<PAGE>
PAGE 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 17 (File No. 2-97636) X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 17 (File No. 811-4299) X
IDS LIFE SERIES FUND, INC.
___________________________________________________________________
IDS Tower 10, Minneapolis, Minnesota 55440-0010
___________________________________________________________________
(612) 671-3678
___________________________________________________________________
Mary Ellyn Minenko - IDS Tower 10, Minneapolis, MN 55440-0010
___________________________________________________________________
Approximate Date of Proposed Public Offering:
It is proposed that this filing will become effective (check
appropriate box)
_____immediately upon filing pursuant to paragraph (b)
X on April 28, 1995 pursuant to paragraph (b) of rule 485
_____60 days after filing pursuant to paragraph (a)
on (date) pursuant to paragraph (a) of rule 485
Registrant filed its 24f-2 Notice for the fiscal year ending
April 30, 1994 on or about June 30, 1995.
<PAGE>
PAGE 2
Cross reference sheet for the IDS Life Series Fund showing location
in the prospectuses and Statements of Additional Information of the
information called for by the items enumerated in Part A and Part B
of Form N-1A.
Negative answers omitted from Part A or Part B are so indicated.
<TABLE>
<CAPTION>
PART A
Item No. Page Number in Prospectus
<S> <C>
1 Cover page of prospectus
2 The fund in brief; Sales charge and fund expenses
3(a) Financial highlights
(b) NA
(c) Performance
(d) Financial Highlights
4(a) The fund in brief; Investment policies and risks; How the fund is organized
(b) Investment policies and risks
(c) Investment policies and risks
5(a) How the fund is organized; Directors and officers; Directors and officers of the fund (listing)
(b) How the fund is organized; About American Express Financial Corporation
(b)(i) About American Express Financial Corporation - General Information
(b)(ii) Investment manager and transfer agent
(b)(iii) Investment manager and transfer agent
(c) Portfolio manager
(d) The fund in brief
(e) How the fund is organized: Investment manager and transfer agent
(f) How the fund is organized: Distributor
(g) How the fund is organized: Investment manager and transfer agent
5A(a) *
(b) *
6(a) How the fund is organized: Shares; Voting rights
(b) NA
(c) NA
(d) Voting rights
(e) Cover page; Special shareholder services
(f) Distributions and taxes: Dividends and capital gain distributions; reinvestments
(g) Distributions and taxes: Taxes
7(a) How the fund is organized: Distributor
(b) Performance: Key terms; Valuing assets
(c) How to buy, exchange or sell shares
(d) How to buy, exchange or sell shares: Three ways to invest
(e) NA
(f) Distributor
8(a) How to buy, exchange or sell shares: How to sell shares
(b) NA
(c) How to buy, exchange or sell shares: Three ways to invest - "If your account falls below $300..."
(d) How to buy, exchange or sell shares: Redemption policies - "Important..."
9 None
<PAGE>
PAGE 3
PART B
Item No. Section in Statement of Additional Information
10 Cover page of SAI
11 Table of contents
12 NA
13(a) Additional Investment Policies; all appendices except Dollar Cost Averaging
(b) Additional Investment Policies
(c) "Unless changed by the board of directors, the fund may..." in Additional Investment Policies
(d) Portfolio Turnover, last paragraph of Portfolio Transactions
14(a) Directors and officers of the fund;** Directors and officers (SAI & prospectus)
(b) Directors and Officers
(c) Directors and Officers (last paragraph)
15(a) NA
(b) NA
(c) Directors and Officers (last paragraph)
16(a)(i) How the fund is organized; About American Express Financial Corporation**
(a)(ii) Investment Management and Services Agreement; Supplemental Agreement of Distribution
(a)(iii) Investment Management and Services Agreement: Group Asset Charge
(b) Investment Management and Services Agreement; Plan and Supplemental Agreement of Distribution
(c) NA
(d) None
(e) NA
(f) Distribution Agreement; Plan and Supplemental Agreement of Distribution
(g) NA
(h) Custodian; Independent Auditors
(i) Transfer Agency Agreement; Custodian
17(a) Portfolio Transactions
(b) Brokerage Commissions Paid to Brokers Affiliated with American Express Financial Corporation
(c) Portfolio Transactions
(d) Portfolio Transactions
(e) Portfolio Transactions
18(a) How the fund is organized: Shares and Voting rights**
(b) NA
19(a) Investing in the Fund
(b) Valuing Fund Shares; Investing in the Fund
(c) NA
20 Taxes
21(a) Distribution Agreement
(b) Distribution Agreement - the table
(c) NA
22(a) Performance Information: Calculation of Yield (money market funds) (NA for all other funds).
(b) Performance Information: Calculation of Total Return and/or Yield (all other funds) (NA for money market funds)
23 Financial Statements
* Designates information is located in annual report.
**Designates page number in prospectus.
</TABLE>
<PAGE>
PAGE 4
IDS Life Series Fund
Prospectus
April 28, 1995
IDS Life Series Fund, Inc. (the fund) is a series mutual fund with
five portfolios, each with a different investment objective.
Equity Portfolio is a stock portfolio.
Income Portfolio is a bond portfolio.
Money Market Portfolio is a money market portfolio.
An investment in Money Market Portfolio is neither insured nor
guaranteed by the U.S. government, and there can be no assurance
that the portfolio will be able to maintain a stable net asset
value of $1 per share.
Managed Portfolio is a managed portfolio.
Government Securities Portfolio is a government securities
portfolio.
This prospectus contains information about the fund that you should
know before investing. Read it along with your variable life
insurance policy prospectus before you invest and keep them for
future reference.
Additional facts about the fund are in a Statement of Additional
Information (SAI) and the IDS Life Series Fund, Inc. Semiannual
Report, filed with the Securities and Exchange Commission. The
SAI, dated April 28, 1995, the 1994 Annual Report and the
Semiannual Report are incorporated here by reference. For free
copies, contact IDS Life Series Fund, Inc.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
IDS LIFE IS NOT A FINANCIAL INSTITUTION, AND THE SECURITIES IT
OFFERS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY FINANCIAL INSTITUTION NOR ARE THEY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR
ANY OTHER AGENCY.
IDS Life Series Fund, Inc.
IDS Tower 10
Minneapolis, MN 55440-0010
612-671-3733
TTY: 800-285-8846
<PAGE>
PAGE 5
New York Service:
518-869-8613
<PAGE>
PAGE 6
Table of contents
The fund in brief
Goals and types of portfolio investments
Manager and distributor
Variable accounts
Sales charge
Expenses
Performance
Financial highlights
Total returns
Yield calculations
Key terms
Investment policies and risks
Facts about investments and their risks
Alternative investment option
Valuing assets
How to invest, transfer or redeem shares
How to invest
How to transfer among subaccounts
Redeeming shares
Distributions and taxes
Dividend and capital gain distributions
Taxes
How the fund is organized
Shares
Voting rights
Shareholder meetings
Portfolio managers
Directors and officers
Investment manager
Investment Advisory Agreement
About IDS Life and American Express Financial Corporation
General information
<PAGE>
PAGE 7
The fund in brief
Goals and types of portfolio investments
IDS Life Series Fund is a series mutual fund. It has five
portfolios whose goals and types of investments are as follows:
Equity Portfolio's goal is capital appreciation. The portfolio
invests primarily in U.S. common stocks and securities convertible
into common stock.
Income Portfolio's goal is to maximize current income while
attempting to conserve the value of the investment and to continue
the high level of income for the longest period of time. The
portfolio invests primarily in corporate bonds of the four highest
ratings.
Money Market Portfolio's goal is to provide maximum current income
consistent with liquidity and conservation of capital. The
portfolio invests primarily in high-quality, short-term debt
securities.
Managed Portfolio's goal is to maximize total investment return
through a combination of capital appreciation and current income.
The portfolio invests in common and preferred stocks, convertible
securities, debt securities and money market instruments.
Government Securities Portfolio's goal is to provide a high level
of current income and safety of principal. The portfolio invests
in debt obligations issued or guaranteed by U.S. governmental
units.
Because any investment involves risk, achieving these goals cannot
be guaranteed. Only the shareholders can change the goals.
Manager and distributor
The fund is managed by IDS Life Insurance Company (IDS Life), a
subsidiary of American Express Financial Corporation. American
Express Financial Corporation has an agreement with IDS Life to
furnish investment advice for funds managed by IDS Life. IDS Life
and IDS Life Insurance Company of New York (IDS Life of New York)
buy fund shares for their variable accounts used in connection with
their variable life insurance policies. In the future, the fund
may offer shares to the owners of other variable life and variable
annuity contracts issued by IDS Life or by IDS Life of New York.
Variable accounts
You may not buy (nor will you own) shares of the fund directly.
You invest by buying a variable life insurance policy from IDS Life
or IDS Life of New York and allocating your premium payments among
different subaccounts of the variable accounts that invest in the
portfolios.
<PAGE>
PAGE 8
Sales charge
Cost of insurance charges, premium expense charges, surrender
charges, mortality and expense risk fees and other charges under
your policy are described in the variable life insurance policy
prospectus. There is no sales charge for the sale or redemption of
fund shares.
Expenses
The fund pays IDS Life a fee for managing its investment portfolios
and for certain administrative services. The fund also pays
certain nonadvisory expenses. See "Investment manager" under "How
the fund is organized."
<PAGE>
PAGE 9
Performance
Financial highlights
<TABLE>
<CAPTION>
Equity Portfolio
Financial highlights
The tables below show certain important financial information for evaluating each portfolio's
results.
Fiscal period ended April 30,
Per share income and capital changes*
1994++++ 1994 1993 1992 1991 1990 1989 1988 1987 1986**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $18.10 $16.87 $16.01 $13.94 $12.77 $12.16 $10.79 $12.05 $9.94 $10.00
Income (loss) from
investment operations:
Net investment income .05 .06 .03 .03 .13 .35 .36 .15 .16 .13
Net gains (losses) on
securities (both realized
and unrealized .91 3.26 1.40 2.90 2.09 .61 1.37 (1.13) 2.17 (.06)
Total from investment
operations .96 3.32 1.43 2.93 2.22 .96 1.73 (0.98) 2.33 .07
Less distributions:
Dividends from net
investment income (.05) (.06) (.03) (.03) (.13) (.35) (.36) (.15) (.16) (.13)
Distributions from
realized gains -- (2.03) (.54) (.83) (.92) - - (.13) (.06) -
Total distributions (.05) (2.09) (.57) (.86) (1.05) (.35) (.36) (.28) (.22) (.13)
Net asset value,
end of period $19.01 $18.10 $16.87 $16.01 $13.94 $12.77 $12.16 $10.79 $12.05 $9.94
Ratios/supplemental data
1994++++ 1994 1993 1992 1991 1990 1989 1988 1987 1986**
Net assets, end of period
(in thousands) $195,727 $151,860 $87,742 $55,265 $33,933 $16,355 $11,620 $7,247 $2,984 $211
Ratio of expenses to average
daily net assets .80%++ .75% .79% .80% .80%+ .80%+ .80%+ 1.10% 1.23% .95%++
Ratio of net income to average
daily net assets .63%++ .33% .21% .17% 1.03% 2.61% 3.32% 1.21% 1.40% 3.83%++
Portfolio turnover rate
(excluding short-term
securities) 68% 109% 81% 52% 79% 190% 48% 57% 57% 15%
Total return+++ 5.21% 19.72% 8.92% 21.06% 18.55% 7.84% 16.18% (8.04)% 23.66% .69%***
* For a share outstanding throughout the period. Rounded to the nearest cent.
**Commencement of operations. Period from Jan. 20, 1986 to April 30, 1986.
***For the period from Jan. 20, 1986 to April 30, 1986, the annualized total return is 2.50%.
+ Commencing on May 1, 1989, IDS Life voluntarily limited total operating expenses to 0.8% of average daily net assets.
Had IDS Life not done so, the expenses per share and the ratio of expenses to average daily net assets would have been
$.11 and 0.86% and $.13 and 0.90% for the years ended April 30, 1991 and 1990, respectively.
++Adjusted to an annual basis.
+++Total return does not reflect the expenses that apply to the subaccounts or the policies.
++++Semiannual period, ended Oct. 31, 1994 (unaudited).
</TABLE>
<PAGE>
PAGE 10
<TABLE>
<CAPTION>
Income Portfolio
Financial highlights (continued)
Fiscal period ended April 30,
Per share income and capital changes*
1994++++ 1994 1993 1992 1991 1990 1989 1988 1987 1986**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $9.71 $10.19 $9.40 $9.19 $8.55 $8.93 $9.05 $9.42 $10.35 $10.00
Income (loss) from
investment operations:
Net investment income .35 .71 .76 .73 .75 .75 .70 .68 .74 .35
Net gains (losses) on
securities (both realized
and unrealized) (.34) (.48) .80 .21 .64 (.40) (.12) (.37) (.93) .35
Total from investment
operations .01 .23 1.56 .94 1.39 .35 .58 .31 (.19) .70
Less distributions:
Dividends from net
investment income (.35) (.71) (.77) (.73) (.75) (.73) (.70) (.68) (.74) (.35)
Net asset value,
end of period $9.37 $9.71 $10.19 $9.40 $9.19 $8.55 $8.93 $9.05 $9.42 $10.35
Ratios/supplemental data
1994++++ 1994 1993 1992 1991 1990 1989 1988 1987 1986**
Net assets, end of period
(in thousands) $34,329 $33,770 $22,641 $16,306 $11,949 $8,831 $6,203 $4,456 $2,397 $215
Ratio of expenses to average
daily net assets .80%++ .80% .80%+ 80%+ .80%+ .80%+ 1.11% 1.13% 1.72% .68%++
Ratio of net income to
average daily net assets 7.29%++ 6.83% 7.66% 7.86% 8.41% 8.02% 7.87% 7.50% 6.27% 13.99%++
Portfolio turnover rate (excluding
short-term securities) 14% 60% 47% 75% 55% 60% 99% 64% 38% -
Total return+++ 0.00% 2.12% 17.17% 10.60% 16.77% 3.75% 6.70% 3.59% (1.58)% 6.98%***
* For a share outstanding throughout the period. Rounded to the nearest cent.
**Commencement of operations. Period from Jan. 20, 1986 to April 30, 1986.
*** For the period from Jan. 20, 1986 to April 30, 1986, the annualized total return is 25.49%.
+ Commencing on May 1, 1989, IDS Life voluntarily limited total operating expenses to 0.8% of average daily net
assets. Had IDS Life not done so, the expenses per share and the ratio of expenses to average daily net assets would
have been $.08 and 0.83%, $.08 and 0.88%, $.08 and 0.93% and $09.and 0.96% for the years ended April 30,
1993, 1992, 1991 and 1990, respectively.
++Adjusted to an annual basis.
+++Total return does not reflect the expenses that apply to the subaccounts or the policies.
++++Semiannual period, ended Oct. 31, 1994 (unaudited).
</TABLE>
<PAGE>
PAGE 11
<TABLE>
<CAPTION>
Money Market Portfolio
Financial highlights (continued)
Fiscal period ended April 30,
Per share income and capital changes*
1994++++ 1994 1993 1992 1991 1990 1989 1988 1987 1986**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from
investment operations:
Net investment income .02 .03 .03 .05 .07 .08 .07 .06 .05 .02
Total from investment
operations .02 .03 .03 .05 .07 .08 .07 .06 .05 .02
Less distributions:
Dividends from net
investment income (.02) (.03) (.03) (.05) (.07) (.08) (.07) (.06) (.05) (.02)
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Ratios/supplemental data
1994++++ 1994 1993 1992 1991 1990 1989 1988 1987 1986**
Net assets, end of period
(in thousands) $9,805 $9,557 $8,181 $9,771 $9,596 $6,321 $4,721 $2,748 $1,007 $199
Ratio of expenses to
average daily net assets .60%++ .60%+ .60%+ .60%+ .60%+ .60%+ 1.10%+ .96% 1.35% .64%++
Ratio of net income to
average daily net assets 3.90%++ 2.61% 3.00% 4.60% 7.06% 8.26% 7.38% 5.89% 4.46% 6.01%++
Total return+++ 1.94% 2.61% 3.04% 4.71% 7.41% 8.61% 7.52% 6.13% 5.38% 1.74%***
* For a share outstanding throughout the period. Rounded to the nearest cent.
**Commencement of operations. Period from Jan. 20, 1986 to April 30, 1986.
***For the period from Jan. 20, 1986 to April 30, 1986, the annualized total return is 6.35%.
+ Commencing on April 5, 1989, IDS Life voluntarily limited total operating expenses to 0.6% of average daily net
assets. Had IDS Life not done so, the expenses per share and the ratio of expenses to average daily net assets would
have been $.01 and 0.71%, $.01 and 0.74%, $.01 and 0.75%, $.01 and 0.86%, $.01 and 0.96% and $.01 and
1.35% for the years ended April 30, 1994, 1993, 1992, 1991, 1990 and 1989, respectively.
++Adjusted to an annual basis.
+++Total return does not reflect the expenses that apply to the subaccounts or the policies.
++++Semiannual period, ended Oct. 31, 1994 (unaudited).
</TABLE>
<PAGE>
PAGE 12
<TABLE>
<CAPTION>
Managed Portfolio
Financial highlights (continued)
Fiscal period ended April 30,
Per share income and capital changes*
1994++++ 1994 1993 1992 1991 1990 1989 1988 1987 1986**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $13.85 $13.84 $13.55 $13.29 $12.80 $11.22 $10.42 $11.40 $10.06 $10.00
Income (loss) from
investment operation:
Net investment income .19 .42 .44 .48 .57 .57 .61 .42 .40 .18
Net gains (losses) on
securities (both realized
and unrealized) .74 1.40 1.44 1.87 1.90 1.58 .80 (.84) 1.41 .06
Total from investment
operations .93 1.82 1.88 2.35 2.47 2.15 1.41 (.42) 1.81 .24
Less distributions:
Dividends from net
investment income (.19) (.42) (.44) (.48) (.57) (.57) (.61) (.42) (.40) (.18)
Distributions from
realized gains -- (1.39) (1.15) (1.61) (1.41) - - (.14) (.07) -
Total distributions (.19) (1.81) (1.59) (2.09) (1.98) (.57) (.61) (.56) (.47) (.18)
Net asset value, end
of period $14.59 $13.85 $13.84 $13.55 $13.29 $12.80 $11.22 $10.42 $11.40 $10.06
Ratios/supplemental data
1994++++ 1994 1993 1992 1991 1990 1989 1988 1987 1986**
Net assets, end of period
(in thousands) $201,020 $160,706 $100,139 $72,366 $51,442 $32,725 $25,807 $21,901 $10,779 $588
Ratio of expenses to
average daily net assets .80%++ .77% .79% .80% .80%+ .80%+ .72%+ 1.03% 1.30% .68%++
Ratio of net income to
average daily net assets 2.85%++ 2.83% 3.15% 3.40% 4.38% 4.54% 5.76% 3.86% 3.53% 6.41%++
Portfolio turnover rate
(excluding short-term
securities) 59% 106% 118% 122% 71% 107% 58% 67% 43% -
Total return+++ 6.79% 13.30% 14.03% 17.84% 20.18% 19.37% 13.88% (3.57%) 18.32% 2.38%***
* For a share outstanding throughout the period. Rounded to the nearest cent.
**Commencement of operations. Period from Jan. 20, 1986 to April 30, 1986.
***For the period from Jan. 20, 1986 to April 30, 1986, the annualized total return is 8.71%.
+ Commencing on April 5, 1989, IDS Life voluntarily limited total operating expenses to 0.8% of average daily net
assets. Had IDS Life not done so, the expenses per share and the ratio of expenses to average daily net assets would
have been $.11 and 0.81%, $.10 and 0.82% and $.09 and 0.84% for the years ended April 30, 1991, 1990 and
1989 respectively.
++Adjusted to an annual basis.
+++Total return does not reflect the expenses that apply to the subaccounts or the policies.
++++Semiannual period, ended Oct. 31, 1994 (unaudited).
</TABLE>
<PAGE>
PAGE 13
<TABLE>
<CAPTION>
Government Securities Portfolio
Financial highlights (continued)
Fiscal period ended April 30,
Per share income and capital changes*
1994++++ 1994 1993 1992 1991 1990 1989 1988 1987 1986**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value
beginning of period $9.88 $10.54 $9.69 $9.44 $8.88 $8.97 $9.00 $9.40 $10.32 $10.00
Income (loss) from
investment operations:
Net investment income .28 .60 .63 .66 .67 .69 .64 .64 .66 .34
Net gains (losses) on
securities (both realized
and unrealized) (.26) (.56) .94 .28 .56 (.09) (.03) (.40) (.92) .32
Total from investment
operations .02 .04 1.57 .94 1.23 .60 .61 .24 (.26) .66
Less distributions:
Dividends from net
investment income (.28) (.60) (.63) (.66) (.67) (.69) (.64) (.64) (.66) (.34)
Distributions from
realized gains -- (.10) (.09) (.03) - - - - - -
Total distributions (.28) (.70) (.72) (.69) (.67) (.69) (.64) (.64) (.66) (.34)
Net asset value, end
of period $9.62 $ 9.88 $10.54 $9.69 $9.44 $8.88 $8.97 $9.00 $ 9.40 $10.32
Ratios/supplemental data
1994++++ 1994 1993 1992 1991 1990 1989 1988 1987 1986**
Net assets, end of period
(in thousands) $11,183 $11,185 $9,619 $7,853 $6,314 $3,184 $2,773 $2,170 $1,230 $309
Ratio of expenses to
average daily net assets .80%++ .80%+ .80%+ .80%+ .80%+ .80%+ 1.12%+ 1.13% 1.56% .68%++
Ratio of net income to
average daily net assets 5.67%++ 5.59% 6.10% 6.79% 7.24% 7.34% 7.19% 7.04% 5.90% 1.47%++
Portfolio turnover rate
(excluding short-term
securities) 1% 32% 15% 11% 18% 18% 14% 13% 43% -
Total return+++ 0.17% 0.16% 16.58% 10.20% 14.30% 6.50% 7.12% 2.77% (2.73)% 6.60%***
* For a share outstanding throughout the period. Rounded to the nearest cent.
**Commencement of operations. Period from Jan. 20, 1986 to April 30, 1986.
***For the period from Jan. 20, 1986 to April 30, 1986, the annualized total return is 24.09%.
+ Commencing on April 5, 1989, IDS Life voluntarily limited total operating expenses to 0.8% of average daily net
assets. Had IDS Life not done so, the expenses per share and the ratio of expenses to average daily net assets would
have been $.09 and 0.85%, $.09 and 0.88%, $.09 and 0.92%, $.10 and 1.08%, $.11 and 1.12%, and $.11 and
1.21% for the years ended April 30, 1994, 1993, 1992, 1991, 1990 and 1989 respectively.
++Adjusted to an annual basis.
+++Total return does not reflect the expenses that apply to the subaccounts or the policies.
++++Semiannual period, ended Oct. 31, 1994 (unaudited).
</TABLE>
Except for the semiannual period ended October 31, 1994, the
information in the preceding tables has been audited by KPMG Peat
Marwick LLP, independent auditors. The independent auditors'
report and additional information about the performance of the fund
is contained in the fund's annual report which may be obtained
without charge.
<PAGE>
PAGE 14
Total returns
Average annual total returns as of April 30, 1994
Purchase 1 year 5 years Since
made ago ago inception*
Equity Portfolio +19.72% +15.07% +12.67%
S&P 500 + 5.32% +11.25% +13.17%
Lipper Growth
and Income Fund
Index + 7.76% +10.73% +12.21%
Cumulative total returns as of April 30, 1994
Purchase 1 year 5 years Since
made ago ago inception*
Equity Portfolio +19.72% +101.79% +168.42%
S&P 500 + 5.32% + 70.38% +178.37%
Lipper Growth
and Income Fund
Index + 7.76% + 66.43% +159.48%
Average annual total returns as of April 30, 1994
Purchase 1 year 5 years Since
made ago ago inception*
Income Portfolio +2.12% +9.90% +7.77%
Lehman Aggregate
Bond Index +0.83% +9.74% +9.31%
Cumulative total returns as of April 30, 1994
Purchase 1 year 5 years Since
made ago ago inception*
Income Portfolio +2.12% +60.36% + 85.77%
Lehman Aggregate
Bond Index +0.83% +59.18% +108.95%
<PAGE>
PAGE 15
Average annual total returns as of April 30, 1994
Purchase 1 year 5 years Since
made ago ago inception*
Managed Portfolio +13.30% +16.91% +13.76%
S&P 500 + 5.32% +11.25% +13.17%
Lipper Balanced
Fund Index + 4.61% +10.37% +10.49%
Cumulative total returns as of April 30, 1994
Purchase 1 year 5 years Since
made ago ago inception*
Managed Portfolio +13.30% +118.41% +190.55%
S&P 500 + 5.32% + 70.38% +178.37%
Lipper Balanced
Fund Index + 4.61% + 63.77% +128.42%
Average annual total returns as of April 30, 1994
Purchase 1 year 5 years Since
made ago ago inception*
Government
Securities Portfolio +0.16% +9.39% +7.27%
Merrill Lynch 1-3
Gov't Index +1.62% +7.98% +7.79%
Cumulative total returns as of April 30, 1994
Purchase 1 year 5 years Since
made ago ago inception*
Government
Securities Portfolio +0.16% +56.62% +78.78%
Merrill Lynch 1-3
Gov't Index +1.62% +46.83% +86.06%
*Jan. 20, 1986
These examples show total returns from hypothetical investments in
each portfolio. These returns are compared to those of popular
indexes for the same periods. The results do not reflect the
expenses that apply to the subaccounts or the policies. Inclusion
of these charges would reduce total return for all periods shown.
<PAGE>
PAGE 16
For purposes of calculation, information about each portfolio
assumes the deduction of applicable portfolio expenses, makes no
adjustments for taxes that may have been paid on the reinvested
income and capital gains, and covers a period of widely fluctuating
securities prices. Returns shown should not be considered a
representation of the fund's future performance.
The portfolio's investments may be different from those in the
indexes. The indexes reflect reinvestment of all distributions and
changes in market prices, but exclude brokerage commissions or
other fees.
Standard & Poor's 500 Stock Index (S&P 500), an unmanaged list of
common stocks, is frequently used as a general measure of market
performance. However, the S&P 500 companies are generally larger
than those in which the fund invests.
Lipper Growth and Income Fund Index, published by Lipper Analytical
Services, Inc., includes 30 funds that are generally similar to
Equity Portfolio, although some funds in the index may have
somewhat different investment policies or objectives.
Lehman Aggregate Bond Index is made up of a representative list of
government and corporate bonds as well as asset-backed securities
and mortgage-backed securities. The index is frequently used as a
general measure of bond market performance. However, the
securities used to create the index may not be representative of
the bonds held in the Income Portfolio.
Merrill Lynch 1-3 Year Government Index is an unmanaged list of all
treasury and agency securities. The index is used here as a
general measure of performance. However, the securities used to
create the index may not be representative of the debt securities
held in the Government Securities Portfolio.
Lipper Balanced Fund Index, published by Lipper Analytical
Services, Inc., includes 10 funds that are generally similar to the
Managed Portfolio, although some funds in the index may have
somewhat different investment policies or objectives.
Yield calculations
Income Portfolio and Government Securities Portfolio may calculate
a 30-day annualized yield by dividing:
o net investment income per share deemed earned during a 30-day
period by
o the net asset value per share on the last day of the period,
and
o converting the result to a yearly equivalent figure.
<PAGE>
PAGE 17
This yield calculation does not include any surrender charge or
life insurance policy charges, which would reduce the yield quoted.
A portfolio's yield varies from day to day, mainly because share
values and net asset values (which are calculated daily) vary in
response to changes in interest rates. Net investment income
normally changes much less in the short run. Thus, when interest
rates rise and share values fall, yield tends to rise. When
interest rates fall, yield tends to follow.
Money Market Portfolio calculates annualized simple and compound
yields based on a seven-day period.
Past yields should not be considered an indicator of future yields.
Key terms
Average annual total return - The annually compounded rate of
return over a given time period (usually two or more years) - total
return for the period converted to an equivalent annual figure.
Capital gains or losses - Increase or decrease in value of the
securities the portfolio holds. Gains are realized when securities
that have increased in value are sold. A portfolio also may have
unrealized gains or losses when securities increase or decrease in
value but are not sold.
Close of business - Normally 3 p.m. Central time each business day
(any day the New York Stock Exchange is open).
Distributions - Payments to the subaccounts of two types:
investment income (dividends) and realized net long-term capital
gains (capital gains distributions).
Investment income - Dividends and interest earned on securities
held by the portfolio.
Net asset value (NAV) - Value of a single share held by the
portfolio. It is the total market value of all of a portfolio's
investments and other assets, less any liabilities, divided by the
number of shares outstanding.
The NAV is the price the subaccount receives when it sells shares.
It usually changes from day to day, and is calculated at the close
of business. For the Income and Government Securities Portfolios,
NAV generally declines as interest rates increase and rises as
interest rates decline.
Total return - Sum of all returns for a given period, assuming
reinvestment of all distributions. Calculated by taking the total
value of shares at the end of the period (including shares acquired
by reinvestment), less the price of shares purchased at the
beginning of the period.
Yield - Net investment income earned per share for a specified time
period, divided by the share price at the end of the period.
<PAGE>
PAGE 18
Investment policies and risks
Equity Portfolio - Under normal market conditions, Equity Portfolio
invests in U.S. common stocks listed on national securities
exchanges that the investment manager believes have potential for
capital appreciation. The companies in which the portfolio invests
may be well-seasoned or relatively new and lesser-known as long as
the investment manager believes the stock is attractive for capital
growth.
The portfolio also may invest in convertible securities, derivative
instruments, money market instruments and foreign investments.
Neither foreign investments nor derivative instruments will exceed
25% of the portfolio's total assets.
Income Portfolio - Under normal market conditions, Income Portfolio
primarily invests in debt securities. At least 50% of its net
assets are invested in corporate bonds of the four highest ratings,
in other corporate bonds the investment manager believes have the
same investment qualities, and in government bonds.
The portfolio also may invest in corporate bonds with lower
ratings, convertible securities, preferred stocks, derivative
instruments, foreign investments and money market instruments.
Foreign investments are limited to 25% of the portfolio's total
assets. The portfolio does not have a minimum rating requirement
for corporate bonds.
Money Market Portfolio - Under normal market conditions, Money
Market Portfolio invests primarily in high-quality, short-term,
marketable debt securities and other money market instruments. For
a description of money market securities, see Appendix B in the
SAI.
Managed Portfolio - This portfolio invests in common and preferred
stocks, convertible securities, debt securities, derivative
instruments, foreign securities and money market instruments. The
portfolio manager continuously will adjust the mix of investments
subject to the following three net asset limits: 1) up to 75% in
equity securities (stocks), 2) up to 75% in bonds or other debt
securities, and 3) up to 100% in money market instruments. Stocks
and debt securities will be selected for capital appreciation,
income or both. Money market instruments will be selected for
current income and safety of principal.
Of the assets invested in bonds, at least 50% will be in corporate
bonds of the four highest ratings, in other corporate bonds the
investment manager believes have the same investment qualities, and
in government bonds. For the other 50% invested in corporate
bonds, there is no minimum rating requirement. Foreign investments
are limited to 25% of the portfolio's total assets.
Government Securities Portfolio - Under normal market conditions,
Government Securities Portfolio invests in securities that are
issued or guaranteed by a U.S. governmental unit. The portfolio
<PAGE>
PAGE 19
also may invest in derivative instruments on U.S. government
securities. Shares of this portfolio are not insured or guaranteed
by the U.S. government or by any other person or entity.
The various types of investments the portfolio managers use to
achieve investment performance are described in more detail in the
next section and in the SAI.
Facts about investments and their risks
Common stocks: Stock prices are subject to market fluctuations.
Stocks of smaller or foreign companies may be subject to abrupt or
erratic price movements. Also, small companies often have limited
product lines, smaller markets or fewer financial resources.
Therefore, some of the securities in which a portfolio invests
involve substantial risk and may be considered speculative.
Preferred stocks: If a company earns a profit, it generally must
pay its preferred stockholders a dividend at a pre-established
rate.
Convertible securities: These securities generally are preferred
stocks or bonds that can be exchanged for other securities, usually
common stock, at prestated prices. When the trading price of the
common stock makes the exchange likely, the convertible securities
trade more like common stock.
Investment grade bonds: The price of an investment grade bond
fluctuates as interest rates change or if its credit rating is
upgraded or downgraded.
Debt securities below investment grade: The price of these bonds
may react more to the ability of a company to pay interest and
principal when due than to changes in interest rates. They have
greater price fluctuations, are more likely to experience a
default, and sometimes are referred to as "junk bonds." Reduced
market liquidity for these bonds may occasionally make it more
difficult to value them. In valuing bonds, a portfolio relies both
on independent rating agencies and the investment manager's credit
analysis. Securities that are subsequently downgraded in quality
may continue to be held and will be sold only when the portfolio's
investment manager believes it is advantageous to do so.
<PAGE>
PAGE 20
Bond ratings of holdings for period ended
April 30, 1994 for Income Portfolio
<TABLE><CAPTION>
Percent of
S&P Rating Protection of net assets
Percent of (or Moody's principal and in unrated
net assets equivalent) interest securities*
<S> <C> <C> <C>
3.10% AAA Highest quality -- %
3.80 AA High quality --
12.70 A Upper medium grade 0.63
26.17 BBB Medium grade 0.32
10.70 BB Moderately speculative --
13.68 B Speculative --
0.17 CCC Highly speculative --
-- CC Poor quality --
-- C Lowest quality --
-- D In default --
1.35 NR Unrated securities 0.40
* American Express Financial Corporation's assessment of unrated securities.
</TABLE>
<TABLE><CAPTION>
Bond ratings of holdings for period ended
April 30, 1994 for Managed Portfolio
Percent of
S&P Rating Protection of net assets
Percent of (or Moody's principal and in unrated
net assets equivalent) interest securities*
<S> <C> <C> <C>
2.49% AAA Highest quality -- %
1.30 AA High quality --
4.28 A Upper medium grade 0.11
5.21 BBB Medium grade --
4.61 BB Moderately speculative --
5.36 B Speculative 0.08
0.09 CCC Highly speculative --
-- CC Poor quality --
-- C Lowest quality --
-- D In default --
0.82 NR Unrated securities 0.63
* American Express Financial Corporation's assessment of unrated securities.
</TABLE>
(See Appendix G to the SAI for further information regarding
ratings.)
Debt securities sold at a deep discount: Some bonds are sold at
deep discounts because they do not pay interest until maturity.
They include zero coupon bonds and PIK (pay-in-kind) bonds. To
comply with tax laws, a portfolio has to recognize a computed
amount of interest income and pay dividends to shareholders even
though no cash has been received. In some instances, a portfolio
may have to sell securities to have sufficient cash to pay the
dividends.
Mortgage-backed securities: All portfolios except Money Market may
invest in U.S. government securities representing part ownership of
pools of mortgage loans. A pool, or group, of mortgage loans
issued by such lenders as mortgage bankers, commercial banks and
savings and loan associations, is assembled and mortgage pass-
through certificates are offered to investors through securities
dealers. In pass-through certificates, both principal and interest
payments, including prepayments, are passed through to the holder
of the certificate. Prepayments on underlying mortgages result in <PAGE>
PAGE 21
a loss of anticipated interest, and the actual yield (or total
return) to the portfolio, which is influenced by both stated
interest rates and market conditions, may be different than the
quoted yield on the certificates.
Foreign investments: Securities of foreign companies and
governments may be traded in the United States, but often they are
traded only on foreign markets. Frequently, there is less
information about foreign companies and less government supervision
of foreign markets. Foreign investments are subject to political
and economic risks of the countries in which the investments are
made including the possibility of seizure or nationalization of
companies, imposition of withholding taxes on income, establishment
of exchange controls or adoption of other restrictions that might
affect an investment adversely. If an investment is made in a
foreign market, the local currency must be purchased. This is done
by using a forward contract in which the price of the foreign
currency in U.S. dollars is established on the date the trade is
made, but delivery of the currency is not made until the securities
are received. As long as the portfolio holds foreign currencies or
securities valued in foreign currencies, the price of a portfolio
share will be affected by changes in the value of the currencies
relative to the U.S. dollar. Because of the limited trading volume
in some foreign markets, efforts to buy or sell a security may
change the price of the security, and it may be difficult to
complete the transaction.
Derivative instruments: The portfolio managers may use derivative
instruments in addition to securities to achieve investment
performance. Derivative instruments include futures, options and
forward contracts. Such instruments may be used to maintain cash
reserves while remaining fully invested, to offset anticipated
declines in values of investments, to facilitate trading, to reduce
transaction costs, or to pursue higher investment returns.
Derivative instruments are characterized by requiring little or no
initial payment and a daily change in price based on or derived
from a security, a currency, a group of securities or currencies,
or an index. A number of strategies or combination of instruments
can be used to achieve the desired investment performance
characteristics. A small change in the value of the underlying
security, currency or index will cause a sizable gain or loss in
the price of the derivative instrument. Derivative instruments
allow a portfolio manager to change the investment performance
characteristics very quickly and at lower costs. Risks include
losses of premiums, rapid changes in prices, defaults by other
parties, and inability to close such instruments. A portfolio will
use derivative instruments only to achieve the same investment
performance characteristics it could achieve by directly holding
those securities and currencies permitted under the investment
policies. The portfolios' custodian will maintain, in a segregated
account, cash or liquid high-grade debt securities that are marked
to market daily and are at least equal in value to the portfolios'
obligations. No more than 5% of each portfolio's net assets can be
used at any one time for good faith deposits on futures and
<PAGE>
PAGE 22
premiums for options on futures that do not offset existing
investment positions. For further information, see the options and
futures appendixes in the SAI.
Securities and derivative instruments that are illiquid: Illiquid
means the security or derivative instrument cannot be sold quickly
in the normal course of business. Some investments cannot be
resold to the U.S. public because of their terms or government
regulations. All securities and derivative instruments, however,
can be sold in private sales, and many may be sold to other
institutions and qualified buyers or on foreign markets. Each
portfolio manager will follow guidelines established by the board
of directors and consider relevant factors such as the nature of
the security and the number of likely buyers when determining
whether a security is illiquid. No more than 10% of each
portfolio's net assets will be held in securities and derivative
instruments that are illiquid.
Money market instruments: Short-term debt securities rated in the
top two grades are used to meet daily cash needs and at various
times to hold assets until better investment opportunities arise.
Generally less than 25% of each of Equity, Income, Managed and
Government Securities Portfolio's assets are in these money market
instruments. However, for temporary defensive purposes these
investments could exceed that amount for a limited period of time.
The investment policies described above may be changed by the board
of directors.
Lending portfolio securities: Each portfolio may lend its
securities to earn income so long as borrowers provide collateral
equal to the market value of the loans. The risks are that
borrowers will not provide collateral when required or return
securities when due. Unless shareholders approve otherwise, loans
may not exceed 30% of a portfolio's net assets.
Alternative investment option
In the future, the board of the fund may determine for operating
efficiencies to use a master/feeder structure. Under that
structure, the fund's investment portfolios would be managed by
another investment company with the same goal as the fund, rather
than being invested directly in a portfolio of securities.
Valuing assets
Money Market Portfolio's securities are valued at amortized cost.
In valuing assets of Equity, Income, Managed and Government
Securities Portfolios:
o Securities and assets with available market values are valued
on that basis.
<PAGE>
PAGE 23
o Securities maturing in 60 days or less are valued at amortized
cost.
o Securities and assets without readily available market values
are valued according to methods selected in good faith by the
board of directors.
o Assets and liabilities denominated in foreign currencies are
translated daily into U.S. dollars at a rate of exchange set
as near to the close of the day as practicable.
How to invest, transfer or redeem shares
How to invest
You may invest in the portfolios of the fund only by buying a
variable life insurance policy offered by IDS Life or IDS Life of
New York. Your financial advisor will help you fill out and submit
an application. For further information concerning acceptance of
your application, see the variable life insurance policy
prospectus.
How to transfer among subaccounts
You can transfer all or part of your value in a subaccount to one
or more of the other subaccounts. That way, you transfer to a
portfolio with a different investment objective. Please refer to
your variable life insurance policy prospectus for more information
about transfers among subaccounts.
Redeeming shares
The fund will buy (redeem) any shares presented by the subaccounts.
Policy surrender details are described in your variable life
insurance policy prospectus. Payment generally will be made within
seven days of the surrender request. The amount may be more or
less than the amount invested. Shares will be redeemed at net
asset value at the close of business on the day the request is
accepted at the Minneapolis office for IDS Life or at the Albany
office for IDS Life of New York. If the request arrives after the
close of business, the price per share will be the net asset value
at the close of business on the next business day.
Distributions and taxes
The fund distributes to shareholders (the subaccounts) net
investment income and net capital gains. It does so to qualify as
a regulated investment company and to avoid paying corporate income
and excise taxes.
Dividend and capital gain distributions
The fund distributes its net investment income (dividends and
interest earned on securities held by the fund, less operating
expenses) to shareholders (the subaccounts) at the end of each
<PAGE>
PAGE 24
calendar quarter for the Equity and Managed Portfolios. For the
Income, Money Market and Government Securities Portfolios, net
investment income is distributed monthly. Short-term capital gains
distributed are included in net investment income. Net realized
capital gains, if any, from selling securities are distributed at
the end of the calendar year. Before they're distributed, both net
investment income and net capital gains are included in the value
of each share. After they're distributed, the value of each share
drops by the per-share amount of the distribution. (Since the
distributions are reinvested, the total value of the holdings will
not change.) The reinvestment price is the net asset value at
close of business on the day the distribution is paid.
Taxes
The Internal Revenue Service (IRS) has issued final regulations
relating to the diversification requirements under section 817(h)
of the Internal Revenue Code. Each portfolio intends to comply
with these requirements.
Federal income taxation of separate accounts, life insurance
companies and variable life insurance policies is discussed in the
variable life insurance policy prospectus.
How the fund is organized
IDS Life Series Fund, Inc. is a series mutual fund with five
portfolios: Equity Portfolio, Income Portfolio, Money Market
Portfolio, Managed Portfolio and Government Securities Portfolio.
The fund is a diversified, open-end management investment company,
as defined in the Investment Company Act of 1940. It was
incorporated in Minnesota on May 8, 1985. The fund headquarters
are at IDS Tower 10, Minneapolis, MN 55440-0010.
Shares
The fund is owned by the subaccounts, its shareholders. Each of
the five portfolios issues its own series of common stock. All
shares issued by each portfolio are of the same class--capital
stock. Par value is $.001 per share. Both full and fractional
shares can be issued. The shares of each portfolio making up IDS
Life Series Fund, Inc. represent an interest in that portfolio's
assets only (and profits or losses) and, in the event of
liquidation, each share of a portfolio would have the same rights
to dividends and assets as every other share of that portfolio.
Voting rights
For a discussion of the rights of policy owners concerning the
voting of shares held by the subaccounts, please see the variable
life insurance policy prospectus. Each share of a portfolio has
one vote. On an issue affecting a particular portfolio, its shares
vote as a separate series. On some issues, all shares of the fund
vote together as one series. All shares have cumulative voting
when voting on the election of directors.
<PAGE>
PAGE 25
The goals of the portfolios can be changed only if the majority of
the outstanding shares agree. The vote of a majority of the
outstanding voting shares means the vote:
o of 67% or more of the voting shares present at such meeting, if
the holders of more than 50% of the outstanding voting shares are
present or represented by proxy; or
o of more than 50% of the outstanding voting shares, whichever is
less.
Shareholder meetings
The fund does not hold annual shareholder meetings. However, the
directors may call meetings at their discretion, or on demand by
holders of 10% or more of the outstanding shares, to elect or
remove directors.
Portfolio managers
Equity Portfolio
Marty Hurwitz joined American Express Financial Corporation in 1987
and serves as portfolio manager. He was appointed to manage this
portfolio in July 1993. He also serves as portfolio manager for
IDS Life Aggressive Growth Fund and manages accounts for IDS
Advisory Portfolio Management Group, a division of American Express
Financial Advisors Inc.
Income Portfolio
Lorraine Hart joined American Express Financial Corporation in 1984
and serves as vice president - insurance investments. She has
managed this portfolio since 1991. She also manages the invested
asset portfolios of IDS Life, IDS Life of New York, and American
Enterprise Life Insurance Company.
Money Market Portfolio
Gregg Syverson joined American Express Financial Corporation in
1984 and serves as portfolio manager. He has managed this
portfolio since 1992. He also manages the short-term investments
and debt for American Express Financial Corporation, American
Express Financial Advisors Inc., IDS Life and IDS Certificate
Company.
Managed Portfolio
Jeanie Tebault joined American Express Financial Corporation in
1985 as an analyst, becoming associate portfolio manager in 1991,
helping to manage Wealth Management Portfolios and the IDS Stock
Fund. She became portfolio manager in 1993 and was appointed to
manage this portfolio in January 1995.
Government Securities Portfolio
Jim Snyder joined American Express Financial Corporation in 1989
and serves as portfolio manager. He was appointed to manage this
portfolio in April 1994. He also serves as associate portfolio
<PAGE>
PAGE 26
manager of IDS Federal Income Fund. Prior to joining American
Express Financial Corporation, he had been a Quantitative
Investment Analyst at Harris Trust.
Directors and officers
Shareholders elect a board of directors that oversees the
operations of the fund and chooses its officers. Its officers are
responsible for day-to-day business decisions based on policies set
by the board. The board has named an executive committee that has
authority to act on its behalf between meetings.
On April 30, 1994 the fund's directors and officers did not own any
shares of the fund.
Investment manager
The fund pays IDS Life for managing its portfolio, providing
administrative services and serving as transfer agent.
Under its Investment Management and Services Agreement, IDS Life
determines which securities will be purchased, held or sold
(subject to the direction and control of the fund's board of
directors). For these services the fund pays IDS Life a fee based
on the average daily net assets of the portfolios at the following
rates: 0.7% on an annual basis for Equity, Income, Managed and
Government Securities Portfolios and 0.5% for Money Market
Portfolio.
Under the Agreement, the fund also pays taxes, brokerage
commissions and nonadvisory expenses. However, IDS Life has agreed
to a voluntary limit of the annual charge of 0.1% of the average
daily net assets of the fund for these nonadvisory expenses. Total
net fees and expenses incurred after the limitations by each
portfolio amounted to 0.8% of average daily net assets for Equity,
Income, Managed and Government Securities Portfolios and 0.6% for
Money Market Portfolio for the period ended April 30, 1994.
IDS Life reserves the right to discontinue limiting these
nonadvisory expenses at 0.1%. However, its present intention is to
continue the limit until the time that actual expenses are less
than the limit.
Investment Advisory Agreement
IDS Life and American Express Financial Corporation have an
Investment Advisory Agreement which calls for IDS Life to pay
American Express Financial Corporation a fee for investment advice
about the fund's Portfolios. The fee paid by IDS Life is 0.25% of
the fund's average net assets for the year. American Express
Financial Corporation also executes purchases and sales and
negotiates brokerage as directed by IDS Life.
Total fees and expenses (excluding taxes and brokerage commissions)
cannot exceed the most restrictive applicable state expense
limitation.
<PAGE>
PAGE 27
About IDS Life and American Express Financial Corporation
General information
IDS Life Series Fund is managed by IDS Life, a wholly owned
subsidiary of American Express Financial Corporation, which itself
is a wholly owned subsidiary of the American Express Company, a
financial services company headquartered in New York City.
IDS Life is a stock life insurance company organized in 1957 under
the laws of the State of Minnesota and located at IDS Tower 10,
Minneapolis, MN 55440-0010. IDS Life conducts a conventional life
insurance business in the District of Columbia and all states
except New York.
The American Express Financial Corporation family of companies
offers not only insurance and annuities, but also mutual funds,
investment certificates and a broad range of financial management
services.
American Express Financial Corporation has been providing financial
services since 1894. Besides managing investments for all publicly
offered funds in the IDS MUTUAL FUND GROUP, American Express
Financial Corporation also manages investments for itself and its
subsidiaries, IDS Certificate Company and IDS Life. Total assets
under management on April 30, 1994 were more than $100 billion.
American Express Financial Advisors Inc. serves individuals and
businesses through its nationwide network of more than 175 offices
and more than 7,500 planners.
Other subsidiaries provide investment management and related
services for pension, profit-sharing, employee savings and
endowment funds of businesses and institutions.
<PAGE>
PAGE 28
IDS Life Series Fund
Prospectus
April 28, 1995
IDS Life Series Fund, Inc. (the fund) is a series mutual fund with
six portfolios, each with a different investment objective.
Equity Portfolio is a stock portfolio.
Income Portfolio is a bond portfolio.
Money Market Portfolio is a money market portfolio.
An investment in Money Market Portfolio is neither insured nor
guaranteed by the U.S. Government and there can be no assurance
that the portfolio will be able to maintain a stable net asset
value of $1 per share.
Managed Portfolio is a managed portfolio.
Government Securities Portfolio is a government securities
portfolio.
International Equity Portfolio is an international stock portfolio.
This prospectus contains information about the fund that you should
know before investing. Read it along with your variable life
insurance policy prospectus before you invest and keep them for
future reference.
Additional facts about the fund are in a Statement of Additional
Information (SAI), and the IDS Life Series Fund, Inc. Semiannual
Report, filed with the Securities and Exchange Commission (SEC).
The SAI, dated April 28, 1995, the 1994 Annual Report and the
Semiannual Report are incorporated here by reference. For free
copies, contact IDS Life Series Fund, Inc.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC
OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SEC OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
IDS LIFE IS NOT A FINANCIAL INSTITUTION, AND THE SECURITIES IT
OFFERS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY FINANCIAL INSTITUTION NOR ARE THEY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR
ANY OTHER AGENCY.
IDS Life Series Fund, Inc.
IDS Tower 10
Minneapolis, MN 55440-0010
612-671-3733, or TTY: 800-285-8846
New York Service: 518-869-8613
<PAGE>
PAGE 29
Table of contents
The fund in brief
Goals and types of portfolio investments
Manager and distributor
Variable accounts
Sales charge
Expenses
Performance
Financial highlights
Total returns
Yield calculations
Key terms
Investment policies and risks
Facts about investments and their risks
Alternative investment option
Valuing assets
How to invest, transfer or redeem shares
How to invest
How to transfer among subaccounts
Redeeming shares
Distributions and taxes
Dividend and capital gain distributions
Taxes
How the fund is organized
Shares
Voting rights
Shareholder meetings
Portfolio managers
Directors and officers
Investment manager
Investment advisory agreement
About IDS Life and American Express Financial Corporation
General information
<PAGE>
PAGE 30
The fund in brief
Goals and types of portfolio investments
IDS Life Series Fund is a series mutual fund. It has six
portfolios whose goals and types of investments are as follows:
Equity Portfolio's goal is capital appreciation. The portfolio
invests primarily in U.S. common stocks and securities convertible
into common stock.
Income Portfolio's goal is to maximize current income while
attempting to conserve the value of the investment and to continue
the high level of income for the longest period of time. The
portfolio invests primarily in corporate bonds of the four highest
ratings.
Money Market Portfolio's goal is to provide maximum current income
consistent with liquidity and conservation of capital. The
portfolio invests primarily in high-quality, short-term debt
securities.
Managed Portfolio's goal is to maximize total investment return
through a combination of capital appreciation and current income.
The portfolio invests in common and preferred stocks, convertible
securities, debt securities and money market instruments.
Government Securities Portfolio's goal is to provide a high level
of current income and safety of principal. The portfolio invests
in debt obligations issued or guaranteed by U.S. governmental
units.
International Equity Portfolio's goal is capital appreciation and
it invests primarily in common stocks of foreign issuers.
Because any investment involves risk, achieving these goals cannot
be guaranteed. Only the shareholders can change the goals.
Manager and distributor
The fund is managed by IDS Life Insurance Company (IDS Life), a
subsidiary of American Express Financial Corporation. American
Express Financial Corporation has an agreement with IDS Life to
furnish investment advice for funds managed by IDS Life. IDS Life
and IDS Life Insurance Company of New York (IDS Life of New York)
buy fund shares for their variable accounts used in connection with
their variable life insurance policies. In the future, the fund
may offer shares to the owners of other variable life and variable
annuity contracts issued by IDS Life or by IDS Life of New York.
Variable accounts
You may not buy (nor will you own) shares of the fund directly.
You invest by buying a variable life insurance policy from IDS Life
or IDS Life of New York and allocating your premium payments among
different subaccounts of the variable accounts that invest in these
portfolios.
<PAGE>
PAGE 31
Sales charge
Cost of insurance charges, premium expense charges, surrender
charges, mortality and expense risk fees and other charges under
your policy are described in the variable life insurance policy
prospectus. There is no sales charge for the sale or redemption of
fund shares.
Expenses
The fund pays IDS Life a fee for managing its investment portfolios
and for certain administrative services. The fund also pays
certain nonadvisory expenses. See "Investment manager" under "How
the fund is organized."
<PAGE>
PAGE 32
Performance
Financial highlights
<TABLE>
<CAPTION>
Equity Portfolio
Financial highlights
The tables below show certain important financial information for evaluating each portfolio's results.
Fiscal period ended April 30,
Per share income and capital changes*
1994++++ 1994 1993 1992 1991 1990 1989 1988 1987 1986**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 18.10 $ 16.87 $ 16.01 $ 13.94 $ 12.77 $ 12.16 $ 10.79 $ 12.05 $ 9.94 $10.00
Income (loss from
investment operations:
Net investment income .05 .06 .03 .03 .13 .35 .36 .15 .16 .13
Net gains (losses) on
securities (both realized
and unrealized .91 3.26 1.40 2.90 2.09 .61 1.37 (1.13) 2.17 (.06)
Total from investment
operations .96 3.32 1.43 2.93 2.22 .96 1.73 (0.98) 2.33 .07
Less distributions:
Dividends from net
investment income (.05) (.06) (.03) (.03) (.13) (.35) (.36) (.15) (.16) (.13)
Distributions from
realized gains -- (2.03) (.54) (.83) (.92) - - (.13) (.06) -
Total distributions (.05) (2.09) (.57) (.86) (1.05) (.35) (.36) (.28) (.22) (.13)
Net asset value,
end of period $ 19.01 $ 18.10 $ 16.87 $ 16.01 $ 13.94 $ 12.77 $ 12.16 $ 10.79 $12.05 $ 9.94
Ratios/supplemental data
1994++++ 1994 1993 1992 1991 1990 1989 1988 1987 1986**
Net assets, end of period
(in thousands) $195,727 $151,860 $87,742 $55,265 $33,933 $16,355 $11,620 $ 7,247 $2,984 $ 211
Ratio of expenses to average
daily net assets .80%++ .75% .79% .80% .80%+ .80%+ .80%+ 1.10% 1.23% .95%++
Ratio of net income to average
daily net assets .63%++ .33% .21% .17% 1.03% 2.61% 3.32% 1.21% 1.40% 3.83%++
Portfolio turnover rate
(excluding short-term
securities) 68% 109% 81% 52% 79% 190% 48% 57% 57% 15%
Total return+++ 5.21% 19.72% 8.92% 21.06% 18.55% 7.84% 16.18% (8.04)% 23.66% .69%***
* For a share outstanding throughout the period. Rounded to the nearest cent.
** Commencement of operations. Period from Jan. 20, 1986 to April 30, 1986.
*** For the period from Jan. 20, 1986 to April 30, 1986, the annualized total return is 2.50%.
+ Commencing on May 1, 1989, IDS Life voluntarily limited total operating expenses to 0.8% of average daily net assets.
Had IDS Life not done so, the expenses per share and the ratio of expenses to average daily net assets would have been
$.11 and 0.86% and $.13 and 0.90% for the years ended April 30, 1991 and 1990, respectively.
++ Adjusted to an annual basis.
+++ Total return does not reflect the expenses that apply to the subaccounts or the policies.
++++Semiannual period, ended Oct. 31, 1994 (unaudited).
</TABLE>
<PAGE>
PAGE 33
<TABLE>
<CAPTION>
Income Portfolio
Financial highlights (continued)
Fiscal period ended April 30,
Per share income and capital changes*
1994++++ 1994 1993 1992 1991 1990 1989 1988 1987 1986**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 9.71 $ 10.19 $ 9.40 $ 9.19 $ 8.55 $ 8.93 $ 9.05 $ 9.42 $10.35 $10.00
Income (loss) from
investment operations:
Net investment income .35 .71 .76 .73 .75 .75 .70 .68 .74 .35
Net gains (losses) on
securities (both realized
and unrealized) (.34) (.48) .80 .21 .64 (.40) (.12) (.37) (.93) .35
Total from investment
operations .01 .23 1.56 .94 1.39 .35 .58 .31 (.19) .70
Less distributions:
Dividends from net
investment income (.35) (.71) (.77) (.73) (.75) (.73) (.70) (.68) (.74) (.35)
Net asset value,
end of period $ 9.37 $ 9.71 $ 10.19 $ 9.40 $ 9.19 $ 8.55 $ 8.93 $ 9.05 $ 9.42 $10.35
Ratios/supplemental data
1994++++ 1994 1993 1992 1991 1990 1989 1988 1987 1986**
Net assets, end of period
(in thousands) $34,329 $33,770 $22,641 $16,306 $11,949 $8,831 $6,203 $4,456 $2,397 $ 215
Ratio of expenses to average
daily net assets .80%++ .80% .80%+ 80%+ .80%+ .80%+ 1.11% 1.13% 1.72% .68%++
Ratio of net income to
average daily net assets 7.29%++ 6.83% 7.66% 7.86% 8.41% 8.02% 7.87% 7.50% 6.27% 13.99%++
Portfolio turnover rate
(excluding short-term
securities) 14% 60% 47% 75% 55% 60% 99% 64% 38% -
Total return+++ 0.00% 2.12% 17.17% 10.60% 16.77% 3.75% 6.70% 3.59% (1.58)% 6.98%***
* For a share outstanding throughout the period. Rounded to the nearest cent.
** Commencement of operations. Period from Jan. 20, 1986 to April 30, 1986.
*** For the period from Jan. 20, 1986 to April 30, 1986, the annualized total return is 25.49%.
+ Commencing on May 1, 1989, IDS Life voluntarily limited total operating expenses to 0.8% of average daily net
assets. Had IDS Life not done so, the expenses per share and the ratio of expenses to average daily net assets would
have been $.08 and 0.83%, $.08 and 0.88%, $.08 and 0.93% and $09.and 0.96% for the years ended April 30,
1993, 1992, 1991 and 1990, respectively.
++ Adjusted to an annual basis.
+++ Total return does not reflect the expenses that apply to the subaccounts or the policies.
++++Semiannual period, ended Oct. 31, 1994 (unaudited).
</TABLE>
<PAGE>
PAGE 34
<TABLE>
<CAPTION>
Money Market Portfolio
Financial highlights (continued)
Fiscal period ended April 30,
Per share income and capital changes*
1994++++ 1994 1993 1992 1991 1990 1989 1988 1987 1986**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $1.00
Income from
investment operations:
Net investment income .02 .03 .03 .05 .07 .08 .07 .06 .05 .02
Total from investment
operations .02 .03 .03 .05 .07 .08 .07 .06 .05 .02
Less distributions:
Dividends from net
investment income (.02) (.03) (.03) (.05) (.07) (.08) (.07) (.06) (.05) (.02)
Net asset value,
end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $1.00
Ratios/supplemental data
1994++++ 1994 1993 1992 1991 1990 1989 1988 1987 1986**
Net assets, end of period
(in thousands) $9,805 $9,557 $8,181 $9,771 $9,596 $6,321 $4,721 $2,748 $1,007 $ 199
Ratio of expenses to
average daily net assets .60%++ .60%+ .60%+ .60%+ .60%+ .60%+ 1.10%+ .96% 1.35% .64%++
Ratio of net income to
average daily net assets 3.90%++ 2.61% 3.00% 4.60% 7.06% 8.26% 7.38% 5.89% 4.46% 6.01%++
Total return+++ 1.94% 2.61% 3.04% 4.71% 7.41% 8.61% 7.52% 6.13% 5.38% 1.74%***
* For a share outstanding throughout the period. Rounded to the nearest cent.
** Commencement of operations. Period from Jan. 20, 1986 to April 30, 1986.
*** For the period from Jan. 20, 1986 to April 30, 1986, the annualized total return is 6.35%.
+ Commencing on April 5, 1989, IDS Life voluntarily limited total operating expenses to 0.6% of average daily net
assets. Had IDS Life not done so, the expenses per share and the ratio of expenses to average daily net assets would
have been $.01 and 0.71%, $.01 and 0.74%, $.01 and 0.75%, $.01 and 0.86%, $.01 and 0.96% and $.01 and
1.35% for the years ended April 30, 1994, 1993, 1992, 1991, 1990 and 1989, respectively.
++ Adjusted to an annual basis.
+++ Total return does not reflect the expenses that apply to the subaccounts or the policies.
++++Semiannual period, ended Oct. 31, 1994 (unaudited).
</TABLE>
<PAGE>
PAGE 35
<TABLE>
<CAPTION>
Managed Portfolio
Financial highlights (continued)
Fiscal period ended April 30,
Per share income and capital changes*
1994++++ 1994 1993 1992 1991 1990 1989 1988 1987 1986**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 13.85 $ 13.84 $ 13.55 $ 13.29 $ 12.80 $ 11.22 $ 10.42 $ 11.40 $ 10.06 $10.00
Income (loss) from
investment operation:
Net investment income .19 .42 .44 .48 .57 .57 .61 .42 .40 .18
Net gains (losses) on
securities (both realized
and unrealized) .74 1.40 1.44 1.87 1.90 1.58 .80 (.84) 1.41 .06
Total from investment
operations .93 1.82 1.88 2.35 2.47 2.15 1.41 (.42) 1.81 .24
Less distributions:
Dividends from net
investment income (.19) (.42) (.44) (.48) (.57) (.57) (.61) (.42) (.40) (.18)
Distributions from
realized gains -- (1.39) (1.15) (1.61) (1.41) - - (.14) (.07) -
Total distributions (.19) (1.81) (1.59) (2.09) (1.98) (.57) (.61) (.56) (.47) (.18)
Net asset value,
end of period $ 14.59 $ 13.85 $ 13.84 $ 13.55 $ 13.29 $ 12.80 $ 11.22 $ 10.42 $ 11.40 $10.06
Ratios/supplemental data
1994++++ 1994 1993 1992 1991 1990 1989 1988 1987 1986**
Net assets, end of period
(in thousands) $201,020 $160,706 $100,139 $72,366 $51,442 $32,725 $25,807 $21,901 $10,779 $ 588
Ratio of expenses to
average daily net assets .80%++ .77% .79% .80% .80%+ .80%+ .72%+ 1.03% 1.30% .68%++
Ratio of net income to
average daily net assets 2.85%++ 2.83% 3.15% 3.40% 4.38% 4.54% 5.76% 3.86% 3.53% 6.41%++
Portfolio turnover rate
(excluding short-term
securities) 59% 106% 118% 122% 71% 107% 58% 67% 43% -
Total return+++ 6.79% 13.30% 14.03% 17.84% 20.18% 19.37% 13.88% (3.57%) 18.32% 2.38%***
* For a share outstanding throughout the period. Rounded to the nearest cent.
** Commencement of operations. Period from Jan. 20, 1986 to April 30, 1986.
*** For the period from Jan. 20, 1986 to April 30, 1986, the annualized total return is 8.71%.
+ Commencing on April 5, 1989, IDS Life voluntarily limited total operating expenses to 0.8% of average daily net
assets. Had IDS Life not done so, the expenses per share and the ratio of expenses to average daily net assets would
have been $.11 and 0.81%, $.10 and 0.82% and $.09 and 0.84% for the years ended April 30, 1991, 1990 and
1989 respectively.
++ Adjusted to an annual basis.
+++ Total return does not reflect the expenses that apply to the subaccounts or the policies.
++++Semiannual period, ended Oct. 31, 1994 (unaudited).
</TABLE>
<PAGE>
PAGE 36
<TABLE>
<CAPTION>
Government Securities Portfolio
Financial highlights (continued)
Fiscal period ended April 30,
Per share income and capital changes*
1994++++ 1994 1993 1992 1991 1990 1989 1988 1987 1986**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 9.88 $ 10.54 $ 9.69 $ 9.44 $ 8.88 $ 8.97 $ 9.00 $ 9.40 $10.32 $10.00
Income (loss) from
investment operations:
Net investment income .28 .60 .63 .66 .67 .69 .64 .64 .66 .34
Net gains (losses) on
securities (both realized
and unrealized) (.26) (.56) .94 .28 .56 (.09) (.03) (.40) (.92) .32
Total from investment
operations .02 .04 1.57 .94 1.23 .60 .61 .24 (.26) .66
Less distributions:
Dividends from net
investment income (.28) (.60) (.63) (.66) (.67) (.69) (.64) (.64) (.66) (.34)
Distributions from
realized gains -- (.10) (.09) (.03) - - - - - -
Total distributions (.28) (.70) (.72) (.69) (.67) (.69) (.64) (.64) (.66) (.34)
Net asset value,
end of period $ 9.62 $ 9.88 $10.54 $ 9.69 $ 9.44 $ 8.88 $ 8.97 $ 9.00 $ 9.40 $10.32
Ratios/supplemental data
1994++++ 1994 1993 1992 1991 1990 1989 1988 1987 1986**
Net assets, end of period
(in thousands) $11,183 $11,185 $9,619 $7,853 $6,314 $3,184 $2,773 $2,170 $1,230 $ 309
Ratio of expenses to
average daily net assets .80%++ .80%+ .80%+ .80%+ .80%+ .80%+ 1.12%+ 1.13% 1.56% .68%++
Ratio of net income to
average daily net assets 5.67%++ 5.59% 6.10% 6.79% 7.24% 7.34% 7.19% 7.04% 5.90% 1.47%++
Portfolio turnover rate
(excluding short-term
securities) 1% 32% 15% 11% 18% 18% 14% 13% 43% -
Total return+++ 0.17% 0.16% 16.58% 10.20% 14.30% 6.50% 7.12% 2.77% (2.73)% 6.60%***
* For a share outstanding throughout the period. Rounded to the nearest cent.
** Commencement of operations. Period from Jan. 20, 1986 to April 30, 1986.
*** For the period from Jan. 20, 1986 to April 30, 1986, the annualized total return is 24.09%.
+ Commencing on April 5, 1989, IDS Life voluntarily limited total operating expenses to 0.8% of average daily net
assets. Had IDS Life not done so, the expenses per share and the ratio of expenses to average daily net assets would
have been $.09 and 0.85%, $.09 and 0.88%, $.09 and 0.92%, $.10 and 1.08%, $.11 and 1.12%, and $.11 and
1.21% for the years ended April 30, 1994, 1993, 1992, 1991, 1990 and 1989 respectively.
++ Adjusted to an annual basis.
+++ Total return does not reflect the expenses that apply to the subaccounts or the policies.
++++Semiannual period, ended Oct. 31, 1994 (unaudited).
</TABLE>
<PAGE>
PAGE 37
<TABLE>
<CAPTION>
International Equity Portfolio
Financial highlights (continued)
Fiscal period ended April 30,
Per share income and capital changes*
1994**
<S> <C>
Net asset value, beginning of period $10.00
Income (loss) from investment operations:
Net investment income .02
Net gains (losses) on securities (both
realized and unrealized) (.75)
Total from investment operations (.73)
Less Distributions:
Dividends from net investment income (.02)
Distributions from realized gains -
Total distributions (.02)
Net asset value, end of period $ 9.25
Ratios/supplemental data
1994**
Net assets, end of period (in thousands) $5,224
Ratio of expenses to average daily .95%++
net assets
Ratio of net income to average daily
net assets 2.0%++
Portfolio turnover rate (excluding
short-term securities) 12%
Total return+++ (7.3)%
* For a share outstanding throughout the period. Rounded to the nearest cent.
** Period from Oct. 28, 1994 (commencement of operations) to Feb. 28, 1995 (Unaudited).
++ Adjusted to an annual basis.
+++Total return does not reflect the expenses that apply to the subaccounts or the policies.
</TABLE>
Except for the semiannual period ended Oct. 31, 1994, and the
period from Oct. 28, 1994 to Feb. 28, 1995 (for International
Equity Portfolio), the information in the preceding tables has been
audited by KPMG Peat Marwick LLP, independent auditors. The
independent auditors' report and additional information about the
performance of the fund is contained in the fund's annual report
which may be obtained without charge.
<PAGE>
PAGE 38
Total returns
Average annual total returns as of April 30, 1994
Purchase 1 year 5 years Since
made ago ago inception*
Equity Portfolio +19.72% +15.07% +12.67%
S&P 500 + 5.32% +11.25% +13.17%
Lipper Growth
and Income Fund
Index + 7.76% +10.73% +12.21%
Cumulative total returns as of April 30, 1994
Purchase 1 year 5 years Since
made ago ago inception*
Equity Portfolio +19.72% +101.79% +168.42%
S&P 500 + 5.32% + 70.38% +178.37%
Lipper Growth
and Income Fund
Index + 7.76% + 66.43% +159.48%
Average annual total returns as of April 30, 1994
Purchase 1 year 5 years Since
made ago ago inception*
Income Portfolio +2.12% +9.90% +7.77%
Lehman Aggregate
Bond Index +0.83% +9.74% +9.31%
Cumulative total returns as of April 30, 1994
Purchase 1 year 5 years Since
made ago ago inception*
Income Portfolio +2.12% +60.36% + 85.77%
Lehman Aggregate
Bond Index +0.83% +59.18% +108.95%
<PAGE>
PAGE 39
Average annual total returns as of April 30, 1994
Purchase 1 year 5 years Since
made ago ago inception*
Managed Portfolio +13.30% +16.91% +13.76%
S&P 500 + 5.32% +11.25% +13.17%
Lipper Balanced
Fund Index + 4.61% +10.37% +10.49%
Cumulative total returns as of April 30, 1994
Purchase 1 year 5 years Since
made ago ago inception*
Managed Portfolio +13.30% +118.41% +190.55%
S&P 500 + 5.32% + 70.38% +178.37%
Lipper Balanced
Fund Index + 4.61% + 63.77% +128.42%
Average annual total returns as of April 30, 1994
Purchase 1 year 5 years Since
made ago ago inception*
Government
Securities Portfolio +0.16% +9.39% +7.27%
Merrill Lynch 1-3
Gov't Index +1.62% +7.98% +7.79%
Cumulative total returns as of April 30, 1994
Purchase 1 year 5 years Since
made ago ago inception*
Government
Securities Portfolio +0.16% +56.62% +78.78%
Merrill Lynch 1-3
Gov't Index +1.62% +46.83% +86.06%
*Jan. 20, 1986
These examples show total returns from hypothetical investments in
each portfolio. These returns are compared to those of popular
indexes for the same periods. The results do not reflect the
expenses that apply to the subaccounts or the policies. Inclusion
of these charges would reduce total return for all periods shown.
<PAGE>
PAGE 40
For purposes of calculation, information about each portfolio
assumes the deduction of applicable portfolio expenses, makes no
adjustments for taxes that may have been paid on the reinvested
income and capital gains, and covers a period of widely fluctuating
securities prices. Returns shown should not be considered a
representation of the fund's future performance.
The portfolio's investments may be different from those in the
indexes. The indexes reflect reinvestment of all distributions and
changes in market prices, but exclude brokerage commissions or
other fees.
Standard & Poor's 500 Stock Index (S&P 500), an unmanaged list of
common stocks, is frequently used as a general measure of market
performance. However, the S&P 500 companies are generally larger
than those in which the fund invests.
Lipper Growth and Income Fund Index, published by Lipper Analytical
Services, Inc., includes 30 funds that are generally similar to
Equity Portfolio, although some funds in the index may have
somewhat different investment policies or objectives.
Lehman Aggregate Bond Index is made up of a representative list of
government and corporate bonds as well as asset-backed securities
and mortgage-backed securities. The index is frequently used as a
general measure of bond market performance. However, the
securities used to create the index may not be representative of
the bonds held in the Income Portfolio.
Merrill Lynch 1-3 Year Government Index is an unmanaged list of all
treasury and agency securities. The index is used here as a
general measure of performance. However, the securities used to
create the index may not be representative of the debt securities
held in the Government Securities Portfolio.
Lipper Balanced Fund Index, published by Lipper Analytical
Services, Inc., includes 10 funds that are generally similar to the
Managed Portfolio, although some funds in the index may have
somewhat different investment policies or objectives.
Yield calculations
Income Portfolio and Government Securities Portfolio may calculate
a 30-day annualized yield by dividing:
o net investment income per share deemed earned during a 30-day
period by
o the net asset value per share on the last day of the period,
and
o converting the result to a yearly equivalent figure.
This yield calculation does not include any surrender charge or
life insurance policy charges, which would reduce the yield quoted.
<PAGE>
PAGE 41
A portfolio's yield varies from day to day, mainly because share
values and net asset values (which are calculated daily) vary in
response to changes in interest rates. Net investment income
normally changes much less in the short run. Thus, when interest
rates rise and share values fall, yield tends to rise. When
interest rates fall, yield tends to follow.
Money Market Portfolio calculates annualized simple and compound
yields based on a seven-day period.
Past yields should not be considered an indicator of future yields.
Key terms
Average annual total return - The annually compounded rate of
return over a given time period (usually two or more years) - total
return for the period converted to an equivalent annual figure.
Capital gains or losses - Increase or decrease in value of the
securities the portfolio holds. Gains are realized when securities
that have increased in value are sold. A portfolio also may have
unrealized gains or losses when securities increase or decrease in
value but are not sold.
Close of business - Normally 3 p.m. Central time each business day
(any day the New York Stock Exchange is open).
Distributions - Payments to the subaccounts of two types:
investment income (dividends) and realized net long-term capital
gains (capital gains distributions).
Investment income - Dividends and interest earned on securities
held by the portfolio.
Net asset value (NAV) - Value of a single share held by the
portfolio. It is the total market value of all of a portfolio's
investments and other assets, less any liabilities, divided by the
number of shares outstanding.
The NAV is the price the subaccount receives when it sells shares.
It usually changes from day to day, and is calculated at the close
of business. For the Income and Government Securities Portfolios,
NAV generally declines as interest rates increase and rises as
interest rates decline.
Total return - Sum of all returns for a given period, assuming
reinvestment of all distributions. Calculated by taking the total
value of shares at the end of the period (including shares acquired
by reinvestment), less the price of shares purchased at the
beginning of the period.
Yield - Net investment income earned per share for a specified time
period, divided by the share price at the end of the period.
<PAGE>
PAGE 42
Investment policies and risks
Equity Portfolio - Under normal market conditions, Equity Portfolio
invests in U.S. common stocks listed on national securities
exchanges that the investment manager believes have potential for
capital appreciation. The companies in which the portfolio invests
may be well-seasoned or relatively new and lesser-known as long as
the investment manager believes the stock is attractive for capital
growth.
The portfolio also may invest in convertible securities, derivative
instruments, money market instruments and foreign investments.
Neither foreign investments nor derivative instruments will exceed
25% of the portfolio's total assets.
Income Portfolio - Under normal market conditions, Income Portfolio
primarily invests in debt securities. At least 50% of its net
assets are invested in corporate bonds of the four highest ratings,
in other corporate bonds the investment manager believes have the
same investment qualities, and in government bonds.
The portfolio also may invest in corporate bonds with lower
ratings, convertible securities, preferred stocks, derivative
instruments, foreign investments and money market instruments.
Foreign investments are limited to 25% of the portfolio's total
assets. The portfolio does not have a minimum rating requirement
for corporate bonds.
Money Market Portfolio - Under normal market conditions, Money
Market Portfolio invests primarily in high-quality, short-term,
marketable debt securities and other money market instruments. For
a description of money market securities, see Appendix B in the
SAI.
Managed Portfolio - This portfolio invests in common and preferred
stocks, convertible securities, debt securities, derivative
instruments, foreign securities and money market instruments. The
portfolio manager continuously will adjust the mix of investments
subject to the following three net asset limits: 1) up to 75% in
equity securities (stocks), 2) up to 75% in bonds or other debt
securities, and 3) up to 100% in money market instruments. Stocks
and debt securities will be selected for capital appreciation,
income or both. Money market instruments will be selected for
current income and safety of principal.
Of the assets invested in bonds, at least 50% will be in corporate
bonds of the four highest ratings, in other corporate bonds the
investment manager believes have the same investment qualities, and
in government bonds. For the other 50% invested in corporate
bonds, there is no minimum rating requirement. Foreign investments
are limited to 25% of the portfolio's total assets.
Government Securities Portfolio - Under normal market conditions,
Government Securities Portfolio invests in securities that are
issued or guaranteed by a U.S. governmental unit. The portfolio
<PAGE>
PAGE 43
also may invest in derivative instruments on U.S. government
securities. Shares of this portfolio are not insured or guaranteed
by the U.S. government or by any other person or entity.
International Equity Portfolio - Under normal market conditions,
International Equity Portfolio invests at least 80% of its total
assets in foreign equity securities having a potential for superior
growth. Superior means portfolio performance better than the
Morgan Stanley Capital International World Index.
The Morgan Stanley Capital International World Index, compiled from
a composite of securities listed on the markets of North America,
Europe, Australasia and the Far East is widely recognized by
investors as the measurement index for portfolios that invest in
the major markets of the world.
The portfolio's investments will be primarily in common stocks and
securities convertible into common stocks of foreign issuers.
However, if the investment manager believes they have more
potential for capital growth, the portfolio may invest in bonds
issued or guaranteed either by countries that are members of the
Organization for Economic Cooperation and Development (OECD) or by
international agencies such as the World Bank or the European
Investment Bank. These bonds will not be purchased unless, in the
judgment of the investment manager, they are comparable in quality
to bonds rated AA by Standard & Poor's Corporation (S&P).
The percentage of portfolio assets invested in particular countries
or regions of the world will change according to their political
stability and economic condition. Ordinarily, the portfolio will
invest in companies domiciled in at least three foreign countries.
Normally, investments in U.S. issuers will constitute less than 20%
of the portfolio's investments. However, as a temporary measure,
the portfolio may invest any portion of its assets in securities of
U.S. issuers that appear to have greater potential for superior
growth than foreign securities. U.S. investments would include
common stocks, convertible securities and corporate and government
bonds. The bonds must bear one of the four highest ratings given
by Moody's or S&P or must be of comparable quality. The portfolio
also may invest in money market instruments and derivative
instruments. No more than 5% of the portfolio's total assets may
be invested in options on individual securities.
The various types of investments the portfolio managers use to
achieve investment performance are described in more detail in the
next section and in the SAI.
Facts about investments and their risks
Common stocks: Stock prices are subject to market fluctuations.
Stocks of smaller or foreign companies may be subject to abrupt or
erratic price movements. Also, small companies often have limited
product lines, smaller markets or fewer financial resources.
Therefore, some of the securities in which a portfolio invests
involve substantial risk and may be considered speculative.
<PAGE>
PAGE 44
Preferred stocks: If a company earns a profit, it generally must
pay its preferred stockholders a dividend at a pre-established
rate.
Convertible securities: These securities generally are preferred
stocks or bonds that can be exchanged for other securities, usually
common stock, at prestated prices. When the trading price of the
common stock makes the exchange likely, the convertible securities
trade more like common stock.
Investment grade bonds: The price of an investment grade bond
fluctuates as interest rates change or if its credit rating is
upgraded or downgraded.
Debt securities below investment grade: The price of these bonds
may react more to the ability of a company to pay interest and
principal when due than to changes in interest rates. They have
greater price fluctuations, are more likely to experience a
default, and sometimes are referred to as "junk bonds." Reduced
market liquidity for these bonds may occasionally make it more
difficult to value them. In valuing bonds, a portfolio relies both
on independent rating agencies and the investment manager's credit
analysis. Securities that are subsequently downgraded in quality
may continue to be held and will be sold only when the portfolio's
investment manager believes it is advantageous to do so.
<TABLE><CAPTION>
Bond ratings of holdings for fiscal year ended
April 30, 1994 for Income Portfolio
S&P Rating Protection of Percent of net
Percent of (or Moody's principal and assets in unrated
net assets equivalent) interest securities*
<C> <C> <C> <C>
3.10% AAA Highest quality --%
3.80 AA High quality --
12.70 A Upper medium grade 0.63
26.17 BBB Medium grade 0.32
10.70 BB Moderately speculative --
13.68 B Speculative --
0.17 CCC Highly speculative --
-- CC Poor quality --
-- C Lowest quality --
-- D In default --
1.35 NR Unrated securities 0.40
* American Express Financial Corporation's assessment of unrated securities.
Bond ratings of holdings for fiscal year ended
April 30, 1994 for Managed Portfolio
S&P Rating Protection of Percent of net
Percent of (or Moody's principal and assets in unrated
net assets equivalent) interest securities*
2.49% AAA Highest quality --%
1.30 AA High quality --
4.28 A Upper medium grade 0.11
5.21 BBB Medium grade --
4.61 BB Moderately speculative --
5.36 B Speculative 0.08
0.09 CCC Highly speculative --
-- CC Poor quality --
-- C Lowest quality --
-- D In default --
0.82 NR Unrated securities 0.63
* American Express Financial Corporation's assessment of unrated securities.
</TABLE>
<PAGE>
PAGE 45
(See Appendix G to the SAI for further information regarding
ratings.)
Debt securities sold at a deep discount: Some bonds are sold at
deep discounts because they do not pay interest until maturity.
They include zero coupon bonds and PIK (pay-in-kind) bonds. To
comply with tax laws, a portfolio has to recognize a computed
amount of interest income and pay dividends to shareholders even
though no cash has been received. In some instances, a portfolio
may have to sell securities to have sufficient cash to pay the
dividends.
Mortgage-backed securities: All portfolios except Money Market may
invest in U.S. government securities representing part ownership of
pools of mortgage loans. A pool, or group, of mortgage loans
issued by such lenders as mortgage bankers, commercial banks and
savings and loan associations, is assembled and mortgage pass-
through certificates are offered to investors through securities
dealers. In pass-through certificates, both principal and interest
payments, including prepayments, are passed through to the holder
of the certificate. Prepayments on underlying mortgages result in
a loss of anticipated interest, and the actual yield (or total
return) to the portfolio, which is influenced by both stated
interest rates and market conditions, may be different than the
quoted yield on the certificates.
Foreign investments: Securities of foreign companies and
governments may be traded in the United States, but often they are
traded only on foreign markets. Frequently, there is less
information about foreign companies and less government supervision
of foreign markets. Foreign investments are subject to political
and economic risks of the countries in which the investments are
made including the possibility of seizure or nationalization of
companies, imposition of withholding taxes on income, establishment
of exchange controls or adoption of other restrictions that might
affect an investment adversely. If an investment is made in a
foreign market, the local currency must be purchased. This is done
by using a forward contract in which the price of the foreign
currency in U.S. dollars is established on the date the trade is
made, but delivery of the currency is not made until the securities
are received. As long as the portfolio holds foreign currencies or
securities valued in foreign currencies, the price of a portfolio
share will be affected by changes in the value of the currencies
relative to the U.S. dollar. Because of the limited trading volume
in some foreign markets, efforts to buy or sell a security may
change the price of the security, and it may be difficult to
complete the transaction.
Derivative instruments: The portfolio managers may use derivative
instruments in addition to securities to achieve investment
performance. Derivative instruments include futures, options and
forward contracts. Such instruments may be used to maintain cash
reserves while remaining fully invested, to offset anticipated
declines in values of investments, to facilitate trading, to reduce
transaction costs, or to pursue higher investment returns.
Derivative instruments are characterized by requiring little or no
<PAGE>
PAGE 46
initial payment and a daily change in price based on or derived
from a security, a currency, a group of securities or currencies,
or an index. A number of strategies or combination of instruments
can be used to achieve the desired investment performance
characteristics. A small change in the value of the underlying
security, currency or index will cause a sizable gain or loss in
the price of the derivative instrument. Derivative instruments
allow a portfolio manager to change the investment performance
characteristics very quickly and at lower costs. Risks include
losses of premiums, rapid changes in prices, defaults by other
parties, and inability to close such instruments. A portfolio will
use derivative instruments only to achieve the same investment
performance characteristics it could achieve by directly holding
those securities and currencies permitted under the investment
policies. The portfolios' custodian will maintain, in a segregated
account, cash or liquid high-grade debt securities that are marked
to market daily and are at least equal in value to the portfolios'
obligations. No more than 5% of each portfolio's net assets can be
used at any one time for good faith deposits on futures and
premiums for options on futures that do not offset existing
investment positions. For further information, see the options and
futures appendixes in the SAI.
Securities and derivative instruments that are illiquid: Illiquid
means the security or derivative instrument cannot be sold quickly
in the normal course of business. Some investments cannot be
resold to the U.S. public because of their terms or government
regulations. All securities and derivative instruments, however,
can be sold in private sales, and many may be sold to other
institutions and qualified buyers or on foreign markets. Each
portfolio manager will follow guidelines established by the board
of directors and consider relevant factors such as the nature of
the security and the number of likely buyers when determining
whether a security is illiquid. No more than 10% of each
portfolio's net assets will be held in securities and derivative
instruments that are illiquid.
Money market instruments: Short-term debt securities rated in the
top two grades are used to meet daily cash needs and at various
times to hold assets until better investment opportunities arise.
Generally less than 25% of each of Equity, Income, Managed,
Government Securities and International Equity Portfolio's assets
are in these money market instruments. However, for temporary
defensive purposes these investments could exceed that amount for a
limited period of time.
Securities of other investment companies: Equity, Income and
International Equity Portfolio may invest in securities of
investment companies by purchase in the open market where the
dealer's or sponsor's profit is the regular commission. If any
such investment is made, not more than 5% of the portfolio's net
assets (10% for International Equity Portfolio) will be so
invested. To the extent the portfolio were to make such
investments, you may be subject to duplicative advisory,
administrative and distribution fees.
<PAGE>
PAGE 47
The investment policies described above may be changed by the board
of directors.
Lending portfolio securities: Each portfolio may lend its
securities to earn income so long as borrowers provide collateral
equal to the market value of the loans. The risks are that
borrowers will not provide collateral when required or return
securities when due. Unless shareholders approve otherwise, loans
may not exceed 30% of a portfolio's net assets.
Alternative investment option
In the future, the board of the fund may determine for operating
efficiencies to use a master/feeder structure. Under that
structure, the fund's investment portfolios would be managed by
another investment company with the same goal as the fund, rather
than being invested directly in a portfolio of securities.
Valuing assets
Money Market Portfolio's securities are valued at amortized cost.
In valuing assets of Equity, Income, Managed, Government Securities
and International Equity Portfolios:
o Securities and assets with available market values are valued
on that basis.
o Securities maturing in 60 days or less are valued at amortized
cost.
o Securities and assets without readily available market values
are valued according to methods selected in good faith by the
board of directors.
o Assets and liabilities denominated in foreign currencies are
translated daily into U.S. dollars at a rate of exchange set
as near to the close of the day as practicable.
How to invest, transfer or redeem shares
How to invest
You may invest in the portfolios of the fund only by buying a
variable life insurance policy offered by IDS Life or IDS Life of
New York. Your financial advisor will help you fill out and submit
an application. For further information concerning acceptance of
your application, see the variable life insurance policy
prospectus.
How to transfer among subaccounts
You can transfer all or part of your value in a subaccount to one
or more of the other subaccounts. That way, you transfer to a
portfolio with a different investment objective. Please refer to
your variable life insurance policy prospectus for more information
about transfers among subaccounts.
<PAGE>
PAGE 48
Redeeming shares
The fund will buy (redeem) any shares presented by the subaccounts.
Policy surrender details are described in your variable life
insurance policy prospectus. Payment generally will be made within
seven days of the surrender request. The amount may be more or
less than the amount invested. Shares will be redeemed at net
asset value at the close of business on the day the request is
accepted at the Minneapolis office for IDS Life or at the Albany
office for IDS Life of New York. If the request arrives after the
close of business, the price per share will be the net asset value
at the close of business on the next business day.
Distributions and taxes
The fund distributes to shareholders (the subaccounts) net
investment income and net capital gains. It does so to qualify as
a regulated investment company and to avoid paying corporate income
and excise taxes.
Dividend and capital gain distributions
The fund distributes its net investment income (dividends and
interest earned on securities held by the fund, less operating
expenses) to shareholders (the subaccounts) at the end of each
calendar quarter for Equity, Managed and International Equity
Portfolios. For Income, Money Market and Government Securities
Portfolios, net investment income is distributed monthly. Short-
term capital gains distributed are included in net investment
income. Net realized capital gains, if any, from selling
securities are distributed at the end of the calendar year. Before
they're distributed, both net investment income and net capital
gains are included in the value of each share. After they're
distributed, the value of each share drops by the per-share amount
of the distribution. (Since the distributions are reinvested, the
total value of the holdings will not change.) The reinvestment
price is the net asset value at close of business on the day the
distribution is paid.
Taxes
The Internal Revenue Service (IRS) has issued final regulations
relating to the diversification requirements under section 817(h)
of the Internal Revenue Code. Each portfolio intends to comply
with these requirements.
Federal income taxation of separate accounts, life insurance
companies and variable life insurance policies is discussed in the
variable life insurance policy prospectus.
Income received by the International Equity Portfolio may be
subject to foreign tax and withholding. Tax conventions between
certain countries and the United States may reduce or eliminate
these taxes.
<PAGE>
PAGE 49
How the fund is organized
IDS Life Series Fund, Inc. is a series mutual fund. The fund is a
diversified, open-end management investment company, as defined in
the Investment Company Act of 1940. It was incorporated in
Minnesota on May 8, 1985. The fund headquarters are at IDS Tower
10, Minneapolis, MN 55440-0010.
Shares
The fund is owned by the subaccounts, its shareholders. Each of
the portfolios issues its own series of common stock. All shares
issued by each portfolio are of the same class--capital stock. Par
value is $.001 per share. Both full and fractional shares can be
issued. The shares of each portfolio making up IDS Life Series
Fund, Inc. represent an interest in that portfolio's
assets only (and profits or losses) and, in the event of
liquidation, each share of a portfolio would have the same rights
to dividends and assets as every other share of that portfolio.
Voting rights
For a discussion of the rights of policy owners concerning the
voting of shares held by the subaccounts, please see the variable
life insurance policy prospectus. Each share of a portfolio has
one vote. On an issue affecting a particular portfolio, its shares
vote as a separate series. On some issues, all shares of the fund
vote together as one series. All shares have cumulative voting
when voting on the election of directors.
The goals of the portfolios can be changed only if the majority of
the outstanding shares agree. The vote of a majority of the
outstanding voting shares means the vote:
o of 67% or more of the voting shares present at such meeting,
if the holders of more than 50% of the outstanding voting
shares are present or represented by proxy; or
o of more than 50% of the outstanding voting shares, whichever
is less.
Shareholder meetings
The fund does not hold annual shareholder meetings. However, the
directors may call meetings at their discretion, or on demand by
holders of 10% or more of the outstanding shares, to elect or
remove directors.
Portfolio managers
Equity Portfolio
Marty Hurwitz joined American Express Financial Corporation in 1987
and serves as portfolio manager. He was appointed to manage this
portfolio in July 1993. He also serves as portfolio manager for
IDS Life Aggressive Growth Fund and manages accounts for IDS
Advisory Portfolio Management Group, a division of American Express
Financial Advisors Inc.
<PAGE>
PAGE 50
Income Portfolio
Lorraine Hart joined American Express Financial Corporation in 1984
and serves as vice president - insurance investments. She has
managed this portfolio since 1991. She also manages the invested
asset portfolios of IDS Life, IDS Life of New York, and American
Enterprise Life Insurance Company.
Money Market Portfolio
Gregg Syverson joined American Express Financial Corporation in
1984 and serves as portfolio manager. He has managed this
portfolio since 1992. He also manages the short-term investments
and debt for American Express Financial Corporation, American
Express Financial Advisors Inc., IDS Life and IDS Certificate
Company.
Managed Portfolio
Jeanie Tebault joined American Express Financial Corporation in
1985 as an analyst, becoming associate portfolio manager in 1991,
helping to manage Wealth Management Portfolios and the IDS Stock
Fund. She became portfolio manager in 1993 and was appointed to
manage this portfolio in January 1995.
Government Securities Portfolio
Jim Snyder joined American Express Financial Corporation in 1989
and serves as portfolio manager. He was appointed to manage this
portfolio in April 1994. He also serves as associate portfolio
manager of IDS Federal Income Fund. Prior to joining American
Express Financial Corporation, he had been a Quantitative
Investment Analyst at Harris Trust.
International Equity Portfolio
Richard Lazarchic joined American Express Financial Corporation in
1979 and serves as portfolio manager. He was associate portfolio
manager of IDS Mutual from 1988 through 1989 and served as
portfolio manager of IDS Utilities Income Fund from 1989 through
mid 1993 and Diversified Equity Income Fund from 1990 through mid
1994. He also serves as portfolio manager of IDS Managed
Retirement Fund.
Directors and officers
Shareholders elect a board of directors that oversees the
operations of the fund and chooses its officers. Its officers are
responsible for day-to-day business decisions based on policies set
by the board. The board has named an executive committee that has
authority to act on its behalf between meetings.
On April 30, 1994 the fund's directors and officers did not own any
shares of the fund.
Investment manager
The fund pays IDS Life for managing its portfolio, providing
administrative services and serving as transfer agent.
<PAGE>
PAGE 51
Under its Investment Management and Services Agreement, IDS Life
determines which securities will be purchased, held or sold
(subject to the direction and control of the fund's board of
directors). For these services the fund pays IDS Life a fee based
on the average daily net assets of the portfolios at the following
rates: 0.7% on an annual basis for Equity, Income, Managed and
Government Securities Portfolios, 0.5% for Money Market Portfolio,
and 0.95% for International Equity Portfolio.
Under the Agreement, the fund also pays taxes, brokerage
commissions and nonadvisory expenses. However, IDS Life has agreed
to a voluntary limit of the annual charge of 0.1% of the average
daily net assets of the fund for these nonadvisory expenses. Total
net fees and expenses incurred after the limitations by each
portfolio amounted to 0.8% of average daily net assets for Equity,
Income, Managed and Government Securities Portfolios and 0.6% for
Money Market Portfolio for the period ended April 30, 1994.
IDS Life reserves the right to discontinue limiting these
nonadvisory expenses at 0.1%. However, its present intention is to
continue the limit until the time that actual expenses are less
than the limit.
Investment Advisory Agreement
IDS Life and American Express Financial Corporation have an
Investment Advisory Agreement that calls for IDS Life to pay
American Express Financial Corporation a fee for investment advice
about the fund's Portfolios. The fee paid by IDS Life is 0.25% of
Equity, Income, Money Market, Managed and Government Securities
portfolios' average net assets for the year. The fee paid by IDS
Life is 0.50% of International Equity portfolio's average net
assets for the year. American Express Financial Corporation also
executes purchases and sales and negotiates brokerage as directed
by IDS Life.
Total fees and expenses (excluding taxes and brokerage commissions)
cannot exceed the most restrictive applicable state expense
limitation.
About IDS Life and American Express Financial Corporation
General information
IDS Life Series Fund is managed by IDS Life, a wholly owned
subsidiary of American Express Financial Corporation, which itself
is a wholly owned subsidiary of the American Express Company
(American Express), a financial services company headquartered in
New York City.
IDS Life is a stock life insurance company organized in 1957 under
the laws of the State of Minnesota and located at IDS Tower 10,
Minneapolis, MN 55440-0010. IDS Life conducts a conventional life
insurance business in the District of Columbia and all states
except New York.
<PAGE>
PAGE 52
The American Express Financial Corporation family of companies
offers not only insurance and annuities, but also mutual funds,
investment certificates and a broad range of financial management
services.
American Express Financial Corporation has been providing financial
services since 1894. Besides managing investments for all publicly
offered funds in the IDS MUTUAL FUND GROUP, American Express
Financial Corporation also manages investments for itself and its
subsidiaries, IDS Certificate Company and IDS Life. Total assets
under management on April 30, 1994 were more than $105 billion.
American Express Financial Advisors Inc. serves individuals and
businesses through its nationwide network of more than 175 offices
and more than 7,800 planners.
Other subsidiaries provide investment management and related
services for pension, profit-sharing, employee savings and
endowment funds of businesses and institutions.
<PAGE>
PAGE 53
STATEMENT OF ADDITIONAL INFORMATION
for
IDS LIFE SERIES FUND, INC.
Equity Portfolio
Government Securities Portfolio
Income Portfolio
Managed Portfolio
Money Market Portfolio
April 28, 1995
This Statement of Additional Information is not a prospectus. It
should be read together with the Fund's prospectus which may be
obtained from your American Express financial advisor, or by
writing or calling IDS Life Series Fund, Inc. at the address or
telephone number below.
The date of this Statement of Additional Information is
April 28, 1995, and is to be used with the Fund's Prospectus dated
April 28, 1995, the Fund's Annual Report for the fiscal year ended
April 30, 1994, and the Semiannual Report for the period ended Oct.
31, 1994.
IDS Life Series Fund, Inc.
IDS Tower 10
Minneapolis, MN 55440-0010
(612) 671-3733
TTY: 800-285-8846
New York Service: (518) 869-8613
<PAGE>
PAGE 54
TABLE OF CONTENTS
Goals and Investment Policies........................See Prospectus
Additional Investment Policies................................p. 4
Portfolio Transactions........................................p. 19
Brokerage Commissions Paid to
Brokers Affiliated with IDS Life..............................p. 21
Calculation of Total Return...................................p. 22
Calculation of Yield..........................................p. 22
Valuing Each Portfolio's Shares...............................p. 24
Investing in the Fund.........................................p. 26
Redeeming Shares..............................................p. 27
Capital Gains and Losses......................................p. 27
Investment Management and Other Services......................p. 27
Management of the Fund........................................p. 28
Custodian.....................................................p. 31
Independent Auditors..........................................p. 31
Financial Statements..............................See Annual Report
Appendix A: Foreign Currency Transactions, for
Investments of Equity, Income and Managed
Portfolios.......................................p. 32
Appendix B: Description of Money Market Securities, for
Investments of all Portfolios except
Government Securities............................p. 37
Appendix C: Options and Stock Index Futures Contracts,
for Investments of Equity and Managed
Portfolios.......................................p. 39
Appendix D: Options and Interest Rate Futures Contracts,
for Investments of Income, Managed and
Government Securities Portfolios.................p. 47
Appendix E: Mortgage-Backed Securities and Additional
Information on Investment Policies for all
Portfolios except Money Market...................p. 53
Appendix F: Dollar-Cost Averaging............................p. 56
Appendix G: Description of Corporate Bond Ratings............p. 57
<PAGE>
PAGE 55
ADDITIONAL INVESTMENT POLICIES
In addition to the investment goals and policies presented in the
prospectus, each Portfolio has the investment policies stated
below.
Unless the holders of a majority of the outstanding shares (as
defined in the section entitled "Voting rights" of the prospectus)
of Equity Portfolio agree to a change, Equity Portfolio will not:
Underwrite securities of other issuers. However, this shall not
preclude the purchase of securities for investment, on original
issue or otherwise, and shall not preclude the acquisition of
portfolio securities under circumstances where the portfolio would
not be free to sell them without being deemed an underwriter for
purposes of the Securities Act of 1933 (1933 Act) and without
registration of such securities or the filing of a notification
under that Act, or the taking of similar action under other
securities laws relating to the sale of securities.
Buy securities of an issuer if the officers and directors of the
portfolio and of American Express Financial Corporation hold more
than a certain percent of the issuer's outstanding securities. The
holdings of all officers and directors of the portfolio who own
more than 0.5% of an issuer's securities are added together and if
in total they own more than 5%, the portfolio will not purchase
securities of that issuer.
Buy or sell real estate, unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent
the portfolio from investing in securities or other instruments
backed by real estate or securities of companies engaged in the
real estate business.
Buy or sell physical commodities unless acquired as a result of
ownership of securities or other instruments, except this shall not
prevent the portfolio from buying or selling options and futures
contracts or from investing in securities or other instruments
backed by, or whose value is derived from, physical commodities.
Make cash loans if the total commitment amount exceeds 5% of the
portfolio's total assets.
Lend portfolio securities in excess of 30% of its net assets, at
market value. The current policy of the board of directors is to
make these loans, either long- or short-term, to broker-dealers.
In making such loans the portfolio gets the market price in cash,
U.S. government securities, letters of credit or such other
collateral as may be permitted by regulatory agencies and approved
by the board of directors. If the market price of the loaned
securities goes up, the portfolio will get additional collateral on
a daily basis. The risks are that the borrower may not provide
additional collateral when required or return the securities when
due. A loan will not be made unless the opportunity for additional
income outweighs the risks. During the existence of the loan, the
portfolio receives cash payments equivalent to all interest or
other distributions paid on the loaned securities.
<PAGE>
PAGE 56
Invest more than 5% of its total assets, at market value, in
securities of any one company, government or political subdivision
thereof, except the limitation will not apply to investments in
securities issued by the U.S. government, its agencies or
instrumentalities. Up to 25% of the portfolio's total assets may
be invested without regard to this 5% limitation.
Borrow money or property except as a temporary measure for
extraordinary or emergency purposes, and in an amount not exceeding
one-third of the market value of its total assets (including
borrowings) less liabilities (other than borrowings) immediately
after the borrowing. The portfolio will not purchase additional
portfolio securities at any time borrowing for temporary purposes
exceeds 5%. The portfolio has not borrowed in the past and has no
present intention to borrow.
Concentrate its investments in any particular industry, but
reserves freedom of action to do so provided that not more than 25%
of its assets, taken at cost, may be so invested at any one time.
Purchase securities of any issuer if immediately after and as a
result of such purchase the Portfolio would own more than 10% of
the outstanding voting securities of such issuer.
Unless changed by the board of directors, the following policies
apply to Equity Portfolio:
The portfolio will not invest in companies for the purpose of, or
with the effect of, acquiring control.
The portfolio will not buy on margin or sell short.
The portfolio will not invest in securities of any investment
company except in the open market where no commission or profit to
a sponsor or dealer results from such purchase other than customary
broker's commission. The portfolio does not intend to invest in
such securities but may do so to the extent of not more than 5% of
its total assets (taken at market or other current value). The
portfolio may acquire limited amounts of securities of one or more
investment companies as permitted by the Investment Company Act of
1940 (1940 Act), in connection with the acquisition of or merger
with such companies. Except for these instances, the portfolio
will not purchase securities of investment companies.
The portfolio may make contracts to purchase securities for a fixed
price at a future date beyond normal settlement time (when issued
securities or forward commitments). A portfolio does not pay for
the securities or receive dividends or interest on them until the
contractual settlement date. The portfolio's custodian will
maintain, in a segregated account, cash or liquid high-grade debt
securities that are marked to market daily and are at least equal
in value to the portfolio's commitments to purchase the securities.
When-issued securities or forward commitments are subject to market
fluctuations and they may affect the portfolio's total assets the
same as owned securities.
<PAGE>
PAGE 57
The portfolio may maintain a portion of its assets in cash and
cash-equivalent investments. The cash-equivalent investments the
Portfolio may use are short-term U.S. and Canadian government
securities and negotiable certificates of deposit, non-negotiable
fixed-time deposits, bankers' acceptances and letters of credit of
banks or savings and loan associations having capital, surplus and
undivided profits (as of the date of its most recently published
annual financial statements) in excess of $100 million (or the
equivalent in the instance of a foreign branch of a U.S. bank) at
the date of investment. Any cash-equivalent investments in foreign
securities will be subject to the limitations on foreign
investments described in the prospectus. The portfolio also may
purchase short-term corporate notes and obligations rated in the
top two classifications by Moody's Investors Service, Inc. or
Standard & Poor's Corporation or the equivalent and may use
repurchase agreements with broker-dealers registered under the
Securities Exchange Act of 1934 and with commercial banks. A risk
of a repurchase agreement is that if the seller seeks the
protection of the bankruptcy laws, the portfolio's ability to
liquidate the security involved could be impaired.
The portfolio does not intend to invest more than 2% of its net
assets in warrants that are not listed on a national securities
exchange. In no event will the investment in warrants exceed 5% of
the portfolio's net assets. A warrant is a right to buy a certain
security at a set price for a certain period of time and is freely
traded in the market.
The portfolio may invest in Rule 144A securities, which are
unregistered securities offered to qualified institutional buyers,
and interest-only and principal-only fixed mortgage-backed
securities (IOs and POs) issued by the United States government or
its agencies and instrumentalities. In determining the liquidity
of Rule 144A securities, IOs and POs, the investment manager, under
guidelines established by the board of directors, will consider any
relevant factors including the frequency of trades, the number of
dealers willing to purchase or sell the security and the nature of
marketplace trades.
The portfolio may invest in commercial paper issued in transactions
not involving a public offering under Section 4(2) of the
Securities Act of 1933 (4(2) paper). In determining the liquidity
of 4(2) paper, the investment manager, under guidelines established
by the board of directors, will evaluate relevant factors such as
the issuer and the size and nature of its commercial paper
programs, the willingness and ability of the issuer or dealer to
repurchase the paper, and the nature of the clearance and
settlement procedures for the paper.
The portfolio will not invest in securities which are not readily
marketable (including restricted securities and repurchase
agreements over 7 days) without registration or the filing of a
notification under the 1933 Act, or the taking of similar action
under other securities laws relating to the sale of securities, if
immediately after the making of any such investment more than 10%
of the portfolio's net assets (taken at market or other current
value) are invested in such securities.
<PAGE>
PAGE 58
The portfolio will not invest in interests in oil, gas and other
mineral exploration or development programs.
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.
Unless the holders of a majority of the outstanding shares (as
defined in the section entitled "Voting rights" of the prospectus)
of Government Securities Portfolio agree to a change, Government
Securities Portfolio will not:
Act as an underwriter (sell securities for others). However, under
the securities laws, the portfolio may be deemed to be an
underwriter when it purchases securities directly from the issuer
and later resells them.
Buy securities of an issuer if the officers and directors of the
portfolio and of American Express Financial Corporation hold more
than a certain percent of the issuer's outstanding securities. The
holdings of all officers and directors of the portfolio and of
American Express Financial Corporation who own more than 0.5% of an
issuer's securities are added together and if in total they own
more than 5%, the portfolio will not purchase securities of that
issuer.
Buy or sell real estate, unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent
the portfolio from investing in securities or other instruments
backed by real estate or securities of companies engaged in the
real estate business.
Buy or sell physical commodities unless acquired as a result of
ownership of securities or other instruments, except this shall not
prevent the portfolio from buying or selling options and futures
contracts or from investing in securities or other instruments
backed by, or whose value is derived from, physical commodities.
Make cash loans if the total commitment amount exceeds 5% of the
portfolio's total assets.
Lend portfolio securities in excess of 30% of its net assets, at
market value. The current policy of the board of directors is to
make these loans, either long- or short-term, to broker-dealers.
In making such loans the portfolio gets the market price in cash,
U.S. government securities, letters of credit or such other
collateral as may be permitted by regulatory agencies and approved
by the board of directors. If the market price of the loaned
securities goes up, the portfolio will get additional collateral on
a daily basis. The risks are that the borrower may not provide
additional collateral when required or return the securities when
due. A loan will not be made unless the opportunity for additional
income outweighs the risks. During the existence of the loan, the
portfolio receives cash payments equivalent to all interest or
other distributions paid on the loaned securities.
<PAGE>
PAGE 59
Invest more than 5% of its total assets, at market value, in
securities of any one company, government or political subdivision
thereof, except the limitation will not apply to investments in
securities issued by the U.S. government, its agencies or
instrumentalities. Up to 25% of the portfolio's total assets may
be invested without regard to this 5% limitation.
Borrow money or property except as a temporary measure for
extraordinary or emergency purposes, and in an amount not exceeding
one-third of the market value of its total assets (including
borrowings) less liabilities (other than borrowings) immediately
after the borrowing. The portfolio will not purchase additional
portfolio securities at any time borrowing for temporary purposes
exceeds 5%. The portfolio has not borrowed in the past and has no
present intention to borrow.
Make a loan of any part of its assets to American Express Financial
Corporation, to the officers and directors of American Express
Financial Corporation or to its own officers and directors.
Buy any property or security (other than securities issued by the
portfolio) from any officer or director of American Express
Financial Corporation or the portfolio, nor will the portfolio sell
any property or security to them.
Issue senior securities, except that this restriction shall not be
deemed to prohibit the portfolio from borrowing money from banks,
lending its securities, or entering into repurchase agreements or
options or futures contracts.
Unless changed by the board of directors, the following policies
will apply to Government Securitites Portfolio:
The portfolio will not invest in illiquid securities if,
immediately after making such an investment, more than 10% of the
portfolio's net assets, at market, would be invested in such
securities.
The portfolio will not invest for the purpose of exercising control
or management.
The portfolio will not buy on margin or sell short, except that it
may enter into interest rate futures contracts.
The portfolio will not invest in securities of investment companies
except by purchase in the open market where the dealer's or
sponsor's profit is just the regular commission.
The portfolio may make contracts to purchase securities for a fixed
price at a future date beyond normal settlement time (when issued
securities or forward commitments). A portfolio does not pay for
the securities or receive dividends or interest on them until the
contractual settlement date. The portfolio's custodian will
maintain, in a segregated account, cash or liquid high-grade debt
securities that are marked to market daily and are at least equal
in value to the portfolio's commitments to purchase the securities.
<PAGE>
PAGE 60
When-issued securities or forward commitments are subject to market
fluctuations and they may affect the portfolio's total assets the
same as owned securities.
The portfolio may maintain a portion of its assets in cash and
cash-equivalent investments. The cash-equivalent investments the
portfolio may use are short-term U.S. and Canadian government
securities and negotiable certificates of deposit, non-negotiable
fixed-time deposits, bankers' acceptances and letters of credit of
banks or savings and loan associations having capital, surplus and
undivided profits (as of the date of its most recently published
annual financial statements) in excess of $100 million (or the
equivalent in the instance of a foreign branch of a U.S. bank) at
the date of investment. Any cash-equivalent investments in foreign
securities will be subject to the limitations on foreign
investments described in the prospectus. The portfolio also may
purchase short-term corporate notes and obligations rated in the
top two classifications by Moody's Investors Service, Inc. or
Standard & Poor's Corporation or the equivalent and may use
repurchase agreements with broker-dealers registered under the
Securities Exchange Act of 1934 and with commercial banks. A risk
of a repurchase agreement is that if the seller seeks the
protection of the bankruptcy laws, the portfolio's ability to
liquidate the security involved could be impaired.
The portfolio may invest in repurchase agreements. Repurchase
agreements involve investment in debt securities whereby the seller
agrees to repurchase the securities at cost plus an agreed to
interest rate within a specified time. A risk of a repurchase
agreement is that if the party with whom this portfolio has entered
into such an agreement seeks the protection of bankruptcy laws, the
portfolio's ability to liquidate the security involved could be
temporarily impaired, and it subsequently may incur a loss if the
value of the security declines, or if the other party defaults on
its obligation. There also is the risk that the portfolio may be
delayed or prevented from exercising its rights to dispose of the
collateral securities.
The portfolio may invest in Rule 144A securities, which are
unregistered securities offered to qualified institutional buyers,
and interest-only and principal-only fixed mortgage-backed
securities (IOs and POs) issued by the United States government or
its agencies and instrumentalities. In determining the liquidity
of Rule 144A securities, IOs and POs, the investment manager, under
guidelines established by the board of directors, will consider any
relevant factors including the frequency of trades, the number of
dealers willing to purchase or sell the security and the nature of
marketplace trades.
The portfolio may invest in commercial paper issued in transactions
not involving a public offering under Section 4(2) of the
Securities Act of 1933 (4(2) paper). In determining the liquidity
of 4(2) paper, the investment manager, under guidelines established
by the board of directors, will evaluate relevant factors such as
the issuer and the size and nature of its commercial paper
programs, the willingness and ability of the issuer or dealer to
repurchase the paper, and the nature of the clearance and
settlement procedures for the paper.
<PAGE>
PAGE 61
The portfolio will not pledge or mortgage its assets beyond 15% of
the cost of its gross assets. For purposes of this restriction,
collateral arrangements with respect to margin for interest rate
futures contracts are not deemed to be a pledge of assets.
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.
Unless the holders of a majority of the outstanding shares (as
defined in the section entitled "Voting rights" of the prospectus)
of Income Portfolio agree to a change, Income Portfolio will not:
Underwrite securities of other issuers. However, this shall not
preclude the purchase of securities for investment, on original
issue or otherwise, and shall not preclude the acquisition of
portfolio securities under circumstances where the portfolio would
not be free to sell them without being deemed an underwriter for
purposes of the Securities Act of 1933 (1933 Act) and without
registration of such securities or the filing of a notification
under that Act, or the taking of similar action under other
securities laws relating to the sale of securities.
Buy securities of an issuer if the officers and directors of the
portfolio and of American Express Financial Corporation hold more
than a certain percent of the issuer's outstanding securities. The
holdings of all officers and directors of the portfolio who own
more than 0.5% of an issuer's securities are added together and if
in total they own more than 5%, the portfolio will not purchase
securities of that issuer.
Buy or sell real estate, unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent
the portfolio from investing in securities or other instruments
backed by real estate or securities of companies engaged in the
real estate business.
Buy or sell physical commodities unless acquired as a result of
ownership of securities or other instruments, except this shall not
prevent the portfolio from buying or selling options and futures
contracts or from investing in securities or other instruments
backed by, or whose value is derived from, physical commodities.
Make cash loans if the total commitment amount exceeds 5% of the
portfolio's total assets.
Lend portfolio securities in excess of 30% of its net assets, at
market value. The current policy of the board of directors is to
make these loans, either long- or short-term, to broker-dealers.
In making such loans the portfolio gets the market price in cash,
U.S. government securities, letters of credit or such other
collateral as may be permitted by regulatory agencies and approved
by the board of directors. If the market price of theloaned
securities goes up, the portfolio will get additional collateral on
<PAGE>
PAGE 62
a daily basis. The risks are that the borrower may not provide
additional collateral when required or return the securities when
due. A loan will not be made unless the opportunity for additional
income outweighs the risks. During the existence of the loan, the
portfolio receives cash payments equivalent to all interest or
other distributions paid on the loaned securities.
Invest more than 5% of its total assets, at market value, in
securities of any one company, government or political subdivision
thereof, except the limitation will not apply to investments in
securities issued by the U.S. government, its agencies or
instrumentalities. Up to 25% of the portfolio's total assets may
be invested without regard to this 5% limitation.
Borrow money or property except as a temporary measure for
extraordinary or emergency purposes, and in an amount not exceeding
one-third of the market value of its total assets (including
borrowings) less liabilities (other than borrowings) immediately
after the borrowing. The portfolio will not purchase additional
portfolio securities at any time borrowing for temporary purposes
exceeds 5%. The portfolio has not borrowed in the past and has no
present intention to borrow.
Concentrate its investments in any particular industry, but
reserves freedom of action to do so provided that not more than 25%
of its assets, taken at cost, may be so invested at any one time.
Purchase securities of any issuer if immediately after and as a
result of such purchase the portfolio would own more than 10% of
the outstanding voting securities of such issuer.
Unless changed by the board of directors, the following policies
apply to Income Portfolio:
The portfolio will not invest in companies for the purpose of, or
with the effect of, acquiring control.
The portfolio will not buy on margin or sell short.
The portfolio will not invest in securities of any investment
company except in the open market where no commission or profit to
a sponsor or dealer results from such purchase other than customary
broker's commission. The portfolio does not intend to invest in
such securities but may do so to the extent of not more than 5% of
its total assets (taken at market or other current value). The
portfolio may acquire limited amounts of securities of one or more
investment companies as permitted by the Investment Company Act of
1940 (1940 Act), in connection with the acquisition of or merger
with such companies. Except for these instances, the portfolio
will not purchase securities of investment companies.
The portfolio may make contracts to purchase securities for a fixed
price at a future date beyond normal settlement time (when issued
securities or forward commitments). A portfolio does not pay for
the securities or receive dividends or interest on them until the
contractual settlement date. The portfolio's custodian will
maintain, in a segregated account, cash or liquid high-grade debt
<PAGE>
PAGE 63
securities that are marked to market daily and are at least equal
in value to the portfolio's commitments to purchase the securities.
When-issued securities or forward commitments are subject to market
fluctuations and they may affect the portfolio's total assets the
same as owned securities.
The portfolio may maintain a portion of its assets in cash and
cash-equivalent investments. The cash-equivalent investments the
portfolio may use are short-term U.S. and Canadian government
securities and negotiable certificates of deposit, non-negotiable
fixed-time deposits, bankers' acceptances and letters of credit of
banks or savings and loan associations having capital, surplus and
undivided profits (as of the date of its most recently published
annual financial statements) in excess of $100 million (or the
equivalent in the instance of a foreign branch of a U.S. bank) at
the date of investment. Any cash-equivalent investments in foreign
securities will be subject to the limitations on foreign
investments described in the prospectus. The portfolio also may
purchase short-term corporate notes and obligations rated in the
top two classifications by Moody's Investors Service, Inc. or
Standard & Poor's Corporation or the equivalent and may use
repurchase agreements with broker-dealers registered under the
Securities Exchange Act of 1934 and with commercial banks. A risk
of a repurchase agreement is that if the seller seeks the
protection of the bankruptcy laws, the portfolio's ability to
liquidate the security involved could be impaired.
The portfolio may invest in Rue 144A securities, which are
unregistered securities offered to qualified institutional buyers,
and interest-only and principal-only fixed mortgage-backed
securities (IOs and POs) issued by the United States government or
its agencies and instrumentalities. In determining the liquidity
of Rule 144A securities, IOs and POs, the investment manager, under
guidelines established by the board of directors, will consider any
relevant factors including the frequency of trades, the number of
dealers willing to purchase or sell the security and the nature of
marketplace trades.
The portfolio may invest in commercial paper issued in transactions
not involving a public offering under Section 4(2) of the
Securities Act of 1933 (4(2) paper). In determining the liquidity
of 4(2) paper, the investment manager, under guidelines established
by the board of directors, will evaluate relevant factors such as
the issuer and the size and nature of its commercial paper
programs, the willingness and ability of the issuer or dealer to
repurchase the paper, and the nature of the clearance and
settlement procedures for the paper.
The portfolio will not invest in securities which are not readily
marketable (including restricted securities and repurchase
agreements over 7 days) without registration or the filing of a
notification under the 1933 Act, or the taking of similar action
under other securities laws relating to the sale of securities, if
immediately after the making of any such investment more than 10%
of the portfolio's net assets (taken at market or other current
value) are invested in such securities.
<PAGE>
PAGE 64
The portfolio will not invest in interests in oil, gas and other
mineral exploration or development programs.
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.
Unless the holders of a majority of the outstanding shares (as
defined in the section entitled "Voting rights" of the prospectus)
of Managed Portfolio agree to a change, Managed Portfolio will not:
Act as an underwriter (sell securities for others). However, under
the securities laws, the portfolio may be deemed to be an
underwriter when it purchases securities directly from the issuer
and later resells them.
Buy securities of an issuer if the officers and directors of the
portfolio and of American Express Financial Corporation hold more
than a certain percentage of the issuer's outstanding securities.
The holdings of all officers and directors of the portfolio and of
American Express Financial Corporation who own more than 0.5% of an
issuer's securities are added together and if in total they own
more than 5%, the portfolio will not purchase securities of that
issuer.
Buy or sell real estate, unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent
the portfolio from investing in securities or other instruments
backed by real estate or securities of companies engaged in the
real estate business.
Buy or sell physical commodities unless acquired as a result of
ownership of securities or other instruments, except this shall not
prevent the portfolio from buying or selling options and futures
contracts or from investing in securities or other instruments
backed by, or whose value is derived from, physical commodities.
Make cash loans if the total commitment amount exceeds 5% of the
portfolio's total assets.
Lend portfolio securities in excess of 30% of its net assets, at
market value. The current policy of the board of directors is to
make these loans, either long- or short-term, to broker-dealers.
In making such loans the portfolio gets the market price in cash,
U.S. government securities, letters of credit or such other
collateral as may be permitted by regulatory agencies and approved
by the board of directors. If the market price of the loaned
securities goes up, the portfolio will get additional collateral on
a daily basis. The risks are that the borrower may not provide
additional collateral when required or return the securities when
due. A loan will not be made unless the opportunity for additional
income outweighs the risks. During the existence of the loan, the
portfolio receives cash payments equivalent to all interest or
other distributions paid on the loaned securities.
<PAGE>
PAGE 65
Invest more than 5% of its total assets, at market value, in
securities of any one company, government or political subdivision
thereof, except the limitation will not apply to investments in
securities issued by the U.S. government, its agencies or
instrumentalities. Except for Money Market Portfolio, up to 25% of
each Portfolio's total assets may be invested without regard to
this 5% limitation.
Borrow money or property except as a temporary measure for
extraordinary or emergency purposes, and in an amount not exceeding
one-third of the market value of its total assets (including
borrowings) less liabilities (other than borrowings) immediately
after the borrowing. The portfolio will not purchase additional
portfolio securities at any time borrowing for temporary purposes
exceeds 5%. The portfolio has not borrowed in the past and has no
present intention to borrow.
Concentrate in any one industry. (According to the present
interpretation of the staff of the Securities and Exchange
Commission this means no more than 25% of the portfolio's total
assets, based on current market value at the time of purchase, can
be invested in any one industry).
Make a loan of any part of its assets to American Express Financial
Corporation, to the officers and directors of American Express
Financial Corporation or to its own officers and directors.
Issue senior securities, except that this restriction shall not be
deemed to prohibit the portfolio from borrowing money from banks,
lending its securities, or entering into repurchase agreements or
options or futures contracts.
Unless changed by the board of directors, the following policies
apply to Managed Portfolio:
The portfolio will not invest in a company to get control or manage
it.
The portfolio will not buy on margin or sell short, but it may make
margin payments in connection with transactions in futures
contracts.
The portfolio will not invest in securities of investment companies
except by purchases in the open market where the dealer's or
sponsor's profit is just the regular commission.
The portfolio may make contracts to purchase securities for a fixed
price at a future date beyond normal settlement time (when issued
securities or forward commitments). A portfolio does not pay for
the securities or receive dividends or interest on them until the
contractual settlement date. The portfolio's custodian will
maintain, in a segregated account, cash or liquid high-grade debt
securities that are marked to market daily and are at least equal
in value to the portfolio's commitments to purchase the securities.
When-issued securities or forward commitments are subject to market
fluctuations and they may affect the portfolio's total assets the
same as owned securities.
<PAGE>
PAGE 66
The portfolio may maintain a portion of its assets in cash and
cash-equivalent investments. The cash-equivalent investments the
portfolio may use are short-term U.S. and Canadian government
securities and negotiable certificates of deposit, non-negotiable
fixed-time deposits, bankers' acceptances and letters of credit of
banks or savings and loan associations having capital, surplus and
undivided profits (as of the date of its most recently published
annual financial statements) in excess of $100 million (or the
equivalent in the instance of a foreign branch of a U.S. bank) at
the date of investment. Any cash-equivalent investments in foreign
securities will be subject to the limitations on foreign
investments described in the prospectus. The portfolio also may
purchase short-term corporate notes and obligations rated in the
top two classifications by Moody's Investors Service, Inc. or
Standard & Poor's Corporation or the equivalent and may use
repurchase agreements with broker-dealers registered under the
Securities Exchange Act of 1934 and with commercial banks. A risk
of a repurchase agreement is that if the seller seeks the
protection of the bankruptcy laws, the portfolio's ability to
liquidate the security involved could be impaired.
The portfolio will not invest more than 5% of its total assets,
taken at cost, in securities of companies, including any
predecessor, which have a record of less than three years
continuous operations.
The portfolio does not intend to invest in exploration or
development programs, such as oil, gas or mineral programs.
The portfolio may invest in repurchase agreements. Repurchase
agreements involve investment in debt securities whereby the seller
agrees to repurchase the securities at cost plus an agreed to
interest rate within a specified time. A risk of a repurchase
agreement is that if the party with whom this portfolio has entered
into such an agreement seeks the protection of bankruptcy laws, the
portfolio's ability to liquidate the security involved could be
temporarily impaired, and it subsequently may incur a loss if the
value of the security declines, or if the other party defaults on
its obligation. There also is the risk that the portfolio may be
delayed or prevented from exercising its rights to dispose of the
collateral securities.
The portfolio may invest in Rule 144A securities, which are
unregistered securities offered to qualified institutional buyers,
and interest-only and principal-only fixed mortgage-backed
securities (IOs and POs) issued by the United States government or
its agencies and instrumentalities. In determining the liquidity
of Rule 144A securities, IOs and POs, the investment manager, under
guidelines established by the board of directors, will consider any
relevant factors including the frequency of trades, the number of
dealers willing to purchase or sell the security and the nature of
marketplace trades.
The portfolio may invest in commercial paper issued in transactions
not involving a public offering under Section 4(2) of the
Securities Act of 1933 (4(2) paper). In determining the liquidity
of 4(2) paper, the investment manager, under guidelines established
<PAGE>
PAGE 67
by the board of directors, will evaluate relevant factors such as
the issuer and the size and nature of its commercial paper
programs, the willingness and ability of the issuer or dealer to
repurchase the paper, and the nature of the clearance and
settlement procedures for the paper.
The portfolio does not intend to invest in illiquid securities if,
immediately after making such an investment, more than 10% of the
portfolio's net assets, at market, would be invested in such
securities.
The portfolio will not pledge or mortgage its assets beyond 15% of
the cost of its gross assets taken at cost. For the purposes of
this restriction, collateral arrangements with respect to margin
for futures contracts are not deemed to be a pledge of assets.
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.
Unless the holders of a majority of the outstanding shares (as
defined in the section entitled "Voting rights" of the prospectus)
of Money Market Portfolio agree to a change, Money Market Portfolio
will not:
Act as an underwriter (sell securities for others). However, under
securities laws the portfolio may be deemed to be an underwriter
when it purchases securities directly from the issuer and later
resells them.
Buy securities of an issuer if the directors and officers of the
portfolio and of American Express Financial Corporation hold more
than a certain percentage of the issuer's outstanding securities.
The holdings of all directors and officers of the portfolio who own
more than 0.5% of an issuer's securities are added together, and if
in total they own more than 5%, the portfolio will not purchase
securities of that issuer.
Buy or sell real estate, commodities, or commodity contracts.
Make cash loans. However, it does make short-term investments
which it may have an agreement with the seller to reacquire (See
Appendix B).
Lend portfolio securities in excess of 30% of its net assets, at
market value. The current policy of the board of directors is to
make these loans, either long- or short-term, to broker-dealers.
In making such loans the portfolio gets the market price in cash,
U.S. government securities, letters of credit or such other
collateral as may be permitted by regulatory agencies and approved
by the board of directors. If the market price of the loaned
securities goes up, the portfolio will get additional collateral on
a daily basis. The risks are that the borrower may not provide
additional collateral when required or return the securities when
due. A loan will not be made unless the opportunity for additional
<PAGE>
PAGE 68
income outweighs the risks. During the existence of the loan, the
portfolio receives cash payments equivalent to all interest or
other distributions paid on the loaned securities.
Invest more than 5% of its total assets, at market value, in
securities of any one company, government or political subdivision
thereof, except the limitation will not apply to investments in
securities issued by the U.S. government, its agencies or
instrumentalities. Except for Money Market Portfolio, up to 25% of
each portfolio's total assets may be invested without regard to
this 5% limitation.
Borrow money or property except as a temporary measure for
extraordinary or emergency purposes, and in an amount not exceeding
one-third of the market value of its total assets (including
borrowings) less liabilities (other than borrowings) immediately
after the borrowing. The portfolio will not purchase additional
portfolio securities at any time borrowing for temporary purposes
exceeds 5%. The portfolio has not borrowed in the past and has no
present intention to borrow.
Buy on margin or sell short.
Invest in exploration or development programs, such as oil, gas or
mineral programs.
Purchase common stocks, preferred stocks, warrants, other equity
securities, corporate bonds or debentures, state bonds, municipal
bonds, or industrial revenue bonds.
Pledge or mortgage portfolio assets beyond 15% of the cost of the
portfolio's gross assets. If the portfolio should engage in such
transactions, valuation of its assets for such purposes would be
based on their market value.
Invest in an investment company beyond 5% of its total assets taken
at market and then only on the open market where the dealer's or
sponsor's profit is just the regular commission. However, the
portfolio will not purchase or retain the securities of other open-
end investment companies.
Invest in a company to get control or manage it.
Invest more than 25% of the portfolio's assets taken at market
value in any particular industry, except there is no limitation
with respect to investing in U.S. government or agency securities
and bank obligations. Investments are varied according to what is
judged advantageous under different economic conditions.
Unless changed by the board of directors, the following policies
apply to Money Market Portfolio:
The portfolio will not invest in illiquid securities if,
immediately after making such an investment, more than 10% of the
portfolio's net assets, at market, would be invested in such
securities.
<PAGE>
PAGE 69
The portfolio may make contracts to purchase securities for a fixed
price at a future date beyond normal settlement time (when issued
securities or forward commitments). A portfolio does not pay for
the securities or receive dividends or interest on them until the
contractual settlement date. The portfolio's custodian will
maintain, in a segregated account, cash or liquid high-grade debt
securities that are marked to market daily and are at least equal
in value to the portfolio's commitments to purchase the securities.
When-issued securities or forward commitments are subject to market
fluctuations and they may affect the portfolio's total assets the
same as owned securities.
The portfolio may maintain a portion of its assets in cash and
cash-equivalent investments. The cash-equivalent investments the
portfolio may use are short-term U.S. and Canadian government
securities and negotiable certificates of deposit, non-negotiable
fixed-time deposits, bankers' acceptances and letters of credit of
banks or savings and loan associations having capital, surplus and
undivided profits (as of the date of its most recently published
annual financial statements) in excess of $100 million (or the
equivalent in the instance of a foreign branch of a U.S. bank) at
the date of investment. Any cash-equivalent investments in foreign
securities will be subject to the limitations on foreign
investments described in the prospectus. The portfolio also may
purchase short-term corporate notes and obligations rated in the
top two classifications by Moody's Investors Service, Inc. or
Standard & Poor's Corporation or the equivalent and may use
repurchase agreements with broker-dealers registered under the
Securities Exchange Act of 1934 and with commercial banks. A risk
of a repurchase agreement is that if the seller seeks the
protection of the bankruptcy laws, the portfolio's ability to
liquidate the security involved could be impaired.
The portfolio may invest in repurchase agreements. Repurchase
agreements involve investment in debt securities whereby the seller
agrees to repurchase the securities at cost plus an agreed to
interest rate within a specified time. A risk of a repurchase
agreement is that if the party with whom this portfolio has entered
into such an agreement seeks the protection of bankruptcy laws, the
portfolio's ability to liquidate the security involved could be
temporarily impaired, and it subsequently may incur a loss if the
value of the security declines, or if the other party defaults on
its obligation. There also is the risk that the portfolio may be
delayed or prevented from exercising its rights to dispose of the
collateral securities.
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.
For a discussion on foreign currency transactions, see Appendix A.
For a discussion on money market securities, see Appendix B. For a
discussion on options and stock index futures contracts, see
Appendix C. For a discussion on options and interest rate futures
contracts, see Appendix D. For a discussion on mortgage-backed
<PAGE>
PAGE 70
securities, see Appendix E. For a discussion on dollar-cost
averaging, see Appendix F. For a description of corporate bond
ratings, see Appendix G.
PORTFOLIO TRANSACTIONS
Subject to policies set by the Board of Directors, IDS Life is
authorized to determine, consistent with each Portfolio's
investment goals and policies, which securities shall be purchased,
held or sold. In determining where the buy and sell orders are to
be placed, IDS Life has been directed to use its best efforts to
obtain the best available price and the most favorable execution
except where otherwise authorized by the Board of Directors. IDS
Life intends to direct American Express Financial Corporation to
execute trades and negotiate commissions on its behalf. In
selecting broker-dealers to execute transactions, American Express
Financial Corporation may consider the price of the security,
including commission or mark-up, the size and difficulty of the
order, the reliability, integrity, financial soundness and general
operation and execution capabilities of the broker, the broker's
expertise in particular markets, and research services provided by
the broker. These services are covered by the Investment Advisory
agreement between American Express Financial Corporation and IDS
Life. When American Express Financial Corporation acts on IDS
Life's behalf for the Fund, it follows the rules described here for
IDS Life.
Because Income Portfolio's investments are primarily in bonds,
which are traded in the over-the-counter market, IDS Life generally
will deal through a dealer acting as a principal. The price
usually includes a dealer's mark-up without a separate brokerage
charge. When IDS Life believes that dealing through a broker as
agent for a commission will produce the best results, it will do
so. The Portfolio also may buy securities directly from an issuing
company which may be resold only privately to other institutional
investors.
On occasion it may be desirable to compensate a broker for research
services or for brokerage services, by paying a commission which
might not otherwise be charged or a commission in excess of the
amount another broker might charge. The Board of Directors has
adopted a policy authorizing IDS Life to do so to the extent
authorized by law, if IDS Life determines, in good faith, that such
commission is reasonable in relation to the value of the brokerage
or research services provided by a broker or dealer, viewed either
in the light of that transaction or IDS Life's or American Express
Financial Corporation's overall responsibilities.
Research provided by brokers supplements IDS Life's own research
activities. Research services provided by brokers include economic
data on, and analysis of, U.S. and foreign economies; information
on specific industries; information about specific companies,
including earnings estimates; purchase recommendations for stock
and bonds; portfolio strategy services; political, economic,
business and industry trend assessments; historical statistical
information; market data services providing information on specific
issues and prices; and technical analysis of various aspects of the
<PAGE>
PAGE 71
securities markets, including technical charts. Research services
may take the form of written reports, computer software or personal
contact by telephone or at seminars or other meetings. IDS Life
has obtained and, in the near future, may obtain computer hardware
from brokers, including but not limited to personal computers that
will be used exclusively for investment decision-making purposes,
which include the research, portfolio management and trading
functions and other services to the extent permitted under an
interpretation by the Securities and Exchange Commission.
When paying a commission that might not otherwise be charged or a
commission in excess of that which another broker might charge, IDS
Life must follow procedures authorized by the Board of Directors.
To date, three procedures have been authorized. One procedure
permits IDS Life to direct an order to buy or sell a security
traded on a national securities exchange to a specific broker for
research services it has provided. The second procedure permits
IDS Life, in order to obtain research, to direct an order on an
agency basis to buy or sell a security traded only in the over-the-
counter market to a firm that does not make a market in the
security. The commission paid generally includes compensation for
research services. The third procedure permits IDS Life, in order
to obtain research and brokerage services, to cause a Portfolio to
pay a commission in excess of the amount another broker might have
charged. IDS Life has advised the Fund that it is necessary to do
business with a number of brokerage firms on a continuous basis to
obtain such services as: handling large orders; the willingness of
a broker to risk its own money by taking a position in a security;
and specialized handling of a particular group of securities that
only certain brokers may be able to offer. As a result of this
arrangement, some portfolio transactions may not be effected at
the lowest commission, but IDS Life believes it may obtain better
overall execution. IDS Life has assured the Fund that under all
three procedures the amount of commission paid will be reasonable
and competitive in relation to the value of the brokerage services
performed or research provided.
All other transactions shall be executed on the basis of the policy
to obtain the best available price and the most favorable
execution. In so doing, if, in the professional opinion of the
person responsible for selecting the broker or dealer, several
firms can execute the transaction on the same basis, consideration
will be given by such person to those firms offering research
services. Such services may be used by IDS Life and American
Express Financial Corporation in providing advice to all the funds
and other accounts advised by IDS Life even though it is not
possible to relate the benefits to any particular fund or account.
Each investment decision made for a Portfolio is made independently
from any decision made for another Portfolio or fund or other
account advised by IDS Life or any of its subsidiaries. When the
Portfolio buys or sells the same security as another fund or
account, IDS Life carries out the purchase or sale in a way the
Fund agrees in advance is fair. Although sharing in large
transactions may adversely affect the price or volume purchased or
<PAGE>
PAGE 72
sold by the Fund, the Fund hopes to gain an overall advantage in
execution. IDS Life has assured the Fund it will continue to seek
ways to reduce brokerage costs.
On a periodic basis, IDS Life makes a comprehensive review of the
broker-dealers and the overall reasonableness of their commissions.
The review evaluates execution, back office efficiency and research
services.
The Fund paid total brokerage commissions of $190,220 for fiscal
year 1992, $210,093 for fiscal year 1993, and $405,141 for fiscal
year ended April 30, 1994. The majority of all firms through whom
transactions were executed provide research services. There were
no transactions directed to brokers by the Fund because of research
services received for the fiscal year ended April 30, 1994.
Income and Managed Portfolios' acquisition during the period ended
April 30, 1994, of securities of its regular brokers or dealers or
of the parents of those brokers or dealers that derive more than
15% of gross revenue from securities-related activities is
presented below:
Value of Securities
Owned at End of
Name of Issuer Fiscal Year
Bank of America $1,081,250
Bankers Trust 298,000
Citicorp 303,375
Goldman Sachs 191,250
Salomon Brothers 450,000
BROKERAGE COMMISSIONS PAID TO BROKERS AFFILIATED WITH IDS LIFE
Affiliates of American Express Company (of which IDS Life is a
wholly owned indirect subsidiary) may engage in brokerage and other
securities transactions on behalf of the Fund in accordance with
procedures adopted by the Fund's Board of Directors and to the
extent consistent with applicable provisions of the federal
securities laws. IDS Life will use an American Express affiliate
only if (i) IDS Life determines that the Fund will receive prices
and executions at least as favorable as those offered by qualified
independent brokers performing similar brokerage and other services
for the Fund and (ii) if such use is consistent with terms of the
Investment Management and Services Agreement.
Information about brokerage commissions paid by the Fund for the
last three fiscal years to brokers affiliated with IDS Life is
contained in the following table:
<PAGE>
PAGE 73
<TABLE>
<CAPTION>
For the Fiscal Year Ended April 30,
1994 1993 1992
Aggregate Percent of Aggregate Aggregate
Dollar Aggregate Dollar Dollar Dollar
Amount of Percent of Amount of Amount of Amount of
Nature Commissions Aggregate Transactions Commissions Commissions
of Paid to Brokerage Involving Payment Paid to Paid to
Broker Affiliation Broker Commissions of Commissions Broker Broker
<S> <C> <C> <C> <C> <C> <C>
American (2) $19,878 4.91% .01% $35,204 $27,081
Enterprise
Investment
Services Inc.
Lehman (1) $ 4,851 1.19% 0% $ 8,390 $ 5,660
Brothers
Inc.
The Robinson (3) none none none none $ 1,680
Humphrey
Company, Inc.
</TABLE>
(1) Under common control with American Express Financial
Corporation as a subsidiary of American Express Company (American
Express) until July 30, 1993.
(2) Wholly owned subsidiary of American Express Financial
Corporation.
(3) Under common control with American Express Financial
Corporation as an indirect subsidiary of American Express until
July 30, 1993.
PERFORMANCE INFORMATION
Each Portfolio may quote various performance figures to illustrate
past performance. Average annual total return and current yield
quotations used by a Fund are based on standardized methods of
computing performance as required by the SEC. An explanation of
these and any other methods used by each Portfolio to compute
performance follows below.
CALCULATION OF TOTAL RETURN
Each Portfolio may calculate average annual total return for
certain periods by finding the average annual compounded rates of
return over the period that would equate the initial amount
invested to the ending redeemable value, according to the following
formula:
P(1+T)n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 payment at the beginning of a period, at
the end of the period (or fractional portion
thereof)
<PAGE>
PAGE 74
Aggregate total return
Each Portfolio may calculate aggregate total return for certain
periods representing the cumulative change in the value of an
investment in a Portfolio over a specified period of time according
to the following formula:
ERV - P
P
where: P = a hypothetical initial payment of $1,000
ERV = ending redeemable value of a hypothetical $1,000
payment at the beginning of a period, at the end of
the period (or fractional portion thereof)
CALCULATION OF YIELD
Government Securities and Income Portfolios - These portfolios may
calculate an annualized yield by dividing the average net
investment income per share earned during a 30-day period by the
net asset value per share on the last day of the period and
annualizing the results.
Yield is calculated according to the following formula:
Yield = 2[ (a-b + 1)6 - 1]
cd
where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of
reimbursements)
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends
d = the maximum offering price per share on the
last day of the period
Government Securities Portfolio's yield was 5.31% for the 30-day
period ended April 30, 1994 and Income Portfolio's yield was 6.67%.
IDS Life has agreed to a voluntary limitation of non-advisory
expenses at an annual charge not to exceed 0.1% of the average
daily net assets of the Fund. If non-advisory expenses had not
been limited, Government Securities Portfolio's yield would have
been 5.27%. Income Portfolio's yield would have been 6.67*%.
*Expenses did not exceed .1% of average daily net assets.
Money Market Portfolio calculates annualized simple and compound
yields based on a seven-day period.
The simple yield is calculated by determining the net change in the
value of a hypothetical account having a balance of one share at
the beginning of the seven day period, dividing the net change in
account value by the value of the account at the beginning of the
period to obtain the return for the period, and multiplying that
return by 365/7 to obtain an annualized figure. The value of the
<PAGE>
PAGE 75
hypothetical account includes the amount of any declared dividends,
the value of any shares purchased with any dividend paid during the
period and any dividends declared for such shares. The Portfolio's
yield does not include any realized or unrealized gain or loss.
The Portfolio calculates its compound yield according to the
following formula:
Compound Yield = (return for seven day period + 1) 365/7 - 1
The Portfolio's simple annualized yield was 2.99% and its compound
yield was 3.03% on April 30, 1994, the last business day of the
fund's fiscal year. If direct expenses had not been limited, the
simple annualized yield would have been 2.89% and its compound
yield would have been 2.93%.
Yield, or rate of return, on Portfolio shares may fluctuate daily
and does not provide a basis for determining future yields.
However, it may be used as one element in assessing how the
Portfolio is meeting its goal. When comparing an investment in the
Portfolio with savings accounts and similar investment
alternatives, you must consider that such alternatives often
provide an agreed to or guaranteed fixed yield for a stated period
of time, whereas the Portfolio's yield fluctuates. In comparing
the yield of one money market fund to another, you should consider
each fund's investment policies, including the types of investments
permitted.
In its sales material and other communications, the Fund may quote
rankings, yields or returns as published by independent statistical
services or publishers and publications such as The Bank Rate
Monitor National Index, Barron's, Business Week, Donoghue's Money
Market Fund Report, Financial Services Week, Financial Times,
Financial World, Forbes, Fortune, Global Investor, Institutional
Investor, Investor's Daily, Kiplinger's Personal Finance, Lipper
Analytical Services, Money, Mutual Fund Forecaster, Newsweek, The
New York Times, Personal Investor, Shearson Lehman Aggregate Bond
Index, Stanger Report, Sylvia Porter's Personal Finance, USA Today,
U.S. News and World Report, The Wall Street Journal and
Wiesenberger Investment Companies Service.
VALUING EACH PORTFOLIO'S SHARES
The value of an individual share in the Equity, Income, Managed and
Government Securities Portfolios, is determined by using the net
asset value before the shareholder transactions for the day. On
April 30, 1994, the computation looked like this for Equity,
Income, Managed and Government Securities Portfolios:
<TABLE>
<CAPTION>
Net assets before Shares outstanding Net asset
shareholder transactions at end of previous day value of one share
<S> <C> <C> <C> <C><C>
Equity Portfolio $151,860,163 divided by 8,391,259 = $18.10
Income Portfolio $ 33,769,928 divided by 3,476,335 = $ 9.71
Managed Portfolio $160,719,325 divided by 11,604,807 = $13.85
Government Securities $ 11,184,851 divided by 1,132,254 = $ 9.88
Portfolio
</TABLE>
<PAGE>
PAGE 76
The net asset value per share is determined by dividing the total
market value of the Fund's investments and other assets, less any
liabilities, by the number of outstanding shares of the Fund. To
establish the net assets, all securities are valued as of the close
of each business day, which is the closing time of the New York
Stock Exchange (currently 3 p.m. Central time). A business day for
the Fund is any day the New York Stock Exchange is open. The
portfolio securities are valued at amortized cost, which
approximates market value.
In determining net assets, the Fund's portfolio securities are
valued as follows:
`Stocks, convertible bonds, warrants, futures and options traded on
major exchanges are valued each day at their last quoted sales
price on their primary exchange as of the close of the New York
Stock Exchange. If the last quoted sales price is not readily
available for a particular security, the value is the average price
between the last offer to buy and the last offer to sell.
`Stocks, convertible bonds and warrants with readily available
market quotations but without a listing on an exchange are also
valued at the average between the last bid (offer to buy) and asked
(offer to sell) price at the time of the close of the New York
Stock Exchange.
`Short-term securities maturing in 60 days or less at the
acquisition date are valued at amortized cost. (Amortized cost is
an approximation of market value determined by systematically
increasing the carrying value of a security if acquired at a
discount, or systematically reducing the carrying value if acquired
at a premium, so that the carrying value is equal to maturity value
on the maturity date.)
`Securities without a readily available market price, bonds other
than convertibles and other assets are valued at fair value. In
valuing these, the Fund directors are responsible for selecting
methods which they believe give the fair value. For nonconvertible
bonds, the usual method is to use the pricing service of an outside
organization. Such pricing service may take into consideration
yield, quality, coupon, maturity, type of issue, trading
characteristics and other market data in determining valuations for
normal institutional-size trading units of debt securities and does
not rely exclusively on quoted prices.
`Generally, trading in foreign securities is substantially
completed each day at various times prior to the close of the New
York Stock Exchange. The values of such securities used in
determining the net asset value of the Fund's shares are computed
as of such times. Occasionally, events affecting the value of such
securities may occur between such times and the close of the New
York Stock Exchange which will not be reflected in the computation
of the Fund's net asset value. If events materially affecting the
value of such securities occur during such period, then these
securities will be valued at their fair value according to
procedures decided upon in good faith by the Fund's Board of
Directors. Foreign securities quoted in foreign currencies are
translated into U.S. dollars at the current exchange rate.
<PAGE>
PAGE 77
Valuing Money Market Portfolio's shares
Money Market Portfolio intends to use its best efforts to maintain
a constant net asset value of $1 per share although there is no
assurance it will be able to do so. Accordingly, it uses the
amortized cost method in valuing its Portfolio.
Short-term securities maturing in 60 days or less are valued at
amortized cost. Amortized cost is an approximation of market value
determined by systematically increasing the carrying value of a
security if acquired at a discount, or reducing the carrying value
if acquired at a premium, so that the carrying value is equal to
maturity value on the maturity date. It does not take into
consideration unrealized capital gains or losses. All of the
securities in the portfolio will be valued at their amortized cost.
In addition, the Portfolio must abide by certain conditions. It
must only invest in securities of high quality which present
minimal credit risks as determined by the Board of Directors. This
means that the rated commercial paper in the Fund's portfolio will
be issues that have been rated in the highest rating category by at
least two nationally recognized statistical rating organizations
(or by one if only one rating is assigned) and in unrated paper
determined by the Fund's Board of Directors to be comparable. The
Portfolio must also purchase securities with original or remaining
maturities of no more than 13 months or less, and maintain a
dollar-weighted average portfolio maturity of 90 days or less.
In addition, the Board of Directors must establish procedures
designed to stabilize the Portfolio's price per share for purposes
of sales and redemptions at $1 to the extent that it is reasonably
possible to do so. These procedures include review of the
portfolio securities by the Board, at intervals deemed appropriate
by it, to determine whether the net asset value per share computed
by using the available market quotations deviates from a share
value of $1 as computed using the amortized cost method. The Board
must consider any deviation that appears, and if it exceeds 0.5
percent, it must determine what action, if any, needs to be taken.
If the Board determines that a deviation exists that may result in
a material dilution of the holdings of current shareholders or
investors, or in other unfair consequences for such people, it must
undertake remedial action that it deems necessary and appropriate.
Such action may include withholding dividends, calculating net
asset value per share for purposes of sales and redemptions using
available market quotations, making redemptions in kind, and
selling portfolio securities before maturity in order to realize
capital gain or loss or to shorten average portfolio maturity.
In other words, while the amortized cost method provides certainty
and consistency in portfolio valuation, it may, from time to time,
result in valuations of portfolio securities which are either
somewhat higher or lower than the prices at which the securities
could be sold. This means that during times of declining interest
rates, the yield on the Portfolio's shares may be higher than if
valuations of securities were made based on actual market prices
and estimates of market prices. Accordingly, if use of the
<PAGE>
PAGE 78
amortized cost method were to result in a lower portfolio value at
a given time, a prospective investor would be able to obtain a
somewhat higher yield than he or she would get if portfolio
valuation were based on actual market values. Existing
shareholders, on the other hand, would receive a somewhat lower
yield than they would otherwise receive. The opposite would happen
during a period of rising interest rates.
INVESTING IN THE FUND
You cannot buy shares of the Fund directly. The only way you can
invest in the Fund at the present time is by buying a Variable Life
Insurance Policy from IDS Life or IDS Life of New York and
directing the allocation of part or all of your net purchase
payment to the Variable Accounts which will invest in shares of the
Fund. Read this fund's prospectus along with your Variable Life
Insurance Policy prospectus.
Sales Charges and Surrender Charges
The Fund does not assess any sales charge, either when it sells or
when it redeems securities. The surrender charges which may be
assessed under your Variable Life Insurance Policy are described in
the Variable Life Insurance Policy prospectus, as are mortality and
expense risk fees and other charges.
REDEEMING SHARES
The Fund will redeem any shares presented by the shareholders (the
Variable Accounts) for redemption. The Variable Accounts' policy
on when or whether to buy or redeem Fund shares is described in the
Variable Life Insurance Policy prospectus.
During an emergency the Board of Directors can suspend the
computation of net asset value, stop accepting payments for
purchase of shares, or suspend the duty of the Fund to redeem
shares for more than seven days. Such emergency situations would
occur if:
`The New York Stock Exchange closes for reasons other than the
usual weekend and holiday closings, or trading on the Exchange is
restricted,
`Disposal of the Fund's securities is not reasonably practicable,
or it is not reasonably practicable for the Fund to determine the
fair value of its net assets, or
`The Securities and Exchange Commission, under the provisions of
the Investment Company Act of 1940, declares a period of emergency
to exist.
Should the Fund stop selling shares, the directors may make a
deduction from the value of the assets held by the Fund to cover
the cost of future liquidations of the assets so as to distribute
fairly these costs among all contract owners.
<PAGE>
PAGE 79
CAPITAL GAINS AND LOSSES
For federal income tax purposes, Income and Money Market Portfolios
had a capital loss carryover of $3,648 and $174 respectively, at
April 30, 1994, which, if not offset by subsequent capital gains,
will expire in 1996 through 2000. It is unlikely the Board of
Directors will authorize a distribution of any net realized gain
for this Portfolio until the capital loss carryover has been offset
or expires.
INVESTMENT MANAGEMENT AND OTHER SERVICES
Management and Services Agreement
The Fund does not maintain its own research department or record-
keeping services. These are provided by IDS Life under the
Investment Management and Services Agreement.
For its services, IDS Life is paid a fee based on the net assets of
the Portfolios. The asset charge is based on the aggregate average
daily net assets of each of the Portfolios at the following rates:
0.7 percent, on an annual basis, for Equity Portfolio;
0.7 percent, on an annual basis, for Income Portfolio;
0.5 percent, on an annual basis, for Money Market Portfolio;
0.7 percent, on an annual basis, for Managed Portfolio; and
0.7 percent, on an annual basis, for Government Securities
Portfolio.
The management fee is paid monthly. The total amount paid for
fiscal year ended April 30, 1994 was $850,524 for Equity Portfolio,
$199,578 for Income Portfolio, $41,168 for Money Market Portfolio,
$920,594 for Managed Portfolio, and $75,428 for Government
Securities Portfolio. The total amount paid for fiscal year ended
April 30, 1993 was $504,402 for Equity Portfolio, $136,217 for
Income Portfolio, $47,061 for Money Market Portfolio, $596,745 for
Managed Portfolio and $61,668 for Government Securities Portfolio.
The total amount paid for fiscal year ended April 30, 1992 was
$327,914 for Equity Portfolio, $94,784 for Income Portfolio,
$48,939 for Money Market Portfolio, $436,549 for Managed Portfolio
and $48,470 for Government Securities Portfolio.
All non-advisory expenses incurred by the Fund will be paid at an
annual charge not to exceed 0.1% of the aggregate average daily net
assets of the Fund. The voluntary limitation of 0.1% has been
established by IDS Life at that figure and IDS Life reserves the
right to discontinue the voluntary limitation.
Investment Advisory Agreement
IDS Life and American Express Financial Corporation have an
Investment Advisory Agreement. It calls for IDS Life to pay
American Express Financial Corporation a fee for investment advice
about the Fund's Portfolios. American Express Financial
Corporation also executes purchases and sales and
negotiates brokerage as directed by IDS Life. The fee paid by IDS
Life is 0.25% of the Fund's average net assets for the year.
<PAGE>
PAGE 80
IDS Life paid American Express Financial Corporation 751,255 for
investment advice for the fiscal year ended April 30, 1994. IDS
Life paid American Express Financial Corporation $487,415 for
investment advice for the fiscal year ended April 30, 1993. IDS
Life paid American Express Financial Corporation $348,615 for
investment advice for the fiscal year ended April 30, 1992.
Information concerning other funds advised by IDS Life or American
Express Financial Corporation is contained in the prospectus.
MANAGEMENT OF THE FUND
The Fund has a Board of Directors elected by policyholders that
oversees the operations of the Fund as required by state law. The
Board has named an executive committee of directors that has
authority to act on its behalf between meetings.
The Fund's directors and officers do not own any of the outstanding
shares of the Fund.
Directors of the Fund
The following is a list of the Fund's directors.
Carl N. Platou
President Emeritus and Chief Executive Officer, Fairview Hospital
and Healthcare Services, Retired 1990. Director, St. Thomas
University since 1990.
*Richard W. Kling
President, IDS Life since March 1994. Director and Executive Vice
President, Marketing and Products from January 1988 to March 1994.
Manager of IDS Life Variable Annuity Funds A&B.
Edward Landes
Retired, former Development Consultant.
*Janis E. Miller
Director and Executive Vice President, Variable Assets, IDS Life
since March 1994. Vice President, American Express Financial
Corporation since June 1990. Manager of IDS Life Variable Annuity
Funds A & B.
Gordon H. Ritz
President, Con Rad Broadcasting Corp. (radio broadcasting).
Director, Sunstar Foods and Mid-America Publishing.
*Interested person of IDS Life and of the Fund as the term
"interested person" is defined in the 1940 Act.
<PAGE>
PAGE 81
Officers of the Fund
Besides Mr. Kling, who is the President, the Fund's other executive
officers are listed below:
Colleen Curran
IDS Tower 10
Minneapolis, MN
Secretary
Senior Counsel, American Express Financial Corporation, since 1990.
Louis C. Fornetti
IDS Tower 10
Minneapolis, MN
Vice President
Director, IDS Life, since March 1994. Director and Senior Vice
President--Corporate Controller, American Express Financial
Corporation, since August 1988. Vice President--Corporate
Controller, from 1985 to 1988.
Morris Goodwin, Jr.
IDS Tower 10
Minneapolis, MN
Vice President and Treasurer
Vice President and Treasurer, IDS Life since March 1994. Vice
President and Corporate Treasurer, American Express Financial
Corporation, since July 1989. Chief Financial Officer and
Treasurer, American Express Trust Company from 1988 to 1989.
Paul F. Kolkman
IDS Tower 10
Minneapolis, MN
Vice President and Chief Actuary
Director and Vice President--Finance, IDS Life. Vice President--
Insurance Finance, American Express Financial Corporation.
William A. Stoltzmann
IDS Tower 10
Minneapolis, MN
General Counsel and Assistant Secretary
General Counsel and Assistant Secretary, IDS Life. Vice President
and Assistant General Counsel, American Express Financial
Corporation.
<PAGE>
PAGE 82
Melinda S. Urion
IDS Tower
Minneapolis, MN
Vice President and Controller
Vice President and Corporate Controller, American Express Financial
Corporation, since April 1994; Vice President - Insurance
Controller, American Express Financial Corporation, from September
1991 to April 1994. Chief Accounting Officer for American Express
Financial Advisors Inc. from July 1988 to September 1991.
Board Compensation Table for IDS Life Series Fund
for fiscal year ended April 30, 1994
IDS Life Series Fund, IDS Life Variable Annuity Fund A and IDS Life
Variable Annuity Fund B comprise the three funds in the Fund
Complex.
<TABLE>
<CAPTION>
Aggregate Compensation Total Compensation
Manager from IDS Life Series Fund from the Fund Complex
<S> <C> <C>
Edward Landes $4,000 $8,000
Carl N. Platou $3,500 $7,000
Gordon H. Ritz $4,000 $8,000
</TABLE>
Managers of the Fund who are not salaried employees of IDS Life or
one of its affiliates receive $2,000 per year plus $500 per meeting
they attend and expenses. All officers are salaried employees of
IDS Life or American Express Financial Corporation and receive no
remuneration from the Fund.
There are no pension or retirement benefits accrued as part of fund
expenses.
CUSTODIAN
The Fund's securities and cash are held by American Express Trust
Company, 1200 Northstar Center West, 625 Marquette Ave.,
Minneapolis, MN 55402, through a custodian agreement. The
custodian is permitted to deposit some or all of its securities in
central depository systems as allowed by federal law.
The custodian has entered into a sub-custodian arrangement with
Morgan Stanley Trust Co. (Morgan Stanley), One Pierrepont Plaza,
8th Floor, Brooklyn NY 11201-2775. As part of this arrangement,
portfolio securities purchased outside the United States may be
held in custody and deposit accounts that have been established by
Morgan Stanley with one or more domestic or foreign banks, or
through the facilities of one or more clearing agencies or central
securities depositories as may be permitted by law and by the
Fund's sub-custodian agreement.
INDEPENDENT AUDITORS
The Fund's financial statements contained in its Annual Report to
shareholders at the end of its fiscal year are audited by
independent auditors, KPMG Peat Marwick LLP, 4200 Norwest Center,
90 South Seventh Street, Minneapolis, MN 55402-3900. IDS Life has
<PAGE>
PAGE 83
agreed that it will send a copy of this report and the unaudited
Semi-Annual Report to every Variable Life Insurance policyowner
having an interest in the Fund. The independent auditors also
provide other accounting and tax-related services as requested by
the Fund from time to time.
FINANCIAL STATEMENTS
The 1994 Annual Report to IDS Life Series Fund, Inc. shareholders,
filed pursuant to Section 30(d) of the 1940 Act, is hereby
incorporated in this Statement of Additional Information by
reference. The 1994 Semiannual Report to shareholders is also
incorporated in this SAI by reference.
The prospectus, dated April 28, 1995, is hereby incorporated in
this Statement of Additional Information by reference.
<PAGE>
PAGE 84
APPENDIX A
FOREIGN CURRENCY TRANSACTIONS, FOR INVESTMENTS OF EQUITY, INCOME
AND MANAGED PORTFOLIOS
Since investments in foreign countries usually involve currencies
of foreign countries, and since the Portfolio may hold cash and
cash-equivalent investments in foreign currencies, the value of the
Portfolio's assets as measured in U.S. dollars may be affected
favorably or unfavorably by changes in currency exchange rates and
exchange control regulations. Also, the Portfolio may incur costs
in connection with conversions between various currencies.
Spot Rates and Forward Contracts. The Portfolio conducts its
foreign currency exchange transactions either at the spot (cash)
rate prevailing in the foreign currency exchange market or by
entering into forward currency exchange contracts (forward
contracts) as a hedge against fluctuations in future foreign
exchange rates. A forward contract involves an obligation to buy
or sell a specific currency at a future date, which may be any
fixed number of days from the contract date, at a price set at the
time of the contract. These contracts are traded in the interbank
market conducted directly between currency traders (usually large
commercial banks) and their customers. A forward contract
generally has no deposit requirements. No commissions are charged
at any stage for trades.
The Portfolio may enter into forward contracts to settle a security
transaction or handle dividend and interest collection. When the
Portfolio enters into a contract for the purchase or sale of a
security denominated in a foreign currency or has been notified of
a dividend or interest payment, it may desire to lock in the price
of the security or the amount of the payment in dollars. By
entering into a forward contract, the Portfolio will be able to
protect itself against a possible loss resulting from an adverse
change in the relationship between different currencies from the
date the security is purchased or sold to the date on which payment
is made or received or when the dividend or interest is actually
received.
The Portfolio also may enter into forward contracts when management
of the Portfolio believes the currency of a particular foreign
country may suffer a substantial decline against another currency.
It may enter into a forward contract to sell, for a fixed amount of
dollars, the amount of foreign currency approximating the value of
some or all of the Portfolio's portfolio securities denominated in
such foreign currency. The precise matching of forward contract
amounts and the value of securities involved generally will not be
possible since the future value of such securities in foreign
currencies more than likely will change between the date the
forward contract is entered into and the date it matures. The
projection of short-term currency market movements is extremely
difficult and successful execution of a short-term hedging strategy
is highly uncertain. The Portfolio will not enter into such
<PAGE>
PAGE 85
forward contracts or maintain a net exposure to such contracts when
consummating the contracts would obligate the Portfolio to deliver
an amount of foreign currency in excess of the value of the
Portfolio's portfolio securities or other assets denominated in
that currency.
The Portfolio will designate cash or securities in an amount equal
to the value of the Portfolio's total assets committed to
consummating forward contracts entered into under the second
circumstance set forth above. If the value of the securities
declines, additional cash or securities will be designated on a
daily basis so that the value of the cash or securities will equal
the amount of the Portfolio's commitments on such contracts.
At maturity of a forward contract, the Portfolio may either sell
the portfolio security and make delivery of the foreign currency or
retain the security and terminate its contractual obligation to
deliver the foreign currency by purchasing an offsetting contract
with the same currency trader obligating it to buy, on the same
maturity date, the same amount of foreign currency.
If the Portfolio retains the portfolio security and engages in an
offsetting transaction, the Portfolio will incur a gain or a loss
(as described below) to the extent there has been movement in
forward contract prices. If the Portfolio engages in an offsetting
transaction, it may subsequently enter into a new forward contract
to sell the foreign currency. Should forward prices decline
between the date the Portfolio enters into a forward contract for
selling foreign currency and the date it enters into an offsetting
contract for purchasing the foreign currency, the Portfolio will
realize a gain to the extent that the price of the currency it has
agreed to sell exceeds the price of the currency it has agreed to
buy. Should forward prices increase, the Portfolio will suffer a
loss to the extent the price of the currency it has agreed to buy
exceeds the price of the currency it has agreed to sell.
It is impossible to forecast what the market value of portfolio
securities will be at the expiration of a contract. Accordingly,
it may be necessary for the Portfolio to buy additional foreign
currency on the spot market (and bear the expense of such purchase)
if the market value of the security is less than the amount of
foreign currency the Portfolio is obligated to deliver and a
decision is made to sell the security and make delivery of the
foreign currency. Conversely, it may be necessary to sell on the
spot market some of the foreign currency received on the sale of
the portfolio security if its market value exceeds the amount of
foreign currency the Portfolio is obligated to deliver.
The Portfolio's dealing in forward contracts will be limited to the
transactions described above. This method of protecting the value
of the Portfolio's portfolio securities against a decline in the
value of a currency does not eliminate fluctuations in the
underlying prices of the securities. It simply establishes a rate
of exchange that can be achieved at some point in time. Although
such forward contracts tend to minimize the risk of loss due to a
<PAGE>
PAGE 86
decline in value of hedged currency, they tend to limit any
potential gain that might result should the value of such currency
increase.
Although the Portfolio values its assets each business day in terms
of U.S. dollars, it does not intend to convert its foreign
currencies into U.S. dollars on a daily basis. It will do so from
time to time, and shareholders should be aware of currency
conversion costs. Although foreign exchange dealers do not charge
a fee for conversion, they do realize a profit based on the
difference (spread) between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a
foreign currency to the Portfolio at one rate, while offering a
lesser rate of exchange should the Portfolio desire to resell that
currency to the dealer.
Options on Foreign Currencies. The Portfolio may buy put and write
covered call options on foreign currencies for hedging purposes.
For example, a decline in the dollar value of a foreign currency in
which portfolio securities are denominated will reduce the dollar
value of such securities, even if their value in the foreign
currency remains constant. In order to protect against such
diminutions in the value of portfolio securities, the Portfolio may
buy put options on the foreign currency. If the value of the
currency does decline, the Portfolio will have the right to sell
such currency for a fixed amount in dollars and will thereby
offset, in whole or in part, the adverse effect on its portfolio
which otherwise would have resulted.
As in the case of other types of options, however, the benefit to
the Portfolio derived from purchases of foreign currency options
will be reduced by the amount of the premium and related
transaction costs. In addition, where currency exchange rates do
not move in the direction or to the extent anticipated, the
Portfolio could sustain losses on transactions in foreign currency
options which would require it to forego a portion or all of the
benefits of advantageous changes in such rates.
The Portfolio may write options on foreign currencies for the same
types of hedging purposes. For example, when the Portfolio
anticipates a decline in the dollar value of foreign-denominated
securities due to adverse fluctuations in exchange rates, it could,
instead of purchasing a put option, write a call option on the
relevant currency. If the expected decline occurs, the option will
most likely not be exercised and the diminution in value of
portfolio securities will be fully or partially offset by the
amount of the premium received.
As in the case of other types of options, however, the writing of a
foreign currency option will constitute only a partial hedge up to
the amount of the premium, and only if rates move in the expected
direction. If this does not occur, the option may be exercised and
the Portfolio would be required to buy or sell the underlying
currency at a loss which may not be offset by the amount of the
<PAGE>
PAGE 87
premium. Through the writing of options on foreign currencies, the
Portfolio also may be required to forego all or a portion of the
benefits which might otherwise have been obtained from favorable
movements on exchange rates.
All options written on foreign currencies will be covered. An
option written on foreign currencies is covered if the Portfolio
holds currency sufficient to cover the option or has an absolute
and immediate right to acquire that currency without additional
cash consideration upon conversion of assets denominated in that
currency or exchange of other currency held in its portfolio. An
option writer could lose amounts substantially in excess of its
initial investments, due to the margin and collateral requirements
associated with such positions.
Options on foreign currencies are traded through financial
institutions acting as market-makers, although foreign currency
options also are traded on certain national securities exchanges,
such as the Philadelphia Stock Exchange and the Chicago Board
Options Exchange, subject to SEC regulation. In an over-the-
counter trading environment, many of the protections afforded to
exchange participants will not be available. For example, there
are no daily price fluctuation limits, and adverse market movements
could therefore continue to an unlimited extent over a period of
time. Although the purchaser of an option cannot lose more than
the amount of the premium plus related transaction costs, this
entire amount could be lost.
Foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the OCC, thereby
reducing the risk of counterparty default. Further, a liquid
secondary market in options traded on a national securities
exchange may be more readily available than in the over-the-counter
market, potentially permitting the Portfolio to liquidate open
positions at a profit prior to exercise or expiration, or to limit
losses in the event of adverse market movements.
The purchase and sale of exchange-traded foreign currency options,
however, is subject to the risks of availability of a liquid
secondary market described above, as well as the risks regarding
adverse market movements, margining of options written, the nature
of the foreign currency market, possible intervention by
governmental authorities and the effects of other political and
economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-
counter market. For example, exercise and settlement of such
options must be made exclusively through the OCC, which has
established banking relationships in certain foreign countries for
the purpose. As a result, the OCC may, if it determines that
foreign governmental restrictions or taxes would prevent the
orderly settlement of foreign currency option exercises, or would
result in undue burdens on OCC or its clearing member, impose
special procedures on exercise and settlement, such as technical
changes in the mechanics of delivery of currency, the fixing of
dollar settlement prices or prohibitions on exercise.
<PAGE>
PAGE 88
Foreign Currency Futures and Related Options. The Portfolio may
enter into currency futures contracts to sell currencies. It also
may buy put and write covered call options on currency futures.
Currency futures contracts are similar to currency forward
contracts, except that they are traded on exchanges (and have
margin requirements) and are standardized as to contract size and
delivery date. Most currency futures call for payment of delivery
in U.S. dollars. The Portfolio may use currency futures for the
same purposes as currency forward contracts, subject to CFTC
limitations, including the limitation on the percentage of assets
that may be used, described in the prospectus. All futures
contracts are aggregated for purposes of the percentage
limitations.
Currency futures and options on futures values can be expected to
correlate with exchange rates, but will not reflect other factors
that may affect the values of the Portfolio's investments. A
currency hedge, for example, should protect a Yen-denominated bond
against a decline in the Yen, but will not protect the Portfolio
against price decline if the issuer's creditworthiness
deteriorates. Because the value of the Portfolio's investments
denominated in foreign currency will change in response to many
factors other than exchange rates, it may not be possible to match
the amount of a forward contract to the value of the Portfolio's
investments denominated in that currency over time.
The Portfolio will not use leverage in its options and futures
strategies. The Portfolio will hold securities or other options or
futures positions whose values are expected to offset its
obligations. The Portfolio will not enter into an option or
futures position that exposes the Portfolio to an obligation to
another party unless it owns either (i) an offsetting position in
securities or (ii) cash, receivables and short-term debt securities
with a value sufficient to cover its potential obligations.
<PAGE>
PAGE 89
APPENDIX B
DESCRIPTION OF MONEY MARKET SECURITIES
Certificates of Deposit -- A certificate of deposit is a negotiable
receipt issued by a bank or savings and loan association in
exchange for the deposit of funds. The issuer agrees to pay the
amount deposited, plus interest, on the date specified on the
certificate.
Time Deposit -- A time deposit is a non-negotiable deposit in a
bank for a fixed period of time.
Bankers' Acceptances -- A bankers' acceptance arises from a short-
term credit arrangement designed to enable businesses to obtain
funds to finance commercial transactions. It is a time draft drawn
on a bank by an exporter or an importer to obtain a stated amount
of funds to pay for specific merchandise. The draft is then
"accepted" by a bank that, in effect, unconditionally guarantees to
pay the face value of the instrument on its maturity date.
Commercial Paper -- Commercial paper is generally defined as
unsecured short-term notes issued in bearer form by large well-
known corporations and finance companies. Maturities on commercial
paper range from one day to nine months.
Commercial paper rated A by Standard & Poor's Corporation has the
following characteristics: Liquidity ratios are better than the
industry average. Long-term senior debt rating is "A" or better.
The issuer has access to at least two additional channels of
borrowing. Basic earnings and cash flow have an upward trend with
allowances made for unusual circumstances. Typically, the issuer's
industry is well established, the issuer has a strong position
within its industry and the reliability and quality of management
is unquestioned. Issuers rated A are further rated by use of
numbers 1, 2 and 3 to denote relative strength within this highest
classification.
A Prime rating is the highest commercial paper rating assigned by
Moody's Investors Services Inc. Issuers rated Prime are further
rated by use of numbers 1, 2 and 3 to denote relative strength
within this highest classification. Among the factors considered
by Moody's in assigning ratings for an issuer are the following:
(1) management; (2) economic evaluation of the industry and an
appraisal of speculative type risks which may be inherent in
certain areas; (3) competition and customer acceptance of products;
(4) liquidity; (5) amount and quality of long-term debt; (6) ten
year earnings trends; (7) financial strength of a parent company
and the relationships which exist with the issuer; and (8)
recognition by management of obligations which may be present or
may arise as a result of public interest questions and preparations
to meet such obligations.
Letters of Credit -- A letter of credit is a short-term note issued
in bearer form with a bank letter of credit which provides that the
bank pay to the bearer the amount of the note upon presentation.
<PAGE>
PAGE 90
U.S. Treasury Bills -- Treasury bills are issued with maturities of
any period up to one year. Three-month and six-month bills are
currently offered by the Treasury on 13-week and 26-week cycles
respectively and are auctioned each week by the Treasury. Treasury
bills are issued in book entry form and are sold only on a discount
basis, i.e. the difference between the purchase price and the
maturity value constitutes interest income for the investor. If
they are sold before maturity, a portion of the income received may
be a short-term capital gain.
U.S. Government Agency Securities -- Federal agency securities are
debt obligations which principally result from lending programs of
the U.S. government. Housing and agriculture have traditionally
been the principal beneficiaries of Federal credit programs, and
agencies involved in providing credit to agriculture and housing
account for the bulk of the outstanding agency securities.
Repurchase Agreements -- A repurchase agreement involves the
acquisition of securities by the Portfolio, with the concurrent
agreement by a bank (or securities dealer if permitted by law or
regulation), to reacquire the securities at the portfolio's cost,
plus interest, within a specified time. The Portfolio thereby
receives a fixed rate of return on this investment, one that is
insulated from market and rate fluctuations during the holding
period. In these transactions, the securities acquired by the
Portfolio have a total value equal to or in excess of the value of
the repurchase agreement and are held by the Portfolio's custodian
until required. Pursuant to guidelines established by the
Portfolio's Board of Directors, the creditworthiness of the other
party to the transaction is considered and the value of those
securities held as collateral is monitored to ensure that such
value is maintained at the required level.
If IDS Life becomes aware that a security owned by a Portfolio is
downgraded below the second highest rating, IDS Life will either
sell the security or recommend to the Fund's Board of Directors why
it should not be sold.
<PAGE>
PAGE 91
APPENDIX C
OPTIONS AND STOCK INDEX FUTURES CONTRACTS, FOR INVESTMENTS OF
EQUITY AND MANAGED PORTFOLIOS
Each Portfolio may buy or write options traded on any U.S. or
foreign exchange or in the over-the-counter market. Each Portfolio
may enter into stock index futures contracts traded on any U.S. or
foreign exchange. Each Portfolio also may buy or write put and
call options on these futures and on stock indexes. Options in the
over-the-counter market will be purchased only when the investment
manager believes a liquid secondary market exists for the options
and only from dealers and institutions the investment manager
believes present a minimal credit risk. Some options are
exercisable only on a specific date. In that case, or if a liquid
secondary market does not exist, a Portfolio could be required to
buy or sell securities at disadvantageous prices, thereby incurring
losses. Managed Portfolio also may enter into interest rate
futures contracts (see Appendix D).
OPTIONS. An option is a contract. A person who buys a call option
for a security has the right to buy the security at a set price for
the length of the contract. A person who sells a call option is
called a writer. The writer of a call option agrees to sell the
security at the set price when the buyer wants to exercise the
option, no matter what the market price of the security is at that
time. A person who buys a put option has the right to sell a
security at a set price for the length of the contract. A person
who writes a put option agrees to buy the security at the set price
if the purchaser wants to exercise the option, no matter what the
market price of the security is at that time. An option is covered
if the writer owns the security (in the case of a call) or sets
aside the cash or securities of equivalent value (in the case of a
put) that would be required upon exercise.
The price paid by the buyer for an option is called a premium. In
addition, the buyer generally pays a broker a commission. The
writer receives a premium, less another commission, at the time the
option is written. The cash received is retained by the writer
whether or not the option is exercised. A writer of a call option
may have to sell the security for a below-market price if the
market price rises above the exercise price. A writer of a put
option may have to pay an above-market price for the security if
its market price decreases below the exercise price. The risk of
the writer is potentially unlimited, unless the option is covered.
Options can be used to produce incremental earnings, protect gains
and facilitate buying and selling securities for investment
purposes. The use of options and futures contracts may benefit a
Portfolio and its shareholders by improving the Portfolio's
liquidity and by helping to stabilize the value of its net assets.
Buying options. Put and call options may be used as a trading
technique to facilitate buying and selling securities for
investment reasons. They also may be used for investment. Options
are used as a trading technique to take advantage of any disparity
<PAGE>
PAGE 92
between the price of the underlying security in the securities
market and its price on the options market. It is anticipated the
trading technique will be utilized only to effect a transaction
when the price of the security plus the option price will be as
good or better than the price at which the security could be bought
or sold directly. When the option is purchased, the Portfolio pays
a premium and a commission. It then pays a second commission on
the purchase or sale of the underlying security when the option is
exercised. For record keeping and tax purposes, the price obtained
on the purchase of the underlying security will be the combination
of the exercise price, the premium and both commissions. When
using options as a trading technique, commissions on the option
will be set as if only the underlying securities were traded.
Put and call options also may be held by a Portfolio for investment
purposes. Options permit a Portfolio to experience the change in
the value of a security with a relatively small initial cash
investment.
The risk a Portfolio assumes when it buys an option is the loss of
the premium. To be beneficial to a Portfolio, the price of the
underlying security must change within the time set by the option
contract. Furthermore, the change must be sufficient to cover the
premium paid, the commissions paid both in the acquisition of the
option and in a closing transaction or in the exercise of the
option and subsequent sale (in the case of a call) or purchase (in
the case of a put) of the underlying security. Even then, the
price change in the underlying security does not ensure a profit
since prices in the option market may not reflect such a change.
Writing covered options. Each Portfolio will write covered options
when it feels it is appropriate and will follow these guidelines:
'Underlying securities will continue to be bought or sold solely on
the basis of investment considerations consistent with each
Portfolio's goal.
'All options written by a Portfolio will be covered. For covered
call options, if a decision is made to sell the security, each
Portfolio will attempt to terminate the option contract through a
closing purchase transaction.
'Each Portfolio will deal only in standard option contracts traded
on national securities exchanges or those that may be quoted on
NASDAQ (a system of price quotations developed by the National
Association of Securities Dealers, Inc.)
'Each Portfolio will write options only as permitted under federal
laws or regulations, such as those that limit the amount of total
assets subject to the options. Some regulations also affect the
Custodian. When a covered option is written, the Custodian
segregates the underlying securities, and issues a receipt. There
are certain rules regarding banks issuing such receipts that may
restrict the amount of covered call options written. Furthermore,
each Portfolio is limited to pledging not more than 15 percent of
the cost of its total assets.
<PAGE>
PAGE 93
Net premiums on call options closed or premiums on expired call
options are treated as short-term capital gains. Since each
Portfolio is taxed as a regulated investment company under the
Internal Revenue Code, any gains on options and other securities
held less than three months must be limited to less than 30 percent
of its annual gross income.
If a covered call option is exercised, the security is sold by the
Portfolio. The premium received upon writing the option is added
to the proceeds received from the sale of the security. The
Portfolio will recognize a capital gain or loss based upon the
difference between the proceeds and the security's basis. Premiums
received from writing outstanding options are included as a
deferred credit in the Statement of Assets and Liabilities and
adjusted daily to the current market value.
Options are valued at the close of the New York Stock Exchange. An
option listed on a national exchange, CBOE or NASDAQ will be valued
at the last-quoted sales price or, if such a price is not readily
available, at the mean of the last bid and asked prices.
STOCK INDEX FUTURES CONTRACTS. Stock index futures contracts are
commodity contracts listed on commodity exchanges. They currently
include contracts on the Standard & Poor's 500 Stock Index (S&P 500
Index) and other broad stock market indexes such as the New York
Stock Exchange Composite Stock Index and the Value Line Composite
Stock Index, as well as narrower sub-indexes such as the S&P 100
Energy Stock Index and the New York Stock Exchange Utilities Stock
Index. A stock index assigns relative values to common stocks
included in the index and the index fluctuates with the value of
the common stocks so included.
A futures contract is a legal agreement between a buyer or seller
and the clearinghouse of a futures exchange in which the parties
agree to make a cash settlement on a specified future date in an
amount determined by the stock index on the last trading day of the
contract. The amount is a specified dollar amount (usually $100 or
$500) multiplied the difference between the index value on the last
trading day and the value on the day the contract was struck.
For example, the S&P 500 Index consists of 500 selected common
stocks, most of which are listed on the New York Stock Exchange.
The S&P 500 Index assigns relative weightings to the common stocks
included in the Index, and the Index fluctuates with changes in the
market values of those stocks. In the case of S&P 500 Index
futures contracts, the specified multiple is $500. Thus, if the
value of the S&P 500 Index were 150, the value of one contract
would be $75,000 (150 x $500). Unlike other futures contracts, a
stock index futures contract specifies that no delivery of the
actual stocks making up the index will take place. Instead,
settlement in cash must occur upon the termination of the contract.
For example, excluding any transaction costs, if a Portfolio enters
into one futures contract to buy the S&P 500 Index at a specified
future date at a contract value of 150 and the S&P 500 Index is at
154 on that future date, the Portfolio will gain $500 x (154-150)
<PAGE>
PAGE 94
or $2,000. If the Portfolio enters into one futures contract to
sell the S&P 500 Index at a specified future date at a contract
value of 150 and the S&P 500 Index is at 152 on that future date,
the Portfolio will lose $500 x (152-150) or $1,000.
Unlike the purchase or sale of an equity security, no price would
be paid or received by the Portfolio upon entering into stock index
futures contracts. However, the Portfolio would be required to
deposit with its custodian, in a segregated account in the name of
the futures broker, an amount of cash or U.S. Treasury bills equal
to approximately 5 percent of the contract value. This amount is
known as initial margin. The nature of initial margin in futures
transactions is different from that of margin in security
transactions in that futures contract margin does not involve
borrowing funds by the Portfolio to finance the transactions.
Rather, the initial margin is in the nature of a performance bond
or good-faith deposit on the contract that is returned to the
Portfolio upon termination of the contract, assuming all
contractual obligations have been satisfied.
Subsequent payments, called variation margin, to and from the
broker would be made on a daily basis as the price of the
underlying stock index fluctuates, making the long and short
positions in the contract more or less valuable, a process known as
marking to market. For example, when a Portfolio enters into a
contract in which it benefits from a rise in the value of an index
and the price of the underlying stock index has risen, the
Portfolio will receive from the broker a variation margin payment
equal to that increase in value. Conversely, if the price of the
underlying stock index declines, the Portfolio would be required to
make a variation margin payment to the broker equal to the decline
in value.
How These Portfolios Would Use Stock Index Futures Contracts. The
Portfolios intend to use stock index futures contracts and related
options for hedging and not for speculation. Hedging permits a
Portfolio to gain rapid exposure to or protect itself from changes
in the market. For example, a Portfolio may find itself with a
high cash position at the beginning of a market rally.
Conventional procedures of purchasing a number of individual issues
entail the lapse of time and the possibility of missing a
significant market movement. By using futures contracts, the
Portfolio can obtain immediate exposure to the market and benefit
from the beginning stages of a rally. The buying program can then
proceed and once it is completed (or as it proceeds), the contracts
can be closed. Conversely, in the early stages of a market
decline, market exposure can be promptly offset by entering into
stock index futures contracts to sell units of an index and
individual stocks can be sold over a longer period under cover of
the resulting short contract position.
A Portfolio may enter into contracts with respect to any stock
index or sub-index. To hedge the Portfolio's investment portfolio
successfully, however, the Portfolio must enter into contracts with
respect to indexes or sub-indexes whose movements will have a
significant correlation with movements in the prices of the
Portfolio's individual portfolio securities.
<PAGE>
PAGE 95
Special Risks of Transactions in Stock Index Futures Contracts.
1. Liquidity. Each Portfolio may elect to close some or all of
its contracts prior to expiration. The purpose of making such a
move would be to reduce or eliminate the hedge position held by the
Portfolio. The Portfolio may close its positions by taking
opposite positions. Final determinations of variation margin are
then made, additional cash as required is paid by or to the
Portfolio, and the Portfolio realizes a gain or a loss.
Positions in stock index futures contracts may be closed only on an
exchange or board of trade providing a secondary market for such
futures contracts. For example, futures contracts transactions can
currently be entered into with respect to the S&P 500 Stock Index
on the Chicago Mercantile Exchange, the New York Stock Exchange
Composite Stock Index on the New York Futures Exchange and the
Value Line Composite Stock Index on the Kansas City Board of Trade.
Although the Portfolios intend to enter into futures contracts only
on exchanges or boards of trade where there appears to be an active
secondary market, there is no assurance that a liquid secondary
market will exist for any particular contract at any particular
time. In such event, it may not be possible to close a futures
contract position, and in the event of adverse price movements, the
Portfolio would have to make daily cash payments of variation
margin. Such price movements, however, will be offset all or in
part by the price movements of the securities subject to the hedge.
Of course, there is no guarantee the price of the securities will
correlate with the price movements in the futures contract and thus
provide an offset to losses on a futures contract.
2. Hedging Risks. There are several risks in using stock index
futures contracts as a hedging device. One risk arises because the
prices of futures contracts may not correlate perfectly with
movements in the underlying stock index due to certain market
distortions. First, all participants in the futures market are
subject to initial margin and variation margin requirements.
Rather than making additional variation margin payments, investors
may close the contracts through offsetting transactions which could
distort the normal relationship between the index and futures
markets. Second, the margin requirements in the futures market are
lower than margin requirements in the securities market, and as a
result the futures market may attract more speculators than does
the securities market. Increased participation by speculators in
the futures market also may cause temporary price distortions.
Because of price distortion in the futures market and because of
imperfect correlation between movements in stock indexes and
movements in prices of futures contracts, even a correct forecast
of general market trends may not result in a successful hedging
transaction over a short period.
Another risk arises because of imperfect correlation between
movements in the value of the stock index futures contracts and
movements in the value of securities subject to the hedge. If this
occurred, a Portfolio could lose money on the contracts and also
experience a decline in the value of its portfolio securities.
While this could occur, IDS Life believes that over time the value
<PAGE>
PAGE 96
of the Portfolio's investment portfolio will tend to move in the
same direction as the market indexes and will attempt to reduce
this risk, to the extent possible, by entering into futures
contracts on indexes whose movements it believes will have a
significant correlation with movements in the value of the
Portfolio's investment portfolio securities sought to be hedged.
It is also possible that if the Portfolio has hedged against a
decline in the value of the stocks held in its portfolio and stock
prices increase instead, the Portfolio will lose part or all of the
benefit of the increased value of its stock which it has hedged
because it will have offsetting losses in its futures positions.
In addition, in such situations, if the Portfolio has insufficient
cash, it may have to sell securities to meet daily variation
margin requirements. Such sales of securities may be, but will not
necessarily be, at increased prices which reflect the rising
market. The Portfolio may have to sell securities at a time when
it may be disadvantageous to do so.
OPTIONS ON STOCK INDEX FUTURES CONTRACTS. Options on stock index
futures contracts are similar to options on stock except that
options on futures contracts give the purchaser the right, in
return for the premium paid, to assume a position in a stock index
futures contract (a long position if the option is a call and a
short position if the option is a put) at a specified exercise
price at any time during the period of the option. If the option
is closed instead of exercised, the holder of the option receives
an amount that represents the amount by which the market price of
the contract exceeds (in the case of a call) or is less than (in
the case of a put) the exercise price of the option on the futures
contract. If the option does not appreciate in value prior to the
exercise date, the Portfolio will suffer a loss of the premium
paid.
OPTIONS ON STOCK INDEXES. Options on stock indexes are securities
traded on national securities exchanges. An option on a stock
index is similar to an option on a futures contract except all
settlements are in cash. A Portfolio exercising a put, for
example, would receive the difference between the exercise price
and the current index level. Such options would be used in the
same manner as options on futures contracts.
SPECIAL RISKS OF TRANSACTIONS IN OPTIONS ON STOCK INDEX FUTURES
CONTRACTS AND OPTIONS ON STOCK INDEXES. As with options on stocks,
the holder of an option on a stock index futures contract or on a
stock index may terminate a position by selling an option covering
the same contract or index and having the same exercise price and
expiration date. The ability to establish and close out positions
on such options will be subject to the development and maintenance
of a liquid secondary market. The Portfolios will not purchase
options unless the market for such options has developed
sufficiently, so that the risks in connection with options are not
greater than the risks in connection with stock index futures
contracts transactions themselves. Compared to using futures
contracts, purchasing options involves less risk to the Portfolios
because the maximum amount at risk is the premium paid for the
options (plus transaction costs). There may be circumstances,
<PAGE>
PAGE 97
however, when using an option would result in a greater loss to a
Portfolio than using a futures contract, such as when there is no
movement in the level of the stock index.
TAX TREATMENT. As permitted under federal income tax laws, each
Portfolio intends to identify futures contracts as mixed straddles
and not mark them to market, that is, not treat them as having been
sold at the end of the year at market value. Such an election may
result in the Portfolio being required to defer recognizing losses
incurred by entering into futures contracts and losses on
underlying securities identified as being hedged against.
Federal income tax treatment of gains or losses from transactions
in options on futures contracts and stock indexes is currently
unclear, although the Portfolios' tax advisors currently believe
marking to market is not required. Depending on developments, a
Portfolio may seek IRS rulings clarifying questions concerning such
treatment. Certain provisions of the Code also may limit a
Portfolio's ability to engage in futures contracts and related
options transactions. For example, at the close of each quarter of
the Portfolio's taxable year, at least 50 percent of the value of
its assets must consist of cash, government securities and other
securities, subject to certain diversification requirements. Less
than 30 percent of its gross income must be derived from sales of
securities held less than three months.
The IRS has ruled publicly that an exchange-traded call option is a
security for purposes of the 50-percent-of-assets test and that its
issuer is the issuer of the underlying security, not the writer of
the option, for purposes of the diversification requirements. In
order to avoid realizing a gain within the three-month period, a
Portfolio may be required to defer closing out a contract beyond
the time when it might otherwise be advantageous to do so. The
Portfolio also may be restricted in purchasing put options for the
purpose of hedging underlying securities because of applying the
short sale holding period rules with respect to such underlying
securities.
Accounting for futures contracts will be according to generally
accepted accounting principles. Initial margin deposits will be
recognized as assets due from a broker (the Portfolio's agent in
acquiring the futures position). During the period the futures
contract is open, changes in value of the contract will be62
recognized as unrealized gains or losses by marking to market on a
daily basis to reflect the market value of the contract at the end
of each day's trading. Variation margin payments will be made or
received depending upon whether gains or losses are incurred. All
contracts and options will be valued at the last-quoted sales price
on their primary exchange.
<PAGE>
PAGE 98
APPENDIX D
OPTIONS AND INTEREST RATE FUTURES CONTRACTS, FOR INVESTMENTS OF
INCOME, MANAGED AND GOVERNMENT SECURITIES PORTFOLIOS
Income and Managed Portfolios may buy or write options traded on
any U.S. or foreign exchange or in the over-the-counter market.
Each Portfolio may enter into interest rate futures contracts
traded on any U.S. or foreign exchange. Each Portfolio also may
buy or write put and call options on these futures. Options in the
over-the-counter market will be purchased only when the investment
manager believes a liquid secondary market exists for the options
and only from dealers and institutions the investment manager
believes present a minimal credit risk. Some options are
exercisable only on a specific date. In that case, or if a liquid
secondary market does not exist, a Portfolio could be required to
buy or sell securities at disadvantageous prices, thereby incurring
losses. Managed Portfolio also may enter into stock index futures
contracts (see Appendix C).
Government Securities Portfolio may buy or write options traded on
any U.S. exchange or in the over-the-counter market. The Portfolio
may enter into interest rate futures contracts traded on any U.S.
exchange. The Portfolio also may buy or write put and call options
on these futures. Options in the over-the-counter market will be
purchased only when the investment manager believes a liquid
secondary market exists for the options and only from dealers and
institutions the investment manager believes present a minimal
credit risk. Some options are exercisable only on a specific date.
In that case, or if a liquid secondary market does not exist, the
Portfolio could be required to buy or sell securities at
disadvantageous prices, thereby incurring losses.
OPTIONS. An option is a contract. A person who buys a call option
for a security has the right to buy the security at a set price for
the length of the contract. A person who sells a call option is
called a writer. The writer of a call option agrees to sell the
security at the set price when the buyer wants to exercise the
option, no matter what the market price of the security is at that
time. A person who buys a put option has the right to sell a
security at a set price for the length of the contract. A person
who writes a put option agrees to buy the security at the set price
if the purchaser wants to exercise the option, no matter what the
market price of the security is at that time. An option is covered
if the writer owns the security (in the case of a call) or sets
aside the cash (in the case of a put) that would be required upon
exercise.
The price paid by the buyer for an option is called a premium. In
addition the buyer generally pays a broker a commission. The
writer receives a premium, less a commission, at the time the
option is written. The cash received is retained by the writer
whether or not the option is exercised. A writer of a call option
may have to sell the security for a below-market price if the
market price rises above the exercise price. A writer of a put
option may have to pay an above-market price for the security if
its market price decreases below the exercise price.<PAGE>
PAGE 99
Options can be used to produce incremental earnings, protect gains
and facilitate buying and selling securities for investment
purposes. The use of options and futures contracts may benefit a
Portfolio and its shareholders by improving the Portfolio's
liquidity and by helping to stabilize the value of its net assets.
Buying options. Put and call options may be used as a trading
technique to facilitate buying and selling securities for
investment reasons. They also may be used for investment. Options
are used as a trading technique to take advantage of any disparity
between the price of the underlying security in the securities
market and its price on the options market. It is anticipated the
trading technique will be utilized only to effect a transaction
when the price of the security plus the option price will be as
good or better than the price at which the security could be bought
or sold directly. When the option is purchased, the Portfolio pays
a premium and a commission. It then pays a second commission on
the purchase or sale of the underlying security when the option is
exercised. For record keeping and tax purposes, the price obtained
on the purchase of the underlying security will be the combination
of the exercise price, the premium and both commissions. When
using options as a trading technique, commissions on the option
will be set as if only the underlying securities were traded.
Put and call options also may be held by a Portfolio for investment
purposes. Options permit the Portfolio to experience the change in
the value of a security with a relatively small initial cash
investment. The risk the Portfolio assumes when it buys an option
is the loss of the premium. To be beneficial to the Portfolio, the
price of the underlying security must change within the time set by
the option contract. Furthermore, the change must be sufficient to
cover the premium paid, the commissions paid both in the
acquisition of the option and in a closing transaction or in the
exercise of the option and sale (in the case of a call) or purchase
(in the case of a put) of the underlying security. Even then the
price change in the underlying security does not ensure a profit
since prices in the option market may not reflect such a change.
Writing covered options. A Portfolio will write covered options
when it feels it is appropriate and will follow these guidelines:
'Underlying securities will continue to be bought or sold solely on
the basis of investment considerations consistent with the
Portfolio's goal.
'All options written by the Portfolio will be covered. For covered
call options if a decision is made to sell the security, the
Portfolio will attempt to terminate the option contract through a
closing purchase transaction.
'The Portfolio will write options only as permitted under federal
laws or regulations, such as those that limit the amount of total
assets subject to the options. Some regulations also affect the
Custodian. When a covered call option is written, the Custodian
segregates the underlying securities and issues a receipt. There
are certain rules regarding banks issuing such receipts that may
<PAGE>
PAGE 100
restrict the amount of covered call options written. Furthermore,
a Portfolio is limited to pledging not more than 15 percent of the
cost of its total assets.
Net premiums on call options closed or premiums on expired call
options are treated as short-term capital gains. Since a Portfolio
is taxed as a regulated investment company under the Code, any
gains on options and other securities held less than three months
must be limited to less than 30 percent of its annual gross income.
If a covered call option is exercised, the security is sold by the
Portfolio. The Portfolio will recognize a capital gain or loss
based upon the difference between the proceeds and the security's
basis.
Options on many securities are listed on options exchanges. If a
Portfolio writes listed options, it will follow the rules of the
options exchange. Options are valued at the close of the New York
Stock Exchange. An option listed on a national exchange, CBOE or
NASDAQ will be valued at the last quoted sales price or, if such a
price is not readily available, at the mean of the last bid and
asked prices.
FUTURES CONTRACTS. A futures contract is an agreement between two
parties to buy and sell a security for a set price on a future
date. They have been established by boards of trade which have
been designated contracts markets by the Commodity Futures Trading
Commission (CFTC). Futures contracts trade on these markets in a
manner similar to the way a stock trades on a stock exchange, and
the boards of trade, through their clearing corporations, guarantee
performance of the contracts. Currently, there are futures
contracts based on such debt securities as long-term U.S. Treasury
bonds, Treasury notes, GNMA modified pass-through mortgate-backed
securities, three-month U.S. Treasury bills and bank certificates
of deposit. While futures contracts based on debt securities do
provide for the delivery and acceptance of securities, such
deliveries and acceptances are very seldom made. Generally, the
futures contract is terminated by entering into an offsetting
transaction. An offsetting transaction for a futures contract sale
is effected by the Portfolio entering into a futures contract
purchase for the same aggregate amount of the specific type of
financial instrument and same delivery date. If the price in the
sale exceeds the price in the offsetting purchase, the Portfolio
immediately is paid the difference and realizes a gain. If the
offsetting purchase price exceeds the sale price, the Portfolio
pays the difference and realizes a loss. Similarly, closing out a
futures contract purchase is effected by the Portfolio entering
into a futures contract sale. If the offsetting sale price
exceeds the purchase price, the Portfolio realizes a gain, and if
the offsetting sale price is less than the purchase price, the
Portfolio realizes a loss. At the time a futures contract is made,
a good-faith deposit called initial margin is set up within a
segregated account at the Portfolios' custodian bank. The initial
margin deposit is approximately 1.5 percent of a contract's face
value. Daily thereafter, the futures contract is valued and the
payment of variation margin is required so that each day the
<PAGE>
PAGE 101
Portfolio would pay out cash in an amount equal to any decline in
the contract's value or receive cash equal to any increase. At the
time a futures contract is closed out, a nominal commission is
paid, which is generally lower than the commission on a comparable
transaction in the cash markets.
The purpose of a futures contract, in the case of a fund holding
long-term debt securities, is to gain the benefit of changes in
interest rates without actually buying or selling long-term debt
securities. For example, if a Portfolio owned long-term bonds and
interest rates were expected to increase, it might enter into
futures contracts to sell securities which would have much the same
effect as selling some of the long-term bonds it owned. Futures
contracts are based on types of debt securities referred to above,
which have historically reacted to an increase or decline in
interest rates in a fashion similar to the debt securities the
Portfolio owns. If interest rates did increase, the value of the
debt securities in the portfolio would decline, but the value of
the Portfolio's futures contracts would increase at approximately
the same rate, thereby keeping the net asset value of the Portfolio
from declining as much as it otherwise would have. If, on the
other hand, the Portfolio held cash reserves and interest rates
were expected to decline, the Portfolio might enter into interest
rate futures contracts for the purchase of securities. If short-
term rates were higher than long-term rates, the ability to
continue holding these cash reserves would have a very beneficial
impact on the Portfolio's earnings. Even if short-term rates were
not higher, the Portfolio would still benefit from the income
earned by holding these short-term investments. At the same time,
by entering into futures contracts for the purchase of securities,
the Portfolio could take advantage of the anticipated rise in the
value of long-term bonds without actually buying them until the
market had stabilized. At that time, the futures contracts could
be liquidated and the Portfolio's cash reserves could then be used
to buy long-term bonds on the cash market. The Portfolio could
accomplish similar results by selling bonds with long maturities
and investing in bonds with short maturities when interest rates
are expected to increase or by buying bonds with long maturities
and selling bonds with short maturities when interest rates are
expected to decline. But by using futures contracts as an
investment tool, given the greater liquidity in the futures market
than in the cash market, it might be possible to accomplish the
same result more easily and more quickly. Successful use of
futures contracts depends on the investment manager's ability to
predict the future direction of interest rates. If the investment
manager's prediction is incorrect, the Portfolio would have been
better off had it not entered into futures contracts.
OPTIONS ON FUTURES CONTRACTS. Options give the holder a right to
buy or sell futures contracts in the future. Unlike a futures
contract, which requires the parties to the contract to buy and
sell a security on a set date, an option on a futures contract
merely entitles its holder to decide on or before a future date
(within nine months of the date of issue) whether to enter into
such a contract. If the holder decides not to enter into the
contract, all that is lost is the amount (premium) paid for the
<PAGE>
PAGE 102
option. Furthermore, because the value of the option is fixed at
the point of sale, there are no daily payments of cash to reflect
the change in the value of the underlying contract.
However, since an option gives the buyer the right to enter into a
contract at a set price for a fixed period of time, its value does
change daily and that change is reflected in the net asset value of
the Portfolio.
RISKS. There are risks in engaging in each of the management tools
described above. The risk a Portfolio assumes when it buys an
option is the loss of the premium paid for the option. Purchasing
options also limits the use of monies that might otherwise be
available for long-term investments.
The risk involved in writing options on futures contracts the
Portfolio owns, or on securities held in its portfolio, is that
there could be an increase in the market value of such contracts or
securities. If that occurred, the option would be exercised and
the asset sold at a lower price than the cash market price. To
some extent, the risk of not realizing a gain could be reduced by
entering into a closing transaction. The Portfolio could enter
into a closing transaction by purchasing an option with the same
terms as the one it had previously sold. The cost to close the
option and terminate the Portfolio's obligation, however, might be
more or less than the premium received when it originally wrote the
option. Furthermore, the Portfolio might not be able to close the
option because of insufficient activity in the options market.
A risk in employing futures contracts to protect against the price
volatility of securities is that the prices of securities subject
to futures contracts may not correlate perfectly with the behavior
of the cash prices of the Portfolio's securities. The correlation
may be distorted because the futures market is dominated by short-
term traders seeking to profit from the difference between a
contract or security price and their cost of borrowed funds. Such
distortions are generally minor and would diminish as the contract
approached maturity.
Another risk is that the Portfolio's investment manager could be
incorrect in anticipating as to the direction or extent of various
interest rate movements or the time span within which the movements
take place. For example, if the Portfolio sold futures contracts
for the sale of securities in anticipation of an increase in
interest rates, and interest rates declined instead, the Portfolio
would lose money on the sale.
TAX TREATMENT. As permitted under federal income tax laws, each
Portfolio intends to identify futures contracts as mixed straddles
and not mark them to market, that is, not treat them as having been
sold at the end of the year at market value. Such an election may
result in the Portfolio being required to defer recognizing losses
incurred by entering into futures contracts and losses on
underlying securities identified as being hedged against.
<PAGE>
PAGE 103
Federal income tax treatment of gains or losses from transactions
in options on futures contracts and indexes currently is unclear,
although the Portfolios' tax advisors currently believe marking to
market is not required. Depending on developments, a Portfolio may
seek IRS rulings clarifying questions concerning such treatment.
Certain provisions of the Code also may limit a Portfolio's ability
to engage in futures contracts and related options transactions.
For example, at the close of each quarter of the Portfolio's
taxable year, at least 50 percent of the value of its assets must
consist of cash, government securities and other securities,
subject to certain diversification requirements. Less than 30
percent of its gross income must be derived from sales of
securities held less than three months.
The IRS has ruled publicly that an exchange-traded call option is a
security for purposes of the 50-percent-of-assets test and that its
issuer is the issuer of the underlying security, not the writer of
the option, for purposes of the diversification requirements. In
order to avoid realizing a gain within the three-month period, the
Portfolio may be required to defer closing out a contract beyond
the time when it might otherwise be advantageous to do so. The
Portfolio also may be restricted in purchasing put options for the
purpose of hedging underlying securities because of applying the
short sale holding period rules with respect to such underlying
securities.
Accounting for futures contracts will be according to generally
accepted accounting principles. Initial margin deposits will be
recognized as assets due from a broker (the Portfolio's agent in
acquiring the futures position). During the period the futures
contract is open, changes in value of the contract will be
recognized as unrealized gains or losses by marking to market on a
daily basis to reflect the market value of the contract at the end
of each day's trading. Variation margin payments will be made or
received depending upon whether gains or losses are incurred. All
contracts and options will be valued at the last-quoted sales price
on their primary exchange.
<PAGE>
PAGE 104
APPENDIX E
MORTGAGE-BACKED SECURITIES AND ADDITIONAL INFORMATION ON INVESTMENT
POLICIES (FOR ALL PORTFOLIOS EXCEPT MONEY MARKET)
GNMA Certificates
The Government National Mortgage Association (GNMA) is a wholly
owned corporate instrumentality of the United States within the
Department of Housing and Urban Development. GNMA certificates are
mortgage-backed securities of the modified pass-through type, which
means that both interest and principal payments (including
prepayments) are passed through monthly to the holder of the
certificate. Each certificate evidences an interest in a specific
pool of mortgage loans insured by the Federal Housing
Administration or the Farmers Home Administration or guaranteed by
the Veterans Administration. The National Housing Act provides
that the full faith and credit of the United States is pledged to
the timely payment of principal and interest by GNMA of amounts due
on these certificates. GNMA is empowered to borrow without
limitation from the U.S. Treasury, if necessary, to make such
payments.
Underlying Mortgages of the Pool. Pools consist of whole mortgage
loans or participations in loans. The majority of these loans are
made to purchasers of 1-4 member family homes. The terms and
characteristics of the mortgage instruments generally are uniform
within a pool but may vary among pools. For example, in addition
to fixed-rate fixed-term mortgages, the Portfolio may purchase
pools of variable rate mortgages, growing equity mortgages,
graduated payment mortgages and other types.
All servicers apply standards for qualification to local lending
institutions which originate mortgages for the pools. Servicers
also establish credit standards and underwriting criteria for
individual mortgages included in the pools. In addition, many
mortgages included in pools are insured through private mortgage
insurance companies.
Average Life of GNMA Certificates. The average life of GNMA
certificates varies with the maturities of the underlying mortgage
instruments which have maximum maturities of 30 years. The average
life is likely to be substantially less than the original maturity
of the mortgage pools underlying the securities as the result of
prepayments or refinancing of such mortgages. Such prepayments are
passed through to the registered holder with the regular monthly
payments of principal and interest.
As prepayment rates vary widely, it is not possible to accurately
predict the average life of a particular pool. It is customary in
the mortgage industry in quoting yields on a pool of 30-year
mortgages to compute the yield as if the pool were a single loan
that is amortized according to a 30-year schedule and that is
prepaid in full at the end of the 12th year. For this reason, it
is standard practice to treat GNMA certificates as 30-year
mortgage-backed securities which prepay fully in the 12th year.
<PAGE>
PAGE 105
Calculation of Yields. Yields on pass-through securities are
typically quoted based on the maturity of the underlying
instruments and the associated average life assumption.
Actual pre-payment experience may cause the yield to differ from
the assumed average life yield. When mortgage rates drop, pre-
payments will increase, thus reducing the yield. Reinvestment of
pre-payments may occur at higher or lower interest rates than the
original investment, thus affecting the yield of a Portfolio. The
compounding effect from reinvestments of monthly payments received
by the Portfolio will increase the yield to shareholders compared
to bonds that pay interest semi-annually. The yield also may be
affected if the certificate was issued at a premium or discount,
rather than at par. This also applies after issuance to
certificates trading in the secondary market at a premium or
discount.
"When-Issued" GNMA Certificates. Some U.S. government securities
may be purchased on a "when-issued" basis, which means that it may
take as long as 45 days after the purchase before the securities
are delivered to the Portfolio. Payment and interest terms,
however, are fixed at the time the purchaser enters into the
commitment. However, the yield on a comparable GNMA certificate
when the transaction is consummated may vary from the yield on the
GNMA certificate at the time that the when-issued transaction was
made. A Portfolio does not pay for the securities or start earning
interest on them until the contractual settlement date. When-
issued securities are subject to market fluctuations and they may
affect the Portfolio's gross assets the same as owned securities.
Market for GNMA Certificates. Since the inception of the GNMA
mortgage-backed securities program in 1970, the amount of GNMA
certificates outstanding has grown rapidly. The size of the market
and the active participation in the secondary market by securities
dealers and many types of investors make the GNMA certificates a
highly liquid instrument. Prices of GNMA certificates are readily
available from securities dealers and depend on, among other
things, the level of market interest rates, the certificate's
coupon rate and the prepayment experience of the pool of mortgages
underlying each certificate.
Stripped mortgage-backed securities. Generally, there are two
classes of stripped mortgage-backed securities: Interest Only (IO)
and Principal Only (PO). IOs entitle the holder to receive
distributions consisting of all or a portion of the interest on the
underlying pool of mortgage loans or mortgage-backed securities.
POs entitle the holder to receive distributions consisting of all
or a portion of the principal of the underlying pool of mortgage
loans or mortgage-backed securities. The cash flows and yields on
IOs and POs are extremely sensitive to the rate of principal
payments (including prepayments) on the underlying mortgage loans
or mortgage-backed securities. A rapid rate of principal payments
may adversely affect the yield to maturity of IOs. A slow rate of
principal payments may adversely affect the yield to maturity of
POs. If prepayments of principal are greater than anticipated, an
investor may incur substantial losses. If prepayments of principal
<PAGE>
PAGE 106
are slower than anticipated, the yield on a PO will be affected
more severely than would be the case with a traditional mortgage-
backed security.
Income, Managed and Government Securities Portfolios may invest in
securities called "inverse floaters". Inverse floaters are created
by underwriters using the interest payments on securities. A
portion of the interest received is paid to holders of instruments
based on current interest rates for short-term securities. What is
left over, less a servicing fee, is paid to holders of the inverse
floaters. As interest rates go down, the holders of the inverse
floaters receive more income and an increase in the price for the
inverse floaters. As interest rates go up, the holders of the
inverse floaters receive less income and a decrease in the price
for the inverse floaters.
Income, Managed and Government Securities Portfolios may purchase
some securities in advance of when they are issued. Price and rate
of interest are set on the date the commitments are given but no
payment is made or interest earned until the date the securities
are issued, usually within two months, but other terms may be
negotiated. The commitment requires the portfolio to buy the
security when it is issued so the commitment is valued daily the
same way as owning a security would be valued. The Portfolio's
custodian will maintain, in a segregated account, cash or liquid
high-grade debt securities that are marked to market daily and are
at least equal in value to the Portfolio's commitments to purchase
the securities. The Portfolio may sell the commitment just like it
can sell a security. Frequently, the Portfolio has the opportunity
to sell the commitment back to the institution that plans to issue
the security and at the same time enter into a new commitment to
purchase a when-issued security in the future. For rolling its
commitment forward, the Portfolio realizes a gain or loss on the
sale of the current commitment or receives a fee for entering into
the new commitment.
Income, Managed and Government Securities Portfolios may purchase
mortgage-backed security (MBS) put spread options and write covered
MBS call spread options. MBS spread options are based upon the
changes in the price spread between a specified mortgage-backed
security and a like-duration Treasury security. MBS spread options
are traded in the OTC market and are of short duration, typically
one to two months. The Portfolio would buy or sell covered MBS
call spread options in situations where mortgage-backed securities
are expected to under perform like-duration Treasury securities.
<PAGE>
PAGE 107
APPENDIX F
DOLLAR-COST AVERAGING
A technique that works well for many investors is one that
eliminates random buy and sell decisions. One such system is
dollar-cost averaging. Dollar-cost averaging involves building a
portfolio through the investment of fixed amounts of money on a
regular basis regardless of the price or market condition. This
may enable an investor to smooth out the effects of the volatility
of the financial markets. By using this strategy, more units will
be purchased when the price is low and less when the price is high.
As the accompanying chart illustrates, dollar-cost averaging tends
to keep the average price paid for the units lower than the average
market price of units purchased, although there is no guarantee.
While this does not ensure a profit and does not protect against a
loss if the market declines, it is an effective way for many policy
owners who can continue investing through changing market
conditions to accumulate units to meet long term goals.
Dollar-cost averaging
Regular Market Price Units
Investment of a Unit Acquired
$100 $ 6.00 16.7
100 4.00 25.0
100 4.00 25.0
100 6.00 16.7
100 5.00 20.0
$500 $25.00 103.4
Average market price of a unit over 5 periods:
$5.00 ($25.00 divided by 5).
The average price you paid for each unit:
$4.84 ($500 divided by 103.4).
<PAGE>
PAGE 108
APPENDIX G
Description of corporate bond ratings
Bond ratings concern the quality of the issuing corporation. They
are not an opinion of the market value of the security. Such
ratings are opinions on whether the principal and interest will be
repaid when due. A security's rating may change which could affect
its price. Ratings by Moody's Investors Service, Inc. are Aaa, Aa,
A, Baa, Ba, B, Caa, Ca, C and D. Ratings by Standard & Poor's
Corporation are AAA, AA, A, BBB, BB, B, CCC, CC, C and D.
Aaa/AAA - Judged to be of the best quality and carry the smallest
degree of investment risk. Interest and principal are secure.
Aa/AA - Judged to be high-grade although margins of protection for
interest and principal may not be quite as good as Aaa or AAA rated
securities.
A - Considered upper-medium grade. Protection for interest and
principal is deemed adequate but may be susceptible to future
impairment.
Baa/BBB - Considered medium-grade obligations. Protection for
interest and principal is adequate over the short-term; however,
these obligations may have certain speculative characteristics.
Ba/BB - Considered to have speculative elements. The protection of
interest and principal payments may be very moderate.
B - Lack characteristics of the desirable investments. There may
be small assurance over any long period of time of the payment of
interest and principal.
Caa/CCC - Are of poor standing. Such issues may be in default or
there may be risk with respect to principal or interest.
Ca/CC - Represent obligations that are highly speculative. Such
issues are often in default or have other marked shortcomings.
C - Are obligations with a higher degree of speculation. These
securities have major risk exposures to default.
D - Are in payment default. The D rating is used when interest
payments or principal payments are not made on the due date.
Definitions of Zero-Coupon and Pay-In-Kind Securities
A zero-coupon security is a security that is sold at a deep
discount from its face value and makes no periodic interest
payments. The buyer of such a security receives a rate of return
by gradual appreciation of the security, which is redeemed at face
value on the maturity date.
<PAGE>
PAGE 109
A pay-in-kind security is a security in which the issuer has the
option to make interest payments in cash or in additional
securities. The securities issued as interest usually have the
same terms, including maturity date, as the pay-in-kind securities.
Non-rated securities will be considered for investment when they
possess a risk comparable to that of rated securities consistent
with the Fund's objectives and policies. When assessing the risk
involved in each non-rated security, the Fund will consider the
financial condition of the issuer or the protection afforded by the
terms of the security.
<PAGE>
PAGE 110
STATEMENT OF ADDITIONAL INFORMATION
for
IDS LIFE SERIES FUND, INC.
Equity Portfolio
Government Securities Portfolio
Income Portfolio
International Equity Portfolio
Managed Portfolio
Money Market Portfolio
April 28, 1995
This Statement of Additional Information is not a prospectus. It
should be read together with the Fund's prospectus which may be
obtained from your American Express financial advisor, or by
writing or calling IDS Life Series Fund, Inc. at the address or
telephone number below.
The date of this Statement of Additional Information is April 28,
1995, and is to be used with the Fund's Prospectus dated April 28,
1995, the Fund's Annual Report for the fiscal year ended April 30,
1994, and the Semiannual Report for the period ended Oct. 31, 1994.
IDS Life Series Fund, Inc.
IDS Tower 10
Minneapolis, MN 55440-0010
(612) 671-3733
TTY: 800-285-8846
New York Service:
(518) 869-8613
<PAGE>
PAGE 111
TABLE OF CONTENTS
Goals and Investment Policies........................See Prospectus
Additional Investment Policies................................p. 4
Portfolio Transactions........................................p. 23
Brokerage Commissions Paid to
Brokers Affiliated with IDS Life..............................p. 25
Calculation of Total Return...................................p. 26
Calculation of Yield..........................................p. 27
Valuing Each Portfolio's Shares...............................p. 28
Investing in the Fund.........................................p. 31
Redeeming Shares..............................................p. 31
Capital Gains and Losses......................................p. 32
Investment Management and Other Services......................p. 32
Management of the Fund........................................p. 33
Custodian.....................................................p. 35
Independent Auditors..........................................p. 36
Financial Statements..............................See Annual Report
Appendix A: Foreign Currency Transactions, for
Investments of Equity, Income, Managed
and International Equity Portfolios..............p. 37
Appendix B: Description of Money Market Securities, for
Investments of all Portfolios except
Government Securities............................p. 42
Appendix C: Options and Stock Index Futures Contracts,
for Investments of Equity, Managed and
International Equity Portfolios..................p. 44
Appendix D: Options and Interest Rate Futures Contracts,
for Investments of Income, Managed and
Government Securities Portfolios.................p. 52
Appendix E: Mortgage-Backed Securities and Additional
Information on Investment Policies for all
Portfolios except Money Market...................p. 58
<PAGE>
PAGE 112
Appendix F: Dollar-Cost Averaging............................p. 61
Appendix G: Description of Corporate Bond Ratings............p. 62
<PAGE>
PAGE 113
ADDITIONAL INVESTMENT POLICIES
In addition to the investment goals and policies presented in the
prospectus, each Portfolio has the investment policies stated
below.
Unless the holders of a majority of the outstanding shares (as
defined in the section entitled "Voting rights" of the prospectus)
of Equity Portfolio agree to a change, Equity Portfolio will not:
Underwrite securities of other issuers. However, this shall not
preclude the purchase of securities for investment, on original
issue or otherwise, and shall not preclude the acquisition of
portfolio securities under circumstances where the portfolio would
not be free to sell them without being deemed an underwriter for
purposes of the Securities Act of 1933 (1933 Act) and without
registration of such securities or the filing of a notification
under that Act, or the taking of similar action under other
securities laws relating to the sale of securities.
Buy securities of an issuer if the officers and directors of the
Portfolio and of American Express Financial Corporation hold more
than a certain percent of the issuer's outstanding securities. The
holdings of all officers and directors of the Portfolio who own
more than 0.5% of an issuer's securities are added together and if
in total they own more than 5%, the Portfolio will not purchase
securities of that issuer.
Buy or sell real estate, unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent
the portfolio from investing in securities or other instruments
backed by real estate or securities of companies engaged in the
real estate business.
Buy or sell physical commodities unless acquired as a result of
ownership of securities or other instruments, except this shall not
prevent the portfolio from buying or selling options and futures
contracts or from investing in securities or other instruments
backed by, or whose value is derived from, physical commodities.
Make cash loans if the total commitment amount exceeds 5% of the
portfolio's total assets.
Lend portfolio securities in excess of 30% of its net assets, at
market value. The current policy of the board of directors is to
make these loans, either long- or short-term, to broker-dealers.
In making such loans the portfolio gets the market price in cash,
U.S. government securities, letters of credit or such other
collateral as may be permitted by regulatory agencies and approved
by the board of directors. If the market price of the loaned
securities goes up, the portfolio will get additional collateral on
a daily basis. The risks are that the borrower may not provide
additional collateral when required or return the securities when
due. A loan will not be made unless the opportunity for additional
<PAGE>
PAGE 114
income outweighs the risks. During the existence of the loan, the
portfolio receives cash payments equivalent to all interest or
other distributions paid on the loaned securities.
Invest more than 5% of its total assets, at market value, in
securities of any one company, government or political subdivision
thereof, except the limitation will not apply to investments in
securities issued by the U.S. government, its agencies or
instrumentalities. Up to 25% of the portfolio's total assets may
be invested without regard to this 5% limitation.
Borrow money or property except as a temporary measure for
extraordinary or emergency purposes, and in an amount not exceeding
one-third of the market value of its total assets (including
borrowings) less liabilities (other than borrowings) immediately
after the borrowing. The portfolio will not purchase additional
portfolio securities at any time borrowing for temporary purposes
exceeds 5%. The portfolio has not borrowed in the past and has no
present intention to borrow.
Concentrate its investments in any particular industry, but
reserves freedom of action to do so provided that not more than 25%
of its assets, taken at cost, may be so invested at any one time.
Purchase securities of any issuer if immediately after and as a
result of such purchase the Portfolio would own more than 10% of
the outstanding voting securities of such issuer.
Unless changed by the board of directors, the following policies
apply to Equity Portfolio:
The portfolio will not invest in companies for the purpose of, or
with the effect of, acquiring control.
The portfolio will not buy on margin or sell short.
The portfolio will not invest in securities of any investment
company except in the open market where no commission or profit to
a sponsor or dealer results from such purchase other than customary
broker's commission. The portfolio does not intend to invest in
such securities but may do so to the extent of not more than 5% of
its total assets (taken at market or other current value). The
portfolio may acquire limited amounts of securities of one or more
investment companies as permitted by the Investment Company Act of
1940 (1940 Act), in connection with the acquisition of or merger
with such companies. Except for these instances, the portfolio
will not purchase securities of investment companies.
The portfolio may make contracts to purchase securities for a fixed
price at a future date beyond normal settlement time (when issued
securities or forward commitments). A portfolio does not pay for
the securities or receive dividends or interest on them until the
contractual settlement date. The portfolio's custodian will
maintain, in a segregated account, cash or liquid high-grade debt
securities that are marked to market daily and are at least equal
in value to the portfolio's commitments to purchase the securities.
<PAGE>
PAGE 115
When-issued securities or forward commitments are subject to market
fluctuations and they may affect the portfolio's total assets the
same as owned securities.
The portfolio may maintain a portion of its assets in cash and
cash-equivalent investments. The cash-equivalent investments the
Portfolio may use are short-term U.S. and Canadian government
securities and negotiable certificates of deposit, non-negotiable
fixed-time deposits, bankers' acceptances and letters of credit of
banks or savings and loan associations having capital, surplus and
undivided profits (as of the date of its most recently published
annual financial statements) in excess of $100 million (or the
equivalent in the instance of a foreign branch of a U.S. bank) at
the date of investment. Any cash-equivalent investments in foreign
securities will be subject to the limitations on foreign
investments described in the prospectus. The portfolio also may
purchase short-term corporate notes and obligations rated in the
top two classifications by Moody's Investors Service, Inc. or
Standard & Poor's Corporation or the equivalent and may use
repurchase agreements with broker-dealers registered under the
Securities Exchange Act of 1934 and with commercial banks. A risk
of a repurchase agreement is that if the seller seeks the
protection of the bankruptcy laws, the portfolio's ability to
liquidate the security involved could be impaired.
The portfolio does not intend to invest more than 2% of its net
assets in warrants that are not listed on a national securities
exchange. In no event will the investment in warrants exceed 5% of
the portfolio's net assets. A warrant is a right to buy a certain
security at a set price for a certain period of time and is freely
traded in the market.
The portfolio may invest in Rule 144A securities, which are
unregistered securities offered to qualified institutional buyers,
and interest-only and principal-only fixed mortgage-backed
securities (IOs and POs) issued by the United States government or
its agencies and instrumentalities. In determining the liquidity
of Rule 144A securities, IOs and POs, the investment manager, under
guidelines established by the board of directors, will consider any
relevant factors including the frequency of trades, the number of
dealers willing to purchase or sell the security and the nature of
marketplace trades.
The portfolio may invest in commercial paper issued in transactions
not involving a public offering under Section 4(2) of the
Securities Act of 1933 (4(2) paper). In determining the liquidity
of 4(2) paper, the investment manager, under guidelines established
by the board of directors, will evaluate relevant factors such as
the issuer and the size and nature of its commercial paper
programs, the willingness and ability of the issuer or dealer to
repurchase the paper, and the nature of the clearance and
settlement procedures for the paper.
<PAGE>
PAGE 116
The portfolio will not invest in securities which are not readily
marketable (including restricted securities and repurchase
agreements over 7 days) without registration or the filing of a
notification under the 1933 Act, or the taking of similar action
under other securities laws relating to the sale of securities, if
immediately after the making of any such investment more than 10%
of the portfolio's net assets (taken at market or other current
value) are invested in such securities.
The portfolio will not invest in interests in oil, gas and other
mineral exploration or development programs.
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.
Unless the holders of a majority of the outstanding shares (as
defined in the section entitled "Voting rights" of the prospectus)
of Government Securities Portfolio agree to a change, Government
Securities Portfolio will not:
Act as an underwriter (sell securities for others). However, under
the securities laws, the portfolio may be deemed to be an
underwriter when it purchases securities directly from the issuer
and later resells them.
Buy securities of an issuer if the officers and directors of the
portfolio and of American Express Financial Corporation hold more
than a certain percent of the issuer's outstanding securities. The
holdings of all officers and directors of the portfolio and of
American Express Financial Corporation who own more than 0.5% of an
issuer's securities are added together and if in total they own
more than 5%, the portfolio will not purchase securities of that
issuer.
Buy or sell real estate, unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent
the portfolio from investing in securities or other instruments
backed by real estate or securities of companies engaged in the
real estate business.
Buy or sell physical commodities unless acquired as a result of
ownership of securities or other instruments, except this shall not
prevent the portfolio from buying or selling options and futures
contracts or from investing in securities or other instruments
backed by, or whose value is derived from, physical commodities.
Make cash loans if the total commitment amount exceeds 5% of the
portfolio's total assets.
Lend portfolio securities in excess of 30% of its net assets, at
market value. The current policy of the board of directors is to
make these loans, either long- or short-term, to broker-dealers.
<PAGE>
PAGE 117
In making such loans the portfolio gets the market price in cash,
U.S. government securities, letters of credit or such other
collateral as may be permitted by regulatory agencies and approved
by the board of directors. If the market price of the loaned
securities goes up, the portfolio will get additional collateral on
a daily basis. The risks are that the borrower may not provide
additional collateral when required or return the securities when
due. A loan will not be made unless the opportunity for additional
income outweighs the risks. During the existence of the loan, the
portfolio receives cash payments equivalent to all interest or
other distributions paid on the loaned securities.
Invest more than 5% of its total assets, at market value, in
securities of any one company, government or political subdivision
thereof, except the limitation will not apply to investments in
securities issued by the U.S. government, its agencies or
instrumentalities. Up to 25% of the portfolio's total assets may
be invested without regard to this 5% limitation.
Borrow money or property except as a temporary measure for
extraordinary or emergency purposes, and in an amount not exceeding
one-third of the market value of its total assets (including
borrowings) less liabilities (other than borrowings) immediately
after the borrowing. The portfolio will not purchase additional
portfolio securities at any time borrowing for temporary purposes
exceeds 5%. The portfolio has not borrowed in the past and has no
present intention to borrow.
Make a loan of any part of its assets to American Express Financial
Corporation, to the officers and directors of American Express
Financial Corporation or to its own officers and directors.
Buy any property or security (other than securities issued by the
portfolio) from any officer or director of American Express
Financial Corporation or the Fund, nor will the portfolio sell any
property or security to them.
Issue senior securities, except that this restriction shall not be
deemed to prohibit the portfolio from borrowing money from banks,
lending its securities, or entering into repurchase agreements or
options or futures contracts.
Unless changed by the board of directors, the following policies
will apply to Government Securitites Portfolio:
The portfolio will not invest in illiquid securities if,
immediately after making such an investment, more than 10% of the
portfolio's net assets, at market, would be invested in such
securities.
The portfolio will not invest for the purpose of exercising control
or management.
The portfolio will not buy on margin or sell short, except that it
may enter into interest rate futures contracts.
<PAGE>
PAGE 118
The portfolio will not invest in securities of investment companies
except by purchase in the open market where the dealer's or
sponsor's profit is just the regular commission.
The portfolio may make contracts to purchase securities for a fixed
price at a future date beyond normal settlement time (when issued
securities or forward commitments). A portfolio does not pay for
the securities or receive dividends or interest on them until the
contractual settlement date. The portfolio's custodian will
maintain, in a segregated account, cash or liquid high-grade debt
securities that are marked to market daily and are at least equal
in value to the portfolio's commitments to purchase the securities.
When-issued securities or forward commitments are subject to market
fluctuations and they may affect the portfolio's total assets the
same as owned securities.
The portfolio may maintain a portion of its assets in cash and
cash-equivalent investments. The cash-equivalent investments the
portfolio may use are short-term U.S. and Canadian government
securities and negotiable certificates of deposit, non-negotiable
fixed-time deposits, bankers' acceptances and letters of credit of
banks or savings and loan associations having capital, surplus and
undivided profits (as of the date of its most recently published
annual financial statements) in excess of $100 million (or the
equivalent in the instance of a foreign branch of a U.S. bank) at
the date of investment. Any cash-equivalent investments in foreign
securities will be subject to the limitations on foreign
investments described in the prospectus. The portfolio also may
purchase short-term corporate notes and obligations rated in the
top two classifications by Moody's Investors Service, Inc. or
Standard & Poor's Corporation or the equivalent and may use
repurchase agreements with broker-dealers registered under the
Securities Exchange Act of 1934 and with commercial banks. A risk
of a repurchase agreement is that if the seller seeks the
protection of the bankruptcy laws, the portfolio's ability to
liquidate the security involved could be impaired.
The portfolio may invest in repurchase agreements. Repurchase
agreements involve investment in debt securities whereby the seller
agrees to repurchase the securities at cost plus an agreed to
interest rate within a specified time. A risk of a repurchase
agreement is that if the party with whom this portfolio has entered
into such an agreement seeks the protection of bankruptcy laws, the
portfolio's ability to liquidate the security involved could be
temporarily impaired, and it subsequently may incur a loss if the
value of the security declines, or if the other party defaults on
its obligation. There also is the risk that the portfolio may be
delayed or prevented from exercising its rights to dispose of the
collateral securities.
The portfolio may invest in Rule 144A securities, which are
unregistered securities offered to qualified institutional buyers,
and interest-only and principal-only fixed mortgage-backed
securities (IOs and POs) issued by the United States government or
its agencies and instrumentalities. In determining the liquidity
<PAGE>
PAGE 119
of Rule 144A securities, IOs and POs, the investment manager, under
guidelines established by the board of directors, will consider any
relevant factors including the frequency of trades, the number of
dealers willing to purchase or sell the security and the nature of
marketplace trades.
The portfolio may invest in commercial paper issued in transactions
not involving a public offering under Section 4(2) of the
Securities Act of 1933 (4(2) paper). In determining the liquidity
of 4(2) paper, the investment manager, under guidelines established
by the board of directors, will evaluate relevant factors such as
the issuer and the size and nature of its commercial paper
programs, the willingness and ability of the issuer or dealer to
repurchase the paper, and the nature of the clearance and
settlement procedures for the paper.
The portfolio will not pledge or mortgage its assets beyond 15% of
the cost of its gross assets. For purposes of this restriction,
collateral arrangements with respect to margin for interest rate
futures contracts are not deemed to be a pledge of assets.
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 same
purpose of having those assets managed as part of a combined pool.
Unless the holders of a majority of the outstanding shares (as
defined in the section entitled "Voting rights" of the prospectus)
of Income Portfolio agree to a change, Income Portfolio will not:
Underwrite securities of other issuers. However, this shall not
preclude the purchase of securities for investment, on original
issue or otherwise, and shall not preclude the acquisition of
portfolio securities under circumstances where the portfolio would
not be free to sell them without being deemed an underwriter for
purposes of the Securities Act of 1933 (1933 Act) and without
registration of such securities or the filing of a notification
under that Act, or the taking of similar action under other
securities laws relating to the sale of securities.
Buy securities of an issuer if the officers and directors of the
Portfolio and of American Express Financial Corporation hold more
than a certain percent of the issuer's outstanding securities. The
holdings of all officers and directors of the Portfolio who own
more than 0.5% of an issuer's securities are added together and if
in total they own more than 5%, the Portfolio will not purchase
securities of that issuer.
Buy or sell real estate, unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent
the portfolio from investing in securities or other instruments
backed by real estate or securities of companies engaged in the
real estate business.
<PAGE>
PAGE 120
Buy or sell physical commodities unless acquired as a result of
ownership of securities or other instruments, except this shall not
prevent the portfolio from buying or selling options and futures
contracts or from investing in securities or other instruments
backed by, or whose value is derived from, physical commodities.
Make cash loans if the total commitment amount exceeds 5% of the
portfolio's total assets.
Lend portfolio securities in excess of 30% of its net assets, at
market value. The current policy of the board of directors is to
make these loans, either long- or short-term, to broker-dealers.
In making such loans the portfolio gets the market price in cash,
U.S. government securities, letters of credit or such other
collateral as may be permitted by regulatory agencies and approved
by the board of directors. If the market price of theloaned
securities goes up, the portfolio will get additional collateral on
a daily basis. The risks are that the borrower may not provide
additional collateral when required or return the securities when
due. A loan will not be made unless the opportunity for additional
income outweighs the risks. During the existence of the loan, the
portfolio receives cash payments equivalent to all interest or
other distributions paid on the loaned securities.
Invest more than 5% of its total assets, at market value, in
securities of any one company, government or political subdivision
thereof, except the limitation will not apply to investments in
securities issued by the U.S. government, its agencies or
instrumentalities. Up to 25% of the portfolio's total assets may
be invested without regard to this 5% limitation.
Borrow money or property except as a temporary measure for
extraordinary or emergency purposes, and in an amount not exceeding
one-third of the market value of its total assets (including
borrowings) less liabilities (other than borrowings) immediately
after the borrowing. The portfolio will not purchase additional
portfolio securities at any time borrowing for temporary purposes
exceeds 5%. The portfolio has not borrowed in the past and has no
present intention to borrow.
Concentrate its investments in any particular industry, but
reserves freedom of action to do so provided that not more than 25%
of its assets, taken at cost, may be so invested at any one time.
Purchase securities of any issuer if immediately after and as a
result of such purchase the portfolio would own more than 10% of
the outstanding voting securities of such issuer.
Unless changed by the board of directors, the following policies
apply to Income Portfolio:
The portfolio will not invest in companies for the purpose of, or
with the effect of, acquiring control.
The portfolio will not buy on margin or sell short.
<PAGE>
PAGE 121
The portfolio will not invest in securities of any investment
company except in the open market where no commission or profit to
a sponsor or dealer results from such purchase other than customary
broker's commission. The portfolio does not intend to invest in
such securities but may do so to the extent of not more than 5% of
its total assets (taken at market or other current value). The
portfolio may acquire limited amounts of securities of one or more
investment companies as permitted by the Investment Company Act of
1940 (1940 Act), in connection with the acquisition of or merger
with such companies. Except for these instances, the portfolio
will not purchase securities of investment companies.
The portfolio may make contracts to purchase securities for a fixed
price at a future date beyond normal settlement time (when issued
securities or forward commitments). A portfolio does not pay for
the securities or receive dividends or interest on them until the
contractual settlement date. The portfolio's custodian will
maintain, in a segregated account, cash or liquid high-grade debt
securities that are marked to market daily and are at least equal
in value to the portfolio's commitments to purchase the securities.
When-issued securities or forward commitments are subject to market
fluctuations and they may affect the portfolio's total assets the
same as owned securities.
The portfolio may maintain a portion of its assets in cash and
cash-equivalent investments. The cash-equivalent investments the
portfolio may use are short-term U.S. and Canadian government
securities and negotiable certificates of deposit, non-negotiable
fixed-time deposits, bankers' acceptances and letters of credit of
banks or savings and loan associations having capital, surplus and
undivided profits (as of the date of its most recently published
annual financial statements) in excess of $100 million (or the
equivalent in the instance of a foreign branch of a U.S. bank) at
the date of investment. Any cash-equivalent investments in foreign
securities will be subject to the limitations on foreign
investments described in the prospectus. The portfolio also may
purchase short-term corporate notes and obligations rated in the
top two classifications by Moody's Investors Service, Inc. or
Standard & Poor's Corporation or the equivalent and may use
repurchase agreements with broker-dealers registered under the
Securities Exchange Act of 1934 and with commercial banks. A risk
of a repurchase agreement is that if the seller seeks the
protection of the bankruptcy laws, the portfolio's ability to
liquidate the security involved could be impaired.
The portfolio may invest in Rue 144A securities, which are
unregistered securities offered to qualified institutional buyers,
and interest-only and principal-only fixed mortgage-backed
securities (IOs and POs) issued by the United States government or
its agencies and instrumentalities. In determining the liquidity
of Rule 144A securities, IOs and POs, the investment manager, under
guidelines established by the board of directors, will consider any
relevant factors including the frequency of trades, the number of
dealers willing to purchase or sell the security and the nature of
marketplace trades.
<PAGE>
PAGE 122
The portfolio may invest in commercial paper issued in transactions
not involving a public offering under Section 4(2) of the
Securities Act of 1933 (4(2) paper). In determining the liquidity
of 4(2) paper, the investment manager, under guidelines established
by the board of directors, will evaluate relevant factors such as
the issuer and the size and nature of its commercial paper
programs, the willingness and ability of the issuer or dealer to
repurchase the paper, and the nature of the clearance and
settlement procedures for the paper.
The portfolio will not invest in securities which are not readily
marketable (including restricted securities and repurchase
agreements over 7 days) without registration or the filing of a
notification under the 1933 Act, or the taking of similar action
under other securities laws relating to the sale of securities, if
immediately after the making of any such investment more than 10%
of the portfolio's net assets (taken at market or other current
value) are invested in such securities.
The portfolio will not invest in interests in oil, gas and other
mineral exploration or development programs.
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.
Unless the holders of a majority of the outstanding shares (as
defined in the section entitled "Voting rights" of the prospectus)
of International Equity Portfolio agree to a change, International
Equity Portfolio will not:
Act as an underwriter (sell securities for others). However, under
the securities laws, the portfolio may be deemed to be an
underwriter when it purchases securities directly from the issuer
and later resells them. It may be considered an underwriter under
securities laws when its sells restricted securities.
Purchase securities of an issuer if the directors and officers of
the portfolio, American Express Financial Corporation and IDS Life
Insurance Company (IDS Life) hold more than a certain percentage of
the issuer's outstanding securities. The holdings of all officers
and directors of the portfolio, American Express Financial
Corporation and IDS Life who own more than 0.5% of an issuer's
securities are added together, and if in total they own more than
5%, the portfolio will not purchase securities of that issuer.
Buy or sell real estate, unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent
the portfolio from investing in securities or other instruments
backed by real estate or securities of companies engaged in the
real estate business.
<PAGE>
PAGE 123
Buy or sell physical commodities unless acquired as a result of
ownership of securities or other instruments, except this shall not
prevent the portfolio from buying or selling options and futures
contracts or from investing in securities or other instruments
backed by, or whose value is derived from, physical commodities.
Make cash loans if the total commitment amount exceeds 5% of the
portfolio's total assets.
Lend portfolio securities in excess of 30% of its net assets, at
market value. The current policy of the board of directors is to
make these loans, either long- or short-term, to broker-dealers.
In making such loans the portfolio gets the market price in cash,
U.S. government securities, letters of credit or such other
collateral as may be permitted by regulatory agencies and approved
by the board of directors. If the market price of the loaned
securities goes up, the portfolio will get additional collateral on
a daily basis. The risks are that the borrower may not provide
additional collateral when required or return the securities when
due. A loan will not be made unless the opportunity for additional
income outweighs the risks. During the existence of the loan, the
portfolio receives cash payments equivalent to all interest or
other distributions paid on the loaned securities.
Invest more than 5% of its total assets, at market value, in
securities of any one company, government or political subdivision
thereof, except the limitation will not apply to investments in
securities issued by the U.S. government, its agencies or
instrumentalities. Up to 25% of the portfolio's total assets may
be invested without regard to this 5% limitation.
Borrow money or property except as a temporary measure for
extraordinary or emergency purposes, and in an amount not exceeding
one-third of the market value of its total assets (including
borrowings) less liabilities (other than borrowings) immediately
after the borrowing. The portfolio will not purchase additional
portfolio securities at any time borrowing for temporary purposes
exceeds 5%. The portfolio has not borrowed in the past and has no
present intention to borrow.
Concentrate in any one industry. According to the present
interpretation by the Securities and Exchange Commission (SEC),
this means no more than 25% of a portfolio's total assets, based on
current market value at time of purchase, can be invested in any
one industry.
Purchase more than 10% of the outstanding voting securities of an
issuer.
Make a loan of any part of its assets to American Express Financial
Corporation, to its directors and officers or to its own directors
and officers.
<PAGE>
PAGE 124
Issue senior securities, except to the extent that borrowing from
banks, lending its securities, or entering into repurchase
agreements or options or futures contracts may be deemed to
constitute issuing a senior security.
Unless changed by the board of directors, the following policies
apply to International Equity Portfolio:
The portfolio will not invest more than 10% of the portfolio's net
assets in illiquid securities and derivative instruments that are
illiquid. For purposes of this policy illiquid securities include
some privately placed securities, public securities and Rule 144A
securities that for one reason or another may no longer have a
readily available market, repurchase agreements with maturities
greater than seven days, non-negotiable fixed-time deposits and
over-the-counter options.
The portfolio will not invest in a company to control or manage it.
The portfolio will not buy on margin or sell short, but the
portfolio may make margin payments in connection with transactions
in stock index futures contracts.
The portfolio will not invest more than 10% of its net assets, at
market, in securities of investment companies. To the extent the
portfolio were to make such investments, the shareholders may be
subject to duplicate advisory, administrative and distribution
fees.
The portfolio may make contracts to purchase securities for a fixed
price at a future date beyond normal settlement time (when issued
securities or forward commitments). A portfolio does not pay for
the securities or receive dividends or interest on them until the
contractual settlement date. The portfolio's custodian will
maintain, in a segregated account, cash or liquid high-grade debt
securities that are marked to market daily and are at least equal
in value to the portfolio's commitments to purchase the securities.
When-issued securities or forward commitments are subject to market
fluctuations and they may affect the portfolio's total assets the
same as owned securities.
The portfolio may maintain a portion of its assets in cash and
cash-equivalent investments. The cash-equivalent investments the
Portfolio may use are short-term U.S. and Canadian government
securities and negotiable certificates of deposit, non-negotiable
fixed-time deposits, bankers' acceptances and letters of credit of
banks or savings and loan associations having capital, surplus and
undivided profits (as of the date of its most recently published
annual financial statements) in excess of $100 million (or the
equivalent in the instance of a foreign branch of a U.S. bank) at
the date of investment. Any cash-equivalent investments in foreign
securities will be subject to the limitations on foreign
investments described in the prospectus. The portfolio also may
purchase short-term corporate notes and obligations rated in the
top two classifications by Moody's Investors Service, Inc. or
<PAGE>
PAGE 125
Standard & Poor's Corporation or the equivalent and may use
repurchase agreements with broker-dealers registered under the
Securities Exchange Act of 1934 and with commercial banks. A risk
of a repurchase agreement is that if the seller seeks the
protection of the bankruptcy laws, the portfolio's ability to
liquidate the security involved could be impaired.
The portfolio will not pledge or mortgage its assets beyond 15% of
the cost of its total assets. If the portfolio were ever to do so,
valuation of its assets would be based on market value and the
portfolio would comply with applicable state laws, one of which
requires 90% of the offering price to consist of net assets that
are not pledged or mortgaged. For the purpose of this restriction,
collateral arrangements with respect to margin for futures
contracts are not deemed to be a pledge of assets.
The portfolio may invest in Rule 144A securities, which are
unregistered securities offered to qualified institutional buyers,
and interest-only and principal-only fixed mortgage-backed
securities (IOs and POs) issued by the United States government or
its agencies and instrumentalities. In determining the liquidity
of Rule 144A securities, IOs and POs, the investment manager, under
guidelines established by the board of directors, will consider any
relevant factors including the frequency of trades, the number of
dealers willing to purchase or sell the security and the nature of
marketplace trades.
The portfolio may invest in commercial paper issued in transactions
not involving a public offering under Section 4(2) of the
Securities Act of 1933 (4(2) paper). In determining the liquidity
of 4(2) paper, the investment manager, under guidelines established
by the board of directors, will evaluate relevant factors such as
the issuer and the size and nature of its commercial paper
programs, the willingness and ability of the issuer or dealer to
repurchase the paper, and the nature of the clearance and
settlement procedures for the paper.
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.
Unless the holders of a majority of the outstanding shares (as
defined in the section entitled "Voting rights" of the prospectus)
of Managed Portfolio agree to a change, Managed Portfolio will not:
Act as an underwriter (sell securities for others). However, under
the securities laws, the portfolio may be deemed to be an
underwriter when it purchases securities directly from the issuer
and later resells them.
Buy securities of an issuer if the officers and directors of the
portfolio and of American Express Financial Corporation hold more
than a certain percentage of the issuer's outstanding securities.
<PAGE>
PAGE 126
The holdings of all officers and directors of the portfolio and of
American Express Financial Corporation who own more than 0.5% of an
issuer's securities are added together and if in total they own
more than 5%, the portfolio will not purchase securities of that
issuer.
Buy or sell real estate, unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent
the portfolio from investing in securities or other instruments
backed by real estate or securities of companies engaged in the
real estate business.
Buy or sell physical commodities unless acquired as a result of
ownership of securities or other instruments, except this shall not
prevent the portfolio from buying or selling options and futures
contracts or from investing in securities or other instruments
backed by, or whose value is derived from, physical commodities.
Make cash loans if the total commitment amount exceeds 5% of the
portfolio's total assets.
Lend portfolio securities in excess of 30% of its net assets, at
market value. The current policy of the board of directors is to
make these loans, either long- or short-term, to broker-dealers.
In making such loans the portfolio gets the market price in cash,
U.S. government securities, letters of credit or such other
collateral as may be permitted by regulatory agencies and approved
by the board of directors. If the market price of the loaned
securities goes up, the portfolio will get additional collateral on
a daily basis. The risks are that the borrower may not provide
additional collateral when required or return the securities when
due. A loan will not be made unless the opportunity for additional
income outweighs the risks. During the existence of the loan, the
portfolio receives cash payments equivalent to all interest or
other distributions paid on the loaned securities.
Invest more than 5% of its total assets, at market value, in
securities of any one company, government or political subdivision
thereof, except the limitation will not apply to investments in
securities issued by the U.S. government, its agencies or
instrumentalities. Except for Money Market Portfolio, up to 25% of
each Portfolio's total assets may be invested without regard to
this 5% limitation.
Borrow money or property except as a temporary measure for
extraordinary or emergency purposes, and in an amount not exceeding
one-third of the market value of its total assets (including
borrowings) less liabilities (other than borrowings) immediately
after the borrowing. The portfolio will not purchase additional
portfolio securities at any time borrowing for temporary purposes
exceeds 5%. The portfolio has not borrowed in the past and has no
present intention to borrow.
<PAGE>
PAGE 127
Concentrate in any one industry. (According to the present
interpretation of the staff of the Securities and Exchange
Commission this means no more than 25% of the portfolio's total
assets, based on current market value at the time of purchase, can
be invested in any one industry).
Make a loan of any part of its assets to American Express Financial
Corporation, to the officers and directors of American Express
Financial Corporation or to its own officers and directors.
Issue senior securities, except that this restriction shall not be
deemed to prohibit the portfolio from borrowing money from banks,
lending its securities, or entering into repurchase agreements or
options or futures contracts.
Unless changed by the board of directors, the following policies
apply to Managed Portfolio:
The portfolio will not invest in a company to get control or manage
it.
The portfolio will not buy on margin or sell short, but it may make
margin payments in connection with transactions in futures
contracts.
The portfolio will not invest in securities of investment companies
except by purchases in the open market where the dealer's or
sponsor's profit is just the regular commission.
The portfolio may make contracts to purchase securities for a fixed
price at a future date beyond normal settlement time (when issued
securities or forward commitments). A portfolio does not pay for
the securities or receive dividends or interest on them until the
contractual settlement date. The portfolio's custodian will
maintain, in a segregated account, cash or liquid high-grade debt
securities that are marked to market daily and are at least equal
in value to the portfolio's commitments to purchase the securities.
When-issued securities or forward commitments are subject to market
fluctuations and they may affect the portfolio's total assets the
same as owned securities.
The portfolio may maintain a portion of its assets in cash and
cash-equivalent investments. The cash-equivalent investments the
portfolio may use are short-term U.S. and Canadian government
securities and negotiable certificates of deposit, non-negotiable
fixed-time deposits, bankers' acceptances and letters of credit of
banks or savings and loan associations having capital, surplus and
undivided profits (as of the date of its most recently published
annual financial statements) in excess of $100 million (or the
equivalent in the instance of a foreign branch of a U.S. bank) at
the date of investment. Any cash-equivalent investments in foreign
securities will be subject to the limitations on foreign
investments described in the prospectus. The portfolio also may
purchase short-term corporate notes and obligations rated in the
top two classifications by Moody's Investors Service, Inc. or
<PAGE>
PAGE 128
Standard & Poor's Corporation or the equivalent and may use
repurchase agreements with broker-dealers registered under the
Securities Exchange Act of 1934 and with commercial banks. A risk
of a repurchase agreement is that if the seller seeks the
protection of the bankruptcy laws, the portfolio's ability to
liquidate the security involved could be impaired.
The portfolio will not invest more than 5% of its total assets,
taken at cost, in securities of companies, including any
predecessor, which have a record of less than three years
continuous operations.
The portfolio does not intend to invest in exploration or
development programs, such as oil, gas or mineral programs.
The portfolio may invest in repurchase agreements. Repurchase
agreements involve investment in debt securities whereby the seller
agrees to repurchase the securities at cost plus an agreed to
interest rate within a specified time. A risk of a repurchase
agreement is that if the party with whom this portfolio has entered
into such an agreement seeks the protection of bankruptcy laws, the
portfolio's ability to liquidate the security involved could be
temporarily impaired, and it subsequently may incur a loss if the
value of the security declines, or if the other party defaults on
its obligation. There also is the risk that the portfolio may be
delayed or prevented from exercising its rights to dispose of the
collateral securities.
The portfolio may invest in Rule 144A securities, which are
unregistered securities offered to qualified institutional buyers,
and interest-only and principal-only fixed mortgage-backed
securities (IOs and POs) issued by the United States government or
its agencies and instrumentalities. In determining the liquidity
of Rule 144A securities, IOs and POs, the investment manager, under
guidelines established by the board of directors, will consider any
relevant factors including the frequency of trades, the number of
dealers willing to purchase or sell the security and the nature of
marketplace trades.
The portfolio may invest in commercial paper issued in transactions
not involving a public offering under Section 4(2) of the
Securities Act of 1933 (4(2) paper). In determining the liquidity
of 4(2) paper, the investment manager, under guidelines established
by the board of directors, will evaluate relevant factors such as
the issuer and the size and nature of its commercial paper
programs, the willingness and ability of the issuer or dealer to
repurchase the paper, and the nature of the clearance and
settlement procedures for the paper.
The portfolio does not intend to invest in illiquid securities if,
immediately after making such an investment, more than 10% of the
portfolio's net assets, at market, would be invested in such
securities.
<PAGE>
PAGE 129
The portfolio will not pledge or mortgage its assets beyond 15% of
the cost of its gross assets taken at cost. For the purposes of
this restriction, collateral arrangements with respect to margin
for futures contracts are not deemed to be a pledge of assets.
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.
Unless the holders of a majority of the outstanding shares (as
defined in the section entitled "Voting rights" of the prospectus)
of Money Market Portfolio agree to a change, Money Market Portfolio
will not:
Act as an underwriter (sell securities for others). However, under
securities laws the portfolio may be deemed to be an underwriter
when it purchases securities directly from the issuer and later
resells them.
Buy securities of an issuer if the directors and officers of the
portfolio and of American Express Financial Corporation hold more
than a certain percentage of the issuer's outstanding securities.
The holdings of all directors and officers of the portfolio who own
more than 0.5% of an issuer's securities are added together, and if
in total they own more than 5%, the portfolio will not purchase
securities of that issuer.
Buy or sell real estate, commodities, or commodity contracts.
Make cash loans. However, it does make short-term investments
which it may have an agreement with the seller to reacquire (See
Appendix B).
Lend portfolio securities in excess of 30% of its net assets, at
market value. The current policy of the board of directors is to
make these loans, either long- or short-term, to broker-dealers.
In making such loans the portfolio gets the market price in cash,
U.S. government securities, letters of credit or such other
collateral as may be permitted by regulatory agencies and approved
by the board of directors. If the market price of the loaned
securities goes up, the portfolio will get additional collateral on
a daily basis. The risks are that the borrower may not provide
additional collateral when required or return the securities when
due. A loan will not be made unless the opportunity for additional
income outweighs the risks. During the existence of the loan, the
portfolio receives cash payments equivalent to all interest or
other distributions paid on the loaned securities.
Invest more than 5% of its total assets, at market value, in
securities of any one company, government or political subdivision
thereof, except the limitation will not apply to investments in
securities issued by the U.S. government, its agencies or
<PAGE>
PAGE 130
instrumentalities. Except for Money Market Portfolio, up to 25% of
each portfolio's total assets may be invested without regard to
this 5% limitation.
Borrow money or property except as a temporary measure for
extraordinary or emergency purposes, and in an amount not exceeding
one-third of the market value of its total assets (including
borrowings) less liabilities (other than borrowings) immediately
after the borrowing. The portfolio will not purchase additional
portfolio securities at any time borrowing for temporary purposes
exceeds 5%. The portfolio has not borrowed in the past and has no
present intention to borrow.
Buy on margin or sell short.
Invest in exploration or development programs, such as oil, gas or
mineral programs.
Purchase common stocks, preferred stocks, warrants, other equity
securities, corporate bonds or debentures, state bonds, municipal
bonds, or industrial revenue bonds.
Pledge or mortgage portfolio assets beyond 15% of the cost of the
portfolio's gross assets. If the portfolio should engage in such
transactions, valuation of its assets for such purposes would be
based on their market value.
Invest in an investment company beyond 5% of its total assets taken
at market and then only on the open market where the dealer's or
sponsor's profit is just the regular commission. However, the
portfolio will not purchase or retain the securities of other open-
end investment companies.
Invest in a company to get control or manage it.
Invest more than 25% of the portfolio's assets taken at market
value in any particular industry, except there is no limitation
with respect to investing in U.S. government or agency securities
and bank obligations. Investments are varied according to what is
judged advantageous under different economic conditions.
Unless changed by the board of directors, the following policies
apply to Money Market Portfolio:
The portfolio will not invest in illiquid securities if,
immediately after making such an investment, more than 10% of the
portfolio's net assets, at market, would be invested in such
securities.
The portfolio may make contracts to purchase securities for a fixed
price at a future date beyond normal settlement time (when issued
securities or forward commitments). A portfolio does not pay for
the securities or receive dividends or interest on them until the
contractual settlement date. The portfolio's custodian will
maintain, in a segregated account, cash or liquid high-grade debt
<PAGE>
PAGE 131
securities that are marked to market daily and are at least equal
in value to the portfolio's commitments to purchase the securities.
When-issued securities or forward commitments are subject to market
fluctuations and they may affect the portfolio's total assets the
same as owned securities.
The portfolio may maintain a portion of its assets in cash and
cash-equivalent investments. The cash-equivalent investments the
portfolio may use are short-term U.S. and Canadian government
securities and negotiable certificates of deposit, non-negotiable
fixed-time deposits, bankers' acceptances and letters of credit of
banks or savings and loan associations having capital, surplus and
undivided profits (as of the date of its most recently published
annual financial statements) in excess of $100 million (or the
equivalent in the instance of a foreign branch of a U.S. bank) at
the date of investment. Any cash-equivalent investments in foreign
securities will be subject to the limitations on foreign
investments described in the prospectus. The portfolio also may
purchase short-term corporate notes and obligations rated in the
top two classifications by Moody's Investors Service, Inc. or
Standard & Poor's Corporation or the equivalent and may use
repurchase agreements with broker-dealers registered under the
Securities Exchange Act of 1934 and with commercial banks. A risk
of a repurchase agreement is that if the seller seeks the
protection of the bankruptcy laws, the portfolio's ability to
liquidate the security involved could be impaired.
The portfolio may invest in repurchase agreements. Repurchase
agreements involve investment in debt securities whereby the seller
agrees to repurchase the securities at cost plus an agreed to
interest rate within a specified time. A risk of a repurchase
agreement is that if the party with whom this portfolio has entered
into such an agreement seeks the protection of bankruptcy laws, the
portfolio's ability to liquidate the security involved could be
temporarily impaired, and it subsequently may incur a loss if the
value of the security declines, or if the other party defaults on
its obligation. There also is the risk that the portfolio may be
delayed or prevented from exercising its rights to dispose of the
collateral securities.
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.
For a discussion on foreign currency transactions, see Appendix A.
For a discussion on money market securities, see Appendix B. For a
discussion on options and stock index futures contracts, see
Appendix C. For a discussion on options and interest rate futures
contracts, see Appendix D. For a discussion on mortgage-backed
securities, see Appendix E. For a discussion on dollar-cost
averaging, see Appendix F. For a description of corporate bond
ratings, see Appendix G.
<PAGE>
PAGE 132
PORTFOLIO TRANSACTIONS
Subject to policies set by the Board of Directors, IDS Life is
authorized to determine, consistent with each Portfolio's
investment goals and policies, which securities shall be purchased,
held or sold. In determining where the buy and sell orders are to
be placed, IDS Life has been directed to use its best efforts to
obtain the best available price and the most favorable execution
except where otherwise authorized by the Board of Directors. IDS
Life intends to direct American Express Financial Corporation to
execute trades and negotiate commissions on its behalf. In
selecting broker-dealers to execute transactions, American Express
Financial Corporation may consider the price of the security,
including commission or mark-up, the size and difficulty of the
order, the reliability, integrity, financial soundness and general
operation and execution capabilities of the broker, the broker's
expertise in particular markets, and research services provided by
the broker. These services are covered by the Investment Advisory
agreement between American Express Financial Corporation and IDS
Life. When American Express Financial Corporation acts on IDS
Life's behalf for the Fund, it follows the rules described here for
IDS Life.
Because Income Portfolio's investments are primarily in bonds,
which are traded in the over-the-counter market, IDS Life generally
will deal through a dealer acting as a principal. The price
usually includes a dealer's mark-up without a separate brokerage
charge. When IDS Life believes that dealing through a broker as
agent for a commission will produce the best results, it will do
so. The Portfolio also may buy securities directly from an issuing
company which may be resold only privately to other institutional
investors.
On occasion it may be desirable to compensate a broker for research
services or for brokerage services, by paying a commission which
might not otherwise be charged or a commission in excess of the
amount another broker might charge. The Board of Directors has
adopted a policy authorizing IDS Life to do so to the extent
authorized by law, if IDS Life determines, in good faith, that such
commission is reasonable in relation to the value of the brokerage
or research services provided by a broker or dealer, viewed either
in the light of that transaction or IDS Life's or American Express
Financial Corporation's overall responsibilities.
Research provided by brokers supplements IDS Life's own research
activities. Research services provided by brokers include economic
data on, and analysis of, U.S. and foreign economies; information
on specific industries; information about specific companies,
including earnings estimates; purchase recommendations for stock
and bonds; portfolio strategy services; political, economic,
business and industry trend assessments; historical statistical
information; market data services providing information on specific
issues and prices; and technical analysis of various aspects of the
securities markets, including technical charts. Research services
may take the form of written reports, computer software or personal
<PAGE>
PAGE 133
contact by telephone or at seminars or other meetings. IDS Life
has obtained and, in the near future, may obtain computer hardware
from brokers, including but not limited to personal computers that
will be used exclusively for investment decision-making purposes,
which include the research, portfolio management and trading
functions and other services to the extent permitted under an
interpretation by the Securities and Exchange Commission.
When paying a commission that might not otherwise be charged or a
commission in excess of that which another broker might charge, IDS
Life must follow procedures authorized by the Board of Directors.
To date, three procedures have been authorized. One procedure
permits IDS Life to direct an order to buy or sell a security
traded on a national securities exchange to a specific broker for
research services it has provided. The second procedure permits
IDS Life, in order to obtain research, to direct an order on an
agency basis to buy or sell a security traded only in the over-the-
counter market to a firm that does not make a market in the
security. The commission paid generally includes compensation for
research services. The third procedure permits IDS Life, in order
to obtain research and brokerage services, to cause a Portfolio to
pay a commission in excess of the amount another broker might have
charged. IDS Life has advised the Fund that it is necessary to do
business with a number of brokerage firms on a continuous basis to
obtain such services as: handling large orders; the willingness of
a broker to risk its own money by taking a position in a security;
and specialized handling of a particular group of securities that
only certain brokers may be able to offer. As a result of this
arrangement, some portfolio transactions may not be effected at
the lowest commission, but IDS Life believes it may obtain better
overall execution. IDS Life has assured the Fund that under all
three procedures the amount of commission paid will be reasonable
and competitive in relation to the value of the brokerage services
performed or research provided.
All other transactions shall be executed on the basis of the policy
to obtain the best available price and the most favorable
execution. In so doing, if, in the professional opinion of the
person responsible for selecting the broker or dealer, several
firms can execute the transaction on the same basis, consideration
will be given by such person to those firms offering research
services. Such services may be used by IDS Life and American
Express Financial Corporation in providing advice to all the funds
and other accounts advised by IDS Life even though it is not
possible to relate the benefits to any particular fund or account.
Each investment decision made for a Portfolio is made independently
from any decision made for another Portfolio or fund or other
account advised by IDS Life or any of its subsidiaries. When the
Portfolio buys or sells the same security as another fund or
account, IDS Life carries out the purchase or sale in a way the
Fund agrees in advance is fair. Although sharing in large
transactions may adversely affect the price or volume purchased or
sold by the Fund, the Fund hopes to gain an overall advantage in
execution. IDS Life has assured the Fund it will continue to seek
ways to reduce brokerage costs.
<PAGE>
PAGE 134
On a periodic basis, IDS Life makes a comprehensive review of the
broker-dealers and the overall reasonableness of their commissions.
The review evaluates execution, back office efficiency and research
services.
The Fund paid total brokerage commissions of $190,220 for fiscal
year 1992, $210,093 for fiscal year 1993, and $405,141 for fiscal
year ended April 30, 1994. The majority of all firms through whom
transactions were executed provide research services. There were
no transactions directed to brokers by the Fund because of research
services received for the fiscal year ended April 30, 1994.
Income and Managed Portfolios' acquisition during the period ended
April 30, 1994, of securities of its regular brokers or dealers or
of the parents of those brokers or dealers that derive more than
15% of gross revenue from securities-related activities is
presented below:
Value of Securities
Owned at End of
Name of Issuer Fiscal Year
Bank of America $1,081,250
Bankers Trust 298,000
Citicorp 303,375
Goldman Sachs 191,250
Salomon Brothers 450,000
BROKERAGE COMMISSIONS PAID TO BROKERS AFFILIATED WITH IDS LIFE
Affiliates of American Express Company (of which IDS Life is a
wholly owned indirect subsidiary) may engage in brokerage and other
securities transactions on behalf of the Fund in accordance with
procedures adopted by the Fund's Board of Directors and to the
extent consistent with applicable provisions of the federal
securities laws. IDS Life will use an American Express affiliate
only if (i) IDS Life determines that the Fund will receive prices
and executions at least as favorable as those offered by qualified
independent brokers performing similar brokerage and other services
for the Fund and (ii) if such use is consistent with terms of the
Investment Management and Services Agreement.
Information about brokerage commissions paid by the Fund for the
last three fiscal years to brokers affiliated with IDS Life is
contained in the following table:
<PAGE>
PAGE 135
<TABLE>
<CAPTION>
For the Fiscal Year Ended April 30,
1994 1993 1992
Aggregate Percent of Aggregate Aggregate
Dollar Aggregate Dollar Dollar Dollar
Amount of Percent of Amount of Amount of Amount of
Nature Commissions Aggregate Transactions Commissions Commissions
of Paid to Brokerage Involving Payment Paid to Paid to
Broker Affiliation Broker Commissions of Commissions Broker Broker
<S> <C> <C> <C> <C> <C> <C>
American (2) $19,878 4.91% .01% $35,204 $27,081
Enterprise
Investment
Services Inc.
Lehman (1) $ 4,851 1.19% 0% $ 8,390 $ 5,660
Brothers
Inc.
The Robinson (3) none none none none $ 1,680
Humphrey
Company, Inc.
</TABLE>
(1) Under common control with American Express Financial
Corporation as a subsidiary of American Express Company (American
Express) until July 30, 1993.
(2) Wholly owned subsidiary of American Express Financial
Corporation.
(3) Under common control with American Express Financial
Corporation as an indirect subsidiary of American Express until
July 30, 1993.
PERFORMANCE INFORMATION
Each Portfolio may quote various performance figures to illustrate
past performance. Average annual total return and current yield
quotations used by a Fund are based on standardized methods of
computing performance as required by the SEC. An explanation of
these and any other methods used by each Portfolio to compute
performance follows below.
CALCULATION OF TOTAL RETURN
Each Portfolio may calculate average annual total return for
certain periods by finding the average annual compounded rates of
return over the period that would equate the initial amount
invested to the ending redeemable value, according to the following
formula:
P(1+T)n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 payment at the beginning of a period, at
the end of the period (or fractional portion
thereof)
<PAGE>
PAGE 136
Aggregate total return
Each Portfolio may calculate aggregate total return for certain
periods representing the cumulative change in the value of an
investment in a Portfolio over a specified period of time according
to the following formula:
ERV - P
P
where: P = a hypothetical initial payment of $1,000
ERV = ending redeemable value of a hypothetical $1,000
payment at the beginning of a period, at the end of
the period (or fractional portion thereof)
CALCULATION OF YIELD
Government Securities and Income Portfolios - These portfolios may
calculate an annualized yield by dividing the average net
investment income per share earned during a 30-day period by the
net asset value per share on the last day of the period and
annualizing the results.
Yield is calculated according to the following formula:
Yield = 2[ (a-b + 1)6 - 1]
cd
where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of
reimbursements)
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends
d = the maximum offering price per share on the
last day of the period
Government Securities Portfolio's yield was 5.31% for the 30-day
period ended April 30, 1994 and Income Portfolio's yield was 6.67%.
IDS Life has agreed to a voluntary limitation of non-advisory
expenses at an annual charge not to exceed 0.1 percent of the
average daily net assets of the Fund. If non-advisory expenses had
not been limited, Government Securities Portfolio's yield would
have been 5.27%. Income Portfolio's yield would have been 6.67*%.
*Expenses did not exceed .1% of average daily net assets.
Money Market Portfolio calculates annualized simple and compound
yields based on a seven-day period.
The simple yield is calculated by determining the net change in the
value of a hypothetical account having a balance of one share at
the beginning of the seven day period, dividing the net change in
account value by the value of the account at the beginning of the
<PAGE>
PAGE 137
period to obtain the return for the period, and multiplying that
return by 365/7 to obtain an annualized figure. The value of the
hypothetical account includes the amount of any declared dividends,
the value of any shares purchased with any dividend paid during the
period and any dividends declared for such shares. The Portfolio's
yield does not include any realized or unrealized gain or loss.
The Portfolio calculates its compound yield according to the
following formula:
Compound Yield = (return for seven day period + 1) 365/7 - 1
The Portfolio's simple annualized yield was 2.99% and its compound
yield was 3.03% on April 30, 1994, the last business day of the
fund's fiscal year. If direct expenses had not been limited, the
simple annualized yield would have been 2.89% and its compound
yield would have been 2.93%.
Yield, or rate of return, on Portfolio shares may fluctuate daily
and does not provide a basis for determining future yields.
However, it may be used as one element in assessing how the
Portfolio is meeting its goal. When comparing an investment in the
Portfolio with savings accounts and similar investment
alternatives, you must consider that such alternatives often
provide an agreed to or guaranteed fixed yield for a stated period
of time, whereas the Portfolio's yield fluctuates. In comparing
the yield of one money market fund to another, you should consider
each fund's investment policies, including the types of investments
permitted.
In its sales material and other communications, the Fund may quote
rankings, yields or returns as published by independent statistical
services or publishers and publications such as The Bank Rate
Monitor National Index, Barron's, Business Week, Donoghue's Money
Market Fund Report, Financial Services Week, Financial Times,
Financial World, Forbes, Fortune, Global Investor, Institutional
Investor, Investor's Daily, Kiplinger's Personal Finance, Lipper
Analytical Services, Money, Mutual Fund Forecaster, Newsweek, The
New York Times, Personal Investor, Shearson Lehman Aggregate Bond
Index, Stanger Report, Sylvia Porter's Personal Finance, USA Today,
U.S. News and World Report, The Wall Street Journal and
Wiesenberger Investment Companies Service.
VALUING EACH PORTFOLIO'S SHARES
The value of an individual share in the Equity, Income, Managed,
Government Securities and International Equity Portfolios, is
determined by using the net asset value before the shareholder
transactions for the day. On April 30, 1994 the computation looked
like this for Equity, Income, Managed and Government Securities
Portfolios:
<PAGE>
PAGE 138
<TABLE>
<CAPTION>
Net assets before Shares outstanding Net asset
shareholder transactions at end of previous day value of one share
<S> <C> <C> <C> <C><C>
Equity Portfolio $151,860,163 divided by 8,391,259 = $18.10
Income Portfolio $ 33,769,928 divided by 3,476,335 = $ 9.71
Managed Portfolio $160,719,325 divided by 11,604,807 = $13.85
Government Securities
Portfolio $ 11,184,851 divided by 1,132,254 = $ 9.88
</TABLE>
The net asset value per share is determined by dividing the total
market value of the Fund's investments and other assets, less any
liabilities, by the number of outstanding shares of the Fund. To
establish the net assets, all securities are valued as of the close
of each business day, which is the closing time of the New York
Stock Exchange (currently 3 p.m. Central time). A business day for
the Fund is any day the New York Stock Exchange is open. The
portfolio securities are valued at amortized cost, which
approximates market value.
In determining net assets, the Fund's portfolio securities are
valued as follows:
`Stocks, convertible bonds, warrants, futures and options traded on
major exchanges are valued each day at their last quoted sales
price on their primary exchange as of the close of the New York
Stock Exchange. If the last quoted sales price is not readily
available for a particular security, the value is the average price
between the last offer to buy and the last offer to sell.
`Stocks, convertible bonds and warrants with readily available
market quotations but without a listing on an exchange are also
valued at the average between the last bid (offer to buy) and asked
(offer to sell) price at the time of the close of the New York
Stock Exchange.
`Short-term securities maturing in 60 days or less at the
acquisition date are valued at amortized cost. (Amortized cost is
an approximation of market value determined by systematically
increasing the carrying value of a security if acquired at a
discount, or systematically reducing the carrying value if acquired
at a premium, so that the carrying value is equal to maturity value
on the maturity date.)
`Securities without a readily available market price, bonds other
than convertibles and other assets are valued at fair value. In
valuing these, the Fund directors are responsible for selecting
methods which they believe give the fair value. For nonconvertible
bonds, the usual method is to use the pricing service of an outside
organization. Such pricing service may take into consideration
yield, quality, coupon, maturity, type of issue, trading
characteristics and other market data in determining valuations for
normal institutional-size trading units of debt securities and does
not rely exclusively on quoted prices.
`Generally, trading in foreign securities is substantially
completed each day at various times prior to the close of the New
York Stock Exchange. The values of such securities used in
determining the net asset value of the Fund's shares are computed
<PAGE>
PAGE 139
as of such times. Occasionally, events affecting the value of such
securities may occur between such times and the close of the New
York Stock Exchange which will not be reflected in the computation
of the Fund's net asset value. If events materially affecting the
value of such securities occur during such period, then these
securities will be valued at their fair value according to
procedures decided upon in good faith by the Fund's Board of
Directors. Foreign securities quoted in foreign currencies are
translated into U.S. dollars at the current exchange rate.
Valuing Money Market Portfolio's shares
Money Market Portfolio intends to use its best efforts to maintain
a constant net asset value of $1 per share although there is no
assurance it will be able to do so. Accordingly, it uses the
amortized cost method in valuing its Portfolio.
Short-term securities maturing in 60 days or less are valued at
amortized cost. Amortized cost is an approximation of market value
determined by systematically increasing the carrying value of a
security if acquired at a discount, or reducing the carrying value
if acquired at a premium, so that the carrying value is equal to
maturity value on the maturity date. It does not take into
consideration unrealized capital gains or losses. All of the
securities in the portfolio will be valued at their amortized cost.
In addition, the Portfolio must abide by certain conditions. It
must only invest in securities of high quality which present
minimal credit risks as determined by the Board of Directors. This
means that the rated commercial paper in the Fund's portfolio will
be issues that have been rated in the highest rating category by at
least two nationally recognized statistical rating organizations
(or by one if only one rating is assigned) and in unrated paper
determined by the Fund's Board of Directors to be comparable. The
Portfolio must also purchase securities with original or remaining
maturities of no more than 13 months or less, and maintain a
dollar-weighted average portfolio maturity of 90 days or less.
In addition, the Board of Directors must establish procedures
designed to stabilize the Portfolio's price per share for purposes
of sales and redemptions at $1 to the extent that it is reasonably
possible to do so. These procedures include review of the
portfolio securities by the Board, at intervals deemed appropriate
by it, to determine whether the net asset value per share computed
by using the available market quotations deviates from a share
value of $1 as computed using the amortized cost method. The Board
must consider any deviation that appears, and if it exceeds 0.5
percent, it must determine what action, if any, needs to be taken.
If the Board determines that a deviation exists that may result in
a material dilution of the holdings of current shareholders or
investors, or in other unfair consequences for such people, it must
undertake remedial action that it deems necessary and appropriate.
Such action may include withholding dividends, calculating net
asset value per share for purposes of sales and redemptions using
<PAGE>
PAGE 140
available market quotations, making redemptions in kind, and
selling portfolio securities before maturity in order to realize
capital gain or loss or to shorten average portfolio maturity.
In other words, while the amortized cost method provides certainty
and consistency in portfolio valuation, it may, from time to time,
result in valuations of portfolio securities which are either
somewhat higher or lower than the prices at which the securities
could be sold. This means that during times of declining interest
rates, the yield on the Portfolio's shares may be higher than if
valuations of securities were made based on actual market prices
and estimates of market prices. Accordingly, if use of the
amortized cost method were to result in a lower portfolio value at
a given time, a prospective investor would be able to obtain a
somewhat higher yield than he or she would get if portfolio
valuation were based on actual market values. Existing
shareholders, on the other hand, would receive a somewhat lower
yield than they would otherwise receive. The opposite would happen
during a period of rising interest rates.
INVESTING IN THE FUND
You cannot buy shares of the Fund directly. The only way you can
invest in the Fund at the present time is by buying a Variable Life
Insurance Policy from IDS Life or IDS Life of New York and
directing the allocation of part or all of your net purchase
payment to the Variable Accounts which will invest in shares of the
Fund. Read this fund's prospectus along with your Variable Life
Insurance Policy prospectus.
Sales Charges and Surrender Charges
The Fund does not assess any sales charge, either when it sells or
when it redeems securities. The surrender charges which may be
assessed under your Variable Life Insurance Policy are described in
the Variable Life Insurance Policy prospectus, as are mortality and
expense risk fees and other charges.
REDEEMING SHARES
The Fund will redeem any shares presented by the shareholders (the
Variable Accounts) for redemption. The Variable Accounts' policy
on when or whether to buy or redeem Fund shares is described in the
Variable Life Insurance Policy prospectus.
During an emergency the Board of Directors can suspend the
computation of net asset value, stop accepting payments for
purchase of shares, or suspend the duty of the Fund to redeem
shares for more than seven days. Such emergency situations would
occur if:
`The New York Stock Exchange closes for reasons other than the
usual weekend and holiday closings, or trading on the Exchange is
restricted,
<PAGE>
PAGE 141
`Disposal of the Fund's securities is not reasonably practicable,
or it is not reasonably practicable for the Fund to determine the
fair value of its net assets, or
`The Securities and Exchange Commission, under the provisions of
the Investment Company Act of 1940, declares a period of emergency
to exist.
Should the Fund stop selling shares, the directors may make a
deduction from the value of the assets held by the Fund to cover
the cost of future liquidations of the assets so as to distribute
fairly these costs among all contract owners.
CAPITAL GAINS AND LOSSES
For federal income tax purposes, Income and Money Market Portfolios
had a capital loss carryover of $3,648 and $174 respectively, at
April 30, 1994, which, if not offset by subsequent capital gains,
will expire in 1996 through 2000. It is unlikely the Board of
Directors will authorize a distribution of any net realized gain
for this Portfolio until the capital loss carryover has been offset
or expires.
INVESTMENT MANAGEMENT AND OTHER SERVICES
Management and Services Agreement
The Fund does not maintain its own research department or record-
keeping services. These are provided by IDS Life under the
Investment Management and Services Agreement.
For its services, IDS Life is paid a fee based on the net assets of
the Portfolios. The asset charge is based on the aggregate average
daily net assets of each of the Portfolios at the following rates:
0.7 percent, on an annual basis, for Equity Portfolio;
0.7 percent, on an annual basis, for Income Portfolio;
0.95 percent, on an annual basis, for International Equity
Portfolio;
0.5 percent, on an annual basis, for Money Market Portfolio;
0.7 percent, on an annual basis, for Managed Portfolio; and
0.7 percent, on an annual basis, for Government Securities
Portfolio.
The management fee is paid monthly. The total amount paid for
fiscal year ended April 30, 1994 was $850,524 for Equity Portfolio,
$199,578 for Income Portfolio, $41,168 for Money Market Portfolio,
$920,594 for Managed Portfolio, and $75,428 for Government
Securities Portfolio. The total amount paid for fiscal year ended
April 30, 1993 was $504,402 for Equity Portfolio, $136,217 for
Income Portfolio, $47,061 for Money Market Portfolio, $596,745 for
Managed Portfolio and $61,668 for Government Securities Portfolio.
The total amount paid for fiscal year ended April 30, 1992 was
$327,914 for Equity Portfolio, $94,784 for Income Portfolio,
$48,939 for Money Market Portfolio, $436,549 for Managed Portfolio
and $48,470 for Government Securities Portfolio.
<PAGE>
PAGE 142
All non-advisory expenses incurred by the Fund will be paid at an
annual charge not to exceed 0.1 percent of the aggregate average
daily net assets of the Fund. The voluntary limitation of 0.1
percent has been established by IDS Life at that figure and IDS
Life reserves the right to discontinue the voluntary limitation.
Investment Advisory Agreement
IDS Life and American Express Financial Corporation have an
Investment Advisory Agreement. It calls for IDS Life to pay
American Express Financial Corporation a fee for investment advice
about the Fund's Portfolios. American Express Financial
Corporation also executes purchases and sales and negotiates
brokerage as directed by IDS Life. The fee paid by IDS Life is
0.25 percent of the average net assets for the year of all
portfolios, except for International Equity. The fee paid by IDS
Life is 0.50 percent of International Equity portfolio's average
net assets.
IDS Life paid American Express Financial Corporation $751,255 for
investment advice for the fiscal year ended April 30, 1994. IDS
Life paid American Express Financial Corporation $487,415 for
investment advice for the fiscal year ended April 30, 1993. IDS
Life paid American Express Financial Corporation $348,615 for
investment advice for the fiscal year ended April 30, 1992.
Information concerning other funds advised by IDS Life or American
Express Financial Corporation is contained in the prospectus.
MANAGEMENT OF THE FUND
The Fund has a Board of Directors elected by policyholders that
oversees the operations of the Fund as required by state law. The
Board has named an executive committee of directors that has
authority to act on its behalf between meetings.
The Fund's directors and officers do not own any of the outstanding
shares of the Fund.
Directors of the Fund
The following is a list of the Fund's directors.
Carl N. Platou
President Emeritus and Chief Executive Officer, Fairview Hospital
and Healthcare Services, Retired 1990. Director, St. Thomas
University since 1990.
*Richard W. Kling
President, IDS Life since March 1994. Director and Executive Vice
President, Marketing and Products from January 1988 to March 1994.
Manager of IDS Life Variable Annuity Funds A&B.
<PAGE>
PAGE 143
Edward Landes
Retired, former Development Consultant.
*Janis E. Miller
Director and Executive Vice President, Variable Assets, IDS Life
since March 1994. Vice President, American Express Financial
Corporation since June 1990. Manager of IDS Life Variable Annuity
Funds A & B.
Gordon H. Ritz
President, Con Rad Broadcasting Corp. (radio broadcasting).
Director, Sunstar Foods and Mid-America Publishing.
*Interested person of IDS Life and of the Fund as the term
"interested person" is defined in the 1940 Act.
Officers of the Fund
Besides Mr. Kling, who is the President, the Fund's other executive
officers are listed below:
Colleen Curran
IDS Tower 10
Minneapolis, MN
Secretary
Senior Counsel, American Express Financial Corporation, since 1990.
Louis C. Fornetti
IDS Tower 10
Minneapolis, MN
Vice President
Director, IDS Life, since March 1994. Director and Senior Vice
President--Corporate Controller, American Express Financial
Corporation, since August 1988. Vice President--Corporate
Controller, from 1985 to 1988.
Morris Goodwin, Jr.
IDS Tower 10
Minneapolis, MN
Vice President and Treasurer
Vice President and Treasurer, IDS Life since March 1994. Vice
President and Corporate Treasurer, American Express Financial
Corporation, since July 1989. Chief Financial Officer and
Treasurer, American Express Trust Compapny, from 1988 to 1989.
<PAGE>
PAGE 144
Paul F. Kolkman
IDS Tower 10
Minneapolis, MN
Vice President and Chief Actuary
Director and Vice President--Finance, IDS Life. Vice President--
Insurance Finance, American Express Financial Corporation.
William A. Stoltzmann
IDS Tower 10
Minneapolis, MN
General Counsel and Assistant Secretary
General Counsel and Assistant Secretary, IDS Life. Vice President
and Assistant General Counsel, American Express Financial
Corporation.
Melinda S. Urion
IDS Tower
Minneapolis, MN
Vice President and Controller
Vice President and Corporate Controller, American Express Financial
Corporation, since April 1994; Vice President - Insurance
Controller, American Express Financial Corporation, from September
1991 to April 1994. Chief Accounting Officer for American Express
Financial Advisors, Inc. from July 1988 to September 1991.
Board Compensation Table for IDS Life Series Fund
for fiscal year ended April 30, 1994
IDS Life Series Fund, IDS Life Variable Annuity Fund A and IDS Life
Variable Annuity Fund B comprise the three funds in the Fund
Complex.
<TABLE>
<CAPTION>
Aggregate Compensation Total Compensation
Manager from IDS Life Series Fund from the Fund Complex
<S> <C> <C>
Edward Landes $4,000 $8,000
Carl N. Platou $3,500 $7,000
Gordon H. Ritz $4,000 $8,000
</TABLE>
Managers of the Fund who are not salaried employees of IDS Life or
one of its affiliates receive $2,000 per year plus $500 per meeting
they attend and expenses. All officers are salaried employees of
IDS Life or American Express Financial Corporation and receive no
remuneration from the Fund.
There are no pension or retirement benefits accrued as part of fund
expenses.
CUSTODIAN
The Fund's securities and cash are held by American Express Trust
Company, 1200 Northstar Center West, 625 Marquette Ave.,
Minneapolis, MN 55402, through a custodian agreement. The
custodian is permitted to deposit some or all of its securities in
central depository systems as allowed by federal law.
<PAGE>
PAGE 145
The custodian has entered into a sub-custodian arrangement with
Morgan Stanley Trust Co. (Morgan Stanley), One Pierrepont Plaza,
8th Floor, Brooklyn, NY, 11201-2775. As part of this arrangement,
portfolio securities purchased outside the United States may be
held in custody and deposit accounts that have been established by
Morgan Stanley with one or more domestic or foreign banks, or
through the facilities of one or more clearing agencies or central
securities depositories as may be permitted by law and by the
Fund's sub-custodian agreement.
INDEPENDENT AUDITORS
The Fund's financial statements contained in its Annual Report to
shareholders at the end of its fiscal year are audited by
independent auditors, KPMG Peat Marwick LLP, 4200 Norwest Center,
90 South Seventh Street, Minneapolis, MN 55402-3900. IDS Life has
agreed that it will send a copy of this report and the unaudited
Semi-Annual Report to every Variable Life Insurance policyowner
having an interest in the Fund. The independent auditors also
provide other accounting and tax-related services as requested by
the Fund from time to time.
FINANCIAL STATEMENTS
The 1994 Annual Report to IDS Life Series Fund, Inc. shareholders,
filed pursuant to Section 30(d) of the 1940 Act, is hereby
incorporated in this Statement of Additional Information by
reference. The 1994 Semiannual Report to shareholders is also
incorporated in this SAI by reference.
The prospectus dated April 28, 1995, is hereby incorporated in this
Statement of Additional Information by reference.
<PAGE>
PAGE 146
APPENDIX A
FOREIGN CURRENCY TRANSACTIONS, FOR INVESTMENTS OF EQUITY, INCOME,
MANAGED, AND INTERNATIONAL EQUITY PORTFOLIOS
Since investments in foreign countries usually involve currencies
of foreign countries, and since the Portfolio may hold cash and
cash-equivalent investments in foreign currencies, the value of the
Portfolio's assets as measured in U.S. dollars may be affected
favorably or unfavorably by changes in currency exchange rates and
exchange control regulations. Also, the Portfolio may incur costs
in connection with conversions between various currencies.
Spot Rates and Forward Contracts. The Portfolio conducts its
foreign currency exchange transactions either at the spot (cash)
rate prevailing in the foreign currency exchange market or by
entering into forward currency exchange contracts (forward
contracts) as a hedge against fluctuations in future foreign
exchange rates. A forward contract involves an obligation to buy
or sell a specific currency at a future date, which may be any
fixed number of days from the contract date, at a price set at the
time of the contract. These contracts are traded in the interbank
market conducted directly between currency traders (usually large
commercial banks) and their customers. A forward contract
generally has no deposit requirements. No commissions are charged
at any stage for trades.
The Portfolio may enter into forward contracts to settle a security
transaction or handle dividend and interest collection. When the
Portfolio enters into a contract for the purchase or sale of a
security denominated in a foreign currency or has been notified of
a dividend or interest payment, it may desire to lock in the price
of the security or the amount of the payment in dollars. By
entering into a forward contract, the Portfolio will be able to
protect itself against a possible loss resulting from an adverse
change in the relationship between different currencies from the
date the security is purchased or sold to the date on which payment
is made or received or when the dividend or interest is actually
received.
The Portfolio also may enter into forward contracts when management
of the Portfolio believes the currency of a particular foreign
country may suffer a substantial decline against another currency.
It may enter into a forward contract to sell, for a fixed amount of
dollars, the amount of foreign currency approximating the value of
some or all of the Portfolio's portfolio securities denominated in
such foreign currency. The precise matching of forward contract
amounts and the value of securities involved generally will not be
possible since the future value of such securities in foreign
currencies more than likely will change between the date the
forward contract is entered into and the date it matures. The
projection of short-term currency market movements is extremely
difficult and successful execution of a short-term hedging strategy
is highly uncertain. The Portfolio will not enter into such
<PAGE>
PAGE 147
forward contracts or maintain a net exposure to such contracts when
consummating the contracts would obligate the Portfolio to deliver
an amount of foreign currency in excess of the value of the
Portfolio's portfolio securities or other assets denominated in
that currency.
The Portfolio will designate cash or securities in an amount equal
to the value of the Portfolio's total assets committed to
consummating forward contracts entered into under the second
circumstance set forth above. If the value of the securities
declines, additional cash or securities will be designated on a
daily basis so that the value of the cash or securities will equal
the amount of the Portfolio's commitments on such contracts.
At maturity of a forward contract, the Portfolio may either sell
the portfolio security and make delivery of the foreign currency or
retain the security and terminate its contractual obligation to
deliver the foreign currency by purchasing an offsetting contract
with the same currency trader obligating it to buy, on the same
maturity date, the same amount of foreign currency.
If the Portfolio retains the portfolio security and engages in an
offsetting transaction, the Portfolio will incur a gain or a loss
(as described below) to the extent there has been movement in
forward contract prices. If the Portfolio engages in an offsetting
transaction, it may subsequently enter into a new forward contract
to sell the foreign currency. Should forward prices decline
between the date the Portfolio enters into a forward contract for
selling foreign currency and the date it enters into an offsetting
contract for purchasing the foreign currency, the Portfolio will
realize a gain to the extent that the price of the currency it has
agreed to sell exceeds the price of the currency it has agreed to
buy. Should forward prices increase, the Portfolio will suffer a
loss to the extent the price of the currency it has agreed to buy
exceeds the price of the currency it has agreed to sell.
It is impossible to forecast what the market value of portfolio
securities will be at the expiration of a contract. Accordingly,
it may be necessary for the Portfolio to buy additional foreign
currency on the spot market (and bear the expense of such purchase)
if the market value of the security is less than the amount of
foreign currency the Portfolio is obligated to deliver and a
decision is made to sell the security and make delivery of the
foreign currency. Conversely, it may be necessary to sell on the
spot market some of the foreign currency received on the sale of
the portfolio security if its market value exceeds the amount of
foreign currency the Portfolio is obligated to deliver.
The Portfolio's dealing in forward contracts will be limited to the
transactions described above. This method of protecting the value
of the Portfolio's portfolio securities against a decline in the
value of a currency does not eliminate fluctuations in the
underlying prices of the securities. It simply establishes a rate
of exchange that can be achieved at some point in time. Although
<PAGE>
PAGE 148
such forward contracts tend to minimize the risk of loss due to a
decline in value of hedged currency, they tend to limit any
potential gain that might result should the value of such currency
increase.
Although the Portfolio values its assets each business day in terms
of U.S. dollars, it does not intend to convert its foreign
currencies into U.S. dollars on a daily basis. It will do so from
time to time, and shareholders should be aware of currency
conversion costs. Although foreign exchange dealers do not charge
a fee for conversion, they do realize a profit based on the
difference (spread) between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a
foreign currency to the Portfolio at one rate, while offering a
lesser rate of exchange should the Portfolio desire to resell that
currency to the dealer.
Options on Foreign Currencies. The Portfolio may buy put and write
covered call options on foreign currencies for hedging purposes.
For example, a decline in the dollar value of a foreign currency in
which portfolio securities are denominated will reduce the dollar
value of such securities, even if their value in the foreign
currency remains constant. In order to protect against such
diminutions in the value of portfolio securities, the Portfolio may
buy put options on the foreign currency. If the value of the
currency does decline, the Portfolio will have the right to sell
such currency for a fixed amount in dollars and will thereby
offset, in whole or in part, the adverse effect on its portfolio
which otherwise would have resulted.
As in the case of other types of options, however, the benefit to
the Portfolio derived from purchases of foreign currency options
will be reduced by the amount of the premium and related
transaction costs. In addition, where currency exchange rates do
not move in the direction or to the extent anticipated, the
Portfolio could sustain losses on transactions in foreign currency
options which would require it to forego a portion or all of the
benefits of advantageous changes in such rates.
The Portfolio may write options on foreign currencies for the same
types of hedging purposes. For example, when the Portfolio
anticipates a decline in the dollar value of foreign-denominated
securities due to adverse fluctuations in exchange rates, it could,
instead of purchasing a put option, write a call option on the
relevant currency. If the expected decline occurs, the option will
most likely not be exercised and the diminution in value of
portfolio securities will be fully or partially offset by the
amount of the premium received.
As in the case of other types of options, however, the writing of a
foreign currency option will constitute only a partial hedge up to
the amount of the premium, and only if rates move in the expected
direction. If this does not occur, the option may be exercised and
the Portfolio would be required to buy or sell the underlying
<PAGE>
PAGE 149
currency at a loss which may not be offset by the amount of the
premium. Through the writing of options on foreign currencies, the
Portfolio also may be required to forego all or a portion of the
benefits which might otherwise have been obtained from favorable
movements on exchange rates.
All options written on foreign currencies will be covered. An
option written on foreign currencies is covered if the Portfolio
holds currency sufficient to cover the option or has an absolute
and immediate right to acquire that currency without additional
cash consideration upon conversion of assets denominated in that
currency or exchange of other currency held in its portfolio. An
option writer could lose amounts substantially in excess of its
initial investments, due to the margin and collateral requirements
associated with such positions.
Options on foreign currencies are traded through financial
institutions acting as market-makers, although foreign currency
options also are traded on certain national securities exchanges,
such as the Philadelphia Stock Exchange and the Chicago Board
Options Exchange, subject to SEC regulation. In an over-the-
counter trading environment, many of the protections afforded to
exchange participants will not be available. For example, there
are no daily price fluctuation limits, and adverse market movements
could therefore continue to an unlimited extent over a period of
time. Although the purchaser of an option cannot lose more than
the amount of the premium plus related transaction costs, this
entire amount could be lost.
Foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the OCC, thereby
reducing the risk of counterparty default. Further, a liquid
secondary market in options traded on a national securities
exchange may be more readily available than in the over-the-counter
market, potentially permitting the Portfolio to liquidate open
positions at a profit prior to exercise or expiration, or to limit
losses in the event of adverse market movements.
The purchase and sale of exchange-traded foreign currency options,
however, is subject to the risks of availability of a liquid
secondary market described above, as well as the risks regarding
adverse market movements, margining of options written, the nature
of the foreign currency market, possible intervention by
governmental authorities and the effects of other political and
economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-
counter market. For example, exercise and settlement of such
options must be made exclusively through the OCC, which has
established banking relationships in certain foreign countries for
the purpose. As a result, the OCC may, if it determines that
foreign governmental restrictions or taxes would prevent the
orderly settlement of foreign currency option exercises, or would
result in undue burdens on OCC or its clearing member, impose
<PAGE>
PAGE 150
special procedures on exercise and settlement, such as technical
changes in the mechanics of delivery of currency, the fixing of
dollar settlement prices or prohibitions on exercise.
Foreign Currency Futures and Related Options. The Portfolio may
enter into currency futures contracts to sell currencies. It also
may buy put and write covered call options on currency futures.
Currency futures contracts are similar to currency forward
contracts, except that they are traded on exchanges (and have
margin requirements) and are standardized as to contract size and
delivery date. Most currency futures call for payment of delivery
in U.S. dollars. The Portfolio may use currency futures for the
same purposes as currency forward contracts, subject to CFTC
limitations, including the limitation on the percentage of assets
that may be used, described in the prospectus. All futures
contracts are aggregated for purposes of the percentage
limitations.
Currency futures and options on futures values can be expected to
correlate with exchange rates, but will not reflect other factors
that may affect the values of the Portfolio's investments. A
currency hedge, for example, should protect a Yen-denominated bond
against a decline in the Yen, but will not protect the Portfolio
against price decline if the issuer's creditworthiness
deteriorates. Because the value of the Portfolio's investments
denominated in foreign currency will change in response to many
factors other than exchange rates, it may not be possible to match
the amount of a forward contract to the value of the Portfolio's
investments denominated in that currency over time.
The Portfolio will not use leverage in its options and futures
strategies. The Portfolio will hold securities or other options or
futures positions whose values are expected to offset its
obligations. The Portfolio will not enter into an option or
futures position that exposes the Portfolio to an obligation to
another party unless it owns either (i) an offsetting position in
securities or (ii) cash, receivables and short-term debt securities
with a value sufficient to cover its potential obligations.
<PAGE>
PAGE 151
APPENDIX B
DESCRIPTION OF MONEY MARKET SECURITIES
Certificates of Deposit -- A certificate of deposit is a negotiable
receipt issued by a bank or savings and loan association in
exchange for the deposit of funds. The issuer agrees to pay the
amount deposited, plus interest, on the date specified on the
certificate.
Time Deposit -- A time deposit is a non-negotiable deposit in a
bank for a fixed period of time.
Bankers' Acceptances -- A bankers' acceptance arises from a short-
term credit arrangement designed to enable businesses to obtain
funds to finance commercial transactions. It is a time draft drawn
on a bank by an exporter or an importer to obtain a stated amount
of funds to pay for specific merchandise. The draft is then
"accepted" by a bank that, in effect, unconditionally guarantees to
pay the face value of the instrument on its maturity date.
Commercial Paper -- Commercial paper is generally defined as
unsecured short-term notes issued in bearer form by large well-
known corporations and finance companies. Maturities on commercial
paper range from one day to nine months.
Commercial paper rated A by Standard & Poor's Corporation has the
following characteristics: Liquidity ratios are better than the
industry average. Long-term senior debt rating is "A" or better.
The issuer has access to at least two additional channels of
borrowing. Basic earnings and cash flow have an upward trend with
allowances made for unusual circumstances. Typically, the issuer's
industry is well established, the issuer has a strong position
within its industry and the reliability and quality of management
is unquestioned. Issuers rated A are further rated by use of
numbers 1, 2 and 3 to denote relative strength within this highest
classification.
A Prime rating is the highest commercial paper rating assigned by
Moody's Investors Services Inc. Issuers rated Prime are further
rated by use of numbers 1, 2 and 3 to denote relative strength
within this highest classification. Among the factors considered
by Moody's in assigning ratings for an issuer are the following:
(1) management; (2) economic evaluation of the industry and an
appraisal of speculative type risks which may be inherent in
certain areas; (3) competition and customer acceptance of products;
(4) liquidity; (5) amount and quality of long-term debt; (6) ten
year earnings trends; (7) financial strength of a parent company
and the relationships which exist with the issuer; and (8)
recognition by management of obligations which may be present or
may arise as a result of public interest questions and preparations
to meet such obligations.
<PAGE>
PAGE 152
Letters of Credit -- A letter of credit is a short-term note issued
in bearer form with a bank letter of credit which provides that the
bank pay to the bearer the amount of the note upon presentation.
U.S. Treasury Bills -- Treasury bills are issued with maturities of
any period up to one year. Three-month and six-month bills are
currently offered by the Treasury on 13-week and 26-week cycles
respectively and are auctioned each week by the Treasury. Treasury
bills are issued in book entry form and are sold only on a discount
basis, i.e. the difference between the purchase price and the
maturity value constitutes interest income for the investor. If
they are sold before maturity, a portion of the income received may
be a short-term capital gain.
U.S. Government Agency Securities -- Federal agency securities are
debt obligations which principally result from lending programs of
the U.S. government. Housing and agriculture have traditionally
been the principal beneficiaries of Federal credit programs, and
agencies involved in providing credit to agriculture and housing
account for the bulk of the outstanding agency securities.
Repurchase Agreements -- A repurchase agreement involves the
acquisition of securities by the Portfolio, with the concurrent
agreement by a bank (or securities dealer if permitted by law or
regulation), to reacquire the securities at the portfolio's cost,
plus interest, within a specified time. The Portfolio thereby
receives a fixed rate of return on this investment, one that is
insulated from market and rate fluctuations during the holding
period. In these transactions, the securities acquired by the
Portfolio have a total value equal to or in excess of the value of
the repurchase agreement and are held by the Portfolio's custodian
until required. Pursuant to guidelines established by the
Portfolio's Board of Directors, the creditworthiness of the other
party to the transaction is considered and the value of those
securities held as collateral is monitored to ensure that such
value is maintained at the required level.
If IDS Life becomes aware that a security owned by a portfolio is
downgraded below the second highest rating, IDS Life will either
sell the security or recommend to the Fund's Board of Directors why
it should not be sold.
<PAGE>
PAGE 153
APPENDIX C
OPTIONS AND STOCK INDEX FUTURES CONTRACTS, FOR INVESTMENTS OF
EQUITY, MANAGED AND INTERNATIONAL EQUITY PORTFOLIOS
Each Portfolio may buy or write options traded on any U.S. or
foreign exchange or in the over-the-counter market. Each Portfolio
may enter into stock index futures contracts traded on any U.S. or
foreign exchange. Each Portfolio also may buy or write put and
call options on these futures and on stock indexes. Options in the
over-the-counter market will be purchased only when the investment
manager believes a liquid secondary market exists for the options
and only from dealers and institutions the investment manager
believes present a minimal credit risk. Some options are
exercisable only on a specific date. In that case, or if a liquid
secondary market does not exist, a Portfolio could be required to
buy or sell securities at disadvantageous prices, thereby incurring
losses. Managed Portfolio also may enter into interest rate
futures contracts (see Appendix D).
OPTIONS. An option is a contract. A person who buys a call option
for a security has the right to buy the security at a set price for
the length of the contract. A person who sells a call option is
called a writer. The writer of a call option agrees to sell the
security at the set price when the buyer wants to exercise the
option, no matter what the market price of the security is at that
time. A person who buys a put option has the right to sell a
security at a set price for the length of the contract. A person
who writes a put option agrees to buy the security at the set price
if the purchaser wants to exercise the option, no matter what the
market price of the security is at that time. An option is covered
if the writer owns the security (in the case of a call) or sets
aside the cash or securities of equivalent value (in the case of a
put) that would be required upon exercise.
The price paid by the buyer for an option is called a premium. In
addition, the buyer generally pays a broker a commission. The
writer receives a premium, less another commission, at the time the
option is written. The cash received is retained by the writer
whether or not the option is exercised. A writer of a call option
may have to sell the security for a below-market price if the
market price rises above the exercise price. A writer of a put
option may have to pay an above-market price for the security if
its market price decreases below the exercise price. The risk of
the writer is potentially unlimited, unless the option is covered.
Options can be used to produce incremental earnings, protect gains
and facilitate buying and selling securities for investment
purposes. The use of options and futures contracts may benefit a
Portfolio and its shareholders by improving the Portfolio's
liquidity and by helping to stabilize the value of its net assets.
<PAGE>
PAGE 154
Buying options. Put and call options may be used as a trading
technique to facilitate buying and selling securities for
investment reasons. They also may be used for investment. Options
are used as a trading technique to take advantage of any disparity
between the price of the underlying security in the securities
market and its price on the options market. It is anticipated the
trading technique will be utilized only to effect a transaction
when the price of the security plus the option price will be as
good or better than the price at which the security could be bought
or sold directly. When the option is purchased, the Portfolio pays
a premium and a commission. It then pays a second commission on
the purchase or sale of the underlying security when the option is
exercised. For record keeping and tax purposes, the price obtained
on the purchase of the underlying security will be the combination
of the exercise price, the premium and both commissions. When
using options as a trading technique, commissions on the option
will be set as if only the underlying securities were traded.
Put and call options also may be held by a Portfolio for investment
purposes. Options permit a Portfolio to experience the change in
the value of a security with a relatively small initial cash
investment.
The risk a Portfolio assumes when it buys an option is the loss of
the premium. To be beneficial to a Portfolio, the price of the
underlying security must change within the time set by the option
contract. Furthermore, the change must be sufficient to cover the
premium paid, the commissions paid both in the acquisition of the
option and in a closing transaction or in the exercise of the
option and subsequent sale (in the case of a call) or purchase (in
the case of a put) of the underlying security. Even then, the
price change in the underlying security does not ensure a profit
since prices in the option market may not reflect such a change.
Writing covered options. Each Portfolio will write covered options
when it feels it is appropriate and will follow these guidelines:
'Underlying securities will continue to be bought or sold solely on
the basis of investment considerations consistent with each
Portfolio's goal.
'All options written by a Portfolio will be covered. For covered
call options, if a decision is made to sell the security, each
Portfolio will attempt to terminate the option contract through a
closing purchase transaction.
'Each Portfolio will deal only in standard option contracts traded
on national securities exchanges or those that may be quoted on
NASDAQ (a system of price quotations developed by the National
Association of Securities Dealers, Inc.)
'Each Portfolio will write options only as permitted under federal
laws or regulations, such as those that limit the amount of total
assets subject to the options. Some regulations also affect the
Custodian. When a covered option is written, the Custodian
<PAGE>
PAGE 155
segregates the underlying securities, and issues a receipt. There
are certain rules regarding banks issuing such receipts that may
restrict the amount of covered call options written. Furthermore,
each Portfolio is limited to pledging not more than 15 percent of
the cost of its total assets.
Net premiums on call options closed or premiums on expired call
options are treated as short-term capital gains. Since each
Portfolio is taxed as a regulated investment company under the
Internal Revenue Code, any gains on options and other securities
held less than three months must be limited to less than 30 percent
of its annual gross income.
If a covered call option is exercised, the security is sold by the
Portfolio. The premium received upon writing the option is added
to the proceeds received from the sale of the security. The
Portfolio will recognize a capital gain or loss based upon the
difference between the proceeds and the security's basis. Premiums
received from writing outstanding options are included as a
deferred credit in the Statement of Assets and Liabilities and
adjusted daily to the current market value.
Options are valued at the close of the New York Stock Exchange. An
option listed on a national exchange, CBOE or NASDAQ will be valued
at the last-quoted sales price or, if such a price is not readily
available, at the mean of the last bid and asked prices.
STOCK INDEX FUTURES CONTRACTS. Stock index futures contracts are
commodity contracts listed on commodity exchanges. They currently
include contracts on the Standard & Poor's 500 Stock Index (S&P 500
Index) and other broad stock market indexes such as the New York
Stock Exchange Composite Stock Index and the Value Line Composite
Stock Index, as well as narrower sub-indexes such as the S&P 100
Energy Stock Index and the New York Stock Exchange Utilities Stock
Index. A stock index assigns relative values to common stocks
included in the index and the index fluctuates with the value of
the common stocks so included.
A futures contract is a legal agreement between a buyer or seller
and the clearinghouse of a futures exchange in which the parties
agree to make a cash settlement on a specified future date in an
amount determined by the stock index on the last trading day of the
contract. The amount is a specified dollar amount (usually $100 or
$500) multiplied the difference between the index value on the last
trading day and the value on the day the contract was struck.
For example, the S&P 500 Index consists of 500 selected common
stocks, most of which are listed on the New York Stock Exchange.
The S&P 500 Index assigns relative weightings to the common stocks
included in the Index, and the Index fluctuates with changes in the
market values of those stocks. In the case of S&P 500 Index
futures contracts, the specified multiple is $500. Thus, if the
value of the S&P 500 Index were 150, the value of one contract
would be $75,000 (150 x $500). Unlike other futures contracts, a
<PAGE>
PAGE 156
stock index futures contract specifies that no delivery of the
actual stocks making up the index will take place. Instead,
settlement in cash must occur upon the termination of the contract.
For example, excluding any transaction costs, if a Portfolio enters
into one futures contract to buy the S&P 500 Index at a specified
future date at a contract value of 150 and the S&P 500 Index is at
154 on that future date, the Portfolio will gain $500 x (154-150)
or $2,000. If the Portfolio enters into one futures contract to
sell the S&P 500 Index at a specified future date at a contract
value of 150 and the S&P 500 Index is at 152 on that future date,
the Portfolio will lose $500 x (152-150) or $1,000.
Unlike the purchase or sale of an equity security, no price would
be paid or received by the Portfolio upon entering into stock index
futures contracts. However, the Portfolio would be required to
deposit with its custodian, in a segregated account in the name of
the futures broker, an amount of cash or U.S. Treasury bills equal
to approximately 5 percent of the contract value. This amount is
known as initial margin. The nature of initial margin in futures
transactions is different from that of margin in security
transactions in that futures contract margin does not involve
borrowing funds by the Portfolio to finance the transactions.
Rather, the initial margin is in the nature of a performance bond
or good-faith deposit on the contract that is returned to the
Portfolio upon termination of the contract, assuming all
contractual obligations have been satisfied.
Subsequent payments, called variation margin, to and from the
broker would be made on a daily basis as the price of the
underlying stock index fluctuates, making the long and short
positions in the contract more or less valuable, a process known as
marking to market. For example, when a Portfolio enters into a
contract in which it benefits from a rise in the value of an index
and the price of the underlying stock index has risen, the
Portfolio will receive from the broker a variation margin payment
equal to that increase in value. Conversely, if the price of the
underlying stock index declines, the Portfolio would be required to
make a variation margin payment to the broker equal to the decline
in value.
How These Portfolios Would Use Stock Index Futures Contracts. The
Portfolios intend to use stock index futures contracts and related
options for hedging and not for speculation. Hedging permits a
Portfolio to gain rapid exposure to or protect itself from changes
in the market. For example, a Portfolio may find itself with a
high cash position at the beginning of a market rally.
Conventional procedures of purchasing a number of individual issues
entail the lapse of time and the possibility of missing a
significant market movement. By using futures contracts, the
Portfolio can obtain immediate exposure to the market and benefit
from the beginning stages of a rally. The buying program can then
proceed and once it is completed (or as it proceeds), the contracts
can be closed. Conversely, in the early stages of a market
decline, market exposure can be promptly offset by entering into
<PAGE>
PAGE 157
stock index futures contracts to sell units of an index and
individual stocks can be sold over a longer period under cover of
the resulting short contract position.
A Portfolio may enter into contracts with respect to any stock
index or sub-index. To hedge the Portfolio's investment portfolio
successfully, however, the Portfolio must enter into contracts with
respect to indexes or sub-indexes whose movements will have a
significant correlation with movements in the prices of the
Portfolio's individual portfolio securities.
Special Risks of Transactions in Stock Index Futures Contracts.
1. Liquidity. Each Portfolio may elect to close some or all of
its contracts prior to expiration. The purpose of making such a
move would be to reduce or eliminate the hedge position held by the
Portfolio. The Portfolio may close its positions by taking
opposite positions. Final determinations of variation margin are
then made, additional cash as required is paid by or to the
Portfolio, and the Portfolio realizes a gain or a loss.
Positions in stock index futures contracts may be closed only on an
exchange or board of trade providing a secondary market for such
futures contracts. For example, futures contracts transactions can
currently be entered into with respect to the S&P 500 Stock Index
on the Chicago Mercantile Exchange, the New York Stock Exchange
Composite Stock Index on the New York Futures Exchange and the
Value Line Composite Stock Index on the Kansas City Board of Trade.
Although the Portfolios intend to enter into futures contracts only
on exchanges or boards of trade where there appears to be an active
secondary market, there is no assurance that a liquid secondary
market will exist for any particular contract at any particular
time. In such event, it may not be possible to close a futures
contract position, and in the event of adverse price movements, the
Portfolio would have to make daily cash payments of variation
margin. Such price movements, however, will be offset all or in
part by the price movements of the securities subject to the hedge.
Of course, there is no guarantee the price of the securities will
correlate with the price movements in the futures contract and thus
provide an offset to losses on a futures contract.
2. Hedging Risks. There are several risks in using stock index
futures contracts as a hedging device. One risk arises because the
prices of futures contracts may not correlate perfectly with
movements in the underlying stock index due to certain market
distortions. First, all participants in the futures market are
subject to initial margin and variation margin requirements.
Rather than making additional variation margin payments, investors
may close the contracts through offsetting transactions which could
distort the normal relationship between the index and futures
markets. Second, the margin requirements in the futures market are
lower than margin requirements in the securities market, and as a
result the futures market may attract more speculators than does
the securities market. Increased participation by speculators in
<PAGE>
PAGE 158
the futures market also may cause temporary price distortions.
Because of price distortion in the futures market and because of
imperfect correlation between movements in stock indexes and
movements in prices of futures contracts, even a correct forecast
of general market trends may not result in a successful hedging
transaction over a short period.
Another risk arises because of imperfect correlation between
movements in the value of the stock index futures contracts and
movements in the value of securities subject to the hedge. If this
occurred, a Portfolio could lose money on the contracts and also
experience a decline in the value of its portfolio securities.
While this could occur, IDS Life believes that over time the value
of the Portfolio's investment portfolio will tend to move in the
same direction as the market indexes and will attempt to reduce
this risk, to the extent possible, by entering into futures
contracts on indexes whose movements it believes will have a
significant correlation with movements in the value of the
Portfolio's investment portfolio securities sought to be hedged.
It is also possible that if the Portfolio has hedged against a
decline in the value of the stocks held in its portfolio and stock
prices increase instead, the Portfolio will lose part or all of the
benefit of the increased value of its stock which it has hedged
because it will have offsetting losses in its futures positions.
In addition, in such situations, if the Portfolio has insufficient
cash, it may have to sell securities to meet daily variation
margin requirements. Such sales of securities may be, but will not
necessarily be, at increased prices which reflect the rising
market. The Portfolio may have to sell securities at a time when
it may be disadvantageous to do so.
OPTIONS ON STOCK INDEX FUTURES CONTRACTS. Options on stock index
futures contracts are similar to options on stock except that
options on futures contracts give the purchaser the right, in
return for the premium paid, to assume a position in a stock index
futures contract (a long position if the option is a call and a
short position if the option is a put) at a specified exercise
price at any time during the period of the option. If the option
is closed instead of exercised, the holder of the option receives
an amount that represents the amount by which the market price of
the contract exceeds (in the case of a call) or is less than (in
the case of a put) the exercise price of the option on the futures
contract. If the option does not appreciate in value prior to the
exercise date, the Portfolio will suffer a loss of the premium
paid.
OPTIONS ON STOCK INDEXES. Options on stock indexes are securities
traded on national securities exchanges. An option on a stock
index is similar to an option on a futures contract except all
settlements are in cash. A Portfolio exercising a put, for
example, would receive the difference between the exercise price
and the current index level. Such options would be used in the
same manner as options on futures contracts.
<PAGE>
PAGE 159
SPECIAL RISKS OF TRANSACTIONS IN OPTIONS ON STOCK INDEX FUTURES
CONTRACTS AND OPTIONS ON STOCK INDEXES. As with options on stocks,
the holder of an option on a stock index futures contract or on a
stock index may terminate a position by selling an option covering
the same contract or index and having the same exercise price and
expiration date. The ability to establish and close out positions
on such options will be subject to the development and maintenance
of a liquid secondary market. The Portfolios will not purchase
options unless the market for such options has developed
sufficiently, so that the risks in connection with options are not
greater than the risks in connection with stock index futures
contracts transactions themselves. Compared to using futures
contracts, purchasing options involves less risk to the Portfolios
because the maximum amount at risk is the premium paid for the
options (plus transaction costs). There may be circumstances,
however, when using an option would result in a greater loss to a
Portfolio than using a futures contract, such as when there is no
movement in the level of the stock index.
TAX TREATMENT. As permitted under federal income tax laws, each
Portfolio intends to identify futures contracts as mixed straddles
and not mark them to market, that is, not treat them as having been
sold at the end of the year at market value. Such an election may
result in the Portfolio being required to defer recognizing losses
incurred by entering into futures contracts and losses on
underlying securities identified as being hedged against.
Federal income tax treatment of gains or losses from transactions
in options on futures contracts and stock indexes is currently
unclear, although the Portfolios' tax advisors currently believe
marking to market is not required. Depending on developments, a
Portfolio may seek IRS rulings clarifying questions concerning such
treatment. Certain provisions of the Code also may limit a
Portfolio's ability to engage in futures contracts and related
options transactions. For example, at the close of each quarter of
the Portfolio's taxable year, at least 50 percent of the value of
its assets must consist of cash, government securities and other
securities, subject to certain diversification requirements. Less
than 30 percent of its gross income must be derived from sales of
securities held less than three months.
The IRS has ruled publicly that an exchange-traded call option is a
security for purposes of the 50-percent-of-assets test and that its
issuer is the issuer of the underlying security, not the writer of
the option, for purposes of the diversification requirements. In
order to avoid realizing a gain within the three-month period, a
Portfolio may be required to defer closing out a contract beyond
the time when it might otherwise be advantageous to do so. The
Portfolio also may be restricted in purchasing put options for the
purpose of hedging underlying securities because of applying the
short sale holding period rules with respect to such underlying
securities.
<PAGE>
PAGE 160
Accounting for futures contracts will be according to generally
accepted accounting principles. Initial margin deposits will be
recognized as assets due from a broker (the Portfolio's agent in
acquiring the futures position). During the period the futures
contract is open, changes in value of the contract will be
recognized as unrealized gains or losses by marking to market on a
daily basis to reflect the market value of the contract at the end
of each day's trading. Variation margin payments will be made or
received depending upon whether gains or losses are incurred. All
contracts and options will be valued at the last-quoted sales price
on their primary exchange.
<PAGE>
PAGE 161
APPENDIX D
OPTIONS AND INTEREST RATE FUTURES CONTRACTS, FOR INVESTMENTS OF
INCOME, MANAGED AND GOVERNMENT SECURITIES PORTFOLIOS
Income and Managed Portfolios may buy or write options traded on
any U.S. or foreign exchange or in the over-the-counter market.
Each Portfolio may enter into interest rate futures contracts
traded on any U.S. or foreign exchange. Each Portfolio also may
buy or write put and call options on these futures. Options in the
over-the-counter market will be purchased only when the investment
manager believes a liquid secondary market exists for the options
and only from dealers and institutions the investment manager
believes present a minimal credit risk. Some options are
exercisable only on a specific date. In that case, or if a liquid
secondary market does not exist, a Portfolio could be required to
buy or sell securities at disadvantageous prices, thereby incurring
losses. Managed Portfolio also may enter into stock index futures
contracts (see Appendix C).
Government Securities Portfolio may buy or write options traded on
any U.S. exchange or in the over-the-counter market. The Portfolio
may enter into interest rate futures contracts traded on any U.S.
exchange. The Portfolio also may buy or write put and call options
on these futures. Options in the over-the-counter market will be
purchased only when the investment manager believes a liquid
secondary market exists for the options and only from dealers and
institutions the investment manager believes present a minimal
credit risk. Some options are exercisable only on a specific date.
In that case, or if a liquid secondary market does not exist, the
Portfolio could be required to buy or sell securities at
disadvantageous prices, thereby incurring losses.
OPTIONS. An option is a contract. A person who buys a call option
for a security has the right to buy the security at a set price for
the length of the contract. A person who sells a call option is
called a writer. The writer of a call option agrees to sell the
security at the set price when the buyer wants to exercise the
option, no matter what the market price of the security is at that
time. A person who buys a put option has the right to sell a
security at a set price for the length of the contract. A person
who writes a put option agrees to buy the security at the set price
if the purchaser wants to exercise the option, no matter what the
market price of the security is at that time. An option is covered
if the writer owns the security (in the case of a call) or sets
aside the cash (in the case of a put) that would be required upon
exercise.
The price paid by the buyer for an option is called a premium. In
addition the buyer generally pays a broker a commission. The
writer receives a premium, less a commission, at the time the
option is written. The cash received is retained by the writer
whether or not the option is exercised. A writer of a call option
may have to sell the security for a below-market price if the
<PAGE>
PAGE 162
market price rises above the exercise price. A writer of a put
option may have to pay an above-market price for the security if
its market price decreases below the exercise price.
Options can be used to produce incremental earnings, protect gains
and facilitate buying and selling securities for investment
purposes. The use of options and futures contracts may benefit a
Portfolio and its shareholders by improving the Portfolio's
liquidity and by helping to stabilize the value of its net assets.
Buying options. Put and call options may be used as a trading
technique to facilitate buying and selling securities for
investment reasons. They also may be used for investment. Options
are used as a trading technique to take advantage of any disparity
between the price of the underlying security in the securities
market and its price on the options market. It is anticipated the
trading technique will be utilized only to effect a transaction
when the price of the security plus the option price will be as
good or better than the price at which the security could be bought
or sold directly. When the option is purchased, the Portfolio pays
a premium and a commission. It then pays a second commission on
the purchase or sale of the underlying security when the option is
exercised. For record keeping and tax purposes, the price obtained
on the purchase of the underlying security will be the combination
of the exercise price, the premium and both commissions. When
using options as a trading technique, commissions on the option
will be set as if only the underlying securities were traded.
Put and call options also may be held by a Portfolio for investment
purposes. Options permit the Portfolio to experience the change in
the value of a security with a relatively small initial cash
investment. The risk the Portfolio assumes when it buys an option
is the loss of the premium. To be beneficial to the Portfolio, the
price of the underlying security must change within the time set by
the option contract. Furthermore, the change must be sufficient to
cover the premium paid, the commissions paid both in the
acquisition of the option and in a closing transaction or in the
exercise of the option and sale (in the case of a call) or purchase
(in the case of a put) of the underlying security. Even then the
price change in the underlying security does not ensure a profit
since prices in the option market may not reflect such a change.
Writing covered options. A Portfolio will write covered options
when it feels it is appropriate and will follow these guidelines:
'Underlying securities will continue to be bought or sold solely on
the basis of investment considerations consistent with the
Portfolio's goal.
'All options written by the Portfolio will be covered. For covered
call options if a decision is made to sell the security, the
Portfolio will attempt to terminate the option contract through a
closing purchase transaction.
<PAGE>
PAGE 163
'The Portfolio will write options only as permitted under federal
laws or regulations, such as those that limit the amount of total
assets subject to the options. Some regulations also affect the
Custodian. When a covered call option is written, the Custodian
segregates the underlying securities and issues a receipt. There
are certain rules regarding banks issuing such receipts that may
restrict the amount of covered call options written. Furthermore,
a Portfolio is limited to pledging not more than 15 percent of the
cost of its total assets.
Net premiums on call options closed or premiums on expired call
options are treated as short-term capital gains. Since a Portfolio
is taxed as a regulated investment company under the Code, any
gains on options and other securities held less than three months
must be limited to less than 30 percent of its annual gross income.
If a covered call option is exercised, the security is sold by the
Portfolio. The Portfolio will recognize a capital gain or loss
based upon the difference between the proceeds and the security's
basis.
Options on many securities are listed on options exchanges. If a
Portfolio writes listed options, it will follow the rules of the
options exchange. Options are valued at the close of the New York
Stock Exchange. An option listed on a national exchange, CBOE or
NASDAQ will be valued at the last quoted sales price or, if such a
price is not readily available, at the mean of the last bid and
asked prices.
FUTURES CONTRACTS. A futures contract is an agreement between two
parties to buy and sell a security for a set price on a future
date. They have been established by boards of trade which have
been designated contracts markets by the Commodity Futures Trading
Commission (CFTC). Futures contracts trade on these markets in a
manner similar to the way a stock trades on a stock exchange, and
the boards of trade, through their clearing corporations, guarantee
performance of the contracts. Currently, there are futures
contracts based on such debt securities as long-term U.S. Treasury
bonds, Treasury notes, GNMA modified pass-through mortgate-backed
securities, three-month U.S. Treasury bills and bank certificates
of deposit. While futures contracts based on debt securities do
provide for the delivery and acceptance of securities, such
deliveries and acceptances are very seldom made. Generally, the
futures contract is terminated by entering into an offsetting
transaction. An offsetting transaction for a futures contract sale
is effected by the Portfolio entering into a futures contract
purchase for the same aggregate amount of the specific type of
financial instrument and same delivery date. If the price in the
sale exceeds the price in the offsetting purchase, the Portfolio
immediately is paid the difference and realizes a gain. If the
offsetting purchase price exceeds the sale price, the Portfolio
pays the difference and realizes a loss. Similarly, closing out a
futures contract purchase is effected by the Portfolio entering
into a futures contract sale. If the offsetting sale price
<PAGE>
PAGE 164
exceeds the purchase price, the Portfolio realizes a gain, and if
the offsetting sale price is less than the purchase price, the
Portfolio realizes a loss. At the time a futures contract is made,
a good-faith deposit called initial margin is set up within a
segregated account at the Portfolios' custodian bank. The initial
margin deposit is approximately 1.5 percent of a contract's face
value. Daily thereafter, the futures contract is valued and the
payment of variation margin is required so that each day the
Portfolio would pay out cash in an amount equal to any decline in
the contract's value or receive cash equal to any increase. At the
time a futures contract is closed out, a nominal commission is
paid, which is generally lower than the commission on a comparable
transaction in the cash markets.
The purpose of a futures contract, in the case of a fund holding
long-term debt securities, is to gain the benefit of changes in
interest rates without actually buying or selling long-term debt
securities. For example, if a Portfolio owned long-term bonds and
interest rates were expected to increase, it might enter into
futures contracts to sell securities which would have much the same
effect as selling some of the long-term bonds it owned. Futures
contracts are based on types of debt securities referred to above,
which have historically reacted to an increase or decline in
interest rates in a fashion similar to the debt securities the
Portfolio owns. If interest rates did increase, the value of the
debt securities in the portfolio would decline, but the value of
the Portfolio's futures contracts would increase at approximately
the same rate, thereby keeping the net asset value of the Portfolio
from declining as much as it otherwise would have. If, on the
other hand, the Portfolio held cash reserves and interest rates
were expected to decline, the Portfolio might enter into interest
rate futures contracts for the purchase of securities. If short-
term rates were higher than long-term rates, the ability to
continue holding these cash reserves would have a very beneficial
impact on the Portfolio's earnings. Even if short-term rates were
not higher, the Portfolio would still benefit from the income
earned by holding these short-term investments. At the same time,
by entering into futures contracts for the purchase of securities,
the Portfolio could take advantage of the anticipated rise in the
value of long-term bonds without actually buying them until the
market had stabilized. At that time, the futures contracts could
be liquidated and the Portfolio's cash reserves could then be used
to buy long-term bonds on the cash market. The Portfolio could
accomplish similar results by selling bonds with long maturities
and investing in bonds with short maturities when interest rates
are expected to increase or by buying bonds with long maturities
and selling bonds with short maturities when interest rates are
expected to decline. But by using futures contracts as an
investment tool, given the greater liquidity in the futures market
than in the cash market, it might be possible to accomplish the
same result more easily and more quickly. Successful use of
futures contracts depends on the investment manager's ability to
predict the future direction of interest rates. If the investment
manager's prediction is incorrect, the Portfolio would have been
better off had it not entered into futures contracts.
<PAGE>
PAGE 165
OPTIONS ON FUTURES CONTRACTS. Options give the holder a right to
buy or sell futures contracts in the future. Unlike a futures
contract, which requires the parties to the contract to buy and
sell a security on a set date, an option on a futures contract
merely entitles its holder to decide on or before a future date
(within nine months of the date of issue) whether to enter into
such a contract. If the holder decides not to enter into the
contract, all that is lost is the amount (premium) paid for the
option. Furthermore, because the value of the option is fixed at
the point of sale, there are no daily payments of cash to reflect
the change in the value of the underlying contract.
However, since an option gives the buyer the right to enter into a
contract at a set price for a fixed period of time, its value does
change daily and that change is reflected in the net asset value of
the Portfolio.
RISKS. There are risks in engaging in each of the management tools
described above. The risk a Portfolio assumes when it buys an
option is the loss of the premium paid for the option. Purchasing
options also limits the use of monies that might otherwise be
available for long-term investments.
The risk involved in writing options on futures contracts the
Portfolio owns, or on securities held in its portfolio, is that
there could be an increase in the market value of such contracts or
securities. If that occurred, the option would be exercised and
the asset sold at a lower price than the cash market price. To
some extent, the risk of not realizing a gain could be reduced by
entering into a closing transaction. The Portfolio could enter
into a closing transaction by purchasing an option with the same
terms as the one it had previously sold. The cost to close the
option and terminate the Portfolio's obligation, however, might be
more or less than the premium received when it originally wrote the
option. Furthermore, the Portfolio might not be able to close the
option because of insufficient activity in the options market.
A risk in employing futures contracts to protect against the price
volatility of securities is that the prices of securities subject
to futures contracts may not correlate perfectly with the behavior
of the cash prices of the Portfolio's securities. The correlation
may be distorted because the futures market is dominated by short-
term traders seeking to profit from the difference between a
contract or security price and their cost of borrowed funds. Such
distortions are generally minor and would diminish as the contract
approached maturity.
Another risk is that the Portfolio's investment manager could be
incorrect in anticipating as to the direction or extent of various
interest rate movements or the time span within which the movements
take place. For example, if the Portfolio sold futures contracts
for the sale of securities in anticipation of an increase in
interest rates, and interest rates declined instead, the Portfolio
would lose money on the sale.
<PAGE>
PAGE 166
TAX TREATMENT. As permitted under federal income tax laws, each
Portfolio intends to identify futures contracts as mixed straddles
and not mark them to market, that is, not treat them as having been
sold at the end of the year at market value. Such an election may
result in the Portfolio being required to defer recognizing losses
incurred by entering into futures contracts and losses on
underlying securities identified as being hedged against.
Federal income tax treatment of gains or losses from transactions
in options on futures contracts and indexes currently is unclear,
although the Portfolios' tax advisors currently believe marking to
market is not required. Depending on developments, a Portfolio may
seek IRS rulings clarifying questions concerning such treatment.
Certain provisions of the Code also may limit a Portfolio's ability
to engage in futures contracts and related options transactions.
For example, at the close of each quarter of the Portfolio's
taxable year, at least 50 percent of the value of its assets must
consist of cash, government securities and other securities,
subject to certain diversification requirements. Less than 30
percent of its gross income must be derived from sales of
securities held less than three months.
The IRS has ruled publicly that an exchange-traded call option is a
security for purposes of the 50-percent-of-assets test and that its
issuer is the issuer of the underlying security, not the writer of
the option, for purposes of the diversification requirements. In
order to avoid realizing a gain within the three-month period, the
Portfolio may be required to defer closing out a contract beyond
the time when it might otherwise be advantageous to do so. The
Portfolio also may be restricted in purchasing put options for the
purpose of hedging underlying securities because of applying the
short sale holding period rules with respect to such underlying
securities.
Accounting for futures contracts will be according to generally
accepted accounting principles. Initial margin deposits will be
recognized as assets due from a broker (the Portfolio's agent in
acquiring the futures position). During the period the futures
contract is open, changes in value of the contract will be
recognized as unrealized gains or losses by marking to market on a
daily basis to reflect the market value of the contract at the end
of each day's trading. Variation margin payments will be made or
received depending upon whether gains or losses are incurred. All
contracts and options will be valued at the last-quoted sales price
on their primary exchange.
<PAGE>
PAGE 167
APPENDIX E
MORTGAGE-BACKED SECURITIES AND ADDITIONAL INFORMATION ON INVESTMENT
POLICIES (FOR ALL PORTFOLIOS EXCEPT MONEY MARKET)
GNMA Certificates
The Government National Mortgage Association (GNMA) is a wholly
owned corporate instrumentality of the United States within the
Department of Housing and Urban Development. GNMA certificates are
mortgage-backed securities of the modified pass-through type, which
means that both interest and principal payments (including
prepayments) are passed through monthly to the holder of the
certificate. Each certificate evidences an interest in a specific
pool of mortgage loans insured by the Federal Housing
Administration or the Farmers Home Administration or guaranteed by
the Veterans Administration. The National Housing Act provides
that the full faith and credit of the United States is pledged to
the timely payment of principal and interest by GNMA of amounts due
on these certificates. GNMA is empowered to borrow without
limitation from the U.S. Treasury, if necessary, to make such
payments.
Underlying Mortgages of the Pool. Pools consist of whole mortgage
loans or participations in loans. The majority of these loans are
made to purchasers of 1-4 member family homes. The terms and
characteristics of the mortgage instruments generally are uniform
within a pool but may vary among pools. For example, in addition
to fixed-rate fixed-term mortgages, the Portfolio may purchase
pools of variable rate mortgages, growing equity mortgages,
graduated payment mortgages and other types.
All servicers apply standards for qualification to local lending
institutions which originate mortgages for the pools. Servicers
also establish credit standards and underwriting criteria for
individual mortgages included in the pools. In addition, many
mortgages included in pools are insured through private mortgage
insurance companies.
Average Life of GNMA Certificates. The average life of GNMA
certificates varies with the maturities of the underlying mortgage
instruments which have maximum maturities of 30 years. The average
life is likely to be substantially less than the original maturity
of the mortgage pools underlying the securities as the result of
prepayments or refinancing of such mortgages. Such prepayments are
passed through to the registered holder with the regular monthly
payments of principal and interest.
As prepayment rates vary widely, it is not possible to accurately
predict the average life of a particular pool. It is customary in
the mortgage industry in quoting yields on a pool of 30-year
mortgages to compute the yield as if the pool were a single loan
that is amortized according to a 30-year schedule and that is
<PAGE>
PAGE 168
prepaid in full at the end of the 12th year. For this reason, it
is standard practice to treat GNMA certificates as 30-year
mortgage-backed securities which prepay fully in the 12th year.
Calculation of Yields. Yields on pass-through securities are
typically quoted based on the maturity of the underlying
instruments and the associated average life assumption.
Actual pre-payment experience may cause the yield to differ from
the assumed average life yield. When mortgage rates drop, pre-
payments will increase, thus reducing the yield. Reinvestment of
pre-payments may occur at higher or lower interest rates than the
original investment, thus affecting the yield of a Portfolio. The
compounding effect from reinvestments of monthly payments received
by the Portfolio will increase the yield to shareholders compared
to bonds that pay interest semi-annually. The yield also may be
affected if the certificate was issued at a premium or discount,
rather than at par. This also applies after issuance to
certificates trading in the secondary market at a premium or
discount.
"When-Issued" GNMA Certificates. Some U.S. government securities
may be purchased on a "when-issued" basis, which means that it may
take as long as 45 days after the purchase before the securities
are delivered to the Portfolio. Payment and interest terms,
however, are fixed at the time the purchaser enters into the
commitment. However, the yield on a comparable GNMA certificate
when the transaction is consummated may vary from the yield on the
GNMA certificate at the time that the when-issued transaction was
made. A Portfolio does not pay for the securities or start earning
interest on them until the contractual settlement date. When-
issued securities are subject to market fluctuations and they may
affect the Portfolio's gross assets the same as owned securities.
Market for GNMA Certificates. Since the inception of the GNMA
mortgage-backed securities program in 1970, the amount of GNMA
certificates outstanding has grown rapidly. The size of the market
and the active participation in the secondary market by securities
dealers and many types of investors make the GNMA certificates a
highly liquid instrument. Prices of GNMA certificates are readily
available from securities dealers and depend on, among other
things, the level of market interest rates, the certificate's
coupon rate and the prepayment experience of the pool of mortgages
underlying each certificate.
Stripped mortgage-backed securities. Generally, there are two
classes of stripped mortgage-backed securities: Interest Only (IO)
and Principal Only (PO). IOs entitle the holder to receive
distributions consisting of all or a portion of the interest on the
underlying pool of mortgage loans or mortgage-backed securities.
POs entitle the holder to receive distributions consisting of all
or a portion of the principal of the underlying pool of mortgage
loans or mortgage-backed securities. The cash flows and yields on
IOs and POs are extremely sensitive to the rate of principal
<PAGE>
PAGE 169
payments (including prepayments) on the underlying mortgage loans
or mortgage-backed securities. A rapid rate of principal payments
may adversely affect the yield to maturity of IOs. A slow rate of
principal payments may adversely affect the yield to maturity of
POs. If prepayments of principal are greater than anticipated, an
investor may incur substantial losses. If prepayments of principal
are slower than anticipated, the yield on a PO will be affected
more severely than would be the case with a traditional mortgage-
backed security.
Income, Managed and Government Securities Portfolios may invest in
securities called "inverse floaters". Inverse floaters are created
by underwriters using the interest payments on securities. A
portion of the interest received is paid to holders of instruments
based on current interest rates for short-term securities. What is
left over, less a servicing fee, is paid to holders of the inverse
floaters. As interest rates go down, the holders of the inverse
floaters receive more income and an increase in the price for the
inverse floaters. As interest rates go up, the holders of the
inverse floaters receive less income and a decrease in the price
for the inverse floaters.
Income, Managed and Government Securities Portfolios may purchase
some securities in advance of when they are issued. Price and rate
of interest are set on the date the commitments are given but no
payment is made or interest earned until the date the securities
are issued, usually within two months, but other terms may be
negotiated. The commitment requires the portfolio to buy the
security when it is issued so the commitment is valued daily the
same way as owning a security would be valued. The Portfolio's
custodian will maintain, in a segregated account, cash or liquid
high-grade debt securities that are marked to market daily and are
at least equal in value to the Portfolio's commitments to purchase
the securities. The Portfolio may sell the commitment just like it
can sell a security. Frequently, the Portfolio has the opportunity
to sell the commitment back to the institution that plans to issue
the security and at the same time enter into a new commitment to
purchase a when-issued security in the future. For rolling its
commitment forward, the Portfolio realizes a gain or loss on the
sale of the current commitment or receives a fee for entering into
the new commitment.
Income, Managed and Government Securities Portfolios may purchase
mortgage-backed security (MBS) put spread options and write covered
MBS call spread options. MBS spread options are based upon the
changes in the price spread between a specified mortgage-backed
security and a like-duration Treasury security. MBS spread options
are traded in the OTC market and are of short duration, typically
one to two months. The Portfolio would buy or sell covered MBS
call spread options in situations where mortgage-backed securities
are expected to under perform like-duration Treasury securities.
<PAGE>
PAGE 170
APPENDIX F
DOLLAR-COST AVERAGING
A technique that works well for many investors is one that
eliminates random buy and sell decisions. One such system is
dollar-cost averaging. Dollar-cost averaging involves building a
portfolio through the investment of fixed amounts of money on a
regular basis regardless of the price or market condition. This
may enable an investor to smooth out the effects of the volatility
of the financial markets. By using this strategy, more units will
be purchased when the price is low and less when the price is high.
As the accompanying chart illustrates, dollar-cost averaging tends
to keep the average price paid for the units lower than the average
market price of units purchased, although there is no guarantee.
While this does not ensure a profit and does not protect against a
loss if the market declines, it is an effective way for many policy
owners who can continue investing through changing market
conditions to accumulate units to meet long term goals.
Dollar-cost averaging
Regular Market Price Units
Investment of a Unit Acquired
$100 $ 6.00 16.7
100 4.00 25.0
100 4.00 25.0
100 6.00 16.7
100 5.00 20.0
$500 $25.00 103.4
Average market price of a unit over 5 periods:
$5.00 ($25.00 divided by 5).
The average price you paid for each unit:
$4.84 ($500 divided by 103.4).
<PAGE>
PAGE 171
APPENDIX G
Description of corporate bond ratings
Bond ratings concern the quality of the issuing corporation. They
are not an opinion of the market value of the security. Such
ratings are opinions on whether the principal and interest will be
repaid when due. A security's rating may change which could affect
its price. Ratings by Moody's Investors Service, Inc. are Aaa, Aa,
A, Baa, Ba, B, Caa, Ca, C and D. Ratings by Standard & Poor's
Corporation are AAA, AA, A, BBB, BB, B, CCC, CC, C and D.
Aaa/AAA - Judged to be of the best quality and carry the smallest
degree of investment risk. Interest and principal are secure.
Aa/AA - Judged to be high-grade although margins of protection for
interest and principal may not be quite as good as Aaa or AAA rated
securities.
A - Considered upper-medium grade. Protection for interest and
principal is deemed adequate but may be susceptible to future
impairment.
Baa/BBB - Considered medium-grade obligations. Protection for
interest and principal is adequate over the short-term; however,
these obligations may have certain speculative characteristics.
Ba/BB - Considered to have speculative elements. The protection of
interest and principal payments may be very moderate.
B - Lack characteristics of the desirable investments. There may
be small assurance over any long period of time of the payment of
interest and principal.
Caa/CCC - Are of poor standing. Such issues may be in default or
there may be risk with respect to principal or interest.
Ca/CC - Represent obligations that are highly speculative. Such
issues are often in default or have other marked shortcomings.
C - Are obligations with a higher degree of speculation. These
securities have major risk exposures to default.
D - Are in payment default. The D rating is used when interest
payments or principal payments are not made on the due date.
Definitions of Zero-Coupon and Pay-In-Kind Securities
A zero-coupon security is a security that is sold at a deep
discount from its face value and makes no periodic interest
payments. The buyer of such a security receives a rate of return
by gradual appreciation of the security, which is redeemed at face
value on the maturity date.
<PAGE>
PAGE 172
A pay-in-kind security is a security in which the issuer has the
option to make interest payments in cash or in additional
securities. The securities issued as interest usually have the
same terms, including maturity date, as the pay-in-kind securities.
Non-rated securities will be considered for investment when they
possess a risk comparable to that of rated securities consistent
with the Fund's objectives and policies. When assessing the risk
involved in each non-rated security, the Fund will consider the
financial condition of the issuer or the protection afforded by the
terms of the security.
<PAGE>
PAGE 173
<TABLE>
<CAPTION>
Statements of assets and liabilities
IDS Life Series Fund, Inc.
February 28, 1995 (Unaudited)
International
Equity
Portfolio
Assets
__________________________________________________________________________________________________
<S> <C>
Investments in securities, at value (Note 1)
(identified cost: $5,955,137) $5,695,874
Cash in bank on demand deposit 56,334
Receivable for investment securities sold 22,601
Dividends and accrued interest receivable 4,980
Receivable for forward foreign currency contracts
held, at value (Notes 1 and 4) 405,770
Receivable (for capital stock sold) from:
IDS Life subaccounts 86,667
IDS Life of New York subaccounts 914
___________________________________________________________________________________________________
Total assets 6,273,140
___________________________________________________________________________________________________
Liabilities
___________________________________________________________________________________________________
Payable for investment securities purchased 639,675
Accrued investment management and services fee 3,329
Payable for forward foreign currency contracts held,
at value (Notes 1 and 4) 405,746
___________________________________________________________________________________________________
Total liabilities 1,048,750
___________________________________________________________________________________________________
Net assets applicable to outstanding capital stock $5,224,390
___________________________________________________________________________________________________
Represented by
___________________________________________________________________________________________________
Capital stock - authorized 10,000,000,000 shares
of $.001 par value: outstanding, 564,741 shares $ 565
Additional paid-in capital 5,435,273
Accumulated net realized gain (loss)
on investments 37,864
Undistributed net investment income 9,950
Unrealized appreciation (depreciation) of
investments (Notes 4) (259,262)
____________________________________________________________________________________________________
Total - representing net assets applicable to
outstanding capital stock $5,224,390
____________________________________________________________________________________________________
Net asset value per share of outstanding capital
stock $ 9.25
____________________________________________________________________________________________________
See accompanying notes to financial statements.
<PAGE>
PAGE 174
Statements of operations
IDS Life Series Fund, Inc
Four months ended Feb. 28, 1995 (Unaudited)
International
Equity
Portfolio
Investment income
___________________________________________________________________________________________________
Income:
Dividends (net of foreign taxes withheld of $686) $ 5,435
Interest 20,392
___________________________________________________________________________________________________
Total income 25,827
___________________________________________________________________________________________________
Expenses (Note 2):
Investment management and services fee 8,360
___________________________________________________________________________________________________
Total expenses - net 8,360
___________________________________________________________________________________________________
Investment income (loss) - net 17,467
___________________________________________________________________________________________________
Realized and unrealized gain (loss) on investments - net
___________________________________________________________________________________________________
Realized gain on security transactions (Note 3) 37,885
Realized loss on foreign currency transactions (21)
___________________________________________________________________________________________________
Net realized gain on investments 37,864
Net change in unrealized
depreciation of investments (259,262)
___________________________________________________________________________________________________
Net loss on investments (221,398)
___________________________________________________________________________________________________
Net decrease in net assets resulting from
operations $ (203,931)
___________________________________________________________________________________________________
See accompanying notes to financial statements.
<PAGE>
PAGE 175
Statements of changes in net assets
IDS Life Series Fund, Inc.
International
Equity
Portfolio
Operations and distributions Feb. 28, 1995
Four months ended
(Unaudited)
___________________________________________________________________________________________________
Investment income - net $ 17,467
Net realized gain on investments 37,864
Net change in unrealized appreciation or
depreciation of investments (259,262)
___________________________________________________________________________________________________
Net decrease in net assets resulting
from operations (203,931)
___________________________________________________________________________________________________
Distributions to shareholders from:
Net investment income (7,517)
___________________________________________________________________________________________________
Total distributions (7,517)
___________________________________________________________________________________________________
Capital share transactions (Note 5)
___________________________________________________________________________________________________
Proceeds from sales 5,262,780
Reinvested distributions at net asset value 7,517
Payments for redemptions (19,246)
___________________________________________________________________________________________________
Increase in net assets from capital
share transactions 5,251,051
___________________________________________________________________________________________________
Total increase in net assets 5,039,603
___________________________________________________________________________________________________
Net assets at beginning of period 184,787
___________________________________________________________________________________________________
Net assets at end of period $5,224,390
___________________________________________________________________________________________________
Undistributed (excess of distributions over)
net investment income $ 9,950
___________________________________________________________________________________________________
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 176
Notes to Financial Statements
(Unaudited as of Feb. 28, 1995)
1. Summary of significant accounting policies
The fund is registered under the Investment Company Act of 1940, as
amended (the 1940 Act), as a diversified, open-end management
investment company. Shares of each portfolio of the fund are sold
to IDS Life Insurance Company (IDS Life) subaccounts or IDS Life
Insurance Company of New York subaccounts in connection with the
sale of variable insurance contracts.
The significant accounting policies followed by the Fund are
summarized as follows:
Valuation of securities
All securities are valued at the close of each business day.
Securities, other than bonds, traded on national securities
exchanges, or included in the NASDAQ National Market System, are
valued at the last quoted sales price; securities traded in the
over-the-counter market and securities for which a last quoted
sales price is not readily available are valued at the mean of the
closing bid and asking prices; and bonds and other securities are
valued at fair value according to methods selected in good faith by
the board of directors. Determination of fair value involves,
among other things, reference to market indexes, matrixes and data
from independent brokers. Short-term securities in the
International Equity Portfolio maturing in more than 60 days from
the valuation date are valued at the market price or approximate
market value based on current interest rates; those maturing in 60
days or less are valued at amortized cost.
Option transactions
In order to produce incremental earnings, protect gains, and
facilitate buying and selling of securities for investment
purposes, the International Equity Portfolio may buy and sell put
and call options and write covered call options on portfolio
securities and may write cash-secured puts. The risk in writing a
call option is that the portfolio gives up the opportunity of
profit if the market price of the security increases. The risk in
writing a put option is that the portfolio may incur a loss if the
market price of the security decreases and the option is exercised.
The risk in buying an option is that the portfolio pays a premium
whether or not the option is exercised. The portfolio also has the
additional risk of not being able to enter into a closing
transaction if a liquid secondary market does not exist. The
portfolio also may write over-the-counter options where the
completion of the obligation is dependent upon the credit standing
of the other party.
Option contracts are valued daily at the closing prices on their
primary exchanges and unrealized appreciation or depreciation is
recorded. The portfolio will realize a gain or loss upon
expiration or closing of the option transaction. When an option is
exercised, the proceeds on sales for a written call option, the
<PAGE>
PAGE 177
purchase cost for a written put option or the cost of a security
for a purchased put or call option is adjusted by the amount of
premium received or paid.
Future transactions
In order to gain exposure to or protect itself from changes in the
market, the International Equity Portfolio may buy and sell stock
index and interest rate future contracts. Risks of entering into
future contracts and related options include the possibility that
there may be an illiquid market and that a change in the value of
the contract or option may not correlate with changes in the value
of the underlying securities.
Upon entering into a futures contract, the portfolio is required to
deposit either cash or securities in an amount (initial margin)
equal to a certain percentage of the contract value. Subsequent
payments (variation margin) are made or received by the portfolio
each day. The variation margin payments are equal to the daily
changes in the contract value and are recorded as unrealized gains
and losses. The portfolio recognizes a realized gain or loss when
the contract is closed or expires.
Foreign currency translations and forward foreign currency
contracts
Securities and other assets and liabilities denominated in foreign
currencies are translated daily into U.S. dollars at the closing
rate of exchange. Foreign currency amounts related to the purchase
or sale of securities, income and expenses are translated at the
exchange rate on the transaction date. It is not practicable to
identify that portion of realized and unrealized gain (loss)
arising from changes in the exchange rates from the portion arising
from changes in the market value of investments.
The International Equity Portfolio also may enter into forward
foreign currency exchange contracts for operational purposes and to
protect against adverse exchange rate fluctuation. The net U.S.
dollar value of foreign currency underlying all contractual
commitments held by the portfolio and the resulting unrealized
appreciation or depreciation are determined using foreign currency
exchange rates from an independent pricing service. The portfolio
is subject to the credit risk that the other party will not
complete the obligations of the contract.
Federal income taxes
Since the Fund's policy is to comply with all requirements of the
Internal Revenue Code applicable to regulated investment companies
and to distribute all of its taxable income to shareholders, no
provision for income taxes is required. Each Portfolio is treated
as a separate entity for federal income tax purposes.
Net investment income (loss) and net realized gains (losses) differ
for financial statement and tax purposes primarily because of wash
sale transactions, foreign currency exchange rates and the timing
and amount of market discount recognized as ordinary income. The
character of distributions made during the year from net investment
<PAGE>
PAGE 178
income or net realized gains may differ from their ultimate
characterizations for federal income tax purposes. Also, due to
the timing of dividend distributions, the fiscal year in which
amounts are distributed may differ from the year that the income or
realized gains are recorded by the portfolios.
Dividends
At Feb. 28, 1995, dividends declared of $.02 per share for
International Equity Portfolio were payable Mar. 2, 1995.
Distributions to shareholders are recorded as of the close of
business on the record date and are payable on the first business
day following the record date. Dividends from net investment
income are declared and distributed quarterly for International
Equity Portfolio. Capital gain distributions (if any) will be made
annually. However, additional capital gain distributions may be
made periodically during the fiscal year in order to comply with
the Internal Revenue Code as applicable to regulated investment
companies.
Other
Security transactions are accounted for on the date securities are
purchased or sold. Dividend income is recognized on the ex-
dividend date and interest income, including level-yield
amortization of premium and discount, is accrued daily.
2. Investment management and services agreement
The fund has an Investment Management and Services Agreement with
IDS Life. For its services, IDS Life is paid a fee based on the
aggregate average daily net assets of each of the portfolios. For
International Equity Portfolio the fee is 0.95% on an annual basis.
IDS Life and IDS Financial Corporation Inc. (IDS) have an
Investment Advisory Agreement that calls for IDS Life to pay IDS a
fee for investment advice about the fund's portfolios. The fee
paid by IDS Life is 0.50% of International Equity Portfolio's
average daily net assets for the year.
In addition to paying its own management fee, each portfolio also
pays its taxes, brokerage commissions and nonadvisory expenses.
Expenses that relate to a particular portfolio, such as custodian
fees and registration fees for shares, are paid by that Portfolio.
Other expenses are allocated to the portfolios in an equitable
manner as determined by the Fund's board. Each portfolio also pays
custodian fees to IDS Trust Company, an affiliate of IDS Life.
The Investment Management and Services Agreement provides that IDS
Life will reimburse the portfolio, if in any year the aggregate
ordinary operating expenses of any portfolio exceed the most
restrictive expense limitations then in effect under any state
securities law or the regulations thereunder. However, commencing
April 5, 1989, IDS Life has voluntarily agreed to reimburse each
portfolio for operating expenses, excluding the investment
management and services fees, which exceed 0.1 % on an annual basis
of average daily net assets of each portfolio.
<PAGE>
PAGE 179
3. Securities transactions
For the four months ended Feb. 28, 1995, cost of purchases and
proceeds from sales of securities aggregated $3,873,376 and
$251,682 for International Equity Portfolio. Realized gains and
losses are determined on the basis of identified costs.
4. Forward foreign currency contracts
At Feb. 28, 1995, International Equity Portfolio had entered into
forward currency exchange contracts that obligate the portfolio to
deliver currency at a specified future date. The terms of the open
contract are as follows:
<TABLE>
<CAPTION>
U.S. Dollar Value U.S. Dollar Value
Currency to as of Currency to as of
Exchange Date be delivered Feb. 28, 1995 be received Feb. 28, 1995
_________________________________________________________________________________________
<S> <C> <C> <C> <C>
March 8, 1995 $ 19,860 $ 7,781 $ 7,777 $ 7,777
Malaysian Dollar U.S. Dollar
March 9, 1995 37,830 14,821 14,819 14,819
Malaysian Dollar U.S. Dollar
March 1, 1995 241,056 241,056 1,863,364 241,009
U.S. Dollar Hong Kong Dollar
March 2, 1995 142,088 142,088 198,100 142,165
U.S. Dollar Canadian Dollar
$405,746 $405,770
</TABLE>
5. Capital share transactions
Transactions in shares of the Portfolio for the four months ended
Feb. 28, 1995 were as follows:
Number of shares:
International
Equity
Portfolio
___________________________________________________________________
Shares at beginning of period 18,479
___________________________________________________________________
Sold 547,495
Issued for reinvested
distributions 830
Redeemed (2,063)
___________________________________________________________________
Net increase 546,262
___________________________________________________________________
Shares at end of period 564,741
___________________________________________________________________
6. Financial highlights
"Financial highlights" showing per share data and selected
information is presented on page 10 of this prospectus.
<PAGE>
PAGE 180
<TABLE><CAPTION>
IDS Life Series Fund, Inc. (Percentages represent
Feb. 28, 1995 (Unaudited) value of investments
International Equity Portfolio compared to net assets)
Common stocks (65.1%)
Issuer Shares Value(a)
_____________________________________________________________________________________________
<S> <C> <C> <C>
Argentina (6.8%)
Energy
Transportadora De Gas 30,000 (b) 258,750
YPF 5,000 95,000
Total 353,750
_____________________________________________________________________________________________
Austria (2.6%)
Energy
Oester-Mineral (OEMV) 1,400 (b) 135,806
_____________________________________________________________________________________________
Brazil (1.9%)
Metals
Usiminas ADR 7,000 (b,c) 99,750
_____________________________________________________________________________________________
Canada (4.8%)
Precious metals
Barrick Gold 5,000 108,750
Diamond Fields 10,000 (b) 140,832
Total 249,582
_____________________________________________________________________________________________
Denmark (2.4%)
Miscellaneous
Kopenhavns Lufthavre 2,100 (b) 125,649
_____________________________________________________________________________________________
France (2.1%)
Financial services
AXA 2,500 (b) $107,970
_____________________________________________________________________________________________
Germany (2.1%)
Building materials
Kampa Haus 190 (b) 112,110
_____________________________________________________________________________________________
Hong Kong (9.9%)
Beverages & tobacco (4.7%)
San Miguel Brewery 280,000 (b) 242,480
Health care (1.2%)
G-Casa Autrey 6,000 61,500
Industrial machines (1.5%)
Luks Industrial 600,000 78,600
Multi-industry (2.5%)
Jardine Matheson 14,400 132,480
_____________________________________________________________________________________________
Indonesia (3.7%)
Food (2.1%)
Sekar Bumi 80,000 (b) 106,400
Paper & packaging (1.6%)
Barito Pacific 60,000 (b) 85,260
_____________________________________________________________________________________________
Italy (1.8%)
Telecommunications
Telecom Italia 40,000 (b) 96,440
_____________________________________________________________________________________________
Japan (7.6%)
Automotive (1.7%)
Nippon Denso 5,000 (b) 88,530
Building materials (1.8%)
Chichibu Onoda 16,000 (b) 92,272
Electronics (4.1%)
Kyocera 2,000 129,018
Sharp 6,000 85,734
Total 214,752
_____________________________________________________________________________________________<PAGE>
PAGE 181
Luxembourg (2.4%)
Financial services
Espirito Santo Financial 11,000 127,875
_____________________________________________________________________________________________
Malaysia (3.6%)
Building materials (1.7%)
Hume Ind 22,000 87,032
Industrial machines (1.9%)
United Eng Malaysia 18,000 100,134
_____________________________________________________________________________________________
Mexico (2.7%)
Beverages & tobacco (2.1%)
Panamerican Beverages Class A 4,500 109,687
Restaurants & lodging (0.6%)
Grupo Situr Class B 80,000 (b) 30,256
_____________________________________________________________________________________________
Philippines (1.4%)
Industrial transportation
JG Summit 270,000 (b) 75,600
_____________________________________________________________________________________________
Singapore (1.5%)
Financial services
DBS Land 30,000 (b) 78,240
_____________________________________________________________________________________________
Spain (1.8%)
Retail
Cortefiel 3,200 (b) 92,624
_____________________________________________________________________________________________
United Kingdom (6.0%)
Computers & office equipment (1.7%)
Rank Organisation 15,000 87,615
Health care (1.9%)
Glaxo PLC ADR 5,000 100,625
Multi-industry (2.4%)
Hanson PLC ADR 6,800 127,500
_____________________________________________________________________________________________
Total common stocks
(Cost: $3,659,557) $3,400,519
_____________________________________________________________________________________________
Short-term securities (43.9%)
Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
______________________________________________________________________________________________
U.S. government agency (43.9%)
FHLB Disc Nts
03-01-95 5.95 1,000,000 1,000,000
FHLMC Disc Nts
03-03-95 5.86 800,000 799,740
FNMA Disc Nts
04-20-95 6.08 500,000 495,615
______________________________________________________________________________________________
Total short-term securities
(Cost: $2,295,580) $2,295,355
______________________________________________________________________________________________
Total investments in securities
(Cost: $5,955,137)(d) $5,695,874
______________________________________________________________________________________________
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial statements.
(b) Presently non-income producing.
(c) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended.
This security has been determined to be liquid under guidelines established by the board of directors.
(d) At Feb. 28, 1995, the cost of securities for federal income tax purposes was approximately $5,955,000 and the approximate
aggregate gross unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $ 79,000
Unrealized depreciation (338,000)
______________________________________________________________________________________________
Net unrealized depreciation $ (259,000)
______________________________________________________________________________________________
/TABLE
<PAGE>
PAGE 182
<TABLE>
<CAPTION>
Statements of assets and liabilities
IDS Life Series Fund, Inc.
October 31, 1994 (Unaudited)
Equity Income Money
Portfolio Portfolio Market
Portfolio
Assets
__________________________________________________________________________________________________
<S> <C> <C> <C>
Investments in securities, at value (Note 1)
(identified cost: $170,333,553; $34,753,584 and
$9,318,771, respectively) $195,911,929 $33,461,689 $9,318,771
Cash in bank on demand deposit -- 364,234 496,404
Receivable for investment securities sol 4,387,443 -- --
Dividends and accrued interest receivable 4,090 583,826 --
Receivable (for capital stock sold) from:
IDS Life subaccounts 132,340 177,945 35,073
IDS Life of New York subaccounts -- 15,470 1,229
__________________________________________________________________________________________________
Total assets 200,435,802 34,603,164 9,851,477
__________________________________________________________________________________________________
Liabilities
__________________________________________________________________________________________________
Cash overdraft 73,148 -- --
Dividends payable to shareholders (Note 1) 258,888 220,859 34,379
Payable for investment securities purchased 4,149,042 -- --
Accrued investment management and services fee 112,738 20,335 4,127
Payable (for capital stock redeemed) to:
IDS Life subaccounts -- 5,836 264
IDS Life of New York subaccounts 11,496 1,881 418
Other accrued expenses 103,222 25,382 7,093
__________________________________________________________________________________________________
Total liabilities 4,708,534 274,293 46,281
__________________________________________________________________________________________________
Net assets applicable to outstanding capital stock $195,727,268 $34,328,871 $9,805,196
__________________________________________________________________________________________________
Represented by
__________________________________________________________________________________________________
Capital stock - authorized 10,000,000,000 shares
of $.001 par value: outstanding, 10,296,496;
3,664,460 and 9,805,965 shares, respectively $ 10,296 $ 3,664 $ 9,806
Additional paid-in capital 169,700,544 36,192,432 9,796,042
Accumulated net realized gain (loss) on
investments 443,685 (601,369) (652)
Undistributed net investment income (5,633) 8,039 --
Unrealized appreciation (depreciation) of
investments 25,578,376 (1,273,895) --
__________________________________________________________________________________________________
Total - representing net assets applicable to
outstanding capital stock $195,727,268 $34,328,871 $9,805,196
__________________________________________________________________________________________________
Net asset value per share of outstanding capital
stock $ 19.01 $ 9.37 $ 1.00
__________________________________________________________________________________________________
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 183
<TABLE>
<CAPTION>
Statements of assets and liabilities (continued)
IDS Life Series Fund, Inc.
October 31, 1994 (Unaudited)
Managed Government
Portfolio Securities
Portfolio
Assets
__________________________________________________________________________________________________
<S> <C> <C>
Investments in securities, at value (Note 1)
(identified cost: $186,073,405 and $ 11,066,099,
respectively) $196,062,062 $10,914,151
Cash in bank on demand deposit 1,310,192 142,679
Receivable for investment securities sold 7,005,792 --
Dividends and accrued interest receivable 1,018,032 191,040
Receivable for forward foreign currency contracts
held, at value (Notes 1 and 4) 174,744 --
Receivable (for capital stock sold) from:
IDS Life subaccounts 1,135,799 46,038
IDS Life of New York subaccounts 65,340 2,392
__________________________________________________________________________________________________
Total assets 206,771,961 11,296,300
__________________________________________________________________________________________________
Liabilities
__________________________________________________________________________________________________
Dividends payable to shareholders (Note 1) 1,386,803 58,361
Payable for investment securities purchased 3,512,741 --
Accrued investment management and services fee 117,170 6,667
Payable for forward foreign currency contracts held,
at value (Notes 1 and 4) 174,846 --
Open option contracts written, at value (Premium
received $502,533) 444,684 --
Payable (for capital stock redeemed) to:
IDS Life subaccounts 783 39,670
Other accrued expenses 115,133 8,414
__________________________________________________________________________________________________
Total liabilities 5,752,160 113,112
__________________________________________________________________________________________________
Net assets applicable to outstanding capital stock $201,019,801 $11,183,188
__________________________________________________________________________________________________
Represented by
__________________________________________________________________________________________________
Capital stock - authorized 10,000,000,000 shares
of $.001 par value: outstanding, 13,777,767 and
1,162,597 shares, respectively $ 13,778 $ 1,163
Additional paid-in capital 188,708,713 11,335,443
Accumulated net realized gain (loss)
on investments 2,227,766 (967)
Undistributed net investment income (1,168) (503)
Unrealized appreciation (depreciation) of
investments (Notes 4 and 6) 10,070,712 (151,948)
__________________________________________________________________________________________________
Total - representing net assets applicable to
outstanding capital stock $201,019,801 $11,183,188
__________________________________________________________________________________________________
Net asset value per share of outstanding capital
stock $ 14.59 $ 9.62
__________________________________________________________________________________________________
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 184
<TABLE>
<CAPTION>
Statements of operations
IDS Life Series Fund, Inc.
Six months ended Oct. 31, 1994 (Unaudited)
Equity Income Money
Portfolio Portfolio Market
Portfolio
Investment income
___________________________________________________________________________________________________
<S> <C> <C> <C>
Income:
Dividends $ 157,592 $ 9,809 $ --
Interest 1,026,656 1,375,925 221,607
___________________________________________________________________________________________________
Total income 1,184,248 1,385,734 221,607
___________________________________________________________________________________________________
Expenses (Note 2):
Investment management and services fee 590,731 121,436 24,912
Custodial fees 27,849 5,226 4,446
Audit fees 11,750 5,000 5,000
Registration fees 20,640 3,537 1,246
Directors fees 2,551 465 127
Printing and postage 9,500 2,500 500
Other 1,710 620 126
___________________________________________________________________________________________________
Total expenses 664,731 138,784 36,357
___________________________________________________________________________________________________
Less expenses reimbursed by IDS Life -- -- (6,463)
___________________________________________________________________________________________________
Total expenses - net 664,731 138,784 29,894
___________________________________________________________________________________________________
Investment income - net 519,517 1,246,950 191,713
___________________________________________________________________________________________________
Realized and unrealized gain (loss) on investments - net
___________________________________________________________________________________________________
Net realized gain (loss) on investments (Note 3) 440,075 (201,301) (453)
Net change in unrealized appreciation or depreciation
of investments 9,697,618 (1,039,597) --
___________________________________________________________________________________________________
Net gain (loss) on investments 10,137,693 (1,240,898) (453)
___________________________________________________________________________________________________
Net increase in net assets resulting from
operations $10,657,210 $ 6,052 $191,260
___________________________________________________________________________________________________
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 185
<TABLE>
<CAPTION>
Statements of operations (continued)
IDS Life Series Fund, Inc
Six months ended Oct. 31, 1994 (Unaudited)
Managed Government
Portfolio Securities
Portfolio
Investment income (loss)
___________________________________________________________________________________________________
<S> <C> <C>
Income:
Dividends (net of foreign taxes withheld of $4,184
for Managed Portfolio) $ 595,341 $ --
Interest 2,661,503 365,896
___________________________________________________________________________________________________
Total income 3,256,844 365,896
___________________________________________________________________________________________________
Expenses (Note 2):
Investment management and services fee 631,443 40,032
Custodial fees 35,968 2,081
Audit fees 11,750 7,250
Registration fees 21,337 1,596
Directors fees 2,709 146
Printing and postage 10,000 750
Other 1,486 137
___________________________________________________________________________________________________
Total expenses 714,693 51,992
___________________________________________________________________________________________________
Less expenses reimbursed by IDS Life -- (6,241)
___________________________________________________________________________________________________
Total expenses - net 714,693 45,751
___________________________________________________________________________________________________
Investment income (loss) - net 2,542,151 320,145
___________________________________________________________________________________________________
Realized and unrealized gain (loss) on investments - net
___________________________________________________________________________________________________
Realized gain (loss) on security transactions (Note 3) 1,359,702 (967)
Realized gain on foreign currency transactions 205 --
Realized gain on closed options contracts
written (Note 5) 811,314 --
Realized gain on closed futures contracts (Note 6) 55,136 --
___________________________________________________________________________________________________
Net realized gain (loss) on investments 2,226,357 (967)
Net change in unrealized appreciation or
depreciation of investments 7,674,363 (299,747)
___________________________________________________________________________________________________
Net gain (loss) on investments 9,900,720 (300,714)
___________________________________________________________________________________________________
Net increase in net assets resulting from
operations $ 12,442,871 $ 19,431
___________________________________________________________________________________________________
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 186
<TABLE>
<CAPTION>
Statements of changes in net assets
IDS Life Series Fund, Inc.
Equity Portfolio Income Portfolio
Operations and distributions Oct. 31, 1994 April 30, 1994 Oct. 31, 1994 April 30, 1994
Six months ended Year ended Six months ended Year ended
(Unaudited) (Unaudited)
_______________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Investment income - net $ 519,517 $ 399,133 $ 1,246,950 $ 1,955,311
Net realized gain (loss) on investments 440,075 15,326,818 (201,301) (52,946)
Net change in unrealized appreciation or
depreciation of investments 9,697,618 2,153,291 (1,039,597) (1,813,728)
_______________________________________________________________________________________________________________
Net increase in net assets resulting from
operations 10,657,210 17,879,242 6,052 88,637
_______________________________________________________________________________________________________________
Distributions to shareholders from:
Net investment income (519,517) (399,133) (1,246,950) (1,955,311)
Net realized gain on investments -- (15,323,208) -- --
_______________________________________________________________________________________________________________
Total distributions (519,517) (15,722,341) (1,246,950) (1,955,311)
_______________________________________________________________________________________________________________
Capital share transactions (Note 7)
_______________________________________________________________________________________________________________
Proceeds from sales 35,239,163 49,951,411 2,698,706 3,258,320
Reinvested distributions at net asset value 519,517 15,722,341 1,246,950 1,955,311
Payments for redemptions (2,029,268) (3,712,328) (2,145,815) (2,218,371)
_______________________________________________________________________________________________________________
Increase in net assets from capital
share transactions 33,729,412 61,961,424 1,799,841 12,995,260
_______________________________________________________________________________________________________________
Total increase in net assets 43,867,105 64,118,325 558,943 11,128,586
_______________________________________________________________________________________________________________
Net assets at beginning of period 151,860,163 87,741,838 33,769,928 22,641,342
_______________________________________________________________________________________________________________
Net assets at end of period $195,727,268 $151,860,163 $34,328,871 $33,769,928
_______________________________________________________________________________________________________________
Undistributed (excess of distributions over)
net investment income $ (5,633) $ (5,633) $ 8,039 $ 8,039
_______________________________________________________________________________________________________________
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 187
<TABLE>
<CAPTION>
Statements of changes in net assets (continued)
IDS Life Series Fund, Inc.
Money Market Portfolio Managed Portfolio
Operations and distributions Oct. 31, 1994 April 30, 1994 Oct. 31, 1994 April 30, 1994
Six months ended Year ended Six months ended Year ended
(Unaudited) (Unaudited)
_______________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Investment income - net $ 191,713 $ 215,399 $ 2,542,151 $ 3,737,551
Net realized gain (loss) on investments (453) (97) 2,226,357 14,672,291
Net change in unrealized appreciation or
depreciation of investments -- -- 7,674,363 (4,972,356)
_______________________________________________________________________________________________________________
Net increase in net assets resulting from
operations 191,260 215,302 12,442,871 13,437,486
_______________________________________________________________________________________________________________
Distributions to shareholders from:
Net investment income (191,713) (215,399) (2,542,356) (3,765,550)
Net realized gain on investments -- -- -- (14,672,291)
_______________________________________________________________________________________________________________
Total distributions (191,713) (215,399) (2,542,356) (18,437,841)
_______________________________________________________________________________________________________________
Capital share transactions (Note 7)
_______________________________________________________________________________________________________________
Proceeds from sales 3,321,647 5,854,599 30,455,381 51,937,576
Reinvested distributions at net asset value 191,713 215,399 2,542,356 18,437,841
Payments for redemptions (3,265,141) (4,693,099) (2,584,651) (4,807,830)
_______________________________________________________________________________________________________________
Increase in net assets from capital
share transactions 248,219 1,376,899 30,413,086 65,567,587
_______________________________________________________________________________________________________________
Total increase in net assets 247,766 1,376,802 40,313,601 60,567,232
_______________________________________________________________________________________________________________
Net assets at beginning of period 9,557,430 8,180,628 160,706,200 100,138,968
_______________________________________________________________________________________________________________
Net assets at end of period $9,805,196 $9,557,430 $201,019,801 $160,706,200
_______________________________________________________________________________________________________________
Undistributed (excess of distributions over)
net investment income $ -- $ -- $ (1,168) $ (963)
_______________________________________________________________________________________________________________
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 188
<TABLE>
<CAPTION>
Statements of changes in net assets (continued)
IDS Life Series Fund, Inc.
Government Securities Portfolio
Operations and distributions Oct. 31, 1994 April 30, 1994
Six months ended Year ended
(Unaudited)
___________________________________________________________________________________________________
<S> <C> <C>
Investment income (loss) - net $ 320,145 $ 604,172
Net realized gain (loss) on investments (967) 112,301
Net change in unrealized appreciation or
depreciation of investments (299,747) (750,136)
___________________________________________________________________________________________________
Net increase (decrease) in net assets resulting
from operations 19,431 (33,663)
___________________________________________________________________________________________________
Distributions to shareholders from:
Net investment income (320,145) (604,172)
Net realized gain on investments -- (112,301)
___________________________________________________________________________________________________
Total distributions (320,145) (716,473)
___________________________________________________________________________________________________
Capital share transactions (Note 7)
___________________________________________________________________________________________________
Proceeds from sales 826,914 3,250,828
Reinvested distributions at net asset value 320,145 716,473
Payments for redemptions (848,008) (1,651,297)
___________________________________________________________________________________________________
Increase in net assets from capital
share transactions 299,051 2,316,004
___________________________________________________________________________________________________
Total increase (decrease) in net assets (1,663) 1,565,868
___________________________________________________________________________________________________
Net assets at beginning of period 11,184,851 9,618,983
___________________________________________________________________________________________________
Net assets at end of period $11,183,188 $11,184,851
___________________________________________________________________________________________________
Undistributed (excess of distributions over)
net investment income $ (503) $ (503)
___________________________________________________________________________________________________
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 189
Notes to Financial Statements
(Unaudited as of Oct. 31, 1994)
1. Summary of significant accounting policies
The fund is registered under the Investment Company Act of 1940, as
amended (the 1940 Act), as a diversified, open-end management
investment company. Shares of each portfolio of the fund are sold
to IDS Life Insurance Company (IDS Life) subaccounts or IDS Life
Insurance Company of New York subaccounts in connection with the
sale of variable insurance contracts.
The significant accounting policies followed by the Fund are
summarized as follows:
Valuation of securities
All securities are valued at the close of each business day.
Securities, other than bonds, traded on national securities
exchanges, or included in the NASDAQ National Market System, are
valued at the last quoted sales price; securities traded in the
over-the-counter market and securities for which a last quoted
sales price is not readily available are valued at the mean of the
closing bid and asking prices; and bonds and other securities are
valued at fair value according to methods selected in good faith by
the board of directors. Determination of fair value involves, among
other things, reference to market indexes, matrixes and data from
independent brokers. Short-term securities in the Equity, Income,
Managed and Government Securities Portfolios maturing in more than
60 days from the valuation date are valued at the market price or
approximate market value based on current interest rates; those
maturing in 60 days or less are valued at amortized cost. Pursuant
to Rule 2a-7 of the 1940 Act,all securities in the Money Market
Portfolio are valued daily at amortized cost, which approximates
market value, in order to maintain a constant net asset value of $1
per share.
Option transactions
In order to produce incremental earnings, protect gains,and
facilitate buying and selling of securities for investment
purposes, the Equity, Managed and Government Securities Portfolios
may buy and sell put and call options and write covered call
options on portfolio securities and may write cash-secured puts.
The risk in writing a call option is that the portfolios give up
the opportunity of profit if the market price of the security
increases. The risk in writing a put option is that the portfolios
may incur a loss if the market price of the security decreases and
the option is exercised.The risk in buying an option is that the
portfolios pay a premium whether or not the option is exercised.
The portfolios also have the additional risk of not being able to
enter into a closing transaction if a liquid secondary market does
not exist. The portfolios also may write over-the-counter options
where the completion of the obligation is dependent upon the credit
standing of the other party.
<PAGE>
PAGE 190
Option contracts are valued daily at the closing prices on their
primary exchanges and unrealized appreciation or depreciation is
recorded. The portfolios will realize a gain or loss upon
expiration or closing of the option transaction. When an option is
exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option or the cost of a security
for a purchased put or call option is adjusted by the amount of
premium received or paid.
Futures transactions
In order to gain exposure to or protect itself from changes in the
market, the Income, Managed and Government Securities Portfolios
may buy and sell stock index and interest rate futures contracts.
Risks of entering into futures contracts and related options
include the possibility that there may be an illiquid market and
that a change in the value of the contract or option may not
correlate with changes in the value of the underlying securities.
Upon entering into a futures contract, the portfolios are required
to deposit either cash or securities in an amount (initial margin)
equal to a certain percentage of the contract value. Subsequent
payments (variation margin) are made or received by the portfolios
each day. The variation margin payments are equal to the daily
changes in the contract value and are recorded as unrealized gains
and losses. The portfolios recognize a realized gain or loss when
the contract is closed or expires.
Foreign currency translations and forward foreign currency
contracts
Securities and other assets and liabilities denominated in foreign
currencies are translated daily into U.S.dollars at the closing
rate of exchange. Foreign currency amounts related to the purchase
or sale of securities, income and expenses are translated at the
exchange rate on the transaction date. It is not practicable to
identify that portion of realized and unrealized gain (loss)
arising from changes in the exchange rates from the portion arising
from changes in the market value of investments.
The Equity, Income and Managed Portfolios also may enter into
forward foreign currency exchange contracts for operational
purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all
contractual commitments held by the portfolios and the resulting
unrealized appreciation or depreciation are determined using
foreign currency exchange rates from an independent pricing
service. The portfolios are subject to the credit risk that the
other party will not complete the obligations of the contract.
Illiquid securities
At Oct. 31, 1994, investments in securities for Managed Portfolio
included issues that are illiquid. The portfolios currently limit
investments in illiquid securities to 10 % of the net assets, at
market value, at the time of purchase. The aggregate value of such
securities at Oct. 31, 1994 was $1,387,500 which represents .69% of
net assets for Managed Portfolio. Pursuant to guidelines adopted
<PAGE>
PAGE 191
by the board of directors, certain unregistered securities are
determined to be liquid and are not included within the 10 %
limitation specified above.
Federal income taxes
Since the Fund's policy is to comply with all requirements of the
Internal Revenue Code applicable to regulated investment companies
and to distribute all of its taxable income to shareholders, no
provision for income taxes is required. Each Portfolio is treated
as a separate entity for federal income tax purposes.
Net investment income (loss) and net realized gains (losses) differ
for financial statement and tax purposes primarily because of wash
sale transactions, foreign currency exchange rates and the timing
and amount of market discount recognized as ordinary income. The
character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate
characterizations for federal income tax purposes. Also, due to
the timing of dividend distributions, the fiscal year in which
amounts are distributed may differ from the year that the income or
realized gains are recorded by the portfolios.
Dividends
At Oct. 31, 1994, dividends declared of $.03 per share for Equity,
$.06 for Income, $.004 for Money Market, $.10 for Managed and $.05
for Government Securities Portfolios were payable Nov. 1, 1994.
Distributions to shareholders are recorded as of the close of
business on the record date and are payable on the first business
day following the record date. Dividends from net investment
income are declared daily and distributed monthly for the Money
Market, Income and Government Securities Portfolios and declared
and distributed quarterly for Equity and Managed Portfolios.
Capital gain distributions (if any) will be made annually.
However, additional capital gain distributions may be made
periodically during the fiscal year in order to comply with the
Internal Revenue Code as applicable to regulated investment
companies.
Other
Security transactions are accounted for on the date securities are
purchased or sold. Dividend income is recognized on the
ex-dividend date and interest income, including level-yield
amortization of premium and discount, is accrued daily.
2. Investment management and services agreement
The fund has an Investment Management and Services Agreement with
IDS Life. For its services, IDS Life is paid a fee based on the
aggregate average daily net assets of each of the portfolios. The
fee is 0.7 % on an annual basis for Equity, Income, Managed and
Government Securities Portfolios. For Money Market Portfolio the
fee is 0.5 % on an annual basis.
<PAGE>
PAGE 192
IDS Life and American Express Financial Corporation Inc. have an
Investment Advisory Agreement that calls for IDS Life to pay
American Express Financial Corporation a fee for investment advice
about the fund's portfolios. The fee paid by IDS Life is 0.25 % of
Equity, Income, Money Market, Managed and Government Securities
Portfolios' average daily net assets for the year.
In addition to paying its own management fee, each portfolio also
pays its taxes, brokerage commissions and nonadvisory expenses.
Expenses that relate to a particular portfolio, such as custodian
fees and registration fees for shares, are paid by that Portfolio.
Other expenses are allocated to the portfolios in an equitable
manner as determined by the Fund's board. Each portfolio also pays
custodian fees to American Express Trust Company, an affiliate of
IDS Life.
The Investment Management and Services Agreement provides that IDS
Life will reimburse the portfolio, if in any year the aggregate
ordinary operating expenses of any portfolio exceed the most
restrictive expense limitations then in effect under any state
securities law or the regulations thereunder. However, commencing
April 5, 1989, IDS Life has voluntarily agreed to reimburse each
portfolio for operating expenses, excluding the investment
management and services fees, which exceed 0.1 % on an annual basis
of average daily net assets of each portfolio.
3. Securities transactions
For the six months ended Oct. 31, 1994, cost of purchases and
proceeds from sales of securities aggregated $37,380,081 and
$37,329,169 for Money Market Portfolio; cost of purchases and
proceeds from sales of securities (other than short-term
obligations) aggregated $123,373,668 and $83,774,439 for Equity,
$14,767,499 and $4,253,662 for Income, $82,996,959 and $97,815,026
for Managed and $1,956,545 and $48,438 for Government Securities
Portfolios. Realized gains and losses are determined on the basis
of identified costs.
Brokerage commissions paid to brokers affiliated with IDS Life were
$16,176 and $5,239 for Equity Portfolio and Managed Portfolio,
respectively, for the six months ended Oct. 31, 1994.
4. Forward foreign currency contracts
At Oct. 31, 1994, Managed Portfolio had entered into a forward
foreign currency exchange contract that obligates the portfolio to
deliver currency at a specified future date. The unrealized
depreciation of $102 on this contract is included in the
accompanying financial statements. The terms of the open contract
are as follows:
<TABLE>
<CAPTION>
U.S. Dollar Value U.S. Dollar Value
Currency to as of Currency to as of
Exchange Date be delivered Oct. 31, 1994 be received Oct. 31, 1994
____________________________________________________________________________________
<S> <C> <C> <C> <C>
Nov. 03, 1994 174,846 $ 174,846 600,595 $ 174,744
U.S. Dollar Mexican Peso
____________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 193
5. Options contracts written
The number of contracts and premium amounts associated with option
contracts written by Managed Portfolio during the six months ended
Oct. 31, 1994, is as follows:
<TABLE>
<CAPTION>
Puts Calls
Contracts Premium Contracts Premium
____________________________________________________________________________________
<S> <C> <C> <C> <C>
Balance April 30, 1994 -- $ -- -- $ --
____________________________________________________________________________________
Opened 16,730 1,133,827 8,850 1,071,062
Closed (4,150) (382,134) (4,900) (649,298)
Exercised (250) (24,374) (2,450) (189,353)
Expired (6,480) (401,605) (600) (55,592)
____________________________________________________________________________________
Balance Oct. 31, 1994 5,850 $ 325,714 900 $ 176,819
____________________________________________________________________________________
</TABLE>
The value of the put options written as of Oct. 31, 1994 are
covered by cash and cash equivalents of $9,346,000.
6. Stock index futures contracts
At Oct. 31, 1994, investments in securities in Managed Portfolio
included securities valued at $492,935 that were pledged as
collateral to cover initial margin deposits on 10 purchase
contracts. The market value of the open contracts at Oct. 31, 1994
was $1,279,500 with a net unrealized gain of $23,000.
7. Capital share transactions
Transactions in shares of each Portfolio for the six months ended
Oct. 31, 1994 and the year ended April 30, 1994 were as follows:
<TABLE>
<CAPTION>
Number of shares: Six months ended Oct. 31, 1994
Money Government
Equity Income Market Managed Securities
Portfolio Portfolio Portfolio Portfolio Portfolio
_____________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Shares at beginning of period 8,391,259 3,476,335 9,557,747 11,604,807 1,132,254
_____________________________________________________________________________________________
Sold 1,989,423 281,603 3,321,862 2,177,281 84,391
Issued for reinvested distributions 28,408 130,596 191,727 179,471 32,800
Redeemed (112,594) (224,074)(3,265,371) (183,792) (86,848)
_____________________________________________________________________________________________
Net increase 1,905,237 188,125 248,218 2,172,960 30,343
_____________________________________________________________________________________________
Shares at end of period 10,296,496 3,664,460 9,805,965 13,777,767 1,162,597
_____________________________________________________________________________________________
<PAGE>
PAGE 194
Number of shares Year ended April 30, 1994
_____________________________________________________________________________________________
Money Government
Equity Income Market Managed Securities
Portfolio Portfolio Portfolio Portfolio Portfolio
_____________________________________________________________________________________________
Shares at beginning of year 5,202,534 2,222,158 8,180,775 7,237,215 912,972
_____________________________________________________________________________________________
Sold 2,513,413 1,279,899 5,854,806 3,372,853 306,174
Issued for reinvested distributions 872,481 189,664 215,404 1,316,899 68,402
Redeemed (197,169) (215,386)(4,693,238) (322,160) (155,294)
_____________________________________________________________________________________________
Net increase 3,188,725 1,254,177 1,376,972 4,367,592 219,282
_____________________________________________________________________________________________
Shares at end of year 8,391,259 3,476,335 9,557,747 11,604,807 1,132,254
_____________________________________________________________________________________________
</TABLE>
8. Tax loss carryforward
For federal income tax purposes, Income Portfolio and Money Market
Portfolio had capital loss carryovers at April 30, 1994 of $1,364
and $174, respectively, which, if not offset by subsequent capital
gains, will expire in 1997 through 2001. It is unlikely the board
of directors will authorize a distribution of any net realized gain
for a Portfolio until the capital loss carryover has been offset or
expires.
9. Financial highlights
"Financial highlights" showing per share data and selected
information for Equity, Income, Money Market, Managed, and
Government Securities Portfolios are presented on pages 5-9 of this
prospectus.
<PAGE>
PAGE 195
Investments in securities
IDS Life Series Fund, Inc. (Percentages represent
Oct. 31, 1994 (Unaudited) value of investment
Equity Portfolio compared to net assets)
Common stocks (80.3%)
Issuer Shares Value(a)
___________________________________________________________________
Automotive related (0.9%)
Lund International Holdings 55,000(b) 1,031,250
Tower Auto 70,000(b) 717,500
Total 1,748,750
___________________________________________________________________
Banks and savings & loans (1.0%)
Roosevelt Financial Group 135,000 2,041,875
___________________________________________________________________
Building materials (0.3%)
American Home Star 60,000(b) 626,250
___________________________________________________________________
Chemicals (0.7%)
Methanex 85,000(b) 1,275,000
___________________________________________________________________
Computers & office equipment (19.6%)
Adobe Systems 55,000 1,087,500
American Management Systems 45,000(b) 714,375
American Power Conversion 50,000(b) 1,980,000
Affiliated Computer Services Class A 50,000(b) 925,000
BISYS Group 90,000(b) 1,968,750
Banyan Systems 55,000(b) 948,750
Broadway & Seymour 190,000(b) 3,657,500
Brock Control Systems 70,000(b) 682,500
Ceridian 40,000 1,040,000
Cisco Systems 135,000(b) 4,066,875
Cognex 45,000(b) 1,102,500
Compuware 40,000(b) 1,565,000
EMC 45,000(b) 967,500
International Imaging Materials 40,000(b) 1,000,000
KnowledgeWare 80,000(b) 320,000
Komag 75,000(b) 1,864,453
Lotus Development 20,000(b) 765,000
Microdyne 55,000(b) 446,875
Parametric Technology 70,000(b) 2,520,000
Reynolds & Reynolds Class A 56,000 1,393,000
Sanmina 65,000(b) 1,454,375
Spectrum Holobyte 75,000(b) 1,031,250
Synopsys 35,000(b) 1,614,375
Tech Data 80,000(b) 1,580,000
3Com 35,000(b) 1,408,750
VMARK Software 50,000(b) 812,500
Wall Data 40,000(b) 1,450,000
Total 38,366,828
___________________________________________________________________
<PAGE>
PAGE 196
Electronics (10.3%)
Atmel 40,000(b) 1,475,000
Cherry 62,000(b) 976,500
Credence Systems 49,000(b) 1,249,500
Fusion Systems 50,500(b) 1,754,875
Harman International 33,000 1,179,750
Lam Research 28,000(b) 1,260,000
Linear Technology 25,000 1,200,000
Medar 90,000(b) 1,226,250
Metrologic Technology 40,000(b) 510,000
Micro-Chip 27,000(b) 1,265,625
Quad Systems 70,000(b) 980,000
Quickturn Design Systems 80,000(b) 900,000
Standard Microsystems 110,000(b) 2,701,875
Ultratech Stepper 33,000(b) 1,295,250
Xilinx 25,700(b) 1,493,813
Zilog 26,400(b) 759,000
Total 20,227,438
___________________________________________________________________
Energy (0.5%)
Ziegler Coal Holdings 63,000(b) 874,125
___________________________________________________________________
Energy equipment & services (0.6%)
Corrpro 80,000(b) 1,250,000
___________________________________________________________________
Financial services (1.4%)
ADVANTA Class A 33,000 940,500
Comdata Holdings 65,000(b) 763,750
Regional Acceptance 80,000(b) 1,040,000
Total 2,744,250
___________________________________________________________________
Foreign (2.9%)
BioChem Pharmaceutical 60,000(b) 670,956
Mutual Risk Management 40,000 1,095,000
Natuzzi 50,000 1,612,500
Petroleum Geo Services ADS 50,000(b) 1,265,625
Renaissance Energy 45,000(b) 1,043,860
Total 5,687,941
___________________________________________________________________
Health care (4.5%)
Anesta 40,000(b) 255,000
Centocor 45,000(b) 795,938
Ethical Holdings 85,000(b) 605,625
Heart Technology 40,000(b) 955,000
IDEXX Laboratories 110,000(b) 3,107,500
Interpore International 70,000(b) 612,500
Thermedics 60,000(b) 907,500
Ventritex 60,000(b) 1,560,000
Total 8,799,063
___________________________________________________________________
<PAGE>
PAGE 197
Health care services (10.0%)
Beverly Enterprises 85,000(b) 1,285,625
Cardinal Distribution 50,000 2,337,500
Columbia Healthcare 28,000 1,165,500
Equity Corp International 60,000(b) 825,000
HEALTHSOUTH Rehabilitation 40,000(b) 1,520,000
Manor Care 35,000 962,500
Medaphis 100,000(b) 3,812,500
Mid Atlantic Medical Services 50,000(b) 1,156,250
North American Biological 80,000(b) 610,000
PhyCor 42,000(b) 1,438,500
Quantum Health Resources 40,600(b) 1,492,050
Sierra Health Services 40,000(b) 1,300,000
Surgical Care Affiliates 55,000 1,079,375
Tokos Medical 75,000(b) 534,375
Total 19,519,175
___________________________________________________________________
Industrial machines & services (3.2%)
Blount Class A 50,000 2,131,250
Blyth Industries 43,000(b) 989,000
Greenfield Industries 75,000 1,781,250
Owosso 60,000(b) 735,000
Triple S Plastics 55,000(b) 687,500
Total 6,324,000
___________________________________________________________________
Industrial transportation (1.2%)
American Freightways 50,000(b) 1,062,500
Feather Light 65,000(b) 503,750
Miller Industries 55,000(b) 825,000
Total 2,391,250
___________________________________________________________________
Leisure time & entertainment (3.5%)
Autotote Class A 100,000(b) 1,750,000
Callaway Golf 30,000 1,147,500
Primadonna Resorts 40,000(b) 1,270,000
Promus 25,000(b) 740,625
Scientific Games Holdings 45,000(b) 1,980,000
Total 6,888,125
___________________________________________________________________
Media (1.2%)
DIMAC 75,000(b) 909,375
Hollywood Entertainment 45,000(b) 1,440,000
Total 2,349,375
___________________________________________________________________
Metals (1.7%)
Alumax 15,600(b) 464,100
Gibralter Steel 70,000(b) 717,500
Imco Recycling 60,000(b) 870,000
Nucor 20,000 1,235,000
Total 3,286,600
___________________________________________________________________
<PAGE>
PAGE 198
Multi-industry (2.0%)
Career Horizons 55,000(b) 1,031,250
Manpower 50,000 1,456,250
PMT Services 80,000(b) 800,000
Wackenhut 40,000 600,000
Total 3,887,500
___________________________________________________________________
Paper & packaging (0.6%)
Crown Cork & Seal 30,000(b) 1,166,250
___________________________________________________________________
Restaurants (1.3%)
Hospitality Franchise Systems 50,000(b) 1,362,500
Outback Steakhouse 40,000(b)
1,235,000
Total 2,597,500
___________________________________________________________________
Retail (5.0%)
Alliance Entertainment 170,000(b) 956,250
Barnes & Noble 40,000(b) 1,135,000
Best Buy 50,000(b) 1,887,500
Central Tracor Farms Country 50,000(b) 812,500
Department 56 50,000(b) 1,831,250
Fred Meyer 50,000(b) 1,612,500
Insty-Print 70,000(b) 297,500
Viking Office Products 40,000(b) 1,240,000
Total 9,772,500
___________________________________________________________________
Telecommunication equipment & services (5.4%)
BroadBand Technologies 20,000(b) 517,500
DSC Communications 50,000 1,537,500
EIS International 90,000(b) 1,248,750
International Cabletel 20,000(b) 620,000
InterVoice 85,000(b) 1,328,125
MFS Communications 20,000(b) 740,000
Nokia Preferred 35,000 2,629,375
Pair-Gain Technologies 33,000(b) 511,500
Transaction Network 65,000(b) 853,125
Video Telecommunications 65,000(b) 503,750
Total 10,489,625
___________________________________________________________________
Textiles & apparel (2.3%)
Authentic Fitness 62,000(b) 937,750
Conso Products 65,000(b) 958,750
Donnkenny 80,000(b) 1,660,000
Nautica Enterprises 35,000(b) 1,015,000
Total 4,571,500
___________________________________________________________________
Miscellaneous (0.2%)
Netrix 55,000(b) 343,750
___________________________________________________________________
Total common stocks
(Cost: $131,644,868) $157,228,670
___________________________________________________________________
<PAGE>
PAGE 199
Short-term securities (19.8%)
Issuer Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
___________________________________________________________________
Commercial paper (19.8%)
Agic
11-16-94 5.02 3,200,000(c) 3,193,333
AT&T
11-02-94 4.92 500,000 499,932
CPC International
12-08-94 5.19 1,900,000(c) 1,889,943
Ciesco
11-09-94 4.81 1,000,000 998,746
11-08-94 4.83 4,000,000 3,996,267
Commercial Credit
11-08-94 5.12 900,000 899,107
Fleet Funding
11-22-94 4.91 2,800,000(c) 2,791,997
12-13-94 5.07 1,000,000(c) 994,132
Ford Motor Credit
11-08-94 4.83 1,100,000 1,098,973
J.C. Penney Funding
11-21-94 4.90 2,600,000 2,592,951
Melville
11-21-94 4.88 5,000,000 4,985,408
Metlife Funding
11-09-94 4.79 3,825,000 3,819,795
Nestle Capital
11-29-94 4.92 1,200,000 1,195,417
Sysco
11-18-94 4.92 3,700,000(c) 3,691,439
Toyota Motor Credit
11-01-94 4.97 1,300,000 1,300,000
U.S. West Communications Group
01-24-95 5.54 4,800,000 4,735,819
Total 38,683,259
___________________________________________________________________
Total short-term securities
(Cost: $38,688,685) $ 38,683,259
___________________________________________________________________
Total investments in securities
(Cost: $170,333,553)(d) $195,911,929
___________________________________________________________________
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the
financial statements.
(b) Presently non-income producing.
<PAGE>
PAGE 200
(c) Commercial paper sold within terms of a private placement
memorandum, exempt from registration under section 4(2) of the
Securities Act of 1933, as amended, and may be sold only to dealers
in that program or other "accredited investors." These securities
have been determined to be liquid under guidelines established by
the board of directors.
(d) At Oct. 31, 1994, the cost of securities for federal income tax
purposes was approximately $170,334,000 and the approximate
aggregate gross unrealized appreciation and depreciation based on
that cost was:
Unrealized appreciation $28,051,000
Unrealized depreciation (2,473,000)
___________________________________________________________________
Net unrealized appreciation $25,578,000
<PAGE>
PAGE 201
___________________________________________________________________
IDS Life Series Fund, Inc. (Percentages represent
Oct. 31, 1994 (Unaudited) value of investments
Income Portfolio compared to total net assets)
Bonds (90.6%)
Issuer Coupon Maturity Principal Value(a)
rate year amount
___________________________________________________________________
U.S government obligations (14.3%)
U.S. Treasury Notes 5.50% 1996 $1,500,000 $1,477,875
6.50 1999 2,000,000 1,931,440
6.875 1997 1,500,000 1,497,105
Total 4,906,420
___________________________________________________________________
Mortgage backed securities (20.8%)
Federal Home Loan Mtge Corp 7.00% 2008 1,009,225 959,079
8.00 2017-22 2,485,841 2,403,498
Collateralized Mtge Obligation
8.00 2020 185,000 174,244
8.50 2022 1,000,000 968,510
Federal Natl Mtge Assn 6.00 2024 1,004,103 855,998
8.00 2021 524,579 506,874
8.50 2023 916,577 908,843
Collateralized Mtge Obligation
8.00 2021 376,344 358,102
Total 7,135,148
___________________________________________________________________
Aerospace & defense (0.3%)
AEC Acquisition
Sr Sub 10.00 2003 100,000 95,750
___________________________________________________________________
Airlines (0.3%)
AMR 9.50 2001 100,000 101,250
___________________________________________________________________
Automotive (3.2%)
Exide 10.75 2002 100,000 104,500
GMAC 6.05 1996 1,000,000 986,250
Total 1,090,750
___________________________________________________________________
Banks and savings & loans (5.7%)
Banca Comm Italy 8.25 2007 300,000 285,750
Bankers Trust 7.50 2002 300,000 288,375
Barclays NA Capital 9.75 2021 300,000 317,250
Chrysler Building NY 9.125 1999 40,000 42,050
<PAGE>
PAGE 202
Citicorp 8.00 2003 300,000 292,500
Corestates Capital 9.375 2003 200,000 212,000
Fleet Norstar Financial 9.00 2001 200,000 206,750
Midlantic 9.20 2001 300,000 310,500
Total 1,955,175
___________________________________________________________________
Beverages & tobacco (1.2%)
Dr. Pepper/7Up
Zero Coupon Cv 11.50 1997 71,000(e) 57,332
RJR Nabisco 8.625 2002 300,000 277,875
Royal crown
Sr Nts 9.75 2000 100,000 92,000
Total 427,207
___________________________________________________________________
Building materials (1.1%)
Owens Corning Fiberglass 9.375 2012 100,000 101,000
Pulte 7.00 2003 300,000 262,875
Total 363,875
___________________________________________________________________
Chemicals (0.7%)
B.F. Goodrich 9.625 2001 150,000 153,562
Uniroyal Chemical
Sr Nts 10.50 2002 100,000 101,000
Total 254,562
___________________________________________________________________
Electronics (1.1%)
Magnetek 10.75 1998 100,000 101,750
Reliance Electric 6.80 2003 300,000 270,750
Total 372,500
___________________________________________________________________
Energy (2.1%)
BP North America 9.50 1998 60,000 63,075
Clark Oil 9.50 2004 100,000 98,375
10.50 2001 100,000 103,750
USX 9.375 2022 300,000 292,125
9.80 2001 150,000 156,000
Total 713,325
___________________________________________________________________
Energy equipment & services (0.6%)
Global Marine
Sr Sub Nt 12.75 1999 100,000 108,625
McDermott 9.375 2002 100,000 104,625
Total 213,250
___________________________________________________________________
Financial services (6.4%)
Avco Financial 7.25 1999 300,000 292,125
Carco Auto 7.875 1998 300,000 302,325
Corporate Property Investors 7.18 2013 300,000(c) 263,250
Countrywide Funding 8.42 1999 300,000 304,500
<PAGE>
PAGE 203
First Union 8.875 2003 100,000 83,125
General Electric Capital
Reset Nt 8.65 2018 200,000(f) 205,000
Goldman Sachs 7.125 2003 200,000(c) 180,250
Kearny (RE) LP Class B 6.55 2000 200,000 198,626
Kearny (RE) LP Class C 7.70 2001 100,000 99,469
Property Trust America 7.50 2014 300,000 260,250
Total 2,188,920
___________________________________________________________________
Food (0.8%)
ARA Group
Sr Sub Deb 12.00 2000 75,000 79,500
Chiquita Brands 9.625 2004 100,000 95,375
Specialty Foods 10.25 2001 100,000(c) 94,000
Total 268,875
___________________________________________________________________
Foreign (6.7%)(b)
Alcan Aluminum
(U.S. Dollar) 8.875 2022 200,000 194,750
Avenor (Can Pac For)
(U.S. Dollar) 9.375 2004 100,000 95,500
BNCE
(U.S. Dollar) 7.25 2004 100,000 81,750
Doman Industries
(U.S. Dollar) 8.75 2004 100,000 89,750
Guang Dong Enterprise
(U.S. Dollar) 8.75 2003 400,000(c) 361,000
Korean Electric Power
(U.S. Dollar) 8.00 2002 200,000 191,250
Petroleos Mexicanos
(U.S. Dollar) 8.625 2023 300,000 237,000
Qantas Air
(U.S. Dollar) 7.50 2003 300,000(c) 271,500
Republic of Argentina
(U.S. Dollar) 4.25 2023 250,000 116,250
Republic of Columbia
(U.S. Dollar) 7.25 2004 200,000 170,000
Republic of Italy
(U.S. Dollar) 6.875 2023 300,000 234,375
WMC Finance USA
(U.S. Dollar) 7.25 2013 300,000 252,000
Total 2,295,125
___________________________________________________________________
Health care (0.8%)
Schering-Plough
Zero Coupon 7.26 1996 300,000(c,d)259,875
___________________________________________________________________
Health care services (0.6%)
Healthtrust 10.75 2002 100,000 109,000
Hillhaven 10.125 2001 100,000 100,500
Total 209,500
<PAGE>
PAGE 204
___________________________________________________________________
Household products (0.3%)
First Brands 9.125 1999 100,000 102,750
___________________________________________________________________
Industrial transportation (0.4%)
Ryder Systems 9.25 2001 150,000 156,375
___________________________________________________________________
Insurance (1.3%)
Americo Life 9.25 2005 100,000 88,375
Leucadia National
Sub Nts 10.375 2002 100,000 106,000
SunAmerica 8.125 2023 300,000 258,000
Total 452,375
___________________________________________________________________
Leisure time & entertainment (1.4%)
Bally's Park Place 9.25 2004 100,000 82,625
Caesars World 8.875 2002 100,000 94,500
GB Property Funding
1st Mtge 10.875 2004 100,000 75,500
GNF Bally 10.625 2003 100,000 57,000
MGM Grand Hotel 12.00 2002 100,000 108,875
Showboat 9.25 2008 100,000 83,250
Total 501,750
___________________________________________________________________
Media (2.8%)
Ackerley Communications
Sr Secured Nts 10.75 2003 100,000(c) 96,250
Adelphia Communications 11.875 2004 100,000 97,000
Cablevision Systems 10.75 2004 100,000 102,250
Continental Cablevision
Sr Deb 8.875 2005 100,000 89,625
Continental Cablevision
Sr Sub Deb 11.00 2007 100,000 101,000
Outdoor Systems
Sr Nts 10.75 2003 100,000 94,125
Time Warner Entertainment 8.375 2033 250,000 212,500
Turner Broadcasting
Sr Nts 8.375 2013 100,000 81,375
Viacom Int'l
Sr Sub 10.25 2001 100,000 102,750
Total 976,875
___________________________________________________________________
Metals (0.8%)
Amax
Sr Nts 14.50 1994 150,000 150,750
Magma Copper 12.00 2001 100,000 108,750
Total 259,500
___________________________________________________________________
Multi-industry (1.7%)
Coltec Industries 9.75 2000 100,000 100,500
Crane 7.25 1999 300,000 288,750
<PAGE>
PAGE 205
Fairchild 13.125 2006 65,000 59,800
Mark IV Industries 8.75 2003 100,000 91,000
Tally Industries
Zero Coupon 5.00 1998 100,000(e) 50,500
Total 590,550
___________________________________________________________________
Natural gas (0.9%)
Southwest Gas 9.75 2002 100,000 99,375
Texas Gas Transmission 9.625 1997 100,000 101,375
Transcontinental Gas Pipeline 8.875 2002 100,000 98,625
Total 299,375
___________________________________________________________________
Paper & packaging (3.6%)
Chesapeake 9.875 2003 100,000 107,375
Container Corp America 9.75 2003 100,000 96,500
Federal Paper Board 10.00 2011 100,000 107,125
International Paper 5.125 2012 85,000 58,863
Owens Illinois
Sr Sub Nts 11.00 2003 150,000 157,500
Pope & Talbot 8.375 2013 300,000 271,125
Repap Wisconsin
Sr Secured Nts 9.25 2002 100,000 90,875
Scotia Pacific Holding 7.95 2015 283,489 258,329
Silgan
Sr Sub Nts 11.75 2002 100,000 103,250
Total 1,250,942
___________________________________________________________________
Restaurants & lodging (0.3%)
John Q Hammons Hotel
Sr Nts 8.875 2004 100,000 89,750
___________________________________________________________________
Retail (3.3%)
Di Giorgio 12.00 2003 100,000 100,375
Farm Fresh 12.25 2000 100,000 86,500
Food4Less
Zero Coupon 15.25 1997 100,000(e) 72,500
Grand Union
Sr Nts 12.25 2002 100,000 69,500
J.C. Penney 9.05 2001 150,000 157,313
Levitz Furniture
Sr Nts 12.375 1997 100,000 105,000
Pathmark Stores 9.625 2003 100,000 88,500
Penn Traffic 9.625 2005 100,000 89,500
Penn Traffic
Sr Nts 10.25 2002 100,000 98,500
Safeway Stores 10.00 2001 100,000 105,750
Service Merchandise 9.00 2004 100,000 87,500
Stop & Shop 9.75 2002 75,000 77,625
Total 1,138,563
___________________________________________________________________
Telecommunication equipment & services (0.2%)
NEXTEL Communications
Zero Coupon 9.75 1999 150,000(e) 67,500
<PAGE>
PAGE 206
___________________________________________________________________
Textiles & apparel (0.3%)
Dominion Textiles 8.875 2003 100,000 93,000
___________________________________________________________________
Utilities - electric (5.4%)
Arizona Public Service 8.00 2025 200,000 175,250
Commonwealth Edison 9.875 2020 200,000 205,250
Houston Industries 9.375 2001 150,000 156,938
Long Island Lighting 9.625 2024 300,000 272,250
Louisiana Power & Light 10.30 2005 100,000 105,250
Midland Cogeneration Venture 11.75 2005 100,000 96,500
North Atlantic Energy
1st Mtge 9.05 2002 100,000 97,375
Northeast Utilities 8.58 2006 200,000 195,250
Pennsylvania Power & Light
1st Mtge 9.25 2019 100,000 99,750
Sithe Independence Funding 9.00 2013 100,000 95,250
Texas New Mexico Power
1st Mtge 9.25 2000 100,000 99,000
Texas Utilities Electric 9.875 2019 100,000 107,000
Texas Utilities
1st Mtge 7.375 2025 200,000 164,750
Total 1,869,813
___________________________________________________________________
Utilities - telephone (1.2%)
New York Telephone 9.375 2031 150,000 157,500
Pacific Bell Telephone 7.375 2043 300,000 252,375
Total 409,875
___________________________________________________________________
Total bonds
(Cost: $32,384,480) $31,110,500
___________________________________________________________________
Preferred stocks (0.5%)
Issuer Shares Value(a)
___________________________________________________________________
First Chicago
2.88 % Cv 500 $25,250
National Health Investors
8.50 % Cv 2,000 48,750
Public Service of New Hampshire
10.60 % 3,500 88,585
Total 162,585
___________________________________________________________________
Total preferred stocks $162,585
(Cost: $162,500)
___________________________________________________________________
<PAGE>
PAGE 207
Short-term securities (6.4%)
Issuer Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
__________________________________________________________________
Commercial paper (6.4%)
CPC International
12-08-94 5.19 1,100,000 $1,094,178
USAA Capital
12-08-94 4.96 1,100,000 1,094,426
Total $2,188,604
___________________________________________________________________
Total short-term securities
(Cost: $2,188,604) $2,188,604
___________________________________________________________________
Total investments in securities
(Cost: $34,735,584)(g) $33,461,689
___________________________________________________________________
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the
financial statements.
(b) Foreign securities values are stated in U.S. dollars; principal
amounts are denominated in the currency indicated.
(c) Represent securities sold under Rule 144A and are exempt from
registration under the Securities Act of 1933, as amended. These
securities has been determined to be liquid under guidelines
established by the board of directors.
(d) For zero coupon bonds, the interest rate disclosed represents
the annualized effective yield on the date of acquisition.
(e) For zero coupon bonds, the interest rate disclosed represents
the annualized effective yield from the date of acquisition to
interest reset date disclosed.
(f) Interest rate varies, rate shown is the effective rate on Oct.
31, 1994.
(g) At Oct. 31, 1994, the cost of securities for federal income tax
purposes was approximately $34,736,000 and the approximate
aggregate gross unrealized appreciation and depreciation based on
that cost was:
Unrealized appreciation $ 253,000
Unrealized depreciation (1,440,000)
___________________________________________________________________
Net unrealized depreciation $ (1,187,000)
___________________________________________________________________
<PAGE>
PAGE 208
IDS Life Series Fund, Inc. (Percentages represent
Oct. 31, 1994 (Unaudited) value of investments
Money Market Portfolio compared to total net assets)
Short-term securities (95.0%)
Issuer Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
___________________________________________________________________
U.S. government agencies (11.9%)
Federal Farm Credit
Disc Nts
12-07-94 4.97% $325,000 $ 323,391
Federal Home Loan
Mtge Corp Disc Nts
11-02-94 4.67 350,000 349,955
12-16-94 4.99 500,000 496,906
___________________________________________________________________
Total U.S. government agencies
(Cost: $1,170,252) $1,170,252
___________________________________________________________________
Commercial paper (83.1%)
Automotive & related (4.6%)
Ford Motor Credit
11-14-94 4.85 450,000 $ 449,218
___________________________________________________________________
Banks and savings & loans (8.1%)
Commerzbank
12-14-94 4.96 400,000 397,659
Paribas Finance
11-07-94 4.78 400,000 399,683
Total 797,342
___________________________________________________________________
Beverages & tobacco (4.6%)
PepsiCo
11-21-94 4.86 450,000 448,790
___________________________________________________________________
Financial services (34.3%)
AGIC
11-16-94 5.02 450,000(b) 449,063
A.I. Credit
11-03-94 4.77 350,000 349,907
Ciesco LP
11-23-94 4.87 450,000 448,666
Commerical Credit
11-08-94 5.12 400,000 399,603
Eiger Capital
11-28-94 4.94 375,000(b) 373,616
GE Capital
11-28-94 4.89 500,000 498,200
<PAGE>
PAGE 209
J.C. Penney Funding
11-23-94 4.86 400,000 398,815
USAA Capital
12-14-94 5.18 450,000 447,237
Total 3,365,107
___________________________________________________________________
Food (8.9%)
CPC International
11-28-94 5.01 475,000(b) 473,230
Sysco
12-27-94 5.09 400,000(b) 396,858
Total 870,088
___________________________________________________________________
Health care (4.1%)
SmithKline Beecham
11-02-94 4.78 400,000 399,947
___________________________________________________________________
Industrial transportation (4.6%)
Norfolk Southern
11-30-94 4.70 450,000(b) 448,333
___________________________________________________________________
Insurance (4.8%)
Metlife Funding
11-09-94 4.79 475,000 474,499
___________________________________________________________________
Retail (4.6%)
Melville
11-10-94 4.76 450,000 449,471
___________________________________________________________________
Utilities - telephone (4.5%)
AT&T Capital
01-03-95 5.48 450,000 445,724
___________________________________________________________________
Total commercial paper
(Cost: $8,148,519) $8,148,519
___________________________________________________________________
Total investments in securities
(Cost: $9,318,771)(c) $9,318,771
___________________________________________________________________
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the
financial statements.
(b) Commercial paper sold within terms of a private placement
memorandum, exempt from registration under section 4(2) of the
Securities Act of 1933, as amended, and may be sold only to
dealers in that program or other "accredited investors." These
securities have been determined to be liquid under guidelines
established by the board of directors.
(c) At Oct. 31, 1994, this cost also represents the cost of
securities for federal income tax purposes.
<PAGE>
PAGE 210
IDS Life Series Fund, Inc. (Percentages represent
Oct. 31, 1994 (Unaudited) value of investments
Managed Portfolio compared to total net assets)
Bonds (22.4%)
Issuer Coupon Maturity Principal Value(a)
rate year amount
___________________________________________________________________
U.S. government obligations (2.9 %)
Federal Home Loan Bank
Stepup Notes 8.00% 2014 $ 500,000 $ 480,000
U.S. Treasury Bond 10.375 2012 500,000 593,215
U.S. Treasury Notes 5.50 1996 1,000,000 985,250
6.375 1997 2,000,000(j) 1,971,740
6.875 1997 1,000,000 998,070
7.875 2001 750,000 760,252
Total 5,788,527
___________________________________________________________________
Mortgage backed securities (3.3%)
Federal Home Loan Mtge Corp 8.00 2022 667,807 645,686
10.00 2005 1,995,779 2,108,665
Federal Natl Mtge Assn 8.00 2022 290,193 280,399
8.50 2023 458,289 454,422
9.00 2024 243,334 248,809
6.00 2024 2,008,207 1,711,996
Series Z 6.50 2023 263,877(l) 165,147
7.00 2016 1,170,045(l) 984,499
Total 6,599,623
___________________________________________________________________
Aerospace & defense (0.1%)
United Technologies 8.875 2019 300,000 303,000
___________________________________________________________________
Airlines (0.2%)
Delta 9.875 2000 500,000 515,625
___________________________________________________________________
Automotive related (0.8%)
Auburn Hills Trust
Gtd Exchangable Certs 12.375 2020 550,000 720,500
GMAC 6.05 1996 750,000 739,688
8.375 1997 65,000 66,138
Total 1,526,326
___________________________________________________________________
Banks and savings & loans (0.9%)
Banca Comm Italy NY 8.25 2007 500,000 476,250
Chrysler Building NY 9.125 1999 85,000 89,356
Citicorp 7.75 2006 500,000 470,625
First USA Bank 6.88 1996 300,000 299,625
Midlantic Bank 9.20 2001 400,000 414,000
Riggs National
Sub Nts 8.50 2006 100,000 94,000
Total 1,843,856
<PAGE>
PAGE 211
___________________________________________________________________
Beverages & tobacco (0.3%)
RJR Nabisco
Attached put 8.375 2017 286,000 258,115
RJR Nabisco Capital 10.50 1998 150,000 161,250
Royal Crown
Sr Nts 9.75 2000 150,000 138,000
Total 557,365
___________________________________________________________________
Building materials (0.3%)
Building Materials
Zero Coupon Cv 11.70 1999 450,000(e,h) 243,000
Pulte 7.00 2003 500,000 438,125
Total 681,125
___________________________________________________________________
Electronics (0.2%)
Reliance Electronics 6.80 2003 500,000 451,250
___________________________________________________________________
Energy (0.9%)
BP North America 9.50 1998 140,000 147,175
Cross Timbers Oil
Cv 5.25 2003 1,000,000 860,000
Standard Oil 9.00 2019 300,000 296,250
USX 9.125 2013 500,000 483,750
Total 1,787,175
___________________________________________________________________
Financial services (1.5%)
AVCO Financial 7.25 1999 250,000 243,437
Carco Auto
Asset-Backed Obligation 7.875 1998 250,000 251,937
Corporate Property Investors 7.18 2013 500,000(h) 438,750
First Union 8.875 2003 300,000 249,375
GE Capital
Reset Nt 8.65 1996 250,000(i) 256,250
Kearny (RE) LP Class B
Collateralized Mtge
Obligation 6.50 2000 300,000 297,939
Kearny (RE) LP Class C
Collateralized Mtge
Obligation 7.70 2001 150,000 149,203
Property Trust America 7.50 2014 750,000 650,625
Salomon Brothers 6.75 2006 500,000 420,625
Total 2,958,141
___________________________________________________________________
Food (0.2%)
Specialty Foods 10.25 2001 400,000(h) 376,000
___________________________________________________________________
Foreign (3.5%)(c)
Argentina Republic
(U.S. Dollar) 4.25 2023 500,000 232,500
Avenor
(U.S. Dollar) 9.375 2004 500,000 477,500
<PAGE>
PAGE 212
Banco Nacional de Mexico
(U.S. Dollar) Cv 7.00 1999 1,250,000(g) 1,387,500
BNCE
(U.S. Dollar) 7.25 2004 400,000 327,000
Brazil C Bonds
(U.S. Dollar) 4.00 2014 250,000 126,250
Doman Industries
(U.S. Dollar) 8.75 2004 200,000 179,500
Gov't Trust Certificate Israel
(U.S. Dollar) 9.25 2001 275,000 292,531
Guang Dong Enterprise
(U.S. Dollar) 8.75 2003 750,000(h) 676,875
Hydro Quebec
(U.S. Dollar) 9.375 2030 500,000 513,125
(U.S. Dollar) 9.50 2030 500,000 520,000
KFW International Finance
(U.S. Dollar) 8.20 2006 250,000 248,438
Mexican U.S. Series D
(U.S. Dollar) 5.813 2019 250,000 212,969
Philippines Long Distance Telephone
(U.S. Dollar) 10.625 2004 100,000 98,500
PT Indah Kiat Pulp & Paper
(U.S. Dollar) 11.875 2002 250,000 251,250
Qantas Air
(U.S. Dollar) 7.50 2003 500,000(h) 452,500
Republic of Columbia
(U.S. Dollar) 7.25 2004 500,000 425,000
Republic of Italy
(U.S. Dollar) 6.875 2023 350,000 273,438
Rogers Cable System
(Canadian Dollar) 9.65 2014 600,000 371,520
Total 7,066,396
___________________________________________________________________
Health care (0.7%)
Johnson & Johnson 8.00 1998 1,000,000 1,017,500
Schering-Plough
Zero Coupon 7.31 1996 350,000(d,h) 303,188
Total 1,320,688
___________________________________________________________________
Health care services (0.2%)
Hillhaven 10.125 2001 500,000 502,500
___________________________________________________________________
Insurance (0.6%)
Americo Life 9.25 2005 400,000 353,500
General American Life
Sub Cap Nts 7.625 2024 500,000(h) 425,000
New England Mutual
Credit Sensitive Notes 7.875 2024 250,000(h) 203,125
Principal Mutual 8.00 2044 250,000(h) 210,625
Total 1,192,250
___________________________________________________________________
Leisure time & entertainment (0.4%)
Bally's Park Place 9.25 2004 400,000 330,500
<PAGE>
PAGE 213
GB Property Funding
1st Mtge 10.875 2004 250,000 188,750
Showboat 9.25 2008 250,000 208,125
Total 727,375
___________________________________________________________________
Media (2.0%)
Ackerley Communications
Sr Secured Nts 10.75 2003 400,000(h) 385,000
Adelphia Communications
Pay-in-kind 9.50 2004 523,055 418,444
Continental Cablevision
Sr Deb 8.875 2005 250,000 224,063
News America Holdings 7.50 2000 250,000 239,062
Outdoor Systems
Sr Nts 10.75 2003 400,000 376,500
Time Warner
Zero Coupon 6.59 2012 4,750,000(d) 1,460,625
Time Warner Entertainment 8.375 2033 500,000 425,000
Turner Broadcasting System
Sr Nts 8.375 2013 500,000 406,875
Total 3,935,569
___________________________________________________________________
Multi-industry (0.3%)
Crane 7.25 1999 250,000 240,625
Mark IV Industries 8.75 2003 400,000 364,000
Total 604,625
___________________________________________________________________
Natural gas (0.3%)
Coastal 10.25 2004 500,000 539,375
___________________________________________________________________
Paper & packaging (1.1%)
Container Corp America 9.75 2003 500,000 482,500
Sr Nts 10.75 2002 250,000 255,000
Federal Paperboard 10.00 2011 250,000 267,813
International Paper 5.125 2012 250,000 173,125
Pope & Talbot 8.375 2013 400,000 361,500
Repap Wisconsin
Sr Secured Nts 9.25 2002 200,000 181,750
Scotia Pacific Holding 7.95 2015 283,489 258,329
Stone Container
1st Mtge 10.75 2002 200,000 198,750
Total 2,178,767
___________________________________________________________________
Retail (0.5%)
Food4Less Supermarket
Zero Coupon Cv 9.30 1997 300,000(e) 217,500
J.C. Penney 9.05 2001 200,000 209,750
Pathmark Stores 9.625 2003 400,000 354,000
Penn Traffic 9.625 2005 300,000 268,500
Total 1,049,750
<PAGE>
PAGE 214
___________________________________________________________________
Telecommunications equipment & services (0.1%)
Nextel Communications
Zero Coupon Cv 9.75 1999 400,000(e) 180,000
___________________________________________________________________
Utilities - electric (0.5%)
Long Island Lighting 9.75 2021 300,000 272,250
Pennsylvania Power & Light 7.625 2002 50,000 49,312
RGS Funding I & M
Sale Lease-Back Obligation 9.82 2022 208,792 215,056
Sithe Independence Funding 9.00 2013 150,000 142,875
Texas-New Mexico Power
1st Mtge 9.25 2000 400,000 396,000
Total 1,075,493
___________________________________________________________________
Utilities - telephone (0.5%)
GTE 9.375 2000 400,000 425,000
GTE Florida 9.625 2030 300,000 304,125
Mountain States Tel & Tel 5.50 2005 80,000 64,100
New England Tel & Tel 6.375 2008 70,000 58,362
New York Telephone 4.875 2006 130,000 98,150
Total 949,737
___________________________________________________________________
Miscellanous (0.1%)
KinderKare Learning Center 10.375 2001 250,000 253,437
___________________________________________________________________
Total bonds
(Cost: $47,250,099) $ 44,963,975
___________________________________________________________________
Common stocks (42.5%)
Issuer Shares Value(a)
___________________________________________________________________
Banks and savings & loans (0.9%)
Roosevelt Financial Group 115,000 $ 1,739,375
___________________________________________________________________
Computers & office equipment (11.3%)
Bay Networks 65,000(b) 1,645,312
Chipcom 30,000(b,m) 1,807,500
Cisco Systems 60,000(b) 1,807,500
Informix 55,000(b) 1,512,500
Iomega 280,000(b) 1,155,000
Landmark Graphics 90,000(b) 1,845,000
Legent 55,000(b) 1,567,500
Sanmina 60,000(b) 1,342,500
Sterling Software 55,000(b) 1,718,750
System Software 140,000 1,741,250
Tech Data 80,000(b) 1,580,000
3 Com 35,000(b,m) 1,408,750
VMARK Software 120,000(b) 1,950,000
Wall Data 45,000(b) 1,631,250
Total 22,712,812
<PAGE>
PAGE 215
___________________________________________________________________
Electronics (3.1%)
Arrow Electronics 40,000(b) 1,510,000
GTI 80,000(b) 1,320,000
Intel 25,000(m) 1,553,125
MagneTek 130,000(b) 1,933,750
Total 6,316,875
___________________________________________________________________
Energy equipment & services (0.7%)
Input/Output 65,000(b) 1,397,500
___________________________________________________________________
Financial services (0.8%)
Travelers 45,000 1,563,750
___________________________________________________________________
Foreign (9.0%)
Banco Frances 55,000 1,409,375
Central Puerto 40,000 1,320,000
Comp Naviera Perez 100,000 1,084,000
Consorcio G ADR 110,000 1,416,250
Femsa Coke 40,000(b) 1,235,000
Grupo Simec 50,000(b) 1,237,500
Grupo Financiero Bancomer 1,250,000(b) 1,447,500
Maderas Y Sinteticos 45,000 1,260,000
Mutual Risk Management 60,000 1,642,500
Repsol S. A. ADR 45,000 1,462,500
Sceptre 219,800(b) 1,950,088
T. Tolmex "B" 90,000 1,309,284
YPF 60,000 1,447,500
Total 18,221,497
__________________________________________________________________
Health care services (5.1%)
Columbia Healthcare 35,000 1,456,875
HEALTHSOUTH Rehabilitation 50,000(b) 1,900,000
Horizon Healthcare 60,000(b) 1,657,500
Medaphis 45,000(b) 1,715,625
Physician Corp of America 80,000(b) 1,930,000
United Healthcare 30,000 1,582,500
Total 10,242,500
___________________________________________________________________
Industrial machines & services (2.6%)
Caterpillar 20,000 1,195,000
General Signal 60,000 2,160,000
Greenfields 75,000 1,781,250
Total 5,136,250
___________________________________________________________________
Industrial transportation (2.5%)
CSX 25,000 1,812,500
Trinity Industries 50,000 1,712,500
Wabash National 45,000 1,563,750
Total 5,088,750
<PAGE>
PAGE 216
___________________________________________________________________
Metals (1.4%)
Birmingham Steel 55,000 1,423,125
Cyprus Minerals 50,000 1,331,250
Total 2,754,375
___________________________________________________________________
Multi-industry (1.7%)
Albany International 110,000 2,172,500
Madeco 40,000 1,250,000
Total 3,422,500
___________________________________________________________________
Paper & packaging (0.6%)
Longview Fibre Wash 70,000 1,172,500
___________________________________________________________________
Restaurants & lodging (0.9%)
Shoney's 125,000(b) 1,875,000
___________________________________________________________________
Retail (0.9%)
Best Buy 50,000(b) 1,887,500
___________________________________________________________________
Telecommunication equipment & services (1.0%)
InterVoice 125,000(b) 1,953,125
___________________________________________________________________
Total common stocks
(Cost: $72,717,810) $85,484,309
___________________________________________________________________
Preferred stocks (2.5%)
Issuer Shares Value(a)
___________________________________________________________________
COINTEL
5.04% 25,000(k) $ 1,556,250
First Nationwide Bank
11.50% 1,000(b) 102,500
Kenetech
1.67% 100,000(k) 1,675,000
National Health Investors
8.50% Cv 10,000 243,750
Public Service of New Hampshire
$2.65 1,450 36,699
Snyder Oil
6% Cv 65,000 1,503,125
Total 5,117,324
___________________________________________________________________
Total preferred stocks
(Cost: $5,584,694) $ 5,117,324
<PAGE>
PAGE 217
___________________________________________________________________
Short-term securities (30.1%)
Issuer Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
___________________________________________________________________
U.S. government and agency (1.4%)
Federal Home Loan Mtge Corp
Disc Nts, 12-02-94 4.91% $1,600,000 $ 1,593,263
U.S. Treasury Bills, 01-05-95 4.83 1,200,000 1,176,300
Total 2,769,563
___________________________________________________________________
Commercial paper (28.7%)
AGIC, 11-16-94 5.02 2,100,000(f) 2,095,625
AT & T
11-04-94 4.92 1,900,000 1,899,224
01-03-94 5.48 3,000,000 2,969,682
BBV Finance, 11-21-94 4.90 4,300,000 4,287,657
CPC International
11-01-94 4.83 1,500,000(f) 1,500,000
12-08-94 5.19 3,300,000(f) 3,282,533
Ciesco
11-03-94 4.81 2,000,000 1,999,469
11-08-94 4.83 2,400,000 2,397,770
11-09-94 4.81 1,900,000 1,897,617
Commercial Credit, 11-08-94 5.12 1,200,000 1,198,810
Ford Motor Credit
11-08-94 4.83 2,100,000 2,098,040
12-12-94 5.04 1,000,000 994,294
J.C. Penney Funding, 11-21-94 4.90 3,000,000 2,991,867
Melville, 11-10-94 4.76 2,000,000 1,997,274
Metlife Funding
12-16-94 5.03 1,600,000 1,590,020
01-26-95 5.55 5,000,000 4,931,500
Nestle Capital, 11-29-94 4.92 3,600,000 3,586,252
Norfolk Southern, 11-30-94 4.70 2,000,000(f) 1,991,042
PepsiCo
11-21-94 4.86 2,100,000 2,094,353
11-21-94 4.86 2,400,000 2,393,533
St. Paul Companies, 11-04-94 5.00 2,300,000(f) 2,299,046
Sysco, 11-18-94 4.92 800,000(f) 798,149
Toyota Motor Credit, 11-01-94 4.97 1,500,000 1,500,000
U.S. West Communications, 01-24-95
5.54 5,000,000 4,933,144
Total 57,726,891
___________________________________________________________________
Total short-term securities
(Cost: $60,520,802) $ 60,496,454
___________________________________________________________________
Total investments in securities
(Cost: $186,073,405)(n) $196,062,062
___________________________________________________________________
<PAGE>
PAGE 218
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the
financial statements.
(b) Presently non-income producing.
(c) Foreign securities values are stated in U.S. dollars; principal
amounts are denominated in the currency indicated.
(d) For zero coupon bonds, the interest rate disclosed represents
the annualized effective yield on the date of acquisition.
(e) For zero coupon bonds, the interest rate disclosed represents
the annualized effective yield from the date of acquisition to
interest reset date disclosed.
(f) Commercial paper sold within terms of a private placement
memorandum, exempt from registration under section 4(2) of the
Securities Act of 1933, as amended, and may be sold only to dealers
in that program or other "accredited investors." These securities
have been determined to be liquid under guidelines established by
the board of directors.
(g) Identifies issues considered to be illiquid as to their
marketability (see Note 1 to the financial statements).
Information concerning such security holdings as of Oct. 31, 1994,
is as follows:
Security Acquisition Purchase
date cost
___________________________________________________________________
Banco Nacional de Mexico
7.00%, 1999 02-04-93 to 10-20-94 $1,313,875
(h) Represents security sold under Rule 144A and is exempt from
registration under the Securities Act of 1933, as amended. This
security has been determined to be liquid under guidelines
established by the Board of Directors.
(i) Interest rate varies, rate shown is the effective rate on Oct.
31, 1994.
(j) Partially pledged as initial deposit on the following open
stock index futures purchase contracts (see Note 6 to the financial
statements):
Type of security Contracts
___________________________________________________________________
Russell 2000, Dec. 1994 10
(k) PRIDES -- Preferred Redeemed Increased Dividend Equity
Securities are structured as convertible preferred securities
issued by a company. Investors receive an enhanced yield but based
upon a specific formula, potential appreciation is limited. PRIDES
pay dividends, have voting rights, are noncallable for three years
and upon maturity, convert into shares of common stock.
<PAGE>
PAGE 219
(l) This security is a collateralized mortgage obligation whose
payment of principal has been deferred until the principal of
previous series within the trust has been paid off.
(m) At Oct. 31, 1994, securities valued at $4,769,375 were held in
escrow to cover open call options written as follows:
Number Exercise Expiration
Issuer of contracts price date Value(a)
___________________________________________________________________
Chipcom 300 $60 Nov. 19, 1994 $ 67,500
Intel 250 60 Nov. 19, 1994 3,907
3 Com 350 40 Nov. 19, 1994 70,000
________
$141,407
(n) At Oct. 31, 1994, the cost of securities for federal income tax
purposes was approximately $186,073,000 and the approximate
aggregate gross unrealized appreciation and depreciation based on
that cost was:
Unrealized appreciation $13,968,000
Unrealized depreciation (3,979,000)
___________________________________________________________________
Net unrealized appreciation $ 9,989,000
___________________________________________________________________
IDS Life Series Fund, Inc. (Percentages represent
Oct. 31, 1994 (Unaudited) value of investments
Government Securities Portfolio compared to total net assets)
Bonds (86.0%)
Issuer Coupon Maturity Principal Value (a)
rate year amount
___________________________________________________________________
U.S. government obligations (67.9%)
U.S. Treasury Bonds 8.125% 2019 $ 500,000 $ 501,225
10.375 2012 750,000 889,823
U.S. Treasury Notes 6.375 1997 850,000 837,990
7.375 1996 1,250,000 1,264,262
7.75 2001 1,510,000 1,523,137
8.875 1999 2,450,000 2,582,104
Total 7,598,541
___________________________________________________________________
Mortgage backed securities (18.1%)
Federal Natl Mtge Assn 8.50 2023 1,100,198 1,090,915
9.00 2023 797,501 815,445
Govt Natl Mtge Assn 8.00 2017 119,657 114,870
Total 2,021,230
___________________________________________________________________
Total bonds
(Cost: $9,771,719) $ 9,619,771
<PAGE>
PAGE 220
___________________________________________________________________
Short-term security (11.6%)
Issuer Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
___________________________________________________________________
U.S. government agency
Federal Home Loan Mtge Corp
Disc Note
12-02-94 5.05% $1,300,000 $ 1,294,380
___________________________________________________________________
Total short-term security
(Cost: $1,294,380) $ 1,294,380
___________________________________________________________________
Total investments in securities
(Cost: $11,066,099)(b) $10,914,151
___________________________________________________________________
See accompanying notes to financial statements.
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the
financial statements.
(b) At Oct. 31, 1994, the cost of securities for federal income tax
purposes was approximately $11,066,000 and the approximate
aggregate gross unrealized appreciation and depreciation based on
that cost was:
Unrealized appreciation $ 60,000
Unrealized depreciation (212,000)
___________________________________________________________________
Net unrealized depreciation $(152,000)
___________________________________________________________________
<PAGE>
PAGE 221
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS:
List of financial statements filed as part of this Post-Effective
Amendment to the Registration Statement:
Four-month updated financial statements for International Equity
Portfolio of IDS Life Series Fund, Inc.:
- Statements of assets and liabilities, Feb. 28, 1995
(unaudited).
- Statements of operations, four months ended Feb. 28, 1995
(unaudited).
- Statements of changes in net assets, four months ended Feb.
28, 1995 (unaudited).
- Notes to financial statements, dated Feb. 28, 1995
(unaudited).
- Investments in securities, Feb. 28, 1995 (unaudited).
- Notes to investments in securities, Feb. 28, 1995
(unaudited).
For Equity, Income, Money Market, Managed and Government Securities
Portfolios of IDS Life Series Fund, Inc.:
- Semiannual Report, Statements of assets and liabilities,
Oct. 31, 1994 (unaudited).
- Semiannual Report, Statements of operations, six months
ended Oct. 31, 1994 (unaudited).
- Semiannual Report, Statements of changes in net assets, six
months ended Oct. 31, 1994 (unaudited).
- Semiannual Report, Notes to financial statements, dated Oct.
31, 1994 (unaudited).
- Semiannual Report, Investments in securities, Oct. 31, 1994
(unaudited).
- Semiannual Report, Notes to investments in securities, Oct.
31, 1994 (unaudited).
(b) EXHIBITS:
1.(a) Copy of Articles of Incorporation dated May 8, 1985,
filed as Exhibit No. 1 to Registrant's Registration
Statement No. 2-97636, are incorporated herein by
reference.
(b) Articles of Amendment of the Articles of Incorporation,
dated December 20, 1994, filed electronically as Exhibit
1(b) to Registrant's Post-Effective Amendment no. 16, are
incorporated herein by reference.
2. Copy of By-laws, filed electronically as Exhibit 2 with Post-
Effective Amendment No. 15 to Registration Statement No. 2-
97636, is incorporated herein by reference.
3. Not Applicable.
<PAGE>
PAGE 222
4. Copy of Stock Certificate, filed as Exhibit No. 3 to
Registrant's Registration Statement No. 2-97636, is
incorporated herein by reference.
5.(a) Copy of Investment Management and Services Agreement
between IDS Life Insurance Company and the Registrant
dated December 17, 1985, filed electronically as Exhibit
5(a) with Post-Effective Amendment No. 15 to Registration
Statement No. 2-97636, is incorporated herein by
reference.
(b) Copy of Investment Advisory Agreement between IDS Life
Insurance Company and IDS/American Express Inc., dated
July 11, 1984, filed electronically as Exhibit 5(b) with
Post-Effective Amendment No. 15 to Registration Statement
No. 2-97636, is incorporated herein by reference.
6. Not Applicable.
7. All employees are eligible to participate in a profit sharing
plan. Entry into the plan is Jan. 1 or July 1. The
Registrant contributes each year an amount equal to 15 percent
of their annual salaries, the maximum amount permitted under
Section 404 (a) of the Internal Revenue Code.
8.(a) Copy of Custodian Agreement between IDS Trust Company and
Registrant dated January 1, 1986, filed electronically as
Exhibit 8 with Post-Effective Amendment No. 15 to
Registration Statement No. 2-97636, is incorporated
herein by reference.
(b) Copy of Custody Agreement between Morgan Stanley Trust
Company and IDS Bank and Trust, dated May 1993, is filed
electronically herewith.
9. None.
10. Opinion and Consent of Counsel, filed as Exhibit No. 10 to
Registrant's Post-Effective Amendment No. 2 to Registration
Statement No. 2-97636, is incorporated herein by reference.
11. Independent Auditors' Consent, is filed electronically
herewith.
12. None.
13. None.
14. None.
15. None.
16. Copy of Schedule for computation of each performance
quotation, filed concurrently on Form SE as Exhibit 16 to
Registrant's Post-Effective Amendment No. 9 to Registration
Statement No. 2-97636, is incorporated herein by reference.
<PAGE>
PAGE 223
17. Financial Data Schedule for International Equity Portfolio's
4-month financial statements, is filed electronically
herewith. The Financial Data Schedule for IDS Life Series
Fund, Inc.'s 1994 semiannual report, filed on or about Dec.
30, 1994, is incorporated herein by reference.
18. Power of Attorney dated February 9, 1995, is filed
electronically herewith.
Item 25. Persons Controlled by or Under Common Control with
Registrant
Not Applicable.
Item 26. Number of Holders of Securities
(1) (2)
Number of Record Holders as
of March 31, 1995 for Equity,
Government Securities,
Income, Managed and Money
Title of Class Market Portfolios
Common Stock 5
Number of Record Holders as
of March 31, 1995 for
Title of Class International Equity Portfolio
Common Stock 2
Item 27. Indemnification
The Articles of Incorporation of the registrant provide that the
Fund shall indemnify any person who was or is a party or is
threatened to be made a party, by reason of the fact that he is or
was a director, officer, employee or agent of the Fund, or is or
was serving at the request of the Fund as a director, officer,
employee or agent of another company, partnership, joint venture,
trust or other enterprise, to any threatened, pending or completed
action, suit or proceeding, wherever brought, and the Fund may
purchase liability insurance and advance legal expenses, all to the
fullest extent permitted by the laws of the State of Minnesota, as
now existing or hereafter amended.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director,
<PAGE>
PAGE 224
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
Any indemnification hereunder shall not be exclusive of any other
rights of indemnification to which the directors, officers,
employees or agents might otherwise be entitled. No
indemnification shall be made in violation of the Investment
Company Act of 1940.
<TABLE><CAPTION>
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)
Directors and officers of American Express Financial Corporation who are directors and/or
officers of one or more other companies:
Ronald G. Abrahamson, Vice President--Service Quality and Reengineering
<S> <C> <C>
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Service Quality
and Reengineering
American Express Service Corporation Vice President
Douglas A. Alger, Vice President--Total Compensation
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Total Compensation
Jerome R. Amundson, Vice President--Investment Accounting
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Investment Accounting
Peter J. Anderson, Director and Senior Vice President--Investments
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Investments
IDS Advisory Group Inc. Director and Chairman
of the Board
IDS Capital Holdings Inc. Director and President
IDS International, Inc. Director, Chairman of the
Board and Executive Vice
President
IDS Securities Corporation Executive Vice President-
Investments
NCM Capital Management Group, Inc. 2 Mutual Plaza Director
501 Willard Street
Durham, NC 27701
Ward D. Armstrong, Vice President-Sales and Marketing, American Express Institutional Services
American Express Financial Advisors IDS Tower 10 Vice President-Sales and
Minneapolis, MN 55440 Marketing, American
Express Institutional
Services<PAGE>
PAGE 225
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Joseph M. Barsky III, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager
IDS Advisory Group Inc. Vice President
Robert C. Basten, Vice President--Tax and Business Services
American Express Financial Advisors IDS Tower 10 Vice President-Tax
Minneapolis, MN 55440 and Business Services
American Express Tax & Business Director, President and
Services Inc. Chief Executive Officer
Timothy V. Bechtold, Vice President--Risk Management Products
American Express Financial Advisors IDS Tower 10 Vice President-Risk
Minneapolis, MN 55440 Management Products
IDS Life Insurance Company Vice President-Risk
Management Products
Carl E. Beihl, Vice President--Strategic Technology Planning
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Strategic Technology
Planning
Alan F. Bignall, Vice President--Financial Planning Systems
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Financial Planning
Systems
American Express Service Corporation Vice President
John C. Boeder, Vice President--Mature Market Group
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Mature Market Group
IDS Life Insurance Company of New York Box 5144 Director
Albany, NY 12205
Karl J. Breyer, Director and Senior Vice President--Corporate Affairs and General Counsel
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Corporate Affairs and
Special Counsel
American Express Minnesota Foundation Director
IDS Aircraft Services Corporation Director and President
<PAGE>
PAGE 226
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Harold E. Burke, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
American Express Service Corporation Vice President
Daniel J. Candura, Vice President--Marketing Support
American Express Financial Advisors IDS Tower 10 Vice President-Marketing
Minneapolis, MN 55440 Support
Cynthia M. Carlson, Vice President--American Express Securities Services
American Enterprise Investment IDS Tower 10 Director, President and
Services Inc. Minneapolis, MN 55440 Chief Executive Officer
American Express Financial Advisors Vice President-American
Express Securities Services
Orison Y. Chaffee III, Vice President--Field Real Estate
American Express Financial Advisors IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Real Estate
James E. Choat, Director and Senior Vice President--Field Management
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Field Management
American Express Minnesota Foundation Director
American Express Service Corporation Vice President
IDS Insurance Agency of Alabama Inc. Vice President--North
Central Region
IDS Insurance Agency of Arkansas Inc. Vice President--North
Central Region
IDS Insurance Agency of Massachusetts Inc. Vice President--North
Central Region
IDS Insurance Agency of Nevada Inc. Vice President--North
Central Region
IDS Insurance Agency of New Mexico Inc. Vice President--North
Central Region
IDS Insurance Agency of North Carolina Inc. Vice President--North
Central Region
IDS Insurance Agency of Ohio Inc. Vice President--North
Central Region
IDS Insurance Agency of Wyoming Inc. Vice President-- North
Central Region
IDS Property Casualty Insurance Co. Director
<PAGE>
PAGE 227
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Kenneth J. Ciak, Vice President and General Manager--IDS Property Casualty
American Express Financial Advisors IDS Tower 10 Vice President and General
Minneapolis, MN 55440 Manager-IDS Property
Casualty
IDS Property Casualty Insurance Co. I WEG Blvd. Director and President
DePere, Wisconsin 54115
Alan R. Dakay, Vice President--Institutional Products Group
American Enterprise Life Insurance Co. IDS Tower 10 Director and President
Minneapolis, MN 55440
American Express Financial Advisors Vice President -
Institutional Products
Group
American Partners Life Insurance Co. Director and President
IDS Life Insurance Company Vice President -
Institutional Insurance
Marketing
Regenia David, Vice President--Systems Services
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Systems Services
William H. Dudley, Director and Executive Vice President--Investment Operations
American Express Financial Advisors IDS Tower 10 Director and Executive
Minneapolis, MN 55440 Vice President-
Investment Operations
IDS Advisory Group Inc. Director
IDS Capital Holdings Inc. Director
IDS Futures Corporation Director
IDS Futures III Corporation Director
IDS International, Inc. Director
IDS Securities Corporation Director, Chairman of the
Board, President and
Chief Executive Officer
Roger S. Edgar, Director, Senior Vice President and Technology Advisor
American Express Financial Advisors IDS Tower 10 Senior Vice President and
Minneapolis, MN 55440 Technology Advisor
<PAGE>
PAGE 228
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Gordon L. Eid, Director, Senior Vice President and Deputy General Counsel
American Express Financial Advisors IDS Tower 10 Senior Vice President and
Minneapolis, MN 55440 General Counsel
IDS Insurance Agency of Alabama Inc. Director and Vice President
IDS Insurance Agency of Arkansas Inc. Director and Vice President
IDS Insurance Agency of Massachusetts Inc. Director and Vice President
IDS Insurance Agency of Nevada Inc. Director and Vice President
IDS Insurance Agency of New Mexico Inc. Director and Vice President
IDS Insurance Agency of North Carolina Inc. Director and Vice President
IDS Insurance Agency of Ohio Inc. Director and Vice President
IDS Insurance Agency of Wyoming Inc. Director and Vice President
IDS Real Estate Services, Inc. Vice President
Investors Syndicate Development Corp. Director
Robert M. Elconin, Vice President--Government Relations
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Government Relations
IDS Life Insurance Company Vice President
Mark A. Ernst, Vice President--Retail Services
American Enterprise Investment IDS Tower 10 Director
Services Inc. Minneapolis, MN 55440
American Express Financial Advisors Vice President-
Retail Services
American Express Tax & Business Director and Chairman of
Services Inc. the Board
Gordon M. Fines, Vice President--Mutual Fund Equity Investments
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Mutual Fund Equity
Investments
IDS Advisory Group Inc. Executive Vice President
IDS International, Inc. Vice President and
Portfolio Manager
<PAGE>
PAGE 229
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Louis C. Fornetti, Director, Senior Vice President and Chief Financial Officer
American Enterprise Investment IDS Tower 10 Vice President
Services Inc. Minneapolis, MN 55440
American Express Financial Advisors Senior Vice President and
Chief Financial Officer
American Express Tax & Business Director
Services Inc.
American Express Trust Company Director
IDS Cable Corporation Director
IDS Cable II Corporation Director
IDS Capital Holdings Inc. Senior Vice President
IDS Certificate Company Vice President
IDS Insurance Agency of Alabama Inc. Vice President
IDS Insurance Agency of Arkansas Inc. Vice President
IDS Insurance Agency of Massachusetts Inc. Vice President
IDS Insurance Agency of Nevada Inc. Vice President
IDS Insurance Agency of New Mexico Inc. Vice President
IDS Insurance Agency of North Carolina Inc. Vice President
IDS Insurance Agency of Ohio Inc. Vice President
IDS Insurance Agency of Wyoming Inc. Vice President
IDS Life Insurance Company Director
IDS Life Series Fund, Inc. Vice President
IDS Life Variable Annuity Funds A&B Vice President
IDS Property Casualty Insurance Co. Director and Vice President
IDS Real Estate Services, Inc. Vice President
IDS Sales Support Inc. Director
IDS Securities Corporation Vice President
Investors Syndicate Development Corp. Vice President
Robert G. Gilbert, Vice President--Real Estate
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Real Estate
John J. Golden, Vice President--Field Compensation Development
American Express Financial Advisors IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Compensation Development
Harvey Golub, Director
American Express Company American Express Tower Chairman and Chief
World Financial Center Executive Officer
New York, New York 10285
American Express Travel Chairman and Chief
Related Services Company, Inc. Executive Officer
National Computer Systems, Inc. 11000 Prairie Lakes Drive Director
Minneapolis, MN 55440
<PAGE>
PAGE 230
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Morris Goodwin Jr., Vice President and Corporate Treasurer
American Enterprise Investment IDS Tower 10 Vice President and
Services Inc. Minneapolis, MN 55440 Treasurer
American Enterprise Life Insurance Vice President and
Company Treasurer
American Express Financial Advisors Vice President and
Corporate Treasurer
American Express Minnesota Foundation Director, Vice President
and Treasurer
American Express Service Corporation Vice President and
Treasurer
American Express Tax & Business Vice President and
Services Inc. Treasurer
IDS Advisory Group Inc. Vice President and
Treasurer
IDS Aircraft Services Corporation Vice President and
Treasurer
IDS Cable Corporation Director, Vice President
and Treasurer
IDS Cable II Corporation Director, Vice President
and Treasurer
IDS Capital Holdings Inc. Vice President and
Treasurer
IDS Certificate Company Vice President and
Treasurer
IDS Deposit Corp. Director, President
and Treasurer
IDS Insurance Agency of Alabama Inc. Vice President and
Treasurer
IDS Insurance Agency of Arkansas Inc. Vice President and
Treasurer
IDS Insurance Agency of Massachusetts Inc. Vice President and
Treasurer
IDS Insurance Agency of Nevada Inc. Vice President and
Treasurer
IDS Insurance Agency of New Mexico Inc. Vice President and
Treasurer
IDS Insurance Agency of North Carolina Inc. Vice President and
Treasurer
IDS Insurance Agency of Ohio Inc. Vice President and
Treasurer
IDS Insurance Agency of Wyoming Inc. Vice President and
Treasurer
IDS International, Inc. Vice President and
Treasurer
IDS Life Insurance Company Vice President and
Treasurer
IDS Life Series Fund, Inc. Vice President and
Treasurer
<PAGE>
PAGE 231
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
IDS Life Variable Annuity Funds A&B Vice President and
Treasurer
IDS Management Corporation Director, Vice President
and Treasurer
IDS Partnership Services Corporation Director, Vice President
and Treasurer
IDS Plan Services of California, Inc. Vice President and
Treasurer
IDS Property Casualty Insurance Co. Vice President and
Treasurer
IDS Real Estate Services, Inc Vice President and
Treasurer
IDS Realty Corporation Director, Vice President
and Treasurer
IDS Sales Support Inc. Director, Vice President
and Treasurer
IDS Securities Corporation Vice President and
Treasurer
Investors Syndicate Development Corp. Vice President and
Treasurer
NCM Capital Management Group, Inc. 2 Mutual Plaza Director
501 Willard Street
Durham, NC 27701
Sloan Financial Group, Inc. Director
Suzanne Graf, Vice President--Systems Services
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Systems Services
David A. Hammer, Vice President and Marketing Controller
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Marketing Controller
IDS Plan Services of California, Inc. Director and Vice President
Lorraine R. Hart, Vice President--Insurance Investments
American Enterprise Life IDS Tower 10 Vice President-Investments
Insurance Company Minneapolis, MN 55440
American Express Financial Advisors Vice President-Insurance
Investments
American Partners Life Insurance Co. Director and Vice
President-Investments
IDS Certificate Company Vice President-Investments
IDS Life Insurance Company Vice President-Investments
IDS Life Series Fund, Inc. Vice President-Investments
IDS Life Variable Annuity Funds A and B Vice President-Investments
IDS Property Casualty Insurance Company Vice President-Investment
Officer
Investors Syndicate Development Corp. Vice President-Investments
<PAGE>
PAGE 232
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Scott A. Hawkinson, Vice President--Assured Assets Product Development and Management
American Express Financial Advisors IDS Tower 10 Vice President-Assured
Minneapolis, MN 55440 Assets Product
Development & Management
Raymond E. Hirsch, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager
James G. Hirsh, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
IDS Securities Corporation Director, Vice President
and General Counsel
Darryl G. Horsman, Vice President--Product Development and Technology, American Express
Institutional Services
American Express Trust Company IDS Tower 10 Director and President
Minneapolis, MN 55440
Kevin P. Howe, Vice President--Government and Customer Relations and Chief Compliance Officer
American Enterprise Investment IDS Tower 10 Vice President and
Services Inc. Minneapolis, MN 55440 Compliance Officer
American Express Financial Advisors Vice President-
Government and
Customer Relations
American Express Service Corporation Vice President
IDS Securities Corporation Vice President and Chief
Compliance Officer
David R. Hubers, Director, President and Chief Executive Officer
American Express Financial Advisors IDS Tower 10 Chairman, Chief Executive
Minneapolis, MN 55440 Officer and President
American Express Service Corporation Director and President
IDS Aircraft Services Corporation Director
IDS Certificate Company Director
IDS Life Insurance Company Director
IDS Plan Services of California, Inc. Director and President
IDS Property Casualty Insurance Co. Director
Marietta L. Johns, Director and Senior Vice President--Field Management
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Field Management
<PAGE>
PAGE 233
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Douglas R. Jordal, Vice President--Taxes
American Express Financial Advisors IDS Tower 10 Vice President-Taxes
Minneapolis, MN 55440
IDS Aircraft Services Corporation Vice President
James E. Kaarre, Vice President--Marketing Information
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Marketing Information
Linda B. Keene, Vice President--Market Development
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Market Development
G. Michael Kennedy, Vice President--Investment Services and Investment Research
American Express Financial Advisors IDS Tower 10 Vice President-Investment
Minneapolis, MN 55440 Services and Investment
Research
Susan D. Kinder, Director and Senior Vice President--Human Resources
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Human Resources
American Express Minnesota Foundation Director
American Express Service Corporation Vice President
<PAGE>
PAGE 234
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Richard W. Kling, Director and Senior Vice President--Risk Management Products
American Enterprise Life Insurance Co. IDS Tower 10 Director and Chairman of
Minneapolis, MN 55440 the Board
American Express Financial Advisors Senior Vice President-
Risk Management Products
American Partners Life Insurance Co. Director and Chairman of
the Board
IDS Insurance Agency of Alabama Inc. Director and President
IDS Insurance Agency of Arkansas Inc. Director and President
IDS Insurance Agency of Massachusetts Inc. Director and President
IDS Insurance Agency of Nevada Inc. Director and President
IDS Insurance Agency of New Mexico Inc. Director and President
IDS Insurance Agency of North Carolina Inc. Director and President
IDS Insurance Agency of Ohio Inc. Director and President
IDS Insurance Agency of Wyoming Inc. Director and President
IDS Life Insurance Company Director and President
IDS Life Series Fund, Inc. Director and President
IDS Life Variable Annuity Funds A and B Chairman of the Board of
Managers and President
IDS Property Casualty Insurance Co. Director and Chairman of
the Board
IDS Life Insurance Company P.O. Box 5144 Director, Chairman of the
of New York Albany, NY 12205 Board and President
Paul F. Kolkman, Vice President--Actuarial Finance
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Actuarial Finance
IDS Life Insurance Company Director and Executive
Vice President
IDS Life Series Fund, Inc. Vice President and Chief
Actuary
Claire Kolmodin, Vice President--Service Quality
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Service Quality
Steven C. Kumagai, Director and Senior Vice President--Field Management and Business Systems
American Express Financial Advisors IDS Tower 10 Director and Senior Vice
Minneapolis, MN 55440 President-Field
Management and Business
Systems
American Express Service Corporation Vice President
<PAGE>
PAGE 235
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Edward Labenski, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio
Manager
IDS Advisory Group Inc. Senior Vice President
Kurt A. Larson, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio Manager
Lori J. Larson, Vice President--Variable Assets Product Development
American Express Financial Advisors IDS Tower 10 Vice President-Variable
Minneapolis, MN 55440 Assets Product
Development
IDS Cable Corporation Director and Vice President
IDS Cable II Corporation Director and Vice President
IDS Futures Brokerage Group Assistant Vice President-
General Manager/Director
IDS Futures Corporation Director and Vice President
IDS Futures III Corporation Director and Vice President
IDS Management Corporation Director and Vice President
IDS Partnership Services Corporation Director and Vice President
IDS Realty Corporation Director and Vice President
Ryan R. Larson, Vice President--IPG Product Development
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 IPG Product Development
IDS Life Insurance Company Vice President-
Annuity Product
Development
Daniel E. Laufenberg, Vice President and Chief U.S. Economist
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Chief U.S. Economist
Richard J. Lazarchic, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager
<PAGE>
PAGE 236
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Peter A. Lefferts, Director and Senior Vice President--Corporate Strategy and Development
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Corporate Strategy and
Development
American Express Service Corporation Director
American Express Trust Company Director
IDS Life Insurance Company Director and Executive
Vice President-Marketing
IDS Plan Services of California, Inc. Director
Investors Syndicate Development Corp. Director
Douglas A. Lennick, Director and Executive Vice President--Private Client Group
American Express Financial Advisors IDS Tower 10 Director and Executive
Minneapolis, MN 55440 Vice President-Private
Client Group
American Express Service Corporation Vice President
Mary J. Malevich, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio
Manager
IDS International, Inc. Vice President and
Portfolio Manager
Fred A. Mandell, Vice President--Field Marketing Readiness
American Express Financial Advisors IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Marketing Readiness
William J. McKinney, Vice President--Field Management Support
American Express Financial Advisors IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Management Support
Thomas W. Medcalf, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager
William C. Melton, Vice President-International Research and Chief International Economist
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 International Research
and Chief International
Economist
<PAGE>
PAGE 237
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Janis E. Miller, Vice President--Variable Assets
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Variable Assets
IDS Cable Corporation Director and President
IDS Cable II Corporation Director and President
IDS Futures Corporation Director and President
IDS Futures III Corporation Director and President
IDS Life Insurance Company Director and Executive
Vice President-Variable
Assets
IDS Life Series Fund, Inc. Director
IDS Life Variable Annuity Funds A&B Director
IDS Management Corporation Director and President
IDS Partnership Services Corporation Director and President
IDS Realty Corporation Director and President
IDS Life Insurance Company of New York Box 5144 Executive Vice President
Albany, NY 12205
James A. Mitchell, Director and Executive Vice President--Marketing and Products
American Enterprise Investment IDS Tower 10 Director
Services Inc. Minneapolis, MN 55440
American Express Financial Advisors Executive Vice President-
Marketing and Products
American Express Tax and Business Director
Services Inc.
IDS Certificate Company Director and Chairman of
the Board
IDS Life Insurance Company Director, Chairman of
the Board and Chief
Executive Officer
IDS Plan Services of California, Inc. Director
IDS Property Casualty Insurance Co. Director
Pamela J. Moret, Vice President--Corporate Communications
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Corporate Communications
American Express Minnesota Foundation Director and President
Barry J. Murphy, Director and Senior Vice President--Client Service
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Client Service
IDS Life Insurance Company Director and Executive
Vice President-Client
Service
<PAGE>
PAGE 238
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Robert J. Neis, Vice President--Information Systems Operations
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Information Systems
Operations
James R. Palmer, Vice President--Insurance Operations
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Insurance Operations
IDS Life Insurance Company Vice President-Taxes
Carla P. Pavone, Vice President--Specialty Service Teams and Emerging Business
American Express Financial Advisors IDS Tower 10 Vice President-Specialty
Minneapolis, MN 55440 Service Teams and
Emerging Business
George M. Perry, Vice President--Corporate Strategy and Development
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Corporate Strategy
and Development
IDS Property Casualty Insurance Co. Director
Susan B. Plimpton, Vice President--Segmentation Development and Support
American Express Financial Advisors IDS Tower 10 Vice President--
Minneapolis, MN 55440 Segmentation Development
and Support
Ronald W. Powell, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
IDS Cable Corporation Vice President and
Assistant Secretary
IDS Cable II Corporation Vice President and
Assistant Secretary
IDS Management Corporation Vice President and
Assistant Secretary
IDS Partnership Services Corporation Vice President and
Assistant Secretary
IDS Plan Services of California, Inc. Vice President and
Assistant Secretary
IDS Realty Corporation Vice President and
Assistant Secretary
<PAGE>
PAGE 239
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
James M. Punch, Vice President--TransAction Services
American Express Financial Advisors IDS Tower 10 Vice President-Trans
Minneapolis, MN 55440 Action Services
Frederick C. Quirsfeld, Vice President--Taxable Mutual Fund Investments
American Express Financial Advisors IDS Tower 10 Vice President--
Minneapolis, MN 55440 Taxable Mutual Fund
Investments
IDS Advisory Group Inc. Vice President
ReBecca K. Roloff, Vice President--1994 Program Director
American Express Financial Advisors IDS Tower 10 Vice President-1994
Minneapolis, MN 55440 Program Director
Stephen W. Roszell, Vice President--Advisory Institutional Marketing
American Express Financial Advisors IDS Tower 10 Vice President-Advisory
Minneapolis, MN 55440 Institutional Marketing
IDS Advisory Group Inc. President and Chief
Executive Officer
Robert A. Rudell, Vice President--American Express Institutional Services
American Express Financial Advisors IDS Tower 10 Vice President-American
Minneapolis, MN 55440 Express Institutional
Services
American Express Trust Company Director and Chairman of
the Board
IDS Sales Support Inc. Director and President
John P. Ryan, Vice President and General Auditor
American Express Financial Advisors IDS Tower 10 Vice President and General
Minneapolis, MN 55440 Auditor
<PAGE>
PAGE 240
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Erven A. Samsel, Director and Senior Vice President--Field Management
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Field Management
American Express Service Corporation Vice President
IDS Insurance Agency of Alabama Inc. Vice President-
New England Region
IDS Insurance Agency of Arkansas Inc. Vice President-
New England Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
New England Region
IDS Insurance Agency of Nevada Inc. Vice President-
New England Region
IDS Insurance Agency of New Mexico Inc. Vice President-
New England Region
IDS Insurance Agency of North Carolina Inc. Vice President-
New England Region
IDS Insurance Agency of Ohio Inc. Vice President-
New England Region
IDS Insurance Agency of Wyoming Inc. Vice President-
New England Region
Stuart A. Sedlacek, Vice President--Assured Assets
American Enterprise Life Insurance Co. IDS Tower 10 Director and Executive
Minneapolis, MN 55440 Vice President, Assured
Assets
American Express Financial Advisors Vice President-
Assured Assets
IDS Certificate Company Director and President
IDS Life Insurance Company Director and Executive
Vice President, Assured
Assets
Investors Syndicate Development Corp. Chairman of the Board
and President
Donald K. Shanks, Vice President--Property Casualty
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Property Casualty
IDS Property Casualty Insurance Co. Senior Vice President
<PAGE>
PAGE 241
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
F. Dale Simmons, Vice President--Senior Portfolio Manager, Insurance Investments
American Enterprise Life Insurance Co. IDS Tower 10 Vice President-Real
Minneapolis, MN 55440 Estate Loan Management
American Express Financial Advisors Vice President-Senior
Portfolio Manager,
Insurance Investments
American Partners Life Insurance Co. Vice President-Real
Estate Loan Management
IDS Certificate Company Vice President-Real
Estate Loan Management
IDS Life Insurance Company Vice President-Real
Estate Loan Management
IDS Partnership Services Corporation Vice President
IDS Real Estate Services Inc. Director and Vice President
IDS Realty Corporation Vice President
IDS Life Insurance Company of New York Box 5144 Vice President and
Albany, NY 12205 Assistant Treasurer
Judy P. Skoglund, Vice President--Human Resources and Organization Development
American Express Financial Advisors IDS Tower 10 Vice President-Human
Minneapolis, MN 55440 Resources and
Organization Development
Ben C. Smith, Vice President--Workplace Marketing
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Workplace Marketing
William A. Smith, Vice President and Controller--Private Client Group
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Controller-Private
Client Group
Bridget Sperl, Vice President--Human Resources Management Services
American Express Financial Advisors IDS Tower 10 Vice President-Human
Minneapolis, MN 55440 Resources Management
Services
Jeffrey E. Stiefler, Director
American Express Company American Express Tower Director and President
World Financial Center
New York, NY 10285
<PAGE>
PAGE 242
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
William A. Stoltzmann, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
American Partners Life Insurance Co. Director, Vice President,
General Counsel and
Secretary
IDS Life Insurance Company Vice President, General
Counsel and Secretary
American Enterprise Life Insurance P.O. Box 534 Director, Vice President,
Company Minneapolis, MN 55440 General Counsel
and Secretary
James J. Strauss, Vice President--Corporate Planning and Analysis
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Corporate Planning and
Analysis
Jeffrey J. Stremcha, Vice President--Information Resource Management/ISD
American Express Financial Advisors IDS Tower 10 Vice President-Information
Minneapolis, MN 55440 Resource Management/ISD
Fenton R. Talbott, Director
ACUMA Ltd. ACUMA House President and Chief
The Glanty, Egham Executive Officer
Surrey TW 20 9 AT
UK
<PAGE>
PAGE 243
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
John R. Thomas, Director and Senior Vice President--Information and Technology
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Information and
Technology
IDS Bond Fund, Inc. Director
IDS California Tax-Exempt Trust Trustee
IDS Discovery Fund, Inc. Director
IDS Equity Select Fund, Inc. Director
IDS Extra Income Fund, Inc. Director
IDS Federal Income Fund, Inc. Director
IDS Global Series, Inc. Director
IDS Growth Fund, Inc. Director
IDS High Yield Tax-Exempt Fund, Inc. Director
IDS Investment Series, Inc. Director
IDS Managed Retirement Fund, Inc. Director
IDS Market Advantage Series, Inc. Director
IDS Money Market Series, Inc. Director
IDS New Dimensions Fund, Inc. Director
IDS Precious Metals Fund, Inc. Director
IDS Progressive Fund, Inc. Director
IDS Selective Fund, Inc. Director
IDS Special Tax-Exempt Series Trust Trustee
IDS Stock Fund, Inc. Director
IDS Strategy Fund, Inc. Director
IDS Tax-Exempt Bond Fund, Inc. Director
IDS Tax-Free Money Fund, Inc. Director
IDS Utilities Income Fund, Inc. Director
Melinda S. Urion, Vice President and Corporate Controller
American Enterprise Life IDS Tower 10 Vice President and
Insurance Company Minneapolis, MN 55440 Controller
American Express Financial Advisors Vice President and
Corporate Controller
American Partners Life Insurance Co. Director, Vice President,
Controller and Treasurer
IDS Life Insurance Company Director, Executive Vice
President and Controller
IDS Life Series Fund, Inc. Vice President and
Controller
Wesley W. Wadman, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio Manager
IDS Advisory Group Inc. Executive Vice President
IDS Fund Management Limited Director and Vice Chairman
IDS International, Inc. Senior Vice President
<PAGE>
PAGE 244
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Michael L. Weiner, Vice President--Corporate Tax Operations
American Express Financial Advisors IDS Tower 10 Vice President-Corporate
Minneapolis, MN 55440 Tax Operations
IDS Capital Holdings Inc. Vice President
IDS Futures Brokerage Group Vice President
IDS Futures Corporation Vice President, Treasurer
and Secretary
IDS Futures III Corporation Vice President, Treasurer
and Secretary
Lawrence J. Welte, Vice President--Investment Administration
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Investment Administration
IDS Securities Corporation Director, Executive Vice
President and Chief
Operating Officer
Jeffry F. Welter, Vice President--Equity and Fixed Income Trading
American Express Financial Advisors IDS Tower 10 Vice President-Equity
Minneapolis, MN 55440 and Fixed Income Trading
William N. Westhoff, Director, Senior Vice President and Global Chief Investment Officer
American Enterprise Life Insurance IDS Tower 10 Director
Company Minneapolis, MN 55440
American Express Financial Advisors Senior Vice President and
Global Chief Investment
Officer
IDS Fund Management Limited Director
IDS International, Inc. Director
IDS Partnership Services Corporation Director and Vice President
IDS Real Estate Services Inc. Director, Chairman of the
Board and President
IDS Realty Corporation Director and Vice President
Investors Syndicate Development Corp. Director
<PAGE>
PAGE 245
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Edwin M. Wistrand, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
Michael R. Woodward, Director and Senior Vice President--Field Management
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Field Management
American Express Service Corporation Vice President
IDS Insurance Agency of Alabama Inc. Vice President-
North Region
IDS Insurance Agency of Arkansas Inc. Vice President-
North Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
North Region
IDS Insurance Agency of Nevada Inc. Vice President-
North Region
IDS Insurance Agency of New Mexico Inc. Vice President-
North Region
IDS Insurance Agency of North Carolina Inc. Vice President-
North Region
IDS Insurance Agency of Ohio Inc. Vice President-
North Region
IDS Insurance Agency of Wyoming Inc. Vice President-
North Region
IDS Life Insurance Company Box 5144 Director
of New York Albany, NY 12205
</TABLE>
Item 29. The Fund has no principal underwriter.
Item 30. Location of Accounts and Records
American Express Financial Corporation
IDS Tower 10
Minneapolis, Minnesota
Item 31. Management Services
Not applicable
Item 32. Undertakings
(a) Not applicable.
(b) Not applicable.
(c) The Registrant undertakes to furnish each person to
whom a prospectus is delivered with a copy of the
Registrant's latest annual report to shareholders,
upon request and without charge.
<PAGE>
PAGE 246
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, IDS Life Series
Fund, Inc., certifies that it meets all of the requirements for
effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this
Amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereto duly authorized, in the City of
Minneapolis and State of Minnesota on the 28th day of April, 1995.
IDS LIFE SERIES FUND, INC.
By /s/ Richard W. Kling
Richard W. Kling
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by
the following persons in the capacities indicated on the 28th day
of April, 1995.
Signature Capacity
/s/ Richard W. Kling* President and Director
Richard W. Kling
/s/ Louis C. Fornetti* Vice President
Louis C. Fornetti
/s/ Morris Goodwin, Jr.* Vice President and
Morris Goodwin, Jr. Treasurer
/s/ Paul Kolkman* Vice President and Chief
Paul Kolkman Actuary
/s/ Melinda S. Urion* Vice President and
Melinda S. Urion Controller
/s/ Edward Landes* Director
Edward Landes
/s/ Carl N. Platou* Director
Carl N. Platou
/s/ Gordon H. Ritz* Director
Gordon H. Ritz
/s/ Janis E. Miller* Director
Janis E. Miller
*Signed pursuant to Power of Attorney dated February 9, 1995, filed
electronically herewith as Exhibit 18 by:
Mary Ellyn Minenko
<PAGE>
PAGE 247
CONTENTS OF THIS POST-EFFECTIVE AMENDMENT NO. 17
TO REGISTRATION STATEMENT NO. 2-97636
This Post-Effective Amendment comprises the following papers and
documents:
The facing sheet.
The cross-reference page.
Part A.
The prospectus.
Part B.
Statement of Additional Information.
Financial Statements.
Part C.
Other Information.
The signatures.
<PAGE>
PAGE 1
EXHIBIT INDEX
Exhibit 8(b) Copy of Custody Agreement between Morgan Stanley
Trust Company and IDS Bank and Trust, dated May
1993.
Exhibit 11 Independent Auditors' Consent.
Exhibit 17 Financial Data Schedule.
Exhibit 18 Power of Attorney dated February 9, 1995.
<PAGE>
PAGE 1
CUSTODY AGREEMENT
This Custody Agreement is dated May, 1993 between MORGAN STANLEY
TRUST COMPANY, a New York State chartered trust company (the
"Custodian"), and IDS Bank & Trust (the "Customer").
1. The Customer hereby appoints the Custodian as a custodian of
securities and other property owned or under the control of the
Customer which are delivered to the Custodian, or any Subcustodian
as appointed below, from time to time to be held in custody for the
benefit of the Customer. The Customer instructs the Custodian to
establish on the books and records of the Custodian an account (the
"Account") in the name of the Customer. The Custodian shall record
in the Account and shall have general responsibility for the
safekeeping of all securities ("Securities"), cash and other
property (all such Securities, cash and other Property being
collectively the "Property") of the Customer so delivered for
custody. It is understood that the specific procedures the
Custodian will use in carrying out its responsibilities under this
Agreement are set forth in the procedures manual (the "Procedures
Manual") prepared by the Custodian and delivered to the Customer,
as such Procedures Manual may be amended from time to time by the
Custodian by 90 days prior written notice to the Customer (unless
the Customer agrees to a shorter period). The Customer acknowledges
that the Procedures Manual constitutes an integral part of this
Agreement.
2. The Property may be held in custody and deposit accounts that
have been established by the Custodian with one or more domestic or
foreign banks, or through the facilities of one or more clearing
agencies or central securities depositories, as listed on Exhibit A
hereto (the "Subcustodians"), as such Exhibit may be amended from
time to time by the Custodian by written notice to the Customer.
The Custodian shall deliver to the Customer such information as is
necessary or appropriate for the Customer to determine that the
Customer is in compliance with Rule 17f-5 promulgated under the
Investment Company Act of 1940, as amended. The Custodian may hold
Property for all of its customers with a Subcustodian in a single
account that is identified-as belonging to the Custodian for the
benefit of its customers. Any Subcustodian may hold Property in a
securities depository and may utilize a clearing agency. The
Customer agrees that the Property may be physically held outside
the United States. The Custodian shall not be liable for any loss
resulting directly from the physical presence of any Property in a
foreign country (and not by virtue of the actions of the Custodian
or any Subcustodian) including, but not limited to, losses
resulting from nationalization, expropriation, exchange controls or
acts of war or terrorism. Except as provided in the previous
sentence, the liability of the Custodian for losses incurred by the
Customer in respect of Securities shall not be affected by the
Custodian's use of Subcustodians.
<PAGE>
PAGE 2
3. With respect to Property held by a Subcustodian pursuant to
Section 2:
(a) The Custodian will identify on its books as belonging to
the Customer any Property held by a Subcustodian for the
Custodian's account;
(b) The Custodian will hold Property through a Subcustodian
only if (i) such Subcustodian and any securities depository or
clearing agency in which such Subcustodian holds Property, or
any of their creditors, may not assert any right, charge
security interest, lien, encumbrance or other claim of any
kind to such Property except a claim of payment for its safe
custody or administration and (ii) beneficial ownership of
such Property may be freely transferred without the payment of
money or value other than for safe custody or administration;
(c) The Custodian shall require that Property held by the
Subcustodian for the Custodian's account be identified on the
Subcustodian's books as separate from any property held by the
Subcustodian other than property of the Custodian's customers
and as held solely for the benefit of customers of the
Custodian; and
(d) In the event that the Subcustodian holds Property in a
securities depository or clearing agency, such Subcustodian
will be required by its agreement with the Custodian to
identify on its books such Property as being held for the
account of the Custodian as a custodian for its customers.
4. The Custodian shall allow the Customer's accountants reasonable
access to the Custodian's records relating to the Property held by
the Custodian as such accountants may reasonably require in
connection with their examination of the Customer's affairs. The
Custodian shall also obtain from any Subcustodian (and will require
each Subcustodian to use reasonable efforts to obtain from any
securities depository or clearing agency in which it deposits
Property) an undertaking, to the extent consistent with local
practice and the laws of the jurisdiction or jurisdictions to which
such Subcustodian, securities depository or clearing agency is
subject, to permit independent public accountants such reasonable
access to the records of such Subcustodian, securities depository
or clearing agency as may be reasonably required in connection with
the examination of the Customer's affairs or to take such other
action as the Custodian in its judgment may deem sufficient to
ensure such reasonable access.
5. The Custodian shall provide such reports and other information
to the Customer and to such persons as the Customer directs as the
Custodian and the Customer may agree from time to time, including
such reports which are described in the Procedures Manual.
<PAGE>
PAGE 3
6. The Custodian shall make or cause any Subcustodian to make
payments from monies being held in the Account only:
(a) upon the purchase of Securities and then, to the extent
consistent with practice in the jurisdiction in which
settlement occurs, upon the delivery of such Securities;
(b) for payments to be made in connection with the conversion,
exchange or surrender of Securities;
(c) upon a request of the Customer that the Custodian return
monies being held in the Account;
(d) upon a request of the Customer that monies be exchanged
for or used to purchase monies denominated in a different
currency and then only upon receipt of such exchanged or
purchased monies;
(e) as provided in Section 8 and 12 hereof;
(f) upon termination of this Custody Agreement as hereinafter
set forth; and
(g) for any other purpose upon receipt of explicit
instructions of the Customer accompanied by evidence
reasonably acceptable to the Custodian as to the authorization
of such payment.
Except as provided in the last two sentences of this Section 6 and
as provided in Section 8, all payments pursuant to this Section 6
will be made only upon receipt by the Custodian of Authorized
Instructions (as hereinafter defined) from the Customer which shall
specify the purpose for which the payment is to be made. In the
event that it is not possible to make a payment in accordance with
Authorized Instructions of the Customer, the Custodian shall
proceed in accordance with the procedures set forth in the
Procedures Manual. Any payment pursuant to subsection (f) of this
Section 6 will be made in accordance with Section 16.
7. The Custodian shall make or cause any Subcustodian to make
transfers, exchanges or deliveries of Securities only:
(a) upon sale of such Securities and then, to the extent
consistent with practice in the jurisdiction in which
settlement occurs, upon receipt of payment therefor;
(b) upon exercise of conversion, subscription, purchase,
exchange or other similar rights pertaining to such Securities
and, if applicable to such exercise and if consistent with
practice in the applicable jurisdiction, only on receipt of
substitute or additional securities to be received upon such
exercise;
(c) as provided in Section 8 hereof;
(d) upon the termination of this Custody Agreement as
hereinafter set forth; and
<PAGE>
PAGE 4
(e) for any other purpose upon receipt of explicit
instructions of the Customer accompanied by evidence
reasonably acceptable to the Custodian as to the authorization
of such transfer, exchange or delivery.
Except as provided in the last two sentences of this Section 7 and
as provided in Section 8, all transfers, exchanges or deliveries of
Securities pursuant to this Section 7 will be made only upon
receipt by the Custodian of Authorized Instructions of the Customer
which shall specify the purpose for which the transfer, exchange or
delivery is to be made. In the event that it is not possible to
transfer Securities in accordance with Authorized Instructions of
the Customer, the Custodian shall proceed in accordance with the
procedures set forth in the Procedures Manual. Any transfer or
delivery pursuant to subsection (d) of this Section 7 will be made
in accordance with Section 16.
8. In the absence of Authorized Instructions from the Customer to
the contrary, the Custodian may, and may authorize any Subcustodian
to:
(a) make payments to itself or others for expenses of handling
Property or other similar items relating to its duties under
this Agreement, provided that all such payments shall be
accounted for to the Customer;
(b) receive and collect all income and principal with respect
to Securities and to credit cash receipts to the Account;
(c) exchange Securities when the exchange is purely
ministerial (including, without limitation, the exchange of
interim receipts or temporary securities for securities in
definitive form and the exchange of warrants, or other
documents of entitlement to securities, for the securities
themselves);
(d) surrender Securities at maturity or when called for
redemption upon receiving payment therefor;
(e) execute in the Customer's name such ownership and other
certificates as may be required to obtain the payment of
income from Securities:
(f) pay or cause to be paid, from the Account, any and all
taxes and levies in the nature of taxes imposed on Property by
any governmental authority in connection with custody of and
transactions in such Property;
(g) endorse for collection, in the name of the Customer,
checks, drafts and other negotiable instruments; and
(h) in general, attend to all nondiscretionary details in
connection with the custody, sale, purchase, transfer and
other dealings with the Property.
<PAGE>
PAGE 5
9. "Authorized Instructions" of the Customer shall mean
instructions received by telecopy, tested telex, electronic link or
other electronic means or by such other means as may be agreed in
writing in advance between the Customer and the Custodian. The
Custodian shall be entitled to act, and shall have no liability for
acting, in accordance with the terms of this Agreement or upon any
instructions, notice, request, consent, certificate or other
instrument or paper believed by it to be genuine and to have been
properly executed by one or more persons which the Customer has
previously identified to the Custodian as authorized to act on the
Customer's behalf.
10. Securities which must be held in registered form may be
registered in the name of the Custodian's nominee or, in the case
of Securities in the custody of an entity other than the Custodian,
in the name of such entity's nominee. The Customer agrees to hold
the Custodian and Subcustodians and any such nominee harmless from
any liability arising out of any such person acting as a holder of
record of such Securities. The Custodian may without notice to the
Customer cause any Securities to cease to be registered in the name
of any such nominee and to be registered in the name of the
Customer.
11. All cash received by the Custodian for the Account shall be
held by the Custodian as a short-term credit balance in favor of
the Customer and, if the Custodian and the Customer have agreed in
writing in advance that such credit balances shall bear interest,
the Customer shall earn interest at the rates and times as agreed
between the Custodian and the Customer. The Customer understands
that any such credit balances will not be accompanied by the
benefit of any governmental insurance.
12. From time to time, the Custodian may arrange or extend short-
term credit for the Customer which is (i) necessary in connection
with payment and clearance of securities and foreign exchange
transactions or (ii) pursuant to an agreed schedule, as and if set
forth in the Procedures Manual, of credits for dividends and
interest payments on Securities. All such extensions of credit
shall be repayable by the Customer on demand. The Custodian shall
be entitled to charge the Customer interest for any such credit
extension at rates to be agreed upon from time to time. In addition
to any other remedies available, the Custodian shall be entitled to
a right of set-off against the Property to satisfy the repayment of
such credit extensions and the payment of accrued interest thereon.
The Custodian may act as the Customer's agent or act as a principal
in foreign exchange transactions at such rates as are agreed from
time to time between the Customer and the Custodian.
13. The Customer represents that (i) the execution, delivery and
performance of this Agreement (including, without limitation, the
ability to obtain the short-term extensions of credit in accordance
with Section 12) are within the Customer's power and authority and
have been duly authorized by all requisite action (corporate or
otherwise) and (ii) this Agreement and each extension of short-term
credit extended or arranged for the benefit of the Customer in
accordance with Section 12 will at all times constitute a legal,
valid and binding obligation of the Customer and be enforceable'
<PAGE>
PAGE 6
against the Customer in accordance with their respective terms,
except as may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights in general and
subject to the effect of general principles of equity (regardless
of whether considered in a proceeding in equity or at law).
The Custodian represents that the execution, delivery and
performance of this Agreement is within the Custodian's power and
authority and has been duly authorized by all requisite action of
the Custodian. This Agreement constitutes the legal, valid and
binding obligation of the Custodian enforceable against the
Custodian in accordance with its terms, except as may be limited by
bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights in general and subject to the
effect of general principles of equity (regardless of whether
considered in a proceeding in equity or at law).
14. The Custodian shall be responsible for the performance of only
such duties as are set forth in this Agreement or the Procedures
Manual or contained in Authorized Instructions given to the
Custodian which are not contrary to the provisions of any relevant
law or regulation. The Custodian shall not be liable to the
Customer or to any other person for any action taken or omitted to
be taken by it in connection with this Agreement in the absence of
negligence or willful misconduct on the part of the Custodian. Upon
Custodian, the Customer agrees to deliver to the Custodian a duly
executed power of attorney, in form and substance satisfactory to
the Custodian, authorizing the Custodian to take any action or
execute any instrument on behalf of the Customer as necessary or
advisable to accomplish the purposes of this Agreement.
15. The Customer agrees to pay to the Custodian from time to time
such compensation for its services pursuant to this Agreement as
may be mutually agreed upon from time to time and the Custodian's
out-of-pocket or incidental expenses. The Customer hereby agrees to
hold the Custodian harmless from any liability or loss resulting
from any taxes or other governmental charges, and any expenses
related thereto, which may be imposed or assessed with respect to
the Account or any Property held therein. The Custodian is and any
Subcustodians are authorized to charge the Account for such items
and the Custodian shall have a lien, charge and security interest
on any and all Property for any amount owing to the Custodian from
time to time under this Agreement. Except as set forth in the
previous sentence, or otherwise permitted pursuant to the terms of
this agreement, the Custodian shall not pledge, assign, hypothecate
or otherwise encumber Property without Authorized Instructions; it
being understood that a Subcustodian will generally retain a lien
against securities which the Subcustodian has purchased for the
Account but for which the Customer has not yet paid.
If the Customer is a U.S. person as defined in Rule 902 promulgated
by the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended (the "Act"), the Customer
recognizes that, in connection with the Customer's election from
time to time to participate in distributions of securities (whether
pursuant to rights offerings, warrant subscriptions, mergers,
reorganizations or otherwise) which have not been registered
<PAGE>
PAGE 7
pursuant to the Act, the Custodian may inform the issuer and its
agents that the acquire of the securities is a U.S. person. The
Custodian shall not be responsible to the Customer for the
consequences of any issuer's or agent's refusal to permit the
Customer to acquire such securities, and the Customer shall hold
the Custodian harmless from liability to the issuer and its agents
in connection with any such election by the Customer.
16. This Agreement may be terminated by the Customer or the
Custodian by 90 days written notice to the other, sent by
registered mail. If notice of termination is given, the Customer
shall, within 60 days following the giving of such notice, deliver
to the Custodian a statement in writing specifying the successor
custodian or other person to whom the Custodian shall transfer the
Property. In either event the Custodian, subject to the
satisfaction of any lien it may have, will transfer the Property to
the person so specified. If the Custodian does not receive such
statement the Custodian, at its election, may transfer the Property
to a bank or trust company established under the laws of the United
States or any state thereof to be held and disposed of pursuant to
the provisions of this Agreement or may continue to hold the
Property until such a statement is delivered to the Custodian. In
such event the Custodian shall be entitled to fair compensation for
its services during such period as the Custodian remains in
possession of any Property and the provisions of this Agreement
relating to the duties and obligations of the Custodian shall
remain in full force and effect; provided, however, that the
Custodian shall no longer settle any transactions in securities for
the Account.
17. The Custodian, its agents and employees will maintain the
confidentiality of information concerning the Property held in the
Account, including in dealings with affiliates of the Custodian. In
the event the Custodian or any Subcustodian is requested or
required to disclose any confidential information concerning the
Property, the Custodian shall to the extent practicable and legally
permissible, promptly notify the Customer of such request or
requirement so that the Customer may seek a protective order or
waive the Custodian's or such Subcustodian's compliance with this
Section 17. In the absence of such a waiver, if the Custodian or
such Subcustodian is compelled, in the opinion of its counsel, to
disclose any confidential information, the Custodian or such
Subcustodian may disclose such information to such persons as, in
the opinion of counsel, is so required.
18. Any notice or other communication from the Customer to the
Custodian, unless otherwise provided by this Agreement, shall be
sent by certified or registered mail to Morgan Stanley Trust
Company, One Pierrepont Plaza, Brooklyn, New York, 11201,
Attention: President, and any notice from the Custodian to the
Customer is to be mailed postage prepaid, addressed to the Customer
at the address appearing below, or as it may hereafter be changed
on the Custodian's records in accordance with notice from the
Customer.
<PAGE>
PAGE 8
19. The Custodian may assign all of its rights and obligations
hereunder to any other entity which is qualified to act as
custodian under the terms of this Agreement and majority-owned,
directly or indirectly, by Morgan Stanley Group Inc., and upon the
assumption of the rights and obligations hereunder by such entity,
such entity shall succeed to all of the rights and obligations of,
and be substituted for, the Custodian hereunder as if such entity
had been originally named as custodian herein. The Custodian shall
give prompt written notice to the Customer upon the effectiveness
of any such assignment.
This Agreement shall bind the successors and assigns of the
Customer and the Custodian and shall be governed by the laws of the
State of New York applicable to contracts executed in and to be
performed in that state.
________________________
By /s/ Mark Ellis
Name: Mark Ellis
Title: Vice President
Address for record: IDS Trust
1200 Northstar West
P.O. Box 534
Minneapolis, MN 55440-0534
________________________
Accepted:
MORGAN STANLEY TRUST COMPANY
By /s/ David P. Roccato
Authorized Signature
Roccato
<PAGE>
PAGE 9
BILLING GUIDE for IDS
PURPOSE OF THIS GUIDE
We have written this guide to provide a ready reference for billing
questions. Of course, personal help continues to be available from
your billing representative and your Client Executive.
UPDATE SCHEDULE
This guide will be amended periodically as changes occur. We
appreciate your feedback on improvements to our communication as we
continue to upgrade our service to you.
DEFINITIONS
Transaction
A Transaction is an entry to the system e.g. an original trade.
Custody
An asset in Custody is a position, short or long.
Out of Pocket Expenses
Out of Pocket Expenses are those charges relating to stamp duty,
transfer taxes, registration fees, Spanish put-throughs, tax
reclaim commission, and similar charges which are market-mandated
and which, when incurred through our sub-custodian banks, are
passed directly along to you as indicated in your Custody
Agreement.
Cut-Off Date
The Cut-Off Date is the date on which the MSGS Billing System is
closed. Therefore only transactions entered before that date are
charged on that particular bill.
Process Date
The Process Date of a transaction is the date on which it was
entered to the MSGS system.
Trade Date
The Trade Date of a transaction is the date quoted by the client on
which it was executed.
Basis Point
One Basis Point is a multiple of 0.0001 per year (e.g.
$1,000,000,000 of assets at 1 basis point equals a charge of
$100,000 per year).
MSGS
<PAGE>
PAGE 10
DEFINITIONS (continued)
In-Kind
An In-kind transaction is a book entry between a client's accounts
at MSGS, rather than movements external to MSGS.
Regular
A Regular transaction is a term used to describe an entry of a
trade to the system, not including cancel/correct, in-kind, cash
movement, bulk and conversion transactions, etc.
Conversion
A Conversion transaction is a movement of securities to or from an
outside custodian, i.e. external to MSGS.
Internal
An Internal transaction is one with Morgan Stanley as the broker.
External
An External transaction is one with a broker other than Morgan
Stanley.
Cash Movement
A Cash Movement transaction is a movement of funds from a client
account to a bank, broker, institution, etc. These are based on an
instruction from the client.
PREPARATION OF BILLS
Your bills are produced automatically by the MSGS Billing System
and are reviewed by your billing representative.
The bills are printed by the third business day of the month. They
include transactions processed up to the 'Cut-Off Date' quoted in
the cover letter to your bill. Further information can be found in
the 'Custody Fees' and 'Transaction Fees' sections.
Our standard is to mail your bills by the fifteenth day of the
month.
PAYMENT OF BILLS
Payment of bills is required by the last business day of the month.
Wire transfer or direct debit is preferred.
ADJUSTMENT TO BILLS
If there are adjustments to be made to any bill, these will be made
on the next bill that is due. Adjustments are separately identified
on your cover letter and supporting details are provided. Timely
review of your bills is beneficial as no adjustments are made three
months after the mailing date.
MSGS
<PAGE>
PAGE 11
FEES FOR NEW COUNTRIES / NEW PRODUCTS
If you trade in a country that is new to you or if you trade in a
new product and you do not have a fee for it on your fee schedule,
you are requested to discuss the appropriate fee with your client
executive in advance. If your client executive is not notified
ahead of time, you will be charged at the MSGS generic rates for
each respective new country / new product.
CUSTODY FEES
Average Month-End Valuation
Custody of assets will be billed on the basis of Average Month-End
Valuation. The closing asset positions recorded on the last
business day of the month are added to the closing asset positions
of the previous month and the sum is divided by two. This is done
for each issue currency that you hold. These are converted from the
various global currencies to your billing currency at the Morgan
Stanley & Company closing exchange rates.
The absolute value of the short and long trade date positions is
used to calculate the asset value. Available cash is billed;
however, ledger cash is not billed except for dividend and interest
accruals. The asset values of as-of transactions are not included.
Material Differences
MSGS may use a Daily Weighted Average Valuation where patterns of
business would lead to a material difference in asset value
compared to the Average Month-End Valuation method. The Daily
Weighted Average Valuation method records the closing asset
positions (in issue currency) on each business day and converts
them to your billing currency at the daily Morgan Stanley & Company
closing exchange rates. If this method of valuation is to be
introduced, it will be discussed with you and put into writing at
least one complete month before the change.
Eurobond vs. Euroclear
Assets are billed based on their product type but not based on
their location. A eurobond, regardless of where it is held, is
charged at the eurobond rate. Assets other than eurobonds are
charged based on the product type and/or the issue currency. Please
refer your fee schedule in Appendix A for specific charges.
GLOBAL PROXY VOTING SERVICE
You may elect to subscribe to our Global Proxy Voting Service. This
service provides meeting notifications and execution of voting
instructions, as well as reporting on a monthly, quarterly, semi-
annual or annual basis upon request. For a summary of the charges
see Appendix B.
MSGS
<PAGE>
PAGE 12
TRANSACTION FEES
Transactions that have been input since the previous billing 'Cut-
Off Date' are billed in the current month. If a trade is entered
and is later cancelled outright within the same billing period, the
cancel is charged but the trade is not charged. If it is cancelled
outright in a different billing period, both the trade and the
cancel are charged. If it is cancel/corrected, both the trade and
the cancel are always charged. Only stored trades are charged,
including same-day cancel/corrects.
Transactions are billed on the following basis:
Example
November 1992 Bill
* The trade date is earlier than December 1, 1992 - and -
* The transaction has not been previously charged - and -
* The transaction was processed before the cut-off date stated on
your bill
Examples of Transactions (Including Cancel/Corrects)
Trade AAAA11 Trade Date November 11, 1992
Process Date November 21, 1992
Cut-Off Date December 10, 1992
Included in the November 1992 Bill
Trade AAAA22 Trade Date November 30, 1992
Process Date December 2, 1992
Cut-Off Date December 10, 1992
Included in the November 1992 Bill
Trade AAAA33 Trade Date December 1, 1992
Process Date December 2, 1992
Cut-Off Date December 10, 1992
Included in the December 1992 Bill
Trade AAAA44 Trade Date November 30, 1992
Process Date December 11, 1992
Cut-Off Date December 10, 1992
Included in the December 1992 Bill
Trade AAAA55 Trade Date November 30, 1992
Process Date November 30, 1992
Cut-Off Date December 10, 1992
Included in the November 1992 Bill as one
transaction charge (a trade) - then -
Cancelled December 14, 1992
Included in the December 1992 Bill as one
cancel/correct charge
(an outright cancellation)
MSGS
<PAGE>
PAGE 13
TRANSACTION FEES (continued)
Examples of Transactions (continued)
Trade AAAA66 Trade Date November 11, 1992
Process Date November 11, 1992
Cancelled November 11, 1992
Cut-Off Date December 10, 1992
Included in the November 1992 Bill as one
transaction charge (a trade) and one
cancel/correct charge (a same day cancel)
Trade AAAA77 Trade Date November 30, 1992
Process Date November 30, 1992
Cancelled December 3, 1992
Cut-Off Date December 10, 1992
Included in the November 1992 Bill as one
cancel/correct charge (an outright
cancellation)
Trade AAAA88 Trade Date November 30, 1992
Process Date November 30, 1992
Cut-Off Date December 10, 1992
Included in the November 1992 Bill as one
transaction charge (a trade) - then -
Cancel/Corrected December 14, 1992
Included in the December 1992 Bill as one
cancel/correct charge
Trade AAAA99 Trade Date November 30, 1992
Process Date November 30, 1992
Cancel/Corrected December 3, 1992
Cut-Off Date December 10, 1992
Included in the November 1992 Bill as one
transaction charge (a trade) and one
cancel/correct charge
MSGS
<PAGE>
PAGE 14
YOUR BILL AND AVAILABLE SUPPORTING REPORTS
Cover Letter (example - appendix C1)
The relevant account numbers are shown on the top left-hand corner
of the cover letter.
The invoice date is the date on which the cover letter is produced.
Please note that it is not the date to which the transactions are
counted or the date on which the assets are valued.
The name and address of the recipient are shown. Please help us
keep our records accurate by informing us of any changes to this
data, either in writing or by electronic mail to your client
executive.
Specifically mentioned are the billing period for the custody of
assets and the cut-off date for the processing of transactions.
The opening balance is calculated by subtracting any payment
received since the previous bill from the prior month balance.
The current billing period activity details any adjustments
processed and fees charged for the month. Adjustments are also
explained on a supporting note to the bill where necessary. All of
the fee categories shown on your bill are supported by the reports
detailed in this guide. See 'Appendix' for reference. 'Additional
Charges' are also documented by an extra notation where necessary.
The amount for the current billing period is calculated and added
to the amount outstanding from previous billing periods to arrive
at the total amount due.
'Client Level Summary' Report
(example - appendix C2)
This automatic report is the overall summary of your bill detailing
the charges for 'Custody', 'Transactions', 'Lending' (i.e.
Securities Lending), 'Misc Fee' (i.e. Miscellaneous Fees), 'Cash
Mov Fee' (i.e. Cash Movement Fees) and 'Total Fees'. If a category
does not apply to your bill, zeroes will be shown in that column.
'Account Level Custody Fees' Report
(example - appendix C3)
This automated report is the overall summary of your assets
detailing the countries of issue, and local and base currency
market value of the assets.
The 'Average Assets in Issue Currency' column shows the local asset
value for each country of issue. This is converted to your billing
currency. (See 'Custody Fees' section for more detailed
information.)
The basis point rates are shown in the 'Annual Fee Schedule (Basis
Points)' column. The result of the calculation:
(Basis Points * 1/12 of the year) * (Average Assets in US dollars)
is shown in the column 'Total Monthly Fees'.
MSGS
<PAGE>
PAGE 15
YOUR BILL AND AVAILABLE SUPPORTING REPORTS (continued)
MT5016 'Securities Valuation Listed By Holding Location' Report
This report details, by cusip, the holdings on an individual
account basis. The report calculates the security holdings total
for each location where assets are held and this is detailed as
'Location Totals' on the report. Also detailed are the dividend and
interest accruals (if applicable) and cash. We bill on dividend and
interest accruals, the 'Total Cash' (except ledger cash) and the
'Location Totals'. With the exception of ledger cash, billed assets
are derived directly from the MT5016 valuation by averaging the
prior month-end values with the current month-end values.
'Transactions Summary' Report
(example - appendix C4)
This report is the overall summary of your transactions, detailing
the charges by transaction type.
'Account Level Transaction Fees' Report
(example - appendix C5)
This automated report further details your transactions by
identifying charges for regular transactions, regular
cancel/corrects, in-kind transfer transactions, in-kind transfer
cancel/corrects, conversion transactions, conversion
cancel/corrects, bulk transactions, bulk cancel/corrects,
underlying transactions, and underlying cancel/corrects. If a
category does not apply in any billing period, it will not appear
on your bill.
Products and countries of issue are separately identified. These
are further categorized as internal (Morgan Stanley as the broker)
or external (a broker other than Morgan Stanley.
'Transactions Detail Listing' Report
This report is used by MSGS as an internal audit control and can be
made available to you for reconciliation purposes. Items specified
on this report are:
trade date
order number
process date
buy/sell indicator
principal value ('net amount' of the trade)
quantity (number of shares)
issue currency
cancel/corrects
product identifier
execution method (in-kind, bulk, conversion)
MSGS's agent mnemonic
client reference number
security description
number and identity of trades and cancel/corrects billed
MSGS
<PAGE>
PAGE 16
'Agent Fees - Other Charges (Country)' Report
(see appendix C6)
This report states the out-of-pocket charges passed on to MSGS from
our global agents. For a summary of the charges see Appendix D.
To help your review of the 'Agent Fees' report, the column headings
are listed in the order that they are printed on the report.
Client: the client name
Client A/C #: the client account number
Trade Date: the trade date as input to the MSGS
system
Order Number: the unique identification number
attached to the trade by the MSGS
system
Security Description: the description of the security being
traded, as found in the MSGS Product
File.
Quantity: the trade number of shares as input
to the MSGS system.
Charges: the charges incurred through our sub-
custodian bank for registration/stamp
duty and taxes, etc. in the named
country, calculated using the matrix
in Appendix D
MSGS
<PAGE>
PAGE 17
Appendix A
Current Fee Schedule for IDS Bank & Trust
This letter describes Morgan Stanley Trust Company's ("Morgan
Stanley") compensation under the revised fee schedule of September
8, 1992 with IDS Bank & Trust.
Morgan Stanley's compensation shall be as follows:
Transaction Custody Rate
Country Rate (Basis Points)
Australia $100 10
Austria $50 10
Belgium $50 10
Canada $50 10
Finland $50 10
France $80 10
Germany $50 10
Hong Kong $80 10
Italy $80 10
Japan $35 6
Malaysia $80 12
Mexico $100 30
Netherlands $80 10
Norway $50 10
Singapore $80 12
Spain $80 15
Sweden $50 10
Switzerland $80 10
Thailand $300 15
United Kingdom * $80/$45 10
* The $45 UK transaction rate applies to the International
Collective Fund and the International Collective Tilt Fund.
Transactions are defined in the Morgan Stanely Trust Company
Billing Guide, as is the method of calculating custody.
All new business will be separately negotiated. You are requested
to contact your client executive if you are trading in new
countries or in new products. If your client executive is not
notified ahead of time, you will be charged at the MSTC generic
rates for each respective new country/new product (see attached).
In-Kind transactions will not be charged.
Cancel/corrects will not be charged.
Cash movements will not be charged.
<PAGE>
PAGE 18
Appendix A
Generic Fees for IDS Bank & Trust
Subject to negotiation or change, Morgan Stanley's compensation
shall be as follows:
Transaction Custody Rate
Country Rate (Basis Points)
Argentina $150 45
Brazil $150 40
Chile $125 45
China $200 45
Columbia $175 60
Denmark $50 11
ECU $50 11
Greece $100 60
Indonesia $200 40
Ireland $80 12
New Zealand $125 12
Pakistan $150 35
Peru $175 65
Philippines $500 20
Portugal $300 50
South Africa $125 12
South Korea $100 25
Sri Lanka $100 25
Taiwan $200 15
Turkey $200 25
United States $35 5
Uruguay Equity $100 60
Uruguay Fixed Income $100 45
Venezuela $150 45
Eurobonds $35 7
Euro CDs $35 5
<PAGE>
PAGE 19
Appendix A
IDS Bank & Trust
Registration/transfer fees will be charged where incurred by Morgan
Stanley.
Stamp taxes/duties will be charged where incurred by Morgan
Stanley.
All fees are calculated and billed quarterly in arrears.
The fees are due for renegotiation two years from the date of the
Agreement, and they will remain effective until renegotiation is
complete.
For further assistance, please contact Lee Williams, your client
executive, at (718) 754-2734, or Alice Malina, your billing
representative, at (718) 754-2704.
<PAGE>
PAGE 20
Appendix B
Fees (USD
Country Fees Frequency equivalent)
Austria ATS 200 per vote 20
Belgium BEF 1,500 annual fee 50
BEF 3,000 per vote 100
Denmark DKK 5,000 per vote 800
DKK 7.75 registration fee n/a
Finland FIM 1,000 per vote 190
variable registration fees
France** FRF 1,000 per company 200
Italy ** ITL 515,200 per company 300
Japan USD 25 per vote 25
Norway NOK 1,400 per vote 200
Sweden SEK 5,000 annual fee 706
SEK 400 registration fees 60
** Please note that in these countries the cost is per
company. If more than one client votes, the cost will be
equally distributed among the voting clients.
<PAGE>
PAGE 21
Appendix C1
MORGAN STANLEY Morgan Stanley Trust Co.
One Pierrepoint Plaza
Account: 40540-40552 Brooklyn, New York 11201
Invoice Date: January 13, 1993 (212)703-4000
Mr. Chan Patel
IDS Bank & Trust
2800 Multifoods Tower
Minneapolis, MN 55402
For the billing period December 1, 1992 to December 31, 1992:
Prior Month Balance $ 97,730.90 USD
Payment Received $0.00
Opening Balance $ 97,730.90 USD
Current Billing Period Activity:
Adjustments: $0.00
Transaction Fees: $ 15,995.00
Custody Fees: $ 41,456.09
Securities Lending Fees: $525.00
Cancel/Correct Fees: $ 1,310.00
Out of Pocket Fees: $ 26,317.00
Additional Charges: $0.00
Monthly Total: $ 85,603.09 USD
Balance outstanding as of
December 31, 1992 $183,333.99 USD
===========
* The Cut-Off Date for Transactions
is January 6, 1993
If you hvae any questions, please feel free to call me at (718)
754-2734 or Alice Malina at (718) 754-2704.
Yours Sincerely,
/s/ Lee Williams
Lee Williams
Client Executive
<PAGE>
PAGE 22
<TABLE>
<CAPTION>
Appendix C2
Date: 03/12/93
MORGAN STANLEY TRUST COMPANY
CLIENT LEVEL SUMMARY
BILLING DETAIL FOR FEBRUARY 1993
Client: IDS Financial Services, Inc.
Billing Currency: USD
CUSTODY TRANSACTIONS LENDING MISCCASH MOVTOTAL
ACCOUNT VALUATION FEE QTY FEE QTY FEE FEEFEEFEES
<S> <C> <C> <C> <C> <C> <C> <C><C> <C>
40540 43,631,645 3,364.12 62 3,550.00 6.0 210.000.000.00 7,124.12
40541 146,375,346 14,891.56 16 960.00 2.0 70.000.000.00 15,921.56
40543 13,549,667 1,037.09 1 50.00 0.0 0.000.000.00 1,087.09
40544 7,800,544 650.05 0 0.00 0.0 0.000.000.00 650.05
40546 13,078,522 1,089.88 9 540.00 0.0 0.000.000.00 1,629.88
40547 699,545 58.30 0 0.00 0.0 0.000.000.00 58.30
40548 216,640,474 16,930.04 66 3,735.00 15.0 540.000.000.00 21,205.04
40549 80,933,575 6,453.05 31 2,075.00 0.0 0.000.000.00 8,528.05
40552 7,849,521 457.88 0 0.00 0.0 0.000.000.00 457.88
TOTALS USD 530,558,839 44,931.97 185 10,910.00 23.0 820.000.000.00 56,661.97
</TABLE>
<PAGE>
PAGE 23
<TABLE>
<CAPTION>
APPENDIX C3
MORGAN STANLEY TRUST COMPANY DATE: 03/12/93
ACCOUNT LEVEL TRANSACTION FEES
BILLING DETAIL FOR FEBRUARY 1993
CLIENT: IDS FINANCIAL SERVICES INC. IDS STRATEGY FUND INC/
BILLING CURRENCY: USD ACCOUNT: 00-40540
I N T E R N A L E X T E R N A L TOTAL TOTAL
COUNTRY TRNS. RATE FEE TRNS. RATE FEE TRNS. FEES
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REGULAR TRANSACTIONS
TRANSACTIONS
EQUITIES
SWITZERLAND 0.00 0.00 0.00 6.00 80.00 480.00 6.00 480.00
GERMANY 0.00 0.00 0.00 5.00 50.00 250.00 5.00 250.00
FRANCE 0.00 0.00 0.00 4.00 80.00 320.00 4.00 320.00
UNITED KINGDOM 0.00 0.00 0.00 10.00 80.00 800.00 10.00 800.00
HONG KONG 0.00 0.00 0.00 4.00 80.00 320.00 4.00 320.00
JAPAN 0.00 0.00 0.00 26.00 35.00 910.00 26.00 910.00
NETHERLANDS 0.00 0.00 0.00 1.00 80.00 80.00 1.00 80.00
SWEDEN 0.00 0.00 0.00 2.00 50.00 100.00 2.00 100.00
TRANSACTIONS TOTAL 0.00 0.00 58.00 3,260.00 58.00 3,260.00 USD
C/C TRANSACTIONS
EQUITIES
SWITZERLAND 0.00 0.00 0.00 1.00 80.00 80.00 1.00 80.00
GERMANY 0.00 0.00 0.00 1.00 50.00 50.00 1.00 50.00
SPAIN 0.00 0.00 0.00 1.00 80.00 80.00 1.00 80.00
FRANCE 0.00 0.00 0.00 1.00 80.00 80.00 1.00 80.00
C/C TRANSACTIONS
TOTAL 0.00 0.00 4.00 290.00 4.00 290.00 USD
REGULAR TRANSACTIONS
TOTAL 0.00 0.00 62.00 3,550.00 62.00 3,550.00 USD
GRAND TOTAL
0.00 0.00 62.00 3,550.00 62.00 3,550.00 USD
</TABLE>
<PAGE>
PAGE 24
<TABLE>
<CAPTION>
APPENDIX C4
MORGAN STANLEY TRUST COMPANY DATE: 03/12/93
TRANSACTIONS SUMMARY REPORT
BILLING DETAIL FOR FEBRUARY 1993
CLIENT: IDS FINANCIAL SERVICES INC.
BILLING CURRENCY: USD
ACCOUNT I N T E R N A L E X T E R N A L TOTALTOTAL
NO TRNS. FEE TRNS. FEE TRNS. FEES
<S> <C> <C> <C> <C> <C> <C><C>
REGULAR TRANSACTIONS
TRANSACTIONS
00-40540 0.00 0.00 58.00 3,260.00 58.00 3,260.00
00-40541 0.00 0.00 15.00 880.00 15.00 880.00
00-40543 0.00 0.00 1.00 50.00 1.00 50.00
00-40546 0.00 0.00 8.00 460.00 8.00 460.00
00-40548 0.00 0.00 63.00 3,525.00 63.00 3,525.00
00-40549 0.00 0.00 30.00 1,995.00 30.00 1,995.00
TRANSACTIONS TOTAL 0.00 0.00 175.00 10,170.00 175.0010,170.00
C/C TRANSACTIONS
00-40540 0.00 0.00 4.00 290.00 4.00 290.00
00-40541 0.00 0.00 1.00 80.00 1.00 80.00
00-40546 0.00 0.00 1.00 80.00 1.00 80.00
00-40548 0.00 0.00 3.00 210.00 3.00 210.00
00-40549 0.00 0.00 1.00 80.00 1.00 80.00
C/C TRANSACTIONS TOTAL 0.00 0.00 10.00 740.00 10.00 740.00
REGULAR TRANSACTIONS TOTAL
0.00 0.00 185.00 10,910.00 185.0010,910.00
GRAND TOTAL
0.00 0.00 185.00 10,910.00 185.0010,910.00
</TABLE>
<PAGE>
PAGE 25
<TABLE>
<CAPTION>
APPENDIX C5
MORGAN STANLEY TRUST COMPANY DATE: 03/12/93
ACCOUNT LEVEL CUSTODY FEES
BILLING DETAIL FOR FEBRUARY 1993
CLIENT: IDS FINANCIAL SERVICES INC. IDS STRATEGY FUND INC/
BILLING CURRENCY: USD ACCOUNT: 00-40540
AVERAGE AVERAGE ANNUAL
ASSETS IN ASSETS IN FEE SCHEDULE TOTAL
COUNTRY ISSUE CURRENCY USD (BASIS POINTS) MONTHLY FEEES
<S> <C> <C> <C> <C> <C>
AUSTRALIA
AUSTRALIA 267,850 184,301
TOTAL AUSTRALIA 184,301
184,301 10.00 15.36
CANADA
CANADA 1,117,652 887,996
TOTAL CANADA 887,996
887,996 10.00 74.00
FRANCE
FRANCE 29,251,621 5,305,892
TOTAL FRANCE 5,305,892
5,305,892 10.00 442.16
GERMANY
GERMANY 773,578 473,429
TOTAL GERMANY 473,429
473,429 10.00 39.45
HONG KONG
HONG KONG 15,512,013 2,005,991
TOTAL HONG KONG 2,005,991
2,005,991 10.00 167.17
JAPAN
JAPAN 1,577,073,667 12,994,948
TOTAL JAPAN 12,994,948
12,994,948 6.00 649.75
MALAYSIA
MALAYSIA 1,207,000 460,063
TOTAL MALAYSIA 460,063
460,063 12.00 46.01
</TABLE>
<PAGE>
PAGE 26
<TABLE>
<CAPTION>
APPENDIX C6
MORGAN STANLEY TRUST COMPANY
AGENT FEES - OTHER CHARGES (SINGAPORE)
FEBRUARY 26, 1993
CLIENT TRADE ORDER SECURITY CHARGES
CLIENT A/C# DATE NUMBER DESCRIPTION QUANTITY REGISTRATION STAMP DUTY TOTAL
<S> <C> <C> <C> <C> <C> <C>
3-Feb United Overseas Bank 15,000 18 174 192
4-Feb United Overseas Bank 37,000 45 430 475
4-Feb Singapore Press Holdings 36,000 44 717 761
5-Feb United Overseas Bank 10,000 12 113 126
119 1,434 1,553
</TABLE>
<PAGE>
PAGE 27
<TABLE>
<CAPTION>
STAMP AND REGISTRATION FEES
COUNTRY CONTRACT STAMP TAX TRANSFER TAX STAMP OTHER CHARGEABLE FEES
<S> <C> <C> <C>
.2% on the value of the Stock Exchange Transaction Registration(Scrip) Fee: HKD 2.00 per
transaction payable by both Levy: .025% on the value of board lot (500 or 1000 shares) payable
the buyer and the seller the transaction payable by by the registerer (ie, buyer of each
HONG KONG by both the buyer and seller new certificate)
to the SEHK Special Levy: .03% of transaction
value
Incorporated in the net Pass through to client Pass through to client
settlement figure
- ---------------------------------------------------------------------------------------------------------------------------------
IDR 1000 per contract (trade) Stock Exchange Clearing Registration Fee: USD 3.00 per board
Fees: .1% of the total lot (500 shares). Additional put
consideration through charges for off-market trans-
INDONESIA actions including NCBO's (approx.
.0475% of transaction value)
Incorporated in the net Pass through to client Pass through to client
settlement figure
- --------------------------------------------------------------------------------------------------------------------------------
.1% transaction value paid Change of ownership: .3% Registration Fee: MYR 3.00 or MYR
by both the buyer and seller of the transaction value 5.00 per certificate (1000 shares)
(round up to nearest MYR payable by the buyer payable by the Registerer
MALAYSIA 1000) NCBO transfer: MYR 10.00
Incorporated in the net
settlement figure Pass through to client Pass through to client
- --------------------------------------------------------------------------------------------------------------------------------
1% of transaction value .2% of market value payable Registration Fee: SGD 2.00 per
paid by both the buyer and by the buyer certificate (1000 shares) payable
the seller by the Registerer
(round up to nearest SGD
SINGAPORE 1000)
Incorporated in the net
settlement figure Pass through to client Pass through to client
- --------------------------------------------------------------------------------------------------------------------------------
Registration fee: Negotiable by
Network Management
NONE NONE Corporate Action Bank Commissions:
SPAIN 60 basis points on sale proceeds
30 BPs of nominal value on purchases
Subscription Cost: 60 basis points
Tax Reclaim Fees: 5% with a minimum
charge of ESP 10,000
Pass through to client
- --------------------------------------------------------------------------------------------------------------------------------
1.5% on the par value of the
shares payable by the buyer
PAKISTAN NONE NONE
Incorporated in the net
settlement figure
</TABLE>
<PAGE>
PAGE 1
Independent Auditors' Consent
The Board of Directors
IDS Life Series Fund, Inc.:
We consent to the use of our reports included herein by reference
and to the references to our Firm under the headings "Financial
Highlights" in Part A and "Independent Auditors" in Part B of the
Registration Statement.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
April 28, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<NAME> IDS LIFE SERIES INTERNATIONAL EQUITY PORTFOLIO
<CIK> 0000768845
<CURRENCY> U.S. DOLLAR
<PERIOD-TYPE> 4-MOS
<EXCHANGE-RATE> 1
<FISCAL-YEAR-END> APR-30-1995
<PERIOD-END> FEB-28-1995
<INVESTMENTS-AT-COST> 5955137
<INVESTMENTS-AT-VALUE> 5695874
<RECEIVABLES> 520932
<ASSETS-OTHER> 56334
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6273140
<PAYABLE-FOR-SECURITIES> 639675
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 409075
<TOTAL-LIABILITIES> 1048750
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5435838
<SHARES-COMMON-STOCK> 564741
<SHARES-COMMON-PRIOR> 18479
<ACCUMULATED-NII-CURRENT> 9950
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 37864
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (259262)
<NET-ASSETS> 5224390
<DIVIDEND-INCOME> 5435
<INTEREST-INCOME> 20392
<OTHER-INCOME> 0
<EXPENSES-NET> 8360
<NET-INVESTMENT-INCOME> 17467
<REALIZED-GAINS-CURRENT> 37864
<APPREC-INCREASE-CURRENT> (259262)
<NET-CHANGE-FROM-OPS> (203931)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (7517)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 547495
<NUMBER-OF-SHARES-REDEEMED> (2063)
<SHARES-REINVESTED> 830
<NET-CHANGE-IN-ASSETS> 5039603
<ACCUMULATED-NII-PRIOR> (8)
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 8360
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8360
<AVERAGE-NET-ASSETS> 2632378
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> (.75)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.02)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.25
<EXPENSE-RATIO> .95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
PAGE 1
IDS LIFE SERIES FUND, INC.
POWER OF ATTORNEY
City of Minneapolis
State of Minnesota
Each of the undersigned, as a director or officer of IDS Life
Series Fund, Inc., which is an open-end, diversified investment
company that previously has filed registration statements and
amendments thereto pursuant to the requirements of the Securities
Act of 1933 and the Investment Company Act of 1940 with the
Securities and Exchange Commission, File Numbers 2-97636 and 811-
4299, respectively, hereby constitutes and appoints William A.
Stoltzmann, Mary Ellyn Minenko and Colleen Curran or any one of
them, as his/her attorney-in-fact and agent, to sign for him/her in
his/her name, place and stead any and all further filings,
applications (including applications for exemptive relief),
periodic reports, registration statements (with all exhibits and
other documents required or desirable in connection therewith),
other documents, an amendments thereto and to such filings,
applications, periodic reports, registration statements, other
documents, and amendments thereto with the Securities and Exchange
Commission, and any necessary states, and grants to any or all of
them the full power and authority to do and perform each and every
act required or necessary in connection therewith.
Dated the 9th day of February, 1995.
/s/ Richard W. Kling /s/ Morris Goodwin Jr.
Richard W. Kling Morris Goodwin Jr.
/s/ Edward Landes /s/ Paul F. Kolkman
Edward Landes Paul F. Kolkman
/s/ Janis E. Miller /s/ Melinda S. Urion
Janis E. Miller Melinda S. Urion
/s/ Carl N. Platou /s/ William A. Stoltzmann
Carl N. Platou William A. Stoltzmann
/s/ Gordon H. Ritz /s/ Colleen Curran
Gordon H. Ritz Colleen Curran
/s/ Louis C. Fornetti
Louis C. Fornetti
