<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 25 (File No. 2-97636) [X]
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 25 (File No. 811-4299) [X]
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IDS LIFE SERIES FUND, INC.
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IDS Tower 10, Minneapolis, Minnesota 55440-0010
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(612) 671-3678
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Mary Ellyn Minenko - IDS Tower 10, Minneapolis, MN 55440-0010
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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 June 29, 1999 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
IDS Life Series Fund, Inc.
Equity Portfolio
Equity Income Portfolio
Government Securities Portfolio
Income Portfolio
International Equity Portfolio
Managed Portfolio
Money Market Portfolio
prospectus/june 29, 1999
References to "Fund" throughout the remainder of this prospectus refer to Equity
Portfolio, Equity Income Portfolio, Government Securities Portfolio, Income
Portfolio, International Equity Portfolio, Managed Portfolio and Money Market
Portfolio, singularly or collectively as the context requires.
Please note that each Fund:
o is not a bank deposit
o is not federally insured
o is not endorsed by a bank or government agency
o is not guaranteed to achieve its goals
Like all mutual funds, the Securities and Exchange Commission has not approved
or disapproved these securities or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal offense.
IDS Life Insurance Company (IDS Life) is not a bank or financial institution,
and the securities it offers are not deposits or obligations of, or guaranteed
or endorsed by, any bank or financial institution, nor are they insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other
agency.
Managed by IDS Life Insurance Company
<PAGE>
Table of Contents
TAKE A CLOSER LOOK AT:
The Funds
Equity Portfolio 3p
Goal 3p
Investment Strategy 3p
Risks 4p
Past Performance 5p
Management 6p
Equity Income Portfolio 7p
Goal 7p
Investment Strategy 7p
Risks 8p
Management 8p
Past Performance 8p
Government Securities Portfolio 9p
Goal 9p
Investment Strategy 9p
Risks 9p
Past Performance 10p
Management 11p
Income Portfolio 12p
Goal 12p
Investment Strategy 12p
Risks 13p
Past Performance 13p
Management 14p
International Equity Portfolio 15p
Goal 15p
Investment Strategy 15p
Risks 16p
Past Performance 17p
Management 18p
Managed Portfolio 19p
Goal 19p
Investment Strategy 19p
Risks 20p
Past Performance 20p
Management 21p
Money Market Portfolio 22p
Goal 22p
Investment Strategy 22p
Risks 23p
Past Performance 23p
Management 24p
Buying and Selling Shares 24p
Valuing Fund Shares 24p
Purchasing Shares 24p
Transferring/Selling Shares 24p
Distributions and Taxes 25p
Business Structure 26p
Financial Highlights 28p
<PAGE>
Please remember that 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 Insurance Company of New York and allocating your premium payments to
the subaccounts that invest in the Fund. The Fund may have similar investment
policies, goals and objectives as other funds managed or advised by IDS Life or
its affiliates. However, it is not the same as those other funds. It will have
its own portfolio holdings and its own fees and expenses. Accordingly, the
performance of the Fund will not be the same as any other fund.
Equity Portfolio
GOAL
The goal of the Fund is capital appreciation. Because any investment involves
risk, achieving this goal cannot be guaranteed.
INVESTMENT STRATEGY
The Fund primarily invests in U.S. common stocks and securities convertible into
common stocks.
In pursuit of the Fund's goal, American Express Financial Corporation (AEFC),
the Fund's investment advisor, chooses equity investments by:
o Identifying companies with:
-- effective management,
-- financial strength,
-- competitive market position, and
-- growth potential (these companies may be well-seasoned or relatively new
and lesser-known as long as the investment advisor believes the stock is
attractive for capital growth),
o Anticipating market trends.
In evaluating whether to sell a security, AEFC considers, among other factors,
whether:
-- the security is overvalued,
-- the security has reached AEFC's price objective,
-- the company has met AEFC's earnings and/or growth expectations,
-- political, economic, or other events could affect the company's
performance,
-- AEFC wishes to minimize potential losses (i.e., in a market down-turn),
-- AEFC wishes to lock-in profits, and
-- AEFC identifies a more attractive opportunity.
Although not a primary investment strategy, the Fund also may invest in foreign
securities, derivative instruments, money market securities, and other
instruments.
During weak or declining markets or when growth opportunities are unavailable,
the Fund may invest more of its assets in money market securities. Although the
Fund primarily will invest in these securities to avoid losses, this type of
investing also could reduce the benefit from any improvement in the market or
result in the Fund not achieving its goal. During these times, AEFC may make
frequent securities trades that could result in increased fees and expenses.
For more information on strategies and holdings, see the Statement of Additional
Information (SAI) and the annual/semiannual reports.
<PAGE>
RISKS
This Fund is designed for investors with above-average risk tolerance. Please
remember that with any investment you may lose money. Principal risks associated
with an investment in the Fund include:
Market Risk
Small Company Risk
Style Risk
Market Risk
The market may drop and you may lose money. Market risk may affect a single
issuer, sector of the economy, industry, or the market as a whole. The market
value of all securities may move up and down, sometimes rapidly and
unpredictably.
Small Company Risk
Investments in small and medium companies often involve greater risks than
investments in larger, more established companies because small and medium
companies may lack the management experience, financial resources, product
diversification, and competitive strengths of larger companies. In addition, in
many instances the securities of small and medium companies are traded only
over-the-counter or on regional securities exchanges and the frequency and
volume of their trading is substantially less than is typical of larger
companies.
Style Risk
AEFC purchases growth stocks based on the expectation that the companies will
have strong growth in earnings. The price paid often reflects an expected rate
of growth. If that growth fails to occur, the price of the stock may decline
significantly and quickly.
<PAGE>
PAST PERFORMANCE
The following bar chart and table show the risks and variability of investing
in the Fund by showing:
o how the Fund's performance has varied for each full calendar year that the
Fund existed, and
o how its average annual total returns compare to other recognized securities
market indexes.
How the Fund performed in the past does not indicate how the Fund will perform
in the future.
Equity Portfolio Performance (based on calendar years)
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+23.72% -4.90% +66.28% +5.20% +13.36% +2.76% +38.39% +19.91% +21.13% +9.05%
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1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
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During the period shown in the bar chart, the highest return for a calendar
quarter was +26.33% (quarter ending December 1998) and the lowest return for a
calendar quarter was -23.55% (quarter ending September 1998).
The Fund's year to date return as of March 31, 1999 was -1.86%.
<TABLE>
<CAPTION>
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Average Annual Total Returns (as of Dec. 31, 1998)
1 year 5 years 10 years
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<S> <C> <C>
Equity Portfolio +9.05% +17.64% +18.05%
S&P 500 Index +28.57% +24.01% +18.29%
S&P MidCap 400 Index +18.91% +18.68% +17.90%
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Lipper Growth & Income Fund Index +13.58% +17.83% +15.54%
</TABLE>
This table shows total returns from a hypothetical investment in the Fund.
Comparison index returns are for the same period. The expenses do not reflect
the expenses that apply to the subaccounts or the policies. Inclusion of these
charges would reduce total return for all periods shown.
For purposes of calculation, information about each Fund 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.
S&P 500 Index, an unmanaged list of common stocks, is frequently used as a
general measure of market performance. The index reflects reinvestment of all
distributions and changes in market prices, but excludes brokerage commissions
or other fees. However, the S&P500 Index companies are generally larger than
those in which the Fund invests.
The S&P MidCap 400 Index is a capitalization-weighted index that measures the
performance of the mid-range sector of the U.S. stock market. The index was
developed with a base level of 100 as of Dec. 31, 1990.
<PAGE>
Lipper Growth & Income Fund Index, an unmanaged index published by Lipper
Analytical Services, Inc., includes 30 funds that are generally similar to the
Fund, although some funds in the index may have somewhat different investment
policies or objectives.
The securities included in the indexes may not be the same as those held by
the Fund.
MANAGEMENT
Louis Giglio joined AEFC in January 1994 and serves as portfolio manager. He was
appointed to manage this Fund in April 1997. He also serves as portfolio manager
for IDS Strategy Aggressive Fund and the World Technologies Portfolio. Prior to
joining AEFC, he had eight years of experience as a financial analyst with Bear,
Stearns & Co. Inc. covering the microcomputer software and computer services
industries.
<PAGE>
Equity Income Portfolio
GOAL
The goals of the Fund are a high level of current income and, as a secondary
goal, steady growth of capital. Because any investment involves risk, achieving
this goal cannot be guaranteed.
INVESTMENT STRATEGY
The Fund's assets primarily are invested in equity securities. Under normal
market conditions, the Fund will invest at least 65% of its net assets in
dividend-paying common and preferred stocks.
The selection of dividend-paying stocks is the primary decision in building the
investment portfolio.
In pursuit of the Fund's goal, AEFC, the Fund's investment advisor, chooses
equity investments by:
o Identifying companies with:
-- dividend-paying stocks,
-- effective management,
-- financial strength, and
-- moderate growth potential.
o Determining specific industry weightings within the following sectors:
-- Consumer cyclical -- Energy
-- Consumer stable -- Technology
-- Financial -- Industrial
o Identifying stocks that are selling at low prices in relation to:
-- current and projected earnings,
-- current and projected dividends, and
-- historic price levels.
In evaluating whether to sell a security, AEFC considers, among other factors,
whether:
-- the security is overvalued,
-- the security has reached AEFC's price objective,
-- the company has met AEFC's earnings and/or growth expectations, and
-- the company or the security continues to meet the other standards
described above.
<PAGE>
Although not a primary investment strategy, the Fund also may invest in foreign
securities, convertible securities, real estate investment trusts, debt
obligations (including bonds and commercial paper), money market securities, and
other instruments.
During weak or declining markets or when growth opportunities are unavailable,
the Fund may invest more of its assets in money market securities or commercial
paper. Although the Fund primarily will invest in these securities to avoid
losses, this type of investing could reduce the benefit from any improvement in
the market or result in the Fund not achieving its goal. During these times,
AEFC may make frequent securities trades that could result in increased fees,
expenses, and taxes.
For more information on strategies, see the Fund's SAI.
RISKS
Please remember that with any mutual fund investment you may lose money.
Principal risks associated with an investment in the Fund include:
Market Risk
Sector/Concentration Risk
Inflation Risk
Market Risk
The market may drop and you may lose money. Market risk may affect a single
issuer, sector of the economy, industry, or the market as a whole. The market
value of all securities may move up and down, sometimes rapidly and
unpredictably.
Sector/Concentration Risk
Investments that are concentrated in a particular issuer, geographic region, or
industry will be more susceptible to changes in price (the more you diversify,
the more you spread risk).
Inflation Risk
Also known as purchasing power risk, inflation risk measures the effects of
continually rising prices on investments. If an investment's yield is lower than
the rate of inflation, your money will have less purchasing power as time goes
on.
MANAGEMENT
Kurt Winters, senior portfolio manager, joined AEFC in 1987. Kurt is responsible
for overall investment management, including the determination of the sectors in
which the Fund will invest. A team of research professionals makes investment
decisions within those sectors. From 1992 to 1995, he managed IDS Life Series
Fund, Managed Portfolio. He was appointed to manage IDS Discovery Fund in 1995.
He also manages IDS Equity Value Fund, IDS Progressive Fund and Balanced
Portfolio.
PAST PERFORMANCE
The Fund is new and began operation on May 3, 1999 and, therefore, performance
information is not available at this time.
<PAGE>
Goverment Securities Portfolio
GOAL
The goal of the Fund is a high level of current income and safety of principal.
Because any investment involves risk, achieving this goal cannot be guaranteed.
INVESTMENT STRATEGY
Under normal market conditions, the Fund's assets primarily are invested in
securities issued or guaranteed as to principal and interest by the U.S.
government and its agencies.
In pursuit of the Fund's goal, AEFC, the Fund's investment advisor, chooses
investments by:
o Considering opportunities and risks by reviewing credit characteristics and
interest rate outlook.
o Identifying and buying securities that:
-- are high quality, or
-- have similar qualities, in AEFC's opinion, even though they are not rated
or have been given a lower rating by a rating agency, and
-- have short or intermediate-term maturities.
In evaluating whether to sell a security, AEFC considers, among other factors,
whether:
-- the interest rate or economic outlook changes,
-- the security is overvalued,
-- AEFC wishes to lock-in profits,
-- AEFC identifies a more attractive opportunity, and
-- the issuer or the security continues to meet the other standards
described above.
Although not a primary investment strategy, the Fund also may invest in money
market securities, investment grade non-governmental debt obligations, and other
instruments.
During weak or declining markets, the Fund may invest more of its assets in
money market securities. Although the Fund primarily will invest in these
securities to avoid losses, this type of investing also could reduce the benefit
from any improvement in the market or result in the Fund not achieving its goal.
During these times, AEFC may make frequent securities trades that could result
in increased fees and expenses.
For more information on strategies and holdings, see the SAI and the
annual/semiannual reports.
RISKS
Please remember that with any investment you may lose money. Principal risks
associated with an investment in the Fund include:
Market Risk
Correlation Risk
Interest Rate Risk
Market Risk
The market may drop and you may lose money. Market risk may affect a single
issuer, sector of the economy, industry, or the market as a whole. The market
value of all securities may move up and down, sometimes rapidly and
unpredictably.
<PAGE>
Correlation Risk
The risk that a given transaction may fail to achieve its objectives due to an
imperfect relationship between markets. Certain investments may react more
negatively than others in response to changing market conditions.
Interest Rate Risk
The risk of losses attributable to changes in interest rates. This term is
generally associated with bond prices (when interest rates rise, bond prices
fall).
PAST PERFORMANCE
The following bar chart and table show the risks and variability of investing in
the Fund by showing:
o how the Fund's performance has varied for each full calendar year that the
Fund existed, and
o how its average annual total returns compare to a recognized securities
market index.
How the Fund performed in the past does not indicate how the Fund will perform
in the future.
Government Securities Portfolio Performance (based on calendar years)
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+15.28% +6.09% +16.39% +6.68% +12.18% -4.89% +18.02% +1.49% +8.60% +8.39%
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1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
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During the period shown in the bar chart, the highest return for a calendar
quarter was +9.50% (quarter ending June 1989) and the lowest return for a
calendar quarter was -4.14% (quarter ending March 1994).
The Fund's year to date return as of March 31, 1999 was -1.02%.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Average Annual Total Returns (as of Dec. 31, 1998)
1 year 5 years 10 years
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Government Securities Portfolio +8.39% +6.04% +8.61%
- ---------------------------------------------------------------------------------------------------
Merrill Lynch 1-3 Year Government Index +6.98% +5.98% +7.38%
</TABLE>
This table shows total returns from a hypothetical investment in the Fund.
Comparison index returns are for the same period. The expenses do not reflect
the expenses that apply to the subaccounts or the policies. Inclusion of these
charges would reduce total return for all periods shown.
For purposes of calculation, information about each Fund 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.
<PAGE>
Merrill Lynch 1-3 Year Government Index is an unmanaged list of all treasury and
agency securities. The index is used 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. The securities
included in the index may not be the same as those held by the Fund.
MANAGEMENT
Colin Lundgren joined AEFC in 1986 and serves as portfolio manager. He has
managed the Fund since January 1997. He served as associate portfolio manager
for IDS Advisory and Wealth Management Service from 1995 to 1997. Prior to that
he held various positions of responsibility for the development and operation of
enhanced equity index products, fixed income quantitative analysis, and mortgage
sector analysis.
<PAGE>
Income Portfolio
GOAL
The goal of the Fund 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. Because any investment involves risk, achieving this
goal cannot be guaranteed.
INVESTMENT STRATEGY
Under normal market conditions, the Fund primarily will invest in debt
securities. At least 50% of its net assets are invested in investment grade
corporate bonds, certain unrated debt obligations that are believed to be of
investment grade quality, and government securities (including asset-backed
securities). The Fund will purchase bonds that are issued by U.S. and foreign
companies. Foreign investments are limited to 25% of the Fund's total assets.
In pursuit of the Fund's goal, AEFC, the Fund's investment advisor, chooses
investments by:
o Considering opportunities and risks by reviewing credit characteristics and
interest rate outlook.
o Identifying and buying securities that:
-- are medium and high quality,
-- have maturities that complement AEFC's expectations for long-term and
short-term interest rates, and
-- are expected to outperform other market sectors on a risk-adjusted
basis (i.e., after considering coupon, sinking fund provision, call
protection, and quality).
In evaluating whether to sell a security, AEFC considers, among other factors,
whether:
-- the interest rate or economic outlook changes,
-- a sector or industry is experiencing change,
-- a security's rating is changed or is vulnerable to a change,
-- the security is overvalued, and
-- AEFC identifies a more attractive opportunity.
Although not a primary investment strategy, the Fund also may invest in money
market securities, derivative instruments, convertible securities, and other
instruments.
During weak or declining markets, the Fund may invest more of its assets in
money market securities. Although the Fund primarily will invest in these
securities to avoid losses, this type of investing also could reduce the benefit
from any improvement in the market or result in the Fund not achieving its goal.
During these times, AEFC may make frequent securities trades that could result
in increased fees and expenses.
For more information on strategies and holdings, see the SAI and the
annual/semiannual reports.
<PAGE>
RISKS
Please remember that with any investment you may lose money. Principal risks
associated with an investment in the Fund include:
Market Risk
Interest Rate Risk
Credit Risk
Market Risk
The market may drop and you may lose money. Market risk may affect a single
issuer, sector of the economy, industry, or the market as a whole. The market
value of all securities may move up and down, sometimes rapidly and
unpredictably.
Interest Rate Risk
The risk of losses attributable to changes in interest rates. This term is
generally associated with bond prices (when interest rates rise, bond prices
fall).
Credit Risk
The risk that the issuer of a security, or the counterparty to a contract, will
default or otherwise become unable to honor a financial obligation (such as
payments due on a bond or a note). The price of junk bonds may react more to the
ability of the issuing company to pay interest and principal when due than to
changes in interest rates. They have greater price fluctuations and are more
likely to experience a default.
PAST PERFORMANCE
The following bar chart and table show the risks and variability of investing in
the Fund by showing:
o how the Fund's performance has varied for each full calendar year that the
Fund existed, and
o how its average annual total returns compare to a recognized securities
market index.
How the Fund performed in the past does not indicate how the Fund will perform
in the future.
Income Portfolio Performance (based on calendar years)
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+11.63% +6.04% +15.43% +9.62% +14.92% -4.38% +21.04% +3.60% +8.04% +5.49%
- -------------------------------------------------------------------------------
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1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
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During the period shown in the bar chart, the highest return for a calendar
quarter was +7.24% (quarter ending June 1995) and the lowest return for a
calendar quarter was -3.44% (quarter ending March 1994).
The Fund's year to date return as of March 31, 1999 was +0.06%.
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Returns (as of Dec. 31, 1998)
1 year 5 years 10 years
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Income Portfolio +5.49% +6.42% +8.92%
- ---------------------------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index +7.44% +6.97% +9.10%
</TABLE>
This table shows total returns from a hypothetical investment in the Fund.
Comparison index returns are for the same period. The expenses do not reflect
the expenses that apply to the subaccounts or the policies. Inclusion of these
charges would reduce total return for all periods shown.
For purposes of calculation, information about each Fund 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.
Lehman Brothers Aggregate Bond Index is an unmanaged index made up of a
representative list of government and corporate bonds as well as asset-backed
and mortgage-backed securities. The index is frequently used as a general
measure of bond market performance. The index reflects reinvestment of all
distributions and changes in market prices, but excludes brokerage commissions
or other fees. However, the securities used to create the index may not be
representative of the bonds held in the Fund.
MANAGEMENT
Lorraine R. Hart joined AEFC in 1984 and serves as vice president - insurance
investments. She has managed the Fund since 1991. She also manages the invested
asset portfolios of IDS Life, IDS Life of New York, and American Enterprise Life
Insurance Company.
<PAGE>
International Equity Portfolio
GOAL
The goal of the Fund is capital appreciation. Because any investment involves
risk, achieving this goal cannot be guaranteed.
INVESTMENT STRATEGY
The Fund's assets primarily are invested in common stocks of foreign issuers.
Under normal market conditions, at least 65% of the Fund's total assets are
invested in foreign equity securities having a potential for superior growth.
The Fund may invest in developed and in emerging markets.
In pursuit of the Fund's goal, AEFC, the Fund's investment advisor, chooses
investments by:
o Considering opportunities and risks within regions or countries (the
percentage of assets invested in particular countries or regions will change
according to their political stability and economic condition -- ordinarily
AEFC will invest in companies domiciled in at least three foreign countries),
o Identifying sectors or companies with strong growth potential, and
o Selecting stocks of companies that AEFC believes have the following
fundamental strengths:
-- financial strength,
-- high demand for their products or services, and
-- effective management.
AEFC decides how much to invest in various countries and local currencies, and
then buys securities that offer the best opportunity for long-term growth.
In evaluating whether to sell a security, AEFC considers, among other factors,
whether:
-- the security is overvalued,
-- the security has reached AEFC's price objective,
-- the company or the security continues to meet the standards described
above, and
-- the region or country is undergoing political, economic, or other change.
AEFC closely monitors the Fund's exposure to foreign currency fluctuations. From
time to time, AEFC may purchase derivative instruments to hedge against currency
fluctuations.
Although not a primary investment strategy, the Fund also may invest in money
market securities, debt securities, and other instruments.
During weak or declining markets or when growth opportunities are unavailable,
the Fund may invest more of its assets in these securities. Although the Fund
will invest in these securities primarily to avoid losses, this type of
investing also could reduce the benefit from any improvement in the market or
result in the Fund not achieving its goal. During these times, AEFC may make
frequent securities trades that could result in increased fees and expenses.
For more information on strategies and holdings, see the SAI and the
annual/semiannual reports.
<PAGE>
RISKS
This Fund is designed for long-term investors with above-average risk tolerance.
Please remember that with any investment you may lose money. Principal risks
associated with an investment in the Fund include:
Market Risk
Correlation Risk
Foreign/Emerging Markets Risk
Liquidity Risk
Style Risk
Market Risk
The market may drop and you may lose money. Market risk may affect a single
issuer, sector of the economy, industry, or the market as a whole. The market
value of all securities may move up and down, sometimes rapidly and
unpredictably.
Correlation Risk
The risk that a given transaction may fail to achieve its objectives due to an
imperfect relationship between markets. Certain investments may react more
negatively than others in response to changing market conditions.
Foreign/Emerging Markets Risk
The following are all components of foreign/emerging markets risk:
Country risk includes the political, economic, and other conditions of a
country. These conditions include lack of publicly available information, less
government oversight (including lack of accounting, auditing, and financial
reporting standards), the possibility of government-imposed restrictions, and
even the nationalization of assets.
Currency risk results from the constantly changing exchange rate between local
currency and the U.S. dollar. Whenever an investor holds securities valued in
local currency or holds the currency, changes in the exchange rate add or
subtract from the value of the investment.
Custody risk refers to the process of clearing and settling trades. It also
covers holding securities with local agents and depositories. Low trading
volumes and volatile prices in less developed markets make trades harder to
complete and settle. Local agents are held only to the standard of care of the
local market. Governments or trade groups may compel local agents to hold
securities in designated depositories that are not subject to independent
evaluation. The less developed a country's securities market is, the greater the
likelihood of problems occurring.
Emerging markets risk includes the dramatic pace of change (economic, social,
and political) in these countries as well as the other considerations listed
above. These markets are in early stages of development and are extremely
volatile. They can be marked by extreme inflation, devaluation of currencies,
dependence on trade partners, and hostile relations with neighboring countries.
Liquidity Risk
Securities may be difficult or impossible to sell at the time that the Fund
would like. The Fund may have to lower the selling price, sell other
investments, or forego an investment opportunity.
Style Risk
AEFC purchases growth stocks based on the expectation that the companies will
have strong growth in earnings. The price paid often reflects an expected rate
of growth. If that growth fails to occur, the price of the stock may decline
quickly.
<PAGE>
PAST PERFORMANCE
The following bar chart and table show the risks and variability of investing in
the Fund by showing:
o how the Fund's performance has varied for each full calendar year that the
Fund existed, and
o how its average annual total returns compare to other recognized securities
market indexes.
How the Fund performed in the past does not indicate how the Fund will perform
in the future.
International Equity Portfolio Performance (based on calendar years)
- -------------------------------------------------------------------------------
+39.33% +23.85% +6.20% +21.52%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- -------------------------------------------------------------------------------
During the period shown in the bar chart, the highest return for a calendar
quarter was +17.80% (quarter ending June 1995) and the lowest return for a
calendar quarter was -15.13% (quarter ending September 1998). The Fund's year to
date return as of March 31, 1999 was +2.25%.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Average Annual Total Returns (as of Dec. 31, 1998)
1 year Since inception
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
International Equity Portfolio +21.52% +20.67%a
- ---------------------------------------------------------------------------------------------------
Goldman Sachs Extended Global Market Index ex U.S. +16.70% +10.44%b
</TABLE>
a Inception date was Oct. 28, 1994.
b Measurement period started Nov. 1, 1994.
This table shows total returns from a hypothetical investment in the Fund.
Comparison index returns are for the same period. The expenses do not reflect
the expenses that apply to the subaccounts or the policies. Inclusion of these
charges would reduce total return for all periods shown.
For purposes of calculation, information about each Fund 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.
<PAGE>
The Goldman Sachs Extended Global Market Index ex. U.S. consists of market
capitalization-weighted combinations of the Financial Times/Standard & Poor's
(FT/S&P) Actuaries World Indices and the International Finance Corporation
Investable (IFCI) Indices. The FT/S&P Actuaries Indices include 26 primarily
developed countries and cover approximately 80% of the equity capitalization
within those countries. The IFCI Market Indices consist of an additional 46
primarily emerging market countries and covers between 60% and 70% of the total
capitalization in the markets included. 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 securities held in the International Equity Portfolio.
The securities included in the indexes may not be the same as those held by the
Fund.
MANAGEMENT
John O'Brien joined AEFC in 1988 and serves as vice president and portfolio
manager for American Express Asset Management International Inc. He became
portfolio manager of this Fund and World Growth Portfolio in September 1997. He
also is a member of the portfolio management team for Total Return Portfolio.
<PAGE>
Managed Portfolio
GOAL
The goal of the Fund is to maximize total investment return through a
combination of capital appreciation and current income. Because any investment
involves risk, achieving this goal cannot be guaranteed.
INVESTMENT STRATEGY
The Fund's assets primarily are invested in a combination of equity and debt
securities. It will invest in a combination of common and preferred stocks,
convertible securities, debt securities, and money market instruments. Its
investments will be continuously adjusted subject to the following three net
asset limits: (1) up to 75% in equity securities, (2) up to 75% in bonds or
other debt securities, and (3) up to 100% in money market instruments. Of the
assets invested in bonds, at least 50% will be in investment grade corporate
bonds (or in other bonds that the investment manager believes have the same
investment qualities) and in government bonds. Foreign investments will not
exceed 25% of the Fund's total assets.
In pursuit of the Fund's goal, AEFC, the Fund's investment advisor, chooses
equity investments by:
o Identifying companies with:
-- effective management,
-- financial strength,
-- competitive market position, and
-- growth potential (these companies may be well-seasoned or relatively new
and lesser-known as long as the investment advisor believes the stock is
attractive for capital growth),
o Anticipating market trends.
AEFC chooses debt obligations by:
o Considering opportunities and risks by credit rating and currency.
o Focusing on investment-grade U.S. and foreign bonds.
o Focusing on bonds that contribute to portfolio diversification.
In evaluating whether to sell a security, AEFC considers, among other factors,
whether:
-- the security is overvalued,
-- the security has reached AEFC's price objective, and
-- the company or the security continues to meet the standards
described above.
Although not a primary investement strategy, the Fund also may invest in certain
other instruments (including derivative instruments). AEFC may make frequent
securities trades that could result in increased fees and expenses.
For more information on strategies and holdings, see the SAI and the
annual/semiannual reports.
<PAGE>
RISKS
Please remember that with any investment you may lose money. Principal risks
associated with an investment in the Fund include:
Market Risk
Interest Rate Risk
Credit Risk
Market Risk
The market may drop and you may lose money. Market risk may affect a single
issuer, sector of the economy, industry, or the market as a whole. The market
value of all securities may move up and down, sometimes rapidly and
unpredictably.
Interest Rate Risk
The risk of losses attributable to changes in interest rates. This term is
generally associated with bond prices (when interest rates rise, bond prices
fall).
Credit Risk
The risk that the issuer of a security, or the counterparty to a contract, will
default or otherwise become unable to honor a financial obligation (such as
payments due on a bond or a note). The price of junk bonds may react more to the
ability of the issuing company to pay interest and principal when due than to
changes in interest rates. They have greater price fluctuations and are more
likely to experience a default.
PAST PERFORMANCE
The following bar chart and table show the risks and variability of investing in
the Fund by showing:
o how the Fund's performance has varied for each full calendar year that the
Fund existed, and
o how its average annual total returns compare to other recognized securities
market indexes.
How the Fund performed in the past does not indicate how the Fund will perform
in the future.
- --------------------------------------------------------------------------------
Managed Portfolio Performance (based on calendar years)
- -------------------------------------------------------------------------------
+30.61% +8.39% +32.11% +10.34% +19.87% +0.66% +19.04% +14.52% +17.91% +14.42%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- -------------------------------------------------------------------------------
During the period shown in the bar chart, the highest return for a calendar
quarter was +16.86% (quarter ending December 1998) and the lowest return for a
calendar quarter was -11.45% (quarter ending September 1998).
The Fund's year to date return as of March 31, 1999 was +4.95%.
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Returns (as of Dec. 31, 1998)
1 year 5 years 10 years
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Managed Portfolio +14.42% +13.11% +16.44%
S&P 500 Index +28.57% +24.01% +18.29%
- ---------------------------------------------------------------------------------------------------
Lipper Balanced Fund Index +15.09% +13.87% +13.32%
</TABLE>
This table shows total returns from a hypothetical investment in the Fund.
Comparison index returns are for the same period. The expenses do not reflect
the expenses that apply to the subaccounts or the policies. Inclusion of these
charges would reduce total return for all periods shown.
For purposes of calculation, information about each Fund 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.
S&P 500 Index, an unmanaged list of common stocks, is frequently used as a
general measure of market performance. The index reflects reinvestment of all
distributions and changes in market prices, but excludes brokerage commissions
or other fees. However, the S&P 500 Index companies are generally larger than
those in which the Fund invests.
Lipper Balanced Fund Index, an unmanaged index published by Lipper Analytical
Services, Inc., includes 30 funds that are generally similar to the Fund,
although some funds in the index may have somewhat different investment policies
or objectives.
The securities included in the indexes may not be the same as those held by the
Fund.
MANAGEMENT
Scott Schroepfer joined AEFC in 1990 and serves as senior portfolio manager. He
has managed the fixed income portfolio of Managed Portfolio since 1995 and as
associate portfolio manager since 1994. Prior to that he served as a high-yield
corporate bond analyst.
Douglas Guffy joined AEFC in 1994 as an equity analyst and serves as portfolio
manager. He began managing the equity income portfolio of Managed Portfolio in
September 1998 and served as associate portfolio manager since 1997. Prior to
that, he served as group director-financial services within the research
department.
<PAGE>
Money Market Portfolio
GOAL
The goal of the Fund is to provide maximum current income consistent with
liquidity and conservation of capital. Because any investment involves risk,
achieving this goal cannot be guaranteed.
INVESTMENT STRATEGY
The Fund's assets primarily are invested in money market instruments, such as
marketable debt obligations issued by the U.S. government or its agencies, bank
certificates of deposit, bankers' acceptances, letters of credit, and commercial
paper.
Because the Fund seeks to maintain a constant net asset value of $1.00 per
share, capital appreciation is not expected to play a role in the Fund's return.
An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Company or any other government agency.
The selection of short-term debt obligations is the primary decision in building
the investment portfolio. The Fund restricts its investments to instruments that
meet certain maturity and quality standards required by the SEC for money market
funds. For example, the Fund:
o limits its average portfolio maturity to ninety days or less;
o buys obligations with remaining maturities of 397 days or less; and
o buys only domestic obligations that present minimal credit risk.
In pursuit of the Fund's goal, AEFC, the Fund's investment advisor, chooses
investments by:
o Considering opportunities and risks given current interest rates and
anticipated interest rates.
o Purchasing securities based on the timing of cash flows in and out of
the Fund.
In evaluating whether to sell a security, AEFC considers, among other factors,
whether:
-- the issuer's credit rating declines or AEFC expects a decline
(the Fund, in certain cases, may continue to own securities that are
down-graded until AEFC believes it is advantageous to sell),
-- political, economic, or other events could affect the issuer's
performance,
-- AEFC identifies a more attractive opportunity, and
-- the issuer or the security continues to meet the other standards
described above.
For more information on strategies and holdings, see the SAI and the
annual/semiannual reports.
<PAGE>
RISKS
Please remember that with any investment you may lose money. Although the Fund
seeks to maintain the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Fund. The Fund's yield will vary from
day-to-day. Principal risks associated with an investment in the Fund include:
Market Risk
Interest Rate Risk
Market Risk
The market may drop and you may lose money. Market risk may affect a single
issuer, sector of the economy, industry, or the market as a whole. The market
value of all securities may move up and down, sometimes rapidly and
unpredictably.
Interest Rate Risk
The risk of losses attributable to changes in interest rates. This term is
generally associated with bond prices (when interest rates rise, bond prices
fall).
PAST PERFORMANCE
The following bar chart and table show the risks and variability of investing in
the Fund by showing:
o how the Fund's performance has varied for each full calendar year that the
Fund existed, and
o how its average annual total returns compare to a recognized
securities market index.
How the Fund performed in the past does not indicate how the Fund will perform
in the future.
Money Market Portfolio Performance (based on calendar years)
- -------------------------------------------------------------------------------
+8.76% +7.98% +5.60% +3.37% +2.66% +3.62% +5.21% +4.94% +5.09% +5.06%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- -------------------------------------------------------------------------------
During the period shown in the bar chart, the highest return for a calendar
quarter was +2.26% (quarter ending June 1989) and the lowest return for a
calendar quarter was +0.63% (quarter ending March 1994).
The Fund's year to date return as of March 31, 1999 was +1.09%.
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Returns (as of Dec. 31, 1998)
1 year 5 years 10 years
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Money Market Portfolio +5.06% +4.78% +5.21%
</TABLE>
This table shows total returns from a hypothetical investment in the Fund. The
expenses do not reflect the expenses that apply to the subaccounts or the
policies. Inclusion of these charges would reduce total return for all periods
shown.
For purposes of calculation, information about each Fund 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.
MANAGEMENT
Terry Fettig joined AEFC in 1986 and serves as portfolio manager. He has managed
this Fund since 1996. He also serves as portfolio manager of IDS Cash Management
Fund, IDS Intermediate Tax-Exempt Fund, IDS Tax-Free money Fund and IDS Life
Moneyshare Fund.
Buying and Selling Shares
VALUING SHARES
The net asset value (NAV) is the value of a single Fund share. The NAV usually
changes daily, and is calculated at the close of business of the New York Stock
Exchange, normally 3 p.m. Central Standard Time (CST), each business day (any
day the New York Stock Exchange is open).
Money Market Portfolio's securities are valued at amortized cost. In valuing
assets of Equity, Equity Income, Government Securities, Income, International
Equity, and Managed Portfolios investments are valued based on market value, or
where market quotations are not readily available, based on methods selected in
good faith by the board. Because each Fund invests in securities that are
primarily listed on foreign stock exchanges that trade on weekends or other days
when the Fund does not price its shares, the value of the Fund's underlying
investments may change on days when you could not buy or sell shares of the
Fund. Please see the SAI for further information.
PURCHASING SHARES
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 Funds. In the future, the Fund may offer shares to
the owners of other variable life and variable annuity contracts and qualified
plans. Shares will be priced at the next NAV calculated after premium payments
are received by the insurance company. Your financial advisor will help you fill
out and submit an application. For further information concerning acceptance of
our application see the variable life insurance policy prospectus.
TRANSFERRING/SELLING SHARES
You can transfer all or part of your value in a subaccount investing in shares
of the Fund to one or more of the other subaccounts investing in shares of other
funds with different investment objectives. Please refer to your variable life
insurance policy prospectus for more information about transfers among
subaccounts.
You may sell any shares presented by the subaccounts. Policy surrender details
are described in your variable life insurance policy prospectus. Payment
generally will be mailed within seven days of the surrender request. The amount
may be more or less than the amount invested. Shares will be sold at NAV at the
next close of business after we accept the request.
<PAGE>
Distributions and Taxes
The Fund distributes to shareholders (the variable accounts or subaccounts)
dividends and capital gains to qualify as a regulated investment company and to
avoid paying corporate income and excise taxes.
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
The Fund's net investment income is distributed to the shareholders (the
variable accounts or subaccounts) as dividends. Capital gains are realized when
a security is sold for a higher price than was paid for it. Short-term capital
gains are included in net investment income. Long-term capital gains are
realized when a security is held for more than one year. The Fund offsets any
net realized capital gains by any available capital loss carryovers. Net
realized long-term capital gains, if any, are distributed by the end of the
calendar year as capital gain distributions.
REINVESTMENT
Since the distributions are reinvested, the total value of the holdings will not
change. The reinvestment price is the NAV at close of business on the day the
distribution is paid.
TAXES
The Internal Revenue Service has issued final regulations relating to the
diversification requirements under section 817(h) of the Internal Revenue Code.
The Fund 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 Fund may be subject to foreign tax and withholding. Tax
conventions between certain countries and the U.S. may reduce or eliminate these
taxes.
<PAGE>
<TABLE>
<CAPTION>
Business Structure
<S> <C> <C> <C>
Life insurance
contract owners
invest in a separate
account
Separate account
invests in the Fund
Investment Advisor: Investment
American Express Manager: Custodian:
Financial IDS Life Insurance American Express
Corporation Company Trust Company
Provides investment Manages the Fund The Fund Provides safekeeping
advice and executes and provides of assets: receives a
purchases and sales administrative fee that varies based
and receives a services - receives a on the number of
portion of the fee based on securities held.
management fee average daily net
from IDS Life** assets.*
Sub-Custodian:
Bank of New York
</TABLE>
* Each Fund pays IDS Life a fee for managing its assets. Under the Investment
Management Services Agreement, the fee for the most recent fiscal year was
.70% of average daily net assets for Equity Portfolio, .70% for Government
Securities Portfolio, .70% for Income Portfolio, .95% for International
Equity Portfolio, .70% for Managed Portfolio, and .50% for Money Market
Portfolio. Under the Agreement, each Fund also pays taxes, brokerage
commissions and nonadvisory expenses. However, IDS Life has agreed to a
voluntary limit of the annual charge of 0.10% of average daily net assets
for these nonadvisory expenses. IDS Life reserves the right to discontinue
limiting these nonadvisory expenses to 0.10%. However, its present
intention is to continue the limit until the time that actual expenses are
less than the limit.
** IDS Life and AEFC have an Investment Advisory Agreement that calls for IDS
Life to pay AEFC a fee for investment advice. The fee paid by IDS Life is
0.25% of average net assets for the year for Equity, Government Securities,
Income, Managed and Money Market Portfolios. The fee paid by IDS Life for
International Equity Portfolio is 0.35% of average net assets for the year.
<PAGE>
ABOUT AMERICAN EXPRESS FINANCIAL CORPORATION
IDS Life is a wholly owned subsidiary of American Express Financial Corporation
(AEFC), which itself is a wholly owned subsidiary of the American Express
Company, a financial services company headquartered at American Express Tower,
World Financial Center, New York, NY 10285.
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 AEFC family of companies offers not only insurance and annuities, but also
mutual funds, investment certificates and a broad range of financial management
services. AEFC has been a provider of financial services since 1894 and as of
April 30, 1999 manages more than $224 billion in assets.
YEAR 2000
The Fund could be adversely affected if the computer systems used by AEFC and
the Fund's other service providers do not properly process and calculate
date-related information from and after Jan. 1, 2000. While Year 2000-related
computer problems could have a negative effect on the Fund, AEFC is working to
avoid such problems and to obtain assurances from service providers that they
are taking similar steps.
The companies, governments or international markets in which the Fund invests
also may be adversely affected by Year 2000 issues. To the extent a portfolio
holding is adversely affected by a Year 2000 processing issue, the Fund's return
could be adversely affected.
<PAGE>
Financial Highlights
Equity Portfolio
<TABLE>
<CAPTION>
Fiscal period ended April 30,
- ---------------------------------------------------------------------------------------------------
Per share income and capital changesa
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $33.96 $23.52 $29.34 $20.05 $18.10
- ---------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.06) (.08) .05 .03 .10
Net gains (losses) (both realized and unrealized) (1.17) 11.55 (1.34) 9.30
2.40
- ---------------------------------------------------------------------------------------------------
Total from investment operations (1.23) 11.47 (1.29) 9.33 2.50
Less distributions:
Dividends from net investment income -- -- (.05) (.03) (.10)
Distributions from realized gains (4.93) (1.03) (4.48) (.01) (.45)
Total distributions (4.93) (1.03) (4.53) (.04) (.55)
- ---------------------------------------------------------------------------------------------------
Net asset value, end of period $27.80 $33.96 $23.52 $29.34 $20.05
- ---------------------------------------------------------------------------------------------------
Ratios/supplemental data
Net assets, end of period (in thousands)$988,937 $933,817 $551,518 $448,412 $241,032
- ---------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets .73% .72% .76% .76% .77%
Ratio of net investment income (loss)
to average daily net assets (.26%) (.29%) .21% .15% .56%
Portfolio turnover rate
(excluding short-term securities) 130% 147% 231% 184% 144%
Total returnb (2.80%) 49.52% (3.66%) 46.63% 13.87%
- ---------------------------------------------------------------------------------------------------
</TABLE>
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Total return does not reflect the expenses that apply to the subaccounts
or the policies.
<PAGE>
Income Portfolio
<TABLE>
<CAPTION>
Fiscal period ended April 30,
- ---------------------------------------------------------------------------------------------------
Per share income and capital changesa
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.28 $10.03 $ 9.93 $9.64 $9.71
- ---------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .67 .69 .68 .68 .69
Net gains (losses) (both realized and unrealized) (.32) .29 .10 .29
(.07)
- ---------------------------------------------------------------------------------------------------
Total from investment operations .35 .98 .78 .97 .62
- ---------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (.67) (.69) (.68) (.68) (.69)
Distributions from realized gains (.07) (.04) -- -- --
- ---------------------------------------------------------------------------------------------------
Total distributions (.74) (.73) (.68) (.68) (.69)
Net asset value, end of period $ 9.89 $10.28 $10.03 $9.93 $9.64
- ---------------------------------------------------------------------------------------------------
Ratios/supplemental data
Net assets, end of period (in thousands) $97,578 $82,773 $66,745 $54,976 $37,823
- ---------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets .75% .74% .80% .80% .80%
Ratio of net investment income (loss)
to average daily net assets 6.65% 6.69% 6.73% 6.72% 7.23%
Portfolio turnover rate
(excluding short-term securities) 22% 94% 106% 36% 55%
Total returnb 3.52% 9.97% 8.08% 10.03% 6.67%
- ---------------------------------------------------------------------------------------------------
</TABLE>
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Total return does not reflect the expenses that apply to the subaccounts or
the policies.
<PAGE>
Money Market Portfolio
<TABLE>
<CAPTION>
Fiscal period ended April 30,
- ---------------------------------------------------------------------------------------------------
Per share income and capital changesa
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .05 .05 .05 .05 .04
Less distributions:
Dividends from net investment income (.05) (.05) (.05) (.05) (.04)
- ---------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------
Ratios/supplemental data
Net assets, end of period (in thousands)$45,564 $34,373 $28,546 $14,318 $9,885
- ---------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assetsb .60% .60% .60% .60% .60%
Ratio of net investment income (loss)
to average daily net assets 4.72% 5.04% 4.81% 5.04% 4.45%
Total returnc 4.84% 5.16% 4.91% 5.13% 4.50%
- ---------------------------------------------------------------------------------------------------
</TABLE>
a For a share outstanding throughout the period. Rounded to the nearest cent.
b IDS Life voluntarily limited total operating expenses to 0.60% of average
daily net assets. Had IDS Life not done so, the ratio of expenses to
average daily net assets would have been 0.64%, 0.73%, 0.77% and 0.71% for
the years ended April 30, 1998, 1997, 1996 and 1995, respectively.
c Total return does not reflect the expenses that apply to the subaccounts or
the policies.
<PAGE>
Managed Portfolio
<TABLE>
<CAPTION>
Fiscal period ended April 30,
- ---------------------------------------------------------------------------------------------------
Per share income and capital changesa
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $19.81 $17.16 $16.49 $14.11 $13.85
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .41 .47 .57 .57 .44
Net gains (losses) (both realized and unrealized) 1.49 3.92 1.37 2.51
.30
- ---------------------------------------------------------------------------------------------------
Total from investment operations 1.90 4.39 1.94 3.08 .74
Less distributions:
Dividends from net investment income (.41) (.47) (.57) (.57) (.44)
Distributions from realized gains (1.22) (1.27) (.70) (.13) (.04)
- ---------------------------------------------------------------------------------------------------
Total distributions (1.63) (1.74) (1.27) (.70) (.48)
Net asset value, end of period $20.08 $19.81 $17.16 $16.49 $14.11
- ---------------------------------------------------------------------------------------------------
Ratios/supplemental data
Net assets, end of period (in thousands)$685,154 $580,697 $410,737 $316,732 $219,986
- ---------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets .74% .72% .75% .78% .78%
Ratio of net investment income (loss)
to average daily net assets 2.23% 2.60% 3.46% 3.73% 3.27%
Portfolio turnover rate
(excluding short-term securities) 96% 112% 100% 83% 143%
Total returnb 10.52% 26.70% 12.45% 22.28% 5.47%
- ---------------------------------------------------------------------------------------------------
</TABLE>
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Total return does not reflect the expenses that apply to the subaccounts or
the policies.
<PAGE>
Government Securities Portfolio
<TABLE>
<CAPTION>
Fiscal period ended April 30,
- ---------------------------------------------------------------------------------------------------
Per share income and capital changesa
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.18 $ 9.87 $9.98 $9.85 $9.88
- ---------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .53 .56 .59 .61 .59
Net gains (losses) (both realized and unrealized) .04 .42 (.03) .13
(.03)
- ---------------------------------------------------------------------------------------------------
Total from investment operations .57 .98 .56 .74 .56
Less distributions:
Dividends from net investment income (.53) (.56) (.59) (.61) (.59)
Excess distributions from net investment income -- -- -- --
- --
Distributions from realized gains (.09) (.11) (.08) -- --
- ---------------------------------------------------------------------------------------------------
Total distributions (.62) (.67) (.67) (.61) (.59)
Net asset value, end of period $10.13 $10.18 $9.87 $9.98 $9.85
Ratios/supplemental data
- ---------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)$21,935 $14,607 $13,377 $12,464 $11,440
- ---------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assetsb .80% .80% .80% .80% .80%
Ratio of net investment income (loss)
to average daily net assets 5.19% 5.57% 5.88% 5.98% 6.02%
Portfolio turnover rate
(excluding short-term securities) 89% 82% 62% 38% 12%
Total returnc 5.73% 10.11% 5.83% 7.45% 5.98%
- ---------------------------------------------------------------------------------------------------
</TABLE>
a For a share outstanding throughout the period. Rounded to the nearest cent.
b IDS Life voluntarily limited total operating expenses to 0.80% of average
daily net assets. Had IDS Life not done so, the ratio of expenses to
average daily net assets would have been 0.87%, 0.89%, 0.85%, 0.88% and
0.87% for the years ended April 30, 1999, 1998, 1997, 1996 and 1995,
respectively.
c Total return does not reflect the expenses that apply to the subaccounts or
the policies.
<PAGE>
International Equity Portfolio
<TABLE>
<CAPTION>
Fiscal period ended April 30,
- ---------------------------------------------------------------------------------------------------
Per share income and capital changesa
1999 1998 1997 1996 1995b
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $18.33 $14.73 $16.35 $10.29 $10.00
- ---------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .18 .08 .14 .11 .15
Net gains (losses) (both realized and unrealized) 1.32 4.06 (.24) 6.08
.29
- ---------------------------------------------------------------------------------------------------
Total from investment operations 1.50 4.14 (.10) 6.19 .44
Less distributions:
Dividends from net investment income (.17) (.07) (.15) (.13) (.15)
Excess distributions from net investment income -- (.05) -- --
- --
Distributions from realized gains (.62) (.42) (1.37) -- --
- ---------------------------------------------------------------------------------------------------
Total distributions (.79) (.54) (1.52) (.13) (.15)
Net asset value, end of period $19.04 $18.33 $14.73 $16.35 $10.29
- ---------------------------------------------------------------------------------------------------
Ratios/supplemental data
Net assets, end of period (in thousands)$283,001 $217,573 $125,874 $52,061 $8,497
- ---------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assetsd1.05% 1.05% 1.05% 1.05% 1.00%c
Ratio of net investment income (loss)
to average daily net assets 1.01% .49% .73% .92% 5.66%c
Portfolio turnover rate
(excluding short-term securities) 67% 172% 151% 172% 40%
Total returne 8.27% 28.41% (.54%) 60.47% 4.39%
- ---------------------------------------------------------------------------------------------------
</TABLE>
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Commencement of operations. Period from Oct. 28, 1994 to April 30, 1995.
c Adjusted to an annual basis.
d IDS Life voluntarily limited total operating expenses. Had IDS not done so,
the ratio of expenses to average daily net assets would have been 1.06%,
1.22%, 1.32% and 1.76% for the periods ended April 30, 1998, 1997, 1996 and
1995, respectively.
e Total return does not reflect the expenses that apply to the subaccounts
or the policies.
<PAGE>
Additional information about the Fund is available in the Fund's SAI. The SAI is
incorporated by reference in this prospectus. For a free copy of the SAI or to
make inquiries about the Fund, contact IDS Life Series Fund, Inc. at:
IDS Life Series Fund, Inc.
IDS Tower 10, Minneapolis, MN 55440-0010
800-437-0602
or TTY: 800-285-8846
You may review and copy information about the Fund, including the SAI, at the
Securities and Exchange Commission's (Commission) Public Reference Room in
Washington, D.C. (for information about the public reference room call
1-800-SEC-0330). Reports and other information about the Fund are available on
the Commission's Internet site at http://www.sec.gov. Copies of this information
may be obtained by writing and paying a duplicating fee to the Public Reference
Section of the Commission, Washington, D.C. 20549-6009.
Investment Company Act File #811-4299
S-6191-99 N (6/99)
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
FOR
IDS LIFE SERIES FUND, INC.
EQUITY PORTFOLIO
EQUITY INCOME PORTFOLIO
GOVERNMENT SECURITIES PORTFOLIO
INCOME PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
MANAGED PORTFOLIO
MONEY MARKET PORTFOLIO
References to "Fund" throughout the remainder of this Statement of Additional
Information (SAI) refer to Equity Portfolio, Equity Income Portfolio, Government
Securities Portfolio, Income Portfolio, International Equity Portfolio, Managed
Portfolio and Money Market Portfolio, singularly or collectively as the context
requires.
June 29, 1999
This SAI is not a prospectus. It should be read together with the prospectus and
the financial statements contained in the most recent Annual Report to
shareholders (Annual Report) that may be obtained from your financial advisor or
by writing to IDS Life Series Fund, Inc., IDS Tower 10, Minneapolis, MN
55440-0010 or by calling 800-437-0602.
The Independent Auditors' Report and the Financial Statements, including Notes
to the Financial Statements and the Schedule of Investments in Securities,
contained in the Annual Report are incorporated in this SAI by reference. No
other portion of the Annual Report, however, is incorporated by reference.
Please note that Equity Income Portfolio is new and began operations on May 3,
1999 and, therefore, financial information is not available at this time. The
prospectus for the Fund, dated the same date as this SAI, also is incorporated
in this SAI by reference.
<PAGE>
TABLE OF CONTENTS
Fundamental Investment Policies..........................................p. 3
Investment Strategies and Types of Investments...........................p. 9
Information Regarding Risks and Investment Strategies...................p. 13
Security Transactions...................................................p. 36
Brokerage Commissions Paid to Brokers Affiliated with IDS Life..........p. 38
Performance Information.................................................p. 40
Valuing Fund Shares.....................................................p. 42
Selling Shares..........................................................p. 44
Capital Loss Carryover..................................................p. 44
Taxes...................................................................p. 44
Agreements..............................................................p. 45
Organizational Information..............................................p. 46
Board Members and Officers..............................................p. 47
Compensation for Board Members..........................................p. 50
Independent Auditors....................................................p. 50
Appendix: Description of Ratings.......................................p. 51
<PAGE>
FUNDAMENTAL INVESTMENT POLICIES
- -------------------------------------------------------------------------------
Fundamental investment policies adopted by the Fund cannot be changed without
the approval of a majority of the outstanding voting securities of the Fund as
defined in the Investment Company Act of 1940, as amended (the 1940 Act).
Notwithstanding any of the Fund's other investment policies, the Fund may invest
its assets in an open-end management investment company having substantially the
same investment objectives, policies, and restrictions as the Fund for the
purpose of having those assets managed as part of a combined pool.
These are investment policies in addition to those presented in the prospectus.
The policies below are fundamental policies that apply to the Fund and may be
changed only with shareholder approval. Unless holders of a majority of the
outstanding voting securities agree to make the change, the Fund will not:
Equity Portfolio
o 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 Fund securities under
circumstances where the Fund 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.
o Buy or sell real estate, unless acquired as a result of ownership of
securities or other instruments, except this shall not prevent the Fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business.
o Buy or sell physical commodities unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent the Fund
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.
o Make cash loans if the total commitment amount exceeds 5% of the Fund's
total assets.
o Lend Fund securities in excess of 30% of its net assets, at market value.
o 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 Fund's
total assets may be invested without regard to this 5% limitation.
o 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 Fund will not
purchase additional securities at any time borrowing for temporary purposes
exceeds 5%.
<PAGE>
o Concentrate in any one industry. According to the present interpretation by
the Securities and Exchange Commission (SEC), this means no more than 25%
of the Fund's total assets, based on current market value at time of
purchase, can be invested in any one industry.
o Purchase securities of any issuer if immediately after and as a result of
such purchase the Fund would own more than 10% of the outstanding voting
securities of such issuer.
o Issue senior securities, except as permitted under the Investment Company
Act of 1940.
Equity Income Portfolio
o 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 Fund securities under
circumstances where the Fund would not be free to sell them without being
deemed an underwriter for purposes of the 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.
o Buy or sell real estate, unless acquired as a result of ownership of
securities or other instruments, except this shall not prevent the Fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business or real estate
investment trusts.
o Buy or sell physical commodities unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent the Fund
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.
o Make cash loans if the total commitment amount exceeds 5% of the Fund's
total assets.
o Lend Fund securities in excess of 30% of its net assets.
o Invest more than 5% of its total assets in securities of any one company,
government, or political subdivision thereof, except the limitation will
not apply to investments in securities issued by the U.S. government, its
agencies, or instrumentalities, and except that up to 25% of the Fund's
total assets may be invested without regard to this 5% limitation.
o Borrow money or property, except as a temporary measure for extraordinary
or emergency purposes, in an amount not exceeding one-third of the market
value of its total assets (including borrowings) less liabilities (other
than borrowings) immediately after the borrowing.
o Concentrate in any one industry. According to the present interpretation by
the Securities and Exchange Commission (SEC), this means no more than 25%
of the Fund's total assets, based on current market value at time of
purchase, can be invested in any one industry.
o Purchase securities of any issuer if immediately after and as a result of
such purchase the Fund would own more than 10% of the outstanding voting
securities of such issuer.
o Issue senior securities, except as permitted under the 1940 Act.
<PAGE>
Government Securities Portfolio
o Act as an underwriter (sell securities for others). However, under the
securities laws, the Fund may be deemed to be an underwriter when it
purchases securities directly from the issuer and later resells them.
o Buy or sell real estate, unless acquired as a result of ownership of
securities or other instruments, except this shall not prevent the Fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business.
o Buy or sell physical commodities unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent the Fund
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.
o Make cash loans if the total commitment amount exceeds 5% of the Fund's
total assets.
o Lend Fund securities in excess of 30% of its net assets, at market value.
o 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 Fund's
total assets may be invested without regard to this 5% limitation.
o 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 Fund will not
purchase additional Fund securities at any time borrowing for temporary
purposes exceeds 5%. The Fund has not borrowed in the past and has no
present intention to borrow.
o Issue senior securities, except as permitted under the Investment Company
Act of 1940.
Income Portfolio
o 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 Fund securities under
circumstances where the Fund would not be free to sell them without being
deemed an underwriter for purposes of the 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.
o Buy or sell real estate, unless acquired as a result of ownership of
securities or other instruments, except this shall not prevent the Fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business.
o Buy or sell physical commodities unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent the Fund
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.
<PAGE>
o Make cash loans if the total commitment amount exceeds 5% of the Fund's
total assets.
o Lend Fund securities in excess of 30% of its net assets, at market value.
o 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 Fund's
total assets may be invested without regard to this 5% limitation.
o 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 Fund will not
purchase additional securities at any time borrowing for temporary purposes
exceeds 5%.
o Concentrate in any one industry. According to the present interpretation by
the Securities and Exchange Commission (SEC), this means no more tan 25% of
the Fund's total assets, based on current market value at time of purchase,
can be invested in any one industry.
o Purchase securities of any issuer if immediately after and as a result of
such purchase the Fund would own more than 10% of the outstanding voting
securities of such issuer.
o Issue senior securities, except as permitted under the Investment Company
Act of 1940.
International Equity Portfolio
o Act as an underwriter (sell securities for others). However, under the
securities laws, the Fund 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.
o Buy or sell real estate, unless acquired as a result of ownership of
securities or other instruments, except this shall not prevent the Fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business.
o Buy or sell physical commodities unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent the Fund
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.
o Make cash loans if the total commitment amount exceeds 5% of the Fund's
total assets.
o Lend Fund securities in excess of 30% of its net assets, at market value.
o 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 Fund's
total assets may be invested without regard to this 5% limitation.
o 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 Fund will not
purchase additional Fund securities at any time borrowing for temporary
purposes exceeds 5%.
<PAGE>
o Concentrate in any one industry. According to the present interpretation by
the SEC, this means no more than 25% of a Fund's total assets, based on
current market value at time of purchase, can be invested in any one
industry.
o Purchase more than 10% of the outstanding voting securities of an issuer.
o Issue senior securities, except as permitted under the Investment Company
Act of 1940.
Managed Portfolio
o Act as an underwriter (sell securities for others). However, under the
securities laws, the Fund may be deemed to be an underwriter when it
purchases securities directly from the issuer and later resells them.
o Purchase more than 10% of the outstanding voting securities of an issuer.
o Buy or sell real estate, unless acquired as a result of ownership of
securities or other instruments, except this shall not prevent the Fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business.
o Buy or sell physical commodities unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent the Fund
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.
o Make cash loans if the total commitment amount exceeds 5% of the Fund's
total assets.
o Lend Fund securities in excess of 30% of its net assets, at market value.
o 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 this Fund's
total assets may be invested without regard to this 5% limitation.
o 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 Fund will not
purchase additional Fund securities at any time borrowing for temporary
purposes exceeds 5%.
o Concentrate in any one industry. (According to the present interpretation
of the staff of the SEC this means no more than 25% of the Fund's total
assets, based on current market value at the time of purchase, can be
invested in any one industry).
o Issue senior securities, except as permitted under the Investment Company
Act of 1940.
Money Market Portfolio
o Act as an underwriter (sell securities for others). However, under
securities laws the Fund may be deemed to be an underwriter when it
purchases securities directly from the issuer and later resells them.
o Buy or sell real estate, commodities, or commodity contracts.
<PAGE>
o Make cash loans. However, it does make short-term investments which it may
have an agreement with the seller to reacquire.
o Lend Fund securities in excess of 30% of its net assets, at market value.
o 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.
o 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 Fund will not
purchase additional Fund securities at any time borrowing for temporary
purposes exceeds 5%.
o Buy on margin or sell short.
o Purchase common stocks, preferred stocks, warrants, other equity
securities, corporate bonds or debentures, state bonds, municipal bonds, or
industrial revenue bonds.
o Invest more than 25% of the Fund'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.
o Issue senior securities, except as permitted under the Investment Company
Act of 1940.
Except for the fundamental investment policies listed above, the other
investment policies described in the prospectus and in this SAI are not
fundamental and may be changed by the board at any time.
<PAGE>
INVESTMENT STRATEGIES AND TYPES OF INVESTMENTS
- -------------------------------------------------------------------------------
This table shows various investment strategies and investments that many funds
are allowed to engage in and purchase. It also lists certain percentage
guidelines that are generally followed by the Fund's investment manager. This
table is intended to show the breadth of investments that the investment manager
may make on behalf of the Fund. For a description of principal risks, please see
the prospectus. Notwithstanding the Fund's ability to utilize these strategies
and techniques, the investment manager is not obligated to use them at any
particular time. For example, even though the investment manager is authorized
to adopt temporary defensive positions and is authorized to hedge against
certain types of risk, these practices are left to the investment manager's sole
discretion.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Allowable for
the Fund?
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment strategies & types of Equity Equity Government Income International Managed Money
investments: Portfolio Income Securities Portfolio Equity Portfolio Market
Portfolio Portfolio Portfolio Portfolio
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Agency and Government Securities yes yes yes yes yes yes yes
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Borrowing yes yes yes yes yes yes no
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Cash/Money Market Instruments yes yes yes yes yes yes yes
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Collateralized Bond Obligations yes yes yes yes yes yes no
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Commercial Paper yes yes yes yes yes yes yes
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Common Stock yes yes yes yes yes yes no
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Convertible Securities yes yes yes yes yes yes no
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Corporate Bonds yes yes yes yes yes yes yes
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Debt Obligations yes yes yes yes yes yes yes
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Depositary Receipts yes yes yes yes yes yes no
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Derivative Instruments yes yes yes yes yes yes no
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Foreign Currency Transactions yes yes yes yes yes yes no
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Foreign Securities yes yes yes yes yes yes yes
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
High-Yield (High-Risk) Securities yes yes no yes no yes no
(Junk Bonds)
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Illiquid and Restricted Securities yes yes yes yes yes yes yes
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Indexed Securities yes yes yes yes yes yes no
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Inverse Floaters no no yes yes no yes no
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Investment Companies yes yes yes yes yes no no
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Lending of Portfolio Securities yes yes yes yes yes yes yes
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Loan Participations yes yes yes yes yes yes no
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Mortgage- and Asset-Backed yes yes yes yes yes yes no
Securities
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Mortgage Dollar Rolls no no no yes no yes no
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Municipal Obligations yes yes yes yes yes yes no
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Preferred Stock yes yes yes yes yes yes no
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts yes yes yes yes yes yes no
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Repurchase Agreements yes yes yes yes yes yes yes
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Reverse Repurchase Agreements yes yes yes yes yes yes no
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Short Sales no no no no no no no
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Sovereign Debt yes yes yes yes yes yes no
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Structured Products yes yes yes yes yes yes no
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Variable- or Floating-Rate yes yes yes yes yes yes yes
Securities
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Warrants yes yes yes yes yes yes no
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
When-Issued Securities yes yes yes yes yes yes yes
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Zero-Coupon, Step-Coupon, and yes yes yes yes yes yes no
Pay-in-Kind Securities
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
The following are guidelines that may be changed by the board at any time:
For Equity Portfolio:
o Neither foreign investments nor derivative instruments will exceed 25% of
the Fund's total assets.
o No more than 5% of the Fund'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.
o No more than 10% of the Fund's net assets will be held in securities and
other instruments that are illiquid.
o Ordinarily, less than 25% of the Fund's total assets are invested in money
market instruments.
o The Fund will not invest in companies for the purpose of, or with the
effect of acquiring control.
o The Fund will not buy on margin or sell short.
o The Fund 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
Fund 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).
For Equity Income Portfolio:
o Under normal market conditions, the Fund will invest at least 65% of its
net assets in dividend-paying common and preferred stocks.
o No more than 20% of the Fund's net assets may be invested in bonds below
investment grade unless the bonds are convertible securities.
o The Fund may invest up to 25% of its total assets in foreign investments.
o No more than 5% of the Fund'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.
o No more than 10% of the Fund's net assets will be held in securities and
other instruments that are illiquid.
o Ordinarily, less than 25% of the Fund's total assets are invested in money
market instruments.
o The Fund will not buy on margin or sell short, except the Fund may make
margin payments in connection with transactions in futures contracts.
o The Fund will not invest in a company to control or manage it.
o The Fund will not invest more than 10% of its total assets in securities of
investment companies.
o Under normal market conditions, the Fund does not intend to commit more
than 5% of its total assets to when issued securities or forward
commitments.
<PAGE>
For Government Securities Portfolio:
o No more than 5% of the Fund'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.
o No more than 10% of the Fund's net assets will be held in securities and
other instruments that are illiquid.
o Ordinarily, less than 25% of the Fund's total assets are invested in money
market instruments.
o The Fund will not invest for the purpose of exercising control or
management.
o The Fund will not buy on margin or sell short, except that it may enter
into interest rate futures contracts.
o The Fund 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.
For Income Portfolio:
o Under normal market conditions, the Fund 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 both U.S. and
foreign government bonds.
o Foreign investments are limited to 25% of the portfolio's total assets.
o No more than 5% of the Fund'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.
o No more than 10% of the Fund's net assets will be held in securities and
other instruments that are illiquid.
o Ordinarily, less than 25% of the Fund's total assets are invested in money
market instruments.
o The Fund will not invest in companies for the purpose of, or with the
effect of, acquiring control.
o The Fund will not buy on margin or sell short.
o The Fund 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
Fund does not intent 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).
For International Equity Portfolio:
o Under normal market conditions, the Fund invests at least 65% of its total
assets in foreign equity securities having a potential for superior growth.
o The Fund will not invest more than 10% of its net assets, at market, in
securities of investment companies.
o The Fund will not invest in a company to control or manage it.
<PAGE>
o The Fund will not buy on margin or sell short, but the Fund may make margin
payments in connection with transactions in stock index future contracts.
o Normally, investments in U.S. issuers will constitute less than 20% of the
Fund's investments. However, as a temporary measure, the Fund 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.
o No more than 5% of the Fund'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.
o No more than 10% of the Fund's net assets will be held in securities and
other instruments that are illiquid.
o Ordinarily, less than 25% of the Fund's total assets are invested in money
market instruments.
For Managed Portfolio:
o The Fund invests in common and preferred stocks, convertible 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.
o 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.
o Foreign investments are limited to 25% of the portfolio's total assets.
o No more than 5% of the Fund'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.
o No more than 10% of the Fund's net assets will be held in securities and
other instruments that are illiquid.
o Ordinarily, less than 25% of the Fund's total assets are invested in money
market instruments.
o The Fund will not invest in a company to get control or manage it.
o The Fund will not buy on margin or sell short, but it may make margin
payments in connection with transactions in futures contracts.
o The Fund 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.
For Money Market Portfolio:
o No more than 10% of the Fund's net assets will be held in securities and
other instruments that are illiquid.
o 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 Fund will not purchase
or retain the securities of other open-end investment companies.
<PAGE>
INFORMATION REGARDING RISKS AND INVESTMENT STRATEGIES
- -------------------------------------------------------------------------------
RISKS
The following is a summary of common risk characteristics. Following this
summary is a description of certain investments and investment strategies and
the risks most commonly associated with them (including certain risks not
described below and, in some cases, a more comprehensive discussion of how the
risks apply to a particular investment or investment strategy). Please remember
that a mutual fund's risk profile is largely defined by the fund's primary
securities and investment strategies. However, most mutual funds are allowed to
use certain other strategies and investments that may have different risk
characteristics. Some of these investments are speculative and involve a high
degree of risk. Accordingly, one or more of the following types of risk will be
associated with the Fund at any time (for a description of principal risks,
please see the prospectus):
Call/Prepayment Risk
The risk that a bond or other security might be called (or otherwise converted,
prepaid, or redeemed) before maturity. This type of risk is closely related to
"reinvestment risk."
Correlation Risk
The risk that a given transaction may fail to achieve its objectives due to an
imperfect relationship between markets. Certain investments may react more
negatively than others in response to changing market conditions.
Credit Risk
The risk that the issuer of a security, or the counterparty to a contract, will
default or otherwise become unable to honor a financial obligation (such as
payments due on a bond or a note). The price of junk bonds may react more to the
ability of the issuing company to pay interest and principal when due than to
changes in interest rates. They have greater price fluctuations and are more
likely to experience a default.
Event Risk
Occasionally, the value of a security may be seriously and unexpectedly changed
by a natural or industrial accident or occurrence.
Foreign/Emerging Markets Risk
The following are all components of foreign/emerging markets risk:
Country risk includes the political, economic, and other conditions of
a country. These conditions include lack of publicly available information, less
government oversight (including lack of accounting, auditing, and financial
reporting standards), the possibility of government-imposed restrictions, and
even the nationalization of assets.
Currency risk results from the constantly changing exchange rate
between local currency and the U.S. dollar. Whenever the Fund holds securities
valued in a foreign currency or holds the currency, changes in the exchange rate
add or subtract from the value of the investment.
<PAGE>
Custody risk refers to the process of clearing and settling trades. It
also covers holding securities with local agents and depositories. Low trading
volumes and volatile prices in less developed markets make trades harder to
complete and settle. Local agents are held only to the standard of care of the
local market. Governments or trade groups may compel local agents to hold
securities in designated depositories that are not subject to independent
evaluation. The less developed a country's securities market is, the greater the
likelihood of problems occurring.
Emerging markets risk includes the dramatic pace of change (economic,
social, and political) in emerging market countries as well as the other
considerations listed above. These markets are in early stages of development
and are extremely volatile. They can be marked by extreme inflation, devaluation
of currencies, dependence on trade partners, and hostile relations with
neighboring countries.
Inflation Risk
Also known as purchasing power risk, inflation risk measures the effects of
continually rising prices on investments. If an investment's yield is lower than
the rate of inflation, your money will have less purchasing power as time goes
on.
Interest Rate Risk
The risk of losses attributable to changes in interest rates. This term is
generally associated with bond prices (when interest rates rise, bond prices
fall).
Issuer Risk
The risk that an issuer, or the value of its stocks or bonds, will perform
poorly. Poor performance may be caused by poor management decisions, competitive
pressures, breakthroughs in technology, reliance on suppliers, labor problems or
shortages, corporate restructurings, fraudulent disclosures, or other factors.
Legal/Legislative Risk
Congress and other governmental units have the power to change existing laws
affecting securities. A change in law might affect an investment adversely.
Leverage Risk
Some derivative investments (such as options, futures, or options on futures)
require little or no initial payment and base their price on a security, a
currency, or an index. A small change in the value of the underlying security,
currency, or index may cause a sizable gain or loss in the price of the
instrument.
Liquidity Risk
Securities may be difficult or impossible to sell at the time that the Fund
would like. The Fund may have to lower the selling price, sell other
investments, or forego an investment opportunity.
Management Risk
The risk that a strategy or selection method utilized by the investment manager
may fail to produce the intended result. When all other factors have been
accounted for and the investment manager chooses an investment, there is always
the possibility that the choice will be a poor one.
<PAGE>
Market Risk
The market may drop and you may lose money. Market risk may affect a single
issuer, sector of the economy, industry, or the market as a whole. The market
value of all securities may move up and down, sometimes rapidly and
unpredictably.
Reinvestment Risk
The risk that an investor will not be able to reinvest their income or principal
at the same rate as it currently is earning.
Sector/Concentration Risk
Investments that are concentrated in a particular issuer, geographic region, or
industry will be more susceptible to changes in price (the more you diversify,
the more you spread risk).
Small Company Risk
Investments in small and medium companies often involve greater risks than
investments in larger, more established companies because small and medium
companies may lack the management experience, financial resources, product
diversification, and competitive strengths of larger companies. In addition, in
many instances the securities of small and medium companies are traded only
over-the-counter or on regional securities exchanges and the frequency and
volume of their trading is substantially less than is typical of larger
companies.
<PAGE>
INVESTMENT STRATEGIES
The following information supplements the discussion of the Fund's investment
objectives, policies, and strategies that are described in the prospectus and in
this SAI. The following describes many strategies that many mutual funds use and
types of securities that they purchase. Please refer to the section entitled
Investment Strategies and Types of Investments to see which are applicable to
the Fund.
Agency and Government Securities
The U.S. government and its agencies issue many different types of securities.
U.S. Treasury bonds, notes, and bills and securities including mortgage pass
through certificates of the Government National Mortgage Association (GNMA) are
guaranteed by the U.S. government. Other U.S. government securities are issued
or guaranteed by federal agencies or government-sponsored enterprises but are
not guaranteed by the U.S. government. This may increase the credit risk
associated with these investments.
Government-sponsored entities issuing securities include privately owned,
publicly chartered entities created to reduce borrowing costs for certain
sectors of the economy, such as farmers, homeowners, and students. They include
the Federal Farm Credit Bank System, Farm Credit Financial Assistance
Corporation, Federal Home Loan Bank, FHLMC, FNMA, Student Loan Marketing
Association (SLMA), and Resolution Trust Corporation (RTC). Government-sponsored
entities may issue discount notes (with maturities ranging from overnight to 360
days) and bonds. Agency and government securities are subject to the same
concerns as other debt obligations. (See also Debt Obligations and Mortgage- and
Asset-Backed Securities.)
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with agency and government securities include:
Call/Prepayment Risk, Inflation Risk, Interest Rate Risk, Management Risk, and
Reinvestment Risk.
Borrowing
The Fund may borrow money from banks for temporary or emergency purposes and
make other investments or engage in other transactions permissible under the
1940 Act that may be considered a borrowing (such as derivative instruments).
Borrowings are subject to costs (in addition to any interest that may be paid)
and typically reduce the Fund's total return. Except as qualified above,
however, the Fund will not buy securities on margin.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with borrowing include: Inflation Risk and Management
Risk.
Cash/Money Market Instruments
The Fund may maintain a portion of its assets in cash and cash-equivalent
investments. Cash-equivalent investments include 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. The Fund also may purchase short-term
notes and obligations of U.S. and foreign banks and corporations and may use
repurchase agreements with broker-dealers registered under the Securities
Exchange Act of 1934 and with commercial banks. (See also Commercial Paper, Debt
Obligations, Repurchase Agreements, and Variable- or Floating-Rate Securities.)
These types of instruments generally offer low rates of return and subject the
Fund to certain costs and expenses.
<PAGE>
See the appendix for a discussion of securities ratings.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with cash/money market instruments include: Credit
Risk, Inflation Risk, and Management Risk.
Collateralized Bond Obligations
Collateralized bond obligations (CBOs) are investment grade bonds backed by a
pool of junk bonds. CBOs are similar in concept to collateralized mortgage
obligations (CMOs), but differ in that CBOs represent different degrees of
credit quality rather than different maturities. (See also Mortgage- and
Asset-Backed Securities.) Underwriters of CBOs package a large and diversified
pool of high-risk, high-yield junk bonds, which is then separated into "tiers."
Typically, the first tier represents the higher quality collateral and pays the
lowest interest rate; the second tier is backed by riskier bonds and pays a
higher rate; the third tier represents the lowest credit quality and instead of
receiving a fixed interest rate receives the residual interest payments--money
that is left over after the higher tiers have been paid. CBOs, like CMOs, are
substantially overcollateralized and this, plus the diversification of the pool
backing them earns them investment-grade bond ratings. Holders of third-tier
CBOs stand to earn high yields or less money depending on the rate of defaults
in the collateral pool. (See also High-Yield (High-Risk) Securities.)
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with CBOs include: Call/Prepayment Risk, Credit Risk,
Interest Rate Risk, and Management Risk.
Commercial Paper
Commercial paper is a short-term debt obligation with a maturity ranging from 2
to 270 days issued by banks, corporations, and other borrowers. It is sold to
investors with temporary idle cash as a way to increase returns on a short-term
basis. These instruments are generally unsecured, which increases the credit
risk associated with this type of investment. (See also Debt Obligations and
Illiquid and Restricted Securities.)
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with commercial paper include: Credit Risk, Liquidity
Risk, and Management Risk.
Common Stock
Common stock represents units of ownership in a corporation. Owners typically
are entitled to vote on the selection of directors and other important matters
as well as to receive dividends on their holdings. In the event that a
corporation is liquidated, the claims of secured and unsecured creditors and
owners of bonds and preferred stock take precedence over the claims of those who
own common stock.
The price of a common stock is generally determined by corporate earnings, type
of products or services offered, projected growth rates, experience of
management, liquidity, and general market conditions for the markets on which
the stock trades.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with common stock include: Issuer Risk, Management
Risk, Market Risk, and Small Company Risk.
<PAGE>
Convertible Securities
Convertible securities are bonds, debentures, notes, preferred stocks, or other
securities that may be converted into common stock of the same or a different
issuer within a particular period of time at a specified price. Some convertible
securities, such as preferred equity-redemption cumulative stock (PERCs), have
mandatory conversion features. Others are voluntary. A convertible security
entitles the holder to receive interest normally paid or accrued on debt or the
dividend paid on preferred stock until the convertible security matures or is
redeemed, converted, or exchanged. Convertible securities have unique investment
characteristics in that they generally (i) have higher yields than common stocks
but lower yields than comparable non-convertible securities, (ii) are less
subject to fluctuation in value than the underlying stock since they have fixed
income characteristics, and (iii) provide the potential for capital appreciation
if the market price of the underlying common stock increases.
The value of a convertible security is a function of its "investment value"
(determined by its yield in comparison with the yields of other securities of
comparable maturity and quality that do not have a conversion privilege) and its
"conversion value" (the security's worth, at market value, if converted into the
underlying common stock). The investment value of a convertible security is
influenced by changes in interest rates, with investment value declining as
interest rates increase and increasing as interest rates decline. The credit
standing of the issuer and other factors also may have an effect on the
convertible security's investment value. The conversion value of a convertible
security is determined by the market price of the underlying common stock. If
the conversion value is low relative to the investment value, the price of the
convertible security is governed principally by its investment value. Generally,
the conversion value decreases as the convertible security approaches maturity.
To the extent the market price of the underlying common stock approaches or
exceeds the conversion price, the price of the convertible security will be
increasingly influenced by its conversion value. A convertible security
generally will sell at a premium over its conversion value by the extent to
which investors place value on the right to acquire the underlying common stock
while holding a fixed income security.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with convertible securities include: Call/Prepayment
Risk, Interest Rate Risk, Issuer Risk, Management Risk, Market Risk, and
Reinvestment Risk.
Corporate Bonds
Corporate bonds are debt obligations issued by private corporations, as distinct
from bonds issued by a government agency or a municipality. Corporate bonds
typically have four distinguishing features: (1) they are taxable; (2) they have
a par value of $1000; (3) they have a term maturity, which means they come due
all at once; and (4) many are traded on major exchanges. Corporate bonds are
subject to the same concerns as other debt obligations. (See also Debt
Obligations and High-Yield (High-Risk) Securities.)
Corporate bonds may be either secured or unsecured. Unsecured corporate bonds
are generally referred to as "debentures." See the appendix for a discussion of
securities ratings.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with corporate bonds include: Call/Prepayment Risk,
Credit Risk, Interest Rate Risk, Issuer Risk, Management Risk, and Reinvestment
Risk.
<PAGE>
Debt Obligations
Many different types of debt obligations exist (for example, bills, bonds, or
notes). Issuers of debt obligations have a contractual obligation to pay
interest at a specified rate on specified dates and to repay principal on a
specified maturity date. Certain debt obligations (usually intermediate- and
long-term bonds) have provisions that allow the issuer to redeem or "call" a
bond before its maturity. Issuers are most likely to call these securities
during periods of falling interest rates. When this happens, an investor may
have to replace these securities with lower yielding securities, which could
result in a lower return.
The market value of debt obligations is affected primarily by changes in
prevailing interest rates and the issuers perceived ability to repay the debt.
The market value of a debt obligation generally reacts inversely to interest
rate changes. When prevailing interest rates decline, the price usually rises,
and when prevailing interest rates rise, the price usually declines.
In general, the longer the maturity of a debt obligation, the higher its yield
and the greater the sensitivity to changes in interest rates. Conversely, the
shorter the maturity, the lower the yield but the greater the price stability.
As noted, the values of debt obligations also may be affected by changes in the
credit rating or financial condition of their issuers. Generally, the lower the
quality rating of a security, the higher the degree of risk as to the payment of
interest and return of principal. To compensate investors for taking on such
increased risk, those issuers deemed to be less creditworthy generally must
offer their investors higher interest rates than do issuers with better credit
ratings. (See also Agency and Government Securities, Corporate Bonds, and
High-Yield (High-Risk) Securities.)
See the appendix for a discussion of securities ratings.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with debt obligations include: Call/Prepayment Risk,
Credit Risk, Interest Rate Risk, Issuer Risk, Management Risk, and Reinvestment
Risk.
Depositary Receipts
Some foreign securities are traded in the form of American Depositary Receipts
(ADRs). ADRs are receipts typically issued by a U.S. bank or trust company
evidencing ownership of the underlying securities of foreign issuers. European
Depositary Receipts (EDRs) and Global Depositary Receipts (GDRs) are receipts
typically issued by foreign banks or trust companies, evidencing ownership of
underlying securities issued by either a foreign or U.S. issuer. Generally,
depositary receipts in registered form are designed for use in the U.S. and
depositary receipts in bearer form are designed for use in securities markets
outside the U.S. Depositary receipts may not necessarily be denominated in the
same currency as the underlying securities into which they may be converted.
Depositary receipts involve the risks of other investments in foreign
securities. (See also Common Stock and Foreign Securities.)
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with depositary receipts include: Foreign/Emerging
Markets Risk, Issuer Risk, Management Risk, and Market Risk.
<PAGE>
Derivative Instruments
Derivative instruments are commonly defined to include securities or contracts
whose values depend on (or "derive" from) the value of one or more other assets,
such as securities, currencies, or commodities.
A derivative instrument generally consists of, is based upon, or exhibits
characteristics similar to options or 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. Their
value changes daily based on a security, a currency, a group of securities or
currencies, or an index. A small change in the value of the underlying security,
currency, or index can cause a sizable gain or loss in the price of the
derivative instrument.
Options and forward contracts are considered to be the basic "building blocks"
of derivatives. For example, forward-based derivatives include forward
contracts, swap contracts, and exchange-traded futures. Forward-based
derivatives are sometimes referred to generically as "futures contracts."
Option-based derivatives include privately negotiated, over-the-counter (OTC)
options (including caps, floors, collars, and options on futures) and
exchange-traded options on futures. Diverse types of derivatives may be created
by combining options or futures in different ways, and by applying these
structures to a wide range of underlying assets.
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 to
the premium, the buyer generally pays a broker a commission. The writer receives
a premium, less another commission, at the time the option is written. The
premium received by the writer is retained 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.
When an option is purchased, the buyer 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 sale of the underlying security is the combination of the exercise price,
the premium, and both commissions.
One of the risks an investor assumes when it buys an option is the loss of the
premium. To be beneficial to the investor, 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.
<PAGE>
Options on many securities are listed on options exchanges. If the Fund writes
listed options, it will follow the rules of the options exchange. Options are
valued at the close of the New York Stock Exchange. An option listed on a
national exchange, CBOE, or NASDAQ will be valued at the last quoted sales price
or, if such a price is not readily available, at the mean of the last bid and
ask prices.
Options on certain securities are not actively traded on any exchange, but may
be entered into directly with a dealer. These options may be more difficult to
close. If an investor is unable to effect a closing purchase transaction, it
will not be able to sell the underlying security until the call written by the
investor expires or is exercised.
Futures Contracts. A futures contract is a sales contract between a buyer
(holding the "long" position) and a seller (holding the "short" position) for an
asset with delivery deferred until a future date. The buyer agrees to pay a
fixed price at the agreed future date and the seller agrees to deliver the
asset. The seller hopes that the market price on the delivery date is less than
the agreed upon price, while the buyer hopes for the contrary. Many futures
contracts trade in a manner similar to the way a stock trades on a stock
exchange and the commodity exchanges.
Generally, a futures contract is terminated by entering into an offsetting
transaction. An offsetting transaction is effected by an investor taking an
opposite position. At the time a futures contract is made, a good faith deposit
called initial margin is set up. Daily thereafter, the futures contract is
valued and the payment of variation margin is required so that each day an
investor would pay out cash in an amount equal to any decline in the contract's
value or receive cash equal to any increase. At the time a futures contract is
closed out, a nominal commission is paid, which is generally lower than the
commission on a comparable transaction in the cash market.
Futures contracts may be based on various securities, securities indices (such
as the S&P 500 Index), foreign currencies and other financial instruments and
indices.
Options on Futures Contracts. Options on futures contracts give the holder
a right to buy or sell futures contracts in the future. Unlike a futures
contract, which requires the parties to the contract to buy and sell a security
on a set date (some futures are settled in cash), 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 a contract. If the
holder decides not to enter into the contract, all that is lost is the amount
(premium) paid for the option. Further, because the value of the option is fixed
at the point of sale, there are no daily payments of cash to reflect the change
in the value of the underlying contract. However, since an option gives the
buyer the right to enter into a contract at a set price for a fixed period of
time, its value does change daily.
One of the risks in buying an option on a futures contract is the loss of the
premium paid for the option. The risk involved in writing options on futures
contracts an investor owns, or on securities held in its portfolio, is that
there could be an increase in the market value of these 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. An investor could
enter into a closing transaction by purchasing an option with the same terms as
the one previously sold. The cost to close the option and terminate the
investor's obligation, however, might still result in a loss. Further, the
investor might not be able to close the option because of insufficient activity
in the options market. Purchasing options also limits the use of monies that
might otherwise be available for long-term investments.
Options on Stock Indexes. Options on stock indexes are securities traded
on national securities exchanges. An option on a stock index is similar to an
option on a futures contract except all settlements are in cash. A fund
exercising a put, for example, would receive the difference between the exercise
price and the current index level.
<PAGE>
Tax Treatment. As permitted under federal income tax laws and to the
extent the Fund is allowed to invest in futures contacts, the Fund 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 Fund being required to defer recognizing
losses incurred by entering into futures contracts and losses on underlying
securities identified as being hedged against.
Federal income tax treatment of gains or losses from transactions in options on
futures contracts and indexes will depend on whether the option is a section
1256 contract. If the option is a non-equity option, the Fund will either make a
1256(d) election and treat the option as a mixed straddle or mark to market the
option at fiscal year end and treat the gain/loss as 40% short-term and 60%
long-term. Certain provisions of the Internal Revenue Code also may limit the
Fund's ability to engage in futures contracts and related options transactions.
For example, at the close of each quarter of the Fund's taxable year, at least
50% of the value of its assets must consist of cash, government securities and
other securities, subject to certain diversification requirements.
The IRS has ruled publicly that an exchange-traded call option is a security for
purposes of the 50%-of-assets test and that its issuer is the issuer of the
underlying security, not the writer of the option, for purposes of the
diversification requirements.
Accounting for futures contracts will be according to generally accepted
accounting principles. Initial margin deposits will be recognized as assets due
from a broker (the Fund'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.
Other Risks of Derivatives.
Derivatives are risky investments.
The primary risk of derivatives is the same as the risk of the underlying asset,
namely that the value of the underlying asset may go up or down. Adverse
movements in the value of an underlying asset can expose an investor to losses.
Derivative instruments may include elements of leverage and, accordingly, the
fluctuation of the value of the derivative instrument in relation to the
underlying asset may be magnified. The successful use of derivative instruments
depends upon a variety of factors, particularly the investment manager's ability
to predict movements of the securities, currencies, and commodity markets, which
requires different skills than predicting changes in the prices of individual
securities. There can be no assurance that any particular strategy will succeed.
Another risk is the risk that a loss may be sustained as a result of the failure
of a counterparty to comply with the terms of a derivative instrument. The
counterparty risk for exchange-traded derivative instruments is generally less
than for privately-negotiated or OTC derivative instruments, since generally a
clearing agency, which is the issuer or counterparty to each exchange-traded
instrument, provides a guarantee of performance. For privately-negotiated
instruments, there is no similar clearing agency guarantee. In all transactions,
an investor will bear the risk that the counterparty will default, and this
could result in a loss of the expected benefit of the derivative transaction and
possibly other losses.
<PAGE>
When a derivative transaction is used to completely hedge another position,
changes in the market value of the combined position (the derivative instrument
plus the position being hedged) result from an imperfect correlation between the
price movements of the two instruments. With a perfect hedge, the value of the
combined position remains unchanged for any change in the price of the
underlying asset. With an imperfect hedge, the values of the derivative
instrument and its hedge are not perfectly correlated. For example, if the value
of a derivative instrument used in a short hedge (such as writing a call option,
buying a put option, or selling a futures contract) increased by less than the
decline in value of the hedged investment, the hedge would not be perfectly
correlated. Such a lack of correlation might occur due to factors unrelated to
the value of the investments being hedged, such as speculative or other
pressures on the markets in which these instruments are traded.
Derivatives also are subject to the risk that they cannot be sold, closed out,
or replaced quickly at or very close to their fundamental value. Generally,
exchange contracts are very liquid because the exchange clearinghouse is the
counterparty of every contract. OTC transactions are less liquid than
exchange-traded derivatives since they often can only be closed out with the
other party to the transaction.
Another risk is caused by the legal unenforcibility of a party's obligations
under the derivative. A counterparty that has lost money in a derivative
transaction may try to avoid payment by exploiting various legal uncertainties
about certain derivative products.
(See also Foreign Currency Transactions.)
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with derivative instruments include: Leverage Risk,
Liquidity Risk, and Management Risk.
Foreign Currency Transactions
Since investments in foreign countries usually involve currencies of foreign
countries, the value of the Fund'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 Fund may incur costs in connection with
conversions between various currencies. Currency exchange rates may fluctuate
significantly over short periods of time causing the Fund's NAV to fluctuate.
Currency exchange rates are generally determined by the forces of supply and
demand in the foreign exchange markets, actual or anticipated changes in
interest rates, and other complex factors. Currency exchange rates also can be
affected by the intervention of U.S. or foreign governments or central banks, or
the failure to intervene, or by currency controls or political developments.
Spot Rates and Derivative Instruments. The Fund 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. (See also Derivative Instruments). These contracts are traded in the
interbank market conducted directly between currency traders (usually large
commercial banks) and their customers. Because foreign currency transactions
occurring in the interbank market might involve substantially larger amounts
than those involved in the use of such derivative instruments, the Fund could be
disadvantaged by having to deal in the odd lot market for the underlying foreign
currencies at prices that are less favorable than for round lots.
The Fund may enter into forward contracts to settle a security transaction or
handle dividend and interest collection. When the Fund 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 Fund 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.
<PAGE>
The Fund also may enter into forward contracts when management of the Fund
believes the currency of a particular foreign country may change in relationship
to another currency. The precise matching of forward contract amounts and the
value of securities involved generally will not be possible since the future
value of 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
Fund will not enter into such forward contracts or maintain a net exposure to
such contracts when consummating the contracts would obligate the Fund to
deliver an amount of foreign currency in excess of the value of the Fund's
securities or other assets denominated in that currency.
The Fund will designate cash or securities in an amount equal to the value of
the Fund'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 Fund's
commitments on such contracts.
At maturity of a forward contract, the Fund may either sell the security and
make delivery of the foreign currency or retain the security and terminate its
contractual obligation to deliver the foreign currency by purchasing an
offsetting contract with the same currency trader obligating it to buy, on the
same maturity date, the same amount of foreign currency.
If the Fund retains the security and engages in an offsetting transaction, the
Fund will incur a gain or loss (as described below) to the extent there has been
movement in forward contract prices. If the Fund 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 Fund enters
into a forward contract for selling foreign currency and the date it enters into
an offsetting contract for purchasing the foreign currency, the Fund 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 Fund will suffer a loss to the extent the price of the
currency it has agreed to buy exceeds the price of the currency it has agreed to
sell.
It is impossible to forecast what the market value of securities will be at the
expiration of a contract. Accordingly, it may be necessary for the Fund to buy
additional foreign currency on the spot market (and bear the expense of that
purchase) if the market value of the security is less than the amount of foreign
currency the Fund 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 Fund is obligated to deliver.
The Fund's dealing in forward contracts will be limited to the transactions
described above. This method of protecting the value of the Fund's securities
against a decline in the value of a currency does not eliminate fluctuations in
the underlying prices of the securities. It simply establishes a rate of
exchange that can be achieved at some point in time. Although 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 Fund 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 Fund at one rate,
while offering a lesser rate of exchange should the Fund desire to resell that
currency to the dealer.
<PAGE>
Options on Foreign Currencies. The Fund may buy options on foreign currencies
for hedging purposes. For example, a decline in the dollar value of a foreign
currency in which securities are denominated will reduce the dollar value of
such securities, even if their value in the foreign currency remains constant.
In order to protect against the diminutions in the value of securities, the Fund
may buy options on the foreign currency. If the value of the currency does
decline, the Fund will have the right to sell the currency for a fixed amount in
dollars and will offset, in whole or in part, the adverse effect on its
portfolio that otherwise would have resulted.
As in the case of other types of options, however, the benefit to the Fund
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
Fund could sustain losses on transactions in foreign currency options that would
require it to forego a portion or all of the benefits of advantageous changes in
rates.
The Fund may write options on foreign currencies for the same types of hedging
purposes. For example, when the Fund 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 options, write a call option on the
relevant currency. If the expected decline occurs, the option will most likely
not be exercised and the diminution in value of securities will be fully or
partially offset by the amount of the premium received.
As in the case of other types of options, however, the writing of a foreign
currency option will constitute only a partial hedge up to the amount of the
premium, and only if rates move in the expected direction. If this does not
occur, the option may be exercised and the Fund would be required to buy or sell
the underlying currency at a loss that may not be offset by the amount of the
premium. Through the writing of options on foreign currencies, the Fund also may
be required to forego all or a portion of the benefits that 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 Fund holds currency sufficient to cover the
option or has an absolute and immediate right to acquire that currency without
additional cash consideration upon conversion of assets denominated in that
currency or exchange of other currency held in its portfolio. An option writer
could lose amounts substantially in excess of its initial investments, due to
the margin and collateral requirements associated with such positions.
Options on foreign currencies are traded through financial institutions acting
as market-makers, although foreign currency options also are traded on certain
national securities exchanges, such as the Philadelphia Stock Exchange and the
Chicago Board Options Exchange, subject to SEC regulation. In an
over-the-counter trading environment, many of the protections afforded to
exchange participants will not be available. For example, there are no daily
price fluctuation limits, and adverse market movements could therefore continue
to an unlimited extent over a period of time. Although the purchaser of an
option cannot lose more than the amount of the premium plus related transaction
costs, this entire amount could be lost.
Foreign currency option positions entered into on a national securities exchange
are cleared and guaranteed by the Options Clearing Corporation (OCC), thereby
reducing the risk of counterparty default. Further, a liquid secondary market in
options traded on a national securities exchange may be more readily available
than in the over-the-counter market, potentially permitting the Fund to
liquidate open positions at a profit prior to exercise or expiration, or to
limit losses in the event of adverse market movements.
<PAGE>
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 that purpose. As a result, the OCC may, if it determines that foreign
governmental restrictions or taxes would prevent the orderly settlement of
foreign currency option exercises, or would result in undue burdens on OCC or
its clearing member, impose special procedures on exercise and settlement, such
as technical changes in the mechanics of delivery of currency, the fixing of
dollar settlement prices or prohibitions on exercise.
Foreign Currency Futures and Related Options. The Fund may enter into currency
futures contracts to sell currencies. It also may buy put options and write
covered call options on currency futures. Currency futures contracts are similar
to currency forward contracts, except that they are traded on exchanges (and
have margin requirements) and are standardized as to contract size and delivery
date. Most currency futures call for payment of delivery in U.S. dollars. The
Fund may use currency futures for the same purposes as currency forward
contracts, subject to Commodity Futures Trading Commission (CFTC) 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 value of
the Fund's investments. A currency hedge, for example, should protect a
Yen-denominated bond against a decline in the Yen, but will not protect the Fund
against price decline if the issuer's creditworthiness deteriorates. Because the
value of the Fund'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 Fund's investments
denominated in that currency over time.
The Fund will hold securities or other options or futures positions whose values
are expected to offset its obligations. The Fund will not enter into an option
or futures position that exposes the Fund 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.
(See also Derivative Instruments and Foreign Securities.)
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with foreign currency transactions include: Correlation
Risk, Interest Rate Risk, Leverage Risk, Liquidity Risk, and Management Risk.
Foreign Securities and Domestic Companies with Foreign Operations
Foreign securities, foreign currencies, and securities issued by U.S. entities
with substantial foreign operations involve special risks, including those set
forth below, which are not typically associated with investing in U.S.
securities. Foreign companies are not generally subject to uniform accounting,
auditing, and financial reporting standards comparable to those applicable to
domestic companies. Additionally, many foreign stock markets, while growing in
volume of trading activity, have substantially less volume than the New York
Stock Exchange, and securities of some foreign companies are less liquid and
more volatile than securities of domestic companies. Similarly, volume and
liquidity in most foreign bond markets are less than the volume and liquidity in
the U.S. and, at times, volatility of price can be greater than in the U.S.
Further, foreign markets have different clearance, settlement, registration, and
communication procedures and in certain markets there have been times when
settlements have been unable to keep pace with the volume of securities
transactions making it difficult to conduct such transactions. Delays in such
procedures could result in temporary periods when assets are uninvested and no
return is
<PAGE>
earned on them. The inability of an investor to make intended security purchases
due to such problems could cause the investor to miss attractive investment
opportunities. Payment for securities without delivery may be required in
certain foreign markets and, when participating in new issues, some foreign
countries require payment to be made in advance of issuance (at the time of
issuance, the market value of the security may be more or less than the purchase
price). Some foreign markets also have compulsory depositories (i.e., an
investor does not have a choice as to where the securities are held). Fixed
commissions on some foreign stock exchanges are generally higher than negotiated
commissions on U.S. exchanges. Further, an investor may encounter difficulties
or be unable to pursue legal remedies and obtain judgments in foreign courts.
There is generally less government supervision and regulation of business and
industry practices, stock exchanges, brokers, and listed companies than in the
U.S. It may be more difficult for an investor's agents to keep currently
informed about corporate actions such as stock dividends or other matters that
may affect the prices of portfolio securities. Communications between the U.S.
and foreign countries may be less reliable than within the U.S., thus increasing
the risk of delays or loss of certificates for portfolio securities. In
addition, with respect to certain foreign countries, there is the possibility of
nationalization, expropriation, the imposition of additional withholding or
confiscatory taxes, political, social, or economic instability, diplomatic
developments that could affect investments in those countries, or other
unforeseen actions by regulatory bodies (such as changes to settlement or
custody procedures).
The risks of foreign investing may be magnified for investments in emerging
markets, which may have relatively unstable governments, economies based on only
a few industries, and securities markets that trade a small number of
securities.
The introduction of a single currency, the euro, on January 1, 1999 for
participating European nations in the Economic and Monetary Union ("EU")
presents unique uncertainties, including whether the payment and operational
systems of banks and other financial institutions will be ready by the scheduled
launch date; the creation of suitable clearing and settlement payment systems
for the new currency; the legal treatment of certain outstanding financial
contracts after January 1, 1999 that refer to existing currencies rather than
the euro; the establishment and maintenance of exchange rates; the fluctuation
of the euro relative to non-euro currencies during the transaction period from
January 1, 1999 to December 31, 2000 and beyond; whether the interest rate, tax
or labor regimes of European countries participating in the euro will converge
over time; and whether the conversion of the currencies of other EU countries
such as the United Kingdom, Denmark, and Greece into the euro and the admission
of other non-EU countries such as Poland, Latvia, and Lithuania as members of
the EU may have an impact on the euro.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with foreign securities include: Foreign/Emerging
Markets Risk, Issuer Risk, and Management Risk.
High-Yield (High-Risk) Securities (Junk Bonds)
High yield (high-risk) securities are sometimes referred to as "junk bonds."
They are non-investment grade (lower quality) securities that have speculative
characteristics. Lower quality securities, while generally offering higher
yields than investment grade securities with similar maturities, involve greater
risks, including the possibility of default or bankruptcy. They are regarded as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal. The special risk considerations in connection with
investments in these securities are discussed below.
See the appendix for a discussion of securities ratings. (See also Debt
Obligations.)
The lower-quality and comparable unrated security market is relatively new and
its growth has paralleled a long economic expansion. As a result, it is not
clear how this market may withstand a prolonged recession or economic downturn.
Such conditions could severely disrupt the market for and adversely affect the
value of such securities.
<PAGE>
All interest-bearing securities typically experience appreciation when interest
rates decline and depreciation when interest rates rise. The market values of
lower-quality and comparable unrated securities tend to reflect individual
corporate developments to a greater extent than do higher rated securities,
which react primarily to fluctuations in the general level of interest rates.
Lower-quality and comparable unrated securities also tend to be more sensitive
to economic conditions than are higher-rated securities. As a result, they
generally involve more credit risks than securities in the higher-rated
categories. During an economic downturn or a sustained period of rising interest
rates, highly leveraged issuers of lower-quality securities may experience
financial stress and may not have sufficient revenues to meet their payment
obligations. The issuer's ability to service its debt obligations also may be
adversely affected by specific corporate developments, the issuer's inability to
meet specific projected business forecast, or the unavailability of additional
financing. The risk of loss due to default by an issuer of these securities is
significantly greater than issuers of higher-rated securities because such
securities are generally unsecured and are often subordinated to other
creditors. Further, if the issuer of a lower quality security defaulted, an
investor might incur additional expenses to seek recovery.
Credit ratings issued by credit rating agencies are designed to evaluate the
safety of principal and interest payments of rated securities. They do not,
however, evaluate the market value risk of lower-quality securities and,
therefore, may not fully reflect the true risks of an investment. In addition,
credit rating agencies may or may not make timely changes in a rating to reflect
changes in the economy or in the condition of the issuer that affect the market
value of the securities. Consequently, credit ratings are used only as a
preliminary indicator of investment quality.
An investor may have difficulty disposing of certain lower-quality and
comparable unrated securities because there may be a thin trading market for
such securities. Because not all dealers maintain markets in all lower quality
and comparable unrated securities, there is no established retail secondary
market for many of these securities. To the extent a secondary trading market
does exist, it is generally not as liquid as the secondary market for
higher-rated securities. The lack of a liquid secondary market may have an
adverse impact on the market price of the security. The lack of a liquid
secondary market for certain securities also may make it more difficult for an
investor to obtain accurate market quotations. Market quotations are generally
available on many lower-quality and comparable unrated issues only from a
limited number of dealers and may not necessarily represent firm bids of such
dealers or prices for actual sales.
Legislation may be adopted from time to time designed to limit the use of
certain lower quality and comparable unrated securities by certain issuers.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with high-yield (high-risk) securities include:
Call/Prepayment Risk, Credit Risk, Currency Risk, Interest Rate Risk, and
Management Risk.
Illiquid and Restricted Securities
The Fund may invest in illiquid securities (i.e., securities that are not
readily marketable). These securities may include, but are not limited to,
certain securities that are subject to legal or contractual restrictions on
resale, certain repurchase agreements, and derivative instruments.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with illiquid and restricted securities include:
Liquidity Risk and Management Risk.
<PAGE>
Indexed Securities
The value of indexed securities is linked to currencies, interest rates,
commodities, indexes, or other financial indicators. Most indexed securities are
short- to intermediate-term fixed income securities whose values at maturity or
interest rates rise or fall according to the change in one or more specified
underlying instruments. Indexed securities may be more volatile than the
underlying instrument itself and they may be less liquid than the securities
represented by the index. (See also Derivative Instruments.)
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with indexed securities include: Liquidity Risk,
Management Risk, and Market Risk.
Inverse Floaters
Inverse floaters are created by underwriters using the interest payment on
securities. A portion of the interest received is paid to holders of instruments
based on current interest rates for short-term securities. The remainder, minus
a servicing fee, is paid to holders of inverse floaters. As interest rates go
down, the holders of the inverse floaters receive more income and an increase in
the price for the inverse floaters. As interest rates go up, the holders of the
inverse floaters receive less income and a decrease in the price for the inverse
floaters. (See also Derivative Instruments.)
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with inverse floaters include: Interest Rate Risk and
Management Risk.
Investment Companies
The Fund may invest in securities issued by registered and unregistered
investment companies. These investments may involve the duplication of advisory
fees and certain other expenses.
Although one or more of the other risks described in this SAI may apply, the
largest risk associated with the securities of other investment companies
includes: Management Risk and Market Risk.
Lending of Portfolio Securities
The Fund may lend certain of its portfolio securities to broker-dealers. The
current policy of the Fund's board is to make these loans, either long- or
short-term, to broker-dealers. In making loans, the Fund receives the market
price in cash, U.S. government securities, letters of credit, or such other
collateral as may be permitted by regulatory agencies and approved by the board.
If the market price of the loaned securities goes up, an investor will get
additional collateral on a daily basis. The risks are that the borrower may not
provide additional collateral when required or return the securities when due.
During the existence of the loan, the Fund receives cash payments equivalent to
all interest or other distributions paid on the loaned securities. The Fund may
pay reasonable administrative and custodial fees in connection with a loan and
may pay a negotiated portion of the interest earned on the cash or money market
instruments held as collateral to the borrower or placing broker. The Fund will
receive reasonable interest on the loan or a flat fee from the borrower and
amounts equivalent to any dividends, interest, or other distributions on the
securities loaned.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with the lending of portfolio securities include:
Credit Risk and Management Risk.
<PAGE>
Loan Participations
Loans, loan participations, and interests in securitized loan pools are
interests in amounts owed by a corporate, governmental, or other borrower to a
lender or consortium of lenders (typically banks, insurance companies,
investment banks, government agencies, or international agencies). Loans involve
a risk of loss in case of default or insolvency of the borrower and may offer
less legal protection to an investor in the event of fraud or misrepresentation.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with loan participations include: Credit Risk and
Management Risk.
Mortgage- and Asset-Backed Securities
Mortgage-backed securities represent direct or indirect participations in, or
are secured by and payable from, mortgage loans secured by real property, and
include single- and multi-class pass-through securities and Collateralized
Mortgage Obligations (CMOs). These securities may be issued or guaranteed by
U.S. government agencies or instrumentalities (see also Agency and Government
Securities), or by private issuers, generally originators and investors in
mortgage loans, including savings associations, mortgage bankers, commercial
banks, investment bankers, and special purpose entities. Mortgage-backed
securities issued by private lenders may be supported by pools of mortgage loans
or other mortgage-backed securities that are guaranteed, directly or indirectly,
by the U.S. government or one of its agencies or instrumentalities, or they may
be issued without any governmental guarantee of the underlying mortgage assets
but with some form of non-governmental credit enhancement.
Stripped mortgage-backed securities are a type of mortgage-backed security that
receive differing proportions of the interest and principal payments from the
underlying assets. 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 in IOs 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.
CMOs are hybrid mortgage-related instruments secured by pools of mortgage loans
or other mortgage-related securities, such as mortgage pass through securities
or stripped mortgage-backed securities. CMOs may be structured into multiple
classes, often referred to as "tranches," with each class bearing a different
stated maturity and entitled to a different schedule for payments of principal
and interest, including prepayments. Principal prepayments on collateral
underlying a CMO may cause it to be retired substantially earlier than its
stated maturity.
The yield characteristics of mortgage-backed securities differ from those of
other debt securities. Among the differences are that interest and principal
payments are made more frequently on mortgage-backed securities, usually
monthly, and principal may be repaid at any time. These factors may reduce the
expected yield.
<PAGE>
Asset-backed securities have structural characteristics similar to
mortgage-backed securities. Asset-backed debt obligations represent direct or
indirect participation in, or secured by and payable from, assets such as motor
vehicle installment sales contracts, other installment loan contracts, home
equity loans, leases of various types of property, and receivables from credit
card or other revolving credit arrangements. The credit quality of most
asset-backed securities depends primarily on the credit quality of the assets
underlying such securities, how well the entity issuing the security is
insulated from the credit risk of the originator or any other affiliated
entities, and the amount and quality of any credit enhancement of the
securities. Payments or distributions of principal and interest on asset-backed
debt obligations may be supported by non-governmental credit enhancements
including letters of credit, reserve funds, overcollateralization, and
guarantees by third parties. The market for privately issued asset-backed debt
obligations is smaller and less liquid than the market for government sponsored
mortgage-backed securities. (See also Derivative Instruments.)
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with mortgage- and asset-backed securities include:
Call/Prepayment Risk, Credit Risk, Interest Rate Risk, Liquidity Risk, and
Management Risk.
Mortgage Dollar Rolls
Mortgage dollar rolls are investments whereby an investor would sell
mortgage-backed securities for delivery in the current month and simultaneously
contract to purchase substantially similar securities on a specified future
date. While an investor would forego principal and interest paid on the
mortgage-backed securities during the roll period, the investor would be
compensated by the difference between the current sales price and the lower
price for the future purchase as well as by any interest earned on the proceeds
of the initial sale. The investor also could be compensated through the receipt
of fee income equivalent to a lower forward price.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with mortgage dollar rolls include: Credit Risk,
Interest Rate Risk, and Management Risk.
Municipal Obligations
Municipal obligations include debt obligations issued by or on behalf of states,
territories, or possessions of the United States (including the District of
Columbia). The interest on these obligations is generally exempt from federal
income tax. Municipal obligations are generally classified as either "general
obligations" or "revenue obligations."
General obligation bonds are secured by the issuer's pledge of its full faith,
credit, and taxing power for the payment of interest and principal. Revenue
bonds are payable only from the revenues derived from a project or facility or
from the proceeds of a specified revenue source. Industrial development bonds
are generally revenue bonds secured by payments from and the credit of private
users. Municipal notes are issued to meet the short-term funding requirements of
state, regional, and local governments. Municipal notes include tax anticipation
notes, bond anticipation notes, revenue anticipation notes, tax and revenue
anticipation notes, construction loan notes, short-term discount notes,
tax-exempt commercial paper, demand notes, and similar instruments.
<PAGE>
Municipal lease obligations may take the form of a lease, an installment
purchase, or a conditional sales contract. They are issued by state and local
governments and authorities to acquire land, equipment, and facilities. An
investor may purchase these obligations directly, or it may purchase
participation interests in such obligations. Municipal leases may be subject to
greater risks than general obligation or revenue bonds. State constitutions and
statutes set forth requirements that states or municipalities must meet in order
to issue municipal obligations. Municipal leases may contain a covenant by the
state or municipality to budget for and make payments due under the obligation.
Certain municipal leases may, however, provide that the issuer is not obligated
to make payments on the obligation in future years unless funds have been
appropriated for this purpose each year.
Yields on municipal bonds and notes depend on a variety of factors, including
money market conditions, municipal bond market conditions, the size of a
particular offering, the maturity of the obligation, and the rating of the
issue. The municipal bond market has a large number of different issuers, many
having smaller sized bond issues, and a wide choice of different maturities
within each issue. For these reasons, most municipal bonds do not trade on a
daily basis and many trade only rarely. Because many of these bonds trade
infrequently, the spread between the bid and offer may be wider and the time
needed to develop a bid or an offer may be longer than other security markets.
See the appendix for a discussion of securities ratings. (See also Debt
Obligations.)
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with municipal obligations include: Credit Risk, Event
Risk, Inflation Risk, Interest Rate Risk, Legal/Legislative Risk, and Market
Risk.
Preferred Stock
Preferred stock is a type of stock that pays dividends at a specified rate and
that has preference over common stock in the payment of dividends and the
liquidation of assets. Preferred stock does not ordinarily carry voting rights.
The price of a preferred stock is generally determined by earnings, type of
products or services, projected growth rates, experience of management,
liquidity, and general market conditions of the markets on which the stock
trades.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with preferred stock include: Issuer Risk, Management
Risk, and Market Risk.
Real Estate Investment Trusts
Real estate investment trusts (REITs) are entities that manage a portfolio of
real estate to earn profits for their shareholders. REITs can make investments
in real estate such as shopping centers, nursing homes, office buildings,
apartment complexes, and hotels. REITs can be subject to extreme volatility due
to fluctuations in the demand for real estate, changes in interest rates, and
adverse economic conditions. Additionally, the failure of a REIT to continue to
qualify as a REIT for tax purposes can materially affect its value.
Although one or more of the other risks described in this SAI may apply, the
largest associated with REITs include: Issuer Risk, Management Risk, and Market
Risk.
<PAGE>
Repurchase Agreements
The Fund may enter into repurchase agreements with certain banks or non-bank
dealers. In a repurchase agreement, the Fund buys a security at one price, and
at the time of sale, the seller agrees to repurchase the obligation at a
mutually agreed upon time and price (usually within seven days). The repurchase
agreement, thereby, determines the yield during the purchaser's holding period,
while the seller's obligation to repurchase is secured by the value of the
underlying security. Repurchase agreements could involve certain risks in the
event of a default or insolvency of the other party to the agreement, including
possible delays or restrictions upon the Fund's ability to dispose of the
underlying securities.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with repurchase agreements include: Credit Risk and
Management Risk.
Reverse Repurchase Agreements
In a reverse repurchase agreement, the investor would sell a security and enter
into an agreement to repurchase the security at a specified future date and
price. The investor generally retains the right to interest and principal
payments on the security. Since the investor receives cash upon entering into a
reverse repurchase agreement, it may be considered a borrowing. (See also
Derivative Instruments.)
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with reverse repurchase agreements include: Credit
Risk, Interest Rate Risk, and Management Risk.
Short Sales
With short sales, an investor sells a security that it does not own in
anticipation of a decline in the market value of the security. To complete the
transaction, the investor must borrow the security to make delivery to the
buyer. The investor is obligated to replace the security that was borrowed by
purchasing it at the market price on the replacement date. The price at such
time may be more or less than the price at which the investor sold the security.
A fund that is allowed to utilize short sales will designate cash or liquid
securities to cover its open short positions. Those funds also may engage in
"short sales against the box," a form of short-selling that involves selling a
security that an investor owns (or has an unconditioned right to purchase) for
delivery at a specified date in the future. This technique allows an investor to
hedge protectively against anticipated declines in the market of its securities.
If the value of the securities sold short increased prior to the scheduled
delivery date, the investor loses the opportunity to participate in the gain.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with short sales include: Management Risk and Market
Risk.
Sovereign Debt
A sovereign debtor's willingness or ability to repay principal and pay interest
in a timely manner may be affected by a variety of factors, including its cash
flow situation, the extent of its reserves, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of the debt
service burden to the economy as a whole, the sovereign debtor's policy toward
international lenders, and the political constraints to which a sovereign debtor
may be subject. (See also Foreign Securities.)
With respect to sovereign debt of emerging market issuers, investors should be
aware that certain emerging market countries are among the largest debtors to
commercial banks and foreign governments. At times, certain emerging market
countries have declared moratoria on the payment of principal and interest on
external debt.
<PAGE>
Certain emerging market countries have experienced difficulty in servicing their
sovereign debt on a timely basis that led to defaults and the restructuring of
certain indebtedness.
Sovereign debt includes Brady Bonds, which are securities issued under the
framework of the Brady Plan, an initiative announced by former U.S. Treasury
Secretary Nicholas F. Brady in 1989 as a mechanism for debtor nations to
restructure their outstanding external commercial bank indebtedness.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with sovereign debt include: Credit Risk,
Foreign/Emerging Markets Risk, and Management Risk.
Structured Products
Structured products are over-the-counter financial instruments created
specifically to meet the needs of one or a small number of investors. The
instrument may consist of a warrant, an option, or a forward contract embedded
in a note or any of a wide variety of debt, equity, and/or currency
combinations. Risks of structured products include the inability to close such
instruments, rapid changes in the market, and defaults by other parties. (See
also Derivative Instruments.)
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with structured products include: Credit Risk,
Liquidity Risk, and Management Risk.
Variable- or Floating-Rate Securities
The Fund may invest in securities that offer a variable- or floating-rate of
interest. Variable-rate securities provide for automatic establishment of a new
interest rate at fixed intervals (e.g., daily, monthly, semi-annually, etc.).
Floating-rate securities generally provide for automatic adjustment of the
interest rate whenever some specified interest rate index changes.
Variable- or floating-rate securities frequently include a demand feature
enabling the holder to sell the securities to the issuer at par. In many cases,
the demand feature can be exercised at any time. Some securities that do not
have variable or floating interest rates may be accompanied by puts producing
similar results and price characteristics.
Variable-rate demand notes include master demand notes that are obligations that
permit the Fund to invest fluctuating amounts, which may change daily without
penalty, pursuant to direct arrangements between the Fund as lender, and the
borrower. The interest rates on these notes fluctuate from time to time. The
issuer of such obligations normally has a corresponding right, after a given
period, to prepay in its discretion the outstanding principal amount of the
obligations plus accrued interest upon a specified number of days' notice to the
holders of such obligations. Because these obligations are direct lending
arrangements between the lender and borrower, it is not contemplated that such
instruments generally will be traded. There generally is not an established
secondary market for these obligations. Accordingly, where these obligations are
not secured by letters of credit or other credit support arrangements, the
Fund's right to redeem is dependent on the ability of the borrower to pay
principal and interest on demand. Such obligations frequently are not rated by
credit rating agencies and may involve heightened risk of default by the issuer.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with variable- or floating-rate securities include:
Credit Risk and Management Risk.
<PAGE>
Warrants
Warrants are securities giving the holder the right, but not the obligation, to
buy the stock of an issuer at a given price (generally higher than the value of
the stock at the time of issuance) during a specified period or perpetually.
Warrants may be acquired separately or in connection with the acquisition of
securities. Warrants do not carry with them the right to dividends or voting
rights and they do not represent any rights in the assets of the issuer.
Warrants may be considered to have more speculative characteristics than certain
other types of investments. In addition, the value of a warrant does not
necessarily change with the value of the underlying securities, and a warrant
ceases to have value if it is not exercised prior to its expiration date.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with warrants include: Management Risk and Market Risk.
When-Issued Securities
These instruments are contracts to purchase securities for a fixed price at a
future date beyond normal settlement time (when-issued securities or forward
commitments). The price of debt obligations purchased on a when-issued basis,
which may be expressed in yield terms, generally is fixed at the time the
commitment to purchase is made, but delivery and payment for the securities take
place at a later date. Normally, the settlement date occurs within 45 days of
the purchase although in some cases settlement may take longer. The investor
does not pay for the securities or receive dividends or interest on them until
the contractual settlement date. Such instruments involve a risk of loss if the
value of the security to be purchased declines prior to the settlement date,
which risk is in addition to the risk of decline in value of the investor's
other assets.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with when-issued securities include: Credit Risk and
Management Risk.
Zero-Coupon, Step-Coupon, and Pay-in-Kind Securities
These securities are debt obligations that do not make regular cash interest
payments (see also Debt Obligations). Zero-coupon and step-coupon securities are
sold at a deep discount to their face value because they do not pay interest
until maturity. Pay-in-kind securities pay interest through the issuance of
additional securities. Because these securities do not pay current cash income,
the price of these securities can be extremely volatile when interest rates
fluctuate. See the appendix for a discussion of securities ratings.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with zero-coupon, step-coupon, and pay-in-kind
securities include: Credit Risk, Interest Rate Risk, and Management Risk.
<PAGE>
SECURITY TRANSACTIONS
- -------------------------------------------------------------------------------
Subject to policies set by the board, IDS Life Insurance Company (IDS Life) is
authorized to determine, consistent with the Fund's investment goal and
policies, which securities will be purchased, held, or sold. In determining
where the buy and sell orders are to be placed, 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. IDS Life intends to
direct AEFC to execute trades and negotiate commissions on its benefit. In
selecting broker-dealers to execute transactions, AEFC may consider the price of
the security, including commission or mark-up, the size and difficulty of the
order, the reliability, integrity, financial soundness, and general operation
and execution capabilities of the broker, the broker's expertise in particular
markets, and research services provided by the broker. These services are
covered by the Investment Advisory Agreement between IDS Life and AEFC. When
AEFC acts on IDS Life's behalf for the Fund, it follows the guidelines stated
below.
AEFC has a strict Code of Ethics that prohibits its affiliated personnel from
engaging in personal investment activities that compete with or attempt to take
advantage of planned portfolio transactions for any fund or trust for which it
acts as investment manager.
The Fund's securities may be traded on a principal rather than an agency basis.
In other words, AEFC will trade directly with the issuer or with a dealer who
buys or sells for its own account, rather than acting on behalf of another
client. AEFC does not pay the dealer commissions. Instead, the dealer's profit,
if any, is the difference, or spread, between the dealer's purchase and sale
price for the security.
On occasion, it may be desirable to compensate a broker for research services or
for brokerage services by paying a commission that might not otherwise be
charged or a commission in excess of the amount another broker might charge. The
board has adopted a policy authorizing 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 AEFC's overall responsibilities.
Research provided by brokers supplements AEFC's own research activities. Such
services include economic data on, and analysis of, U.S. and foreign economies;
information on specific industries; information about specific companies,
including earnings estimates; purchase recommendations for stocks and bonds;
portfolio strategy services; political, economic, business, and industry trend
assessments; historical statistical information; market data services providing
information on specific issues and prices; and technical analysis of various
aspects of the securities markets, including technical charts. Research services
may take the form of written reports, computer software, or personal contact by
telephone or at seminars or other meetings. AEFC has obtained, and in the future
may obtain, computer hardware from brokers, including but not limited to
personal computers that will be used exclusively for investment decision-making
purposes, which include the research, portfolio management, and trading
functions and other services to the extent permitted under an interpretation by
the SEC.
When paying a commission that might not otherwise be charged or a commission in
excess of the amount another broker might charge, IDS Life must follow
procedures authorized by the board. 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 in the over-the-counter market to a firm that does not make a
market in that security. The commission paid generally includes compensation for
research services. The third procedure permits IDS Life, in order to obtain
research and brokerage services, to cause the Fund to pay a
<PAGE>
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 continuing basis to obtain such services as the handling of
large orders, the willingness of a broker to risk its own money by taking a
position in a security, and the specialized handling of a particular group of
securities that only certain brokers may be able to offer. As a result of this
arrangement, some portfolio transactions may not be effected at the lowest
commission, but IDS Life believes it may obtain better overall execution. IDS
Life has represented that under all three procedures the amount of commission
paid will be reasonable and competitive in relation to the value of the
brokerage services performed or research provided.
All other transactions will be placed on the basis of obtaining the best
available price and the most favorable execution. In so doing, if in the
professional opinion of the person responsible for selecting the broker or
dealer, several firms can execute the transaction on the same basis,
consideration will be given by such person to those firms offering research
services. Such services may be used by IDS Life and AEFC in providing advice to
all the funds and accounts advised by IDS Life even though it is not possible to
relate the benefits to any particular fund.
Each investment decision made for the Fund is made independently from any
decision made for another portfolio, fund, or other account advised by IDS Life
or any of its subsidiaries. When the Fund buys or sells the same security as
another portfolio, 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.
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, operational efficiency, and research services.
For fiscal years noted below, each Fund paid the following total brokerage
commissions. Substantially all firms through whom transactions were executed
provide research services.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Government International Money
April 30, Equity Securities ----------- Equity ----------- Market
Income Managed
- ------------------
1999 $1,545,090 $-0- $-0- $2,881,012 $816,300 $-0-
- ------------------
1998 878,563 -0- -0- 1,638,191 464,162 -0-
- ------------------
1997 1,053,258 -0- -0- 1,963,931 556,456 -0-
</TABLE>
In fiscal year 1999, the following transactions and commissions were
specifically directed to firms in exchange for research services:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Government International Money Market
Equity Securities ----------- Equity -----------
Income Managed
Transactions $12,612,000 $-0- $-0- $-0- $6,165,000 $-0-
- ---------------
Commissions 15,900 6,000
</TABLE>
As of the end of the most recent fiscal year, Government Securities held no
securities of its regular brokers or dealers or of the parent of those brokers
or dealers that derived more than 15% of gross revenue from securities-related
activities.
<PAGE>
As of the end of the most recent fiscal year, each Fund held securities of its
regular brokers or dealers of the parent of those brokers or dealers that
derived more than 15% of gross revenue from securities-related activities as
presented below:
<TABLE>
<CAPTION>
<S> <C> <C>
Value of Securities
Fund Name of Issuer owned at End of Fiscal Year
Equity Fleet Funding $3,782,560
Income Fleet Financial Group $216,215
International Equity Salomon Smith Barney $1,098,675
Managed Bank of America $11,061,613
Fleet Funding 1,293,240
Merrill Lynch 1,063,435
Morgan (JP) 448,530
Salomon 501,265
Money Market Bank of America $1,989,492
Bear Stearns 498,337
Goldman Sachs Group 1,662,600
Morgan Stanley 1,291,494
</TABLE>
The portfolio turnover rates for the two most recent fiscal years were as
follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Government International
April 30, Equity Securities ----------- Equity -----------
Income Managed
- ---------------
1999 130% 89% 22% 67% 96%
- ---------------
1998 147 82 94 172 112
</TABLE>
Higher turnover rates may result in higher brokerage expenses. The variation in
turnover rates for International Equity Portfolio can be attributed to: stock
prices very quickly moving beyond our developed valuation parameters.
BROKERAGE COMMISSIONS PAID TO BROKERS AFFILIATED WITH IDS LIFE
- -------------------------------------------------------------------------------
Affiliates of American Express Company (IDS Life is a wholly owned indirect
subsidiary) may engage in brokerage and other securities transactions on behalf
of the Fund according to procedures adopted by the board 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) the affiliate charges the Fund commission rates consistent
with those the affiliate charges comparable unaffiliated customers in similar
transactions and if such use is consistent with terms of the Investment
Management and Services Agreement.
No brokerage commissions were paid to brokers affiliated with the Advisor for
the three most recent fiscal years for Government Securities, Income and
International Equity Funds.
<PAGE>
Information about brokerage commissions paid by the Fund for the last three
fiscal years to brokers affiliated with the Advisor is contained in the
following table:
<TABLE>
<CAPTION>
As of the end of Fiscal Year,
1999 1998 1997
------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Percent of
------------ ------------- ------------- ------------- Aggregate ------------ -------------
Dollar
Aggregate Amount of Aggregate Aggregate
Dollar Percent of Transactions Dollar Dollar
amount of Aggregate Involving Amount of Amount of
Fund Nature of Commissions Brokerage Payment of Commissions Commissions
Broker Affiliation Paid to Commissions Commissions Paid to Paid to
Broker Broker Broker
Equity American Wholly-owned $9,828 0.64% 0.85% $17,813 $36,641
Enterprise subsidiary
Investment of the
Services Advisor
Inc.
Managed American Wholly-owned 3,702 0.45 0.91 6,710 13,802
Enterprise subsidiary
Investment of the
Services Advisor
Inc.
- ---------------
</TABLE>
<PAGE>
PERFORMANCE INFORMATION
The Fund may quote various performance figures to illustrate past performance.
Average annual total return and current yield quotations, if applicable, used by
the Fund are based on standardized methods of computing performance as required
by the SEC. An explanation of the methods used by the Fund to compute
performance follows below.
AVERAGE ANNUAL TOTAL RETURN
The Fund may calculate average annual total return for certain periods by
finding the average annual compounded rates of return over the period that would
equate the initial amount invested to the ending redeemable value, according to
the following formula:
P(1+T)n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
at the beginning of a period, at the end of the period (or
fractional portion thereof)
Aggregate total return
The Fund may calculate aggregate total return for certain periods representing
the cumulative change in the value of an investment in the Fund over a specified
period of time according to the following formula:
ERV - P
P
where: P = a hypothetical initial payment of $1,000
ERV = ending redeemable value of a hypothetical $1,000 payment
at the beginning of a period, at the end of the period (or
fractional portion thereof)
ANNUALIZED YIELD
Government Securities and Income Portfolios - The Fund may calculate an
annualized yield by dividing the net investment income per share deemed 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
<PAGE>
Annualized yield based on the 30-day period ending April 30, 1999 for Government
Securities Portfolio was 4.91% and Income Portfolio's yield was 6.39%, IDS Life
agreed to a voluntary limitation of non-advisory expenses at an annual charge
not to exceed 0.10% of the daily net assets of the Fund. If non-advisory
expenses had not been limited, Government Securities Portfolio's yield would
have been 0.87%.
Money Market Portfolio calculates annualized simple and compound yields based on
a seven-day period.
The simple yield is calculated by:
o (a) 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,
o (b) 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
o (c) 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 Fund's yield does not
include any realized or unrealized gain or loss.
The Fund calculates its compound yield according to the following formula:
Compound Yield = [(return for seven day period + 1)365/7] - 1
The Fund's simple annualized yield was 4.26% and its compound yield was 4.36%
for the seven-day period ending April 30, 1999.
Yield, or rate of return, on Fund 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 Fund is meeting its goal. When comparing an
investment in the Fund 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 Fund'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, compare or
refer to rankings, yields, or returns as published by independent statistical
services or publishers and publications such as The Bank Rate Monitor National
Index, Barron's, Business Week, CDA Technologies, Donoghue's Money Market Fund
Report, Financial Services Week, Financial Times, Financial World, Forbes,
Fortune, Global Investor, Institutional Investor, Investor's Daily, Kiplinger's
Personal Finance, Lipper Analytical Services, Money, Morningstar, Mutual Fund
Forecaster, Newsweek, The New York Times, Personal Investor, 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.
<PAGE>
VALUING FUND SHARES
- -------------------------------------------------------------------------------
The value of an individual share in the Equity, Equity Income, Government
Securities, Income, International Equity and Managed Portfolios is determined by
using the net asset value (NAV) before shareholder transactions for the day.
On the first business day following the end of the fiscal year, the computation
looked like this:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Shares
outstanding at
the end of Net asset
Portfolio Net assets divided by previous day equals value of one
share
- ------------------------- ---------------- ---------------- ---------------- ---------------- ----------------
Equity $989,716,308 35,575,712 $27.82
Government Securities 21,914,374 2,165,452 10.12
Income 97,579,645 9,866,496 9.89
International Equity 284,168,629 14,862,376 19.12
Managed 688,635,114 34,124,634 20.18
</TABLE>
In determining net assets before shareholder transactions, the Fund's securities
are valued as follows as of the close of business of the New York Stock Exchange
(the Exchange):
o 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 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.
o 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 Exchange.
o 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.)
o 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.
<PAGE>
o Generally, trading in foreign securities is substantially completed
each day at various times prior to the close of the 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 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. Foreign
securities quoted in foreign currencies are translated into U.S.
dollars at the current exchange rate.
Valuing Money Market shares.
o 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 of securities.
o 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.
o 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 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.
o 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 securities before maturity in order to realize
capital gain or loss or to shorten average portfolio maturity.
o 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.
<PAGE>
SELLING SHARES
- -------------------------------------------------------------------------------
The Fund will sell any shares presented by the shareholders (the subaccounts)
for sale. The subaccounts' policy on when or whether to buy or sell 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 sell shares for more than seven days. Such emergency situations
would occur if:
o The Exchange closes for reasons other than the usual weekend and
holiday closings or trading on the Exchange is restricted or
o 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
o The SEC, under the provisions of the 1940 Act, declares a period of
emergency to exist.
Should the Fund stop selling shares, the board may make a deduction from the
value of the assets held by the Fund to cover the cost of future liquidations of
the assets so as to distribute fairly these costs among all contract owners.
Rejection of business
The Fund reserves the right to reject any business, in its sole discretion.
CAPITAL LOSS CARRYOVER
- -------------------------------------------------------------------------------
For federal income tax purposes, the Equity and Income Portfolios had total
capital loss carryovers of $92,078,069 and $812,251, respectively at the end of
the most recent fiscal year, that if not offset by subsequent capital gains will
expire as follows:
Fund 2007 2008
- ---- ---- ----
Equity Portfolio $91,910,864 $-0-
Income Portfolio 167,205 $812,251
It is unlikely that the board will authorize a distribution of any net realized
capital gains until the available capital loss carryover has been offset or has
expired except as required by Internal Revenue Service rules.
TAXES
- -------------------------------------------------------------------------------
The Fund may be subject to U.S. taxes resulting from holdings in a passive
foreign investment company (PFIC). A foreign corporation is a PFIC when 75% or
more of its gross income for the taxable year is passive income or 50% or more
of the average value of its assets consists of assets that produce or could
produce passive income.
<PAGE>
AGREEMENTS
- -------------------------------------------------------------------------------
Investment Management and Services Agreement
The Funds do not maintain their own research department or record-keeping
services. These are provided by the Advisor under the Investment Management and
Services Agreement.
For its services, the Advisor is paid a fee based on the net assets of the Fund.
The asset charge is based on the aggregate average daily net assets of each of
the Funds at the following rates:
0.70%, on an annual basis, for Equity;
0.70%, on an annual basis, for Equity Income;
0.70%, on an annual basis, for Government Securities;
0.70%, on an annual basis, for Income;
0.95%, on an annual basis, for International Equity;
0.70%, on an annual basis, for Managed; and
0.50%, on an annual basis, for Money Market
The management fee is paid monthly. The total amount paid for fiscal year 1999
was $6,157,181 for Equity, $116,139 for Government Securities, $630,775 for
Income, $2,302,001 for International Equity, $4,211,867 for Managed, and
$187,130 for Money Market. The total amount paid for fiscal year 1998 was
$5,369,342 for Equity, $98,674 for Government Securities, $520,492 for Income,
$1,616,804 for International Equity, $3,495,488 for Managed, and $156,403 for
Money Market. The total amount paid for fiscal year 1997 was $3,629,237 for
Equity, $91,353 for Government Securities, $430,476 for Income, $862,518 for
International Equity, $2,555,556 for Managed and $98,580 for Money Market.
All nonadvisory expenses incurred by each Fund will be paid at an annual charge
not to exceed 0.10% of the aggregate average daily net assets of the respective
Fund. The voluntary limitation of 0.10% has been established by the Advisor at
that figure and the Advisor reserves the right to discontinue the voluntary
limitation.
Investment Advisory Agreement
The Advisor and AEFC have an Investment Advisory Agreement. It calls for the
Advisor to pay AEFC a fee for investment advice. AEFC also executes purchases
and sales and negotiates brokerage as directed by the Advisor. The fee paid by
the Advisor is 0.25% of the average net assets for the year of all Funds, except
for International Equity. The fee paid by the Advisor is 0.35% of International
Equity's average net assets.
The Advisor paid AEFC $4,911,181 for investment advice for fiscal year 1999,
$4,060,601 for fiscal year 1998, and $2,761,994 for fiscal year 1997.
Information concerning other funds advised by the Advisor or AEFC is contained
in the prospectus.
<PAGE>
Custodian Agreement
The Fund's securities and cash are held by American Express Trust Company, 1200
Northstar Center West, 625 Marquette Ave., Minneapolis, MN 55402-2307, through a
custodian agreement. The custodian is permitted to deposit some or all of its
securities in central depository systems as allowed by federal law. For its
services, the Fund pays the custodian a maintenance charge and a charge per
transaction in addition to reimbursing the custodian's out-of-pocket expenses.
The custodian has entered into a sub-custodian agreement with the Bank of New
York, 90 Washington Street, New York, NY 10286. As part of this arrangement,
securities purchased outside the United Stated are maintained in the custody of
various foreign branches of Bank of New York or in other financial institutions
as permitted by law and by the Fund's sub-custodian agreement.
ORGANIZATIONAL INFORMATION
- -------------------------------------------------------------------------------
The Fund is an open-end management investment company. The Fund headquarters are
at IDS Tower 10, Minneapolis, MN 55440-0010.
SHARES
The Fund is owned by the subaccounts, its shareholders. The shares of the Fund
represent an interest in that fund's assets only (and profits or losses), and,
in the event of liquidation, each share of the Fund would have the same rights
to dividends and assets as every other share of that Fund.
VOTING RIGHTS
For a discussion of the rights of contract owners concerning the voting of
shares held by the subaccounts, please see your policy prospectus. All shares
have voting rights over the Fund's management and fundamental policies. Each
share is entitled to one vote for each share owned. Each class, if applicable,
has exclusive voting rights with respect to matters for which separate class
voting is appropriate under applicable law. All shares have cumulative voting
rights with respect to the election of board members. This means that
shareholders have as many votes as the number of shares owned, including
fractional shares, multiplied by the number of members to be elected.
Dividend Rights
Dividends paid by the Fund, if any, with respect to each class of shares, if
applicable, will be calculated in the same manner, at the same time, on the same
day, and will be in the same amount, except for differences resulting from
differences in fee structures.
<PAGE>
FUND HISTORY TABLE FOR FUNDS MANAGED BY IDS LIFE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Date of Form of State of Fiscal Diversified
Organization Organization Organization Year End
- ----------------------------------- ------------- ------------ ------------- ------------- -------------
AXP Variable Portfolio -Income 4/27/81, Corporation NV/MN 8/31
Series, Inc. 6/13/86*
AXP Variable Portfolio - Bond Yes
Fund
AXP Variable Portfolio -Extra Yes
Income Fund
AXP Variable Portfolio -Global No
Bond Fund
- ----------------------------------- ------------- ------------ ------------- ------------- -------------
AXP Variable Portfolio - 4/27/81, Corporation NV/MN 8/31
Investment Series, Inc. 6/13/86*
AXP Variable Portfolio - Yes
Capital Resource Fund
AXP Variable Portfolio - Yes
International Fund
AXP Variable Portfolio - New Yes
Dimensions Fund
AXP Variable Portfolio - Yes
Strategy Aggressive Fund
- ----------------------------------- ------------- ------------ ------------- ------------- -------------
AXP Variable Portfolio - Managed 3/5/85 Corporation MN 8/31 Yes
Series, Inc.
AXP Variable Portfolio - Yes
Managed Fund
- ----------------------------------- ------------- ------------ ------------- ------------- -------------
AXP Variable Portfolio -Money 4/27/81, Corporation NV/MN 8/31 Yes
Market Series, Inc. 6/13/86*
AXP Variable Portfolio - Cash Yes
Management Fund
- ----------------------------------- ------------- ------------ ------------- ------------- -------------
- ----------------------------------- ------------- ------------ ------------- ------------- -------------
IDS Life Series Fund, Inc. 5/8/85 Corporation MN 4/30
Equity Income Portfolio yes
Equity Portfolio yes
Government Securities yes
Portfolio
Income Portfolio yes
International Equity Portfolio yes
Managed Portfolio yes
Money Market Portfolio yes
* Date merged into a Minnesota corporation.
</TABLE>
BOARD MEMBERS AND OFFICERS
- -------------------------------------------------------------------------------
The Fund has a board that oversees the Fund's operations. The board appoints
officers who are responsible for day-to-day business decisions based on policies
set by the board.
The following is a list of the Fund's board members.
James M. Jensen*
Born in 1955
IDS Tower 10
Minneapolis, MN
Vice President - Insurance Product Development and Management, AEFC since
January 1996. Director - Insurance Actuarial Product Development, AEFC from 1992
to 1995. Vice President - Insurance Product Development, IDS Life since January
1996.
<PAGE>
Richard W. Kling*
Born in 1940
IDS Tower 10
Minneapolis, MN
President, IDS Life Series Fund, Inc. President and Chairman of the Board, IDS
Life Variable Annuity Funds A&B. President and Director, IDS Life. Senior Vice
President - Products and Director, AEFC. Director, IDS Certificate Company.
Rodney P. Burwell
Born in 1939
Xerxes Corporation
7901 Xerxes Ave. S.
Minneapolis, MN
Chairman, Xerxes Corporation (fiberglass storage tanks). Director, Fairview
Corporation, Strategist Funds, IDS Certificate Company.
Jean B. Keffeler
Born in 1945
3424 Zenith Ave. S.
Minneapolis, MN
Independent management consultant. Director, National Computer Systems,
Strategist Funds, IDS Certificate Company.
Thomas R. McBurney
Born in 1938
McBurney Management Advisors
1700 Foshay Tower
821 Marquette Ave.
Minneapolis, MN
President, McBurney Management Advisors. Director, The Valspar Corporation
(paints), Wenger Corporation, Allina, Space Center Enterprises, Greenspring
Corporation, Strategist Funds, IDS Certificate Company.
*Interested person of the Advisor and of the Fund as the term "interested
person" is defined in the 1940 Act.
The board also has appointed officers who are responsible for the day-to-day
business decisions based on policies it has established.
In addition to Mr. Kling, who is the President, the Fund's other officers are:
Lorraine R. Hart
Born in 1951
IDS Tower 10
Minneapolis, MN
Vice President - Investments
Vice President--Insurance Investments, AEFC. Vice President--Investments, IDS
Life.
<PAGE>
Jeffrey S. Horton
Born in1961
IDS Tower 10
Minneapolis, MN
Vice President and Treasurer
Vice President and Corporate Treasurer, AEFC. Vice President and Treasurer, IDS
Life.
Paul F. Kolkman
Born in 1946
IDS Tower 10
Minneapolis, MN
Vice President and Actuary
Director and Executive Vice President, IDS Life. Vice President - Actuarial
Finance, AEFC.
Timothy S. Meehan
Born in 1957
IDS Tower 10
Minneapolis, MN
Secretary
Vice President, Group Counsel and Secretary, AEFC.
William A. Stoltzmann
Born in 1948
IDS Tower 10
Minneapolis, MN
General Counsel and Assistant Secretary
Vice President and Assistant General Counsel, AEFC. Vice President, General
Counsel and Secretary, IDS Life.
Philip C. Wentzel
Born in 1961
IDS Tower 10
Minneapolis, MN
Controller
Vice President - Finance, Risk Management Products, AEFC. Vice President and
Controller, IDS Life.
<PAGE>
COMPENSATION FOR BOARD MEMBERS
- -------------------------------------------------------------------------------
The board members were elected on June 16, 1999 and, therefore, received no
compensation during the most recent fiscal year.
As of 30 days prior to the date of this SAI, the Fund's board members and
officers as a group owned less than 1% of the Fund's outstanding shares.
INDEPENDENT AUDITORS
- -------------------------------------------------------------------------------
The financial statements contained in the Annual Report were audited by
independent auditors, KPMG Peat Marwick LLP, 4200 Norwest Center, 90 S. Seventh
St., Minneapolis, MN 55402-3900. The independent auditors also provide other
accounting and tax-related services as requested by the Fund.
<PAGE>
APPENDIX
DESCRIPTION OF RATINGS
Standard & Poor's Debt Ratings
A Standard & Poor's corporate or municipal debt rating is a current assessment
of the creditworthiness of an obligor with respect to a specific obligation.
This assessment may take into consideration obligors such as guarantors,
insurers, or lessees.
The debt rating is not a recommendation to purchase, sell, or hold a security,
inasmuch as it does not comment as to market price or suitability for a
particular investor.
The ratings are based on current information furnished by the issuer or obtained
by S&P from other sources it considers reliable. S&P does not perform an audit
in connection with any rating and may, on occasion, rely on unaudited financial
information. The ratings may be changed, suspended, or withdrawn as a result of
changes in, or unavailability of such information or based on other
circumstances.
The ratings are based, in varying degrees, on the following considerations:
o Likelihood of default capacity and willingness of the obligor as
to the timely payment of interest and repayment of principal in
accordance with the terms of the obligation.
o Nature of and provisions of the obligation.
o Protection afforded by, and relative position of, the obligation
in the event of bankruptcy, reorganization, or other arrangement
under the laws of bankruptcy and other laws affecting creditors'
rights.
Investment Grade
Debt rated AAA has the highest rating assigned by Standard & Poor's. Capacity to
pay interest and repay principal is extremely strong.
Debt rated AA has a very strong capacity to pay interest and repay principal and
differs from the highest rated issues only in a small degree.
Debt rated A has a strong capacity to pay interest and repay principal, although
it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
Debt rated BBB is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher-rated categories.
Speculative grade
Debt rated BB, B, CCC, CC, and C is regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal. BB
indicates the least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major exposures to adverse conditions.
<PAGE>
Debt rated BB has less near-term vulnerability to default than other speculative
issues. However, it faces major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions that could lead to inadequate
capacity to meet timely interest and principal payments. The BB rating category
also is used for debt subordinated to senior debt that is assigned an actual or
implied BBB- rating.
Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category also is used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
Debt rated CCC has a currently identifiable vulnerability to default and is
dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category also is
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.
Debt rated CC typically is applied to debt subordinated to senior debt that is
assigned an actual or implied CCC rating.
Debt rated C typically is applied to debt subordinated to senior debt that is
assigned an actual or implied CCC rating. The C rating may be used to cover a
situation where a bankruptcy petition has been filed, but debt service payments
are continued.
The rating CI is reserved for income bonds on which no interest is being paid.
Debt rated D is in payment default. The D rating category is used when interest
payments or principal payments are not made on the date due, even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
Moody's Long-Term Debt Ratings
Aaa - Bonds that are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk. Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present that make the
long-term risk appear somewhat larger than in Aaa securities.
A - Bonds that are rated A possess many favorable investment attributes and are
to be considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment some time in the future.
Baa - Bonds that are rated Baa are considered as medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
<PAGE>
Ba - Bonds that are rated Ba are judged to have speculative elements--their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds that are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or maintenance of other
terms of the contract over any long period of time may be small.
Caa - Bonds that are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca - Bonds that are rated Ca represent obligations that are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C - Bonds that are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Fitch Investors Service, Inc. Bond Ratings
Fitch investment grade bond and preferred stock ratings provide a guide to
investors in determining the credit risk associated with a particular security.
The ratings represent Fitch's assessment of the issuer's ability to meet the
obligations of a specific debt or preferred issue in a timely manner.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be provided by
insurance policies or financial guaranties unless otherwise indicated.
Bonds and preferred stock carrying the same rating are of similar but not
necessarily identical credit quality since the rating categories do not fully
reflect small differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell, or hold any security.
Ratings do not comment on the adequacy of market price, the suitability of any
security for a particular investor, or the tax-exempt nature or taxability of
payments made in respect of any security.
Fitch ratings are based on information obtained from issuers, other obligors,
underwriters, their experts, and other sources Fitch believes to be reliable.
Fitch does not audit or verify the truth or accuracy of such information.
Ratings may be changed, suspended, or withdrawn as a result of changes in, or
the unavailability of, information or for other reasons.
AAA Bonds and preferred stock considered to be investment grade
and of the highest credit quality. The obligor has an
exceptionally strong ability to pay interest and/or dividends
and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA Bonds and preferred stock considered to be investment grade
and of very high credit quality. The obligor's ability to pay
interest and/or dividends and repay principal is very strong,
although not quite as strong as bonds rated AAA.
<PAGE>
A Bonds and preferred stock considered to be investment grade
and of high credit quality. The obligor's ability to pay
interest and/or dividends and repay principal is considered to
be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than debt or preferred
securities with higher ratings.
BBB Bonds and preferred stock considered to be investment grade
and of satisfactory credit quality. The obligor's ability to
pay interest or dividends and repay principal is considered to
be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact
on these securities and, therefore, impair timely payment. The
likelihood that the ratings of these bonds or preferred stock
will fall below investment grade is higher than for securities
with higher ratings.
Fitch speculative grade bond or preferred stock ratings provide a guide to
investors in determining the credit risk associated with a particular security.
The ratings (BB to C) represent Fitch's assessment of the likelihood of timely
payment of principal and interest or dividends in accordance with the terms of
obligation for issues not in default. For defaulted bonds or preferred stock,
the rating (DDD to D) is an assessment of the ultimate recovery value through
reorganization or liquidation.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer or possible recovery value in
bankruptcy, the current and prospective financial condition and operating
performance of the issuer and any guarantor, as well as the economic and
political environment that might affect the issuer's future financial strength.
Bonds or preferred stock that have the same rating are of similar but not
necessarily identical credit quality since the rating categories cannot fully
reflect the differences in the degrees of credit risk.
BB Bonds or preferred stock are considered speculative. The
obligor's ability to pay interest or dividends and repay
principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be
identified, which could assist the obligor in satisfying its
debt service requirements.
B Bonds or preferred stock are considered highly speculative.
While bonds in this class are currently meeting debt service
requirements or paying dividends, the probability of continued
timely payment of principal and interest reflects the
obligor's limited margin of safety and the need for reasonable
business and economic activity throughout the life of the
issue.
CCC Bonds or preferred stock have certain identifiable
characteristics that if not remedied, may lead to default. The
ability to meet obligations requires an advantageous business
and economic environment.
CC Bonds or preferred stock are minimally protected. Default in
payment of interest and/or principal seems probable over time.
C Bonds are in imminent default in payment of interest or
principal or suspension of preferred stock dividends is
imminent.
<PAGE>
DDD,
DD,
and D Bonds are in default on interest and/or principal payments
or preferred stock dividends are suspended. Such securities
are extremely speculative and should be valued on the basis of
their ultimate recovery value in liquidation or reorganization
of the obligor. DDD represents the highest potential for
recovery of these securities and D represents the lowest
potential for recovery.
Duff & Phelps, Inc. Long-Term Debt Ratings
These ratings represent a summary opinion of the issuer's long-term fundamental
quality. Rating determination is based on qualitative and quantitative factors
that may vary according to the basic economic and financial characteristics of
each industry and each issuer. Important considerations are vulnerability to
economic cycles as well as risks related to such factors as competition,
government action, regulation, technological obsolescence, demand shifts, cost
structure, and management depth and expertise. The projected viability of the
obligor at the trough of the cycle is a critical determination.
Each rating also takes into account the legal form of the security (e.g. first
mortgage bonds, subordinated debt, preferred stock, etc.). The extent of rating
dispersion among the various classes of securities is determined by several
factors including relative weightings of the different security classes in the
capital structure, the overall credit strength of the issuer, and the nature of
covenant protection. Review of indenture restrictions is important to the
analysis of a company's operating and financial constraints.
The Credit Rating Committee formally reviews all ratings once per quarter (more
frequently, if necessary). Ratings of BBB- and higher fall within the definition
of investment grade securities, as defined by bank and insurance supervisory
authorities. Structured finance issues, including real estate, asset-backed and
mortgage-backed financings, use this same rating scale with minor modification
in the definitions. Thus, an investor can compare the credit quality of
investment alternatives across industries and structural types. A "Cash Flow
Rating" (as noted for specific ratings) addresses the likelihood that aggregate
principal and interest will equal or exceed the rated amount under appropriate
stress conditions.
Rating Scale Definition
-------------------------- ---------------------------------------------------
AAA Highest credit quality. The risk factors are
negligible, being only slightly more than for
risk-free U.S. Treasury debt.
-------------------------- ---------------------------------------------------
AA+ High credit quality. Protection factors are strong.
AA Risk is modest, but may vary slightly from time to
AA- time because of economic conditions.
-------------------------- ---------------------------------------------------
A+ Protection factors are average but adequate.
A However, risk factors are more variable and greater
A- in periods of economic stress.
-------------------------- ---------------------------------------------------
BBB+ Below-average protection factors but still
BBB considered sufficient for prudent investment.
BBB- Considerable variability in risk during economic
cycles.
<PAGE>
-------------------------- ---------------------------------------------------
BB+ Below investment grade but deemed likely to meet
BB obligations when due. Present or prospective
BB- financial protection factors fluctuate according to
industry conditions or company fortunes. Overall
quality may move up or down frequently within this
category.
-------------------------- ---------------------------------------------------
B+ Below investment grade and possessing risk that
B obligations will not be met when due. Financial
B- protection factors will fluctuate widely according to
economic cycles, industry conditions, and/or company
fortunes. Potential exists for frequent changes in the
rating within this category or into a higher or lower
rating grade.
-------------------------- ---------------------------------------------------
CCC Well below investment grade securities. Considerable
uncertainty exists as to timely payment of
principal, interest, or preferred dividends.
Protection factors are narrow and risk can be
substantial with unfavorable economic/industry
conditions, and or with unfavorable company
developments.
-------------------------- ---------------------------------------------------
DD Defaulted debt obligations. Issuer failed to meet
scheduled principal and/or interest payments.
DP Preferred stock with dividend arrearages.
-------------------------- ---------------------------------------------------
IBCA Long-Term Debt Ratings
AAA Obligations for which there is the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial, such that adverse changes in business, economic, or
financial conditions are unlikely to increase investment risk
substantially.
AA Obligations for which there is a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic, or financial
conditions may increase investment risk, albeit not very significantly.
A Obligations for which there is a low expectation of investment risk.
Capacity for timely repayment of principal and interest is strong,
although adverse changes in business, economic, or financial conditions
may lead to increased investment risk.
BBB Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal and
interest is adequate, although adverse changes in business, economic,
or financial conditions are more likely to lead to increased investment
risk than for obligations in other categories.
BB Obligations for which there is a possibility of investment risk
developing. Capacity for timely repayment of principal and interest
exists, but is susceptible over time to adverse changes in business,
economic, or financial conditions.
B Obligations for which investment risk exists. Timely repayment of
principal and interest is not sufficiently protected against adverse
changes in business, economic, or financial conditions.
CCC Obligations for which there is a current perceived possibility of
default. Timely repayment of principal and interest is dependent on
favorable business, economic, or financial conditions.
<PAGE>
CC Obligations that are highly speculative or that have a high risk of default.
C Obligations that are currently in default.
Notes: "+" or "-" may be appended to a rating below AAA to denote relative
status within major rating categories. Ratings of BB and below are assigned
where it is considered that speculative characteristics are present.
Thomson Bank Watch Long-Term Debt Ratings
Investment Grade
AAA (LC-AAA) Indicates that the ability to repay principal and interest
on a timely basis is extremely high.
AA (LC-AA) Indicates a very strong ability to repay principal
and interest on a timely basis, with limited incremental
risk compared to issues rated in the highest category.
A (LC-A) Indicates the ability to repay principal and
interest is strong. Issues rated A could be more
vulnerable to adverse developments (both internal and
external) than obligations with higher ratings.
BBB (LC-BBB) The lowest investment-grade category: indicates
an acceptable capacity to repay principal and interest.
BBB issues are more vulnerable to adverse developments
(both internal and external) than obligations with higher
ratings.
Non-Investment Grade - may be speculative in the likelihood of timely repayment
of principal and interest.
BB (LC-BB) While not investment grade, the BB rating suggests
that the likelihood of default is considerably less than
for lower-rated issues. However, there are significant
uncertainties that could affect the ability to adequately
service debt obligations.
B (LC-B) Issues rated B show higher degree of uncertainty
and therefore greater likelihood of default than
higher-rated issues. Adverse developments could negatively
affect the payment of interest and principal on a timely
basis.
CCC (LC-CCC) Issues rated CCC clearly have a high likelihood
of default, with little capacity to address further
adverse changes in financial circumstances.
CC (LC-CC) CC is applied to issues that are subordinate to other
obligations rated CCC and are afforded less protection in
the event of bankruptcy or reorganization.
D (LC-D) Default.
<PAGE>
SHORT-TERM RATINGS
Standard & Poor's Commercial Paper Ratings
A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt considered short-term in the relevant
market.
Ratings are graded into several categories, ranging from A-1 for the highest
quality obligations to D for the lowest. These categories are as follows:
A-1 This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to
possess extremely strong safety characteristics are denoted
with a plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as
high as for issues designated A-1.
A-3 Issues carrying this designation have adequate capacity for
timely payment. They are, however, more vulnerable to the
adverse effects of changes in circumstances than obligations
carrying the higher designations.
B Issues are regarded as having only speculative capacity for
timely payment.
C This rating is assigned to short-term debt obligations with
doubtful capacity for payment.
D Debt rated D is in payment default. The D rating category is
used when interest payments or principal payments are not made
on the date due, even if the applicable grace period has not
expired, unless S&P believes that such payments will be made
during such grace period.
Standard & Poor's Note Ratings
An S&P note rating reflects the liquidity factors and market-access risks unique
to notes. Notes maturing in three years or less will likely receive a note
rating. Notes maturing beyond three years will most likely receive a long-term
debt rating.
Note rating symbols and definitions are as follows:
SP-1 Strong capacity to pay principal and interest. Issues
determined to possess very strong characteristics are given a
plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over
the term of the notes.
SP-3 Speculative capacity to pay principal and interest.
<PAGE>
Moody's Short-Term Ratings
Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually senior debt obligations. These obligations have an original maturity
not exceeding one year, unless explicitly noted.
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:
Issuers rated Prime-l (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-l
repayment ability will often be evidenced by many of the following
characteristics: (i) leading market positions in well-established
industries, (ii) high rates of return on funds employed, (iii)
conservative capitalization structure with moderate reliance on debt
and ample asset protection, (iv) broad margins in earnings coverage of
fixed financial charges and high internal cash generation, and (v) well
established access to a range of financial markets and assured sources
of alternate liquidity.
Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above, but
to a lesser degree. Earnings trends and coverage ratios, while sound,
may be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.
Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of
industry characteristics and market compositions may be more
pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurements and may require
relatively high financial leverage. Adequate alternate liquidity is
maintained.
Issuers rated Not Prime do not fall within any of the Prime rating
categories.
Fitch Investors Service, Inc. Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
The short-term rating places greater emphasis than a long-term rating on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.
F-1+ Exceptionally Strong Credit Quality. Issues assigned this
rating are regarded as having the strongest degree of
assurance for timely payment.
F-1 Very Strong Credit Quality. Issues assigned this rating
reflect an assurance of timely payment only slightly less in
degree than issues rated F.
F-2 Good Credit Quality. Issues assigned this rating have a
satisfactory degree of assurance for timely payment but the
margin of safety is not as great as for issues assigned F-1+
and F-1 ratings.
F-3 Fair Credit Quality. Issues assigned this rating have
characteristics suggesting that the degree of assurance for
timely payment is adequate; however, near-term adverse changes
could cause these securities to be rated below investment
grade.
<PAGE>
F-S Weak Credit Quality. Issues assigned this rating have
characteristics suggesting a minimal degree of assurance for
timely payment and are vulnerable to near-term adverse changes
in financial and economic conditions.
D Default Issues assigned this rating are in actual or
imminent payment default.
LOC The symbol LOC indicates that the rating is based on a letter
of credit issued by a commercial bank.
Duff & Phelps, Inc. Short-Term Debt Ratings
Duff & Phelps' short-term ratings are consistent with the rating criteria used
by money market participants. The ratings apply to all obligations with
maturities of under one year, including commercial paper, the uninsured portion
of certificates of deposit, unsecured bank loans, master notes, banker's
acceptances, irrevocable letters of credit, and current maturities of long-term
debt.
Asset-backed commercial paper also is rated according to this scale.
Emphasis is placed on liquidity, which is defined as not only cash from
operations but also access to alternative sources of funds including trade
credit, bank lines, and the capital markets. An important consideration is the
level of an obligor's reliance on short-term funds on an ongoing basis.
Rating Scale: Definition
High Grade
D-1+ Highest certainty of timely payment. Short-term
liquidity, including internal operating factors and
or access to alternative sources of funds, is
outstanding, and safety is just below risk-free
U.S. Treasury short-term obligations.
D-1 Very high certainty of timely payment. Liquidity
factors are excellent and supported by good
fundamental protection factors. Risk factors are
minor.
D-1- High certainty of timely payment. Liquidity factors
are strong and supported by good fundamental
protection factors. Risk factors are very small.
Good Grade
D-2 Good certainty of timely payment. Liquidity factors
and company fundamentals are sound. Although
ongoing funding needs may enlarge total financing
requirements, access to capital markets is good.
Risk factors are small.
Satisfactory Grade
D-3 Satisfactory liquidity and other protection factors
qualify issues as to investment grade. Risk factors
are larger and subject to more variation.
Nevertheless, timely payment is expected.
<PAGE>
Non-Investment Grade
D-4 Speculative investment characteristics. Liquidity
is not sufficient to insure against disruption in
debt service. Operating factors and market access
may be subject to a high degree of variation.
Default
D-5 Issuer failed to meet scheduled principal and/or
interest payments.
Thomson BankWatch (TBW) Short-Term Ratings
The TBW Short-Term Ratings apply, unless otherwise noted, to specific debt
instruments of the rated entities with a maturity of one year or less. TBW
Short-Term Ratings are intended to assess the likelihood of untimely or
incomplete payments of principal or interest.
TBW-1 The highest category; indicates a very high likelihood that
principal and interest will be paid on a timely basis.
TBW-2 The second highest category; while the degree of safety
regarding timely repayment of principal and interest is
strong, the relative degree of safety is not as high as
for issues rated TBW- I.
TBW-3 The lowest investment-grade category; indicates that while
the obligation is more susceptible to adverse developments
(both internal and external) than those with higher
ratings, the capacity to service principal and interest in
a timely fashion is considered adequate.
TBW-4 The lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.
IBCA Short-Term Ratings
IBCA Short-Term Ratings assess the borrowing characteristics of banks and
corporations, and the capacity for timely repayment of debt obligations. The
Short-Term Ratings relate to debt that has a maturity of less than one year.
A1 Obligations supported by the highest capacity for timely
repayment. Where issues possess a particularly strong credit
feature, a rating of A1+ is assigned.
A2 Obligations supported by a good capacity for timely repayment.
A3 Obligations supported by a satisfactory capacity for
timely repayment.
B Obligations for which there is an uncertainty as to the
capacity to ensure timely repayment.
C Obligations for which there is a high risk of default or
which are currently in default.
<PAGE>
Moody's & S&P's
Short-Term Muni Bonds and Notes
Short-term municipal bonds and notes are rated by Moody's and by S&P. The
ratings reflect the liquidity concerns and market access risks unique to notes.
Moody's MIG 1/VMIG 1 indicates the best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
Moody's MIG 2/VMIG 2 indicates high quality. Margins of protection are ample
although not so large as in the preceding group.
Moody's MIG 3/VMIG 3 indicates favorable quality. All security elements are
accounted for but there is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
Moody' s MIG 4/VMIG 4 indicates adequate quality. Protection commonly regarded
as required of an investment security is present and although not distinctly or
predominantly speculative, there is specific risk.
Standard & Poor's rating SP-1 indicates very strong or strong capacity to pay
principal and interest. Those issues determined to possess overwhelming safety
characteristics will be given a plus (+) designation.
Standard & Poor's rating SP-2 indicates satisfactory capacity to pay principal
and interest.
Standard & Poor's rating SP-3 indicates speculative capacity to pay principal
and interest.
<PAGE>
Independent Auditors' Report
THE BOARD AND SHAREHOLDERS
IDS LIFE SERIES FUND, INC.
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments in securities, of the Equity, Income, Money Market,
Managed, Government Securities and International Equity Portfolios of IDS Life
Series Fund, Inc. as of April 30, 1999, and the related statements of operations
for the year then ended, the statements of changes in net assets for each of the
years in the two-year period ended April 30, 1999, and the financial highlights
for each of the years in the five-year period ended April 30, 1999 (for the
four-year period ended April 30, 1999 and for the period from October 28, 1994,
commencement of operations, to April 30, 1995 for the International Equity
Portfolio.) These financial statements and the financial highlights are the
responsibility of fund management. Our responsibility is to express an opinion
on these financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Investment securities held in custody are confirmed to us by the
custodian. As to securities purchased and sold but not received or delivered, we
request confirmations from brokers, and where replies are not received, we carry
out other appropriate auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Equity, Income, Money Market, Managed, Government Securities and International
Equity Portfolios of IDS Life Series Fund, Inc. as of April 30, 1999 and the
results of their operations, changes in their net assets, and the financial
highlights for the periods stated in the first paragraph above, in conformity
with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
June 4, 1999
<PAGE>
<TABLE>
<CAPTION>
Financial Statements
Statements of assets and liabilities
IDS Life Series Fund, Inc.
Equity Income Money
Portfolio Portfolio Market
April 30, 1999 Portfolio
Assets
Investments in securities, at value (Note 1):
<S> <C> <C> <C>
(identified cost: $723,985,592; $96,279,852 and $45,649,448, respectively) $ 995,922,538 $95,928,941 $45,649,448
Cash in bank on demand deposit 70,704 36,981 124,022
Receivable for investment securities sold 9,428,089 693,721 25,633
Dividends and accrued interest receivable 42,250 1,623,737 --
Receivable for capital stock sold -- 351,456 35,258
------ ------- ------
Total assets 1,005,463,581 98,634,836 45,834,361
------------- ---------- ----------
Liabilities
Dividends payable to shareholders (Note 1) -- 509,685 158,350
Payable for investment securities purchased 10,772,592 476,423 --
Accrued investment management services fee 565,157 55,991 18,523
Payable for capital stock redeemed 384,448 -- 69,404
Other accrued expenses 26,306 14,274 24,144
Options contracts written, at value
(premium received $2,198,981 for Equity Portfolio) (Note 6) 4,778,438 -- --
--------- ------ -----
Total liabilities 16,526,941 1,056,373 270,421
---------- --------- -------
Net assets applicable to outstanding capital stock $ 988,936,640 $97,578,463 $45,563,940
============== =========== ===========
Represented by
Capital stock-- $.001 par value (Note 1) $ 35,576 $ 9,866 $ 45,565
Additional paid-in capital 811,590,010 98,879,611 45,516,269
Undistributed (excess of distributions over) net investment income -- 23,969 3,100
Accumulated net realized gain (loss) (92,046,435) (984,072) (994)
Unrealized appreciation (depreciation) on investments and on
translation of assets and liabilities in foreign currencies 269,357,489 (350,911) --
----------- -------- --------
Total-- representing net assets applicable to outstanding capital stock $ 988,936,640 $97,578,463 $45,563,940
============== =========== ===========
Shares outstanding 35,575,712 9,866,496 45,565,159
---------- --------- ----------
Net asset value per share of outstanding capital stock $ 27.80 $ 9.89 $ 1.00
-------------- ----------- -----------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of assets and liabilities (continued)
IDS Life Series Fund, Inc.
Managed Government International
Portfolio Securities Equity
April 30, 1999 Portfolio Portfolio
Assets
Investments in securities, at value (Note 1):
<S> <C> <C> <C>
(identified cost: $537,947,223; $24,125,797 and $233,523,553, respectively) $681,021,108 $24,364,582 $281,075,909
Cash in bank on demand deposit 17,653 81,691 95,634
Receivable for investment securities sold 111,344 997,987 1,748,709
Dividends and accrued interest receivable 4,587,352 172,772 699,633
Unrealized appreciation on foreign currency contracts
held, at value (Notes 1 and 4) -- -- 6,602
Receivable for capital stock sold 3,152,415 42,255 506,009
--------- ------ -------
Total assets 688,889,872 25,659,287 284,132,496
----------- ---------- -----------
Liabilities
Dividends payable to shareholders (Note 1) 3,195,374 85,888 539,770
Payable for investment securities purchased 121,000 3,621,106 346,703
Accrued investment management services fee 397,294 12,272 217,574
Payable for capital stock redeemed -- 2,434 --
Other accrued expenses 22,325 2,177 27,210
------ ----- ------
Total liabilities 3,735,993 3,723,877 1,131,257
--------- --------- ---------
Net assets applicable to outstanding capital stock $685,153,879 $21,935,410 $283,001,239
============ =========== ============
Represented by
Capital stock-- $.001 par value (Note 1) $ 34,125 $ 2,165 $ 14,862
Additional paid-in capital 535,348,049 21,612,750 230,057,324
Undistributed (excess of distributions over) net investment income (254,517) (3,870) (833)
Accumulated net realized gain (loss) 7,315,281 85,580 5,393,850
Unrealized appreciation (depreciation) on investments and on
translation of assets and liabilities in foreign currencies (Note 7) 142,710,941 238,785 47,536,036
----------- ------- ----------
Total-- representing net assets applicable to outstanding capital stock $685,153,879 $21,935,410 $283,001,239
============ =========== ============
Shares outstanding 34,124,634 2,165,452 14,862,376
---------- --------- ----------
Net asset value per share of outstanding capital stock $ 20.08 $ 10.13 $ 19.04
------------ ----------- ------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of operations
IDS Life Series Fund, Inc.
Equity Income Money
Portfolio Portfolio Market
Year ended April 30, 1999 Portfolio
Investment income
Income:
<S> <C> <C> <C>
Dividends $ 1,448,049 $ 154 $ --
Interest 2,733,760 6,666,779 1,991,128
Less foreign taxes withheld (23,258) -- --
------- ------ -----
Total income 4,158,551 6,666,933 1,991,128
--------- --------- ---------
Expenses (Note 2):
Investment management and services fee 6,157,181 630,775 187,130
Custodian fees 176,249 24,359 27,563
Audit fees 15,500 10,000 7,500
Directors fees 6,195 617 260
Printing and postage 45,793 7,160 1,910
Other 5,895 580 193
----- --- ---
Total expenses 6,406,813 673,491 224,556
--------- ------- -------
Investment income (loss)-- net (2,248,262) 5,993,442 1,766,572
---------- --------- ---------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (including $5,307,404 realized loss on
investments of affiliated issuers for Equity Portfolio) (Note 3) (90,022,272) (966,603) (25)
Foreign currency transactions 6,850 (7) --
Options contracts written (Note 6) 1,890,886 -- --
- --------- ----- -----
Net realized gain (loss) on investments (88,124,536) (966,610) (25)
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 73,036,482 (1,882,801) --
---------- ---------- -----
Net gain (loss) on investments and foreign currencies (15,088,054) (2,849,411) (25)
----------- ---------- ---
Net increase (decrease) in net assets resulting from operations $(17,336,316) $3,144,031 $1,766,547
============ ========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of operations (continued)
IDS Life Series Fund, Inc.
Managed Government International
Portfolio Securities Equity
Year ended April 30, 1999 Portfolio Portfolio
Investment income
Income:
<S> <C> <C> <C>
Dividends $ 2,476,757 $ -- $ 2,868,780
Interest 15,388,076 993,474 2,255,892
Less foreign taxes withheld (2,812) -- (128,512)
------ ----- --------
Total income 17,862,021 993,474 4,996,160
Expenses (Note 2):
Investment management and services fee 4,211,867 116,139 2,302,001
Custodian fees 150,485 17,149 224,700
Audit fees 14,500 8,500 12,500
Directors fees 4,177 114 1,667
Printing and postage 41,392 2,712 2,000
Other 3,865 150 1,447
----- --- -----
Total expenses 4,426,286 144,764 2,544,315
Less expenses voluntarily reimbursed by IDSLife -- (12,034) --
----- ------- -----
Total expenses-- net 4,426,286 132,730 2,544,315
--------- ------- ---------
Investment income (loss)-- net 13,435,735 860,744 2,451,845
---------- ------- ---------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactons (Note 3) 5,671,652 89,785 5,453,189
Financial futures contracts 2,133,444 -- --
Foreign currency transactions (70,351) -- (147,024)
Options contracts written (Note 6) 7,920 -- --
----- ----- -----
Net realized gain (loss) on investments 7,742,665 89,785 5,306,165
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 44,855,676 (134,841) 13,907,417
---------- -------- ----------
Net gain (loss) on investments and foreign currencies 52,598,341 (45,056) 19,213,582
---------- ------- ----------
Net increase (decrease) in net assets resulting from operations $66,034,076 $ 815,688 $21,665,427
=========== ========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
IDS Life Series Fund, Inc.
Equity Portfolio Income Portfolio
Year ended April 30, 1999 1998 1999 1998
Operations and distributions
<S> <C> <C> <C> <C>
Investment income (loss)-- net $ (2,248,262) $ (2,253,021) $ 5,993,442 $ 4,972,299
Net realized gain (loss) on investments (88,124,536) 137,928,346 (966,610) 575,895
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 73,036,482 153,419,212 (1,882,801) 1,370,727
---------- ----------- ---------- ---------
Net increase (decrease) in net assets resulting from operations (17,336,316) 289,094,537 3,144,031 6,918,921
----------- ----------- --------- ---------
Distributions to shareholders from:
Net investment income -- (20,999) (5,993,479) (4,972,299)
Net realized gain (139,606,605) (25,086,345) (589,189) (287,088)
------------ ----------- -------- --------
Total distributions (139,606,605) (25,107,344) (6,582,668) (5,259,387)
------------ ----------- ---------- ----------
Capital share transactions (Note 5)
Proceeds from sales 96,248,573 108,453,258 17,071,293 14,789,401
Reinvested distributions at net asset value 139,606,605 25,107,344 6,582,668 5,259,387
Payments for redemptions (23,792,543) (15,248,865) (5,410,142) (5,679,799)
----------- ----------- ---------- ----------
Increase (decrease) in net assets from capital share transactions 212,062,635 118,311,737 18,243,819 14,368,989
----------- ----------- ---------- ----------
Total increase (decrease) in net assets 55,119,714 382,298,930 14,805,182 16,028,523
Net assets at beginning of year 933,816,926 551,517,996 82,773,281 66,744,758
----------- ----------- ---------- ----------
Net assets at end of year $988,936,640 $933,816,926 $97,578,463 $82,773,281
============ ============ =========== ===========
Undistributed (excess of distributions over) net investment income $ -- $ -- $ 23,969 $ 20,872
------------ ---------- ----------- -----------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets (continued)
IDS Life Series Fund, Inc.
Money Market Portfolio Managed Portfolio
Year ended April 30, 1999 1998 1999 1998
Operations and distributions
<S> <C> <C> <C> <C>
Investment income (loss)-- net $ 1,766,572 $ 1,575,961 $ 13,435,735 $ 12,977,787
Net realized gain (loss) on investments (25) (159) 7,742,665 35,844,608
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies -- -- 44,855,676 66,941,764
---- ---- ---------- ----------
Net increase (decrease) in net assets resulting from operations 1,766,547 1,575,802 66,034,076 115,764,159
--------- --------- ---------- -----------
Distributions to shareholders from:
Net investment income (1,763,472) (1,575,961) (13,365,384) (12,977,741)
Net realized gain -- -- (36,482,550) (31,257,376)
---- ---- ----------- -----------
Total distributions (1,763,472) (1,575,961) (49,847,934) (44,235,117)
---------- ---------- ----------- -----------
Capital share transactions (Note 5)
Proceeds from sales 26,717,943 19,622,034 54,815,469 64,443,186
Reinvested distributions at net asset value 1,763,472 1,575,961 49,847,934 44,235,117
Payments for redemptions (17,293,901) (15,370,198) (16,393,026) (10,246,876)
----------- ----------- ----------- -----------
Increase (decrease) in net assets from capital share transactions 11,187,514 5,827,797 88,270,377 98,431,427
---------- --------- ---------- ----------
Total increase (decrease) in net assets 11,190,589 5,827,638 104,456,519 169,960,469
Net assets at beginning of year 34,373,351 28,545,713 580,697,360 410,736,891
---------- ---------- ----------- -----------
Net assets at end of year $ 45,563,940 $ 34,373,351 $ 685,153,879 $580,697,360
============ ============ ============= ============
Undistributed (excess of distributions over) net investment income $ 3,100 $ -- $ (254,517) $ (98,258)
------------ ------------ ------------- ------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets (continued)
IDS Life Series Fund, Inc.
Government Securities Portfolio International Equity Portfolio
Year ended April 30, 1999 1998 1999 1998
Operations and distributions
<S> <C> <C> <C> <C>
Investment income (loss)-- net $ 860,744 $ 785,608 $ 2,451,845 $ 833,466
Net realized gain (loss) on investments 89,785 134,337 5,306,165 8,299,556
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (134,841) 445,383 13,907,417 33,874,515
-------- ------- ---------- ----------
Net increase (decrease) in net assets resulting from operations 815,688 1,365,328 21,665,427 43,007,537
------- --------- ---------- ----------
Distributions to shareholders from:
Net investment income (854,104) (785,584) (2,272,892) (800,705)
Excess distributions of net investment income -- -- -- (548,730)
Net realized gain (130,692) (141,363) (7,835,052) (3,978,926)
-------- -------- ---------- ----------
Total distributions (984,796) (926,947) (10,107,944) (5,328,361)
-------- -------- ----------- ----------
Capital share transactions (Note 5)
Proceeds from sales 9,394,678 4,424,154 47,763,156 51,860,011
Reinvested distributions at net asset value 984,796 926,947 10,107,944 5,328,361
Payments for redemptions (2,881,530) (4,560,150) (4,000,061) (3,168,693)
---------- ---------- ---------- ----------
Increase (decrease) in net assets from capital share transactions 7,497,944 790,951 53,871,039 54,019,679
--------- ------- ---------- ----------
Total increase (decrease) in net assets 7,328,836 1,229,332 65,428,522 91,698,855
Net assets at beginning of year 14,606,574 13,377,242 217,572,717 125,873,862
---------- ---------- ----------- -----------
Net assets at end of year $21,935,410 $14,606,574 $283,001,239 $217,572,717
=========== =========== ============ ============
Undistributed (excess of distributions over) net investment income $ (3,870) $ (14,715) $ (833) $ (32,762)
----------- ----------- ------------ ------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
IDS Life Series Fund, Inc.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
IDSLife Series Fund, Inc. is registered under the Investment Company Act of 1940
(as amended) as a diversified, open-end management investment company. Each Fund
has 10 billion authorized shares of capital stock and the primary investments
are as follows:
Equity Portfolio primarily invests in U.S. common stocks and securities
convertible into common stock;
Income Portfolio primarily invests in investment grade corporate bonds and
governement securities;
Money Market Portfolio primarily invests in high-quality, short-term debt
securities;
Managed Portfolio primarily invests in a combination of equity and debt
securities;
Government Securities Portfolio primarily invests in securities issued or
guaranteed as to principal and interest by the U.S. government and its
agencies; and
International Equity Portfolio invests primarily in common stocks of foreign
issuers.
Shares of each 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 Fund's significant accounting policies are summarized as follows:
Use of estimates
Preparing financial statements that conform to generally accepted accounting
principles requires management to make estimates (e.g., on assets and
liabilities) that could differ from actual results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Securities for which market quotations are not readily available are valued at
fair value according to methods selected in good faith by the board. Short-term
securities in the Fund, except Money Market 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. 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
To produce incremental earnings, protect gains, and facilitate buying and
selling of securities for investments, the Fund, except Money Market Portfolio,
may buy and sell put or call options and write covered call options on portfolio
securities as well as write cash-secured put options. The risk in writing a call
option is that the Fund gives up the opportunity for profit if the market price
of the security increases. The risk in writing a put option is that the Fund 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 Fund pays a premium whether
or not the option is exercised.
The Fund also has the additional risk of being unable to enter into a closing
transaction if a liquid secondary market does not exist. The Fund also may write
over-the-counter options where completing the obligation depends 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 Fund will
realize a gain or loss when the option transaction expires or closes. 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
To gain exposure to or protect itself from market changes, the Fund, except
Money Market Portfolio, may buy and sell financial future contracts. Risks of
entering into future contracts and related options include the possibility of 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 Fund 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 Fund 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 Fund recognizes a realized gain or loss when the contract is closed
or expires.
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars at the closing rate of exchange. Foreign
currency amounts related to the purchase or sale of securities and income and
expenses are translated at the exchange rate on the transaction date. The effect
of changes in foreign exchange rates on realized and unrealized security gains
or losses is reflected as a component of such gains or losses. In the statements
of operations, net realized gains or losses from foreign currency transactions,
if any, may arise from sales of foreign currency, closed forward contracts,
exchange gains or losses realized between the trade date and settlement date on
securities transactions, and other translation gains or losses on dividends,
interest income and foreign withholding taxes.
The Fund, except Money Market Portfolio, may enter into forward foreign currency
exchange contracts for operational purposes and to protect against adverse
exchange rate fluctuation. The net U.S. dollar value of foreign currency
underlying all contractual commitments held by the Fund and the resulting
unrealized appreciation or depreciation are determined using foreign currency
exchange rates from an independent pricing service. The Fund is subject to the
credit risk that the other party will not complete its contract obligations.
Illiquid securities
As of April 30, 1999, investments in securities for Equity Portfolio included
issues that are illiquid which the Fund currently limits to 10% of net assets,
at market value, at the time of purchase. The aggregate value of such securities
as of April 30, 1999 was $5,000,001 representing 0.5% of net assets for Equity
Portfolio. According to board guidelines, certain unregistered securities are
determined to be liquid and are not included within the 10% limitation specified
above.
Securities purchased on a when-issued basis
Delivery and payment for securities that have been purchased by the Fund on a
forward-commitment or when-issued basis can take place one month or more after
the transaction date. During this period, such securities are subject to market
fluctuations and they may affect the Fund's net assets the same as owned
securities. The Fund designates cash or liquid high-grade short-term debt
securities at least equal to the amount of its commitment. As of April 30, 1999,
Government Securities Portfolio had entered into outstanding when-issued or
forward-commitments of $2,633,060.
<PAGE>
<TABLE>
<CAPTION>
Federal income taxes
The Fund's policy is to comply with all sections of the Internal Revenue Code
that apply to regulated investment companies and to distribute all of its
taxable income to shareholders. No provision for income taxes is thus required.
Each Fund is treated as a separate entity for federal income tax purposes.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of wash sale
transactions, foreign currency exchange gains and losses, and the timing and
amount of market discount recognized as ordinary income. The character of
distributions made during the year from net investment income or net realized
gains may differ from their ultimate characterization for federal income tax
purposes. Also, due to the timing of dividend distributions, the fiscal year in
which amounts are distributed may differ from the year that the income or
realized gains (losses) are recorded by the Fund.
On the statements of assets and liabilities, as a result of permanent
book-to-tax differences, undistributed net investment income and accumulated net
realized gain (loss) have been increased (decreased), resulting in net
reclassification adjustments to additional paid-in capital by the following:
Government International
Equity Income Managed Securities Equity
Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C>
Undistributed net investment income $2,248,262 $ 3,134 $(226,610) $ 4,205 $(147,024)
Accumulated net realized gain (loss) 80,434 (3,134) 226,610 (4,205) 147,024
------ ------ ------- ------ -------
Additional paid-in capital reductions (increase) $2,328,696 $ -- $ -- $ -- $ --
Dividends to shareholders
As of April 30, 1999, dividends declared for each Fund payable May 3, 1999 are
as follows:
Income Portfolio $.052
Money Market Portfolio $.004
Managed Portfolio $.094
Government Securities Portfolio $.041
International Equity Portfolio $.036
Distributions to shareholders are recorded as of the close of business on the
record date and are payable on the first business day following the record date.
Dividends from net investment income are declared daily and distributed monthly
for the Money Market, Income and Government Securities Portfolios and declared
and distributed quarterly for the Equity, Managed and International Equity
Portfolios. Capital gain distributions, when available, 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 or upon receipt of
ex-dividend notification in the case of certain foreign securities. Interest
income, including level-yield amortization of premium and discount, is accrued
daily.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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 Fund. 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. For International Equity Portfolio the fee is 0.95%
on an annual basis.
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 Equity, Income, Money Market, Managed and Government Securities
Portfolios' average daily net assets for the year. The fee paid by IDS Life is
0.35% of International Equity Portfolio's average daily net assets for the year.
In addition to paying its own management fee, the Fund also pays its taxes,
brokerage commissions and nonadvisory expenses. Expenses that relate to a
particular Fund, such as custodian fees and registration fees for shares, are
paid by that Fund. Other expenses are allocated to the Fund in an equitable
manner as determined by the Fund's board. Each Fund also pays custodian fees to
American Express Trust Company, an affiliate of IDS Life.
IDS Life has voluntarily agreed to reimburse each Fund for non-advisory expenses
which exceed 0.1% on an annual basis of average daily net assets of each Fund.
3. SECURITIES TRANSACTIONS
For the year ended April 30, 1999, cost of purchases and proceeds from sales of
securities aggregated, respectively, $243,317,620 and $231,780,182 for Money
Market Portfolio. Cost of purchases and proceeds from sales of securities (other
than short-term obligations) aggregated for each Fund are as follows:
Fund Purchases Proceeds
Equity Portfolio $1,111,739,293 $1,093,451,278
Income Portfolio 28,407,839 18,591,361
Managed Portfolio 572,586,955 535,019,349
Government Securities Portfolio 20,642,856 14,151,841
International Equity Portfolio 167,425,488 144,445,459
Realized gains and losses are determined on an identified cost basis.
Brokerage commissions paid to brokers affiliated with IDS Life were $9,828 and
$3,702 for Equity Portfolio and Managed Portfolio, respectively, for the year
ended April 30, 1999.
4. FOREIGN CURRENCY CONTRACTS
As of April 30, 1999, International Equity Portfolio has foreign currency
exchange contracts that obligate it to deliver currencies at specified future
dates. The unrealized appreciation and/or depreciation on these contracts is
included in the accompanying financial statements. See "Summary of significant
accounting policies." The terms of the open contracts are as follows:
Currency to Currency to Unrealized Unrealized
Exchange date be delivered be received appreciation depreciation
<S> <C> <C> <C> <C>
May 3, 1999 251,773 267,899 $1,876 $--
European Monetary Unit U.S. Dollar
May 3, 1999 345,770 3,196,639 746 --
U.S. Dollar Mexican Peso
May 6, 1999 40,961,017 344,378 1,307 --
Japanese Yen U.S. Dollar
May 7, 1999 57,517,554 482,773 1,031 --
Japanese Yen U.S. Dollar
May 28, 1999 184,531 196,618 1,642 --
European Monetary Unit U.S. Dollar
Total $6,602 $--
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
5. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for each Fund for the years indicated
are as follows:
Year ended April 30, 1999
Money Government International
Equity Income Market Managed Securities Equity
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C> <C>
Sold 3,674,588 1,697,801 26,720,544 2,965,062 914,617 2,679,831
Issued for reinvested distributions 5,307,274 655,205 1,763,642 2,729,787 95,971 534,400
Redeemed (902,671) (539,281) (17,295,607) (883,671) (280,555) (219,595)
-------- -------- ----------- -------- -------- --------
Net increase (decrease) 8,079,191 1,813,725 11,188,579 4,811,178 730,033 2,994,636
Year ended April 30, 1998
Money Government International
Equity Income Market Managed Securities Equity
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
Sold 3,690,818 1,441,650 19,623,972 3,499,409 440,153 3,199,923
Issued for reinvested distributions 878,375 512,508 1,576,114 2,439,015 91,894 310,769
Redeemed (519,416) (554,245) (15,371,758) (559,693) (451,521) (190,260)
-------- -------- ----------- -------- -------- --------
Net increase (decrease) 4,049,777 1,399,913 5,828,328 5,378,731 80,526 3,320,432
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
6. OPTIONS CONTRACTS WRITTEN
Contracts and premium amounts associated with options contracts written by
Equity Portfolio are as follows:
Year ended April 30, 1999
Puts Calls
Contracts Premium Contracts Premium
Balance April 30, 1998 -- $ -- -- $ --
<S> <C> <C> <C> <C>
Opened 8,900 2,926,591 16,363 7,787,977
Closed (6,000) (2,253,738) (4,613) (1,992,941)
Exercised (299) (55,164) (6,050) (2,981,868)
Expired (2,201) (562,314) (2,400) (669,562)
------ -------- ------ --------
Balance April 30, 1999 400 $ 55,375 3,300 $2,143,606
See "Summary of significant accounting policies."
Contracts and premium amounts associated with options contracts written by
Managed Portfolio are as follows:
Year ended April 30, 1999
Calls
Contracts Premium
Balance April 30, 1998 -- $ --
Opened 16 7,920
Expired (16) (7,920)
Balance April 30, 1999 -- $ --
See "Summary of significant accounting policies."
7. STOCK INDEX FUTURES CONTRACTS
As of April 30, 1999, investments in securities for Managed Portfolio included
securities valued at $1,077,568 that were pledged as collateral to cover initial
margin deposits on 44 open purchase contracts. The market value of the open
purchase contracts as of April 30, 1999, was $14,701,500 with a net unrealized
loss of $361,426. See "Summary of significant accounting policies"
8. CAPITAL LOSS CARRYOVER
For federal income tax purposes, Equity Portfolio and Income Portfolio have
capital loss carryovers of $91,910,864 and $979,456, respectively, as of April
30, 1999, that will expire in 2007 for Equity Portfolio and 2007-2008 for Income
Portfolio if not offset by capital gains. It is unlikely the board will
authorize a distribution of any net realized capital gains until the available
capital loss carryover has been offset or expires.
9. FINANCIAL HIGHLIGHTS
"Financial highlights" showing per share data and selected financial information
is presented on pages 28-33 of the prospectus.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Investments in Securities
IDS Life Series Fund,Inc.
Equity Portfolio
April 30, 1999
(Percentages represent value of investments compared to net assets)
Common stocks (93.4%)(e)
Issuer Shares Value(a)
Aerospace & defense (0.9%)
<S> <C> <C>
HEICO Cl A 425,000 $8,951,563
Airlines (1.1%)
Atlantic Coast Airlines Holdings 150,000(b) 4,631,250
SkyWest 225,000 5,850,000
Total 10,481,250
Automotive & related (1.6%)
Dura Automotive Systems Cl A 300,000(b) 8,587,500
O'Reilly Automotive 150,000(b) 6,862,500
Total 15,450,000
Banks and savings & loans (2.8%)
CompuCredit 350,000(b) 5,600,000
Creditrust 250,000(b) 5,625,000
Golden State Bancorp 241,500(b) 5,931,844
TeleBanc Financial 60,000(b) 6,217,500
UnionBanCal 130,000 4,436,250
Total 27,810,594
Communications equipment & services (9.3%)
America Online 120,000(b,f) 17,130,000
CMGI 65,000(b) 16,546,563
Concentric Network 135,000(b) 11,272,500
Network Solutions Cl A 100,000(b) 7,775,000
Rhythms NetConnections 40,000(b) 3,300,000
Sterling Commerce 700,000(b) 21,918,749
Tellabs 125,000(b) 13,695,313
Total 91,638,125
Computers & office equipment (24.2%)
American Management Systems 150,000(b) 5,156,250
Ascend Communications 100,000(b) 9,662,500
BindView Development 240,000(b) 5,160,000
BMC Software 360,000(b) 15,502,500
Cisco Systems 157,500(b) 17,964,843
Citrix Systems 125,000(b) 5,312,500
Comdisco 100,000 2,631,250
Compuware 430,000(b) 10,481,250
Critical Path 34,600(b) 3,442,700
CSG Systems Intl 200,000(b) 7,725,000
Descartes Systems Group 380,000(b,c) 2,398,750
EMC 42,500(b) 4,629,844
Equant 50,000(b,c) 4,462,500
Extreme Networks 25,000(b) 1,385,938
Fiserv 225,000(b) 13,176,563
Fundtech 300,000(b) 10,331,250
InfoSpace.com 60,000(b) 8,598,750
Legato Systems 232,055(b) 9,383,724
MAXIMUS 300,000(b) 7,800,000
Mercury Interactive 29,900(b) 842,806
Metzler Group 294,800(b) 8,217,550
Mpath Interactive 62,400(b) 2,457,000
Multex.com 50,000(b) 2,150,000
Net Perceptions 25,000(b) 659,375
Pervasive Software 250,000(b) 3,625,000
Profit Recovery Group Intl 300,000(b,f) 10,950,000
Rational Software 300,000(b) 8,887,500
SunGard Data Systems 540,300(b) 17,255,831
VeriSign 80,000(b) 9,200,000
WebTrends 200,000(b) 10,625,000
Whittman-Hart 200,000(b) 5,650,000
Xoom.com 63,000(b) 4,410,000
Yahoo! 50,000(b) 8,734,375
Total 238,870,549
Electronics (10.5%)
Advanced Energy Inds 125,000(b) 3,460,938
Altera 70,000(b) 5,057,500
Conexant Systems 100,000(b) 4,075,000
Flextronics Intl 200,000(b) 9,337,500
Galileo Technology 200,000(b) 4,600,000
Jabil Circuit 200,000(b,f) 9,312,500
KLA-Tencor 135,000(b) 6,699,375
Novellus Systems 185,000(b) 8,741,250
PMC-Sierra 37,600(b) 3,604,900
RF Micro Devices 100,000(b) 5,587,500
Sawtek 150,000(b) 5,287,500
Taiwan Semiconductor Mfg ADR 100,000(b) 2,400,000
Teradyne 140,000(b) 6,606,250
Uniphase 200,000(b) 24,274,999
Vitesse Semiconductor 100,000(b) 4,631,250
Total 103,676,462
Financial services (5.9%)
Capital One Financial 50,000 8,684,375
Knight/Trimark Group Cl A 325,000(b,f) 49,785,938
Total 58,470,313
Food (0.4%)
U.S. Foodservice 100,000(b) 4,206,250
Furniture & appliances (0.3%)
Select Comfort 200,000(b) 3,237,500
Health care (3.2%)
Bausch & Lomb 20,000(f) 1,500,000
Boston Scientific 100,000(b) 4,256,250
Genzyme (General Division) 100,000(b) 3,775,000
Maxxim Medical 175,000(b) 2,789,063
Medicis Pharmaceutical Cl A 300,000(b) 7,293,749
Medtronic 75,000 5,395,313
Pharmacyclics 250,000(b) 3,562,500
Stryker 15,700 960,644
Watson Pharmaceuticals 40,000(b,f) 1,620,000
Total 31,152,519
Health care services (2.2%)
Medical Manager 150,000(b) 4,275,000
Quintiles Transnational 250,000(b) 10,140,625
Sunrise Assisted Living 175,000(b) 7,000,000
Total 21,415,625
Insurance (0.6%)
Blanch (EW) Holdings 100,000 5,887,500
Leisure time & entertainment (0.3%)
Ticketmaster Online-Citysearch Cl B 100,000(b) 3,162,500
Media (7.1%)
Adelphia Communications Cl A 110,000(b) 7,507,500
Cablevision Systems Cl A 80,000(b) 6,190,000
Outdoor Systems 717,800(b) 18,079,588
TeleWest Communications 1,330,000(b,c) 6,130,236
Univision Communications Cl A 550,000(b) 31,831,249
Value America 20,000(b) 788,750
Total 70,527,323
Miscellaneous (0.4%)
Marimba 6,800(b) 413,100
Resource America Cl A 250,000 3,093,750
WorldGate Communications 30,000(b) 855,000
Total 4,361,850
Multi-industry conglomerates (3.7%)
ACNielsen 100,000(b) 2,787,500
Electronics for Imaging 100,000(b) 4,731,250
ITT Educational Services 475,000(b) 11,667,188
Personnel Group of America 300,000(b) 2,737,500
SM&A Corp 330,000 2,475,000
Tyco Intl 150,000(c) 12,187,500
Total 36,585,938
Restaurants & lodging (0.8%)
Papa John's Intl 200,000(b) 8,037,500
Retail (8.5%)
99 Cents Only Stores 60,000(b,f) 2,827,500
AnnTaylor Stores 100,000(b) 4,750,000
Bed Bath & Beyond 200,000(b) 7,137,500
Borders Group 200,000(b) 2,887,500
Circuit City Stores 75,000 4,612,500
CVS 200,000 9,525,000
Egghead.com 400,000(b) 5,600,000
Family Dollar Stores 250,000 6,031,250
Kohl's 110,000(b) 7,308,125
Rite Aid 162,000 3,776,625
Tiffany & Co 210,000 17,639,999
TJX Companies 200,000 6,662,500
Valley Media 150,000(b) 3,768,750
Venator Group 150,000(b) 1,453,125
Total 83,980,374
Textiles & apparel (1.1%)
Abercrombie & Fitch 75,000(b) 7,134,375
Tommy Hilfiger 50,000(b) 3,493,750
Total 10,628,125
Transportation (1.8%)
C.H. Robinson Worldwide 250,000 7,484,375
Covenant Transport 325,000(b) 4,468,750
Kansas City Southern Inds 100,000 5,956,250
Total 17,909,375
Utilities -- telephone (6.8%)
Allegiance Telecom 200,000(b) 9,200,000
COLT Telecom Group ADR 200,000(b,c) 15,275,000
Energis 300,000(b,c) 8,175,930
Global TeleSystems Group 51,000(b) 3,372,375
Omnipoint 375,000(b) 6,656,250
RCN 100,000(b) 4,862,500
Viatel 100,000(b) 4,600,000
Western Wireless Cl A 70,000(b) 2,874,375
WinStar Communications 250,000(b) 12,156,250
Total 67,172,680
Total common stocks
(Cost: $651,814,057) $923,613,915
Preferred stock (0.5%)
Issuer Shares Value(a)
MARS
Cv Series C 2,702,703(g) $5,000,001
Total preferred stock
(Cost: $5,000,000) $5,000,001
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Options purchased (0.1%)
Issuer Shares Exercise Expiration Value(a)
price date
Calls
Altera 50,000 $65 Sept. 1999 $762,500
Rite Aid 120,000 40 July 1999 15,000
Venator Group 100,000 10 Aug. 1999 175,000
Total options purchased
(Cost: $810,600) $952,500
Short-term securities (6.7%)(f)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (5.3%)
Federal Home Loan Mtge Corp Disc Nts
<S> <C> <C> <C> <C>
05-06-99 4.80% $7,900,000 $7,894,766
05-14-99 4.71 2,000,000 1,996,606
05-14-99 4.82 500,000 498,996
05-18-99 4.77 8,500,000 8,480,974
06-21-99 4.72 20,000,000 19,862,445
Federal Natl Mtge Assn Disc Nts
05-19-99 4.71 1,600,000 1,596,248
05-20-99 4.69 12,500,000 12,469,124
Total 52,799,159
Commercial paper (1.4%)
BMW US Capital
05-05-99 4.86 3,200,000 3,198,283
BOC Group
05-03-99 4.92 1,000,000 999,727
CAFCO
06-01-99 4.82 1,900,000(d) 1,892,147
Dresdner US Finance
06-02-99 4.81 3,700,000 3,684,246
Fleet Funding
06-03-99 4.82 2,900,000(d) 2,887,240
06-09-99 4.82 900,000(d) 895,320
Total 13,556,963
Total short-term securities
(Cost: $66,360,935) $66,356,122
Total investments in securities
(Cost: $723,985,592)(h) $995,922,538
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars. As of April 30, 1999,
the value of foreign securities represented 4.92% of net assets.
(d) Commercial paper sold within terms of a private placement memorandum, exempt
from registration under Section 4(2) of the Securities Act of 1933, as amended,
and may be sold only to dealers in that program or other "accredited investors."
This security has been determined to be liquid under guidelines established by
the board.
(e) Investments representing 5% or more of the outstanding voting securities of
the issuer. Transactions with companies that are or were affiliates during the
year ended April 30, 1999 are as follows:
Issuer Beginning Purchase Sales Ending Dividend Value(a)
cost cost cost cost income
<S> <C> <C> <C> <C> <C> <C>
Rock of Ages* $5,604,628 $-- $5,604,628 $-- $-- $--
Tier Technologies* -- 6,027,188 6,027,188 -- -- --
Total $5,604,628 $6,027,188 $11,631,816 $-- $-- $--
*Issuer was not an affiliate for the entire year ended April 30, 1999.
(f) At April 30, 1999, securities valued at $28,497,188 were held to cover open
call options written as follows:
Exercise Expiration Value(a)
Issuer Shares price date
99 Cents Only Stores 15,000 $50 May 1999 $17,813
America Online 60,000 130 May 1999 1,136,250
Jabil Circuit 100,000 55 May 1999 46,875
Knight/Trimark Group Cl A 75,0000 110 May 1999 3,525,000
Profit Recovery Group Intl 40,000 40 May 1999 30,000
Watson Pharmaceuticals 40,000 50 May 1999 17,500
Total $4,773,438
At April 30, 1999, cash or short-term securities were designated to cover open
put options written as follows:
Exercise Expiration Value(a)
Issuer Shares price date
Bausch & Lomb 40,000 $65 May 1999 $5,000
(g) Identifies issues considered to be illiquid as to their marketability (see
Note 1 to the financial statements). Information concerning such security
holdings at April 30, 1999, is as follows:
Security Acquisition date Cost
MARS
Cv Series C 02-17-99 $5,000,000
(h) At April 30, 1999, the cost of securities for federal income tax purposes
was $724,121,164 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $292,588,329
Unrealized depreciation (20,786,955)
-----------
Net unrealized appreciation $271,801,374
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Investments in Securities
IDS Life Series Fund,Inc.
Income Portfolio
April 30, 1999
(Percentages represent value of investments compared to net assets)
Bonds (89.5%)
Issuer Coupon Principal Value(a)
rate amount
Government obligations (3.7%)
Govt of Russia
(Russian Ruble)
<S> <C> <C> <C>
12-15-20 6.63% 150,000(b,c) $9,563
(U.S. Dollar)
12-29-49 6.63 6,875(b,c) 455
People's Republic of China
(U.S. Dollar)
07-03-01 7.38 100,000(c) 101,840
Republic of Argentina
(Argentine Peso)
02-12-07 11.75 200,000(c) 186,952
United Mexican States
(U.S. Dollar)
03-12-08 8.63 250,000(c) 245,625
U.S. Treasury
11-15-27 6.13 3,000,000 3,105,232
Total 3,649,667
Mortgage-backed securities (22.4%)
Federal Home Loan Mtge Corp
06-01-09 5.50 584,724 572,421
08-01-11 6.50 1,616,688 1,636,217
03-01-13 5.50 909,544 884,840
06-15-20 8.00 126,382 130,094
Collateralized Mtge Obligation
04-15-22 8.50 1,000,000 1,047,350
Federal Natl Mtge Assn
03-15-01 5.63 600,000 603,486
04-15-03 5.75 2,000,000 2,010,153
02-15-08 5.75 500,000 496,553
06-01-10 6.50 798,829 806,985
02-01-11 6.00 1,441,278 1,430,915
09-01-13 6.00 1,861,068 1,846,950
11-01-13 6.00 1,899,936 1,883,905
07-01-26 7.00 1,607,204 1,629,945
12-01-27 6.00 2,370,906 2,300,872
12-01-27 6.50 1,965,597 1,954,944
10-01-28 6.50 1,980,951 1,969,808
Merrill Lynch Mtge Investors
06-15-21 7.99 129,203 120,219
Morgan Stanley Capital
Collateralized Mtge Obligation
11-15-28 6.59 591,730 596,180
Total 21,921,837
Aerospace & defense (0.6%)
BE Aerospace
Sr Sub Nts Series B
02-01-06 9.88 100,000 104,000
Goodrich (BF)
07-01-01 9.63 150,000 160,914
Newport News Shipbuilding
Sr Nts
12-01-06 8.63 75,000 80,625
Northrop-Grumman
03-01-06 7.00 250,000 254,021
Total 599,560
Airlines (0.4%)
Continental Airlines
Series 1996A
04-15-15 6.94 372,211 378,550
Automotive & related (0.4%)
Arvin Capital
Company Guaranty
02-01-27 9.50 250,000 267,179
MSX Intl
Company Guaranty
01-15-08 11.38 125,000 125,000
Total 392,179
Banks and savings & loans (6.8%)
Banca Commercial Italian
(U.S. Dollar)
07-15-07 8.25 300,000(c) 325,370
Banco General
(U.S. Dollar)
08-01-02 7.70 350,000(c,d) 323,852
Bank One
Medium-term Nts Series A
02-17-09 6.00 500,000 485,565
Capital One Bank
05-15-08 6.70 500,000 490,070
Comerica Bank
Sub Nts
10-01-08 6.00 500,000 482,049
Corp Andina de Fomento
(U.S. Dollar)
02-01-03 7.10 300,000(c) 297,731
Crestar Capital
Company Guaranty
12-15-26 8.16 350,000 373,302
Dao Heng Bank
(U.S. Dollar) Sub Nts
01-24-07 7.75 500,000(c,d) 463,750
Fleet Financial Group
Sub Nts
12-01-01 9.00 200,000 216,215
Greenpoint Capital
Company Guaranty
06-01-27 9.10 200,000 213,179
Hubco Capital Trust I
Company Guaranty Series B
02-01-27 8.98 500,000 512,383
MBNA American Bank
Sub Nts
03-15-08 6.75 500,000 486,978
Mellon Capital
Company Guaranty Series A
12-01-26 7.72 500,000 508,002
Norwest
Sr Medium-term Nts Series G
09-15-02 6.38 400,000 404,831
Union Planters Bank
Sub Nts
03-15-18 6.50 500,000 486,849
US Bancorp
Sub Nts
09-15-07 6.88 400,000 412,113
Washington Mutual Capital
Company Guaranty
06-01-27 8.38 200,000(d) 213,721
Total 6,695,960
Building materials & construction (1.7%)
Carlisle Companies
Sr Nts
01-15-07 7.25 500,000 525,442
Foster Wheeler
11-15-05 6.75 300,000 290,638
Pulte
Sr Nts
12-15-03 7.00 300,000 305,508
Southdown
Sr Sub Nts Series B
03-01-06 10.00 50,000 55,250
Tyco Intl Group
(U.S. Dollar) Company Guaranty
06-15-03 6.25 500,000(c) 502,470
Total 1,679,308
Chemicals (1.4%)
Allied Waste North America
Company Guaranty Series B
01-01-09 7.88 350,000 343,875
IMC Global
10-15-01 6.63 500,000 502,922
USA Waste Services
Sr Nts
10-01-07 7.13 500,000 519,951
Total 1,366,748
Commercial finance (0.1%)
Netia Holdings
(U.S. Dollar) Company Guaranty Series B
11-01-07 10.25 100,000(c) 96,000
Communications equipment & services (1.8%)
EchoStar DBS
Sr Nts
02-01-09 9.38 205,000(d) 214,225
Iridium LLC/Capital
Company Guaranty Series C
07-15-05 11.25 40,000 12,400
IXC Communications
Sr Sub Nts
04-15-08 9.00 250,000 253,750
Jordan Telecommunications Products
Sr Nts Series B
08-01-07 9.88 250,000 252,500
KMC Telecom Holdings
Zero Coupon Sr Disc Nts
02-15-03 12.78 250,000(e) 142,500
MJD Communications
Sr Sub Nts Series B
05-01-08 9.50 100,000 101,000
NTL
Zero Coupon Sr Nts Series B
04-01-03 9.78 190,000(e) 133,475
PhoneTel Technologies
Sr Nts
12-15-06 12.00 125,000(b) 36,250
U S West Capital Funding
Company Guaranty
07-15-28 6.88 500,000 496,505
Versatel Telecom
(U.S. Dollar) Sr Nts
05-15-08 13.25 100,000(c) 108,000
Total 1,750,605
Computers & office equipment (0.3%)
Globix
Sr Nts
05-01-05 13.00 250,000 257,188
PSINet
Sr Nts Series B
02-15-05 10.00 50,000 52,500
Total 309,688
Electronics (0.8%)
Hyundai Semiconductor
(U.S. Dollar) Sr Nts
05-15-07 8.63 500,000(c,d) 423,140
Thomas & Betts
01-15-06 6.50 400,000 401,024
Total 824,164
Energy (3.1%)
Gulf Canada Resources
07-01-05 9.63 500,000 520,625
Honam Oil Refinery
(U.S. Dollar)
10-15-05 7.13 250,000(c,d) 236,250
Lodestar Holdings
Company Guaranty
05-15-05 11.50 250,000 195,000
Oryx Energy
10-15-05 8.13 500,000 535,957
R & B Falcon
04-15-08 6.95 500,000 367,033
Roil
(U.S. Dollar)
12-05-02 12.78 203,580(c,d) 71,253
Trizec Hahn
Sr Nts
09-15-04 9.50 100,000 99,750
USX
03-01-08 6.85 500,000 498,628
Woodside Petroleum
(U.S. Dollar)
04-15-08 6.60 500,000(c,d) 457,339
Total 2,981,835
Energy equipment & services (1.2%)
DI Inds
Sr Nts
07-01-07 8.88 150,000 127,500
Global Marine
09-01-07 7.13 500,000 496,687
Pioneer Natural Resource
01-15-08 6.50 500,000 421,627
Pool Energy Services
Company Guaranty Series B
04-01-08 8.63 100,000 101,500
Total 1,147,314
Financial services (4.8%)
Airplanes GPA Cl D
(U.S. Dollar) Series 1
03-15-19 10.88 100,000(c) 98,850
American General Finance
Sr Nts
11-01-03 5.75 500,000 494,561
Arcadia Financial
Sr Nts
03-15-07 11.50 130,000 107,900
Associates
11-01-03 5.75 350,000 346,598
Avco Financial Services
Sr Nts
07-15-99 7.25 300,000 301,135
Barclays North America Capital
05-15-21 9.75 300,000 334,779
Capital One Financial
08-01-08 7.13 500,000 481,156
GMAC
11-10-03 5.75 500,000 494,225
Household Finance
Medium-term Nts Series E
06-17-08 6.40 500,000 496,555
Providian Master Trust
Series 1997-4 Cl A
06-15-07 6.25 500,000 508,155
Providian Natl Bank
Sr Nts
03-15-03 6.70 500,000 501,794
Wilmington Trust
05-01-08 6.63 500,000 495,833
Total 4,661,541
Food (0.2%)
Ameriserve Food Distributions
Company Guaranty
07-15-07 10.13 100,000 83,000
Chiquita Brands Intl
Sr Nts
01-15-04 9.63 100,000 104,250
Total 187,250
Furniture & appliances (0.1%)
Interface
Sr Sub Nts Series B
11-15-05 9.50 100,000 105,875
Health care (0.7%)
Alaris Medical Systems
Company Guaranty
12-01-06 9.75 150,000 153,750
Watson Pharmaceuticals
Sr Nts
05-15-08 7.13 500,000 500,477
Total 654,227
Health care services (2.5%)
Cardinal Health
07-15-08 6.25 500,000 489,701
Columbia/HCA Healthcare
06-15-05 6.91 100,000 93,158
HEALTHSOUTH
Sr Nts
06-15-08 7.00 500,000 475,587
Magellan Health Services
Sr Sub Nts
02-15-08 9.00 125,000 105,625
Manor Care
Sr Nts
06-15-06 7.50 250,000 258,575
Oxford Health Plans
Sr Nts
05-15-05 11.00 50,000(d) 51,250
Paracelsus Healthcare
Sr Sub Nts
08-15-06 10.00 350,000 252,000
Service Corp Intl
03-15-20 6.30 500,000 491,250
Tenet Healthcare
Sr Sub Nts
12-01-08 8.13 200,000(d) 194,498
Total 2,411,644
Household products (0.6%)
Chattem
Company Guaranty Series B
04-01-08 8.88 250,000 252,812
Revlon Consumer Products
Sr Nts
02-01-06 8.13 250,000 248,125
Scotts
Sr Sub Nts
01-15-09 8.63 115,000(d) 119,169
Total 620,106
Industrial equipment & services (2.5%)
AGCO
Sr Sub Nts
03-15-06 8.50 250,000 234,375
ARAMARK Services
Company Guaranty
12-01-06 7.10 500,000 507,252
Case
08-01-05 7.25 400,000 404,723
Ingersoll-Rand
Sr Nts
02-15-01 6.26 500,000 505,669
Motor & Gears
Sr Nts Series D
11-15-06 10.75 250,000 258,125
Terex
Company Guaranty
04-01-08 8.88 250,000 247,813
Wesco Distribution
Company Guaranty Series B
06-01-08 9.13 250,000 260,000
Total 2,417,957
Insurance (2.0%)
American General Institute Capital
Company Guaranty Series A
12-01-45 7.57 250,000(d) 259,239
American United Life Insurance
03-30-26 7.75 200,000(d) 202,016
Americo Life
Sr Sub Nts
06-01-05 9.25 100,000 102,500
Conseco Financing Trust
Company Guaranty
11-15-26 8.70 300,000 281,373
Orion Capital
Company Guaranty
04-15-28 7.70 250,000 212,699
SAFECO Capital
Company Guaranty
07-15-37 8.07 500,000 496,507
Veritas Holdings
(U.S. Dollar) Sr Nts
12-15-03 9.63 127,000(c) 129,540
Zurich Capital
(U.S. Dollar) Company Guaranty
06-01-37 8.38 250,000(c,d) 264,881
Total 1,948,755
Leisure time & entertainment (2.2%)
Coast Hotels & Casino
Sr Sub Nts
04-01-09 9.50 75,000(d) 76,688
Hammons (JQ) Hotels
1st Mtge
02-15-04 8.88 250,000 233,750
Hollywood Park
Sr Sub Nts
02-15-07 9.25 250,000(d) 259,375
Mirage Resorts
02-01-08 6.75 500,000 486,604
Riviera Holdings
Company Guaranty
08-15-04 10.00 250,000 237,500
Time Warner
02-01-24 7.57 350,000 371,962
Trump Holdings & Funding
Sr Nts
06-15-05 15.50 250,000 249,688
United Artists Theatres
Series 1995A
07-01-15 9.30 94,448 84,890
Venetian Casino/LV Sands
Company Guaranty
11-15-04 12.25 150,000 159,000
Total 2,159,457
Media (4.2%)
CBS
Sr Nts
05-20-05 7.15 500,000 513,499
Chancellor Media
Sr Nts
11-01-08 8.00 500,000(d) 516,250
Comcast
Sr Sub Deb
10-15-06 9.13 500,000 547,499
Comcast Cable Communications
11-15-08 6.20 300,000 295,761
Globo Communicacoes Participacoes
(U.S. Dollar) Sr Nts
12-05-08 10.63 275,000(c,d) 222,063
Lamar Advertising
Company Guaranty
12-01-06 9.63 275,000 297,000
Lenfest Communications
Sr Nts
11-01-05 8.38 250,000 271,875
MDC Communications
(U.S. Dollar) Sr Sub Nts
12-01-06 10.50 100,000(c) 101,250
Quebecor Printing Capital
Company Guaranty
01-15-07 7.25 500,000 505,787
TCI Communications
08-01-15 8.75 350,000 423,048
TeleWest Communications
(U.S. Dollar) Zero Coupon Sr Disc Nts
04-15-04 9.25 125,000(c,d.e) 84,375
Time Warner Entertainment
Sr Nts
07-15-33 8.38 250,000 293,283
Total 4,071,690
Metals (0.9%)
Alcan Aluminum
(U.S. Dollar)
01-15-22 8.88 200,000(c) 216,803
Imexsa Export Trust
(U.S. Dollar)
05-31-03 10.13 175,960(c,d) 168,922
Natl Steel
1st Mtge
03-01-09 9.88 250,000(d) 264,375
Ormet
Company Guaranty
08-15-08 11.00 200,000(d) 193,000
Total 843,100
Miscellaneous (5.8%)
Adams Outdoor Advertising
Sr Nts
03-15-06 10.75 100,000 109,500
Advanced Glassfiber Yarn
Sr Sub Nts
01-15-09 9.88 185,000(d) 189,163
Bistro Trust
Sub Nts
12-31-02 9.50 250,000(d) 240,550
California Infrastructure-
San Diego Gas & Electric
03-25-02 6.04 381,179 383,306
Southern California Edison
03-25-02 6.14 770,447 775,162
Delphes 2
(U.S. Dollar)
05-05-09 7.75 600,000(c) 592,499
Dura Operating
Sr Sub Nts
05-01-09 9.00 250,000(d) 255,625
Florida Windstorm
(MBIA Insured)
02-25-19 7.13 500,000(d,f) 499,137
Grant Geophysical
Company Guaranty Series B
02-15-08 9.75 100,000 50,000
Great Central Mines
(U.S. Dollar) Sr Nts
04-01-08 8.88 250,000(c,d) 247,500
Guangdong Enterprises
(U.S. Dollar) Sr Nts
05-22-07 8.88 200,000(c,d) 65,000
Hyder
(U.S. Dollar)
12-15-07 6.88 500,000(c,d) 503,010
ISG Resources
04-15-08 10.00 140,000 144,200
Jorgensen (Earle M)
Sr Nts
04-01-05 9.50 275,000 259,188
NSM Steel
Company Guaranty
02-01-06 12.00 175,000(b) 35,219
Oshkosh Truck
Company Guaranty
03-01-08 8.75 250,000 257,500
Outsourcing Solutions
Sr Sub Nts Series B
11-01-06 11.00 140,000 139,300
Pierce Leahy Command
Company Guaranty
05-15-08 8.13 200,000 198,500
Provident Companies
03-15-38 7.41 500,000 495,208
Stellex Inds
Sr Sub Nts Series B
11-01-07 9.50 250,000 228,125
Total 5,667,692
Multi-industry conglomerates (2.2%)
Coltec Inds
Company Guaranty
04-15-08 7.50 500,000 523,751
Crane
06-15-99 7.25 300,000 300,436
Hutchison Whampoa Finance
(U.S. Dollar) Company Guaranty Series A
08-01-07 6.95 250,000(c,d) 248,574
(U.S. Dollar) Company Guaranty Series B
08-01-17 7.45 125,000(c,d) 114,642
Jordan Inds
Sr Nts Series C
08-01-07 10.38 175,000(d) 178,500
Prime Succession
Sr Sub Nts
08-15-04 10.75 65,000 46,881
USI American Holdings
Sr Nts Series B
12-01-06 7.25 425,000 429,641
Westinghouse Electric
06-01-01 8.88 250,000 260,925
Total 2,103,350
Paper & packaging (1.9%)
Ball
Company Guaranty
08-01-08 8.25 250,000 259,375
Chesapeake
05-01-03 9.88 100,000 112,736
Gaylord Container
Sr Nts
06-15-07 9.75 150,000 144,750
Sr Nts Series B
06-15-07 9.38 100,000 94,500
Intl Paper
11-15-12 5.13 85,000 71,866
Owens-Illinois
Sr Nts
05-15-07 8.10 250,000 260,442
05-15-08 7.35 250,000 249,179
Packaging Corp of America
Sr Sub Nts
04-01-09 9.63 250,000(d) 260,000
Quno
(U.S. Dollar) Sr Nts
05-15-05 9.13 250,000(c) 263,125
Silgan Holdings
06-01-09 9.00 100,000 103,000
Total 1,818,973
Real estate investment trust (0.3%)
Property Trust of America
02-15-14 7.50 300,000 299,154
Restaurants & lodging (0.7%)
Domino's
Sr Sub Nts
01-15-09 10.38 175,000(d) 182,000
MGM Grand
02-06-08 6.88 500,000 460,568
Total 642,568
Retail (2.2%)
Federated Dept Stores
02-15-28 7.00 250,000 245,113
Kroger
Sr Nts
07-15-06 8.15 500,000 548,240
Maxim Group
Company Guaranty Series B
10-15-07 9.25 250,000 251,250
Meyer (Fred)
Company Guaranty
03-01-08 7.45 250,000 262,473
Pep Boys - Manny, Moe & Jack
06-01-05 7.00 300,000 292,056
Safeway
11-15-01 5.88 500,000 501,324
Total 2,100,456
Textiles & apparel (0.5%)
Tommy Hilfiger USA
Company Guaranty
06-01-03 6.50 500,000 487,456
Transportation (1.6%)
Enterprise Rent-A-Car USA Finance
02-15-08 6.80 200,000(d) 199,980
Medium-term Nts
12-15-99 8.75 300,000(d) 305,406
Greater Beijing
(U.S. Dollar) Sr Nts
06-15-04 9.25 100,000(c) 55,000
Hermes Europe RailTel
(U.S. Dollar) Sr Nts
01-15-09 10.38 200,000(c) 213,000
Ryder System
Series N
05-15-01 9.25 150,000 158,675
Union Pacific
02-01-08 6.63 500,000 500,753
Zhuhai Highway
(U.S. Dollar) Sub Nts
07-01-08 12.00 250,000(c,d) 132,500
Total 1,565,314
Utilities -- electric (3.5%)
CalEnergy
Sr Nts
09-15-06 9.50 250,000 279,688
California Infrastructure-
Pacific Gas & Electric
06-25-02 6.15 1,000,000 1,006,369
Cleveland Electric Illuminating
1st Mtge Series B
05-15-05 9.50 250,000 266,912
CMS Energy
Sr Nts
05-15-02 8.13 200,000 205,764
Sr Nts Series B
11-15-00 7.38 300,000 302,325
Connecticut Light & Power
1st Mtge Series C
06-01-02 7.75 250,000 256,744
El Paso Electric
1st Mtge Series D
02-01-06 8.90 100,000 113,000
Houston Inds
06-01-01 9.38 150,000 159,926
Israel Electric
(U.S. Dollar) Sr Nts
12-15-06 7.25 300,000(c) 302,307
Midland Funding
Series A
07-23-05 11.75 100,000 113,000
Sithe Independence Funding
Series A
12-30-13 9.00 100,000 112,012
Western Massachusetts Electric
1st Mtge Series B
07-01-01 7.38 250,000 253,902
Total 3,371,949
Utilities -- gas (0.6%)
Columbia Gas System
Series E
11-28-10 7.32 500,000 511,430
Southwest Gas
Series F
06-15-02 9.75 100,000 109,391
Total 620,821
Utilities -- telephone (4.9%)
Airtouch Communications
05-01-08 6.65 500,000 510,149
Cable & Wireless Communications
(U.S. Dollar)
03-06-03 6.38 500,000(c) 502,555
Call-Net Enterprises
(U.S. Dollar) Sr Nts
08-15-08 8.00 175,000(c) 171,500
Grupo Iusacell
(U.S. Dollar)
07-15-04 10.00 100,000(c) 96,500
GTE Florida
02-01-28 6.86 500,000 501,806
GTE North
Series F
02-15-10 6.38 500,000 502,841
Intermedia Communications
Sr Nts Series B
11-01-07 8.88 100,000 101,000
McLeod USA
Sr Nts
03-15-08 8.38 105,000 105,525
02-15-09 8.13 250,000(d) 248,750
MetroNet Communications
(U.S. Dollar) Sr Nts
11-01-08 10.63 200,000(c,d) 235,500
(U.S. Dollar) Zero Coupon Sr Disc Nts
06-15-03 10.03 300,000(c,e) 234,750
NEXTLINK Communications
Sr Nts
11-15-08 10.75 500,000(d) 538,750
Primus Telecommunications Group
Sr Nts
08-01-04 11.75 200,000 208,000
Qwest Communications Intl
11-01-08 7.50 500,000(d) 525,244
RSL Communications
(U.S. Dollar) Company Guaranty
11-15-06 12.25 250,000(c) 280,000
Total 4,762,870
Total bonds
(Cost: $87,708,805) $87,315,620
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Other (--%)
Issuer Shares Value(a)
Bell Technology
Warrants 250 $24,375
Intermedia Communications
Warrants 100 12,400
KMC Telecom Holdings
Warrants 700 1,750
Primus Telecommunications
Warrants 200 3,000
Versatel
Warrants 100 7,000
Total 48,525
Total other
(Cost: $5,331) $48,525
Short-term securities (8.8%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies
Federal Home Loan Bank Disc Nts
<S> <C> <C> <C>
05-26-99 4.70% $800,000 $797,394
06-30-99 4.73 1,600,000 1,586,715
Federal Home Loan Mtge Corp Disc Nts
05-04-99 4.76 500,000 499,803
05-06-99 4.80 600,000 599,603
05-12-99 4.80 600,000 599,126
05-18-99 4.79 600,000 598,482
06-04-99 4.71 600,000 597,342
06-04-99 4.78 700,000 696,863
06-22-99 4.72 1,000,000 993,226
Federal Natl Mtge Assn Disc Nts
05-19-99 4.71 500,000 498,828
05-19-99 4.72 1,100,000 1,097,414
Total short-term securities
(Cost: $8,565,716) $8,564,796
Total investments in securities
(Cost: $96,279,852)(g) $95,928,941
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing. For long-term debt securities, item identified is in
default as to payment of interest and/or principal.
(c) Foreign security values are stated in U.S. dollars. For debt securities,
principal amounts are denominated in the currency indicated. As of April 30,
1999, the value of foreign securities represented 9.63% of net assets.
(d) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security has
been determined to be liquid under guidelines established by the board.
(e) For those zero coupon bonds that become coupon paying at a future date, the
interest rate disclosed represents the annualized effective yield from the date
of acquisition to interest reset date disclosed.
(f) The following abbreviation is used in portfolio descriptions to identify the
insurer of the issue:
MBIA -- Municipal Bond Investors Assurance
(g) At April 30, 1999, the cost of securities for federal income tax purposes
was $96,241,943 and the aggregate gross unrealized appreciation and depreciation
based on that cost was:
Unrealized appreciation $1,753,337
Unrealized depreciation (2,066,339)
----------
Net unrealized depreciation $(313,002)
See accompanying notes to investments in securities.
<PAGE>
<TABLE>
<CAPTION>
Investments in Securities
IDS Life Series Fund, Inc.
Money Market Portfolio
April 30, 1999
(Percentages represent value of investments compared to net assets)
U.S. government agency (8.5%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
Federal Home Loan Mtge Corp Disc Nt
<S> <C> <C> <C>
06-22-99 4.72% $3,900,000 $3,873,581
Total U.S. government agency
(Cost: $3,873,581) $3,873,581
Certificate of deposit (3.7%)
U.S. Bank Minneapolis
07-30-99 4.98% $1,700,000 $1,700,000
Total certificate of deposit
(Cost: $1,700,000) $1,700,000
Commercial paper (79.3%)
Automotive & related (7.6%)
Daimler-Benz
07-13-99 4.86% $1,900,000 $1,881,661
Ford Motor Credit
07-08-99 4.87 1,600,000 1,585,584
Total 3,467,245
Banks and savings & loans (14.1%)
ANZ (Delaware)
10-12-99 4.91 1,300,000 1,271,573
Kredietbank North America Finance
05-10-99 4.86 2,000,000 1,997,600
NBD Bank Canada
06-21-99 4.91 1,000,000 993,129
Westpac Capital
06-10-99 4.92 1,600,000 1,591,431
10-19-99 4.91 600,000 586,320
Total 6,440,053
Broker dealers (7.6%)
Bear Stearns
05-26-99 4.86 500,000 498,337
Morgan Stanley, Dean Witter, Discover & Co
05-13-99 4.90 500,000 499,190
07-12-99 4.87 800,000 792,304
Goldman Sachs Group
10-13-99 4.91 1,700,000 1,662,600
Total 3,452,431
Commercial finance (16.4%)
Delaware Funding
06-18-99 4.89 1,800,000(b) 1,788,384
Falcon Asset
05-14-99 4.90 600,000(b) 598,943
05-20-99 4.91 1,300,000(b) 1,296,666
New Center Asset Trust
06-04-99 4.93 1,700,000 1,692,229
Variable Funding Capital
07-20-99 4.86 2,100,000(b) 2,077,553
Total 7,453,775
Energy (4.6%)
Petrofina (Delaware)
07-14-99 4.86 2,100,000 2,079,237
Financial services (18.6%)
Associates First Capital
07-30-99 4.87 900,000 889,200
Corporate Receivables
07-16-99 4.89 2,100,000(b) 2,078,586
Intl Lease Finance
05-11-99 4.91 1,500,000 1,497,987
Sheffield Receivables
05-17-99 4.92 2,000,000(b) 1,995,662
Windmill Funding
05-04-99 4.87 2,000,000(b) 1,999,197
Total 8,460,632
Health care (1.3%)
Becton Dickinson
07-13-99 4.85 600,000 594,160
Insurance (1.3%)
American General Finance
05-07-99 4.89 600,000 599,518
Miscellaneous (5.4%)
Thames Asset Global
08-16-99 4.90 2,000,000(b) 1,971,348
USAA Capital
08-26-99 4.87 500,000 492,216
Total 2,463,564
Utilities -- electric (2.4%)
Northern States Power
05-07-99 4.88 1,100,000 1,099,105
Total commercial paper
(Cost: $36,109,720) $36,109,720
Letters of credit (8.7%)
Bank of America-
AES Hawaii
06-09-99 4.90% $2,000,000 $1,989,492
Bank of New York-
River Fuel Trust
07-27-99 4.88 2,000,000(b) 1,976,655
Total letters of credit
(Cost: $3,966,147) $3,966,147
Total investments in securities
(Cost: $45,649,448)(c) $45,649,448
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."
This security has been determined to be liquid under guidelines established by
the board.
(c) Also represents the cost of securities for federal income tax purposes at
April 30, 1999.
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Investments in Securities
IDS Life Series Fund, Inc.
Managed Portfolio
April 30, 1999
(Percentages represent value of investments compared to net assets)
Common stocks (62.5%)
Issuer Shares Value(a)
Banks and savings & loans (4.7%)
<S> <C> <C>
Bank of America 140,000 $10,053,750
Mellon Bank 80,000 5,945,000
Washington Mutual 140,000 5,757,500
Wells Fargo 240,000 10,365,000
Total 32,121,250
Chemicals (0.8%)
Waste Management 100,000 5,650,000
Communications equipment & services (3.1%)
American Tower Cl A 300,000(b) 6,356,250
Lucent Technologies 150,000 9,018,750
Nortel Networks 90,000(b,c) 6,136,875
Total 21,511,875
Computers & office equipment (14.0%)
America Online 150,000 21,412,500
Ascend Communications 80,000(b) 7,730,000
BMC Software 160,000(b) 6,890,000
Cisco Systems 140,000(b) 15,968,750
Dell Computer 160,000(b) 6,590,000
Fiserv 40,000(b) 2,342,500
Inktomi 30,000(b) 3,592,500
Intl Business Machines 40,000 8,367,500
Microsoft 280,000(b) 22,767,500
Total 95,661,250
Electronics (2.5%)
Intel 180,000 11,013,750
Maxim Integrated Products 110,000(b) 6,160,000
Total 17,173,750
Financial services (2.1%)
Citigroup 110,000 8,277,500
Mutual Risk Management 150,000(c) 5,831,250
Total 14,108,750
Food (1.9%)
Keebler Foods 200,000(b) 6,425,000
U.S. Foodservice 160,000(b) 6,730,000
Total 13,155,000
Health care (8.7%)
American Home Products 165,000 10,065,000
Boston Scientific 400,000(b) 17,025,000
Guidant 100,000 5,368,750
Medtronic 140,000 10,071,250
Pfizer 80,000 9,205,000
Schering-Plough 170,000 8,213,125
Total 59,948,125
Industrial equipment & services (0.4%)
Illinois Tool Works 40,000 3,080,000
Insurance (1.9%)
ACE 150,000(c) 4,537,500
American Intl Group 70,000 8,220,625
Total 12,758,125
Leisure time & entertainment (1.2%)
Harley-Davidson 140,000 8,347,500
Media (3.5%)
Comcast Cl A 140,000 8,802,500
MediaOne Group 190,000(b) 15,496,875
Total 24,299,375
Multi-industry conglomerates (6.1%)
Danaher 140,000 9,301,250
General Electric 160,000 16,880,000
Tyco Intl 190,000(c) 15,437,500
Total 41,618,750
Retail (6.4%)
Costco Companies 60,000(b) 4,856,250
CVS 170,000 8,096,250
Kohl's 80,000(b) 5,315,000
Kroger 70,000(b) 3,801,875
Rite Aid 210,000 4,895,625
Safeway 125,000(b) 6,742,188
Wal-Mart Stores 220,000 10,120,000
Total 43,827,188
Utilities -- telephone (5.1%)
Ameritech 100,000 6,843,750
AT&T 135,000 6,817,500
MCI WorldCom 260,000(b) 21,368,750
Total 35,030,000
Total common stocks
(Cost: $280,280,545) $428,290,938
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Preferred stock & other (0.2%)
Issuer Shares Value(a)
Bar Technologies
Warrants 500 $27,500
Bell Technology
Warrants 750 73,125
Century Maintenance
13.25% Pay-in-kind Series C 10,636(e) 1,169,960
Clearnet Communications
Warrants 990 7,920
Poland Telecom
Warrants 775(c) 27,125
Vialog
Warrants 2,075 103,750
Total preferred stock & other
(Cost: $1,257,050) $1,409,380
Bonds (28.6%)
Issuer Coupon Principal Value(a)
rate amount
Government obligations (7.2%)
Govt of Algeria
(U.S. Dollar)
<S> <C> <C> <C>
03-04-00 7.06% $45,455(c) $40,455
Govt of Russia
(Russian Ruble)
09-27-00 14.00 3,158,829(b,c) 3,586
Govt Trust Certs Israel
11-15-01 9.25 154,481 158,335
U.S. Treasury
11-15-05 5.88 22,000,000 22,617,082
05-15-07 6.63 20,500,000(f) 22,077,291
08-15-23 6.25 4,000,000 4,162,960
Total 49,059,709
Mortgage-backed securities (7.1%)
Federal Home Loan Mtge Corp
03-01-13 5.50 909,544 884,840
11-01-22 8.00 271,809 284,986
08-01-24 8.00 289,211 301,604
07-01-28 6.00 2,425,952 2,354,459
Federal Natl Mtge Assn
02-15-08 5.75 10,000,000 9,931,055
01-01-09 5.50 1,275,415 1,246,182
06-01-10 6.50 1,065,106 1,075,980
08-01-11 8.50 753,232 786,262
09-01-13 6.00 930,534 923,475
04-01-22 8.00 100,661 105,164
04-01-23 8.50 150,292 158,798
05-01-24 6.00 1,443,286 1,405,270
06-01-24 9.00 76,055 81,416
06-01-25 8.50 307,732(f) 323,710
08-01-25 7.50 446,171 459,096
09-01-25 6.50 840,379 835,984
09-01-25 7.00 613,024 621,888
12-01-25 7.00 1,459,743 1,480,850
02-01-26 7.00 620,490 629,270
04-01-26 7.00 740,221 750,695
05-01-26 7.50 1,367,709 1,406,908
09-01-26 7.50 686,695 706,376
09-01-28 6.00 2,058,691 1,996,745
09-01-28 6.50 1,985,029 1,973,880
11-01-28 6.00 5,966,152 5,787,281
12-01-28 6.00 3,975,572 3,855,946
12-01-28 6.50 1,979,419 1,968,453
01-01-29 6.50 2,966,447 2,950,013
Collateralized Mtge Obligation
09-25-08 4.50 1,500,000 1,393,000
Merrill Lynch Mtge Investors
06-15-21 7.99 206,726(d) 192,352
Merrill Lynch Mtge Investors Cl D
Series 1996-C2
12-21-28 6.96 900,000 871,083
Total 47,743,021
Aerospace & defense (0.1%)
Northrop-Grumman
03-01-16 7.75 500,000 520,035
Airlines (--%)
Continental Airlines
Series 1996A
04-15-15 6.94 465,264 473,187
Automotive & related (0.1%)
MSX Intl
Company Guaranty
01-15-08 11.38 855,000 855,000
Banks and savings & loans (1.1%)
Banca Commercial Italian
(U.S. Dollar)
07-15-07 8.25 500,000(c) 542,284
Banco General
(U.S. Dollar)
08-01-02 7.70 750,000(c,d) 693,968
BankAmerica
Sub Nts Series B
12-31-26 7.70 1,000,000(d) 1,007,863
CEI Citicorp Holdings
(Argentine Peso)
02-14-07 11.25 250,000(c,d) 185,000
Dao Heng Bank
(U.S. Dollar) Sub Nts
01-24-07 7.75 750,000(c,d) 695,625
Firstar Capital
Company Guaranty Series B
12-15-26 8.32 500,000 518,777
Mellon Capital
Company Guaranty Series A
12-01-26 7.72 750,000 762,005
Morgan (JP)
Sr Sub Medium-term Nts Series A
02-15-12 5.70 500,000(h) 448,530
Norwest
Sr Medium-term Nts Series G
09-15-02 6.38 800,000 809,661
Riggs Natl
Sub Nts
02-01-06 8.50 100,000 104,250
Union Planters Bank
Sub Nts
03-15-18 6.50 500,000 486,849
Union Planters Capital
Company Guaranty
12-15-26 8.20 1,000,000 991,222
Wilshire Financial Services
Series B
08-15-04 13.00 750,000(b) 112,500
Total 7,358,534
Building materials & construction (0.4%)
Formica
Sr Sub Nts
03-01-09 10.88 850,000(d) 859,562
Foster Wheeler
11-15-05 6.75 750,000 726,595
Pulte
Sr Nts
12-15-03 7.00 500,000 509,180
Tyco Intl Group
(U.S. Dollar) Company Guaranty
01-15-29 6.88 700,000(c) 682,200
Total 2,777,537
Chemicals (0.3%)
Allied Waste North America
Company Guaranty Series B
01-01-09 7.88 700,000 687,750
Waste Management
Sr Nts
07-15-28 7.00 1,500,000 1,449,237
Total 2,136,987
Communications equipment & services (0.8%)
Jordan Telecommunications Products
Sr Nts Series B
08-01-07 9.88 1,000,000 1,010,000
NTL
Zero Coupon Sr Nts Series B
04-01-03 9.10 1,515,000(g) 1,064,288
PhoneTel Technologies
Sr Nts
12-15-06 12.00 1,000,000(b) 290,000
Talton Holdings
Company Guaranty Sr Nts Series B
06-30-07 11.00 315,000 284,288
U S West Capital Funding
Company Guaranty
07-15-28 6.88 1,000,000 993,010
Vialog
Company Guaranty
11-15-01 12.75 2,075,000 1,691,124
Total 5,332,710
Computers & office equipment (0.2%)
Cooperative Computing
Sr Sub Nts
02-01-08 9.00 500,000 450,000
Globix
Sr Nts
05-01-05 13.00 750,000 771,563
Total 1,221,563
Electronics (0.2%)
Hyundai Semiconductor
(U.S. Dollar) Sr Nts
05-15-07 8.63 500,000(c,d) 423,139
Reliance Electric
04-15-03 6.80 500,000 515,962
Thomas & Betts
01-15-06 6.50 400,000 401,024
Total 1,340,125
Energy (0.7%)
Enron Oil & Gas
11-15-06 6.70 1,000,000 1,016,482
Honam Oil Refinery
(U.S. Dollar)
10-15-05 7.13 1,000,000(c,d) 945,000
Parker & Parsley Petroleum
Sr Nts
08-15-07 8.25 500,000 455,302
Rayovac
Sr Sub Nts Series B
11-01-06 10.25 925,000 1,011,719
USX
03-01-08 6.85 1,500,000 1,495,883
Total 4,924,386
Energy equipment & services (0.1%)
Northern Offshore ASA
(U.S. Dollar) Company Guaranty
05-15-05 10.00 1,250,000(c,d) 475,000
Financial services (0.5%)
Arcadia Financial
Sr Nts
03-15-07 11.50 1,000,000 815,000
Bat-CRAVE-800
08-12-00 6.68 700,000(d) 706,075
GenAmerica Capital
Company Guaranty
06-30-27 8.53 500,000 476,262
Salomon
Sr Nts
01-15-06 6.75 500,000 501,265
Wilmington Trust
05-01-08 6.63 800,000 793,333
Total 3,291,935
Food (0.1%)
Daya Guna
(U.S. Dollar) Company Guaranty
06-01-07 10.00 400,000(c,d) 296,000
RAB Enterprises
Company Guaranty
05-01-05 10.50 1,250,000 687,500
Total 983,500
Health care (0.2%)
Watson Pharmaceuticals
Sr Nts
05-15-08 7.13 1,500,000 1,501,431
Health care services (0.7%)
Paracelsus Healthcare
Sr Sub Nts
08-15-06 10.00 1,000,000 720,000
Physician Sales & Service
Company Guaranty
10-01-07 8.50 1,000,000 1,018,750
Service Corp Intl
03-15-08 6.50 1,500,000 1,430,972
Tenet Healthcare
Sr Sub Nts
12-01-08 8.13 1,800,000(d) 1,750,482
Total 4,920,204
Household products (--%)
Scotts
Sr Sub Nts
01-15-09 8.63 290,000(d) 300,513
Industrial equipment & services (0.3%)
Ametek
Sr Nts
07-15-08 7.20 1,500,000 1,438,627
Case
08-01-05 7.25 850,000 860,035
Total 2,298,662
Insurance (0.6%)
American United Life Insurance
03-30-26 7.75 500,000(d) 505,040
Americo Life
Sr Sub Nts
06-01-05 9.25 600,000 615,000
New England Mutual
02-15-24 7.88 250,000(d) 271,476
Presidential Life
Sr Nts
02-15-09 7.88 750,000 731,226
Principal Mutual
03-01-44 8.00 250,000(d) 261,988
SAFECO Capital
Company Guaranty
07-15-37 8.07 1,000,000 993,015
SunAmerica
08-30-05 7.34 700,000 746,756
Total 4,124,501
Leisure time & entertainment (0.4%)
Coast Hotels & Casino
Sr Sub Nts
04-01-09 9.50 900,000(d) 920,250
Time Warner
Sr Nts
01-15-28 6.95 500,000 498,080
Trump Atlantic City Assn/Funding
1st Mtge Company Guaranty
05-01-06 11.25 1,000,000 875,000
United Artists Theatres
Series 1995A
07-01-15 9.30 708,359 636,680
Total 2,930,010
Media (1.8%)
Capstar Broadcasting
Zero Coupon Sr Disc Nts
02-01-02 7.49 1,000,000(d,g) 855,000
Chancellor Media
Sr Nts
11-01-08 8.00 1,000,000(d) 1,032,500
Cox Communications
06-15-25 7.63 500,000 539,712
CSC Holdings
Sr Nts
07-15-08 7.25 1,000,000 1,014,566
Sr Sub Nts
11-01-05 9.25 500,000 538,750
Globo Communicacoes Participacoes
(U.S. Dollar) Sr Nts
12-05-08 10.63 1,000,000(c,d) 807,500
Outdoor Systems
Company Guaranty
06-15-07 8.88 1,000,000 1,065,000
Paxson Communications
Sr Sub Nts
10-01-02 11.63 1,000,000 1,047,500
Price Communications Wireless
Company Guaranty Series B
12-15-06 9.13 1,000,000 1,052,500
Rogers Cablesystems
(Canadian Dollar)
01-15-14 9.65 600,000(c) 453,953
Sony
(U.S. Dollar)
03-04-03 6.13 1,400,000(c) 1,409,568
TCI Communications
08-01-15 8.75 1,000,000 1,208,707
TeleWest Communications
(U.S. Dollar) Zero Coupon Sr Disc Nts
04-15-09 9.25 400,000(c,d) 270,000
Time Warner Entertainment
Sr Nts
07-15-33 8.38 500,000 586,566
Turner Broadcasting
07-01-13 8.38 250,000 286,632
Total 12,168,454
Metals (0.1%)
EnviroSource
Sr Nts
06-15-03 9.75 170,000 98,600
Sr Nts Series B
06-15-03 9.75 400,000 232,000
Imexsa Export Trust
(U.S. Dollar)
05-31-03 10.13 439,901(c,d) 422,305
Total 752,905
Miscellaneous (1.2%)
Advanced Glassfiber Yarn
Sr Sub Nts
01-15-09 9.88 615,000(d) 628,838
Bistro Trust
Sub Nts
12-31-02 9.50 1,000,000(d) 962,200
Centaur Mining & Exploration
(U.S. Dollar) Company Guaranty
12-01-07 11.00 500,000(c) 472,500
DTE Burns Harbor LLC
(U.S. Dollar) Sr Nts
01-30-03 6.57 630,840(c,d) 613,807
Great Central Mines
(U.S. Dollar) Sr Nts
04-01-08 8.88 1,000,000(c,d) 990,000
ISG Resources
04-15-08 10.00 835,000 860,050
Nationwide Credit
Sr Nts Series A
01-15-08 10.25 750,000 401,250
Norcal Waste Systems
Company Guaranty Series B
11-15-05 13.50 500,000 556,250
NSM Steel
Company Guaranty
02-01-06 12.00 625,000(b,d) 125,781
NTex
(U.S. Dollar) Sr Nts
06-01-06 11.50 700,000(c) 647,500
Outsourcing Solutions
Sr Sub Nts Series B
11-01-06 11.00 1,000,000 995,000
Poland Telecom Finance
(U.S. Dollar) Company Guaranty Series B
12-01-07 14.00 775,000(c) 709,125
United Inds
Sr Sub Nts
04-01-09 9.88 360,000(d) 375,300
Total 8,337,601
Multi-industry conglomerates (0.5%)
Coltec Inds
Company Guaranty
04-15-08 7.50 1,000,000 1,047,500
Crane
06-15-99 7.25 250,000 250,364
Hutchison Whampoa Finance
(U.S. Dollar) Company Guaranty
08-01-17 7.45 250,000(c,d) 229,285
Prime Succession
Sr Sub Nts
08-15-04 10.75 1,000,000 721,250
USI American Holdings
Sr Nts Series B
12-01-06 7.25 850,000 859,282
Total 3,107,681
Paper & packaging (0.5%)
Doman Inds
(U.S. Dollar) Sr Nts Series B
11-15-07 9.25 350,000(c) 238,000
Gaylord Container
Sr Nts Series B
06-15-07 9.38 1,000,000 945,000
Intl Paper
11-15-12 5.13 250,000 211,372
Owens-Illinois
Sr Nts
05-15-08 7.35 1,500,000 1,495,071
Packaging Corp of America
Sr Sub Nts
04-01-09 9.63 250,000(d) 260,000
Repap New Brunswick
(U.S. Dollar) Sr Nts
06-01-04 9.00 600,000(c) 580,500
Total 3,729,943
Real estate investment trust (0.1%)
Property Trust of America
02-15-14 7.50 750,000 747,886
Restaurants & lodging (0.1%)
Domino's
Sr Sub Nts
01-15-09 10.38 650,000(d) 676,000
Retail (0.2%)
Meyer (Fred)
Company Guaranty
03-01-08 7.45 1,000,000 1,049,891
Pep Boys - Manny, Moe & Jack
06-01-05 7.00 500,000 486,761
Total 1,536,652
Textiles & apparel (0.2%)
Anvil Knitwear
Sr Nts Series B
03-15-07 10.88 1,000,000 500,000
Westpoint Stevens
Sr Nts
06-15-08 7.88 750,000 774,375
Total 1,274,375
Transportation (0.3%)
American Architectural
Company Guaranty
12-01-07 11.75 1,000,000 800,000
Enterprises Shipholding
(U.S. Dollar) Sr Nts
05-01-08 8.88 1,000,000(c) 700,000
Greater Beijing First Expressways
(U.S. Dollar) Sr Nts
06-15-04 9.25 200,000(c) 110,000
06-15-07 9.50 300,000(c) 159,000
Total 1,769,000
Utilities -- electric (1.1%)
Alabama Power
1st Mtge
12-01-24 9.00 300,000 322,238
California Infrastructure-
Pacific Gas & Electric Series 1997-1
09-25-05 6.32 1,000,000 1,018,010
Cleveland Electric Illuminating
1st Mtge Series B
05-15-05 9.50 1,000,000 1,067,649
CMS Energy
Sr Nts
11-15-04 7.63 500,000 511,357
Connecticut Light & Power
1st Mtge Series C
06-01-02 7.75 1,000,000 1,026,975
El Paso Electric
1st Mtge Series D
02-01-06 8.90 650,000 734,500
Jersey Central Power & Light
1st Mtge
11-01-25 6.75 1,000,000 938,138
Salton Sea Funding
Series C
05-30-10 7.84 300,000 317,507
Sithe Independence Funding
Series A
12-30-13 9.00 150,000 168,018
Texas-New Mexico Power
1st Mtge Series U
09-15-00 9.25 400,000 415,000
TU Electric Capital
Company Guaranty
01-30-37 8.18 750,000 781,078
Total 7,300,470
Utilities -- telephone (1.4%)
Airtouch Communications
05-01-08 6.65 1,000,000 1,020,298
Bell Atlantic
09-01-08 6.38 70,000 68,670
Series P
01-01-06 4.88 130,000 121,722
Geotek Communications
Cv Sr Sub Nts
02-15-01 12.00 205,000(b) 256
GTE North
Series F
02-15-10 6.38 1,000,000 1,005,682
Intermedia Communications
Sr Nts Series B
11-01-07 8.88 500,000 505,000
Zero Coupon Sr Disc Nts Series B
07-15-02 9.54 1,000,000(g) 767,500
ITC Deltacom
Sr Nts
03-01-08 8.88 1,150,000 1,187,375
McLeod USA
Sr Nts
02-15-09 8.13 500,000(d) 497,500
MetroNet Communications
(U.S. Dollar) Sr Nts
11-01-08 10.63 400,000(c,d) 471,000
(U.S. Dollar) Zero Coupon Sr Disc Nts
06-15-03 9.95 250,000(c,g) 195,625
Mountain States Telephone & Telegraph
06-01-05 5.50 80,000 77,159
Qwest Communications Intl
11-01-08 7.50 1,000,000(d) 1,050,488
Rogers Cantel
(U.S. Dollar)
06-01-08 9.38 450,000(c) 497,250
RSL Communications
(U.S. Dollar) Company Guaranty
11-15-08 10.50 500,000(c) 522,500
U S WEST Communications
11-10-26 7.20 700,000 697,495
WorldCom
04-01-07 7.75 1,000,000 1,079,437
Total 9,764,957
Total bonds
(Cost: $200,818,460) $195,734,474
Issuer Annualized Amount Value(a)
yield on date Payable at
of purchase maturity
U.S. government agencies (7.8%)
Federal Home Loan Mtge Corp Disc Nts
05-07-99 4.80% $1,200,000 $1,199,046
05-10-99 4.77 2,700,000 2,696,801
05-12-99 4.73 1,600,000 1,597,692
05-18-99 4.79 2,100,000 2,094,687
05-24-99 4.71 17,500,000 17,447,563
06-16-99 4.75 4,100,000 4,072,968
06-21-99 4.72 4,700,000 4,667,675
06-22-99 4.72 2,600,000 2,582,386
Federal Natl Mtge Assn Disc Nts
05-07-99 4.72 8,500,000 8,493,327
06-17-99 4.73 9,000,000 8,943,918
Total 53,796,063
Commercial paper (0.3%)
Deutsche Bank Financial
06-15-99 4.81 500,000 497,013
Fleet Funding
06-09-99 4.82 1,300,000(i) 1,293,240
Total 1,790,253
Total short-term securities
(Cost: $55,591,168) $55,586,316
Total investments in securities
(Cost: $537,947,223)(j) $681,021,108
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing. For long-term debt securities, item identified is in
default as to payment of interest and/or principal.
(c) Foreign security values are stated in U.S. dollars. For debt securities,
principal amounts are denominated in the currency indicated. As of April 30,
1999, the value of foreign securities represented 6.93% of net assets.
(d) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security has
been determined to be liquid under guidelines established by the board.
(e) Pay-in-kind securities are securities in which the issuer makes interest or
dividend payments in cash or in additional securities. The securities usually
have the same terms as the original holdings.
(f) Partially pledged as initial margin deposit on the following open stock
index futures purchase contracts (see Note 7 to the financial statements):
Type of security Contracts
S&P 500 Index, June 1999 44
(g) For those zero coupon bonds that become coupon paying at a future date, the
interest rate disclosed represents the annualized effective yield from the date
of acquisition to interest reset date disclosed.
(h) Interest rate varies either based on a predetermined schedule or to reflect
current market conditions; rate shown is the effective rate on April 30, 1999.
(i) Commercial paper sold within terms of a private placement memorandum, exempt
from registration under Section 4(2) of the Securities Act of 1933, as amended,
and may be sold only to dealers in that program or other "accredited investors."
This security has been determined to be liquid under guidelines established by
the board.
(j) At April 30, 1999, the cost of securities for federal income tax purposes
was $537,884,462 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $154,689,047
Unrealized depreciation (11,552,401)
-----------
Net unrealized appreciation $143,136,646
See accompanying notes to investments in securities.
<PAGE>
<TABLE>
<CAPTION>
Investments in Securities
IDS Life Series Fund, Inc.
Government Securities Portfolio
April 30, 1999
(Percentages represent value of investments compared to net assets)
Bonds (92.9%)
Issuer Coupon Principal Value(a)
rate amount
Mortgage-backed securities (74.1%)
Federal Home Loan Mtge Corp
<S> <C> <C> <C>
06-01-12 7.00% $170,754 $174,702
01-01-13 6.00 357,799 355,621
02-01-13 6.50 245,802 248,580
12-01-27 6.00 289,145 281,058
05-01-28 7.00 345,957 351,022
08-01-28 7.00 190,079 192,950
Federal Natl Mtge Assn
02-13-04 5.13 1,125,000 1,101,388
02-15-08 5.75 550,000 546,208
05-15-08 6.00 400,000 403,038
03-01-10 5.50 500,000(b) 485,313
03-01-10 6.50 630,000(b) 635,709
06-01-10 6.50 266,276 268,995
08-01-11 8.50 97,920 102,214
09-01-12 7.00 179,656 183,643
03-01-13 6.00 183,566 182,344
04-01-13 5.50 375,948 365,451
06-01-13 6.00 720,837 715,370
07-01-13 6.00 466,950 463,009
07-01-13 6.50 458,322 462,594
03-01-23 9.00 75,757 81,049
04-01-23 8.50 150,292 158,798
09-01-23 8.50 208,473 220,403
03-01-25 6.50 1,000,000(b) 994,063
03-01-25 7.00 500,000(b) 506,719
03-01-25 8.50 60,597 63,799
09-01-25 7.00 180,266 182,873
04-01-27 6.50 241,449 240,441
03-01-28 6.50 1,034,874 1,029,260
04-01-28 6.00 287,692 279,072
08-01-28 7.00 455,631 462,030
09-01-28 6.00 665,197 645,181
10-01-28 6.00 737,617 715,422
10-01-28 7.00 1,012,159 1,026,157
11-01-28 6.00 494,912 480,065
12-01-28 6.50 494,855 492,113
12-01-28 7.00 386,066 391,495
03-01-29 6.50 497,083 494,329
Collateralized Mtge Obligation
07-18-19 5.50 250,000 246,295
Govt Natl Mtge Assn
05-15-17 8.00 33,083 34,887
Total 16,263,660
U.S. government obligations (18.8%)
Resolution Funding Corp
10-15-19 8.13 400,000 491,213
Zero Coupon
04-15-05 5.66 200,000(c) 143,401
10-15-09 7.12 460,000(c) 250,026
U.S. Treasury
02-28-03 5.50 150,000 151,273
11-15-16 7.50 700,000 820,473
08-15-23 6.25 725,000 754,537
11-15-24 7.50 895,000 1,081,333
08-15-25 6.88 150,000 169,176
TIPS
01-15-09 3.88 250,000(d) 249,610
Total 4,111,042
Total bonds
(Cost: $20,135,917) $20,374,702
Short-term securities (18.2%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies
Federal Home Loan Bank Disc Nts
05-21-99 4.77% $700,000 $698,157
05-26-99 4.70 700,000 697,720
Federal Home Loan Mtge Corp Disc Nts
05-06-99 4.80 1,300,000 1,299,138
05-14-99 4.69 600,000 598,986
06-15-99 4.73 700,000 695,879
Total short-term securities
(Cost: $3,989,880) $3,989,880
Total investments in securities
(Cost: $24,125,797)(e) $24,364,582
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) At April 30, 1999, the cost of securities purchased, including interest
purchased, on a when-issued basis was $2,633,060.
(c) For zero coupon bonds, the interest rate disclosed represents the annualized
effective yield on the date of acquisition.
(d) U.S. Treasury inflation-protection securities (TIPS) are securities in which
the principal amount is adjusted for inflation and the semiannual interest
payments equal a fixed percentage of the inflation-adjusted principal amount.
(e) At April 30, 1999, the cost of securities for federal income tax purposes
was $24,123,314 and the aggregate gross unrealized appreciation and depreciation
based on that cost was:
Unrealized appreciation $336,432
Unrealized depreciation (95,164)
-------
Net unrealized appreciation $241,268
See accompanying notes to investments in securities.
<PAGE>
<TABLE>
<CAPTION>
Investments in Securities
IDS Life Series Fund, Inc.
International Equity Portfolio
April 30, 1999
(Percentages represent value of investments compared to net assets)
Common stocks (83.5%)
Issuer Shares Value(a)
Argentina (0.3%)
Utilities -- telephone
<S> <C> <C>
Telefonica de Argentina ADR 23,000 $859,625
Australia (1.7%)
Insurance (0.8%)
AMP 186,000 2,172,462
Transportation (0.9%)
Brambles Inds 88,000 2,585,880
Canada (1.0%)
Multi-industry conglomerates (0.5%)
Bombardier Cl B 99,100 1,536,961
Utilities -- telephone (0.5%)
BCE 31,800 1,452,863
France (15.7%)
Banks and savings & loans (3.1%)
Banque Natl de Paris 106,643 8,839,670
Electronics (2.2%)
SGS-Thomson Microelectronics 59,990 6,249,805
Energy (6.8%)
Elf Aquitaine 57,644 8,953,278
Total Petroleum Cl B 75,474 10,335,062
Total 19,288,340
Food (1.1%)
Sodexho Alliance 19,048 3,125,586
Industrial equipment & services (2.1%)
Castorama Dubois 24,440 5,848,978
Utilities -- electric (0.4%)
Suez Lyonnaise des Eaux 6,193 1,053,507
Germany (6.9%)
Automotive & related (3.5%)
Bayerische Motoren Werke 8,030 5,752,490
Volkswagen 59,008 4,183,543
Total 9,936,033
Industrial equipment & services (3.4%)
Mannesmann 72,546 9,550,856
Hong Kong (0.6%)
Multi-industry conglomerates
Hutchison Whampoa 200,000 1,793,320
Italy (6.2%)
Banks and savings & loans (5.9%)
Banca Intesa 884,710 4,711,346
Instituto Bancario San Paolo di Torino 398,411 5,977,640
Unicredito Italiano 1,205,780 6,115,355
Total 16,804,341
Utilities -- telephone (0.3%)
Telecom Italia 85,169 906,198
Japan (5.6%)
Automotive & related (0.5%)
Honda Motor 35,000 1,541,939
Banks and savings & loans (0.2%)
Sakura Bank 169,000 652,526
Computers & office equipment (1.2%)
Fujitsu 201,000 3,442,728
Electronics (0.8%)
Fujikura 39,000 203,174
Tokyo Electron 38,000 2,164,245
Total 2,367,419
Media (0.5%)
Sony 16,000 1,494,200
Utilities -- telephone (2.4%)
Nippon Telegraph & Telephone 3,810 4,148,415
NTT Mobile Communication Network 470 2,755,559
Total 6,903,974
Mexico (1.7%)
Banks and savings & loans (0.1%)
Grupo Financiero Banamex Accival 130,570(b) 332,784
Media (0.4%)
Grupo Televisa 26,900(b) 1,102,900
Multi-industry conglomerates (0.5%)
Grupo Financiero Banorte Cl B 1,000,000(b) 1,296,537
Retail (0.7%)
Controladora Comercial Mexicana GDR 90,000 1,878,750
Netherlands (5.2%)
Industrial equipment & services (2.8%)
Philips Electronics 91,906 7,914,292
Utilities -- telephone (2.4%)
Equant 76,112 6,908,070
Singapore (1.1%)
Banks and savings & loans (0.1%)
United Overseas Bank 32,000 247,126
Financial services (1.0%)
DBS Land 1,535,000 2,841,439
Spain (3.5%)
Building materials & construction (1.0%)
Fomento de Construcciones y Contractas 46,855 2,861,505
Utilities - telephone (2.5%)
Telefonica de Espana 149,641 7,012,207
Sweden (3.2%)
Banks and savings & loans (0.6%)
Nordbanken Holding 263,119 1,652,677
Communications equipment & services (2.6%)
Ericsson (LM) Cl B 284,543 7,469,339
Switzerland (3.5%)
Banks and savings & loans
UBS 29,173 9,907,305
United Kingdom (17.2%)
Banks and savings & loans (0.4%)
Standard Chartered 60,205 1,086,742
Insurance (0.7%)
Allied Zurich 136,698 1,873,719
Media (0.9%)
British Sky Broadcasting Group 278,930 2,465,853
Multi-industry conglomerates (5.2%)
General Electric 983,559 10,380,187
Williams 621,664 4,238,070
Total 14,618,257
Retail (1.5%)
Great Universal Stores 362,974 4,137,323
Transportation (1.3%)
Stagecoach Holdings 1,091,798 3,785,264
Utilities - telephone (7.3%)
Cable & Wireless Communications 568,861 6,493,207
Orange 467,622 6,341,983
Vodafone 432,895 7,925,527
Total 20,760,717
United States (9.7%)
Communications equipment & services (1.0%)
Lucent Technologies 49,400 2,970,175
Computers & office equipment (1.2%)
America Online 14,600 2,084,150
Intel 23,000 1,407,313
Total 3,491,463
Financial services (0.7%)
Citigroup 28,000 2,107,000
Health care (0.8%)
Pfizer 20,500 2,358,781
Household products (0.9%)
Colgate-Palmolive 24,000 2,458,500
Retail (2.7%)
Rite Aid 90,000 2,098,125
Safeway 48,000(b) 2,589,000
Wal-Mart Stores 65,200 2,999,200
Total 7,686,325
Utilities -- telephone (2.4%)
AT&T 48,600 2,454,300
MCI WorldCom 18,800(b) 1,545,125
SBC Communications 47,400 2,654,400
Total 6,653,825
Total common stocks
(Cost: $190,019,371) $236,286,086
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Other (0.4%)
Issuer Shares Value(a)
Italy (0.4%)
Banca Intesa
Warrants 884,710 $1,009,543
Spain (--%)
Telefonica
Rights 149,641 139,136
Total other
(Cost: $194,747) $1,148,679
Bond (4.4%)
Issuer Coupon Principal Value(a)
rate amount
United Kingdom
United Kingdom Treasury
(British Pound)
<S> <C> <C> <C>
06-07-02 7.00% 7,300,000 $12,424,556
Total bond
(Cost: $12,091,023) $12,424,556
Short-term securities (11.0%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (9.8%)
Federal Home Loan Mtge Corp Disc Nts
05-06-99 4.75% $1,300,000 $1,299,144
05-14-99 4.77 3,100,000 3,094,694
05-17-99 4.80 900,000 897,846
05-18-99 4.79 1,600,000 1,595,952
05-20-99 4.75 12,800,000 12,768,079
06-15-99 4.73 1,100,000 1,093,524
06-16-99 4.75 2,000,000 1,986,814
Federal Natl Mtge Assn Disc Nts
05-18-99 4.70 3,900,000 3,891,363
05-19-99 4.72 1,100,000 1,097,415
Total 27,724,831
Commercial paper (1.2%)
Ciesco LP
05-27-99 4.82 600,000(c) 597,920
GTE Funding
05-05-99 4.85 800,000 799,570
Salomon Smith Barney
05-10-99 4.84 1,100,000 1,098,675
Thames Asset Global
05-27-99 4.83 500,000(c) 498,259
Westpac Capital
06-10-99 4.83 500,000 497,333
Total 3,491,757
Total short-term securities
(Cost: $31,218,412) $31,216,588
Total investments in securities
(Cost: $233,523,553)(d) $281,075,909
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements. Foreign security values are stated in U.S. dollars. For debt
securities, principal amounts are denominated in the currency indicated.
(b) Non-income producing.
(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."
This security has been determined to be liquid under guidelines established by
the board.
(d) At April 30, 1999, the cost of securities for federal income tax purposes
was $233,582,894 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $50,628,947
Unrealized depreciation (3,135,932)
----------
Net unrealized appreciation $47,493,015
See accompanying notes to investments in securities.
<PAGE>
PART C. OTHER INFORMATION
Item 23. Exhibits
(a) Articles of Incorporation as amended December 20, 1994, filed
electronically as Exhibit 1 with Post-Effective Amendment No. 18 to
Registration Statement No. 2-97636 are incorporated by reference.
(b) By-laws filed electronically as Exhibit 2 with Post-Effective Amendment
No. 15 to Registration Statement No. 2-97636 are incorporated by
reference.
(c) Stock Certificate filed as Exhibit No. 3 to Registrant's
Registration Statement No. 2-97636 is incorporated by reference.
(d)(1) 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 by reference.
(d)(2) 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 by reference.
(d)(3) Addendum to Investment Advisory Agreement between IDS Life
Insurance Company and American Express Financial Corporation for IDS
Life International Equity Portfolio, dated January 1, 1995, filed
electronically as Exhibit 5(c) with Post Effective Amendment No. 20 to
Registration Statement No. 2-97636 is incorporated by reference.
(e) Underwriting Contracts: Not Applicable.
(f) 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.
(g)(1) 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 by reference.
(g)(2) Custody Agreement dated May 13, 1999 between American Express
Trust Company and The Bank of New York filed electronically as Exhibit
g(3) with IDS Precious Metals Fund, Inc. Post-Effective Amendment No.
33 to Registration Statement No. 2-93745 filed on or about May 24,
1999 is incorporated by reference.
(h) Other Material Contracts: None.
(i) Opinion and consent of counsel as to the legality of the securities
being registered, dated Feb. 9, 1999, filed electronically as Exhibit
(i) with Post-Effective Amendment No. 23 to Registration Statement No.
2-97636 is incorporated by reference.
(j) Independent Auditors' Consent filed electronically herewith.
(k) Omitted Financial Statements: None.
(l) Initial Capital Agreements: None.
(m) Rule 12b-1 Plan: None.
(n) Financial Data Schedule: Not applicable.
(o)(1) Power of Attorney dated April 11, 1997, filed electronically as
Exhibit 17 with Post-Effective Amendment No. 20 to Registration
Statement No. 2-97636 is incorporated by reference.
(o)(2) Power of Attorney dated April 20, 1999, filed electronically as
Exhibit o(2) with Post-Effective Amendment No. 24 to Registration
Statement No. 2-97636 is incorporated by reference.
<PAGE>
Item 24. Persons Controlled by or Under Common Control with Registrant
Not Applicable.
Item 25. Indemnification
The Articles of Incorporation of the registrant provide that the Fund shall
indemnify any person who was or is a party or is threatened to be made a party,
by reason of the fact that he is or was a director, officer, employee or agent
of the Fund, or is or was serving at the request of the Fund as a director,
officer, employee or agent of another company, partnership, joint venture, trust
or other enterprise, to any threatened, pending or completed action, suit or
proceeding, wherever brought, and the Fund may purchase liability insurance and
advance legal expenses, all to the fullest extent permitted by the laws of the
State of Minnesota, as now existing or hereafter amended.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Any indemnification hereunder shall not be exclusive of any other rights of
indemnification to which the directors, officers, employees or agents might
otherwise be entitled. No indemnification shall be made in violation of the
Investment Company Act of 1940.
<PAGE>
Item 26. Business and Other Connections of Investment Adviser (IDS Life
Insurance Company)
Directors and officers of IDS Life Insurance Company who are directors and/or
officers of one or more other companies:
<TABLE>
<CAPTION>
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Name and Title Other company(s) Address Title within other
company(s)
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
Timothy V. Bechtold, American Centurion Life IDS Tower 10 Director and President
Executive Vice President Assurance Company Minneapolis, MN 55440
American Express Financial Vice President
Advisors Inc.
American Express Financial Vice President
Corporation
IDS Life Insurance Company P.O. Box 5144 Director and President
of New York Albany, NY 12205
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
David J. Berry, IDS Tower 10
Vice President Minneapolis, MN 55440
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Mark W. Carter, American Express Financial IDS Tower 10 Senior Vice President and
Executive Vice President Advisors Inc. Minneapolis, MN 55440 Chief Marketing Officer
American Express Financial Senior Vice President and
Corporation Chief Marketing Officer
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Robert M. Elconin, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
American Express Financial Vice President
Corporation
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Lorraine R. Hart, AMEX Assurance Company IDS Tower 10 Vice President
Vice President Minneapolis, MN 55440
American Centurion Life Vice President
Assurance Company
American Enterprise Life Vice President
Insurance Company
American Express Financial Vice President
Advisors Inc.
American Express Financial Vice President
Corporation
American Partners Life Director and Vice
Insurance Company President
IDS Certificate Company Vice President
IDS Life Series Fund, Inc. Vice President
IDS Life Variable Annuity Vice President
Funds A and B
Investors Syndicate Director and Vice
Development Corp. President
IDS Life Insurance Company P.O. Box 5144 Vice President
of New York Albany, NY 12205
IDS Property Casualty 1 WEG Blvd. Vice President
Insurance Company DePere, WI 54115
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Jeffrey S. Horton, AMEX Assurance Company IDS Tower 10 Vice President, Treasurer
Vice President Minneapolis, MN 55440 and Assistant Secretary
American Centurion Life Vice President and
Assurance Company Treasurer
American Enterprise Vice President and
Investment Services Inc. Treasurer
American Enterprise Life Vice President and
Insurance Company Treasurer
American Express Asset Vice President and
Management Group Inc. Treasurer
American Express Asset Vice President and
Management International Treasurer
Inc.
American Express Client Vice President and
Service Corporation Treasurer
American Express Vice President and
Corporation Treasurer
American Express Financial Vice President and
Advisors Inc. Treasurer
American Express Financial Vice President and
Corporation Corporate Treasurer
American Express Insurance Vice President and
Agency of Arizona Inc. Treasurer
American Express Insurance Vice President and
Agency of Idaho Inc. Treasurer
American Express Insurance Vice President and
Agency of Nevada Inc. Treasurer
American Express Insurance Vice President and
Agency of Oregon Inc. Treasurer
American Express Minnesota Vice President and
Foundation Treasurer
American Express Property Vice President and
Casualty Insurance Agency Treasurer
of Kentucky Inc.
American Express Property Vice President and
Casualty Insurance Agency Treasurer
of Maryland Inc.
American Express Property Vice President and
Casualty Insurance Agency Treasurer
of Pennsylvania Inc.
American Partners Life Vice President and
Insurance Company Treasurer
IDS Cable Corporation Director, Vice President
and Treasurer
IDS Cable II Corporation Director, Vice President
and Treasurer
IDS Capital Holdings Inc. Vice President, Treasurer
and Assistant Secretary
IDS Certificate Company Vice President and
Treasurer
IDS Insurance Agency of Vice President and
Alabama Inc. Treasurer
IDS Insurance Agency of Vice President and
Arkansas Inc. Treasurer
IDS Insurance Agency of Vice President and
Massachusetts Inc. Treasurer
IDS Insurance Agency of Vice President and
New Mexico Inc. Treasurer
IDS Insurance Agency of Vice President and
North Carolina Inc. Treasurer
IDS Insurance Agency of Vice President and
Ohio Inc. Treasurer
IDS Insurance Agency of Vice President and
Wyoming Inc. Treasurer
IDS Life Insurance Company P.O. Box 5144 Vice President and
of New York Albany, NY 12205 Treasurer
IDS Life Series Fund Inc. Vice President and
Treasurer
IDS Life Variable Annuity Vice President and
Funds A & B Treasurer
IDS Management Corporation Director, Vice President
and Treasurer
IDS Partnership Services Vice President and
Corporation Treasurer
IDS Plan Services of Vice President and
California, Inc. Treasurer
IDS Real Estate Services, Vice President and
Inc. Treasurer
IDS Realty Corporation Vice President and
Treasurer
IDS Sales Support Inc. Vice President and
Treasurer
American Express Financial Vice President and
Advisors Japan Inc. Treasurer
Investors Syndicate Vice President and
Development Corp. Treasurer
IDS Property Casualty 1 WEG Blvd. Vice President, Treasurer
Insurance Company DePere, WI 54115 and Assistant Secretary
Public Employee Payment Vice President and
Company Treasurer
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
David R. Hubers, AMEX Assurance Company IDS Tower 10 Director
Director Minneapolis, MN 55440
American Express Financial Chairman, President and
Advisors Inc. Chief Executive Officer
American Express Financial Director, President and
Corporation Chief Executive Officer
American Express Service Director and President
Corporation
IDS Certificate Company Director
IDS Plan Services of Director and President
California, Inc.
IDS Property Casualty 1 WEG Blvd. Director
Insurance Company DePere, WI 54115
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
James M. Jensen, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
American Express Financial Vice President
Corporation
IDS Life Series Fund, Inc. Director
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Richard W. Kling, AMEX Assurance Company IDS Tower 10 Director
Director and President Minneapolis, MN 55440
American Centurion Life Director and Chairman of
Assurance Company the Board
American Enterprise Life Director and Chairman of
Insurance Company the Board
American Express Director and President
Corporation
American Express Financial Senior Vice President
Advisors Inc.
American Express Financial Director and Senior Vice
Corporation President
American Express Insurance Director and President
Agency of Arizona Inc.
American Express Insurance Director and President
Agency of Idaho Inc.
American Express Insurance Director and President
Agency of Nevada Inc.
American Express Insurance Director and President
Agency of Oregon Inc.
American Express Property Director and President
Casualty Insurance Agency
of Kentucky Inc.
American Express Property Director and President
Casualty Insurance Agency
of Maryland Inc.
American Express Property Director and President
Casualty Insurance Agency
of Pennsylvania Inc.
American Express Service Vice President
Corporation
American Partners Life Director and Chairman of
Insurance Company the Board
IDS Certificate Company Director and Chairman of
the Board
IDS Insurance Agency of Director and President
Alabama Inc.
IDS Insurance Agency of Director and President
Arkansas Inc.
IDS Insurance Agency of Director and President
Massachusetts Inc.
IDS Insurance Agency of Director and President
New Mexico Inc.
IDS Insurance Agency of Director and President
North Carolina Inc.
IDS Insurance Agency of Director and President
Ohio Inc.
IDS Insurance Agency of Director and President
Wyoming Inc.
IDS Life Series Fund, Inc. Director and President
IDS Life Variable Annuity Manager, Chairman of the
Funds A and B Board and President
IDS Property Casualty 1 WEG Blvd. Director
Insurance Company DePere, WI 54115
IDS Life Insurance Company P.O. Box 5144 Director and Chairman of
of New York Albany, NY 12205 the Board
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Paul F. Kolkman, American Express Financial IDS Tower 10 Vice President
Director and Executive Vice Advisors Inc. Minneapolis, MN 55440
President
American Express Financial Vice President
Corporation
IDS Life Series Fund, Inc. Vice President and Chief
Actuary
IDS Property Casualty 1 WEG Blvd. Director
Insurance Company DePere, WI 54115
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Paula R. Meyer, American Enterprise Life IDS Tower 10 Vice President
Director and Executive Vice Insurance Company Minneapolis, MN 55440
President
American Express Director
Corporation
American Express Financial Vice President
Advisors Inc.
American Partners Life Director and President
Insurance Company
IDS Certificate Company Director and President
American Express Financial Vice President
Corporation
Investors Syndicate Director, Chairman of the
Development Corporation Board and President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
James A. Mitchell, AMEX Assurance Company IDS Tower 10 Director
Director, Chairman of the Minneapolis, MN 55440
Board and Chief Executive
Officer
American Enterprise Director
Investment Services Inc.
American Express Financial Executive Vice President
Advisors Inc.
American Express Financial Director and Executive
Corporation Vice President
American Express Service Director and Senior Vice
Corporation President
American Express Tax and Director
Business Services Inc.
IDS Certificate Company Director
IDS Plan Services of Director
California, Inc.
IDS Property Casualty 1 WEG Blvd. Director
Insurance Company DePere, WI 54115
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Pamela J. Moret, American Express Financial IDS Tower 10 Vice President
Executive Vice President Advisors Inc. Minneapolis, MN 55440
American Express Financial Vice President
Corporation
American Express Trust Vice President
Company
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Barry J. Murphy, American Express Client IDS Tower 10 Director and President
Director and Executive Vice Service Corporation Minneapolis, MN 55440
President
American Express Financial Senior Vice President
Advisors Inc.
American Express Financial Director and Senior Vice
Corporation President
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
James R. Palmer, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
American Express Financial Vice President
Corporation
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Stuart A. Sedlacek, AMEX Assurance Company IDS Tower 10 Director
Director and Executive Vice Minneapolis, MN 55440
President
American Enterprise Life Executive Vice President
Insurance Company
American Express Financial Senior Vice President and
Advisors Inc. Chief Financial Officer
American Express Financial Senior Vice President and
Corporation Chief Financial Officer
American Express Trust Director
Company
American Partners Life Director and Vice President
Insurance Agency
IDS Certificate Company Director and President
IDS Property Casualty 1 WEG Blvd. Director
Insurance Company DePere, WI 54115
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
F. Dale Simmons, AMEX Assurance Company IDS Tower 10 Vice President
Vice President Minneapolis, MN 55440
American Centurion Life Vice President
Assurance Company
American Enterprise Life Vice President
Insurance
American Express Financial Vice President
Advisors Inc.
American Express Financial Vice President
Corporation
American Partners Life Vice President
Insurance Company
IDS Certificate Company Vice President
IDS Partnership Services Director and Vice President
Corporation
IDS Real Estate Services Director and Vice President
Inc.
IDS Realty Corporation Director and Vice President
IDS Life Insurance Company P.O. Box 5144 Vice President
of New York Albany, NY 12205
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
William A. Stoltzmann, American Enterprise Life IDS Tower 10 Director, Vice President,
Vice President, General Insurance Company Minneapolis, MN 55440 General Counsel and
Counsel and Secretary Secretary
American Express Director, Vice President
Corporation and Secretary
American Express Financial Vice President and
Advisors Inc. Assistant General Counsel
American Express Financial Vice President and
Corporation Assistant General Counsel
American Partners Life Director, Vice President,
Insurance Company General Counsel and
Secretary
IDS Life Insurance Company Vice President, General
Counsel and Secretary
IDS Life Series Fund Inc. General Counsel and
Assistant Secretary
IDS Life Variable Annuity General Counsel and
Funds A & B Assistant Secretary
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Philip C. Wentzel, American Centurion Life IDS Tower 10 Vice President and
Vice President and Controller Assurance Company Minneapolis, MN 55440 Controller, Risk Management
American Enterprise Life Vice President and
Insurance Company Controller
IDS Life Insurance Company P.O. Box 5144 Vice President and
of New York Albany, NY 12205 Controller, Risk Management
</TABLE>
Item 27. Principal Underwriters
The Fund has no principal underwriter.
Item 28. Location of Accounts and Records
American Express Financial Corporation
IDS Tower 10
Minneapolis, Minnesota
Item 29. Management Services
Not applicable
Item 30. Undertakings
Not applicable.
<PAGE>
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 Amendment to its
Registration Statement under rule 485(b) under the Securities Act 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 June, 1999.
IDS LIFE SERIES FUND, INC.
By /s/ Richard W. Kling*
Richard W. Kling, President
By /s/ Jeffrey S. Horton*
Jeffrey S. Horton, Vice President and Treasurer
By /s/ Philip C. Wentzel**
Philip C. Wentzel Controller
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 June, 1999.
Signature Capacity
/s/ James M. Jensen** Director
James M. Jensen
/s/ Richard W. Kling* Director
Richard W. Kling
/s/ Edward Landes* Director
Edward Landes
/s/ Carl N. Platou* Director
Carl N. Platou
/s/ Gordon H. Ritz* Director
Gordon H. Ritz
*Signed pursuant to Power of Attorney dated April 11, 1997, filed electronically
as Exhibit 17 with Post-Effective Amendment No. 20 to Registration Statement No.
2-97636 is incorporated by reference.
**Signed pursuant to Power of Attorney dated April 20, 1999, filed
electronically herewith.
/s/ Mary Ellyn Minenko
Mary Ellyn Minenko
<PAGE>
CONTENTS OF THIS POST-EFFECTIVE AMENDMENT NO. 25
TO REGISTRATION STATEMENT NO. 2-97636
This Post-Effective Amendment comprises the following papers and documents:
The facing sheet.
Part A.
The prospectus.
Part B.
Statement of Additional Information.
Part C.
Other Information.
The signatures.
EXHIBIT INDEX
EXHIBIT (j) Independent Auditors' Consent
Independent auditors' consent
The board and shareholders
IDS Life Series Fund, Inc.:
Equity Portfolio
Government Securities Portfolio
Income Portfolio
International Equity Portfolio
Managed Portfolio
Money Market Portfolio
We consent to the use of our reports included or incorporated herein by
reference, and to the references to our Firm under the heading "Financial
highlights" in Part A and "INDEPENDENT AUDITORS" in Part B of the Registration
Statement.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
June 29, 1999
