<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
IDS Life Series Fund, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2)
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:*
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
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<PAGE>
EQUITY PORTFOLIO
GOVERNMENT SECURITIES PORTFOLIO
INCOME PORTFOLIO
MANAGED PORTFOLIO
MONEY MARKET PORTFOLIO
PORTFOLIOS MAKING UP
IDS LIFE SERIES FUND
IDS TOWER 10
MINNEAPOLIS, MINNESOTA 55440-0010
NOTICE OF REGULAR MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 9, 1994
September 17, 1994
Dear Contract Owner:
As the owner (the "Shareholder" to simplify the following discussion) of a
life insurance policy invested in IDS Life Series Fund, Inc. (the "Fund"), you
are invited to attend the regular shareholder meeting of the Fund. The meeting
will be held at p.m. on November 9, 1994, at
Minneapolis, Minnesota. The purposes of the meeting include the election of
Board members and changes to the Fund's investment policies. The agenda for the
meeting is on the next page.
Please take the time to read the proxy statement which discusses each agenda
item. The Board of Directors has approved the proposals and recommends that you
vote in favor of each item. If you were a shareholder on September 11, 1994, you
may vote at the meeting or any adjournment of the meeting. We hope you can
attend. For those of you who cannot attend, the enclosed card is for your vote.
Please be sure to sign the card and return it to us as soon as possible in the
enclosed postage-paid envelope. The latest annual report was previously mailed
to you.
COLLEEN CURRAN
Secretary
IT IS IMPORTANT THAT YOU VOTE PROMPTLY. PLEASE FILL IN AND SIGN THE ENCLOSED
CARD. PROMPT RESPONSE WILL SAVE YOUR FUND THE COST OF ADDITIONAL MAILINGS.
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AGENDA
(1) To elect 5 Board members;
(2) To ratify or reject the selection of KPMG Peat Marwick as the independent
auditors;
(3) To approve or reject a change in the investment policies of each Portfolio
to permit the Portfolio to invest all of its assets in another investment
company with substantially the same investment objectives, policies and
restrictions as the Portfolio;
(4) To approve or reject amendments to the Fund's Articles of Incorporation;
AGENDA ITEM (5) IS FOR SHAREHOLDERS OF EQUITY, GOVERNMENT SECURITIES, INCOME AND
MANAGED ONLY
(5) To approve or reject changes to certain fundamental investment policies;
(6) To transact any other business that comes before the meeting.
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PROXY STATEMENT
As the owner (the "shareholder" to simplify the following discussion) of a
life insurance policy invested in IDS Life Series Fund, Inc. (the "Fund"), you
are invited to attend a regular shareholder meeting of the Fund. At the meeting,
issues will be voted on as described below.
On September 11, 1994, each portfolio had shares outstanding as follows:
Equity -- ; Government Securities -- ; Income -- ; Managed -- ;
Money Market -- (individually a "Portfolio" and collectively the
"Portfolios"). Although you will vote the shares, all of the outstanding shares
are held by IDS Life Insurance Company ("IDS Life") and IDS Life Insurance
Company of New York ("IDS Life of New York"), a wholly-owned subsidiary of IDS
Life. On July 31, 1994, IDS Life held shares of Equity; shares
of Government Securities; shares of Income; shares of Managed
and shares of Money Market for persons with voting rights and IDS
Life of New York held shares of Equity; shares of Government
Securities; shares of Income; shares of Managed and
shares of Money Market for persons with voting rights.
IDS Life and IDS Life of New York are each responsible for mailing this
proxy material to you. You will notify IDS Life or IDS Life of New York, as the
case may be, as to how they want your shares voted. IDS Life and IDS Life of New
York will vote the shares held in proportion to the instructions they receive.
If proper instructions are not received, the shares will be voted in the same
ratio as those shares for which proper instructions were received from other
shareholders. It is estimated that this proxy statement will be mailed on
September 17, 1994.
To avoid the cost of further solicitation, it is important for you to vote
promptly. If you think you might not attend, please complete the card. If your
plans change and you can attend, simply see the Secretary at the meeting and
tell her you will be voting your shares in person. Also, if you change your mind
after you send in the card, you may change your vote or revoke it by writing us
or by sending another card. Make sure you sign and date the card and return it
to us.
(1) ELECTION OF BOARD MEMBERS
The Board has set the number of persons who serve on the Board at 5. Each
Board member will serve until the next regular meeting and until a successor is
elected to take office.
In voting for Board members, you may vote all of your shares cumulatively.
This means that you have the right to give each nominee an equal
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number of votes or divide the votes among the nominees as you wish. You have as
many votes as the number of shares attributed to you, including fractional
shares, multiplied by the number of members to be elected.
All of the nominees have agreed to serve. If an unforeseen event prevents a
nominee from serving, your votes will be cast for the election of a substitute
selected by the Board. Information about each nominee is provided below. The
persons named in the enclosed proxy intend to vote all proxies (except those on
which authority to vote is withheld) for the nominees named in the following
table. If you elect to withhold authority for any individual nominee or
nominees, you may do so by marking the box labeled "Exception" and by striking
the name of any excepted nominee, as is further explained on the card itself. If
you do withhold authority, the proxies will not vote shares equivalent to the
proportionate number applicable to the names for which authority is withheld.
Each of the nominees is also a nominee for IDS Life Variable Annuity Fund A and
IDS Life Variable Annuity Fund B. Each nominee was elected a member of the Board
at the last meeting except for Richard W. Kling and Janis E. Miller. None of the
nominees own, directly or indirectly, any shares in this Fund. Election requires
a vote by a majority of the shares present or represented at the meeting.
RICHARD W. KLING* Board member since 1994 Age 53
Chairman of the Board since March 1994. President and director of IDS Life
Insurance Company ("IDS Life"). Vice President, IDS Financial Corporation
("IDS").
EDWARD LANDES Board member since 1988 Age 75
Former Development Consultant.
JANIS E. MILLER* Board member since 1994 Age 42
Executive Vice President -- Variable Assets and director of IDS Life since March
1994. Vice President, IDS.
CARL N. PLATOU Board member since 1988 Age 69
President Emeritus and Chief Executive Officer, Fairview Hospital and Healthcare
Services.
GORDON H. RITZ Board member since 1988 Age 67
President, Con Rad Broadcasting Corp (radio broadcasting); Director, Sunstar
Foods and Mid-America Publishing.
*Interested person by reason of being an officer and employee of IDS Life or
IDS.
4
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During the last fiscal year, the members of the Board received the following
compensation, in total, from the three funds on whose Boards they serve.
NOMINEE COMPENSATION
<TABLE>
<CAPTION>
Aggregate
Compensation Total Cash
Nominee from Fund Compensation
- ----------------------------------------- ------------- -------------
<S> <C> <C>
Edward Landes $ 4,000 $ 8,000
Carl N. Platou 3,500 7,000
Gordon H. Ritz 4,000 4,000
</TABLE>
Besides Mr. Kling, who is chairman, the Fund's other officers are:
Morris Goodwin, Jr., 42, Vice President and Treasurer since 19 . Vice
President and Corporate Treasurer, IDS.
Louis C. Fornetti, 44, Vice President since 19 . Senior Vice President and
Chief Financial Officer and Director, IDS.
Colleen Curran, 41, Secretary since 19 . Senior Counsel and Secretary, IDS.
William A. Stoltzmann, 45, General Counsel and Assistant Secretary since
19 . Vice President and General Counsel, IDS Life.
Robert O. Schneider, 63, Controller since 1981. Assistant Controller --
Corporate Reports and Equity Administration, IDS Life.
Officers serve at the pleasure of the Board.
The Board met times during the last fiscal year. The Fund does not have
standing audit, nominating or compensation committees. Because of the small size
of the Board, it was determined not to establish such committees. During the
last fiscal year, no nominee had an attendance record of less than 75%.
Board members who are not salaried employees of IDS Life or one of its
affiliates receive $4,000 per year plus expenses. All officers are salaried
employees of IDS Life or IDS and receive no remuneration from the Fund.
During the last fiscal year, no officer earned more than $60,000 from the
Fund. All officers as a group (five persons) earned cash compensation from the
Fund, including salaries and thrift plan, of $ for the last fiscal year.
(2) RATIFY OR REJECT THE SELECTION OF
KPMG PEAT MARWICK AS INDEPENDENT AUDITORS
For the fiscal year ending April 30, 1995, KPMG Peat Marwick has been
selected to serve as the independent auditors for the Fund.
The audit services provided by KPMG Peat Marwick include the examination of
the annual financial statements and assistance in connection with
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filings with the Securities and Exchange Commission (the "SEC"). A
representative of KPMG Peat Marwick is expected to be at the meeting and will
have the opportunity to make a statement and answer questions.
RECOMMENDATION AND VOTE REQUIRED. The Board recommends that you vote to
ratify the selection of the independent auditors. Ratification of the selection
requires a vote by a majority of the shares present or represented at the
meeting. If the selection of the independent auditors is not ratified, the Board
will consider what further action must be taken.
(3) APPROVE OR DISAPPROVE A NEW INVESTMENT POLICY
TO PERMIT EACH PORTFOLIO TO INVEST ALL
OF ITS ASSETS IN AN INVESTMENT COMPANY WITH
SUBSTANTIALLY THE SAME INVESTMENT OBJECTIVES,
POLICIES AND RESTRICTIONS AS THE PORTFOLIO
At some future time the Board may determine that it is in the best interests
of a Portfolio and its shareholders to create what is known as a master/feeder
fund structure. Such a structure allows several investment companies and other
investment groups, including pensions plans and trust accounts, to have their
investment portfolios managed as a combined pool called the master fund. The
purpose of the structure is to achieve operational efficiencies. The
master/feeder structure will be implemented for a Portfolio only if the Board
determines that it is in the best interest of the Portfolio and its shareholders
and any issues relating to current interpretations of federal tax laws are
resolved.
Currently, each Portfolio's investment policies would prohibit the
master/feeder structure. The Board recommends that shareholders adopt the
following investment policy: "NOTWITHSTANDING ANY OF THE PORTFOLIO'S OTHER
INVESTMENT POLICIES, THE PORTFOLIO MAY INVEST ITS ASSETS IN AN OPEN-END
MANAGEMENT INVESTMENT COMPANY HAVING SUBSTANTIALLY THE SAME INVESTMENT
OBJECTIVES, POLICIES AND RESTRICTIONS AS THE PORTFOLIO FOR THE PURPOSE OF HAVING
THOSE ASSETS MANAGED AS PART OF A COMBINED POOL."
Adoption of this policy will permit the Portfolio to invest its assets in a
master fund, without any additional vote of shareholders. The Portfolio's
operations and services will not be affected. Even though the assets are
invested in securities of the master fund, you will continue to receive
information about the underlying investments the same as you now receive in your
annual and semi-annual reports.
RECOMMENDATION AND VOTE REQUIRED. The Board recommends that you approve the
new investment policy. Approval requires the affirmative vote of 67% or more of
the shares represented at the meeting if more than 50% are represented or more
than 50% of the shares entitled to vote, whichever is less. If the change is not
approved, each Portfolio will continue to operate in the same fashion as it is
now operating.
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(4) APPROVE OR REJECT AMENDMENTS TO THE FUND'S
ARTICLES OF INCORPORATION
ESTABLISHMENT OF SEPARATE PORTFOLIOS. In order to provide flexibility in
organizing and creating investment opportunities, IDS Life has recommended that
the Fund's Articles of Incorporation be amended to permit establishment of
additional separate investment portfolios within the Fund. If this proposal is
approved, the Board would be authorized to establish one or more additional
separate series of stock evidencing an interest in separate and distinct
portions of the Fund's assets. This would have no effect on the investment of
existing shareholders.
Shares of each portfolio of the Fund would represent an interest only in
that portfolio's assets (and profits or losses) and, in the event of
liquidation, each share of a portfolio would have the same rights to assets as
every other share of that portfolio. Each share of a portfolio would have one
vote. On some issues, such as the election of directors, all shares of the Fund
would vote together as one series. On an issue affecting a particular portfolio,
its shares would vote as a separate series. An example of such an issue would be
a fundamental investment restriction pertaining to only one portfolio. In voting
on the Investment Management and Services Agreement, approval by the
shareholders with investments allocated to one portfolio would make the
Agreement effective as to that portfolio, whether or not it had been approved by
the shareholders with investments allocated to the other portfolios.
The proposed amendment to the Fund's Articles of Incorporation is shown
below (additions underscored, deletions in brackets). None of these changes will
have a material effect on the purpose or operation of the Fund's existing
portfolios or on shareholder rights.
ARTICLE III -- CAPITALIZATION
Section 1. The amount of the total authorized Capital Stock of the Fund
shall be $100,000,000, consisting of 10,000,000,000 shares of the par value
of one tenth of one cent ($.001) per share. Any or all of said shares of
Capital Stock may be issued in such classes or series with such
designations, preferences and relative, participating, optional or other
special rights, or qualifications, limitations or restrictions thereof, as
shall be stated and expressed in a resolution or resolutions providing for
the issuance of such class or series of stock as may be adopted from time to
time by the Fund's Board of Directors pursuant to the authority hereby
vested in said Board. Each class or series of shares which the Board of
Directors may establish, as provided herein, may, if the Board shall so
determine by resolution, evidence an interest in a separate and distinct
portion of the Fund's assets, which may take the form of a separate
portfolio of investment securities and cash. Authority to establish such
separate portfolios is hereby vested in the Board as full or fractional
shares. Each outstanding fractional share shall have the rights
7
<PAGE>
which are provided in these Articles of Incorporation, the By-Laws of the
Fund, the resolutions of the Board of Directors and the laws of the State of
Minnesota to which a full share of such stock is entitled, but in the
proportion which such fractional share bears to a full share of such stock.
LIMITATION ON LIABILITY OF DIRECTORS. Under Minnesota law, the Fund may
amend its Articles of Incorporation to eliminate or limit monetary damages of a
director. The Board of Directors considered the reasons underlying the
legislation and determined that limitations are appropriate for the directors of
the Fund. Accordingly, it has approved an amendment to Article IV of the
Articles of Incorporation. If approved by shareholders, the amendment will add
Section 6 which reads as follows:
"Section 6. To the full extent permitted by the laws of the State of
Minnesota, as now existing or hereafter amended, no director of the Fund
shall be liable to the Fund or to its shareholders for monetary damages for
breach of fiduciary duty as a director but such limit on liability shall be
permitted only to the extent allowable under the provisions of the
Investment Company Act of 1940."
The Minnesota legislation is designed to prevent directors who work
diligently and honestly in performing their duties from being subject to an
after-the-fact challenge to the way their duties were performed. It is important
to have independent directors who are highly qualified serve on boards of
directors. The changing nature of the investment markets and the insurance
markets, however, has caused a substantial number of such persons to consider
resigning or not accepting the responsibility of being a director. Insurance
policies that previously covered actions taken by directors have ceased to be
available, have limited the scope of the coverage or are available only at much
higher premium rates. In response, state legislatures have sought to determine
what it is fair to expect directors to do and have concluded that directors
should not engage in self-dealing and should act in good faith but should not be
subject to ruinous monetary liability unless their conduct was improper.
Under Minnesota law, a director is required to discharge his or her duties
in good faith, in a manner the director reasonably believes to be in the best
interest of the corporation, and with the care an ordinarily prudent person in a
like position would exercise under similar circumstances. A director who meets
this standard is not liable. However, directors often have been named as
defendants in lawsuits where a loss has occurred, alleging that the loss
occurred, among other reasons, as a result of the directors' failure to act in
accordance with the standard described above. These lawsuits usually have been
brought by a shareholder suing derivatively in the name of the corporation.
Under Minnesota law, the money damages payable by a director
8
<PAGE>
for an act or a failure to act can be eliminated or limited by the Articles of
Incorporation. However, the limitation will not apply if the director failed to
act in good faith; breached his or her duty of loyalty to the corporation or its
shareholders; engaged in any intentional misconduct or knowingly violated a law;
derived any improper personal benefit; violated Section 302A.559 of Minnesota
law (pertaining to paying dividends or other distributions); or violated Section
80A.23 of Minnesota law (pertaining to the sale of securities).
In addition, under federal law, because the Fund is a regulated investment
company, the proposed limitation would not apply if an act or failure to act
were the result of gross negligence or reckless disregard of the duties involved
in the conduct of the director's office. Further, the amendment to the Articles
of Incorporation will not limit monetary damages in the case of violations of
other federal laws pertaining to the sale of securities and will not limit any
legal action which does not seek monetary recovery.
RECOMMENDATION AND VOTE REQUIRED. The Board of Directors recommends that
you vote to approve the amendment. Approval requires the affirmative vote of a
majority of the shares present or represented at the meeting. If the
shareholders approve the amendment, it will become effective upon filing with
the Secretary of State's office. This filing is expected to occur shortly after
the shareholder meeting.
(5) APPROVE OR REJECT CHANGES TO FUNDAMENTAL POLICIES
Each Portfolio has a number of investment policies that can be changed only
with approval of shareholders. These policies are referred to as "fundamental"
policies. Policies that can be changed by the Board are called "non-
fundamental". The Board recommends changing the fundamental policies described
below. These policies were established a number of years ago. New investment
strategies and new investment instruments continue to be created and developed.
If the policies are changed to non-fundamental or revised, a Portfolio will have
the flexibility to use those strategies and instruments promptly without
incurring the cost of shareholder meetings. Some policies were established to
conform to the requirements of federal law that existed at the time. These
policies do not need to be fundamental under those laws and, if changed to
non-fundamental, the Board could react to changes in the laws.
FOR EQUITY, GOVERNMENT SECURITIES, INCOME AND MANAGED
A. PERMIT THE PORTFOLIO TO BUY ON MARGIN OR SELL SHORT TO THE EXTENT
PERMITTED BY THE BOARD. Currently, each Portfolio is prohibited from buying on
margin or selling short. Buying on margin is borrowing money to buy securities
and selling short is selling securities the Portfolio does not own. Both
strategies are cash market transactions that create leverage but are appropriate
if properly used. Leveraging occurs when the market value of an investment
changes significantly more than the amount of cash invested.
9
<PAGE>
Under existing investment policies, the Portfolio can implement the same type of
strategies using derivative instruments. Depending on market conditions,
however, it may be preferable to pursue a strategy in the cash market instead of
the derivatives market. To assure the proper use of leverage transactions, the
Portfolio imposes limitations. One limitation is that its investment portfolio
must have investment performance characteristics similar to those it would have
if all of its assets were invested in the cash market. Accordingly, its
investment portfolio overall will not be leveraged. If the policies pertaining
to use of margin and short-selling are non-fundamental, as market conditions
change, the Board can consider requests of the portfolio manager to employ
investment strategies using these techniques.
B. PERMIT THE BOARD TO ESTABLISH POLICIES FOR INVESTING IN OTHER INVESTMENT
COMPANIES. Each Portfolio is prohibited from investing in other investment
companies except by purchases in the open market where the dealer's or sponsor's
profit is the regular commission. This policy was adopted to conform to current
law. It may be appropriate to make such investments in ways other than open
market purchases in the future if the law changes. If the policy is changed to
non-fundamental, the Board could react to changes in the law.
C. PERMIT THE BOARD TO ESTABLISH POLICIES WHEN THE PORTFOLIO COULD MAKE AN
INVESTMENT FOR THE PURPOSE OF EXERCISING CONTROL OR MANAGING THE COMPANY. Each
Portfolio is prohibited from making investments to control or manage a company.
While it is not the intent of any Portfolio to control or manage a company and
it generally is precluded from doing so by various laws, from time to time one
of its investments may experience financial difficulties. It may be in the
interest of the Portfolio to make an additional investment while at the same
time asserting some influence regarding management.
D. REVISE THE FUNDAMENTAL POLICY ON MAKING LOANS. Currently, each
Portfolio has a fundamental policy prohibiting it from making cash loans. It is
proposed to revise the policy to state that "THE PORTFOLIO WILL NOT MAKE CASH
LOANS, IF THE TOTAL COMMITMENT AMOUNT EXCEEDS 5% OF THE PORTFOLIO'S TOTAL
ASSETS." In certain circumstances the Portfolio may make investments, such as
purchasing short-term debt instruments from banks, that may be considered cash
loans. The Portfolio will not make loans to affiliated companies or to any
individual.
E. REVISE THE FUNDAMENTAL POLICY ON INVESTING IN REAL ESTATE. Currently,
each Portfolio has a fundamental policy that states that the Portfolio will not
buy or sell real estate, commodities or commodity contracts, except the
Portfolio may enter into futures contracts. It is proposed to separate the
policy into two parts. The commodities policy will remain unchanged. The real
estate policy will be revised as follows: "THE PORTFOLIO WILL NOT 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
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OTHER INSTRUMENTS BACKED BY REAL ESTATE OR SECURITIES OF COMPANIES ENGAGED IN
THE REAL ESTATE BUSINESS." Each Portfolio does not expect to hold real estate
directly. However, it may invest in securities issued or guaranteed by companies
engaged in acquiring, constructing, financing, developing or operating real
estate projects, including real estate investment trusts (REITs).
FOR EQUITY AND INCOME
F. PERMIT THE BOARD TO ESTABLISH POLICIES FOR INVESTING IN OIL, GAS OR
OTHER MINERAL EXPLORATION OR DEVELOPMENT PROGRAMS. Currently, the law limits
investments by each Portfolio in oil, gas or other mineral exploration or
development programs. Should the law change, the Board could establish
appropriate guidelines.
G. PERMIT THE BOARD TO ESTABLISH POLICIES WITH RESPECT TO INVESTMENTS IN
ILLIQUID SECURITIES. A Portfolio may not invest more than 10% of its net assets
in securities and derivative instruments that cannot be sold in the ordinary
course of business. Changing this policy to non-fundamental would permit the
Board to change the limit as appropriate.
FOR GOVERNMENT SECURITIES AND MANAGED
H. PERMIT A PORTFOLIO TO PLEDGE ASSETS AS COLLATERAL TO THE EXTENT
PERMITTED BY THE BOARD. Each Portfolio is prohibited from pledging more than
15% of its total assets as collateral for loans or other purposes. If the policy
is changed to non-fundamental, when appropriate, the Board would be able to
raise or lower the maximum percentage in order to implement some of the
strategies described above and to meet other possible needs.
FOR MANAGED
I. PERMIT THE BOARD TO CHANGE THE LIMIT ON INVESTMENTS IN ISSUERS WITH LESS
THAN THREE YEARS OF OPERATING HISTORY. Each Portfolio may not invest more than
5% of its total assets in companies that have less than three years of operating
history. This percentage currently is set by a law which may change in the
future. If the policy is made non-fundamental and the law changes; Board could
take such action as appropriate.
RECOMMENDATION AND VOTE REQUIRED. The Board recommends that you approve the
proposed changes in each Portfolio's fundamental policies. Approval requires the
affirmative vote of 67% or more of the shares represented at the meeting if more
than 50% are represented or more than 50% of the shares entitled to vote,
whichever is less. If the changes are not approved, each Portfolio will continue
to operate in accordance with its current investment policies.
11
<PAGE>
CERTAIN INFORMATION CONCERNING IDS LIFE AND IDS
PRESIDENT AND BOARD OF DIRECTORS OF IDS LIFE. Richard W. Kling is President
and James A. Mitchell is Chief Executive Officer of IDS Life. Listed below are
the names and principal occupations of the directors of IDS Life as of July 31,
1994. The address of each director is IDS Tower 10, Minneapolis, Minnesota
55440-0010.
<TABLE>
<CAPTION>
Name Principal Occupation
- --------------------- ------------------------------------------------
<S> <C>
Louis C. Fornetti Senior Vice President and Chief Financial
Officer, IDS
David R. Hubers President and Chief Executive Officer, IDS
Richard W. Kling President
Paul F. Kolkman Vice President
Peter A. Lefferts Executive Vice President
Janis E. Miller Executive Vice President
James A. Mitchell Chairman of the Board and Chief Executive
Officer
Barry J. Murphy Executive Vice President
Stuart A. Sedlacek Vice President
Melinda S. Urion Vice President and Corporate Controller
</TABLE>
IDS Life and IDS Life of New York are the record holders of all outstanding
shares of the Fund. These shares were purchased and are currently held by IDS
Life and IDS Life of New York pursuant to instructions from shareholders with
life insurance policies issued by IDS Life and IDS Life of New York.
OWNERSHIP AND HEADQUARTERS OF IDS LIFE. The mailing address of IDS Life is
IDS Tower 10, Minneapolis, Minnesota 55440-0010. IDS Life is a wholly-owned
subsidiary of IDS, IDS Tower 10, Minneapolis, Minnesota 55440-0010.
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<PAGE>
PRESIDENT AND BOARD OF DIRECTORS OF IDS. David R. Hubers is President and
Chief Executive Officer of IDS. Listed below are the names and principal
occupations of the directors of IDS as of July 31, 1994. Except as otherwise
noted below, the address of each director is IDS Tower, Minneapolis, MN
55440-0010.
<TABLE>
<CAPTION>
Name and Address Principal Occupation
- -------------------------------------------- -----------------------------------
<S> <C>
Peter J. Anderson Sr. Vice President
Karl J. Breyer Sr. Vice President and General
Counsel
James E. Choat Sr. Vice President
William H. Dudley Executive Vice President
Roger S. Edgar Sr. Vice President
Gordon L. Eid Sr. Vice President and Deputy
General Counsel
Louis C. Fornetti Sr. Vice President
Harvey Golub Chairman, American Express
American Express
New York, New York
David R. Hubers President and Chief Executive
Officer
Marietta L. Johns Sr. Vice President
Susan D. Kinder Sr. Vice President
Steven C. Kumagai Sr. Vice President
Peter A. Lefferts Sr. Vice President
Douglas A. Lennick Exec. Vice President
Jonathan S. Linen Vice Chairman, American Express
American Express
New York, New York
James A. Mitchell Exec. Vice President
Barry Murphy Sr. Vice President
Erven A. Samsel Sr. Vice President
R. Reed Saunders Sr. Vice President
Jeffrey E. Stiefler President, American Express
American Express
New York, New York
Fenton R. Talbot Sr. Vice President, American
American Express Express
New York, New York
John R. Thomas Sr. Vice President
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Name and Address Principal Occupation
- -------------------------------------------- -----------------------------------
<S> <C>
Norman Weaver, Jr. Sr. Vice President
William N. Westhoff Sr. Vice President
Michael R. Woodward Sr. Vice President
</TABLE>
IDS is a wholly owned subsidiary of American Express Company ("American
Express"). American Express is a financial services company located at American
Express Tower, World Financial Center, New York, New York.
MISCELLANEOUS
MANAGEMENT AGREEMENT. The Investment Management and Services Agreement
("Management Agreement") and the Investment Advisory Agreement ("Advisory
Agreement") were approved by shareholders at the first regular meeting of the
Fund on January 30, 1987. Under the Management Agreement, IDS Life furnishes the
Fund investment advice, research and administrative services, such as clerical,
bookkeeping and accounting services. IDS Life has an Advisory Agreement with
IDS. Subject to the direction and control of the Fund's Board, IDS Life
determines which securities shall be purchased, held or sold for the Fund's
portfolio. The Fund pays IDS Life for its services monthly. The Management
Agreement provides for IDS Life to be paid a fee based on the net assets of the
Portfolios. The annual asset charge is based on the aggregate average daily net
assets of each of the Portfolios at the following rates: 0.70% for Equity; 0.70%
for Government Securities; 0.70% for Income; 0.70% for Managed and 0.50% for
Money Market. Under the Advisory Agreement IDS Life pays IDS for investment
advice at a rate of 0.25% of the Fund's average net assets.
The Management Agreement also provides that in addition to paying its own
management fee, brokerage costs and certain taxes, the Fund will pay IDS Life an
amount equal to the cost of certain expenses incurred and paid by IDS Life in
connection with the Fund's operations. IDS Life has agreed to a voluntary limit
of 0.1% of the average daily net assets of the Fund for nonadvisory expenses.
IDS Life reserves the right to discontinue limiting the nonadvisory expenses at
0.1% but has no present intention doing so. Such payments exceed 0.25% of the
Fund's average daily net assets. The expenses of IDS Life which the Fund has
agreed to reimburse include: custodian fees and expenses, audit expenses, cost
of items sent to shareholders, postage, fees and expenses paid to directors who
are not officers or employees of IDS Life or IDS or its affiliates, fees and
expenses of attorneys, costs of fidelity and surety bonds, SEC registration
fees, expenses of preparing prospectuses and of printing and distributing
prospectuses to existing shareholders, and losses due to theft or other
wrongdoing, or due to liabilities not covered by bond or agreement. All other
expenses are borne by IDS Life.
14
<PAGE>
For the last fiscal year, the amount of the fee charged to the Fund by IDS
Life under the Management Agreement was $850,524 for Equity, $75,428 for
Government Securities, $199,578 for Income, $920,594 for Managed and $41,168 for
Money Market. In turn, pursuant to the Advisory Agreement, IDS Life paid
$751,255 for investment advisory services relative to the Fund performed by IDS.
The Management Agreement, by its terms, requires the directors to approve
its continuation annually. Also, as required by its terms and applicable law,
the agreement may be terminated without penalty by either the Board or IDS Life
or by a vote of a majority of the outstanding shares of the Fund will terminate
automatically if assigned.
INVESTMENT DECISIONS, PORTFOLIO TRANSACTIONS AND BROKERAGE. Under the
Management Agreement, IDS Life has responsibility for making the Fund's
investment decisions, for effecting the execution of trades for the Fund's
portfolio and for negotiating any brokerage commissions. IDS Life intends to
direct IDS to execute trades and negotiate commissions on its behalf. These
services are covered by the 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.
The Management Agreement generally requires IDS Life to use its best efforts
to obtain the best available price and the most favorable execution. However,
brokerage firms may give some extra services, including economic or investment
research and analysis. Sometimes it may be desirable to compensate a certain
broker for research or brokerage services by paying a commission which might not
otherwise be charged or a commission in excess of that another broker might
charge. The Board 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 amount
of commission is reasonable in relation to the value of the brokerage or
research services provided by the particular broker.
In purchases and sales of securities involving transactions not listed on an
exchange or in listed securities which are traded off of an exchange, the Fund
will deal with a market maker as principal, or a broker as agent, depending upon
the method believed to produce the best available price and most favorable
execution as described above. In cases where the Fund deals with a broker who
acts as principal, commissions generally are not stated separately but are
included in the price of the securities.
IDS and IDS Life give investment advice to a number of investment companies
and mutual funds. Where more than one of these companies or funds is interested
in the same securities at the same time, IDS and IDS Life can carry out the sale
or purchase in a way that all agree in advance is fair. Sharing in a large
transaction may affect the price or volume of shares acquired, but by these
transactions, the Fund hopes to gain an advantage in execution.
15
<PAGE>
During the last fiscal year, the Fund paid brokerage commissions aggregating
$405,141. Substantially 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.
Certain brokerage transactions were executed through broker-dealer
affiliates of IDS as shown in the table below:
<TABLE>
<CAPTION>
Percent of
Total Value of
Percent Trades Where
Nature of Amount of of All Commissions
Broker Affiliation* Commissions Commissions Were Paid
- ------------------------- ----------------- ------------ --------------- -----------------
<S> <C> <C> <C> <C>
Lehman Bros., Inc. 1 $ 4,851 1.19% .00%
American Enterprise
Investment
Services Inc. 2 19,878 4.91 .01
<FN>
* Nature of affiliation
(1) Under common control with IDS as a subsidiary of American Express
(2) Wholly owned subsidiary of IDS.
</TABLE>
These transactions were executed at rates determined to be reasonable and
fair as compared to the rates another broker would charge, pursuant to
procedures adopted by the Board.
OTHER BUSINESS. At this time the Board does not know of any other business
to come before the meetings. If something does come up, the proxies will use
their best judgment to vote for you on the matter.
SIMULTANEOUS MEETINGS. The regular meeting of shareholders of the Fund is
called to be held at the same time as the regular meetings of shareholders of
IDS Life Variable Annuity Fund A and IDS Life Variable Annuity Fund B. It is
anticipated that all meetings will be held simultaneously. If any shareholder at
the Fund's meeting objects to the holding of a simultaneous meeting, the
shareholder may move for an adjournment of the Fund's meeting to a time
immediately after the simultaneous meetings so that a meeting of the Fund may be
held separately. Should such a motion be made, the persons named as proxies will
take into consideration the reasons for the objection in deciding whether to
vote in favor of the adjournment.
SOLICITATION OF PROXIES. The Board is asking for your vote and for you to
return the proxy card by mail as promptly as possible. The Fund will pay the
expenses for the proxy material and the postage. Supplementary solicitations may
be made by mail, telephone, telegraph or personal contact by financial planners.
The expenses of supplementary solicitation will be paid by the Fund.
SHAREHOLDER PROPOSALS. The Fund does not hold regular meetings of
shareholders on an annual basis. Therefore, no anticipated date of the next
regular meeting can be provided. If a shareholder has a proposal which she or he
feels should be presented to all shareholders, the shareholder should
16
<PAGE>
send the proposal to the President of the Fund. The proposal will be considered
at a meeting of the Board as soon as practicable. Should it be a matter which
would have to be submitted to shareholders, it will be presented at the next
special or regular meeting of shareholders. In addition, should it be a matter
which the Board deems of such significance as to require a special meeting, such
a meeting will be called.
ADJOURNMENT. In the event that sufficient votes in favor of any of the
proposals set forth in the Notice of the Meeting and Proxy Statement are not
received by the time scheduled for the meeting, the persons named as proxies may
move for one or more adjournments of the meeting for a period or periods of not
more than 60 days in the aggregate to permit further solicitation of proxies
with respect to any of the proposals. Any adjournment will require the
affirmative vote of a majority of the shares present at the meeting. The persons
named as proxies will vote in favor of adjournment those shares which they are
entitled to vote which have voted in favor of the proposals. They will vote
against any adjournment those proxies which have voted against any of the
proposals. The costs of any additional solicitation and of any adjourned session
will be borne by the Fund.
By Order of the Board COLLEEN CURRAN
September 17, 1994 Secretary
IMPORTANT! IF YOU DO NOT INTEND TO BE AT THE MEETING IN PERSON, PLEASE FILL IN
AND SIGN THE ENCLOSED PROXY AND MAIL IT AT ONCE. A RETURN ENVELOPE IS ENCLOSED
FOR YOUR CONVENIENCE.
17
<PAGE>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1993
<TABLE>
<CAPTION>
December 31,
1993
-------------
(Thousands)
<S> <C>
ASSETS
Investments:
Fixed maturities (Fair value: $20,425,979).............. $19,392,424
Mortgage loans on real estate (Fair value:
$2,125,686)........................................... 2,055,450
Policy loans.............................................. 350,501
Other investments......................................... 56,307
-------------
Total investments......................................... 21,854,682
-------------
Cash and cash equivalents................................. 146,281
Receivables:
Reinsurance............................................. 55,298
Amounts due from brokers................................ 5,719
Other accounts receivable............................... 21,459
Premiums due............................................ 1,329
-------------
Total receivables......................................... 83,805
-------------
Accrued investment income................................. 307,177
Deferred policy acquisition costs......................... 1,652,384
Other assets.............................................. 21,730
Assets held in segregated asset accounts, primarily common
stocks at market........................................ 8,991,694
-------------
Total assets...................................... $33,057,753
-------------
-------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Future policy benefits:
Fixed annuities......................................... $ 18,492,135
Universal life-type insurance........................... 2,753,455
Traditional life-type insurance......................... 210,205
Disability income, health and long-term care
insurance............................................. 185,272
Policy claims and other policyholders' funds.............. 44,516
Deferred federal income taxes............................. 43,620
Amounts due to brokers.................................... 351,486
Other liabilities......................................... 292,024
Liabilities related to segregated asset accounts.......... 8,991,694
-------------
Total liabilities................................. 31,364,407
-------------
Stockholder's equity:
Capital stock, $30 par value per share; 100,000 shares
authorized, issued and outstanding...................... 3,000
Additional paid-in capital................................ 222,000
Net unrealized appreciation on equity securities.......... 114
Retained earnings......................................... 1,468,232
-------------
Total stockholder's equity........................ 1,693,346
-------------
Total liabilities and stockholder's equity................ $ 33,057,753
-------------
-------------
Commitments and contingencies (Note 6)
</TABLE>
See accompanying notes to consolidated balance sheet.
F-1
<PAGE>
IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED BALANCE SHEET
($ THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS. IDS Life Insurance Company (the Company) is engaged in
the insurance and annuity business. The Company sells various forms of fixed and
variable individual life insurance, group life insurance, individual and group
disability income insurance, long-term care insurance, and single and
installment premium fixed and variable annuities.
BASIS OF PRESENTATION. The Company is a wholly owned subsidiary of IDS
Financial Corporation (IDS), which is a wholly owned subsidiary of American
Express Company. The accompanying consolidated balance sheet includes the
accounts of the Company and its wholly owned subsidiaries, IDS Life Insurance
Company of New York and American Enterprise Life Insurance Company. All material
intercompany accounts and transactions have been eliminated in consolidation.
The accompanying consolidated balance sheet has been prepared in conformity
with generally accepted accounting principles which vary in certain respects
from reporting practices prescribed or permitted by state insurance regulatory
authorities. Also, the consolidated balance sheet is presented on a historical
cost basis without adjustment of the net assets attributable to the 1984
acquisition of IDS by American Express Company.
INVESTMENTS. Investments in fixed maturities are carried at cost, adjusted
where appropriate for amortization of premiums and accretion of discounts.
Mortgage loans on real estate are carried principally at the unpaid principal
balances of the related loans. Policy loans are carried at the aggregate of the
unpaid loan balances which do not exceed the cash surrender values of the
related policies. Other investments include interest rate caps, real estate and
equity securities. When evidence indicates a decline, which is other than
temporary, in the underlying value or earning power of individual investments,
such investments are written down to the estimated realizable value by a charge
to income. Equity securities are carried at market value and the related net
unrealized appreciation or depreciation is reported as a credit or charge to
stockholder's equity.
The Company has the ability and the intent to recover the costs of these
investments by holding them for the forseeable future. The ability to hold
investments to scheduled maturity dates is dependent on, among other things,
annuity contract owners maintaining their annuity contracts in force.
The Company will implement, effective January 1, 1994, Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." Under the new rules, debt securities that the
Company has both the positive intent and ability to hold to maturity will be
carried at amortized cost. Debt securities that the Company does not
F-2
<PAGE>
IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED BALANCE SHEET -- CONTINUED
($ THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
have the positive intent and ability to hold to maturity and all marketable
equity securities will be classified as available-for-sale and carried at fair
value. Unrealized gains and losses on securities classified as available-for-
sale will be carried as a separate component of stockholder's equity. The effect
of the new rules will be to increase stockholder's equity by approximately $181
million, net of taxes, as of January 1, 1994, but the new rules will have no
material impact on the Company's results of operations.
Interest rate cap contracts are purchased to reduce the Company's exposure
to rising interest rates which would increase the cost of future policy benefits
for interest sensitive products. Costs are amortized over the lives of the
agreements and benefits are recognized when realized.
Prepayments are anticipated on certain investments in mortgage-backed
securities in determining the constant effective yield used to recognize
interest income. Prepayment estimates are based on information received from
brokers who deal in mortgage-backed securities.
DEFERRED POLICY ACQUISITION COSTS. The costs of acquiring new business,
principally sales compensation, policy issue costs, underwriting and certain
sales expenses, have been deferred on insurance and annuity contracts. The
deferred acquisition costs for single premium deferred annuities and installment
annuities are amortized based upon surrender charge revenue and a portion of the
excess of investment income earned from investment of the contract
considerations over the interest credited to contract owners. The costs for
universal life-type insurance are amortized over the lives of the policies as a
percentage of the estimated gross profits expected to be realized on the
policies. For traditional life, disability income, health and long-term care
insurance policies, the costs are amortized over an appropriate period in
proportion to premium revenue.
LIABILITIES FOR FUTURE POLICY BENEFITS. Liabilities for universal life-type
insurance, single premium deferred annuities and installment annuities are
accumulation values.
Liabilities for fixed annuities in a benefit status are based on the
Progressive Annuity Table with interest at 5 percent, the 1971 Individual
Annuity Table with interest at 7 percent or 8.25 percent, or the 1983a Table
with various interest rates ranging from 5.5 percent to 9.5 percent, depending
on year of issue.
Liabilities for future benefits on traditional life insurance have been
computed principally by the net level premium method, based on anticipated rates
of mortality (approximating the 1965-1970 Select and Ultimate Basic Table for
policies issued after 1980 and the 1955-1960 Select and Ultimate
F-3
<PAGE>
IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED BALANCE SHEET -- CONTINUED
($ THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
Basic Table for policies issued prior to 1981), policy persistency derived from
Company experience data (first year rates ranging from approximately 70 percent
to 90 percent and increasing rates thereafter), and estimated future investment
yields of 4 percent for policies issued before 1974 and 5.25 percent for
policies issued from 1974 to 1980. Cash value plans issued in 1980 and later
assume future investment rates that grade from 9.5 percent to 5 percent over 20
years. Term insurance issued from 1981 to 1984 assumes an 8 percent level
investment rate and term insurance issued after 1984 assumes investment rates
that grade from 10 percent to 6 percent over 20 years.
Liabilities for future disability income policy benefits have been computed
principally by the net level premium method, based on the 1964 Commissioners
Disability Table with the 1958 Commissioners Standard Ordinary Mortality Table
at 3 percent interest for 1980 and prior, 8 percent interest for persons
disabled from 1981 to 1991 and 6 percent interest for persons disabled after
1991.
Liabilities for future benefits on long-term care insurance have been
computed principally by the net level premium method, using morbidity rates
based on the 1985 National Nursing Home Survey and mortality rates based on the
1983a Table. The interest rate basis is 9.5 percent grading to 7 percent over
ten years for policies issued from 1989 to 1992, 7.75 percent grading to 7
percent over four years for policies issued after 1992, 8 percent for claims
incurred in 1989 to 1991 and 6 percent for claims incurred after 1991.
At December 31, 1993, the carrying amount and fair value of fixed annuities
future policy benefits, after excluding life insurance-related contracts carried
at $913,127, were $17,579,008 and $16,881,747, respectively. The fair value is
net of policy loans of $59,132. The fair value of these benefits is based on the
status of the annuities at December 31, 1993. The fair value of deferred
annuities is estimated as the carrying amount less any surrender charges and
related loans. The fair value for annuities in non-life contingent payout status
is estimated as the present value of projected benefit payments at the rate
appropriate for contracts issued in 1993.
REINSURANCE. The maximum amount of life insurance risk retained by the
Company on any one life is $750 of life and waiver of premium benefits plus $50
of accidental death benefits. The maximum amount of disability income risk
retained by the Company on any one life is $6 of monthly benefit for benefit
periods longer than three years. The excesses are reinsured with other life
insurance companies on a yearly renewable term basis. Graded premium whole life
policies and long term care are primarily reinsured on a coinsurance basis.
F-4
<PAGE>
IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED BALANCE SHEET -- CONTINUED
($ THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
In 1993 the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 113, "Accounting and Reporting for Reinsurance of Short-Duration and
Long-Duration Contracts." Under SFAS No. 113, amounts paid or deemed to have
been paid for reinsurance contracts are recorded as reinsurance receivables.
Prior to 1993, these amounts were recorded as a reduction of the liability for
future insurance policy benefits. The cost of reinsurance is accounted for over
the period covered by the reinsurance contract.
FEDERAL INCOME TAXES. The Company's taxable income is included in the
consolidated federal income tax return of American Express Company. The Company
provides for income taxes on a separate return basis, except that, under an
agreement between IDS and American Express Company, tax benefit is recognized
for losses to the extent they can be used on the consolidated tax return. It is
the policy of IDS and its subsidiaries that IDS will reimburse a subsidiary for
any tax benefit.
Included in other liabilities at December 31, 1993 is $14,709 payable to IDS
for federal income taxes.
SEGREGATED ASSET ACCOUNT BUSINESS. The segregated asset account assets and
liabilities represent funds held for the exclusive benefit of the variable
annuity and variable life insurance contract owners. The Company receives
investment management and mortality and expense assurance fees from the variable
annuity and variable life insurance mutual funds and segregated asset accounts.
The Company also deducts a monthly cost of insurance charge and receives a
minimum death benefit guarantee fee and issue and administrative fee from the
variable life insurance segregated asset accounts.
The Company makes contractual mortality assurances to the variable annuity
contract owners that the net assets of the segregated asset accounts will not be
affected by future variations in the actual life expectancy experience of the
annuitants and the beneficiaries from the mortality assumptions implicit in the
annuity contracts. The Company makes periodic fund transfers to, or withdrawals
from, the segregated asset accounts for such actuarial adjustments for variable
annuities that are in the benefit payment period. The Company guarantees, for
the variable life insurance policyholders, the cost of the contractual insurance
rate and that the death benefit will never be less than the death benefit at the
date of issuance.
F-5
<PAGE>
IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED BALANCE SHEET -- CONTINUED
($ THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
At December 31, 1993 the fair value of liabilities related to segregated
asset accounts was $8,305,209. The fair value of these liabilities is estimated
as the carrying amount less variable insurance contracts carried at $346,276 and
surrender charges, if applicable.
2. INVESTMENTS
Market values of investments in fixed maturities represent quoted market
prices and estimated fair values when quoted prices are not available. Estimated
fair values are determined by established procedures involving, among other
things, review of market indices, price levels of current offerings of
comparable issues, price estimates and market data from independent brokers and
financial files.
The change in net unrealized appreciation (depreciation) of investments for
the year ended December 31, 1993 is summarized as follows:
<TABLE>
<S> <C>
Fixed maturities..................... $ 323,060
Equity securities.................... (156)
</TABLE>
Fair values of and gross unrealized gains and losses on investments in fixed
maturities carried at amortized cost at December 31, 1993 are as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
U.S. Government agency
obligations $ 63,532 $ 3,546 $ 1,377 $ 65,701
State and municipal obligations 11,072 2,380 -- 13,452
Corporate bonds and obligations 9,362,074 768,747 45,706 10,085,115
Mortgage-backed securities 9,978,523 341,067 57,879 10,261,711
------------- ------------ ----------- -------------
19,415,201 1,115,740 104,962 20,425,979
Less allowance for losses 22,777 -- 22,777 --
------------- ------------ ----------- -------------
$ 19,392,424 $ 1,115,740 $ 82,185 $ 20,425,979
------------- ------------ ----------- -------------
------------- ------------ ----------- -------------
</TABLE>
The amortized cost and fair value of investments in fixed maturities at
December 31, 1993 by contractual maturity are shown below. Expected
F-6
<PAGE>
IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED BALANCE SHEET -- CONTINUED
($ THOUSANDS)
2. INVESTMENTS -- CONTINUED
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
------------- -------------
<S> <C> <C>
Due in one year or less $ 89,160 $ 90,928
Due from one to five years 1,430,756 1,532,298
Due from five to ten years 5,488,955 5,924,580
Due in more than ten years 2,427,807 2,616,462
Mortgage-backed securities 9,978,523 10,261,711
------------- -------------
$ 19,415,201 $ 20,425,979
------------- -------------
------------- -------------
</TABLE>
At December 31, 1993, the amount of net unrealized appreciation on equity
securities included $160 of gross unrealized appreciation, $nil of gross
unrealized depreciation and deferred tax credits of $46. The fair value of
equity securities was $1,900 at December 31, 1993.
Included in other investments at December 31, 1993 are interest rate caps at
amortized cost of $26,923 with a fair value of $14,201. These interest rate caps
carry a notional amount of $4,400,000 and expire on various dates from 1994 to
1998.
At December 31, 1993, bonds carried at $4,184 were on deposit with various
states as required by law.
At December 31, 1993, investments in fixed maturities comprised 89 percent
of the Company's total invested assets. These securities are rated by Moody's
and Standard & Poor's (S&P), except for approximately $2.1 billion which is
rated by IDS internal analysts using criteria similar to Moody's and S&P. A
summary of investments in fixed maturities by rating on December 31, 1993 is as
follows:
<TABLE>
<CAPTION>
Rating
- -------------------------------------------
<S> <C>
Aaa/AAA $ 9,959,884
Aa/AA 258,659
Aa/A 160,638
A/A 2,021,177
A/BBB 654,949
Baa/BBB 3,936,366
Baa/BB 717,606
Below investment grade 1,705,922
-------------
$ 19,415,201
-------------
-------------
</TABLE>
F-7
<PAGE>
IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED BALANCE SHEET -- CONTINUED
($ THOUSANDS)
2. INVESTMENTS -- CONTINUED
At December 31, 1993, 99 percent of the securities rated Aaa/AAA are GNMA,
FNMA and FHLMC mortgage-backed securities. No holdings of any other issuer are
greater than 1 percent of the Company's total investments in fixed maturities.
At December 31, 1993, approximately 9.4 percent of the Company's invested
assets were mortgage loans on real estate. Summaries of mortgage loans by region
of the United States and by type of real estate at December 31, 1993 are as
follows:
<TABLE>
<CAPTION>
On Balance Commitments
Region Sheet to Purchase
- ------------------------------------------ ------------ -------------
<S> <C> <C>
East North Central $ 552,150 $ 20,933
West North Central 361,704 16,746
South Atlantic 452,679 52,440
Middle Atlantic 260,239 41,090
New England 155,214 17,620
Pacific 120,378 15,492
West South Central 43,948 525
East South Central 73,748 --
Mountain 70,410 14,594
------------ -------------
2,090,470 179,440
Less allowance for losses 35,020 --
------------ -------------
$ 2,055,450 $ 179,440
------------ -------------
------------ -------------
</TABLE>
<TABLE>
<CAPTION>
On Balance Commitments
Property Type Sheet to Purchase
- ------------------------------------------ ------------ -------------
<S> <C> <C>
Apartments $ 744,788 $ 79,153
Department/retail stores 624,651 65,402
Office buildings 234,042 15,583
Industrial buildings 217,648 9,279
Nursing/retirement homes 83,768 917
Hotels/motels 33,138 --
Medical buildings 30,429 5,954
Residential 78 --
Other 121,928 3,152
------------ -------------
2,090,470 179,440
Less allowance for losses 35,020 --
------------ -------------
$ 2,055,450 $ 179,440
------------ -------------
------------ -------------
</TABLE>
F-8
<PAGE>
IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED BALANCE SHEET -- CONTINUED
($ THOUSANDS)
2. INVESTMENTS -- CONTINUED
Mortgage loan fundings are restricted by state insurance regulatory
authorities to 80 percent or less of the market value of the real estate at the
time of origination of the loan. The Company holds the mortgage document, which
gives the right to take possession of the property if the borrower fails to
perform according to the terms of the agreement. The fair value of the mortgage
loans is determined by a discounted cash flow analysis using mortgage interest
rates currently offered for mortgages of similar maturities. Commitments to
purchase mortgages are made in the ordinary course of business. The fair value
of the mortgage commitments is $nil.
3. INCOME TAXES
The Company qualifies as a life insurance company for federal income tax
purposes. As such, the Company is subject to the Internal Revenue Code
provisions applicable to life insurance companies.
A portion of life insurance company income earned prior to 1984 was not
subject to current taxation but was accumulated, for tax purposes, in a
"policyholders' surplus account." At December 31, 1993, the Company had a
policyholders' surplus account balance of $19,032. The policyholders' surplus
account is only taxable if dividends to the stockholder exceed the stockholder's
surplus account or if the Company is liquidated. Deferred income taxes of $6,661
have not been established because no distributions of such amounts are
contemplated.
Significant components of the Company's deferred tax assets and liabilities
as of December 31, 1993 are as follows:
<TABLE>
<CAPTION>
Deferred tax assets
- --------------------------------------------------------
<S> <C>
Policy reserves $ 453,436
Life insurance guarantee fund assessment reserve 35,000
----------
Total deferred tax assets 488,436
----------
<CAPTION>
Deferred tax liabilities
- --------------------------------------------------------
<S> <C>
Deferred policy acquisition costs 509,868
Investments 10,105
Other 12,083
----------
Total deferred tax liabilities 532,056
----------
Net deferred tax liabilities $ 43,620
----------
----------
</TABLE>
F-9
<PAGE>
IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED BALANCE SHEET -- CONTINUED
($ THOUSANDS)
4. STOCKHOLDER'S EQUITY
Retained earnings available for distribution as dividends to parent are
limited to the Company's surplus as determined in accordance with accounting
practices prescribed by state insurance regulatory authorities. Statutory
unassigned surplus aggregated $922,246 as of December 31, 1993 (see Note 3 with
respect to the income tax effect of certain distributions). In addition, any
dividend distributions in 1994 in excess of approximately $259,063 would require
approval of the Department of Commerce of the State of Minnesota.
Statutory stockholder's equity as of December 31, 1993 was $1,157,022.
5. RELATED PARTY TRANSACTIONS
The Company has loaned funds or agreed to loan funds to IDS under two
separate loan agreements. The balance of the first loan was $75,000 at December
31, 1993. This loan can be increased to a maximum of $100,000 and pays interest
at a rate equal to the preceding month's effective new money rate for the
Company's permanent investments. It is collateralized by equities valued at
$96,790 at December 31, 1993. The second loan was used to fund the construction
of the IDS Operations Center. This loan had an outstanding balance of $84,588 at
December 31, 1993. The loan is secured by a first lien on the IDS Operations
Center property and has an interest rate of 9.89 percent. The Company also has a
loan to an affiliate which was used to fund construction of the IDS Learning
Center. At December 31, 1993, the balance outstanding was $22,573. The loan is
secured by a first lien on the IDS Learning Center property and has an interest
rate of 9.82 percent.
The Company purchased a five year secured note from an affiliated company
which had an outstanding balance of $27,222 at December 31, 1993. The note bears
a market interest rate, revised semi-annually, which at December 31, 1993 was
8.42 percent.
The Company has a reinsurance agreement whereby it assumed 100 percent of a
block of single premium life insurance business from an affiliated company. The
accompanying consolidated balance sheet at December 31, 1993 included $759,714
of future policy benefits related to this agreement.
The Company has a reinsurance agreement to cede 50 percent of its long-term
care insurance business to an affiliated company. The accompanying consolidated
balance sheet at December 31, 1993 includes $44,086 of reinsurance receivables
related to this agreement.
The Company participates in the retirement plan of IDS which covers all
permanent employees age 21 and over who have met certain employment
requirements. The benefits are based on the number of years the employee
participates in the plan, their final average monthly salary, the level of
social
F-10
<PAGE>
IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED BALANCE SHEET -- CONTINUED
($ THOUSANDS)
5. RELATED PARTY TRANSACTIONS -- CONTINUED
security benefits the employee is eligible for and the level of vesting the
employee has earned in the plan. IDS' policy is to fund retirement plan costs
accrued subject to ERISA and federal income tax considerations.
The Company also participates in defined contribution pension plans of IDS
which cover all employees who have met certain employment requirements. Company
contributions to the plans are a percent of either each employee's eligible
compensation or basic contributions.
The Company participates in defined benefit health care plans of IDS that
provide health care and life insurance benefits to retired employees and retired
financial planners. The plans include participant contributions and
service-related eligibility requirements. Upon retirement, such employees are
considered to have been employees of IDS. IDS expenses these benefits and
allocates the expenses to its subsidiaries. Accordingly, costs of such benefits
to the Company are included in employee compensation and benefits and cannot be
identified on a separate company basis.
6. COMMITMENTS AND CONTINGENCIES
At December 31, 1993, traditional life insurance and universal life-type
insurance in force aggregated $46,125,515 of which $3,038,426 was reinsured. The
Company also reinsures a portion of the risks assumed under disability income
policies.
Reinsurance contracts do not relieve the Company from its primary obligation
to policyholders.
The Company is a defendant in various lawsuits, none of which, in the
opinion of the Company counsel, will result in a material liability.
The Company received the revenue agent's report for the tax years 1984
through 1986 in February 1992, and has settled on all agreed audit issues. The
Company will protest the remaining open issues and, while the outcome of the
appeal is not known at this time, management does not believe there will be any
material impact as a result of this audit.
7. LINES OF CREDIT
The Company has available lines of credit with two banks aggregating $75,000
at 45 to 80 basis points over the banks' cost of funds or equal to the prime
rate, depending on which line of credit agreement is used. Borrowings
outstanding under these agreements totalled $1,519 at December 31, 1993.
F-11
<PAGE>
DRAFT CONSENT
The Board of Directors
IDS Life Insurance Company
We have audited the accompanying consolidated balance sheet of IDS Life
Insurance Company (a wholly owned subsidiary of IDS Financial Corporation) as of
December 31, 1993. This consolidated balance sheet is the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated balance sheet is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated balance sheet. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
balance sheet presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated balance sheet referred to above presents
fairly, in all material respects, the consolidated financial position of IDS
Life Insurance Company at December 31, 1993, in conformity with generally
accepted accounting principles.
Ernst & Young
Minneapolis, Minnesota
February 3, 1994
F-12
<PAGE>
IDS FINANCIAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1993
($ THOUSANDS)
ASSETS
<TABLE>
<S> <C>
Investments:
Investment securities at amortized cost -- fair value
$23,253,854........................................... $22,156,263
Other securities generally at cost -- fair value
$214,108.............................................. 191,718
Mortgage loans -- fair value $2,301,866................. 2,231,302
Cash and cash equivalents................................. 90,715
Life insurance policy and investment certificate loans.... 417,931
Accounts and notes receivable............................. 563,450
Deferred acquisition costs................................ 1,746,291
Consumer loans............................................ 296,161
Land, buildings and equipment -- less accumulated
depreciation, $103,460.................................. 213,984
Goodwill -- less accumulated amortization, $83,970........ 251,897
Other assets.............................................. 199,805
Assets held in segregated asset accounts -- primarily
common stocks at fair value............................. 8,991,694
-------------
$37,351,211
-------------
-------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Fixed annuity reserves.................................. $18,492,135
Life and disability insurance reserves.................. 3,169,569
Investment certificate reserves......................... 2,751,825
Career Distributors' Retirement Plan.................... 234,112
Open securities transactions............................ 299,710
Short-term borrowings................................... 302,894
Accounts payable, accrued expenses and other
liabilities........................................... 961,428
Liabilities related to segregated asset accounts........ 8,991,694
-------------
Total liabilities................................. 35,203,367
-------------
Stockholder's Equity:
Common stock -- $.01 par -- 100 shares authorized,
issued and outstanding................................ --
Additional paid-in capital.............................. 1,150,119
Net unrealized appreciation on equity securities........ 114
Retained earnings....................................... 997,611
-------------
Total stockholder's equity........................ 2,147,844
-------------
$37,351,211
-------------
-------------
Committments and contingencies
</TABLE>
See accompanying notes to condensed consolidated balance sheet.
F-13
<PAGE>
IDS FINANCIAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED
BALANCE SHEET
($ THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
IDS Financial Corporation (hereinafter referred to as IDS) is a wholly owned
subsidiary of American Express Company (parent).
PRINCIPLES OF CONSOLIDATION. The accompanying condensed consolidated
balance sheet is prepared in accordance with generally accepted accounting
principles. It includes the accounts of IDS and all of its subsidiaries. All
material intercompany accounts have been eliminated in consolidation.
ANNUITY ACCOUNTING. Liabilities for single premium deferred annuities and
installment annuities are accumulation values. Liabilities for fixed annuities
in benefit status are the present value of future benefits using established
industry mortality tables.
INSURANCE ACCOUNTING. Liabilities for future benefits on traditional life
and disability income and health insurance policies are generally calculated
using anticipated rates of mortality, morbidity, policy persistency and
investment yields. Liabilities for universal life-type life insurance are
accumulation values.
DEFERRED ACQUISITION COSTS. The costs of acquiring new business,
principally sales compensation, policy issue costs and underwriting, have been
deferred on annuity, life insurance and other long-term products.
For annuities, the costs are amortized in relation to surrender charge
revenue and a portion of the excess of investment income earned from investment
of contract considerations over the interest credited to contract owners. For
traditional life insurance, and disability income and health insurance policies,
the costs are amortized over an appropriate period in proportion to premium
revenue. For universal life-type insurance, the costs are amortized over the
lives of the policies as a percentage of the estimated gross profits expected to
be realized on the policies.
SEGREGATED ASSET ACCOUNTS. Assets and liabilities related to segregated
asset accounts represent funds held for the exclusive benefit of the variable
annuity and variable life insurance contract owners.
IDS makes contractual mortality assurances to the variable annuity contract
owners that the net assets of the segregated asset accounts will not be affected
by future variations in the actual life expectancy experience of the annuitants
and beneficiaries from the mortality assumptions implicit in the annuity
contracts. IDS makes periodic fund transfers to, or withdrawals from, the
segregated asset accounts for such actuarial adjustments for variable annuities
that are in the benefit payment period. IDS guarantees, for the
F-14
<PAGE>
IDS FINANCIAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED
BALANCE SHEET -- CONTINUED
($ THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
variable life insurance funds, the cost of the contractual insurance rates and
that the death benefit will never be less than the death benefit at the date of
issuance.
INVESTMENT CERTIFICATES. Investment certificates entitle certificate
holders, who have either made lump-sum or installment payments, to receive a
definite sum of money at maturity. Payments from certificate holders are
credited to investment certificate reserves. Investment certificate reserves
accumulate at specified percentage rates of accumulation. For certificates that
allow for the deduction of a surrender charge, cash surrender values may be less
than accumulated investment certificate reserves prior to maturity dates.
Investment certificate reserves are maintained for advance payments by
certificate holders, additional credits granted and interest accrued on each.
The payment distribution, reserve accumulation rates, cash surrender values and
reserve values, among other matters, are governed by the Investment Company Act
of 1940.
GOODWILL. Goodwill represents the unamortized excess of cost over the
underlying fair value of the net tangible assets of IDS as of the date of
acquisition by its parent. Goodwill is being amortized on a straight-line basis
over the next 30 years.
INCOME TAXES. IDS taxable income is included in the consolidated Federal
tax return of IDS' parent. Each eligible subsidiary of IDS' parent provides for
income taxes on a separate return basis.
INVESTMENTS. Bonds and notes, mortgage-backed securities, and preferred
stocks that either must be redeemed by the issuer or may be redeemed by the
issuer at the holder's request are carried at amortized cost. The expected
maturities of these investments are, for the most part, matched with the
expected payments of fixed annuity, life and disability insurance, and
investment certificate future benefits. IDS has the ability to hold these
investments to their maturities and has the intent to hold them for the
foreseeable future. When there is a decline in value, which is other than
temporary, the investments are carried at estimated realizable value.
Marketable equity securities of IDS and its subsidiaries, other than the
life insurance subsidiary, are carried at the lower of aggregate cost or market
value. Common and nonredeemable preferred stocks of the life insurance
subsidiary are carried at market value. The net unrealized appreciation/
depreciation on such securities is included in stockholder's equity. When there
is a decline in value, which is other than temporary, the securities are carried
at estimated realizable value.
F-15
<PAGE>
IDS FINANCIAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED
BALANCE SHEET -- CONTINUED
($ THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
Prepayments are anticipated on certain investments in mortgage-backed
securities in determining the constant effective yield used to recognize
interest income. Prepayment estimates are based on information received from
brokerage firms which deal in mortgage-backed securities.
INTEREST RATE CAPS. IDS purchases interest rate caps as protection against
exposed interest rate positions. Cost is amortized to the expiration dates on a
straight-line basis. Benefits are recognized when realized.
MORTGAGE LOANS. Mortgage loans on real estate are carried at amortized cost
less reserve for losses. When credit and economic evaluations of the underlying
real estate indicate a loss on the loan is likely to occur, an allowance for
such loss is recorded. IDS generally stops accruing interest on loans for which
interest payments are delinquent more than three months.
The estimated fair value of the mortgage loans is determined by a discounted
cash flow analysis using mortgage interest rates currently offered for mortgages
of similar maturities.
LAND, BUILDINGS AND EQUIPMENT. Land, buildings and equipment are carried at
cost less accumulated depreciation. IDS generally utilizes the straight-line
method of computing depreciation.
2. QUALIFIED ASSETS AND ASSETS ON DEPOSIT
IDS' subsidiary, IDS Certificate Company, has issued investment certificates
to clients. The terms of the investment certificates and the provisions of the
Investment Company Act of 1940 require the maintenance of qualified assets. The
carrying value of qualified assets at December 31, 1993 aggregated $2,931,737
and exceeded legal requirements.
Under the terms of the investment certificates, the Investment Company Act
of 1940, depository agreements and the statutes of various states relating to
investment certificates, assets are required to be on deposit with the states or
authorized depositories. Investments, mortgage loans and other assets on deposit
at December 31, 1993, aggregated $2,814,974 and exceeded legal requirements.
IDS' banking subsidiaries are generally required to maintain reserve
balances with the Federal Reserve Bank, the Depository Trust Company and other
institutions. Based upon the dollar volumes and types of deposit liabilities,
the subsidiaries maintained $1,373 in reserves at December 31, 1993.
3. INVESTMENTS
Fair values of bonds and notes, mortgage-backed securities, and common and
preferred stocks represent quoted market prices where available. In
F-16
<PAGE>
IDS FINANCIAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED
BALANCE SHEET -- CONTINUED
($ THOUSANDS)
3. INVESTMENTS -- CONTINUED
the absence of quoted market prices, estimated fair values are determined by
established procedures involving, among other things, review of market indices,
price levels of current offerings and comparable issues, price estimates and
market data from independent brokers.
Fair values, and gross unrealized gains and losses of investment securities
at amortized cost at December 31, 1993 were:
<TABLE>
<CAPTION>
Gross Gross
Fair Unrealized Unrealized
Cost Value Gains Losses
------------- ------------- ------------ -----------
<S> <C> <C> <C> <C>
Mortgage-backed Securities $ 10,697,725 $ 10,995,052 $ 358,609 $ 61,284
Corporate Bonds and Obligations 10,373,609 11,112,009 792,684 54,282
Preferred Stocks 801,747 839,941 40,851 2,657
State and Municipal Obligations 258,447 283,010 24,602 39
U.S. Government Agency
Obligations 24,735 23,842 484 1,377
------------- ------------- ------------ -----------
Total Investment Securities $ 22,156,263 $ 23,253,854 $ 1,217,230 $ 119,639
------------- ------------- ------------ -----------
------------- ------------- ------------ -----------
</TABLE>
Contractual maturities of debt securities carried at amortized cost as of
December 31, 1993 were:
<TABLE>
<CAPTION>
Fair
Cost Value
------------- -------------
<S> <C> <C>
Due within 1 year $ 553,129 $ 558,107
Due after 1 year through 5 years 2,062,332 2,174,664
Due after 5 years through 10 years 6,107,705 6,581,514
Due after 10 years 2,735,372 2,944,517
------------- -------------
11,458,538 12,258,802
Mortgage-backed Securities 10,697,725 10,995,052
------------- -------------
Total Investment Securities $ 22,156,263 $ 23,253,854
------------- -------------
------------- -------------
</TABLE>
(The timing of actual receipts will differ from contractual maturities
because issuers may call or prepay obligations.)
At December 31, 1993, IDS had a valuation allowance of $114 reflecting the
net unrealized appreciation of equity securities carried at fair value at that
date. The amount is net of $160 of gross unrealized appreciation and deferred
taxes of $46.
IDS will implement, effective January 1, 1994, Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt
F-17
<PAGE>
IDS FINANCIAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED
BALANCE SHEET -- CONTINUED
($ THOUSANDS)
3. INVESTMENTS -- CONTINUED
and Equity Securities". Under the new rules, debt securities that IDS has both
the positive intent and ability to hold to maturity will be carried at amortized
cost. Debt securities that IDS does not have the positive intent and ability to
hold to maturity, as well as all marketable equity securities, will be
classified as available for sale or trading and carried at fair value.
Unrealized gains and losses on securities classified as available for sale will
be carried as a separate component of Stockholder's Equity. Unrealized holding
gains and losses on securities classified as trading will be reported in
earnings. The effect of the new rules will be to increase Stockholder's Equity
by approximately $200 million, net of taxes, as of January 1, 1994. The
measurement of unrealized securities gains (losses) in Stockholder's Equity is
affected by market conditions, and therefore, subject to volatility.
Other securities, at cost, include shares in affiliated mutual funds at
December 31, 1993 of $106,131. The fair value was $115,465.
Included in bonds and notes at December 31, 1993 are interest rate caps at
amortized cost of $51,733 with an estimated fair value of $21,117. These
interest rate caps carry a notional amount of $5,570,000 and expire on various
dates from 1994 to 1998.
4. SHORT-TERM BORROWINGS
IDS has lines of credit with various banks totaling $495,000, of which
$302,894 was outstanding at December 31, 1993. $75,000 of the amount outstanding
was borrowed from a related party. The weighted average interest rate on the
borrowings was 3.71 percent at December 31, 1993.
IDS has entered into an interest rate swap agreement expiring in 1999
enabling it to convert $21,000 of its variable-rate borrowings to a fixed
interest rate of 8.88 percent. IDS has estimated the cost to terminate the
agreement in the current interest rate environment at $2.0 million at December
31, 1993.
5. RETIREMENT PLANS
IDS and its subsidiaries have qualified and non-qualified pension plans
which cover all permanent employees age 21 and over and certain other employees.
Pension benefits generally depend upon length of service, compensation and other
factors. Funding of retirement costs for the qualified plan complies with the
applicable minimum funding requirements specified by the Employee Retirement
Income Security Act of 1974, as amended.
F-18
<PAGE>
IDS FINANCIAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED
BALANCE SHEET -- CONTINUED
($ THOUSANDS)
5. RETIREMENT PLANS -- CONTINUED
The funded status of the plans at December 31, 1993 is set forth in the
table below:
<TABLE>
<CAPTION>
Unfunded
Funded Plan Plan
----------- -----------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation........................ $ (67,260) $ (2,283)
----------- -----------
----------- -----------
Projected benefit obligation for service rendered to
date................................................ (107,261) (7,003)
Fair value of plan assets, primarily invested in bonds
and equities........................................... 131,637 --
----------- -----------
Plan assets in excess of projected benefit obligation... 24,376 (7,003)
Unrecognized prior service cost being recognized over
14.2 years............................................. (1,395) 2,978
Unrecognized net (gain) loss from past experience
different from assumptions and effects of changes in
assumptions............................................ (10,266) 801
Unrecognized net transition asset being recognized over
13.7 years............................................. (10,812) --
----------- -----------
Prepaid (accrued) pension cost included in other
assets................................................. $ 1,903 $ (3,224)
----------- -----------
----------- -----------
</TABLE>
The weighted average discount rate used in determining the actuarial present
value of the projected benefit obligation of all plans was 7.25 percent. The
rate of increase in future compensation levels used in determining the actuarial
present value of the projected benefit obligation of all plans was 6.0 percent.
The weighted average expected long-term rates of return on plan assets was 9.5
percent.
The Career Distributors' Retirement Plan is an unfunded, noncontributory,
non-qualified deferred compensation plan for IDS financial planners, district
managers and division vice presidents, based on their independent contractor
earnings.
IDS sponsors defined benefit health care plans that provide health care and
life insurance benefits to employees and financial planners who retire after
having worked five years and attained age 55 while in service with IDS or its
subsidiaries. Upon retirement, annual health care premiums will be paid through
participant contributions and fixed amounts contributed by IDS
F-19
<PAGE>
IDS FINANCIAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED
BALANCE SHEET -- CONTINUED
($ THOUSANDS)
5. RETIREMENT PLANS -- CONTINUED
based on years of service. For employees and financial planners who retired
prior to April, 1990, IDS contributes a percentage of their annual health care
premiums. The cost of retiree life insurance will be paid entirely by IDS. IDS
funds the cost of these benefits as they are incurred.
The accrued postretirement benefit cost included in other liabilities at
December 31, 1993 was $31,883.
The weighted average discount rates used in determining the 1993
postretirement benefit obligation was 7.25. The rate of increase in the per
capita cost of covered benefits was assumed to be 13 percent for 1994; the rate
was assumed to decrease one percent per year to seven percent in 2000 and remain
at the level thereafter. An increase in the assumed health care cost trend rates
by one percentage point, in each year, would increase the accumulated
postretirement benefit obligation as of December 31, 1993 by $1,653.
6. STOCKHOLDER'S EQUITY
Various state laws, the Investment Company Act of 1940 and terms of
investment certificates restrict the amount of dividends that the subsidiaries
may pay to IDS. The amount of net assets of subsidiaries which may be
transferred to IDS was approximately $699.
7. COMMITMENTS AND CONTINGENCIES
IDS is committed to pay aggregate minimum rentals under noncancelable leases
for office facilities and equipment in future years as follows: 1994, $57,313;
1995, $50,341; 1996, $40,737; 1997, $30,572; 1998, $24,337 and an aggregate of
$70,334 thereafter.
Life insurance in force aggregated $46.1 billion at December 31, 1993, of
which $3.0 billion was reinsured. Reinsured risks could become a liability in
the event the reinsurers become unable to meet the obligations they have
assumed.
Approved but unused consumer lines of credit aggregated $457,038 at December
31, 1993. Of the amount approved, 95 percent is in lines of $25 or less, and
less than 1 percent is in lines exceeding $100.
IDS and certain of its subsidiaries are defendants in various lawsuits. In
the opinion of management, the ultimate resolution of these lawsuits, taken in
the aggregate, will not materially affect IDS' consolidated financial position.
F-20
<PAGE>
IDS FINANCIAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED
BALANCE SHEET -- CONTINUED
($ THOUSANDS)
8. CREDIT RISK CONCENTRATIONS
Concentrations of credit risk of investment securities at cost at December
31, 1993 were:
<TABLE>
<CAPTION>
On Balance
Sheet
-------------
<S> <C>
By Investment Grade:
Mortgage-backed Securities $ 10,697,725
Aaa/AAA 493,228
Aa/AA 288,727
Aa/A 144,222
A/A 2,619,628
A/BBB 671,159
Baa/BBB 5,182,582
Below Investment Grade 2,058,992
-------------
$ 22,156,263
-------------
-------------
</TABLE>
Mortgage-backed securities are FHLMC, FNMA and GNMA pools which are
guaranteed as to principal and interest by agencies of the U.S. Government.
Other debt securities are rated by Moody's and Standard & Poors (S&P) except for
approximately $2.4 billion which is rated by IDS' analysts using criteria
similar to Moody's and S&P. Commitments to purchase investments were $nil at
December 31, 1993.
Concentrations of credit risk of mortgage loans at December 31, 1993 were:
<TABLE>
<CAPTION>
On Balance Commitments
Sheet to Purchase
------------ -------------
<S> <C> <C>
Mortgage Loans By Region:
North Central $ 896,174 $ 36,325
Atlantic 819,082 94,345
New England 162,227 18,130
South Central 137,707 900
Pacific 128,311 15,140
Mountain 87,801 14,600
------------ -------------
$ 2,231,302 $ 179,440
------------ -------------
------------ -------------
</TABLE>
F-21
<PAGE>
IDS FINANCIAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED
BALANCE SHEET -- CONTINUED
($ THOUSANDS)
8. CREDIT RISK CONCENTRATIONS -- CONTINUED
<TABLE>
<CAPTION>
On Balance Commitments
Sheet to Purchase
------------ -------------
<S> <C> <C>
Mortgage Loans By Property Type:
Apartments $ 821,645 $ 78,560
Shopping Ctrs/Retail 705,319 67,355
Office Buildings 261,673 15,675
Industrial Buildings 253,557 9,250
Retirement Homes 85,338 1,000
Hotels/Motels 36,743 --
Medical Buildings 30,430 6,100
Residential 142 --
Other 36,455 1,500
------------ -------------
$ 2,231,302 $ 179,440
------------ -------------
------------ -------------
</TABLE>
Mortgage loans are first mortgages on real estate. IDS' underwriting policy
is that at the time of loan origination, the loan amount cannot exceed 75
percent of appraised value. If a mortgage is in default, IDS can begin
foreclosure proceedings. Commitments to purchase mortgages are made in the
ordinary course of business. The estimated fair value of the mortgage
commitments is $nil.
Concentrations of credit risk of unsecured consumer loans at December 31,
1993 were:
<TABLE>
<CAPTION>
On Balance Approved
Sheet But Unused
----------- -------------
<S> <C> <C>
Consumer Loans By Region:
North Central $ 88,790 $ 165,829
Atlantic 76,827 120,307
Pacific 51,707 80,205
South Central 34,696 38,637
New England 25,805 27,541
Mountain 18,336 24,519
----------- -------------
$ 296,161 $ 457,038
----------- -------------
----------- -------------
</TABLE>
Consumer loans have a variable rate of interest. As a result, the estimated
fair value of the consumer loans is approximated to be the carrying value. The
estimated fair value of the approved but unused lines of credit is $nil.
F-22
<PAGE>
IDS FINANCIAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED
BALANCE SHEET -- CONTINUED
($ THOUSANDS)
8. CREDIT RISK CONCENTRATIONS -- CONTINUED
Included in accounts receivable at December 31, 1993 are interest and
dividends receivable on investments of $350,098 and fees receivable from
affiliated mutual funds of $25,507.
9. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following are fair values of financial instruments not presented
elsewhere in the condensed consolidated balance sheet, and methods and
assumptions that were used to estimate these fair values.
The estimated fair values for short-term financial instruments, such as cash
and cash equivalents, short-term borrowings and customers' deposits are
approximated to be the carrying amounts disclosed in the condensed consolidated
balance sheet.
The estimated fair value of fixed annuities future policy benefits is based
on the status of the annuities at December 31, 1993. The estimated fair value
for deferred annuities approximates the carrying amount less any surrender
charges and related loans. The estimated fair value for annuities in non-life
contingent payout status approximates the present value of projected benefit
payments at the rate appropriate for contracts issued in 1993. At December 31,
1993, the carrying amount and fair value of fixed annuities future policy
benefits, after excluding life insurance-related contracts carried at $913,127
was $17,579,008 and $16,881,747, respectively. The fair value is net of policy
loans of $59,132 at December 31, 1993.
The estimated fair value of investment certificate reserves is based upon a
method appropriate for each class of certificate. The estimated fair value for
investment certificates that reprice within a year approximates the carrying
value. The estimated fair value for other investment certificates is determined
by a discounted cash flow analysis using investment rates currently offered for
investment certificates of similar remaining maturities. These amounts are
reduced by applicable surrender charges and related loans. At December 31, 1993,
the estimated fair value of the investment certificate reserves was $2,694,720,
net of certificate loans of $67,429.
The estimated fair value of liabilities related to segregated asset accounts
is the carrying amount less variable insurance contracts carried at $346,276 and
surrender charges, if applicable. At December 31, 1993, the estimated fair value
of these liabilities was $8,305,209.
10. RELATED PARTY TRANSACTIONS
IDS has entered into various related party transactions with its parent and
the parent's other affiliates.
F-23
<PAGE>
IDS FINANCIAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED
BALANCE SHEET -- CONTINUED
($ THOUSANDS)
10. RELATED PARTY TRANSACTIONS -- CONTINUED
IDS has a reinsurance agreement to assume a single premium life line of
business from an affiliated company. The accompanying condensed consolidated
balance sheet at December 31, 1993 includes $759,714 of liabilities for future
policy benefits related to this agreement.
IDS has a reinsurance agreement to cede 50 percent of its long-term care
insurance business to an affiliated company. The accompanying condensed
consolidated balance sheet at December 31, 1993 includes $44,086 of reinsurance
receivables related to this agreement.
IDS purchased a $35,000 five year secured note from an affiliated company.
The note bears a market interest rate, revised semi-annually, which was 8.42
percent at December 31, 1993.
Included in other liabilities is $30,420 at December 31, 1993 for federal
income taxes payable to the parent.
11. INCOME TAXES
At December 31, 1993, the life insurance subsidiary had a policyholders'
surplus account balance of $19,032. The policyholders' surplus is only taxable
if dividends to shareholders exceed the shareholders' surplus account and/or the
company is liquidated. Deferred taxes of $6,661 have not been established
because no distributions of such amounts are contemplated.
F-24
<PAGE>
DRAFT CONSENT
The Board of Directors and Shareholders
IDS Financial Corporation
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements of IDS Financial Corporation at December
31, 1993, not presented separately herein, and in our report dated February 3,
1994, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet is fairly stated in all material respects
in relation to the consolidated financial statements from which it has been
derived.
Ernst & Young
Minneapolis, Minnesota
February 3, 1994
F-25
<PAGE>
FORM OF PROXY CARD
VOTE THIS PROXY CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE YOUR FUND
THE EXPENSE OF ADDITIONAL MAILINGS
EQUITY PORTFOLIO, A SERIES OF
IDS LIFE SERIES FUND, INC.
PROXY/VOTING
INSTRUCTION CARD
___________________________________________________________________
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints _____________ and _________ ________, or either
of them, as proxies, with full power of substitution, to represent and to vote
all of the shares of the undersigned at the regular meeting to be held on
November 9, 1994, and any adjournment thereof.
TO HAVE YOUR VOTE COUNTED, YOU MUST SIGN, DATE AND RETURN THIS PROXY. IT WILL
BE VOTED AS MARKED, OR IF NOT MARKED, WILL BE VOTED "FOR" EACH PROPOSAL.
THE BOARD RECOMMENDS A VOTE "FOR" ALL PROPOSALS.
(client name and address)
X______________________
X______________________
Date_____________, 1994
Owners please sign as names appear at left. Executors, administrators,
trustees, etc., should indicate position when signing.
<PAGE>
For With- Excep-
held tion
1. Election of Board Members ( ) ( ) ( )
TO VOTE FOR ALL NOMINEES, MARK THE "FOR" BOX IN ITEM 1. TO WITHHOLD AUTHORITY
TO VOTE FOR ALL NOMINEES, MARK THE "WITHHOLD" BOX. TO WITHHOLD AUTHORITY TO
VOTE FOR ANY NOMINEE, MARK THE "EXCEPTION" BOX AND STRIKE A LINE THROUGH THE
NOMINEE'S NAME.
Five board members are to be elected at the meeting. The nominees are RICHARD
W. KLING, EDWARD LANDES, JANIS E. MILLER, CARL N. PLATOU, GORDON H. RITZ.
For Against Abstain
2. Ratification of
Independent Auditors ( ) ( ) ( )
3. Approval of a Change in
Investment Policies to Permit
the Fund to Invest All its For Against Abstain
Assets in Another Investment
Company ( ) ( ) ( )
4. Approval of Changes in FOR each policy
Fundamental Investment listed below (except AGAINST ABSTAIN
Policies as marked to the ALL ALL
contrary)
( ) ( ) ( )
If you do NOT wish to approve a policy change, please check the appropriate box
below:
( ) A. Margin/Sell Short ( ) E. Real Estate
( ) B. Investment Companies ( ) F. Exploration/Development
( ) C. Control or Manage ( ) G. Illiquid Securities
( ) D. Cash Loans
5. Approval of an Amendment to For Against Abstain
the Fund's Articles of
Incorporation ( ) ( ) ( )
<PAGE>
FORM OF PROXY CARD
VOTE THIS PROXY CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE YOUR FUND
THE EXPENSE OF ADDITIONAL MAILINGS
GOVERNMENT SECURITIES PORTFOLIO, A SERIES OF
IDS LIFE SERIES FUND, INC.
PROXY/VOTING
INSTRUCTION CARD
___________________________________________________________________
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints _____________ and _________ ________, or either
of them, as proxies, with full power of substitution, to represent and to vote
all of the shares of the undersigned at the regular meeting to be held on
November 9, 1994, and any adjournment thereof.
TO HAVE YOUR VOTE COUNTED, YOU MUST SIGN, DATE AND RETURN THIS PROXY. IT WILL
BE VOTED AS MARKED, OR IF NOT MARKED, WILL BE VOTED "FOR" EACH PROPOSAL.
THE BOARD RECOMMENDS A VOTE "FOR" ALL PROPOSALS.
(client name and address)
X______________________
X______________________
Date_____________, 1994
Owners please sign as names appear at left. Executors, administrators,
trustees, etc., should indicate position when signing.
<PAGE>
For With- Excep-
held tion
1. Election of Board Members ( ) ( ) ( )
TO VOTE FOR ALL NOMINEES, MARK THE "FOR" BOX IN ITEM 1. TO WITHHOLD AUTHORITY
TO VOTE FOR ALL NOMINEES, MARK THE "WITHHOLD" BOX. TO WITHHOLD AUTHORITY TO
VOTE FOR ANY NOMINEE, MARK THE "EXCEPTION" BOX AND STRIKE A LINE THROUGH THE
NOMINEE'S NAME.
Five board members are to be elected at the meeting. The nominees are RICHARD
W. KLING, EDWARD LANDES, JANIS E. MILLER, CARL N. PLATOU, GORDON H. RITZ.
For Against Abstain
2. Ratification of
Independent Auditors ( ) ( ) ( )
3. Approval of a Change in
Investment Policies to Permit
the Fund to Invest All its For Against Abstain
Assets in Another Investment
Company ( ) ( ) ( )
4. Approval of Changes in FOR each policy
Fundamental Investment listed below (except AGAINST ABSTAIN
Policies as marked to the ALL ALL
contrary)
( ) ( ) ( )
If you do NOT wish to approve a policy change, please check the appropriate box
below:
( ) A. Margin/Sell Short ( ) D. Cash Loans
( ) B. Investment Companies ( ) E. Real Estate
( ) C. Control or Manage ( ) H. Pledge Assets
5. Approval of an Amendment to For Against Abstain
the Fund's Articles of
Incorporation ( ) ( ) ( )
<PAGE>
FORM OF PROXY CARD
VOTE THIS PROXY CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE YOUR FUND
THE EXPENSE OF ADDITIONAL MAILINGS
INCOME PORTFOLIO, A SERIES OF
IDS LIFE SERIES FUND, INC.
PROXY/VOTING
INSTRUCTION CARD
___________________________________________________________________
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints _____________ and _________ ________, or either
of them, as proxies, with full power of substitution, to represent and to vote
all of the shares of the undersigned at the regular meeting to be held on
November 9, 1994, and any adjournment thereof.
TO HAVE YOUR VOTE COUNTED, YOU MUST SIGN, DATE AND RETURN THIS PROXY. IT WILL
BE VOTED AS MARKED, OR IF NOT MARKED, WILL BE VOTED "FOR" EACH PROPOSAL.
THE BOARD RECOMMENDS A VOTE "FOR" ALL PROPOSALS.
(client name and address)
X______________________
X______________________
Date_____________, 1994
Owners please sign as names appear at left. Executors, administrators,
trustees, etc., should indicate position when signing.
<PAGE>
For With- Excep-
held tion
1. Election of Board Members ( ) ( ) ( )
TO VOTE FOR ALL NOMINEES, MARK THE "FOR" BOX IN ITEM 1. TO WITHHOLD AUTHORITY
TO VOTE FOR ALL NOMINEES, MARK THE "WITHHOLD" BOX. TO WITHHOLD AUTHORITY TO
VOTE FOR ANY NOMINEE, MARK THE "EXCEPTION" BOX AND STRIKE A LINE THROUGH THE
NOMINEE'S NAME.
Five board members are to be elected at the meeting. The nominees are RICHARD
W. KLING, EDWARD LANDES, JANIS E. MILLER, CARL N. PLATOU, GORDON H. RITZ.
For Against Abstain
2. Ratification of
Independent Auditors ( ) ( ) ( )
3. Approval of a Change in
Investment Policies to Permit
the Fund to Invest All its For Against Abstain
Assets in Another Investment
Company ( ) ( ) ( )
4. Approval of Changes in FOR each policy
Fundamental Investment listed below (except AGAINST ABSTAIN
Policies as marked to the ALL ALL
contrary)
( ) ( ) ( )
If you do NOT wish to approve a policy change, please check the appropriate box
below:
( ) A. Margin/Sell Short ( ) E. Real Estate
( ) B. Investment Companies ( ) F. Exploration/Development
( ) C. Control or Manage ( ) G. Illiquid Securities
( ) D. Cash Loans
5. Approval of an Amendment to For Against Abstain
the Fund's Articles of
Incorporation ( ) ( ) ( )
<PAGE>
FORM OF PROXY CARD
VOTE THIS PROXY CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE YOUR FUND
THE EXPENSE OF ADDITIONAL MAILINGS
MANAGED PORTFOLIO, A SERIES OF
IDS LIFE SERIES FUND, INC.
PROXY/VOTING
INSTRUCTION CARD
___________________________________________________________________
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints _____________ and _________ ________, or either
of them, as proxies, with full power of substitution, to represent and to vote
all of the shares of the undersigned at the regular meeting to be held on
November 9, 1994, and any adjournment thereof.
TO HAVE YOUR VOTE COUNTED, YOU MUST SIGN, DATE AND RETURN THIS PROXY. IT WILL
BE VOTED AS MARKED, OR IF NOT MARKED, WILL BE VOTED "FOR" EACH PROPOSAL.
THE BOARD RECOMMENDS A VOTE "FOR" ALL PROPOSALS.
(client name and address)
X______________________
X______________________
Date_____________, 1994
Owners please sign as names appear at left. Executors, administrators,
trustees, etc., should indicate position when signing.
<PAGE>
For With- Excep-
held tion
1. Election of Board Members ( ) ( ) ( )
TO VOTE FOR ALL NOMINEES, MARK THE "FOR" BOX IN ITEM 1. TO WITHHOLD AUTHORITY
TO VOTE FOR ALL NOMINEES, MARK THE "WITHHOLD" BOX. TO WITHHOLD AUTHORITY TO
VOTE FOR ANY NOMINEE, MARK THE "EXCEPTION" BOX AND STRIKE A LINE THROUGH THE
NOMINEE'S NAME.
Five board members are to be elected at the meeting. The nominees are RICHARD
W. KLING, EDWARD LANDES, JANIS E. MILLER, CARL N. PLATOU, GORDON H. RITZ.
For Against Abstain
2. Ratification of
Independent Auditors ( ) ( ) ( )
3. Approval of a Change in
Investment Policies to Permit
the Fund to Invest All its
Assets in Another Investment For Against Abstain
Company ( ) ( ) ( )
4. Approval of Changes in FOR each policy
Fundamental Investment listed below (except AGAINST ABSTAIN
Policies as marked to the ALL ALL
contrary)
( ) ( ) ( )
If you do NOT wish to approve a policy change, please check the appropriate box
below:
( ) A. Margin/Sell Short ( ) E. Real Estate
( ) B. Investment Companies ( ) H. Pledge Assets
( ) C. Control or Manage ( ) I. Start Up Companies
( ) D. Cash Loans
5. Approval of an Amendment to
the Fund's Articles of For Against Abstain
Incorporation ( ) ( ) ( )
<PAGE>
FORM OF PROXY CARD
VOTE THIS PROXY CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE YOUR FUND
THE EXPENSE OF ADDITIONAL MAILINGS
MONEY MARKET PORTFOLIO, A SERIES OF
IDS LIFE SERIES FUND, INC.
PROXY/VOTING
INSTRUCTION CARD
___________________________________________________________________
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints _____________ and _________ ________, or either
of them, as proxies, with full power of substitution, to represent and to vote
all of the shares of the undersigned at the regular meeting to be held on
November 9, 1994, and any adjournment thereof.
TO HAVE YOUR VOTE COUNTED, YOU MUST SIGN, DATE AND RETURN THIS PROXY. IT WILL
BE VOTED AS MARKED, OR IF NOT MARKED, WILL BE VOTED "FOR" EACH PROPOSAL.
THE BOARD RECOMMENDS A VOTE "FOR" ALL PROPOSALS.
(client name and address)
X______________________
X______________________
Date_____________, 1994
Owners please sign as names appear at left. Executors, administrators,
trustees, etc., should indicate position when signing.
<PAGE>
For With- Excep-
held tion
1. Election of Board Members ( ) ( ) ( )
TO VOTE FOR ALL NOMINEES, MARK THE "FOR" BOX IN ITEM 1. TO WITHHOLD AUTHORITY
TO VOTE FOR ALL NOMINEES, MARK THE "WITHHOLD" BOX. TO WITHHOLD AUTHORITY TO
VOTE FOR ANY NOMINEE, MARK THE "EXCEPTION" BOX AND STRIKE A LINE THROUGH THE
NOMINEE'S NAME.
Five board members are to be elected at the meeting. The nominees are RICHARD
W. KLING, EDWARD LANDES, JANIS E. MILLER, CARL N. PLATOU, GORDON H. RITZ.
For Against Abstain
2. Ratification of
Independent Auditors ( ) ( ) ( )
3. Approval of a Change in
Investment Policies to Permit
the Fund to Invest All its
Assets in Another Investment
Company ( ) ( ) ( )
4. Approval of an Amendment to
the Fund's Articles of
Incorporation ( ) ( ) ( )
