<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 20 (File No. 33-20872) X
---- ---
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY (ACT OF 1940)
Amendment No. 23 (File No. 811-5522)
IDS UTILITIES INCOME FUND, INC.
IDS Tower 10, Minneapolis, MN 55440-0010
Leslie L. Ogg - 901 S. Marquette Ave., Suite 2810
Minneapolis, MN 55402-3268
(612) 330-9283
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 Aug. 28, 1998 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>
Cross reference sheet showing the location in the prospectus and Statement of
Additional Information of the information called for by items enumerated in
Parts A and B of Form N-1A.
Negative answers omitted are so indicated.
PART A
<TABLE>
<CAPTION>
<S> <C>
Item No. Section in Prospectus
1 Cover page of prospectus
2 (a) Sales charge and Fund expenses
(b) The Fund in brief
(c) The Fund in brief
3 (a) Financial highlights
(b) NA
(c) Performance
(d) Financial highlights
4 (a) The Fund in brief; Investment policies and risks; How the Fund is organized
(b) Investment policies and risks
(c) Investment policies and risks
5 (a) Board members and officers
(b)(i) Investment manager; About American Express Financial Corporation - General information
(b)(ii) Investment manager
(b)(iii) Investment manager
(c) Portfolio manager
(d) Administrator and transfer agent
(e) Administrator and transfer agent
(f) Distributor
(g) Investment manager; About American Express Financial Corporation - General information
5A(a) *
(b) *
6 (a) Shares; Voting rights
(b) NA
(c) NA
(d) Voting rights
(e) Cover page; Special shareholder services
(f) Dividend and capital gain distributions; Reinvestments
(g) Taxes
(h) Alternative purchase arrangements
7 (a) Distributor
(b) Valuing Fund shares
(c) How to purchase, exchange or redeem shares
(d) How to purchase shares
(e) NA
(f) Distributor
(g) Alternative purchase arrangements; Reductions and waivers of the sales charge
8 (a) How to redeem shares
(b) NA
(c) How to purchase shares: Three ways to invest
(d) How to purchase, exchange or redeem shares: Redemption policies -
"Important...
9 None
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART B
<S> <C>
Item No. Section in Statement of Additional Information
10 Cover page of SAI
11 Table of Contents
12 NA
13 (a) Additional Investment Policies; all appendices except Dollar-Cost Averaging
(b) Additional Investment Policies
(c) Additional Investment Policies
(d) Security Transactions
14 (a) Board members and officers**; Board Members and Officers
(b) Board Members and Officers
(c) Board Members and Officers
15 (a) NA
(b) Principal Holders of Securities, if applicable
(c) Board Members and Officers
16 (a)(i) How the Fund is organized; About the American Express Financial Corporation**
(a)(ii) Agreements: Investment Management Services Agreement, Plan and Agreement of Distribution
(a)(iii) Agreements: Investment Management Services Agreement
(b) Agreements: Investment Management Services Agreement
(c) NA
(d) Agreements: Administrative Services Agreement, Shareholder Service Agreement
(e) NA
(f) Agreement: Distribution Agreement
(g) NA
(h) Custodian Agreement; Independent Auditors
(i) Agreements: Transfer Agency Agreement; Custodian Agreement
17 (a) Security Transactions
(b) Brokerage Commissions Paid to Brokers Affiliated with American Express Financial Corporation
(c) Security Transactions
(d) Security Transactions
(e) Security Transactions
18 (a) Shares; Voting rights**
(b) NA
19(a) Investing in the Fund
(b) Valuing Fund Shares; Investing in the Fund
(c) Redeeming Shares
20 Taxes
21 (a) Agreements: Distribution Agreement
(b) NA
(c) NA
22 (a) Performance Information (for money market funds only) (b) Performance
Information (for all funds except money market funds)
23 Financial Statements
</TABLE>
<PAGE>
* Designates information is located in annual report.
** Designates location in prospectus.
<PAGE>
IDS Utilities Income Fund
Prospectus
August 28, 1998
The primary goal of IDS Utilities Income Fund, Inc. is a high level of current
income. Secondary goals are growth of income and capital. The Fund invests
primarily in securities of public utility companies.
This prospectus contains facts that can help you decide if the Fund is the right
investment for you. Read it before you invest and keep it for future reference.
Additional facts about the Fund are in a Statement of Additional Information
(SAI), filed with the Securities and Exchange Commission (SEC) and available for
reference, along with other related materials, on the SEC Internet web site
(http://www.sec.gov). The SAI is incorporated by reference. For a free copy,
contact American Express Shareholder Service.
Like all mutual fund shares, these securities have not been approved or
disapproved by the Securities and Exchange Commission or any state securities
commission, nor has the Securities and Exchange Commission or any state
securities commission passed upon the accuracy or adequacy of this prospectus.
Any representation to the contrary is a criminal offense.
Please note that the 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
American Express Shareholder Service
P.O. Box 534
Minneapolis, MN
55440-0534
800-862-7919
TTY: 800-846-4852
Web site address: http://www.americanexpress.com/advisors
<PAGE>
Table of contents
The Fund in brief
Goals
Investment policies and risks
Manager and distributor
Portfolio manager
Alternative purchase arrangements
Sales charge and Fund expenses
Performance
Financial highlights
Total returns
Investment policies and risks
Facts about investments and their risks
Alternative investment option
Valuing Fund shares
How to purchase, exchange or redeem shares Alternative purchase
arrangements How to purchase shares How to exchange shares How to
redeem shares Reductions and waivers of the sales charge
Special shareholder services
Services
Quick telephone reference
Distributions and taxes
Dividend and capital gain distributions
Reinvestments
Taxes
How to determine the correct TIN
<PAGE>
How the Fund is organized
Shares
Voting rights
Shareholder meetings
Board members and officers
Investment manager
Administrator and transfer agent
Distributor
About American Express Financial Corporation
General information
Year 2000
Appendix
Descriptions of derivative instruments
<PAGE>
The Fund in brief
Goals
IDS Utilities Income Fund (the Fund) seeks to provide shareholders with a high
level of current income. Secondary goals are growth of income and capital.
Because any investment involves risk, achieving these goals cannot be
guaranteed. Only shareholders can change the goals.
Investment policies and risks
The Fund is a diversified mutual fund that invests primarily in securities of
public utilities. These include companies that produce or supply electric power,
natural gas, water, sanitary services, telecommunications and other
communications services (excluding radio and television broadcasters) for public
use or consumption. Other investments include derivative instruments, money
market instruments and securities that are not public utilities. Some of the
Fund's investments may be considered speculative and involve additional
investment risks. For further information, refer to the later section in the
prospectus titled "Investment policies and risks."
Manager and distributor
The Fund is managed by American Express Financial Corporation (AEFC), a provider
of financial services since 1894. AEFC currently manages more than $80 billion
in assets for the IDS MUTUAL FUND GROUP. Shares of the Fund are sold through
American Express Financial Advisors Inc. (AEFA), a wholly-owned subsidiary of
AEFC.
Portfolio manager
Bern Fleming joined AEFC in 1985 and worked as a utility analyst until becoming
portfolio manager of this Fund in January 1995.
Alternative purchase arrangements
The Fund offers its shares in three classes. Class A shares are subject to a
sales charge at the time of purchase. Class B shares are subject to a contingent
deferred sales charge (CDSC) on redemptions made within six years of purchase
and an annual distribution (12b-1) fee. Class Y shares are sold without a sales
charge to qualifying institutional investors.
<PAGE>
Sales charge and Fund expenses
Shareholder transaction expenses are incurred directly by an investor on the
purchase or redemption of Fund shares. Fund operating expenses are paid out of
Fund assets for each class of shares. Operating expenses are reflected in the
Fund's daily share price and dividends, and are not charged directly to
shareholder accounts.
Shareholder transaction expenses
<TABLE>
<CAPTION>
Class A Class B Class Y
<S> <C> <C> <C>
Maximum sales charge on purchases*
(as a percentage of offering price) 5% 0% 0%
Maximum deferred sales charge
imposed on redemptions (as a
percentage of original purchase price) 0% 5% 0%
Annual Fund operating expenses (as a percentage of average daily net assets):
Class A Class B Class Y
Management fee 0.52% 0.52% 0.52%
12b-1 fee 0.00% 0.75% 0.00%
Other expenses** 0.34% 0.35% 0.27%
Total 0.86% 1.62% 0.79%
</TABLE>
*This charge may be reduced depending on your total investments in IDS funds.
See "Reductions of the sales charge." **Other expenses include an administrative
services fee, a shareholder services fee, a transfer agency fee and other
nonadvisory expenses.
Example: Suppose for each year for the next 10 years, Fund expenses are as above
and annual return is 5%. If you sold your shares at the end of the following
years, for each $1,000 invested, you would pay total expenses of:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 year 3 years 5 years 10 years
Class A $58 $76 $ 95 $151
Class B $66 $91 $108 $172**
Class B* $16 $51 $ 88 $172**
Class Y $ 8 $25 $ 44 $ 98
*Assuming Class B shares are not redeemed at the end of the period.
**Based on conversion of Class B shares to Class A shares in the ninth year.
</TABLE>
<PAGE>
This example does not represent actual expenses, past or future. Actual expenses
may be higher or lower than those shown. Because Class B pays annual
distribution (12b-1) fees, long-term shareholders of Class B may indirectly pay
an equivalent of more than a 6.25% sales charge, the maximum permitted by the
National Association of Securities Dealers.
Performance
Financial highlights
<TABLE>
<CAPTION>
IDS Utilities Income Fund, Inc.
Financial highlights
Fiscal period ended June 30,
Per share income and capital changes(a)
Class A
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989(b)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $8.04 $7.24 $6.26 $6.23 $7.05 $6.35 $5.67 $5.67 $5.54 $5.00
beginning of period
Income from investment operations:
Net investment income .24 .25 .30 .29 .31 .32 .33 .35 .37 .34
(loss)
Net gains (losses) 1.93 1.01 .96 .21 (.38) .89 .73 .05 .19 .54
(both realized
and unrealized)
Total from investment 2.17 1.26 1.26 .50 (.07) 1.21 1.06 .40 .56 .88
operations
Less distributions:
Dividends from net (.23) (.24) (.28) (.31) (.31) (.33) (.32) (.35) (.37) (.34)
investment income
Distributions from (1.00) (.22) -- (.16) (.44) (.18) (.06) (.05) (.06) --
realized gains
Total distributions (1.23) (.46) (.28) (.47) (.75) (.51) (.38) (.40) (.43) (.34)
Net asset value, $8.98 $8.04 $7.24 $6.26 $6.23 $7.05 $6.35 $5.67 $5.67 $5.54
end of period
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Ratios/supplemental data
Class A
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989b
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net assets, end of $973 $740 $677 $601 $651 $655 $406 $252 $197 $72
period (in millions)
Ratio of expenses to .86% .89% .90% .89% .82% .86% .92% .90% .96% .87%c
average daily net assets(d)
Ratio of net income (loss) 2.81% 3.42% 4.03% 4.84% 4.55% 4.78% 5.37% 6.37% 6.65% 7.09%c
to average daily net assets
Portfolio turnover rate 83% 90% 84% 68% 102% 64% 49% 57% 53% 41%
(excluding short-term
securities)
Total return(e) 28.4% 18.1% 20.2% 8.4% (1.7%) 19.9% 19.2% 7.3% 10.3% 18.2%
Average brokerage
commisson rate(f) $.0495 $.0454 -- -- -- -- -- -- -- --
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Inception date. Period from Aug. 1, 1988 to June 30, 1989.
c Adjusted to an annual basis.
d Effective fiscal year 1996, expense ratio is based on total
expenses of the Fund before reduction of earnings credits on
cash balances.
e Total return does not reflect payment of a sales charge.
f Effective fiscal year 1997, the Fund is required to disclose an average
brokerage commission rate per share for security trades on which
commissions are charged. The comparability of this information may be
affected by the fact that commission rates per share vary significantly
among foreign countries.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial highlights
Fiscal period ended June 30,
Per share income and capital changes(a)
Class B Class Y
1998 1997 1996 1995(b) 1998 1997 1996 1995(b)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $8.04 $7.23 $6.26 $5.98 $8.04 $7.24 $6.26 $5.98
beginning of period
Income from investment operations:
Net investment income .17 .19 .23 .15 .24 .26 .31 .16
(loss)
Net gains (losses) both 1.94 1.03 .96 .26 1.94 1.02 .96 .27
realized and unrealized)
Total from investment 2.11 1.22 1.19 .41 2.18 1.28 1.27 .43
operations
Less distributions:
Dividends from net (.17) (.19) (.22) (.13) (.24) (.26) (.29) (.15)
investment income
Distributions from (1.00) (.22) -- -- (1.00) (.22) -- --
realized gains
Total distributions (1.17) (.41) (.22) (.13) (1.24) (.48) (.29) (.15)
Net asset value, $8.98 $8.04 $7.23 $6.26 $8.98 $8.04 $7.24 $6.26
end of period
Ratios/supplemental data
Class B Class Y
1998 1997 1996 1995(b) 1998 1997 1996 1995(b)
Net assets, end of $201 $93 $47 $7 $-- $-- $-- $--
period (in millions)
Ratio of expenses to 1.62% 1.65% 1.68% 1.83%c .79% .74% .73% .84%c
average daily net assets(d)
Ratio of net income 2.01% 2.66% 3.05% 4.83%c 3.02% 3.57% 4.13% 5.84%c
(loss) to average daily net assets
Portfolio turnover rate 83% 90% 84% 68% 83% 90% 84% 68%
(excluding short-term
securities)
Total return(e) 27.5% 17.3% 19.3% 6.9% 28.4% 18.3% 20.4% 7.2%
Average brokerage
commisson rate(f) $.0495 $.0454 -- -- $.0495 $.0454 -- --
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Inception date was March 20, 1995.
c Adjusted to an annual basis.
d Effective fiscal year 1996, expense ratio is based on total expenses of the
Fund before reduction of earnings credits on cash balances.
e Total return does not reflect payment of a sales charge.
f Effective fiscal year 1997, the Fund is required to disclose an average
brokerage commission rate per share for security trades on which commissions
are charged. The comparability of this information may be affected by the fact
that commission rates per share vary significantly among foreign countries.
The information in these tables has been audited by KPMG Peat Marwick 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>
Total returns
Total return is the sum of all of your returns for a given period, assuming you
reinvest all distributions. It is calculated by taking the total value of shares
you own at the end of the period (including shares acquired by reinvestment),
less the price of shares you purchased at the beginning of the period.
Average annual total return is the annually compounded rate of return over a
given time period (usually two or more years). It is the total return for the
period converted to an equivalent annual figure.
<TABLE>
<CAPTION>
Average annual total returns as of June 30, 1998
<S> <C> <C> <C> <C>
Since Since
Purchase 1 year ago inception 5 years inception
made (B&Y) ago (A)
- ---------------------------- ------------------- ------------------- ------------------- -------------------
Utilities:
Class A +21.98% --% +13.06% +14.09%***
Class B +23.47% +21.41%* --% --%
Class Y +28.43% +22.97%* --% --%
S&P 500 +30.02% +30.83%** +23.01% +18.53%****
*Inception date was March 20, 1995.
**Measurement period started April 1, 1995.
***Inception date was Aug. 1, 1988.
****Measurement period started Aug. 1, 1988.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Cumulative total returns as of June 30, 1998
<S> <C> <C> <C> <C>
Since Since
Purchase 1 year ago inception 5 years inception
made (B&Y) ago (A)
- ---------------------------- ------------------- ------------------- ------------------- ----------------------
Utilities:
Class A +21.98% --% +84.77% +269.52%***
Class B +23.47% +89.05%* --% --%
Class Y +28.43% +97.11%* --% --%
S&P 500 +30.02% +141.33%** +181.65% +447.17%****
*Inception date was March 20, 1995.
**Measurement period started April 1, 1995.
***Inception date was Aug. 1, 1988.
****Measurement period started Aug. 1, 1988.
</TABLE>
These examples show total returns from hypothetical investments in Class A,
Class B and Class Y shares of the Fund. These returns are compared to those of a
popular index for the same periods. The performance of Class B and Class Y will
vary from the performance of Class A based on differences in sales charges and
fees. Past performance for Class Y for the periods prior to March 20, 1995 may
be calculated based on the performance of Class A, adjusted to reflect
differences in sales charges although not for other differences in expenses.
For purposes of calculation, information about the Fund assumes:
o a sales charge of 5% for Class A shares
o redemption at the end of the period and deduction of the applicable
contingent deferred sales charge for Class B shares
o no sales charge for Class Y shares
o no adjustments for taxes an investor may have paid on the reinvested
income and capital gains
o a period of widely fluctuating securities prices. Returns shown should
not be considered a representation of the Fund's future performance.
Standard & Poor's 500 Stock Index (S&P 500), an unmanaged list of common stocks,
is frequently used as a general measure of market performance. The index
reflects reinvestment of all distributions and changes in market prices, but
excludes brokerage commissions or other fees.
<PAGE>
Investment policies and risks
Under normal market conditions, the Fund will concentrate at least 65% of its
total assets in securities of public utility companies. Generally the Fund will
invest in dividend-paying stocks. These include companies that produce or supply
electric power, natural gas, water, sanitary services, telecommunications and
other communications services (but not radio or television broadcasters) for
public use or consumption.
The Fund also may invest in derivative instruments, money market instruments and
securities that are not public utilities.
The various types of investments the investment manager uses to achieve
investment performance are described in more detail in the next section and in
the SAI.
Facts about investments and their risks
Utility stocks: Utility stocks are sensitive to interest rate changes. As
interest rates rise, the price of utility stocks generally decreases, and as
interest rates fall, the price of utility stocks generally increases. Utilities
are subject to certain regulatory rulings that may affect the value of their
stocks. Such rules include regulation over growth, environmental protection, and
allocation of increased production cost to consumers. Other conditions that may
affect their stock value include fluctuations in demands for service,
availability and cost of fuels, and special risks associated with operating
nuclear power plants or other specialized types of power plants and recently a
trend toward deregulation. The latter trend has been evident for the natural gas
and telephone utilities and is occurring in varying degrees for electric
utilities in some states. Deregulation is increasing competition among the
electric companies, which in turn puts pressure on company performance.
Other stocks: Stock prices are subject to market fluctuations. Stocks of smaller
companies may be subject to more abrupt or erratic price movements than stocks
of larger, established companies or the stock market as a whole. While most of
the Fund's investments are in established companies having adequate financial
reserves, some investments involve substantial risk and may be considered
speculative.
Preferred stocks: If a company earns a profit, it generally must pay its
preferred stockholders a dividend at a pre-established rate.
Convertible securities: These securities generally are preferred stocks or bonds
that can be exchanged for other securities, usually common stock, at prestated
prices. When the trading price of the common stock makes the exchange likely,
convertible securities trade more like common stock.
<PAGE>
Debt securities: The Fund may invest in bonds if they are rated in the top four
classifications by Moody's Investors Service, Inc. or Standard & Poor's
Corporation, or are of equivalent quality in the opinion of the investment
manager. The price of bonds generally falls as interest rates increase, and
rises as interest rates decrease. The price of bonds also fluctuates if the
credit rating is upgraded or downgraded. Securities that are subsequently
downgraded in quality may continue to be held by the Fund and will be sold only
when the investment manager believes it is advantageous to do so.
Foreign investments: Securities of foreign companies and governments may be
traded in the United States, but often they are traded only on foreign markets.
Frequently, there is less information about foreign companies and less
government supervision of foreign markets. There are risks when investing in
securities of foreign companies and governments in addition to those assumed
when investing in domestic securities. These risks are classified as country
risk, currency risk, and custody risk. Each can adversely affect the value of an
investment. Country risk includes the political, economic, and other conditions
of a country. These conditions include lack of publicly available information,
less government oversight, the possibility of government-imposed restrictions,
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 local currency or holds the currency, changes in
the exchange rate add or subtract from the asset value of the Fund. 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. The risks of foreign investments are managed carefully but
the Fund cannot guarantee against losses that might result from them. The Fund
may invest up to 25% of its total assets in foreign investments.
Derivative instruments: The investment manager may use derivative instruments in
addition to securities to achieve investment performance. Derivative instruments
include futures, options and forward contracts. Such instruments may be used to
maintain cash reserves while remaining fully invested, to offset anticipated
declines in values of investments, to facilitate trading, to reduce transaction
costs or to pursue higher investment returns. Derivative instruments are
characterized by requiring little or no initial payment and a daily change in
price based on or derived from a security, a currency, a group of securities or
currencies, or an index. A number of strategies or combination of instruments
can be used to achieve the desired investment performance characteristics. A
small change in the value of the underlying security, currency or index will
cause a sizable gain or loss in the price of the derivative instrument.
Derivative instruments allow the investment manager to change the investment
performance characteristics very quickly and at lower costs. Risks include
losses of premiums, rapid
<PAGE>
changes in prices, defaults by other parties and inability to close such
instruments. The Fund will use derivative instruments only to achieve the same
investment performance characteristics it could achieve by directly holding
those securities and currencies permitted under the investment policies. The
Fund will designate cash or appropriate liquid assets to cover its portfolio
obligations. 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. This does not, however, limit the
portion of the Fund's assets at risk to 5%. The Fund is not limited as to the
percentage of its assets that may be invested in permissible investments,
including derivatives, except as otherwise explicitly provided in this
prospectus or the SAI. For descriptions of these and other types of derivative
instruments, see the Appendix to this prospectus and the SAI.
Securities and other instruments that are illiquid: A security or other
instrument is illiquid if it cannot be sold quickly in the normal course of
business. Some investments cannot be resold to the U.S. public because of their
terms or government regulations. Securities and instruments, however, can be
sold in private sales, and many may be sold to other institutions and qualified
buyers or on foreign markets. The investment manager will follow guidelines
established by the board and consider relevant factors such as the nature of the
security and the number of likely buyers when determining whether a security is
illiquid. No more than 10% of the Fund's net assets will be held in securities
and other instruments that are illiquid.
Money market instruments: Short-term debt securities rated in the top two grades
or the equivalent are used to meet daily cash needs and at various times to hold
assets until better investment opportunities arise. Generally, less than 25% of
the Fund's total assets are in these money market instruments. However, for
temporary defensive purposes these investments could exceed that amount for a
limited period of time.
The investment policies described above may be changed by the board.
Lending portfolio securities: The Fund may lend its securities to earn income so
long as borrowers provide collateral equal to the market value of the loans. The
risks are that borrowers will not provide collateral when required or return
securities when due. Unless a majority of the outstanding voting securities
approve otherwise, loans may not exceed 30% of the Fund's net assets.
Alternative investment option
In the future, the board of the Fund may determine for operating efficiencies to
use a master/feeder structure. Under that structure, the Fund's assets would be
invested in an investment company with the same goal as the Fund, rather than
invested directly in a portfolio of securities.
<PAGE>
Valuing Fund shares
The public offering price is the net asset value (NAV) adjusted for the sales
charge for Class A. It is the NAV for Class B and Class Y.
The NAV is the value of a single Fund share. The NAV usually changes daily, and
is calculated at the close of business, normally 3 p.m. Central time, each
business day (any day the New York Stock Exchange is open).
To establish the net assets, all securities are valued as of the close of each
business day. In valuing assets:
o Securities and assets with available market values are valued on that
basis
o Securities maturing in 60 days or less are valued at amortized cost
o Assets without readily available market values are valued according to
methods selected in good faith by the board
How to purchase, exchange or redeem shares
Alternative purchase arrangements
The Fund offers three different classes of shares - Class A, Class B and Class
Y. The primary differences among the classes are in the sales charge structures
and in their ongoing expenses. These differences are summarized in the table
below. You may choose the class that best suits your circumstances and
objectives.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Sales charge and
distribution
(12b-1) fee Service fee Other information
Class A Maximum initial sales 0.175% of average daily net Initial sales charge waived
charge of 5%; no 12b-1 fee assets or reduced for certain
purchases
Class B No initial sales charge; 0.175% of average daily net Shares convert to Class A
maximum CDSC of 5% assets in the ninth year of
declines to 0% after six ownership; CDSC waived in
years; 12b-1 fee of 0.75% certain circumstances
of average daily net
assets
Class Y None 0.10% of average daily net Available only to certain
assets qualifying institutional
investors
</TABLE>
<PAGE>
Conversion of Class B shares to Class A shares - During the ninth calendar year
of owning your Class B shares, Class B shares will convert to Class A shares and
will no longer be subject to a distribution fee. Class B shares that convert to
Class A shares are not subject to a sales charge. Class B shares purchased
through reinvested dividends and distributions also will convert to Class A
shares in the same proportion as the other Class B shares. This means more of
your money will be put to work for you.
Considerations in determining whether to purchase Class A or Class B shares -
You should consider the information below in determining whether to purchase
Class A or Class B shares. The distribution fee (included in "Ongoing expenses")
and sales charges are structured so that you will have approximately the same
total return at the end of eight years regardless of which class you chose.
Sales charges on purchase or redemption
If you purchase Class A shares
o You will not have all of your purchase price invested. Part of your
purchase price will go to pay the sales charge. You will not pay a
sales charge when you redeem your shares.
o You will be able to take advantage of reductions in the sales charge.
If you purchase Class B shares
o All of your money is invested in shares of stock. However, you will pay
a sales charge if you redeem your shares within six years of purchase.
o No reductions of the sales charge are available for large purchases.
If your investments in IDS funds that are subject to a sales charge total
$250,000 or more, you are better off paying the reduced sales charge in Class A
than paying the higher fees in Class B. If you qualify for a waiver of the sales
charge, you should purchase Class A shares.
<PAGE>
Ongoing expenses
If you purchase Class A shares
o Your shares will have a lower expense ratio than Class B shares because
Class A does not pay a distribution fee and the transfer agency fee for
Class A is lower than the fee for Class B. As a result, Class A shares
will pay higher dividends than Class B shares.
If you purchase Class B shares
o The distribution and transfer agency fees for Class B will cause your
shares to have a higher expense ratio and to pay lower dividends than
Class A shares. In the ninth year of ownership, Class B shares will
convert to Class A shares and you will no longer be subject to higher
fees.
You should consider how long you plan to hold your shares and whether the
accumulated higher fees and CDSC on Class B shares prior to conversion would be
less than the initial sales charge on Class A shares. Also consider to what
extent the difference would be offset by the lower expenses on Class A shares.
To help you in this analysis, the example in the "Sales charge and Fund
expenses" section of the prospectus illustrates the charges applicable to each
class of shares.
Class Y shares - Class Y shares are offered to certain institutional investors.
Class Y shares are sold without a front-end sales charge or a CDSC and are not
subject to a distribution fee. The following investors are eligible to purchase
Class Y shares:
o Qualified employee benefit plans* if the plan:
- uses a daily transfer recordkeeping service offering participants daily
access to IDS funds and has
- at least $10 million in plan assets or
- 500 or more participants; or
- does not use daily transfer recordkeeping and has
- at least $3 million invested in funds of the IDS MUTUAL FUND GROUP or
- 500 or more participants.
o Trust companies or similar institutions, and charitable organizations
that meet the definition in Section 501(c)(3) of the Internal Revenue
Code.* These organizations must have at least $10 million invested in
funds of the IDS MUTUAL FUND GROUP.
<PAGE>
o Nonqualified deferred compensation plans* whose participants are
included in a qualified employee benefit plan described above.
* Eligibility must be determined in advance by AEFA. To do so, contact your
financial advisor.
How to purchase shares
If you are investing in this Fund for the first time, you will need to set up an
account. Your financial advisor will help you fill out and submit an
application. Once your account is set up, you can choose among several
convenient ways to invest.
Important: When opening an account, you must provide your correct Taxpayer
Identification Number (Social Security or Employer Identification number). See
"Distributions and taxes."
When you purchase shares for a new or existing account, the price you pay per
share is determined at the close of business on the day your investment is
received and accepted at the Minneapolis headquarters.
Purchase policies:
o Investments must be received and accepted in the Minneapolis
headquarters on a business day before 3 p.m. Central time to be
included in your account that day and to receive that day's share
price. Otherwise, your purchase will be processed the next business day
and you will pay the next day's share price.
o The minimums allowed for investment may change from time to time.
o Wire orders can be accepted only on days when your bank, American
Express Client Service Corporation (AECSC), the Fund and Norwest Bank
Minneapolis are open for business.
o Wire purchases are completed when wired payment is received and the
Fund accepts the purchase.
o AECSC and the Fund are not responsible for any delays that occur in
wiring funds, including delays in processing by the bank.
o You must pay any fee the bank charges for wiring.
o The Fund reserves the right to reject any application for any reason.
o If your application does not specify which class of shares you are
purchasing, it will be assumed that you are investing in Class A
shares.
<PAGE>
Three ways to invest
1 By regular account
Send your check and application (or your name and account number if you have an
established account) to:
American Express Financial Advisors Inc.
P.O. Box 74
Minneapolis, MN 55440-0074
Your financial advisor will help you with this process.
Minimum amounts
Initial investment: $ 2,000
Additional investments: $ 100
Account balances: $ 300*
Qualified retirement accounts: none
2 By scheduled investment plan
Contact your financial advisor to set up one of the following scheduled plans:
o automatic payroll deduction
o bank authorization
o direct deposit of Social Security check
o other plan approved by the Fund
Minimum amounts
Initial investment: $ 100
Additional investments: $ 100/each payment for nonqualified accounts
$ 50/each payment for qualified accounts
Account balances: none
(on active plans of monthly payments)
If account balance is below $2,000, frequency of payments must be at least
monthly.
<PAGE>
3 By wire
If you have an established account, you may wire money to:
Norwest Bank Minneapolis
Routing No. 091000019
Minneapolis, MN
Attn: Domestic Wire Dept.
Give these instructions: Credit IDS Account #00-30-015 for personal account #
(your account number) for (your name).
If this information is not included, the order may be rejected and all money
received by the Fund, less any costs the Fund or AECSC incurs, will be returned
promptly.
Minimum amounts
Each wire investment: $ 1,000
*If your account balance falls below $300, you will be asked in writing to bring
it up to $300 or establish a scheduled investment plan. If you do not do so
within 30 days, your shares can be redeemed and the proceeds mailed to you. If
you are in a "wrap-fee" program sponsored by AEFA and your wrap program balance
falls below the required program minimum or is terminated, your shares will be
redeemed and the proceeds mailed to you.
How to exchange shares
You can exchange your shares of the Fund at no charge for shares of the same
class of any other publicly offered fund in the IDS MUTUAL FUND GROUP available
in your state. Exchanges into IDS Tax-Free Money Fund must be made from Class A
shares. For complete information on any other fund, including fees and expenses,
read that fund's prospectus carefully.
If your exchange request arrives at the Minneapolis headquarters before the
close of business, your shares will be redeemed at the net asset value set for
that day. The proceeds will be used to purchase new fund shares the same day.
Otherwise, your exchange will take place the next business day at that day's net
asset value.
For tax purposes, an exchange represents a redemption and purchase and may
result in a gain or loss. However, you cannot use the sales charge imposed on
the purchase of Class A shares to create or increase a tax loss (or reduce a
taxable gain) by exchanging from the Fund within 91 days of your purchase. For
further explanation, see the SAI.
<PAGE>
How to redeem shares
You can redeem your shares at any time. American Express Shareholder Service
will mail payment within seven days after receiving your request.
When you redeem shares, the amount you receive may be more or less than the
amount you invested. Your shares will be redeemed at net asset value, minus any
applicable sales charge, at the close of business on the day your request is
accepted at the Minneapolis headquarters. If your request arrives after the
close of business, the price per share will be the net asset value, minus any
applicable sales charge, at the close of business on the next business day.
A redemption is a taxable transaction. If the proceeds from your redemption are
more or less than the cost of your shares, you will have a gain or loss, which
can affect your tax liability. Redeeming shares held in an IRA or qualified
retirement account may subject you to certain federal taxes, penalties and
reporting requirements. Consult your tax advisor.
Two ways to request an exchange or redemption of shares
1 By letter
Include in your letter:
o the name of the fund (s)
o the class of shares to be exchanged or redeemed
o your account number(s) (for exchanges, both funds must be registered in the
same ownership) o your Taxpayer Identification Number (TIN)
o the dollar amount or number of shares you want to exchange or redeem
o signature of all registered account owners
o for redemptions, indicate how you want your money delivered to
you
o any paper certificates of shares you hold
Regular mail:
American Express Shareholder Service
Attn: Redemptions
P.O. Box 534
Minneapolis, MN 55440-0534
Express mail:
American Express Shareholder Service
Attn: Redemptions
733 Marquette Ave.
Minneapolis, MN 55402
<PAGE>
2 By phone
American Express Financial Advisors Telephone Transaction Service:
800-437-3133 or
612-671-3800
o The Fund and AECSC will honor any telephone exchange or redemption
request believed to be authentic and will use reasonable procedures to
confirm that they are. This includes asking identifying questions and
tape recording calls. If reasonable procedures are followed, the Fund
or AECSC will not be liable for any loss resulting from fraudulent
requests.
o Phone exchange and redemption privileges automatically apply to all
accounts except custodial, corporate or qualified retirement accounts
unless you request these privileges NOT apply by writing American
Express Shareholder Service. Each registered owner must sign the
request.
o AECSC answers phone requests promptly, but you may experience delays
when call volume is high. If you are unable to get through, use mail
procedure as an alternative.
o Acting on your instructions, your financial advisor may conduct
telephone transactions on your behalf.
o Phone privileges may be modified or discontinued at any time.
Minimum amount
Redemption: $100
Maximum amount
Redemption: $50,000
Exchange policies:
o You may make up to three exchanges within any 30-day period, with each limited
to $300,000. These limits do not apply to scheduled exchange programs and
certain employee benefit plans or other arrangements through which one
shareholder represents the interests of several. Exceptions may be allowed with
pre-approval of the Fund.
o Exchanges must be made into the same class of shares of the new fund.
o If your exchange creates a new account, it must satisfy the minimum investment
amount for new purchases.
<PAGE>
o Once we receive your exchange request, you cannot cancel it.
o Shares of the new fund may not be used on the same day for another exchange.
o If your shares are pledged as collateral, the exchange will be delayed until
written approval is obtained from the secured party.
o AECSC and the Fund reserve the right to reject any exchange, limit the amount,
or modify or discontinue the exchange privilege, to prevent abuse or adverse
effects on the Fund and its shareholders. For example, if exchanges are too
numerous or too large, they may disrupt the Fund's investment strategies or
increase its costs.
Redemption policies:
o A "change of mind" option allows you to change your mind after requesting a
redemption and to use all or part of the proceeds to purchase new shares in the
same account from which you redeemed. If you reinvest in Class A, you will
purchase the new shares at net asset value rather than the offering price on the
date of a new purchase. If you reinvest in Class B, any CDSC you paid on the
amount you are reinvesting also will be reinvested. To take advantage of this
option, send a written request within 30 days of the date your redemption
request was received. Include your account number and mention this option. This
privilege may be limited or withdrawn at any time, and it may have tax
consequences.
o A telephone redemption request will not be allowed within 30 days of a
phoned-in address change.
Important: If you request a redemption of shares you recently purchased by a
check or money order that is not guaranteed, the Fund will wait for your check
to clear. It may take up to 10 days from the date of purchase before a check is
mailed to you. (A check may be mailed earlier if your bank provides evidence
satisfactory to the Fund and AECSC that your check has cleared.)
Three ways to receive payment when you redeem shares
1 By regular or express mail
o Mailed to the address on record
o Payable to names listed on the account
NOTE: You will be charged a fee if you request express mail delivery.
<PAGE>
2 By wire
o Minimum wire redemption: $1,000
o Request that money be wired to your bank
o Bank account must be in the same ownership as the IDS fund account
NOTE: Pre-authorization required. For instructions, contact your
financial advisor or American Express Shareholder Service.
3 By scheduled payout plan
o Minimum payment: $50
o Contact your financial advisor or American Express Shareholder Service
to set up regular payments to you on a monthly, bimonthly, quarterly,
semiannual or annual basis
o Purchasing new shares while under a payout plan may be disadvantageous
because of the sales charges
Reductions and waivers of the sales charge
Class A - initial sales charge alternative
On purchases of Class A shares, you pay a 5% sales charge on the first $50,000
of your total investment and less on investments after the first $50,000:
Total investment Sales charge as a
percentage of:*
Public Net
offering amount
price invested
Up to $50,000 5.0% 5.26%
Next $50,000 4.5 4.71
Next $400,000 3.8 3.95
Next $500,000 2.0 2.04
$1,000,000 or more 0.0 0.00
* To calculate the actual sales charge on an investment greater than $50,000 and
less than $1,000,000, amounts for each applicable increment must be totaled. See
the SAI.
Reductions of the sales charge on Class A shares
Your sales charge may be reduced, depending on the totals of:
o the amount you are investing in this Fund now;
<PAGE>
o the amount of your existing investment in this Fund, if any; and
o the amount you and your primary household group are investing or have in other
funds in the IDS MUTUAL FUND GROUP that carry a sales charge. (The primary
household group consists of accounts in any ownership for spouses or domestic
partners and their unmarried children under 21. Domestic partners are
individuals who maintain a shared primary residence and have joint property or
other insurable interests.)
Other policies that affect your sales charge:
o IDS Tax-Free Money Fund and Class A shares of IDS Cash Management Fund do not
carry sales charges. However, you may count investments in these funds if you
acquired shares in them by exchanging shares from IDS funds that carry sales
charges.
o IRA purchases or other employee benefit plan purchases made through a payroll
deduction plan or through a plan sponsored by an employer, association of
employers, employee organization or other similar entity, may be added together
to reduce sales charges for all shares purchased through that plan.
o If you intend to invest $1 million over a period of 13 months, you can reduce
the sales charges in Class A by filing a letter of intent. For more details, see
the SAI.
Waivers of the sales charge for Class A shares Sales charges do not apply to:
o Current or retired board members, officers or employees of the Fund or AEFC or
its subsidiaries, their spouses and unmarried children under 21.
o Current or retired American Express financial advisors, their spouses and
unmarried children under 21.
o Investors who have a business relationship with a newly associated financial
advisor who joined AEFA from another investment firm provided that (1) the
purchase is made within six months of the advisor's appointment date with AEFA,
(2) the purchase is made with proceeds of a redemption of shares that were
sponsored by the financial advisor's previous broker-dealer, and (3) the
proceeds must be the result of a redemption of an equal or greater value where a
sales load was previously assessed.
<PAGE>
o Qualified employee benefit plans* using a daily transfer recordkeeping system
offering participants daily access to IDS funds.
(Participants in certain qualified plans for which the initial sales charge is
waived may be subject to a deferred sales charge of up to 4% on certain
redemptions. For more information, see the SAI.)
o Shareholders who have at least $1 million invested in funds of the IDS MUTUAL
FUND GROUP. If the investment is redeemed in the first year after purchase, a
CDSC of 1% will be charged on the redemption. The CDSC will be waived only in
the circumstances described for waivers for Class B shares.
o Purchases made within 30 days after a redemption of shares (up to the
amount redeemed):
- - of a product distributed by AEFA in a qualified plan subject to a deferred
sales charge or
- - in a qualified plan where American Express Trust Company has a
recordkeeping, trustee, investment management or investment servicing
relationship.
Send the Fund a written request along with your payment, indicating the amount
of the redemption and the date on which it occurred.
o Purchases made with dividend or capital gain distributions from the same class
of another fund in the IDS MUTUAL FUND GROUP that has a sales charge.
o Purchases made through or under a "wrap fee" product sponsored by AEFA (total
amount of all investments must be $50,000); the University of Massachusetts
After-Tax Savings Program; the University of Texas System ORP; or a segregated
separate account offered by Nationwide Life Insurance Company or Nationwide Life
and Annuity Insurance Company.
o Purchases made with the proceeds from IDS Life Real Estate Variable Annuity
surrenders.
* Eligibility must be determined in advance by AEFA. To do so, contact your
financial advisor.
Class B - contingent deferred sales charge alternative
Where a CDSC is imposed on a redemption, it is based on the amount of the
redemption and the number of calendar years, including the year of purchase,
between purchase and redemption. The following table shows the declining scale
of percentages that apply to redemptions during each year after a purchase:
<PAGE>
If a redemption is The percentage rate
made during the for the CDSC is:
First year 5%
Second year 4%
Third year 4%
Fourth year 3%
Fifth year 2%
Sixth year 1%
Seventh year 0%
If the amount you are redeeming reduces the current net asset value of your
investment in Class B shares below the total dollar amount of all your purchase
payments during the last six years (including the year in which your redemption
is made), the CDSC is based on the lower of the redeemed purchase payments or
market value.
The following example illustrates how the CDSC is applied. Assume you had
invested $10,000 in Class B shares and that your investment had appreciated in
value to $12,000 after 15 months, including reinvested dividend and capital gain
distributions. You could redeem any amount up to $2,000 without paying a CDSC
($12,000 current value less $10,000 purchase amount). If you redeemed $2,500,
the CDSC would apply only to the $500 that represented part of your original
purchase price. The CDSC rate would be 4% because a redemption after 15 months
would take place during the second year after purchase.
Because the CDSC is imposed only on redemptions that reduce the total of your
purchase payments, you never have to pay a CDSC on any amount you redeem that
represents appreciation in the value of your shares, income earned by your
shares or capital gains. In addition, when determining the rate of any CDSC,
your redemption will be made from the oldest purchase payment you made. Of
course, once a purchase payment is considered to have been redeemed, the next
amount redeemed is the next oldest purchase payment. By redeeming the oldest
purchase payments first, lower CDSCs are imposed than would otherwise be the
case.
Waivers of the contingent deferred sales charge The CDSC on Class B shares will
be waived on redemptions of shares:
o In the event of the shareholder's death,
o Held in a trusteed employee benefit plan,
o Held in IRAs or certain qualified plans for which American Express
Trust Company acts as custodian, such as Keogh plans, tax-sheltered custodial
accounts or corporate pension plans, provided that the shareholder is:
<PAGE>
- at least 59-1/2 years old, and
- taking a retirement distribution (if the redemption is part of a
transfer to an IRA or qualified plan in a product distributed by AEFA,
or a custodian-to-custodian transfer to a product not distributed by
AEFA, the CDSC will not be waived), or
- redeeming under an approved substantially equal periodic payment
arrangement.
Special shareholder services
Services
To help you track and evaluate the performance of your investments, AECSC
provides these services:
Quarterly statements featuring: (1) a list of: all your holdings and
transactions during the previous three months and (2) personalized mutual fund
performance information about your specific account.
Yearly tax statements featuring average-cost-basis reporting of capital gains or
losses if you redeem your shares along with distribution information which
simplifies tax calculations.
A personalized mutual fund progress report detailing returns on your initial
investment and cash-flow activity in your account. It calculates a total return
to reflect your individual history in owning Fund shares. This report is
available from your financial advisor.
Quick telephone reference
American Express Financial Advisors Telephone Transaction Service
Redemptions and exchanges, dividend payments or reinvestments and automatic
payment arrangements
National/Minnesota: 800-437-3133
Mpls./St. Paul area: 671-3800
TTY Service
For the hearing impaired
800-846-4852
American Express Financial Advisors Easy Access Line
Automated account information (TouchTone(R) phones only), including current Fund
prices and performance, account values and recent account transactions
800-862-7919
<PAGE>
Distributions and taxes
As a shareholder you are entitled to your share of the Fund's net income and any
net gains realized on its investments. The Fund distributes dividends and
capital gain distributions to qualify as a regulated investment company and to
avoid paying corporate income and excise taxes. Dividend and capital gain
distributions will have tax consequences you should know about.
Dividend and capital gain distributions
The Fund's net investment income from dividends and interest is distributed to
you at the end of each calendar quarter as dividends. Capital gains are realized
when a security is sold for a higher price than was paid for it. Short-term
capital gains are distributed at the end of the calendar year and are included
in net investment income. Long-term capital gains are realized when a security
is held for more than one year. The Fund will offset any net realized capital
gains by any available capital loss carryovers. Net realized long-term capital
gains, if any, are distributed at the end of the calendar year as capital gain
distributions. These long-term capital gains will be subject to differing tax
rates depending on the holding period of the underlying investments. Before they
are distributed, both net investment income and net long-term capital gains are
included in the value of each share. After they are distributed, the value of
each share drops by the per-share amount of the distribution. (If your
distributions are reinvested, the total value of your holdings will not change.)
Dividends for each class will be calculated at the same time, in the same manner
and will be the same amount prior to deduction of expenses. Expenses
attributable solely to a class of shares will be paid exclusively by that class.
Reinvestments
Dividends and capital gain distributions are automatically reinvested in
additional shares in the same class of the Fund, unless:
o you request the Fund in writing or by phone to pay distributions to you
in cash, or
o you direct the Fund to invest your distributions in the same class of
another publicly available IDS fund for which you have previously
opened an account.
The reinvestment price is the net asset value at close of business on the day
the distribution is paid. (Your quarterly statement will confirm the amount
invested and the number of shares purchased.)
If you choose cash distributions, you will receive cash only for distributions
declared after your request has been processed.
<PAGE>
If the U.S. Postal Service cannot deliver the checks for the cash distributions,
we will reinvest the checks into your account at the then-current net asset
value and make future distributions in the form of additional shares. Prior to
reinvestment, no interest will accrue on amounts represented by uncashed
distribution or redemption checks.
Taxes
Distributions are subject to federal income tax and also may be subject to state
and local taxes. Distributions are taxable in the year the Fund declares them
regardless of whether you take them in cash or reinvest them.
Corporate shareholders of the Fund generally are entitled to a deduction equal
to 70% of that portion of the Fund's dividend that is attributable to dividends
the Fund received from domestic securities. To calculate any dividends-received
deduction the Fund will report to corporate shareholders annually the percentage
of the Fund's income that comes from dividends from domestic securities. Receipt
of income that qualifies for the dividends-received deduction is incidental to
the Fund's investment activity.
Each January, you will receive a tax statement showing the kinds and total
amount of all distributions you received during the previous year. You must
report distributions on your tax returns, even if they are reinvested in
additional shares.
Buying a dividend creates a tax liability. This means buying shares shortly
before a net investment income or a capital gain distribution. You pay the full
pre-distribution price for the shares, then receive a portion of your investment
back as a distribution, which is taxable.
Redemptions and exchanges subject you to a tax on any capital gain. If you sell
shares for more than their cost, the difference is a capital gain. Your gain may
be short term (for shares held for one year or less) or long term (for shares
held for more than one year). Long-term capital gains will be taxed at rates
that vary depending upon the holding period. Long-term capital gains are divided
into two holding periods: (1) shares held more than one year but not more than
18 months and (2) shares held more than 18 months.
Your Taxpayer Identification Number (TIN) is important. As with any financial
account you open, you must list your current and correct Taxpayer Identification
Number (TIN) -- either your Social Security or Employer Identification number.
The TIN must be certified under penalties of perjury on your application when
you open an account.
<PAGE>
If you do not provide the TIN, or the TIN you report is incorrect, you could be
subject to backup withholding of 31% of taxable distributions and proceeds from
certain sales and exchanges. You also could be subject to further penalties,
such as:
o a $50 penalty for each failure to supply your correct TIN
o a civil penalty of $500 if you make a false statement that results in
no backup withholding
o criminal penalties for falsifying information
You also could be subject to backup withholding because you failed to report
interest or dividends on your tax return as required.
How to determine the correct TIN
<TABLE>
<CAPTION>
<S> <C>
Use the Social Security or
For this type of account: Employer Identification number of:
Individual or joint account The individual or one of the individuals listed on
the joint account
Custodian account of a minor (Uniform The minor
Gifts/Transfers to Minors Act)
A living trust The grantor-trustee
(the person who puts the
money into the trust)
An irrevocable trust, The legal entity (not the personal representative
pension trust or estate or trustee, unless no legal entity is designated in
the account title)
Sole proprietorship The owner
Partnership The partnership
Corporate The corporation
Association, club or tax-exempt organization The organization
</TABLE>
For details on TIN requirements, ask your financial advisor or local American
Express Financial Advisors office for federal Form W-9, "Request for Taxpayer
Identification Number and Certification."
<PAGE>
Important: This information is a brief and selective summary of certain federal
tax rules that apply to this Fund. Tax matters are highly individual and
complex, and you should consult a qualified tax advisor about your personal
situation.
How the Fund is organized
Shares
The Fund is owned by its shareholders. The Fund issues shares in three classes -
Class A, Class B and Class Y. Each class has different sales arrangements and
bears different expenses. Each class represents interests in the assets of the
Fund. Par value is one cent per share. Both full and fractional shares can be
issued.
The Fund no longer issues stock certificates.
Voting rights
As a shareholder, you have voting rights over the Fund's management and
fundamental policies. You are entitled to one vote for each share you own.
Shares of the Fund have cumulative voting rights. Each class has exclusive
voting rights with respect to the provisions of the Fund's distribution plan
that pertain to a particular class and other matters for which separate class
voting is appropriate under applicable law.
Shareholder meetings
The Fund does not hold annual shareholder meetings. However, the board members
may call meetings at their discretion, or on demand by holders of 10% or more of
the outstanding shares, to elect or remove board members.
Board members and officers
Shareholders elect a board that oversees the operations of the Fund and chooses
its officers. Its officers are responsible for day-to-day business decisions
based on policies set by the board. The board has named an executive committee
that has authority to act on its behalf between meetings. Board members and
officers serve 47 IDS and IDS Life funds and 15 Master Trust portfolios, except
for William H. Dudley, who does not serve the nine IDS Life funds.
<PAGE>
Independent board members and officers
Chairman of the board
William R. Pearce*
Chairman of the board, Board Services Corporation (provides administrative
services to boards including the boards of the IDS and IDS Life funds and Master
Trust portfolios).
H. Brewster Atwater, Jr.
Retired chairman and chief executive officer, General Mills, Inc.
Lynne V. Cheney
Distinguished fellow, American Enterprise Institute for Public Policy Research.
Heinz F. Hutter
Retired president and chief operating officer, Cargill, Inc.
Anne P. Jones
Attorney and telecommunications consultant.
Alan K. Simpson
Former United States senator for Wyoming.
Edson W. Spencer
Retired chairman and chief executive officer, Honeywell, Inc.
Wheelock Whitney
Chairman, Whitney Management Company.
C. Angus Wurtele
Chairman of the board, The Valspar Corporation.
Officer
Vice president, general counsel and secretary
Leslie L. Ogg*
President of Board Services Corporation.
<PAGE>
Board members and officers associated with AEFC
President
John R. Thomas*
Senior vice president, AEFC.
William H. Dudley*
Senior advisor to the chief executive officer, AEFC.
David R. Hubers*
President and chief executive officer, AEFC.
Officers associated with AEFC
Vice president
Peter J. Anderson*
Senior vice president, AEFC.
Vice president
Frederick C. Quirsfeld*
Vice president, AEFC.
Treasurer
Matthew N. Karstetter*
Vice president, AEFC.
Refer to the SAI for the board members' and officers' biographies.
* Interested person as defined by the Investment Company Act of 1940.
<PAGE>
Investment manager
The Fund pays AEFC for managing its assets. Under its Investment Management
Services Agreement, AEFC is paid a fee for these services based on the average
daily net assets of the Fund, as follows:
Assets Annual rate
(billions)at each asset level
First $0.50 0.530%
Next 0.50 0.505
Next 1.0 0.480
Next 1.0 0.455
Next 3.0 0.430
Over 6.0 0.400
For the fiscal year ended June 30, 1998, the Fund paid AEFC a total investment
management fee of 0.52% of its average daily net assets. Under the Agreement,
the Fund also pays taxes, brokerage commissions and nonadvisory expenses.
Administrator and transfer agent
Under an Administrative Services Agreement, the Fund pays AEFC for
administration and accounting services at an annual rate of 0.04% decreasing in
gradual percentages to 0.02% as assets increase.
Under a separate Transfer Agency Agreement, AECSC maintains shareholder accounts
and records. The Fund pays AECSC an annual fee per shareholder account for this
service as follows:
o Class A $15
o Class B $16
o Class Y $15
Distributor
The Fund has an exclusive distribution agreement with AEFA. Financial advisors
representing AEFA provide information to investors about individual investment
programs, the Fund and its operations, new account applications, and exchange
and redemption requests. The cost of these services is paid partially by the
Fund's sales charges.
<PAGE>
Persons who buy Class A shares pay a sales charge at the time of purchase.
Persons who buy Class B shares are subject to a contingent deferred sales charge
on a redemption in the first six years and pay an asset-based sales charge (also
known as a 12b-1 fee) of 0.75% of the Fund's average daily net assets. Class Y
shares are sold without a sales charge and without an asset-based sales charge.
Financial advisors may receive different compensation for selling Class A, Class
B and Class Y shares. Portions of the sales charge also may be paid to
securities dealers who have sold the Fund's shares or to banks and other
financial institutions. The amounts of those payments range from 0.8% to 4% of
the Fund's offering price depending on the monthly sales volume.
Under a Shareholder Service Agreement, the Fund also pays a fee for service
provided to shareholders by financial advisors and other servicing agents. The
fee is calculated at a rate of 0.175% of average daily net assets for Class A
and Class B shares and 0.10% for Class Y shares.
Total expenses paid by the Fund's Class A shares for the fiscal year ended June
30, 1998, were 0.86% of its average daily net assets. Expenses for Class B and
Class Y were 1.62% and 0.79%, respectively.
About American Express Financial Corporation
General information
The AEFC family of companies offers not only mutual funds but also insurance,
annuities, investment certificates and a broad range of financial management
services.
Besides managing investments for all funds in the IDS MUTUAL FUND GROUP, AEFC
also manages investments for itself and its subsidiaries, IDS Certificate
Company and IDS Life Insurance Company. Total assets under management on June
30, 1998 were more than $200 billion.
AEFA serves individuals and businesses through its nationwide network of more
than 180 offices and more than 8,500 advisors.
Other AEFC subsidiaries provide investment management and related services for
pension, profit sharing, employee savings and endowment funds of businesses and
institutions.
<PAGE>
AEFC is located at IDS Tower 10, Minneapolis, MN 55440-0010. It is a
wholly-owned subsidiary of American Express Company (American Express), a
financial services company with headquarters at American Express Tower, World
Financial Center, New York, NY 10285. The Fund may pay brokerage commissions to
broker-dealer affiliates of AEFC.
Year 2000
The Year 2000 issue is the result of computer programs having been written using
two digits rather than four to define a year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than 2000. This could result in the failure of major systems or miscalculations,
which would have a material impact on the operations of the Fund. The Fund has
no computer systems of its own but is dependent upon the systems maintained by
AEFC and certain other third parties.
A comprehensive review of AEFC's computer systems and business processes has
been conducted to identify the major systems that could be affected by the Year
2000 issue. Steps are being taken to resolve any potential problems including
modification of existing software and the purchase of new software. These
measures are scheduled to be completed and tested on a timely basis. AEFC's goal
is to complete internal remediation and testing of each of its critical systems
by the end of 1998 and to continue compliance efforts through 1999. The Year
2000 readiness of other third parties whose system failures could have an impact
on the Fund's operations currently is being evaluated. The companies or
governments in which the Fund invests also may be adversely affected by Year
2000 issues. This may affect the value of the Fund's investments. The potential
materiality of any impact is not known at this time.
<PAGE>
Appendix
Descriptions of derivative instruments
What follows are brief descriptions of derivative instruments the Fund may use.
At various times the Fund may use some or all of these instruments and is not
limited to these instruments. It may use other similar types of instruments if
they are consistent with the Fund's investment goal and policies. For more
information on these instruments, see the SAI.
Options and futures contracts - An option is an agreement to buy or sell an
instrument at a set price during a certain period of time. A futures contract is
an agreement to buy or sell an instrument for a set price on a future date. The
Fund may buy and sell options and futures contracts to manage its exposure to
changing interest rates, security prices and currency exchange rates. Options
and futures may be used to hedge the Fund's investments against price
fluctuations or to increase market exposure.
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.
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.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
FOR
IDS UTILITIES INCOME FUND
Aug. 28, 1998
This Statement of Additional Information (SAI) is not a prospectus. It should be
read together with the prospectus and the financial statements contained in the
Annual Report which may be obtained from your American Express financial advisor
or by writing to American Express Shareholder Service, P.O. Box 534,
Minneapolis, MN 55440-0534.
This SAI is dated Aug. 28, 1998, and it is to be used with the prospectus dated
Aug. 28, 1998, and the Annual Report for the fiscal year ended June 30, 1998.
<PAGE>
TABLE OF CONTENTS
Goals and Investment Policies..................................See Prospectus
Additional Investment Policies...........................................p. 4
Security Transactions....................................................p. 7
Brokerage Commissions Paid to Brokers Affiliated with
American Express Financial Corporation...................................p. 9
Performance Information.................................................p. 10
Valuing Fund Shares.....................................................p. 12
Investing in the Fund...................................................p. 14
Redeeming Shares........................................................p. 18
Pay-out Plans...........................................................p. 19
Taxes...................................................................p. 20
Agreements..............................................................p. 21
Organizational Information..............................................p. 24
Board Members and Officers..............................................p. 24
Compensation for Fund Board Members.....................................p. 28
Independent Auditors....................................................p. 29
Financial Statements........................................See Annual Report
Prospectus..............................................................p. 29
Appendix A: Description of the Four Highest Bond Ratings...............p. 30
Appendix B: Foreign Currency Transactions..............................p. 32
<PAGE>
Appendix C: Investing in Foreign Securities............................p. 37
Appendix D: Options and Futures Contracts..............................p. 38
Appendix E: Mortgage-Backed Securities.................................p. 44
Appendix F: Dollar-Cost Averaging......................................p. 45
<PAGE>
ADDITIONAL INVESTMENT POLICIES
These are investment policies in addition to those presented in the prospectus.
The policies below are fundamental policies of IDS Utilities Income Fund, Inc.
(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:
`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.
`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. The Fund has not borrowed in the past and has
no present intention to borrow.
`Make cash loans if the total commitment amount exceeds 5% of the Fund's total
assets.
`Purchase more than 10% of the outstanding voting securities of an issuer.
`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.
`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. For
purposes of this policy, real estate includes real estate limited partnerships.
`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.
`Lend Fund securities in excess of 30% of its net assets. 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. A loan will not be made unless the
investment manager believes the opportunity for additional income outweighs the
risks.
Unless changed by the board, the Fund will not:
`Buy on margin or sell short, except the Fund may make margin payments in
connection with transactions in futures contracts.
`Pledge or mortgage its assets beyond 15% of total assets. If the Fund were ever
to do so, valuation of the pledged or mortgaged assets would be based on market
values. For purposes of this policy, collateral arrangements for margin deposits
on a futures contract are not deemed to be a pledge of assets.
`Invest more than 5% of its total assets in securities of companies, including
any predecessors, that have a record of less than three years continuous
operations.
`Invest in a company to control or manage it.
`Invest in exploration or development programs, such as oil, gas or mineral
leases.
`Invest more than 10% of its total assets in securities of investment companies.
The Fund has no current intention to invest in securities of other investment
companies.
`Purchase securities of an issuer if the directors and officers of the Fund and
of American Express Financial Corporation (AEFC) hold more than a certain
percentage of the issuer's outstanding securities. The holdings of all directors
and officers of the Fund and of AEFC who own more than 0.5% of an issuers
securities are added together, and if in total they own more than 5%, the Fund
will not purchase securities of that issuer.
`Invest no more than 5% of its net assets in warrants.
`Invest more than 10% of the Fund's net assets in securities and derivative
instruments that are illiquid. For purposes of this policy, illiquid securities
include some privately placed securities, public securities and Rule 144A
securities that for one reason or another may no longer have a readily available
market, repurchase agreements with maturities greater than seven days,
non-negotiable fixed-time deposits and over-the-counter options.
In determining the liquidity of Rule 144A securities, which are unregistered
securities offered to qualified institutional buyers, and interest-only and
principal-only fixed mortgage-backed securities (IOs and POs) issued by the U.S.
government or its agencies and instrumentalities, the investment manager, under
guidelines established by the board, will consider any relevant factors
including the frequency of trades, the number of dealers willing to purchase or
sell the security and the nature of marketplace trades.
<PAGE>
In determining the liquidity of commercial paper issued in transactions not
involving a public offering under Section 4(2) of the Securities Act of 1933,
the investment manager, under guidelines established by the board, will evaluate
relevant factors such as the issuer and the size and nature of its commercial
paper programs, the willingness and ability of the issuer or dealer to
repurchase the paper, and the nature of the clearance and settlement procedures
for the paper.
The Fund may make contracts to purchase securities for a fixed price at a future
date beyond normal settlement time (when-issued securities or forward
commitments). Under normal market conditions, the Fund does not intend to commit
more than 5% of its total assets to these practices. The Fund does not pay for
the securities or receive dividends or interest on them until the contractual
settlement date. The Fund will designate cash or liquid high-grade debt
securities at least equal in value to its commitments to purchase the
securities. When-issued securities or forward commitments are subject to market
fluctuations and they may affect the Fund's total assets the same as owned
securities.
The Fund may maintain a portion of its assets in cash and cash-equivalent
investments. The cash-equivalent investments the Fund may use are short-term
U.S. and Canadian government securities and negotiable certificates of deposit,
non-negotiable fixed-time deposits, bankers' acceptances and letters of credit
of banks or savings and loan associations having capital, surplus and undivided
profits (as of the date of its most recently published annual financial
statements) in excess of $100 million (or the equivalent in the instance of a
foreign branch of a U.S. bank) at the date of investment. Any cash-equivalent
investments in foreign securities will be subject to the limitations on foreign
investments described in the prospectus. The Fund also may purchase short-term
corporate notes and obligations rated in the top two classifications by Moody's
Investors Service, Inc. (Moody's) or Standard & Poor's Corporation (S&P) or the
equivalent and may use repurchase agreements with broker-dealers registered
under the Securities Exchange Act of 1934 and with commercial banks. A risk of a
repurchase agreement is that if the seller seeks the protection of the
bankruptcy laws, the Fund's ability to liquidate the security involved could be
impaired.
The Fund may invest in foreign securities that 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. securities market 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 also
involve the risks of other investments in foreign securities.
<PAGE>
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.
For a description of the four highest bond ratings, see Appendix A. For a
discussion about foreign currency transactions, see Appendix B. For a discussion
on investing in foreign securities, see Appendix C. For a discussion on options
and futures contracts, see Appendix D. For a discussion on mortgage-backed
securities, see Appendix E.
SECURITY TRANSACTIONS
Subject to policies set by the board, AEFC 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, AEFC 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. 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.
AEFC has a strict Code of Ethics that prohibits its affiliated personnel from
engaging in personal investment activities that compete with or attempt to take
advantage of planned portfolio transactions for any fund in the IDS MUTUAL FUND
GROUP. AEFC carefully monitors compliance with its Code of Ethics.
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 AEFC to do so to the extent authorized by
law, if AEFC 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 AEFC's overall
responsibilities with respect to the Fund and other funds and trusts in the IDS
MUTUAL FUND GROUP for which it acts as investment advisor.
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.
<PAGE>
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 Securities and Exchange Commission (SEC).
When paying a commission that might not otherwise be charged or a commission in
excess of the amount another broker might charge, AEFC must follow procedures
authorized by the board. To date, three procedures have been authorized. One
procedure permits AEFC 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 AEFC, 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 AEFC, 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. AEFC has advised the Fund it is necessary to do
business with a number of brokerage firms on a continuing basis to obtain such
services as the handling of large orders, the willingness of a broker to risk
its own money by taking a position in a security, and the specialized handling
of a particular group of securities that only certain brokers may be able to
offer. As a result of this arrangement, some portfolio transactions may not be
effected at the lowest commission, but AEFC believes it may obtain better
overall execution. AEFC 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 shall 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 AEFC in providing advice to all the funds
in the IDS MUTUAL FUND GROUP even though it is not possible to relate the
benefits to any particular fund or account.
Each investment decision made for the Fund is made independently from any
decision made for another fund in the IDS MUTUAL FUND GROUP or other account
advised by AEFC or any AEFC subsidiary. When the Fund buys or sells the same
security as another Fund or account, AEFC 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. AEFC has assured the fund it
will continue to seek ways to reduce brokerage costs.
<PAGE>
On a periodic basis, AEFC makes a comprehensive review of the broker-dealers and
the overall reasonableness of their commissions. The review evaluates execution,
operational efficiency and research services.
The Fund paid total brokerage commissions of $2,130,303 for the fiscal year
ended June 30, 1998, $1,896,857 for fiscal year 1997, and $1,721,950 for fiscal
year 1996. Substantially all firms through whom transactions were executed
provide research services.
In fiscal year 1998, transactions amounting to $27,517,000, on which $47,225 in
commissions were imputed or paid, were specifically directed to firms in
exchange for research services.
As of the fiscal year ended June 30, 1998, the Fund held 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
presented below:
Value of Securities owned at
Name of Issuer End of Fiscal Year
Salomon Brothers $3,915,625
The portfolio turnover rate was 83% in the fiscal year ended June 30, 1998, and
90% in fiscal year 1997.
BROKERAGE COMMISSIONS PAID TO BROKERS AFFILIATED WITH AMERICAN EXPRESS FINANCIAL
CORPORATION
Affiliates of American Express Company (American Express) (of which AEFC is a
wholly-owned subsidiary) may engage in brokerage and other securities
transactions on behalf of the Fund according to procedures adopted by that
Fund's board and to the extent consistent with applicable provisions of the
federal securities laws. AEFC will use an American Express affiliate only if (i)
AEFC 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 Services Agreement.
<PAGE>
Information about brokerage commissions paid by the Fund for the last three
fiscal years to brokers affiliated with AEFC is contained in the following
table:
<TABLE>
<CAPTION>
For the Fiscal Year Ended June 30,
1998 1997 1996
------------------------------------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Percent of
Aggregate
Dollar Amount
Aggregate Percent of of Aggregate Aggregate
Dollar Amount Aggregate Transactions Dollar Amount Dollar Amount
Nature of Brokerage Involving of of
Broker of Commissions Commissions Payment of Commissions Commissions
- ------ -----------
AffiliationPaid to Broker Commissions Paid to Broker Paid to Broker
------------------------- ----------- -------------- --------------
American (1) $22,259 1.04% 2.32% $56,075 $34,136
Enterprise
Investment
Services Inc.
(1) Wholly-owned subsidiary of AEFC.
</TABLE>
PERFORMANCE INFORMATION
The Fund may quote various performance figures to illustrate past performance.
Average annual total return and current yield quotations 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 a class 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)
<PAGE>
Aggregate total return
The Fund may calculate aggregate total return for a class for certain periods
representing the cumulative change in the value of an investment in the Fund
over a specified period of time according to the following formula:
ERV - P
P
where: P = a hypothetical initial payment of $1,000
ERV = ending redeemable value of a hypothetical $1,000 payment,
made at the beginning of a period, at the end of the period
(or fractional portion thereof)
Annualized yield
The Fund may calculate an annualized yield for a class by dividing the net
investment income per share deemed earned during a 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
The Fund's annualized yield was 2.32% for Class A, 1.69% for Class B and 2.50%
for Class Y for the 30-day period ended June 30, 1998.
The Fund's yield, calculated as described above according to the formula
prescribed by the SEC, is a hypothetical return based on market value yield to
maturity for the Fund's securities. It is not necessarily indicative of the
amount which was or may be paid to the Fund's shareholders. Actual amounts paid
to Fund shareholders are reflected in the distribution yield.
<PAGE>
Distribution yield
Distribution yield is calculated according to the following formula:
D divided by POP F equals DY
30 30
where: D = sum of dividends for 30-day period
POP = sum of public offering price for 30-day period
F = annualizing factor DY = distribution yield
The Fund's distribution yield was 1.84% for Class A, 1.19% for Class B and 2.00%
for Class Y for the 30-day period ended June 30, 1998.
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, Donoghue's Money Market Fund Report, Financial
Services Week, Financial Times, Financial World, Forbes, Fortune, Global
Investor, Institutional Investor, Investor's Daily, Kiplinger's Personal
Finance, Lipper Analytical Services, Money, Morningstar, Mutual Fund Forecaster,
Newsweek, The New York Times, Personal Investor, Stanger Report, Sylvia Porter's
Personal Finance, USA Today, U.S. News and World Report, The Wall Street Journal
and Wiesenberger Investment Companies Service.
VALUING FUND SHARES
The value of an individual share for each class is determined by using the net
asset value before shareholder transactions for the day. On July 1, 1998, the
first business day following the end of the fiscal year, the computation looked
like this:
<TABLE>
<CAPTION>
Net assets Shares
before outstanding at Net asset value
shareholder the end of of one share
transactions previous day
----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Class A $981,073,275 divided by 108,334,063 equals $9.056
Class B 202,875,721 22,407,303 9.054
Class Y 36,769 4,062 9.052
</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):
`Securities traded on a securities exchange for which a last-quoted sales price
is readily available are valued at the last-quoted sales price on the exchange
where such security is primarily traded.
<PAGE>
`Securities traded on a securities exchange for which a last-quoted sales price
is not readily available are valued at the mean of the closing bid and asked
prices, looking first to the bid and asked prices on the exchange where the
security is primarily traded and, if none exist, to the over-the-counter market.
`Securities included in the NASDAQ National Market System are valued at the
last-quoted sales price in this market.
`Securities included in the NASDAQ National Market System for which a
last-quoted sales price is not readily available, and other securities traded
over-the-counter but not included in the NASDAQ National Market System are
valued at the mean of the closing bid and asked prices.
`Futures and options traded on major exchanges are valued at the last-quoted
sales price on their primary exchange.
`Foreign securities traded outside the United States are generally valued as of
the time their trading is complete, which is usually different from the close of
the Exchange. Foreign securities quoted in foreign currencies are translated
into U.S. dollars at the current rate of exchange. Occasionally, events
affecting the value of such securities may occur between such times and the
close of the Exchange that 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, these securities will be valued at their
fair value according to procedures decided upon in good faith by the board.
`Short-term securities maturing more than 60 days from the valuation date are
valued at the readily available market price or approximate market value based
on current interest rates. Short-term securities maturing in 60 days or less
that originally had maturities of more than 60 days at acquisition date are
valued at amortized cost using the market value on the 61st day before maturity.
Short-term securities maturing in 60 days or less at 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 reducing the carrying value if acquired at a premium, so that the
carrying value is equal to maturity value on the maturity date.
`Securities without a readily available market price and other assets are valued
at fair value as determined in good faith by the board. The board is responsible
for selecting methods it believes provide fair value. When possible, bonds are
valued by a pricing service independent from the Fund. If a valuation of a bond
is not available from a pricing service, the bond will be valued by a dealer
knowledgeable about the bond if such a dealer is available.
The Exchange, AEFC and the Fund will be closed on the following holidays: New
Year's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
<PAGE>
INVESTING IN THE FUND
Sales Charge
Shares of the Fund are sold at the public offering price determined at the close
of business on the day an application is accepted. The public offering price is
the net asset value of one share adjusted for the sales charge for Class A. For
Class B and Class Y, there is no initial sales charge so the public offering
price is the same as the net asset value. For Class A, the public offering price
for an investment of less than $50,000, made July 1, 1998, was determined by
dividing the net asset value of one share, $9.056, by 0.95 (1.00-0.05 for a
maximum 5% sales charge) for a public offering price of $9.53. The sales charge
is paid to American Express Financial Advisors Inc. (AEFA) by the person buying
the shares.
Class A - Calculation of the Sales Charge
Sales charges are determined as follows:
<TABLE>
<CAPTION>
Within each increment,
sales charge as a
percentage of:
-------------------------------------------------------------
<S> <C> <C>
Public Net
Amount of Investment Offering Price Amount Invested
- -------------------- -------------- ---------------
First $ 50,000 5.0% 5.26%
Next 50,000 4.5 4.71
Next 400,000 3.8 3.95
Next 500,000 2.0 2.04
$1,000,000 or more 0.0 0.00
</TABLE>
Sales charges on an investment greater than $50,000 and less than $1,000,000 are
calculated for each increment separately and then totaled. The resulting total
sales charge, expressed as a percentage of the public offering price and of the
net amount invested, will vary depending on the proportion of the investment at
different sales charge levels.
For example, compare an investment of $60,000 with an investment of $85,000. The
$60,000 investment is composed of $50,000 that incurs a sales charge of $2,500
(5.0% x $50,000) and $10,000 that incurs a sales charge of $450 (4.5% x
$10,000). The total sales charge of $2,950 is 4.92% of the public offering price
and 5.17% of the net amount invested.
In the case of the $85,000 investment, the first $50,000 also incurs a sales
charge of $2,500 (5.0% x $50,000) and $35,000 incurs a sales charge of $1,575
(4.5% x $35,000). The total sales charge of $4,075 is 4.79% of the public
offering price and 5.04% of the net amount invested.
<PAGE>
The following table shows the range of sales charges as a percentage of the
public offering price and of the net amount invested on total investments at
each applicable level.
<TABLE>
<CAPTION>
On total
investment, sales
charge as a
percentage of:
-------------------------------------------------------------
Public Net
Offering Price Amount Invested
Amount of investment ranges from:
- --------------------------------------------
<S> <C> <C> <C>
First $ 50,000 5.00% 5.26%
Next 50,000 to 100,000 5.00-4.50 5.26-4.71
Next 100,000 to 500,000 4.50-3.80 4.71-3.95
Next 500,000 to 999,999 3.80-2.00 3.95-2.04
$1,000,000 or more 0.00 0.00
</TABLE>
The initial sales charge is waived for certain qualified plans that meet the
requirements described in the prospectus. Participants in these qualified plans
may be subject to a deferred sales charge on certain redemptions. The deferred
sales charge on certain redemptions will be waived if the redemption is a result
of a participant's death, disability, retirement, attaining age 59 1/2, loans or
hardship withdrawals. The deferred sales charge varies depending on the number
of participants in the qualified plan and total plan assets as follows:
Deferred Sales Charge
Number of Participants
Total Plan Assets 1-99 100 or more
- ----------------- ---- -----------
Less than $1 million 4% 0%
$1 million or more 0% 0%
- -------------------------------------------------------------------------------
Class A - Reducing the Sales Charge
Sales charges are based on the total amount of your investments in the Fund. The
amount of all prior investments plus any new purchase is referred to as your
"total amount invested." For example, suppose you have made an investment of
$20,000 and later decide to invest $40,000 more. Your total amount invested
would be $60,000. As a result, $10,000 of your $40,000 investment qualifies for
the lower 4.5% sales charge that applies to investments of more than $50,000 and
up to $100,000.
The total amount invested includes any shares held in the Fund in the name of a
member of your primary household group. (The primary household group consists of
accounts in any ownership for spouses or domestic partners and their unmarried
children under 21.
<PAGE>
Domestic partners are individuals who maintain a shared primary residence and
have joint property or other insurable interests.) For instance, if your spouse
already has invested $20,000 and you want to invest $40,000, your total amount
invested will be $60,000 and therefore you will pay the lower charge of 4.5% on
$10,000 of the $40,000.
Until a spouse remarries, the sales charge is waived for spouses and unmarried
children under 21 of deceased board members, officers or employees of the Fund
or AEFC or its subsidiaries and deceased advisors.
The total amount invested also includes any investment you or your immediate
family already have in the other publicly offered funds in the IDS MUTUAL FUND
GROUP where the investment is subject to a sales charge. For example, suppose
you already have an investment of $30,000 in another IDS fund. If you invest
$40,000 more in this Fund, your total amount invested in the funds will be
$70,000 and therefore $20,000 of your $40,000 investment will incur a 4.5% sales
charge.
Finally, Individual Retirement Account (IRA) purchases, or other employee
benefit plan purchases made through a payroll deduction plan or through a plan
sponsored by an employer, association of employers, employee organization or
other similar entity, may be added together to reduce sales charges for shares
purchased through that plan.
Class A - Letter of Intent (LOI)
If you intend to invest $1 million over a period of 13 months, you can reduce
the sales charges in Class A by filing a LOI. The agreement can start at any
time and will remain in effect for 13 months. Your investment will be charged
normal sales charges until you have invested $1 million. At that time, your
account will be credited with the sales charges previously paid. Class A
investments made prior to signing a LOI may be used to reach the $1 million
total, excluding Cash Management Fund and Tax-Free Money Fund. However, we will
not adjust for sales charges on investments made prior to the signing of the
LOI. If you do not invest $1 million by the end of 13 months, there is no
penalty, you'll just miss out on the sales charge adjustment. A LOI is not an
option (absolute right) to buy shares.
Here's an example. You file a LOI to invest $1 million and make an investment of
$100,000 at that time. You pay the normal 5% sales charge on the first $50,000
and 4.5% sales charge on the next $50,000 of this investment. Let's say you make
a second investment of $900,000 (bringing the total up to $1 million) one month
before the 13-month period is up. On the date that you bring your total to $1
million, AEFC makes an adjustment to your account. The adjustment is made by
crediting your account with additional shares, in an amount equivalent to the
sales charge previously paid.
<PAGE>
Systematic Investment Programs
After you make your initial investment of $100 or more, you must make additional
payments of $100 or more on at least a monthly basis until your balance reaches
$2,000. These minimums do not apply to all systematic investment programs. You
decide how often to make payments - monthly, quarterly, or semiannually. You are
not obligated to make any payments. You can omit payments or discontinue the
investment program altogether. The Fund also can change the program or end it at
any time. If there is no obligation, why do it? Putting money aside is an
important part of financial planning. With a systematic investment program, you
have a goal to work for.
How does this work? Your regular investment amount will purchase more shares
when the net asset value per share decreases, and fewer shares when the net
asset value per share increases. Each purchase is a separate transaction. After
each purchase your new shares will be added to your account. Shares bought
through these programs are exactly the same as any other fund shares. They can
be bought and sold at any time. A systematic investment program is not an option
or an absolute right to buy shares.
The systematic investment program itself cannot ensure a profit, nor can it
protect against a loss in a declining market. If you decide to discontinue the
program and redeem your shares when their net asset value is less than what you
paid for them, you will incur a loss.
For a discussion on dollar-cost averaging, see Appendix F.
Automatic Directed Dividends
Dividends, including capital gain distributions, paid by another fund in the IDS
MUTUAL FUND GROUP subject to a sales charge, may be used to automatically
purchase shares in the same class of this Fund without paying a sales charge.
Dividends may be directed to existing accounts only. Dividends declared by a
fund are exchanged to this Fund the following day. Dividends can be exchanged
into the same class of another fund in the IDS MUTUAL FUND GROUP but cannot be
split to make purchases in two or more funds. Automatic directed dividends are
available between accounts of any ownership except:
Between a non-custodial account and an IRA, or 401(k) plan account or other
qualified retirement account of which American Express Trust Company acts as
custodian;
Between two American Express Trust Company custodial accounts with different
owners (for example, you may not exchange dividends from your IRA to the IRA of
your spouse);
<PAGE>
Between different kinds of custodial accounts with the same ownership (for
example, you may not exchange dividends from your IRA to your 401(k) plan
account, although you may exchange dividends from one IRA to another IRA).
Dividends may be directed from accounts established under the Uniform Gifts to
Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) only into other UGMA
or UTMA accounts with identical ownership.
The Fund's investment goals are described in its prospectus along with other
information, including fees and expense ratios. Before exchanging dividends into
another fund, you should read that fund's prospectus. You will receive a
confirmation that the automatic directed dividend service has been set up for
your account.
REDEEMING SHARES
You have a right to redeem your shares at any time. For an explanation of
redemption procedures, please see the 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 redeem shares for more than seven days. Such emergency situations would occur
if:
`The Exchange closes for reasons other than the usual weekend and holiday
closings or trading on the Exchange is restricted, or
`Disposal of the Fund's securities is not reasonably practicable or it is not
reasonably practicable for the Fund to determine the fair value of its net
assets, or
`The SEC, under the provisions of the Investment Company Act of 1940, as amended
(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 shareholders.
The Fund has elected to be governed by Rule 18f-1 under the 1940 Act, which
obligates the Fund to redeem shares in cash, with respect to any one shareholder
during any 90-day period, up to the lesser of $250,000 or 1% of the net assets
of the Fund at the beginning of the period. Although redemptions in excess of
this limitation would normally be paid in cash, the Fund reserves the right to
make these payments in whole or in part in securities or other assets in case of
an emergency, or if the payment of a redemption in cash would be detrimental to
the existing shareholders of the Fund as determined by the board. In these
circumstances, the securities distributed would be valued as set forth in the
prospectus. Should the Fund distribute securities, a shareholder may incur
brokerage fees or other transaction costs in converting the securities to cash.
<PAGE>
PAY-OUT PLANS
You can use any of several pay-out plans to redeem your investment in regular
installments. If you redeem Class B shares you may be subject to a contingent
deferred sales charge as discussed in the prospectus. While the plans differ on
how the pay-out is figured, they all are based on the redemption of your
investment. Net investment income dividends and any capital gain distributions
will automatically be reinvested, unless you elect to receive them in cash. If
you are redeeming a tax-qualified plan account for which American Express Trust
Company acts as custodian, you can elect to receive your dividends and other
distributions in cash when permitted by law. If you redeem an IRA or a qualified
retirement account, certain restrictions, federal tax penalties and special
federal income tax reporting requirements may apply. You should consult your tax
advisor about this complex area of the tax law.
Applications for a systematic investment in a class of the Fund subject to a
sales charge normally will not be accepted while a pay-out plan for any of those
funds is in effect. Occasional investments, however, may be accepted.
To start any of these plans, please write American Express Shareholder Service,
P.O. Box 534, Minneapolis, MN 55440-0534, or call American Express Financial
Advisors Telephone Transaction Service at 800-437-3133 (National/Minnesota) or
612-671-3800 (Mpls./St. Paul). Your authorization must be received in the
Minneapolis headquarters at least five days before the date you want your
payments to begin. The initial payment must be at least $50. Payments will be
made on a monthly, bimonthly, quarterly, semiannual or annual basis. Your choice
is effective until you change or cancel it.
The following pay-out plans are designed to take care of the needs of most
shareholders in a way AEFC can handle efficiently and at a reasonable cost. If
you need a more irregular schedule of payments, it may be necessary for you to
make a series of individual redemptions, in which case you'll have to send in a
separate redemption request for each pay-out. The Fund reserves the right to
change or stop any pay-out plan and to stop making such plans available.
Plan #1: Pay-out for a fixed period of time
If you choose this plan, a varying number of shares will be redeemed at regular
intervals during the time period you choose. This plan is designed to end in
complete redemption of all shares in your account by the end of the fixed
period.
Plan #2: Redemption of a fixed number of shares
If you choose this plan, a fixed number of shares will be redeemed for each
payment and that amount will be sent to you. The length of time these payments
continue is based on the number of shares in your account.
<PAGE>
Plan #3: Redemption of a fixed dollar amount
If you decide on a fixed dollar amount, whatever number of shares is necessary
to make the payment will be redeemed in regular installments until the account
is closed.
Plan #4: Redemption of a percentage of net asset value
Payments are made based on a fixed percentage of the net asset value of the
shares in the account computed on the day of each payment. Percentages range
from 0.25% to 0.75%. For example, if you are on this plan and arrange to take
0.5% each month, you will get $50 if the value of your account is $10,000 on the
payment date.
TAXES
If you buy shares in the Fund and then exchange into another fund, it is
considered a redemption and subsequent purchase of shares. Under the tax laws,
if this exchange is done within 91 days, any sales charge waived on Class A
shares on a subsequent purchase of shares applies to the new shares acquired in
the exchange. Therefore, you cannot create a tax loss or reduce a tax gain
attributable to the sales charge when exchanging shares within 91 days.
Retirement Accounts
If you have a nonqualified investment in the Fund and you wish to move part or
all of those shares to an IRA or qualified retirement account in the Fund, you
can do so without paying a sales charge. However, this type of exchange is
considered a redemption of shares and may result in a gain or loss for tax
purposes. In addition, this type of exchange may result in an excess
contribution under IRA or qualified plan regulations if the amount exchanged
plus the amount of the initial sales charge applied to the amount exchanged
exceeds annual contribution limitations. For example: If you were to exchange
$2,000 in Class A shares from a nonqualified account to an IRA without
considering the 5% ($100) initial sales charge applicable to that $2,000, you
may be deemed to have exceeded current IRA annual contribution limitations. You
should consult your tax advisor for further details about this complex subject.
Net investment income dividends received should be treated as dividend income
for federal income tax purposes. Corporate shareholders are generally entitled
to a deduction equal to 70% of that portion of the Fund's dividend that is
attributable to dividends the Fund received from domestic (U.S.) securities. For
the fiscal year ended June 30, 1998, 46.93% of the Fund's net investment income
dividends qualified for the corporate deduction.
Capital gain distributions, if any, received by corporate shareholders should be
treated as long-term capital gains regardless of how long they owned their
shares. Capital gain distributions, if any, received by individuals should be
treated as long-term if held for
<PAGE>
more than one year; however, recent tax laws have divided long-term capital
gains into two holding periods: (1) shares held more than one year but not more
than 18 months and (2) shares held more than 18 months. Short-term capital gains
earned by the Fund are paid to shareholders as part of their ordinary income
dividend and are taxable.
Under federal tax law, by the end of a calendar year the Fund must declare and
pay dividends representing 98% of ordinary income for that calendar year and 98%
of net capital gains (both long-term and short-term) for the 12-month period
ending Oct. 31 of that calendar year. The Fund is subject to an excise tax equal
to 4% of the excess, if any, of the amount required to be distributed over the
amount actually distributed. The Fund intends to comply with federal tax law and
avoid any excise tax.
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 if 50% or
more of the average value of its assets consists of assets that produce or could
produce passive income.
This is a brief summary that relates to federal income taxation only.
Shareholders should consult their tax advisor as to the application of federal,
state and local income tax laws to Fund distributions.
AGREEMENTS
Investment Management Services Agreement
The Fund has an Investment Management Services Agreement with AEFC. For its
services, AEFC is paid a fee based on the following schedule. Each class of the
Fund pays its proportionate share of the fee.
Assets Annual rate at
(billions) each asset level
- --------- ----------------
First $0.50 0.530%
Next 0.50 0.505
Next 1.0 0.480
Next 1.0 0.455
Next 3.0 0.430
Over 6.0 0.400
On June 30, 1998, the daily rate applied to the Fund's net assets was equal to
0.512% on an annual basis. The fee is calculated for each calendar day on the
basis of net assets as of the close of business two business days prior to the
day for which the calculation is made.
The management fee is paid monthly. Under the agreement, the total amount paid
was $5,074,299 for the fiscal year ended June 30, 1998, $3,919,693 for fiscal
year 1997, and $3,508,256 for fiscal year 1996.
<PAGE>
Under the agreement, the Fund also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees; audit and certain legal
fees; fidelity bond premiums; registration fees for shares; office expenses;
consultants' fees; compensation of board members, officers and employees;
corporate filing fees; organizational expenses; expenses incurred in connection
with lending securities of the Fund; and expenses properly payable by the Fund,
approved by the board. Under the agreement, the Fund paid nonadvisory expenses
of $201,192 for the fiscal year ended June 30, 1998, $302,118 for fiscal year
1997, and $251,849 for fiscal year 1996.
Administrative Services Agreement
The Fund has an Administrative Services Agreement with AEFC. Under this
agreement, the Fund pays AEFC for providing administration and accounting
services. The fee is calculated as follows:
Assets Annual rate
(billions) each asset level
- --------- ----------------
First $0.50 0.040%
Next 0.50 0.035
Next 1.0 0.030
Next 1.0 0.025
Next 3.0 0.020
Over 6.0 0.020
On June 30, 1998, the daily rate applied to the Fund's net assets was equal to
0.036% on an annual basis. The fee is calculated for each calendar day on the
basis of net assets as of the close of business two business days prior to the
day for which the calculation is made. Under the agreement, the Fund paid fees
of $379,141 for the fiscal year ended June 30, 1998.
Transfer Agency Agreement
The Fund has a Transfer Agency Agreement with American Express Client Service
Corporation (AECSC). This agreement governs AECSC's responsibility for
administering and/or performing transfer agent functions, for acting as service
agent in connection with dividend and distribution functions and for performing
shareholder account administration agent functions in connection with the
issuance, exchange and redemption or repurchase of the Fund's shares. Under the
agreement, AECSC will earn a fee from the Fund determined by multiplying the
number of shareholder accounts at the end of the day by a rate determined for
each class per year and dividing by the number of days in the year. The rate for
Class A and Class Y is $15 per year and for Class B is $16 per year. The fees
paid to AECSC may be changed from time to time upon agreement of the parties
without shareholder approval. Under the agreement, the Fund paid fees of
$1,004,792 for the fiscal year ended June 30, 1998.
<PAGE>
Distribution Agreement
Under a Distribution Agreement, sales charges deducted for distributing Fund
shares are paid to AEFA daily. These charges amounted to $3,476,009 for the
fiscal year ended June 30, 1998. After paying commissions to personal financial
advisors, and other expenses, the amount retained was $(244,797). The amounts
were $1,681,037 and $124,140 for fiscal year 1997, and $1,792,014 and $100,719
for fiscal period 1996.
Shareholder Service Agreement
The Fund pays a fee for service provided to shareholders by financial advisors
and other servicing agents. The fee is calculated at a rate of 0.175% of average
daily net assets for Class A and Class B and 0.10% for Class Y.
Plan and Agreement of Distribution
For Class B shares, to help AEFA defray the cost of distribution and servicing,
not covered by the sales charges received under the Distribution Agreement, the
Fund and AEFA entered into a Plan and Agreement of Distribution (Plan). These
costs cover almost all aspects of distributing the Fund's shares except
compensation to the sales force. A substantial portion of the costs are not
specifically identified to any one fund in the IDS MUTUAL FUND GROUP. Under the
Plan, AEFA is paid a fee at an annual rate of 0.75% of the Fund's average daily
net assets attributable to Class B shares.
The Plan must be approved annually by the board, including a majority of the
disinterested board members, if it is to continue for more than a year. At least
quarterly, the board must review written reports concerning the amounts expended
under the Plan and the purposes for which such expenditures were made. The Plan
and any agreement related to it may be terminated at any time by vote of a
majority of board members who are not interested persons of the Fund and have no
direct or indirect financial interest in the operation of the Plan or in any
agreement related to the Plan, or by vote of a majority of the outstanding
voting securities of the Fund's Class B shares or by AEFA. The Plan (or any
agreement related to it) will terminate in the event of its assignment, as that
term is defined in the 1940 Act. The Plan may not be amended to increase the
amount to be spent for distribution without shareholder approval, and all
material amendments to the Plan must be approved by a majority of the board
members, including a majority of the board members who are not interested
persons of the Fund and who do not have a financial interest in the operation of
the Plan or any agreement related to it. The selection and nomination of
disinterested board members is the responsibility of the other disinterested
board members. No board member who is not an interested person, has any direct
or indirect financial interest in the operation of the Plan or any related
agreement. For the fiscal year ended June 30, 1998, under the agreement, the
Fund paid fees of $1,019,619.
<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 arrangement with the Morgan
Stanley Trust Company (Morgan Stanley), One Pierrepont Plaza, Eighth Floor,
Brooklyn, NY 11201-2775. As part of this arrangement, securities purchased
outside the United States are maintained in the custody of various foreign
branches of Morgan Stanley or in other financial institutions as permitted by
law and by the Fund's sub-custodian agreement.
Total fees and expenses
The Fund paid total fees and nonadvisory expenses, net of earnings credits, of
$9,383,972 for the fiscal year ended June 30, 1998.
ORGANIZATIONAL INFORMATION
The Fund is a diversified, open-end management investment company, as defined in
the 1940 Act. It was incorporated March 25, 1988 in Minnesota. The Fund
headquarters are at 901 S. Marquette Ave., Suite 2810, Minneapolis, MN
55402-3268.
BOARD MEMBERS AND OFFICERS
The following is a list of the Fund's board members. They serve 15 Master Trust
portfolios and 47 IDS and IDS Life funds (except for William H. Dudley, who does
not serve on the nine IDS Life fund boards). All shares have cumulative voting
rights with respect to the election of board members.
H. Brewster Atwater, Jr.
Born in 1931
4900 IDS Tower
Minneapolis, MN
Retired chairman and chief executive officer, General Mills, Inc. Director,
Merck & Co., Inc. and Darden Restaurants, Inc.
<PAGE>
Lynne V. Cheney'
Born in 1941
American Enterprise Institute
for Public Policy Research (AEI)
1150 17th St., N.W. Washington, D.C.
Distinguished Fellow AEI. Former Chair of National Endowment of the Humanities.
Director, The Reader's Digest Association Inc., Lockheed-Martin and Union
Pacific Resources.
William H. Dudley**
Born in 1932
2900 IDS Tower
Minneapolis, MN
Senior advisor to the chief executive officer of AEFC.
David R. Hubers+**
Born in 1943
2900 IDS Tower
Minneapolis, MN
President, chief executive officer and director of AEFC.
Heinz F. Hutter+'
Born in 1929
P.O. Box 2187
Minneapolis, MN
Retired president and chief operating officer, Cargill, Incorporated (commodity
merchants and processors).
Anne P. Jones
Born in 1935
5716 Bent Branch Rd.
Bethesda, MD
Attorney and telecommunications consultant. Former partner, law firm of
Sutherland, Asbill & Brennan. Director, Motorola, Inc. (electronics), C-Cor
Electronics, Inc., and Amnex, Inc. (communications).
<PAGE>
William R. Pearce+*
Born in 1927
901 S. Marquette Ave.
Minneapolis, MN
Chairman of the board, Board Services Corporation (provides administrative
services to boards). Director, trustee and officer of registered investment
companies whose boards are served by the company. Retired vice chairman of the
board, Cargill, Incorporated (commodity merchants and processors).
Alan K. Simpson'
Born in 1931
1201 Sunshine Ave.
Cody, WY
Former three-term United States Senator for Wyoming. Former Assistant Republican
Leader, U.S. Senate. Director, PacifiCorp (electric power) and Biogen
(pharmaceuticals).
Edson W. Spencer+
Born in 1926
4900 IDS Center
80 S. 8th St.
Minneapolis, MN
President, Spencer Associates Inc. (consulting). Retired chairman of the board
and chief executive officer, Honeywell Inc. Director, Boise Cascade Corporation
(forest products). Member of International Advisory Council of NEC (Japan).
John R. Thomas**
Born in 1937
2900 IDS Tower
Minneapolis, MN
Senior vice president of AEFC.
Wheelock Whitney+
Born in 1926
1900 Foshay Tower
821 Marquette Ave.
Minneapolis, MN
Chairman, Whitney Management Company (manages family assets).
<PAGE>
C. Angus Wurtele'
Born in 1934
Valspar Corporation
Suite 1700
Foshay Tower
Minneapolis, MN
Chairman of the board and retired chief executive officer, The Valspar
Corporation (paints). Director, Bemis Corporation (packaging), Donaldson Company
(air cleaners & mufflers) and General Mills, Inc.
(consumer foods).
+ Member of executive committee.
' Member of joint audit committee.
* Interested person by reason of being an officer and employee of the Fund.
**Interested person by reason of being an officer, board member, employee and/or
shareholder of AEFC or American Express.
The board also has appointed officers who are responsible for day-to-day
business decisions based on policies it has established.
In addition to Mr. Pearce, who is chairman of the board, and Mr. Thomas, who is
president, the Fund's other officers are:
Leslie L. Ogg
Born in 1938
901 S. Marquette Ave.
Minneapolis, MN
President of Board Services Corporation. Vice president, general counsel and
secretary for the Fund.
Officers who also are officers and/or employees of AEFC
Peter J. Anderson
Born in 1942
IDS Tower 10
Minneapolis, MN
Director and senior vice president-investments of AEFC. Vice
president-investments for the Fund.
<PAGE>
Frederick C. Quirsfeld
Born in 1947
IDS Tower 10
Minneapolis, MN
Vice president - taxable mutual fund investments of AEFC. Vice president - fixed
income investments for the Fund.
Matthew N. Karstetter
Born in 1961
IDS Tower 10
Minneapolis, MN
Vice president of Investment Accounting for AEFC since 1996. Prior to joining
AEFC, he served as vice president of State Street Bank's mutual fund service
operation from 1991 to 1996. Treasurer for the Fund.
COMPENSATION FOR FUND BOARD MEMBERS
Members of the Fund board who are not officers of the Fund or of AEFC receive an
annual fee of $500, and the chair of the Contracts Committee receives an
additional fee of $86. Board members receive a $50 per day attendance fee for
board meetings. The attendance fee for meetings of the Contracts and Investment
Review Committees is $50; for meetings of the Audit Committee and Personnel
Committee $25 and for traveling from out-of-state $5. Expenses for attending
meetings are reimbursed.
During the fiscal year ended June 30, 1998, the independent members of the
board, for attending up to 27 meetings, received the following compensation:
<TABLE>
<CAPTION>
Compensation Table
<S> <C> <C> <C> <C>
Total cash
compensation
from the IDS
Aggregate Pension or Retirement Estimated annual MUTUAL FUND
compensation benefits accrued as benefit upon GROUP and
Board member from the Fund Fund expenses retirement Preferred Master
Trust Group
H. Brewster Atwater, $1,300 $0 $0 $98,200
Jr.
Lynne V. Cheney 1,180 0 0 92,200
Robert F. Froehlke 608 0 0 44,800
Heinz F. Hutter 1,350 0 0 101,200
Anne P. Jones 1,230 0 0 95,200
Melvin R. Laird 427 0 0 32,600
Alan K. Simpson 1,050 0 0 84,200
Edson W. Spencer 1,525 0 0 111,700
Wheelock Whitney 1,425 0 0 105,700
C. Angus Wurtele 1,450 0 0 107,200
</TABLE>
<PAGE>
On June 30, 1998, the Fund's board members and officers as a group owned less
than 1% of the outstanding shares of any class.
INDEPENDENT AUDITORS
The financial statements contained in the Annual Report to shareholders for the
fiscal year ended June 30, 1998 were audited by independent auditors, KPMG Peat
Marwick LLP, 4200 Norwest Center, 90 S. Seventh St., Minneapolis, MN 55402-3900.
The independent auditors also provide other accounting and tax-related services
as requested by the Fund.
FINANCIAL STATEMENTS
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 to shareholders for the fiscal year ended June
30, 1998, pursuant to Section 30(d) of the 1940 Act, are hereby incorporated in
this SAI by reference. No other portion of the Annual Report, however, is
incorporated by reference.
PROSPECTUS
The prospectus for IDS Utilities Income Fund, dated Aug. 28, 1998, is hereby
incorporated in this SAI by reference.
<PAGE>
APPENDIX A
DESCRIPTION OF THE FOUR HIGHEST BOND RATINGS
These ratings concern the quality of the issuing corporation. They are not an
opinion of the market value of the security. Such ratings are opinions on
whether the principal and interest will be repaid when due. A security's rating
may change which could affect its price.
The four highest ratings by Moody's Investors Service, Inc. are Aaa, Aa, A, and
Baa.
Bonds rated:
Aaa are judged to be of the best quality. They carry the smallest degree of
investment risk and are generally referred to as "gilt edged." 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 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 which make the long-term risk
appear somewhat larger than the Aaa securities.
A possess many favorable investment attributes and are considered as
upper-medium-grade obligations. Factors giving security to principal and
interest are considered adequate, but elements may be present which suggest a
susceptibility to impairment some time in the future.
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.
The four highest ratings by Standard & Poor's Corporation are AAA, AA, A, and
BBB.
AAA has the highest rating assigned by S&P. Capacity to pay interest and repay
principal is extremely strong.
AA has a very strong capacity to pay interest and repay principal and differs
from the highest rated issues only in small degree.
<PAGE>
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.
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>
APPENDIX B
FOREIGN CURRENCY TRANSACTIONS
Since investments in foreign countries usually involve currencies of foreign
countries, and since the Fund may hold cash and cash-equivalent investments in
foreign currencies, 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.
Spot Rates and Forward Contracts. 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. A forward contract involves an obligation to buy or sell a specific
currency at a future date, which may be any fixed number of days from the
contract date, at a price set at the time of the contract. These contracts are
traded in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. A forward contract
generally has no deposit requirements. No commissions are charged at any stage
for trades.
The 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 suffer a substantial
decline against another currency. It may enter into a forward contract to sell,
for a fixed amount of dollars, the amount of foreign currency approximating the
value of some or all of the Fund's securities denominated in such foreign
currency. The precise matching of forward contract amounts and the value of
securities involved generally will not be possible since the future value of
such securities in foreign currencies more than likely will change between the
date the forward contract is entered into and the date it matures. The
projection of short-term currency market movements is extremely difficult and
successful execution of a short-term hedging strategy is highly uncertain. The
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.
<PAGE>
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 a 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 such
purchase) if the market value of the security is less than the amount of foreign
currency the Fund is obligated to deliver and a decision is made to sell the
security and make delivery of the foreign currency. Conversely, it may be
necessary to sell on the spot market some of the foreign currency received on
the sale of the portfolio security if its market value exceeds the amount of
foreign currency the Fund is obligated to deliver.
The Fund's dealing in forward contracts will be limited to the transactions
described above. This method of protecting the value of the Fund's securities
against a decline in the value of a currency does not eliminate fluctuations in
the underlying prices of the securities. It simply establishes a rate of
exchange that can be achieved at some point in time. Although such forward
contracts tend to minimize the risk of loss due to a decline in value of hedged
currency, they tend to limit any potential gain that might result should the
value of such currency increase.
Although the 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
<PAGE>
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 put and write covered call
options on foreign currencies for hedging purposes. For example, a decline in
the dollar value of a foreign currency in which securities are denominated will
reduce the dollar value of such securities, even if their value in the foreign
currency remains constant. In order to protect against such diminutions in the
value of securities, the Fund may buy put options on the foreign currency. If
the value of the currency does decline, the Fund will have the right to sell
such currency for a fixed amount in dollars and will thereby offset, in whole or
in part, the adverse effect on its portfolio which otherwise would have
resulted.
As in the case of other types of options, however, the benefit to the 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 which
would require it to forego a portion or all of the benefits of advantageous
changes in such 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 which 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 which might otherwise
have been obtained from favorable movements on exchange rates.
All options written on foreign currencies will be covered. An option written on
foreign currencies is covered if the 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.
<PAGE>
Options on foreign currencies are traded through financial institutions acting
as market-makers, although foreign currency options also are traded on certain
national securities exchanges, such as the Philadelphia Stock Exchange and the
Chicago Board Options Exchange, subject to SEC regulation. In an
over-the-counter trading environment, many of the protections afforded to
exchange participants will not be available. For example, there are no daily
price fluctuation limits, and adverse market movements could therefore continue
to an unlimited extent over a period of time. Although the purchaser of an
option cannot lose more than the amount of the premium plus related transaction
costs, this entire amount could be lost.
Foreign currency option positions entered into on a national securities exchange
are cleared and guaranteed by the Options Clearing Corporation (OCC), thereby
reducing the risk of counterparty default. Further, a liquid secondary market in
options traded on a national securities exchange may be more readily available
than in the over-the-counter market, potentially permitting the Fund to
liquidate open positions at a profit prior to exercise or expiration, or to
limit losses in the event of adverse market movements.
The purchase and sale of exchange-traded foreign currency options, however, is
subject to the risks of availability of a liquid secondary market described
above, as well as the risks regarding adverse market movements, margining of
options written, the nature of the foreign currency market, possible
intervention by governmental authorities and the effects of other political and
economic events. In addition, exchange-traded options on foreign currencies
involve certain risks not presented by the over-the-counter market. For example,
exercise and settlement of such options must be made exclusively through the
OCC, which has established banking relationships in certain foreign countries
for the purpose. As a result, the OCC may, if it determines that foreign
governmental restrictions or taxes would prevent the orderly settlement of
foreign currency option exercises, or would result in undue burdens on OCC or
its clearing member, impose special procedures on exercise and settlement, such
as technical changes in the mechanics of delivery of currency, the fixing of
dollar settlement prices or prohibitions on exercise.
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.
All futures contracts are aggregated for purposes of the percentage limitations.
Currency futures and options on futures values can be expected to correlate with
exchange rates, but will not reflect other factors that may affect the values of
the Fund's investments. A currency hedge, for example, should protect a
Yen-denominated bond
<PAGE>
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.
<PAGE>
APPENDIX C
INVESTING IN FOREIGN SECURITIES
Investors should recognize that investing in foreign securities involves certain
special considerations, including those set forth below and those described in
the prospectus, which are not typically associated with investing in United
States securities. Foreign companies are not generally subject to uniform
accounting and 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 United States and at times, volatility of price can be greater
than in the United States. 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 of the Fund are uninvested and no return is earned thereon. The inability
of the Fund is to make intended security purchases due to such problems could
cause the Fund 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., the Fund 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, although the
Fund will endeavor to achieve the most favorable net results on its portfolio
transactions. Further, the Fund 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 United States. It may
be more difficult for the Funds' agents to keep currently informed about
corporate actions such as stock dividends or other matters which may affect the
prices of portfolio securities. Communications between the United States and
foreign countries may be less reliable than within the United States, 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 withholding or confiscatory
taxes, political, social, or economic instability, diplomatic developments which
could affect United States investments in those countries, or other unforeseen
actions by regulatory bodies (such as changes to settlement or custody
procedures). Investments in foreign securities may also entail certain risks,
such as possible currency blockages or transfer restrictions, and the difficulty
of enforcing rights in other countries.
<PAGE>
APPENDIX D
OPTIONS AND FUTURES CONTRACTS
The Fund may buy or write options traded on any U.S. or foreign exchange or in
the over-the-counter market. The Fund may enter into interest rate futures
contracts and stock index futures contracts traded on any U.S. or foreign
exchange. The Fund also may buy or write put and call options on these futures
and on stock indexes. Options in the over-the-counter market will be purchased
only when the investment manager believes a liquid secondary market exists for
the options and only from dealers and institutions the investment manager
believes present a minimal credit risk. Some options are exercisable only on a
specific date. In that case, or if a liquid secondary market does not exist, the
Fund could be required to buy or sell securities at disadvantageous prices,
thereby incurring losses.
OPTIONS. An option is a contract. A person who buys a call option for a security
has the right to buy the security at a set price for the length of the contract.
A person who sells a call option is called a writer. The writer of a call option
agrees to sell the security at the set price when the buyer wants to exercise
the option, no matter what the market price of the security is at that time. A
person who buys a put option has the right to sell a security at a set price for
the length of the contract. A person who writes a put option agrees to buy the
security at the set price if the purchaser wants to exercise the option, no
matter what the market price of the security is at that time. An option is
covered if the writer owns the security (in the case of a call) or sets aside
the cash or securities of equivalent value (in the case of a put) that would be
required upon exercise.
The price paid by the buyer for an option is called a premium. In addition the
buyer generally pays a broker a commission. The writer receives a premium, less
another commission, at the time the option is written. The cash received is
retained by the writer whether or not the option is exercised. A writer of a
call option may have to sell the security for a below-market price if the market
price rises above the exercise price. A writer of a put option may have to pay
an above-market price for the security if its market price decreases below the
exercise price. The risk of the writer is potentially unlimited, unless the
option is covered.
Options can be used to produce incremental earnings, protect gains and
facilitate buying and selling securities for investment purposes. The use of
options and futures contracts may benefit the Fund and its shareholders by
improving the Fund's liquidity and by helping to stabilize the value of its net
assets.
Buying options. Put and call options may be used as a trading technique to
facilitate buying and selling securities for investment reasons. Options are
used as a trading technique to take advantage of any disparity between the price
of the underlying security in the securities market and its price on the options
market. It is anticipated the trading
<PAGE>
technique will be utilized only to effect a transaction when the price of the
security plus the option price will be as good or better than the price at which
the security could be bought or sold directly. When the option is purchased, the
Fund pays a premium and a commission. It then pays a second commission on the
purchase or sale of the underlying security when the option is exercised. For
record keeping and tax purposes, the price obtained on the purchase of the
underlying security will be the combination of the exercise price, the premium
and both commissions. When using options as a trading technique, commissions on
the option will be set as if only the underlying securities were traded.
Put and call options also may be held by the Fund for investment purposes.
Options permit the Fund to experience the change in the value of a security with
a relatively small initial cash investment.
The risk the Fund assumes when it buys an option is the loss of the premium. To
be beneficial to the Fund, the price of the underlying security must change
within the time set by the option contract. Furthermore, the change must be
sufficient to cover the premium paid, the commissions paid both in the
acquisition of the option and in a closing transaction or in the exercise of the
option and sale (in the case of a call) or purchase (in the case of a put) of
the underlying security. Even then, the price change in the underlying security
does not ensure a profit since prices in the option market may not reflect such
a change.
Writing covered options. The Fund will write covered options when it feels it is
appropriate and will follow these guidelines:
`Underlying securities will continue to be bought or sold solely on the basis of
investment considerations consistent with the Fund's goal.
`All options written by the Fund will be covered. For covered call options if a
decision is made to sell the security, or for put options if a decision is made
to buy the security, the Fund will attempt to terminate the option contract
through a closing purchase transaction.
Net premiums on call options closed or premiums on expired call options are
treated as short-term capital gains.
If a covered call option is exercised, the security is sold by the Fund. The
premium received upon writing the option is added to the proceeds received from
the sale of the security. The Fund will recognize a capital gain or loss based
upon the difference between the proceeds and the security's basis. Premiums
received from writing outstanding options are included as a deferred credit in
the Statement of Assets and Liabilities and adjusted daily to the current market
value.
<PAGE>
Options on many securities are listed on options exchanges. If the Fund writes
listed options, it will follow the rules of the options exchange. Options are
valued at the close of the New York Stock Exchange. An option listed on a
national exchange, CBOE or NASDAQ will be valued at the last quoted sales price
or, if such a price is not readily available, at the mean of the last bid and
ask prices.
Options on certain securities are not actively traded on any exchange, but may
be entered into directly with a dealer. When the Fund writes such an option, the
Custodian will segregate assets as appropriate to cover the option. These
options may be more difficult to close. If the Fund is unable to effect a
closing purchase transaction, it will not be able to sell the underlying
security until the call written by the Fund expires or is exercised.
FUTURES CONTRACTS. A futures contract is an agreement between two parties to buy
and sell a security for a set price on a future date. Futures contracts trade in
a manner similar to the way a stock trades on a stock exchange and the commodity
exchanges, through their clearing corporations, guarantee performance of the
contracts. Futures contracts are commodity contracts listed on commodity
exchanges. They include contracts based on U.S. Treasury bonds and on Standard &
Poor's 500 Index (S&P 500 Index). In the case of S&P 500 index futures
contracts, the specified multiple is $500. Thus, if the value of the S&P 500
Index were 150, the value of one contract would be $75,000 (150 x $500).
Unlike other futures contracts, a stock index futures contract specifies that no
delivery of the actual stocks making up the index will take place. Instead,
settlement in cash must occur upon the termination of the contract. For example,
excluding any transaction costs, if the Fund enters into one futures contract to
buy the S&P 500 Index at a specified future date at a contract value of 150 and
the S&P 500 Index is at 154 on that future date, the Fund will gain $500 x
(154-150) or $2,000. If the Fund enters into one futures contract to sell the
S&P 500 Index at a specified future date at a contract value of 150 and the S&P
500 Index is at 152 on that future date, the Fund will lose $500 x (152-150) or
$1,000.
Generally, a futures contract is terminated by entering into an offsetting
transaction. An offsetting transaction is effected by the Fund taking an
opposite position. At the time a futures contract is made, a good faith deposit
called initial margin is set up within a segregated account at the Fund's
custodian bank. Daily thereafter, the futures contract is valued and the payment
of variation margin is required so that each day the Fund 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.
The purpose of a futures contract is to allow the Fund to gain rapid exposure to
or protect itself from changes in the market without actually buying or selling
securities. For example, if the Fund owned long-term bonds and interest rates
were expected to increase,
<PAGE>
it might enter into futures contracts to sell securities which would have much
the same effect as selling some of the long-term bonds it owned. If interest
rates did increase, the value of the debt securities in the portfolio would
decline, but the value of the Fund's futures contracts would increase at
approximately the same rate, thereby keeping the net asset value of the Fund
from declining as much as it otherwise would have. If, on the other hand, the
Fund held cash reserves and interest rates were expected to decline, the Fund
might enter into interest rate futures contracts for the purchase of securities.
If short-term rates were higher than long-term rates, the ability to continue
holding these cash reserves would have a very beneficial impact on the Fund's
earnings. Even if short-term rates were not higher, the Fund would still benefit
from the income earned by holding these short-term investments. At the same
time, by entering into futures contracts for the purchase of securities, the
Fund could take advantage of the anticipated rise in the value of long-term
bonds without actually buying them until the market had stabilized. At that
time, the futures contracts could be liquidated and the Fund's cash reserves
could then be used to buy long-term bonds on the cash market. The Fund could
accomplish similar results by selling bonds with long maturities and investing
in bonds with short maturities when interest rates are expected to increase or
by buying bonds with long maturities and selling bonds with short maturities
when interest rates are expected to decline. But by using futures contracts as
an investment tool, given the greater liquidity in the futures market than in
the cash market, it might be possible to accomplish the same result more easily
and more quickly.
Risks of Transactions in Futures Contracts
The Fund may elect to close some or all of its contracts prior to expiration.
Although the Fund intends to enter into futures contracts only on exchanges or
boards of trade where there appears to be an active secondary market, there is
no assurance that a liquid secondary market will exist for any particular
contract at any particular time. In such event, it may not be possible to close
a futures contract position, and in the event of adverse price movements, the
Fund would have to make daily cash payments of variation margin. Such price
movements, however, will be offset all or in part by the price movements of the
securities owned by the Fund. Of course, there is no guarantee the price of the
securities will correlate with the price movements in the futures contract and
thus provide an offset to losses on a futures contract.
Another risk in employing futures contracts to protect against the price
volatility of securities is that the prices of securities subject to futures
contracts may not correlate perfectly with the behavior of the cash prices of
the Fund's securities. The correlation may be distorted because the futures
market is dominated by short-term traders seeking to profit from the difference
between a contract or security price and their cost of borrowed funds. Such
distortions are generally minor and would diminish as the contract approached
maturity.
<PAGE>
In addition, the Fund's investment manager could be incorrect in its
expectations as to the direction or extent of various interest rate or market
movements or the time span within which the movements take place. For example,
if the Fund sold futures contracts for the sale of securities in anticipation of
an increase in interest rates, and interest rates declined instead, the Fund
would lose money on the sale.
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, an option on a futures contract merely entitles its holder to decide on or
before a future date (within nine months of the date of issue) whether to enter
into such a contract. If the holder decides not to enter into the contract, all
that is lost is the amount (premium) paid for the option. 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 and that change is
reflected in the net asset value of the Fund.
The risk the Fund assumes when it buys an option is the loss of the premium paid
for the option. The risk involved in writing options on futures contracts the
Fund owns, or on securities held in its portfolio, is that there could be an
increase in the market value of such contracts or securities. If that occurred,
the option would be exercised and the asset sold at a lower price than the cash
market price. To some extent, the risk of not realizing a gain could be reduced
by entering into a closing transaction. The Fund could enter into a closing
transaction by purchasing an option with the same terms as the one it had
previously sold. The cost to close the option and terminate the Fund's
obligation, however, might be more or less than the premium received when it
originally wrote the option. Further, the Fund 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. Such options would be used in the same manner
as options on futures contracts.
TAX TREATMENT. As permitted under federal income tax laws, the Fund intends to
identify futures contracts as mixed straddles and not mark them to market, that
is, not treat them as having been sold at the end of the year at market value.
Such an election may result in the Fund being required to defer recognizing
losses incurred by entering into futures contracts and losses on underlying
securities identified as being hedged against.
<PAGE>
Federal income tax treatment of gains or losses from transactions in options on
futures contracts and indexes will depend on whether such option is a section
1256 contract. If the option is a non-equity option, the Fund will either make a
1256(d) election and treat the option as a mixed straddle or mark to market the
option at fiscal year end and treat the gain/loss as 40% short-term and 60%
long-term. Certain provisions of the Internal Revenue Code may also limit the
Fund's ability to engage in futures contracts and related options transactions.
For example, at the close of each quarter of the Fund's taxable year, at least
50% of the value of its assets must consist of cash, government securities and
other securities, subject to certain diversification requirements.
The IRS has ruled publicly that an exchange-traded call option is a security for
purposes of the 50%-of-assets test and that its issuer is the issuer of the
underlying security, not the writer of the option, for purposes of the
diversification requirements.
Accounting for futures contracts will be according to generally accepted
accounting principles. Initial margin deposits will be recognized as assets due
from a broker (the Fund's agent in acquiring the futures position). During the
period the futures contract is open, changes in value of the contract will be
recognized as unrealized gains or losses by marking to market on a daily basis
to reflect the market value of the contract at the end of each day's trading.
Variation margin payments will be made or received depending upon whether gains
or losses are incurred. All contracts and options will be valued at the
last-quoted sales price on their primary exchange.
<PAGE>
APPENDIX E
MORTGAGE-BACKED SECURITIES
A mortgage pass-through certificate is one that represents an interest in a
pool, or group, of mortgage loans assembled by the Government National Mortgage
Association (GNMA), Federal Home Loan Mortgage Corporation (FHLMC), Federal
National Mortgage Association (FNMA) or non-governmental entities. In
pass-through certificates, both principal and interest payments, including
prepayments, are passed through to the holder of the certificate. Prepayments on
underlying mortgages result in a loss of anticipated interest, and the actual
yield (or total return) to the Fund, which is influenced by both stated interest
rates and market conditions, may be different than the quoted yield on
certificates. Some U.S. government securities may be purchased on a when-issued
basis, which means that it may take as long as 45 days after the purchase before
the securities are delivered to the Fund.
Stripped Mortgage-Backed Securities. The Fund may invest in stripped
mortgage-backed securities. Generally, there are two classes of stripped
mortgage-backed securities: Interest Only (IO) and Principal Only (PO). IOs
entitle the holder to receive distributions consisting of all or a portion of
the interest on the underlying pool of mortgage loans or mortgage-backed
securities. POs entitle the holder to receive distributions consisting of all or
a portion of the principal of the underlying pool of mortgage loans or
mortgage-backed securities. The cash flows and yields on IOs and POs are
extremely sensitive to the rate of principal payments (including prepayments) on
the underlying mortgage loans or mortgage-backed securities. A rapid rate of
principal payments may adversely affect the yield to maturity of IOs. A slow
rate of principal payments may adversely affect the yield to maturity of POs. On
an IO, if prepayments of principal are greater than anticipated, an investor may
incur substantial losses. If prepayments of principal are slower than
anticipated, the yield on a PO will be affected more severely than would be the
case with a traditional mortgage-backed security.
Mortgage-Backed Security Spread Options. The Fund may purchase mortgage-backed
security (MBS) put spread options and write covered MBS call spread options. MBS
spread options are based upon the changes in the price spread between a
specified mortgage-backed security and a like-duration Treasury security. MBS
spread options are traded in the OTC market and are of short duration, typically
one to two months. The Fund would buy or sell covered MBS call spread options in
situations where mortgage-backed securities are expected to underperform
like-duration Treasury securities.
<PAGE>
APPENDIX F
DOLLAR-COST AVERAGING
A technique that works well for many investors is one that eliminates random buy
and sell decisions. One such system is dollar-cost averaging. Dollar-cost
averaging involves building a portfolio through the investment of fixed amounts
of money on a regular basis regardless of the price or market condition. This
may enable an investor to smooth out the effects of the volatility of the
financial markets. By using this strategy, more shares will be purchased when
the price is low and less when the price is high. As the accompanying chart
illustrates, dollar-cost averaging tends to keep the average price paid for the
shares lower than the average market price of shares purchased, although there
is no guarantee.
While this technique does not ensure a profit and does not protect against a
loss if the market declines, it is an effective way for many shareholders who
can continue investing on a regular basis through changing market conditions,
including times when the price of their shares falls or the market declines, to
accumulate shares in a fund to meet long-term goals.
Dollar-cost averaging
- ---------------------------- --------------------------- -----------------------
Regular Market Price Shares
Investment of a Share Acquired
- ---------------------------- --------------------------- -----------------------
$100 $6.00 16.7
100 4.00 25.0
100 4.00 25.0
100 6.00 16.7
100 5.00 20.0
---- -------- ------
$500 $25.00 103.4
Average market price of a share over 5 periods:
$5.00 ($25.00 divided by 5).
The average price you paid for each share:
$4.84 ($500 divided by 103.4).
<PAGE>
Independent auditors' report
The board and shareholders
IDS Utilities Income Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments in securities, of IDS Utilities
Income Fund, Inc. as of June 30, 1998, and the related statement of
operations for the year then ended and the statements of changes in net
assets for each of the years in the two-year period then ended, and the
financial highlights for each of the years in the nine-year period ended
June 30, 1998, and for the period from August 1, 1988 (commencement of
operations) to June 30, 1989. These financial statements and the financial
highlights are the responsibility of fund management. Our responsibility
is to express an opinion on these financial statements and the financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and the
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Investment securities held in
custody are confirmed to us by the custodian. As to securities purchased
and sold but not received or delivered, and securities on loan, we request
confirmations from brokers, and where replies are not received, we carry
out other appropriate auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of IDS Utilities Income
Fund, Inc. at June 30, 1998, and the results of its operations, changes in
its net assets, and the financial highlights for the periods stated in the
first paragraph above, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
August 7, 1998
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statement of assets and liabilities
IDS Utilities Income Fund, Inc.
June 30, 1998
Assets
Investments in securities, at value (Note 1)
<S> <C>
(identified cost $964,156,302) $1,184,176,024
Cash in bank on demand deposit 1,020,893
Dividends and accrued interest receivable 3,625,104
Receivable for investment securities sold 9,739,619
Unrealized appreciation on foreign currency contracts held, at value (Notes 1 and 4) 25,579
------
Total assets 1,198,587,219
-------------
Liabilities
Dividends payable to shareholders 770,376
Payable upon return of securities loaned (Note 5) 14,895,000
Payable for investment securities purchased 8,794,877
Accrued investment management services fee 16,375
Accrued distribution fee 4,092
Accrued service fee 5,595
Accrued transfer agency fee 3,139
Accrued administrative services fee 1,165
Other accrued expenses 87,811
------
Total liabilities 24,578,430
----------
Net assets applicable to outstanding capital stock $1,174,008,789
==============
Represented by
Capital stock-- $.01 par value (Note 1) $ 1,307,454
Additional paid-in capital 879,341,142
Excess of distributions over net investment income (2)
Accumulated net realized gain (loss) 73,344,078
Unrealized appreciation (depreciation) on investments and on translation
of assets and liabilities in foreign currencies 220,016,117
-----------
Total-- representing net assets applicable to outstanding capital stock $1,174,008,789
==============
Net assets applicable to outstanding shares: Class A $ 972,796,828
Class B $ 201,175,496
Class Y $ 36,465
Net asset value per share of outstanding capital stock: Class A shares 108,334,063 $ 8.98
Class B shares 22,407,303 $ 8.98
Class Y shares 4,062 $ 8.98
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
IDS Utilities Income Fund, Inc.
Year ended June 30, 1998
Investment income
Income:
<S> <C>
Dividends $31,376,047
Interest 4,723,884
Less foreign taxes withheld (220,062)
--------
Total income 35,879,869
----------
Expenses (Note 2):
Investment management services fee 5,074,299
Distribution fee -- Class B 1,019,619
Transfer agency fee 993,319
Incremental transfer agency fee-- Class B 11,473
Service fee
Class A 1,467,758
Class B 237,103
Class Y 68
Administrative services fees and expenses 379,141
Compensation of board members 11,545
Custodian fees 131,975
Postage58,856
Registration fees 70,815
Reports to shareholders 14,450
Audit fees 24,500
Other 5,731
-----
Total expenses 9,500,652
Earnings credits on cash balances (Note 2) (116,680)
--------
Total net expenses 9,383,972
---------
Investment income (loss) -- net 26,495,897
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 120,233,497
Foreign currency transactions (10,500)
Options contracts written 281,926
-------
Net realized gain (loss) on investments 120,504,923
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 93,538,469
----------
Net gain (loss) on investments and foreign currencies 214,043,392
-----------
Net increase (decrease) in net assets resulting from operations $240,539,289
============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statements of changes in net assets
IDS Utilities Income Fund, Inc.
Year ended June 30,
Operations and distributions
1998 1997
<S> <C> <C>
Investment income (loss)-- net $ 26,495,897 $ 24,993,583
Net realized gain (loss) on investments 120,504,923 67,241,707
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 93,538,469 34,416,208
---------- ----------
Net increase (decrease) in net assets resulting from operations 240,539,289 126,651,498
----------- -----------
Distributions to shareholders from:
Net investment income
Class A (23,512,270) (22,560,571)
Class B (2,690,811) (1,658,850)
Class Y (2,108) (7,580)
Net realized gain
Class A (91,228,835) (19,457,819)
Class B (13,882,130) (1,790,823)
Class Y (3,554) (6,467)
------ ------
Total distributions (131,319,708) (45,482,110)
------------ -----------
Capital share transactions (Note 6)
Proceeds from sales
Class A shares (Note 2) 159,688,007 84,967,342
Class B shares 98,078,706 47,369,444
Class Y shares -- 109,954
Reinvestment of distributions at net asset value
Class A shares 106,764,256 38,730,859
Class B shares 16,012,247 3,314,586
Class Y shares 4,647 14,047
Payments for redemptions
Class A shares (128,470,542) (134,149,309)
Class B shares (Note 2) (21,041,055) (11,992,573)
Class Y shares (247,100) (47,737)
-------- -------
Increase (decrease) in net assets from capital share transactions 230,789,166 28,316,613
----------- ----------
Total increase (decrease) in net assets 340,008,747 109,486,001
Net assets at beginning of year 834,000,042 724,514,041
----------- -----------
Net assets at end of year $1,174,008,789 $834,000,042
============== ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to financial statements
IDS Utilities Income Fund, Inc.
1
Summary of
significant
accounting policies
IDS Utilities Income Fund, Inc. is registered under the Investment Company
Act of 1940 (as amended) as a diversified, open-end management investment
company. The Fund has 10 billion authorized shares of capital stock. The
Fund invests primarily in securities of public utilities companies. The
Fund offers Class A, Class B and Class Y shares. Class A shares are sold
with a front-end sales charge. Class B shares may be subject to a
contingent deferred sales charge and such shares automatically convert to
Class A shares during the ninth calendar year of ownership. Class Y
shares, have no sales charge and are offered only to qualifying
institutional investors.
All classes of shares have identical voting, dividend, liquidation and
other rights, and the same terms and conditions, except that the level of
distribution fee, transfer agency fee and service fee (class specific
expenses) differs among classes. Income, expenses (other than class
specific expenses) and realized and unrealized gains or losses on
investments are allocated to each class of shares based upon its relative
net assets.
Significant accounting policies followed by the Fund are summarized below:
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of increase and decrease in
net assets from operations during the period. Actual results could differ
from those estimates.
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
deemed best to reflect fair value as quoted by dealers who make markets 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 maturing in more than 60 days from the valuation date are
valued at the market price or approximate market value based on current
interest rates; those maturing in 60 days or less are valued at amortized
cost.
Option transactions
In order to produce incremental earnings, protect gains, and facilitate
buying and selling of securities for investment purposes, the Fund may buy
and write options traded on any U.S. or foreign exchange or in the
over-the-counter market where the completion of the obligation is
dependent upon the credit standing of the other party. The Fund also may
buy and sell put and call options and write covered call options on the
portfolio securities and may write cash-secured put options. The risk in
writing a call option is that the Fund gives up the opportunity of 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 not being able to
enter into a closing transaction if a liquid secondary market does not
exist.
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 upon expiration or closing of the option
transaction. When an option is exercised, the proceeds on sales for a
written call option, the purchase cost for a written put option or the
cost of a security for a purchased put or call option is adjusted by the
amount of premium received or paid.
<PAGE>
Futures transactions
In order to gain exposure to or protect itself from changes in the market,
the Fund may buy and sell financial futures contracts traded on any U.S.
or foreign exchange. The Fund also may buy and write put and call options
on these contracts. Risks of entering into futures contracts and related
options include the possibility that there may be an illiquid market and
that a change in the value of the contract or option may not correlate
with changes in the value of the underlying securities.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin)
are made or received by the Fund each day. The variation margin payments
are equal to the daily changes in the contract value and are recorded as
unrealized gains and losses. The Fund recognizes a realized gain or loss
when the contract is closed or expires.
Foreign currency translations and
foreign currency contracts
Securities and other assets and liabilities denominated in foreign
currencies are translated daily into U.S. dollars at the closing rate of
exchange. Foreign currency amounts related to the purchase or sale of
securities and income and expenses are translated at the exchange rate on
the transaction date. The effect of changes in foreign exchange rates on
realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the statement of operations, net
realized gains or losses from foreign currency transactions may arise from
sales of foreign currency, closed forward contracts, exchange gains or
losses realized between the trade date and settlement dates on securities
transactions, and other translation gains or losses on dividend, interest
income and foreign withholding taxes.
The Fund 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 the obligations of
the contract.
Federal taxes
Since the Fund's policy is to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to shareholders, no provision for
income or excise taxes is required.
Net investment income (loss) and net realized gains (losses) may differ
for financial statement and tax purposes primarily because of the deferral
of losses on certain futures contracts, the recognition of certain foreign
currency gains (losses) as ordinary income (loss) for tax purposes, and
losses deferred due to "wash sale" transactions. 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) were recorded by the Fund.
On the statement of assets and liabilities, as a result of permanent
book-to-tax differences, undistributed net investment income has been
decreased by $10,500 and accumulated net realized gain has been increased
by $10,500.
Dividends to shareholders
Dividends from net investment income, declared and paid each calendar
quarter, are reinvested in additional shares of the Fund at net asset
value or payable in cash. Capital gains, when available, are distributed
along with the last income dividend of the calendar year.
Other
Security transactions are accounted for on the date securities are
purchased or sold. Dividend income is recognized on the ex-dividend date
and interest income, including level-yield amortization of premium and
discount, is accrued daily.
<PAGE>
2
Expenses and
sales charges
Effective March 20, 1995, the Fund entered into agreements with American
Express Financial Corporation (AEFC) for managing its portfolio and
providing administrative services. Under its Investment Management
Services Agreement, AEFC determines which securities will be purchased,
held or sold. The management fee is a percentage of the Fund's average
daily net assets in reducing percentages from 0.53% to 0.40% annually.
Under its Administrative Services Agreement, the Fund pays AEFC a fee for
administration and accounting services at a percentage of the Fund's
average daily net assets in reducing percentages from 0.04% to 0.02%
annually. Additional administrative service expenses paid by the Fund are
office expenses, consultants' fees and compensation of officers and
employees. Under this agreement, the Fund also pays taxes, audit and
certain legal fees, registration fees for shares, compensation of board
members, corporate filing fees, organizational expenses and any other
expenses properly payable by the Fund and approved by the board.
Under a separate Transfer Agency Agreement, American Express Client
Service Corporation (AECSC) maintains shareholder accounts and records.
The Fund pays AECSC an annual fee per shareholder account for this service
as follows:
oClass A $15
oClass B $16
oClass Y $15
Also effective March 20, 1995, the Fund entered into agreements with
American Express Financial Advisors Inc. for distribution and shareholder
servicing-related services. Under a Plan and Agreement of Distribution,
the Fund pays a distribution fee at an annual rate of 0.75% of the Fund's
average daily net assets attributable to Class B shares for
distribution-related services.
Under a Shareholder Service Agreement, the Fund pays a fee for service
provided to shareholders by financial advisors and other servicing agents.
The fee is calculated at a rate of 0.175% of the Fund's average daily net
assets attributable to Class A and Class B shares and 0.10% of the Fund's
average daily net assets attributable to Class Y shares.
Sales charges received by American Express Financial Advisors Inc. for
distributing Fund shares were $3,377,624 for Class A and $98,385 for Class
B for the year ended June 30, 1998. The Fund also pays custodian fees to
American Express Trust Company, an affiliate of AEFC.
During the year ended June 30, 1998, the Fund's custodian and transfer
agency fees were reduced by $116,680 as a result of earnings credits from
overnight cash balances.
3
Securities
transactions
Cost of purchases and proceeds from sales of securities (other than
short-term obligations) aggregated $921,229,510 and $796,170,278,
respectively, for the year ended June 30, 1998. Realized gains and losses
are determined on an identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC were $22,259
for the year ended June 30, 1998.
4
Foreign currency
contracts
At June 30, 1998, the Fund had entered into foreign currency exchange
contracts that obligate the Fund 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:
Exchange date Currency to Currency to Unrealized Unrealized
be delivered be received appreciation depreciation
July 2, 1998 1,000,366 599,165 $ 60 $--
U.S. Dollar British Pound
July 2, 1998 5,797,883 1,075,000,000 25,519 --
U.S. Dollar Portugese Escudo
Total $25,579 $--
<PAGE>
5
Lending of
portfolio securities
At June 30, 1998, securities valued at $14,212,632 were on loan to
brokers. For collateral, the Fund received $14,895,000 in cash. Income
from securities lending amounted to $326,946 for the year ended June 30,
1998. The risks to the Fund of securities lending are that the borrower
may not provide additional collateral when required or return the
securities when due.
6
Capital share
transactions
Transactions in shares of capital stock for the years indicated are as
follows:
Year ended June 30, 1998
Class A Class B Class Y
Sold 18,523,901 11,322,130 --
Issued for reinvested 12,750,754 1,914,883 556
distributions
Redeemed (14,979,351) (2,448,225) (30,749)
Net increase (decrease) 16,295,304 10,788,788 (30,193)
Year ended June 30, 1997
Class A Class B Class Y
Sold 11,329,257 6,300,553 14,614
Issued for reinvested 5,114,765 436,475 1,844
distributions
Redeemed (18,030,425) (1,600,502) (6,248)
Net increase (decrease) (1,586,403) 5,136,526 10,210
7
Financial
highlights
"Financial highlights" showing per share data and selected information is
presented on pages 6 and 7 of the prospectus.
<PAGE>
Investments in securities
IDS Utilities Income Fund, Inc.
June 30, 1998
(Percentages represent
value of investments
compared to net assets)
Common stocks (90.2%)
Issuer Shares Value(a)
Communications equipment & services (1.0%)
Lucent Technologies 75,000 $6,239,063
Tellabs 75,000(b) 5,371,875
Total 11,610,938
Computers & office equipment (1.1%)
Cisco Systems 70,000(b) 6,444,375
General Instrument 225,000(b) 6,117,188
Total 12,561,563
Energy (0.4%)
Exxon 75,000 5,348,438
Foreign -- utilities (9.8%)(c)
Alcatel Alsthom 25,000 5,090,395
BCE 700,000 29,881,250
British Telecommunications 500,000 6,157,000
Cable & Wireless
Communications 900,000(b) 9,114,030
Electricidade
de Portugal 250,000 5,815,275
Endesa ADR 370,000 8,094,897
Global TeleSystems Group 125,000(b,e) 6,093,750
Iberdrola 450,000(b) 7,306,830
Manitoba Telecom
Services 600,000 8,948,531
Telecom Italia 600,000(e) 4,418,760
Telefonica de Espana ADR 100,000 13,906,250
VEBA 150,000 10,095,675
Total 114,922,643
Miscellaneous (1.1%)
American Water Works 410,000 12,710,000
<PAGE>
Utilities -- electric (33.3%)
Baltimore Gas & Electric 200,000 6,212,500
Black Hills Corp 150,000 3,450,000
Carolina Power & Light 450,000 19,518,750
CMS Energy 450,000 19,800,000
Consolidated Edison 400,000 18,425,000
DPL 400,000 7,250,000
DQE 400,000 14,400,000
Duke Energy 400,000 23,700,000
Edison Intl 500,000 14,781,250
FirstEnergy 400,000 12,300,000
FPL Group 400,000 25,200,000
LG&E Energy 668,000 18,077,750
MDU Resources Group 350,000 12,490,625
Nevada Power 200,000 5,150,000
New Century Energies 450,000 20,446,875
New England
Electric System 250,000 10,812,500
NIPSCO Inds 800,000 22,400,000
Northern States Power 614,000 17,575,750
PECO Energy 300,000 $8,756,250
Pinnacle West Capital 500,000 22,500,000
Public Service
Enterprise Group 300,000 10,331,250
Sempra Energy 400,000(b) 11,100,000
Sierra Pacific Resources 400,000 14,525,000
SIGCORP 200,000 6,412,500
Teco Energy 700,000 18,768,750
Texas Utilities 300,000 12,487,500
Unicom 200,000 7,012,500
Western Resources 200,000 7,762,500
Total 391,647,250
Utilities -- gas (13.7%)
Coastal 325,000 22,689,062
Columbia Energy Group 375,000 20,859,375
El Paso Natural Gas 420,800 16,095,600
Energen 400,000 8,050,000
Enron 475,000 25,679,687
KN Energy 100,000 5,418,750
New Jersey Resources 350,000 12,490,625
NICOR 255,000 10,231,875
Northwest Natural Gas 212,500 5,943,359
ONEOK 275,000 10,965,625
Sonat 100,000 3,862,500
Washington Gas Light 350,000 9,362,500
WICOR 400,000 9,250,000
Total 160,898,958
Utilities -- telephone (29.8%)
AirTouch Communications 400,000(b) 23,375,000
Ameritech 900,000 40,387,500
AT&T 200,000 11,425,000
Bell Atlantic 400,000 18,250,000
BellSouth 700,000 46,987,500
Century Telephone
Enterprises 675,000 30,965,625
Cincinnati Bell 500,000 14,312,500
Frontier 400,000 12,600,000
GTE 675,000 37,546,875
Hyperion
Telecommunications Cl A 78,300 1,228,331
Intermedia
Communications 150,000(b,e) 6,290,625
SBC Communications 500,000 20,000,000
TELUS 400,000 10,395,787
US West Communications
Group 850,000 39,950,000
WorldCom 739,207(b) 35,805,339
Total 349,520,082
Total common stocks
(Cost: $848,592,934) $1,059,219,872
<PAGE>
Preferred stocks & other (2.3%)
Issuer Shares Value(a)
AirTouch Communications
6.00% Cv Series B 300,000 $14,475,000
Omnipoint
7.00% Cv 100,000 (b,f) 4,775,000
SBH-Cincinnati Bell
6.25% Cv 70,000 3,915,625
Sprint
8.25% Cv 76,975 4,411,630
Total preferred stocks & other
(Cost: $22,963,688) $27,577,255
Bonds (4.6%)
Issuer Coupon Principal Value(a)
rate amount
U.S. government obligation (0.7%)
U.S. Treasury
08-15-23 6.25% $7,500,000 $8,036,250
Mortgage-backed security (0.4%)
Federal Natl Mtge Assn
04-01-26 7.00 5,284,346 5,356,001
Domestic (2.7%)
Bell Atlantic Financial Services
Cv
04-01-03 5.75 7,000,000(f) 7,157,500
Bell Atlantic Pennsylvania
03-15-33 7.375 5,000,000 5,195,550
California Infrastructure
Southern California Edison
09-25-08 6.38 7,000,000 7,106,470
Tele-Communications
06-15-22 9.875 4,500,000 6,199,020
TU Electric Capital
Company Guaranty
01-30-37 8.175 6,000,000 6,297,240
Total 31,955,780
Foreign (0.8%)(c)
Hydro-Quebec
(U.S. Dollar) Local Govt Guaranty Series 1989HH
12-01-29 8.50 5,000,000 6,291,300
Trans-Canada Pipelines
(U.S. Dollar)
01-01-21 9.875 2,000,000 2,726,520
Total 9,017,820
Total bonds
(Cost: $49,586,634) $54,365,851
<PAGE>
Short-term securities (3.7%)
Issuer Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
U.S. government agency (0.8%)
Federal Home Loan Mtge Corp Disc Nts
07-06-98 5.45% $2,900,000 $2,897,813
07-08-98 5.45 2,300,000 2,297,572
07-24-98 5.50 4,400,000 4,384,595
Total 9,579,980
Commercial paper (2.9%)
ABB Treasury Center USA
07-08-98 5.52 6,100,000(d) 6,093,476
Alabama Power
07-13-98 5.56 4,800,000 4,791,120
BellSouth Capital Funding
07-15-98 5.55 4,200,000(d) 4,190,951
Commerzbank U.S. Finance
07-22-98 5.56 1,800,000 1,794,183
Deutsche Bank Financial
07-07-98 5.54 600,000 599,448
Fleet Funding
07-20-98 5.55 1,200,000(d) 1,196,504
Intl Lease Finance
07-07-98 5.54 1,000,000 999,078
Natl Australia Funding (Delaware)
07-09-98 5.52 1,600,000 1,598,045
Paccar Financial
07-02-98 5.54 600,000 599,908
07-21-98 5.55 5,100,000 5,084,332
SmithKline Beecham
07-15-98 5.55 6,500,000 6,486,021
Total 33,433,066
Total short-term securities
(Cost: $43,013,046) $43,013,046
Total investments in securities
(Cost: $964,156,302)(g) $1,184,176,024
See accompanying notes to investments in securities.
<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. For debt securities,
principal amounts are denominated in the currency indicated.
(d) Commercial paper sold within terms of a private placement memorandum, exempt
from registration under Section 4(2) of the Securities Act of 1933, as amended,
and may be sold only to dealers in that program or other "accredited investors."
This security has been determined to be liquid under guidelines established by
the board.
(e) Security is partially or fully on loan. See Note 5 to the financial
statements.
(f) 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.
(g) At June 30, 1998, the cost of securities for federal income tax purposes was
$964,151,582 and the aggregate gross unrealized appreciation and depreciation
based on that cost was:
Unrealized appreciation.........................................$226,794,400
Unrealized depreciation...........................................(6,769,958)
Net unrealized appreciation.....................................$220,024,442
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) List of financial statements filed as part of this Post-Effective
Amendment to the Registration Statement:
- Independent Auditors' Report dated August 7, 1998 - Statement of
Assets and Liabilities, June 30, 1998 - Statement of Operations,
Year ended June 30, 1998
- Statements of Changes in Net Assets, for the two-year period ended
June 30, 1998 and June 30, 1997
- Notes to Financial Statements
- Investments in Securities, June 30, 1998
- Notes to Investments in Securities
(b) EXHIBITS:
1. Articles of Incorporation, as amended November 14, 1991, is
filed electronically herewith.
2. By-laws as amended January 12, 1989, is filed electronically herewith.
3. Not Applicable.
4. Copy of Stock Certificate for common stock, filed as Exhibit 4 on Form
SE on June 28, 1988, to Registrant's Pre-Effective Amendment No.
1 to Registration Statement No. 33-20872, is incorporated herein
by reference.
5. Copy of Investment Management and Services Agreement between
Registrant and American Express Financial Corporation, dated
March 20, 1995, filed electronically as Exhibit 5 to Registrant's
Post-Effective Amendment No. 18 to Registration Statement No.
33-20872, is incorporated herein by reference.
6. Copy of Distribution Agreement between Registrant and American Express
Financial Advisors Inc., dated March 20, 1995, filed electronically as
Exhibit 6 to Registrant's Post-Effective Amendment No. 18 to
Registration Statement No. 33-20872, is incorporated herein by
reference.
7. All employees are eligible to participate in a profit sharing plan.
Entry into the plan is Jan. 1 or July 1. The Registrant contributes
each year an amount up to 15 percent of their annual salaries, the
maximum deductible amount permitted under Section 404(a) of the
Internal Revenue Code.
8(a). Copy of Custodian Agreement between Registrant and American Express
Trust Company, dated March 20, 1995, filed electronically as Exhibit
8(a) to Registrant's Post-Effective Amendment No. 18 to Registration
Statement No. 33-20872, is incorporated herein by reference.
<PAGE>
8(b). Copy of Custody Agreement between Morgan Stanley Trust Company and IDS
Bank and Trust dated May, 1993, filed electronically as Exhibit 8(b) to
Registrant's Post-Effective Amendment No. 18 to Registration Statement
No. 33-20872, is incorporated herein by reference.
8(c). Copy of Custodian Agreement Amendment between IDS International Fund,
Inc. and American Express Trust Company, dated October 9, 1997, filed
electronically on or about December 23, 1997 as Exhibit 8(c) to IDS
International Fund, Inc.'s Post-Effective Amendment No. 26 to
Registration Statement No. 2-92309, is incorporated herein by
reference. Registrant's Custodian Agreement Amendment differs from the
one incorporated by reference only by the fact that Registrant is one
executing party.
9(a). Copy of Transfer Agency Agreement between Registrant and American
Express Client Service Corporation, dated January 1, 1998, is filed
electronically herewith.
9(b). Copy of License Agreement between Registrant and IDS Financial
Corporation, dated June 15, 1992, filed as Exhibit 9(b) to Registrant's
Post-Effective Amendment No. 6 to Registration Statement No. 33-20872,
is incorporated herein by reference.
9(c). Copy of Shareholder Service Agreement between Registrant and American
Express Advisors Inc., dated March 20, 1995, filed electronically as
Exhibit 9(c) to Registrant's Post-Effective Amendment No. 18 to
Registration Statement No. 33-20872, is incorporated herein by
reference.
9(d). Copy of Administrative Services Agreement between Registrant and
American Express Financial Corporation, dated March 20, 1995, filed
electronically as Exhibit 9(d) to Registrant's Post-Effective Amendment
No. 18 to Registration Statement No. 33-20872, is incorporated herein
by reference.
9(e) Copy of the Class Y Shareholder Service Agreement between IDS Precious
Metals Fund, Inc. and American Express Financial Advisors Inc., dated
May 9, 1997 filed electronically on or about May 27, as Exhibit 9(e) to
IDS Precious Metals Fund, Inc.'s Amendment No. 30 to Registration
Statement No. 2-93745, is incorporated herein by reference.
Registrant's Class Y Shareholder Service Agreement differs from the one
incorporated by reference only by the fact that Registrant is one
executing party.
10. Opinion and consent of counsel as to the legality of the securities
being registered is filed electronically herewith.
11. Independent Auditors' Consent is filed electronically herewith.
12. None.
13. Copy of Agreement made in consideration for providing initial capital,
between Registrant and IDS Financial Corporation filed as Exhibit 13 to
Registration Statement No. 33-20872, is incorporated herein by
reference.
<PAGE>
14. Forms of Keogh, IRA and other retirement plans, filed as Exhibits
14(a) through 14(n) to IDS Growth Fund, Inc., Post-Effective
Amendment No. 34 to Registration Statement No. 2-38355 on Sept.
8, 1986, are incorporated herein by reference.
15. Copy of Plan and Agreement of Distribution between Registrant and
American Express Financial Advisors Inc., dated March 20, 1995, filed
electronically as Exhibit 15 to Registrant's Post-Effective Amendment
No. 18 to Registration Statement No. 33-20872, is incorporated herein
by reference.
16. Copy of schedule for computation of each performance quotation provided
in the Registration Statement in response to Item 22(b), filed as
Exhibit 16 to Registrant's Post-Effective Amendment No. 7 to
Registration Statement No. 33-20872, is incorporated herein by
reference.
17. Financial Data Schedules are filed electronically herewith.
18. Copy of 18f-3 Plan dated May 9, 1997, filed electronically on or about
January 27, 1998 as Exhibit 18 to IDS Equity Select Fund, Inc.'s
Post-Effective Amendment No. 86 to Registration Statement No. 2-13188,
is incorporated herein by reference.
19(a). Directors' Power of Attorney dated January 7, 1998, to sign Amendments
to this Registration Statement, is filed electronically herewith.
19(b). Officers' Power of Attorney to sign Amendments to this Registration
Statement dated November 1, 1995, filed electronically as Exhibit 19(b)
to Registrant's Post-Effective Amendment No. 17, is incorporated herein
by reference.
Item 25. Persons Controlled by or Under Common Control with Registrant.
None.
Item 26. Number of Holders of Securities
(1) (2)
Number of Record
Holders as of
Title of Class August 21, 1998
Class A 60,097
Class B 17,896
Class Y 1
<PAGE>
Item 27. Indemnification
The Articles of Incorporation of the registrant provide that the Fund shall
indemnify any person who was or is a party or is threatened to be made a party,
by reason of the fact that she or he is or was a director, officer, employee or
agent of the Fund, or is or was serving at the request of the Fund as a
director, officer, employee or agent of another company, partnership, joint
venture, trust or other enterprise, to any threatened, pending or completed
action, suit or proceeding, wherever brought, and the Fund may purchase
liability insurance and advance legal expenses, all to the fullest extent
permitted by the laws of the State of Minnesota, as now existing or hereafter
amended. The By-laws of the registrant provide that present or former directors
or officers of the Fund made or threatened to be made a party to or involved
(including as a witness) in an actual or threatened action, suit or proceeding
shall be indemnified by the Fund to the full extent authorized by the Minnesota
Business Corporation Act, all as more fully set forth in the By-laws filed as an
exhibit to this registration statement.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Any indemnification hereunder shall not be exclusive of any other rights of
indemnification to which the directors, officers, employees or agents might
otherwise be entitled. No indemnification shall be made in violation of the
Investment Company Act of 1940.
<TABLE>
<CAPTION>
Item 28. Business and Other Connections of Investment Adviser (American Express Financial Corporation)
Directors and officers of American Express Financial Corporation who are directors and/or officers of one or more
other companies:
<S> <C> <C> <C>
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Name and Title Other company(s) Address Title within other
company(s)
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Ronald G. Abrahamson, American Express Client IDS Tower 10 Director and Vice President
Vice President Service Corporation Minneapolis, MN 55440
American Express Financial Vice President
Advisors Inc.
North Dakota Public Director and Vice President
Employee Payment Company
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Douglas A. Alger, American Express Financial IDS Tower 10 Senior Vice President
Senior Vice President Advisors Inc. Minneapolis, MN 55440
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Peter J. Anderson, Advisory Capital Strategies IDS Tower 10 Director
Director and Senior Vice Group Inc. Minneapolis, MN 55440
President
American Express Asset Director and Chairman of
Management Group Inc. the Board
American Express Asset Director, Chairman of the
Management International, Board and Executive Vice
Inc. President
American Express Financial Senior Vice President
Advisors Inc.
IDS Capital Holdings Inc. Director and President
IDS Futures Corporation Director
NCM Capital Management 2 Mutual Plaza Director
Group, Inc. 501 Willard Street
Durham, NC 27701
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Ward D. Armstrong, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
American Express Service Vice President
Corporation
American Express Trust Director and Chairman of
Company the Board
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
John M. Baker, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
American Express Trust Senior Vice President
Company
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Joseph M. Barsky III, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Timothy V. Bechtold, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
IDS Life Insurance Company Executive Vice President
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
John C. Boeder, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
IDS Life Insurance Company Box 5144 Director
of New York Albany, NY 12205
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Douglas W. Brewers, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Karl J. Breyer, American Express Financial IDS Tower 10 Senior Vice President
Director, Senior Vice Advisors Inc. Minneapolis, MN 55440
President
American Express Minnesota Director
Foundation
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Daniel J. Candura, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Cynthia M. Carlson, American Enterprise IDS Tower 10 Director, President and
Vice President Investment Services Inc. Minneapolis, MN 55440 Chief Executive Officer
American Express Financial Vice President
Advisors Inc.
American Express Service Vice President
Corporation
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Mark W. Carter, American Express Financial IDS Tower 10 Senior Vice President and
Senior Vice President and Advisors Inc. Minneapolis, MN 55440 Chief Marketing Officer
Chief Marketing Officer
IDS Life Insurance Company Executive Vice President
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
James E. Choat, American Enterprise Life IDS Tower 10 Director, President and
Senior Vice President Insurance Company Minneapolis, MN 55440 Chief Executive Officer
American Express Financial Senior Vice President
Advisors Inc.
American Express Insurance Vice President
Agency of Idaho Inc.
American Express Insurance Vice President
Agency of Nevada Inc.
American Express Insurance Vice President
Agency of Oregon Inc.
American Express Property Vice President
Casualty Insurance Agency
of Kentucky Inc.
American Express Property Vice President
Casualty Insurance Agency
of Maryland Inc.
American Express Property Vice President
Casualty Insurance Agency
of Pennsylvania Inc.
IDS Insurance Agency of Vice President
Alabama Inc.
IDS Insurance Agency of Vice President
Arkansas Inc.
IDS Insurance Agency of Vice President
Massachusetts Inc.
IDS Insurance Agency of New Vice President
Mexico Inc.
IDS Insurance Agency of Vice President
North Carolina Inc.
IDS Insurance Agency of Vice President
Ohio Inc.
IDS Insurance Agency of Vice President
Wyoming Inc.
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Kenneth J. Ciak, AMEX Assurance Company IDS Tower 10 Director and President
Vice President and General Minneapolis, MN 55440
Manager
American Express Financial Vice President and General
Advisors Inc. Manager
IDS Property Casualty 1 WEG Blvd. Director and President
Insurance Company DePere, WI 54115
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Paul A. Connolly, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Colleen Curran, American Express Financial IDS Tower 10 Vice President and
Vice President and Advisors Inc. Minneapolis, MN 55440 Assistant General Counsel
Assistant General Counsel
American Express Service Vice President and Chief
Corporation Legal Counsel
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Regenia David, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Luz Maria Davis American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Gordon L. Eid, American Express Financial IDS Tower 10 Senior Vice President,
Director, Senior Vice Advisors Inc. Minneapolis, MN 55440 General Counsel and Chief
President, Deputy General Compliance Officer
Counsel and Chief
Compliance Officer
American Express Insurance Director and Vice President
Agency of Arizona Inc.
American Express Insurance Director and Vice President
Agency of Idaho Inc.
American Express Insurance Director and Vice President
Agency of Nevada Inc.
American Express Insurance Director and Vice President
Agency of Oregon Inc.
American Express Property Director and Vice President
Casualty Insurance Agency
of Kentucky Inc.
American Express Property Director and Vice President
Casualty Insurance Agency
of Maryland Inc.
American Express Property Director and Vice President
Casualty Insurance Agency
of Pennsylvania Inc.
IDS Insurance Agency of Director and Vice President
Alabama Inc.
IDS Insurance Agency of Director and Vice President
Arkansas Inc.
IDS Insurance Agency of Director and Vice President
Massachusetts Inc.
IDS Insurance Agency of New Director and Vice President
Mexico Inc.
IDS Insurance Agency of Director and Vice President
North Carolina Inc.
IDS Insurance Agency of Director and Vice President
Ohio Inc.
IDS Insurance Agency of Director and Vice President
Wyoming Inc.
IDS Real Estate Services, Vice President
Inc.
Investors Syndicate Director
Development Corp.
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Robert M. Elconin, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
IDS Life Insurance Company Vice President
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Gordon M. Fines, American Express Asset IDS Tower 10 Executive Vice President
Vice President Management Group Inc. Minneapolis, MN 55440
American Express Financial Vice President
Advisors Inc.
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Douglas L. Forsberg, American Centurion Life IDS Tower 10 Director
Vice President Assurance Company Minneapolis, MN 55440
American Express Financial Vice President
Advisors Inc.
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Jeffrey P. Fox, American Enterprise Life IDS Tower 10 Vice President and
Vice President and Insurance Company Minneapolis, MN 55440 Controller
Corporate Controller
American Express Financial Vice President and
Advisors Inc. Corporate Controller
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Harvey Golub, American Express Company American Express Tower Chairman and Chief
Director World Financial Center Executive Officer
New York, NY 10285
American Express Travel Chairman and Chief
Related Services Company, Executive Officer
Inc.
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
David A. Hammer, American Express Financial IDS Tower 10 Vice President and
Vice President and Advisors Inc. Minneapolis, MN 55440 Marketing Controller
Marketing Controller
IDS Plan Services of Director and Vice President
California, Inc.
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Lorraine R. Hart, AMEX Assurance Company IDS Tower 10 Vice President
Vice President Minneapolis, MN 55440
American Enterprise Life Vice President
Insurance Company
American Express Financial Vice President
Advisors Inc.
American Partners Life Director and Vice
Insurance Company President
IDS Certificate Company Vice President
IDS Life Insurance 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 Investment Officer
of New York Albany, NY 12205
IDS Property Casualty 1 WEG Blvd. Vice President
Insurance Company DePere, WI 54115
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Scott A. Hawkinson, American Centurion Life IDS Tower 10 Chief Actuary
Vice President Assurance Company Minneapolis, MN 55440
American Express Financial Vice President
Advisors Inc.
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Janis K. Heaney, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
James G. Hirsh, American Express Financial IDS Tower 10 Vice President and
Vice President and Advisors Inc. Minneapolis, MN 55440 Assistant General Counsel
Assistant General Counsel
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Darryl G. Horsman, American Express Trust IDS Tower 10 Director and President
Vice President Company Minneapolis, MN 55440
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Jeffrey S. Horton, AMEX Assurance Company IDS Tower 10 Vice President, Treasurer
Vice President and Minneapolis, MN 55440 and Assistant Secretary
Corporate Treasurer
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 Corporation Vice President and
Treasurer
American Express Financial Vice President and
Advisors Inc. 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 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 Express Partners Vice President and
Life 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 New Vice President and
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 Vice President, Treasurer
and Assistant Secretary
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
IDS Securities Corporation Vice President and
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
North Dakota Public Vice President and
Employee Payment Company Treasurer
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
David R. Hubers, AMEX Assurance Company IDS Tower 10 Director
Director, President and Minneapolis, MN 55440
Chief Executive Officer
American Express Financial Chairman, President and
Advisors Inc. Chief Executive Officer
American Express Service Director and President
Corporation
IDS Certificate Company Director
IDS Life Insurance Company Director
IDS Plan Services of Director and President
California, Inc.
IDS Property Casualty 1 WEG Blvd. Director
Insurance Company DePere, WI 54115
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Martin G. Hurwitz, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
James M. Jensen, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
IDS Life Insurance Company Vice President
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Marietta L. Johns, American Express Financial IDS Tower 10 Senior Vice President
Director and Senior Vice Advisors Inc. Minneapolis, MN 55440
President
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Nancy E. Jones, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
American Express Service Vice President
Corporation
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
James E. Kaarre, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Matthew N. Karstetter, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Linda B. Keene, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
G. Michael Kennedy, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Susan D. Kinder, American Express Financial IDS Tower 10 Senior Vice President
Director and Senior Vice Advisors Inc. Minneapolis, MN 55440
President
IDS Securities Corporation Director
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Brian C. Kleinberg, American Enterprise IDS Tower 10 Senior Vice President
Executive Vice President Investment Services Inc. Minneapolis, MN 55440
American Express Financial Executive Vice President
Advisors Inc.
American Express Service Director
Corporation
AMEX Assurance Company Director and Chairman of
the Board
American Partners Life Executive Vice President
Insurance Company
IDS Property Casualty 1 WEG Blvd. Director and Chairman of
Insurance Company DePere, WI 54115 the Board
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Richard W. Kling, AMEX Assurance Company IDS Tower 10 Director
Director and Senior Vice Minneapolis, MN 55440
President
American Centurion Life Director
Assurance Company
American Enterprise Life Director and Chairman of
Insurance Company the Board
American Express Corporation Director and President
American Express Financial Senior Vice President
Advisors Inc.
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 New Director and President
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 Insurance Company Director and President
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, Chairman of the
of New York Albany, NY 12205 Board and President
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Paul F. Kolkman, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
IDS Life Insurance Company Director and Executive
Vice President
IDS Life Series Fund, Inc. Vice President and Chief
Actuary
IDS Property Casualty 1 WEG Blvd. Director
Insurance Company DePere, WI 54115
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Claire Kolmodin, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Steve C. Kumagai, American Express Financial IDS Tower 10 Director and Senior Vice
Director and Senior Vice Advisors Inc. Minneapolis, MN 55440 President
President
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Edward Labenski, Jr., American Express Asset IDS Tower 10 Senior Vice President
Vice President Management Group Inc. Minneapolis, MN 55440
American Express Financial Vice President
Advisors Inc.
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Kurt A Larson, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Lori J. Larson, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
IDS Futures Corporation Director
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Daniel E. Laufenberg, American Express Financial IDS Tower 10 Vice President and Chief
Vice President and Chief Advisors Inc. Minneapolis, MN 55440 U.S. Economist
U.S. Economist
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Peter A. Lefferts, American Express Financial IDS Tower 10 Senior Vice President
Director and Senior Vice Advisors Inc. Minneapolis, MN 55440
President
American Express Trust Director
Company
IDS Plan Services of Director
California, Inc.
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Douglas A. Lennick, American Express Financial IDS Tower 10 Director and Executive
Director and Executive Vice Advisors Inc. Minneapolis, MN 55440 Vice President
President
IDS Securities Corporation Director, President and
Chief Executive Officer
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Mary J. Malevich, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Fred A. Mandell, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Thomas W. Medcalf, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Paula R. Meyer, American Enterprise Life IDS Tower 10 Vice President
Vice President Insurance Company Minneapolis, MN 55440
American Express Financial Vice President
Advisors Inc.
American Partners Life Director and President
Insurance Company
IDS Certificate Company Director and President
IDS Life Insurance Company Director and Executive
Vice President
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
James A. Mitchell, AMEX Assurance Company IDS Tower 10 Director
Director and Executive Vice Minneapolis, MN 55440
President
American Enterprise Director
Investment Services Inc.
American Express Financial Executive Vice President
Advisors Inc.
American Express Service Director and Senior Vice
Corporation President
American Express Tax and Director
Business Services Inc.
IDS Certificate Company Director
IDS Life Insurance Company Director, Chairman of the
Board and Chief Executive
Officer
IDS Plan Services of Director
California, Inc.
IDS Property Casualty 1 WEG Blvd. Director
Insurance Company DePere, WI 54115
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
William P. Miller, Advisory Capital Strategies IDS Tower 10 Vice President
Vice President and Senior Group Inc. Minneapolis, MN 55440
Portfolio Manager
American Express Asset Senior Vice President
Management Group Inc.
American Express Financial Vice President and Senior
Advisors Inc. Portfolio Manager
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Pamela J. Moret, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
American Express Trust Vice President
Company
IDS Life Insurance Company Executive Vice President
IDS Life Insurance Company P.O. Box 5144 Vice President
of New York Albany, NY 12205
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Barry J. Murphy, American Express Client IDS Tower 10 Director and President
Director and Senior Vice Service Corporation Minneapolis, MN 55440
President
American Express Financial Senior Vice President
Advisors Inc.
IDS Life Insurance Company Director and Executive
Vice President
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Mary Owens Neal, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Michael J. O'Keefe, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
James R. Palmer, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
IDS Life Insurance Company Vice President
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Carla P. Pavone, American Express Client IDS Tower 10 Director and Vice President
Vice President Service Corporation Minneapolis, MN 55440
American Express Financial Vice President
Advisors Inc.
North Dakota Public Director and President
Employee Payment Company
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Thomas P. Perrine, American Express Financial IDS Tower 10 Senior Vice President
Senior Vice President Advisors Inc. Minneapolis, MN 55440
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Susan B. Plimpton, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Ronald W. Powell, American Express Financial IDS Tower 10 Vice President and
Vice President and Advisors Inc. Minneapolis, MN 55440 Assistant General Counsel
Assistant General Counsel
IDS Cable Corporation Vice President and
Assistant Secretary
IDS Cable II Corporation Vice President and
Assistant Secretary
IDS Management Corporation Vice President and
Assistant Secretary
IDS Partnership Services Vice President and
Corporation Assistant Secretary
IDS Plan Services of Vice President and
California, Inc. Assistant Secretary
IDS Realty Corporation Vice President and
Assistant Secretary
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
James M. Punch, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Frederick C. Quirsfeld, American Express Asset IDS Tower 10 Vice President
Senior Vice President Management Group Inc. Minneapolis, MN 55440
American Express Financial Senior Vice President
Advisors Inc.
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
ReBecca K. Roloff, American Express Financial IDS Tower 10 Senior Vice President
Senior Vice President Advisors Inc. Minneapolis, MN 55440
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Stephen W. Roszell, Advisory Capital Strategies IDS Tower 10 Director
Senior Vice President Group Inc. Minneapolis, MN 55440
American Express Asset Director, President and
Management Group Inc. Chief Executive Officer
American Express Asset Director
Management International,
Inc.
American Express Asset Director
Management Ltd.
American Express Financial Senior Vice President
Advisors Inc.
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
John P. Ryan, American Express Financial IDS Tower 10 Vice President and General
Vice President and General Advisors Inc. Minneapolis, MN 55440 Auditor
Auditor
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Erven A. Samsel, American Express Financial IDS Tower 10 Senior Vice President
Director and Senior Vice Advisors Inc. Minneapolis, MN 55440
President
American Express Insurance Vice President
Agency of Idaho Inc.
American Express Insurance Vice President
Agency of Nevada Inc.
American Express Insurance Vice President
Agency of Oregon Inc.
American Express Property Vice President
Casualty Insurance Agency
of Kentucky Inc.
American Express Property Vice President
Casualty Insurance Agency
of Maryland Inc.
American Express Property Vice President
Casualty Insurance Agency
of Pennsylvania Inc.
IDS Insurance Agency of Vice President
Alabama Inc.
IDS Insurance Agency of Vice President
Arkansas Inc.
IDS Insurance Agency of Vice President
Massachusetts Inc.
IDS Insurance Agency of New Vice President
Mexico Inc.
IDS Insurance Agency of Vice President
North Carolina Inc.
IDS Insurance Agency of Vice President
Ohio Inc.
IDS Insurance Agency of Vice President
Wyoming Inc.
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Stuart A. Sedlacek, American Centurion Life IDS Tower 10 Director, Chairman and
Senior Vice President and Assurance Company Minneapolis, MN 55440 President
Chief Financial Officer
American Enterprise Life Executive Vice President
Insurance Company
American Express Financial Senior Vice President and
Advisors Inc. Chief Financial Officer
American Express Trust Director
Company
American Partners Life Director and Vice President
Insurance Agency
IDS Certificate Company Director and President
IDS Life Insurance Company Executive Vice President
and Controller
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Donald K. Shanks, AMEX Assurance Company IDS Tower 10 Senior Vice President
Vice President Minneapolis, MN 55440
American Express Financial Vice President
Advisors Inc.
IDS Property Casualty 1 WEG Blvd. Senior Vice President
Insurance Company DePere, WI 54115
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
F. Dale Simmons, AMEX Assurance Company IDS Tower 10 Vice President
Vice President Minneapolis, MN 55440
American Enterprise Life Vice President
Insurance
American Express Financial Vice President
Advisors Inc.
American Partners Life Vice President
Insurance Company
IDS Certificate Company Vice President
IDS Life Insurance 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 Box 5144 Vice President and
of New York Albany, NY 12205 Assistant Treasurer
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Judy P. Skoglund, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
William A. Smith, American Express Financial IDS Tower 10 Vice President and
Vice President and Advisors Inc. Minneapolis, MN 55440 Controller
Controller
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Bridget Sperl, American Express Client IDS Tower 10 Vice President
Vice President Service Corporation Minneapolis, MN 55440
American Express Financial Vice President
Advisors Inc.
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Lisa A. Steffes, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
William A. Stoltzmann, American Enterprise Life IDS Tower 10 Director, Vice President,
Vice President and Insurance Company Minneapolis, MN 55440 General Counsel and
Assistant General Counsel Secretary
American Express Corporation Director, Vice President
and Secretary
American Express Financial Vice President and
Advisors Inc. 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
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
James J. Strauss, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Jeffrey J. Stremcha, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Barbara Stroup Stewart, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Wesley W. Wadman, American Express Asset IDS Tower 10 Executive Vice President
Vice President Management Group Inc. Minneapolis, MN 55440
American Express Asset Director and Senior Vice
Management International, President
Inc.
American Express Asset Director and Vice Chairman
Management Ltd.
American Express Financial Vice President
Advisors Inc.
IDS Fund Management Limited Director and Vice Chairman
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Norman Weaver Jr., American Express Financial IDS Tower 10 Senior Vice President
Director and Senior Vice Advisors Inc. Minneapolis, MN 55440
President
American Express Insurance Vice President
Agency of Arizona Inc.
American Express Insurance Vice President
Agency of Idaho Inc.
American Express Insurance Vice President
Agency of Nevada Inc.
American Express Insurance Vice President
Agency of Oregon Inc.
American Express Property Vice President
Casualty Insurance Agency
of Kentucky Inc.
American Express Property Vice President
Casualty Insurance Agency
of Maryland Inc.
American Express Property Vice President
Casualty Insurance Agency
of Pennsylvania Inc.
IDS Insurance Agency of Vice President
Alabama Inc.
IDS Insurance Agency of Vice President
Arkansas Inc.
IDS Insurance Agency of Vice President
Massachusetts Inc.
IDS Insurance Agency of New Vice President
Mexico Inc.
IDS Insurance Agency of Vice President
North Carolina Inc.
IDS Insurance Agency of Vice President
Ohio Inc.
IDS Insurance Agency of Vice President
Wyoming Inc.
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Michael L. Weiner, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
IDS Capital Holdings Inc. Vice President
IDS Futures Brokerage Group Vice President
IDS Futures Corporation Vice President, Treasurer
and Secretary
IDS Sales Support Inc. Director, Vice President
and Assistant Treasurer
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Lawrence J. Welte, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Jeffrey F. Welter, American Express Financial IDS Tower 10 Vice President
Vice President Advisors Inc. Minneapolis, MN 55440
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Edwin M. Wistrand, American Express Financial IDS Tower 10 Vice President and
Vice President and Advisors Inc. Minneapolis, MN 55440 Assistant General Counsel
Assistant General Counsel
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Michael D. Wolf, American Express Asset IDS Tower 10 Executive Vice President
Vice President Management Group Inc. Minneapolis, MN 55440
American Express Financial Vice President
Advisors Inc.
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Michael R. Woodward, American Express Financial IDS Tower 10 Senior Vice President
Director and Senior Vice Advisors Inc. Minneapolis, MN 55440
President
American Express Insurance Vice President
Agency of Idaho Inc.
American Express Insurance Vice President
Agency of Nevada Inc.
American Express Insurance Vice President
Agency of Oregon Inc.
American Express Property Vice President
Casualty Insurance Agency
of Kentucky Inc.
American Express Property Vice President
Casualty Insurance Agency
of Maryland Inc.
American Express Property Vice President
Casualty Insurance Agency
of Pennsylvania Inc.
IDS Insurance Agency of Vice President
Alabama Inc.
IDS Insurance Agency of Vice President
Arkansas Inc.
IDS Insurance Agency of Vice President
Massachusetts Inc.
IDS Insurance Agency of New Vice President
Mexico Inc.
IDS Insurance Agency of Vice President
North Carolina Inc.
IDS Insurance Agency of Vice President
Ohio Inc.
IDS Insurance Agency of Vice President
Wyoming Inc.
IDS Life Insurance Company Box 5144 Director
of New York Albany, NY 12205
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
</TABLE>
<TABLE>
<CAPTION>
Item 29. Principal Underwriters.
(a) American Express Financial Advisors acts as principal underwriter for the following investment
companies:
IDS Bond Fund, Inc.; IDS California Tax-Exempt Trust; IDS Discovery Fund, Inc.; IDS Equity
Select Fund, Inc.; IDS Extra Income Fund, Inc.; IDS Federal Income Fund, Inc.; IDS Global
Series, Inc.; IDS Growth Fund, Inc.; IDS High Yield Tax-Exempt Fund, Inc.; IDS International
Fund, Inc.; IDS Investment Series, Inc.; IDS Managed Retirement Fund, Inc.; IDS Market
Advantage Series, Inc.; IDS Money Market Series, Inc.; IDS New Dimensions Fund, Inc.; IDS
Precious Metals Fund, Inc.; IDS Progressive Fund, Inc.; IDS Selective Fund, Inc.; IDS Special
Tax-Exempt Series Trust; IDS Stock Fund, Inc.; IDS Strategy Fund, Inc.; IDS Tax-Exempt Bond
Fund, Inc.; IDS Tax-Free Money Fund, Inc.; IDS Utilities Income Fund, Inc., Growth Trust;
Growth and Income Trust; Income Trust, Tax-Free Income Trust, World Trust and IDS Certificate
Company.
(b) As to each director, officer or partner of the principal underwriter:
<S> <C> <C>
Name and Principal Business Address Position and Offices with Offices with Registrant
Underwriter
- --------------------------------------------- --------------------------------- --------------------------
Ronald G. Abrahamson Vice President-Service Quality None
IDS Tower 10 and Reengineering
Minneapolis, MN 55440
Douglas A. Alger Senior Vice President-Human None
IDS Tower 10 Resources
Minneapolis, MN 55440
Peter J. Anderson Senior Vice Vice President
IDS Tower 10 President-Investment Operations
Minneapolis, MN 55440
Ward D. Armstrong Vice President-American None
IDS Tower 10 Express, Institutional Services
Minneapolis, MN 55440
John M. Baker Vice President-Plan Sponsor None
IDS Tower 10 Services
Minneapolis, MN 55440
Joseph M. Barsky III Vice President-Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
Timothy V. Bechtold Vice President-Risk Management None
IDS Tower 10 Products
Minneapolis, MN 55440
John D. Begley Group Vice None
Suite 100 President-Ohio/Indiana
7760 Olentangy River Rd.
Columbus, OH 43235
Brent L. Bisson Group Vice President-Los None
Suite 900, E. Westside Twr Angeles Metro
11835 West Olympic Blvd.
Los Angeles, CA 90064
John C. Boeder Vice President-Mature Market None
IDS Tower 10 Group
Minneapolis, MN 55440
Walter K. Booker Group Vice President-New Jersey None
Suite 200, 3500 Market Street
Camp Hill, NJ 17011
Bruce J. Bordelon Group Vice President-Gulf States None
Galleria One Suite 1900
Galleria Blvd.
Metairie, LA 70001
Charles R. Branch Group Vice President-Northwest None
Suite 200
West 111 North River Dr.
Spokane, WA 99201
Douglas W. Brewers Vice President-Sales Support None
IDS Tower 10
Minneapolis, MN 55440
Karl J. Breyer Senior Vice President-Law and None
IDS Tower 10 Corporate
Minneapolis, MN 55440 Affairs
Daniel J. Candura Vice President-Marketing Support None
IDS Tower 10
Minneapolis, MN 55440
Cynthia M. Carlson Vice President-American Express None
IDS Tower 10 Securities Services
Minneapolis, MN 55440
Mark W. Carter Senior Vice President and Chief None
IDS Tower 10 Marketing Officer
Minneapolis, MN 55440
James E. Choat Senior Vice None
IDS Tower 10 President-Institutional
Minneapolis, MN 55440 Products Group
Kenneth J. Ciak Vice President and General None
IDS Property Casualty Manager-IDS Property Casualty
1400 Lombardi Avenue
Green Bay, WI 54304
Paul A. Connolly Vice President - Advisor None
IDS Tower 10 Staffing, Training and Support
Minneapolis, MN 55440
Roger C. Corea Group Vice President-Upstate None
290 Woodcliff Drive New York
Fairport, NY 14450
Henry J. Cormier Group Vice President-Connecticut None
Commerce Center One
333 East River Drive
East Hartford, CT 06108
John M. Crawford Group Vice President-Arkansas / None
Suite 200 Springfield / Memphis
10800 Financial Ctr Pkwy
Little Rock, AR 72211
Kevin F. Crowe Group Vice None
Suite 312 President-Carolinas/Eastern
7300 Carmel Executive Pk Georgia
Charlotte, NC 28226
Colleen Curran Vice President and assistant None
IDS Tower 10 General Counsel
Minneapolis, MN 55440
Reginia David Vice President-Systems Services None
IDS Tower 10
Minneapolis, MN 55440
Luz Maria Davis Vice President-Communications None
IDS Tower 10
Minneapolis, MN 55440
Scott M. DiGiammarino Group Vice None
Suite 500, 8045 Leesburg Pike President-Washington/Baltimore
Vienna, VA 22182
Bradford L. Drew Group Vice President-Eastern None
Two Datran Center Florida
Penthouse One B
9130 S. Dadeland Blvd.
Miami, FL 33156
James P. Egge Group Vice President - Western None
4305 South Louise, Suite 202 Iowa, Nebraska, Dakotas
Sioux Falls, SD 57103
Gordon L. Eid Senior Vice President, General None
IDS Tower 10 Counsel and Chief Compliance
Minneapolis, MN 55440 Officer
Robert M. Elconin Vice President-Government None
IDS Tower 10 Relations
Minneapolis, MN 55440
Louise P. Evenson Group Vice President-San None
Suite 200 Francisco Bay Area
1333 N. California Blvd.
Walnut Creek, CA 94596
Phillip W. Evans, Group Vice President - Rocky None
Suite 600 Mountain
6985 Union Park Center
Midvale, UT 84047-4177
Gordon M. Fines Vice President-Mutual Fund None
IDS Tower 10 Equity Investments
Minneapolis, MN 55440
Douglas L. Forsberg Vice President-Institutional None
IDS Tower 10 Products Group
Minneapolis, MN 55440
Jeffrey P. Fox Vice President and Corporate None
IDS Tower 10 Controller
Minneapolis, MN 55440
William P. Fritz Group Vice President-Gateway None
Suite 160
12855 Flushing Meadows Dr
St. Louis, MO 63131
Carl W. Gans Group Vice President-Twin City None
8500 Tower Suite 1770 Metro
8500 Normandale Lake Blvd.
Bloomington, MN 55437
David A. Hammer Vice President and Marketing None
IDS Tower 10 Controller
Minneapolis, MN 55440
Teresa A. Hanratty Group Vice President-Northern None
Suites 6&7 New England
169 South River Road
Bedford, NH 03110
Robert L. Harden Group Vice President-Boston None
Two Constitution Plaza Metro
Boston, MA 02129
Lorraine R. Hart Vice President-Insurance None
IDS Tower 10 Investments
Minneapolis, MN 55440
Scott A. Hawkinson Vice President-Assured Assets None
IDS Tower 10 Product Development and
Minneapolis, MN 55440 Management
Brian M. Heath Group Vice President-North Texas None
Suite 150
801 E. Campbell Road
Richardson, TX 75081
Janis K. Heaney Vice President - Incentive None
IDS Tower 10 Management
Minneapolis, MN 55440
James G. Hirsh Vice President and Assistant None
IDS Tower 10 General Counsel
Minneapolis, MN 55440
Jon E. Hjelm Group Vice President-Rhode None
319 Southbridge Street Island/Central-Western
Auburn, MA 01501 Massachusetts
David J. Hockenberry Group Vice President-Eastern None
30 Burton Hills Blvd. Tennessee
Suite 175
Nashville, TN 37215
Jeffrey S. Horton Vice President and Treasurer None
IDS Tower 10
Minneapolis, MN 55440
David R. Hubers Chairman, President and Chief Board member
IDS Tower 10 Executive Officer
Minneapolis, MN 55440
Martin G. Hurwitz Vice President-Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
James M. Jensen Vice President-Insurance None
IDS Tower 10 Product Development and
Minneapolis, MN 55440 Management
Marietta L. Johns Senior Vice President-Field None
IDS Tower 10 Management
Minneapolis, MN 55440
Nancy E. Jones Vice President - Business None
IDS Tower 10 Development
Minneapolis, MN 55440
James E. Kaarre Vice President-Marketing None
IDS Tower 10 Promotions
Minneapolis, MN 55440
Matthew N. Karstetter Vice President-Investment None
IDS Tower 10 Accounting
Minneapolis, MN 55440
Linda B. Keene Vice President-Market None
IDS Tower 10 Development
Minneapolis, MN 55440
G. Michael Kennedy Vice President-Investment None
IDS Tower 10 Services and Investment Research
Minneapolis, MN 55440
Susan D. Kinder Senior Vice None
IDS Tower 10 President-Distribution Services
Minneapolis, MN 55440
Brian Kleinberg Executive Vice None
IDS Tower 10 President-Financial Direct
Minneapolis, MN 55440
Richard W. Kling Senior Vice President-Products None
IDS Tower 10
Minneapolis, MN 55440
Paul F. Kolkman Vice President-Actuarial Finance None
IDS Tower 10
Minneapolis, MN 55440
Claire Kolmodin Vice President-Service Quality None
IDS Tower 10
Minneapolis, MN 55440
David S. Kreager Group Vice President-Greater None
Suite 108 Michigan
Trestle Bridge V
5136 Lovers Lane
Kalamazoo, MI 49002
Steven C. Kumagai Director and Senior Vice None
IDS Tower 10 President-Field Management and
Minneapolis, MN 55440 Business Systems
Mitre Kutanovski Group Vice President-Chicago None
Suite 680 Metro
8585 Broadway
Merrillville, IN 48410
Edward Labenski Jr. Vice President-Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
Kurt A. Larson Vice President-Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
Lori J. Larson Vice President - Brokerage and None
IDS Tower 10 Direct Services
Minneapolis, MN 55440
Daniel E. Laufenberg Vice President and Chief U.S. None
IDS Tower 10 Economist
Minneapolis, MN 55440
Peter A. Lefferts Senior Vice President-Corporate None
IDS Tower 10 Strategy and Development
Minneapolis, MN 55440
Douglas A. Lennick Director and Executive Vice None
IDS Tower 10 President-Private Client Group
Minneapolis, MN 55440
Mary J. Malevich Vice President-Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
Fred A. Mandell Vice President-Field Marketing None
IDS Tower 10 Readiness
Minneapolis, MN 55440
Daniel E. Martin Group Vice President-Pittsburgh None
Suite 650 Metro
5700 Corporate Drive
Pittsburgh, PA 15237
Thomas W. Medcalf Vice President-Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
Paula R. Meyer Vice President - Assured Assets None
IDS Tower 10
Minneapolis, MN 55440
William P. Miller Vice President and Senior None
IDS Tower 10 Portfolio Manager
Minneapolis, MN 55440
James A. Mitchell Executive Vice None
IDS Tower 10 President-Marketing and Products
Minneapolis, MN 55440
Pamela J. Moret Vice President-Variable Assets None
IDS Tower 10
Minneapolis, MN 55440
Alan D. Morgenstern Group Vice President-Central None
Suite 200 California/Western Nevada
3500 Market Street
Camp Hill, NJ 17011
Barry J. Murphy Senior Vice President-Client None
IDS Tower 10 Service
Minneapolis, MN 55440
Mary Owens Neal Vice President-Mature Market None
IDS Tower 10 Segment
Minneapolis, MN 55440
Thomas V. Nicolosi Group Vice President-New York None
Suite 220 Metro Area
500 Mamaroneck Avenue
Harrison, NY 10528
Michael J. O'Keefe Vice President - Advisory None
IDS Tower 10 Business Systems
Minneapolis, MN 55440
James R. Palmer Vice President-Taxes None
IDS Tower 10
Minneapolis, MN 55440
Marc A. Parker Group Vice President - None
10200 SW Greenburg Road Portland/Eugene
Suite 110
Portland OR 97223
Carla P. Pavone Vice President-Compensation and None
IDS Tower 10 Field Administration
Minneapolis, MN 55440
Thomas P. Perrine Senior Vice President - Group
IDS Tower 10 Relationship Leader/AXP
Minneapolis, MN 55440 Technologies Financial Services
Susan B. Plimpton Vice President-Marketing None
IDS Tower 10 Services
Minneapolis, MN 55440
Larry M. Post Group Vice None
One Tower Bridge President-Philadelphia Metro
100 Front Street 8th Fl
West Conshohocken, PA 19428
Ronald W. Powell Vice President and Assistant None
IDS Tower 10 General Counsel
Minneapolis, MN 55440
Diana R. Prost Group Vice President - None
3030 N.W. Expressway Kansas/Oklahoma
Suite 900
Oklahoma City, OK 73112
James M. Punch Vice President-Special Projects None
IDS Tower 10
Minneapolis, MN 55440
Frederick C. Quirsfeld Senior Vice President - Fixed None
IDS Tower 10 Income
Minneapolis, MN 55440
R. Daniel Richardson Group Vice President-Southern None
Suite 800 Texas
Arboretum Plaza One
9442 Capital of Texas Hwy N.
Austin, TX 78759
ReBecca K. Roloff Senior Vice President-Field None
IDS Tower 10 Management and Financial
Minneapolis, MN 55440 Advisory Service
Stephen W. Roszell Senior Vice None
IDS Tower 10 President-Institutional
Minneapolis, MN 55440
Max G. Roth Group Vice None
Suite 201 S IDS Ctr President-Wisconsin/Upper
1400 Lombardi Avenue Michigan
Green Bay, WI 54304
John P. Ryan Vice President and General None
IDS Tower 10 Auditor
Minneapolis, MN 55440
Erven A. Samsel Senior Vice President-Field None
45 Braintree Hill Park Management
Suite 402
Braintree, MA 02184
Russell L. Scalfano Group Vice None
Suite 201 President-Illinois/Indiana/Kentucky
101 Plaza East Blvd.
Evansville, IN 47715
William G. Scholz Group Vice None
Suite 205 President-Arizona/Las Vegas
7333 E Doubletree Ranch Rd
Scottsdale, AZ 85258
Stuart A. Sedlacek Senior Vice President and Chief None
IDS Tower 10 Financial Officer
Minneapolis, MN 55440
Donald K. Shanks Vice President-Property Casualty None
IDS Tower 10
Minneapolis, MN 55440
F. Dale Simmons Vice President-Senior Portfolio None
IDS Tower 10 Manager, Insurance Investments
Minneapolis, MN 55440
Judy P. Skoglund Vice President -Quality and None
IDS Tower 10 Service Support
Minneapolis, MN 55440
William A. Smith Vice President and None
IDS Tower 10 Controller-Private Client Group
Minneapolis, MN 55440
James B. Solberg Group Vice President-Eastern None
466 Westdale Mall Iowa Area
Cedar Rapids, IA 52404
Bridget Sperl Vice President-Geographic None
IDS Tower 10 Service Teams
Minneapolis, MN 55440
Paul J. Stanislaw Group Vice President-Southern None
Suite 1100 California
Two Park Plaza
Irvine, CA 92714
Lisa A. Steffes Vice President - Cardmember None
IDS Tower 10 Initiatives
Minneapolis, MN 55440
Lois A. Stilwell Group Vice President-Outstate None
Suite 433 Minnesota Area/ North
9900 East Bren Road Dakota/Western Wisconsin
Minnetonka, MN 55343
William A. Stoltzmann Vice President and Assistant None
IDS Tower 10 General Counsel
Minneapolis, MN 55440
James J. Strauss Vice President and General None
IDS Tower 10 Auditor
Minneapolis, MN 55440
Jeffrey J. Stremcha Vice President-Information None
IDS Tower 10 Resource Management/ISD
Minneapolis, MN 55440
Barbara Stroup Stewart Vice President - Channel None
IDS Tower 10 Development
Minneapolis, MN 55440
Craig P. Taucher Group Vice None
Suite 150 President-Orlando/Jacksonville
4190 Belfort Road
Jacksonville, FL 32216
Neil G. Taylor Group Vice None
Suite 425 President-Seattle/Tacoma
101 Elliott Avenue West
Seattle, WA 98119
Peter S. Velardi Group Vice None
Suite 180 President-Atlanta/Birmingham
1200 Ashwood Parkway
Atlanta, GA 30338
Charles F. Wachendorfer Group Vice President - Detroit None
8115 East Jefferson Avenue Metro
Detroit, MI 48214
Wesley W. Wadman Vice President-Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
Donald F. Weaver Group Vice President - Greater None
3500 Market Street, Suite 200 Pennsylvania
Camp Hill, PA 17011
Norman Weaver Jr. Senior Vice President-Field None
1010 Main St. Suite 2B Management
Huntington Beach, CA 92648
Michael L. Weiner Vice President-Tax Research and None
IDS Tower 10 Audit
Minneapolis, MN 55440
Lawrence J. Welte Vice President-Investment None
IDS Tower 10 Administration
Minneapolis, MN 55440
Jeffry M. Welter Vice President-Equity and Fixed None
IDS Tower 10 Income Trading
Minneapolis, MN 55440
Thomas L. White Group Vice President-Cleveland None
Suite 200 Metro
28601 Chagrin Blvd.
Woodmere, OH 44122
Eric S. Williams Group Vice President-Virginia None
Suite 250
3951 Westerre Parkway
Richmond, VA 23233
William J. Williams Group Vice President-Western None
Two North Tamiami Trail Florida
Suite 702
Sarasota, FL 34236
Edwin M. Wistrand Vice President and Assistant None
IDS Tower 10 General Counsel
Minneapolis, MN 55440
Michael D. Wolf Vice President- Senior None
IDS Tower 10 Portfolio Manager
Minneapolis, MN 55440
Michael R. Woodward Senior Vice President-Field None
32 Ellicott St Management
Suite 100
Batavia, NY 14020
</TABLE>
Item 29(c). Not applicable.
Item 30. Location of Accounts and Records
American Express Financial Corporation
IDS Tower 10
Minneapolis, MN 55440
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
(a) Not Applicable.
(b) Not Applicable.
(c) The Registrant undertakes to furnish each person to
whom a prospectus is delivered with a copy of the
Registrant's latest annual report to shareholders, upon
request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant, IDS Utilities Income Fund, Inc., certifies
that it meets the requirements for the effectiveness of this Amendment to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1993,
and has duly caused this Amendment to its Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Minneapolis and State of Minnesota on the 26th day of August, 1998.
IDS UTILITIES INCOME FUND, INC.
by /s/ William R. Pearce**
William R. Pearce, Chief Executive Officer
by __________________________________________
Matthew N. Karstetter, Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
its Registration Statement has been signed below by the following persons in the
capacities indicated on the 26th day of August, 1998.
Signatures Capacity
/s/ William R. Pearce** Chairman of the Board
William R. Pearce
/s/ H. Brewster Atwater, Jr.* Director
H. Brewster Atwater, Jr.
/s/ Lynne V. Cheney* Director
Lynne V. Cheney
/s/ William H. Dudley* Director
William H. Dudley
/s/ David R. Hubers* Director
David R. Hubers
/s/ Heinz F. Hutter* Director
Heinz F. Hutter
/s/ Anne P. Jones* Director
Anne P. Jones
<PAGE>
Signatures Capacity
/s/ Alan K. Simpson* Director
Alan K. Simpson
/s/ Edson W. Spencer* Director
Edson W. Spencer
/s/ John R. Thomas* Director
John R. Thomas
/s/ Wheelock Whitney* Director
Wheelock Whitney
/s/ C. Angus Wurtele* Director
C. Angus Wurtele
*Signed pursuant to Directors' Power of Attorney, dated January 7, 1998 filed
electronically herewith as Exhibit 19(a) to Registrant's Post-Effective
Amendment No. 20, by:
______________________________
Leslie L. Ogg
**Signed pursuant to Officers' Power of Attorney dated November 1, 1995, filed
electronically as Exhibit 19(b) to Registrant's Post-Effective Amendment No. 17
to Registration Statement No. 33-20872 by:
_____________________________
Leslie L. Ogg
<PAGE>
CONTENTS OF THIS POST-EFFECTIVE AMENDMENT NO. 20 TO REGISTRATION STATEMENT NO.
33-20872
This Post-Effective Amendment comprises the following papers and documents:
The facing sheet.
The cross reference page.
Part A.
The prospectus.
Part B.
Statement of Additional Information.
Financial Statements.
Part C.
Other information.
The signatures.
<PAGE>
IDS Utilities Income Fund, Inc.
File No. 33-20872/811-5522
EXHIBIT INDEX
Exhibit 1: Articles of Incorporation amended November 14, 1991
Exhibit 2: By-laws amended January 12, 1989
Exhibit 9a: Transfer Agency Agreement dated January 1, 1998
Exhibit 10: Opinion and Consent of Counsel
Exhibit 11: Independent Auditors Consent
Exhibit 17: Financial Data Schedules
Exhibit 19a: Directors Power of Attorney dated January 7, 1998
<PAGE>
Effective: 3/25/88
Amended: 11/14/91
ARTICLES OF INCORPORATION
OF
IDS UTILITIES INCOME FUND, INC.
ARTICLE I - NAME
The name of this corporation (hereinafter called the
"Fund") is:
IDS UTILITIES INCOME FUND, INC.
ARTICLE II - LOCATION
The location of the registered office of the Fund is 109 South Seventh
Street - Suite 1000, City of Minneapolis, County of Hennepin, State of Minnesota
(mailing address: IDS Tower 10, Minneapolis, Minnesota 55440). Principal places
of business as well as branch offices may hereafter be established at such other
place or places, either within or without the State of Minnesota, as may from
time to time be determined by the Board of Directors.
ARTICLE III - CAPITALIZATION
Section 1. The amount of the total authorized Capital Stock of the Fund
shall be $100,000,000, consisting of 10,000,000,000 shares of the par value of
one cent ($.01) per share. Any or all of said shares of Capital Stock may be
issued in such classes or series with such designations, preferences and
relative, participating, optional or other special rights, or qualifications,
limitations or restrictions thereof, as shall be stated and expressed in a
resolution or resolutions providing for the issue of such class or series of
stock as may be adopted from time to time by the Fund's Board of Directors
pursuant to the authority hereby vested in said Board. Each class or series of
shares which the Board of Directors may establish, as provided herein, may, if
the Board shall so determine by resolution, evidence an interest in a separate
and distinct portion of the Fund's assets, which may take the form of a separate
portfolio of investment securities and cash. Authority to establish such
separate portfolios is hereby vested in the Board.
Section 2. At all meetings of the shareholders, each shareholder of
record entitled to vote thereat shall be entitled to one vote (and a fractional
vote for and equal to each fractional share) for each share (or fractional
share) of stock standing in her or his name and entitled to vote at such
meetings. At all elections of directors, each shareholder shall be entitled to
as
<PAGE>
many votes as shall equal the number of shares owned multiplied by the number of
directors to be elected and may cast all of such votes for a single director or
may distribute them among the number to be voted for, or any two or more of
them.
Section 3. No shareholder of the Fund shall have any preemptive rights.
Section 4. No share of stock issued by the Fund shall be sold or
exchanged by or on behalf of the Fund for any amount or value less than the
asset value thereof as of the close of business on the day upon which
application and payment or payment for such share is received and accepted by
the Fund, and if the day upon which payment is so received shall not be a
business day, then as of the close of business on the next succeeding business
day. Shares of stock shall be deemed outstanding when issued. The stock of this
Fund, after the par value thereof has been paid, shall not be subject to
assessment to pay the debts of the Fund, and no stock issued as fully paid shall
be assessable, nor shall the private property of any shareholder be subject to
the payment of corporate debts to any extent whatever.
Section 5. The registered holder of a share of the Capital Stock of the
11/14/91 Fund may require the Fund to redeem the same by delivering to the
Fund at its designated principal place of business a written request for
redemption in a form satisfactory to the Board of Directors, together with the
certificate for or evidence of ownership of such stock, if any, being
properly signed and endorsed, and the Fund, upon receipt of such request
and surrender of such certificate or evidence of ownership, promptly shall
pay out of the appropriate assets of the Fund as determined by the Board
pursuant to the authority vested in it by Section 1 of this Article, to or
upon the order of the registered holder, the redemption price as hereinafter
defined. In all cases,
(a) Shares of each class or series shall be redeemed at the asset value
thereof.
(b) All rights with respect to shares submitted for redemption as
provided hereunder, except the right to receive the asset
value thereof, shall cease and terminate as of the close of
business on the day upon which a written request for
redemption meeting the requirements of the first paragraph of
this Section 5 is received. All shares redeemed by the Fund
shall, upon redemption, have the status of authorized and
unissued shares, and shall not be deemed to be treasury
shares.
Section 6. The Board of Directors or any duly authorized committee
thereof or any officer or officers of the Fund duly authorized by such Board or
Committee may suspend the computation of asset value for the purpose of issuing
shares or defer payment of the redemption price for such period, after receipt
of such request and surrender of the certificate or evidence of ownership, as
may be permitted by applicable law, and may suspend sales or defer redemption
during a "period of emergency" as defined in the Investment Company Act of 1940.
<PAGE>
Section 7. The Fund may redeem the shares of a shareholder if the
amount invested is less than $1,000. This redemption will be pursuant to
applicable statutory or regulatory authority, rules or regulations.
ARTICLE IV - DIRECTORS
Section 1. The members of the governing board are styled "directors",
and the number, names and post office addresses of the first Board of Directors,
which shall be two in number, are as follows:
Name Post Office Address
Robert F. Froehlke 109 South Seventh Street -
Suite 1000
IDS Tower 10
Minneapolis, Minnesota 55440
John R. Thomas 2900 IDS Tower
Minneapolis, Minnesota 55440
Section 2. The directors, of which there shall be not less than two nor
more than fifteen, shall be elected at the first meeting of the shareholders for
an indefinite term and thereafter at each regular meeting of shareholders, to
hold office for an indefinite term until the next regular meeting of
shareholders, but in any event, they shall hold office until their successors
are elected and qualify. The number of directors may be increased or decreased
from time to time by action of the Board of Directors. If there be a vacancy on
the Board by reason of death, resignation or otherwise, such vacancy may be
filled for the unexpired term by a majority vote of the remaining directors,
though less than a quorum. The election and qualification of a director or
directors to fill any such vacancy or vacancies shall be in conformity with the
requirements of the Investment Company Act of 1940, as amended.
Section 3. In furtherance and not in limitation of its powers, the Board
of Directors is expressly authorized:
(a) To issue and dispose of and to enter into contracts for the
distribution, sale, exchange, purchase and resale of the
authorized securities of the Fund.
(b) To enter into a contract or contracts with any person, firm,
corporation, association or trust selected by it to act as
trustee or custodian for any of the assets of the Fund pursuant
to such terms and conditions and for such compensation as the
Board of Directors shall determine.
(c) To enter into a contract or contracts wherein and whereby a
responsible person, entity, partnership, association or
corporation is designated and employed as the investment manager
or adviser for the Fund to manage the assets of the Fund by
counseling with and advising the Fund in
<PAGE>
connection with the formulation of an investment program designed
to accomplish the Fund's investment objectives, by determining
what securities and other investments shall be purchased or sold,
by causing the execution of purchase and sell orders, by
determining what portion of the assets shall be held uninvested,
by recommending the purchase and/or sale of assets and by
advising the Fund with respect to the general and specific
policies and transactions to be followed in the purchasing,
owning and handling of securities and other assets and the
disposition thereof. Such management or advisory activities shall
be subject always to the power of the Board of Directors of the
Fund to have full control over the affairs of the Fund and to
review periodically each portfolio of the Fund to see that it is
managed in the long-term interests of the Fund's shareholders and
in accordance with its investment objectives.
(d) To declare and pay dividends in its discretion at any time and
from time to time to the extent and from such sources as
permitted by the laws of the State of Minnesota.
Section 4. Any determination made in good faith by or pursuant to the
direction of the Board of Directors as to the amount of the assets, debts,
obligations or liabilities of the Fund, as to the price or closing bid and asked
prices, as to the value of any security or asset of the Fund, or as to any other
matters relating to the issue, sale, redemption, liquidation, purchase and/or
acquisition or disposition of securities of the Fund, shall be final and
conclusive, and shall be binding upon the Fund and all holders of securities
issued by it, past, present and future, and securities of the Fund shall be
issued and sold on the condition and understanding that any and all such
determinations shall be binding as aforesaid.
Section 5. The Fund shall indemnify any person who was or is a party or
is threatened to be made a party or is involved (including, without limitation,
as a witness), by reason of the fact that she or he is or was a director,
officer, employee or agent of the Fund, or is or was serving at the request of
the Fund as a director, officer, employee or agent of another company,
partnership, joint venture, trust or other enterprise, to or in 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. 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.
Section 6. To the full extent permitted by the laws of the State of
Minnesota, as now existing or hereafter amended, no director of the Fund shall
be liable to the Fund or to its shareholders for monetary damages for breach of
fiduciary duty as a
<PAGE>
director but such limit on liability shall be permitted only to the extent
allowable under the provisions of the Investment Company Act of 1940.
ARTICLE V - INCORPORATOR
The name and post office address of the incorporator signing these
Articles of Incorporation is as follows:
Name Post Office Address
Bruce A. Kohn IDS Tower 10
Minneapolis, Minnesota 55440
ARTICLE VI - MEETINGS AND LOCATION OF BOOKS
The shareholders and directors shall have power to hold their meetings,
and to keep the books of the Fund (subject to the provisions of the laws of the
State of Minnesota) outside the State of Minnesota at such places as may from
time to time be designated by the By-Laws or by resolution of the Directors.
ARTICLE VII - WRITTEN ACTION BY BOARD OF DIRECTORS
An action required or permitted to be taken by the Board of Directors of
the Fund may be taken by written action signed by that number of directors that
would be required to take the same action at a meeting of the Board of Directors
at which all directors are present.
ARTICLE VIII - AMENDMENTS
These Articles of Incorporation, or any provision hereof, may be
amended, altered, changed or repealed in the manner prescribed by the laws of
the State of Minnesota.
<PAGE>
Effective: April 14, 1988
Amended: 1/12/89
BY-LAWS
OF
IDS UTILITIES INCOME FUND, INC.
ARTICLE I
Corporate Seal
The corporate seal shall bear the inscription "IDS Utilities Income
Fund, Inc., Minnesota, Corporate Seal, Incorporated 1988".
ARTICLE II
Meeting of Shareholders
Section 1. No regular meeting of shareholders need be held, however, a
majority of directors present at a duly held meeting may call a regular meeting
of shareholders by fixing the date, time and place for a meeting. A regular
meeting of the shareholders shall include an election of directors. No meeting
shall be considered a regular meeting unless specifically designated as such in
the notice of meeting. Regular meetings may be held no more frequently than once
per year. If a regular meeting of shareholders has not been held during the
immediately preceding 15 months, a shareholder or shareholders holding three
percent or more of the voting power of all shares entitled to vote may demand a
regular meeting of shareholders by written notice of demand given to the chief
executive officer or chief financial officer of the Fund. Within 30 days after
receipt of the demand by one of those officers, the Board of Directors shall
cause a regular meeting of shareholders to be called and held on notice no later
than 90 days after receipt of the demand, all at the expense of the Fund. If the
Board fails to cause a regular meeting to be called, the shareholder or
shareholders making the demand may call the regular meeting by giving notice as
required by the laws of Minnesota at the expense of the Fund.
Section 2. The holders of at least ten percent (10%) of the shares
outstanding and entitled to vote, present in person or by proxy, shall
constitute a quorum, but the holders of a smaller amount may adjourn from time
to time without further notice, other than by notice at the time, until a quorum
is secured at any such adjourned meeting. In case a quorum is not present, the
meeting may be adjourned from time to time without notice other than by notice
at the meeting. At any adjourned meeting at which a quorum may be present, any
business may be transacted which might have been transacted at the meeting as
originally called.
Section 3. At each meeting of the shareholders, the polls may be
opened and closed, the proxies and ballots may be received and taken in
charge, and all questions touching the qualification of voters, the
validity of proxies, and acceptances or rejections of votes may be decided by
two (2) inspectors of election. Inspectors
<PAGE>
may be appointed by the Board of Directors before or at the meeting. If no such
appointment shall have been made or if any inspector be absent or fails to act,
the presiding officer at the meeting shall appoint a person or persons to fill
such vacancy. Inspectors shall take charge of the polls and, when the vote is
completed, shall make a certificate of the result of the vote taken and of such
other facts as may be required by law.
Section 4. Special meetings of the shareholders may be called at any
time as provided for by the laws of the State of Minnesota.
Section 5. Shareholders shall take action by the affirmative vote of the
holders of a majority of the voting power of the shares present and entitled to
vote except where a larger portion is otherwise required.
ARTICLE III
Directors
Section 1. An organizational meeting of the Board of Directors shall be
held as soon as convenient to a majority of the directors, after the final
adjournment of each regular meeting of the shareholders, and no notice shall be
required. Other meetings of the Board of Directors may be previously scheduled
or called by the President or any two directors. Notice of specially called
meetings shall be sufficient if given to each director at least five days prior
thereto by mail or one day prior thereto by telephone, telegraph or in person,
unless such notice period is waived by each director.
Section 2. The Board of Directors shall fix and change, as it may from
time to time determine, by majority vote, the compensation to be paid the
directors, officers and all employees appointed by the Board of Directors.
Section 3. A director may give advance written consent or opposition to
a proposal to be acted on at a Board meeting. If the director is not present at
the meeting, consent or opposition to a proposal does not constitute presence
for purposes of determining the existence of a quorum, but consent or opposition
shall be counted as a vote in favor of or against the proposal and shall be
entered in the minutes of the meeting, if the proposal acted on at the meeting
is substantially the same or has substantially the same effect as the proposal
to which the director has consented or objected.
Section 4. A majority of the directors shall constitute a quorum, but a
smaller number may adjourn from time to time without notice, other than by
announcement at the meeting, until a quorum is secured; and, likewise, in case a
quorum is present, the meeting may be adjourned from time to time without notice
other than by announcement at the meeting. At any adjourned meeting at which a
quorum may be present, any business may be transacted which might have been
transacted at the meeting as originally called.
<PAGE>
Section 5. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate an Executive Committee of two or more
directors, which may meet at stated times or on notice to all by any of their
number during intervals between meetings of the Board. The Executive Committee
shall advise with and aid the officers of the Fund in all matters concerning its
interests and the management of its business, and generally perform such duties
and exercise such powers as may be delegated to it from time to time by the
Board of Directors. Vacancies in the membership of such Executive Committee
shall be filled by the Board of Directors.
Section 6. From time to time the Board of Directors may, by resolution
passed by a majority of the whole Board, appoint any other committee or
committees for any purpose or purposes, which committee or committees shall have
such powers as shall be specified in the resolution of appointment.
Section 7. The quorum for such committee established by the Board of
Directors is two members regardless of the number of members serving on the
committee.
Section 8. Any action required or permitted to be taken at any meeting
of the Board of Directors or of a duly appointed committee of the Board of
Directors may be taken in any manner permitted by law.
ARTICLE IV
Officers
Section 1. The Fund shall have a President who shall serve as the chief
executive officer, a Treasurer who shall serve as the chief financial officer,
and may have such other officers as the Board of Directors may choose from time
to time.
Section 2. The Treasurer shall be the chief financial officer of the
Fund, shall keep or cause to be kept full and accurate accounts of receipts and
disbursements in books belonging to the Fund, and shall perform such other
duties as the Board of Directors may from time to time prescribe or require.
Section 3. Any person designated by the Board of Directors as a Vice
President shall be vested with all the powers and required to perform all the
duties of the President in the President's absence or disability, shall at all
times be vested with the same power as the President to sign and deliver in the
name of the Fund any deeds, mortgages, bonds, contracts or other instruments
pertaining to the business of the Fund, and shall perform such other duties as
may be prescribed by the Board of Directors.
Section 4. Any person designed by the Board of Directors as Secretary
shall attend all meetings of the shareholders of the Fund, the Board of
Directors, and such other meetings as may be designated by the Board of
Directors. The Secretary shall record all of the proceedings of such meetings in
a book or books to be kept for that purpose; shall have custody of the seal,
stock
<PAGE>
certificate books and minute books of the Fund; may affix the seal of the Fund
to any instrument and perform such additional duties as shall be assigned by the
Board of Directors.
Section 5. The officers of the Fund shall hold office until their
successors are chosen and qualify in their stead. Any officer chosen and
appointed by the Board of Directors may be removed either with or without cause
at any time by the Board of Directors.
ARTICLE V
Capital Stock
Shares of capital stock shall be uncertificated.
ARTICLE VI
Transfers
Section 1. Shares of stock of the Fund shall be transferred on the books
of the Fund at the request of the holder thereof in person or of her or his duly
authorized attorney upon surrender of the certificate or certificates therefor,
if any, or in their absence by a request for transfer in a form acceptable to
the Fund that may include the request be in writing, and be signed by the
registered holder or by her or his duly authorized attorney in the manner
specified by the Fund. No transfer or assignment of shares shall affect the
right of the Fund to pay any dividend due upon the shares, or to treat the
holder of record as the holder in fact, until such transfer or assignment is
registered on the books of the Fund and the Fund shall be entitled to treat the
holder of record of any of its shares as the holder in fact thereof and
accordingly shall not be bound to recognize any equitable or other claim to, or
interest in, such shares on the part of any person whether or not it shall have
express or other notice thereof, save as may be expressly provided by law.
Section 2. The Board of Directors shall have power and authority from
time to time to appoint one or more transfer agents and/or clerks and registrars
for the securities issued by the Fund and to make such rules and regulations as
it may deem expedient concerning the issue, transfer and registration of such
securities.
Section 3. If any security issued by the Fund be lost, stolen, mutilated
or destroyed, the security may be transferred upon giving of a satisfactory bond
of indemnity in an amount which, in the judgment of the Board of Directors, is
sufficient to indemnify the Fund against any claim that may result therefrom.
ARTICLE VII
Definitions
For all purposes of the Articles of Incorporation and these By-Laws, the
term "business day" shall be defined as a day with respect to which the New York
Stock Exchange is open for business.
<PAGE>
ARTICLE VIII
Custodian or Trustee Agreements
The Fund shall enter into a custodian or trustee agreement with a bank
or trust company having aggregate capital, surplus and undivided profits of not
less than $2,000,000 for the custody of the Fund's securities and other assets.
All securities and cash assets owned or acquired by the Fund shall be held by
such custodian or trustee pursuant to the terms of such agreement and the Fund
shall deposit or cause to be deposited with such custodian or trustee all such
securities and cash assets. The agreement between the Fund and the custodian or
trustee may be terminated at any time by a vote of a majority of the outstanding
shares of the Fund.
ARTICLE IX
Miscellaneous
Section 1. The fiscal year of the Fund shall begin on the first day of
July in each year and end on the thirtieth day of June following.
Section 2. If the sale of shares issued by the Fund shall at any time be
discontinued, the Board of Directors may in its discretion, pursuant to
resolution, deduct from the value of the assets an amount equal to the brokerage
commissions, transfer taxes, and charges, if any, which would be payable on the
sale of such securities if they were then being sold.
ARTICLE X
Indemnification
Section 1. Each person made or threatened to be made a party to or
involved (including, without limitation, as a witness) in any actual or
threatened action, suit or proceeding whether civil, criminal, administrative,
arbitration, or investigative, including a proceeding by or in the right of the
Fund by reason of the former or present capacity as a director or officer of the
Fund or who, while a director or officer of the Fund, is or was serving at the
request of the Fund or whose duties as a director or officer involve or involved
service as a director, officer, partner, trustee or agent of another
organization or employee benefit plan, whether the basis of any proceeding is
alleged action in an official capacity or in any capacity while serving as a
director, officer, partner, trustee or agent, shall be indemnified and held
harmless by the Fund to the full extent authorized by the Minnesota Business
Corporation Act, as the same has been or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Fund to provide broader indemnification rights than the law permitted the Fund
to provide prior to such amendment, or by any other applicable law as then in
effect, against judgements, penalties, fines including, without limitation,
excise taxes assessed against the person with respect to an employee benefit
plan, settlements and reasonable expenses, including attorneys' fees and
disbursements, incurred in connection therewith and such indemnification shall
continue as to any person who has ceased to be a director or officer and shall
inure to the benefit of the person's heirs, executors and administrators
provided, however, in an action brought against the Fund to enforce rights to
indemnification, the director or officer shall be indemnified only if the action
was authorized by the Board of Directors of the Fund. The right to
indemnification conferred by this Section shall be a contract right and shall
include the right to be paid by the Fund in advance of the final
<PAGE>
disposition of a proceeding for expenses incurred in connection therewith
provided, however, such payment of expenses shall be made only upon receipt of a
written undertaking by the director or officer to repay all amounts so paid if
it is ultimately determined that the director or officer is not entitled to
indemnification.
Section 2. Each person who upon written request to the Fund has not
received payment within thirty days may at any time thereafter bring suit
against the Fund to recover any unpaid amount and, to the extent successful, in
whole or in part, shall be entitled to be paid the expenses of prosecuting such
suit. Each person shall be presumed to be entitled to indemnification upon
filing a written request for payment and the Fund shall have the burden of proof
to overcome the presumption that the director or officer is not so entitled.
Neither the determination by the Fund, whether by the Board of Directors,
special legal counsel or by shareholder, nor the failure of the Fund to have
made any determination shall be a defense or create the presumption that the
director or officer is not entitled to indemnification.
Section 3. The right to indemnification and to the payment of expenses
prior to any final determination shall not be exclusive of any other right which
any person may have or hereinafter acquire under any statute, provision of the
Articles of Incorporation, by-law, agreement, vote of shareholders or otherwise
and notwithstanding any provisions in this Article X, the Fund is not obligated
to make any payment with respect to any claim for which payment is required to
be made to or on behalf of the director or officer under any insurance policy,
except with respect to any excess beyond the amount of required payment under
such insurance and no indemnification will be made in violation of the
provisions of the Investment Company Act of 1940.
TRANSFER AGENCY AGREEMENT
AGREEMENT dated as of January 1, 1998, between IDS Utilities Income Fund, Inc.,
a Minnesota corporation, (the "Company" or "Fund"), and American Express Client
Service Corporation (the "Transfer Agent"), a Minnesota corporation.
In consideration of the mutual promises set forth below, the Company and the
Transfer Agent agree as follows:
1. Appointment of the Transfer Agent. The Company hereby appoints the
Transfer Agent, as transfer agent for its shares and as shareholder
servicing agent for the Company, and the Transfer Agent accepts such
appointment and agrees to perform the duties set forth below.
2. Compensation. The Company will compensate the Transfer Agent for the
performance of its obligations as set forth in Schedule A. Schedule A
does not include out-of-pocket disbursements of the Transfer Agent for
which the Transfer Agent shall be entitled to bill the Company
separately.
The Transfer Agent will bill the Company monthly. The fee provided for
hereunder shall be paid in cash by the Company to the Transfer Agent
within five (5) business days after the last day of each month.
Out-of-pocket disbursements shall include, but shall not be limited to,
the items specified in Schedule B. Reimbursement by the Company for
expenses incurred by the Transfer Agent in any month shall be made as
soon as practicable after the receipt of an itemized bill from the
Transfer Agent.
Any compensation jointly agreed to hereunder may be adjusted from time
to time by attaching to this Agreement a revised Schedule A, dated and
signed by an officer of each party.
3. Documents. The Company will furnish from time to time such
certificates, documents or opinions as the Transfer Agent deems to be
appropriate or necessary for the proper performance of its duties.
4. Representations of the Company and the Transfer Agent.
(a) The Company represents to the Transfer Agent that all
outstanding shares are validly issued, fully paid and
non-assessable by the Company. When shares are hereafter
issued in accordance with the terms of the Company's Articles
of Incorporation and its By-laws, such shares shall be validly
issued, fully paid and non-assessable by the Company.
(b) The Transfer Agent represents that it is registered under
Section 17A(c) of the Securities Exchange Act of 1934. The
Transfer Agent agrees to maintain the necessary facilities,
equipment and personnel to perform its duties and obligations
under this agreement and to comply with all applicable laws.
<PAGE>
5. Duties of the Transfer Agent. The Transfer Agent shall be responsible,
separately and through its subsidiaries or affiliates, for the
following functions:
(a) Sale of Fund Shares.
(1) On receipt of an application and payment, wired
instructions and payment, or payment identified as
being for the account of a shareholder, the Transfer
Agent will deposit the payment, prepare and present
the necessary report to the Custodian and record the
purchase of shares in a timely fashion in accordance
with the terms of the Fund's prospectus. All shares
shall be held in book entry form and no certificate
shall be issued unless the Fund is permitted to do so
by its prospectus and the purchaser so requests.
(2) On receipt of notice that payment was dishonored, the
Transfer Agent shall stop redemptions of all shares
owned by the purchaser related to that payment, place
a stop payment on any checks that have been issued to
redeem shares of the purchaser and take such other
action as it deems appropriate.
(b) Redemption of Fund Shares. On receipt of instructions to
redeem shares in accordance with the terms of the Fund's
prospectus, the Transfer Agent will record the redemption of
shares of the Fund, prepare and present the necessary report
to the Custodian and pay the proceeds of the redemption to the
shareholder, an authorized agent or legal representative upon
the receipt of the monies from the Custodian.
(c) Transfer or Other Change Pertaining to Fund Shares. On receipt
of instructions or forms acceptable to the Transfer Agent to
transfer the shares to the name of a new owner, change the
name or address of the present owner or take other legal
action, the Transfer Agent will take such action as is
requested.
(d) Exchange of Fund Shares. On receipt of instructions to
exchange the shares of the Fund for the shares of another fund
in the IDS MUTUAL FUND GROUP or other American Express
Financial Corporation product in accordance with the terms of
the prospectus, the Transfer Agent will process the exchange
in the same manner as a redemption and sale of shares.
(e) Right to Seek Assurance. The Transfer Agent may refuse to
transfer, exchange or redeem shares of the Fund or take any
action requested by a shareholder until it is satisfied that
the requested transaction or action is legally authorized or
until it is satisfied there is no basis for any claims
adverse to the transaction or action. It may rely on the
provisions of the Uniform Act for the Simplification of
Fiduciary Security Transfers or the Uniform Commercial Code.
The Company shall indemnify the Transfer Agent for any act
done or omitted to be done in reliance on such laws or for
refusing to transfer, exchange or redeem shares or taking
any requested action if it acts on a good faith belief that
the transaction or action is illegal or unauthorized.
<PAGE>
(f) Shareholder Records, Reports and Services.
(1) The Transfer Agent shall maintain all shareholder
accounts, which shall contain all required tax,
legally imposed and regulatory information; shall
provide shareholders, and file with federal and state
agencies, all required tax and other reports
pertaining to shareholder accounts; shall prepare
shareholder mailing lists; shall cause to be printed
and mailed all required prospectuses, annual reports,
semiannual reports, statements of additional
information (upon request), proxies and other
mailings to shareholders; and shall cause proxies to
be tabulated.
(2) The Transfer Agent shall respond to all valid
inquiries related to its duties under this Agreement.
(3) The Transfer Agent shall create and maintain all
records in accordance with all applicable laws, rules
and regulations, including, but not limited to, the
records required by Section 31(a) of the Investment
Company Act of 1940.
(g) Dividends and Distributions. The Transfer Agent shall prepare
and present the necessary report to the Custodian and shall
cause to be prepared and transmitted the payment of income
dividends and capital gains distributions or cause to be
recorded the investment of such dividends and distributions in
additional shares of the Fund or as directed by instructions
or forms acceptable to the Transfer Agent.
(h) Confirmations and Statements. The Transfer Agent shall confirm
each transaction either at the time of the transaction or
through periodic reports as may be legally permitted.
(i) Lost or Stolen Checks. The Transfer Agent will replace lost or
stolen checks issued to shareholders upon receipt of proper
notification and will maintain any stop payment orders against
the lost or stolen checks as it is economically desirable to
do.
(j) Reports to Company. The Transfer Agent will provide reports
pertaining to the services provided under this Agreement as
the Company may request to ascertain the quality and level of
services being provided or as required by law.
(k) Other Duties. The Transfer Agent may perform other duties for
additional compensation if agreed to in writing by the parties
to this Agreement.
6. Ownership and Confidentiality of Records. The Transfer Agent agrees
that all records prepared or maintained by it relating to the services
to be performed by it under the terms of this Agreement are the
property of the Company and may be inspected by the Company or any
person retained by the Company at reasonable times. The Company and
Transfer Agent agree to protect the confidentiality of those records.
<PAGE>
7. Action by Board and Opinion of Counsel. The Transfer Agent may rely on
resolutions of the Board of Directors (the "Board") or the Executive
Committee of the Board and on opinion of counsel for the Company.
8. Duty of Care. It is understood and agreed that, in furnishing the
Company with the services as herein provided, neither the Transfer
Agent, nor any officer, director or agent thereof shall be held liable
for any loss arising out of or in connection with their actions under
this Agreement so long as they act in good faith and with due
diligence, and are not negligent or guilty of any willful misconduct.
It is further understood and agreed that the Transfer Agent may rely
upon information furnished to it reasonably believed to be accurate
and reliable. In the event the Transfer Agent is unable to perform its
obligations under the terms of this Agreement because of an act of
God, strike or equipment or transmission failure reasonably beyond its
control, the Transfer Agent shall not be liable for any damages
resulting from such failure.
9. Term and Termination. This Agreement shall become effective on the
date first set forth above (the "Effective Date") and shall continue
in effect from year to year thereafter as the parties may mutually
agree; provided that either party may terminate this Agreement by
giving the other party notice in writing specifying the date of such
termination, which shall be not less than 60 days after the date of
receipt of such notice. In the event such notice is given by the
Company, it shall be accompanied by a vote of the Board, certified by
the Secretary, electing to terminate this Agreement and designating a
successor transfer agent or transfer agents. Upon such termination and
at the expense of the Company, the Transfer Agent will deliver to such
successor a certified list of shareholders of the Fund (with name,
address and taxpayer identification or Social Security number), a
historical record of the account of each shareholder and the status
thereof, and all other relevant books, records, correspondence, and
other data established or maintained by the Transfer Agent under this
Agreement in the form reasonably acceptable to the Company, and will
cooperate in the transfer of such duties and responsibilities,
including provisions for assistance from the Transfer Agent's
personnel in the establishment of books, records and other data by
such successor or successors.
10. Amendment. This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties.
11. Subcontracting. The Company agrees that the Transfer Agent may
subcontract for certain of the services described under this Agreement
with the understanding that there shall be no diminution in the quality
or level of the services and that the Transfer Agent remains fully
responsible for the services. Except for out-of-pocket expenses
identified in Schedule B, the Transfer Agent shall bear the cost of
subcontracting such services, unless otherwise agreed by the parties.
<PAGE>
12. Miscellaneous.
(a) This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable
without the written consent of the other party.
(b) This Agreement shall be governed by the laws of the State of
Minnesota.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers as of the day and year written above.
IDS UTILITIES INCOME FUND, INC.
By: /s/ Leslie L. Ogg
Leslie L. Ogg
Vice President
AMERICAN EXPRESS CLIENT SERVICE CORPORATION
By: /s/ Barry J. Murphy
Barry J. Murphy
President
<PAGE>
Schedule A
IDS UTILITIES INCOME FUND, INC.
FEE
The annual per account fee for services under this agreement, accrued daily and
payable monthly, is as follows:
Class A Class B Class Y
$15.00 $16.00 $15.00
<PAGE>
Schedule B
OUT-OF-POCKET EXPENSES
The Company shall reimburse the Transfer Agent monthly for the following
out-of-pocket expenses:
o typesetting, printing, paper, envelopes, postage and return postage for
proxy soliciting material, and proxy tabulation costs
o printing, paper, envelopes and postage for dividend notices, dividend
checks, records of account, purchase confirmations, exchange
confirmations and exchange prospectuses, redemption confirmations,
redemption checks, confirmations on changes of address and any other
communication required to be sent to shareholders
o typesetting, printing, paper, envelopes and postage for prospectuses,
annual and semiannual reports, statements of additional information,
supplements for prospectuses and statements of additional information
and other required mailings to shareholders
o stop orders
o outgoing wire charges
o other expenses incurred at the request or with the consent of the
Company
August 27, 1998
IDS Utilities Income Fund, Inc.
IDS Tower 10
Minneapolis, Minnesota 55440-0010
Gentlemen:
I have examined the Articles of Incorporation and the By-Laws of IDS Utilities
Income Fund, Inc. (the Company) and all necessary certificates, permits, minute
books, documents and records of the Company, and the applicable statutes of the
State of Minnesota, and it is my opinion that the shares sold in accordance with
applicable federal and state securities laws will be legally issued, fully paid,
and nonassessable.
This opinion may be used in connection with the Post-Effective Amendment.
Sincerely,
Leslie L. Ogg
Attorney at Law
901 S. Marquette Ave., Suite 2810
Minneapolis, Minnesota 55402-3268
Independent auditors' consent
The board of trustees and shareholders IDS Utilities Income Fund, Inc.
We consent to the use of our reports incorporated herein by reference and to the
references to our Firm under the headings "Financial highlights" in Part A and
"INDEPENDENT AUDITORS" in Part B of the Registration Statement.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
August , 1998
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> IDS UTILITIES INCOME FUND CLASS A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 964156302
<INVESTMENTS-AT-VALUE> 1184176024
<RECEIVABLES> 13364723
<ASSETS-OTHER> 1046472
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1198587219
<PAYABLE-FOR-SECURITIES> 8794877
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 15783553
<TOTAL-LIABILITIES> 24578430
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 880648596
<SHARES-COMMON-STOCK> 108334063
<SHARES-COMMON-PRIOR> 92038759
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 2
<ACCUMULATED-NET-GAINS> 73344078
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 220016117
<NET-ASSETS> 972796828
<DIVIDEND-INCOME> 31155985
<INTEREST-INCOME> 4723884
<OTHER-INCOME> 0
<EXPENSES-NET> 9383972
<NET-INVESTMENT-INCOME> 26495897
<REALIZED-GAINS-CURRENT> 120504923
<APPREC-INCREASE-CURRENT> 93538469
<NET-CHANGE-FROM-OPS> 240539289
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 23512270
<DISTRIBUTIONS-OF-GAINS> 91228835
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 18523901
<NUMBER-OF-SHARES-REDEEMED> 14979351
<SHARES-REINVESTED> 12750754
<NET-CHANGE-IN-ASSETS> 340008747
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 57943174
<OVERDISTRIB-NII-PRIOR> 280210
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5074299
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 9500652
<AVERAGE-NET-ASSETS> 846251587
<PER-SHARE-NAV-BEGIN> 8.04
<PER-SHARE-NII> .24
<PER-SHARE-GAIN-APPREC> 1.93
<PER-SHARE-DIVIDEND> .23
<PER-SHARE-DISTRIBUTIONS> 1.00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.98
<EXPENSE-RATIO> .86
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> IDS UTILITIES INCOME FUND CLASS B
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 964156302
<INVESTMENTS-AT-VALUE> 1184176024
<RECEIVABLES> 13364723
<ASSETS-OTHER> 1046472
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1198587219
<PAYABLE-FOR-SECURITIES> 8794877
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 15783553
<TOTAL-LIABILITIES> 24578430
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 880648596
<SHARES-COMMON-STOCK> 22407303
<SHARES-COMMON-PRIOR> 11618515
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 2
<ACCUMULATED-NET-GAINS> 73344078
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 220016117
<NET-ASSETS> 201175496
<DIVIDEND-INCOME> 31155985
<INTEREST-INCOME> 4723884
<OTHER-INCOME> 0
<EXPENSES-NET> 9383972
<NET-INVESTMENT-INCOME> 26495897
<REALIZED-GAINS-CURRENT> 120504923
<APPREC-INCREASE-CURRENT> 93538469
<NET-CHANGE-FROM-OPS> 240539289
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2690811
<DISTRIBUTIONS-OF-GAINS> 13882130
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11322130
<NUMBER-OF-SHARES-REDEEMED> 2448225
<SHARES-REINVESTED> 1914883
<NET-CHANGE-IN-ASSETS> 340008747
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 57943174
<OVERDISTRIB-NII-PRIOR> 281210
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5074299
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 9500652
<AVERAGE-NET-ASSETS> 135946047
<PER-SHARE-NAV-BEGIN> 8.04
<PER-SHARE-NII> .17
<PER-SHARE-GAIN-APPREC> 1.94
<PER-SHARE-DIVIDEND> .17
<PER-SHARE-DISTRIBUTIONS> 1.00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.98
<EXPENSE-RATIO> 1.62
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> IDS UTILITIES INCOME FUND CLASS Y
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 964156302
<INVESTMENTS-AT-VALUE> 1184176024
<RECEIVABLES> 13364723
<ASSETS-OTHER> 1046472
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1198587219
<PAYABLE-FOR-SECURITIES> 8794877
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 15783553
<TOTAL-LIABILITIES> 24578430
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 880648596
<SHARES-COMMON-STOCK> 4062
<SHARES-COMMON-PRIOR> 34255
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 2
<ACCUMULATED-NET-GAINS> 73344078
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 220016117
<NET-ASSETS> 36465
<DIVIDEND-INCOME> 31155985
<INTEREST-INCOME> 4723884
<OTHER-INCOME> 0
<EXPENSES-NET> 9383972
<NET-INVESTMENT-INCOME> 26495897
<REALIZED-GAINS-CURRENT> 120504923
<APPREC-INCREASE-CURRENT> 93538469
<NET-CHANGE-FROM-OPS> 240539289
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2108
<DISTRIBUTIONS-OF-GAINS> 3554
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 30749
<SHARES-REINVESTED> 556
<NET-CHANGE-IN-ASSETS> 340008747
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 57943174
<OVERDISTRIB-NII-PRIOR> 281210
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5074299
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 9500652
<AVERAGE-NET-ASSETS> 68250
<PER-SHARE-NAV-BEGIN> 8.04
<PER-SHARE-NII> .24
<PER-SHARE-GAIN-APPREC> 1.94
<PER-SHARE-DIVIDEND> .24
<PER-SHARE-DISTRIBUTIONS> 1.00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.98
<EXPENSE-RATIO> .79
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
DIRECTORS/TRUSTEES POWER OF ATTORNEY
City of Minneapolis
State of Minnesota
Each of the undersigned, as directors and trustees of the below listed
open-end, diversified investment companies that previously have filed
registration statements and amendments thereto pursuant to the requirements of
the Securities Act of 1933 and the Investment Company Act of 1940 with the
Securities and Exchange Commission:
<TABLE>
<CAPTION>
1933 Act 1940 Act
Reg. Number Reg. Number
<S> <C> <C> <C>
IDS Bond Fund, Inc. 2-51586 811-2503
IDS California Tax-Exempt Trust 33-5103 811-4646
IDS Discovery Fund, Inc. 2-72174 811-3178
IDS Equity Select Fund, Inc. 2-13188 811-772
IDS Extra Income Fund, Inc. 2-86637 811-3848
IDS Federal Income Fund, Inc. 2-96512 811-4260
IDS Global Series, Inc. 33-25824 811-5696
IDS Growth Fund, Inc. 2-38355 811-2111
IDS High Yield Tax-Exempt Fund, Inc. 2-63552 811-2901
IDS International Fund, Inc. 2-92309 811-4075
IDS Investment Series, Inc. 2-11328 811-54
IDS Managed Retirement Fund, Inc. 2-93801 811-4133
IDS Market Advantage Series, Inc. 33-30770 811-5897
IDS Money Market Series, Inc. 2-54516 811-2591
IDS New Dimensions Fund, Inc. 2-28529 811-1629
IDS Precious Metals Fund, Inc. 2-93745 811-4132
IDS Progressive Fund, Inc. 2-30059 811-1714
IDS Selective Fund, Inc. 2-10700 811-499
IDS Special Tax-Exempt Series Trust 33-5102 811-4647
IDS Stock Fund, Inc. 2-11358 811-498
IDS Strategy Fund, Inc. 2-89288 811-3956
IDS Tax-Exempt Bond Fund, Inc. 2-57328 811-2686
IDS Tax-Free Money Fund, Inc. 2-66868 811-3003
IDS Utilities Income Fund, Inc. 33-20872 811-5522
</TABLE>
hereby constitutes and appoints William R. Pearce and Leslie L. Ogg or either
one of them, as her or his attorney-in-fact and agent, to sign for her or him in
her or his name, place and stead any and all further amendments to said
registration statements filed pursuant to said Acts and any rules and
regulations thereunder, and to file such amendments with all exhibits thereto
and other documents in connection therewith with the Securities and Exchange
Commission, granting to either of them the full power and authority to do and
perform each and every act required and necessary to be done in connection
therewith.
<PAGE>
Dated the 7th day of January, 1998.
/s/ H. Brewster Atwater, Jr. /s/ William R. Pearce
H. Brewster Atwater, Jr. William R. Pearce
/s/ Lynne V. Cheney /s/ Alan K. Simpson
Lynne V. Cheney Alan K. Simpson
/s/ William H. Dudley /s/ Edson W. Spencer
William H. Dudley Edson W. Spencer
/s/ David R. Hubers /s/ John R. Thomas
David R. Hubers John R. Thomas
/s/ Heinz F. Hutter /s/ Wheelock Whitney
Heinz F. Hutter Wheelock Whitney
/s/ Anne P. Jones /s/ C. Angus Wurtele
Anne P. Jones C. Angus Wurtele
