisory Agreement
IDS Life and IDS have an Investment Advisory Agreement that calls
for IDS Life to pay IDS a fee for investment advice about the
fund's Portfolios. The fee paid by IDS Life is 0.25% of Equity,
Income, Money Market, Managed and Government Securities portfolios'
average net assets for the year. The fee paid by IDS Life is 0.50%
of International Equity portfolio's average net assets for the
year. IDS also executes purchases and sales and negotiates
brokerage as directed by IDS Life.
Total fees and expenses (excluding taxes and brokerage commissions)
cannot exceed the most restrictive applicable state expense
limitation.
About IDS Life and IDS
General information
IDS Life Series Fund is managed by IDS Life, a wholly owned
subsidiary of IDS, which itself is a wholly owned subsidiary of the
American Express Company (American Express), a financial services
company headquartered in New York City.
IDS Life is a stock life insurance company organized in 1957 under
the laws of the State of Minnesota and located at IDS Tower 10,
Minneapolis, MN 55440-0010. IDS Life conducts a conventional life
insurance business in the District of Columbia and all states
except New York.
The IDS family of companies offers not only insurance and
annuities, but also mutual funds, investment certificates and a
broad range of financial management services.
IDS has been providing financial services since 1894. Besides
managing investments for all publicly offered funds in the IDS
MUTUAL FUND GROUP, IDS also manages investments for itself and its
subsidiaries, IDS Certificate Company and IDS Life. Total assets
under management on April 30, 1994 were more than $105 billion.
IDS Financial Services Inc., serves individuals and businesses
through its nationwide network of more than 175 offices and more
than 7,800 planners.
Other subsidiaries provide investment management and related
services for pension, profit-sharing, employee savings and
endowment funds of businesses and institutions.<PAGE>
PAGE 48
STATEMENT OF ADDITIONAL INFORMATION
for
IDS LIFE SERIES FUND, INC.
October 28, 1994
This Statement of Additional Information is not a prospectus. It
should be read together with the Fund's prospectus which may be
obtained from your IDS personal financial planner, or by writing or
calling IDS Life Series Fund, Inc. at the address or telephone
number below.
The date of this Statement of Additional Information is
October 28, 1994, and is to be used with the Fund's Prospectus
dated October 28, 1994 and the Fund's Annual Report for the fiscal
year ended April 30, 1994.
IDS Life Series Fund, Inc.
IDS Tower 10
Minneapolis, MN 55440-0010
(612) 671-3733
TTY: 800-285-8846
New York Service
(518) 869-8613
<PAGE>
PAGE 49
TABLE OF CONTENTS
Goals and Investment Policies........................See Prospectus
Additional Investment Policies................................p. 4
Portfolio Transactions........................................p. 11
Brokerage Commissions Paid to
Brokers Affiliated with IDS Life..............................p. 14
Calculation of Total Return...................................p. 15
Calculation of Yield..........................................p. 15
Valuing Each Portfolio's Shares...............................p. 17
Investing in the Fund.........................................p. 19
Redeeming Shares..............................................p. 20
Capital Gains and Losses......................................p. 20
Investment Management and Other Services......................p. 20
Management of the Fund........................................p. 21
Custodian.....................................................p. 23
Independent Auditors..........................................p. 23
Financial Statements..............................See Annual Report
Appendix A: Foreign Currency Transactions, for
Investments of Equity, Income and Managed
Portfolios.......................................p. 25
Appendix B: Description of Money Market Securities, for
Investments of all Portfolios except
Government Securities............................p. 30
Appendix C: Options and Stock Index Futures Contracts,
for Investments of Equity and Managed
Portfolios.......................................p. 32
Appendix D: Options and Interest Rate Futures Contracts,
for Investments of Income, Managed and
Government Securities Portfolios.................p. 40
Appendix E: Mortgage-Backed Securities and Additional
Information on Investment Policies for all
Portfolios except Money Market...................p. 46
<PAGE>
PAGE 50
Appendix F: Dollar-Cost Averaging............................p. 49
Appendix G: Description of Corporate Bond Ratings............p. 50
<PAGE>
PAGE 51
ADDITIONAL INVESTMENT POLICIES
In addition to the investment goals and policies presented in the
prospectus, each Portfolio has the investment policies stated
below.
Investment Policies Applicable to each Portfolio
Unless the holders of a majority of the outstanding shares (as
defined in the section entitled "Voting rights" of the prospectus)
of the Portfolio to which the policy applies agree to a change, the
Portfolio will not:
`Invest more than 5 percent of its total assets, at market value,
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. Except for Money Market Portfolio,
up to 25 percent of each Portfolio's total assets may be invested
without regard to this 5 percent limitation.
`Borrow money or property except as a temporary measure for
extraordinary or emergency purposes, and 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 will not purchase additional
portfolio securities at any time borrowing for temporary purposes
exceeds 5 percent. The Portfolio has not borrowed in the past and
has no present intention to borrow.
`Lend portfolio securities in excess of 30 percent of its net
assets, at market value. The current policy of the Board of
Directors is to make these loans, either long- or short-term, to
broker-dealers. In making such loans the Portfolio gets the market
price in cash, U.S. government securities, letters of credit or
such other collateral as may be permitted by regulatory agencies
and approved by the Board of Directors. 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. A loan will not be made unless the
opportunity for additional income outweighs the risks. During the
existence of the loan, the Portfolio receives cash payments
equivalent to all interest or other distributions paid on the
loaned securities.
These policies may be changed without notice or consent of
shareholders:
`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). A Portfolio does not
pay for the securities or receive dividends or interest on them
until the contractual settlement date. The Portfolio's custodian
will maintain, in a segregated account, cash or liquid high-grade
<PAGE>
PAGE 52
debt securities that are marked to market daily and are at least
equal in value to the Portfolio's 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. or
Standard & Poor's Corporation 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 the bankruptcy laws, the Portfolio's ability to
liquidate the security involved could be impaired.
Investment Policies Applicable to Equity and Income Portfolios
Unless the holders of a majority of the outstanding shares (as
defined in the section "Voting rights" in the prospectus) agree to
a change, Equity or Income Portfolios will not:
`Invest in companies for the purpose of, or with the effect of,
acquiring control.
`Underwrite securities of other issuers. However, this shall not
preclude the purchase of securities for investment, on original
issue or otherwise, and shall not preclude the acquisition of
portfolio securities under circumstances where Equity or Income
Portfolios would not be free to sell them without being deemed an
underwriter for purposes of the Securities Act of 1933 (1933 Act)
and without registration of such securities or the filing of a
notification under that Act, or the taking of similar action under
other securities laws relating to the sale of securities. Equity
and Income Portfolios will not invest in securities which are not
readily marketable (including restricted securities and repurchase
agreements over 7 days) without registration or the filing of a
notification under the 1933 Act, or the taking of similar action
under other securities laws relating to the sale of securities, if
immediately after the making of any such investment more than 10
percent of Equity Portfolio's net assets or 10 percent of Income
Portfolio's net assets (taken at market or other current value) are
invested in such securities.
<PAGE>
PAGE 53
`Engage in the purchase and sale of commodities or commodity
contracts, except that Income Portfolio may enter into interest
rate futures contracts.
`Invest in interests in oil, gas and other mineral exploration or
development programs.
`Buy securities of an issuer if the officers and directors of the
Fund and of IDS Financial Corporation (IDS) hold more than a
certain percent of the issuer's outstanding securities. The
holdings of all officers and directors of the Fund who own more
than 0.5 percent of an issuer's securities are added together and
if in total they own more than 5 percent, the Fund will not
purchase securities of that issuer.
`Concentrate its investments in any particular industry, but
reserves freedom of action to do so provided that not more than 25
percent of its assets, taken at cost, may be so invested at any one
time.
`Buy on margin or sell short.
`Invest more than 10 percent of its assets, taken at cost, in real
properties, or not do so as a principal activity.
`Purchase securities of any issuer if immediately after and as a
result of such purchase the Portfolio would own more than 10
percent of the outstanding voting securities of such issuer.
`Invest in securities of any investment company except in the open
market where no commission or profit to a sponsor or dealer results
from such purchase other than customary broker's commission. The
Portfolios do not intend to invest in such securities but may do so
to the extent of not more than 5 percent of their total assets
(taken at market or other current value). The Portfolios may
acquire limited amounts of securities of one or more investment
companies as permitted by the Investment Company Act of 1940 (1940
Act), in connection with the acquisition of or merger with such
companies. Except for these instances, the Portfolios will not
purchase securities of investment companies.
`Make loans except that (a) assets may be invested in debt
securities, whether or not publicly distributed, of a type
customarily purchased by institutional investors; and (b) to the
extent that loans are fully collateralized, and subject to the
applicable New York Stock Exchange rules, the Portfolios may engage
in lending portfolio securities to qualified banks or broker-
dealers.
Additional Investment Policy Applicable to Equity Portfolio
This policy may be changed without notice to or consent of
shareholders.
<PAGE>
PAGE 54
`Equity Portfolio does not intend to invest more than 2 percent of
its net assets in warrants that are not listed on a national
securities exchange. In no event will the investment in warrants
exceed 5 percent of Equity Portfolio's net assets. A warrant is a
right to buy a certain security at a set price for a certain period
of time and is freely traded in the market.
Investment Policies Applicable to Money Market Portfolio
Unless the holders of a majority of the outstanding shares (as
defined in the section entitled "Voting rights" in the prospectus)
agree to a change, Money Market Portfolio will not:
`Buy on margin or sell short.
`Invest in exploration or development programs, such as oil, gas or
mineral programs.
`Purchase common stocks, preferred stocks, warrants, other equity
securities, corporate bonds or debentures, state bonds, municipal
bonds, or industrial revenue bonds.
`Pledge or mortgage Portfolio assets beyond 15 percent of the cost
of the Portfolio's gross assets. If the Portfolio should engage in
such transactions, valuation of its assets for such purposes would
be based on their market value.
`Make cash loans. However, it does make short-term investments
which it may have an agreement with the seller to reacquire (See
Appendix B).
`Invest in an investment company beyond 5 percent of its total
assets taken at market and then only on the open market where the
dealer's or sponsor's profit is just the regular commission.
However, Money Market Portfolio will not purchase or retain the
securities of other open-end investment companies.
`Buy or sell real estate, commodities, or commodity contracts.
`Invest in a company to get control or manage it.
`Invest more than 25 percent of the Portfolio's assets taken at
market value in any particular industry, except there is no
limitation with respect to investing in U.S. government or agency
securities and bank obligations. Investments are varied according
to what is judged advantageous under different economic conditions.
`Act as an underwriter (sell securities for others). However,
under securities laws the Portfolio may be deemed to be an
underwriter when it purchases securities directly from the issuer
and later resells them.
`Buy securities of an issuer if the directors and officers of the
Fund and of IDS hold more than a certain percentage of the issuer's
outstanding securities. The holdings of all directors and officers
<PAGE>
PAGE 55
of the Fund who own more than 0.5 percent of an issuer's securities
are added together, and if in total they own more than 5 percent,
the Fund will not purchase securities of that issuer.
Additional Investment Policy of Money Market Portfolio
This policy may be changed without notice to or consent of
shareholders:
`Money Market Portfolio will not invest in illiquid securities if,
immediately after making such an investment, more than 10 percent
of the Portfolio's net assets, at market, would be invested in such
securities.
Investment Policies Applicable to the Managed Portfolio
Unless the holders of a majority of the outstanding shares (as
defined in the section entitled "Voting rights" in the prospectus)
agree to a change, Managed Portfolio will not:
`Purchase more than 10 percent of the outstanding voting securities
of an issuer.
`Concentrate in any one industry. (According to the present inter-
pretation of the staff of the Securities and Exchange Commission
this means no more than 25 percent of Managed Portfolio's total
assets, based on current market value at the time of purchase, can
be invested in any one industry).
`Invest more than 5 percent of its total assets, taken at cost, in
securities of companies, including any predecessor, which have a
record of less than three years continuous operations.
`Invest in securities of investment companies except by purchases
in the open market where the dealer's or sponsor's profit is just
the regular commission.
`Buy or sell real estate, real estate mortgage loans, commodities,
or commodity contracts, except that Managed Portfolio may enter
into futures contracts.
`Invest in a company to get control or manage it.
`Buy on margin or sell short, but it may make margin payments in
connection with transactions in futures contracts.
`Pledge or mortgage its assets beyond 15 percent of the cost of its
gross assets taken at cost. For the purposes of this restriction,
collateral arrangements with respect to margin for futures
contracts are not deemed to be a pledge of assets.
`Make cash loans. However, Managed Portfolio does make investments
in debt securities where the sellers agree to repurchase the
securities at cost plus an agreed to interest rate within a
specified period of time.
<PAGE>
PAGE 56
`Act as an underwriter (sell securities for others). However,
under the securities laws, Managed Portfolio may be deemed to be an
underwriter when it purchases securities directly from the issuer
and later resells them.
`Make a loan of any part of its assets to IDS, to the officers and
directors of IDS or to its own officers and directors.
`Buy securities of an issuer if the officers and directors of the
Fund and of IDS hold more than a certain percentage of the issuer's
outstanding securities. The holdings of all officers and directors
of Managed Portfolio and of IDS who own more than 0.5 percent of an
issuer's securities are added together and if in total they own
more than 5 percent, Managed Portfolio will not purchase securities
of that issuer.
`Issue senior securities, except that this restriction shall not be
deemed to prohibit Managed Portfolio from borrowing money from
banks, lending its securities, or entering into repurchase
agreements or options or futures contracts.
Other Investment Policies of Managed Portfolio
These policies may be changed without notice to or consent of
shareholders:
`Managed Portfolio does not intend to invest in exploration or
development programs, such as oil, gas or mineral programs.
`Managed Portfolio does not intend to invest in illiquid securities
if, immediately after making such an investment, more than 10
percent of the Portfolio's net assets, at market, would be invested
in such securities.
Investment Policies Applicable to Government Securities Portfolio
Unless the holders of a majority of the outstanding shares (as
defined in the section entitled "Voting rights" in the prospectus)
agree to a change, Government Securities Portfolio will not:
`Invest in securities of investment companies except by purchase in
the open market where the dealer's or sponsor's profit is just the
regular commission.
`Buy or sell real estate, commodities, or commodity contracts,
except the Portfolio may enter into interest rate futures contracts
and make deposits or have similar arrangements.
`Invest for the purpose of exercising control or management.
`Buy on margin or sell short, except that it may enter into
interest rate futures contracts.
<PAGE>
PAGE 57
`Pledge or mortgage its assets beyond 15 percent of the cost of its
gross assets. For purposes of this restriction, collateral
arrangements with respect to margin for interest rate futures
contracts are not deemed to be a pledge of assets.
`Make cash loans. However, the Portfolio does make investments in
debt securities where the sellers agree to repurchase the
securities at cost plus an agreed-to interest rate within a
specified period of time.
`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.
`Make a loan of any part of its assets to IDS, to the officers and
directors of IDS or to its own officers and directors.
`Buy any property or security (other than securities issued by the
Portfolio) from any officer or director of IDS or the Fund, nor
will the Portfolio sell any property or security to them.
`Buy securities of an issuer if the officers and directors of the
Fund and of IDS hold more than a certain percent of the issuer's
outstanding securities. The holdings of all officers and directors
of the Fund and of IDS who own more than 0.5 percent of an issuer's
securities are added together and if in total they own more than 5
percent, the Fund will not purchase securities of that issuer.
`Issue senior securities, except that this restriction shall not be
deemed to prohibit the Fund from borrowing money from banks,
lending its securities, or entering into repurchase agreements or
options or futures contracts.
Other Investment Policies of Government Securities Portfolio
This policy may be changed without notice to or consent of
shareholders:
`Government Securities Portfolio will not invest in illiquid
securities if, immediately after making such an investment, more
than 10 percent of the Portfolio's net assets, at market, would be
invested in such securities.
Other Investment Policies of Money Market, Managed and Government
Securities Portfolios
This policy may be changed without notice or consent of
shareholders:
The Portfolio may invest in repurchase agreements. Repurchase
agreements involve investment in debt securities whereby the seller
agrees to repurchase the securities at cost plus an agreed to
interest rate within a specified time. A risk of a repurchase
agreement is that if the party with whom this Portfolio has entered
<PAGE>
PAGE 58
into such an agreement seeks the protection of bankruptcy laws, the
Portfolio's ability to liquidate the security involved could be
temporarily impaired, and it subsequently may incur a loss if the
value of the security declines, or if the other party defaults on
its obligation. There also is the risk that the Portfolio may be
delayed or prevented from exercising its rights to dispose of the
collateral securities.
Other Investment Policies for all Portfolios except Money Market.
The portfolio may invest in 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 United States government or
its agencies and instrumentalities. In determining the liquidity
of Rule 144A securities, IOs and POs, the investment manager, under
guidelines established by the board of directors, 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.
The portfolio may invest in commercial paper issued in transactions
not involving a public offering under Section 4(2) of the
Securities Act of 1933 (4(2) paper). In determining the liquidity
of 4(2) paper, the investment manager, under guidelines established
by the board of directors, 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.
For a discussion on foreign currency transactions, see Appendix A.
For a discussion on money market securities, see Appendix B. For a
discussion on options and stock index futures contracts, see
Appendix C. For a discussion on options and interest rate futures
contracts, see Appendix D. For a discussion on mortgage-backed
securities, see Appendix E. For a discussion on dollar-cost
averaging, see Appendix F.
PORTFOLIO TRANSACTIONS
Subject to policies set by the Board of Directors, IDS Life is
authorized to determine, consistent with each Portfolio's
investment goals and policies, which securities shall be purchased,
held or sold. In determining where the buy and sell orders are to
be placed, IDS Life 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 of Directors. IDS
Life intends to direct IDS to execute trades and negotiate
commissions on its behalf. In selecting broker-dealers to execute
transactions, IDS 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.
These services are covered by the Investment Advisory agreement<PAGE>
PAGE 59
between IDS and IDS Life. When IDS acts on IDS Life's behalf for
the Fund, it follows the rules described here for IDS Life.
Because Income Portfolio's investments are primarily in bonds,
which are traded in the over-the-counter market, IDS Life generally
will deal through a dealer acting as a principal. The price
usually includes a dealer's mark-up without a separate brokerage
charge. When IDS Life believes that dealing through a broker as
agent for a commission will produce the best results, it will do
so. The Portfolio also may buy securities directly from an issuing
company which may be resold only privately to other institutional
investors.
On occasion it may be desirable to compensate a broker for research
services or for brokerage services, by paying a commission which
might not otherwise be charged or a commission in excess of the
amount another broker might charge. The Board of Directors has
adopted a policy authorizing IDS Life to do so to the extent
authorized by law, if IDS Life 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 IDS Life's or IDS' overall
responsibilities.
Research provided by brokers supplements IDS Life's own research
activities. Research services provided by brokers 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 stock
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. IDS Life
has obtained and, in the near 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 Securities and Exchange Commission.
When paying a commission that might not otherwise be charged or a
commission in excess of that which another broker might charge, IDS
Life must follow procedures authorized by the Board of Directors.
To date, three procedures have been authorized. One procedure
permits IDS Life to direct an order to buy or sell a security
traded on a national securities exchange to a specific broker for
research services it has provided. The second procedure permits
IDS Life, in order to obtain research, to direct an order on an
agency basis to buy or sell a security traded only in the over-the-
counter market to a firm that does not make a market in the
security. The commission paid generally includes compensation for
research services. The third procedure permits IDS Life, in order
to obtain research and brokerage services, to cause a Portfolio to<PAGE>
PAGE 60
pay a commission in excess of the amount another broker might have
charged. IDS Life has advised the Fund that it is necessary to do
business with a number of brokerage firms on a continuous basis to
obtain such services as: handling large orders; the willingness of
a broker to risk its own money by taking a position in a security;
and 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 IDS Life believes it may obtain better
overall execution. IDS Life has assured the Fund that under all
three procedures the amount of commission paid will be reasonable
and competitive in relation to the value of the brokerage services
performed or research provided.
All other transactions shall be executed on the basis of the policy
to obtain 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 IDS Life and IDS in provid-
ing advice to all the funds and other accounts advised by IDS Life
even though it is not possible to relate the benefits to any
particular fund or account.
Each investment decision made for a Portfolio is made independently
from any decision made for another Portfolio or fund or other
account advised by IDS Life or any of its subsidiaries. When the
Portfolio buys or sells the same security as another fund or
account, IDS Life carries out the purchase or sale in a way the
Fund agrees in advance is fair. Although sharing in large
transactions may adversely affect the price or volume purchased or
sold by the Fund, the Fund hopes to gain an overall advantage in
execution. IDS Life has assured the Fund it will continue to seek
ways to reduce brokerage costs.
On a periodic basis, IDS Life makes a comprehensive review of the
broker-dealers and the overall reasonableness of their commissions.
The review evaluates execution, back office efficiency and research
services.
The Fund paid total brokerage commissions of $190,220 for fiscal
year 1992, $210,093 for fiscal year 1993 and $405,141 for fiscal
year ended April 30, 1994. The majority of all firms through whom
transactions were executed provide research services. There were
no transactions directed to brokers by the Fund because of research
services received for the fiscal year ended April 30, 1994.
Income and Managed Portfolios' acquisition during the fiscal year
ended April 30, 1994, of securities of its regular brokers or
dealers or of the parents of those brokers or dealers that derive
more than 15 percent of gross revenue from securities-related
activities is presented below:
<PAGE>
PAGE 61
Value of Securities
Owned at End of
Name of Issuer Fiscal Year
Bank of America $1,081,250
Bankers Trust 298,000
Citicorp 303,375
Goldman Sachs 191,250
Salomon Brothers 450,000
BROKERAGE COMMISSIONS PAID TO BROKERS AFFILIATED WITH IDS LIFE
Affiliates of American Express Company (of which IDS Life is a
wholly owned indirect subsidiary) may engage in brokerage and other
securities transactions on behalf of the Fund in accordance with
procedures adopted by the Fund's Board of Directors and to the
extent consistent with applicable provisions of the federal
securities laws. IDS Life will use an American Express affiliate
only if (i) IDS Life determines that the Fund will receive prices
and executions at least as favorable as those offered by qualified
independent brokers performing similar brokerage and other services
for the Fund and (ii) if such use is consistent with terms of the
Investment Management and Services Agreement.
Information about brokerage commissions paid by the Fund for the
last three fiscal years to brokers affiliated with IDS Life is
contained in the following table:
<TABLE><CAPTION>
For the Fiscal Year Ended April 30,
1994 1993 1992
Aggregate Percent of Aggregate Aggregate
Dollar Aggregate Dollar Dollar Dollar
Amount of Percent of Amount of Amount of Amount of
Nature Commissions Aggregate Transactions Commissions Commissions
of Paid to Brokerage Involving Payment Paid to Paid to
Broker Affiliation Broker Commissions of Commissions Broker Broker
<S> <C> <C> <C> <C> <C> <C>
American (2) $19,878 4.91% .01% $35,204 $27,081
Enterprise
Investment
Services Inc.
Lehman (1) $ 4,851 1.19% 0% $ 8,390 $ 5,660
Brothers
Inc.
The Robinson (3) none none none none $ 1,680
Humphrey
Company, Inc.
</TABLE>
(1) Under common control with IDS as a subsidiary of American
Express Company (American Express) until July 30, 1993.
(2) Wholly owned subsidiary of IDS.
(3) Under common control with IDS as an indirect subsidiary of
American Express until July 30, 1993.
PERFORMANCE INFORMATION
Each Portfolio may quote various performance figures to illustrate
past performance. Average annual total return and current yield<PAGE>
PAGE 62
quotations used by a Fund are based on standardized methods of
computing performance as required by the SEC. An explanation of
these and any other methods used by each Portfolio to compute
performance follows below.
CALCULATION OF TOTAL RETURN
Each Portfolio may calculate average annual total return 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 at the beginning of a period, at
the end of the period (or fractional portion
thereof)
Aggregate total return
Each Portfolio may calculate aggregate total return for certain
periods representing the cumulative change in the value of an
investment in a Portfolio 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 at the beginning of a period, at the end of
the period (or fractional portion thereof)
CALCULATION OF YIELD
Government Securities and Income Portfolios - These portfolios may
calculate an annualized yield by dividing the average net
investment income per share earned during a 30-day period by the
net asset value per share on the last day of the period and
annualizing the results.
Yield is calculated according to the following formula:
Yield = 2[ (a-b + 1)6 - 1]
cd
<PAGE>
PAGE 63
where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of
reimbursements)
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends
d = the maximum offering price per share on the
last day of the period
Government Securities Portfolio's yield was 5.31 percent for the
30-day period ended April 30, 1994 and Income Portfolio's yield was
6.67 percent. IDS Life has agreed to a voluntary limitation of
non-advisory expenses at an annual charge not to exceed 0.1 percent
of the average daily net assets of the Fund. If non-advisory
expenses had not been limited, Government Securities Portfolio's
yield would have been 5.27 percent. Income Portfolio's yield would
have been 6.67* percent.
*Expenses did not exceed .1% of average daily net assets.
Money Market Portfolio calculates annualized simple and compound
yields based on a seven-day period.
The simple yield is calculated by determining the net change in the
value of a hypothetical account having a balance of one share at
the beginning of the seven day period, dividing the net change in
account value by the value of the account at the beginning of the
period to obtain the return for the period, and multiplying that
return by 365/7 to obtain an annualized figure. The value of the
hypothetical account includes the amount of any declared dividends,
the value of any shares purchased with any dividend paid during the
period and any dividends declared for such shares. The Portfolio's
yield does not include any realized or unrealized gain or loss.
The Portfolio calculates its compound yield according to the
following formula:
Compound Yield = (return for seven day period + 1) 365/7 - 1
The Portfolio's simple annualized yield was 2.99 percent and its
compound yield was 3.03 percent on April 30, 1994, the last
business day of the Fund's fiscal year. If direct expenses had not
been limited, the simple annualized yield would have been 2.89
percent and its compound yield would have been 2.93 percent.
Yield, or rate of return, on Portfolio shares may fluctuate daily
and does not provide a basis for determining future yields.
However, it may be used as one element in assessing how the
Portfolio is meeting its goal. When comparing an investment in the
Portfolio with savings accounts and similar investment
alternatives, you must consider that such alternatives often
provide an agreed to or guaranteed fixed yield for a stated period
of time, whereas the Portfolio's yield fluctuates. In comparing
the yield of one money market fund to another, you should consider<PAGE>
PAGE 64
each fund's investment policies, including the types of investments
permitted.
In its sales material and other communications, the Fund may quote
rankings, yields or returns as published by independent statistical
services or publishers and publications such as The Bank Rate
Monitor National Index, Barron's, Business Week, Donoghue's Money
Market Fund Report, Financial Services Week, Financial Times,
Financial World, Forbes, Fortune, Global Investor, Institutional
Investor, Investor's Daily, Kiplinger's Personal Finance, Lipper
Analytical Services, Money, Mutual Fund Forecaster, Newsweek, The
New York Times, Personal Investor, Shearson Lehman Aggregate Bond
Index, 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 EACH PORTFOLIO'S SHARES
The value of an individual share in the Equity, Income, Managed and
Government Securities Portfolios, is determined by using the net
asset value before the shareholder transactions for the day. On
April 30, 1994 the computation looked like this for Equity, Income,
Managed and Government Securities Portfolios:
<TABLE><CAPTION>
Net assets before Shares outstanding Net asset
shareholder transactions at end of previous day value of one share
<S> <C> <C> <C>
Equity Portfolio $151,860,163 divided by 8,391,259 = $18.10
Income Portfolio $ 33,769,928 divided by 3,476,335 = $ 9.71
Managed Portfolio $160,719,325 divided by 11,604,807 = $13.85
Government Securities $ 11,184,851 divided by 1,132,254 = $ 9.88
Portfolio
</TABLE>
The net asset value per share is determined by dividing the total
market value of the Fund's investments and other assets, less any
liabilities, by the number of outstanding shares of the Fund. To
establish the net assets, all securities are valued as of the close
of each business day, which is the closing time of the New York
Stock Exchange (currently 3 p.m. Central time). A business day for
the Fund is any day the New York Stock Exchange is open. The
portfolio securities are valued at amortized cost, which
approximates market value.
In determining net assets, the Fund's portfolio securities are
valued as follows:
`Stocks, convertible bonds, warrants, futures and options traded on
major exchanges are valued each day at their last quoted sales
price on their primary exchange as of the close of the New York
Stock Exchange. If the last quoted sales price is not readily
available for a particular security, the value is the average price
between the last offer to buy and the last offer to sell.
`Stocks, convertible bonds and warrants with readily available
market quotations but without a listing on an exchange are also
valued at the average between the last bid (offer to buy) and asked
(offer to sell) price at the time of the close of the New York
Stock Exchange.
<PAGE>
PAGE 65
`Short-term securities maturing in 60 days or less at the
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 systematically reducing the carrying value if acquired
at a premium, so that the carrying value is equal to maturity value
on the maturity date.)
`Securities without a readily available market price, bonds other
than convertibles and other assets are valued at fair value. In
valuing these, the Fund directors are responsible for selecting
methods which they believe give the fair value. For nonconvertible
bonds, the usual method is to use the pricing service of an outside
organization. Such pricing service may take into consideration
yield, quality, coupon, maturity, type of issue, trading
characteristics and other market data in determining valuations for
normal institutional-size trading units of debt securities and does
not rely exclusively on quoted prices.
`Generally, trading in foreign securities is substantially
completed each day at various times prior to the close of the New
York Stock Exchange. The values of such securities used in
determining the net asset value of the Fund's shares are computed
as of such times. Occasionally, events affecting the value of such
securities may occur between such times and the close of the New
York Stock Exchange which 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, then these
securities will be valued at their fair value according to
procedures decided upon in good faith by the Fund's Board of
Directors. Foreign securities quoted in foreign currencies are
translated into U.S. dollars at the current exchange rate.
Valuing Money Market Portfolio's shares
Money Market Portfolio intends to use its best efforts to maintain
a constant net asset value of $1 per share although there is no
assurance it will be able to do so. Accordingly, it uses the
amortized cost method in valuing its Portfolio.
Short-term securities maturing in 60 days or less 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. It does not take into
consideration unrealized capital gains or losses. All of the
securities in the portfolio will be valued at their amortized cost.
In addition, the Portfolio must abide by certain conditions. It
must only invest in securities of high quality which present
minimal credit risks as determined by the Board of Directors. This
means that the rated commercial paper in the Fund's portfolio will
be issues that have been rated in the highest rating category by at
least two nationally recognized statistical rating organizations
(or by one if only one rating is assigned) and in unrated paper<PAGE>
PAGE 66
determined by the Fund's Board of Directors to be comparable. The
Portfolio must also purchase securities with original or remaining
maturities of no more than 13 months or less, and maintain a
dollar-weighted average portfolio maturity of 90 days or less.
In addition, the Board of Directors must establish procedures
designed to stabilize the Portfolio's price per share for purposes
of sales and redemptions at $1 to the extent that it is reasonably
possible to do so. These procedures include review of the
portfolio securities by the Board, at intervals deemed appropriate
by it, to determine whether the net asset value per share computed
by using the available market quotations deviates from a share
value of $1 as computed using the amortized cost method. The Board
must consider any deviation that appears, and if it exceeds 0.5
percent, it must determine what action, if any, needs to be taken.
If the Board determines that a deviation exists that may result in
a material dilution of the holdings of current shareholders or
investors, or in other unfair consequences for such people, it must
undertake remedial action that it deems necessary and appropriate.
Such action may include withholding dividends, calculating net
asset value per share for purposes of sales and redemptions using
available market quotations, making redemptions in kind, and
selling portfolio securities before maturity in order to realize
capital gain or loss or to shorten average portfolio maturity.
In other words, while the amortized cost method provides certainty
and consistency in portfolio valuation, it may, from time to time,
result in valuations of portfolio securities which are either
somewhat higher or lower than the prices at which the securities
could be sold. This means that during times of declining interest
rates, the yield on the Portfolio's shares may be higher than if
valuations of securities were made based on actual market prices
and estimates of market prices. Accordingly, if use of the
amortized cost method were to result in a lower portfolio value at
a given time, a prospective investor would be able to obtain a
somewhat higher yield than he or she would get if portfolio
valuation were based on actual market values. Existing
shareholders, on the other hand, would receive a somewhat lower
yield than they would otherwise receive. The opposite would happen
during a period of rising interest rates.
INVESTING IN THE FUND
You cannot buy shares of the Fund directly. The only way you can
invest in the Fund at the present time is by buying a Variable Life
Insurance Policy from IDS Life or IDS Life of New York and
directing the allocation of part or all of your net purchase
payment to the Variable Accounts which will invest in shares of the
Fund. Read this fund's prospectus along with your Variable Life
Insurance Policy prospectus.
Sales Charges and Surrender Charges
The Fund does not assess any sales charge, either when it sells or
when it redeems securities. The surrender charges which may be
assessed under your Variable Life Insurance Policy are described in<PAGE>
PAGE 67
the Variable Life Insurance Policy prospectus, as are mortality and
expense risk fees and other charges.
REDEEMING SHARES
The Fund will redeem any shares presented by the shareholders (the
Variable Accounts) for redemption. The Variable Accounts' policy
on when or whether to buy or redeem Fund shares is described in the
Variable Life Insurance Policy prospectus.
During an emergency the Board of Directors 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 New York Stock Exchange closes for reasons other than the
usual weekend and holiday closings, or trading on the Exchange is
restricted,
`Disposal of the Fund's securities is not reasonably practicable,
or it is not reasonably practicable for the Fund to determine the
fair value of its net assets, or
`The Securities and Exchange Commission, under the provisions of
the Investment Company Act of 1940, declares a period of emergency
to exist.
Should the Fund stop selling shares, the directors 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 contract owners.
CAPITAL GAINS AND LOSSES
For federal income tax purposes, Income and Money Market Portfolios
had a capital loss carryover of $3,648 and $174, respectively, at
April 30, 1994, which, if not offset by subsequent capital gains,
will expire in 1996 through 2000. It is unlikely the Board of
Directors will authorize a distribution of any net realized gain
for this Portfolio until the capital loss carryover has been offset
or expires.
INVESTMENT MANAGEMENT AND OTHER SERVICES
Management and Services Agreement
The Fund does not maintain its own research department or record-
keeping services. These are provided by IDS Life under the
Investment Management and Services Agreement.
For its services, IDS Life is paid a fee based on the net assets of
the Portfolios. The asset charge is based on the aggregate average
daily net assets of each of the Portfolios at the following rates:
<PAGE>
PAGE 68
0.7 percent, on an annual basis, for Equity Portfolio;
0.7 percent, on an annual basis, for Income Portfolio;
0.5 percent, on an annual basis, for Money Market Portfolio;
0.7 percent, on an annual basis, for Managed Portfolio; and
0.7 percent, on an annual basis, for Government Securities
Portfolio.
The management fee is paid monthly. The total amount paid for
fiscal year ended April 30, 1994 was $850,524 for Equity Portfolio,
$199,578 for Income Portfolio, $41,168 for Money Market Portfolio,
$920,594 for Managed Portfolio and $75,428 for Government
Securities Portfolio. The total amount paid for fiscal year ended
April 30, 1993 was $504,402 for Equity Portfolio, $136,217 for
Income Portfolio, $47,061 for Money Market Portfolio,
$596,745 for Managed Portfolio and $61,668 for Government
Securities Portfolio. The total amount paid for fiscal year ended
April 30, 1992 was $327,914 for Equity Portfolio, $94,784 for
Income Portfolio, $48,939 for Money Market Portfolio, $436,549 for
Managed Portfolio and $48,470 for Government Securities Portfolio.
All non-advisory expenses incurred by the Fund will be paid at an
annual charge not to exceed 0.1 percent of the aggregate average
daily net assets of the Fund. The voluntary limitation of 0.1
percent has been established by IDS Life at that figure and IDS
Life reserves the right to discontinue the voluntary limitation.
Investment Advisory Agreement
IDS Life and IDS have an Investment Advisory Agreement. It calls
for IDS Life to pay IDS a fee for investment advice about the
Fund's Portfolios. IDS also executes purchases and sales and
negotiates brokerage as directed by IDS Life. The fee paid by IDS
Life is 0.25 percent of the Fund's average net assets for the year.
IDS Life paid IDS $751,255 for investment advice for the fiscal
year ended April 30, 1994. IDS Life paid IDS $487,415 for
investment advice for the fiscal year ended April 30, 1993. IDS
Life paid IDS $348,615 for investment advice for the fiscal year
ended April 30, 1992.
Information concerning other funds advised by IDS Life or IDS is
contained in the prospectus.
MANAGEMENT OF THE FUND
The Fund has a Board of Directors elected by policyholders that
oversees the operations of the Fund as required by state law. The
Board has named an executive committee of directors that has
authority to act on its behalf between meetings.
The Fund's directors and officers do not own any of the outstanding
shares of the Fund.
<PAGE>
PAGE 69
Directors of the Fund
The following is a list of the Fund's directors.
Carl N. Platou
President Emeritus and Chief Executive Officer, Fairview Hospital
and Healthcare Services, Retired 1990. Director, St. Thomas
University since 1990.
*Richard W. Kling
President, IDS Life since March 1994. Director and Executive Vice
President, Marketing and Products from January 1988 to March 1994.
Manager of IDS Life Variable Annuity Funds A&B.
Edward Landes
Retired, former Development Consultant.
*Janis E. Miller
Director and Executive Vice President, Variable Assets, IDS Life
since March 1994. Vice President, IDS since June 1990. Manager of
IDS Life Variable Annuity Funds A & B.
Gordon H. Ritz
President, Con Rad Broadcasting Corp. (Radio Broadcasting).
Director, Sunstar Foods and Mid-America Publishing.
*Interested person of IDS Life and of the Fund as the term
"interested person" is defined in the 1940 Act.
Officers of the Fund
Besides Mr. Kling, who is the President, the Fund's other executive
officers are listed below:
Colleen Curran
IDS Tower 10
Minneapolis, MN
Secretary
Senior Counsel, IDS, since 1990.
Louis C. Fornetti
IDS Tower 10
Minneapolis, MN
Vice President
Director, IDS Life, since March 1994. Director and Senior Vice
President--Corporate Controller, IDS, since August 1988. Vice
President--Corporate Controller, from 1985 to 1988.
<PAGE>
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Morris Goodwin, Jr.
IDS Tower 10
Minneapolis, MN
Vice President and Treasurer
Vice President and Treasurer, IDS Life since March 1994. Vice
President and Corporate Treasurer, IDS, since July 1989. Chief
Financial Officer and Treasurer, IDS Bank & Trust, from 1988 to
1989.
Paul F. Kolkman
IDS Tower 10
Minneapolis, MN
Vice President and Chief Actuary
Director and Vice President--Finance, IDS Life. Vice President--
Insurance Finance, IDS.
William A. Stoltzmann
IDS Tower 10
Minneapolis, MN
General Counsel and Assistant Secretary
General Counsel and Assistant Secretary, IDS Life. Vice President
and Assistant General Counsel, IDS.
Melinda S. Urion
IDS Tower
Minneapolis, MN
Vice President and Controller
Vice President and Corporate Controller, IDS, since April 1994;
Vice President - Insurance Controller, IDS, from September 1991 to
April 1994. Chief Accounting Officer for IDS Financial Services
Inc. from July 1988 to September 1991.
CUSTODIAN
The Fund's securities and cash are held by IDS Trust Company, 1200
Northstar Center West, 625 Marquette Ave., Minneapolis, MN 55402,
through a custodian agreement. The custodian is permitted to
deposit some or all of its securities in central depository systems
as allowed by federal law.
The custodian has entered into a sub-custodian arrangement with
Boston Safe Deposit & Trust Co. (Boston Safe), 31 St. James Ave.,
Boston, MA 02116. As part of this arrangement, portfolio
securities purchased outside the United States are maintained in
the custody of various foreign branches of Boston Safe or in such
other financial institutions as may be permitted by law and by the
Fund's sub-custodian agreement.
INDEPENDENT AUDITORS
The Fund's financial statements contained in its Annual Report to
shareholders at the end of its fiscal year are audited by<PAGE>
PAGE 71
independent auditors, KPMG Peat Marwick LLP, 4200 Norwest Center,
90 South Seventh Street, Minneapolis, MN 55402-3900. IDS Life has
agreed that it will send a copy of this report and the unaudited
Semi-Annual Report to every Variable Life Insurance policyowner
having an interest in the Fund. The independent auditors also
provide other accounting and tax-related services as requested by
the Fund from time to time.
FINANCIAL STATEMENTS
The Independent Auditors' Report and the Financial Statements,
including the Notes to the Financial Statements and the Schedule of
Investments in Securities, contained in the 1994 Annual Report to
IDS Life Series Fund, Inc. shareholders, pursuant to Section 30(d)
of the 1940 Act, are hereby incorporated in this Statement of
Additional Information by reference. No other portion of the
Annual Report, however, is incorporated by reference.
The prospectus dated October 28, 1994, is hereby incorporated in
this Statement of Additional Information by reference.
<PAGE>
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APPENDIX A
FOREIGN CURRENCY TRANSACTIONS, FOR INVESTMENTS OF EQUITY, INCOME
AND MANAGED PORTFOLIOS
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 portfolio 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
<PAGE>
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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 portfolio 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 portfolio 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 portfolio 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 portfolio
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 portfolio 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
<PAGE>
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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 portfolio 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 portfolio 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
portfolio 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
<PAGE>
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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 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.
<PAGE>
PAGE 76
Foreign Currency Futures and Related Options. The Portfolio may
enter into currency futures contracts to sell currencies. It also
may buy put 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 CFTC
limitations, including the limitation on the percentage of assets
that may be used, described in the prospectus. 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 not use leverage in its options and futures
strategies. 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>
PAGE 77
APPENDIX B
DESCRIPTION OF MONEY MARKET SECURITIES
Certificates of Deposit -- A certificate of deposit is a negotiable
receipt issued by a bank or savings and loan association in
exchange for the deposit of funds. The issuer agrees to pay the
amount deposited, plus interest, on the date specified on the
certificate.
Time Deposit -- A time deposit is a non-negotiable deposit in a
bank for a fixed period of time.
Bankers' Acceptances -- A bankers' acceptance arises from a short-
term credit arrangement designed to enable businesses to obtain
funds to finance commercial transactions. It is a time draft drawn
on a bank by an exporter or an importer to obtain a stated amount
of funds to pay for specific merchandise. The draft is then
"accepted" by a bank that, in effect, unconditionally guarantees to
pay the face value of the instrument on its maturity date.
Commercial Paper -- Commercial paper is generally defined as
unsecured short-term notes issued in bearer form by large well-
known corporations and finance companies. Maturities on commercial
paper range from one day to nine months.
Commercial paper rated A by Standard & Poor's Corporation has the
following characteristics: Liquidity ratios are better than the
industry average. Long-term senior debt rating is "A" or better.
The issuer has access to at least two additional channels of
borrowing. Basic earnings and cash flow have an upward trend with
allowances made for unusual circumstances. Typically, the issuer's
industry is well established, the issuer has a strong position
within its industry and the reliability and quality of management
is unquestioned. Issuers rated A are further rated by use of
numbers 1, 2 and 3 to denote relative strength within this highest
classification.
A Prime rating is the highest commercial paper rating assigned by
Moody's Investors Services Inc. Issuers rated Prime are further
rated by use of numbers 1, 2 and 3 to denote relative strength
within this highest classification. Among the factors considered
by Moody's in assigning ratings for an issuer are the following:
(1) management; (2) economic evaluation of the industry and an
appraisal of speculative type risks which may be inherent in
certain areas; (3) competition and customer acceptance of products;
(4) liquidity; (5) amount and quality of long-term debt; (6) ten
year earnings trends; (7) financial strength of a parent company
and the relationships which exist with the issuer; and (8)
recognition by management of obligations which may be present or
may arise as a result of public interest questions and preparations
to meet such obligations.
<PAGE>
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Letters of Credit -- A letter of credit is a short-term note issued
in bearer form with a bank letter of credit which provides that the
bank pay to the bearer the amount of the note upon presentation.
U.S. Treasury Bills -- Treasury bills are issued with maturities of
any period up to one year. Three-month and six-month bills are
currently offered by the Treasury on 13-week and 26-week cycles
respectively and are auctioned each week by the Treasury. Treasury
bills are issued in book entry form and are sold only on a discount
basis, i.e. the difference between the purchase price and the
maturity value constitutes interest income for the investor. If
they are sold before maturity, a portion of the income received may
be a short-term capital gain.
U.S. Government Agency Securities -- Federal agency securities are
debt obligations which principally result from lending programs of
the U.S. government. Housing and agriculture have traditionally
been the principal beneficiaries of Federal credit programs, and
agencies involved in providing credit to agriculture and housing
account for the bulk of the outstanding agency securities.
Repurchase Agreements -- A repurchase agreement involves the
acquisition of securities by the Portfolio, with the concurrent
agreement by a bank (or securities dealer if permitted by law or
regulation), to reacquire the securities at the portfolio's cost,
plus interest, within a specified time. The Portfolio thereby
receives a fixed rate of return on this investment, one that is
insulated from market and rate fluctuations during the holding
period. In these transactions, the securities acquired by the
Portfolio have a total value equal to or in excess of the value of
the repurchase agreement and are held by the Portfolio's custodian
until required. Pursuant to guidelines established by the
Portfolio's Board of Directors, the creditworthiness of the other
party to the transaction is considered and the value of those
securities held as collateral is monitored to ensure that such
value is maintained at the required level.
If IDS Life becomes aware that a security owned by a Portfolio is
downgraded below the second highest rating, IDS Life will either
sell the security or recommend to the Fund's Board of Directors why
it should not be sold.
<PAGE>
PAGE 79
APPENDIX C
OPTIONS AND STOCK INDEX FUTURES CONTRACTS, FOR INVESTMENTS OF
EQUITY AND MANAGED PORTFOLIOS
Each Portfolio may buy or write options traded on any U.S. or
foreign exchange or in the over-the-counter market. Each Portfolio
may enter into stock index futures contracts traded on any U.S. or
foreign exchange. Each 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, a Portfolio could be required to
buy or sell securities at disadvantageous prices, thereby incurring
losses. Managed Portfolio also may enter into interest rate
futures contracts (see Appendix D).
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 a
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. They also may be used for investment. Options<PAGE>
PAGE 80
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 a Portfolio for investment
purposes. Options permit a Portfolio to experience the change in
the value of a security with a relatively small initial cash
investment.
The risk a Portfolio assumes when it buys an option is the loss of
the premium. To be beneficial to a 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 subsequent 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. Each 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 each
Portfolio's goal.
'All options written by a Portfolio will be covered. For covered
call options, if a decision is made to sell the security, each
Portfolio will attempt to terminate the option contract through a
closing purchase transaction.
'Each Portfolio will deal only in standard option contracts traded
on national securities exchanges or those that may be quoted on
NASDAQ (a system of price quotations developed by the National
Association of Securities Dealers, Inc.)
'Each Portfolio will write options only as permitted under federal
laws or regulations, such as those that limit the amount of total
assets subject to the options. Some regulations also affect the
Custodian. When a covered option is written, the Custodian
segregates the underlying securities, and issues a receipt. There
are certain rules regarding banks issuing such receipts that may
<PAGE>
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restrict the amount of covered call options written. Furthermore,
each Portfolio is limited to pledging not more than 15 percent of
the cost of its total assets.
Net premiums on call options closed or premiums on expired call
options are treated as short-term capital gains. Since each
Portfolio is taxed as a regulated investment company under the
Internal Revenue Code, any gains on options and other securities
held less than three months must be limited to less than 30 percent
of its annual gross income.
If a covered call option is exercised, the security is sold by the
Portfolio. The premium received upon writing the option is added
to the proceeds received from the sale of the security. The
Portfolio will recognize a capital gain or loss based upon the
difference between the proceeds and the security's basis. Premiums
received from writing outstanding options are included as a
deferred credit in the Statement of Assets and Liabilities and
adjusted daily to the current market value.
Options are valued at the close of the New York Stock Exchange. An
option listed on a national exchange, CBOE or NASDAQ will be valued
at the last-quoted sales price or, if such a price is not readily
available, at the mean of the last bid and asked prices.
STOCK INDEX FUTURES CONTRACTS. Stock index futures contracts are
commodity contracts listed on commodity exchanges. They currently
include contracts on the Standard & Poor's 500 Stock Index (S&P 500
Index) and other broad stock market indexes such as the New York
Stock Exchange Composite Stock Index and the Value Line Composite
Stock Index, as well as narrower sub-indexes such as the S&P 100
Energy Stock Index and the New York Stock Exchange Utilities Stock
Index. A stock index assigns relative values to common stocks
included in the index and the index fluctuates with the value of
the common stocks so included.
A futures contract is a legal agreement between a buyer or seller
and the clearinghouse of a futures exchange in which the parties
agree to make a cash settlement on a specified future date in an
amount determined by the stock index on the last trading day of the
contract. The amount is a specified dollar amount (usually $100 or
$500) multiplied the difference between the index value on the last
trading day and the value on the day the contract was struck.
For example, the S&P 500 Index consists of 500 selected common
stocks, most of which are listed on the New York Stock Exchange.
The S&P 500 Index assigns relative weightings to the common stocks
included in the Index, and the Index fluctuates with changes in the
market values of those stocks. In the case of S&P 500 Index
futures contracts, the specified multiple is $500. Thus, if the
value of the S&P 500 Index were 150, the value of one contract
would be $75,000 (150 x $500). Unlike other futures contracts, a
stock index futures contract specifies that no delivery of the
actual stocks making up the index will take place. Instead,
settlement in cash must occur upon the termination of the contract.<PAGE>
PAGE 82
For example, excluding any transaction costs, if a 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.
Unlike the purchase or sale of an equity security, no price would
be paid or received by the Portfolio upon entering into stock index
futures contracts. However, the Portfolio would be required to
deposit with its custodian, in a segregated account in the name of
the futures broker, an amount of cash or U.S. Treasury bills equal
to approximately 5 percent of the contract value. This amount is
known as initial margin. The nature of initial margin in futures
transactions is different from that of margin in security
transactions in that futures contract margin does not involve
borrowing funds by the Portfolio to finance the transactions.
Rather, the initial margin is in the nature of a performance bond
or good-faith deposit on the contract that is returned to the
Portfolio upon termination of the contract, assuming all
contractual obligations have been satisfied.
Subsequent payments, called variation margin, to and from the
broker would be made on a daily basis as the price of the
underlying stock index fluctuates, making the long and short
positions in the contract more or less valuable, a process known as
marking to market. For example, when a Portfolio enters into a
contract in which it benefits from a rise in the value of an index
and the price of the underlying stock index has risen, the
Portfolio will receive from the broker a variation margin payment
equal to that increase in value. Conversely, if the price of the
underlying stock index declines, the Portfolio would be required to
make a variation margin payment to the broker equal to the decline
in value.
How These Portfolios Would Use Stock Index Futures Contracts. The
Portfolios intend to use stock index futures contracts and related
options for hedging and not for speculation. Hedging permits a
Portfolio to gain rapid exposure to or protect itself from changes
in the market. For example, a Portfolio may find itself with a
high cash position at the beginning of a market rally.
Conventional procedures of purchasing a number of individual issues
entail the lapse of time and the possibility of missing a
significant market movement. By using futures contracts, the
Portfolio can obtain immediate exposure to the market and benefit
from the beginning stages of a rally. The buying program can then
proceed and once it is completed (or as it proceeds), the contracts
can be closed. Conversely, in the early stages of a market
decline, market exposure can be promptly offset by entering into
stock index futures contracts to sell units of an index and
individual stocks can be sold over a longer period under cover of
the resulting short contract position.
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A Portfolio may enter into contracts with respect to any stock
index or sub-index. To hedge the Portfolio's investment portfolio
successfully, however, the Portfolio must enter into contracts with
respect to indexes or sub-indexes whose movements will have a
significant correlation with movements in the prices of the
Portfolio's individual portfolio securities.
Special Risks of Transactions in Stock Index Futures Contracts.
1. Liquidity. Each Portfolio may elect to close some or all of
its contracts prior to expiration. The purpose of making such a
move would be to reduce or eliminate the hedge position held by the
Portfolio. The Portfolio may close its positions by taking
opposite positions. Final determinations of variation margin are
then made, additional cash as required is paid by or to the
Portfolio, and the Portfolio realizes a gain or a loss.
Positions in stock index futures contracts may be closed only on an
exchange or board of trade providing a secondary market for such
futures contracts. For example, futures contracts transactions can
currently be entered into with respect to the S&P 500 Stock Index
on the Chicago Mercantile Exchange, the New York Stock Exchange
Composite Stock Index on the New York Futures Exchange and the
Value Line Composite Stock Index on the Kansas City Board of Trade.
Although the Portfolios intend 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 subject to the hedge.
Of course, there is no guarantee the price of the securities will
correlate with the price movements in the futures contract and thus
provide an offset to losses on a futures contract.
2. Hedging Risks. There are several risks in using stock index
futures contracts as a hedging device. One risk arises because the
prices of futures contracts may not correlate perfectly with
movements in the underlying stock index due to certain market
distortions. First, all participants in the futures market are
subject to initial margin and variation margin requirements.
Rather than making additional variation margin payments, investors
may close the contracts through offsetting transactions which could
distort the normal relationship between the index and futures
markets. Second, the margin requirements in the futures market are
lower than margin requirements in the securities market, and as a
result the futures market may attract more speculators than does
the securities market. Increased participation by speculators in
the futures market also may cause temporary price distortions.
Because of price distortion in the futures market and because of
imperfect correlation between movements in stock indexes and
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movements in prices of futures contracts, even a correct forecast
of general market trends may not result in a successful hedging
transaction over a short period.
Another risk arises because of imperfect correlation between
movements in the value of the stock index futures contracts and
movements in the value of securities subject to the hedge. If this
occurred, a Portfolio could lose money on the contracts and also
experience a decline in the value of its portfolio securities.
While this could occur, IDS Life believes that over time the value
of the Portfolio's investment portfolio will tend to move in the
same direction as the market indexes and will attempt to reduce
this risk, to the extent possible, by entering into futures
contracts on indexes whose movements it believes will have a
significant correlation with movements in the value of the
Portfolio's investment portfolio securities sought to be hedged.
It is also possible that if the Portfolio has hedged against a
decline in the value of the stocks held in its portfolio and stock
prices increase instead, the Portfolio will lose part or all of the
benefit of the increased value of its stock which it has hedged
because it will have offsetting losses in its futures positions.
In addition, in such situations, if the Portfolio has insufficient
cash, it may have to sell securities to meet daily variation
margin requirements. Such sales of securities may be, but will not
necessarily be, at increased prices which reflect the rising
market. The Portfolio may have to sell securities at a time when
it may be disadvantageous to do so.
OPTIONS ON STOCK INDEX FUTURES CONTRACTS. Options on stock index
futures contracts are similar to options on stock except that
options on futures contracts give the purchaser the right, in
return for the premium paid, to assume a position in a stock index
futures contract (a long position if the option is a call and a
short position if the option is a put) at a specified exercise
price at any time during the period of the option. If the option
is closed instead of exercised, the holder of the option receives
an amount that represents the amount by which the market price of
the contract exceeds (in the case of a call) or is less than (in
the case of a put) the exercise price of the option on the futures
contract. If the option does not appreciate in value prior to the
exercise date, the Portfolio will suffer a loss of the premium
paid.
OPTIONS ON STOCK INDEXES. Options on stock indexes are securities
traded on national securities exchanges. An option on a stock
index is similar to an option on a futures contract except all
settlements are in cash. A 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.
SPECIAL RISKS OF TRANSACTIONS IN OPTIONS ON STOCK INDEX FUTURES
CONTRACTS AND OPTIONS ON STOCK INDEXES. As with options on stocks,
the holder of an option on a stock index futures contract or on a
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stock index may terminate a position by selling an option covering
the same contract or index and having the same exercise price and
expiration date. The ability to establish and close out positions
on such options will be subject to the development and maintenance
of a liquid secondary market. The Portfolios will not purchase
options unless the market for such options has developed
sufficiently, so that the risks in connection with options are not
greater than the risks in connection with stock index futures
contracts transactions themselves. Compared to using futures
contracts, purchasing options involves less risk to the Portfolios
because the maximum amount at risk is the premium paid for the
options (plus transaction costs). There may be circumstances,
however, when using an option would result in a greater loss to a
Portfolio than using a futures contract, such as when there is no
movement in the level of the stock index.
TAX TREATMENT. As permitted under federal income tax laws, each
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 stock indexes is currently
unclear, although the Portfolios' tax advisers currently believe
marking to market is not required. Depending on developments, a
Portfolio may seek IRS rulings clarifying questions concerning such
treatment. Certain provisions of the Code also may limit a
Portfolio's ability to engage in futures contracts and related
options transactions. For example, at the close of each quarter of
the Portfolio's taxable year, at least 50 percent of the value of
its assets must consist of cash, government securities and other
securities, subject to certain diversification requirements. Less
than 30 percent of its gross income must be derived from sales of
securities held less than three months.
The IRS has ruled publicly that an exchange-traded call option is a
security for purposes of the 50-percent-of-assets test and that its
issuer is the issuer of the underlying security, not the writer of
the option, for purposes of the diversification requirements. In
order to avoid realizing a gain within the three-month period, a
Portfolio may be required to defer closing out a contract beyond
the time when it might otherwise be advantageous to do so. The
Portfolio also may be restricted in purchasing put options for the
purpose of hedging underlying securities because of applying the
short sale holding period rules with respect to such underlying
securities.
Accounting for futures contracts will be according to generally
accepted accounting principles. Initial margin deposits will be
recognized as assets due from a broker (the Portfolio's agent in
acquiring the futures position). During the period the futures
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contract is open, changes in value of the contract will be62
recognized as unrealized gains or losses by marking to market on a
daily basis to reflect the market value of the contract at the end
of each day's trading. Variation margin payments will be made or
received depending upon whether gains or losses are incurred. All
contracts and options will be valued at the last-quoted sales price
on their primary exchange.
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APPENDIX D
OPTIONS AND INTEREST RATE FUTURES CONTRACTS, FOR INVESTMENTS OF
INCOME, MANAGED AND GOVERNMENT SECURITIES PORTFOLIOS
Income and Managed Portfolios may buy or write options traded on
any U.S. or foreign exchange or in the over-the-counter market.
Each Portfolio may enter into interest rate futures contracts
traded on any U.S. or foreign exchange. Each Portfolio also may
buy or write put and call options on these futures. 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, a Portfolio could be required to
buy or sell securities at disadvantageous prices, thereby incurring
losses. Managed Portfolio also may enter into stock index futures
contracts (see Appendix C).
Government Securities Portfolio may buy or write options traded on
any U.S. exchange or in the over-the-counter market. The Portfolio
may enter into interest rate futures contracts traded on any U.S.
exchange. The Portfolio also may buy or write put and call options
on these futures. 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 (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 a 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
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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.
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 a
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. They also may be used for investment. 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 a 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. A 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
Portfolio's goal.
'All options written by the Portfolio will be covered. For covered
call options if a decision is made to sell the security, the
Portfolio will attempt to terminate the option contract through a
closing purchase transaction.
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'The Portfolio will write options only as permitted under federal
laws or regulations, such as those that limit the amount of total
assets subject to the options. Some regulations also affect the
Custodian. When a covered call option is written, the Custodian
segregates the underlying securities and issues a receipt. There
are certain rules regarding banks issuing such receipts that may
restrict the amount of covered call options written. Furthermore,
a Portfolio is limited to pledging not more than 15 percent of the
cost of its total assets.
Net premiums on call options closed or premiums on expired call
options are treated as short-term capital gains. Since a Portfolio
is taxed as a regulated investment company under the Code, any
gains on options and other securities held less than three months
must be limited to less than 30 percent of its annual gross income.
If a covered call option is exercised, the security is sold by the
Portfolio. The Portfolio will recognize a capital gain or loss
based upon the difference between the proceeds and the security's
basis.
Options on many securities are listed on options exchanges. If a
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
asked prices.
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. They have been established by boards of trade which have
been designated contracts markets by the Commodity Futures Trading
Commission (CFTC). Futures contracts trade on these markets in a
manner similar to the way a stock trades on a stock exchange, and
the boards of trade, through their clearing corporations, guarantee
performance of the contracts. Currently, there are futures
contracts based on such debt securities as long-term U.S. Treasury
bonds, Treasury notes, GNMA modified pass-through mortgate-backed
securities, three-month U.S. Treasury bills and bank certificates
of deposit. While futures contracts based on debt securities do
provide for the delivery and acceptance of securities, such
deliveries and acceptances are very seldom made. Generally, the
futures contract is terminated by entering into an offsetting
transaction. An offsetting transaction for a futures contract sale
is effected by the Portfolio entering into a futures contract
purchase for the same aggregate amount of the specific type of
financial instrument and same delivery date. If the price in the
sale exceeds the price in the offsetting purchase, the Portfolio
immediately is paid the difference and realizes a gain. If the
offsetting purchase price exceeds the sale price, the Portfolio
pays the difference and realizes a loss. Similarly, closing out a
futures contract purchase is effected by the Portfolio entering
into a futures contract sale. If the offsetting sale price
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exceeds the purchase price, the Portfolio realizes a gain, and if
the offsetting sale price is less than the purchase price, the
Portfolio realizes a loss. At the time a futures contract is made,
a good-faith deposit called initial margin is set up within a
segregated account at the Portfolios' custodian bank. The initial
margin deposit is approximately 1.5 percent of a contract's face
value. Daily thereafter, the futures contract is valued and the
payment of variation margin is required so that each day the
Portfolio would pay out cash in an amount equal to any decline in
the contract's value or receive cash equal to any increase. At the
time a futures contract is closed out, a nominal commission is
paid, which is generally lower than the commission on a comparable
transaction in the cash markets.
The purpose of a futures contract, in the case of a fund holding
long-term debt securities, is to gain the benefit of changes in
interest rates without actually buying or selling long-term debt
securities. For example, if a 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. Futures
contracts are based on types of debt securities referred to above,
which have historically reacted to an increase or decline in
interest rates in a fashion similar to the debt securities the
Portfolio owns. 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. Successful use of
futures contracts depends on the investment manager's ability to
predict the future direction of interest rates. If the investment
manager's prediction is incorrect, the Portfolio would have been
better off had it not entered into futures contracts.
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OPTIONS ON FUTURES CONTRACTS. Options 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. Furthermore, 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 Portfolio.
RISKS. There are risks in engaging in each of the management tools
described above. The risk a Portfolio assumes when it buys an
option is the loss of the premium paid for the option. Purchasing
options also limits the use of monies that might otherwise be
available for long-term investments.
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. Furthermore, the Portfolio might not be able to close the
option because of insufficient activity in the options market.
A 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.
Another risk is that the Portfolio's investment manager could be
incorrect in anticipating as to the direction or extent of various
interest rate 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.
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TAX TREATMENT. As permitted under federal income tax laws, each
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 currently is unclear,
although the Portfolios' tax advisers currently believe marking to
market is not required. Depending on developments, a Portfolio may
seek IRS rulings clarifying questions concerning such treatment.
Certain provisions of the Code also may limit a Portfolio's ability
to engage in futures contracts and related options transactions.
For example, at the close of each quarter of the Portfolio's
taxable year, at least 50 percent of the value of its assets must
consist of cash, government securities and other securities,
subject to certain diversification requirements. Less than 30
percent of its gross income must be derived from sales of
securities held less than three months.
The IRS has ruled publicly that an exchange-traded call option is a
security for purposes of the 50-percent-of-assets test and that its
issuer is the issuer of the underlying security, not the writer of
the option, for purposes of the diversification requirements. In
order to avoid realizing a gain within the three-month period, the
Portfolio may be required to defer closing out a contract beyond
the time when it might otherwise be advantageous to do so. The
Portfolio also may be restricted in purchasing put options for the
purpose of hedging underlying securities because of applying the
short sale holding period rules with respect to such underlying
securities.
Accounting for futures contracts will be according to generally
accepted accounting principles. Initial margin deposits will be
recognized as assets due from a broker (the Portfolio's agent in
acquiring the futures position). During the period the futures
contract is open, changes in value of the contract will be
recognized as unrealized gains or losses by marking to market on a
daily basis to reflect the market value of the contract at the end
of each day's trading. Variation margin payments will be made or
received depending upon whether gains or losses are incurred. All
contracts and options will be valued at the last-quoted sales price
on their primary exchange.
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APPENDIX E
MORTGAGE-BACKED SECURITIES AND ADDITIONAL INFORMATION ON INVESTMENT
POLICIES (FOR ALL PORTFOLIOS EXCEPT MONEY MARKET)
GNMA Certificates
The Government National Mortgage Association (GNMA) is a wholly
owned corporate instrumentality of the United States within the
Department of Housing and Urban Development. GNMA certificates are
mortgage-backed securities of the modified pass-through type, which
means that both interest and principal payments (including
prepayments) are passed through monthly to the holder of the
certificate. Each certificate evidences an interest in a specific
pool of mortgage loans insured by the Federal Housing
Administration or the Farmers Home Administration or guaranteed by
the Veterans Administration. The National Housing Act provides
that the full faith and credit of the United States is pledged to
the timely payment of principal and interest by GNMA of amounts due
on these certificates. GNMA is empowered to borrow without
limitation from the U.S. Treasury, if necessary, to make such
payments.
Underlying Mortgages of the Pool. Pools consist of whole mortgage
loans or participations in loans. The majority of these loans are
made to purchasers of 1-4 member family homes. The terms and
characteristics of the mortgage instruments generally are uniform
within a pool but may vary among pools. For example, in addition
to fixed-rate fixed-term mortgages, the Portfolio may purchase
pools of variable rate mortgages, growing equity mortgages,
graduated payment mortgages and other types.
All servicers apply standards for qualification to local lending
institutions which originate mortgages for the pools. Servicers
also establish credit standards and underwriting criteria for
individual mortgages included in the pools. In addition, many
mortgages included in pools are insured through private mortgage
insurance companies.
Average Life of GNMA Certificates. The average life of GNMA
certificates varies with the maturities of the underlying mortgage
instruments which have maximum maturities of 30 years. The average
life is likely to be substantially less than the original maturity
of the mortgage pools underlying the securities as the result of
prepayments or refinancing of such mortgages. Such prepayments are
passed through to the registered holder with the regular monthly
payments of principal and interest.
As prepayment rates vary widely, it is not possible to accurately
predict the average life of a particular pool. It is customary in
the mortgage industry in quoting yields on a pool of 30-year
mortgages to compute the yield as if the pool were a single loan
that is amortized according to a 30-year schedule and that is
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prepaid in full at the end of the 12th year. For this reason, it
is standard practice to treat GNMA certificates as 30-year
mortgage-backed securities which prepay fully in the 12th year.
Calculation of Yields. Yields on pass-through securities are
typically quoted based on the maturity of the underlying
instruments and the associated average life assumption.
Actual pre-payment experience may cause the yield to differ from
the assumed average life yield. When mortgage rates drop, pre-
payments will increase, thus reducing the yield. Reinvestment of
pre-payments may occur at higher or lower interest rates than the
original investment, thus affecting the yield of a Portfolio. The
compounding effect from reinvestments of monthly payments received
by the Portfolio will increase the yield to shareholders compared
to bonds that pay interest semi-annually. The yield also may be
affected if the certificate was issued at a premium or discount,
rather than at par. This also applies after issuance to
certificates trading in the secondary market at a premium or
discount.
"When-Issued" GNMA 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. Payment and interest terms,
however, are fixed at the time the purchaser enters into the
commitment. However, the yield on a comparable GNMA certificate
when the transaction is consummated may vary from the yield on the
GNMA certificate at the time that the when-issued transaction was
made. A Portfolio does not pay for the securities or start earning
interest on them until the contractual settlement date. When-
issued securities are subject to market fluctuations and they may
affect the Portfolio's gross assets the same as owned securities.
Market for GNMA Certificates. Since the inception of the GNMA
mortgage-backed securities program in 1970, the amount of GNMA
certificates outstanding has grown rapidly. The size of the market
and the active participation in the secondary market by securities
dealers and many types of investors make the GNMA certificates a
highly liquid instrument. Prices of GNMA certificates are readily
available from securities dealers and depend on, among other
things, the level of market interest rates, the certificate's
coupon rate and the prepayment experience of the pool of mortgages
underlying each certificate.
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
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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. 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.
Income, Managed and Government Securities Portfolios may invest in
securities called "inverse floaters". Inverse floaters are created
by underwriters using the interest payments on securities. A
portion of the interest received is paid to holders of instruments
based on current interest rates for short-term securities. What is
left over, less a servicing fee, is paid to holders of the 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.
Income, Managed and Government Securities Portfolios may purchase
some securities in advance of when they are issued. Price and rate
of interest are set on the date the commitments are given but no
payment is made or interest earned until the date the securities
are issued, usually within two months, but other terms may be
negotiated. The commitment requires the portfolio to buy the
security when it is issued so the commitment is valued daily the
same way as owning a security would be valued. The Portfolio's
custodian will maintain, in a segregated account, cash or liquid
high-grade debt securities that are marked to market daily and are
at least equal in value to the Portfolio's commitments to purchase
the securities. The Portfolio may sell the commitment just like it
can sell a security. Frequently, the Portfolio has the opportunity
to sell the commitment back to the institution that plans to issue
the security and at the same time enter into a new commitment to
purchase a when-issued security in the future. For rolling its
commitment forward, the Portfolio realizes a gain or loss on the
sale of the current commitment or receives a fee for entering into
the new commitment.
Income, Managed and Government Securities Portfolios 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 under perform like-duration Treasury securities.
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APPENDIX F
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 units 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 units lower than the average
market price of units purchased, although there is no guarantee.
While this does not ensure a profit and does not protect against a
loss if the market declines, it is an effective way for many policy
owners who can continue investing through changing market
conditions to accumulate units to meet long term goals.
Dollar-cost averaging
Regular Market Price Units
Investment of a Unit 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 unit over 5 periods:
$5.00 ($25.00 divided by 5).
The average price you paid for each unit:
$4.84 ($500 divided by 103.4).
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APPENDIX G
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, C and D. Ratings by Standard & Poor's
Corporation are AAA, AA, A, BBB, BB, B, CCC, CC, C and D.
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 the 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.
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.
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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.
Non-rated securities will be considered for investment when they
possess a risk comparable to that of rated securities consistent
with the Fund's objectives and policies. When assessing the risk
involved in each non-rated security, the Fund will consider the
financial condition of the issuer or the protection afforded by the
terms of the security.
<PAGE>
PAGE 99
STATEMENT OF ADDITIONAL INFORMATION
for
IDS LIFE SERIES FUND, INC.
October 28, 1994
This Statement of Additional Information is not a prospectus. It
should be read together with the Fund's prospectus which may be
obtained from your IDS personal financial planner, or by writing or
calling IDS Life Series Fund, Inc. at the address or telephone
number below.
The date of this Statement of Additional Information is October 28,
1994, and is to be used with the Fund's Prospectus dated October
28, 1994 and the Fund's Annual Report for the fiscal year ended
April 30, 1994.
IDS Life Series Fund, Inc.
IDS Tower 10
Minneapolis, MN 55440-0010
(612) 671-3733
TTY: 800-285-8846
New York Service:
(518) 869-8613
<PAGE>
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TABLE OF CONTENTS
Goals and Investment Policies........................See Prospectus
Additional Investment Policies................................p. 3
Portfolio Transactions........................................p. 12
Brokerage Commissions Paid to
Brokers Affiliated with IDS Life..............................p. 14
Calculation of Total Return...................................p. 15
Calculation of Yield..........................................p. 16
Valuing Each Portfolio's Shares...............................p. 17
Investing in the Fund.........................................p. 20
Redeeming Shares..............................................p. 20
Capital Gains and Losses......................................p. 21
Investment Management and Other Services......................p. 21
Management of the Fund........................................p. 22
Custodian.....................................................p. 24
Independent Auditors..........................................p. 24
Financial Statements..............................See Annual Report
Appendix A: Foreign Currency Transactions, for
Investments of Equity, Income, Managed
and International Equity Portfolios..............p. 25
Appendix B: Description of Money Market Securities, for
Investments of all Portfolios except
Government Securities............................p. 30
Appendix C: Options and Stock Index Futures Contracts,
for Investments of Equity, Managed and
International Equity Portfolios..................p. 32
Appendix D: Options and Interest Rate Futures Contracts,
for Investments of Income, Managed and
Government Securities Portfolios.................p. 40
Appendix E: Mortgage-Backed Securities and Additional
Information on Investment Policies for all
Portfolios except Money Market...................p. 46
Appendix F: Dollar-Cost Averaging............................p. 49
Appendix G: Description of Corporate Bond Ratings............p. 50
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ADDITIONAL INVESTMENT POLICIES
In addition to the investment goals and policies presented in the
prospectus, each Portfolio has the investment policies stated
below.
Investment Policies Applicable to each Portfolio
Unless the holders of a majority of the outstanding shares (as
defined in the section entitled "Voting rights" of the prospectus)
of the Portfolio to which the policy applies agree to a change, the
Portfolio will not:
`Invest more than 5 percent of its total assets, at market value,
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. Except for Money Market Portfolio,
up to 25 percent of each Portfolio's total assets may be invested
without regard to this 5 percent limitation.
`Borrow money or property except as a temporary measure for
extraordinary or emergency purposes, and 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 will not purchase additional
portfolio securities at any time borrowing for temporary purposes
exceeds 5 percent. The Portfolio has not borrowed in the past and
has no present intention to borrow.
`Lend portfolio securities in excess of 30 percent of its net
assets, at market value. The current policy of the Board of
Directors is to make these loans, either long- or short-term, to
broker-dealers. In making such loans the Portfolio gets the market
price in cash, U.S. government securities, letters of credit or
such other collateral as may be permitted by regulatory agencies
and approved by the Board of Directors. 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. A loan will not be made unless the
opportunity for additional income outweighs the risks. During the
existence of the loan, the Portfolio receives cash payments
equivalent to all interest or other distributions paid on the
loaned securities.
These policies may be changed without notice or consent of
shareholders:
`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). A Portfolio does not
pay for the securities or receive dividends or interest on them
until the contractual settlement date. The Portfolio's custodian
will maintain, in a segregated account, cash or liquid high-grade
<PAGE>
PAGE 102
debt securities that are marked to market daily and are at least
equal in value to the Portfolio's 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. or
Standard & Poor's Corporation 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 the bankruptcy laws, the Portfolio's ability to
liquidate the security involved could be impaired.
Investment Policies Applicable to Equity and Income Portfolios
Unless the holders of a majority of the outstanding shares (as
defined in the section "Voting rights" in the prospectus) agree to
a change, Equity or Income Portfolios will not:
`Invest in companies for the purpose of, or with the effect of,
acquiring control.
`Underwrite securities of other issuers. However, this shall not
preclude the purchase of securities for investment, on original
issue or otherwise, and shall not preclude the acquisition of
portfolio securities under circumstances where Equity or Income
Portfolios would not be free to sell them without being deemed an
underwriter for purposes of the Securities Act of 1933 (1933 Act)
and without registration of such securities or the filing of a
notification under that Act, or the taking of similar action under
other securities laws relating to the sale of securities. Equity
and Income Portfolios will not invest in securities which are not
readily marketable (including restricted securities and repurchase
agreements over 7 days) without registration or the filing of a
notification under the 1933 Act, or the taking of similar action
under other securities laws relating to the sale of securities, if
immediately after the making of any such investment more than 10
percent of Equity Portfolio's net assets or 10 percent of Income
Portfolio's net assets (taken at market or other current value) are
invested in such securities.
<PAGE>
PAGE 103
`Engage in the purchase and sale of commodities or commodity
contracts, except that Income Portfolio may enter into interest
rate futures contracts.
`Invest in interests in oil, gas and other mineral exploration or
development programs.
`Buy securities of an issuer if the officers and directors of the
Fund and of IDS Financial Corporation (IDS) hold more than a
certain percent of the issuer's outstanding securities. The
holdings of all officers and directors of the Fund who own more
than 0.5 percent of an issuer's securities are added together and
if in total they own more than 5 percent, the Fund will not
purchase securities of that issuer.
`Concentrate its investments in any particular industry, but
reserves freedom of action to do so provided that not more than 25
percent of its assets, taken at cost, may be so invested at any one
time.
`Buy on margin or sell short.
`Invest more than 10 percent of its assets, taken at cost, in real
properties, or not do so as a principal activity.
`Purchase securities of any issuer if immediately after and as a
result of such purchase the Portfolio would own more than 10
percent of the outstanding voting securities of such issuer.
`Invest in securities of any investment company except in the open
market where no commission or profit to a sponsor or dealer results
from such purchase other than customary broker's commission. The
Portfolios do not intend to invest in such securities but may do so
to the extent of not more than 5 percent of their total assets
(taken at market or other current value). The Portfolios may
acquire limited amounts of securities of one or more investment
companies as permitted by the Investment Company Act of 1940 (1940
Act), in connection with the acquisition of or merger with such
companies. Except for these instances, the Portfolios will not
purchase securities of investment companies.
`Make loans except that (a) assets may be invested in debt
securities, whether or not publicly distributed, of a type
customarily purchased by institutional investors; and (b) to the
extent that loans are fully collateralized, and subject to the
applicable New York Stock Exchange rules, the Portfolios may engage
in lending portfolio securities to qualified banks or broker-
dealers.
Additional Investment Policy Applicable to Equity Portfolio
This policy may be changed without notice to or consent of
shareholders.
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PAGE 104
`Equity Portfolio does not intend to invest more than 2 percent of
its net assets in warrants that are not listed on a national
securities exchange. In no event will the investment in warrants
exceed 5 percent of Equity Portfolio's net assets. A warrant is a
right to buy a certain security at a set price for a certain period
of time and is freely traded in the market.
Investment Policies Applicable to Money Market Portfolio
Unless the holders of a majority of the outstanding shares (as
defined in the section entitled "Voting rights" in the prospectus)
agree to a change, Money Market Portfolio will not:
`Buy on margin or sell short.
`Invest in exploration or development programs, such as oil, gas or
mineral programs.
`Purchase common stocks, preferred stocks, warrants, other equity
securities, corporate bonds or debentures, state bonds, municipal
bonds, or industrial revenue bonds.
`Pledge or mortgage Portfolio assets beyond 15 percent of the cost
of the Portfolio's gross assets. If the Portfolio should engage in
such transactions, valuation of its assets for such purposes would
be based on their market value.
`Make cash loans. However, it does make short-term investments
which it may have an agreement with the seller to reacquire (See
Appendix B).
`Invest in an investment company beyond 5 percent of its total
assets taken at market and then only on the open market where the
dealer's or sponsor's profit is just the regular commission.
However, Money Market Portfolio will not purchase or retain the
securities of other open-end investment companies.
`Buy or sell real estate, commodities, or commodity contracts.
`Invest in a company to get control or manage it.
`Invest more than 25 percent of the Portfolio's assets taken at
market value in any particular industry, except there is no
limitation with respect to investing in U.S. government or agency
securities and bank obligations. Investments are varied according
to what is judged advantageous under different economic conditions.
`Act as an underwriter (sell securities for others). However,
under securities laws the Portfolio may be deemed to be an
underwriter when it purchases securities directly from the issuer
and later resells them.
`Buy securities of an issuer if the directors and officers of the
Fund and of IDS hold more than a certain percentage of the issuer's
outstanding securities. The holdings of all directors and officers
<PAGE>
PAGE 105
of the Fund who own more than 0.5 percent of an issuer's securities
are added together, and if in total they own more than 5 percent,
the Fund will not purchase securities of that issuer.
Additional Investment Policy of Money Market Portfolio
This policy may be changed without notice to or consent of
shareholders:
`Money Market Portfolio will not invest in illiquid securities if,
immediately after making such an investment, more than 10 percent
of the Portfolio's net assets, at market, would be invested in such
securities.
Investment Policies Applicable to the Managed Portfolio
Unless the holders of a majority of the outstanding shares (as
defined in the section entitled "Voting rights" in the prospectus)
agree to a change, Managed Portfolio will not:
`Purchase more than 10 percent of the outstanding voting securities
of an issuer.
`Concentrate in any one industry. (According to the present inter-
pretation of the staff of the Securities and Exchange Commission
this means no more than 25 percent of Managed Portfolio's total
assets, based on current market value at the time of purchase, can
be invested in any one industry).
`Invest more than 5 percent of its total assets, taken at cost, in
securities of companies, including any predecessor, which have a
record of less than three years continuous operations.
`Invest in securities of investment companies except by purchases
in the open market where the dealer's or sponsor's profit is just
the regular commission.
`Buy or sell real estate, real estate mortgage loans, commodities,
or commodity contracts, except that Managed Portfolio may enter
into futures contracts.
`Invest in a company to get control or manage it.
`Buy on margin or sell short, but it may make margin payments in
connection with transactions in futures contracts.
`Pledge or mortgage its assets beyond 15 percent of the cost of its
gross assets taken at cost. For the purposes of this restriction,
collateral arrangements with respect to margin for futures
contracts are not deemed to be a pledge of assets.
`Make cash loans. However, Managed Portfolio does make investments
in debt securities where the sellers agree to repurchase the
securities at cost plus an agreed to interest rate within a
specified period of time.
<PAGE>
PAGE 106
`Act as an underwriter (sell securities for others). However,
under the securities laws, Managed Portfolio may be deemed to be an
underwriter when it purchases securities directly from the issuer
and later resells them.
`Make a loan of any part of its assets to IDS, to the officers and
directors of IDS or to its own officers and directors.
`Buy securities of an issuer if the officers and directors of the
Fund and of IDS hold more than a certain percentage of the issuer's
outstanding securities. The holdings of all officers and directors
of Managed Portfolio and of IDS who own more than 0.5 percent of an
issuer's securities are added together and if in total they own
more than 5 percent, Managed Portfolio will not purchase securities
of that issuer.
`Issue senior securities, except that this restriction shall not be
deemed to prohibit Managed Portfolio from borrowing money from
banks, lending its securities, or entering into repurchase
agreements or options or futures contracts.
Other Investment Policies of Managed Portfolio
These policies may be changed without notice to or consent of
shareholders:
`Managed Portfolio does not intend to invest in exploration or
development programs, such as oil, gas or mineral programs.
`Managed Portfolio does not intend to invest in illiquid securities
if, immediately after making such an investment, more than 10
percent of the Portfolio's net assets, at market, would be invested
in such securities.
Investment Policies Applicable to Government Securities Portfolio
Unless the holders of a majority of the outstanding shares (as
defined in the section entitled "Voting rights" in the prospectus)
agree to a change, Government Securities Portfolio will not:
`Invest in securities of investment companies except by purchase in
the open market where the dealer's or sponsor's profit is just the
regular commission.
`Buy or sell real estate, commodities, or commodity contracts,
except the Portfolio may enter into interest rate futures contracts
and make deposits or have similar arrangements.
`Invest for the purpose of exercising control or management.
`Buy on margin or sell short, except that it may enter into
interest rate futures contracts.
<PAGE>
PAGE 107
`Pledge or mortgage its assets beyond 15 percent of the cost of its
gross assets. For purposes of this restriction, collateral
arrangements with respect to margin for interest rate futures
contracts are not deemed to be a pledge of assets.
`Make cash loans. However, the Portfolio does make investments in
debt securities where the sellers agree to repurchase the
securities at cost plus an agreed-to interest rate within a
specified period of time.
`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.
`Make a loan of any part of its assets to IDS, to the officers and
directors of IDS or to its own officers and directors.
`Buy any property or security (other than securities issued by the
Portfolio) from any officer or director of IDS or the Fund, nor
will the Portfolio sell any property or security to them.
`Buy securities of an issuer if the officers and directors of the
Fund and of IDS hold more than a certain percent of the issuer's
outstanding securities. The holdings of all officers and directors
of the Fund and of IDS who own more than 0.5 percent of an issuer's
securities are added together and if in total they own more than 5
percent, the Fund will not purchase securities of that issuer.
`Issue senior securities, except that this restriction shall not be
deemed to prohibit the Fund from borrowing money from banks,
lending its securities, or entering into repurchase agreements or
options or futures contracts.
Other Investment Policies of Government Securities Portfolio
This policy may be changed without notice to or consent of
shareholders:
`Government Securities Portfolio will not invest in illiquid
securities if, immediately after making such an investment, more
than 10 percent of the Portfolio's net assets, at market, would be
invested in such securities.
Other Investment Policies of Money Market, Managed and Government
Securities Portfolios
This policy may be changed without notice or consent of
shareholders:
The Portfolio may invest in repurchase agreements. Repurchase
agreements involve investment in debt securities whereby the seller
agrees to repurchase the securities at cost plus an agreed to
interest rate within a specified time. A risk of a repurchase
agreement is that if the party with whom this Portfolio has entered
<PAGE>
PAGE 108
into such an agreement seeks the protection of bankruptcy laws, the
Portfolio's ability to liquidate the security involved could be
temporarily impaired, and it subsequently may incur a loss if the
value of the security declines, or if the other party defaults on
its obligation. There also is the risk that the Portfolio may be
delayed or prevented from exercising its rights to dispose of the
collateral securities.
Other Investment Policies of International Equity Portfolio
Unless the holders of a majority of the outstanding shares (as
defined in the section entitled "Voting rights" in the prospectus)
agree to a change, International Equity Portfolio will not:
'Purchase securities of an issuer if the directors and officers of
the portfolio, IDS Financial Corporation (IDS) and IDS Life
Insurance Company (IDS Life) hold more than a certain percentage of
the issuer's outstanding securities. The holdings of all officers
and directors of the portfolio, IDS and IDS Life who own more than
0.5 percent of an issuer's securities are added together, and if in
total they own more than 5 percent, the portfolio will not purchase
securities of that issuer.
'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. It may be considered an underwriter under
securities laws when it sells restricted securities.
'Concentrate in any one industry. According to the present
interpretation by the Securities and Exchange Commission (SEC),
this means no more than 25 percent of a portfolio's total assets,
based on current market value at time of purchase, can be invested
in any one industry.
'Purchase more than 10 percent of the outstanding voting securities
of an issuer.
'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.
'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 cash loans if the total commitment amount exceeds 5% of the
portfolio's total assets.
'Make a loan of any part of its assets to IDS, to its directors and
officers or to its own directors and officers.
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PAGE 109
'Issue senior securities, except to the extent that borrowing from
banks, lending its securities, or entering into repurchase
agreements or options or futures contracts may be deemed to
constitute issuing a senior security.
Unless these policies are changed by the Board of Directors,
International Equity will not:
'Buy on margin or sell short, but International Equity, may make
margin payments in connection with transactions in stock index
futures contracts.
'Invest in a company to control or manage it.
'Pledge or mortgage its assets beyond 15 percent of the cost of its
total assets. If the portfolio were ever to do so, valuation of
its assets would be based on market value and the portfolio would
comply with applicable state laws, one of which requires 90 percent
of the offering price to consist of net assets that are not pledged
or mortgaged. For the purpose of this restriction, collateral
arrangements with respect to margin for futures contracts are not
deemed to be a pledge of assets.
'Invest more than 10 percent of the portfolio's net assets, at
market, in securities of investment companies. To the extent the
portfolio were to make such investments, the shareholders may be
subject to duplicate advisory, administrative and distribution
fees.
'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.
Other Investment Policies for All Portfolios except Money Market
Portfolio
The portfolio may invest in 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 United States government or
its agencies and instrumentalities. In determining the liquidity
of Rule 144A securities, IOs and POs, the investment manager, under
guidelines established by the board of directors, 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.
The portfolio may invest in commercial paper issued in transactions
not involving a public offering under Section 4(2) of the
Securities Act of 1933 (4(2) paper). In determining the liquidity<PAGE>
PAGE 110
of 4(2) paper, the investment manager, under guidelines established
by the board of directors, 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.
For a discussion on foreign currency transactions, see Appendix A.
For a discussion om money market securities, see Appendix B. For a
discussion on options and stock index futures contracts, see
Appendix C. For a discussion on options and interest rate futures
contracts, see Appendix D. For a discussion on mortgage-backed
securities, see Appendix E. For a discussion on dollar-cost
averaging, see Appendix F.
PORTFOLIO TRANSACTIONS
Subject to policies set by the Board of Directors, IDS Life is
authorized to determine, consistent with each Portfolio's
investment goals and policies, which securities shall be purchased,
held or sold. In determining where the buy and sell orders are to
be placed, IDS Life 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 of Directors. IDS
Life intends to direct IDS to execute trades and negotiate
commissions on its behalf. In selecting broker-dealers to execute
transactions, IDS 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.
These services are covered by the Investment Advisory agreement
between IDS and IDS Life. When IDS acts on IDS Life's behalf for
the Fund, it follows the rules described here for IDS Life.
Because Income Portfolio's investments are primarily in bonds,
which are traded in the over-the-counter market, IDS Life generally
will deal through a dealer acting as a principal. The price
usually includes a dealer's mark-up without a separate brokerage
charge. When IDS Life believes that dealing through a broker as
agent for a commission will produce the best results, it will do
so. The Portfolio also may buy securities directly from an issuing
company which may be resold only privately to other institutional
investors.
On occasion it may be desirable to compensate a broker for research
services or for brokerage services, by paying a commission which
might not otherwise be charged or a commission in excess of the
amount another broker might charge. The Board of Directors has
adopted a policy authorizing IDS Life to do so to the extent
authorized by law, if IDS Life 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 IDS Life's or IDS' overall
responsibilities. <PAGE>
PAGE 111
Research provided by brokers supplements IDS Life's own research
activities. Research services provided by brokers 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 stock
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. IDS Life
has obtained and, in the near 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 Securities and Exchange Commission.
When paying a commission that might not otherwise be charged or a
commission in excess of that which another broker might charge, IDS
Life must follow procedures authorized by the Board of Directors.
To date, three procedures have been authorized. One procedure
permits IDS Life to direct an order to buy or sell a security
traded on a national securities exchange to a specific broker for
research services it has provided. The second procedure permits
IDS Life, in order to obtain research, to direct an order on an
agency basis to buy or sell a security traded only in the over-the-
counter market to a firm that does not make a market in the
security. The commission paid generally includes compensation for
research services. The third procedure permits IDS Life, in order
to obtain research and brokerage services, to cause a Portfolio to
pay a commission in excess of the amount another broker might have
charged. IDS Life has advised the Fund that it is necessary to do
business with a number of brokerage firms on a continuous basis to
obtain such services as: handling large orders; the willingness of
a broker to risk its own money by taking a position in a security;
and 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 IDS Life believes it may obtain better
overall execution. IDS Life has assured the Fund that under all
three procedures the amount of commission paid will be reasonable
and competitive in relation to the value of the brokerage services
performed or research provided.
All other transactions shall be executed on the basis of the policy
to obtain 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 IDS Life and IDS in provid-
ing advice to all the funds and other accounts advised by IDS Life
even though it is not possible to relate the benefits to any
particular fund or account.<PAGE>
PAGE 112
Each investment decision made for a Portfolio is made independently
from any decision made for another Portfolio or fund or other
account advised by IDS Life or any of its subsidiaries. When the
Portfolio buys or sells the same security as another fund or
account, IDS Life carries out the purchase or sale in a way the
Fund agrees in advance is fair. Although sharing in large
transactions may adversely affect the price or volume purchased or
sold by the Fund, the Fund hopes to gain an overall advantage in
execution. IDS Life has assured the Fund it will continue to seek
ways to reduce brokerage costs.
On a periodic basis, IDS Life makes a comprehensive review of the
broker-dealers and the overall reasonableness of their commissions.
The review evaluates execution, back office efficiency and research
services.
The Fund paid total brokerage commissions of $190,220 for fiscal
year 1992, $210,093 for fiscal year 1993 and $405,141 for fiscal
year ended April 30, 1994. The majority of all firms through whom
transactions were executed provide research services. There were
no transactions directed to brokers by the Fund because of research
services received for the fiscal year ended April 30, 1994.
Income and Managed Portfolios' acquisition during the fiscal year
ended April 30, 1994, of securities of its regular brokers or
dealers or of the parents of those brokers or dealers that derive
more than 15 percent of gross revenue from securities-related
activities is presented below:
Value of Securities
Owned at End of
Name of Issuer Fiscal Year
Bank of America $1,081,250
Bankers Trust 298,000
Citicorp 303,375
Goldman Sachs 191,250
Salomon Brothers 450,000
BROKERAGE COMMISSIONS PAID TO BROKERS AFFILIATED WITH IDS LIFE
Affiliates of American Express Company (of which IDS Life is a
wholly owned indirect subsidiary) may engage in brokerage and other
securities transactions on behalf of the Fund in accordance with
procedures adopted by the Fund's Board of Directors and to the
extent consistent with applicable provisions of the federal
securities laws. IDS Life will use an American Express affiliate
only if (i) IDS Life determines that the Fund will receive prices
and executions at least as favorable as those offered by qualified
independent brokers performing similar brokerage and other services
for the Fund and (ii) if such use is consistent with terms of the
Investment Management and Services Agreement.
Information about brokerage commissions paid by the Fund for the
last three fiscal years to brokers affiliated with IDS Life is
contained in the following table:
<PAGE>
PAGE 113
<TABLE><CAPTION> For the Fiscal Year Ended April 30,
1994 1993 1992
Aggregate Percent of Aggregate Aggregate
Dollar Aggregate Dollar Dollar Dollar
Amount of Percent of Amount of Amount of Amount of
Nature Commissions Aggregate Transactions Commissions Commissions
of Paid to Brokerage Involving Payment Paid to Paid to
Broker Affiliation Broker Commissions of Commissions Broker Broker
<S> <C> <C> <C> <C> <C> <C>
American (2) $19,878 4.91% .01% $35,204 $27,081
Enterprise
Investment
Services Inc.
Lehman (1) $ 4,851 1.19% 0% $ 8,390 $ 5,660
Brothers
Inc.
The Robinson (3) none none none none $ 1,680
Humphrey
Company, Inc.
</TABLE>
(1) Under common control with IDS as a subsidiary of American
Express Company (American Express) until July 30, 1993.
(2) Wholly owned subsidiary of IDS.
(3) Under common control with IDS as an indirect subsidiary of
American Express until July 30, 1993.
PERFORMANCE INFORMATION
Each Portfolio may quote various performance figures to illustrate
past performance. Average annual total return and current yield
quotations used by a Fund are based on standardized methods of
computing performance as required by the SEC. An explanation of
these and any other methods used by each Portfolio to compute
performance follows below.
CALCULATION OF TOTAL RETURN
Each Portfolio may calculate average annual total return 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 at the beginning of a period, at
the end of the period (or fractional portion
thereof)
Aggregate total return
Each Portfolio may calculate aggregate total return for certain
periods representing the cumulative change in the value of an
investment in a Portfolio over a specified period of time according
to the following formula:<PAGE>
PAGE 114
ERV - P
P
where: P = a hypothetical initial payment of $1,000
ERV = ending redeemable value of a hypothetical $1,000
payment at the beginning of a period, at the end of
the period (or fractional portion thereof)
CALCULATION OF YIELD
Government Securities and Income Portfolios - These portfolios may
calculate an annualized yield by dividing the average net
investment income per share earned during a 30-day period by the
net asset value per share on the last day of the period and
annualizing the results.
Yield is calculated according to the following formula:
Yield = 2[ (a-b + 1)6 - 1]
cd
where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of
reimbursements)
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends
d = the maximum offering price per share on the
last day of the period
Government Securities Portfolio's yield was 5.31 percent for the
30-day period ended April 30, 1994 and Income Portfolio's yield was
6.67 percent. IDS Life has agreed to a voluntary limitation of
non-advisory expenses at an annual charge not to exceed 0.1 percent
of the average daily net assets of the Fund. If non-advisory
expenses had not been limited, Government Securities Portfolio's
yield would have been 5.27 percent. Income Portfolio's yield would
have been 6.67* percent.
*Expenses did not exceed .1% of average daily net assets.
Money Market Portfolio calculates annualized simple and compound
yields based on a seven-day period.
The simple yield is calculated by determining the net change in the
value of a hypothetical account having a balance of one share at
the beginning of the seven day period, dividing the net change in
account value by the value of the account at the beginning of the
period to obtain the return for the period, and multiplying that
return by 365/7 to obtain an annualized figure. The value of the
hypothetical account includes the amount of any declared dividends,
the value of any shares purchased with any dividend paid during the
period and any dividends declared for such shares. The Portfolio's
yield does not include any realized or unrealized gain or loss.
<PAGE>
PAGE 115
The Portfolio calculates its compound yield according to the
following formula:
Compound Yield = (return for seven day period + 1) 365/7 - 1
The Portfolio's simple annualized yield was 2.99 percent and its
compound yield was 3.03 percent on April 30, 1994, the last
business day of the Fund's fiscal year. If direct expenses had not
been limited, the simple annualized yield would have been 2.89
percent and its compound yield would have been 2.93 percent.
Yield, or rate of return, on Portfolio shares may fluctuate daily
and does not provide a basis for determining future yields.
However, it may be used as one element in assessing how the
Portfolio is meeting its goal. When comparing an investment in the
Portfolio with savings accounts and similar investment
alternatives, you must consider that such alternatives often
provide an agreed to or guaranteed fixed yield for a stated period
of time, whereas the Portfolio's yield fluctuates. In comparing
the yield of one money market fund to another, you should consider
each fund's investment policies, including the types of investments
permitted.
In its sales material and other communications, the Fund may quote
rankings, yields or returns as published by independent statistical
services or publishers and publications such as The Bank Rate
Monitor National Index, Barron's, Business Week, Donoghue's Money
Market Fund Report, Financial Services Week, Financial Times,
Financial World, Forbes, Fortune, Global Investor, Institutional
Investor, Investor's Daily, Kiplinger's Personal Finance, Lipper
Analytical Services, Money, Mutual Fund Forecaster, Newsweek, The
New York Times, Personal Investor, Shearson Lehman Aggregate Bond
Index, 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 EACH PORTFOLIO'S SHARES
The value of an individual share in the Equity, Income, Managed,
Government Securities and International Equity Portfolios, is
determined by using the net asset value before the shareholder
transactions for the day. On April 30, 1994 the computation looked
like this for Equity, Income, Managed and Government Securities
Portfolios:
<TABLE><CAPTION>
Net assets before Shares outstanding Net asset
shareholder transactions at end of previous day value of one share
<S> <C> <C> <C>
Equity Portfolio $151,860,163 divided by 8,391,259 = $18.10
Income Portfolio $ 33,769,928 divided by 3,476,335 = $ 9.71
Managed Portfolio $160,719,325 divided by 11,604,807 = $13.85
Government Securities $ 11,184,851 divided by 1,132,254 = $ 9.88
Portfolio
</TABLE>
The net asset value per share is determined by dividing the total
market value of the Fund's investments and other assets, less any
liabilities, by the number of outstanding shares of the Fund. To
establish the net assets, all securities are valued as of the close
of each business day, which is the closing time of the New York <PAGE>
PAGE 116
Stock Exchange (currently 3 p.m. Central time). A business day for
the Fund is any day the New York Stock Exchange is open. The
portfolio securities are valued at amortized cost, which
approximates market value.
In determining net assets, the Fund's portfolio securities are
valued as follows:
`Stocks, convertible bonds, warrants, futures and options traded on
major exchanges are valued each day at their last quoted sales
price on their primary exchange as of the close of the New York
Stock Exchange. If the last quoted sales price is not readily
available for a particular security, the value is the average price
between the last offer to buy and the last offer to sell.
`Stocks, convertible bonds and warrants with readily available
market quotations but without a listing on an exchange are also
valued at the average between the last bid (offer to buy) and asked
(offer to sell) price at the time of the close of the New York
Stock Exchange.
`Short-term securities maturing in 60 days or less at the
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 systematically reducing the carrying value if acquired
at a premium, so that the carrying value is equal to maturity value
on the maturity date.)
`Securities without a readily available market price, bonds other
than convertibles and other assets are valued at fair value. In
valuing these, the Fund directors are responsible for selecting
methods which they believe give the fair value. For nonconvertible
bonds, the usual method is to use the pricing service of an outside
organization. Such pricing service may take into consideration
yield, quality, coupon, maturity, type of issue, trading
characteristics and other market data in determining valuations for
normal institutional-size trading units of debt securities and does
not rely exclusively on quoted prices.
`Generally, trading in foreign securities is substantially
completed each day at various times prior to the close of the New
York Stock Exchange. The values of such securities used in
determining the net asset value of the Fund's shares are computed
as of such times. Occasionally, events affecting the value of such
securities may occur between such times and the close of the New
York Stock Exchange which 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, then these
securities will be valued at their fair value according to
procedures decided upon in good faith by the Fund's Board of
Directors. Foreign securities quoted in foreign currencies are
translated into U.S. dollars at the current exchange rate.
<PAGE>
PAGE 117
Valuing Money Market Portfolio's shares
Money Market Portfolio intends to use its best efforts to maintain
a constant net asset value of $1 per share although there is no
assurance it will be able to do so. Accordingly, it uses the
amortized cost method in valuing its Portfolio.
Short-term securities maturing in 60 days or less 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. It does not take into
consideration unrealized capital gains or losses. All of the
securities in the portfolio will be valued at their amortized cost.
In addition, the Portfolio must abide by certain conditions. It
must only invest in securities of high quality which present
minimal credit risks as determined by the Board of Directors. This
means that the rated commercial paper in the Fund's portfolio will
be issues that have been rated in the highest rating category by at
least two nationally recognized statistical rating organizations
(or by one if only one rating is assigned) and in unrated paper
determined by the Fund's Board of Directors to be comparable. The
Portfolio must also purchase securities with original or remaining
maturities of no more than 13 months or less, and maintain a
dollar-weighted average portfolio maturity of 90 days or less.
In addition, the Board of Directors must establish procedures
designed to stabilize the Portfolio's price per share for purposes
of sales and redemptions at $1 to the extent that it is reasonably
possible to do so. These procedures include review of the
portfolio securities by the Board, at intervals deemed appropriate
by it, to determine whether the net asset value per share computed
by using the available market quotations deviates from a share
value of $1 as computed using the amortized cost method. The Board
must consider any deviation that appears, and if it exceeds 0.5
percent, it must determine what action, if any, needs to be taken.
If the Board determines that a deviation exists that may result in
a material dilution of the holdings of current shareholders or
investors, or in other unfair consequences for such people, it must
undertake remedial action that it deems necessary and appropriate.
Such action may include withholding dividends, calculating net
asset value per share for purposes of sales and redemptions using
available market quotations, making redemptions in kind, and
selling portfolio securities before maturity in order to realize
capital gain or loss or to shorten average portfolio maturity.
In other words, while the amortized cost method provides certainty
and consistency in portfolio valuation, it may, from time to time,
result in valuations of portfolio securities which are either
somewhat higher or lower than the prices at which the securities
could be sold. This means that during times of declining interest
rates, the yield on the Portfolio's shares may be higher than if
valuations of securities were made based on actual market prices
<PAGE>
PAGE 118
and estimates of market prices. Accordingly, if use of the
amortized cost method were to result in a lower portfolio value at
a given time, a prospective investor would be able to obtain a
somewhat higher yield than he or she would get if portfolio
valuation were based on actual market values. Existing
shareholders, on the other hand, would receive a somewhat lower
yield than they would otherwise receive. The opposite would happen
during a period of rising interest rates.
INVESTING IN THE FUND
You cannot buy shares of the Fund directly. The only way you can
invest in the Fund at the present time is by buying a Variable Life
Insurance Policy from IDS Life or IDS Life of New York and
directing the allocation of part or all of your net purchase
payment to the Variable Accounts which will invest in shares of the
Fund. Read this fund's prospectus along with your Variable Life
Insurance Policy prospectus.
Sales Charges and Surrender Charges
The Fund does not assess any sales charge, either when it sells or
when it redeems securities. The surrender charges which may be
assessed under your Variable Life Insurance Policy are described in
the Variable Life Insurance Policy prospectus, as are mortality and
expense risk fees and other charges.
REDEEMING SHARES
The Fund will redeem any shares presented by the shareholders (the
Variable Accounts) for redemption. The Variable Accounts' policy
on when or whether to buy or redeem Fund shares is described in the
Variable Life Insurance Policy prospectus.
During an emergency the Board of Directors 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 New York Stock Exchange closes for reasons other than the
usual weekend and holiday closings, or trading on the Exchange is
restricted,
`Disposal of the Fund's securities is not reasonably practicable,
or it is not reasonably practicable for the Fund to determine the
fair value of its net assets, or
`The Securities and Exchange Commission, under the provisions of
the Investment Company Act of 1940, declares a period of emergency
to exist.
Should the Fund stop selling shares, the directors 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 contract owners. <PAGE>
PAGE 119
CAPITAL GAINS AND LOSSES
For federal income tax purposes, Income and Money Market Portfolios
had a capital loss carryover of $3,648 and $174, respectively, at
April 30, 1994, which, if not offset by subsequent capital gains,
will expire in 1996 through 2000. It is unlikely the Board of
Directors will authorize a distribution of any net realized gain
for this Portfolio until the capital loss carryover has been offset
or expires.
INVESTMENT MANAGEMENT AND OTHER SERVICES
Management and Services Agreement
The Fund does not maintain its own research department or record-
keeping services. These are provided by IDS Life under the
Investment Management and Services Agreement.
For its services, IDS Life is paid a fee based on the net assets of
the Portfolios. The asset charge is based on the aggregate average
daily net assets of each of the Portfolios at the following rates:
0.7 percent, on an annual basis, for Equity Portfolio;
0.7 percent, on an annual basis, for Income Portfolio;
0.95 percent, on an annual basis, for International Equity
Portfolio;
0.5 percent, on an annual basis, for Money Market Portfolio;
0.7 percent, on an annual basis, for Managed Portfolio; and
0.7 percent, on an annual basis, for Government Securities
Portfolio.
The management fee is paid monthly. The total amount paid for
fiscal year ended April 30, 1994 was $850,524 for Equity Portfolio,
$199,578 for Income Portfolio, $41,168 for Money Market Portfolio,
$920,594 for Managed Portfolio and $75,428 for Government
Securities Portfolio. The total amount paid for fiscal year ended
April 30, 1993 was $504,402 for Equity Portfolio, $136,217 for
Income Portfolio, $47,061 for Money Market Portfolio,
$596,745 for Managed Portfolio and $61,668 for Government
Securities Portfolio. The total amount paid for fiscal year ended
April 30, 1992 was $327,914 for Equity Portfolio, $94,784 for
Income Portfolio, $48,939 for Money Market Portfolio, $436,549 for
Managed Portfolio and $48,470 for Government Securities Portfolio.
All non-advisory expenses incurred by the Fund will be paid at an
annual charge not to exceed 0.1 percent of the aggregate average
daily net assets of the Fund. The voluntary limitation of 0.1
percent has been established by IDS Life at that figure and IDS
Life reserves the right to discontinue the voluntary limitation.
Investment Advisory Agreement
IDS Life and IDS have an Investment Advisory Agreement. It calls
for IDS Life to pay IDS a fee for investment advice about the
Fund's Portfolios. IDS also executes purchases and sales and
negotiates brokerage as directed by IDS Life. The fee paid by IDS<PAGE>
PAGE 120
Life is 0.25 percent of the average net assets for the year of all
portfolios, except for International Equity. The fee paid by IDS
Life is 0.50 percent of International Equity portfolio's average
net assets.
IDS Life paid IDS $751,255 for investment advice for the fiscal
year ended April 30, 1994. IDS Life paid IDS $487,415 for
investment advice for the fiscal year ended April 30, 1993. IDS
Life paid IDS $348,615 for investment advice for the fiscal year
ended April 30, 1992.
Information concerning other funds advised by IDS Life or IDS is
contained in the prospectus.
MANAGEMENT OF THE FUND
The Fund has a Board of Directors elected by policyholders that
oversees the operations of the Fund as required by state law. The
Board has named an executive committee of directors that has
authority to act on its behalf between meetings.
The Fund's directors and officers do not own any of the outstanding
shares of the Fund.
Directors of the Fund
The following is a list of the Fund's directors.
Carl N. Platou
President Emeritus and Chief Executive Officer, Fairview Hospital
and Healthcare Services, Retired 1990. Director, St. Thomas
University since 1990.
*Richard W. Kling
President, IDS Life since March 1994. Director and Executive Vice
President, Marketing and Products from January 1988 to March 1994.
Manager of IDS Life Variable Annuity Funds A&B.
Edward Landes
Retired, former Development Consultant.
*Janis E. Miller
Director and Executive Vice President, Variable Assets, IDS Life
since March 1994. Vice President, IDS since June 1990. Manager of
IDS Life Variable Annuity Funds A & B.
Gordon H. Ritz
President, Con Rad Broadcasting Corp. (Radio Broadcasting).
Director, Sunstar Foods and Mid-America Publishing.
<PAGE>
PAGE 121
*Interested person of IDS Life and of the Fund as the term
"interested person" is defined in the 1940 Act.
Officers of the Fund
Besides Mr. Kling, who is the President, the Fund's other executive
officers are listed below:
Colleen Curran
IDS Tower 10
Minneapolis, MN
Secretary
Senior Counsel, IDS, since 1990.
Louis C. Fornetti
IDS Tower 10
Minneapolis, MN
Vice President
Director, IDS Life, since March 1994. Director and Senior Vice
President--Corporate Controller, IDS, since August 1988. Vice
President--Corporate Controller, from 1985 to 1988.
Morris Goodwin, Jr.
IDS Tower 10
Minneapolis, MN
Vice President and Treasurer
Vice President and Treasurer, IDS Life since March 1994. Vice
President and Corporate Treasurer, IDS, since July 1989. Chief
Financial Officer and Treasurer, IDS Bank & Trust, from 1988 to
1989.
Paul F. Kolkman
IDS Tower 10
Minneapolis, MN
Vice President and Chief Actuary
Director and Vice President--Finance, IDS Life. Vice President--
Insurance Finance, IDS.
William A. Stoltzmann
IDS Tower 10
Minneapolis, MN
General Counsel and Assistant Secretary
General Counsel and Assistant Secretary, IDS Life. Vice President
and Assistant General Counsel, IDS.
<PAGE>
PAGE 122
Melinda S. Urion
IDS Tower
Minneapolis, MN
Vice President and Controller
Vice President and Corporate Controller, IDS, since April 1994;
Vice President - Insurance Controller, IDS, from September 1991 to
April 1994. Chief Accounting Officer for IDS Financial Services
Inc. from July 1988 to September 1991.
CUSTODIAN
The Fund's securities and cash are held by IDS Trust Company, 1200
Northstar Center West, 625 Marquette Ave., Minneapolis, MN 55402,
through a custodian agreement. The custodian is permitted to
deposit some or all of its securities in central depository systems
as allowed by federal law.
The custodian has entered into a sub-custodian arrangement with
Boston Safe Deposit & Trust Co. (Boston Safe), 31 St. James Ave.,
Boston, MA 02116. As part of this arrangement, portfolio
securities purchased outside the United States are maintained in
the custody of various foreign branches of Boston Safe or in such
other financial institutions as may be permitted by law and by the
Fund's sub-custodian agreement.
INDEPENDENT AUDITORS
The Fund's financial statements contained in its Annual Report to
shareholders at the end of its fiscal year are audited by
independent auditors, KPMG Peat Marwick LLP, 4200 Norwest Center,
90 South Seventh Street, Minneapolis, MN 55402-3900. IDS Life has
agreed that it will send a copy of this report and the unaudited
Semi-Annual Report to every Variable Life Insurance policyowner
having an interest in the Fund. The independent auditors also
provide other accounting and tax-related services as requested by
the Fund from time to time.
FINANCIAL STATEMENTS
The Independent Auditors' Report and the Financial Statements,
including the Notes to the Financial Statements and the Schedule of
Investments in Securities, contained in the 1994 Annual Report to
IDS Life Series Fund, Inc. shareholders, pursuant to Section 30(d)
of the 1940 Act, are hereby incorporated in this Statement of
Additional Information by reference. No other portion of the
Annual Report, however, is incorporated by reference.
The prospectus dated October 28, 1994, is hereby incorporated in
this Statement of Additional Information by reference.
<PAGE>
PAGE 123
APPENDIX A
FOREIGN CURRENCY TRANSACTIONS, FOR INVESTMENTS OF EQUITY, INCOME,
MANAGED, AND INTERNATIONAL EQUITY PORTFOLIOS
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 portfolio 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
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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 portfolio 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 portfolio 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 portfolio 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 portfolio
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 portfolio 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
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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 portfolio 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 portfolio 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
portfolio 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
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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 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.
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Foreign Currency Futures and Related Options. The Portfolio may
enter into currency futures contracts to sell currencies. It also
may buy put 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 CFTC
limitations, including the limitation on the percentage of assets
that may be used, described in the prospectus. 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 not use leverage in its options and futures
strategies. The Portfolio will hold securities or other options or
futures positions whose values are expected to offset its
obligations. The Portfolio will not enter into an option or
futures position that exposes the Portfolio to an obligation to
another party unless it owns either (i) an offsetting position in
securities or (ii) cash, receivables and short-term debt securities
with a value sufficient to cover its potential obligations.
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APPENDIX B
DESCRIPTION OF MONEY MARKET SECURITIES
Certificates of Deposit -- A certificate of deposit is a negotiable
receipt issued by a bank or savings and loan association in
exchange for the deposit of funds. The issuer agrees to pay the
amount deposited, plus interest, on the date specified on the
certificate.
Time Deposit -- A time deposit is a non-negotiable deposit in a
bank for a fixed period of time.
Bankers' Acceptances -- A bankers' acceptance arises from a short-
term credit arrangement designed to enable businesses to obtain
funds to finance commercial transactions. It is a time draft drawn
on a bank by an exporter or an importer to obtain a stated amount
of funds to pay for specific merchandise. The draft is then
"accepted" by a bank that, in effect, unconditionally guarantees to
pay the face value of the instrument on its maturity date.
Commercial Paper -- Commercial paper is generally defined as
unsecured short-term notes issued in bearer form by large well-
known corporations and finance companies. Maturities on commercial
paper range from one day to nine months.
Commercial paper rated A by Standard & Poor's Corporation has the
following characteristics: Liquidity ratios are better than the
industry average. Long-term senior debt rating is "A" or better.
The issuer has access to at least two additional channels of
borrowing. Basic earnings and cash flow have an upward trend with
allowances made for unusual circumstances. Typically, the issuer's
industry is well established, the issuer has a strong position
within its industry and the reliability and quality of management
is unquestioned. Issuers rated A are further rated by use of
numbers 1, 2 and 3 to denote relative strength within this highest
classification.
A Prime rating is the highest commercial paper rating assigned by
Moody's Investors Services Inc. Issuers rated Prime are further
rated by use of numbers 1, 2 and 3 to denote relative strength
within this highest classification. Among the factors considered
by Moody's in assigning ratings for an issuer are the following:
(1) management; (2) economic evaluation of the industry and an
appraisal of speculative type risks which may be inherent in
certain areas; (3) competition and customer acceptance of products;
(4) liquidity; (5) amount and quality of long-term debt; (6) ten
year earnings trends; (7) financial strength of a parent company
and the relationships which exist with the issuer; and (8)
recognition by management of obligations which may be present or
may arise as a result of public interest questions and preparations
to meet such obligations.
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Letters of Credit -- A letter of credit is a short-term note issued
in bearer form with a bank letter of credit which provides that the
bank pay to the bearer the amount of the note upon presentation.
U.S. Treasury Bills -- Treasury bills are issued with maturities of
any period up to one year. Three-month and six-month bills are
currently offered by the Treasury on 13-week and 26-week cycles
respectively and are auctioned each week by the Treasury. Treasury
bills are issued in book entry form and are sold only on a discount
basis, i.e. the difference between the purchase price and the
maturity value constitutes interest income for the investor. If
they are sold before maturity, a portion of the income received may
be a short-term capital gain.
U.S. Government Agency Securities -- Federal agency securities are
debt obligations which principally result from lending programs of
the U.S. government. Housing and agriculture have traditionally
been the principal beneficiaries of Federal credit programs, and
agencies involved in providing credit to agriculture and housing
account for the bulk of the outstanding agency securities.
Repurchase Agreements -- A repurchase agreement involves the
acquisition of securities by the Portfolio, with the concurrent
agreement by a bank (or securities dealer if permitted by law or
regulation), to reacquire the securities at the portfolio's cost,
plus interest, within a specified time. The Portfolio thereby
receives a fixed rate of return on this investment, one that is
insulated from market and rate fluctuations during the holding
period. In these transactions, the securities acquired by the
Portfolio have a total value equal to or in excess of the value of
the repurchase agreement and are held by the Portfolio's custodian
until required. Pursuant to guidelines established by the
Portfolio's Board of Directors, the creditworthiness of the other
party to the transaction is considered and the value of those
securities held as collateral is monitored to ensure that such
value is maintained at the required level.
If IDS Life becomes aware that a security owned by a portfolio is
downgraded below the second highest rating, IDS Lifewill either
sell the security or recommend to the Fund's Board of Directors why
it should not be sold.
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APPENDIX C
OPTIONS AND STOCK INDEX FUTURES CONTRACTS, FOR INVESTMENTS OF
EQUITY, MANAGED AND INTERNATIONAL EQUITY PORTFOLIOS
Each Portfolio may buy or write options traded on any U.S. or
foreign exchange or in the over-the-counter market. Each Portfolio
may enter into stock index futures contracts traded on any U.S. or
foreign exchange. Each 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, a Portfolio could be required to
buy or sell securities at disadvantageous prices, thereby incurring
losses. Managed Portfolio also may enter into interest rate
futures contracts (see Appendix D).
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 a
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. They also may be used for investment. Options<PAGE>
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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 a Portfolio for investment
purposes. Options permit a Portfolio to experience the change in
the value of a security with a relatively small initial cash
investment.
The risk a Portfolio assumes when it buys an option is the loss of
the premium. To be beneficial to a 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 subsequent 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. Each 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 each
Portfolio's goal.
'All options written by a Portfolio will be covered. For covered
call options, if a decision is made to sell the security, each
Portfolio will attempt to terminate the option contract through a
closing purchase transaction.
'Each Portfolio will deal only in standard option contracts traded
on national securities exchanges or those that may be quoted on
NASDAQ (a system of price quotations developed by the National
Association of Securities Dealers, Inc.)
'Each Portfolio will write options only as permitted under federal
laws or regulations, such as those that limit the amount of total
assets subject to the options. Some regulations also affect the
Custodian. When a covered option is written, the Custodian
segregates the underlying securities, and issues a receipt. There
are certain rules regarding banks issuing such receipts that may
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restrict the amount of covered call options written. Furthermore,
each Portfolio is limited to pledging not more than 15 percent of
the cost of its total assets.
Net premiums on call options closed or premiums on expired call
options are treated as short-term capital gains. Since each
Portfolio is taxed as a regulated investment company under the
Internal Revenue Code, any gains on options and other securities
held less than three months must be limited to less than 30 percent
of its annual gross income.
If a covered call option is exercised, the security is sold by the
Portfolio. The premium received upon writing the option is added
to the proceeds received from the sale of the security. The
Portfolio will recognize a capital gain or loss based upon the
difference between the proceeds and the security's basis. Premiums
received from writing outstanding options are included as a
deferred credit in the Statement of Assets and Liabilities and
adjusted daily to the current market value.
Options are valued at the close of the New York Stock Exchange. An
option listed on a national exchange, CBOE or NASDAQ will be valued
at the last-quoted sales price or, if such a price is not readily
available, at the mean of the last bid and asked prices.
STOCK INDEX FUTURES CONTRACTS. Stock index futures contracts are
commodity contracts listed on commodity exchanges. They currently
include contracts on the Standard & Poor's 500 Stock Index (S&P 500
Index) and other broad stock market indexes such as the New York
Stock Exchange Composite Stock Index and the Value Line Composite
Stock Index, as well as narrower sub-indexes such as the S&P 100
Energy Stock Index and the New York Stock Exchange Utilities Stock
Index. A stock index assigns relative values to common stocks
included in the index and the index fluctuates with the value of
the common stocks so included.
A futures contract is a legal agreement between a buyer or seller
and the clearinghouse of a futures exchange in which the parties
agree to make a cash settlement on a specified future date in an
amount determined by the stock index on the last trading day of the
contract. The amount is a specified dollar amount (usually $100 or
$500) multiplied the difference between the index value on the last
trading day and the value on the day the contract was struck.
For example, the S&P 500 Index consists of 500 selected common
stocks, most of which are listed on the New York Stock Exchange.
The S&P 500 Index assigns relative weightings to the common stocks
included in the Index, and the Index fluctuates with changes in the
market values of those stocks. In the case of S&P 500 Index
futures contracts, the specified multiple is $500. Thus, if the
value of the S&P 500 Index were 150, the value of one contract
would be $75,000 (150 x $500). Unlike other futures contracts, a
stock index futures contract specifies that no delivery of the
actual stocks making up the index will take place. Instead,
settlement in cash must occur upon the termination of the contract.<PAGE>
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For example, excluding any transaction costs, if a 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.
Unlike the purchase or sale of an equity security, no price would
be paid or received by the Portfolio upon entering into stock index
futures contracts. However, the Portfolio would be required to
deposit with its custodian, in a segregated account in the name of
the futures broker, an amount of cash or U.S. Treasury bills equal
to approximately 5 percent of the contract value. This amount is
known as initial margin. The nature of initial margin in futures
transactions is different from that of margin in security
transactions in that futures contract margin does not involve
borrowing funds by the Portfolio to finance the transactions.
Rather, the initial margin is in the nature of a performance bond
or good-faith deposit on the contract that is returned to the
Portfolio upon termination of the contract, assuming all
contractual obligations have been satisfied.
Subsequent payments, called variation margin, to and from the
broker would be made on a daily basis as the price of the
underlying stock index fluctuates, making the long and short
positions in the contract more or less valuable, a process known as
marking to market. For example, when a Portfolio enters into a
contract in which it benefits from a rise in the value of an index
and the price of the underlying stock index has risen, the
Portfolio will receive from the broker a variation margin payment
equal to that increase in value. Conversely, if the price of the
underlying stock index declines, the Portfolio would be required to
make a variation margin payment to the broker equal to the decline
in value.
How These Portfolios Would Use Stock Index Futures Contracts. The
Portfolios intend to use stock index futures contracts and related
options for hedging and not for speculation. Hedging permits a
Portfolio to gain rapid exposure to or protect itself from changes
in the market. For example, a Portfolio may find itself with a
high cash position at the beginning of a market rally.
Conventional procedures of purchasing a number of individual issues
entail the lapse of time and the possibility of missing a
significant market movement. By using futures contracts, the
Portfolio can obtain immediate exposure to the market and benefit
from the beginning stages of a rally. The buying program can then
proceed and once it is completed (or as it proceeds), the contracts
can be closed. Conversely, in the early stages of a market
decline, market exposure can be promptly offset by entering into
stock index futures contracts to sell units of an index and
individual stocks can be sold over a longer period under cover of
the resulting short contract position.
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A Portfolio may enter into contracts with respect to any stock
index or sub-index. To hedge the Portfolio's investment portfolio
successfully, however, the Portfolio must enter into contracts with
respect to indexes or sub-indexes whose movements will have a
significant correlation with movements in the prices of the
Portfolio's individual portfolio securities.
Special Risks of Transactions in Stock Index Futures Contracts.
1. Liquidity. Each Portfolio may elect to close some or all of
its contracts prior to expiration. The purpose of making such a
move would be to reduce or eliminate the hedge position held by the
Portfolio. The Portfolio may close its positions by taking
opposite positions. Final determinations of variation margin are
then made, additional cash as required is paid by or to the
Portfolio, and the Portfolio realizes a gain or a loss.
Positions in stock index futures contracts may be closed only on an
exchange or board of trade providing a secondary market for such
futures contracts. For example, futures contracts transactions can
currently be entered into with respect to the S&P 500 Stock Index
on the Chicago Mercantile Exchange, the New York Stock Exchange
Composite Stock Index on the New York Futures Exchange and the
Value Line Composite Stock Index on the Kansas City Board of Trade.
Although the Portfolios intend 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 subject to the hedge.
Of course, there is no guarantee the price of the securities will
correlate with the price movements in the futures contract and thus
provide an offset to losses on a futures contract.
2. Hedging Risks. There are several risks in using stock index
futures contracts as a hedging device. One risk arises because the
prices of futures contracts may not correlate perfectly with
movements in the underlying stock index due to certain market
distortions. First, all participants in the futures market are
subject to initial margin and variation margin requirements.
Rather than making additional variation margin payments, investors
may close the contracts through offsetting transactions which could
distort the normal relationship between the index and futures
markets. Second, the margin requirements in the futures market are
lower than margin requirements in the securities market, and as a
result the futures market may attract more speculators than does
the securities market. Increased participation by speculators in
the futures market also may cause temporary price distortions.
Because of price distortion in the futures market and because of
imperfect correlation between movements in stock indexes and
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movements in prices of futures contracts, even a correct forecast
of general market trends may not result in a successful hedging
transaction over a short period.
Another risk arises because of imperfect correlation between
movements in the value of the stock index futures contracts and
movements in the value of securities subject to the hedge. If this
occurred, a Portfolio could lose money on the contracts and also
experience a decline in the value of its portfolio securities.
While this could occur, IDS Life believes that over time the value
of the Portfolio's investment portfolio will tend to move in the
same direction as the market indexes and will attempt to reduce
this risk, to the extent possible, by entering into futures
contracts on indexes whose movements it believes will have a
significant correlation with movements in the value of the
Portfolio's investment portfolio securities sought to be hedged.
It is also possible that if the Portfolio has hedged against a
decline in the value of the stocks held in its portfolio and stock
prices increase instead, the Portfolio will lose part or all of the
benefit of the increased value of its stock which it has hedged
because it will have offsetting losses in its futures positions.
In addition, in such situations, if the Portfolio has insufficient
cash, it may have to sell securities to meet daily variation
margin requirements. Such sales of securities may be, but will not
necessarily be, at increased prices which reflect the rising
market. The Portfolio may have to sell securities at a time when
it may be disadvantageous to do so.
OPTIONS ON STOCK INDEX FUTURES CONTRACTS. Options on stock index
futures contracts are similar to options on stock except that
options on futures contracts give the purchaser the right, in
return for the premium paid, to assume a position in a stock index
futures contract (a long position if the option is a call and a
short position if the option is a put) at a specified exercise
price at any time during the period of the option. If the option
is closed instead of exercised, the holder of the option receives
an amount that represents the amount by which the market price of
the contract exceeds (in the case of a call) or is less than (in
the case of a put) the exercise price of the option on the futures
contract. If the option does not appreciate in value prior to the
exercise date, the Portfolio will suffer a loss of the premium
paid.
OPTIONS ON STOCK INDEXES. Options on stock indexes are securities
traded on national securities exchanges. An option on a stock
index is similar to an option on a futures contract except all
settlements are in cash. A 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.
SPECIAL RISKS OF TRANSACTIONS IN OPTIONS ON STOCK INDEX FUTURES
CONTRACTS AND OPTIONS ON STOCK INDEXES. As with options on stocks,
the holder of an option on a stock index futures contract or on a
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stock index may terminate a position by selling an option covering
the same contract or index and having the same exercise price and
expiration date. The ability to establish and close out positions
on such options will be subject to the development and maintenance
of a liquid secondary market. The Portfolios will not purchase
options unless the market for such options has developed
sufficiently, so that the risks in connection with options are not
greater than the risks in connection with stock index futures
contracts transactions themselves. Compared to using futures
contracts, purchasing options involves less risk to the Portfolios
because the maximum amount at risk is the premium paid for the
options (plus transaction costs). There may be circumstances,
however, when using an option would result in a greater loss to a
Portfolio than using a futures contract, such as when there is no
movement in the level of the stock index.
TAX TREATMENT. As permitted under federal income tax laws, each
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 stock indexes is currently
unclear, although the Portfolios' tax advisers currently believe
marking to market is not required. Depending on developments, a
Portfolio may seek IRS rulings clarifying questions concerning such
treatment. Certain provisions of the Code also may limit a
Portfolio's ability to engage in futures contracts and related
options transactions. For example, at the close of each quarter of
the Portfolio's taxable year, at least 50 percent of the value of
its assets must consist of cash, government securities and other
securities, subject to certain diversification requirements. Less
than 30 percent of its gross income must be derived from sales of
securities held less than three months.
The IRS has ruled publicly that an exchange-traded call option is a
security for purposes of the 50-percent-of-assets test and that its
issuer is the issuer of the underlying security, not the writer of
the option, for purposes of the diversification requirements. In
order to avoid realizing a gain within the three-month period, a
Portfolio may be required to defer closing out a contract beyond
the time when it might otherwise be advantageous to do so. The
Portfolio also may be restricted in purchasing put options for the
purpose of hedging underlying securities because of applying the
short sale holding period rules with respect to such underlying
securities.
Accounting for futures contracts will be according to generally
accepted accounting principles. Initial margin deposits will be
recognized as assets due from a broker (the Portfolio's agent in
acquiring the futures position). During the period the futures
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contract is open, changes in value of the contract will be
recognized as unrealized gains or losses by marking to market on a
daily basis to reflect the market value of the contract at the end
of each day's trading. Variation margin payments will be made or
received depending upon whether gains or losses are incurred. All
contracts and options will be valued at the last-quoted sales price
on their primary exchange.
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APPENDIX D
OPTIONS AND INTEREST RATE FUTURES CONTRACTS, FOR INVESTMENTS OF
INCOME, MANAGED AND GOVERNMENT SECURITIES PORTFOLIOS
Income and Managed Portfolios may buy or write options traded on
any U.S. or foreign exchange or in the over-the-counter market.
Each Portfolio may enter into interest rate futures contracts
traded on any U.S. or foreign exchange. Each Portfolio also may
buy or write put and call options on these futures. 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, a Portfolio could be required to
buy or sell securities at disadvantageous prices, thereby incurring
losses. Managed Portfolio also may enter into stock index futures
contracts (see Appendix C).
Government Securities Portfolio may buy or write options traded on
any U.S. exchange or in the over-the-counter market. The Portfolio
may enter into interest rate futures contracts traded on any U.S.
exchange. The Portfolio also may buy or write put and call options
on these futures. 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 (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 a 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
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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.
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 a
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. They also may be used for investment. 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 a 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. A 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
Portfolio's goal.
'All options written by the Portfolio will be covered. For covered
call options if a decision is made to sell the security, the
Portfolio will attempt to terminate the option contract through a
closing purchase transaction.
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'The Portfolio will write options only as permitted under federal
laws or regulations, such as those that limit the amount of total
assets subject to the options. Some regulations also affect the
Custodian. When a covered call option is written, the Custodian
segregates the underlying securities and issues a receipt. There
are certain rules regarding banks issuing such receipts that may
restrict the amount of covered call options written. Furthermore,
a Portfolio is limited to pledging not more than 15 percent of the
cost of its total assets.
Net premiums on call options closed or premiums on expired call
options are treated as short-term capital gains. Since a Portfolio
is taxed as a regulated investment company under the Code, any
gains on options and other securities held less than three months
must be limited to less than 30 percent of its annual gross income.
If a covered call option is exercised, the security is sold by the
Portfolio. The Portfolio will recognize a capital gain or loss
based upon the difference between the proceeds and the security's
basis.
Options on many securities are listed on options exchanges. If a
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
asked prices.
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. They have been established by boards of trade which have
been designated contracts markets by the Commodity Futures Trading
Commission (CFTC). Futures contracts trade on these markets in a
manner similar to the way a stock trades on a stock exchange, and
the boards of trade, through their clearing corporations, guarantee
performance of the contracts. Currently, there are futures
contracts based on such debt securities as long-term U.S. Treasury
bonds, Treasury notes, GNMA modified pass-through mortgate-backed
securities, three-month U.S. Treasury bills and bank certificates
of deposit. While futures contracts based on debt securities do
provide for the delivery and acceptance of securities, such
deliveries and acceptances are very seldom made. Generally, the
futures contract is terminated by entering into an offsetting
transaction. An offsetting transaction for a futures contract sale
is effected by the Portfolio entering into a futures contract
purchase for the same aggregate amount of the specific type of
financial instrument and same delivery date. If the price in the
sale exceeds the price in the offsetting purchase, the Portfolio
immediately is paid the difference and realizes a gain. If the
offsetting purchase price exceeds the sale price, the Portfolio
pays the difference and realizes a loss. Similarly, closing out a
futures contract purchase is effected by the Portfolio entering
into a futures contract sale. If the offsetting sale price
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exceeds the purchase price, the Portfolio realizes a gain, and if
the offsetting sale price is less than the purchase price, the
Portfolio realizes a loss. At the time a futures contract is made,
a good-faith deposit called initial margin is set up within a
segregated account at the Portfolios' custodian bank. The initial
margin deposit is approximately 1.5 percent of a contract's face
value. Daily thereafter, the futures contract is valued and the
payment of variation margin is required so that each day the
Portfolio would pay out cash in an amount equal to any decline in
the contract's value or receive cash equal to any increase. At the
time a futures contract is closed out, a nominal commission is
paid, which is generally lower than the commission on a comparable
transaction in the cash markets.
The purpose of a futures contract, in the case of a fund holding
long-term debt securities, is to gain the benefit of changes in
interest rates without actually buying or selling long-term debt
securities. For example, if a 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. Futures
contracts are based on types of debt securities referred to above,
which have historically reacted to an increase or decline in
interest rates in a fashion similar to the debt securities the
Portfolio owns. 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. Successful use of
futures contracts depends on the investment manager's ability to
predict the future direction of interest rates. If the investment
manager's prediction is incorrect, the Portfolio would have been
better off had it not entered into futures contracts.
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OPTIONS ON FUTURES CONTRACTS. Options 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. Furthermore, 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 Portfolio.
RISKS. There are risks in engaging in each of the management tools
described above. The risk a Portfolio assumes when it buys an
option is the loss of the premium paid for the option. Purchasing
options also limits the use of monies that might otherwise be
available for long-term investments.
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. Furthermore, the Portfolio might not be able to close the
option because of insufficient activity in the options market.
A 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.
Another risk is that the Portfolio's investment manager could be
incorrect in anticipating as to the direction or extent of various
interest rate 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.
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TAX TREATMENT. As permitted under federal income tax laws, each
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 currently is unclear,
although the Portfolios' tax advisers currently believe marking to
market is not required. Depending on developments, a Portfolio may
seek IRS rulings clarifying questions concerning such treatment.
Certain provisions of the Code also may limit a Portfolio's ability
to engage in futures contracts and related options transactions.
For example, at the close of each quarter of the Portfolio's
taxable year, at least 50 percent of the value of its assets must
consist of cash, government securities and other securities,
subject to certain diversification requirements. Less than 30
percent of its gross income must be derived from sales of
securities held less than three months.
The IRS has ruled publicly that an exchange-traded call option is a
security for purposes of the 50-percent-of-assets test and that its
issuer is the issuer of the underlying security, not the writer of
the option, for purposes of the diversification requirements. In
order to avoid realizing a gain within the three-month period, the
Portfolio may be required to defer closing out a contract beyond
the time when it might otherwise be advantageous to do so. The
Portfolio also may be restricted in purchasing put options for the
purpose of hedging underlying securities because of applying the
short sale holding period rules with respect to such underlying
securities.
Accounting for futures contracts will be according to generally
accepted accounting principles. Initial margin deposits will be
recognized as assets due from a broker (the Portfolio's agent in
acquiring the futures position). During the period the futures
contract is open, changes in value of the contract will be
recognized as unrealized gains or losses by marking to market on a
daily basis to reflect the market value of the contract at the end
of each day's trading. Variation margin payments will be made or
received depending upon whether gains or losses are incurred. All
contracts and options will be valued at the last-quoted sales price
on their primary exchange.
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APPENDIX E
MORTGAGE-BACKED SECURITIES AND ADDITIONAL INFORMATION ON INVESTMENT
POLICIES (FOR ALL PORTFOLIOS EXCEPT MONEY MARKET)
GNMA Certificates
The Government National Mortgage Association (GNMA) is a wholly
owned corporate instrumentality of the United States within the
Department of Housing and Urban Development. GNMA certificates are
mortgage-backed securities of the modified pass-through type, which
means that both interest and principal payments (including
prepayments) are passed through monthly to the holder of the
certificate. Each certificate evidences an interest in a specific
pool of mortgage loans insured by the Federal Housing
Administration or the Farmers Home Administration or guaranteed by
the Veterans Administration. The National Housing Act provides
that the full faith and credit of the United States is pledged to
the timely payment of principal and interest by GNMA of amounts due
on these certificates. GNMA is empowered to borrow without
limitation from the U.S. Treasury, if necessary, to make such
payments.
Underlying Mortgages of the Pool. Pools consist of whole mortgage
loans or participations in loans. The majority of these loans are
made to purchasers of 1-4 member family homes. The terms and
characteristics of the mortgage instruments generally are uniform
within a pool but may vary among pools. For example, in addition
to fixed-rate fixed-term mortgages, the Portfolio may purchase
pools of variable rate mortgages, growing equity mortgages,
graduated payment mortgages and other types.
All servicers apply standards for qualification to local lending
institutions which originate mortgages for the pools. Servicers
also establish credit standards and underwriting criteria for
individual mortgages included in the pools. In addition, many
mortgages included in pools are insured through private mortgage
insurance companies.
Average Life of GNMA Certificates. The average life of GNMA
certificates varies with the maturities of the underlying mortgage
instruments which have maximum maturities of 30 years. The average
life is likely to be substantially less than the original maturity
of the mortgage pools underlying the securities as the result of
prepayments or refinancing of such mortgages. Such prepayments are
passed through to the registered holder with the regular monthly
payments of principal and interest.
As prepayment rates vary widely, it is not possible to accurately
predict the average life of a particular pool. It is customary in
the mortgage industry in quoting yields on a pool of 30-year
mortgages to compute the yield as if the pool were a single loan
that is amortized according to a 30-year schedule and that is
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prepaid in full at the end of the 12th year. For this reason, it
is standard practice to treat GNMA certificates as 30-year
mortgage-backed securities which prepay fully in the 12th year.
Calculation of Yields. Yields on pass-through securities are
typically quoted based on the maturity of the underlying
instruments and the associated average life assumption.
Actual pre-payment experience may cause the yield to differ from
the assumed average life yield. When mortgage rates drop, pre-
payments will increase, thus reducing the yield. Reinvestment of
pre-payments may occur at higher or lower interest rates than the
original investment, thus affecting the yield of a Portfolio. The
compounding effect from reinvestments of monthly payments received
by the Portfolio will increase the yield to shareholders compared
to bonds that pay interest semi-annually. The yield also may be
affected if the certificate was issued at a premium or discount,
rather than at par. This also applies after issuance to
certificates trading in the secondary market at a premium or
discount.
"When-Issued" GNMA 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. Payment and interest terms,
however, are fixed at the time the purchaser enters into the
commitment. However, the yield on a comparable GNMA certificate
when the transaction is consummated may vary from the yield on the
GNMA certificate at the time that the when-issued transaction was
made. A Portfolio does not pay for the securities or start earning
interest on them until the contractual settlement date. When-
issued securities are subject to market fluctuations and they may
affect the Portfolio's gross assets the same as owned securities.
Market for GNMA Certificates. Since the inception of the GNMA
mortgage-backed securities program in 1970, the amount of GNMA
certificates outstanding has grown rapidly. The size of the market
and the active participation in the secondary market by securities
dealers and many types of investors make the GNMA certificates a
highly liquid instrument. Prices of GNMA certificates are readily
available from securities dealers and depend on, among other
things, the level of market interest rates, the certificate's
coupon rate and the prepayment experience of the pool of mortgages
underlying each certificate.
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
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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. 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.
Income, Managed and Government Securities Portfolios may invest in
securities called "inverse floaters". Inverse floaters are created
by underwriters using the interest payments on securities. A
portion of the interest received is paid to holders of instruments
based on current interest rates for short-term securities. What is
left over, less a servicing fee, is paid to holders of the 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.
Income, Managed and Government Securities Portfolios may purchase
some securities in advance of when they are issued. Price and rate
of interest are set on the date the commitments are given but no
payment is made or interest earned until the date the securities
are issued, usually within two months, but other terms may be
negotiated. The commitment requires the portfolio to buy the
security when it is issued so the commitment is valued daily the
same way as owning a security would be valued. The Portfolio's
custodian will maintain, in a segregated account, cash or liquid
high-grade debt securities that are marked to market daily and are
at least equal in value to the Portfolio's commitments to purchase
the securities. The Portfolio may sell the commitment just like it
can sell a security. Frequently, the Portfolio has the opportunity
to sell the commitment back to the institution that plans to issue
the security and at the same time enter into a new commitment to
purchase a when-issued security in the future. For rolling its
commitment forward, the Portfolio realizes a gain or loss on the
sale of the current commitment or receives a fee for entering into
the new commitment.
Income, Managed and Government Securities Portfolios 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 under perform like-duration Treasury securities.
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APPENDIX F
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 units 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 units lower than the average
market price of units purchased, although there is no guarantee.
While this does not ensure a profit and does not protect against a
loss if the market declines, it is an effective way for many policy
owners who can continue investing through changing market
conditions to accumulate units to meet long term goals.
Dollar-cost averaging
Regular Market Price Units
Investment of a Unit 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 unit over 5 periods:
$5.00 ($25.00 divided by 5).
The average price you paid for each unit:
$4.84 ($500 divided by 103.4).
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APPENDIX G
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, C and D. Ratings by Standard & Poor's
Corporation are AAA, AA, A, BBB, BB, B, CCC, CC, C and D.
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 the 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.
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.
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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.
Non-rated securities will be considered for investment when they
possess a risk comparable to that of rated securities consistent
with the Fund's objectives and policies. When assessing the risk
involved in each non-rated security, the Fund will consider the
financial condition of the issuer or the protection afforded by the
terms of the security.
<PAGE>
PAGE 150
Independent Auditors' Report
The board of directors and shareholders IDS Life Series Fund, Inc.:
We have audited the accompanying statements of assets and
liabilities, including the schedules of investments in securities,
of the Equity, Income, Money Market, Managed and Government
Securities Portfolios of IDS Life Series Fund, Inc. at April 30,
1994, and the related statements 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 April 30, 1994, and the
financial highlights for each of the years in the eight-year period
ended April 30, 1994 and the period from January 20, 1986
(commencement of operations) to April 30, 1986. These financial
statements and the financial highlights are the responsibility of
the fund's 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 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. Investment securities held in custody are confirmed to
us by the custodian. As to securities purchased and sold but not
received or delivered, 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 and financial highlights
referred to above present fairly, in all material respects, the
financial position of the Equity, Income, Money Market, Managed and
Government Securities Portfolios of IDS Life Series Fund, Inc. at
April 30, 1994 and the results of their operations for the year
then ended and the changes in their net assets for each of the
years in the two-year period ended April 30, 1994, 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
June 3, 1994<PAGE>
PAGE 151
<TABLE>
<CAPTION>
Statements of assets and liabilities
IDS Life Series Fund, Inc.
April 30, 1994
Assets Equity Income Money Managed Government
Portfolio Portfolio Market Portfolio Securities
Portfolio Portfolio
<S> <C> <C> <C> <C> <C>
Investments in securities,
at value (Note 1)(identified
cost: $136,297,503; $33,297,187;
$9,268,312; $158,281,078 and
$10,806,686, respectively) $152,178,261 $33,062,888 $9,268,312 $160,676,958 $10,954,485
Cash in bank on demand deposit 355,669 70,097 298,835 419,602 88,217
Receivable for investment securities
sold 1,044,614 99,587 - 5,362,676 -
Dividends and accrued interest
receivable 89,605 509,589 - 814,021 173,492
Receivable for forward foreign
currency contracts held, at value
(Notes 1 and 4) - - - 1,319,789 -
Receivable (for capital stock sold) from:
IDS Life subaccounts 14,282,270 223,490 21,886 14,469,986 142,709
IDS Life of New York
subaccounts 1,041,045 12,078 592 1,060,450 6,726
Total assets 168,991,464 33,977,729 9,589,625 184,123,482 11,365,629
Liabilities
Dividends payable to shareholders
(Note 1) 15,450,559 177,083 21,783 15,559,612 158,728
Payable for investment securities
purchased 1,568,272 - - 6,410,152 -
Accrued investment management
and services fee 82,868 18,597 3,774 87,519 6,150
Payable for forward foreign
currency contracts held, at value
(Notes 1 and 4) - - - 1,325,729 -
Payable (for capital stock redeemed) to:
IDS Life subaccounts 380 206 3,955 2,387 9,181
IDS Life of New York
subaccounts - 3,881 572 - 4,024
Other accrued expenses 29,222 8,034 2,111 31,883 2,695
Total liabilities 17,131,301 207,801 32,195 23,417,282 180,778
Net assets applicable to
outstanding capital stock $151,860,163 $33,769,928 $9,557,430 $160,706,200 $11,184,851
Represented by
Capital stock - authorized
10,000,000,000 shares of $.001
par value: outstanding, 8,391,259;
3,476,335; 9,557,747; 11,604,807 and
1,132,254 shares, respectively $ 8,391 $ 3,476 $ 9,558 $ 11,605 $ 1,132
Additional paid-in capital 135,973,037 34,392,780 9,548,071 158,297,800 11,036,423
Accumulated net realized gain (loss)
on investments 3,610 (400,068) (199) (1,409) -
Undistributed net investment income (5,633) 8,039 - (963) (503)
Unrealized appreciation
(depreciation) of investments 15,880,758 (234,299) - 2,396,349 147,799
Total - representing net assets
applicable to outstanding capital
stock $151,860,163 $33,769,928 $9,557,430 $160,706,200 $11,184,851
Net asset value per share of
outstanding capital stock $ 18.10 $ 9.71 $ 1.00 $ 13.85 $ 9.88
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 152
<TABLE>
<CAPTION>
Statements of operations
IDS Life Series Fund, Inc
Year ended April 30, 1994
Investment income Equity Income Money Managed Government
Portfolio Portfolio Market Portfolio Securities
Portfolio Portfolio
<S> <C> <C> <C> <C> <C>
Income:
Dividends (net of foreign taxes
withheld of $381 and $29,394 for
Equity Portfolio and Managed
Portfolio, respectively) $ 140,803 $ 20,720 $ - $ 895,768 $ -
Interest 1,174,754 2,162,680 264,800 3,861,027 690,375
Total income 1,315,557 2,183,400 264,800 4,756,795 690,375
Expenses (Note 2):
Investment management
and services fee 850,524 199,578 41,168 920,594 75,428
Custodial fees 25,491 11,098 8,675 46,604 5,205
Audit fees 10,500 7,250 6,000 12,500 6,750
Registration fees 7,554 1,783 621 8,304 787
Directors fees 4,526 1,068 333 5,391 454
Printing and postage 15,790 6,026 1,701 19,931 2,365
Other 2,039 1,286 362 5,920 444
Total expenses 916,424 228,089 58,860 1,019,244 91,433
Less expenses reimbursed by
IDS Life - - (9,459) - (5,230)
Total expenses - net 916,424 228,089 49,401 1,019,244 86,203
Investment income - net 399,133 1,955,311 215,399 3,737,551 604,172
Realized and unrealized gain (loss) on investments - net
Realized gain (loss) on security
transactions (Note 3) 15,326,818 (52,946) (97) 14,561,310 112,301
Realized gain on closed option
contracts written (Note 5) - - - 106,207 -
Realized gain on closed futures
contracts (Note 6) - - - 4,774 -
Net realized gain (loss) on
investments 15,326,818 (52,946) (97) 14,672,291 112,301
Net change in unrealized appreciation
or depreciation of investments 2,153,291 (1,813,728) - (4,972,356) (750,136)
Net gain (loss) on investments 17,480,109 (1,866,674) (97) 9,699,935 (637,835)
Net increase (decrease) in net assets
resulting from operations $17,879,242 $ 88,637 $ 215,302 $ 13,437,486 $ (33,663)
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 153
<TABLE>
<CAPTION>
Statements of changes in net assets
IDS Life Series Fund, Inc.
Year ended April 30,
Equity Portfolio Income Portfolio
Operations and distributions 1994 1993 1994 1993
<S> <C> <C> <C> <C>
Investment income - net $ 399,133 $ 154,331 $ 1,955,311 $ 1,495,755
Net realized gain (loss) on investments 15,326,818 2,737,471 (52,946) 307,531
Net change in unrealized appreciation or
depreciation of investments 2,153,291 2,951,801 (1,813,728) 1,257,080
Net increase in net assets resulting from operations 17,879,242 5,843,603 88,637 3,060,366
Distributions to shareholders from:
Net investment income (399,133) (154,331) (1,955,311) (1,519,065)
Net realized gain on investments (15,323,208) (2,737,471) - -
Total distributions (15,722,341) (2,891,802) (1,955,311) (1,519,065)
Capital share transactions (Note 7)
Proceeds from sales 49,951,411 29,951,771 13,258,320 5,419,851
Reinvested distributions at net asset value 15,722,341 2,891,802 1,955,311 1,519,065
Payments for redemptions (3,712,328) (3,318,523) (2,218,371) (2,145,208)
Increase (decrease) in net assets from capital
share transactions 61,961,424 29,525,050 12,995,260 4,793,708
Total increase (decrease) in net assets 64,118,325 32,476,851 11,128,586 6,335,009
Net assets at beginning of year 87,741,838 55,264,987 22,641,342 16,306,333
Net assets at end of year $151,860,163 $87,741,838 $33,769,928 $22,641,342
Undistributed (excess of distributions over)
net investment income $ (5,633) $ (5,633) $ (8,039) $ (8,039)
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 154
<TABLE>
<CAPTION>
Money Market Portfolio Managed Portfolio Government Securities
Portfolio
1994 1993 1994 1993 1994 1993
<C> <C> <C> <C> <C> <C>
$ 215,399 $ 282,902 $ 3,737,551 $ 2,687,436 $ 604,172 $ 539,008
(97) 274 14,672,291 7,640,740 112,301 81,544
- - (4,972,356) 970,187 (750,136) 712,823
215,302 283,176 13,437,486 11,298,363 (33,663) 1,333,375
(215,399) (282,902) (3,765,550) (2,687,506) (604,172) (539,008)
- - (14,672,291) (7,613,049) (112,301) (81,544)
(215,399) (282,902) (18,437,841) (10,300,555) (716,473) (620,552)
5,854,599 2,908,833 51,937,576 20,265,865 3,250,828 1,836,105
215,399 282,902 18,437,841 10,300,555 716,473 620,552
(4,693,099) (4,782,005) (4,807,830) (3,791,708) (1,651,297) (1,403,259)
1,376,899 (1,590,270) 65,567,587 26,774,712 2,316,004 1,053,398
1,376,802 (1,589,996) 60,567,232 27,772,520 1,565,868 1,766,221
8,180,628 9,770,624 100,138,968 72,366,448 9,618,983 7,852,762
$9,557,430 $8,180,628 $160,706,200 $100,138,968 $11,184,851 $9,618,983
$ - $ - $ (963) $ 24,741 $ (503) $ (418)
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 155
<TABLE>
<CAPTION>
Ten Largest Holdings
Equity Portfolio
Common stocks Percent Value
(of portfolio's net assets) (as of April 30, 1994)
<S> <C> <C>
IDEXX Laboratories 2.61% $3,960,000
Manufacturer of animal biomedical test products
Cisco Systems 2.40 3,637,500
Manufacturer of computer network products
Medaphis 2.29 3,475,000
Medical accounts receivable management services
Broadway & Seymour 1.58 2,400,000
Information technology solutions for financial services industry
Compuware 1.51 2,293,750
Developer of system software to improve programmer productivity
Fastenal 1.47 2,240,000
Fasteners and construction supply stores
ADVANTA Class A 1.27 1,925,000
Fifth largest credit card issuer in the United States
Rio Hotel & Casino 1.26 1,912,500
Operates gaming resorts
Roosevelt Financial Group 1.24 1,885,000
Bank holding company
Standard Microsystems 1.17 1,781,250
Manufacturer of local area network computer equipment and software
Excludes short-term securities.
</TABLE>
<PAGE>
PAGE 156
<TABLE>
<CAPTION>
Ten Largest Holdings (continued)
Income Portfolio
Bonds Percent Value
(of portfolio's net assets) (as of April 30, 1994)
<S> <C> <C>
Guang Dong Enterprise (U.S. Dollar), 8.75%, 12-15-03 1.09% $368,500
Peoples' Republic of China (U.S Dollar),
6.50%, 02-17-04 1.03 349,000
FNMA, 8.00%, 01-25-21 1.02 345,932
Coastal, 9.75%, 08-01-03 0.96 324,375
First Chicago, 8.875%, 03-15-02 0.94 318,375
Countrywide Funding, 8.42%, 03-01-99 0.93 313,125
Carco Auto, 7.875%, 03-15-98 0.91 308,466
Noranda Forest (U.S. Dollar), 8.875%, 10-15-99 0.91 306,750
Citicorp, 8.00%, 02-01-03 0.90 303,375
USX, 9.375%, 05-15-22 0.89 300,000
Excludes short-term securities.
</TABLE>
<PAGE>
PAGE 157
<TABLE>
<CAPTION>
Ten Largest Holdings (continued)
Managed Portfolio
Percent Value
(of portfolio's net assets) (as of April 30, 1994)
<S> <C> <C>
Bonds
U.S. Treasury Notes, 6.375%, 06-30-97 1.25% $2,010,820
Common stocks
Ramsay-HMO 1.08 1,736,506
Operates medical service centers
Willamette Industries 1.00 1,601,250
Manufactures wood and paper products
Wabash National 0.99 1,592,500
Manufactures and markets truck trailers
LIN Broadcasting 0.99 1,586,250
TV broadcasting and cellular telephones
Nations Bank 0.98 1,567,500
Commercial banking
Cyprus Minerals 0.96 1,546,875
Mineral resources exploring and mining
Intel 0.95 1,525,000
Semiconductor memory circuits
Mutual Risk Management 0.94 1,519,375
Provides risk management services
Giddings & Lewis 0.94 1,515,000
Manufactures automated machine tools
Excludes short-term securities.
</TABLE>
<PAGE>
PAGE 158
<TABLE>
<CAPTION>
IDS Life Series Fund, Inc.
April 30, 1994
Managed Portfolio
(Percentages represent value of investments compared to total net assets)
Bonds (23.9%)
Issuer Principal Value(a)
amount
<S> <C> <C>
U.S. government obligations (1.3 %)
U.S. Treasury Notes, 6.375%, 06-30-97 $2,000,000(j) $ 2,010,820
Mortgage backed securities (0.9%)
FNMA Disc Nt, 7.00%, 10-25-16 1,129,917 1,026,417
FNMA Disc Nt, 6.50%, 12-25-23 255,461 177,313
Private Export Funding, 8.60%, 06-30-94 300,000 301,875
Total 1,505,605
Aerospace & defense (0.2%)
United Technology, 8.875%, 11-15-19 300,000 323,250
Airlines (0.3%)
Delta Airlines Sr Deb, 10.375%, 02-01-11 500,000 513,125
Asset backed obligations (0.2%)
Carco Auto, 7.875%, 03-15-98 250,000 257,055
Ford Credit, 8.75%, 10-16-95 21,326 21,345
Total 278,400
Automotive related (0.3%)
General Motors, 9.40%, 07-15-21 350,000 387,188
GMAC, 8.375%, 05-01-97 65,000 67,600
Total 454,788
Banks and savings & loans (0.5%)
Banca Comm Italy, 8.25%, 07-15-07 500,000 499,375
Chrysler Building NY, 9.125%, 05-01-99 85,000 92,544
First Union, 8.875%, 10-01-03 300,000 280,500
Total 872,419
Building materials (0.7%)
Georgia Pacific Credit Sensitive Nts,
9.95%, 06-15-02 250,000 272,500
Nortek, 9.875%, 03-01-04 400,000 364,000
Pulte, 7.00%, 12-15-03 500,000 454,375
Total 1,090,875
Chemicals (0.5%)
G.I. Holdings Zero Coupon Sub Nts, 11.69%, 10-01-98 1,000,000(d) 598,750
Harris Chemical North America Sr Sub, 10.75%, 10-15-03 250,000 249,375
Total 848,125
Electronics (0.3%)
Mosler, 11.00%, 04-15-03 500,000 461,250
Energy (1.8%)
BP North America, 9.50%, 01-01-98 140,000 152,425
Cross Timbers Oil Cvt, 5.25%, 11-01-03 1,250,000 1,085,937
Exxon Capital, 6.625%, 08-15-02 575,000 549,125
Standard Oil, 9.00%, 06-01-19 300,000 314,625
USX, 9.125%, 01-15-13 500,000 493,750
Union Oil Company of California, 9.25%, 02-01-03 250,000 271,875
Total 2,867,737
Financial services (1.5%)
American General Financial with
attached put, 8.125%, 08-15-09 150,000 157,500
Corporate Property Investors, 7.18%, 09-01-13 500,000(h) 462,500
GE Capital Reset Nt, 8.65%, 05-01-18 250,000(i) 262,188
Kearny (RE) LP Class B, 6.55%, 07-15-00 300,000 300,750
Kearny (RE) LP Class C, 7.70%, 07-15-01 150,000 151,500
Property Trust America, 7.50%, 02-15-14 750,000 685,312
Salomon, 6.75%, 01-15-06 500,000 450,000
Total 2,469,750<PAGE>
PAGE 159
Food, beverages & tobacco (0.7%)
RJR Nabisco with attached put, 8.375%,
02-01-17 286,000 244,530
Royal Crown Sr Nts, 9.75%, 08-01-00 400,000 383,500
Specialty Foods, 10.25%, 08-15-01 400,000(h) 387,500
Total 1,015,530
Foreign (4.9%)(c)
Banco Nacional de Mexico (U.S. Dollar),
7.00%, 12-15-99 1,200,000(g) 1,320,000
BNCE (U.S. Dollar), 7.25%, 02-02-04 400,000 338,000
Canadian Pacific Forest (U.S. Dollar),
9.375%, 02-15-04 500,000(h) 471,875
Doman Industries (U.S. Dollar), 8.75%, 03-15-04 400,000 364,000
Gov't Trust Certificate Israel
(U.S. Dollar), 9.25%, 11-15-01 275,000 305,250
Guang Dong Enterprise (U.S. Dollar),
8.75%, 12-15-03 750,000(h) 690,937
IRSA (U.S. Dollar), 8.875%, 03-03-99 400,000(g) 364,000
KFW Int'l Finance (U.S. Dollar),
8.20%, 06-01-06 250,000 260,000
Noranda Forest (U.S. Dollar), 8.875%, 10-15-99 1,000,000 1,022,500
Peoples' Republic of China (U.S. Dollar),
6.50%, 02-17-04 750,000 654,375
Qantas Air (U.S. Dollar), 7.50%, 06-30-03 500,000(h) 471,250
Republic of Columbia (U.S. Dollar),
7.25%, 02-23-04 500,000 456,875
Republic of Italy (U.S. Dollar),
6.875%, 09-27-23 350,000 301,000
Rogers Cable System (Canadian Dollar),
6.986%, 01-15-14 600,000 390,922
U.K. Treasury (British Pound),
12.09%, 06-10-03 300,000 454,392
Total 7,865,376
Health care (0.8%)
Johnson & Johnson, 8.00%, 09-01-98 1,000,000 1,037,500
Schering-Plough Zero Coupon, 7.44%, 12-02-96 350,000(d,h) 298,813
Total 1,336,313
Health care services (0.3%)
Hillhaven Sr Nts, 10.125%, 09-01-01 500,000 494,375
Industrial machines & services (0.3%)
Ingersoll-Rand, 8.25%, 11-01-96 60,000 62,475
Reliance Electric, 6.80%, 04-15-03 500,000 465,625
Total 528,100
Insurance (0.5%)
Americo Life, 9.25%, 06-01-05 400,000 376,000
General American Life Sub Cap Nts,
7.625%, 01-15-24 500,000(h) 453,125
Total 829,125
Leisure time & entertainment (1.0%)
Bally's Park Place, 9.25%, 03-15-04 400,000 364,000
GB Property Funding 1st Mtge, 10.875%, 01-15-04 500,000 425,000
GNF Bally, 10.625%, 04-01-03 250,000 207,500
Lady Luck Gaming 1st Mtge, 10.50%, 02-01-01 400,000(h) 373,500
Showboat 1st Mtge, 9.25%, 05-01-08 250,000 227,187
Total 1,597,187
Media (2.3%)
Ackerley Communications Sr Secured Nts,
10.75%, 10-01-03 400,000(h) 400,000
Adelphia Communications, 9.50%, 02-15-04, Pay-in-kind 500,000(h) 455,000
Comcast Cvt, 1.125%, 04-15-07 3,000,000 1,252,500
Continental Cablevision Sr Deb, 8.875%, 09-15-05 250,000 228,750
Outdoor Systems Sr Nts, 10.75%, 08-15-03 400,000 394,000
Time Warner Entertainment, 8.375%, 07-15-33 500,000 451,875
Turner Broadcasting Sr Nts, 8.375%, 07-01-13 500,000 455,000
Total 3,637,125
Metals (0.2%)
Kaiser Aluminum Sr Nts, 9.875%, 02-15-02 400,000 373,500
Multi-industry (0.2%)
Mark IV Industries, 8.75%, 04-01-03 400,000 375,000<PAGE>
PAGE 160
Paper & packaging (1.5%)
Container Corp America, 9.75%, 04-01-03 500,000 479,375
Federal Paper Board, 10.00%, 04-15-11 250,000 279,375
Int'l Paper, 5.125%, 11-15-12 250,000 182,812
Pope & Talbot, 8.375%, 06-01-13 400,000 381,500
Repap Wisconsin Sr Secured Nts, 9.25%, 02-01-02 400,000 373,500
Scotia Pacific Holding, 7.95%, 07-20-15 287,421 267,302
Stone Container Sr Nts, 9.875%, 02-01-01 500,000 465,000
Total 2,428,864
Restaurants & lodging (0.2%)
Family Restaurant Sr Nts, 9.75%, 02-01-02 400,000 372,000
Retail (0.7%)
Food4Less Zero Coupon Cvt, 9.30%, 12-15-97 300,000(e) 201,000
J.C. Penney, 9.05%, 03-01-01 200,000 218,250
Pathmark Stores, 9.625%, 05-01-03 400,000 371,500
Penn Traffic, 9.625%, 04-15-05 300,000 284,625
Total 1,075,375
Telecommunications equipment & services (0.6%)
MFS Communications Zero Coupon Sr Nts,
9.59%, 01-15-99 800,000(e) 459,000
Nextel Communications Zero Coupon Sr Nts,
9.98%, 02-15-99 750,000(e) 437,812
Total 896,812
Utilities - electric (0.6%)
Carolina Power & Light, 8.125%, 11-01-03 30,443 31,356
Pennsylvania Power & Light, 7.625%, 02-01-02 50,000 51,375
RGS Funding I & M Sale Lease-Back Obligation,
9.82%, 12-07-22 208,804 235,165
Sithe Independence Funding, 9.00%, 12-30-13 150,000 151,800
Texas New Mexico Power 1st Mtge, 9.25%, 09-15-00 400,000 401,500
Total 871,196
Utilities - telephone (0.6%)
GTE, 9.375%, 12-01-00 400,000 440,000
Mountain States Tel & Tel, 5.50%, 06-01-05 80,000 68,100
New England Tel & Tel, 6.375%, 09-01-08 70,000 61,775
New York Telephone, 4.875%, 01-01-06 130,000 102,375
Northwestern Bell, 4.375%, 03-01-03 85,000 68,106
Ohio Bell Telephone
5.00%, 02-01-06 250,000 199,375
5.375%, 03-01-07 65,000 52,325
Total 992,056
Total bonds
(Cost: $39,988,927) $38,384,078
</TABLE>
<PAGE>
PAGE 161
<TABLE>
<CAPTION>
Common stocks (60.4%)
Issuer Shares Value(a)
<S> <C> <C>
Automotive related (1.7%)
Masco Industries 70,000 $ 1,330,000
Simpson Industries 65,000 1,332,500
Total 2,662,500
Banks and savings & loans (2.5%)
Bank America 25,000 1,081,250
Nations Bank 30,000 1,567,500
Roosevelt Financial Group 30,000 1,413,750
Total 4,062,500
Building materials (1.8%)
MagneTek 95,000(b) 1,377,500
Willamette Industries 35,000 1,601,250
Total 2,978,750
Computers & office equipment (12.0%)
Adaptec 80,000(b) 1,260,000
Cisco Systems 45,000(b) 1,364,062
Gupta 75,000(b) 1,143,750
Informix 75,000(b) 1,228,125
Iomega 450,000(b) 1,068,750
Legent 45,000(b) 1,423,125
Parametric Technology 45,000(b) 1,282,500
Park Place 75,000(b) 1,293,750
Progress Software 30,000(b) 1,335,000
Sanmina 53,000(b) 1,179,250
Sterling Software 50,000(b) 1,462,500
SynOptics 70,000(b) 1,400,000
System Software 90,000 1,440,000
Walker Interactive 135,000(b) 1,215,000
Wall Data 35,000(b) 1,303,750
Total 19,399,562
Electronics (5.1%)
Amphenol 80,000(b) 1,410,000
Arrow Electronics 35,000(b) 1,321,250
GTI 120,000(b) 1,230,000
Intel 25,000 1,525,000
Micro-Chip 50,000(b) 1,400,000
TriQuint Semiconductor 125,000(b) 1,250,000
Total 8,136,250
Energy (2.6%)
HS Resources 75,000(b) 1,481,250
Parker & Parsley Petroleum 50,000 1,300,000
Triton Energy 45,000(b) 1,321,875
Total 4,103,125
Energy equipment & services (2.4%)
Dresser Industries 55,000 1,251,250
Input/Output 30,000(b) 1,410,000
Production Operators 45,000 1,215,000
Total 3,876,250
Financial services (3.5%)
Mutual Risk Management 65,000 1,519,375
National RE 50,000 1,375,000
RFS Hotel Investors 80,000 1,320,000
Travelers 40,000 1,390,000
Total 5,604,375
<PAGE>
PAGE 162
Foreign (11.6%)
Banca Pop Bergamo 2,100(b) 31,628
Banco Frances 50,000(b) 1,325,000
Castorama Dubois 10,000 1,434,600
Central Puerto 35,000 1,365,000
Comp Naviera Perez 130,000 1,300,000
Consorcio G ADR 85,000 1,094,375
Femsa Coke 45,000(b) 1,428,750
G-Simec 60,000(b) 1,207,500
Kimberly 70,000 1,325,170
Pfleiderer 447 162,619
Sceptre 140,000(b) 1,368,227
Serfin 60,000 1,320,000
T. Tolmex "B" 115,000 1,406,335
Tarragon Oil & Gas 100,000(b,h) 1,176,385
Telefonos de Mexico ADR 25,000 1,471,875
YPF 50,000 1,237,500
Total 18,654,964
Health care (0.8%)
Pyxis 60,000(b) 1,365,000
Health care services (3.7%)
Columbia Healthcare 35,000 1,483,125
Foundation Health 35,000(b) 1,373,750
Physician Corp of America 55,000(b) 1,323,438
Ramsay-HMO 31,717(b) 1,736,506
Total 5,916,819
Industrial machines & services (2.6%)
General Signal 40,000 1,310,000
Giddings & Lewis 60,000 1,515,000
IDEX 35,000(b) 1,330,000
Total 4,155,000
Industrial transportation (1.7%)
Trinity Industries 35,000 1,216,250
Wabash National 35,000 1,592,500
Total 2,808,750
Leisure time & entertainment (0.8%)
Sodak Gaming 85,000(b) 1,285,625
Metals (1.0%)
Cyprus Minerals 55,000 1,546,875
Multi-industry (2.4%)
Albany Int'l 65,000 1,243,125
Madeco 45,000 1,305,000
Tenneco 25,000 1,281,250
Total 3,829,375
Natural gas (0.7%)
Enron 40,000 1,185,000
Paper & packaging (0.8%)
Longview Fibre Wash 75,000 1,321,875
Restaurants & lodging (0.8%)
Shoney's 65,000(b) 1,235,000
Telecommunication equipment & services (1.9%)
InterVoice 125,000(b) 1,437,500
LIN Broadcasting 15,000(b) 1,586,250
Total 3,023,750
Total common stocks
(Cost: $93,591,135) $97,151,345
</TABLE>
<PAGE>
PAGE 163
<TABLE>
<CAPTION>
Preferred stocks (3.1%)
Issuer Shares Value(a)
<S> <C> <C>
Cointel Pride, 5.04% 20,000(b) $ 1,230,000
Hornbach Holdings, $9.36 1,000 992,182
Kenetech Pride, 1.67% Cvt 60,000(b) 1,215,000
National Health Investors, 8.50% Cvt 10,000 257,500
Snyder Oil, 6% Cvt 50,000 1,318,750
Total preferred stocks
(Cost: $4,565,045) $ 5,013,432
</TABLE>
<TABLE>
<CAPTION>
Short-term securities (12.5%)
Issuer Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
<S> <C> <C> <C>
U.S. government and agency (4.6%)
FHLMC Disc Nts, 05-23-94 3.53% $ 200,000 $ 199,550
FNMA Disc Nts, 05-23-94 3.67 5,000,000 4,988,308
U.S. Treasury Bills, 07-28-94 3.19 2,300,000 2,276,195
Total 7,464,053
Commercial paper (7.3%)
Associates Corp, 05-20-94 3.75 1,000,000 997,917
Consolidated Railway, 05-26-94 3.86 1,900,000 1,894,717
Fleet Funding, 06-10-94 3.77 1,000,000(f) 995,729
GE Capital, 05-20-94 3.79 3,800,000 3,792,020
Lincoln National, 05-23-94 3.82 1,400,000(f) 1,396,592
Metlife Funding, 05-18-94 3.76 2,600,000 2,595,125
Total 11,672,100
Bankers acceptance (0.6%)
Chemical Bank, 07-08-94 3.25 1,000,000 991,950
Total short-term securities
(Cost: $20,135,971) $ 20,128,103
Total investments in securities (100.1%)
(Cost: $158,281,078)(k) $160,676,958
Notes to investments in securities
(a)Securities are valued by procedures described in Note 1 to the financial statements.
(b)Presently non-income producing.
(c)Foreign securities values are stated in U.S. dollars; principal amounts are denominated in the currency indicated.
(d)For zero coupon bonds, the interest rate disclosed represents the annualized effective yield on the date of acquisition.
(e)For zero coupon bonds, the interest rate disclosed represents the annualized effective yield from the date of acquisition to
interest reset date disclosed.
(f)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."
These securities have been determined to be liquid under guidelines established by the board of directors.
(g)Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements).
Informationconcerning such security holdings as of April 30, 1994, is as follows:
Security Acquisition Purchase
date cost
________________________________________________________________________________
<S> <C> <C>
Banco Nacional de Mexico (U.S. Dollar),
7.00%, 12-15-99 02-04-93 to 04-20-94 $1,257,500
IRSA (U.S. Dollar), 8.875%, 03-03-99 02-17-94 395,664
(h)Represents security sold under Rule 144A and 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 of Directors.
(i)Interest rate varies, rate shown is the effective rate on April 30, 1994.
(j)Partially pledged as initial deposit on the following open stock index futures purchase contracts (see Note 6 to the financial
statements):
Type of security Contracts
_______________________________________________________________________________
U.S. Treasury Bonds, June 1994 5<PAGE>
PAGE 164
(k)At April 30, 1994, the cost of securities for federal income tax purposes was $158,804,399 and the aggregate gross
unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $10,892,440100
Unrealized depreciation (9,019,881)
________________________________________________________________________________
Net unrealized appreciation $ 1,872,559
________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 165
<TABLE>
<CAPTION>
IDS Life Series Fund, Inc.
April 30, 1994
Government Securities Portfolio
(Percentages represent value of investments compared to total net assets)
Bonds (71.6%)
Issuer Principal Value (a)
amount
<S> <C> <C>
U.S. government obligations (70.5%)
U.S. Treasury Bonds
10.375%, 11-15-12 $ 750,000 $ 941,685
8.125%, 08-15-19 500,000 537,485
U.S. Treasury Notes
7.375%, 05-15-96 1,250,000 1,287,737
6.375%, 06-30-97 850,000 854,598
8.875%, 02-15-99 2,450,000 2,675,155
7.75%, 02-15-01 1,510,000 1,585,032
Total 7,881,692
Mortgage backed securities (1.1%)
GNMA, 8.00%, 05-15-17 131,010 130,683
Total bonds
(Cost: $7,864,576) $8,012,375
</TABLE>
<TABLE>
<CAPTION>
Short-term securities (26.3%)
Issuer Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
<S> <C> <C> <C>
U.S. government agencies
FHLMC Disc Nts
05-05-94 3.56% $ 350,000 $ 349,827
05-12-94 3.54 800,000 799,059
FHLB Disc Nts
05-11-94 3.67 200,000 199,776
06-08-94 3.79 1,600,000 1,593,448
Total short-term securities
(Cost: $2,942,110) $ 2,942,110
Total investments in securities (97.9%)
(Cost: $10,806,686)(b) $10,954,485
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial statements.
(b)At April 30, 1994, the cost of securities for federal income tax purposes was $10,773,362 and the aggregate gross
unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $224,795
Unrealized depreciation (43,672)
_________________________________________________________________________
Net unrealized appreciation $181,123
________________________________________________________________________
</TABLE>
<PAGE>
PAGE 166
<TABLE>
<CAPTION>
IDS Life Series Fund, Inc.
April 30, 1994
Money Market Portfolio
(Percentages represent value of investments compared to total net assets)
Short-term securities (97.0%)
Issuer Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
<S> <C> <C> <C>
U.S. government and agency (22.7%)
FHLB Disc Nts,
06-03-94 3.64% $375,000 $ 373,721
06-10-94 3.17 900,000 896,792
FHLMC Disc Nts, 05-18-94 3.76 400,000 399,250
U.S. Treasury Bills, 07-28-94 3.19 500,000 496,119
Total U.S. government and agency
(Cost: $2,165,882) $2,165,882
Commercial paper (70.2%)
Banks and savings & loans (8.4%)
BBV Finance, 05-09-94 3.64 400,000 399,637
Commerzbank, 05-11-94 3.63 400,000 399,558
Total 799,195
Computers & office equipment (4.1%)
Pitney Bowes, 07-08-94 3.99 400,000 396,972
Electronics (4.7%)
Intel, 05-09-94 3.60 450,000 449,595
Financial services (11.5%)
Fleet Funding, 06-10-94 3.77 400,000(b) 398,292
GE Capital, 05-17-94 3.79 300,000 299,464
J.C. Penney Funding, 05-26-94 3.79 400,000 398,908
Total 1,096,664
Food (8.4%)
Campbell Soup, 05-11-94 3.61 400,000 399,560
CPC International, 05-06-94 3.74 400,000(b) 399,751
Total 799,311
Health care services (4.1%)
Sandoz, 06-30-94 3.83 400,000 397,424
Insurance (8.1%)
A.I. Credit, 05-20-94 3.13 400,000 399,311
Lincoln National, 05-23-94 3.82 375,000(b) 374,087
Total 773,398
Utilities - electric (4.2%)
Pacific Energy Fuel, 06-14-94 3.92 400,000 398,050
Utilities - telephone (8.3%)
Ameritech Capital, 06-23-94 3.95 400,000(b) 397,642
Bell South Capital, 06-10-94 3.73 400,000 398,310
Total 795,952
Miscellaneous (8.4%)
Ciesco, 05-23-94 3.76 400,000 399,042
Eiger Capital, 05-06-94 3.73 400,000(b) 399,752
Total 798,794
Total commercial paper
(Cost: $6,705,355) $6,705,355
Letters of credit (4.1%)
Bank America-Hyundai, 07-20-94 3.30 400,000 397,075
(Cost: $397,075)
<PAGE>
PAGE 167
Total investments in securities (97.0%)
(Cost: $9,268,312)(c) $9,268,312
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial statements.
(b)Commercial paper sold within terms of a private placement memorandum, exempt from registration under section 4(2) ofthe
Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors."
These securities have been determined to be liquid under guidelines established by the board of directors.
(c)At April 30, 1994, this cost also represents the cost of securities for federal income tax purposes.
</TABLE>
<PAGE>
PAGE 168
Notes to financial statements
1. Summary of significant accounting policies
The Fund is registered under the Investment Company Act of 1940, as
amended, (the 1940 Act), as a diversified, open- end management
investment company. Shares of each portfolio of the Fund are sold
to IDS Life Insurance Company (IDS Life) or IDS Life Insurance
Company of New York subaccounts in connection with the sale of
variable insurance contracts.
The significant accounting policies followed by the Fund are
summarized as follows:
Valuation of securities
All securities are valued at the close of each business day.
Securities, other than bonds, traded on national securities
exchanges or included in the NASDAQ National Market System, are
valued at the last quoted sales price; securities traded in the
over-the-counter market and securities for which a last quoted
sales price is not readily available are valued at the mean of the
closing bid and asking prices; and bonds and other securities are
valued at fair value according to methods selected in good faith by
the board of directors. Determination of fair value involves,
among other things, reference to market indexes, matrixes and data
from independent brokers. Short-term securities in the Equity,
Income, Managed and Government Securities Portfolios 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.
Pursuant to Rule 2a-7 of the 1940 Act, all securities in the Money
Market Portfolio are valued daily at amortized cost, which
approximates market value, in order to maintain a constant net
asset value of $1 per share.
Option transactions
In order to produce incremental earnings, protect gains, and
facilitate buying and selling of securities for investment
purposes, the Equity, Managed and Government Securities Portfolios
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
portfolios 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 portfolios pay a premium whether or not the
option is exercised. The portfolios also have the additional risk
of not being able to enter into a closing transaction if a liquid
secondary market does not exist. The portfolios also may write
over-the-counter options where the completion of the obligation is
dependent upon the credit standing of the other party.
Option contracts are valued daily at the closing prices on their
primary exchanges and unrealized appreciation or depreciation is
recorded. The portfolios will realize a gain or loss upon
expiration or closing of the option transaction. When an option is
<PAGE>
PAGE 169
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.
Future transactions
In order to gain exposure to or protect itself from changes in the
market, the Income, Managed and Government Securities Portfolios
may buy and sell stock index and interest rate future contracts.
Risks of entering into future 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 portfolios are 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 portfolios
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 portfolios recognize a realized gain or loss when
the contract is closed or expires.
Foreign currency translations and
forward 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. It is not practicable to
identify that portion of realized and unrealized gain (loss)
arising from changes in the exchange rates from the portion arising
from changes in the market value of investments.
The Equity, Income and Managed Portfolios also 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 portfolios and the resulting
unrealized appreciation or depreciation are determined using
foreign currency exchange rates from an independent pricing
service. The portfolios are subject to the credit risk that the
other party will not complete the obligations of the contract.
Illiquid securities
At April 30, 1994, investments in securities for Income and Managed
Portfolios included issues that are illiquid. The portfolios
currently limit investments in illiquid securities to 10% of the
net assets, at market value, at the time of purchase. The
aggregate value of such securities at April 30, 1994 was $47,750
and $1,684,000, which represents 0.1% and 1.0% of net assets for
the Income and Managed Portfolios, respectively. Pursuant to
guidelines adopted by the Board of Directors, certain unregistered
securities are determined to be liquid and are not included in the
10% limitation specified above.
<PAGE>
PAGE 170
Federal income taxes
Since the Fund's policy is to comply with all requirements of the
Internal Revenue Code applicable to regulated investment companies
and to distribute all of its taxable income to shareholders, no
provision for income taxes is required. Each portfolio is treated
as a separate entity for federal income tax purposes.
Net investment income (loss) and net realized gains (losses) differ
for financial statement and tax purposes primarily because of wash
sale transactions, foreign currency exchange rates, and the timing
and amount of market discount recognized as ordinary income. 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) are recorded by the portfolios.
On the statements of assets and liabilities, as a result of
permanent book-to-tax differences, accumulated net realized gain
(loss) and undistributed net investment income have been increased
(decreased), resulting in net reclassification adjustments to
additional paid-in-capital by the following:
Managed Government
Portfolio Securities
Portfolio
___________________________________________________________________
Accumulated net realized gain (loss) $1,409 $ -
Undistributed net investment income 2,295 (85)
___________________________________________________________________
Additional paid-in-capital reduction (increase) $3,704 $(85)
Dividends to shareholders
At April 30, 1994, dividends were declared of $2.05 per share for
Equity, $.05 for Income, $.002 for Money Market, $1.48 for Managed
and $.14 for Government Securities Portfolio and were payable May
1, 1994. Distributions to shareholders are recorded as of the
close of business on the record date and are payable on the first
business day following the record date. Dividends from net
investment income are declared daily and distributed monthly for
the Money Market, Income and Government Securities Portfolios and
declared and distributed quarterly for the Equity and Managed
Portfolios. Capital gain distributions (if any) will be made
annually. However, additional capital gain distributions may be
made periodically during the fiscal year in order to comply with
the Internal Revenue Code as applicable to regulated investment
companies.
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.
<PAGE>
PAGE 171
2. Investment management and services agreement
The Fund has an Investment Management and Services Agreement with
IDS Life. For its services, IDS Life is paid a fee based on the
aggregate average daily net assets of each of the portfolios. The
fee is 0.7% on an annual basis for the Equity, Income, Managed and
Government Securities Portfolios. For Money Market Portfolio the
fee is 0.5% on an annual basis.
IDS Life and IDS Financial Corporation Inc. (IDS) have an
Investment Advisory Agreement which calls for IDS Life to pay IDS
a fee for investment advice about the fund's portfolios. The fee
paid by IDS Life is 0.25% of the Fund's average daily net assets
for the year.
In addition to paying its own management fee, each portfolio also
pays its taxes, brokerage commissions and nonadvisory expenses.
Expenses that relate to a particular portfolio, such as custodian
fees and registration fees for shares, are paid by that portfolio.
Other expenses are allocated to the portfolios in an equitable
manner as determined by the Fund's board. Each portfolio also pays
custodian fees to IDS Trust Company, an affiliate of IDS Life.
The Investment Management and Services Agreement provides that IDS
Life will reimburse the portfolio, if in any year the aggregate
ordinary operating expenses of any portfolio exceed the most
restrictive expense limitations then in effect under any state
securities law or the regulations thereunder. However, commencing
April 5, 1989, IDS Life has voluntarily agreed to reimburse each
portfolio for operating expenses, excluding the investment
management and services fees, which exceed 0.1% on an annual basis
of average daily net assets of each portfolio.
3. Securities transactions
For the year ended April 30, 1994, cost of purchases and proceeds
from sales of securities aggregated $40,729,585 and $39,540,499 for
Money Market Portfolio; cost of purchases and proceeds from sales
of securities (other than short-term obligations) aggregated
$124,462,243 and $94,054,186 for Equity, $17,654,109 and
$15,448,897 for Income, $171,806,941 and $126,981,089 for Managed
and $3,187,944 and $3,384,074 for Government Securities Portfolios.
Realized gains and losses are determined on an identified cost
basis.
Brokerage commissions paid to brokers affiliated with IDS Life were
$10,846 and $13,882 for Equity Portfolio and Managed Portfolio,
respectively, for the year ended April 30, 1994.
4. Forward foreign currency contracts
At April 30, 1994, Managed Portfolio had entered into forward
foreign currency exchange contracts that obligate the portfolio to
deliver currencies at a specified future date. The terms of the
open contracts are as follows:
<PAGE>
PAGE 172
<TABLE>
<CAPTION>
U.S. Dollar Value U.S. Dollar Value
Currency to as of Currency to as of
Exchange date be delivered April 30, 1994 be received April 30, 1994
__________________________________________________________________________________
<S> <C> <C> <C> <C>
May 2, 1994 395,125 $ 286,043 286,800 $ 286,800
Canadian Dollar U.S. Dollar
May 2-5, 1994 1,728,998 1,039,686 1,032,989 1,032,989
Deutschemark U.S. Dollar
$1,325,729 $1,319,789
</TABLE>
5. Options contracts written
The number of contracts and premium amounts associated with call
option contracts written by Managed Portfolio during the year ended
April 30, 1994, is as follows:
Contracts Premium
________________________________________________________
Balance April 30, 1993 - $ -
Opened 530 325,699
Closed (530) (325,699)
________________________________________________________
Balance April 30, 1994 - $ -
6. Futures contracts
Investments in securities at April 30, 1994 for Managed Portfolio
include securities valued at $502,700 that were pledged to cover
initial margin deposits on five June U.S. Treasury Bond futures
contracts sold. The market value of the futures contracts as of
April 30, 1994 was $523,438. The unrealized appreciation of $469
on these contracts is included in the accompanying financial
statements.
7. Capital share transactions
Transactions in shares of each Portfolio for the years ended April
30, 1994, and 1993 were as follows:
<PAGE>
PAGE 173
<TABLE>
<CAPTION>
Number of shares: Year ended April 30, 1994
Money Government
Equity Income Market Managed Securities
Portfolio Portfolio Portfolio Portfolio Portfolio
____________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Shares at beginning of year 5,202,534 2,222,158 8,180,775 7,237,215 912,972
____________________________________________________________________________________________________
Sold 2,513,413 1,279,899 5,854,806 3,372,853 306,174
Issued for reinvested distributions 872,481 189,664 215,404 1,316,899 68,402
Redeemed (197,169) (215,386) (4,693,238) (322,160) (155,294)
____________________________________________________________________________________________________
Net increase 3,188,725 1,254,177 1,376,972 4,367,592 219,282
____________________________________________________________________________________________________
Shares at end of year 8,391,259 3,476,335 9,557,747 11,604,807 1,132,254
____________________________________________________________________________________________________
Number of shares: Year ended April 30, 1993
Money Government
Equity Income Market Managed Securities
Portfolio Portfolio Portfolio Portfolio Portfolio
____________________________________________________________________________________________________
Shares at beginning of year 3,451,116 1,735,155 9,771,096 5,342,652 810,596
____________________________________________________________________________________________________
Sold 1,777,607 550,738 2,908,886 1,420,467 179,504
Issued for reinvested distributions 172,258 154,236 282,914 741,788 60,256
Redeemed (198,447) (217,971) (4,782,121) (267,692) (137,384)
____________________________________________________________________________________________________
Net increase (decrease) 1,751,418 487,003 (1,590,321) 1,894,563 102,376
____________________________________________________________________________________________________
Shares at end of year 5,202,534 2,222,158 8,180,775 7,237,215 912,972
____________________________________________________________________________________________________
</TABLE>
8. Tax loss carryforward
For federal income tax purposes, the Income Portfolio and Money
Market Portfolio had capital loss carryovers at April 30, 1994 of
$1,364 and $174, respectively, which, if not offset by subsequent
capital gains, will expire in 1997 through 2001. It is unlikely
the Board of Directors will authorize a distribution of any net
realized gain until the portfolio's capital loss carryover has been
offset or expires.
9. Financial highlights
"Financial highlights" showing per share data and selected
information is presented on pages 5-9 of the prospectus.
<PAGE>
PAGE 174
<TABLE>
<CAPTION>
IDS Life Series Fund, Inc.
April 30, 1994
Equity Portfolio
(Percentages represent value of investments compared to total net assets)
Common stocks (70.8%)
Issuer Shares Value(a)
<S> <C> <C>
Airlines (0.7%)
Mesa Airlines 75,000(b) $ 1,087,500
Automotive related (1.1%)
Automotive Industries 60,000(b) 1,605,000
Banks and savings & loans (1.3%)
Roosevelt Financial Group 40,000 1,885,000
Building materials (0.9%)
Clayton Homes 65,000(b) 1,389,375
Chemicals (0.1%)
GNI Group 65,000(b) 219,375
Computers & office equipment (12.3%)
Adobe Systems 40,000 1,070,000
American Management Systems 45,000(b) 911,250
BISYS Group 80,000(b) 1,450,000
Broadway & Seymour 160,000(b) 2,400,000
Compuware 50,000(b) 2,293,750
Informix 40,000(b) 655,000
Lotus Development 15,000(b) 971,250
Minnesota Education Computers 67,000(b) 619,750
NetFRAME Systems 50,000(b) 575,000
Parametric Technology 45,000(b) 1,282,500
Sanmina 45,000(b) 1,001,250
Serving Software 90,000(b) 680,625
Symantec 50,000(b) 793,750
Synopsys 20,000(b) 800,000
3Com 28,000(b) 1,646,750
Wall Data 24,000(b) 894,000
Xircom 30,000(b) 675,000
Total 18,719,875
Electronics (6.0%)
C-Cube Microsystems 10,000(b) 177,500
Cypress Semiconductor 40,000(b) 665,000
Gasonics Int'l 50,000(b) 718,750
Kent Electronics 24,000(b) 696,000
Maxim Integrated Products 15,000(b) 733,125
Medar 65,000(b) 845,000
Micro-Chip 40,500(b) 1,134,000
Standard Microsystems 100,000(b) 1,781,250
TriQuint Semiconductor 60,000(b) 600,000
Ultimate Electronics 70,000(b) 752,500
Zilog 30,000(b) 1,005,000
Total 9,108,125
Energy (0.9%)
Cross Timbers Oil 40,000 580,000
HS Resources 40,000(b) 790,000
Total 1,370,000
Energy equipment & services (0.7%)
Corrpro 60,000(b) 1,027,500
Financial services (6.8%)
ADVANTA Class A 50,000 1,925,000
Medaphis 100,000(b) 3,475,000
Mercury Finance 100,000 1,637,500
Mutual Risk Management 35,000 818,125
RFS Hotel Investors 60,000 990,000
Regional Acceptance 70,000(b) 875,000
Triad Guaranty 35,000(b) 542,500
Total 10,263,125<PAGE>
PAGE 175
Food (0.2%)
Tootsie Roll Industries 5,000 321,267
Foreign (3.9%)
BioChem Pharmaceutical 55,000(b) 492,725
Cato Corp 'A' 80,000 900,000
Danka Business Systems ADR 40,000 1,565,000
Ek Chor China Motorcycle 55,000 1,313,125
Petroleum Geo Services ADS 60,000(b) 900,000
Quimica Y Minera Chile ADR 25,000 787,500
Total 5,958,350
Furniture & appliances (0.5%)
Bombay 40,000(b) 770,000
Health care (3.9%)
Anesta 33,000(b) 272,250
IDEXX Laboratories 120,000(b) 3,960,000
Interpore Int'l 60,000(b) 585,000
ProCyte 30,000(b) 341,250
Viagene 45,000(b) 315,000
Zoll Medical 25,700(b) 456,175
Total 5,929,675
Health care services (3.0%)
Columbia Healthcare 25,000 1,059,375
Express Scripts 20,000(b) 1,000,000
Quantum Health Resources 33,000(b) 1,056,000
Renal Treatment Centers 70,000(b) 1,435,000
Total 4,550,375
Household products (0.3%)
Valence Technology 35,000(b) 393,750
Industrial machines & services (5.8%)
Airgas 36,700(b) 798,225
Arden Industrial Products 25,000(b) 300,000
Fastenal 70,000 2,240,000
Flair 38,000 731,500
Greenfield Industries 75,000 1,462,500
Int'l Imaging Materials 65,000(b) 1,015,625
KENETECH 45,000(b) 888,750
Matrix Services 80,000(b) 800,000
Triple S Plastics 40,000(b) 560,000
Total 8,796,600
Insurance (0.6%)
Coventry 20,000(b) 965,000
Leisure time & entertainment (3.6%)
Autotote 80,000(b) 1,470,000
Callaway Golf 33,000 1,307,625
Int'l Lottery 35,000(b) 385,000
Rio Hotel & Casino 120,000(b) 1,912,500
Score Board 40,000(b) 350,000
Total 5,425,125
Media (0.2%)
United Int'l Holdings 'A' 25,000(b) 331,250
Metals (1.4%)
Gilbralter Steel 70,000(b) 1,015,000
Steel Technologies 60,000 1,080,000
Total 2,095,000
Multi-industry (0.5%)
Career Horizon 38,000(b) 741,000
Restaurants (1.9%)
Promus 18,000(b) 657,000
Shoney's 55,000(b) 1,045,000
Starbucks 40,000(b) 1,190,000
Total 2,892,000
<PAGE>
PAGE 176
Retail (4.6%)
American Eagle Outfitters 43,000(b) 671,875
Consolidated Stores 80,000(b) 1,380,000
Department 56 60,000(b) 1,665,000
Home Shopping Network 60,000(b) 690,000
Musicland Stores 72,000(b) 1,539,000
PETsMART 43,000(b) 1,112,625
Total 7,058,500
Telecommunication equipment & services (6.2%)
Chipcom 25,000(b) 1,171,875
Cisco Systems 120,000(b) 3,637,500
Communications Central 60,000(b) 825,000
Int'l Cablecasting Technology 30,000(b) 652,500
InterVoice 50,000(b) 575,000
Transaction Network 52,000(b) 533,000
Vanguard Cellular Systems 35,000(b) 1,155,000
Wellfleet Communications 12,000(b) 886,500
Total 9,436,375
Textiles & apparel (2.3%)
Authentic Fitness 70,000(b) 980,000
Conso Products 65,000(b) 926,250
Donnkenny 70,800(b) 1,610,700
Total 3,516,950
Utilities - telephone (1.1%)
IDB Communications Group 100,800(b) 1,663,200
Total common stocks
(Cost: $91,605,511) $107,519,292
</TABLE>
<PAGE>
PAGE 177
<TABLE>
<CAPTION>
Short-term securities (29.4%)
Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
<S> <C> <C> <C>
U.S. government and agency (7.4%)
FFCB Disc Nt
05-02-94 3.32% $4,000,000 $4,000,000
05-12-94 3.56 535,000 534,367
FHLB Disc Nts, 06-10-94 3.17 1,600,000 1,591,000
FHLMC Disc Nts, 05-18-94 3.76 2,100,000 2,096,062
U.S. Treasury Bills, 07-28-94 3.19 3,000,000 2,968,950
Total U.S. government and agency
(Cost: $11,201,455) 11,190,379
Commercial paper (18.4%)
Banks and savings & loans (3.7%)
ABN Amro, 06-14-94 3.72 900,000 895,768
BBV Finance, 05-09-94 3.64 4,800,000 4,795,644
Total 5,691,412
Financial services (6.0%)
A.I. Credit, 05-20-94 3.13 1,800,000 1,795,900
Associates Corp, 05-20-94 3.75 3,100,000 3,093,542
Eiger Capital, 05-18-94 3.83 1,600,000(c) 1,596,944
Fleet Funding, 06-10-94 3.77 1,200,000(c) 1,194,875
GE Capital, 05-20-94 3.79 1,500,000 1,496,850
Total 9,178,111
Food (1.6%)
Campbell Soup, 05-11-94 3.61 1,400,000 1,398,460
Sara Lee, 05-18-94 3.78 1,000,000 998,115
Total 2,396,575
Foreign (1.7%)
Commerzbank U.S. Finance, 05-11-94 3.63 2,600,000 2,597,124
Industrial transportation (3.8%)
Consolidated Railways, 05-02-94 3.65 1,400,000 1,399,716
Norfolk Southern, 07-13-94 3.27 4,400,000(c) 4,362,050
Total 5,761,766
Retail (0.7%)
Dillard Investment, 05-11-94 3.77 1,000,000 998,848
Utilities - telephone (0.9%)
Bell South Telecom, 05-18-94 3.76 1,300,000 1,297,562
Total commercial paper
(Cost: $27,931,295) $27,921,398
Letters of credit (3.6%)
Bank America-Hyundai
07-20-94 3.30% $2,600,000 $2,575,482
07-26-94 3.28 2,000,000(c) 1,979,760
Chemical Bank, 07-08-94 3.25 1,000,000 991,950
Total letters of credit
(Cost:$5,559,242) 5,547,192
Total short-term securities
(Cost: $44,691,992) $44,658,969
Total investments in securities (100.2%)
(Cost: $136,297,503)(d) $152,178,261
<PAGE>
PAGE 178
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial statements.
(b) Presently non-income producing.
(c) Commercial paper sold within terms of a private placement memorandum, exempt from registration under section 4(2) ofthe
Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." These
securities have been determined to be liquid under guidelines established by the board of directors.
(d) At April 30, 1994, the cost of securities for federal income tax purposes was $136,450,317 and the aggregate gross
unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $21,602,895
Unrealized depreciation (5,874,951)
____________________________________________________________________________
Net unrealized appreciation $15,727,944
____________________________________________________________________________
</TABLE>
<PAGE>
PAGE 179
<TABLE>
<CAPTION>
IDS Life Series Fund, Inc.
April 30, 1994
Income Portfolio
(Percentages represent value of investments compared to total net assets)
Bonds (64.4%)
Issuer Principal Value(a)
amount
<S> <C> <C>
Mortgage backed securities (1.6%)
FHLMC
7.55%, 05-15-20 $ 3,662 $ 3,662
8.00%, 06-15-20 185,000 184,671
FNMA, 8.00%, 01-25-21 349,536 345,932
Total 534,265
Aerospace & defense (0.5%)
AEC Acquisition Sr Sub, 10.00%, 12-01-03 100,000 95,875
Fairchild, 13.125%, 03-15-06 65,000 63,375
Total 159,250
Airlines (0.3%)
AMR, 9.50%, 05-15-01 100,000 105,125
Asset backed securities (0.9%)
Carco Auto, 7.875%, 03-15-98 300,000 308,466
Automotive (0.3%)
Exide Sr Nts, 10.75%, 12-15-02 100,000 104,000
Banks and savings & loans (5.8%)
Banca Comm Italy, 8.25%, 07-15-07 300,000 299,625
Bankers Trust Sub Deb, 7.50%, 01-15-02 300,000 298,500
Barclays NA Capital, 9.75%, 05-15-21 150,000 168,000
Chrysler Building NY, 9.125%, 05-01-99 40,000 43,550
Citicorp, 8.00%, 02-01-03 300,000 303,375
Corestates Capital, 9.375%, 04-15-03 200,000 221,000
First Chicago, 8.875%, 03-15-02 300,000 318,375
First Union, 8.875%, 10-01-03 100,000 93,500
Fleet Norstar Financial, 9.00%, 12-01-01 200,000 214,000
Total 1,959,925
Building materials (2.8%)
Magnetek, 10.75%, 11-15-98 100,000 103,000
Nortek, 9.875%, 03-01-04 200,000 182,000
Owens Corning Fiberglass, 9.375%,
06-01-12 100,000 105,000
Pulte, 7.00%, 12-15-03 300,000 272,625
Scotia Pacific Holding, 7.95%, 07-20-15 287,421 267,302
Total 929,927
Chemicals (1.6%,)
B.F. Goodrich, 9.625%, 07-01-01 150,000 159,750
G.I. Holdings Zero Coupon Sub Nts, 11.69%, 10-01-98 100,000(d,e) 59,875
Harris Chemical North America Sr Sub, 10.75%, 10-15-03 100,000 99,750
Praxair, 8.70%, 07-15-22 125,000 129,063
Uniroyal Chemical Sr Nts, 10.50%, 05-01-02 100,000 101,375
Total 549,813
Energy (2.5%)
BP North America, 9.50%, 01-01-98 60,000 65,325
Clark Oil
10.50%, 12-01-01 100,000 102,875
9.50%, 09-15-04 100,000 101,000
McDermott, 9.375%, 03-15-02 100,000 108,125
USX
9.80%, 07-01-01 150,000 160,688
9.375%, 05-15-22 300,000 300,000
Total 838,013
Energy equipment & services (0.3%)<PAGE>
PAGE 180
Global Marine Sr Nts, 12.75%, 12-15-99 100,000 106,000
Financial services (5.5%)
Corporate Property Investors, 7.18%, 09-01-13 300,000(d) 277,500
Countrywide Funding, 8.42%, 03-01-99 300,000 313,125
Exxon Capital, 6.625%, 08-15-02 300,000 286,500
General Electric Capital Reset Nt, 8.65%, 05-01-18 200,000(g) 209,750
Goldman Sachs, 7.125%, 03-01-03 200,000(d) 191,250
Kearny (RE) LP Class B, 6.55%, 07-15-00 200,000 200,500
Kearny (RE) LP Class C, 7.70%, 07-15-01 100,000 101,000
Property Trust America, 7.50%, 02-15-14 300,000 274,125
Total 1,853,750
Food, beverages & tobacco (2.4%)
ARA Group Sr Sub Deb, 12.00%, 04-01-00 75,000 81,281
Chiquita Brands, 9.625%, 01-15-04 100,000 96,000
Di Giorgio, 12.00%, 02-15-03 100,000 100,000
Dr. Pepper/7Up Zero Coupon Cvt,
11.82%, 11-01-97 71,000(f) 53,783
RJR Nabisco, 8.625%, 12-01-02 300,000 267,750
Royal Crown Sr Nts, 9.75%, 08-01-00 100,000 95,875
Specialty Foods, 10.25%, 08-15-01 100,000(d) 96,875
Total 791,564
Foreign (10.0%)(b)
Alcan Aluminum (U.S. Dollar), 8.875%, 01-15-22 200,000 208,750
Banco National Com Ext (U.S. Dollar), 7.25%, 02-02-04 100,000 84,500
Canadian Pacific Forest (U.S. Dollar), 9.375%, 02-15-04 100,000(d) 94,375
Doman Industries (U.S. Dollar), 8.75%, 03-15-04 100,000 91,000
Guang Dong Enterprise (U.S. Dollar), 8.75%, 12-15-03 400,000(d) 368,500
Korean Electric Power (U.S. Dollar), 8.00%, 07-01-02 200,000 197,500
Korea Telecom (U.S. Dollar), 7.40%, 12-01-99 300,000 297,000
Noranda Forest (U.S. Dollar), 8.875%, 10-15-99 300,000 306,750
Peoples' Republic of China (U.S. Dollar), 6.50%, 02-17-04 400,000 349,000
Petroleos Mexicanos (U.S. Dollar), 8.625%, 12-01-23 300,000 249,750
Qantas Air (U.S. Dollar), 7.50%, 06-30-03 300,000(d) 282,750
Republic of Argentina (U.S. Dollar), 4.25%, 03-31-23 250,000 131,875
Republic of Columbia (U.S. Dollar), 7.25%, 02-23-04 200,000 182,750
Republic of Italy (U.S. Dollar), 6.875%, 09-27-23 300,000 258,000
WMC Finance USA (U.S. Dollar), 7.25%, 11-15-13 300,000 265,500
Total 3,368,000
Health care (1.0%)
Healthtrust, 10.75%, 05-01-02 100,000 103,250
Schering-Plough Zero Coupon, 7.44%, 12-02-96 300,000(d,e) 256,125
Total 359,375
Health care services (0.6%)
American Medical Int'l, 9.50%, 04-15-06 100,000 97,000
Hillhaven Sr Sub Nts, 10.125%, 09-01-01 100,000 98,875
Total 195,875
Household products (0.3%)
First Brands, 9.125%, 04-01-99 100,000 103,000
Industrial machines & services (0.9%)
Ingersoll-Rand, 8.25%, 11-01-96 30,000 31,238
Reliance Electric, 6.80%, 04-15-03 300,000 279,375
Total 310,613
Industrial transportation (0.5%)
Ryder Systems, 9.25%, 05-15-01 150,000 162,750
Insurance (1.4%)
Americo Life, 9.25%, 06-01-05 100,000 94,000
Leucadia National Sub Nts, 10.375%, 06-15-02 100,000 106,500
SunAmerica, 8.125%, 04-28-23 300,000 277,875
Total 478,375
Leisure time & entertainment (1.6%)
Bally's Park Place, 9.25%, 03-15-04 100,000 91,000
GB Property Funding 1st Mtge, 10.875%, 01-15-04 100,000 85,000
GNF Bally, 10.625%, 04-01-03 100,000 83,000
Lady Luck Gaming 1st Mtge, 10.50%, 02-01-11 100,000(d) 93,375
MGM Grand Hotel Finance, 12.00%, 05-01-02 100,000 108,875
Showboat 1st Mtge, 9.25%, 05-01-08 100,000 90,875
Total 552,125
<PAGE>
PAGE 181
Media (3.3%)
Ackerley Communications Sr Secured Nts, 10.75%, 10-01-03 100,000(d) 100,000
Adelphia Communications, 11.875%, 09-15-04 100,000 103,500
Allbritton Communications, 11.50%, 08-15-04 100,000 101,500
Cablevision Systems, 10.75%, 04-01-04 100,000 100,000
Continental Cablevision 8.875%, Sr Deb,
09-15-05 100,000 91,500
Continental Cablevision 11.00%, Sr Sub Deb,
06-01-07 100,000 103,500
Outdoor Systems Sr Nts, 10.75%, 08-15-03 100,000 98,500
Time Warner Entertainment, 8.375%, 07-15-33 250,000 225,937
Turner Broadcasting Sr Nts, 8.375%, 07-01-13 100,000 91,000
Viacom Int'l Sr Sub, 10.25%, 09-15-01 100,000 103,000
Total 1,118,437
Metals (1.0%)
Amax Sr Nts, 14.50%, 12-01-94 150,000 156,938
Kaiser Aluminum Sr Nts, 9.875%, 02-15-02 100,000 93,375
Magma Copper, 12.00%, 12-15-01 100,000 112,000
Total 362,313
Multi-industry (0.8%)
Coltec Industries, 9.75%, 04-01-00 100,000 101,500
Mark IV Industries, 8.75%, 04-01-03 100,000 93,750
Tally Industries Zero Coupon, 11.44%, 10-15-98 100,000(e) 59,875
Total 255,125
Natural gas (1.9%)
Coastal, 9.75%, 08-01-03 300,000 324,375
Southwest Gas, 9.75%, 06-15-02 100,000 108,375
Texas Gas Transmission, 9.625%, 07-15-97 100,000 103,750
Transcontinental Gas Pipeline, 8.875%,
09-15-02 100,000 101,750
Total 638,250
Paper & packaging (3.0%)
Chesapeake, 9.875%, 05-01-03 100,000 109,000
Container Corp America, 9.75%, 04-01-03 100,000 95,875
Federal Paper Board, 10.00%, 04-15-11 100,000 111,750
Int'l Paper, 5.125%, 11-15-12 85,000 62,156
Owens Illinois Sr Sub Nts, 11.00%, 12-01-03 150,000 160,500
Pope & Talbot, 8.375%, 06-01-13 300,000 286,125
Repap Wisconsin Sr Secured Nts, 9.25%, 02-01-02 100,000 93,375
Silgan Sr Sub Nts, 11.75%, 06-15-02 100,000 106,125
Total 1,024,906
Restaurants & lodging (0.8%)
Caesars World, 8.875%, 08-15-02 100,000 99,625
Family Restaurant Sr Nts, 9.75%, 02-01-02 100,000 93,000
John Q Hammons Hotel Sr Nts, 8.875%, 02-15-04 100,000 91,000
Total 283,625
Retail (3.3%)
Farm Fresh, 12.25%, 10-01-00 100,000 96,375
Food4Less Zero Coupon, 9.24%, 12-15-97 100,000(e) 67,000
Grand Union Sr Nts, 12.25%, 07-15-02 100,000 98,625
J.C. Penney, 9.05%, 03-01-01 150,000 163,687
Levitz Furniture Sr Nts, 12.375%, 04-15-97 100,000 106,000
Pathmark Stores, 9.625%, 05-01-03 100,000 92,875
Penn Traffic Sr Nts, 10.25%, 02-15-02 100,000 101,250
Penn Traffic, 9.625%, 04-15-05 100,000 94,875
Safeway Stores, 10.00%, 12-01-01 100,000 103,500
Service Merchandise, 9.00%, 12-15-04 100,000 92,000
Stop & Shop, 9.75%, 02-01-02 75,000 78,000
Total 1,094,187
Telecommunication equipment & services (0.6%)
MFS Communications Zero Coupon Sr Nts, 9.56%, 01-15-99 200,000(f) 114,750
Nextel Communications Zero Coupon Sr Nts, 9.98%, 02-15-99 150,000(f) 87,563
Total 202,313
Textiles & apparel (0.3%)
Dominion Textiles, 8.875%, 11-01-03 100,000 91,750
Utilities - electric (5.9%)
Arizona Public Service, 8.00%, 02-01-25 200,000 193,000
Carolina Power & Light, 8.125%, 11-01-03 13,530 13,936
<PAGE>
PAGE 182
Commonwealth Edison, 9.875%, 06-15-20 200,000 218,750
Houston Industries, 9.375%, 06-01-01 150,000 163,125
Long Island Lighting
9.00%, 11-01-22 100,000 96,375
9.625%, 07-01-24 200,000 205,250
Louisiana Power & Light,
10.30%, 01-02-05 100,000 105,625
Midland, 11.75%, 07-23-05 100,000 104,000
North Atlantic Energy 1st Mtge, 9.05%, 06-01-02 100,000 98,500
Northeast Utilities, 8.58%, 12-01-06 200,000 207,000
Pennsylvania Power & Light 1st Mtge, 9.25%, 10-01-19 100,000 108,125
Sithe Independence Funding, 9.00%, 12-30-13 100,000 101,200
Texas New Mexico Power 1st Mtge, 9.25%, 09-15-00 100,000 100,375
Texas Utilities Electric, 9.875%, 11-01-19 100,000 108,125
Texas Utilities 1st Mtge, 7.375%, 10-01-25 200,000 178,000
Total 2,001,386
Utilities - telephone (2.4%)
AT & T, 8.125%, 07-15-24 300,000 298,500
New England Tel & Tel, 6.375%, 09-01-08 40,000 35,300
New York Telephone, 9.375%, 07-15-31 150,000 169,875
Northwestern Bell, 4.375%, 03-01-03 50,000 40,062
Pacific Bell Telephone, 7.375%, 07-15-43 300,000 274,500
Total 818,237
Miscellaneous (0.3%)
Mosler, 11.00%, 04-15-03 100,000 92,250
Total bonds
(Cost: $21,996,207) $21,752,989
</TABLE>
<TABLE>
<CAPTION>
Preferred stocks (0.7%)
Issuer Shares Value(a)
<S> <C> <C>
First Chicago, $2.88, Cvt 500 $ 27,000
National Health Investors, $1.04, Cvt 2,000 51,500
Merry Land & Investments, $1.75 Cvt 1,000 30,250
Occidental Petroleum, $3.88, Cvt 1,000(c) 47,750
Public Service of New Hampshire, $2.65 3,500 90,563
Total preferred stocks
(Cost: $237,500) $247,063
</TABLE>
<TABLE>
<CAPTION>
Short-term securities (32.8%)
Annualized Amount Value(a)
yield on payable at
date of maturity
Issuer purchase
<S> <C> <C> <C>
U.S. government agency (10.1%)
FHLB Disc Nts
05-26-94 3.69% $1,300,000 $ 1,296,545
06-03-94 3.64 200,000 199,213
FHLMC Disc Nts
05-23-94 3.53 800,000 798,201
05-23-94 3.71 700,000 698,344
FNMA Disc Nt, 05-23-94 3.67 400,000 399,065
Total 3,391,368
Commercial paper (22.7%)
ABN Amro, 06-14-94 3.72 1,600,000 1,592,477
Ciesco, 05-19-94 3.78 1,700,000 1,696,608
Consolidated Railway, 5-26-94 3.86 1,200,000 1,196,663
J.C. Penney Funding, 05-26-94 3.76 1,000,000 997,292
Sandoz, 06-30-94 3.83 600,000 595,722
USAA Capital, 06-13-94 3.75 1,600,000 1,592,706
Total 7,671,468
<PAGE>
PAGE 183
Total short-term securities
(Cost: $11,063,480) $11,062,836
Total investments in securities (97.9%)
(Cost: $33,297,187)(h) $33,062,888
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial statements.
(b) Foreign securities values are stated in U.S. dollars; principal amounts are denominated in the currency indicated.
(c) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). Information
concerning such security holdings at April 30,1994, is as follows:
<S> <C> <C>
Security Acquisition Purchase
date cost
Occidental Petroleum, $3.88, Cvt, 12-31-49 02-10-93 $ 50,000
(d) Represent securities sold under Rule 144A and are exempt from registration under the Securities Act of 1933, as amended.
These securities has been determined to be liquid under guidelines established by the board of directors.
(e) For zero coupon bonds, the interest rate disclosed represents the annualized effective yield on the date of acquisition.
(f) For zero coupon bonds, the interest rate disclosed represents the annualized effective yield from the date of
acquisition to interest reset date disclosed.
(g) Interest rate varies, rate shown is the effective rate on April 30, 1994.
(h) At April 30, 1994, the cost of securities for federal income tax purposes was $33,278,667 and the aggregate gross
unrealized appreciation and depreciation based on that cost was:
<S> <C>
Unrealized appreciation $ 561,145
Unrealized depreciation (776,924)
______________________________________________________________________
Net unrealized depreciation $ (215,779)
______________________________________________________________________
</TABLE>
<PAGE>
PAGE 184
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.
Financial Statements included in Part B:
Independent Auditors' Report, June 3, 1994.
Statements:
Statement of Assets and Liabilities, April 30, 1994.
Statements of Operations for the year ended April 30,
1994.
Statements of Changes in Net Assets for the years ended
April 30, 1994 and April 30, 1993.
Notes to Financial Statements.
Schedules:
1. Investments in Securities, April 30, 1994.
Notes to Investments in Securities.
(b) EXHIBITS:
1. Copy of Articles of Incorporation dated May 8, 1985, filed as
Exhibit No. 1 to Registrant's Registration Statement No. 2-
97636, are incorporated herein by reference.
2. Copy of By-laws, filed electronically herewith.
3. Not Applicable.
4. Copy of Stock Certificate, filed as Exhibit No. 3 to
Registrant's Registration Statement No. 2-97636 is
incorporated herein by reference.
5.(a) Copy of Investment Management and Services Agreement
between IDS Life Insurance Company and the Registrant
dated December 17, 1985, filed electronically herewith.
(b) Copy of Investment Advisory Agreement between IDS Life
Insurance Company and IDS/American Express Inc., dated
July 11, 1984, filed electronically herewith.
6. Not Applicable.
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 equal to 15 percent
of their annual salaries, the maximum amount permitted under
Section 404 (a) of the Internal Revenue Code.<PAGE>
PAGE 185
8. Copy of Custodian Agreement between IDS Trust Company and
Registrant dated January 1, 1986, filed electronically
herewith.
9. None.
10. Opinion and Consent of Counsel, filed as Exhibit No. 10 to
Registrant's Post-Effective Amendment No. 2 to Registration
Statement No. 2-97636, is incorporated herein by reference.
11. Auditor's Consent, filed electronically herewith.
12. None.
13. None.
14. None.
15. None.
16. Copy of Schedule for computation of each performance
quotation, filed concurrently on Form SE as Exhibit 16 to
Registrant's Post-Effective Amendment No. 9 to Registration
Statement No. 2-97636, is incorporated herein by reference.
17. Financial Data Schedule filed electronically herewith.
18. Power of Attorney dated Nov. 2, 1993, filed electronically as
Exhibit 17 to Registrant's Post-Effective Amendment No. 12 to
Registration Statement No. 2-97636, is incorporated herein by
reference.
Item 25. Persons Controlled by or Under Common Control with
Registrant
Not Applicable.
Item 26. Number of Holders of Securities
(1) (2)
Number of Record
Holders as of
Title of Class October 28, 1994
Common Stock 2
<PAGE>
PAGE 186
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 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.
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.
Item 29. The Fund has no principal underwriter.
Item 30. Location of Accounts and Records
IDS Financial Corporation
IDS Tower 10
Minneapolis, Minnesota
Item 31. Management Services
Not applicable
Item 32. Undertakings
(a) Not applicable.
(b) Not applicable.<PAGE>
PAGE 187
(c) The Registrant undertakes to furnish each person to
whom a prospectus is delivered with a copy of the
Registrant's latest annual report to shareholders,
upon request and without charge.
<PAGE>
PAGE 188
<PAGE>
PAGE 1
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 2
<TABLE><CAPTION>
Item 28a. Business and Other Connections of Investment Adviser (IDS Financial Corporation)
Directors and officers of IDS Financial Corporation who are directors and/or officers of one
or more other companies:
<S> <C> <C>
Ronald G. Abrahamson, Vice President--Field Administration
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Vice President-Field
Administration
Douglas A. Alger, Vice President--Total Compensation
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Total Compensation
Jerome R. Amundson, Vice President and Controller--Mutual Funds Operations
IDS Financial Services Inc. IDS Tower 10 Vice President and
Minneapolis, MN 55440 Controller-Mutual Funds
Operations
Peter J. Anderson, Director and Senior Vice President--Investments
IDS Advisory Group Inc. IDS Tower 10 Director and Chairman
Minneapolis, MN 55440 of the Board
IDS Capital Holdings Inc. Director and President
IDS Financial Services Inc. Senior Vice President-
Investments
IDS Fund Management Limited Director
IDS International, Inc. Director, Chairman of the
Board and Executive Vice
President
IDS Securities Corporation Executive Vice President-
Investments
NCM Capital Management Group, Inc. 2 Mutual Plaza Director
501 Willard Street
Durham, NC 27701
Ward D. Armstrong, Vice President--Sales and Marketing, IDS Institutional Retirement Services
IDS Financial Services Inc. IDS Tower 10 Vice President-Sales and
Minneapolis, MN 55440 Marketing, IDS
Institutional Retirement
Services
Alvan D. Arthur, Region Vice President--Pacific Northwest Region
American Express Service Corporation IDS Tower 10 Vice President
IDS Financial Services Inc. Minneapolis, MN 55440 Region Vice President-
Pacific Northwest Region
<PAGE>
PAGE 3
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Kent L. Ashton, Vice President--Financial Education Services
IDS Financial Services Inc. IDS Tower 10 Vice President-Financial
Minneapolis, MN 55440 Education Services
Joseph M. Barsky III, Vice President--Senior Portfolio Manager
IDS Advisory Group Inc. IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Vice President-Senior
Portfolio Manager
Robert C. Basten, Vice President--Tax and Business Services
IDS Financial Services Inc. IDS Tower 10 Vice President-Tax
Minneapolis, MN 55440 and Business Services
Timothy V. Bechtold, Vice President--Insurance Product Development
IDS Financial Services Inc. IDS Tower 10 Vice President-Insurance
Minneapolis, MN 55440 Product Development
IDS Life Insurance Company Vice President-Insurance
Product Development
John D. Begley, Region Vice President--Mid-Central Region
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Region Vice President-
Mid-Central Region
IDS Insurance Agency of Alabama Inc. Vice President-Mid-Central
Region
IDS Insurance Agency of Arkansas Inc. Vice President-Mid-Central
Region
IDS Insurance Agency of Massachusetts Inc. Vice President-Mid-Central
Region
IDS Insurance Agency of Nevada Inc. Vice President-Mid-Central
Region
IDS Insurance Agency of New Mexico Inc. Vice President-Mid-Central
Region
IDS Insurance Agency of North Carolina Inc. Vice President-Mid-Central
Region
IDS Insurance Agency of Ohio Inc. Vice President-Mid-Central
Region
IDS Insurance Agency of Wyoming Inc. Vice President-Mid-Central
Region
Carl E. Beihl, Vice President--Strategic Technology Planning
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Strategic Technology
Planning
<PAGE>
PAGE 4
Item 28a. Business and Other Connections of Investment Adviser (IDS Financial
Corporation)(cont'd)
Alan F. Bignall, Vice President--Financial Planning Systems
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Vice President-
Financial Planning
Systems
Brent L. Bisson, Region Vice President--Northwest Region
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Region Vice President-
Northwest Region
IDS Insurance Agency of Alabama Inc. Vice President-
Northwest Region
IDS Insurance Agency of Arkansas Inc. Vice President-
Northwest Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
Northwest Region
IDS Insurance Agency of Nevada, Inc. Vice President-
Northwest Region
IDS Insurance Agency of New Mexico Inc. Vice President-
Northwest Region
IDS Insurance Agency of North Carolina Inc. Vice President-
Northwest Region
IDS Insurance Agency of Ohio Inc. Vice President-
Northwest Region
IDS Insurance Agency of Wyoming Inc. Vice President-
Northwest Region
John C. Boeder, Vice President--Mature Market Group
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Mature Market Group
IDS Life Insurance Company of New York Box 5144 Director
Albany, NY 12205
Karl J. Breyer, Director, Senior Vice President--Corporate Affairs and General Counsel
American Express Minnesota Foundation IDS Tower 10 Director
Minneapolis, MN 55440
IDS Aircraft Services Corporation Director and President
IDS Financial Services Inc. Senior Vice President-
Corporate Affairs and
Special Counsel
Harold E. Burke, Vice President and Assistant General Counsel
American Express Service Corporation IDS Tower 10 Vice President
IDS Financial Services Inc. Minneapolis, MN 55440 Vice President and
Assistant General Counsel
<PAGE>
PAGE 5
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Daniel J. Candura, Vice President--Marketing Support
IDS Financial Services Inc. IDS Tower 10 Vice President-Marketing
Minneapolis, MN 55440 Support
Cynthia M. Carlson, Vice President--IDS Securities Services
American Enterprise Investment IDS Tower 10 Director, President and
Services Inc. Minneapolis, MN 55440 Chief Executive Officer
IDS Financial Services Inc. Vice President-IDS
Securities Services
Orison Y. Chaffee III, Vice President--Field Real Estate
IDS Financial Services Inc. IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Real Estate
James E. Choat, Director and Senior Vice President--Field Management
American Express Minnesota Foundation IDS Tower 10 Director
American Express Service Corporation Minneapolis, MN 55440 Vice President
IDS Financial Services Inc. Senior Vice President-
Field Management
IDS Insurance Agency of Alabama Inc. Vice President--North
Central Region
IDS Insurance Agency of Arkansas Inc. Vice President--North
Central Region
IDS Insurance Agency of Massachusetts Inc. Vice President--North
Central Region
IDS Insurance Agency of Nevada Inc. Vice President--North
Central Region
IDS Insurance Agency of New Mexico Inc. Vice President--North
Central Region
IDS Insurance Agency of North Carolina Inc. Vice President--North
Central Region
IDS Insurance Agency of Ohio Inc. Vice President--North
Central Region
IDS Insurance Agency of Wyoming Inc. Vice President-- North
Central Region
IDS Property Casualty Insurance Co. Director
Kenneth J. Ciak, Vice President and General Manager--IDS Property Casualty
IDS Financial Services Inc. IDS Tower 10 Vice President and General
Minneapolis, MN 55440 Manager-IDS Property
Casualty
IDS Property Casualty Insurance Co. I WEG Blvd. Director and President
DePere, Wisconsin 54115
<PAGE>
PAGE 6
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Roger C. Corea, Region Vice President--Northeast Region
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Region Vice President-
Northeast Region
IDS Insurance Agency of Alabama Inc. Vice President -
Northeast Region
IDS Insurance Agency of Arkansas Inc. Vice President -
Northeast Region
IDS Insurance Agency of Massachusetts Inc. Vice President -
Northeast Region
IDS Insurance Agency of Nevada Inc. Vice President -
Northeast Region
IDS Insurance Agency of New Mexico Inc. Vice President -
Northeast Region
IDS Insurance Agency of North Carolina Inc. Vice President -
Northeast Region
IDS Insurance Agency of Ohio, Inc. Vice President -
Northeast Region
IDS Insurance Agency of Wyoming Inc. Vice President -
Northeast Region
IDS Life Insurance Co. of New York Box 5144 Director
Albany, NY 12205
Kevin F. Crowe, Region Vice President--Atlantic Region
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Region Vice President -
Atlantic Region
Alan R. Dakay, Vice President--Institutional Insurance Marketing
American Enterprise Life Insurance Co. IDS Tower 10 Director and President
Minneapolis, MN 55440
American Partners Life Insurance Co. Director and President
IDS Financial Services Inc. Vice President -
Institutional Insurance
Marketing
IDS Life Insurance Company Vice President -
Institutional Insurance
Marketing
William F. Darland, Region Vice President--South Central Region
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Region Vice President-
South Central Region
IDS Insurance Agency of Alabama Inc. Vice President-
South Central Region
IDS Insurance Agency of Arkansas Inc. Vice President -
South Central Region
<PAGE>
PAGE 7
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
IDS Insurance Agency of Massachusetts Inc. Vice President-
South Central Region
IDS Insurance Agency of Nevada Inc. Vice President-
South Central Region
IDS Insurance Agency of New Mexico Inc. Vice President-
South Central Region
IDS Insurance Agency of North Carolina Inc. Vice President-
South Central Region
IDS Insurance Agency of Ohio Inc. Vice President-
South Central Region
IDS Insurance Agency of Wyoming Inc. Vice President-
South Central Region
William H. Dudley, Director and Executive Vice President--Investment Operations
IDS Advisory Group Inc. IDS Tower 10 Director
Minneapolis, MN 55440
IDS Capital Holdings Inc. Director
IDS Financial Services Inc. Director and Executive
Vice President-
Investment Operations
IDS Futures Corporation Director
IDS Futures III Corporation Director
IDS International, Inc. Director
IDS Securities Corporation Director, Chairman of the
Board, President and
Chief Executive Officer
Roger S. Edgar, Director and Senior Vice President--Information Systems
IDS Financial Services Inc. IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Information Systems
Gordon L. Eid, Director, Senior Vice President and Deputy General Counsel
IDS Financial Services Inc. IDS Tower 10 Senior Vice President and
General Counsel
IDS Insurance Agency of Alabama Inc. Director and Vice President
IDS Insurance Agency of Arkansas Inc. Director and Vice President
IDS Insurance Agency of Massachusetts Inc. Director and Vice President
IDS Insurance Agency of Nevada Inc. Director and Vice President
IDS Insurance Agency of New Mexico Inc. Director and Vice President
IDS Insurance Agency of North Carolina Inc. Director and Vice President
IDS Insurance Agency of Ohio Inc. Director and Vice President
IDS Insurance Agency of Wyoming Inc. Director and Vice President
IDS Real Estate Services, Inc. Vice President
Investors Syndicate Development Corp. Director
Robert M. Elconin, Vice President--Government Relations
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Government Relations
IDS Life Insurance Company Vice President
<PAGE>
PAGE 8
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Mark A. Ernst, Vice President--Retail Services
American Enterprise Investment IDS Tower 10 Director
Services Inc. Minneapolis, MN 55440
IDS Financial Services Inc. Vice President-
Retail Services
Gordon M. Fines, Vice President--Mutual Fund Equity Investments
IDS Advisory Group Inc. IDS Tower 10 Executive Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Vice President-
Mutual Fund Equity
Investments
IDS International Inc. Vice President and
Portfolio Manager
Louis C. Fornetti, Director, Senior Vice President and Chief Financial Officer
American Enterprise Investment IDS Tower 10 Vice President
Services Inc. Minneapolis, MN 55440
IDS Cable Corporation Director
IDS Cable II Corporation Director
IDS Capital Holdings Inc. Senior Vice President
IDS Certificate Company Vice President
IDS Financial Services Inc. Senior Vice President and
Chief Financial Officer
IDS Insurance Agency of Alabama Inc. Vice President
IDS Insurance Agency of Arkansas Inc. Vice President
IDS Insurance Agency of Massachusetts Inc. Vice President
IDS Insurance Agency of Nevada Inc. Vice President
IDS Insurance Agency of New Mexico Inc. Vice President
IDS Insurance Agency of North Carolina Inc. Vice President
IDS Insurance Agency of Ohio Inc. Vice President
IDS Insurance Agency of Wyoming Inc. Vice President
IDS Life Insurance Company Director
IDS Life Series Fund, Inc. Vice President
IDS Life Variable Annuity Funds A&B Vice President
IDS Property Casualty Insurance Co. Director and Vice President
IDS Real Estate Services, Inc. Vice President
IDS Sales Support Inc. Director
IDS Securities Corporation Vice President
IDS Trust Company Director
Investors Syndicate Development Corp. Vice President
Douglas L. Forsberg, Vice President--Securities Services
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Securities Services
<PAGE>
PAGE 9
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Carl W. Gans, Region Vice President--North Central Region
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Region Vice President-
North Central Region
Robert G. Gilbert, Vice President--Real Estate
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Real Estate
John J. Golden, Vice President--Field Compensation Development
IDS Financial Services Inc. IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Compensation Development
Harvey Golub, Director
American Express Company American Express Tower Chairman and Chief
World Financial Center Executive Officer
New York, New York 10285
American Express Travel Chairman and Chief
Related Services Company, Inc. Executive Officer
National Computer Systems, Inc. 11000 Prairie Lakes Drive Director
Minneapolis, MN 55440
Morris Goodwin Jr., Vice President and Corporate Treasurer
American Enterprise Investment IDS Tower 10 Vice President and
Services Inc. Minneapolis, MN 55440 Treasurer
American Enterprise Life Insurance Co. Vice President and
Treasurer
American Express Minnesota Foundation Director, Vice President
and Treasurer
American Express Service Corporation Vice President and
Treasurer
IDS Advisory Group Inc. Vice President and
Treasurer
IDS Aircraft Services Corporation Vice President and
Treasurer
IDS Cable Corporation Vice President and
Treasurer
IDS Cable II Corporation Vice President and
Treasurer
IDS Capital Holdings Inc. Vice President and
Treasurer
IDS Certificate Company Vice President and
Treasurer
IDS Deposit Corp. Director, President
and Treasurer
IDS Financial Services Inc. Vice President and
Corporate Treasurer
<PAGE>
PAGE 10
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
IDS Insurance Agency of Alabama Inc. Vice President and
Treasurer
IDS Insurance Agency of Arkansas Inc. Vice President and
Treasurer
IDS Insurance Agency of Massachusetts Inc. Vice President and
Treasurer
IDS Insurance Agency of Nevada Inc. Vice President and
Treasurer
IDS Insurance Agency of New Mexico Inc. Vice President and
Treasurer
IDS Insurance Agency of North Carolina Inc. Vice President and
Treasurer
IDS Insurance Agency of Ohio Inc. Vice President and
Treasurer
IDS Insurance Agency of Wyoming Inc. Vice President and
Treasurer
IDS International, Inc. Vice President and
Treasurer
IDS Life Insurance Company Vice President and
Treasurer
IDS Life Series Fund, Inc. Vice President and
Treasurer
IDS Life Variable Annuity Funds A&B Vice President and
Treasurer
IDS Management Corporation Vice President and
Treasurer
IDS Partnership Services Corporation Vice President and
Treasurer
IDS Plan Services of California, Inc. Vice President and
Treasurer
IDS Property Casualty Insurance Co. Vice President and
Treasurer
IDS Real Estate Services, Inc Vice President and
Treasurer
IDS Realty Corporation Vice President and
Treasurer
IDS Sales Support Inc. Director, Vice President
and Treasurer
IDS Securities Corporation Vice President and
Treasurer
Investors Syndicate Development Corp. Vice President and
Treasurer
NCM Capital Management Group, Inc. 2 Mutual Plaza Director
501 Willard Street
Durham, NC 27701
Sloan Financial Group, Inc. Director
Suzanne Graf, Vice President--Systems Services
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Systems Services
<PAGE>
PAGE 11
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
David A. Hammer, Vice President and Marketing Controller
IDS Financial Services Inc. IDS Tower 10 Vice President and
Minneapolis, MN 55440 Marketing Controller
IDS Plan Services of California, Inc. Director and Vice President
Robert L. Harden, Region Vice President--Mid-Atlantic Region
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Region Vice President-
Mid Atlantic Region
IDS Insurance Agency of Alabama Inc. Vice President-
Mid Atlantic Region
IDS Insurance Agency of Arkansas Inc. Vice President-
Mid Atlantic Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
Mid Atlantic Region
IDS Insurance Agency of Nevada Inc. Vice President-
Mid Atlantic Region
IDS Insurance Agency of New Mexico Inc. Vice President-
Mid Atlantic Region
IDS Insurance Agency of North Carolina Inc. Vice President-
Mid Atlantic Region
IDS Insurance Agency of Ohio Inc. Vice President-
Mid Atlantic Region
IDS Insurance Agency of Wyoming Inc. Vice President-
Mid Atlantic Region
Lorraine R. Hart, Vice President--Insurance Investments
American Enterprise Life IDS Tower 10 Vice President-Investments
Insurance Company Minneapolis, MN 55440
American Partners Life Insurance Co. Director and Vice
President-Investments
IDS Certificate Company Vice President-Investments
IDS Financial Services Inc. Vice President-Insurance
Investments
IDS Life Insurance Company Vice President-Investments
Investors Syndicate Development Corp. Vice President-Investments
Mark S. Hays, Vice President--Senior Portfolio Manager, IDS International
IDS Financial Services Inc. IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager, IDS
International
IDS Fund Management Limited Director
IDS International, Inc. Senior Vice President
<PAGE>
PAGE 12
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Brian M. Heath, Region Vice President--Southwest Region
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Region Vice President-
Southwest Region
IDS Insurance Agency of Alabama Inc. Vice President-
Southwest Region
IDS Insurance Agency of Arkansas Inc. Vice President-
Southwest Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
Southwest Region
IDS Insurance Agency of Nevada Inc. Vice President-
Southwest Region
IDS Insurance Agency of New Mexico Inc. Vice President-
Southwest Region
IDS Insurance Agency of North Carolina Inc. Vice President-
Southwest Region
IDS Insurance Agency of Ohio Inc. Vice President-
Southwest Region
IDS Insurance Agency of Texas Inc. Director and President
IDS Insurance Agency of Wyoming Inc. Vice President-
Southwest Region
Raymond E. Hirsch, Vice President--Senior Portfolio Manager
IDS Advisory Group Inc. IDS Tower 10 Vice President
IDS Financial Services Inc. Minneapolis, MN 55440 Vice President-Senior
Portfolio Manager
James G. Hirsh, Vice President and Assistant General Counsel
IDS Financial Services Inc. IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
IDS Securities Corporation Director, Vice President
and General Counsel
Paul C. Hopkins, Vice President--Senior Portfolio Manager-IDS International
IDS Financial Services Inc. IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager-IDS
International
IDS International, Inc. Senior Vice President
Kevin P. Howe, Vice President--Government and Customer Relations and Chief Compliance Officer
American Enterprise Investment IDS Tower 10 Vice President and
Services Inc. Minneapolis, MN 55440 Compliance Officer
American Express Service Corporation Vice President
IDS Financial Services Inc. Vice President-
Government and
Customer Relations
IDS Securities Corporation Vice President and Chief
Compliance Officer
<PAGE>
PAGE 13
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
David R. Hubers, Director, President and Chief Executive Officer
American Express Service Corporation IDS Tower 10 Director and President
Minneapolis, MN 55440
IDS Aircraft Services Corporation Director
IDS Certificate Company Director
IDS Financial Services Inc. Chairman, Chief Executive
Officer and President
IDS Life Insurance Company Director
IDS Plan Services of California, Inc. Director and President
IDS Property Casualty Insurance Co. Director
Marietta L. Johns, Director and Senior Vice President--Field Management
IDS Financial Services Inc. IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Field Management
Douglas R. Jordal, Vice President--Taxes
IDS Aircraft Services Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Vice President-Taxes
Craig A. Junkins, Vice President--IDS 1994 Implementation Planning and Financial Planning
Development
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Vice President-IDS 1994
Implementation Planning
and Financial Planning
Development
James E. Kaarre, Vice President--Marketing Information
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Marketing Information
G. Michael Kennedy, Vice President--Investment Services and Investment Research
IDS Financial Services Inc. IDS Tower 10 Vice President-Investment
Minneapolis, MN 55440 Services and Investment
Research
Susan D. Kinder, Director and Senior Vice President--Human Resources
American Express Minnesota Foundation IDS Tower 10 Director
Minneapolis, MN 55440
American Express Service Corporation Vice President
IDS Financial Services Inc. Senior Vice President-
Human Resources
<PAGE>
PAGE 14
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Richard W. Kling, Director and Senior Vice President--Risk Management Products
American Enterprise Life Insurance Co. IDS Tower 10 Director and Chairman of
Minneapolis, MN 55440 the Board
American Partners Life Insurance Co. Director and Chairman of
the Board
IDS Financial Services Inc. Senior Vice President-
Risk Management Products
IDS Insurance Agency of Alabama Inc. Director and President
IDS Insurance Agency of Arkansas Inc. Director and President
IDS Insurance Agency of Massachusetts Inc. Director and President
IDS Insurance Agency of Nevada Inc. Director and President
IDS Insurance Agency of New Mexico Inc. Director and President
IDS Insurance Agency of North Carolina Inc. Director and President
IDS Insurance Agency of Ohio Inc. Director and President
IDS Insurance Agency of Wyoming Inc. Director and President
IDS Life Insurance Company Director and President
IDS Life Series Fund, Inc. Director and President
IDS Life Variable Annuity Funds A&B Member of Board of
Managers, Chairman of the
Board and President
IDS Property Casualty Insurance Co. Director and Chairman of
the Board
IDS Life Insurance Company P.O. Box 5144 Director, Chairman of the
of New York Albany, NY 12205 Board and President
Harold D. Knutson, Vice President--System Services
IDS Financial Services Inc. IDS Tower 10 Vice President--
Minneapolis, MN 55440 System Services
Paul F. Kolkman, Vice President--Actuarial Finance
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Actuarial Finance
IDS Life Insurance Company Director and Executive
Vice President
IDS Life Series Fund, Inc. Vice President and Chief
Actuary
Claire Kolmodin, Vice President--Service Quality
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Service Quality
David S. Kreager, Vice President--Field Management Development
IDS Financial Services Inc. IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Management Development
Christopher R. Kudrna, Vice President--Systems and Technology Development
IDS Financial Services Inc. IDS Tower 10 Vice President-Systems and
Minneapolis, MN 55440 Technology Development
<PAGE>
PAGE 15
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Steven C. Kumagai, Director and Senior Vice President--Field Management and Business Systems
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Director and Senior Vice
President-Field
Management and Business
Systems
Mitre Kutanovski, Region Vice President--Midwest Region
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Region Vice President-
Midwest Region
Edward Labenski, Vice President--Senior Portfolio Manager
IDS Advisory Group Inc. IDS Tower 10 Senior Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Vice President-
Senior Portfolio
Manager
Peter L. Lamaison, Vice President--IDS International Division
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 IDS International
Division
IDS Fund Management Limited Director and Chairman of
the Board
IDS International, Inc. Director, President and
Chief Executive Officer
Kurt A. Larson, Vice President--Senior Portfolio Manager
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio Manager
Ryan R. Larson, Vice President--IPG Product Development
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 IPG Product Development
IDS Life Insurance Company Vice President-
Annuity Product
Development
Daniel E. Laufenberg, Vice President and Chief U.S. Economist
IDS Financial Services Inc. IDS Tower 10 Vice President and
Minneapolis, MN 55440 Chief U.S. Economist
<PAGE>
PAGE 16
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Peter A. Lefferts, Director, Senior Vice President and Chief Marketing Officer
IDS Financial Services Inc. IDS Tower 10 Senior Vice President and
Minneapolis, MN 55440 Chief Marketing Officer
IDS Life Insurance Company Director and Executive
Vice President-Marketing
IDS Plan Services of California, Inc. Director
IDS Trust Company Director and Chairman of
the Board
Investors Syndicate Development Corp. Director
Douglas A. Lennick, Director and Executive Vice President--Private Client Group
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Director and Executive
Vice President-Private
Client Group
Mary J. Malevich, Vice President--Senior Portfolio Manager
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio
Manager
IDS International Inc. Vice President and
Portfolio Manager
Fred A. Mandell, Vice President--Field Marketing Readiness
IDS Financial Services Inc. IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Marketing Readiness
William J. McKinney, Vice President--Field Management Support
IDS Financial Services Inc. IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Management Support
Thomas W. Medcalf, Vice President--Senior Portfolio Manager
IDS Financial Services Inc. IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager
William C. Melton, Vice President-International Research and Chief International Economist
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 International Research
and Chief International
Economist
<PAGE>
PAGE 17
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Janis E. Miller, Vice President--Variable Assets
IDS Cable Corporation IDS Tower 10 Director and President
Minneapolis, MN 55440
IDS Cable II Corporation Director and President
IDS Financial Services Inc. Vice President-
Variable Assets
IDS Futures Corporation Director and President
IDS Futures III Corporation Director and President
IDS Life Insurance Company Director and Executive
Vice President-Variable
Assets
IDS Life Variable Annuity Funds A&B Director
IDS Life Series Fund, Inc. Director
IDS Management Corporation Director and President
IDS Partnership Services Corporation Director and President
IDS Realty Corporation Director and President
IDS Life Insurance Company of New York Box 5144 Executive Vice President
Albany, NY 12205
James A. Mitchell, Director and Executive Vice President--Marketing and Products
American Enterprise Investment IDS Tower 10 Director
Services Inc. Minneapolis, MN 55440
IDS Certificate Company Director and Chairman of
the Board
IDS Financial Services Inc. Executive Vice President-
Marketing and Products
IDS Life Insurance Company Director, Chairman of
the Board and Chief
Executive Officer
IDS Plan Services of California, Inc. Director
IDS Property Casualty Insurance Co. Director
Pamela J. Moret, Vice President--Corporate Communications
American Express Minnesota Foundation IDS Tower 10 Director and President
Minneapolis, MN 55440
IDS Financial Services Inc. Vice President-
Corporate Communications
Barry J. Murphy, Director and Senior Vice President--Client Service
IDS Financial Services Inc. IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Client Service
IDS Life Insurance Company Director and Executive
Vice President-Client
Service
Robert J. Neis, Vice President--Information Systems Operations
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Information Systems
Operations
<PAGE>
PAGE 18
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Vernon F. Palen, Region Vice President--Rocky Mountain Region
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Region Vice President-
Rocky Mountain Region
IDS Insurance Agency of Alabama Inc. Vice President-
Rocky Mountain Region
IDS Insurance Agency of Arkansas Inc. Vice President-
Rocky Mountain Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
Rocky Mountain Region
IDS Insurance Agency of Nevada Inc. Vice President-
Rocky Mountain Region
IDS Insurance Agency of New Mexico Inc. Vice President-
Rocky Mountain Region
IDS Insurance Agency of North Carolina Inc. Vice President-
Rocky Mountain Region
IDS Insurance Agency of Ohio Inc. Vice President-
Rocky Mountain Region
IDS Insurance Agency of Wyoming Inc. Vice President-
Rocky Mountain Region
James R. Palmer, Vice President--Insurance Operations
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Insurance Operations
IDS Life Insurance Company Vice President-Taxes
Judith A. Pennington, Vice President--Field Technology
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Field Technology
George M. Perry, Vice President--Corporate Strategy and Development
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Corporate Strategy
and Development
IDS Property Casualty Insurance Co. Director
Susan B. Plimpton, Vice President--Segmentation Development and Support
IDS Financial Services Inc. IDS Tower 10 Vice President--
Minneapolis, MN 55440 Segmentation Development
and Support
<PAGE>
PAGE 19
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Ronald W. Powell, Vice President and Assistant General Counsel
IDS Cable Corporation IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant Secretary
IDS Cable II Corporation Vice President and
Assistant Secretary
IDS Financial Services Inc. Vice President and
Assistant General Counsel
IDS Management Corporation Vice President and
Assistant Secretary
IDS Partnership Services Corporation Vice President and
Assistant Secretary
IDS Plan Services of California, Inc. Vice President and
Assistant Secretary
IDS Realty Corporation Vice President and
Assistant Secretary
James M. Punch, Vice President--TransAction Services
IDS Financial Services Inc. Vice President-Trans
Action Services
Frederick C. Quirsfeld, Vice President--Taxable Mutual Fund Investments
IDS Advisory Group Inc. IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Vice President--
Taxable Mutual Fund
Investments
Roger B. Rogos, Region Vice President--Great Lakes Region
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Region Vice President-
Great Lakes Region
IDS Insurance Agency of Alabama Inc. Vice President-
Great Lakes Region
IDS Insurance Agency of Arkansas Inc. Vice President-
Great Lakes Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
Great Lakes Region
IDS Insurance Agency of Nevada Inc. Vice President-
Great Lakes Region
IDS Insurance Agency of New Mexico Inc. Vice President-
Great Lakes Region
IDS Insurance Agency of North Carolina Inc. Vice President-
Great Lakes Region
IDS Insurance Agency of Ohio Inc. Vice President-
Great Lakes Region
IDS Insurance Agency of Wyoming Inc. Vice President-
Great Lakes Region
<PAGE>
PAGE 20
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
ReBecca K. Roloff, Vice President--1994 Program Director
IDS Financial Services Inc. IDS Tower 10 Vice President-1994
Minneapolis, MN 55440 Program Director
Stephen W. Roszell, Vice President--Advisory Institutional Marketing
IDS Advisory Group Inc. IDS Tower 10 President and Chief
Minneapolis, MN 55440 Executive Officer
IDS Financial Services Inc. Vice President-Advisory
Institutional Marketing
Robert A. Rudell, Vice President--IDS Institutional Retirement Services
IDS Financial Services Inc. IDS Tower 10 Vice President-IDS
Minneapolis, MN 55440 Institutional Retirement
Services
IDS Sales Support Inc. Director and President
IDS Trust Company Director
John P. Ryan, Vice President and General Auditor
IDS Financial Services Inc. IDS Tower 10 Vice President and General
Minneapolis, MN 55440 Auditor
Erven A. Samsel, Director and Senior Vice President--Field Management
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Senior Vice President-
Field Management
IDS Insurance Agency of Alabama Inc. Vice President-
New England Region
IDS Insurance Agency of Arkansas Inc. Vice President-
New England Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
New England Region
IDS Insurance Agency of Nevada Inc. Vice President-
New England Region
IDS Insurance Agency of New Mexico Inc. Vice President-
New England Region
IDS Insurance Agency of North Carolina Inc. Vice President-
New England Region
IDS Insurance Agency of Ohio Inc. Vice President-
New England Region
IDS Insurance Agency of Wyoming Inc. Vice President-
New England Region
<PAGE>
PAGE 21
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
R. Reed Saunders, Director and Senior Vice President--Corporate Strategy and Development
American Express Service Corporation IDS Tower 10 Director and Vice
Minneapolis, MN 55440 President
IDS Financial Services Inc. Director and Senior
Vice President-Corporate
Strategy and Development
IDS Property Casualty Insurance Co. Director
Stuart A. Sedlacek, Vice President--Assured Assets
American Enterprise Life Insurance Co. IDS Tower 10 Director and Executive
Minneapolis, MN 55440 Vice President, Assured
Assets
IDS Certificate Company Director and President
IDS Financial Services Inc. Vice President-
Assured Assets
IDS Life Insurance Company Director and Executive
Vice President, Assured
Assets
Investors Syndicate Development Corp. Chairman of the Board
and President
Donald K. Shanks, Vice President--Property Casualty
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Property Casualty
IDS Property Casualty Insurance Co. Senior Vice President
F. Dale Simmons, Vice President--Senior Portfolio Manager, Insurance Investments
American Enterprise Life Insurance Co. IDS Tower 10 Vice President-Real
Minneapolis, MN 55440 Estate Loan Management
American Partners Life Insurance Co. Vice President-Real
Estate Loan Management
IDS Certificate Company Vice President-Real
Estate Loan Management
IDS Financial Services Inc. Vice President-Senior
Portfolio Manager
Insurance Investments
IDS Life Insurance Company Vice President-Real
Estate Loan Management
IDS Partnership Services Corporation Vice President
IDS Real Estate Services Inc. Director and Vice President
IDS Realty Corporation Vice President
IDS Life Insurance Company of New York Box 5144 Vice President and
Albany, NY 12205 Assistant Treasurer
Judy P. Skoglund, Vice President--Human Resources and Organization Development
IDS Financial Services Inc. IDS Tower 10 Vice President-Human
Minneapolis, MN 55440 Resources and
Organization Development
<PAGE>
PAGE 22
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Julian W. Sloter, Region Vice President--Southeast Region
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Region Vice President-
Southeast Region
IDS Insurance Agency of Alabama Inc. Vice President-
Southeast Region
IDS Insurance Agency of Arkansas Inc. Vice President-
Southeast Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
Southeast Region
IDS Insurance Agency of Nevada Inc. Vice President-
Southeast Region
IDS Insurance Agency of New Mexico Inc. Vice President-
Southeast Region
IDS Insurance Agency of North Carolina Inc. Vice President-
Southeast Region
IDS Insurance Agency of Ohio Inc. Vice President-
Southeast Region
IDS Insurance Agency of Wyoming Inc. Vice President-
Southeast Region
Ben C. Smith, Vice President--Workplace Marketing
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Workplace Marketing
William A. Smith, Vice President and Controller--Private Client Group
IDS Financial Services Inc. IDS Tower 10 Vice President and
Minneapolis, MN 55440 Controller-Private
Client Group
James B. Solberg, Vice President--Advanced Financial Planning
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Advanced Financial
Planning
Bridget Sperl, Vice President--Human Resources Management Services
IDS Financial Services Inc. IDS Tower 10 Vice President-Human
Minneapolis, MN 55440 Resources Management
Services
Jeffrey E. Stiefler, Director
American Express Company American Express Tower Director and President
World Financial Center
New York, NY 10285
<PAGE>
PAGE 23
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Lois A. Stilwell, Vice President--Planner Training and Development
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Planner Training and
Development
William A. Stoltzmann, Vice President and Assistant General Counsel
American Partners Life Insurance Co. IDS Tower 10 Director, Vice President,
Minneapolis, MN 55440 General Counsel and
Secretary
IDS Financial Services Inc. Vice President and
Assistant General Counsel
IDS Life Insurance Company Vice President, General
Counsel and Secretary
IDS Life Series Fund, Inc. General Counsel and
Assistant Secretary
IDS Life Variable Annuity Funds A&B General Counsel and
Assistant Secretary
American Enterprise Life Insurance P.O. Box 534 Director, Vice President,
Company Minneapolis, MN 55440 General Counsel
and Secretary
James J. Strauss, Vice President--Corporate Planning and Analysis
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Corporate Planning and
Analysis
Jeffrey J. Stremcha, Vice President--Information Resource Management/ISD
IDS Financial Services Inc. IDS Tower 10 Vice President-Information
Minneapolis, MN 55440 Resource Management/ISD
Fenton R. Talbott, Director
ACUMA Ltd. ACUMA House President and Chief
The Glanty, Egham Executive Officer
Surrey TW 20 9 AT
UK
Neil G. Taylor, Vice President--Field Business Systems
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Field Business Systems
<PAGE>
PAGE 24
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
John R. Thomas, Director and Senior Vice President--Information and Technology
IDS Bond Fund, Inc. IDS Tower 10 Director
Minneapolis, MN 55440
IDS California Tax-Exempt Trust Trustee
IDS Discovery Fund, Inc. Director
IDS Equity Plus Fund, Inc. Director
IDS Extra Income Fund, Inc. Director
IDS Federal Income Fund, Inc. Director
IDS Financial Services Inc. Senior Vice President-
Information and
Technology
IDS Global Series, Inc. Director
IDS Growth Fund, Inc. Director
IDS High Yield Tax-Exempt Fund, Inc. Director
IDS Investment Series, Inc. Director
IDS Managed Retirement Fund, Inc. Director
IDS Market Advantage Series, Inc. Director
IDS Money Market Series, Inc. Director
IDS New Dimensions Fund, Inc. Director
IDS Precious Metals Fund, Inc. Director
IDS Progressive Fund, Inc. Director
IDS Selective Fund, Inc. Director
IDS Special Tax-Exempt Series Trust Trustee
IDS Stock Fund, Inc. Director
IDS Strategy Fund, Inc. Director
IDS Tax-Exempt Bond Fund, Inc. Director
IDS Tax-Free Money Fund, Inc. Director
IDS Utilities Income Fund, Inc. Director
Melinda S. Urion, Vice President and Corporate Controller
American Enterprise Life IDS Tower 10 Vice President and
Insurance Company Minneapolis, MN 55440 Controller
American Partners Life Insurance Co. Director, Vice President,
Controller and Treasurer
IDS Financial Services Inc. Vice President and
Corporate Controller
IDS Life Insurance Company Director, Executive Vice
President and Controller
IDS Life Series Fund, Inc. Vice President and
Controller
Wesley W. Wadman, Vice President--Senior Portfolio Manager
IDS Advisory Group Inc. IDS Tower 10 Executive Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Vice President-
Senior Portfolio Manager
IDS Fund Management Limited Director
IDS International, Inc. Senior Vice President
<PAGE>
PAGE 25
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Norman Weaver, Jr., Director and Senior Vice President--Field Management
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Senior Vice President-
Field Management
IDS Insurance Agency of Alabama Inc. Vice President-
Pacific Region
IDS Insurance Agency of Arkansas Inc. Vice President-
Pacific Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
Pacific Region
IDS Insurance Agency of Nevada Inc. Vice President-
Pacific Region
IDS Insurance Agency of New Mexico Inc. Vice President-
Pacific Region
IDS Insurance Agency of North Carolina Inc. Vice President-
Pacific Region
IDS Insurance Agency of Ohio Inc. Vice President-
Pacific Region
IDS Insurance Agency of Wyoming Inc. Vice President-
Pacific Region
Michael L. Weiner, Vice President--Corporate Tax Operations
IDS Capital Holdings Inc. IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Vice President-Corporate
Tax Operations
IDS Futures III Corporation Vice President, Treasurer
and Secretary
IDS Futures Brokerage Group Vice President
IDS Futures Corporation Vice President, Treasurer
and Secretary
Lawrence J. Welte, Vice President--Investment Administration
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Investment Administration
IDS Securities Corporation Director, Executive Vice
President and Chief
Operating Officer
William N. Westhoff, Director and Senior Vice President--Fixed Income Management
American Enterprise Life Insurance IDS Tower 10 Director
Company Minneapolis, MN 55440
IDS Financial Services Inc. Senior Vice President-
Fixed Income Management
IDS Partnership Services Corporation Director and Vice President
IDS Real Estate Services Inc. Director, Chairman of the
Board and President
IDS Realty Corporation Director and Vice President
Investors Syndicate Development Corp. Director
<PAGE>
PAGE 26
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Edwin M. Wistrand, Vice President and Assistant General Counsel
IDS Financial Services Inc. IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
Michael R. Woodward, Director and Senior Vice President--Field Management
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Senior Vice President-
Field Management
IDS Insurance Agency of Alabama Inc. Vice President-
North Region
IDS Insurance Agency of Arkansas Inc. Vice President-
North Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
North Region
IDS Insurance Agency of Nevada Inc. Vice President-
North Region
IDS Insurance Agency of New Mexico Inc. Vice President-
North Region
IDS Insurance Agency of North Carolina Inc. Vice President-
North Region
IDS Insurance Agency of Ohio Inc. Vice President-
North Region
IDS Insurance Agency of Wyoming Inc. Vice President-
North Region
IDS Life Insurance Company Box 5144 Director
of New York Albany, NY 12205
</TABLE>
<PAGE>
PAGE 27
Item 29. Principal Underwriters.
(a) IDS Financial Services Inc. acts as principal underwriter
for the following investment companies:
IDS Bond Fund, Inc.; IDS California Tax-Exempt Trust; IDS
Discovery Fund, Inc.; IDS Equity Plus 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. and IDS
Certificate Company.
(b) As to each director, officer or partner of the principal
underwriter:
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Ronald G. Abrahamson Vice President- None
IDS Tower 10 Field Administration
Minneapolis, MN 55440
Douglas A. Alger Vice President-Total None
IDS Tower 10 Compensation
Minneapolis, MN 55440
Jerome R. Amundson Vice President and None
IDS Tower 10 Controller-Mutual Funds
Minneapolis, MN 55440 Operations
Peter J. Anderson Senior Vice President- None
IDS Tower 10 Investments
Minneapolis, MN 55440
Ward D. Armstrong Vice President- None
IDS Tower 10 Sales and Marketing,
Minneapolis, MN 55440 IDS Institutional Retirement
Services
Alvan D. Arthur Region Vice President- None
IDS Tower 10 Pacific Northwest Region
Minneapolis, MN 55440
Kent L. Ashton Vice President- None
IDS Tower 10 Financial Education
Minneapolis, MN 55440 Services
<PAGE>
PAGE 28
Item 29. (Continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Joseph M. Barsky III Vice President-Senior None
IDS Tower 10 Portfolio Manager
Minneapolis, MN 55440
Robert C. Basten Vice President-Tax None
IDS Tower 10 and Business Services
Minneapolis, MN 55440
Timothy V. Bechtold Vice President-Insurance None
IDS Tower 10 Product Development
Minneapolis, MN 55440
John D. Begley Region Vice President- None
Olentangy Valley Center Mid-Central Region
Suite 300
7870 Olentangy River Rd.
Columbus, OH 43235
Carl E. Beihl Vice President- None
IDS Tower 10 Strategic Technology
Minneapolis, MN 55440 Planning
Alan F. Bignall Vice President- None
IDS Tower 10 Financial Planning
Minneapolis, MN 55440 Systems
Brent L. Bisson Region Vice President- None
Seafirst Financial Northwest Region
Center, Suite 1730
601 W. Riverside Ave.
Spokane, WA 99201
John C. Boeder Vice President- None
IDS Tower 10 Mature Market Group
Minneapolis, MN 55440
Karl J. Breyer Senior Vice President- None
IDS Tower 10 Corporate Affairs and
Minneapolis, MN 55440 Special Counsel
Harold E. Burke Vice President None
IDS Tower 10 and Assistant
Minneapolis, MN 55440 General Counsel
Daniel J. Candura Vice President- None
IDS Tower 10 Marketing Support
Minneapolis, MN 55440
Cynthia M. Carlson Vice President-IDS None
IDS Tower 10 Securities Services
Minneapolis, MN 55440
Orison Y. Chaffee III Vice President-Field None
IDS Tower 10 Real Estate
Minneapolis, MN 55440
<PAGE>
PAGE 29
Item 29. (continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
James E. Choat Senior Vice President- None
Suite 124 Field Management
6210 Campbell Rd.
Dallas, TX 75248
Kenneth J. Ciak Vice President and None
IDS Property Casualty General Manager-
1400 Lombardi Avenue IDS Property Casualty
Green Bay, WI 54304
Roger C. Corea Region Vice President- None
345 Woodcliff Drive Northeast Region
Fairport, NY 14450
Kevin F. Crowe Region Vice President- None
IDS Tower 10 Atlantic Region
Minneapolis, MN 55440
Alan R. Dakay Vice President- None
IDS Tower 10 Institutional Insurance
Minneapolis, MN 55440 Marketing
William F. Darland Region Vice President- None
Suite 108C South Central Region
301 Sovereign Court
Manchester, MO 63011
William H. Dudley Director and Executive Director/
IDS Tower 10 Vice President- Trustee
Minneapolis MN 55440 Investment Operations
Roger S. Edgar Senior Vice President- None
IDS Tower 10 Information Systems
Minneapolis, MN 55440
Gordon L. Eid Senior Vice President None
IDS Tower 10 and General Counsel
Minneapolis, MN 55440
Robert M. Elconin Vice President- None
IDS Tower 10 Government Relations
Minneapolis, MN 55440
Mark A. Ernst Vice President- None
IDS Tower 10 Retail Services
Minneapolis, MN 55440
Gordon M. Fines Vice President- None
IDS Tower 10 Mutual Fund Equity
Minneapolis MN 55440 Investments
Louis C. Fornetti Senior Vice President None
IDS Tower 10 and Chief Financial
Minneapolis, MN 55440 Officer
<PAGE>
PAGE 30
Item 29. (Continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Douglas L. Forsberg Vice President- None
IDS Tower 10 Securities Services
Minneapolis, MN 55440
Carl W. Gans Region Vice President- None
IDS Tower 10 North Central Region
Minneapolis, MN 55440
Robert G. Gilbert Vice President- None
IDS Tower 10 Real Estate
Minneapolis, MN 55440
John J. Golden Vice President- None
IDS Tower 10 Field Compensation
Minneapolis, MN 55440 Development
Morris Goodwin Jr. Vice President and None
IDS Tower 10 Corporate Treasurer
Minneapolis, MN 55440
Suzanne Graf Vice President- None
IDS Tower 10 Systems Services
Minneapolis, MN 55440
David A. Hammer Vice President None
IDS Tower 10 and Marketing
Minneapolis, MN 55440 Controller
Robert L. Harden Region Vice President- None
Suite 403 Mid-Atlantic Region
8500 Leesburg Pike
Vienna, VA 22180
Lorraine R. Hart Vice President- None
IDS Tower 10 Insurance Investments
Minneapolis, MN 55440
Mark S. Hays Vice President-Senior None
IDS Tower 10 Portfolio Manager, IDS
Minneapolis, MN 55440 International
Brian M. Heath Region Vice President- None
IDS Tower 10 Southwest Region
Minneapolis, MN 55440
Raymond E. Hirsch Vice President-Senior None
IDS Tower 10 Portfolio Manager
Minneapolis, MN 55440
James G. Hirsh Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
<PAGE>
PAGE 31
Item 29. (Continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Paul C. Hopkins Vice President- None
IDS Tower 10 Senior Portfolio Manager,
Minneapolis, MN 55440 IDS International
Kevin P. Howe Vice President- None
IDS Tower 10 Government and
Minneapolis, MN 55440 Customer Relations
David R. Hubers Chairman, Chief None
IDS Tower 10 Executive Officer and
Minneapolis, MN 55440 President
Marietta L. Johns Senior Vice President- None
IDS Tower 10 Field Management
Minneapolis, MN 55440
Douglas R. Jordal Vice President-Taxes None
IDS Tower 10
Minneapolis, MN 55440
Craig A. Junkins Vice President - IDS 1994 None
IDS Tower 10 Implementation Planning
Minneapolis, MN 55440 and Financial Planning
Development
James E. Kaarre Vice President- None
IDS Tower 10 Marketing Information
Minneapolis, MN 55440
G. Michael Kennedy Vice President-Investment None
IDS Tower 10 Services and Investment
Minneapolis, MN 55440 Research
Susan D. Kinder Senior Vice President- None
IDS Tower 10 Human Resources
Minneapolis, MN 55440
Richard W. Kling Senior Vice President- None
IDS Tower 10 Risk Management Products
Minneapolis, MN 55440
Harold D. Knutson Vice President- None
IDS Tower 10 System Services
Minneapolis, MN 55440
Paul F. Kolkman Vice President- None
IDS Tower 10 Actuarial Finance
Minneapolis, MN 55440
Claire Kolmodin Vice President- None
IDS Tower 10 Service Quality
Minneapolis, MN 55440
David S. Kreager Vice President-Field None
IDS Tower 10 Management Development
Minneapolis, MN 55440
<PAGE>
PAGE 32
Item 29. (Continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Christopher R. Kudrna Vice President- None
IDS Tower 10 Systems and Technology
Minneapolis, MN 55440 Development
Steven C. Kumagai Director and Senior None
IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Management and Business
Systems
Mitre Kutanovski Region Vice President- None
IDS Tower 10 Midwest Region
Minneapolis, MN 55440
Edward Labenski Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Peter L. Lamaison Vice President- None
One Broadgate IDS International
London, England Division
Kurt A. Larson Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Ryan R. Larson Vice President- None
IDS Tower 10 IPG Product Development
Minneapolis, MN 55440
Daniel E. Laufenberg Vice President and None
IDS Tower 10 Chief U.S. Economist
Minneapolis, MN 55440
Peter A. Lefferts Senior Vice President and None
IDS Tower 10 Chief Marketing Officer
Minneapolis, MN 55440
Douglas A. Lennick Director and Executive None
IDS Tower 10 Vice President-Private
Minneapolis, MN 55440 Client Group
Mary J. Malevich Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Fred A. Mandell Vice President- None
IDS Tower 10 Field Marketing Readiness
Minneapolis, MN 55440
William J. McKinney Vice President- None
IDS Tower 10 Field Management
Minneapolis, MN 55440 Support
Thomas W. Medcalf Vice President- None
IDS Tower 10 Senior Portfolio Manager
Minneapolis, MN 55440
<PAGE>
PAGE 33
Item 29. (Continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
William C. Melton Vice President- None
IDS Tower 10 International Research
Minneapolis, MN 55440 and Chief International
Economist
Janis E. Miller Vice President- None
IDS Tower 10 Variable Assets
Minneapolis, MN 55440
James A. Mitchell Executive Vice President- None
IDS Tower 10 Marketing and Products
Minneapolis, MN 55440
Pamela J. Moret Vice President- None
IDS Tower 10 Corporate Communications
Minneapolis, MN 55440
Barry J. Murphy Senior Vice President- None
IDS Tower 10 Client Service
Minneapolis, MN 55440
Robert J. Neis Vice President- None
IDS Tower 10 Information Systems
Minneapolis, MN 55440 Operations
Vernon F. Palen Region Vice President- None
Suite D-222 Rocky Mountain Region
7100 E. Lincoln Drive
Scottsdale, AZ 85253
James R. Palmer Vice President- None
IDS Tower 10 Insurance Operations
Minneapolis, MN 55440
Judith A. Pennington Vice President- None
IDS Tower 10 Field Technology
Minneapolis, MN 55440
George M. Perry Vice President- None
IDS Tower 10 Corporate Strategy
Minneapolis, MN 55440 and Development
Susan B. Plimpton Vice President- None
IDS Tower 10 Segmentation Development
Minneapolis, MN 55440 and Support
Ronald W. Powell Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
James M. Punch Vice President- None
IDS Tower 10 TransAction Services
Minneapolis, MN 55440
Frederick C. Quirsfeld Vice President-Taxable None
IDS Tower 10 Mutual Fund Investments
Minneapolis, MN 55440
<PAGE>
PAGE 34
Item 29. (Continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Roger B. Rogos Region Vice President- None
Suite 15, Parkside Place Great Lakes Region
945 Boardman-Canfield Rd
Youngstown, Ohio 44512
ReBecca K. Roloff Vice President-1994 None
IDS Tower 10 Program Director
Minneapolis, MN 55440
Stephen W. Roszell Vice President- None
IDS Tower 10 Advisory Institutional
Minneapolis, MN 55440 Marketing
Robert A. Rudell Vice President- None
IDS Tower 10 IDS Institutional
Minneapolis, MN 55440 Retirement Services
John P. Ryan Vice President and None
IDS Tower 10 General Auditor
Minneapolis, MN 55440
Erven A. Samsel Senior Vice President- None
45 Braintree Hill Park Field Management
Braintree, MA 02184
R. Reed Saunders Director and Senior None
IDS Tower 10 Vice President-Corporate
Minneapolis, MN 55440 Strategy and Development
Stuart A. Sedlacek Vice President- None
IDS Tower 10 Assured Assets
Minneapolis, MN 55440
Donald K. Shanks Vice President- None
IDS Tower 10 Property Casualty
Minneapolis, MN 55440
F. Dale Simmons Vice President-Senior None
IDS Tower 10 Portfolio Manager,
Minneapolis, MN 55440 Insurance Investments
Judy P. Skoglund Vice President- None
IDS Tower 10 Human Resources and
Minneapolis, MN 55440 Organization Development
Julian W. Sloter Region Vice President- None
9040 Roswell Rd. Southeast Region
River Ridge-Suite 600
Atlanta, GA 30350
Ben C. Smith Vice President- None
IDS Tower 10 Workplace Marketing
Minneapolis, MN 55440
<PAGE>
PAGE 35
Item 29. (Continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
William A. Smith Vice President and None
IDS Tower 10 Controller-Private
Minneapolis, MN 55440 Client Group
James B. Solberg Vice President- None
IDS Tower 10 Advanced Financial
Minneapolis, MN 55440 Planning
Bridget Sperl Vice President- None
IDS Tower 10 Human Resources
Minneapolis, MN 55440 Management Services
Lois A. Stilwell Vice President- None
IDS Tower 10 Planner Training and
Minneapolis, MN 55440 Development
William A. Stoltzmann Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
James J. Strauss Vice President- None
IDS Tower 10 Corporate Planning
Minneapolis, MN 55440 and Analysis
Jeffrey J. Stremcha Vice President-Information None
IDS Tower 10 Resource Management/ISD
Minneapolis, MN 55440
Neil G. Taylor Vice President- None
IDS Tower 10 Field Business Systems
Minneapolis, MN 55440
John R. Thomas Senior Vice President- Director/
IDS Tower 10 Information and Trustee
Minneapolis, MN 55440 Technology
Melinda S. Urion Vice President and None
IDS Tower 10 Corporate Controller
Minneapolis, MN 55440
Wesley W. Wadman Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Norman Weaver Jr. Senior Vice President- None
Suite 215 Field Management
1501 Westcliff Drive
Newport Beach, CA 92660
<PAGE>
PAGE 36
Item 29. (Continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Michael L. Weiner Vice President- None
IDS Tower 10 Corporate Tax
Minneapolis, MN 55440 Operations
Lawrence J. Welte Vice President- None
IDS Tower 10 Investment Administration
Minneapolis, MN 55440
William N. Westhoff Senior Vice President- None
IDS Tower 10 Fixed Income Management
Minneapolis, MN 55440
Edwin M. Wistrand Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
Michael R. Woodward Senior Vice President- None
Suite 815 Field Management
8585 Broadway
Merrillville, IN 46410
Item 29(c). Not applicable.
Item 30. Location of Accounts and Records
IDS Financial Corporation
IDS Tower 10
Minneapolis, MN 55440
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
(a) Not Applicable.
(b) Not Applicable.
(c) The Registrant undertakes to furnish each person
to whom a prospectus is delivered with a copy of
the Registrant's latest annual report to
shareholders, upon request and without charge.
<PAGE>
PAGE 189
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, IDS Life Series
Fund, Inc., has duly caused this Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Minneapolis and State of Minnesota
on the 19th day of August, 1994.
IDS Life Series Fund, Inc.
By /s/ Richard W. Kling
Richard W. Kling
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 28th day
of April, 1994.
Signature Capacity
/s/ Richard W. Kling* President and Director
Richard W. Kling
/s/ Louis C. Fornetti Vice President
Louis C. Fornetti
/s/ Morris Goodwin, Jr. Vice President and
Morris Goodwin, Jr. Treasurer
/s/ Paul Kolkman* Vice President and Chief
Paul Kolkman Actuary
/s/ Melinda S. Urion Vice President and
Melinda S. Urion Controller
/s/ Edward Landes* Director
Edward Landes
/s/ Carl N. Platou* Director
Carl N. Platou
/s/ Gordon H. Ritz* Director
Gordon H. Ritz
__________________________ Director
Janis E. Miller
*Signed pursuant to Power of Attorney dated November 2, 1993, filed
electronically as exhibit 17 to Registrant's Post-Effective
Amendment No. 12 to Registration Statement No. 2-97636.
/s/ Mary Ellyn Minenko
Mary Ellyn Minenko<PAGE>
PAGE 190
CONTENTS OF THIS POST-EFFECTIVE AMENDMENT NO. 15
TO REGISTRATION STATEMENT NO. 2-97636
This Post-Effective Amendment comprises the following papers and
documents:
The facing sheet.
The cross-reference page.
Part A.
The prospectus.
Part B.
Statement of Additional Information.
Financial Statements.
Part C.
Other Information.
The signatures.
EXHIBIT INDEX
B(2) By-Laws
B(5)(a) Investment Management and Services Agreement
B(5)(b) Investment Advisory Agreement
B(8) Custodian Agreement
B(11) Auditor's Consent
B(17) Financial Data Schedule
<PAGE>
PAGE 1
BY LAWS
IDS LIFE SERIES FUND. INC.
ARTICLE I
Offices
Section 1. The registered office of the Fund is 800 IDS Tower, City
of Minneapolis, State of Minnesota.
ARTICLE II
Corporate Seal
The corporate seal shall be circular in form and shall bear
the inscription "IDS Life Series Fund, Inc., Minnesota,
Incorporated 1985".
ARTICLE III
Meeting of Shareholders
Section 1. A majority of directors present at a duly held
meeting may call a regular or special meeting of shareholders. If
the date, time and place are not fixed by the directors, the
meeting shall be at a date, time and place fixed by the President.
Section 2. Any regular meeting of the shareholders shall
include an election of directors. No meeting shall be considered a
regular meeting unless specifically designated as such in the
notice of meeting. Regular meetings may be held no more frequently
than once per year.
Section 3. The holders of at least ten percent (10%) of the
shares outstanding and entitled to vote, present in person or by
proxy, shall constitute a quorum, but the holders of a smaller
amount may adjourn from time to time without further notice, other
than by notice at the time, until a quorum is secured at any such
adjourned meeting. In case a quorum is not present, the meeting may
be adjourned from time to time without notice other than by notice
at the meeting. At any adjourned meeting a which a quorum may be
present, any business may be transacted which might have been
transacted at the meeting as originally called.
Section 4. At each meeting of the shareholders, the polls may
be opened and closed, the proxies and ballots may be received and
taken in charge, and all questions touching the qualification of
voters, the validity of proxies, and acceptances or rejections of
votes may be decided by two (2) inspectors of election. Except as
by statute otherwise provided, such inspectors may be appointed by
the Board of Directors before or at the meeting, or, if no such
appointment shall have been made, then such may be made by the
presiding officer at the meeting. If any inspector be absent or
refuse to actor if his office becomes vacant, the presiding officer
at the meeting shall appoint an inspector in his place.<PAGE>
PAGE 2
ARTICLE IV
Directors
Section 1. An organizational meeting of the Board of Directors
shall be held as soon as convenient to a majority of the Directors,
after the final adjournment of each regular meeting of the
shareholders, and no notice shall be required.
Section 2. Meetings of the directors may be previously
scheduled or called by the President or any two directors. Nctice
of specially called meetings shall be given to each director at
least one day prior thereto by mail, telephone, telegraph or in
person, unless such notice period is waived by each director.
Meetings or directors or any committee thereof may be conduc~ed in
any manner permitted by law.
Section 3. The Board of Directors shall fix and change, as it
may from time to time determine, by majority vote, the compensation
to be paid the directors and officers and all employees appointed
by the Board of Directors.
Section 4. A director may give advance written consent or
opposition to a proposal to be acted on at a Board meeting. If the
director is not present at the meeting, consent or opposition to a
proposal does not constitute presence for purposes of determining
the existence of a quorum, but consent or opposition shall be
counted as a vote in favor of or against the proposal and shall be
entered in the minutes at the meeting, if the proposal acted on at
the meeting is substantially the same or has substantially the same
effect as the proposal to which the director has consented or
objected.
Section 5. The Board of Directors shall have the general
management and control of all business and affairs of the Fund and
shall exercise or cause to be exercised all the powers that may be
exercised or performed by the Fund under applicable law, its
Articles of Incorporation and its By-Laws.
Section 6. A majority of the directors hall constitute a
quorum, but a smaller number may adjourn form time to time without
notice, other than by announcement at the meeting, until a quorum
is secured; and, likewise, in case a quorum is present, the meeting
may be adjourned from time to time without notice other than by
announcement at the meeting. At any adjourned meeting at which a
quorum may be present, any business may be transacted which might
have been transacted at the meeting as originally called.
Section 7. Any action required or permitted to be taken any
meeting of the Board of Directors may be taken without a meeting if
a written consent thereto is signed by all members the Board,
subject to the requirements of applicable law.
Section 8. The Board of Directors may, by resolution passed by
a majority of the whole Board, designate an Executive Committee of
two or more directors, which may meet at stated times or on notice
to all by any of their number during intervals between meetings of
the Board. The Executive Committee shall advise with and aid the
officers of the Fund in all matters concerning its<PAGE>
PAGE 3
interests and the management of its business, and generally perform
such duties and exercise such powers as may be delegated to it from
time to time by the Board of Directors. Vacancies in the membership
of such Executive Committee shall be filled by the Board of
Directors.
Section 9. From time to time the Board of Directors may, by
resolution passed by a majority of the whole Board, appoint any
other committee or committees for any purpose or purposes, which
committee or committees shall have such powers as shall be
specified in the resolution of appointment.
Section 10. The quorum for each committee established by the
Board of Directors is two members regardless of the number of
members serving on the committee.
Section 11. Any action required or permitted to be taken any
meeting of a duly appointed committee of the Board of Directors may
be taken without a meeting if a written consent thereto is signed
by all the members of such committee.
ARTICLE V
Officers
Section 1. The officers of the Fund shall be a President, one
or more Vice Presidents, a Secretary, a Treasurer, and such other
officers, as may from time to time be chosen by the Board of
Directors.
Section 2. The President shall be the chief executive officer
of the Fund. Except as may be otherwise provided in the Articles of
Incorporation or these By-Laws, he shall be under the control of
the Board of Directors and have all powers and duties conferred by
law.
Section 3. The Vice President or Vice Presidents, in the order
designated by the Board of Directors, shall be vested with all the
powers and required to perform all the duties of the President in
his absence or disability, shall at all times be vested with the
same power as the President to sign and deliver in the name of the
Fund any deeds, mortgages, bonds, contracts or other instruments
pertaining to the business of the fund, and shall perform such
other duties as may be prescribed by the Board of Directors.
Section 4. The Secretary shall attend all meetings of the
shareholders of the Fund, the Board of Directors, and such other
meetings as may be designated by the Board of Directors. He shall
record all of the proceedings of such meetings in a book or books
to be kept for that purpose. He shall have custody of the seal,
stock certificate books and minute books of the Fund any may, when
authorized by the Board of Directors, affix the seal of the Fund to
any instrument requiring the same. He shall perform such additional
duties as shall be assigned to him by the Board of Directors.
Section 5. The Treasurer shall keep or cause to be kept full
and accurate accounts of receipts and disbursements in books<PAGE>
PAGE 4
belonging to the Fund, and shall perform such other duties as the
Board of Directors may from time to time prescribe or require.
Section 6. If required by the Board of Directors, the
Treasurer, and such other directors, officers, employees and agents
of the Fund as the Board of Directors may specify, shall give the
Fund a sureties, as may be satisfactory to the Board of Directors,
conditioned on the faithful performance of the duties of their
office, and for the restoration to the Fund in case of their death,
resignation or removal from office of all books, papers, vouchers,
money, securities and property of whatever kind in their possession
belonging to the Fund. All premiums on such bonds shall be paid by
the Fund.
Section 7. The officers of the Fund shall hold office unti
their successors are chosen and qualify in their stead. Any officer
chosen and appointed by the Board of Directors may be removed
either with or without cause at any time by the affirmative vote of
a majority of the whole Board of Directors. If the office of any
officer becomes vacant for any reason, the vacancy shall be filled
by the affirmative vote of a majority of the directors present.
ARTICLE VI
Notices
Notices required to be given under the provisions of these By-
Laws to any shareholder, director or officer shall not be construed
to mean personal notice, but may be given in writing by depositing
the same, postpaid, in a post office or letter box, addressed to
such shareholder, director or officer at such address as appears on
the books of the Fund by sending same by telegram so addressed, and
such notice shall be deemed to be given at the time when the same
shall be thus mailed, or if telegraphed, when the same is delivered
to the telegraph company, or by telephone. Any shareholder, officer
or director may waive any notice required to be given under these
By-Laws whether before or after the time stated therein.
ARTICLE VII
Capital Stock
Section 1. Except as hereinafter provided, each stockholder
shall be entitled to a certificate stating the number of shares or
fractional shares of stock of the Fund owned by him, in such form
as shall, in conformity to law, be prescribed from time to time by
the Board of Directors. Stock certificates shall be issued at such
times and pursuant to such terms and conditions as the Board of
Directors may determine. All issued stock certificates shall be
signed by such officers and agents as shall, from time to time, be
designated by the Board of Directors and sealed with the corporate
seal, provided, by a transfer agent or clerk and by a registrar,
the signatures of such officers or agents and the seal of the Fund,
or either or both of such signatures and such seal upon such
certificate, may be facsimile signature or signatures shall have
been used on any such certificate or certificates shall cease to
have been such officer or officers of the Fund, whether because of
death, resignation or otherwise, before such certificate or
certificates shall have been delivered by the Fund, such<PAGE>
PAGE 5
certificate or certificates may nevertheless be adopted by the Fund
and be issued and delivered as though the person or persons who
signed such certificate or certificates, or whose facsimile
signature or signatures shall have been used thereon, had not
ceased to be such officer or officers of the Fund, and any such
delivery shall be regarded as an adoption by the Fund of such
certificates or certificates.
Section 2. Shares to stock of the Fund shall be deemed to
become outstanding as of the close of business on the day upon
which payment for such shares is received and accepted at the
designated principal place of business of the Fund; provided,
however, that if the day upon which payment is so received and
accepted shall not be a full business day, then such shares shall
be deemed to become outstanding as of the close of business of the
next succeeding full business day; provided further, however, that
if the Board of Directors shall suspend the computation of asset
value for the purpose of issuing shares during any period of
emergency, as defined in the Investment Company Act of 1940, such
shares shall be deemed to become outstanding as of the close of
business on the day fixed by the Board of Directors on which the
Fund shall resume the computation of asset value for the purpose of
issuing shares. Said day, so fixed by the Board of Directors, shall
be the first business day following the expiration of the period of
emergency or any day fixed in advance during said period of
emergency.
Section 3. Shares of stock of the Fund shall be deemed to
remain outstanding until the close of business on the day a written
request for redemption is received, together with surrender of the
stock certificate or certificates, if any, properly signed or
endorsed for redemption, at the designated principal place of
business of the Fund. If the Board of Directors during any period
of emergency, as defined in the Investment Company Act of 1940,
shall suspend the obligation of the Fund to redeem its shares, such
shares shall be deemed to remain outstanding until the close of
business on the first full business day following the day on which
the Board of Directors, by resolution, shall determine to resume
the redemption of shares of the Fund. The day on which said
determination is made to resume the redemption of shares shall be
the first full business day following the expiration of the period
of emergency or any day prior thereto as determined during said
period of emergency.
Section 4. The Board of Directors, to the extent permitted by
law, its Articles of Incorporation and By-Laws, shall have power to
determine from time to time how, to what extent and on what terms
and conditions any rights to apply or subscribe for shares of the
Fund's stock shall be granted to shareholders.
ARTICLE VIII
Transfers, Lost Certificates
Section 1. Shares of stock of the Fund shall be transferred on
the books of the Fund at the request of the holder thereof in
person or of his duly authorized attorney upon surrender of the
certificate or certificates therefor, if any, or in their absence
by a written request for transfer, and the Fund may require that<PAGE>
PAGE 6
the certificate and request be signed by the registered holder or
by his duly authorized attorney in the manner specified by the
Fund. No transfer or assignment of shares shall affect the right of
the Fund to pay any dividend due upon the shares, or to treat the
holder of record as the holder in fact, until such transfer or
assignment is registered on the books of the Fund and the Fund
shall be entitled to treat the holder of record of any of its
shares as the holder in fact thereof and accordingly shall not be
bound to recognize any equitable or other claim to, or interest in,
such shares on the part of any person whether or not it shall have
express or other notice thereof, save as may be expressly provided
by law.
Section 2. The Board of Directors shall have power to close
the stock records of the Fund for a period not exceeding sixty (60)
days preceding the date of any meeting of shareholders, or the date
for payment of any dividends, or the date for the allotment of
rights, or the date when any change, conversion or exchange of
capital stock shall take effect, or for a period of not exceeding
sixty (60) days in connection with obtaining the consent of
shareholders for any purpose; provided, however, that in lieu of
closing the stock records, as aforesaid, the Board of Directors may
fix in advance a date not exceeding sixty (60) days preceding the
date of any meeting of shareholders, or the date for one payment of
any dividend, or the date for allotment of rights, or the date when
any change, conversion or exchange of capital stock shall take
effect, or a date in connection with obtaining such consent as a
record date for the determination of the shareholders entitled to
notice of any to vote at any such meeting dividend, or to any such
allotment or rights, or to exercise the rights in respect of any
such change, conversion or exchange of capital stock, or to give
such consent, and in such case only such shareholders as shall be
shareholders of record on the date so fixed shall be entitled such
dividend, or to receive such allotment of rights, or to exercise
such rights, or to give such consent, as the case may be,
notwithstanding the transfer of any shares on the books of the Fund
after any such record date is aforesaid.
Section 3. The Board of Directors shall have power and
authority from time to time to appoint one or more transfer agents
and/or clerks and registrars for the securities issued by the Fund
and to make such rules and regulations as it may deem expedient
concerning the issue, transfer and registration of such securities.
Section 4. If any security issued by the Fund be lost, stolen,
mutilated or destroyed, another may be issued in its stead upon
proof, satisfactory to the Board of Directors, of such loss, theft,
mut lation or destruction and the giving of a which, in
judgment of the Board of Directors, is sufficient to indemnify the
Fund against any claim that may result therefrom. A new certificate
may be issued without requiring bond when, in the judgment of the
Board of Directors, it is proper to do so.
Section 5. The Board of Directors in its discretion may
require the payment of a fee not exceeding Ten Dollars ($10.00) for
each new certificate issued by the Fund pursuant to this Article,
or in connection with any special service requested by a
shareholder requiring the issuance of a new certificate in addition<PAGE>
PAGE 7
to the payment of any federal or state taxes required to be paid in
connection therewith.
ARTICLE IX
Definitions
For all purposed of the Articles of Incorporation and these By-
Laws, the terms:
(a) "full business day" shall be defined as a day with
respect to which the New York Stock Exchange is open for
business.
(b) "the close of business" shall be defined as the time of
closing of the New York Stock exchange or such other time
as may be determined by the Board of Directors.
(c) "share" or "shares" shall be defined to include full or
fractional shares, subject to the description of
fractional shares as stated in the Articles of
Incorporation.
(d) "holder", or "shareholder", "registered holder", and
"registered owner" shall mean the registered owner of
shares as recorded upon the books of the Fund.
ARTICLE X
Redemption of Shares
Determination of the asset value for the redemption of shares
shall be made, in each instance, as of the close of business on the
day of the surrender, at the designated principal place of business
of the Fund, of the certificate or evidence of ownership properly
signed or endorsed for redemption. If such day of surrender is not
a full business day, then such asset value shall be determined as
of the close of business on the next full business day.
ARTICLE XI
Custodian or Trustee Agreements
Section 1. The Fund shall enter into a custodian or trustee
agreement with a bank or trust company having aggregate capital,
surplus and undivided profits of not less than $2,000,000 for the
custody of the Fund's securities and other assets. All securities
and cash assets owned or acquired by the Fund shall be held by such
custgdian or trustee pursuant to the terms of such agreement and
the Fund shall deposit or cause to be deposited with such custodian
or trustee all such securities.
Section 2. In the event of the resignation or inability to
serve of the custodian or trustee under an existing custodian or
trustee agreement, the Fund shall use its best efforts to obtain a
similarly qualified successor custodian or trustee. In the event
that no successor custodian or trustee can be found by the Fund
with the exercise of reasonable diligence, which is ready, willing
and able to act as custodian or trustee for a reasonable
compensation, and if no successor custodian or trustee can be found
which is so located as to be able to act as custodian or trustee<PAGE>
PAGE 8
without unduly delaying the authorized transactions of the Fund or
unreasonably increasing the expenses of such transactions, there
shall be submitted to the shareholders of the Fund, within ten days
prior to the termination of the custodian or trustee agreement, the
question of whether the Fund shall be liquidated or shall function
without a custodian or trustee. Notwithstanding the provisions of
this Article or other provisions of the By-Laws, the agreement
between the Fund and the custodian or trustee may be terminated at
any time by a vote of a majority of the outstanding shares of the
Fund.
Section 3. Subject to such rules, regulations and orders as
the Securities and Exchange Commission may adopt, the Fund may
direct its custodian to deposit all or any part of the securities
owned by the Fund in a system for the central handling of
securities established by a national securities exchange or
national securities association registered with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, or
such other person as may be permitted by the Commission, pursuant
to which system all securities of any particular class or series of
any issuer deposited within the system are treated as fungible and
may be transferred or pledged by bookkeeping entry without physical
delivery of such securities is, provided that all such deposits
shall be subject to withdrawal only at the direction of the Fund.
ARTICLE XII
Miscellaneous
Section 1. The fiscal year of the Fund shall begin on the
first day of September in each year and end on the thirty-first day
of August following.
Section 2. If the sale of shares issued by the Fund shall at
any time be discontinued, the Board of Directors may in its
discretion, pursuant to resolution, deduct from the value of the
assets an amount equal to the brokerage commissions, transfer
taxes, and charges, if any, which would be payable on the sale of
such securities if they were then being sold.
<PAGE>
PAGE 1
INVESTMENT MANAGEMENT AND SERVICES AGREEMENT Exhibit A
Agreement made the 17th day of December, 1985, by and between IDS
Life Series Fund, Inc. (the Fund), a Minnesota Corporation, and IDS
Life Insurance Company. (IDS Life), a Minnesota Corporation.
Part One: INVESTMENT MANAGEMENT AND OTHER SERVICES
(1) The Fund hereby retains IDS Life, and IDS Life hereby agrees,
for the period of this agreement and under the terms and conditions
hereinafter set forth, to furnish the Fund continuously with
suggested investment planning; to determine, consistent with the
Fund's investment objectives and policies, which securities in
IDS's discretion shall be purchased, held or sold and to execute or
cause the execution of purchase or sell orders; to prepare and make
available to the Fund all necessary research and statistical data
in connection therewith; to furnish the Fund all administrative,
accounting, clerical, statistical, correspondence, corporate and
all other services of whatever nature required in connection with
the administration of the affairs of the Fund, including transfer
agent and dividend disbursing agent services; and to pay such
expenses as may be provided for in Part Three hereof; subject
always to the direction and control of the Board of Directors, the
Executive Committee and the authorized officers of the Fund. IDS
Life agrees to maintain an adequate organization of competent
persons to provide the services and to perform the functions herein
mentioned. IDS Life agrees to meet with any persons at such times
as the Board of Directors deems appropriate for the purpose of
reviewing IDS Life's performance under this agreement.
(2) IDS Life agrees that the investment planning and investment
decisions will be in accordance with general investment policies of
the Fund as disclosed to IDS Life from time to time by the Fund and
as set forth in its prospectuses and registration statements filed
with the United States Securities and Exchange Commission.
(3) IDS Life agrees that it will maintain all required records,
memoranda, instructions or authorizations relating to the
acquisition or disposition of securities for the Fund.
(4) The Fund agrees that it will furnish to IDS Life any
information that the latter may reasonably request with respect to
the services performed or to be performed by IDS Life under this
agreement.
(5) IDS Life is authorized to select the brokers or dealers that
will execute the purchases and sales of portfolio securities for
the Fund and is directed to use its best efforts to obtain the best
available price and most favorable execution, except as prescribed
herein. Subject to prior authorization by the Fund's Board of
Directors of appropriate policies and procedures, and subject to
termination at any time by the Board of Directors, IDS Life may
also be authorized to effect individual securities transactions at
commission rates in excess of the minimum commission rates
available, to the extent authorized by law, if IDS Lifedetermines
in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of either that<PAGE>
PAGE 2
particular transaction or IDS Life's overall responsibilities with
respect to the Fund and other investment companies advised by them
or either of them.
(6) It is understood and agreed that in furnishing the Fund with
the services as herein provided, neither IDS Life, nor any officer,
director or agent thereof shall be held liable to the Fund or its
creditors or shareholders for errors of judgment or for anything
except willful misfeasance, bad faith, or gross negligence in the
performance of its duties, or reckless disregard of its obligations
and duties under the terms of this agreement. It is further
understood and agreed that IDS Life may rely upon information
furnished to it reasonably believed to be accurate and reliable.
(7) The existence of an investment advisory agreement between IDS
Life and IDS Financial Services Inc. (IDS), a copy of which is
attached hereto as Exhibit B, is specifically acknowledged and
approved.
Part Two: COMPENSATION TO INVESTMENT MANAGER
(1) The Fund agrees to pay to IDS Life, and IDS Life covenants and
agrees to accept from the Fund in full payment for all the services
furnished, and for the use of all facilities and equipment, and for
all expenses paid or reimbursed by IDS Life hereunder, a fee for
each calendar day of each year equal to the total of 1/365th
(1/366th in each leap year) of:
.70 percent for the Equity Portfolio
.70 percent for the Income Portfolio
.70 percent for the Managed Portfolio
.70 percent for the Government Securities Portfolio; and
.50 percent for the Money Market Portfolio
to be computed for each day on the basis of net assets as of the
close of business of the full business day two (2) business days
prior to the day for which the computation is being made. In case
of the suspension of the computation of net asset value, the said
fee for each day during such suspension shall be computed as of the
close of business on the last full business day on which the net
assets were computed. As used herein, "net assets" as of the close
of a full business day shall include all transactions in shares of
the Fund recorded on the books of the Fund for that day.
(2) The foregoing fee shall be paid on a monthly basis and, in the
event of termination of this agreement, the fee accrued shall be
prorated on the basis of the number of days that this agreement is
in effect during the month with respect to which such payment is
made.
(3) The fee provided for hereunder shall be paid in cash by the
Fund to IDS Life within five (5) business days after the last day
of each month.
Part Three: ALLOCATION OF EXPENSES
(1) The Fund agrees to pay:
a. Fees payable to IDS Life for the latter's services under this
agreement.<PAGE>
PAGE 3
b. All taxes of any kind payable by the Fund other than Federal
original issuance taxes on shares issued by the Fund.
c. All brokerage commissions and charges in the purchase and sale
of assets.
(2) IDS Life agrees to incur and pay for the cost of all services
described in Part One, Paragraph (1) of this agreement. The Fund
agrees in return to reimburse IDS Life for the aggregate cost of
the services listed below incurred by IDS Life in its operation of
the Fund.
a. All Custodian or Trustee fees, costs and expenses.
b. Costs and expenses in connection with the auditing and
certification of the records and accounts of the Fund by
independent certified public accountants.
c. Costs of obtaining and printing of dividend checks, reports to
shareholders, notices, proxies, proxy statements and tax notices to
shareholders, and also the cost of envelopes in which such are to
be mailed.
d. Postage on all communications, notices and statements to
brokers, dealers, and the Fund's shareholders.
e. All fees and expenses paid to directors of the Fund; however,
IDS Life will pay fees to directors who are officers or employees
of IDS Life or its affiliated companies.
f. Costs of fidelity and surety bonds covering officers, directors
and employees of the Fund.
g. All fees and expenses of attorneys and consultants who are not
officers or employees of IDS Life or any of its affiliates.
h. All fees paid for the qualification and registration for public
sales of the securities of the Fund under the laws of the United
States and of the several states of the United States in which the
securities of the Fund shall be offered for sale.
i. Cost of printing prospectuses and application forms for existing
shareholders, and any supplements thereto.
j. Any losses due to theft and defalcation of the assets of the
Fund, or due to judgments or adjustments not covered by surety or
fidelity bonds, and not covered by agreement or obligation.
k. All fees, costs, expenses and allowances payable to any person,
firm, or corporation for services under any agreement entered into
by the Fund covering the offering for sale, sale and distribution
of the Fund's shares.
l. Legal costs in conjunction with a claim asserted by the Board of
Directors of the Fund against IDS or IDS Life or their officers,
directors, employees or agents except that IDS Life shall reimburse
the Fund for reasonable legal costs incurred by the Fund if it is
ultimately determined by a court of competent jurisdiction or it is
agreed by IDS Life that it is liable in whole or in part to the
Fund and except further that if the Fund asserts a claim against a<PAGE>
PAGE 4
third party which results in a recovery in whole or in part of
legal costs advanced by IDS Life, such recovery of costs shall be
refunded to IDS Life.
m. Filing fees and charges incurred by the Fund in connection with
filing any amendment to its articles of incorporation, or incurred
in filing any other document with the State of Minnesota or its
political subdivisions.
n. One-half of the Investment Company Institute membership dues
charged to IDS Life.
o. Organizational expenses of the Fund.
(3) IDS Life agrees to pay all other expenses associated with the
services it provides under the terms of this agreement. Further,
IDS Life agrees that, if at the end of any month the expenses of
the Fund, under this and any other agreement between the Fund and
IDS Life, but excluding those expenses set forth in (1)(b) and
(1)(c) of this Part Three exceed the most restrictive expense
limitations then in effect under any state securities law, or
regulations thereunder the Fund shall not pay those expenses set
forth in (1)(a) and (2) of this Part Three, and any expenses due
under any other agreement between the Fund and IDS Life, to the
extent necessary to keep the Fund's expenses from exceeding the
limitation, it being understood that IDS Life will assume all
unpaid expenses and bill the Fund for them in subsequent months but
in no event can the accumulation of unpaid expenses or billing be
carried past the end of the Fund's fiscal year.
Part Four: MISCELLANEOUS
(1) IDS Life shall be deemed to be an independent contractor and,
except as expressly provided or authorized in the agreement, shall
have no authority to act for or represent the Fund.
(2) A "full business day" shall be defined as a day with respect to
which the New York Stock Exchange is open for business, and "the
close of business" shall be defined as the time of closing of the
New York Stock Exchange.
(3) The Fund recognizes that IDS and IDS Life now render and may
continue to render investment advice and other services to other
investment companies which may or may not have investment policies
and investments similar to those of the Fund and that IDS and IDS
Life manages its own investments and those of its subsidiaries.
IDS and IDS Life shall be free to render such investment advice and
other services and the Fund hereby consents thereto.
(4) Neither this agreement nor any transaction had pursuant thereto
shall be invalidated or in anywise affected by the fact that
directors, officers, agents and/or shareholders of the Fund are or
may be interested in IDS or IDS Life, or any successor or assignee
thereof, as directors, officers, stockholders or otherwise; that
directors, officers, stockholders or agents of IDS or IDS Life are
or may be interested in the Fund as directors, officers,
shareholders, or otherwise; or that IDS or IDS Life, or any
successor or assignee, is or may be interested in the Fund as
shareholder or otherwise, provided, however, that neither IDS nor<PAGE>
PAGE 5
IDS Life nor any officer, director or employee of IDS or IDS Life
or of the Fund shall sell to or buy from the Fund any property or
security other than shares issued by the Fund, except in accordance
with an applicable order of the United States Securities and
Exchange Commission.
(5) Any notice under this agreement shall be given in writing,
addressed, and delivered, or mailed postpaid to the party to this
agreement entitled to receive such, at such party's principal place
of business in Minneapolis, Minnesota, or to such other address as
either party may designate in writing mailed to the other.
(6) IDS Life agrees that no officer, director or employee of IDS
Life will deal for or on behalf of the Fund with himself as
principal or agent, or with any corporation or partnership in which
he may have a financial interest, except that this shall not
prohibit:
(a) Officers, directors or employees of IDS Life from having a
financial interest in the Fund or in IDS Life.
(b) The purchase of securities for the Fund, or the sale of
securities owned by the Fund, through a security broker or dealer,
one or more of whose partners, officers, directors or employees is
an officer, director or employee of IDS Life, provided such
transactions are handled in the capacity of broker only and
provided commissions charged do not exceed customary brokerage
charges for such services.
(c) Transactions with the Fund by a broker-dealer affiliate of IDS
Life if allowed by rule or order of the Securities and Exchange
Commission and if made pursuant to procedures adopted by the Fund's
Board of Directors.
(7) IDS Life agrees that, except as herein otherwise expressly
provided or as may be permitted consistent with the use of a broker
dealer affiliate of IDS Life under applicable provisions of the
Federal securities laws, neither it nor any of its officers,
directors or employees shall at any time during the period of this
agreement, make, accept or receive, directly or indirectly, any
fees, profits or emoluments of any character in connection with the
purchase or sale of securities (except shares issued by the Fund)
or other assets by or for the Fund.
Part Five: RENEWAL AND TERMINATION
(1) This agreement shall continue in effect until December 31, 1986
or until a new agreement is approved by a vote of the majority of
the outstanding shares of the Fund, and by vote of Directors
including the vote required by (b) of this paragraph and if no new
agreement is so approved, this agreement shall continue from year
to year thereafter unless and until terminated by either party as
hereinafter provided, except that such continuance shall be
specifically approved at least annually (a) by the Board of
Directors of the Fund or by a vote of the majority of the
outstanding shares of the Fund and (b) by the vote of a majority of
the Directors who are not parties to this agreement or interested
persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval. As used in this paragraph,<PAGE>
PAGE 6
the term "interested person" shall have the same meaning as set
forth in the Investment Company Act of 1940, as amended.
(2) This agreement may be terminated by either the Fund or IDS Life
at any time by giving the other party sixty days' previous written
notice of such intention to terminate, provided that any such
termination shall be made without the payment of any penalty, and
provided further that such termination may be effected either by
the Board of Directors of the Fund or by a vote of the majority of
the outstanding voting shares of the Fund. The vote of the
majority of the outstanding voting shares of the Fund for the
purpose of Part Five of the agreement shall be the vote at a
shareholders' annual meeting, or a special meeting duly called for
the purpose, of sixty-seven percent or more of such shares present
at such meeting if the holders of more than fifty percent of the
outstanding voting shares are present or represented by proxy, or
more than fifty percent of the outstanding voting shares of the
Fund, whichever is the less.
(3) This agreement shall terminate in the event of its assignment,
the term "assignment" for this purpose having the same meaning as
set forth in the Investment Company Act of 1940, as amended.
IN WITNESS THEREOF, the parties hereto have executed the foregoing
agreement on the day and year first above written.
IDS LIFE SERIES FUND, INC.
Attest_____________________________
By______________________________
Secretary President
IDS LIFE INSURANCE COMPANY
Attest_____________________________
By______________________________
Secretary Executive Vice President
<PAGE>
PAGE 7
ADDENDUM TO INVESTMENT MANAGEMENT AND SERVICES AGREEMENT
"Part Two: COMPENSATION TO INVESTMENT MANAGER" paragraph (1) of
the Investment Management and Services Agreement between IDS Life
Series Fund, Inc. (the Fund) and IDS Life Insurance Company (IDS
Life) dated December 17, 1985, has been modified as follows. All
other provisions of this Investment Management and Services
Agreement remain in full force and effect.
(1) The Fund agrees to pay IDS Life, and IDS Life covenants and
agrees to accept from the Fund in full payment for all the services
furnished, and for the use of all facilities and equipment, and for
all expenses paid or reimbursed by IDS Life hereunder, a fee for
each calendar day of each year equal to the total of 1/365th
(1/366th in each leap year) of:
.70 percent for the Equity Portfolio
.70 percent for the Income Portfolio
.70 percent for the Managed Portfolio
.70 percent for the Government Securities Portfolio
.95 percent for the International Equity Portfolio and
.50 percent for the Money Market Portfolio
to be computed for each day on the basis of net assets as of the
close of business of the full business day two (2) business days
prior to the day for which the computation is being made. In the
case of the suspension of the computation of net asset value, the
said fee for each day during such suspension shall be computed as
of the close of business on the last full business day on which the
net assets were computed. As used herein, "net assets" as of the
close of a full business day shall include all transactions in
shares of the Fund recorded on the books of the Fund for that day.
IN WITNESS WHEREOF, the parties have executed the Addendum as of
the __ day of October, 1994.
IDS LIFE SERIES FUND, INC.
Attest: By:
Title: Title:
IDS LIFE INSURANCE COMPANY
Attest: By:
Title: Title:
<PAGE>
PAGE 1
EXHIBIT A: INVESTMENT ADVISORY AGREEMENT
Agreement effective the 11th day of July, 1984, by and between IDS
Life Insurance Company (IDS Life) and IDS/American Express Inc.
(IDS).
Whereas IDS Life has heretofore organized five companies, and
such companies have been registered as investment companies under
the Investment Company Act of 1940 (such companies being referred
to collectively as the "Funds" and individually as the "Fund"), and
may in the future organize one or more additional Funds;
Whereas IDS has a staff of experienced investment personnel
and facilities for the kind of investment portfolio contemplated
for such Fund or Funds;
NOW THEREFORE, it is mutually agreed:
1. Funds to Which Applicable. This agreement shall only be
effective to any Fund in respect of which:
a. IDS Life has notified IDS in writing to include such Fund
under the terms of this agreement; and
b. IDS Life has an existing legal duty to provide investment
management for such Fund; and
c. To the extent required by the Investment Company Act of 1940,
this agreement has been approved by a vote of the persons
having an interest in such Fund or an exemptive order from
such requirement of approval has been obtained from the
Securities and Exchange Commission; and continuance of its
applicability is approved as required by the Investment
Company Act of 1940; and
d. The applicability of this agreement has not been terminated as
provided in paragraph 8 hereof.
2. Investment Advice. IDS will continuously keep under
observation the investment portfolio and investment objectives
of any Fund covered by the terms of this agreement and will,
with respect to each such Fund, continuously furnish to IDS
Life (1) assistance and advice in investment planning, (2)
recommendations as to particular purchases and sales of
securities, and (3) information as to economic and market
factors and other information relating to the investment plans
of and the particular investment held in any such Fund.
3. Information Furnished to IDS. IDS Life shall furnish such
information to IDS as to holdings, purchases, and sales of
securities under its management and investment portfolio
requirements as will reasonably enable IDS to furnish the
investment advice under this agreement.
4. Furnishing Advice, Information and Notices. The advice,
information, reports, etc., furnished under this agreement to
IDS Life and any notice under this agreement shall be
furnished to the President of IDS Life or to the person or
persons designated in writing by him or by a person to whom he
has delegated the authority to so designate. Any information
or notice provided to IDS under the terms of this agreement
shall be furnished to the President of IDS or to the person or
persons designated in writing by him or by a person to whom he
has delegated the authority to so designate.<PAGE>
PAGE 2
5. Purchase and Sale of Securities. IDS Life may, in its
discretion, direct purchase or sale orders to IDS which will
then place any such order with a broker or brokers or
negotiate such executions. All transactions will be executed
in a manner and in accordance with the procedures and
standards as set forth in, or as established in accordance
with, the investment management agreement between IDS Life and
such Fund. IDS Life shall furnish IDS with information
concerning such procedures and standards, and any amendments
thereto; and IDS will maintain records to assure that such
transactions have been executed in accordance therewith. It
is understood that IDS Securities Corporation, a subsidiary of
IDS and a member firm of the Pacific Stock Exchange, may
participate in brokerage commissions generated by any security
transactions under this agreement, and that other broker
dealer affiliates of IDS may be used to the extent consistent
with Section 15(f) of the Investment Company Act of 1940 and
other applicable provisions of the Federal securities laws.
6. Compensation to IDS. The fee for the services provided by
this agreement will be determined as follows:
a. The Fund shall pay the Company a fee for each calendar day of
each year equal to the total of 1/365th (1/366th in each leap
year) of 0.25% of the net assets of the Fund, to be computed
for each such day on the basis of net assets as of the close
of business on the next preceding full business day. In the
case of the suspension of the computation of asset value, the
said fee for each day during such suspension shall be computed
as of the close of business on the last full business day on
which the net assets were computed. As used herein, "net
assets" as of the close of a full business day shall include
all transactions in shares of the Fund recorded on the books
of the Fund for that day.
b. The foregoing fee shall be paid on a monthly basis in cash by
IDS Life to IDS within five (5) business days after the last
day of each month.
7. Miscellaneous.
a. IDS Life recognizes that IDS now renders and may continue to
render investment advice and other services to other persons
which may or may not have investment policies and investments
similar to those of the Funds included herein, and that IDS
manages its own investment and those of certain subsidiaries.
IDS shall be free to render such investment advice and other
services, and IDS Life hereby consents thereto. This
agreement is separate from any agreement IDS Life and IDS may
have concerning investment advice in respect of certain
separate accounts of IDS Life.
b. It is understood and agreed that in furnishing the investment
advice and other services as herein provided neither IDS, nor
any officer, director, employee, or agent thereof shall be
held liable to IDS Life or Funds included herein or creditors
for errors of judgment or for anything except willful
misfeasance, bad faith, or gross negligence in the performance
of its duties, or reckless disregard of its obligations and
duties under the terms of this agreement. It is further
understood and agreed that IDS may rely upon information
furnished to it reasonably believed to be accurate and
reliable and that, except as hereinabove<PAGE>
PAGE 3
provided, IDS shall not be accountable for any loss suffered
by IDS Life or Funds included herein by the reason of the
latter's action or nonaction on the basis of any advice or
recommendation of IDS, its officers, directors or agents.
8. Renewal and Termination
a. As to any Fund which (1) is a registered investment company
under the Investment Company Act of 1940, and (2) this
agreement has become applicable as provided in Section 1
above, this agreement, unless terminated pursuant to paragraph
b,c, or d below, shall continue in effect from year to year,
provided its continued applicability is specifically approved
at least annually (i) by the Board of Directors of said Fund
or by a vote of the holders of a majority of the outstanding
votes of the Fund and (ii) by vote of a majority of the
Directors who are not parties to this agreement or interested
persons of any such party, cast in person at a meeting called
for the purpose of voting on such approval. As used in this
paragraph, the term "interested person" shall have the same
meaning as set forth in the Investment Company Act of 1940, as
amended.
b. The applicability of this agreement to any Fund which is a
registered investment company within the meaning of the
Investment Company Act of 1940 may be terminated by sixty
days' written notice to either IDS or IDS Life.
c. IDS or IDS Life may terminate this agreement or the
applicability of this agreement to any Fund by giving sixty
days' written notice to the other party.
d. This agreement shall terminate, as to any Fund which is a
registered investment company under the Investment Company Act
of 1940, in the event of its assignment, the term "assignment"
for this purpose having the same meaning set forth in the
investment Company Act of 1940, as amended.
IN WITNESS WHEREOF, the parties hereto have executed the foregoing
agreement on the day and year first above written.
IDS LIFE INSURANCE COMPANY
Attest________________________
By_____________________________
Secretary Vice President - Financial
IDS/AMERICAN EXPRESS INC.
Attest________________________
By_____________________________
Asst. Secretary Senior Vice President and
General Counsel
<PAGE>
PAGE 4
ADDENDUM TO INVESTMENT ADVISORY AGREEMENT
The following provision is added to Section 6, Compensation to IDS,
of the Investment Advisory Agreement between IDS Life Insurance
Company (IDS Life) and IDS/American Express, Inc. (IDS) [now known
as IDS Financial Corporation] dated July 11, 1984. All other
provisions of this Investment Advisory Agreement remain in full
force and effect.
6. Compensation to IDS. In addition to the fee for services
provided under the Investment Advisory Agreement described above,
IDS Life Series Fund, Inc. for the International Equity Portfolio
shall pay IDS life a fee for each calendar day of each year equal
to the total of 1/365th (1/366th in each leap year) of 0.25% of the
total net assets of the International Equity Portfolio for a total
of 0.50% of the net assets of the International Equity Portfolio.
This additional 0.25% fee shall be paid on a monthly basis in cash
by IDS Life to IDS within five (5) business days after the last day
of each month.
(IN WITNESS WHEREOF, the parties have executed the Addendum as of
the __ day of October, 1004.)
IDS LIFE INSURANCE COMPANY
Attest: By:
Title: Title:
IDS FINANCIAL CORPORATION
Attest: By:
Title: Title:
<PAGE>
PAGE 1
CUSTODIAN AGREEMENT
THIS CUSTODIAN AGREEMENT made this 1st day of January, 1986,
between IDS Life Series Fund, Inc., a Minnesota Corporation
(hereinafter called the "Corporation" and IDS Trust Company, a
corporation organized under the laws of the State of Minnesota with
its principal place of business at Minneapolis, Minnesota
(hereinafter also called the "Custodian").
WHEREAS, the Corporation desires that its securities and cash be
hereafter held and administered by Custodian pursuant to the terms
of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein
made, the Corporation and the Custodian agree as follows:
Section 2. Definitions
The word "securities" as used herein shall be construed to include,
without being limited to, shares, stocks, treasury stocks,
including any stocks of this Corporation, notes, bonds, debentures,
evidences of indebtedness, options to buy or sell stocks,
certificates of interest or participation in any profit sharing
agreements, collateral trust certiricates, preorganization
certificates or subscriptions, transferable shares, investment
contracts, voting trust certificates, certificates of deposit for a
security, fractional or undivided interests in oil, gas, or other
mineral rights, or any certificates of interest or participation
in, for a security, fractional or undivided interest or
participation in, temporary or interin certificates for, receipts
for, guarantees of, or warrants of rights to subscribe to or
purchase any of the foregoing, acceptances and other obligations
and any evidence of any right or interest in or to any cash,
property or assets and any interest or instrument commonly known as
a security.
The words "custodian order" shall mean a request or direction,
including a computer printout, directed to the Custodian and signed
in the name of the Corporation by any two individuals designated in
the current certified list referred to in Section 2.
The word "facsimile: shall mean an exact copy or likeness which is
electronically transmitted for instant reproduction.
Section 2. Names, Titles and Signatures of Authorized Persons
The Corporation will certify to Custodian the names and signatures
of its present officers and other designated persons authorized on
behalf of the corporation to direct the Custodian by custodian
order as hereinbefore defined. The corporation agrees that
whenever any change occures in this list, it will file with the
Custodian a copy of the resolution certified by the Secretary or an
Assistant Secretary of the Corporation as having been duly adopted
by the Board of Directors or the Executive Committee of the Board
of Directors of the Corporation designating those persons currently
authorized on behalf of the Corporation to direct the Custodian by
Custodian order, as hereinbefore defined, and upon such filing (to
<PAGE>
PAGE 2
be accompanied by the filing of specimen signatures of the
designated persons), the persons so designated in said resolution
shall constitute the current certified list. The Custodian is
authorized to rely and act upon the names and signatures of the
individuals as they appear in the most recent certified list from
the Corporation which has been delivered to the Custodian as
hereinabove provided. The Custodian may make arrangements, where
appropriate, with other banks having not less than one million five
hundred thousand dollars aggregate capital, surplus and undivided
profits for the custody of securities. Any such bank selected by
the Custodian to act as subcustodian shall be deemed to be the
agent of the Custodian.
Section 4. Receipt and Disbursement of Money
(1) The Custodian shall open and maintain a separate account or
accounts in the name of the Corporation or cause its agent to open
and maintain such account or accounts subject only to checks,
drafts or directives bv the Custodian pursuant to the terms of this
Agreement. The Custodian or its agent shall hold in such account
or accounts, subject to the provisions hereof, all cash received by
it from or for the account of the Corporation. The Custodian or
its agent shall make payments of cash to or for the account of the
Corporation from such cash only:
(a) for the purchase of securities for the portfolio of the
Corporation upon the receipt of such securities by the
Custodian or its agent,
(b) for the purchase or redemption of shares of capital stock
of the Corporation,
(c) for the payment of interest, dividends, taxes, management
fees, or operating expenses (including, without
limitation thereto, fees for legal, accounting and
auditing services),
(d) for payment of distribution fees, commissions, or
redemption fees, if any,
(e) for payments in connection with the conversion, exchange
or surrender of securities owned or subscribed to by the
Corporation held by or to be delivered to the Custodian,
(f) for payments in connection with the return of securities
loaned by the Corporation upon receipt of such securities
or the reduction of collateral upon receipt of proper
notice,
(g) for payments for other proper corporated purposes, or
(h) upon the termination of this Agreement.
Before making any such payment for the purposes permitted under the
terms of items (a), (b), (c), (d), (e), (f) or (g) or paragraph (1)
of the Section, the Custodian shall receive and may rely upon a
custodian order directing such payment and stating that the payment
is for such a purpose permitted under these items (a), (b), (c),
<PAGE>
PAGE 3
(d), (e), (f) or (g) and that in respect to item (g), a copy of a
resolution of the Board of Directors or of the Executive Committee
of the Board of Directors of the Corporation signed by an officer
of the Corporation and certified by its Secretary or an Assistant
Secretary, specifying the amount of such payment, setting forth the
purpose to be a proper corporate purpose, and naming the person or
persons to whom such payment is made. Notwithstanding the above,
for the purposes permitted under items (a) or (f) of paragraph (1)
or this Section, the Custodian may rely upon a facsimile order.
(2) The Custodian ls hereby appointed the Attorney-in-fact of the
Corporation to endorse and collect all checks, drafts or other
orders for the payment of money received by the Custodian for the
account of the Corporation and drawn on or to the order of the
Corporation and to deposit same to the account of the Corporation
pursuant to this Agreement.
Section 5. Receipt of Securities
Except as permitted by the second paragraph of this section, the
Custodian or its agent shall ho]d in a separate account or
accounts, and physically segregated at all times from those of any
other persons, firms or corporations, pursuant to the provisions
hereof, all securities received by it for the account of the
Corporation. The Custodian shall record and maintain a record of
all certificate numbers. Securities so received shall be held in
the name of the Corporation, in the name of an exclusive nominee
duly appointed by the Custodian or in bearer form, as appropriate.
Subject to such rules, regulations or guidelines as the Securities
and Exchange Commission may adopt, the Custodian may deposit all or
any part of the securities owned by the Corporation in a securities
depository which includes any system for the central handling of
securities established by a national securities exchange or a
national securities association registered with the Securities and
Exchange Commission under the Securities Commission, pursuant to
which system all securities of any particular class and may be
transferred or pledged by bookkeeping entry without physical
delivery of such securities.
All securities are to be held or disposed of by the Custodian for,
and subject at all times to the instructions of, the Corporation
pursuant to the terms of this Agreement. The Custodian shall have
no power or authority to assign, hypothecate, pledge or otherwise
dispose of any such securities, except pursuant to the directive of
the Corporation and only for the account of the Corporation as set
forth in Section 6 of this Agreement.
Section 6. Transfer, Exchange, Delivery, etc., of Securities
The Custodian shall have sole power to release or deliver any
securities of the Corporation he]d by it pursuant to this
Agreement. The Custodian agrees to transfer, exchange or deliver
securities held by it or its agent hereunder only:
(a) for sales of such securities for the account of the
Corporation, upon receipt of payment therefore;
<PAGE>
PAGE 4
(b) when such securities are called, redeemed, retired or
otherwise become payable;
(c) for examination upon the sale of any such securities in
accordance with "street delivery" custom which would
include delivery against interim receipts or other proper
delivery receipts:
(d) in exchange for or upon conversion into other securities
alone or other securitles and cash whether pursuant to
any plan of merger, consolidation, reorganization,
recapitalization or readjustment, or otherwise;
(e) for the purpose of exchanging interim receipts or
temporary certificates for permanent certificates.
(f) upon conversion of such securities pursuant to their
terms into other securities;
(g) upon exercise of subscription, purchase or other similar
rights represented by such securities;
(h) for loans of such securities by the Corporation upon
receipt of collateral;
(i) for other proper corporate purposes.
As to any deliveries made by the Custodian pursuant to items (a),
(b), (c), (d), (e), (f), (g) and (h), securities or cash received
in exchange therefore shall be delivered to the Custodian, its
agent, or to a securities depository. Before making any such
transfer, exchange, or delivery, the Custodian shall receive a
custodian order or a facsimile from the Corporation requesting such
transfer, exchange or delivery and stating that it is for a purpose
permitted under Section 6 (whenever a facsimile is utilized, the
Corporation will also deliver an original signed custodian order)
and, in respect to item (i), a copy of a resolution of the Board of
Directors or of the Executive Committee of the Board of Directors
of the Corporation signed by an officer of the Corporation and
certified by its Secretary or an Assistant Secretary, specifying
the securities, setting forth the purpose for which such payment,
transfer, exchange, or delivery is to be made, declaring such
purpose to be a proper corporate purpose, and naming the person or
persons to whom such transfer, exchange or delivery of such
securlties shall be made.
Section 7. Custodian's Acts Without Instructions
Unless and until the Custodian receives a contrary custodian order
from the Corporatlon, the Custodian shall or shall cause its agent
to:
(a) present for payment all coupons and other income items
held by the Custodian or its agent for the account of the
Corporation which call for payment upon presentation and
held all cash received by it upon such payment for the
account of the Corporation;
<PAGE>
PAGE 5
(b) present for payment all securities held by it or its
agent which mature or when called, redeemed, retired, or
otherwise become payable;
(c) ascertain all stock dividends, rights and similar
securities to be issued with respect to any securities
held bv the Custodian or its agent, and to collect and
hold such interest and cash dividends for the account of
the Corporation.
Section 8. Voting and Other Action
Neither the Custodian nor any nominee of the Custodian shall vote
any of the securities held hereunder by or for the account of the
Corporation. The Custodian shall promptly deliver to the
Corporation all notices, proxies and proxy solicitation materials
wlth relation to such securities, such proxies to be executed bv
the registered holder or such securities (if registered otherwise
then in the name of the Corporation), but without indicating the
manner in which such proxies are to be voted.
Custodian shall transmit promptly to the Corporation all written
information (including, without limitation, pendency of calls and
maturities of securities and expiration of rights in connection
therewith) received by the Custodian from issuers of the securities
being held for the Corporation. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Corporation
all written information received by the Custodian from issuers of
the securities whose tender or exchange is sought and from the
party (or his agents) making the tender or exchange offer.
Section 9. Transfer Taxes
The Corporation shall pay or reimburse the Custodian for any
transfer taxes payable upon transfers of securities made hereunder,
including transfers resulting from the termination of this
Agreement. The Custodian shall execute such certificates in
connection with securities delivered to it under this Agreement as
may be req uired, under any applicable law or regulation, to
exempt from taxation any transfers and/or deliveries of any such
securities which may be entitled to such exemption.
Section 10. Custodian's Reports
The Custodian shall furnish the Corporation as of the close of
business each day a statement showing all transactions and entries
for the account of the Corporation. The books and records of the
Custodian pertaining to its actions as Custodian under this
Agreement and securities held hereunder by the Custodian shall be
open to inspection and audit, at reasonable times, by officers of
the Corporation, internal auditors employed by the Corporation's
investment adviser, and independent auditors employed by the
Corporation. The Custodian shall furnish the Corporation in such
form as may reasonably be requested by the Corporation a list of
the securities held by it in custody for the account of the
Corporation as of the close of business on the last business day of
each month, which shall be certified by a duly authorized officer
of the Custodian. It is further understood that additional reports
may from time to time be requested by the Corporation. Should any <PAGE>
PAGE 6
report ever be filed with any governmental authority pertaining to
lost or stolen securities, the Custodian will concurrently provide
the Corporation with a copy of that report. The Custodian also
shall furnish such reports on its systems of internal accounting
control as the Corporation may reasonably request from time
to time.
Section 11. Concerning Custodian
For its servlces hereunder the Custodian shail be paid such
compensation at such times as may from tlme to time be agreed on in
writing by the parties hereto in a Custodian Fee Agreement. The
Custodian shall not be liable for any action taken in good faith
upon any custodian order or facsimile herein described or certified
copy or any resolution of the Board of Directors or of the
Executive Committee or the Board of Directors of the Corporation,
and may rely on the genuineness of any such document which it may
in good faith believe to have been validly executed.
The Corporation agrees to indemnify and hold harmless Custodian and
its nominee from all taxes, charges, expenses, assessmenes, claims
and liabilities (including counsel fees) incurred or assessed
against it or its nominee in connection with the performance of
this Agreement, except such as may arise from the Custodian's or
its nominee's own negligent action, negligent failure to act or
willful misconduct. Custodian is authorized to charge any account
of the Corporation for such items. In the event of any advance of
cash for any purpose made by Custodian resulting from orders or
instructions of the Corporation, or in the event that Custodian or
its nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with the
performance of this Agreement, except such as may arise from its or
its nominee's own negligent action, negligent failure to act or
willful misconduct, any property at any time held for the account
of the Corporation shall be security therefore.
The Custodian shall maintain a standard of care equivalent to that
which would be required of a bailee for hire and shall not be
liable for any loss or damage to the Corporation resulting from
participation in a securities depository unless such loss or damage
arises by reason of any negligence, misfeasance, or willful
misconduct of officers or employees of the Custodian, or from its
failure to enforce effectively such rights as it may have against
any agent.
Section 12. Termination and Amendment of Agreement
The Corporation and the Custodian mutually may agree from time to
time in writing to amend, to add to, or to delete from any
provision of this Agreement.
The Custodian may terminate this Agreement by giving the
Corporation ninety days' written notice of such termination by
registered mail addressed to the Corporation at its principal place
of business.
<PAGE>
PAGE 7
The Corporation may terminate this Agreement at any time by written
notice thereof delivered, together with a copy of the resolution of
the Board of Directors authorizing such termination and certified
by the Secretary of the Corporation, by registered mail to the
Custodian.
Upon such termination of this Agreement, assets of the Corporation
held by the Custodian shall be delivered by the Custodian to a
successor custodian, if one has been appointed by the Corporation,
upon receipt by the Custodian of a copy of the resolution of the
Board of Directors of the Corporation certified by the Secretary,
showing appointment of the successor custodian, and provided that
such successor custodian is a bank or trust company, organized
under the laws of the United States or of any State or the United
States, having not less than two million dollars aggregate capital,
surplus and undivided profits. Upon the termination or this
Agreement as a part of the transfer of assets, either to a
successor custodian or otherwise, the Custodian will deliver
securities held by it hereunder, when so authorized and directed by
resolution or the Board of Directors of the Corporation, to a duly
appointed agent of the successor custodian or to the appropriate
transfer agents for transfer of registration and delivery as
directed. Delivery of assets on termination of this Agreement
shall be effected in a reasonable, expeditious and orderly manner;
and in order to accomplish an orderly transition from the Custodian
to the successor custodian, the Custodian shall continue to act as
such under this Agreement as to assets in its possession or
control. Termination as to each security shall become effective
upon delivery to the successor custodian, its agent, or to a
custodian, and such delivery shall constitute effective delivery by
the Custodian to the successor under this Agreement.
In addition to the means of termination hereinbefore authorized,
this Agreement may be terminated at any time by the vote of a
majority of the outstanding shares of the Corporation and after
written notice of such action to the Custodian.
Section 13. General
Nothing expressed or mentioned in or to be implied from any
provision of this Agreement is intended to, or shall be construed
to give any person or corporation other than the parties hereto,
any legal or equitable right, remedy or claim under or in respect
of this Agreement, or any covenant, condition or provision herein
contained, this Agreement and all of the covenants, conditions and
provisions hereof being intended to be and being for the sole and
exclusive benefit of the parties hereto and their respectlve
successors and assigns.
IN WITNESS WHEREOF, the Corporation and the Custodian have caused
this Agreement to be executed and their respective corporate seals
to be affixed hereto as of the date first above written by their
respective officers thereunto duly authorized.
<PAGE>
PAGE 8
Attest: IDS LIFE SERIES FUND, INC.
/s/ Paul D. Sabby By /s/ James A. Mitchell
(Name): (Name):
(Title): (Title):
Attest: IDS TRUST COMPANY
/s/ By James McKay
(Name): (Name):
(Title): Vice President (Title): Trust Officer
<PAGE>
PAGE 1
Independent Auditors' Consent
The Board of Directors
IDS Life Series Fund, Inc.:
We consent to the use of our report incorporated herein by
reference and to the references to our Firm under the headings
"Financial Highlights" in Part A and "Independent Auditors" in Part
B of the Registration Statement.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
October 28, 1994
<PAGE>
PAGE 1
[ARTICLE] 6
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] APR-30-1994
[PERIOD-END] APR-30-1994
[INVESTMENTS-AT-COST] 136297503
[INVESTMENTS-AT-VALUE] 152178261
[RECEIVABLES] 16457534
[ASSETS-OTHER] 355669
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 168991464
[PAYABLE-FOR-SECURITIES] 1568272
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 15563029
[TOTAL-LIABILITIES] 17131301
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 135981428
[SHARES-COMMON-STOCK] 8391259
[SHARES-COMMON-PRIOR] 5202534
[ACCUMULATED-NII-CURRENT] (5633)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 3610
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 15880758
[NET-ASSETS] 151860163
[DIVIDEND-INCOME] 140803
[INTEREST-INCOME] 1174754
[OTHER-INCOME] 0
[EXPENSES-NET] 916424
[NET-INVESTMENT-INCOME] 399133
[REALIZED-GAINS-CURRENT] 15326818
[APPREC-INCREASE-CURRENT] 2153291
[NET-CHANGE-FROM-OPS] 17879242
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (404766)
[DISTRIBUTIONS-OF-GAINS] (15323208)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 2513413
[NUMBER-OF-SHARES-REDEEMED] (197169)
[SHARES-REINVESTED] 872481
[NET-CHANGE-IN-ASSETS] 64118325
[ACCUMULATED-NII-PRIOR] 154331
[ACCUMULATED-GAINS-PRIOR] 2737471
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 850524
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 916424
[AVERAGE-NET-ASSETS] 122098243
[PER-SHARE-NAV-BEGIN] 16.87
[PER-SHARE-NII] .06
[PER-SHARE-GAIN-APPREC] 3.26
[PER-SHARE-DIVIDEND] (.06)
[PER-SHARE-DISTRIBUTIONS] (2.03)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 18.10
[EXPENSE-RATIO] .75
[AVG-DEBT-OUTSTANDING] 0<PAGE>
PAGE 2
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] APR-30-1994
[PERIOD-END] APR-30-1994
[INVESTMENTS-AT-COST] 10806686
[INVESTMENTS-AT-VALUE] 10954485
[RECEIVABLES] 322927
[ASSETS-OTHER] 88217
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 11365629
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 180778
[TOTAL-LIABILITIES] 180778
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 11037555
[SHARES-COMMON-STOCK] 1132254
[SHARES-COMMON-PRIOR] 912972
[ACCUMULATED-NII-CURRENT] (503)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 147799
[NET-ASSETS] 11184851
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 690375
[OTHER-INCOME] 0
[EXPENSES-NET] 86203
[NET-INVESTMENT-INCOME] 604172
[REALIZED-GAINS-CURRENT] 112301
[APPREC-INCREASE-CURRENT] (750136)
[NET-CHANGE-FROM-OPS] (33663)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (604675)
[DISTRIBUTIONS-OF-GAINS] (112301)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 306174
[NUMBER-OF-SHARES-REDEEMED] (155294)
[SHARES-REINVESTED] 68402
[NET-CHANGE-IN-ASSETS] 1565868
[ACCUMULATED-NII-PRIOR] 539008
[ACCUMULATED-GAINS-PRIOR] 81544
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 75428
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 86203
[AVERAGE-NET-ASSETS] 10811281
[PER-SHARE-NAV-BEGIN] 10.54
[PER-SHARE-NII] .60
[PER-SHARE-GAIN-APPREC] (.56)
[PER-SHARE-DIVIDEND] (.60)
[PER-SHARE-DISTRIBUTIONS] (.10)
[RETURNS-OF-CAPITAL] 0<PAGE>
PAGE 3
[PER-SHARE-NAV-END] 9.88
[EXPENSE-RATIO] .80
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] APR-30-1994
[PERIOD-END] APR-30-1994
[INVESTMENTS-AT-COST] 33297187
[INVESTMENTS-AT-VALUE] 33062888
[RECEIVABLES] 844744
[ASSETS-OTHER] 70097
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 33977729
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 207801
[TOTAL-LIABILITIES] 207801
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 34396256
[SHARES-COMMON-STOCK] 3476335
[SHARES-COMMON-PRIOR] 2222158
[ACCUMULATED-NII-CURRENT] 8039
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (400068)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (234299)
[NET-ASSETS] 33769928
[DIVIDEND-INCOME] 20720
[INTEREST-INCOME] 2162680
[OTHER-INCOME] 0
[EXPENSES-NET] 228089
[NET-INVESTMENT-INCOME] 1955311
[REALIZED-GAINS-CURRENT] (52946)
[APPREC-INCREASE-CURRENT] (1813728)
[NET-CHANGE-FROM-OPS] 88637
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (1947272)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1279899
[NUMBER-OF-SHARES-REDEEMED] (215386)
[SHARES-REINVESTED] 189664
[NET-CHANGE-IN-ASSETS] 11128586
[ACCUMULATED-NII-PRIOR] 1495755
[ACCUMULATED-GAINS-PRIOR] 307531
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 199578
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 228089
[AVERAGE-NET-ASSETS] 28634286
[PER-SHARE-NAV-BEGIN] 10.19
[PER-SHARE-NII] .71
[PER-SHARE-GAIN-APPREC] (.48)
PAGE 4
[PER-SHARE-DIVIDEND] (.71)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 9.71
[EXPENSE-RATIO] .80
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] APR-30-1994
[PERIOD-END] APR-30-1994
[INVESTMENTS-AT-COST] 0
[INVESTMENTS-AT-VALUE] 0
[RECEIVABLES] 0
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 0
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 0
[TOTAL-LIABILITIES] 0
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 0
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 0
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 0
[OTHER-INCOME] 0
[EXPENSES-NET] 0
[NET-INVESTMENT-INCOME] 0
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 0
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 0
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 0
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 0
[AVERAGE-NET-ASSETS] 0
PAGE 5
[PER-SHARE-NAV-BEGIN] 0.00
[PER-SHARE-NII] .00
[PER-SHARE-GAIN-APPREC] .00
[PER-SHARE-DIVIDEND] .00
[PER-SHARE-DISTRIBUTIONS] .00
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] .00
[EXPENSE-RATIO] .00
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] APR-30-1994
[PERIOD-END] APR-30-1994
[INVESTMENTS-AT-COST] 158281078
[INVESTMENTS-AT-VALUE] 160676958
[RECEIVABLES] 23026922
[ASSETS-OTHER] 419602
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 184123482
[PAYABLE-FOR-SECURITIES] 6410152
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 17007130
[TOTAL-LIABILITIES] 23417282
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 158309405
[SHARES-COMMON-STOCK] 11604807
[SHARES-COMMON-PRIOR] 7237215
[ACCUMULATED-NII-CURRENT] (963)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 1409
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 2396349
[NET-ASSETS] 160706200
[DIVIDEND-INCOME] 895768
[INTEREST-INCOME] 3861027
[OTHER-INCOME] 0
[EXPENSES-NET] 1019244
[NET-INVESTMENT-INCOME] 3737551
[REALIZED-GAINS-CURRENT] 14672291
[APPREC-INCREASE-CURRENT] (4972356)
[NET-CHANGE-FROM-OPS] 13437486
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (3766513)
[DISTRIBUTIONS-OF-GAINS] (14672291)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 3372853
[NUMBER-OF-SHARES-REDEEMED] (322160)
[SHARES-REINVESTED] 1316899
[NET-CHANGE-IN-ASSETS] 60567232
[ACCUMULATED-NII-PRIOR] 2687436
[ACCUMULATED-GAINS-PRIOR] 7640740
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 920594
PAGE 6
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1019244
[AVERAGE-NET-ASSETS] 132122702
[PER-SHARE-NAV-BEGIN] 13.84
[PER-SHARE-NII] .42
[PER-SHARE-GAIN-APPREC] 1.40
[PER-SHARE-DIVIDEND] (.42)
[PER-SHARE-DISTRIBUTIONS] (1.39)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 13.85
[EXPENSE-RATIO] .77
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] APR-30-1994
[PERIOD-END] APR-30-1994
[INVESTMENTS-AT-COST] 9268312
[INVESTMENTS-AT-VALUE] 9268312
[RECEIVABLES] 22478
[ASSETS-OTHER] 298835
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 9589625
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 32195
[TOTAL-LIABILITIES] 32195
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 9557629
[SHARES-COMMON-STOCK] 9557747
[SHARES-COMMON-PRIOR] 8180775
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (199)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 9557430
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 264800
[OTHER-INCOME] 0
[EXPENSES-NET] 49401
[NET-INVESTMENT-INCOME] 215399
[REALIZED-GAINS-CURRENT] (97)
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 215302
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (215399)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 5854806
[NUMBER-OF-SHARES-REDEEMED] (4693238)
[SHARES-REINVESTED] 215404
[NET-CHANGE-IN-ASSETS] 1376802
[ACCUMULATED-NII-PRIOR] 282902
[ACCUMULATED-GAINS-PRIOR] 274
PAGE 7
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 41168
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 49401
[AVERAGE-NET-ASSETS] 8263625
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] .03
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] (.03)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .60
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
