1998 SEMIANNUAL REPORT
IDS
Global Bond
Fund
(icon of) globe
The goal of IDS Global Bond Fund, a part of IDS Global Series, Inc., is a high
total return through income and growth of capital.
AMERICAN EXPRESS Financial Advisors
Distributed by American Express Financial Advisors Inc.
<PAGE>
(icon of) globe
A bounty of bonds
In today's global economy, investment opportunities don't stop at the water's
edge. While bonds issued by the U.S. government and corporations once made up
almost all of the bond market, today more than half of the world's debt
securities are issued from outside the United States. This means expanded
opportunity for investors. Global Bond Fund's aim is to take advantage of
opportunities in bond markets at any time and in any place, providing investors
with greater portfolio diversification.
Contents
From the chairman 3
From the portfolio manager 3
The Portfolio's ten largest holdings 5
Financial statements (Fund) 6
Notes to financial statements (Fund) 9
Financial statements (Portfolio) 18
Notes to financial statements (Portfolio) 21
Investments in securities 26
Board members and officers 35
IDS mutual funds 36
<PAGE>
To our shareholders
From the chairman
If you're an experienced investor, you know that the past few years have
been unusually strong in many financial markets. Perhaps just as
important, history shows that bull markets don't last forever. Though
they're often unpredictable, declines -- whether they're brief or
long-lasting, moderate or substantial -- are always a possibility. We saw
evidence of that last October, when declines in certain Asian markets
spawned a sharp drop in several financial markets worldwide, including the
U.S.
That potential for such volatility reinforces the need for investors to
review periodically their long-term goals and examine whether their
investment program remains on track to achieving them. Your quarterly
investment statements are one part of that monitoring process. The other
is a meeting with your American Express financial advisor. That becomes
even more important if there's a major change in your financial situation
or in the financial markets.
William R. Pearce
(picture of) William R. Pearce
William R. Pearce
Chairman of the board
<PAGE>
From the portfolio manager
Stable-to-declining interest rates in most global bond markets combined
with an emphasis on U.S. dollar-based investments enabled the Fund to
produce a positive result over the past six months. For the first half of
the fiscal year -- November 1997 through April 1998 -- the Fund's Class A
shares generated a total return (net asset value change and dividends) of
3.6%.
Persistently low inflation and improving financial conditions in all the
industrialized countries put a ceiling on any tendency for interest rates
to rise. In fact, several European countries, which enjoyed a convergence
of sounder economic policies, were able to lower short-term interest rates
in anticipation of the introduction of the common European currency, the
euro, scheduled for 1999.
The value of the dollar continued to benefit from skepticism about the
euro until late in the period, when a surge of confidence in the new
currency sent the dollar lower. The dollar was also strong versus Japan's
yen, owing to dismal economic conditions in that country. Adding to the
dollar's strength was the general economic recession in parts of east
Asia, an impact that peaked around the end of 1997 and then subsided as
emergency financial aid was mobilized to assist the most distressed
countries.
The dominant dollar
Throughout the six months, I kept minimal exposure to low-yielding
yen-denominated bonds while basing nearly all other Asian bond investments
in dollars. The latter group enjoyed marked improvement in valuation early
in 1998.
I also maintained the dollar emphasis by currency hedging tactics that
negated fluctuations in foreign currencies. Finally, despite the upheaval
in Asia, the Fund realized its strongest returns from a small core of
dollar-denominated investments in Latin American markets. These securities
offered high yields and relatively consistent performance as investor
confidence in that region continued to increase.
Looking forward, there are indications that investments in foreign bonds
should enjoy improved performance in upcoming months. This outlook is
based on several factors. One is that the increasing confidence in major
economies of Europe should bolster the value of European currencies in
dollar terms. Another is that, while interest rates in Europe are
generally lower than in the U.S., even lower rates of inflation abroad
should allow for further price appreciation in European bonds. Also, the
dollar-based emerging markets, including Latin America, will likely
continue to perform well as long as the Federal Reserve refrains from
raising interest rates here at home. And finally, there currently are
extraordinary opportunities in Asian bonds, though the economic recovery
in that region will be long and uneven.
Ray Goodner
(picture of) Ray Goodner
Ray Goodner
Portfolio manager
<PAGE>
To our shareholders
Class A
6-month performance
(All figures per share)
Net asset value (NAV)
April 30, 1998 $ 6.19
Oct. 31, 1997 $ 6.26
Decrease $ 0.07
Distributions
Nov. 1, 1997 - April 30, 1998
From income $ 0.22
From capital gains $ 0.07
Total distributions $ 0.29
Total return* +3.6%**
Class B
6-month performance
(All figures per share)
Net asset value (NAV)
April 30, 1998 $ 6.19
Oct. 31, 1997 $ 6.26
Decrease $ 0.07
Distributions
Nov. 1, 1997 - April 30, 1998
From income $ 0.20
From capital gains $ 0.07
Total distributions $ 0.27
Total return* +3.2%**
Class Y
6-month performance
(All figures per share)
Net asset value (NAV)
April 30, 1998 $ 6.19
Oct. 31, 1997 $ 6.26
Decrease $ 0.07
Distributions
Nov. 1, 1997 - April 30, 1998
From income $ 0.22
From capital gains $ 0.07
Total distributions $ 0.29
Total return* +3.6%**
* The prospectus discusses the effect of sales charges, if any, on the various
classes.
** The total return is a hypothetical investment in the Fund with all
distributions reinvested.
<PAGE>
The Portfolio's ten largest holdings
(icon of) pie chart
The ten holdings listed here make up 39.25%
of the Portfolio's net assets
Percent Value
(of Portfolio's net assets) (as of April 30, 1998)
U.S. Treasury 7.68% $76,504,080
7.50% 2001
U.S. Treasury 7.04 70,068,586
7.50% 2016
Govt of Canada 4.62 46,062,498
5.78% 2023
United Kingdom Treasury 4.02 40,020,552
8.00% 2003
United Kingdom Treasury 3.80 37,809,624
9.00% 2000
Govt of Italy 3.07 30,534,750
8.50% 2004
Govt of Sweden 2.49 24,780,056
8.00% 2007
Govt of Spain 2.38 23,703,536
8.80% 2006
Federal Republic of Germany 2.10 20,923,957
6.00% 2016
United Mexican States 2.05 20,425,955
11.50% 2026
Note: Certain foreign investment risks include: changes in currency exchange
rates, adverse political or economic order, and lack of similar regulatory
requirements followed by U.S. companies.
For further detail about these holdings, please refer to the section entitled
"Investments in securities" herein.
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statement of assets and liabilities
IDS Global Bond Fund
April 30, 1998
Assets
(Unaudited)
<S> <C>
Investment in World Income Portfolio (Note 1) $994,985,565
------------
Liabilities
Dividends payable to shareholders 5,198,971
Accrued distribution fee 5,129
Accrued service fee 4,719
Accrued transfer agency fee 3,677
Accrued administrative services fee 1,419
Other accrued expenses 19,010
------
Total liabilities 5,232,925
---------
Net assets applicable to outstanding capital stock $989,752,640
============
Represented by
Capital stock-- $.01 par value (Note 1) $ 1,598,788
Additional paid-in capital 966,554,081
Undistributed net investment income 7,125,552
Accumulated net realized gain (loss) (6,912,341)
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 21,386,560
----------
Total-- representing net assets applicable to outstanding capital stock $989,752,640
------------
Net assets applicable to outstanding shares: Class A $738,571,735
Class B $251,179,748
Class Y $ 1,157
Net asset value per share of outstanding capital stock: Class A shares 119,303,257 $ 6.19
Class B shares 40,575,381 $ 6.19
Class Y shares 187 $ 6.19
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
IDS Global Bond Fund
Six months ended April 30, 1998
Investment income
(Unaudited)
Income:
<S> <C>
Dividends $ 196,271
Interest 35,019,115
Less foreign taxes withheld (943,162)
--------
Total income 34,272,224
----------
Expenses (Note 2):
Expenses allocated from World Income Portfolio 3,740,064
Distribution fee -- Class B 892,271
Transfer agency fee 655,833
Incremental transfer agency fee-- Class B 11,388
Service fee
Class A 636,768
Class B 207,093
Administrative services fees and expenses 255,805
Postage35,392
Registration fees 54,738
Reports to shareholders 2,585
Audit fees 3,750
Other 9,149
-----
Total expenses 6,504,836
Earnings credits on cash balances (Note 2) (58,043)
-------
Total net expenses 6,446,793
---------
Investment income (loss) -- net 27,825,431
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions 2,906,335
Foreign currency transactions (4,022,083)
----------
Net realized gain (loss) on investments (1,115,748)
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 7,147,562
---------
Net gain (loss) on investments and foreign currencies 6,031,814
---------
Net increase (decrease) in net assets resulting from operations $33,857,245
===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statements of changes in net assets
IDS Global Bond Fund
Operations and distributions April 30, 1998 Oct. 31, 1997
Six months ended Year ended
(Unaudited)
<S> <C> <C>
Investment income (loss)-- net $ 27,825,431 $ 50,828,054
Net realized gain (loss) on investments (1,115,748) 5,408,940
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 7,147,562 (12,524,038)
Net increase (decrease) in net assets resulting from operations 33,857,245 43,712,956
---------- ----------
Distributions to shareholders from:
Net investment income
Class A (17,606,555) (32,842,975)
Class B (4,823,824) (7,066,228)
Class Y (28) (50)
Net realized gain
Class A (16,718,446) (4,577,136)
Class B (5,381,162) (1,029,102)
Class Y (25) (7)
--- --
Total distributions (44,530,040) (45,515,498)
----------- -----------
Capital share transactions (Note 3)
Proceeds from sales
Class A shares (Note 2) 79,374,659 207,212,140
Class B shares 42,398,048 119,100,620
Reinvestment of distributions at net asset value
Class A shares 28,857,818 31,634,837
Class B shares 9,658,169 7,250,496
Class Y shares 52 57
Payments for redemptions
Class A shares (109,928,803) (177,248,829)
Class B shares (Note 2) (29,359,550) (36,747,365)
----------- -----------
Increase (decrease) in net assets from capital share transactions 21,000,393 151,201,956
---------- -----------
Total increase (decrease) in net assets 10,327,598 149,399,414
Net assets at beginning of period 979,425,042 830,025,628
----------- -----------
Net assets at end of period $989,752,640 $979,425,042
============ ============
Undistributed net investment income $ 7,125,552 $ 1,730,528
------------ ------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to financial statements
IDS Global Bond Fund
(Unaudited as to April 30, 1998)
1
Summary of
significant
accounting policies
The Fund is a series of IDS Global Series, Inc. and is registered under
the Investment Company Act of 1940 (as amended) as a non-diversified,
open-end management investment company. IDS Global Series, Inc. has 10
billion authorized shares of capital stock that can be allocated among the
separate series as designated by the board. 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.
Investment in World Income Portfolio
Effective May 13, 1996, the Fund began investing all of its assets in the
World Income Portfolio (the Portfolio), a series of World Trust, an
open-end investment company that has the same objectives as the Fund. This
was accomplished by transferring the Fund's assets to the Portfolio in
return for a proportionate ownership interest in the Portfolio. World
Income Portfolio seeks to provide shareholders with a high total return
through income and, as a secondary goal, steady growth of capital by
investing primarily in debt securities of U.S. and foreign issuers.
The Fund records daily its share of the Portfolio's income, expenses and
realized and unrealized gains and losses. The financial statements of the
Portfolio are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
The Fund records its investment in the Portfolio at value which is equal
to the Fund's proportionate ownership interest in the net assets of the
Portfolio. The percentage of the Portfolio owned by the Fund at April 30,
1998 was 99.93%. Valuation of securities held by the Portfolio is
discussed in Note 1 of the Portfolio's "Notes to financial statements",
which are included elsewhere in this report.
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.
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 the shareholders, no provision for
income or excise taxes is required.
Net investment income (loss) and net realized gains (losses) allocated
from the Portfolio 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.
Dividends to shareholders
Dividends declared daily and paid each calendar quarter from net
investment income 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.
2
Expenses and
sales charges
In addition to the expenses allocated from the Portfolio, the Fund accrues
its own expenses as follows:
Effective March 20, 1995, the Fund entered into an agreement with American
Express Financial Corporation (AEFC) for providing administrative
services. 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 0.06% to
0.04% 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 $15.50
oClass B $16.50
oClass Y $15.50
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 commencing on May 9,
1997, the fee is calculated at a rate of 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 $1,094,066 for Class A and $114,000 for
Class B for the six months ended April 30, 1998.
During the six months ended April 30, 1998 the Fund's transfer agency fees
were reduced by $58,043 as a result of earning credits from overnight cash
balances.
3
Capital share
transactions
Transactions in shares of capital stock for the periods indicated are as
follows:
Six months ended April 30, 1998
Class A Class B Class Y
Sold 12,833,327 6,855,896 --
Issued for reinvested 4,692,011 1,570,633 9
distributions
Redeemed (17,781,147) (4,752,695) --
----------- ---------- ----
Net increase (decrease) (255,809) 3,673,834 9
Year ended Oct. 31, 1997
Class A Class B Class Y
Sold 33,399,760 19,191,695 --
Issued for reinvested 5,086,811 1,165,774 9
distributions
Redeemed (28,583,381) (5,927,484) --
----------- ---------- ----
Net increase (decrease) 9,903,190 14,429,985 9
<PAGE>
<TABLE>
<CAPTION>
Notes to financial statements
Global Bond Fund
4
Financial
highlights
The tables below show certain important financial information for evaluating the
Fund's results.
Fiscal period ended Oct. 31,
Per share income and capital changesa
Class A
1998c 1997 1996 1995 1994 1993 1992 1991 1990 1989b
Net asset value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
beginning of period $6.26 $6.28 $6.11 $5.76 $6.27 $5.91 $5.58 $5.46 $5.22 $5.00
Income from investment operations:
Net investment income (loss) .04 .35 .38 .35 .36 .26 .33 .50 .40 .12
Net gains (losses) .18 (.05) .18 .41 (.45) .62 .47 .12 .27 .22
(both realized
and unrealized)
Total from investment .22 .30 .56 .76 (.09) .88 .80 .62 .67 .34
operations
Less distributions:
Dividends from net (.15) (.28) (.39) (.33) (.35) (.27) (.30) (.50) (.40) (.12)
investment income
Distributions from (.14) (.04) -- (.02) (.07) (.10) (.06) -- (.03) --
realized gains
Excess distributions of -- -- -- (.06) -- (.15) (.11) -- -- --
realized gains
Total distributions (.29) (.32) (.39) (.41) (.42) (.52) (.47) (.50) (.43) (.12)
Net asset value,
end of period $6.19 $6.26 $6.28 $6.11 $5.76 $6.27 $5.91 $5.58 $5.46 $5.22
Ratios/supplemental data
Class A
1998c 1997 1996 1995 1994 1993 1992 1991 1990 1989b
Net assets, end of $739 $748 $689 $548 $466 $255 $91 $50 $28 $11
period (in millions)
Ratio of expenses to 1.15%e 1.16% 1.20% 1.25% 1.26% 1.31% 1.39% 1.34% 1.73%h 1.00%g
average daily net assetsd
Ratio of net income (loss) 5.91%e 5.74% 5.72% 6.15% 5.56% 5.11% 6.50% 7.15% 10.60%h 7.04%e,g
to average daily net assets
Portfolio turnover rate 15% 55% 49% 92% 64% 90% 160% 123% 130% 91%
(excluding short-term
securities)
Total returnf 3.6% 4.9% 8.9% 13.6% (1.5%) 15.8% 14.8% 11.9% 13.3% 6.7%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Inception date. Period from March 20, 1989 to Oct. 31, 1989.
c Six months ended April 30, 1998 (Unaudited).
d Effective fiscal year 1996, expense ratio is based on total expenses of the
Fund before reduction of earnings credits on cash balances.
e Adjusted to an annual basis.
f Total return does not reflect payment of a sales charge.
g During the period from March 20, 1989 to Oct. 31, 1989, AEFC reimbursed
the Fund for expenses in excess of 1% of daily net assets. Had AEFC not done
so, the ratio of expenses and ratio of net investment income would have been
1.77% and 5.77%, respectively.
h For the nine months ended July 31, 1990, AEFC voluntarily reimbursed the
Fund for a portion of its expenses. Had AEFC not done so, the ratio of
expenses and ratio of net investment income would have been 1.87% and 10.46%,
respectively.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Fiscal period ended Oct. 31,
Per share income and capital changesa
Class B Class Y
1998c 1997 1996 1995b 1998c 1997 1996g 1995b
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $6.26 $6.28 $6.11 $5.74 $6.26 $6.30 $6.11 $5.74
beginning of period
Income from investment operations:
Net investment income (loss) .03 .31 .33 .24 .04 .35 .29 .27
Net gains on securities .17 (.05) .18 .41 .18 (.06) .20 .41
(both realized and
unrealized)
Total from investment .20 .26 .51 .65 .22 .29 .49 .68
operations
Less distributions:
Dividends from net (.13) (.24) (.34) (.24) (.15) (.29) (.30) (.27)
investment income
Distributions from (.14) -- -- -- (.14) -- -- --
realized gains
Excess distributions of -- (.04) -- (.04) -- (.04) -- (.04)
realized gains
Total distributions (.27) (.28) (.34) (.28) (.29) (.33) (.30) (.31)
Net asset value, end
of period $6.19 $6.26 $6.28 $6.11 $6.19 $6.26 $6.30 $6.11
Ratios/supplemental data
Class B Class Y
1998c 1997 1996 1995b 1998c 1997 1996g 1995b
Net assets, end of $251 $231 $141 $37 $-- $-- $-- $2
period (in millions)
Ratio of expenses to 1.91%e 1.92% 1.96% 2.05%e .80%e 1.01% 1.01% 1.10%e
average daily net assetsd
Ratio of net income (loss) to 5.16%e 5.00% 4.96% 5.88%e 6.30%e 5.89% 6.06% 6.68%e
average daily net assets
Portfolio turnover rate 15% 55% 49% 92% 15% 55% 49% 92%
(excluding short-term
securities)
Total returnf 3.2% 4.1% 8.1% 11.5% 3.6% 5.1% 7.3% 12.0%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Inception date was March 20, 1995.
c Six months ended April 30, 1998 (Unaudited).
d Effective fiscal year 1996, expense ratio is based on total expenses of the
Fund before reduction of earnings credits on cash balances .
e Adjusted to an annual basis.
f Total return does not reflect payment of a sales charge.
g Periods from Nov. 1, 1995 to Nov. 20, 1995 and from Dec. 4, 1995 to Oct 31,
1996. From Nov. 20, 1995 to Dec. 4, 1995 there were no Class Y shares
outstanding.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statement of assets and liabilities
World Income Portfolio
April 30, 1998
Assets
(Unaudited)
Investments in securities, at value (Note 1)
<S> <C>
(identified cost $977,677,075) $1,000,615,252
Cash in bank on demand deposit 387,918
Dividends and accrued interest receivable 27,561,149
Receivable for investment securities sold 18,240,034
Unrealized appreciation on foreign currency contracts held, at value (Notes 1 and 4) 122,565
U.S. government securities held as collateral for securities loaned (Note 5) 2,886,546
---------
Total assets 1,049,813,464
-------------
Liabilities
Payable for investment securities purchased 5,330,188
Unrealized depreciation on foreign currency contracts held, at value (Notes 1 and 4) 1,766,063
Payable upon return of securities loaned (Note 5) 46,916,546
Accrued investment management services fee 19,883
Other accrued expenses 31,505
Open option contracts written, at value (premium received $152,000) (Note 6) 105,000
-------
Total liabilities 54,169,185
----------
Net assets $ 995,644,279
==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
World Income Portfolio
Six months ended April 30, 1998
Investment income
(Unaudited)
Income:
<S> <C>
Dividends $ 196,400
Interest 35,039,016
Less foreign taxes withheld (943,788)
--------
Total income 34,291,628
----------
Expenses (Note 2):
Investment management services fee 3,584,101
Compensation of board members 5,852
Custodian fees 138,472
Audit fees 11,250
Other 9,620
-----
Total expenses 3,749,295
Earnings credits on cash balances (Note 2) (6,757)
------
Total net expenses 3,742,538
Investment income (loss) -- net 30,549,090
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 2,908,242
Foreign currency transactions (4,024,733)
----------
Net realized gain (loss) on investments (1,116,491)
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 7,152,328
---------
Net gain (loss) on investments and foreign currencies 6,035,837
---------
Net increase (decrease) in net assets resulting from operations $36,584,927
===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statements of changes in net assets
World Income Portfolio
Operations April 30, 1998 Oct. 31, 1997
Six months ended Year ended
(Unaudited)
<S> <C> <C>
Investment income (loss)-- net $ 30,549,090 $ 55,752,766
Net realized gain (loss) on investments (1,116,491) 5,413,929
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 7,152,328 (12,533,266)
--------- -----------
Net increase (decrease) in net assets resulting from operations 36,584,927 48,633,429
Net contributions (withdrawals) from partners (26,194,448) 101,894,400
----------- -----------
Total increase (decrease) in net assets 10,390,479 150,527,829
Net assets at beginning of period 985,253,800 834,725,971
----------- -----------
Net assets at end of period $995,644,279 $985,253,800
============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to financial statements
World Income Portfolio
(Unaudited as to April 30, 1998)
1
Summary of
significant
accounting policies
World Income Portfolio (the Portfolio) is a series of World Trust (the
Trust) and is registered under the Investment Company Act of 1940 (as
amended) as a non-diversified, open-end management investment company.
World Income Portfolio invests primarily in debt securities of U.S. and
foreign issuers. The Declaration of Trust permits the Trustees to issue
non-transferable interests in the Portfolio.
Significant accounting policies followed by the Portfolio 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 Portfolio
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 Portfolio also
may buy and sell put and call options and write covered call options on
portfolio securities and may write cash-secured put options. The risk in
writing a call option is that the Portfolio gives up the opportunity of
profit if the market price of the security increases. The risk in writing
a put option is that the Portfolio may incur a loss if the market price of
the security decreases and the option is exercised. The risk in buying an
option is that the Portfolio pays a premium whether or not the option is
exercised. The Portfolio also has the additional risk of not being able to
enter into a closing transaction if a liquid secondary market does not
exist.
Option contracts are valued daily at the closing
prices on their primary exchanges and unrealized appreciation or
depreciation is recorded. The Portfolio will realize a gain or loss upon
expiration or closing of the option transaction. When an option is
exercised, the proceeds on sales for a written call option, the purchase
cost for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or paid.
Futures transactions
In order to gain exposure to or protect itself from changes in the market,
the Portfolio may buy and sell financial futures contracts traded on any
U.S. or foreign exchange. The Portfolio also may buy and write put and
call options on these futures contracts. Risks of entering into futures
contracts and related options include the possibility that there may be an
illiquid market and that a change in the value of the contract or option
may not correlate with changes in the value of the underlying securities.
Upon entering into a futures contract, the Portfolio is required to
deposit either cash or securities in an amount (initial margin) equal to a
certain percentage of the contract value. Subsequent payments (variation
margin) are made or received by the Portfolio each day. The variation
margin payments are equal to the daily changes in the contract value and
are recorded as unrealized gains and losses. The Portfolio recognizes a
realized gain or loss when the contract is closed or expires.
Foreign currency translations and
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 dividends, interest
income and foreign withholding taxes.
The Portfolio may enter into forward foreign currency exchange contracts
for operational purposes and to protect against adverse exchange rate
fluctuation. The net U.S. dollar value of foreign currency underlying all
contractual commitments held by the Portfolio and the resulting unrealized
appreciation or depreciation are determined using foreign currency
exchange rates from an independent pricing service. The Portfolio is
subject to the credit risk that the other party will not complete the
obligations of the contract.
Illiquid securities
At April 30, 1998, investments in securities included issues that are
illiquid. The Portfolio currently limits investments in illiquid
securities to 10% of net assets, at market value, at the time of purchase.
The aggregate value of such securities at April 30, 1998 was $9,975,000
representing 1.0% of net assets. Pursuant to guidelines adopted by the
board, certain unregistered securities are determined to be liquid and are
not included within the 10% limitation specified above.
Federal taxes
For federal income tax purposes the Portfolio qualifies as a partnership
and each investor in the Portfolio is treated as the owner of its
proportionate share of the net assets, income, expenses and realized and
unrealized gains and losses of the Portfolio. Accordingly, as a
"pass-through" entity, the Portfolio does not pay any income dividends or
capital gain distributions.
Other
Security transactions are accounted for on the date securities are
purchased or sold. Dividend income is recognized on the ex-dividend date
or upon receipt of ex-dividend notification in the case of certain foreign
securities. For U.S. dollar denominated bonds, interest income includes
level-yield amortization of premium and discount. For foreign bonds, the
Fund amortizes premium and original issue discount daily and market
discount is recognized at the time of sale.
2
Fees and
expenses
The Trust, on behalf of the Portfolio, has entered into an Investment
Management Services Agreement with AEFC for managing its portfolio. Under
this agreement, AEFC determines which securities will be purchased, held
or sold. The management fee is a percentage of the Portfolio's average
daily net assets in reducing percentages from 0.77% to 0.67% annually.
Under the agreement, the Trust also pays taxes and nonadvisory expenses,
which include custodian fees, audit and certain legal fees, fidelity bond
premiums, registration fees for units, office expenses, consultants' fees,
compensation of trustees, corporate filing fees, expenses incurred in
connection with lending securities of the Portfolio, and any other
expenses properly payable by the Trust or Portfolio and approved by the
board.
During the six months ended April 30, 1998, the Portfolio's custodian fees
were reduced by $6,757 as a result of earnings credits from overnight cash
balances.
Pursuant to a Placement Agency Agreement, American Express Financial
Advisors Inc. acts as placement agent of the units of the Trust.
3
Securities
transactions
Cost of purchases and proceeds from sales of securities (other than
short-term obligations) aggregated $158,092,088 and $143,846,271,
respectively, for the six months ended April 30, 1998. For the same
period, the portfolio turnover rate was 15%. Realized gains and losses are
determined on an identified cost basis.
4
Foreign currency
contracts
At April 30, 1998, the Portfolio had entered into foreign currency
exchange contracts that obligate the Portfolio 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
June 8, 1998 18,700,000 10,436,782 $ -- $ 4,954
Deutsche Mark U.S. Dollar
June 22, 1998 1,000,000,000 7,660,047 51,209 --
Japanese Yen U.S. Dollar
Nov. 15, 1998 3,010,033 4,500,000,000 71,356 --
U.S. Dollar Korean Won
Nov. 19, 1998 3,000,000 11,655,000,000 -- 1,761,109
U.S. Dollar Indonesian Rupiah
Total $122,565 $1,766,063
5
Lending of
portfolio securities
At April 30, 1998, securities valued at $45,359,113 were on loan to
brokers. For collateral, the Portfolio received $44,030,000 in cash and
U.S. government securities valued at 2,886,546. Income from securities
lending amounted to $127,170 for the six months ended April 30, 1998. The
risks to the Portfolio of securities lending are that the borrower may not
provide additional collateral when required or return the securities when
due.
6
Option contracts
written
The number of contracts and premium amounts associated with option
contracts written is as follows: Six months ended April 30, 1998
Puts Calls
Contracts Premium Contracts Premium
Balance Oct. 31, 1997 -- $ -- -- $ --
Opened 100 152,000 100 134,500
Closed -- -- (100) (134,500)
--- --- ---- --------
Balance April 30, 1998 100 $152,000 -- $ --
See "Summary of significant accounting policies."
<PAGE>
<TABLE>
<CAPTION>
Investments in securities
World Income Portfolio
April 30, 1998 (Unaudited)
(Percentages represent
value of investments
compared to net assets)
Bonds (96.6%)(b)
Issuer Coupon Principal Value(a)
rate amount
Argentina (3.1%)
Comp Nav Perez Companc
(U.S. Dollar)
<S> <C> <C> <C>
01-30-04 9.00% $1,975,000(d) $1,994,750
Province of Mendoza
(U.S. Dollar)
09-04-07 10.00 4,000,000(d) 3,873,640
Republic of Argentina
(Japanese Yen)
03-27-01 5.50 880,000,000 6,805,832
(U.S. Dollar)
03-31-05 6.69 10,450,000(j) 9,598,325
01-30-17 11.375 7,300,000 8,084,750
Total 30,357,297
Austria (0.3%)
Autobahn Schnell
(Japanese Yen)
03-11-00 6.00 397,000,000 3,292,718
Bermuda (0.2%)
Central Euro Media
(Deutsche Mark) Sr Nts Series RG
08-15-04 4.45 3,925,000 2,154,670
Brazil (0.7%)
Comp Paranaense De Energ
(U.S. Dollar)
05-02-05 9.75 5,000,000(d) 5,027,400
Espirito Santo Centrais
(U.S. Dollar) Sr Nts
07-15-07 10.00 1,850,000(d) 1,784,584
Total 6,811,984
Canada (4.8%)
Govt of Canada
(Canadian Dollar)
06-01-23 5.78 50,810,000 46,062,498
Rogers Cablesystems
(Canadian Dollar)
01-15-14 9.65 2,000,000 1,528,722
Total 47,591,220
Cayman Islands (0.5%)
Roil
(U.S. Dollar)
12-05-02 12.78 5,000,000(c) 4,975,000
China (2.5%)
Bank of China
(U.S. Dollar)
03-15-14 8.25 5,000,000 4,807,450
Greater Beijing
(U.S. Dollar) Sr Nts
06-15-04 9.25 3,500,000(d) 2,955,680
06-15-07 9.50 5,000,000(d) 3,982,700
People's Republic of China
(U.S. Dollar)
07-03-01 7.375 4,450,000 4,505,856
Zhuhai Highway
(U.S. Dollar) Sub Nts
07-01-08 11.50 9,550,000(d) 8,942,811
Total 25,194,497
Denmark (4.9%)
Govt of Denmark
(Danish Krone)
11-15-00 9.00 40,000,000 6,525,160
05-15-03 8.00 113,200,000 18,738,222
03-15-06 8.00 65,000,000 11,202,230
11-10-24 7.00 70,000,000 12,002,550
Total 48,468,162
France (1.1%)
Govt of France
(European Currency Unit)
04-25-05 7.50 8,710,000 11,084,799
Germany (6.8%)
Federal Republic of Germany
(Deutsche Mark)
07-22-02 8.00 15,265,000 9,624,628
11-11-04 7.50 31,870,000 20,365,695
06-20-16 6.00 34,650,000 20,923,957
07-04-27 6.50 26,400,000 16,755,446
Total 67,669,726
Greece (0.8%)
Hellenic Republic
(Greek Drachma)
03-21-00 9.80 2,550,000,000 8,098,545
Hong Kong (1.0%)
Dao Heng Bank
(U.S. Dollar) Sub Nts
01-24-07 7.75 5,500,000(d) 4,986,410
Hutchison Whampo Finance
(U.S. Dollar) Company Guaranty
08-01-27 7.50 5,000,000(d) 4,501,200
Total 9,487,610
Indonesia (1.1%)
Indah Kiat Finance Mauritius
(U.S. Dollar) Company Guaranty
07-01-07 10.00 4,350,000 3,621,375
Indah Kiat Pulp & Paper
(U.S. Dollar)
11-01-00 8.875 2,500,000 2,206,250
Polysindo Intl Finance
(U.S. Dollar) Company Guaranty
06-15-06 11.375 2,300,000 1,368,500
Tjiwi Kimia Finance Mauritius
(U.S. Dollar) Company Guaranty
08-01-04 10.00 2,450,000 2,009,000
Tjiwi Kimia Intl
(U.S. Dollar) Company Guaranty
08-01-01 13.25 2,000,000 1,875,000
Total 11,080,125
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Italy (4.1%)
Govt of Italy
(Italian Lira)
<S> <C> <C> <C>
01-01-04 8.50 46,125,000,000 30,534,750
11-01-26 7.25 15,270,000,000 10,521,030
Total 41,055,780
Japan (0.3%)
Matsushita Electric Ind
(Japanese Yen) Cv Series 4
03-31-99 1.30 325,000,000 2,535,000
Nippon Express
(Japanese Yen) Cv Series 4
03-31-04 1.00 120,000,000 896,160
Total 3,431,160
Malaysia (0.4%)
Petronas
(U.S. Dollar)
08-15-15 7.75 4,550,000 4,182,224
Mexico (5.3%)
Banco Nacional de Comercio Exterior
(U.S. Dollar)
02-02-04 7.25 8,000,000(e) 7,540,000
Grupo Televisa
(U.S. Dollar) Sr Nts Series A
05-15-03 11.375 2,500,000 2,745,900
Imexsa Export Trust
(U.S. Dollar)
05-31-03 10.125 3,000,000(d) 3,120,000
United Mexican States
(British Pound) Medium-term Nts Series E
05-30-02 14.48 5,000,000 8,205,785
(Japanese Yen)
08-17-98 5.00 580,000,000 4,421,224
(U.S. Dollar)
09-15-16 11.375 5,000,000(e) 5,862,500
05-15-26 11.50 16,951,000(e) 20,425,955
Total 52,321,364
New Zealand (1.0%)
Govt of New Zealand
(New Zealand Dollar)
02-15-00 6.50 10,000,000 5,439,580
Telecom Corp of New Zealand
(New Zealand Dollar)
02-10-03 6.25 5,000,000(d) 4,946,855
Total 10,386,435
Norway (0.9%)
Govt of Norway
(Norwegian Krone)
01-31-99 9.00 65,000,000 8,995,285
Philippines (0.6%)
Philippine Long Distance Telephone
(U.S. Dollar) Medium-term Nts Series E
03-06-07 7.85 1,500,000(d) 1,378,845
03-06-17 8.35 4,700,000(d) 4,251,808
Total 5,630,653
Russia (1.1%)
Alfa-Russia Finance
(U.S. Dollar) Medium-term Nts Bank Guaranty
07-28-00 10.375 3,000,000 2,685,000
Rostelecom
(U.S. Dollar)
02-15-00 9.375 5,000,000(c) 5,000,000
Tatneft Finance
(U.S. Dollar) Company Guaranty
10-29-02 9.00 4,000,000(d) 3,637,720
Total 11,322,720
South Africa (1.4%)
Escom
(South African Rand)
09-01-01 8.00 81,000,000 14,048,640
South Korea (0.5%)
Korea Electric Power
(U.S. Dollar)
12-01-03 6.375 4,000,000 3,507,520
Republic of Korea
(U.S. Dollar)
04-15-08 8.875 1,625,000 1,598,756
Total 5,106,276
Spain (3.4%)
Govt of Spain
(Spanish Peseta)
04-30-99 9.40 1,500,000,000 10,338,000
04-30-06 8.80 2,902,000,000 23,703,536
Total 34,041,536
Sweden (4.3%)
Govt of Sweden
(Japanese Yen) Medium-term Nts
06-21-99 3.875 600,000,000 4,710,000
(Swedish Krona)
02-09-05 6.00 44,500,000 6,011,283
08-15-07 8.00 160,200,000 24,780,056
Paulson Enteprenad
(Swedish Krona)
12-15-00 7.00 56,560,000 6,811,125
Total 42,312,464
United Kingdom (10.8%)
Abbey Natl First Capital
(U.S. Dollar)
10-15-04 8.20 5,000,000 5,499,050
IPC Magazines Group
(British Pound)
03-15-08 9.675 2,475,000(d) 4,036,433
Texon Intl
(Deutsche Mark) Sr Nts
02-01-08 3.12 4,000,000 2,285,012
United Kingdom Treasury
(British Pound)
03-03-00 9.00 21,700,000 37,809,624
06-10-03 8.00 22,000,000 40,020,552
12-07-05 8.50 9,200,000 17,786,121
Total 107,436,792
United States (32.7%)
Chesapeake
(U.S. Dollar)
05-01-03 9.875 1,000,000 1,141,340
Cleveland Electric Illuminating
(U.S. Dollar) 1st Mtge Series B
05-15-05 9.50 3,000,000 3,343,770
Dayton Hudson
(U.S. Dollar)
12-01-22 8.50 3,265,000 3,585,590
Executive Risk Capital
(U.S. Dollar) Company Guaranty Series B
02-01-27 8.675 3,500,000 3,870,020
Federal Natl Mtge Assn
(U.S. Dollar)
02-01-27 7.50 4,244,504 4,363,690
06-01-27 7.50 8,649,430 8,892,306
Federal Natl Mtge Assn Global
(Japanese Yen)
12-20-99 2.00 500,000,000 3,872,500
General Motors
(U.S. Dollar)
07-15-01 9.125 2,000,000 2,173,480
Govt Natl Mtge Assn
(U.S. Dollar)
10-15-26 8.00 7,965,241 8,272,221
GTE North
(U.S. Dollar) Series F
02-15-10 6.375 9,950,000(e) 9,912,091
MGM Grand
(U.S. Dollar)
02-01-05 6.95 7,600,000 7,590,804
Nationwide CSN Trust
(U.S. Dollar)
02-15-25 9.875 7,000,000(d) 8,366,890
New Jersey Economic Development
Authority State Pension Funding
Revenue Bond (MBIA Insured)
(U.S. Dollar)
02-15-29 7.43 5,100,000(f) 5,560,020
New York Life Insurance
(U.S. Dollar)
12-15-23 7.50 7,000,000(d) 7,079,030
Northwest Airlines
(U.S. Dollar) Company Guaranty 1st Series 1996
01-02-15 8.97 1,954,104 2,127,277
Overseas Private Investment
(U.S. Dollar) U.S. Govt Guaranty Series 1996A
01-15-09 6.99 7,500,000 7,767,450
PDV America
(U.S. Dollar) Sr Nts
08-01-03 7.875 3,500,000 3,621,905
Phillips Petroleum
(U.S. Dollar)
04-15-23 7.92 3,115,000 3,301,620
Questar Pipeline
(U.S. Dollar)
06-01-21 9.375 1,000,000 1,120,730
Salomon Smith Barney Holdings
(U.S. Dollar)
01-15-03 6.125 10,400,000 10,292,672
SBC Communications
(U.S. Dollar)
08-15-31 8.50 5,000,000 5,508,850
Southern California Gas
(U.S. Dollar) 1st Mtge Series BB
03-01-23 7.375 900,000 912,726
Swiss Bank
(U.S. Dollar) Sub Deb
07-15-25 7.50 4,700,000 5,061,618
TU Electric Capital
(U.S. Dollar) Company Guaranty
01-30-37 8.18 6,150,000 6,292,557
U.S. Treasury
(U.S. Dollar)
02-15-00 5.875 10,000,000 10,050,200
08-15-00 6.00 8,000,000 8,067,040
11-15-01 7.50 72,250,000 76,504,080
02-15-05 7.50 10,000,000(e) 10,982,700
11-15-16 7.50 60,200,000 70,068,586
(U.S. Dollar) TIPS
01-15-07 3.375 10,000,000(g) 9,897,091
U S WEST Communications
(U.S. Dollar)
11-10-26 7.20 6,000,000 6,014,340
USX
(U.S. Dollar)
03-01-08 6.85 4,775,000 4,791,235
Zurich Capital
(U.S. Dollar) Company Guaranty
06-01-37 8.38 4,550,000(d) 4,976,654
Total 325,383,083
Venezuela (2.0%)
Govt of Venezuela
(U.S. Dollar) Series A
03-31-07 6.625 11,357,143 10,178,839
(U.S. Dollar) Series B
03-31-07 6.75 11,142,857 9,986,786
Total 20,165,625
Total bonds
(Cost: $938,960,713) $962,086,390
</TABLE>
<PAGE>
Preferred stock & other (0.5%)
Issuer Shares Value(a)
Mexico Value
Rights 1,000(h) $--
Pinto Totta Intl Finance
7.77% 50,000(b,d) 4,812,500
Total preferred stock & other
(Cost: $5,000,000) $4,812,500
Short-term securities (3.4%) (k)
Issuer Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
U.S. government agency (2.6%)
Federal Home Loan Mtge Corp Disc Nts
05-07-98 5.46% $7,300,000 $7,293,382
05-15-98 5.47 3,200,000 3,193,230
05-20-98 5.42 11,400,000 11,367,510
05-29-98 5.45 4,100,000 4,082,732
Total 25,936,854
Commercial paper (0.7%)
ABB Treasury Center USA
05-04-98 5.54 1,800,000(i) 1,799,172
Bell Atlantic Finance
05-27-98 5.55 1,100,000 1,095,607
Delaware Funding
05-15-98 5.54 1,600,000(i) 1,596,565
Fleet Funding
05-27-98 5.54 2,000,000(i) 1,992,041
Paccar Financial
05-26-98 5.54 700,000 697,317
Total 7,180,702
Letter of credit (0.1%)
Bank of America-
AES Hawaii
05-14-98 5.53 600,000 598,806
Total short-term securities
(Cost: $33,716,362) $33,716,362
Total investments in securities
(Cost: $977,677,075)(l) $1,000,615,252
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) Foreign security values are stated in U.S. dollars. For debt securities,
principal amounts are denominated in the currency indicated.
(c) Identifies issues considered to be illiquid as to their marketability (see
Note 1 to the financial statements). Information concerning such security
holdings at April 30, 1998, is as follows:
Security Acquisition Cost
dates
Roil
12.78% 2002 04-30-98 $4,975,000
Rostelecom
9.375% 2000 04-28-97 5,000,000
(d) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security has
been determined to be liquid under guidelines established by the board.
(e) Security is partially or fully on loan. See Note 5 to the financial
statements.
(f) The following abbreviation is used in portfolio descriptions to identify the
insurer of the issue:
MBIA -- Municipal Bond Investors Assurance
(g) U.S. Treasury inflation-protection securities (TIPS) are securities in which
the principal amount is adjusted for inflation and the semiannual interest
payments equal a fixed percentage of the inflation-adjusted principal amount.
(h) Negligible market value.
(i) Commercial paper sold within terms of a private placement memorandum, exempt
from registration under Section 4(2) of the Securities Act of 1933, as amended,
and may be sold only to dealers in that program or other "accredited investors."
This security has been determined to be liquid under guidelines established by
the board.
(j) Interest rate varies either based on a predetermined schedule or to reflect
current market conditions; rate shown is the effective rate on April 30, 1998.
(k) At April 30, 1998, cash or short-term securities were designated to cover
open put options written as follows:
Issuer Shares Exercise Expiration Value(a)
price date
Japanese Yen 10,000 $75 June 1998 $105,000
(l) At April 30, 1998, the cost of securities for federal income tax purposes
was approximately $976,966,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation...........................................$43,760,000
Unrealized depreciation...........................................(20,111,000)
-----------
Net unrealized appreciation.......................................$23,649,000
<PAGE>
Board members and officers
Independent board members and officers
Chairman William R. Pearce*
of the board Chairman of the board, Board Services Corporation (provides
administrative services to boards including the boards of the
IDS and IDSLife funds and Master Trust portfolios).
H. Brewster Atwater, Jr.
Former chairman and chief executive officer, General Mills,
Inc.
Lynne V. Cheney
Distinguished fellow, American Enterprise Institute for Public
Policy Research.
Heinz F. Hutter
Former 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
Former 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, Leslie L. Ogg*
general counsel President, treasurer and corporate secretary of Board Services
and secretary Corporation.
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 presient, AEFC.
Treasurer Matthew N. Karstetter*
Vice president, AEFC.
* Interested person as defined by the Investment Company Act of 1940.
<PAGE>
IDS mutual funds
Global/International funds
Funds in this group seek capital growth and/or income by investing primarily in
foreign securities. Foreign investments may be subject to currency fluctuations
and political and economic risks of the countries in which the investments are
made. They are high risk mutual funds with a potential for high reward.
IDS Emerging Markets Fund
Invests in a Portfolio comprised primarily of stocks of companies in developing
countries throughout the world that are believed to offer growth potential.
Seeks to provide long-term growth of capital.
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IDS Global Growth Fund
Invests in a Portfolio comprised primarily of stocks of companies throughout the
world that are positioned to meet market needs in a changing world economy.
These companies offer above-average potential for long-term growth.
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IDS International Fund
Invests primarily in common stocks of foreign companies that offer potential for
superior growth. The Fund may invest up to 20% of its assets in the U.S. market.
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IDS Global Balanced Fund
Invests in stocks and bonds in, for the most part, major markets throughout the
world, including the U.S. Seeks to provide a balance of growth of capital and
current income.
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IDS Global Bond Fund
Invests in a Portfolio comprised primarily of debt securities of U.S. and
foreign issuers to seek high total return through income and growth of capital.
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Growth funds
Funds in this group seek capital growth, primarily from common stocks. They are
high risk mutual funds with a potential for high reward.
IDS Precious Metals Fund
Invests primarily in the securities of foreign or domestic companies that
explore for, mine and process or distribute gold and other precious metals. A
highly aggressive and speculative fund that seeks long-term growth of capital.
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IDS Discovery Fund
Invests in small- and medium-size, growth-oriented companies emphasizing
technological innovation and productivity enhancement. Buys and holds larger
growth-oriented stocks.
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IDS Small Company Index Fund
Invests in all or a representative group of the equity securities comprising the
S&P SmallCap 600 Index, as it strives to provide long-term capital appreciation.
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IDS Strategy Aggressive Fund
Invests primarily in common stocks of companies that are selected for their
potential for above-average growth. Above-average means that their growth
potential is better, in the opinion of the portfolio's investment manager, than
the Standard & Poor's Corporation (S&P) 500 Stock Index.
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IDS Research Opportunities Fund
Invests in a Portfolio comprised primarily of equity securities of companies
included in the S&P 500 Index that are believed to have strong growth potential.
The Portfolio is managed using a research methodology by the Research Department
of AEFC. Goal is long-term appreciation.
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IDS Growth Fund
Invests in a Portfolio comprised primarily of companies that have above-average
potential for long-term growth as a result of new management, marketing
opportunities or technological superiority.
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IDS New Dimensions Fund
Invests in a Portfolio comprised primarily of companies with
significant growth potential due to superiority in
technology, marketing or management. The Fund frequently
changes its industry mix.
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IDS Progressive Fund
Invests primarily in undervalued common stocks. The Fund holds stocks for the
long term with the goal of capital growth.
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Growth & income funds
These funds focus on securities of medium to large, well-established companies
that offer long-term growth of capital and reasonable income from dividends and
interest. Foreign investments may be subject to currency fluctuations and
political and economic risks of the countries in which the investments are made.
IDS Equity Select Fund
Invests primarily in a combination of moderate growth stocks, higher-yielding
equities and bonds. Seeks growth of capital and income.
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IDS Blue Chip Advantage Fund
Invests in selected stocks from a major market index. Securities purchased are
those recommended by our research analysts as the best from each industry
represented on the index. Offers potential for long-term growth as well as
dividend income.
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IDS Managed Allocation Fund
Invests in a Portfolio comprised primarily of U.S. equity securities, U.S. and
foreign debt securities, foreign equity securities and money market instruments.
The Fund provides diversification among these major investment categories and
has a target mix that represents the way the Fund's investments will be
allocated over the long term. Seeks maximum total return.
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IDS Stock Fund
Invests in a Portfolio comprised primarily of common stock of companies
representing many sectors of the economy. Seeks current income and growth of
capital.
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IDS Equity Value Fund
Invests primarily in undervalued common stocks that offer potential for growth
of capital and income.
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IDS Utilities Income Fund
Invests primarily in the stocks of public utility companies to seek high current
income and growth of income and capital with reduced volatility.
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IDS Diversified Equity Income Fund
Invests in a Portfolio comprised primarily in high-yielding common stocks to
seek high current income and, secondarily, to benefit from the growth potential
offered by stock investments.
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IDS Mutual
Invests in a Portfolio which seeks to balance between common stocks and senior
securities (preferred stocks and bonds). Seeks a balance of growth of capital
and current income.
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Income funds
The funds in this group invest their assets primarily in corporate bonds or
government securities to seek interest income. Secondary objective is capital
growth. Risk varies by bond quality.
IDS Extra Income Fund
Invests in a Portfolio comprised mainly of long-term, high-yielding corporate
fixed-income securities in the lower rated, higher risk bond categories to seek
high current income. Secondary objective is capital growth.
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IDS Bond Fund
Invests mainly in corporate bonds, at least 50% in the higher rated, lower risk
bond categories, or the equivalent, and in government bonds.
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IDS Selective Fund
Invests in a Portfolio comprised primarily of high-quality corporate bonds and
other highly rated debt instruments including government securities and
short-term investments. Seeks current income and preservation of capital.
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IDS Federal Income Fund
Invests in a Portfolio comprised primarily of securities issued or guaranteed as
to the timely payment of principal and interest by the U.S. government, its
agencies and instrumentalities. Seeks a high level of current income and safety
of principal consistent with its type of investments.
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Tax-exempt income funds
These funds provide tax-free income by investing in municipal bonds. The income
is generally free from federal income tax, but a portion of the income may be
subject to state and local taxes. Risk varies by bond quality.
IDS Tax-Exempt Bond Fund
Invests mainly in bonds and notes of state or local government units, with at
least 75% in the four highest rated, lowest risk bond categories.
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IDS Insured Tax-Exempt Fund
Invests primarily in municipal securities that are insured as to the timely
payment of principal and interest. The insurance feature minimizes credit risk
of the Fund but does not guarantee the market value of the Fund's shares.
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IDS State Tax-Exempt Funds
(CA, MA, MI, MN, NY, OH)
Invests primarily in high- and medium-grade municipal securities to provide
income to residents of each respective state that is exempt from federal, state
and local income taxes. (New York is the only state that is exempt at the local
level.)
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IDS High Yield Tax-Exempt Fund
Invests in a Portfolio comprised primarily of medium- and lower-quality
municipal bonds and notes. Lower-quality securities generally involve greater
risk of principal and income.
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IDS Intermediate Tax-Exempt Fund
Invests in mainly investment-grade bonds and other debt securities with
intermediate-term maturities issued by state and local government units. Goal is
to seek a high level of current income exempt from federal taxes.
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Money market funds
These money market funds have three main goals: conservation of capital,
constant liquidity and the highest possible current income consistent with these
objectives. An investment in these funds is neither insured nor guaranteed by
the U.S. government, and there can be no assurance that these funds will be able
to maintain a stable net asset value of $1.00 per share. Very limited risk.
IDS Cash Management Fund
Invests in such money market securities as high quality commercial paper,
bankers' acceptances, certificates of deposit (CDs) and other bank securities.
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IDS Tax-Free Money Fund
Invests primarily in short-term bonds and notes issued by state and local
governments to seek high current income exempt from federal income taxes.
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For more complete information about any of these funds, including charges and
expenses, you can obtain a prospectus by contacting your financial advisor or
writing to American Express Shareholder Service, P.O. Box 534, Minneapolis, MN
55440-0534. Read it carefully before you invest or send money.
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Quick telephone reference
American Express Redemptions and exchanges, National/Minnesota
Financial Advisors dividend payments or 800-437-3133
Telephone Transaction reinvestments and automatic
Service payment arrangements Mpls./St. Paul area:
671-3800
TTY Service For the hearing impaired 800-846-4852
American Express Automated account information 800-862-7919
Financial Advisors (TouchTone(R) phones only),
Easy Access Line including current fund prices
and performance, account values
and recent account transactions
AMERICAN EXPRESS Financial Advisors
IDS Global Bond Fund
IDS Tower 10
Minneapolis, MN 55440-0010
