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. 26 (File No. 2-97636) [X]
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 26 (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, 2000 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 30, 2000
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 any 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 3p
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
Fees and Expenses 24p
Shareholder Fees 24p
Annual Fund Operating Expenses 24p
Buying and Selling Shares 25p
Valuing Fund Shares 25p
Purchasing Shares 25p
Transferring/Selling Shares 25p
Distributions and Taxes 26p
Other Information 27p
Financial Highlights 28p
<PAGE>
The Funds
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, derivatives (such as futures, options, and forward contracts), 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 prevent the Fund from achieving its investment objective.
During these times, AEFC may make frequent securities trades that could result
in increased fees, expenses, and taxes.
For more information on strategies and holdings, see the Statement of Additional
Information (SAI) and the annual/semiannual reports.
* Each Fund pays IDS Life a fee for managing its assets. IDSLife and AEFC
have an Investment Advisory Agreement that calls for IDSLIfe to pay AEFC a
fee for investment advice.
<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 varied for each full calendar year shown on the
chart below, and
o how the Fund's 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)
-4.90% +66.28% +5.20% +13.36% +2.76% +38.39% +19.91% +21.13% +9.06% +80.89%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
During the period shown in the bar chart, the highest return for a calendar
quarter was +62.34% (quarter ending December 1999) 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, 2000 was +17.19%.
Average Annual Total Returns (as of Dec. 31, 1999)
1 year 5 years 10 years
Equity Portfolio +80.89% +31.72% +22.62%
S&P 500 Index +21.04% +28.56% +18.21%
S&P MidCap 400 Index +14.72% +23.05% +17.32%
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 securities included in the indexes may not be the same as those held by the
Fund.
<PAGE>
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
these goals 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 other
instruments such as foreign securities, convertible securities, debt obligations
(including bonds and commercial paper of any rating), and money market
securities. Additionally, the Fund may utilize derivatives (such as futures,
options, and forward contracts) to produce incremental earnings, to hedge
existing positions and to increase flexibility.
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 prevent the Fund from achieving its
investment objective. 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
Keith Tufte joined AEFC in 1990. He became portfolio manager of this Fund in May
2000. He also serves as portfolio manager of some of the American Express Funds,
including AXP Blue Chip Advantage Fund, Aggressive Growth Portfolio and
co-manager of AXP Variable Portfolio- Blue Chip Advantage Fund. He has served as
director of research-equities since 1998. Prior to that he was portfolio manager
of Equity Income Portfolio.
PAST PERFORMANCE
The bar chart and past performance table are not presented because the Fund did
not begin operations until June 17, 1999.
<PAGE>
Government 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 prevent the Fund
from achieving its investment objective. During these times, AEFC may make
frequent securities trades that could result in increased fees, expenses, and
taxes.
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 varied for each full calendar year shown on the
chart below, and
o how the Fund's 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.
Government Securities Portfolio Performance (based on calendar years)
+6.09% +16.39% +6.68% +12.18% -4.89% +18.02% +1.49% +8.60% +8.39% -1.97%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
During the period shown in the bar chart, the highest return for a calendar
quarter was +6.88% (quarter ending September 1991) and the lowest return for a
calendar quarter was -4.14% (quarter ending March 1994).
<TABLE>
<CAPTION>
The Fund's year to date return as of March 31, 2000 was +2.29%.
Average Annual Total Returns (as of Dec. 31, 1999)
<S> <C> <C> <C>
1 year 5 years 10 years
Government Securities Portfolio -1.97% +6.69% +6.87%
Merrill Lynch U.S. Government Index -2.11% +7.46% +7.51%
Merrill Lynch 1-3 Year Government Index +3.06% +6.51% +6.59%
</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 U.S. 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.
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 indexes 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, derivatives (such as futures, options, and forward
contracts), 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 prevent the Fund
from achieving its investment objective. During these times, AEFC may make
frequent securities trades that could result in increased fees, expenses, and
taxes.
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 varied for each full calendar year shown on the
chart below and
o how the Fund's 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)
+6.04% +15.43% +9.62% +14.92% -4.38% +21.04% +3.50% +8.04% +5.49% +0.44%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
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, 2000 was +0.94%.
<PAGE>
Average Annual Total Returns (as of Dec. 31, 1999)
1 year 5 years 10 years
Income Portfolio +0.44% +7.48% +7.78%
Lehman Brothers Aggregate Bond Index -0.82% +7.73% +7.70%
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 equity securities of foreign
issuers. Under normal market conditions, at least 65% of the Fund's total assets
are invested in common stocks or convertible securities of companies located in
at least three foreign countries. The Fund may invest in developed and in
emerging markets.
The selection of geographic regions is the primary decision in building the
investment portfolio. The percentage of the Fund's total assets invested in
particular countries or regions will charge according to their political
stability and economic condition.
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,
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.
o Identifying securities with sufficient liquidity in trading volume
(however, AEFC may invest up to 10% of the Fund's net assets in illiquid
securities).
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 may utilize
derivative instruments to produce incremental earnings and to increase
flexibility. The Fund also may invest in other instruments such as money market
securities, preferred stocks, convertible securities and debt securities (of any
rating).
During weak or declining markets or when growth opportunities are unavailable,
the Fund may invest more of its assets in money market securities. Investments
in U.S. issuers generally will constitute less than 20% of the Fund's total
assets. If, however, investments in foreign securities appear to be relatively
unattractive in AEFC's judgment, as a temporary defensive strategy, the Fund may
invest any portion of its assets in securities of U.S. issuers appearing to
offer opportunities for superior growth. Although the Fund will invest in these
securities primarily to avoid losses, this type of investing also could prevent
the Fund from achieving its investment objective. During these times, AEFC may
make frequent securities trades that could result in increased fees, expenses,
and taxes.
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 varied for each full calendar year shown on the
charge below and
o how the Fund's 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.
International Equity Portfolio Performance (based on calendar years)
+39.33% +23.85% +6.20% +21.52% +37.04%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
During the period shown in the bar chart, the highest return for a calendar
quarter was +28.11% (quarter ending December 1999) 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, 2000 was -2.95%.
Average Annual Total Returns (as of Dec. 31, 1999)
1 year 5 year Since inception
International Equity Portfolio +37.04% +25.00% +23.69%(a)
MSCI EAFE Index +25.27% +11.14% +9.79%(b)
(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 Morgan Stanley Capital International EAFE Index (MSCIEAFE) is an unmanaged
index compiled from a composite of securities markets of Europe, Australia and
the Far East, and is widely recognized by investors in foreign markets as the
measurement index for portfolios of non-North American securities. The index
reflects reinvestment of all distributions and changes in market prices, but
excludes brokerage commissions or other fees.
The securities included in the index may not be the same as those held by the
Fund.
MANAGEMENT
Peter Lamaison, co-manager of the Fund, joined AEFC in 1981 and has since served
as president, chief executive officer and chief investment officer of American
Express Asset Management International Inc. He served as portfolio manager of
AXPInternational Fund from its inception in 1984 until 1995. He reassumed this
position in September 1997 and has managed or co-managed AXPInternational
Fundever since. He currently also serves as co-manager of AXP Global Balanced
Fund and AXP Variable Portfolio - International Fund.
Ian King, co-manager of the Fund, joined AEFC in 1995. He also manages the
assets of Emerging Markets Portfolio, which is managed by AEFC and its
London-based subsidiary, American Express Asset Management International Inc. He
currently also is a member of the portfolio management team for Total Return
Portfolio and is co-manager of AXP Global Balanced Fund, AXP Variable Portfolio
- International Fund and AXP International Fund. Prior to joining AEFC, he was
director of Lehman Brothers Global Asset Management Ltd. from 1992 to 1995.
<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 investment strategy, the Fund also may invest in certain
other instruments, including derivatives (such as futures, options, and forward
contracts). AEFC may make frequent securities trades that could result in
increased fees, expenses and taxes.
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 varied for each full calendar year shown on the
chart below, and
o how the Fund's 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)
+8.39% +32.11% +10.34% +19.87% +0.66% +19.04% +14.52% +17.91% +14.43% +24.62%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
During the period shown in the bar chart, the highest return for a calendar
quarter was +18.58% (quarter ending December 1999) 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, 2000 was +8.22%.
<PAGE>
Average Annual Total Returns (as of Dec. 31, 1999)
1 year 5 years 10 years
Managed Portfolio +24.62% +18.05% +15.89%
S&P 500 Index +21.04% +28.56% +18.21%
Lipper Balanced Fund Index +8.98% +16.33% +12.26%
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
Jeanette Parr joined AEFC in 1992 as a fixed income analyst and serves as
portfolio manager. She began managing the fixed income portfolio of managed
portfolio in May 2000. She has been a member of the Advisory Fixed Income
Portfolio Management Team since 1998. Prior to that she served as associate
portfolio manager on the corporate account for investment grade bonds.
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 varied for each full calendar year shown on the
chart below, and
o how the Fund's 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)
+7.98% +5.60% +3.37% +2.66% +3.62% +5.22% +4.94% +5.09% +5.08% +4.72%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
During the period shown in the bar chart, the highest return for a calendar
quarter was +1.95% (quarter ending June 1990) 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, 2000 was +1.37%.
<PAGE>
Average Annual Total Returns (as of Dec. 31, 1999)
1 year 5 years 10 years
Money Market Portfolio +4.72% +5.01% +4.82%
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.
Fees and Expenses
Fund investors pay various expenses. The summary below describes the fees and
expenses that you would pay if you buy a variable life insurance policy and
allocate your premium payments to the subaccount that invests in the Fund.
SHAREHOLDER FEES (fees paid directly from your investment)
Because the Fund is the underlying investment vehicle for a variable life
insurance policy, there is no sales charge for the purchase or sale of Fund
shares. However, there may be charges associated with your life insurance
policy, including those that may be associated with surrender or withdrawal. Any
charges that apply to the subaccount and your policy are described in the life
insurance policy prospectus.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
o Management Fees
Each Fund pays IDS Life Insurance Company (IDS Life) a fee for managing its
assets. Under the Investment Management Services Agreement, the following fees
were paid as a percentage of average daily net assets for the most recent fiscal
year:
Fund Fee
Equity Portfolio 0.70%
Equity Income Portfolio 0.70%
Government Securities Portfolio 0.70%
Income Portfolio 0.70%
International Equity Portfolio 0.95%
Managed Portfolio 0.70%
Money Market Portfolio 0.50%
o Distribution (12b-1) Fees
The Fund has not adopted a plan under Rule 12b-1 of the Investment Company Act
of 1940.
o Other Expenses
Each Fund pays taxes, brokerage commissions and other nonadvisory expenses
including administrative and accounting services. 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.
<PAGE>
Buying and Selling Shares
VALUING FUND 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 all other Funds, the Fund's investments are valued based on market
quotations, or where market quotations are not readily available, based on
methods selected in good faith by the board. If the Fund's investment policies
permit it to invest in securities that are 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. Your purchase price will be the next NAV calculated after your request is
received by the Fund or an authorized insurance company.
For further information concerning minimum and maximum payments and submission
and 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 receive 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. Each realized
capital gain or loss is either long-term or short-term depending on the length
of time the Fund held the security. Realized capital gains or losses offset each
other. The Fund offsets any net realized capital gains by any available capital
loss carryovers. Net short-term capital gains are included in net investment
income. 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 automatically reinvested in additional Fund shares,
the total value of your holdings will not change. The reinvestment price is the
next calculated NAV after the distribution is paid.
TAXES
The Fund intends to comply with the regulations relating to the diversification
requirements under section 817(h) of the Internal Revenue Code.
Important: This information is a brief and selective summary of some of the tax
rules that apply to the Fund. Because tax matters are highly individual and
complex, you should consult a qualified tax advisor.
Federal income taxation of variable account or subaccounts, life insurance
companies and variable life insurance policiesis discussed in your variable life
insurance policy prospectus.
<PAGE>
Other Information
ABOUT IDS LIFE AND AEFC
IDS Life is a stock life insurance company organized in 1957 under the laws of
the State of Minnesota and located at 200 AXP Financial Center, Minneapolis,
MN55474. IDS Life conducts a conventional life insurance business in the
District of Columbia and all states except New York.
IDS Life is a wholly-owned subsidiary of AEFC, which itself is a wholly-owned
subsidiary of American Express Company, a financial services company with
headquarters at American Express Tower, World Financial Center, New York, NY
10285. 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 the end of the most recent fiscal year managed more than $228 billion in
assets.
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
Equity Portfolio
Fiscal period ended April 30,
--------------------------------------------------------------------------------------------------------------------
Per share income and capital changes(a)
<S> <C> <C> <C> <C> <C>
2000 1999 1998 1997 1996
Net asset value, beginning of period $27.80 $33.96 $23.52 $29.34 $20.05
---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.18) (.06) (.08) .05 .03
Net gains (losses) (both realized and unrealized) 20.10 (1.17) 11.55 (1.34)
9.30
---------------------------------------------------------------------------------------------------------------------------
Total from investment operations 19.92 (1.23) 11.47 (1.29) 9.33
Less distributions:
Dividends from net investment income -- -- -- (.05) (.03)
Distributions from realized gains -- (4.93) (1.03) (4.48) (.01)
---------------------------------------------------------------------------------------------------------------------------
Total distributions -- 4.93) (1.03) (4.53) (.04)
---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $47.72 $27.80 $33.96 $23.52 $29.34
---------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data
Net assets, end of period $1,714,508 $988,937 $933,817 $551,518 $448,412
(in thousands)
---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average .72% .73% .72% .76% .76%
daily net assets(b)
---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (.46%) (.26%) (.29%) .21% .15%
to average daily net assets
---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding 126% 130% 147% 231%
short-term securities)
---------------------------------------------------------------------------------------------------------------------------
Total return(c) 71.66% (2.80%) 49.52% (3.66%) 46.63%
---------------------------------------------------------------------------------------------------------------------------
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
c Total return does not reflect the expenses that apply to the subaccounts or
the policies.
<PAGE>
Equity Income Portfolio
Fiscal period ended April 30,
---------------------------------------------------------------------------------------------------------------------------
Per share income and capital changes(a)
2000(b)
Net asset value, beginning of period $10.00
---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .05
Net gains (losses) (both realized and unrealized) (.46)
---------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.41)
Less distributions:
Dividends from net investment income (.05)
---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.54
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data
Net assets, end of period (in thousands) $2,286
---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(c,d) .81%e
---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average 1.15%e
daily net assets
---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 20.07%
---------------------------------------------------------------------------------------------------------------------------
Total return(f) (4.12%)
---------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from June 17, 1999 (commencement of operations) to April 30,
2000.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) IDS Life voluntarily limited total operating expenses. Had IDSLife not done
so, the ratio of expenses to average daily net assets would have been 3.91%
for the period ended April 30, 2000.
(e) Adjusted to an annual basis.
(f) Total return does not reflect the expenses that apply to the subaccounts or
the policies.
<PAGE>
Government Securities Portfolio
Fiscal period ended April 30,
---------------------------------------------------------------------------------------------------------------------------
Per share income and capital changes(a)
2000 1999 1998 1997 1996
Net asset value, beginning of period $10.13 $10.18 $9.87 $9.98 $9.85
---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .52 .53 .56 .59 .61
Net gains (losses) (both realized (.44) .04 .42 (.03) .13
and unrealized)
---------------------------------------------------------------------------------------------------------------------------
Total from investment operations .08 .57 .98 .56 .74
---------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (.53) (.53) (.56) (.59) (.61)
Distributions from realized gains (.04) (.09) (.11) (.08) --
---------------------------------------------------------------------------------------------------------------------------
Total distributions (.57) (.62) (.67) (.67) (.61)
Net asset value, end of period $9.64 $10.13 $10.18 $9.87 $9.98
---------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data
Net assets, end of period $18,491 $21,935 $14,607 $13,377 $12,464
(in thousands)
---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily .81% .80% .80% .80% .80%
net assets(b,c)
Ratio of net investment income (loss) 5.40% 5.19% 5.57% 5.88% 5.98%
to average daily net
---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding 123% 89% 82% 62% 38%
short-term securities)
---------------------------------------------------------------------------------------------------------------------------
Total return(d) .86% 5.73% 10.11% 5.83% 7.45%
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) IDS Life voluntarily limited total operating expenses. Had IDS Life not
done so, the ratio of expenses to average daily net assets would have been
0.87%, 0.89%, 0.85% and 0.88% for the years ended April 30, 1999, 1998,
1997 and 1996, respectively.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Total return does not reflect the expenses that apply to the subaccounts or
the policies.
<PAGE>
Income Portfolio
Fiscal period ended April 30,
---------------------------------------------------------------------------------------------------------------------------
Per share income and capital changes(a)
2000 1999 1998 1997 1996
Net asset value, beginning of period $9.89 $10.28 $10.03 $9.93 $9.64
---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .64 .67 .69 .68 .68
Net gains (losses) (both realized (.67) (.32) .29 .10 .29
and unrealized)
---------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.03) .35 .98 .78 .97
---------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (.64) (.67) (.69) (.68) (.68)
Distributions from realized gains -- (.07) (.04) -- --
Excess distributions from net (.05) -- -- -- --
investment income
---------------------------------------------------------------------------------------------------------------------------
Total distributions (.69) (.74) (.73) (.68) (.68)
---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.17 $9.89 $10.28 $10.03 $9.93
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data
Net assets, end of period $92,351 $97,578 $82,773 $66,745 $54,976
(in thousands)
---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily .74% .75% .74% .80% .80%
net assets(b)
---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) 6.71% 6.65% 6.69% 6.73% 6.72%
to average daily net assets
---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding 50% 22% 94% 106% 36%
short-term securities)
---------------------------------------------------------------------------------------------------------------------------
Total return(c) (.25%) 3.52% 9.97% 8.08% 10.03%
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Total return does not reflect the expenses that apply to the subaccounts or
the policies.
<PAGE>
International Equity Portfolio
Fiscal period ended April 30,
---------------------------------------------------------------------------------------------------------------------------
Per share income and capital changes(a)
2000 1999 1998 1997 1996
Net asset value, beginning of period $19.04 $18.33 $14.73 $16.35 $10.29
---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .13 .18 .08 .14 .11
Net gains (losses) (both realized 3.13 1.32 4.06 (.24) 6.08
and unrealized)
---------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.26 1.50 4.14 (.10) 6.19
---------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (.12) (.17) (.07) (.15) (.13)
Excess distributions from net -- -- (.05) -- --
investment income
Distributions from realized gains (.36) (.62) (.42) (1.37) --
---------------------------------------------------------------------------------------------------------------------------
Total distributions (.48) (.79) (.54) (1.52) (.13)
Net asset value, end of period $21.82 $19.04 $18.33 $14.73 $16.35
---------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data
Net assets, end of period $379,213 $283,001 $217,573 $125,874 $52,061
(in thousands)
---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily 1.02% 1.05% 1.05% 1.05% 1.05%
net assets(b,c)
Ratio of net investment income (loss) .60% 1.01% .49% .73% .92%
to average daily net assets
---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding 124% 67% 172% 151% 172%
short-term securities)
---------------------------------------------------------------------------------------------------------------------------
Total return(d) 17.44% 8.27% 28.41% (.54%) 60.47%
---------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) IDS Life voluntarily limited total operating expenses. Had IDS Life not
done so, the ratio of expenses to average daily net assets would have been
1.06%, 1.22% and 1.32% for the periods ended April 30, 1998, 1997 and 1996,
respectively.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Total return does not reflect the expenses that apply to the subaccounts or
the policies.
<PAGE>
Managed Portfolio
Fiscal period ended April 30,
---------------------------------------------------------------------------------------------------------------------------
Per share income and capital changes(a)
2000 1999 1998 1997 1996
Net asset value, beginning of period $20.08 $19.81 $17.16 $16.49 $14.11
---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .40 .41 .47 .57 .57
Net gains (losses) (both realized 3.69 1.49 3.92 1.37 2.51
and unrealized)
---------------------------------------------------------------------------------------------------------------------------
Total from investment operations 4.09 1.90 4.39 1.94 3.08
Less distributions:
Dividends from net investment income (.40) (.41) (.47) (.57) (.57)
Distributions from realized gains (.21) (1.22) (1.27) (.70) (.13)
---------------------------------------------------------------------------------------------------------------------------
Total distributions (.61) (1.63) (1.74) (1.27) (.70)
Net asset value, end of period $23.56 $20.08 $19.81 $17.16 $16.49
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data
Net assets, end of period $826,549 $685,154 $580,697 $410,737 $316,732
(in thousands)
---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average .72% .74% .72% .75% .78%
daily net assets(b)
---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) 1.87% 2.23% 2.60% 3.46% 3.73%
to average daily net assets
---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding 63% 96% 112% 100% 83%
short-term securities)
---------------------------------------------------------------------------------------------------------------------------
Total return(c) 20.79% 10.52% 26.70% 12.45% 22.28%
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Total return does not reflect the expenses that apply to the subaccounts or
the policies.
<PAGE>
Money Market Portfolio
Fiscal period ended April 30,
---------------------------------------------------------------------------------------------------------------------------
Per share income and capital changes(a)
2000 1999 1998 1997 1996
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 .05
---------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (.05) (.05) (.05) (.05) (.05)
---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data
Net assets, end of period $57,143 $45,564 $34,373 $28,546 $14,318
(in thousands)
---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average .59% .60% .60% .60% .60%
daily net assets(b,c)
Ratio of net investment income (loss) 4.99% 4.72% 5.04% 4.81% 5.04%
to average daily net assets
---------------------------------------------------------------------------------------------------------------------------
Total return(d) 5.11% 4.84% 5.16% 4.91% 5.13%
---------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) IDS Life voluntarily limited total operating expenses. Had IDS Life not
done so, the ratio of expenses to average daily net assets would have been
0.64% and 0.73% for the years ended April 30, 1997 and 1996, respectively.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Total return does not reflect the expenses that apply to the subaccounts or
the policies.
The information in these tables has been audited by KPMG LLP, independent
auditors. The independent auditors' report and additional information about the
performance of the Fund are contained in the Fund's annual report which, if not
included with this prospectus, may be obtained without charge.
</TABLE>
<PAGE>
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.
200 AXP Financial Center,
Minneapolis, MN 55474
800-862-7919 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 P (6/00)
<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 the "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 30, 2000
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., 200 AXP Financial Center, Minneapolis,
MN 55474 or by calling 800-862-7919.
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. 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. 35
Brokerage Commissions Paid to Brokers Affiliated with IDS Life.............p. 37
Performance Information....................................................p. 38
Valuing Fund Shares........................................................p. 40
Selling Shares.............................................................p. 42
Capital Loss Carryover.....................................................p. 42
Taxes......................................................................p. 42
Agreements.................................................................p. 43
Organizational Information.................................................p. 44
Board Members and Officers.................................................p. 46
Compensation for Board Members.............................................p. 48
Independent Auditors.......................................................p. 49
Appendix: Description of Ratings..........................................p. 50
<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.
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%.
o Concentrate its investments 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 Act of
1940.
<PAGE>
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 the 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.
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 securities of an issuer if the officers and directors of the Fund, AEFC
and the Advisor hold more than a certain percent of the issuer's
outstanding securities. If the holdings of all officers and directors of
the Fund and of AEFC who own more than 0.5% of an issuer's securities are
added together and if in total they own more than 5%, the Fund will not
purchase securities of that issuer.
<PAGE>
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.
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.
<PAGE>
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 of
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.
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%.
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.
<PAGE>
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.
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.
<PAGE>
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 Invest in exploration or development programs, such as oil, gas or mineral
programs.
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?
-----------------------------------------------------------------------------------------------------------------------
Investment strategies & types of Equity Equity Government Income International Managed Money
investments: portfolio Income Securities Portfolio Equity Portfolio Market
Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------------
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 yes 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.
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.
<PAGE>
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.
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.
<PAGE>
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.
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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. 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. Junk bonds have greater price fluctuations and are
more likely to experience a default than investment grade bonds.
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.
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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). In general, the longer the maturity of a bond, the higher its yield and
the greater its sensitivity to changes in interest rates.
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.
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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 income or principal at
the same rate 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.
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.
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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.
See the appendix for a discussion of money market securities and 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.
<PAGE>
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 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.
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.
<PAGE>
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 $1,000; (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.
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.)
All ratings limitations are applied at the time of purchase. Subsequent to
purchase, a debt security may cease to be rated or its rating may be reduced
below the minimum required for purchase by the Fund. Neither event will require
the sale of such a security, but it will be a factor in considering whether to
continue to hold the security. To the extent that ratings change as a result of
changes in a rating organization or their rating systems, the Fund will attempt
to use comparable ratings as standards for selecting investments.
See the appendix for a discussion of securities ratings.
<PAGE>
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. In addition, ADR holders may not have all the legal rights of
shareholders and may experience difficulty in receiving shareholder
communications. (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.
Derivative Instruments
Derivative instruments are commonly defined to include securities or contracts
whose values depend, in whole or in part, 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 percentage 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 for the length of the contract 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 during the length of the contract, 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.
<PAGE>
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.
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 a buyer
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.
<PAGE>
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.
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. If the
Fund is using short futures contracts for hedging purposes, the Fund may be
required to defer recognizing losses incurred on short futures contracts and on
underlying securities.
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.
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.
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
<PAGE>
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.
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 derivatives 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
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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.
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
<PAGE>
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.
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 option, write a call option on the
relevant currency. If the expected decline occurs, the option will most likely
not be exercised and the diminution in value of securities will be fully or
partially offset by the amount of the premium received.
As in the case of other types of options, however, the writing of a foreign
currency option will constitute only a partial hedge up to the amount of the
premium, and only if rates move in the expected direction. If this does not
occur, the option may be exercised and the 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.
<PAGE>
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.
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.
<PAGE>
Foreign Securities
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 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 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
transition 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.
<PAGE>
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.
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.
<PAGE>
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.
To the extent the Fund invests in illiquid or restricted securities, it may
encounter difficulty in determining a market value for such securities.
Disposing of illiquid or restricted securities may involve time-consuming
negotiations and legal expense, and it may be difficult or impossible for the
Fund to sell such an investment promptly and at an acceptable price.
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.
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, the Fund 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
<PAGE>
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.
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.
<PAGE>
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.
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, possessions, or sovereign nations within territorial boundaries of
the United States (including the District of Columbia and Puerto Rico). 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.)
Taxable Municipal Obligations. There is another type of municipal obligation
that is subject to federal income tax for a variety of reasons. These municipal
obligations do not qualify for the federal income exemption because (a) they did
not receive necessary authorization for tax-exempt treatment from state or local
government authorities, (b) they exceed certain regulatory limitations on the
cost of issuance for tax-exempt financing or (c) they finance public or private
activities that do not qualify for the federal income tax exemption. These
non-qualifying activities might include, for example, certain types of
multi-family housing, certain professional and local sports facilities,
refinancing of certain municipal debt, and borrowing to replenish a
municipality's underfunded pension plan.
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.
<PAGE>
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.
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 at the time of replacement. 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 future date. 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 between the date of the short
sale and the date on which the borrowed security is replaced, the investor loses
the opportunity to participate in the gain. A "short sale against the box" will
result in a constructive sale of appreciated securities thereby generating
capital gains to the Fund.
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.)
<PAGE>
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.
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. In addition, when the Fund engages in forward commitment and
when-issued transactions, it relies on the counterparty to consummate the
transaction. The failure of the counterparty to consummate the transaction may
result in the Fund losing the opportunity to obtain a price and yield considered
to be advantageous.
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 American Express Financial Corporation, AEFC to execute trades and
negotiate commissions on its behalf. 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.
The Fund, AEFC, and IDS Life each have 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 with respect to the Fund and
the other funds for which they act as investment managers.
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 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
<PAGE>
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> <C>
Equity Government International Money
April 30, Equity Income Securities Income Equity Managed Market
2000 $1,667,398 $1,290 $ -0- $1,063 $1,482,400 $472,759 $ -0-
1999 1,545,000 -0- -0- -0- 2,881,012 816,300 -0-
1998 878,000 -0- -0- -0- 1,638,191 464,162 -0-
</TABLE>
In fiscal year 2000, the following transactions and commissions were
specifically directed to firms in exchange for research services:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Equity Government International Money
Equity Income Securities Income Equity Managed Market
Transactions 60,000 200 -0- -0- -0- -0- -0-
Commissions $3,600 $12 $ -0- $ -0- $ -0- $ -0- $ -0-
</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.
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:
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Value of Securities
Fund Name of Issuer owned at End of Fiscal Year
Equity LaBranche $7,345,144
Equity Income Bank of America 28,517
Chase Manhattan 9,440
FleetBoston Financial 20,766
Morgan Stanley 22,258
Income Fleet Financial Group 204,425
LaBranche 246,250
Merrill Lynch 96,746
Morgan Stanley 362,392
International Equity Fleet Funding 795,439
Managed Goldman Sachs Group 493,582
Merrill Lynch 977,733
Travelers Group 475,032
Schwab (Charles) 8,900,000
Money Market Bank of America 2,378,517
Bear Stearns 1,883,021
Merrill Lynch 2,482,544
Salomon Smith Barney 1,988,909
</TABLE>
The portfolio turnover rates for the two most recent fiscal years were as
follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Equity Government International
April 30, Equity Income Securities Income Equity Managed
2000 126% 20% 123% 50% 124% 63%
1999 130 -0- 89 22 67 96
</TABLE>
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.
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:
<PAGE>
<TABLE>
<CAPTION>
As of the end of Fiscal Year,
2000 1999 1998
------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Percent of
Aggregate
Aggregate Dollar Aggregate Aggregate
Dollar Amount of Dollar Dollar
amount of Percent of Transactions Amount of Amount of
Fund Commissions Aggregate Involving Commissions Commissions
Nature of Paid to Brokerage Payment of Paid to Paid to
Broker Affiliation Broker Commissions Commissions Broker Broker
Equity American * $5,790 0.35% 1.17% $9,828 $17,813
Enterprise
Investment
Services
Inc.
Equity Income American * 11 0.82 1.23 -0- -0-
Enterprise
Investment
Services
Inc.
Managed American * 2,700 0.57 1.36 3,702 6,710
Enterprise
Investment
Services
Inc.
*Wholly-owned subsidiary of the Advisor.
</TABLE>
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, made 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
<PAGE>
where: P = a hypothetical initial payment of $1,000
ERV = ending redeemable value of a hypothetical $1,000 payment,
made at the beginning of a period, at the end of the period
(or fractional portion thereof)
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
Annualized yield based on the 30-day period ending April 28, 2000 for Government
Securities Portfolio was 5.51% and Income Portfolio's yield was 6.66%, 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) x (365/7) - 1
The Fund's simple annualized yield was 7.25% and its compound yield was 7.51%
for the seven-day period ending April 28, 2000.
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,
<PAGE>
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.
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 Business 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. The Fund also may compare its
performance to a wide variety of indexes or averages. There are similarities and
differences between the investments that the Fund may purchase and the
investments measured by the indexes or averages and the composition of the
indexes or averages will differ from that of the Fund.
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.
As of the end of the most recent fiscal year, the computation looked like this:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value
Fund Net assets Shares outstanding of one share
-------------------- ---------------- ----------------- ----------------- ----------------- -----------------
Equity $1,714,507,708 divided by 35,929,904 Equals $47.72
Equity Income 2,286,342 239,688 9.54
Government Securities 18,491,337 1,919,080 9.64
Income 92,351,404 10,073,986 9.17
International Equity 379,212,820 17,381,526 21.82
Managed 826,548,958 35,087,408 23.56
</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.)
<PAGE>
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.
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.
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
<PAGE>
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.
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 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, Equity Income, Government Securities and Income
Portfolios had total capital loss carryovers of $13,419, $317,758 and
$2,761,039, 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 2009
---- ---------- ---------- -------------
Equity Income $ -0- $ 4,009 $ 9,410
Government Securities -0- 252,416 65,342
Income 167,205 411,295 2,182,539
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
portfolio. 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 on the last day of the
most recent fiscal year was $9,965,485 for Equity, $5,680 for Equity Income,
$148,303 for Government Securities, $664,467 for Income, $3,162,742 for
International Equity, $5,215,075 for Managed, and $288,994 for Money Market. The
total amount paid fiscal year ended April 30, 1999 was $6,157,181 for Equity,
$630,775 for Income, $187,130 for Money Market, $4,211,867 for Managed, $116,139
for Government Securities and $2,302,001 for International Equity. The total
amount paid fiscal year ended April 30, 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.
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
portfolio. 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.
The Advisor has agreed to a voluntary limit of 0.1% on an annual basis, of the
average daily net assets of each of the IDS Life Series Fund Portfolios for
these nonadvisory expenses, even though actual expenses on IDS Life Series
Fund-Government Securities Portfolio ranged up to 0.15%, IDS Life Series
Fund-Money Market Portfolio ranged up to 0.14% and IDS Life Series
Fund-International Equity Portfolio ranged up to 0.27%. The Advisor reserves the
right to discontinue limiting these nonadvisory expenses at 0.1%. However, its
present intention is to continue the limit until the time that actual expenses
are less than the limit.
Investment Advisory Agreement
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 $7,031,274 for investment advice for fiscal year 2000,
$4,911,181 for fiscal year 1999, and $4,060,601 for fiscal year 1998.
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 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 200 AXP Financial Center, Minneapolis, MN 55474.
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>
<TABLE>
<CAPTION>
FUND HISTORY TABLE FOR FUNDS MANAGED BY IDS LIFE
<S> <C> <C> <C> <C> <C>
Date of Form of State of Fiscal Diversified
Organization Organization Organization Year End
----------------------------------- ------------- ------------ ------------- ------------- -------------
IDS Life Series Fund, Inc. 5/8/85 Corporation MN 4/30
Equity Portfolio Yes
Equity Income Portfolio Yes
Government Securities Yes
Portfolio
Income Portfolio Yes
International Equity Portfolio Yes
Managed Portfolio Yes
Money Market Portfolio Yes
----------------------------------- ------------- ------------ ------------- ------------- -------------
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 - Yes
Federal Income Fund
AXP Variable Portfolio - No
Global Bond Fund
----------------------------------- ------------- ------------ ------------- ------------- -------------
AXP Variable Portfolio - 4/27/81, Corporation NV/MN 8/31
Investment Series, Inc. 6/13/86*
AXP Variable Portfolio - Blue Yes
Chip Advantage Fund
AXP Variable Portfolio - Yes
Capital Resource Fund
AXP Variable Portfolio - Yes
Emerging Markets Fund
AXP Variable Portfolio - Yes
Growth Fund
AXP Variable Portfolio Yes
-International Fund
AXP Variable Portfolio - New Yes
Dimensions Fund
AXP Variable Portfolio - Small Yes
Cap Advantage Fund
AXP Variable Portfolio - S & P No
500 Index Fund
AXP Variable Portfolio - Yes
Strategy Aggressive Fund
----------------------------------- ------------- ------------ ------------- ------------- -------------
AXP Variable Portfolio - Managed 3/5/85 Corporation MN 8/31
Series, Inc.
AXP Variable Portfolio - Yes
Diversified Equity Income Fund
AXP Variable Portfolio - Yes
Managed Fund
----------------------------------- ------------- ------------ ------------- ------------- -------------
AXP Variable Portfolio - Money 4/27/81, Corporation NV/MN 8/31
Market Series, Inc. 6/13/86*
AXP Variable Portfolio - Cash Yes
Management Fund
----------------------------------- ------------- ------------ ------------- ------------- -------------
* Date merged into a Minnesota corporation.
</TABLE>
<PAGE>
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.
Timothy V. Bechtold
Born in 1953
200 AXP Financial center
Minneapolis, MN
Vice President - Rick Management Products, AEFC. Executive Vice President - Risk
Management Products, IDS Life. Director, IDS Life Series Fund, Inc.
Richard W. Kling*
Born in 1940
200 AXP Financial Center
Minneapolis, MN
President and director, IDS Life Series Fund, Inc. President, Chairman of the
Board and director, IDS Life Variable Annuity Funds A&B. President, Chief
Executive Officer and director, IDS Life. Senior Vice President - Insurance
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.
<PAGE>
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
200 AXP Financial Center
Minneapolis, MN
Vice President - Investments
Vice President--Insurance Investments, AEFC. Vice President--Investments, IDS
Life.
Jeffrey S. Horton
Born in 1961
200 AXP Financial Center
Minneapolis, MN
Vice President and Treasurer
Vice President and Corporate Treasurer, AEFC. Vice President and Treasurer, IDS
Life.
Paul F. Kolkman
Born in 1946
200 AXP Financial Center
Minneapolis, MN
Vice President and Chief Actuary
Vice President--Actuarial Finance, AEFC. Director and Executive Vice President,
IDS Life.
Timothy S. Meehan
Born in 1957
200 AXP Financial Center
Minneapolis, MN
Secretary
Secretary, AEFC.
Frederick C. Quirsfeld
Born in 1947
Minneapolis, MN
Vice President - Investments
Senior Vice President - Fixed Income, AEFC.
William A. Stoltzmann
Born in 1948
200 AXP Financial Center
Minneapolis, MN
General Counsel and Assistant Secretary
Vice President and Assistant General Counsel, AEFC. Vice President, General
Counsel and Secretary, IDS Life.
<PAGE>
Philip C. Wentzel
Born in 1961
200 AXP Financial Center
Minneapolis, MN
Controller
Vice President and Controller, IDS Life.
COMPENSATION FOR BOARD MEMBERS
<TABLE>
<CAPTION>
During the most recent fiscal year, the independent members of the Fund board,
for attending up to __ meetings, received the following compensation:
<S> <C> <C>
Compensation Table
for Equity Portfolio
Total cash compensation from
Board member Aggregate IDS Life Series Fund, Inc. and
compensation from the Fund IDS Life Variable Annuity
Fund A and Fund B
Rodney P. Burwell $2,000 $4,000
Jean B. Keffeler 2,000 4,000
Thomas R. McBurney 1,500 3,000
Compensation Table
for Equity Income Portfolio
Total cash compensation from
Board member Aggregate IDS Life Series Fund, Inc. and
compensation from the Fund IDS Life Variable Annuity
Fund A and Fund B
Rodney P. Burwell $2,000 $4,000
Jean B. Keffeler 2,000 4,000
Thomas R. McBurney 1,500 3,000
Compensation Table
for Government Securities Portfolio
Total cash compensation from
Board member Aggregate IDS Life Series Fund, Inc. and
compensation from the Fund IDS Life Variable Annuity
Fund A and Fund B
Rodney P. Burwell $2,000 $4,000
Jean B. Keffeler 2,000 4,000
Thomas R. McBurney 1,500 3,000
Compensation Table
for Income Portfolio
Total cash compensation from
Board member Aggregate IDS Life Series Fund, Inc. and
compensation from the Fund IDS Life Variable Annuity
Fund A and Fund B
Rodney P. Burwell $2,000 $4,000
Jean B. Keffeler 2,000 4,000
Thomas R. McBurney 1,500 3,000
Compensation Table
for International Equity Portfolio
Total cash compensation from
Board member Aggregate IDS Life Series Fund, Inc. and
compensation from the Fund IDS Life Variable Annuity
Fund A and Fund B
Rodney P. Burwell $2,000 $4,000
Jean B. Keffeler 2,000 4,000
Thomas R. McBurney 1,500 3,000
<PAGE>
Compensation Table
for Managed Portfolio
Total cash compensation from
Board member Aggregate IDS Life Series Fund, Inc. and
compensation from the Fund IDS Life Variable Annuity
Fund A and Fund B
Rodney P. Burwell $2,000 $4,000
Jean B. Keffeler 2,000 4,000
Thomas R. McBurney 1,500 3,000
Compensation Table
for Money Market Portfolio
Total cash compensation from
Board member Aggregate IDS Life Series Fund, Inc. and
compensation from the Fund IDS Life Variable Annuity
Fund A and Fund B
Rodney P. Burwell $2,000 $4,000
Jean B. Keffeler 2,000 4,000
Thomas R. McBurney 1,500 3,000
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.
</TABLE>
INDEPENDENT AUDITORS
The financial statements contained in the Annual Report were audited by
independent auditors, KPMG 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.
<PAGE>
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.
Debt rated BB has less near-term vulnerability to default than other speculative
issues. However, it faces major ongoing uncertainies 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.
<PAGE>
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.
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.
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.
<PAGE>
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.
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.
<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, Equity Income,
Government Securities, Income, International Equity, Managed and Money Market
Portfolios of IDS Life Series Fund, Inc. as of April 30, 2000, 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, 2000,
and the financial highlights for each of the years in the five-year period ended
April 30, 2000 (period from June 17, 1999, commencement of operations, to April
30, 2000 for Equity Income 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 auditing standards generally accepted
in the United States of America. 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. Our procedures included confirmation of
securities owned as of April 30, 2000, by correspondence with the custodian and
brokers. 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, Equity Income, Government Securities, Income, International Equity,
Managed and Money Market Portfolios of IDS Life Series Fund, Inc. as of April
30, 2000 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 accounting principles generally accepted in the United States of
America.
/s/ KPMG LLP
KPMG LLP
Minneapolis, Minnesota
June 2, 2000
<PAGE>
<TABLE>
<CAPTION>
Financial Statements
Statements of assets and liabilities
IDS Life Series Fund, Inc.
Equity Equity Government Income
Portfolio Income Securities Portfolio
April 30, 2000 Portfolio Portfolio
Assets
Investments in securities, at value (Note 1):
(identified cost $1,193,769,069, $2,097,545,
<S> <C> <C> <C> <C> <C>
$18,256,560 and $100,575,355, respectively) $1,711,936,630 $2,136,207 $17,802,302 $95,354,398
Cash in bank on demand deposit 284,120 154,249 455,256 72,800
Receivable for investment securities sold 27,046,114 1,966 916,879 595,480
Dividends and accrued interest receivable 426,147 2,215 184,786 1,653,343
Unrealized appreciation on foreign currency contracts
held, at value (Notes 1 and 5) -- -- -- 20,538
------------ --------- ---------- ------
Total assets 1,739,693,011 2,294,637 19,359,223 97,696,559
------------- --------- ---------- ----------
Liabilities
Dividends payable to shareholders (Note 1) -- 6,837 82,087 495,098
Payable for investment securities purchased 24,144,358 -- 770,298 4,786,185
Accrued investment management services fee 941,033 1,143 10,181 50,323
Other accrued expenses 99,912 315 5,320 13,549
------ --- ----- ------
Total liabilities 25,185,303 8,295 867,886 5,345,155
---------- ----- ------- ---------
Net assets applicable to outstanding capital stock $1,714,507,708 $2,286,342 $18,491,337 $92,351,404
============== ========== =========== ===========
Represented by
Capital stock-- $.001 par value (Note 1) $ 35,930 240 $ 1,919 $ 10,074
Additional paid-in capital 819,990,392 2,261,135 19,272,799 100,807,535
Undistributed (excess of distributions over)
net investment income -- -- (11,365) (498,739)
Accumulated net realized gain (loss) (Note 7) 376,313,825 (13,695) (317,758) (2,766,844)
Unrealized appreciation (depreciation) on
investments and on translation of assets and
liabilities in foreign currencies (Note 5) 518,167,561 38,662 (454,258) (5,200,622)
----------- ------ -------- ----------
Total-- representing net assets applicable to
outstanding capital stock $1,714,507,708 $2,286,342 $18,491,337 $92,351,404
============== ========== =========== ===========
Shares outstanding 35,929,904 239,688 1,919,080 10,073,986
---------- ------- --------- ----------
Net asset value per share of outstanding capital stock $ 47.72 $ 9.54 $ 9.64 $ 9.17
-------------- ---------- ----------- -----------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of assets and liabilities (continued)
IDS Life Series Fund, Inc.
International Managed Money
Equity Portfolio Market
April 30, 2000 Portfolio Portfolio
Assets
Investments in securities, at value (Note 1):
(identified cost $345,170,683, $588,566,488 and
<S> <C> <C> <C>
$57,390,115, respectively) $380,283,848 $829,347,495 $57,390,115
Cash in bank on demand deposit 99,693 93,256 102,833
Receivable for investment securities sold 49,322 942,746 --
Dividends and accrued interest receivable 1,075,275 4,124,345 --
Total assets 381,508,138 834,507,842 57,492,948
Liabilities
Dividends payable to shareholders (Note 1) -- 3,217,605 273,643
Payable for investment securities purchased 1,930,985 4,243,160 --
Accrued investment management services fee 279,330 442,473 22,764
Unrealized depreciation on foreign currency contracts
held, at value (Notes 1 and 5) 24,545 -- --
Other accrued expenses 60,458 55,646 53,087
------ ------ ------
Total liabilities 2,295,318 7,958,884 349,494
--------- --------- -------
Net assets applicable to outstanding capital stock $379,212,820 $826,548,958 $57,143,454
============ ============ ===========
Represented by
Capital stock-- $.001 par value (Note 1) $ 17,382 $ 35,087 $ 57,187
Additional paid-in capital 283,267,337 553,419,412 57,125,531
Undistributed (excess of distributions over) net investment income 24,545 (307,323) (37,940)
Accumulated net realized gain (loss) (Note 7) 60,855,208 32,620,775 (1,324)
Unrealized appreciation (depreciation) on investments and on translation
of assets and liabilities in foreign currencies (Note 5) 35,048,348 240,781,007 --
---------- ----------- ------------
Total-- representing net assets applicable to outstanding capital stock $379,212,820 $826,548,958 $57,143,454
============ ============ ===========
Shares outstanding 17,381,526 35,087,408 57,186,832
---------- ---------- ----------
Net asset value per share of outstanding capital stock $ 21.82 $ 23.56 $ 1.00
------------ ------------ -----------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of operations
IDS Life Series Fund, Inc.
Equity Equity Government Income
Portfolio Income Securities Portfolio
Year ended April 30, 2000 Portfolio* Portfolio
Investment income
Income:
<S> <C> <C> <C> <C>
Dividends $ 1,397,053 $ 12,160 $ -- $ 24,973
Interest 2,335,915 3,774 1,309,406 7,046,056
Less foreign taxes withheld (13,347) -- -- (564)
------- ------ --------- ----
Total income 3,719,621 15,934 1,309,406 7,070,465
Expenses (Note 2):
Investment management and services fee 9,965,485 5,680 148,303 664,467
Custodian fees 122,477 16,940 13,068 18,068
Audit fees 15,750 9,000 9,000 10,500
Directors fees 5,044 -- 54 224
Printing and postage 150,785 300 1,394 6,866
Other 18,938 -- -- 2,832
------ ------- ------- -----
Total expenses 10,278,479 31,920 171,819 702,957
Less expenses voluntarily reimbursed by IDS Life -- (25,278) -- --
---------- ------- ------- ------
10,278,479 6,642 171,819 702,957
Earnings credits on cash balances (Note 2) (10,995) (111) (7,272) (12,648)
------- ---- ------ -------
Total expenses-- net 10,267,484 6,531 164,547 690,309
---------- ----- ------- -------
Investment income (loss)-- net (6,547,863) 9,403 1,144,859 6,380,156
---------- ----- --------- ---------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 468,338,406 (13,695) (317,546) (1,782,898)
Foreign currency transactions 7,803 20 -- 355
Options contracts written (Note 6) 6,561,914 -- -- --
--------- ------ ------- ------
Net realized gain (loss) on investments 474,908,123 (13,675) (317,546) (1,782,543)
Net change in unrealized appreciation (depreciation)
on investments and on translation of assets and
liabilities in foreign currencies 248,810,072 38,662 (693,043) (4,849,711)
Net gain (loss) on investments and foreign currencies 723,718,195 24,987 (1,010,589) (6,632,254)
Net increase (decrease) in net assets resulting
from operations $717,170,332 $ 34,390 $ 134,270 $ (252,098)
============ ======== ============ ============
*For the period from June 17, 1999 (commencement of operations) to April 30,
2000.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of operations (continued)
IDS Life Series Fund, Inc.
International Managed Money
Equity Portfolio Market
Year ended April 30, 2000 Portfolio Portfolio
Investment income
Income:
<S> <C> <C> <C>
Dividends $ 3,681,038 $ 1,982,817 $ --
Interest 1,878,464 17,372,345 3,227,248
Less foreign taxes withheld (187,565) (15,194) --
-------- ------- ------
Total income 5,371,937 19,339,968 3,227,248
--------- ---------- ---------
Expenses (Note 2):
Investment management and services fee 3,162,742 5,215,075 288,994
Custodian fees 116,817 67,516 17,816
Audit fees 13,000 15,000 7,750
Directors fees 1,018 3,871 240
Printing and postage 57,637 63,501 14,721
Other 37,379 17,561 12,420
------ ------ ------
Total expenses 3,388,593 5,382,524 341,941
Earnings credits on cash balances (Note 2) (7,267) (5,628) (3,999)
------ ------ ------
Total expenses-- net 3,381,326 5,376,896 337,942
--------- --------- -------
Investment income (loss)-- net 1,990,611 13,963,072 2,889,306
--------- ---------- ---------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 61,076,534 35,280,815 (330)
Financial futures contracts -- (4,485,642) --
Foreign currency transactions (273,513) (11,763) --
Options contracts written (Note 6) -- 1,514,220 --
--------- --------- ----
Net realized gain (loss) on investments 60,803,021 32,297,630 (330)
Net change in unrealized appreciation (depreciation)
on investments and on translation of assets and
liabilities in foreign currencies (12,487,688) 98,070,066 --
----------- ---------- -----
Net gain (loss) on investments and foreign currencies 48,315,333 130,367,696 (330)
---------- ----------- ----
Net increase (decrease) in net assets resulting
from operations $50,305,944 $144,330,768 $2,888,976
=========== ============ ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
IDS Life Series Fund, Inc.
Equity Portfolio Equity Income Portfolio
April 30, 2000
Year ended April 30, 2000 1999 Period ended*
Operations and distributions
<S> <C> <C> <C>
Investment income (loss)-- net $ (6,547,863) $ (2,248,262) $ 9,403
Net realized gain (loss) on investments 474,908,123 (88,124,536) (13,675)
Net change in unrealized appreciation
(depreciation) on investments and on translation
of assets and liabilities in foreign currencies 248,810,072 73,036,482 38,662
----------- ---------- ------
Net increase (decrease) in net assets resulting from operations 717,170,332 (17,336,316) 34,390
----------- ----------- ------
Distributions to shareholders from:
Net investment income -- -- (9,423)
Net realized gain -- (139,606,605) --
------- ------------ ----
Total distributions -- (139,606,605) (9,423)
------- ------------ ------
Capital share transactions (Note 4)
Proceeds from sales 66,968,738 96,248,573 2,431,557
Reinvested distributions at net asset value -- 139,606,605 2,585
Payments for redemptions (58,568,002) (23,792,543) (172,767)
----------- ----------- --------
Increase (decrease) in net assets from capital share transactions 8,400,736 212,062,635 2,261,375
--------- ----------- ---------
Total increase (decrease) in net assets 725,571,068 55,119,714 2,286,342
Net assets at beginning of year 988,936,640 933,816,926 --
----------- ----------- ---------
Net assets at end of year $1,714,507,708 $988,936,640 $2,286,342
============== ============ ==========
*For the period from June 17, 1999 (commencement of operations) to April 30,
2000.
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 Income Portfolio
Year ended April 30, 2000 1999 2000 1999
Operations and distributions
<S> <C> <C> <C> <C>
Investment income (loss)-- net $ 1,144,859 $ 860,744 $ 6,380,156 $ 5,993,442
Net realized gain (loss) on investments (317,546) 89,785 (1,782,543) (966,610)
Net change in unrealized appreciation
(depreciation) on investments and on translation
of assets and liabilities in foreign currencies (693,043) (134,841) (4,849,711) (1,882,801)
-------- -------- ---------- ----------
Net increase (decrease) in net assets resulting
from operations 134,270 815,688 (252,098) 3,144,031
------- ------- -------- ---------
Distributions to shareholders from:
Net investment income (1,152,566) (854,104) (6,404,125) (5,993,479)
Net realized gain (85,580) (130,692) -- (589,189)
Excess distributions of net investment income -- -- (562,813) --
-------- ------- -------- -------
Total distributions (1,238,146) (984,796) (6,966,938) (6,582,668)
---------- -------- ---------- ----------
Capital share transactions (Note 4)
Proceeds from sales 4,536,902 9,394,678 8,542,530 17,071,293
Reinvested distributions at net asset value 1,156,059 984,796 6,471,840 6,582,668
Payments for redemptions (8,033,158) (2,881,530) (13,022,393) (5,410,142)
Increase (decrease) in net assets from capital
share transactions (2,340,197) 7,497,944 1,991,977 18,243,819
---------- --------- --------- ----------
Total increase (decrease) in net assets (3,444,073) 7,328,836 (5,227,059) 14,805,182
Net assets at beginning of year 21,935,410 14,606,574 97,578,463 82,773,281
---------- ---------- ---------- ----------
Net assets at end of year $18,491,337 $21,935,410 92,351,404 $97,578,463
=========== =========== ========== ===========
Undistributed (excess of distributions over)
net investment income $ (11,365) $ (3,870) $ (498,739) $ 23,969
----------- ----------- ----------- -----------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets (continued)
IDS Life Series Fund, Inc.
International Equity Portfolio Managed Portfolio
Year ended April 30, 2000 1999 2000 1999
Operations and distributions
<S> <C> <C> <C> <C>
Investment income (loss)-- net $ 1,990,611 $ 2,451,845 $ 13,963,072 $ 13,435,735
Net realized gain (loss) on investments 60,803,021 5,306,165 32,297,630 7,742,665
Net change in unrealized appreciation (depreciation)
on investments and on translation of assets and
liabilities in foreign currencies (12,487,688) 13,907,417 98,070,066 44,855,676
----------- ---------- ---------- ----------
Net increase (decrease) in net assets resulting
from operations 50,305,944 21,665,427 144,330,768 66,034,076
---------- ---------- ----------- ----------
Distributions to shareholders from:
Net investment income (1,853,708) (2,272,892) (13,931,314) (13,365,384)
Net realized gain (5,453,188) (7,835,052) (7,076,700) (36,482,550)
---------- ---------- ---------- -----------
Total distributions (7,306,896) (10,107,944) (21,008,014) (49,847,934)
---------- ----------- ----------- -----------
Capital share transactions (Note 4)
Proceeds from sales 52,331,244 47,763,156 37,291,932 54,815,469
Reinvested distributions at net asset value 7,306,895 10,107,944 17,790,408 49,847,934
Payments for redemptions (6,425,606) (4,000,061) (37,010,015) (16,393,026)
Increase (decrease) in net assets from capital
share transactions 53,212,533 53,871,039 18,072,325 88,270,377
---------- ---------- ---------- ----------
Total increase (decrease) in net assets 96,211,581 65,428,522 141,395,079 104,456,519
Net assets at beginning of year 283,001,239 217,572,717 685,153,879 580,697,360
----------- ----------- ----------- -----------
Net assets at end of year $379,212,820 $283,001,239 $826,548,958 $685,153,879
============ ============ ============ ============
Undistributed (excess of distributions over)
net investment income $ 24,545 $ (833) $ (307,323) $ (254,517)
------------ ------------ ------------ ------------
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
Year ended April 30, 2000 1999
Operations and distributions
<S> <C> <C>
Investment income (loss)-- net $ 2,889,306 $ 1,766,572
Net realized gain (loss) on investments (330) (25)
---- ---
Net increase (decrease) in net assets resulting from operations 2,888,976 1,766,547
--------- ---------
Distributions to shareholders from:
Net investment income (2,930,346) (1,763,472)
---------- ----------
Capital share transactions (Note 4)
Proceeds from sales 37,333,359 26,717,943
Reinvested distributions at net asset value 2,656,704 1,763,472
Payments for redemptions (28,369,179) (17,293,901)
----------- -----------
Increase (decrease) in net assets from capital
share transactions 11,620,884 11,187,514
---------- ----------
Total increase (decrease) in net assets 11,579,514 11,190,589
Net assets at beginning of year 45,563,940 34,373,351
---------- ----------
Net assets at end of year $57,143,454 $45,563,940
=========== ===========
Undistributed (excess of distributions over) net investment income $ (37,940) $ 3,100
----------- -----------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
IDS Life Series Fund, Inc.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
IDS Life 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;
Equity Income Portfolio primarily invests in equity securities that provide
steady dividend income;
Government Securities Portfolio primarily invests in securities issued or
guaranteed as to principal and interest by the U.S. government and its
agencies;
Income Portfolio primarily invests in investment grade corporate bonds and
government securities;
International Equity Portfolio primarily invests in equity securities of
foreign issuers;
Managed Portfolio primarily invests in a combination of equity and debt
securities; and
Money Market Portfolio primarily invests in high-quality, short-term debt
securities.
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 accounting principles generally
accepted in the United States of America 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. 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, 2000, 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, 2000 was $35,573,818 representing 2.07% 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 Government
Securities Portfolio, Income Portfolio and Managed Portfolio on a
forward-commitment or when-issued basis can take place one month or more after
the transaction date. During this period, such securities are subject to market
fluctuations and they may affect the Fund's net assets the same as owned
securities. The Fund designates cash or liquid high-grade debt securities at
least equal to the amount of its commitment. As of April 30, 2000, Government
Securities Portfolio, Income Portfolio and Managed Portfolio had entered into
outstanding when-issued or forward-commitments of $286,263, $3,021,521 and
$4,039,944, respectively.
<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 substantially 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:
Equity Equity Government Income International Managed Money
Portfolio Income Securities Portfolio Equity Portfolio Market
Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C> <C> <C>
Undistributed net investment income $6,547,863 $20 $212 $64,074 $(111,525) $(84,564) $--
Accumulated net realized gain (loss) (6,547,863) (20) (212) (229) 111,525 84,564 --
---------- --- ---- ---- ------- ------ ----
Additional paid-in capital reductions
(increase) $-- $-- $-- $63,845 $-- $-- $--
Dividends to shareholders
As of April 30, 2000, dividends declared for each Fund payable May 1, 2000 are
as follows:
Equity Portfolio $.000
Equity Income Portfolio $.029
Government Securities Portfolio $.042
Income Portfolio $.049
International Equity Portfolio $.000
Managed Portfolio $.092
Money Market Portfolio $.005
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, when available, are declared daily and
distributed monthly for the Government Securities, Income and Money Market
Portfolios and declared and distributed quarterly for the Equity, Equity Income,
International Equity and Managed 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.
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 0.70% on an annual basis for Equity, Equity
Income, Government Securities, Income, and Managed Portfolios. For International
Equity Portfolio the fee is 0.95% on an annual basis. For Money Market Portfolio
the fee is 0.50% 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, Equity Income, Government Securities, Income, Managed
and Money Market 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 other non-advisory 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 0.10% on an annual basis of average daily net assets of each Fund.
During the year ended April 30, 2000, the Funds' custodian fees were reduced as
a result of earnings credits from overnight cash balances as follows:
Fund Reduction
Equity Portfolio $10,995
Equity Income Portfolio 111
Government Securities Portfolio 7,272
Income Portfolio 12,648
International Equity Portfolio 7,267
Managed Portfolio 5,628
Money Market Portfolio 3,999
</TABLE>
<PAGE>
3. SECURITIES TRANSACTIONS
For the year ended April 30, 2000, cost of purchases and proceeds from sales of
securities aggregated, respectively, $332,053,967 and $320,312,969 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 $1,762,162,565 $1,758,742,834
Equity Income Portfolio* 1,477,590 162,345
Government Securities Portfolio 24,084,089 26,539,899
Income Portfolio 51,810,077 44,524,276
International Equity Portfolio 379,628,517 350,711,390
Managed Portfolio 455,054,953 412,720,150
*For the period from June 17, 1999 (commencement of operations) to April 30,
2000.
Realized gains and losses are determined on an identified cost basis.
Brokerage commissions paid to brokers affiliated with IDS Life were $5,790 and
$2,700 for Equity Portfolio and Managed Portfolio, respectively, for the year
ended April 30, 2000 and $11 for Equity Income Portfolio for the period then
ended.
<PAGE>
<TABLE>
<CAPTION>
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for each Fund for the years indicated
are as follows:
Year ended April 30, 2000
Equity Equity Government Income International Managed Money
Portfolio Income Securities Portfolio Equity Portfolio Market
Portfolio* Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C> <C> <C>
Sold 1,819,129 258,081 464,865 902,416 2,453,845 1,775,086 37,336,472
Issued for reinvested distributions -- 275 118,811 684,750 378,331 1,162,884 2,656,668
Redeemed (1,464,937) (18,668) (830,048) (1,379,676) (313,026) (1,975,196)(28,371,467)
---------- ------- -------- ---------- -------- ---------- -----------
Net increase (decrease) 354,192 239,688 (246,372) 207,490 2,519,150 962,774 11,621,673
*For the period from June 17, 1999 (commencement of operations) to April 30,
2000.
Year ended April 30, 1999
Equity Government Income International Managed Money
Portfolio Securities Portfolio Equity Portfolio Market
Portfolio Portfolio Portfolio
Sold 3,674,588 914,617 1,697,801 2,679,831 2,965,062 26,720,544
Issued for reinvested distributions 5,307,274 95,971 655,205 534,400 2,729,787 1,763,642
Redeemed (902,671) (280,555) (539,281) (219,595) (883,671)(17,295,607)
-------- -------- -------- -------- -------- -----------
Net increase (decrease) 8,079,191 730,033 1,813,725 2,994,636 4,811,178 11,188,579
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
5. FOREIGN CURRENCY CONTRACTS
As of April 30, 2000, Income Portfolio and International Equity Portfolio have
foreign currency exchange contracts that obligate them 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:
Income Portfolio
Currency to Currency to Unrealized Unrealized
Exchange date be delivered be received appreciation depreciation
<S> <C> <C> <C> <C> <C>
May 2, 2000 36,110 39,795 $68 $--
U.S. Dollar European Monetary Unit
June 27, 2000 324,000 3,213 183 --
Japanese Yen U.S. Dollar
Dec. 27, 2000 324,000 3,307 170 --
Japanese Yen U.S. Dollar
June 27, 2001 324,000 3,401 159 --
Japanese Yen U.S. Dollar
Dec. 27, 2001 40,324,000 436,407 19,958 --
Japanese Yen U.S. Dollar
Total $20,538 $--
International Equity Portfolio
Currency to Currency to Unrealized Unrealized
Exchange date be delivered be received appreciation depreciation
May 2, 2000 141,425 155,326 $-- $218
U.S. Dollar European Monetary Unit
May 2, 2000 1,251,712 792,097 -- 18,655
U.S. Dollar British Pound
May 3, 2000 382,687 242,187 -- 5,672
U.S. Dollar British Pound
Total $-- $24,545
</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, 2000
Puts Calls
Contracts Premium Contracts Premium
<S> <C> <C> <C> <C> <C> <C>
Balance April 30, 1999 400 $55,375 3,300 $2,143,606
Opened 5,560 2,280,905 18,845 9,874,716
Closed (3,560) (757,166) (8,700) (6,284,411)
Exercised (992) (1,219,079) (6,345) (2,976,697)
Expired (1,408) (360,035) (7,100) (2,757,214)
Balance April 30, 2000 -- $-- -- $--
See "Summary of significant accounting policies."
</TABLE>
<PAGE>
Contracts and premium amounts associated with options contracts written by
Managed Portfolio are as follows:
Year ended April 30, 2000
Calls
Contracts Premium
Balance April 30, 1999 -- $--
Opened 14,600 2,573,910
Closed (3,800) (1,021,066)
Exercised (2,700) (410,636)
Expired (8,100) (1,142,208)
Balance April 30, 2000 -- $--
See "Summary of significant accounting policies."
7. CAPITAL LOSS CARRYOVER
For federal income tax purposes, Equity Income Portfolio, Government Securities
Portfolio and Income Portfolio have capital loss carryovers of $13,419, $317,758
and $2,761,039, respectively, as of April 30, 2000, that will expire in
2008-2009 for Equity Income Portfolio, 2008-2009 for Government Securities
Portfolio and 2007-2009 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.
8. FINANCIAL HIGHLIGHTS
"Financial highlights" showing per share data and selected financial information
is presented on pages 28-34 of the prospectus.
<PAGE>
<TABLE>
<CAPTION>
Investments in Securities
IDS Life Series Fund, Inc.
Equity Portfolio
April 30, 2000
(Percentages represent value of investments compared to net assets)
Common stocks (93.4%)
Issuer Shares Value(a)
Airlines (2.1%)
<S> <C> <C>
Continental Airlines Cl B 225,000(b) $9,000,000
Ryanair Holdings ADR 350,000(b,c) 14,262,500
SkyWest 300,000 12,637,500
Total 35,900,000
Banks and savings & loans (1.8%)
CompuCredit 185,000(b) 6,070,625
Sovereign Bancorp 1,500,000 10,312,500
WFS Financial 700,000(b) 13,650,000
Total 30,033,125
Beverages & tobacco (0.4%)
Coors (Adolph) Cl B 150,000 7,650,000
Communications equipment & services (9.7%)
Amdocs 390,000(b) 26,398,125
CIENA 250,000(b) 30,906,250
Copper Mountain Networks 315,000(b) 26,263,125
Covad Communications Group 412,500(b) 11,446,875
Digital Microwave 400,000(b) 14,775,000
Fairchild Semiconductor Intl Cl A 150,000(b) 7,125,000
Finisar 764,400(b) 28,521,675
Turnstone Systems 187,500(b) 20,625,000
Total 166,061,050
Computer software & services (3.4%)
Braun Consulting 175,000(b) 4,375,000
Citrix Systems 250,000(b) 15,265,625
SunGard Data Systems 640,000(b) 22,120,000
WebMethods 40,000(b) 3,600,000
WebTrends 400,000(b) 13,125,000
Total 58,485,625
Computers & office equipment (22.4%)
Affiliated Computer Services Cl A 400,000(b) 13,250,000
Cisco Systems 450,000(b) 31,197,656
Data Return 175,000(b) 4,298,438
E.piphany 100,000(b) 6,606,250
Edwards (JD) & Co 300,000(b) 5,475,000
EMC 85,000(b) 11,809,688
Emulex 244,800(b) 11,107,800
Extreme Networks 360,000(b) 20,745,000
Immersion 200,000(b) 7,200,000
InfoSpace.com 330,000(b) 23,698,125
IntraNet Solutions 225,000(b) 5,006,250
Juniper Networks 220,000(b) 46,791,249
Keynote Systems 250,000(b) 11,218,750
Liberate Technologies 200,000(b) 7,825,000
LifeMinders.com 350,000(b) 15,531,250
Natl Information Consortium 450,000(b) 5,568,750
Netegrity 300,000(b) 13,312,500
NOVA 400,000(b) 12,650,000
Optimal Robotics 150,000(b,c) 6,375,000
Predictive Systems 250,000(b) 11,781,250
S1 299,645(b) 16,274,469
Safeguard Scientifics 380,700(b) 15,894,225
SonicWALL 225,000(b) 13,612,500
Trintech Group ADR 400,000(b,c) 10,800,000
VeriSign 355,000(b) 49,478,124
WatchGuard Technologies 150,000(b) 7,228,125
Total 384,735,399
Electronics (19.7%)
Align-Rite Intl 200,000(b) 4,812,500
Altera 100,000(b) 10,225,000
Flextronics Intl 500,000(b,c) 35,125,000
Jabil Circuit 460,000(b) 18,831,250
JDS Uniphase 200,000(b) 20,750,000
KLA-Tencor 350,000(b) 26,206,250
Novellus Systems 405,000(b) 27,008,438
Pericom Semiconductor 250,000(b) 10,984,375
PMC-Sierra 270,000(b,c) 51,806,249
RF Micro Devices 175,000(b) 18,210,938
SDL 200,000(b) 39,000,000
Taiwan Semiconductor Mfg ADR 100,000(b,c) 5,231,250
Teradyne 380,000(b) 41,800,000
Varian Medical Systems 100,000(b) 4,000,000
Vitesse Semiconductor 325,000(b) 22,120,313
Total 336,111,563
Energy (2.4%)
Apache 250,000 12,109,374
EOG Resources 105,500 2,624,313
Kerr-McGee 269,400 13,963,990
Tosco 375,000 12,023,438
Total 40,721,115
Energy equipment & services (1.3%)
Cooper Cameron 300,000(b) 22,500,000
Financial services (2.1%)
Kansas City Southern Inds 200,000 14,374,999
Knight/Trimark Group Cl A 375,000(b) 14,132,813
LaBranche 615,300(b) 7,345,144
Total 35,852,956
Health care (6.4%)
Alpharma Cl A 250,000 9,656,250
Diversa 185,000(b) 4,995,000
Emisphere Technologies 415,000(b) 17,034,453
ILEX Oncology 340,000(b) 8,160,000
Novoste 250,000(b) 10,250,000
NOVOSTE 50,000(b) 2,050,000
OraPharma 350,000(b) 3,565,625
ORATEC Interventions 250,000(b) 8,515,625
Pharmacyclics 500,000(b) 22,687,500
Priority Healthcare Cl B 400,000(b) 22,150,000
Total 109,064,453
Health care services (1.7%)
Abgenix 100,000(b) 8,956,250
Guilford Pharmaceuticals 750,000(b) 13,031,250
PRAECIS Pharmaceuticals 500,000(b) 7,437,500
Total 29,425,000
Insurance (0.8%)
XL Capital Cl A 300,000(c) 14,287,500
Media (2.4%)
Univision Communications Cl A 375,000(b) 40,968,750
Miscellaneous (3.6%)
Crossroads Systems 30,700(b) 2,168,188
Digex 455,000(b) 35,489,999
FirePond 220,000(b) 3,506,250
FLAG Telecom Holdings 300,000(b,c) 5,850,000
MetaSolv Software 143,500(b) 4,896,938
NetSolve 200,000(b) 5,900,000
Rockford 400,000(b) 4,400,000
Total 62,211,375
Multi-industry conglomerates (2.0%)
Electronics for Imaging 175,000(b) 9,143,750
Mettler-Toledo Intl 350,000(b) 12,075,000
NCO Group 400,000(b) 13,750,000
Total 34,968,750
Retail (3.5%)
American Eagle Outfitters 283,000(b) 4,811,000
Bed Bath & Beyond 470,000(b) 17,243,125
EMusic.com 204,600(b) 441,169
Family Dollar Stores 528,000 10,065,000
Linens `N Things 225,000(b) 6,946,875
Tiffany 150,000 10,903,125
Tuesday Morning 705,000(b) 8,812,500
Total 59,222,794
Transportation (0.5%)
EGL 350,000(b) 8,028,125
Utilities -- electric (0.4%)
Montana Power 175,000 7,710,938
Utilities -- telephone (6.9%)
Allegiance Telecom 500,000(b) 35,375,000
COLT Telecom Group ADR 100,000(b,c) 17,075,000
Concentric Network 375,000(b) 16,312,500
DSL.net 600,000(b) 6,000,000
Intermedia Communications 250,000(b) 10,187,500
RCN 260,000(b) 7,442,500
Viatel 250,000(b) 9,562,500
WinStar Communications 400,000(b) 15,950,000
Total 117,905,000
Total common stocks
(Cost: $1,083,672,752) $1,601,843,518
Preferred stocks (2.1%)
Issuer Shares Value(a)
Aurgin Systems
2.46% 1,371,586(e) $3,374,102
Dia Dexus
Cv Series C 462,500(b,e) 3,700,000
Docent
7.52% Series E 265,957(e) 1,999,997
Egility
3.46% 1,444,043(e) 5,000,000
FREEI.Net
8.05% 372,636(e) 2,999,720
Gorp.com
5.15% Series B 873,786(e) 4,499,998
Mars
1.85% Cv 2,702,703(e) 5,000,000
MarsMusic.com Cl A
Cv 3,000,000(b,e) 3,000,000
Protein Delivery
2.50% 1,200,000(e) 3,000,000
SignalSoft Cl E
Cv 506,757(b,e) 3,000,001
Total preferred stocks
(Cost: $35,574,090) $35,573,818
Bond (0.4%)
Issuer Coupon Principal Value(a)
rate amount
Equinix
12-01-07 13.00% $6,900,000(d) $7,176,000
Total bond
(Cost: $6,900,000) $7,176,000
Options purchased (--%)
Issuer Shares Exercise Expiration Value(a)
price date
Call
Mentor 75,000 $30 May 2000 $58,594
Put
Continental Airlines 42,500 30 June 2000 15,937
Total options purchased
(Cost: $340,917) $74,531
Short-term securities (3.9%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (3.7%)
Federal Home Loan Bank Disc Nts
05-03-00 5.89% $21,000,000 $20,982,821
05-31-00 5.91 9,200,000 9,150,412
Federal Home Loan Mtge Corp Disc Nt
05-23-00 5.93 5,400,000 5,377,837
Federal Natl Mtge Assn Disc Nts
06-20-00 6.01 9,700,000 9,614,887
06-29-00 6.07 2,900,000 2,868,735
07-13-00 6.26 15,700,000 15,495,167
Total 63,489,859
Commercial paper (0.2%)
Falcon Asset
05-16-00 6.05 1,200,000(f) 1,196,382
Motorola
06-07-00 6.09 2,600,000 2,582,522
Total 3,778,904
Total short-term securities
(Cost: $67,281,310) $67,268,763
Total investments in securities
(Cost: $1,193,769,069)(g) $1,711,936,630
</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.
(c) Foreign security values are stated in U.S. dollars. As of April 30, 2000,
the value of foreign securities represented 9.38% 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) 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, 2000, is as follows:
Security Acquisition Cost
dates
Aurgin Systems
2.46% 12-16-99 $3,374,102
Dia Dexus
Cv Series C 04-03-00 3,700,000
Docent
7.52% Series E 03-30-00 1,999,997
Egility
3.46% 03-23-00 5,000,000
FREEI.Net
8.05% 11-04-99 2,999,992
Gorp.com
5.15% Series B 02-21-00 4,499,998
MARS
1.85% Cv 02-17-99 5,000,000
MarsMusic.com Cl A
Cv 12-01-99 3,000,000
Protein Delivery
2.50% 05-04-99 3,000,000
SignalSoft Cl E
Cv 12-15-99 3,000,001
(f) Commercial paper sold within terms of a private placement memorandum, exempt
from registration under Section 4(2) of the Securities Act of 1933, as amended,
and may be sold only to dealers in that program or other "accredited investors."
This security has been determined to be liquid under guidelines established by
the board.
(g) At April 30, 2000, the cost of securities for federal income tax purposes
was $1,195,896,394 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $633,958,077
Unrealized depreciation (117,917,841)
------------
Net unrealized appreciation $516,040,236
<PAGE>
<TABLE>
<CAPTION>
Investments in Securities
IDS Life Series Fund, Inc.
Equity Income
April 30, 2000
(Percentages represent value of investments compared to net assets)
Common stocks (58.6%)
Issuer Shares Value(a)
Aerospace & defense (1.7%)
<S> <C> <C>
Boeing 350 $13,890
Goodrich (BF) 363 11,571
Honeywell Intl 72 4,032
Rockwell Intl 211 8,308
Total 37,801
Automotive & related (1.4%)
Ford Motor 308 16,844
General Motors 171 16,010
Total 32,854
Banks and savings & loans (6.1%)
Allied Capital 560 10,465
Bank of America 582 28,517
Bank of New York 429 17,616
Chase Manhattan 131 9,440
First Union 362 11,539
FleetBoston Financial 586 20,766
Mellon Financial 439 14,103
SLM Holding 200 6,263
Wells Fargo 509 20,900
Total 139,609
Building materials & construction (1.2%)
Fluor 281 9,431
Martin Marietta Materials 360 19,080
Total 28,511
Chemicals (1.2%)
Dow Chemical 56 6,328
Du Pont (EI) de Nemours 239 11,338
Lyondell Petrochemical 510 9,371
Total 27,037
Communications equipment & services (0.9%)
Motorola 175 20,836
Computer software & services (0.3%)
BMC Software 161(b) 7,537
Computers & office equipment (3.0%)
Electronic Data Systems 114 7,838
EQUANT 117(b,c) 9,126
First Data 172 8,374
Hewlett-Packard 99 13,365
NOVA 427(b) 13,504
Solectron 358(b) 16,759
Total 68,966
Energy (7.0%)
Chevron 426 36,263
Conoco Cl A 727 17,312
Conoco Cl B 193 4,801
ENI 2,700(b,c) 13,427
Exxon Mobil 565 43,892
FirstEnergy 222 5,647
Sunoco 510 15,459
Texaco 450 22,275
Total 159,076
Energy equipment & services (0.4%)
Halliburton 220 9,721
Financial services (8.6%)
Alliance Capital Management Holding LP 576 25,812
Citigroup 1,150 68,353
Kansas City Southern Inds 350 25,156
MBNA 950 25,234
Morgan Stanley, Dean Witter, Discover & Co 290 22,258
Providian Financial 342 30,117
Total 196,930
Food (1.3%)
Bestfoods 248 12,462
General Mills 268 9,749
Sara Lee 445 6,675
Total 28,886
Health care (3.0%)
American Home Products 255 14,328
Baxter Intl 177 11,527
Mylan Laboratories 453 12,854
Pharmacia 220 10,994
Warner-Lambert 160 18,210
Total 67,913
Household products (0.9%)
Colgate-Palmolive 351 20,051
Industrial equipment & services (1.7%)
Caterpillar 112 4,417
Illinois Tool Works 235 15,055
Parker-Hannifin 429 19,948
Total 39,420
Insurance (3.4%)
American Intl Group 440 48,263
Aon 400 10,825
Marsh & McLennan 192 18,924
Total 78,012
Media (2.5%)
Adelphia Communications Cl A 117(b) 5,799
CBS 651(b) 38,246
MediaOne Group 174(b) 13,159
Total 57,204
Miscellaneous (--%)
Edwards Lifesciences 33(b) 495
Paper & packaging (0.9%)
Intl Paper 553 20,323
Retail (3.8%)
Circuit City Stores-Circuit City Group 623 36,640
CVS 470 20,445
Target 440 29,288
Total 86,373
Transportation (0.6%)
Teekay Shipping 429 14,077
Utilities -- electric (1.9%)
Duke Energy 182 10,464
Edison Intl 364 6,939
New Century Energies 172 5,612
NiSource 286 5,291
Northern States Power 364 7,940
Texas Utilities 208 7,007
Total 43,253
Utilities -- gas (0.4%)
El Paso Energy 193 8,203
Utilities -- telephone (6.4%)
ALLTEL 56 3,731
AT&T 687 32,073
Bell Atlantic 354 20,975
BellSouth 437 21,276
GTE 106 7,182
MCI WorldCom 447(b) 20,311
SBC Communications 705 30,887
U S WEST Communications Group 152 10,821
Total 147,256
Total common stocks
(Cost: $1,301,550) $1,340,344
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Short-term securities (34.8%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies
Federal Home Loan Mtge Corp Disc Nt
<S> <C> <C> <C> <C> <C>
06-13-00 6.07% $500,000 $496,154
Federal Natl Mtge Assn Disc Nt
05-04-00 5.83 300,000 299,709
Total short-term securities
(Cost: $795,995) $795,863
Total investments in securities
(Cost: $2,097,545)(d) $2,136,207
</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.
(c) Foreign security values are stated in U.S. dollars. As of April 30, 2000,
the value of foreign securities represented 0.99% of net assets.
(d) At April 30, 2000, the cost of securities for federal income tax purposes
was $2,097,821 and the aggregate gross unrealized appreciation and depreciation
based on that cost was:
Unrealized appreciation $104,687
Unrealized depreciation (66,301)
-------
Net unrealized appreciation $38,386
<PAGE>
<TABLE>
<CAPTION>
Investments in Securities
IDS Life Series Fund, Inc.
Government Securities Portfolio
April 30, 2000
(Percentages represent value of investments compared to net assets)
Bonds (91.4%)
Issuer Coupon Principal Value(a)
rate amount
Mortgage-backed securities (64.3%)
Federal Home Loan Mtge Corp
<S> <C> <C> <C> <C> <C>
06-01-12 7.00% $139,007 $135,932
01-01-13 6.00 317,808 298,741
02-01-13 6.50 211,522 202,847
09-01-14 6.00 972,289 912,163
12-01-27 6.00 268,026 243,064
05-01-28 7.00 306,411 293,867
08-01-28 7.00 174,677 167,405
09-01-29 7.00 1,389,698 1,330,205
Federal Natl Mtge Assn
02-13-04 5.13 1,125,000 1,045,729
08-15-04 6.50 100,000 97,158
05-01-09 5.50 442,105 413,125
06-01-10 6.50 214,870 208,190
08-01-11 8.50 68,566 69,980
03-01-13 6.00 161,438 151,914
04-01-13 5.50 346,075 317,493
07-01-13 6.50 405,062 388,231
09-01-14 7.00 496,824 485,340
03-01-15 7.00 99,201 96,908
03-01-23 9.00 50,322 51,895
09-01-25 7.00 153,714 147,806
04-01-27 6.50 212,498 198,678
03-01-28 6.50 323,575 302,342
04-01-28 6.00 266,040 241,218
09-01-28 6.00 624,635 565,998
10-01-28 6.00 694,347 629,562
11-01-28 6.00 464,717 421,358
12-01-28 7.00 372,220 356,202
05-01-30 8.50 280,000(b) 283,850
Govt Natl Mtge Assn
05-15-17 8.00 31,166 31,663
07-15-28 6.50 1,909,773 1,789,820
---------
Total 11,878,684
U.S. government obligations (27.2%)
Resolution Funding Corp
10-15-19 8.13 400,000 447,695
Zero Coupon
04-15-05 5.66 200,000(c) 143,311
10-15-09 7.12 460,000(c) 243,645
U.S. Treasury
08-15-01 7.88 100,000 101,489
11-15-01 7.50 500,000 505,807
11-30-02 5.75 300,000 293,601
05-15-16 7.25 300,000 328,498
11-15-16 7.50 700,000 785,505
05-15-17 8.75 950,000 1,186,245
08-15-23 6.25 725,000 724,594
11-15-24 7.50 145,000 167,993
08-15-27 6.38 100,000 102,219
-------
Total 5,030,602
Total bonds
(Cost: $17,363,039) $16,909,286
Short-term securities (4.8%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agency
Federal Home Loan Bank Disc Nts
05-31-00 5.86% $400,000 $397,719
06-21-00 6.04 500,000 495,297
Total short-term securities
(Cost: $893,521) $893,016
Total investments in securities
(Cost: $18,256,560)(d) $17,802,302
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) At April 30, 2000, the cost of securities purchased, including interest
purchased, on a when-issued basis was $286,263.
(c) For zero coupon bonds, the interest rate disclosed represents the annualized
effective yield on the date of acquisition.
(d) At April 30, 2000, the cost of securities for federal income tax purposes
was $18,255,089 and the aggregate gross unrealized appreciation and depreciation
based on that cost was:
Unrealized appreciation $106,150
Unrealized depreciation (558,937)
--------
Net unrealized depreciation $(452,787)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Investments in Securities
IDS Life Series Fund, Inc.
Income Portfolio
April 30, 2000
(Percentages represent value of investments compared to net assets)
Bonds (93.8%)
Issuer Coupon Principal Value(a)
rate amount
Government obligations (4.7%)
People's Republic of China
(U.S. Dollar)
<S> <C> <C> <C> <C> <C>
07-03-01 7.38% $100,000(c) $100,532
Republic of Brazil
(U.S. Dollar)
04-15-14 8.00 363,963(c) 260,463
U.S. Treasury
05-15-17 8.75 400,000 499,472
05-15-18 9.13 2,300,000 2,983,721
United Mexican States
(U.S. Dollar)
03-12-08 8.63 250,000(c) 238,375
09-15-16 11.38 250,000(c) 281,720
Total 4,364,283
Mortgage-backed securities (32.4%)
Federal Home Loan Mtge Corp
07-15-04 6.25 3,500,000 3,370,909
06-01-09 5.50 456,472 427,407
08-01-11 6.50 1,440,248 1,387,621
03-01-13 5.50 807,783 742,126
06-15-20 8.00 96,297 96,361
Federal Natl Mtge Assn
03-15-01 5.63 600,000 594,528
04-15-03 5.75 2,000,000 1,921,652
06-01-10 6.50 644,609 624,571
02-01-11 6.00 1,222,281 1,158,848
09-01-13 6.00 1,630,851 1,528,804
11-01-13 6.00 1,694,652 1,588,613
05-01-26 7.00 3,378,991 3,249,102
07-01-26 7.00 1,423,983 1,367,906
12-01-27 6.00 2,269,756 2,058,256
12-01-27 6.50 1,826,622 1,706,384
10-01-28 6.50 1,775,402 1,658,610
02-01-30 7.50 3,000,000 2,937,965
05-01-30 8.00 3,000,000(k) 2,994,375
Merrill Lynch Mtge Investors
06-15-21 7.58 103,576(l) 96,746
Morgan Stanley Capital
Collateralized Mtge Obligation
11-15-28 6.59 365,845 362,392
Total 29,873,176
Aerospace & defense (0.5%)
BE Aerospace
Sr Sub Nts Series B
02-01-06 9.88 100,000 90,750
Goodrich (BF)
07-01-01 9.63 150,000 152,439
Northrop-Grumman
03-01-06 7.00 250,000 234,197
Total 477,386
Airlines (0.4%)
Continental Airlines
Series 1996A
10-15-13 6.94 354,888 331,511
Automotive & related (1.8%)
Arvin Capital
Company Guaranty
02-01-27 9.50 250,000 236,009
Exide
Cv Sr Sub Nts
12-15-05 2.90 150,000(d) 77,267
Ford Motor Credit
07-16-04 6.70 500,000 481,393
Lear
Company Guaranty Series B
05-15-09 8.11 500,000 446,330
Mascotech
Cv Sub Deb
12-15-03 4.50 100,000 73,000
MSX Intl
Company Guaranty
01-15-08 11.38 125,000 117,500
Venture Holdings Trust
Sr Nts Series B
07-01-05 9.50 250,000 205,000
Total 1,636,499
Banks and savings & loans (4.6%)
Capital One Bank
05-15-08 6.70 500,000 454,297
Comerica Bank
Sub Nts
10-01-08 6.00 500,000 435,549
Corp Andina de Fomento
(U.S. Dollar)
02-01-03 7.10 300,000(c) 290,588
Dao Heng Bank
(U.S. Dollar) Sub Nts
01-24-07 7.75 500,000(c,d) 472,704
Fleet Financial Group
Sr Nts
12-01-01 9.00 200,000 204,425
Hubco Capital Trust
Company Guaranty Series B
02-01-27 8.98 500,000 490,163
Long Term Credit Bank Japan
(Japanese Yen)
12-27-01 8.00 40,000,000(c) 373,355
MBNA American Bank
Sub Nts
03-15-08 6.75 500,000 462,604
Sanwa Finance Aruba
(U.S. Dollar)
07-15-09 8.35 500,000(c) 493,924
Washington Mutual Capital
Company Guaranty
06-01-27 8.38 200,000 189,762
Wells Fargo
Sr Medium-term Nts Series G
09-15-02 6.38 400,000 389,812
Total 4,257,183
Building materials & construction (1.6%)
Carlisle Companies
Sr Nts
01-15-07 7.25 500,000 478,123
Foster Wheeler
11-15-05 6.75 300,000 251,488
Pulte
Sr Nts
12-15-03 7.00 300,000 284,155
Tyco Intl Group
(U.S. Dollar) Company Guaranty
06-15-03 6.25 500,000(c) 477,938
Total 1,491,704
Chemicals (2.2%)
Allied Waste North America
Company Guaranty Series B
08-01-09 10.00 100,000 67,750
Dow Chemical
11-01-29 7.38 200,000 190,068
IMC Global
10-15-01 6.63 500,000 489,608
Lyondell Chemical
Series A
05-01-07 9.63 250,000 246,563
Rohm & Haas
07-15-04 6.95 500,000 489,469
Sovereign Specialty Chemical
03-15-10 11.88 75,000(d) 75,750
Waste Management
Sr Nts
10-01-07 7.13 500,000 430,150
Total 1,989,358
Communications equipment & services (3.1%)
360 Networks
(U.S. Dollar) Sr Nts
05-01-08 13.00 150,000(c,d) 147,375
American Tower
Cv
02-15-10 5.00 65,000(d) 67,113
DLJ Secured Loan Trust
Sr Secured Ctfs
07-07-07 10.13 500,000(d) 499,999
Dobson/Sygnet Communications
Sr Nts
12-15-08 12.25 100,000 104,000
EchoStar DBS
Sr Nts
02-01-09 9.38 205,000 198,850
KMC Telecom Holdings
Zero Coupon Sr Disc Nts
02-15-03 12.68 250,000(e) 122,813
KPNQwest
(U.S. Dollar) Sr Nts
06-01-09 8.13 250,000(c) 238,750
MJD Communications
Sr Sub Nts Series B
05-01-08 9.50 100,000 91,500
Nextel Partners
Sr Nts
03-15-10 11.00 125,000(d) 121,563
NTL
Cv Sub Nts
12-15-09 5.75 60,000(d) 52,725
Sr Nts Series B
10-01-08 11.50 105,000 106,575
Zero Coupon Sr Nts Series B
04-01-03 9.78 190,000(e) 120,888
Price Communications Wireless
Company Guaranty Series B
12-15-06 9.13 300,000 296,249
Rural Cellular
Sr Sub Nts Series B
05-15-08 9.63 250,000 241,250
Tritel PCS
Zero Coupon Company Guaranty
05-15-04 11.13 250,000(e) 166,250
Versatel Telecom
(European Monetary Unit)
12-17-04 4.00 70,000(c,d) 73,819
03-30-05 4.00 80,000(c,d) 73,353
(U.S. Dollar) Sr Nts
05-15-08 13.25 100,000(c) 101,500
Total 2,824,572
Computers & office equipment (0.8%)
Globix
Sr Nts
02-01-10 12.50 250,000(d) 220,000
Hewlett-Packard
Zero Coupon Sub Nts
10-14-17 3.13 100,000(f) 76,875
Hyperion Solutions
Cv
03-15-05 4.50 25,000 20,625
Juniper Networks
03-15-07 4.75 120,000 109,950
PSINet
Sr Nts
11-01-08 11.50 200,000 179,000
Sanmina
Cv
05-01-04 4.25 20,000 29,575
Silicon Graphics
Cv Sr Nts
09-01-04 5.25 80,000 56,600
Solectron
Zero Coupon Cv
01-27-19 4.00 50,000(f) 38,071
Total 730,696
Electronics (0.9%)
Advanced Energy Industries
Cv
11-15-06 5.25 40,000 61,750
Conexant Systems
Cv
02-01-07 4.00 60,000 50,775
Cv Sub Nts
02-01-07 4.00 60,000(d) 50,775
Metromedia Fiber Network
Sr Nts Series B
11-15-08 10.00 150,000 143,250
Photronics
Cv Sub Nts
06-01-04 6.00 30,000 37,538
SCI Systems
03-15-07 3.00 60,000 68,925
Thomas & Betts
01-15-06 6.50 400,000 375,379
Vitesse Semiconductor
Cv
03-15-05 4.00 65,000(d) 56,469
Total 844,861
Energy (1.6%)
Clark Oil & Refining
Sr Nts
09-15-04 9.50 100,000 81,500
Devon Energy
Cv Deb
08-15-08 4.90 60,000 57,825
Honam Oil Refinery
(U.S. Dollar)
10-15-05 7.13 250,000(c,d) 230,739
Kerr-McGee
10-15-05 8.13 500,000 502,682
Lodestar Holdings
Company Guaranty
05-15-05 11.50 250,000 50,000
Roil
(U.S. Dollar)
12-05-02 12.78 157,500(c,d) 141,750
USX
03-01-08 6.85 500,000 456,643
Total 1,521,139
Energy equipment & services (0.2%)
Pioneer Natural Resource
01-15-08 6.50 250,000 208,441
Financial services (4.5%)
American General Finance
Sr Nts
11-01-03 5.75 500,000 471,487
Arcadia Financial
Sr Nts
03-15-07 11.50 280,000 309,543
Barclays North America Capital
05-15-21 9.75 300,000 319,481
Capital One Financial
08-01-08 7.13 500,000 448,105
Duke Capital
Sr Nts
10-01-09 7.50 500,000 481,825
GMAC
11-10-03 5.75 500,000 473,180
Indah Kiat Finance Mauritius
(U.S. Dollar) Company Guaranty
07-01-07 10.00 50,000(c) 33,000
LaBranche
03-01-07 12.00 250,000(d) 246,250
Providian Master Trust
Series 1997-4 Cl A
06-15-07 6.25 500,000 487,826
Providian Natl Bank
Sr Nts
03-15-03 6.70 500,000 478,407
Wilmington Trust
05-01-08 6.63 500,000 448,863
Total 4,197,967
Furniture & appliances (0.1%)
Interface
Sr Sub Nts Series B
11-15-05 9.50 100,000 88,000
Health care (0.8%)
Alaris Medical Systems
Company Guaranty
12-01-06 9.75 150,000 120,000
Inhale Therapeutic Systems
Cv Sub Nts
02-08-07 5.00 60,000(d) 55,050
Roche Holdings
Zero Coupon Cv
01-19-15 1.47 120,000(d,f) 90,450
Watson Pharmaceuticals
Sr Nts
05-15-08 7.13 500,000 448,480
Total 713,980
Health care services (0.6%)
Columbia/HCA Healthcare
06-15-05 6.91 100,000 90,315
Magellan Health Services
Sr Sub Nts
02-15-08 9.00 125,000 83,125
Paracelsus Healthcare
Sr Sub Nts
08-15-06 10.00 350,000 105,000
Sunrise Assisted Living
Cv Sub Nts
06-15-02 5.50 125,000 104,219
Tenet Healthcare
Sr Sub Nts Series B
12-01-08 8.13 200,000 185,999
Total 568,658
Industrial equipment & services (1.7%)
ARAMARK Services
Company Guaranty
12-01-06 7.10 500,000 465,293
Ingersoll-Rand
Sr Nts
02-15-01 6.26 500,000 495,761
Laidlaw
(U.S. Dollar)
05-15-06 7.65 500,000(c) 185,000
Terex
Company Guaranty Series D
04-01-08 8.88 250,000 221,875
Wesco Distribution
Company Guaranty Series B
06-01-08 9.13 250,000 227,500
Total 1,595,429
Insurance (1.5%)
American General Institute Capital
Company Guaranty Series A
12-01-45 7.57 250,000(d) 218,023
Americo Life
Sr Sub Nts
06-01-05 9.25 100,000 97,125
Florida Windstorm
(MBIA Insured)
02-25-19 7.13 500,000(d,g) 460,916
SAFECO Capital
Company Guaranty
07-15-37 8.07 500,000 416,075
Zurich Capital
Company Guaranty
06-01-37 8.38 250,000(d) 235,680
Total 1,427,819
Leisure time & entertainment (2.2%)
Argosy Gaming
Company Guaranty
06-01-09 10.75 250,000 260,000
Coast Hotels & Casino
Company Guaranty
04-01-09 9.50 325,000 303,469
Hammons (JQ) Hotels
1st Mtge
02-15-04 8.88 250,000 218,750
Horseshoe Gaming Holdings
Company Guaranty
05-15-09 8.63 250,000 233,750
Pinnacle Entertainment
Company Guaranty Series B
02-15-07 9.25 250,000 250,000
Riviera Holdings
Company Guaranty
08-15-04 10.00 250,000 225,000
Time Warner
02-01-24 7.57 350,000 326,701
Trump Holdings & Funding
Sr Nts
06-15-05 15.50 250,000 151,250
United Artists Theatres
Series 1995A
07-01-15 9.30 92,234 60,592
Total 2,029,512
Media (4.3%)
Charter Communications Holdings/Charter Capital
Sr Nts
01-15-10 10.25 250,000(d) 241,875
Comcast
Sr Nts
11-01-05 8.38 250,000 250,938
Sr Sub Deb
10-15-06 9.13 500,000 521,546
Comcast Cable Communications
11-15-08 6.20 300,000 262,894
Cox Enterprises
06-15-09 7.38 500,000(d) 466,330
CSC Holdings
Sr Nts Series B
07-15-09 8.13 400,000 378,874
Lamar Media
Company Guaranty
12-01-06 9.63 275,000 272,938
MDC Communications
(U.S. Dollar) Sr Sub Nts
12-01-06 10.50 100,000(c) 94,000
Radio Unica
Zero Coupon Company Guaranty
08-01-02 22.25 250,000(e) 155,625
Quebecor Printing Capital
Company Guaranty
01-15-07 7.25 500,000 466,788
TCI Communications
08-01-15 8.75 350,000 372,175
Telemundo Holdings
Zero Coupon Sr Disc Nts Series B
08-15-03 13.48 250,000(e) 161,250
Telewest Communications
(U.S. Dollar) Zero Coupon Sr Disc Nts
04-15-04 9.25 125,000(c,d,e) 70,000
Time Warner Entertainment
Sr Nts
07-15-33 8.38 250,000 252,595
Total 3,967,828
Metals (0.6%)
Alcan Aluminum
(U.S. Dollar)
01-15-22 8.88 200,000(c) 203,540
Imexsa Export Trust
(U.S. Dollar)
05-31-03 10.13 141,038(c,d) 137,512
Ormet
Company Guaranty
08-15-08 11.00 200,000(d) 187,000
Total 528,052
Miscellaneous (3.7%)
Adams Outdoor Advertising
Sr Nts
03-15-06 10.75 100,000 102,000
Bistro Trust
Sub Nts
12-31-02 9.50 250,000(d) 233,600
Dura Operating
Company Guaranty Series B
05-01-09 9.00 250,000 223,750
Falcon Products
Company Guaranty Series B
06-15-09 11.38 250,000 233,750
Great Central Mines
(U.S. Dollar) Sr Nts
04-01-08 8.88 250,000(c) 233,750
Guangdong Enterprises
(U.S. Dollar) Sr Nts
05-22-07 8.88 200,000(c,d) 78,000
Hyder
(U.S. Dollar)
12-15-07 6.88 500,000(c,d) 449,109
ISG Resources
04-15-08 10.00 140,000 121,100
Jorgensen (Earle M)
Sr Nts
04-01-05 9.50 275,000 253,000
Network Associates
Zero Coupon Cv Sub Deb
02-13-18 8.70 300,000(f) 105,750
NSM Steel
Company Guaranty
02-01-06 12.00 129,935(b,d) 5,197
Omega Cabinets
Sr Sub Nts
06-15-07 10.50 225,000 218,250
Oshkosh Truck
Company Guaranty
03-01-08 8.75 250,000 $236,250
Outsourcing Solutions
Sr Sub Nts Series B
11-01-06 11.00 140,000 123,375
Stellex Inds
Sr Sub Nts Series B
11-01-07 9.50 250,000 137,500
Teleglobe
(U.S. Dollar) Company Guaranty
07-20-29 7.70 500,000(c) 482,620
Total 3,237,001
Multi-industry conglomerates (1.8%)
CBS
06-01-01 8.88 250,000 253,132
Goodrich (BF)
Company Guaranty
04-15-08 7.50 500,000 480,000
Hutchison Whampoa Finance
(U.S. Dollar) Company Guaranty Series A
08-01-07 6.95 250,000(c,d) 236,257
Jordan Inds
Sr Nts Series D
08-01-07 10.38 175,000 162,750
Iron Mountain
Sr Sub Nts
07-15-06 11.13 125,000 127,500
Prime Succession
Sr Sub Nts
08-15-04 10.75 65,000(b) 13,000
USI American Holdings
Sr Nts Series B
12-01-06 7.25 425,000 399,106
Total 1,671,745
Paper & packaging (2.2%)
Ball
Company Guaranty
08-01-08 8.25 250,000 236,875
Chesapeake
05-01-03 9.88 100,000 101,246
Gaylord Container
Sr Nts
06-15-07 9.75 150,000 134,625
Intl Paper
11-15-12 5.13 85,000 63,208
Owens-Illinois
Sr Nts
05-15-07 8.10 250,000 232,991
05-15-08 7.35 250,000 221,677
Packaging Corp of America
Company Guaranty
04-01-09 9.63 500,000 503,749
Quno Corp
(U.S. Dollar) Sr Nts
05-15-05 9.13 250,000(c) 251,563
Silgan Holdings
06-01-09 9.00 100,000 94,500
Total 1,840,434
Restaurants & lodging (0.5%)
MGM Grand
02-06-08 6.88 500,000 444,546
Retail (1.5%)
Flooring America
Company Guaranty
10-15-07 9.25 185,000 147,306
Kroger
Company Guaranty
03-01-08 7.45 250,000 234,669
Sr Nts
07-15-06 8.15 500,000 506,915
Safeway
11-15-01 5.88 500,000 486,252
Total 1,375,142
Textiles & apparel (0.7%)
Anvil Knitwear
Sr Nts Series B
03-15-20 10.88 200,000 174,000
Galey & Lord
Company Guaranty
03-01-08 9.13 100,000 46,000
Tommy Hilfiger USA
Company Guaranty
06-01-03 6.50 500,000 400,000
Total 622,900
Transportation (1.2%)
Enterprise Rent-A-Car USA Finance
02-15-08 6.80 200,000(d) 179,248
Greater Beijing First Expressways
(U.S. Dollar) Sr Nts
06-15-04 9.25 100,000(c) 32,000
Hermes Europe RailTel
(U.S. Dollar) Sr Nts
01-15-09 10.38 200,000(c) 173,000
Ryder System
Series N
05-15-01 9.25 150,000 151,816
Union Pacific
02-01-08 6.63 500,000 464,328
Zhuhai Highway
(U.S. Dollar) Sub Nts
07-01-08 11.50 250,000(c,d) 76,875
Total 1,077,267
Utilities -- electric (2.4%)
California Infrastructure-
Pacific Gas & Electric
06-25-02 6.15 58,612 58,606
Cleveland Electric Illuminating
1st Mtge Series B
05-15-05 9.50 250,000 254,657
CMS Energy
Sr Nts
05-15-02 8.13 200,000 196,406
Sr Nts Series B
11-15-00 7.38 300,000 298,475
Connecticut Light & Power
1st Mtge Series C
06-01-02 7.75 250,000 248,472
Edison Mission Energy
Sr Nts
06-15-09 7.73 500,000(d) 479,576
El Paso Electric
1st Mtge Series D
02-01-06 8.90 100,000 102,625
Midland Funding
Series A
07-23-05 11.75 100,000 105,046
Reliant Energy
06-01-01 9.38 150,000 152,968
Sithe Independence Funding
Series A
12-30-13 9.00 100,000 101,739
Western Massachusetts Electric
1st Mtge Series B
07-01-01 7.38 250,000 249,185
Total 2,247,755
Utilities -- gas (1.1%)
Columbia Energy Group
Series E
11-28-10 7.32 500,000 475,131
El Paso Energy
Sr Nts
05-16-09 6.75 200,000 182,689
Sr Nts Series B
07-15-01 6.63 300,000 295,776
Southwest Gas
Series F
06-15-02 9.75 100,000 103,623
Total 1,057,219
Utilities -- telephone (8.0%)
Allegiance Telecom
Zero Coupon Sr Disc Nts Series B
02-15-03 12.39 250,000(e) 176,250
AT&T Canada
(U.S. Dollar) Sr Nts
11-01-08 10.63 200,000(c) 225,250
(U.S. Dollar) Zero Coupon Sr Disc Nts
06-15-03 9.95 300,000(c,e) 236,625
BellSouth Capital Funding
02-15-10 7.75 500,000 500,620
Cable & Wireless Communications
(U.S. Dollar)
03-06-03 6.38 500,000(c) 491,009
Call-Net Enterprises
(U.S. Dollar) Sr Nts
08-15-08 8.00 175,000(c) 113,750
Covad Comm Group
Sr Nts
02-15-10 12.00 100,000(d) 94,000
France Telecom
(European Monetary Unit) Cv
11-29-04 4.13 80,000(c) 78,364
Global Crossing Holdings
(U.S. Dollar) Sr Nts
11-15-09 9.50 250,000(c,d) 243,750
GTE Florida
02-01-28 6.86 500,000 438,745
Level 3 Communications
03-15-10 6.00 60,000 53,775
McLeod USA
Sr Nts
02-15-09 8.13 250,000 225,625
Nextel Communications
11-15-09 9.38 250,000 238,750
Cv Sr Nts
01-15-10 5.25 50,000(d) 48,750
Nextlink Communications
Sr Nts
11-15-08 10.75 250,000 245,000
Primus Telecomm Group
02-15-07 5.75 100,000(d) 85,125
Sr Nts
08-01-04 11.75 200,000 192,000
PSINet
Sr Nts
12-01-06 10.50 50,000(d) 43,875
Qwest Communications Intl
Sr Nts Series B
11-01-08 7.50 500,000 479,761
RSL Communications
(U.S. Dollar) Company Guaranty
11-15-06 12.25 250,000(c) 247,500
Sprint Capital
Company Guaranty
11-15-08 6.13 500,000 445,160
U S WEST Capital Funding
Company Guaranty
08-15-01 6.88 500,000 496,045
07-15-28 6.88 500,000 428,466
United Pan-Europe Communications
(U.S. Dollar) Sr Nts
02-01-10 11.25 125,000(c,d) 116,250
02-01-10 11.50 75,000(c,d) 69,000
Verio
Sr Nts
11-15-09 10.63 250,000(d) 238,750
Vodafone AirTouch
(U.S. Dollar)
02-15-10 7.75 500,000(c,d) 490,640
Company Guaranty
05-01-08 6.65 500,000 461,521
Voicestream Wireless
Sr Nts
09-15-09 11.50 165,000(d) 177,375
Total 7,381,731
Total bonds
(Cost: $91,770,398) $86,620,894
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Common stocks (0.1%)
Issuer Shares Value(a)
<S> <C> <C>
Globix 3,520(b) $79,201
Intermedia Communications 485(b) 19,744
PhoneTel Technologies 9,500(b) 6,828
Total common stocks
(Cost: $142,579) $105,773
Preferred stocks & other (1.4%)
Issuer Shares Value(a)
APP China Group
14.00% Cv 200(c,d) $160,000
Coastal
6.63% Cv PRIDES 2,800(j) 82,950
Cox Communications
7.00% Cm Cv PRIDES 900(j) 51,975
CVS
6.00% Cv ACES 950(i) 74,100
Enron
7.00% Cv 1,600 37,600
Georgia-Pacific Group
7.50% Cv 1,200 48,600
Global Crossing
6.38% Cv 550(d) 48,675
Global TeleSystems Group
7.25% Cm Cv 1,300 37,700
Ingersoll-Rand
6.75% Cv PRIDES 2,450(j) 56,350
Intermedia Communications
7.00% Cm Cv Series F 3,500 98,437
Kerr-McGee
5.50% Cv 900 39,600
KMC Telecom Holdings
Warrants 700 2,100
Lincoln Natl
7.75% Cm Cv 2,450 51,144
Metlife Capital
8.00% Cv 1,300 73,206
Primus Telecommunications
Warrants 200 12,600
Sovereign Bancorp
7.50% Cv 1,300 61,019
Suiza Capital
5.50% Cv 1,800(d) 59,625
Wendys Financing
5.00% Cm Cv Series A 1,670 85,032
XM Satellite Radio
14.00% 200 180,000
Total preferred stocks & other
(Cost: $1,293,295) $1,260,713
Short-term securities (8.0%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (6.8%)
Federal Home Loan Bank Disc Nts
05-12-00 5.89% $1,600,000 $1,596,344
05-19-00 5.89 700,000 697,524
05-31-00 5.91 500,000 497,305
05-31-00 5.94 700,000 696,009
06-21-00 6.04 800,000 792,475
Federal Home Loan Mtge Corp Disc Nt
05-23-00 5.99 300,000 298,756
Federal Natl Mtge Assn Disc Nts
05-16-00 5.90 500,000 498,529
06-08-00 6.01 700,000 695,017
06-20-00 6.01 500,000 495,613
Total 6,267,572
Commercial paper (1.2%)
Sysco
05-01-00 6.04 1,100,000(h) 1,099,446
Total short-term securities
(Cost: $7,369,083) $7,367,018
Total investments in securities
(Cost: $100,575,355)(m) $95,354,398
</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,
2000, the value of foreign securities represented 9.97% 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) For zero coupon bonds, the interest rate disclosed represents the annualized
effective yield on the date of acquisition.
(g) The following abbreviation is used in portfolio descriptions to identify the
insurer of the issue:
MBIA -- Municipal Bond Investors Assurance
(h) 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.
(i) ACES (Automatically Convertible Equity Securities) are structured as
convertible preferred securities. Investors receive an enhanced yield but based
upon a specific formula, potential appreciation is limited. ACES pay dividends,
have voting rights, are noncallable for at least three years and upon maturity,
convert into shares of common stock.
(j) PRIDES (Preferred Redeemable Increased Dividend Equity Securities) are
structured as convertible preferred securities. Investors receive an enhanced
yield but based upon a specific formula, potential appreciation is limited.
PRIDES pay dividends, have voting rights, are noncallable for three years and
upon maturity, convert into shares of common stock.
(k) At April 30, 2000, the cost of securities purchased, including interest
purchased, on a when-issued basis was $3,021,521.
(l) Interest rate varies either based on a predetermined schedule or to reflect
current market conditions; rate shown is the effective rate on April 30, 2000.
(m) At April 30, 2000, the cost of securities for federal income tax purposes
was approximately $100,560,056 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $461,295
Unrealized depreciation (5,666,953)
----------
Net unrealized depreciation $(5,205,658)
<PAGE>
<TABLE>
<CAPTION>
Investments in Securities
IDS Life Series Fund, Inc.
International Equity Portfolio
April 30, 2000
(Percentages represent value of investments compared to net assets)
Common stocks (86.3%)(c)
Issuer Shares Value(a)
Australia (1.5%)
Media (0.6%)
<S> <C> <C>
News 186,127 $2,363,549
Metals (0.9%)
Broken Hill Proprietary 224,000 2,412,041
WMC 265,000 1,100,250
Total 3,512,291
Brazil (1.2%)
Banks and savings & loans (0.5%)
Uniao de Bancos Brasileiros GDR 73,371 1,829,689
Utilities -- telephone (0.7%)
Embratel Participacoes ADR 115,446 2,597,535
Canada (2.8%)
Communications equipment & services (1.6%)
Nortel Networks 56,200 6,364,650
Energy (0.5%)
Petro-Canada 116,200 1,957,986
Multi-industry conglomerates (0.7%)
Bombardier Cl B 91,800 2,467,509
Finland (5.1%)
Communications equipment & services
Nokia 212,600 12,195,631
Sonera 127,731
7,025,275
Total 19,220,906
France (6.1%)
Banks and savings & loans (1.0%)
Banque Natl de Paris 46,854 3,786,693
Computers & office equipment (2.2%)
Cap Gemini 43,647 8,570,769
Energy (2.2%)
Total Petroleum Cl B 53,871 8,173,782
Industrial equipment & services (0.7%)
Castorama Dubois 12,555 2,739,300
Germany (3.4%)
Banks and savings & loans (1.3%)
Deutsche Bank 72,531 4,872,813
Computers & office equipment (1.4%)
SAP 9,332 5,488,968
Miscellaneous (0.7%)
Epcos 18,476(b) 2,600,103
Hong Kong (1.8%)
Communications equipment & services (0.8%)
China Telecom 440,000(b) 3,177,477
Multi-industry conglomerates (1.0%)
Hutchison Whampoa 246,000 3,584,578
Italy (3.1%)
Banks and savings & loans (1.5%)
Instituto Bancario San Paolo di Torino 395,173 5,532,478
Utilities -- telephone (1.6%)
Telecom Italia Mobile 632,091 6,033,656
Japan (24.8%)
Automotive & related (0.9%)
Toyota Motor 70,000 3,480,717
Chemicals (0.8%)
Asahi Chemical Inds 523,000 3,012,232
Computers & office equipment (3.9%)
Canon 110,000 5,031,714
Fujitsu 207,000 5,865,272
Hitachi Software Engineering 35,000 3,581,184
Total 14,478,170
Electronics (5.1%)
Alps Electric ADR 116,000 1,476,920
Hitachi 284,000 3,392,379
Kyocera 20,000 3,346,451
Matsushita Communication Industrial 21,000 3,294,041
Nintendo 23,000 3,833,512
Rohm 11,000 3,687,208
Total 19,030,511
Financial services (0.9%)
Nikko Securities 291,000 3,435,576
Furniture & appliances (1.2%)
Matsushita Electric Industrial 172,000 4,555,026
Health care (0.2%)
Sankyo 35,000 771,332
Industrial equipment & services (1.2%)
Amada 480,000 4,373,536
Media (1.8%)
Sony 60,000 6,894,763
Metals (0.7%)
Nippon Steel 1,238,000 2,785,629
Multi-industry conglomerates (0.8%)
Secom 35,000 2,936,247
Retail (0.9%)
FamilyMart 97,000 3,556,831
Textiles & apparel (0.7%)
Asahi Glass 323,000 2,835,353
Utilities -- telephone (5.7%)
Nippon Telegraph & Telephone 713 8,846,892
Nippon Television Network 5,830 4,356,507
NTT Data 237 3,160,146
NTT Mobile Communication Network 150 5,014,121
Total 21,377,666
Mexico (0.9%)
Beverages & tobacco (0.5%)
Fomento Economico Mexicano ADR 44,600 1,839,750
Utilities -- telephone (0.4%)
Telefonos de Mexico ADR Cl L 28,499 1,676,097
Netherlands (3.2%)
Insurance (1.8%)
Fortis 281,825(d) 7,086,689
Miscellaneous (1.4%)
United Pan-Europe Communications 141,738(b) 5,158,026
Singapore (0.8%)
Banks and savings & loans
Overseas Union Bank 696,576 3,183,881
South Korea (1.8%)
Electronics (0.6%)
Samsung Electronics 9,000 2,432,980
Metals (0.4%)
Pohang Iron & Steel ADR 71,421 1,499,841
Utilities -- telephone (0.8%)
Korea Telecom ADR 82,147 2,834,072
Spain (2.0%)
Building materials & construction (0.5%)
Fomento de Construcciones y Contractas 93,710 1,921,074
Energy (1.5%)
Repsol-YPF 275,541 5,636,122
Sweden (4.4%)
Communications equipment & services
Ericsson (LM) Cl B 185,835 16,522,813
Turkey (1.1%)
Banks and savings & loans
Garanti Banking 136,051,902(b) 2,291,860
Yapi Kredit Finance 63,962,000 2,039,871
Total 4,331,731
United Kingdom (22.4%)
Aerospace & defense (0.8%)
British Aerospace 471,911 2,894,416
Communications equipment & services (2.1%)
Marconi 623,153 7,775,043
Health care (5.9%)
Glaxo Wellcome ADR 521,325 16,076,727
SmithKline Beecham 499,510 6,831,099
Total 22,907,826
Insurance (1.6%)
Prudential 383,030 5,879,147
Leisure time & entertainment (2.1%)
EMI Group ADR 828,647 7,933,216
Retail (2.7%)
Next 259,157 2,027,233
Tesco 2,360,475 8,047,262
Total 10,074,495
Utilities -- gas (2.1%)
BG Group 1,333,115 7,948,239
Utilities -- telephone (5.1%)
COLT Telecom Group 184,864(b) 7,853,450
Vodafone AirTouch 2,530,406 11,600,591
Total 19,454,041
Total common stocks
(Cost: $292,254,071) $327,387,820
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Short-term securities (13.9%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (11.3%)
Federal Home Loan Bank Disc Nts
<S> <C> <C> <C> <C> <C>
05-02-00 5.83% $1,400,000 $1,399,093
05-03-00 5.89 500,000 499,591
05-12-00 5.81 3,200,000 3,192,545
05-19-00 5.89 800,000 797,171
06-30-00 6.17 7,800,000 7,716,734
Federal Home Loan Mtge Corp Disc Nts
05-02-00 5.83 300,000 299,806
05-16-00 5.94 700,000 697,928
06-22-00 6.07 900,000 891,238
07-06-00 6.13 7,500,000 7,410,013
07-06-00 6.15 14,100,000 13,930,823
Federal Natl Mtge Assn Disc Nts
05-04-00 5.83 600,000 599,418
05-25-00 5.87 700,000 696,729
06-27-00 6.06 5,000,000 4,947,917
Total 43,079,006
Commercial paper (2.6%)
Alcoa
06-06-00 6.06 600,000 596,087
Bayer
06-20-00 6.10 600,000(e) 594,550
Ciesco LP
06-19-00 6.21 1,200,000 1,189,340
Corporate Receivables
07-17-00 6.34 1,600,000(e) 1,577,742
Fleet Funding
05-31-00 6.06 800,000(e) 795,439
GMAC
06-28-00 6.15 1,100,000 1,088,332
Intl Lease Finance
06-19-00 6.10 900,000 891,979
Motorola
06-12-00 6.13 2,100,000 2,084,040
Procter & Gamble
05-01-00 5.85 1,000,000 999,513
Total 9,817,022
Total short-term securities
(Cost: $52,916,612) $52,896,028
Total investments in securities
(Cost: $345,170,683)(f) $380,283,848
</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.
(c) Foreign security values are stated in U.S. dollars.
(d) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security has
been determined to be liquid under guidelines established by the board.
(e) Commercial paper sold within terms of a private placement memorandum, exempt
from registration under Section 4(2) of the Securities Act of 1933, as amended,
and may be sold only to dealers in that program or other "accredited investors."
This security has been determined to be liquid under guidelines established by
the board.
(f) At April 30, 2000, the cost of securities for federal income tax purposes
was $345,658,178 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $58,237,058
Unrealized depreciation (23,611,388)
-----------
Net unrealized appreciation $34,625,670
<PAGE>
<TABLE>
<CAPTION>
Investments in Securities
IDS Life Series Fund, Inc.
Managed Portfolio
April 30, 2000
(Percentages represent value of investments compared to net assets)
Common stocks (73.8%)
Issuer Shares Value(a)
Banks and savings & loans (0.8%)
<S> <C> <C>
Wells Fargo 160,000 $6,570,000
Wilshire Financial Services Group 77,199(b) 86,849
Total 6,656,849
Communications equipment & services (8.3%)
American Tower Cl A 200,000(b) 9,300,000
Clearnet Communications CL A 990(b,c) 42,446
Finisar 90,000(b)
3,358,125
Lucent Technologies 220,000 13,681,250
Nokia ADR Cl A 200,000(c) 11,375,000
Nortel Networks 175,000 19,818,750
PhoneTel Technologies 76,000(b) 54,625
Sycamore Networks 15,000(b) 1,177,500
Tellabs 140,000(b)
7,673,750
Williams Communications Group 60,000(b) 2,220,000
Total 68,701,446
Computer software & services (2.6%)
Microsoft 300,000(b) 20,925,000
WebMethods 10,000(b) 900,000
Total 21,825,000
Computers & office equipment (19.9%)
America Online 300,000(b) 17,943,750
BEA Systems 60,000(b) 2,895,000
Cisco Systems 540,000(b) 37,437,187
Dell Computer 160,000(b) 8,020,000
EMC 70,000(b) 9,725,625
Exodus Communications 20,000(b) 1,768,750
Globix 10,560(b)
237,600
Inktomi 80,000(b) 12,315,000
Intl Business Machines 60,000 6,697,500
Lexmark Intl Group Cl A 110,000(b) 12,980,000
Portal Software 40,000(b) 1,835,000
Sanmina 300,000(b) 18,018,750
Solectron 500,000(b) 23,406,250
Veritas Software 60,000(b) 6,435,938
Yahoo! 30,000(b)
3,907,500
Total 163,623,850
Electronics (16.6%)
Agilent Technologies 10,000(b) $886,250
Applied Materials 100,000(b) 10,181,250
Avanex 13,100(b)
1,596,563
Corning 170,000 33,575,000
Intel 190,000 24,094,375
Jabil Circuit 480,000(b) 19,650,000
JDS Uniphase 240,000(b) 24,900,000
Maxim Integrated Products 240,000(b) 15,555,000
Texas Instruments 40,000 6,515,000
Total 136,953,438
Financial services (2.8%)
Citigroup 240,000 14,265,000
Schwab (Charles) 200,000 8,900,000
Total 23,165,000
Health care (6.6%)
Amgen 40,000(b) 2,240,000
Bristol-Myers Squibb 100,000 5,243,750
Genentech 20,000(b) 2,340,000
Guidant 160,000(b)
9,180,000
Medtronic 330,000 17,139,375
Pfizer 280,000
11,795,000
Schering-Plough 170,000 6,853,125
Total 54,791,250
Insurance (1.3%)
American Intl Group 100,000 10,968,750
Leisure time & entertainment (1.1%)
Harley-Davidson 220,000 8,758,750
Media (1.1%)
Comcast Special Cl A 230,000(b) 9,214,375
Miscellaneous (0.2%)
Akamai Technologies 10,000(b) 988,750
InterTrust Technologies 40,000(b) 920,000
Total 1,908,750
Multi-industry conglomerates (5.3%)
General Electric 180,000 28,305,000
Tyco Intl 340,000(c) 15,618,750
Total 43,923,750
Retail (3.3%)
Costco Wholesale 120,000(b) 6,487,500
Lowe's Companies 70,000 3,465,000
Safeway 125,000(b) 5,515,625
Wal-Mart Stores 220,000 12,182,500
Total 27,650,625
Utilities -- telephone (3.9%)
AT&T 140,000 6,536,250
Global Crossing 40,000(b,c) 1,260,000
Level 3 Communications 40,000(b) 3,560,000
MCI WorldCom 460,000(b) 20,901,250
Total 32,257,500
Total common stocks
(Cost: $356,172,215) $610,399,333
Preferred stock & other (0.1%)
Issuer Shares Value(a)
Bar Technologies
Warrants 500 $313
Century Maintenance
13.25% Pay-in-kind Series C 12,091(e) 1,064,008
Poland Telecom
Warrants 625 78
Vialog
Warrants 1,075 55,900
Total preferred stock & other
(Cost: $1,329,388) $1,120,299
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bonds (22.9%)
Issuer Coupon Principal Value(a)
rate amount
Government obligations (3.7%)
Govt Trust Certs Israel
<S> <C> <C> <C> <C> <C>
11-15-01 9.25% $103,865 $105,862
U.S. Treasury
11-15-05 5.88 15,000,000 14,548,952
05-15-07 6.63 5,500,000 5,544,300
05-15-08 5.63 3,000,000 2,853,752
11-15-21 8.00 4,000,000 4,816,898
08-15-27 6.38 2,600,000 2,657,689
Total 30,527,453
Mortgage-backed securities (8.9%)
Federal Home Loan Mtge Corp
03-01-13 5.50 807,783 742,126
03-01-15 7.50 2,980,656 2,966,423
11-01-22 8.00 226,572 227,564
08-01-24 8.00 234,526 235,185
07-01-28 6.00 2,280,127 2,067,802
06-01-29 7.00 4,778,642 4,575,389
Federal Natl Mtge Assn
05-14-04 5.63 5,000,000 4,714,325
08-15-04 6.50 7,000,000 6,801,039
02-15-08 5.75 15,000,000 13,600,470
01-01-09 5.50 1,087,711 1,017,097
06-01-10 6.50 859,478 832,761
08-01-11 8.50 527,433 538,304
09-01-13 6.00 815,426 764,402
03-01-14 5.50 4,609,841 4,226,769
04-01-22 8.00 78,057 78,300
04-01-23 8.50 114,264 116,245
05-01-24 6.00 1,290,111 1,187,302
06-01-24 9.00 55,670 57,349
08-01-25 7.50 358,035 351,548
09-01-25 6.50 742,451 697,674
09-01-25 7.00 522,731 502,637
12-01-25 7.00 1,301,238 1,251,218
02-01-26 7.00 530,415 510,026
04-01-26 7.00 676,208 649,579
05-01-26 7.50 1,106,477 1,086,428
09-01-26 7.50 561,769 551,410
09-01-28 6.00 2,021,372 1,831,868
09-01-28 6.50 1,879,395 1,755,762
11-01-28 6.00 5,612,196 5,088,563
12-01-28 6.00 3,645,529 3,300,334
12-01-28 6.50 1,889,143 1,762,797
01-01-29 6.50 2,768,147 2,583,013
06-01-29 7.00 2,104,372 2,013,556
05-01-30 8.00 4,000,000(h) 3,992,500
Merrill Lynch Mtge Investors
06-15-21 7.58 162,760(i) 152,028
Merrill Lynch Mtge Investors Cl D
Series 1996-C2
12-21-28 6.96 900,000 825,705
Total 73,655,498
Aerospace & defense (0.1%)
Northrop-Grumman
03-01-16 7.75 500,000 478,038
Airlines (0.1%)
Continental Airlines
Series 1996A
10-15-13 6.94 443,610 414,389
Automotive & related (0.4%)
Ford Motor Credit
10-28-09 7.38 1,000,000 966,920
Lear
Company Guaranty Series B
05-15-09 8.11 1,500,000 1,338,990
MSX Intl
Company Guaranty
01-15-08 11.38 855,000 803,700
Total 3,109,610
Union Planters Capital
Company Guaranty
12-15-26 8.20 400,000 354,140
Wells Fargo
Sr Medium-term Nts Series G
09-15-02 6.38 800,000 779,624
Total 1,133,764
Building materials & construction (0.1%)
Foster Wheeler
11-15-05 6.75 750,000 628,719
Pulte
Sr Nts
12-15-03 7.00 500,000 473,592
Total 1,102,311
Chemicals (0.8%)
Allied Waste North America
Company Guaranty Series B
01-01-09 7.88 700,000 500,500
Dow Chemical
11-01-29 7.38 1,500,000 1,425,509
E.I. Du Pont De Nemours
10-15-04 6.75 1,400,000 1,368,920
Lyondell Chemical
Series A
05-01-07 9.63 1,250,000 1,232,813
Rohm & Haas
07-15-29 7.85 1,000,000 992,792
Waste Management
Sr Nts
07-15-28 7.00 1,500,000 1,090,289
Total 6,610,823
Communications equipment & services (0.5%)
360Networks
(U.S. Dollar) Sr Nts
08-01-09 12.00 1,000,000(c) 925,000
NTL
Zero Coupon Sr Nts Series B
04-01-03 9.10 1,515,000(f) 963,919
Price Communications Wireless
Company Guaranty Series B
12-15-06 9.13 1,000,000 987,500
Vialog
Company Guaranty
11-15-01 12.75 1,075,000 870,750
Total 3,747,169
Computers & office equipment (0.1%)
Cooperative Computing
Sr Sub Nts
02-01-08 9.00 500,000 110,000
Globix
Sr Nts
02-01-10 12.50 1,000,000(d) 880,000
Total 990,000
Electronics (0.1%)
Reliance Electric
04-15-03 6.80 500,000 492,667
Thomas & Betts
01-15-06 6.50 400,000 375,380
Total 868,047
Energy (0.4%)
Energy Corp of America
Sr Sub Nts Series A
05-15-07 9.50 1,250,000 837,500
Lodestar Holdings
Company Guaranty
05-15-05 11.50 500,000 100,000
Pioneer Natl Resources
Sr Nts
08-15-07 8.25 500,000 456,566
Rayovac
Sr Sub Nts Series B
11-01-06 10.25 925,000 952,750
USX
03-01-08 6.85 1,500,000 1,369,929
Total 3,716,745
Financial services (0.5%)
AOA Holdings LLC
Sr Nts
06-01-06 10.38 1,500,000 1,484,999
Arcadia Financial
Sr Nts
03-15-07 11.50 690,000 762,803
Bat-CRAVE-800
08-12-00 6.68 700,000(d) 699,418
GenAmerica Capital
Company Guaranty
06-30-27 8.52 500,000(d) 493,093
Travelers Group
Sr Nts
01-15-06 6.75 500,000 475,032
Total 3,915,345
Health care (0.2%)
Watson Pharmaceuticals
Sr Nts
05-15-08 7.13 1,500,000 1,345,440
Health care services (0.2%)
Paracelsus Healthcare
Sr Sub Nts
08-15-06 10.00 1,000,000 300,000
Physician Sales & Service
Company Guaranty
10-01-07 8.50 600,000 544,500
Tenet Healthcare
Sr Sub Nts Series B
12-01-08 8.13 1,000,000 930,000
Total 1,774,500
Industrial equipment & services (0.2%)
AMETEK
Sr Nts
07-15-08 7.20 1,500,000 1,333,785
Laidlaw
(U.S. Dollar)
05-01-05 6.50 500,000(c) 185,000
Total 1,518,785
Insurance (0.3%)
Americo Life
Sr Sub Nts
06-01-05 9.25 600,000 582,750
New England Mutual
02-15-24 7.88 250,000(d) 245,090
Principal Mutual
03-01-44 8.00 250,000(d) 234,120
SAFECO Capital
Company Guaranty
07-15-37 8.07 1,000,000 832,150
SunAmerica
08-30-05 7.34 700,000 695,351
Total 2,589,461
Leisure time & entertainment (0.3%)
AMC Entertainment
Sr Sub Nts
02-01-11 9.50 1,250,000 681,250
Regal Cinemas
Sr Sub Nts
12-15-10 8.88 350,000 131,250
Time Warner
Sr Nts
01-15-28 6.95 500,000 434,985
Trump Atlantic City Assn/Funding
1st Mtge Company Guaranty
05-01-06 11.25 700,000 511,875
United Artists Theatres
Series 1995A
07-01-15 9.30 691,756 454,442
Total 2,213,802
Media (0.8%)
AMFM
Zero Coupon Sr Disc Nts
02-01-02 7.49 1,000,000(f) 885,000
Cox Communications
06-15-25 7.63 500,000 458,285
CSC Holdings
Sr Nts
07-15-08 7.25 1,000,000 905,241
Sr Sub Nts
11-01-05 9.25 500,000 503,750
Paxson Communications
Sr Sub Nts
10-01-02 11.63 1,000,000 1,022,500
TCI Communications
08-01-15 8.75 1,000,000 1,063,356
Telewest Communications
(U.S. Dollar) Zero Coupon Sr Disc Nts
04-15-04 8.80 1,400,000(c,f) 784,000
Time Warner Entertainment
Sr Nts
07-15-33 8.38 500,000 505,190
Turner Broadcasting
07-01-13 8.38 250,000 252,785
Total 6,380,107
Metals (0.1%)
EnviroSource
Sr Nts
06-15-03 9.75 170,000 110,500
Sr Nts Series B
06-15-03 9.75 400,000 260,000
Great Lakes Acquisition
Zero Coupon Series B
05-15-03 19.90 1,000,000(f) 490,000
Total 860,500
Miscellaneous (1.0%)
Bistro Trust
12-31-02 9.50 1,000,000(d) 934,400
Centaur Mining & Exploration
(U.S. Dollar) Company Guaranty
12-01-07 11.00 500,000(c) 460,625
DTE Burns Harbor LLC
Sr Nts
01-30-03 6.57 475,090(d) 467,075
Equinix
12-01-07 13.00 1,000,000 1,040,000
Great Central Mines
(U.S. Dollar) Sr Nts
04-01-08 8.88 1,000,000(c) 935,000
ISG Resources
04-15-08 10.00 835,000 722,275
Nationwide Credit
Sr Nts Series A
01-15-08 10.25 1,000,000 740,000
Norcal Waste Systems
Company Guaranty Series B
11-15-05 13.50 500,000 522,500
NSM Steel
Company Guaranty
02-01-06 12.00 461,881(b,d) 18,475
Outsourcing Solutions
Sr Sub Nts Series B
11-01-06 11.00 1,000,000 881,250
Poland Telecom Finance
(U.S. Dollar) Company Guaranty Series B
12-01-07 14.00 625,000(c) 168,750
Teleglobe
(U.S. Dollar) Company Guaranty
07-20-29 7.70 1,500,000(c) 1,447,860
Total 8,338,210
Multi-industry conglomerates (0.4%)
Goodrich (BF)
Company Guaranty
04-15-08 7.50 1,000,000 960,000
Prime Succession
Sr Sub Nts
08-15-04 10.75 1,000,000(b) 200,000
US Inds/USI America Holding
Company Guaranty
10-15-03 7.13 1,500,000 1,445,235
USI American Holdings
Sr Nts Series B
12-01-06 7.25 850,000 798,213
Total 3,403,448
Paper & packaging (0.5%)
Doman Inds
(U.S. Dollar) Sr Nts Series B
11-15-07 9.25 1,350,000(c) 1,123,875
Gaylord Container
Sr Nts Series B
06-15-07 9.38 1,000,000 875,000
Intl Paper
11-15-12 5.13 250,000 185,905
Owens-Illinois
Sr Nts
05-15-08 7.35 1,500,000 1,330,064
Repap New Brunswick
(U.S. Dollar) Sr Nts
06-01-04 9.00 600,000(c) 586,500
Total 4,101,344
Restaurants & lodging (0.1%)
MGM Grand
02-06-08 6.88 1,000,000 889,092
Retail (0.3%)
Kroger
Company Guaranty
03-01-08 7.45 1,000,000 938,675
Wal-Mart Stores
Sr Nts
08-10-09 6.88 1,500,000 1,446,240
Total 2,384,915
Textiles & apparel (0.1%)
Galey & Lord
Company Guaranty
03-01-08 9.13 750,000 345,000
Westpoint Stevens
Sr Nts
06-15-08 7.88 750,000 622,500
Total 967,500
Transportation (--%)
American Architectural
Company Guaranty
12-01-07 11.75 1,000,000 247,500
Greater Beijing First Expressways
(U.S. Dollar) Sr Nts
06-15-04 9.25 200,000(b,c) 64,000
06-15-07 9.50 170,000(b,c) 51,000
Total 362,500
Utilities -- electric (0.9%)
Alabama Power
1st Mtge
12-01-24 9.00 300,000 308,108
California Infrastructure-
Pacific Gas & Electric Series 1997-1
09-25-05 6.32 1,000,000 970,820
Cleveland Electric Illuminating
1st Mtge Series B
05-15-05 9.50 1,000,000 1,018,628
CMS Energy
Sr Nts
11-15-04 7.63 500,000 460,067
Connecticut Light & Power
1st Mtge Series C
06-01-02 7.75 1,000,000 993,888
Edison Mission Energy
Sr Nts
06-15-09 7.73 1,000,000(d) 959,154
El Paso Electric
1st Mtge Series D
02-01-06 8.90 650,000 667,063
Jersey Central Power & Light
1st Mtge
11-01-25 6.75 1,000,000 842,235
Salton Sea Funding
Series C
05-30-10 7.84 300,000 290,367
Sithe Independence Funding
Series A
12-30-13 9.00 150,000 152,608
TXU Electric Capital
Company Guaranty
01-30-37 8.18 750,000 683,052
Total 7,345,990
Utilities -- telephone (1.7%)
AT&T Canada
(U.S. Dollar) Sr Nts
11-01-08 10.63 400,000(c) 450,500
(U.S. Dollar) Zero Coupon Sr Disc Nts
06-15-03 8.05 1,250,000(c,f) 985,938
BellSouth Capital Funding
02-15-10 7.75 2,000,000 2,002,480
Geotek Communications
Cv Sr Sub Nts
02-15-01 12.00 205,000(b) 256
Intermedia Communications
Zero Coupon Sr Disc Nts Series B
07-15-02 9.54 1,000,000(f) 772,500
ITC Deltacom
Sr Nts
03-01-08 8.88 1,150,000 1,058,000
Level 3 Communications
03-15-08 11.00 1,000,000(d) 967,500
McLeod USA
Sr Nts
02-15-09 8.13 500,000 451,250
Mountain States Telephone & Telegraph
06-01-05 5.50 80,000 73,593
New England Telephone & Telegraph
09-01-08 6.38 70,000 63,288
Qwest Communications Intl
Sr Nts Series B
11-01-08 7.50 1,000,000 959,523
Rogers Cantel
(U.S. Dollar)
06-01-08 9.38 450,000(c) 450,000
RSL Communications
(U.S. Dollar) Company Guaranty
11-15-06 12.25 1,150,000(c) 1,138,500
Sprint Capital
Company Guaranty
05-01-09 6.38 1,500,000 1,353,180
U S WEST Capital Funding
Company Guaranty
07-15-28 6.88 1,000,000 856,933
U S WEST Communications
11-10-26 7.20 700,000 613,920
United Pan-Europe Communications
(U.S. Dollar) Sr Nts
02-01-10 11.25 700,000(c,d) 651,000
02-01-10 11.50 425,000(c,d) 391,000
Vodafone AirTouch
Company Guaranty
05-01-08 6.65 1,000,000 923,041
Total 14,162,402
Total bonds
(Cost: $202,136,772) $188,907,188
Short-term securities (3.5%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (3.3%)
Federal Home Loan Bank Disc Nts
05-03-00 5.80% $1,500,000 $1,498,760
05-12-00 5.81 800,000 798,136
05-12-00 5.89 5,400,000 5,387,662
05-31-00 5.91 1,100,000 1,094,071
06-09-00 5.98 2,500,000 2,482,675
06-21-00 6.04 2,200,000 2,179,305
Federal Home Loan Mtge Corp Disc Nts
05-12-00 5.99 400,000 399,071
05-23-00 5.93 1,400,000 1,394,254
06-13-00 6.07 8,400,000 8,335,386
Federal Natl Mtge Assn Disc Nt
06-27-00 6.06 3,500,000 3,463,542
Total 27,032,862
Commercial paper (0.2%)
Gillette
05-30-00 6.08% $500,000(g) $497,311
Goldman Sachs Group
07-10-00 6.41 500,000 493,582
SBC Communications
05-18-00 5.92 900,000(g) 896,920
Total 1,887,813
Total short-term securities
(Cost: $28,928,113) $28,920,675
Total investments in securities
(Cost: $588,566,488)(j) $829,347,495
</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,
2000, the value of foreign securities represented 4.73% 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) 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.
(g) 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.
(h) At April 30, 2000, the cost of securities purchased, including interest
purchased, on a when-issued basis was $4,039,944.
(i) Interest rate varies either based on a predetermeined schedule or to reflect
current market conditions; rate shown is the effective rate on April 30, 2000.
(j) At April 30, 2000, the cost of securities for federal income tax purposes
was $588,777,382 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $266,098,450
Unrealized depreciation (25,528,337)
-----------
Net unrealized appreciation $240,570,113
<PAGE>
<TABLE>
<CAPTION>
Investments in Securities
IDS Life Series Fund, Inc.
Money Market Portfolio
April 30, 2000
(Percentages represent value of investments compared to net assets)
U.S. government agency (10.8%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
Federal Home Loan Bank Disc Nt
<S> <C> <C> <C> <C>
05-02-00 5.83% $6,200,000 $6,196,988
Total U.S. government agency
(Cost: $6,196,988) $6,196,988
Commercial paper (80.6%)
Automotive & related (2.4%)
Ford Motor Credit
06-26-00 6.10 1,400,000 1,386,376
Banks and savings & loans (12.7%)
Abbey Natl North America
06-12-00 6.10 2,500,000 2,481,513
ABN Amro North America Finance
06-19-00 6.12 1,900,000 1,883,662
BBV Finance
05-22-00 6.05 900,000 896,533
Deutsche Bank Financial
06-13-00 6.10 1,500,000 1,488,647
06-30-00 6.15 500,000 494,760
Total 7,245,115
Broker dealers (11.1%)
Bear Stearns
06-21-00 6.12 1,900,000 1,883,021
Merrill Lynch
05-30-00 5.96 1,500,000 1,492,340
06-26-00 6.14 1,000,000 990,204
Salomon Smith Barney
06-01-00 6.08 2,000,000 1,988,909
Total 6,354,474
Chemicals (4.3%)
Bayer
06-20-00 6.10 2,500,000(b) 2,478,153
Commercial finance (1.0%)
Ciesco LP
05-23-00 6.05 600,000 597,588
Communications equipment & services (4.2%)
Motorola
06-14-00 6.10 2.400,000 2,381,447
Financial services (22.9%)
AEGON Funding
06-01-00 5.95 500,000 497,287
CIT Group Holdings
06-19-00 6.11 1,800,000 1,784,547
06-27-00 6.13 900,000 891,047
Corporate Receivables
05-11-00 5.98 800,000(b) 798,408
GMAC
06-28-00 6.14 1,900,000 1,880,747
Household Finance
06-05-00 5.98 3,100,000 3,081,074
Intl Lease Finance
05-30-00 6.05 2,900,000 2,884,966
Variable Funding Capital
05-08-00 5.94 1,300,000(b) 1,298,073
Total 13,116,149
Household products (4.7%)
Clorox
07-25-00 6.35 2,700,000 2,659,219
Insurance (4.7%)
American General
07-18-00 6.33 2,700,000 2,662,560
Miscellaneous (3.5%)
Barton Capital
06-07-00 6.11 600,000(b) 596,055
USAA Capital
05-24-00 6.06 1,400,000 1,394,137
Total 1,990,192
Utilities -- electric (4.9%)
Natl Rural Utilities
06-12-00 6.15 2,800,000 2,779,124
Utilities -- telephone (4.2%)
SBC Communications
06-08-00 6.07 2,400,000(b) 2,383,920
Total commercial paper
(Cost: $46,034,317) $46,034,317
Letters of credit (9.0%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
Bank of America-
AES Shady Point
06-21-00 6.13% $2,400,000(b) $2,378,517
Bank of New York-
River Fuel Trail
06-09-00 6.22 2,800,000(b) 2,780,293
Total letters of credit
(Cost: $5,158,810) $5,158,810
Total investments in securities
(Cost: $57,390,115)(c) $57,390,115
</TABLE>
<PAGE>
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, 2000.
<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.
<PAGE>
(m) Rule 12b-1 Plan: None.
(n) Financial Data Schedule: Not applicable.
(o) Power of Attorney dated April 20, 2000 is filed electronically
herewith.
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>
------------------------------- ---------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
Name and Title Other company(s) Address Title within other
company(s)
------------------------------- ---------------------------- ---------------------------- ----------------------------
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
200 AXP Financial Center
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, 2000.
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, 2000.
Signature Capacity
/s/ Timothy V. Bechtold* Director
Timothy V. Bechtold
/s/ Rodney P. Burwell* Director
Rodney P. Burwell
_______________________ Director
Jean B. Keffeler
/s/ Richard W. Kling* Director and President
Richard W. Kling
/s/ Thomas R. McBurney* Director
Thomas R. McBurney
*Signed pursuant to Power of Attorney dated April 20, 2000, filed electronically
herewith.
/s/ Mary Ellyn Minenko
Mary Ellyn Minenko
<PAGE>
CONTENTS OF THIS POST-EFFECTIVE AMENDMENT NO. 26 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.
Exhibits.
