<PAGE>
PAGE 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. 1 (File No. 33-60323) X
Post-Effective Amendment No.
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 1 (File No. 811-7305) X
EXPRESS DIRECT INCOME FUND, INC.
IDS Tower 10, Minneapolis, Minnesota 55440-0010
Eileen J. Newhouse - IDS Tower 10, Minneapolis, Minnesota
55440-0010
(612) 671-2772
Approximate Date of Proposed Public Offering:
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay the effective date until
the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of
1933 or until the Registration Statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a),
shall determine.
The Registrant has registered an indefinite number or amount of
securities under the Securities Act of 1933 pursuant to Rule 24f of
the Investment Company Act of 1940.
Income Trust has also executed this Registration Statement.<PAGE>
PAGE 2
Cross reference sheet for the Fund showing the location in its
prospectus and the Statement of Additional Information of the
information called for by the items enumerated in Parts A and B of
Form N-1A.
Negative answers omitted from prospectus are so indicated.
<TABLE><CAPTION>
PART A PART B
Section Section in
Item No. in Prospectus Item No. Statement of Additional Information
<S> <C> <C> <C>
1 Cover page of prospectus 10 Cover page of SAI
2(a) The Funds in brief; Sales charge and Fund 11 Table of Contents
expenses
(b) The Funds in brief; Sales charge and Fund 12 NA
expenses
(c) The Funds in brief; Sales charge and Fund 13(a) Additional Investment Policies; all
expenses appendices except Dollar-Cost Averaging
(b) Additional Investment Policies
3(a) NA (c) Additional Investment Policies
(b) NA (d) Portfolio Transactions
(c) Performance
(d) NA 14(a) Board Members and Officers
(b) Board Members and Officers
4(a) The Funds in brief; Investment policies (c) Board Members and Officers
and risks; How the Funds and Portfolios
are organized 15(a) NA
(b) Investment policies and risks (b) NA
(c) Investment policies and risks (c) Board Members and Officers
5(a) Board members and officers 16(a)(i) How the Funds and Portfolios are organized*;
About the Advisor
(b)(i) Manager and distributor; About the Advisor (a)(ii) Agreements: Investment Management Services
(b)(ii) Investment manager; Administrator and Agreement, Plan and Supplemental
transfer agent Agreement of Distribution/Distribution Agreement
(b)(iii) Investment manager (a)(iii) NA
(c) Portfolio managers (b) NA
(d) Administrator and transfer agent (c) NA
(e) Administrator and transfer agent (d) Agreements: Administrative Services Agreement
(f) Investment manager; Administrator and (e) NA
transfer agent; Distributor (f) Agreements: Plan and Supplemental Agreement of
(g) About the Advisor Distribution/Distribution Agreement
(g) NA
5A(a) NA (h) Custodian; Independent Auditors
(b) NA (i) Agreements: Transfer Agency Agreement; Custodian
6(a) Shares; Voting rights 17(a) NA
(b) NA (b) Brokerage Commissions Paid to Brokers Affiliated
(c) NA with American Express Financial Corporation
(d) NA (c) Portfolio Transactions
(e) Cover page; Special shareholder services (d) Portfolio Transactions
(f) Dividends and capital gains distributions; (e) Portfolio Transactions
Reinvestments
(g) Taxes 18(a) Shares; Voting rights*
(h) Special considerations regarding master/ (b) NA
feeder structure
7(a) Distributor 19(a) Investing in the Fund
(b) Valuing Fund shares (b) Valuing Fund shares*; Investing in the Funds;
(c) NA Redeeming Shares
(d) How to purchase shares (c) Redeeming Shares
(e) NA
(f) Distributor 20 Taxes
8(a) How to redeem shares; Special considerations 21(a) Agreements: Plan and Supplemental Agreement of
regarding master/feeder structure Distribution/Distribution Agreement, Placement
(b) NA Agency Agreement
(c) How to purchase, exchange or redeem shares:
Other important information (b) Agreements: Pland and Supplemental Agreement of
(d) How to purchase, exchange or redeem shares: Distribution/Distribution Agreement, Placement
How to redeem shares Agency Agreement
9 None 22(a) NA
(b) Performance Information (for all funds except
money market funds)
23 NA
*Designates page number in prospectus.
/TABLE
<PAGE>
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Express Direct Income Fund, Inc.
Prospectus
_______, 1995
Express Direct Income Fund, Inc. is a series mutual fund with three
series of capital stock representing interests in Express Direct
Government Income Fund, Express Direct Quality Income Fund and
Express Direct Aggressive Income Fund. Each Fund is a diversified
mutual fund with its own goals and investment policies.
The goals of Express Direct Government Income Fund are to provide
shareholders with a high level of current income and safety of
principal consistent with investment in U.S. government and
government agency securities.
The goals of Express Direct Quality Income Fund are current income
and the preservation of capital by investing in investment-grade
bonds.
The primary goal of Express Direct Aggressive Income Fund is to
provide high current income. Capital growth is a secondary goal.
Aggressive Income Fund invests primarily, and may invest all of its
assets, in long-term corporate bonds in the lower-rating
categories, commonly known as junk bonds. These securities
generally have greater price fluctuations than higher-rated
securities and are more likely to experience a default. Investors
should carefully consider these risks before investing. See the
prospectus sections entitled "Goals and types of Fund investments
and their risks" and "Facts about investments and their risks."
Each Fund, unlike most funds that invest directly in securities,
seeks to achieve its objective by investing all of its assets in a
corresponding Portfolio of Income Trust, which is a separate
investment company. The Portfolio in which each Fund invests has
the same investment objectives, policies and restrictions as that
Fund.
This prospectus contains facts that can help you decide if one or
more of the Funds is the right investment for you. Read it before
you invest and keep it for future reference.
Additional facts about the Funds are in a Statement of Additional
Information (SAI), filed with the Securities and Exchange
Commission. The SAI, dated _______, 199_, is incorporated here by
reference. For a free copy, contact American Express Financial
Services Direct.
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.
<PAGE>
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SHARES IN THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND SHARES ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY. INVESTMENTS IN THE FUNDS
INVOLVE INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
American Express Financial Services Direct
P.O. Box 59196
Minneapolis, MN
55459-0196
1-800-AXP-SERV
TTY: 1-800-710-5260
<PAGE>
PAGE 5
Table of contents
The Funds in brief
Goals and types of Fund investments and their risks
Manager and distributor
Portfolio managers
Sales charges and Fund expenses
Performance
Total returns
Yield
Investment policies and risks
Facts about investments and their risks
Valuing Fund shares
How to purchase, exchange or redeem shares
How to purchase shares
How to exchange shares
How to redeem shares
Systematic purchase plans
Other important information
Special shareholder services
Services
Quick telephone reference
Distributions and taxes
Dividend and capital gain distributions
Reinvestments
Taxes
How to determine the correct TIN
How the Funds and Portfolios are organized
Shares
Voting rights
Shareholder meetings
Special considerations regarding master/feeder structure
Board members and officers
Investment manager
Administrator and transfer agent
Distributor
About the Advisor
Appendices
Description of corporate bond ratings
Descriptions of derivative instruments
<PAGE>
PAGE 6
The Funds in brief
Express Direct Income Fund, Inc. (the Company) is a series mutual
fund with three series of capital stock representing interests in
Express Direct Government Income Fund (Government Income Fund),
Express Direct Quality Income Fund (Quality Income Fund) and
Express Direct Aggressive Income Fund (Aggressive Income Fund) (the
Funds). Each Fund is a diversified mutual fund with its own goals
and investment policies. Each of the Funds seeks to achieve its
goals by investing all of its assets in a corresponding series (the
Portfolio) of Income Trust (the Trust) rather than by directly
investing in and managing its own portfolio of securities.
Goals and types of Fund investments and their risks
Government Income Fund seeks to provide shareholders with a high
level of current income and safety of principal consistent with
investment in U.S. government and government agency securities by
investing all of its assets in Government Income Portfolio, a
Portfolio of the Trust with the same investment objective as
Government Income Fund. Government Income Portfolio is a
diversified mutual fund that invests at least 65% of its total
assets in securities issued or guaranteed as to principal and
interest by the U.S. government and its agencies. Most investments
are in pools of mortgage loans. Government Income Portfolio also
may invest in non-governmental debt securities, derivative
instruments and money market instruments.
Quality Income Fund seeks to provide shareholders with current
income and preservation of capital by investing all of its assets
in Quality Income Portfolio, a Portfolio of the Trust with the same
investment objective as Quality Income Fund. Quality Income
Portfolio is a diversified mutual fund that invests at least 90% of
its net assets in the four highest investment grades of corporate
debt securities, certain unrated debt securities the portfolio
manager believes have the same investment qualities, government
securities, derivative instruments and money market securities.
Other investments may include common and preferred stocks and
convertible securities. The investments are both U.S. and foreign.
Aggressive Income Fund seeks to provide shareholders with high
current income as its primary goal and, as its secondary goal,
capital growth by investing all of its assets in Aggressive Income
Portfolio, a Portfolio of the Trust with the same investment
objective as Aggressive Income Fund. Aggressive Income Portfolio
is a diversified mutual fund that invests primarily in long-term,
high-yielding, high risk debt securities below investment grade
issued by U.S. and foreign corporations. These securities are
commonly known as junk bonds. They generally involve greater
volatility of price and risk of principal and income than higher
rated securities. Aggressive Income Portfolio also invests in
government securities, investment-grade bonds, convertible
securities, common and preferred stocks, derivative instruments and
money market instruments.
<PAGE>
PAGE 7
Because investments involve risk, a Fund cannot guarantee achieving
its goals. Some of the Portfolios' investments may be considered
speculative and involve additional investment risks.
The foregoing investment goals are fundamental policies of each
Fund and Portfolio, which may not be changed unless authorized by a
vote of shareholders of the Fund or of the Portfolio, as the case
may be. However, any Fund may withdraw its assets from the
corresponding Portfolio at any time if the board of directors of
the Company determines that it is in the best interests of the Fund
to do so. In such event, the Company would consider what action
should be taken, including whether to retain an investment advisor
to manage the Fund's assets directly or to reinvest all of the
Fund's assets in another pooled investment entity.
Manager and distributor
The Portfolios are managed by American Express Financial
Corporation (the Advisor), a provider of financial services since
1894. The Advisor currently manages more than $__ billion in
assets. Shares of the Funds are sold through American Express
Financial Advisors Inc. (the Distributor), a wholly owned
subsidiary of the Advisor.
Portfolio managers
Government Income Portfolio
Jim Snyder joined the Advisor in 1989 as an investment analyst and
currently serves as portfolio manager. He has managed the assets
of Government Income Portfolio since 1993 after having served as
associate portfolio manager from 1992 to 1993. He also serves as
portfolio manager of IDS Life Series Fund, Government Securities
Portfolio, another fund managed by the Advisor. Prior to joining
the Advisor, he was a Quantitative Investment Analyst at Harris
Trust.
Quality Income Portfolio
Ray Goodner joined the Advisor in 1977 and serves as vice president
and senior portfolio manager. He has managed the assets of Quality
Income Portfolio since 1985. He also manages the assets of World
Income Portfolio, another fund managed by the Advisor.
Aggressive Income Portfolio
Jack Utter joined the Advisor in 1962 and serves as senior
portfolio manager. He has managed the assets of Aggressive Income
Portfolio since 1985.
Sales charge and Fund expenses
The purpose of the following table and example is to summarize the
aggregate expenses of each Fund and its corresponding Portfolio and
to assist investors in understanding the various costs and expenses
that investors in the Fund may bear directly or indirectly. The
Company's board of directors believes that, over time, the
aggregate per share expenses of a Fund and its corresponding<PAGE>
PAGE 8
Portfolio should be approximately equal to (and may be less than)
the per share expenses a Fund would have if the Company retained
its own investment advisor and the assets of each Fund were
invested directly in the type of securities held by the
corresponding Portfolio. The percentages indicated as "Management
fee" and "Other expenses" are based on both the Fund's and
Portfolio's projected fees and expenses for the current fiscal year
ending May 31, 1996. For additional information concerning Fund
and Portfolio expenses, see "How the Funds and Portfolios are
Organized."
Shareholder transaction expenses
Maximum sales charge on purchases*
(as a percentage of offering price)
Government Quality Aggressive
Income Fund Income Fund Income Fund
0% 0% 0%
Annual Fund and allocated Portfolio operating expenses
(% of average daily net assets):
Government Quality Aggressive
Income Fund Income Fund Income Fund
Management fee
12b-1 fee
Other expenses**
Total
*Each Fund imposes a 0.75% redemption fee for shares redeemed or
exchanged within 180 days of their purchase date. This fee
reimburses the Fund for brokerage fees and other costs incurred.
This fee also helps assure that long-term shareholders are not
unfairly bearing the costs associated with frequent traders.
**Other expenses include an administrative 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:
Government Quality Aggressive
Income Fund Income Fund Income Fund
1 year
3 years
The table and example do not represent actual expenses, past or
future. Actual expenses may be higher or lower than those shown.
Because the Funds pay annual distribution (12b-1) fees, long-term
shareholders may indirectly pay an equivalent of more than a __%
sales charge, the maximum permitted by the National Association of
Securities Dealers.
<PAGE>
PAGE 9
Performance
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.
Total returns
Average annual total returns as of Dec. 31, 1995
Purchase 1 year 5 years 10 years Since
made ago ago ago inception*
Government Income
Fund
Lehman Treasury
Bond Index
Quality Income Fund
Aggressive Income Fund
Lehman Aggregate
Bond Index
*August 19, 1985 for Government Income Fund
Cumulative total returns as of Dec. 31, 1995
Purchase 1 year 5 years 10 years Since
made ago ago ago inception*
Government Income
Fund
Lehman Treasury
Bond Index
Quality Income Fund
Aggressive Income Fund
Lehman Aggregate
Bond Index
*August 19, 1985 for Government Income Fund
On _________, 1995, IDS Federal Income Fund, IDS Selective Fund and
IDS Extra Income Fund (the IDS Funds) transferred all of their
assets to Government Income Portfolio, Quality Income Portfolio and
Aggressive Income Portfolio, respectively. The performance
information in the foregoing tables represents performance of the
corresponding IDS Funds prior to March 20, 1995 and of Class A
shares of the corresponding IDS Funds from March 20, 1995 through
____________, 1995, in each case adjusted to reflect the absence of
sales charges on shares of the Funds sold through this prospectus.
<PAGE>
PAGE 10
The historical performance has not been adjusted for any difference
between the estimated aggregate fees and expenses of the Funds and
historical fees and expenses of the IDS Funds.
These examples show total returns from hypothetical investments in
each Fund. These returns are compared to those of popular indexes
for the same periods.
For purposes of calculation, information about each Fund makes no
adjustments for taxes an investor may have paid on the reinvested
income and capital gains, and covers a period of widely fluctuating
securities prices. Returns shown should not be considered a
representation of a Fund's future performance.
A Portfolio's investments may be different from those in the
indexes. The indexes reflect reinvestment of all distributions and
changes in market prices, but exclude brokerage commissions or
other fees.
Lehman Treasury Bond Index is made up of a representative list of
government bonds that include all publicly issued obligations of
the U.S. Treasury. Lehman Aggregate Bond Index is made up of a
representative list of government and corporate bonds as well as
asset-backed securities and mortgage-backed securities. The
indexes are frequently used as general measures of bond market
performance. However, the securities used to create the indexes
may not be representative of the debt securities held in the
Portfolios.
Yield
Yield is the net investment income earned per share for a specified
time period, divided by the net asset value at the end of the
period. From time to time the Funds may advertise their 30-day
annualized yields. The Funds calculate this 30-day annualized
yield by dividing:
o net investment income per share deemed earned during a 30-day
period by
o the net asset value per share on the last day of the period,
and
o converting the result to a yearly equivalent figure.
A Fund's yield varies from day to day, mainly because share values
(that are calculated daily) vary in response to changes in interest
rates. Net investment income normally changes much less in the
short run. Thus, when interest rates rise and share values fall,
yield tends to rise. When interest rates fall, yield tends to
follow. Past yields should not be considered an indicator of
future yields.
<PAGE>
PAGE 11
Investment policies and risks
Unlike mutual funds which directly acquire and manage their own
portfolio of securities, each of the Funds seeks to achieve its
investment objective by investing all of its assets in a
corresponding Portfolio of the Trust, which is a separate
investment company. The Portfolio in which each Fund invests has
the same investment objectives, policies and restrictions as that
Fund. The board of directors of the Company believes that by
investing all of its assets in the corresponding Portfolio, each
Fund will be in a position to realize directly or indirectly
certain economies of scale inherent in managing a larger asset
base. The policies described below apply both to the Fund and its
corresponding Portfolio.
Government Income Portfolio - Government Income Portfolio invests
primarily in securities issued or guaranteed as to principal and
interest by the U.S. government, its agencies and
instrumentalities. Under normal market conditions, at least 65% of
the Portfolio's total assets will be invested in such securities.
Although Government Income Portfolio may invest in any U.S.
government securities, it is anticipated that most of the Portfolio
will consist of government securities representing part ownership
of pools of mortgage loans.
Government Income Portfolio
Bond ratings and holdings for the calendar year
ending Dec. 31, 1995
<TABLE><CAPTION>
Percent of
net assets
in unrated
S&P Rating Protection of securities
Percent of (or Moody's principal and assessed by
net assets equivalent) interest the Advisor
<S> <C> <C> <C>
AAA Highest quality
AA High quality
A Upper medium grade
BBB Medium grade
BB Moderately speculative
B Speculative
CCC Highly speculative
CC Poor quality
C Lowest quality
D In default
Unrated Unrated securities
</TABLE>
Quality Income Portfolio - Quality Income Portfolio invests in the
four highest investment grades of marketable corporate debt
securities, certain unrated debt securities the portfolio manager
believes have the same investment qualities, government securities,
derivative instruments and money market instruments. Under normal
market conditions, at least 90% of Quality Income Portfolio's net
assets will be in these investments. The remaining 10% of Quality
Income Portfolio's net assets may be invested in common and
preferred stocks and convertible securities. The Portfolio may
invest up to 25% of its total assets in foreign investments.
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PAGE 12
Quality Income Portfolio
Bond ratings and holdings for the calendar year
ending Dec. 31, 1995
<TABLE><CAPTION>
Percent of
net assets
in unrated
S&P Rating Protection of securities
Percent of (or Moody's principal and assessed by
net assets equivalent) interest the Advisor
<S> <C> <C> <C>
AAA Highest quality
AA High quality
A Upper medium grade
BBB Medium grade
BB Moderately speculative
B Speculative
CCC Highly speculative
CC Poor quality
C Lowest quality
D In default
Unrated Unrated securities
</TABLE>
Aggressive Income Portfolio - Aggressive Income Portfolio primarily
invests in debt securities below investment grade issued by U.S.
and foreign corporations. Most of these will be rated BBB, BB, or
B by Standard & Poor's Corporation (S&P) or the Moody's Investors
Services, Inc. (Moody's) equivalent. However, the Portfolio may
invest in debt securities with lower ratings, including those in
default. Aggressive Income Portfolio may invest up to 10% of its
total assets in common stocks, preferred stocks that do not pay
dividends and warrants to purchase common stocks. Other
investments include investment grade bonds, convertible securities,
stocks, derivative instruments and money market instruments. The
Portfolio may invest up to 25% of its total assets in foreign
investments.
Aggressive Income Portfolio
Bond ratings and holdings for the calendar year
ending Dec. 31, 1995
<TABLE><CAPTION>
Percent of
net assets
in unrated
S&P Rating Protection of securities
Percent of (or Moody's principal and assessed by
net assets equivalent) interest the Advisor
<S> <C> <C> <C>
AAA Highest quality
AA High quality
A Upper medium grade
BBB Medium grade
BB Moderately speculative
B Speculative
CCC Highly speculative
CC Poor quality
C Lowest quality
D In default
Unrated Unrated securities
</TABLE>
(See Appendix to this prospectus describing corporate bond ratings
for further information. The information in the tables above
relates to IDS Federal Income Fund, IDS Selective Fund and IDS
Extra Income Fund, all of which transferred their assets to
Government Income Portfolio, Quality Income Portfolio and
Aggressive Income Portfolio, respectively, on _____________, 1996.)
<PAGE>
PAGE 13
The various types of investments described above that the portfolio
managers use to achieve investment performance are explained in
more detail in the next section and in the SAI.
Facts about investments and their risks
Debt securities: The price of bonds generally falls as interest
rates increase, and rises as interest rates decrease. The price of
a bond also fluctuates if its credit rating is upgraded or
downgraded. The price of bonds below investment grade may react
more to the ability of a company to pay interest and principal when
due than to changes in interest rates. They have greater price
fluctuations, are more likely to experience a default, and
sometimes are referred to as junk bonds. Reduced market liquidity
for these bonds may occasionally make it more difficult to value
them. In valuing bonds a Portfolio relies both on independent
rating agencies and the investment manager's credit analysis.
Government Income and Quality Income Portfolios do not invest in
securities below investment grade.
Securities that are subsequently downgraded in quality may continue
to be held by a Portfolio and will be sold only when the investment
manager believes it is advantageous to do so.
Debt securities sold at a deep discount: Some bonds are sold at
deep discounts because they do not pay interest until maturity.
They include zero coupon bonds and PIK (pay-in-kind) bonds. To
comply with tax laws, a Portfolio has to recognize a computed
amount of interest income and pay dividends to unitholders even
though no cash has been received. In some instances, a Portfolio
has to sell securities to have sufficient cash to pay the
dividends.
Government securities: U.S. Treasury bonds, notes and bills, and
securities including mortgage pass through certificates of the
Government National Mortgage Association (GNMA), are guaranteed by
the United States. Other U.S. government securities are issued or
guaranteed by federal agencies or government-sponsored enterprises
but are not direct obligations of the United States. These include
securities supported by the right of the issuer to borrow from the
Treasury, such as obligations of Federal Home Loan Mortgage
Corporation (FHLMC) and Federal National Mortgage Association
(FNMA) bonds. Because the U.S. government is not obligated to
provide financial support to its instrumentalities, Government
Income Portfolio will invest only in securities issued by those
instrumentalities where the investment manager is satisfied the
credit risk is minimal.
Mortgage-backed securities: A mortgage pass-through certificate
represents an interest in a pool, or group, of mortgage loans
assembled by GNMA, FNMA, or FHLMC 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 <PAGE>
PAGE 14
a Portfolio, which is influenced by both stated interest rates and
market conditions, may be different than the quoted yield on the
certificates. A Portfolio may also invest in non-governmental
mortgage-related securities and debt securities, such as bonds,
debentures and collateralized mortgage obligations secured by
mortgages on commercial real estate or residential rental
properties, provided such securities are rated A or better by
Moody's or S&P or, if not rated, are of equivalent investment
quality as determined by the Portfolio's investment manager. Some
U.S. government securities may be purchased on a when-issued basis,
which means that it may take as long as 45 days after the purchase
before the securities are delivered to the Portfolio.
Each Portfolio 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. If prepayments of principal
are greater than anticipated, an investor in IOs may incur
substantial losses. If prepayments of principal are slower than
anticipated, the yield on a PO will be affected more severely than
would be the case with a traditional mortgage-backed security.
The Portfolios may purchase mortgage-backed security (MBS) put
spread options and write covered MBS call spread options. MBS
spread options are based upon the changes in the price spread
between a specified mortgage-backed security and a like-duration
Treasury security. MBS spread options are traded in the OTC market
and are of short duration, typically one to two months. A
Portfolio would buy or sell covered MBS call spread options in
situations where mortgage-backed securities are expected to under
perform like-duration Treasury securities.
Common stocks: Stock prices are subject to market fluctuations.
Stocks of larger, established companies that pay dividends may be
less volatile than the stock market as a whole. 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.
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 <PAGE>
PAGE 15
common stock makes the exchange likely, the convertible securities
trade more like common stock.
Foreign investments: Securities of foreign companies and
governments may be traded in the United States, but often they are
traded only on foreign markets. Frequently, there is less
information about foreign companies and less government supervision
of foreign markets. Foreign investments are subject to political
and economic risks of the countries in which the investments are
made, including the possibility of seizure or nationalization of
companies, imposition of withholding taxes on income, establishment
of exchange controls or adoption of other restrictions that might
affect an investment adversely. If an investment is made in a
foreign market, the local currency must be purchased. This is done
by using a forward contract in which the price of the foreign
currency in U.S. dollars is established on the date the trade is
made, but delivery of the currency is not made until the securities
are received. As long as a Portfolio holds foreign currencies or
securities valued in foreign currencies, the price of a share will
be affected by changes in the value of the currencies relative to
the U.S. dollar. Because of the limited trading volume in some
foreign markets, efforts to buy or sell a security may change the
price of the security, and it may be difficult to complete the
transaction.
Derivative instruments: A portfolio 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 portfolio manager to change the investment performance
characteristics very quickly and at lower costs. Risks include
losses of premiums, rapid changes in prices, defaults by other
parties, and inability to close such instruments. A Portfolio will
use derivative instruments only to achieve the same investment
performance characteristics it could achieve by directly holding
those securities and currencies permitted under the investment
policies. The Portfolios will designate cash or appropriate liquid
assets to cover portfolio obligations. No more than 5% of each
Portfolio's net assets can be used at any one time for good faith
deposits on futures and premiums for options on futures that do not
offset existing investment positions. Certain of the investments
previously discussed, including mortgage-backed securities, are
also generally regarded as derivatives. The Portfolios are not
limited as to the percentage of their assets that may be invested
in permissible investments, including derivatives, except as
otherwise explicitly provided in this prospectus or the SAI. For<PAGE>
PAGE 16
descriptions of these and other types of derivative instruments,
see the Appendix to this prospectus and the SAI.
Securities and derivative instruments that are illiquid: A
security or derivative 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. All securities and derivative instruments, however,
can be sold in private sales, and many may be sold to other
institutions and qualified buyers or on foreign markets. Each
portfolio manager will follow guidelines established by the board
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 a Portfolio's net assets will be
held in securities and derivative instruments that are illiquid.
Money market instruments: Short-term debt securities rated in the
top two grades 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 a Portfolio'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: Each Portfolio may lend its
securities to earn income so long as borrowers provide collateral
equal to the market value of the loans. The risks are that
borrowers will not provide collateral when required or return
securities when due. Unless holders of outstanding voting
securities approve otherwise, loans may not exceed 30% of a
Portfolio's net assets.
Valuing Fund shares
The net asset value (NAV) is the value of a single Fund share. It
is the total value of a Fund's investments in the corresponding
Portfolio and other assets, less any liabilities, divided by the
number of shares outstanding. The NAV is the price at which you
purchase Fund shares and the price you receive when you sell your
shares. It usually changes from day to day, 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). NAV generally
declines as interest rates increase and rises as interest rates
decline.
To establish the net assets, all securities are valued as of the
close of each business day. In valuing assets:
o Securities (except bonds) and assets with available market
values are valued on that basis.
o Securities maturing in 60 days or less are valued at amortized
cost.<PAGE>
PAGE 17
o Bonds and assets without readily available market values are
valued according to methods selected in good faith by the
board of trustees.
How to purchase, exchange or redeem shares
How to purchase shares
Purchasing shares through an AEFA account. You may purchase shares
of the Funds exclusively through an Investment Management Account
maintained with American Express Financial Advisors (AEFA). Payment
for shares must be made directly to AEFA.
If you already have an AEFA account, you may buy shares in the
Funds as described below and need not open a new account.
If you do not have an AEFA account, complete an AEFA Account
Application (available by calling 1-800-AXP-SERV) and mail the
application to American Express Financial Services Direct, P.O. Box
59196, Minneapolis, MN 55459-0196. Corporations and other
organizations should contact AEFA to determine which additional
forms may be necessary to open an AEFA account.
You may deposit money into your AEFA account by check, wire or many
other forms of electronic funds transfer (securities may also be
deposited). All deposit checks should be made payable to AEFA. If
you would like to wire funds into your existing AEFA account,
please contact AEFA at 1-800-AXP-SERV for instructions.
Minimum Fund investment requirements. Your initial investment in a
Fund may be as low as $2,000 ($1,000 for custodial accounts,
Individual Retirement Accounts and certain other retirement plans).
The minimum subsequent investment is $100. These requirements may
be reduced or waived as described in the SAI.
When and at what price shares will be purchased. You must have
money available in your AEFA account in order to purchase Fund
shares. If your order and payment (including money transmitted by
wire) are received and accepted by AEFA before 2 p.m. Central time,
your money will be invested at the net asset value determined as of
the close of business (normally 3 p.m. Central time) that day. If
your order and payment are received after that time, your order
will not be accepted or your payment invested until the next
business day. (See "Valuing Fund shares.")
Methods of purchasing shares. AEFA offers you three convenient
ways to purchase shares of the Funds. You may choose the one that
works best for you. AEFA will send you confirmation of your
purchase order.
<PAGE>
PAGE 18
By phone:
You may use money in your AEFA account to make initial and
subsequent purchases. To place your order, call 1-800-AXP-
SERV.
By mail:
Written purchase orders (along with any checks) should be
mailed to American Express Financial Services Direct, P.O. Box
59196, Minneapolis, MN 55459-0196, and should contain the
following information:
o your AEFA account number (or an AEFA Account Application)
o the name of the fund(s) and the dollar amount of shares
you would like purchased
Your check should be made out to AEFA. It will be deposited
into your AEFA account and used, as necessary, to cover your
purchase order.
By systematic purchase:
Once you have opened an AEFA account, you may authorize AEFA
to automatically purchase shares on your behalf at intervals
and in amounts pre-selected by you. (See "Systematic Purchase
Plans")
You may choose from two distribution options. You may select from
two distribution options when you first become a shareholder in any
of the Funds. If you already are a shareholder and wish to change
your distribution option, please call AEFA for assistance.
o Automatic reinvestment: Both income dividends and
capital gains distributions will be reinvested in
additional shares. This option will be selected
automatically unless you specify the other option.
o All cash: Dividends and capital gain distributions will
both be paid in cash.
Dividends and distributions subject to reinvestment will be
invested at the net asset value next determined after their record
date. Cash distributions will be credited to your AEFA account and
will be held there or mailed to you depending on the standing
instructions applicable to your account.
Other purchase information. Each Fund reserves the right in its
sole discretion and without prior notice to shareholders, to
withdraw or suspend all or any part of the offering made by this
prospectus, to reject purchase orders or to change the minimum
investment requirements. All orders to purchase shares of the Fund
<PAGE>
PAGE 19
are subject to acceptance by the Funds and AEFA and are not binding
until confirmed or accepted in writing. AEFA will charge a $15
service fee against an investor's AEFA account if his or her
investment check is returned because of insufficient or uncollected
funds or a stop payment order.
How to exchange shares
The exchange privilege allows you to exchange your investment in a
Fund at no charge for shares of other funds in the Express Direct
Group of Funds available in your state. For complete information,
including fees and expenses, read the prospectus carefully before
exchanging into a new fund. Any exchange will involve the
redemption of Fund shares and the purchase of shares in another
fund on the basis of the net asset value per share of each fund.
An exchange may result in a gain or loss and is a taxable event for
federal income tax purposes. When exchanging into another fund you
must meet that fund's minimum investment requirements. Each Fund
reserves the right to modify, terminate or limit the exchange
privilege. The current limit is four exchanges per calendar year.
AEFA and the Funds 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 Funds and their
shareholders.
How to redeem shares
The price at which shares will be redeemed. Shares will be
redeemed at the net asset value per share next determined after
receipt by AEFA of proper redemption instructions, as described
below. The amount you receive may be more or less than you
invested.
Each Fund imposes a 0.75% redemption fee for shares redeemed or
exchanged within 180 days of their purchase date. This fee
reimburses the Fund for brokerage fees and other costs incurred.
This fee also helps assure that long-term shareholders are not
unfairly bearing the costs associated with frequent traders.
Payment of redemption proceeds. Payment for redeemed shares will
be credited directly to your AEFA account no later than seven days
after AEFA receives your redemption instructions in proper form.
Redemption proceeds will be held there or mailed to you depending
on the account standing instructions you selected.
If you purchased shares by check, your redemption proceeds may be
held in your AEFA account until your check clears (which may take
up to 15 business days from the purchase date).
<PAGE>
PAGE 20
A redemption is a taxable transaction. If the Fund's net asset
value when you sell shares is 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.
Methods of exchanging or redeeming shares
By phone:
You may exchange between any of the Express Direct Funds or redeem
your shares by calling 1-800-AXP-SERV. Telephone exchanges or
redemptions may be difficult to implement during periods of drastic
economic or market changes. If you experience difficulties in
exchanging or redeeming shares by telephone, you can mail your
exchange or redemption requests as described below.
To properly process your telephone exchange or redemption request
we will need the following information:
o your AEFA account number and your name (for exchanges, both
funds must be registered in the same ownership)
o the name of the fund from which you wish to exchange or redeem
shares
o the dollar amount or number of shares you want to exchange or
redeem
o the name of the fund into which shares are to be exchanged, if
applicable
Telephone exchange or redemption requests received before 2 p.m.
(Central time) on any business day, once the caller's identity and
account ownership have been verified by AEFA, will be processed at
the net asset value determined as of the close of business
(normally 3 p.m. Central time) that day.
By mail:
You may also request an exchange or redemption by writing to
American Express Financial Services Direct, P.O. Box 59196,
Minneapolis, MN 55459-0196. Once an exchange or redemption request
is mailed it is irrevocable and cannot be modified or cancelled.
To properly process your mailed exchange or redemption request, we
will need a letter from you that contains the following
information:
o your AEFA account number
o the name of the Fund from which you wish to exchange or redeem
shares
o the dollar amount or number of shares you want to exchange or
redeem
o the name of the fund into which shares are to be exchanged, if
applicable, and
o a signature of at least one of the AEFA account holders in the
exact form specified on the account
<PAGE>
PAGE 21
Telephone transactions. You may make purchase, redemption and
exchange requests by mail or by calling 1-800-AXP-SERV where
trained representatives are available to answer questions about the
Funds and your account. The privilege to initiate transactions by
telephone is automatically available through your AEFA account.
Each Fund will honor any telephone transaction believed to be
authentic and will use reasonable procedures to confirm that
instructions communicated by telephone are genuine. This includes
asking identifying questions and tape recording calls. If these
procedures are not followed, a Fund may be liable for losses due to
unauthorized or fraudulent instructions. Telephone privileges may
be modified or discontinued at any time.
Systematic purchase plans
AEFA offers a Systematic Purchase Plan (SPP) that allows you to
make periodic investments in Express Direct Funds automatically and
conveniently. A SPP can be used as a dollar cost averaging program
and saves you time and expense associated with writing checks or
wiring funds.
Investment minimums: You can make automatic investments in any
amount, from $100 to $50,000.
Investment methods: Automatic investments are made from your AEFA
account and you may select from several different investment
methods to make automatic investment(s):
a) Using uninvested cash in your AEFA account: If you elect to
use this option to make your automatic investments, uninvested
cash in your AEFA account will be used to make the investment
and, if necessary, shares of your Money Market Fund will be
redeemed to cover the balance of the purchase.
b) Using bank authorization on direct deposit: Bank
authorizations (transfers from a bank checking or savings
account) and direct deposit (automatic deposit of all or a
portion of a payroll or government check) are two of the
investment method options that are available through SPP.
Money is transferred into your AEFA account and automatic
investments can be made using these amounts.
If you elect to use bank authorizations and/or direct deposit for
your automatic investments, you will select two dates: a transfer
date (when the money is transferred into your AEFA account) and
your investment date. The automatic investment date selected may
be the same day of your bank authorization or direct deposit. AEFA
recommends that your investment date be on or close to the
transfer/deposit date to minimize uninvested cash in your AEFA
account.
If you make changes to your bank authorization or direct deposit
date, it may also be necessary to change your automatic investment
date to coincide with the new transfer/deposit date.
<PAGE>
PAGE 22
Investment frequency: You can select the frequency of your
automatic investments (twice monthly, monthly or quarterly) and
choose either the 5th or the 20th of the month for your automatic
investment dates. Quarterly investments are made on the date
selected in the first month of each quarter (January, April, July
and October).
Changing instructions to an already established plan: If you want
to change the Fund(s) selected for your SPP you may do so by
calling 1-800-AXP-SERV, or by sending written instructions clearly
outlining the changes to American Express Financial Services
Direct, P.O. Box 59196, Minneapolis, MN 55459-0196. Written
notification must include the following:
o The Funds with SPP that you want to cancel
o The newly selected Fund(s) in which you want to begin
making automatic investments and the amount to be
invested in each Fund
o The investment frequency and investment dates for your
new automatic investments
Information on changing bank authorization and direct deposit
instructions is included in the Systematic Purchase Plan Terms and
Conditions brochure which you will receive after enrolling in SPP.
Terminating your SPP. If you wish to terminate your SPP, you may
call 1-800-AXP-SERV, or send written instructions to American
Express Financial Services Direct, P.O. Box 59196, Minneapolis, MN
55459-0196.
Terminating bank authorizations and direct deposit. If you wish to
terminate your bank authorizations, you may do so at any time by
notifying AEFA in writing. You must notify your employer or
government agency to cancel direct deposit. Your bank
authorization and/or direct deposit will not automatically
terminate when you cancel your SPP.
IMPORTANT: If you are cancelling your bank authorizations and/or
direct deposit and you wish to cancel your SPP, you must also
provide instructions stating that AEFA should cancel your SPP. You
may notify AEFA by sending written instructions to the address
above or telephoning 1-800-AXP-SERV. Your systematic investments
will continue using AEFA account assets if AEFA does not receive
notification to terminate your systematic investments as well.
To avoid procedural difficulties, AEFA should receive instructions
to change or terminate your SPP or bank authorizations at least ten
days prior to your scheduled investment date.
Additional information. This information is only a summary of the
Systematic Purchase Plan Terms and Conditions brochure which you
will receive if you choose to enroll in SPP. Please read it
carefully and keep it for future reference.
<PAGE>
PAGE 23
Other important information
Minimum balance and account requirements. Each Fund reserves the
right to redeem your shares if, as a result of redemptions, the
aggregate value of your holdings in the Fund drops below $1,000
($500 in the case of custodial accounts, IRAs and other retirement
plans). You will be notified in writing 30 days before the Fund
takes such action to allow you to increase your holdings to the
minimum level. If you close your AEFA account, the Fund will
automatically redeem your shares.
Wire transfers to your bank. Funds can be wired from your AEFA
account to your bank account. Call AEFA for additional information
on wire transfers. A $15 service fee will be charged against your
AEFA account for each wire sent.
No person has been authorized to give any information or to make
any representations not contained in this prospectus in connection
with the offering being made by this prospectus and, if given or
made, such information or representation must not be relied upon as
having been authorized by the Funds or their Distributor. This
prospectus does not constitute an offering by the Funds or by the
Distributor in any jurisdiction in which such offering may not be
lawfully made.
Special shareholder services
Services
To help you track and evaluate the performance of your investments,
AEFA provides these services:
Quarterly statements listing all of your holdings and transactions
during the previous three months.
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.
Quick telephone reference
American Express Financial Services Direct Team
Fund performance, objectives and account inquiries, redemptions and
exchanges, dividend payments or reinvestments and automatic payment
arrangements
1-800-AXP-SERV
TTY Service
For the hearing impaired
1-800-710-5260
<PAGE>
PAGE 24
Distributions and taxes
As a shareholder you are entitled to your share of a Fund's net
income and any gains realized on its investments. Each 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
Investment income is allocated to a Fund by its corresponding
Portfolio, less direct and allocated expenses. Each Fund's net
realized capital gains or losses, if any, consist of the net
realized capital gains or losses allocated to the Fund from its
corresponding Portfolio. A Fund's income from dividends and
interest, and any net realized short-term gain, are distributed to
you monthly as dividends. A Fund will offset any net realized
capital gains by any available capital loss carryovers. The net
realized capital gains, if any, are distributed at the end of the
calendar year as capital gain distributions. Before they're
distributed, net long-term capital gains are included in the value
of each share. After they're distributed, the value of each share
drops by the per-share amount of the distribution. (If your
distributions are reinvested, the total value of your holdings will
not change.)
Reinvestments
Dividends and capital gain distributions are automatically
reinvested in additional shares of a Fund, unless you request the
Fund in writing or by phone to pay distributions to you in cash.
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 only those
declared after your request has been processed.
Taxes
The Funds have requested a Private Letter Ruling from the Internal
Revenue Service asking that for purposes of the Internal Revenue
Code each Fund be regarded as directly holding its allocable share
of the income and gain realized by the Portfolio.
Distributions are subject to federal income tax. In certain
states, Fund distributions, to the extent they consist of interest
from securities of the U.S. government and certain of its agencies
or instrumentalities, may be exempt from state and local taxes.
Interest from obligations which are merely guaranteed by the U.S.
government or one of its agencies, such as GNMA certificates, is
generally not entitled to this exemption. Distributions are
taxable in the year the Fund pays them regardless of whether you
take them in cash or reinvest them.<PAGE>
PAGE 25
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 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 either short term (for shares held
for one year or less) or long term (for shares held for more than
one year).
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 at AEFA.
If you don't 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
Use the Social Security or
For this type of account: Employer Identification number of:
Individual or joint account The individual or individuals listed
on the account
Custodian account of a minor The minor
(Uniform Gifts/Transfers to Minors
Act)
A living trust The grantor-trustee (the person who
puts the money into the trust)
<PAGE>
PAGE 26
An irrevocable trust, pension The legal entity (not the
trust or estate personal representative or trustee,
unless no legal entity is designated
in the account title)
Sole proprietorship or The owner or partnership
partnership
Corporate The corporation
Association, club or The organization
tax-exempt organization
For details on TIN requirements, call 1-800-AXP-SERV for federal
Form W-9, "Request for Taxpayer Identification Number and
Certification."
Important: This information is a brief and selective summary of
certain federal tax rules that apply to each Fund. Tax matters are
highly individual and complex, and you should consult a qualified
tax advisor about your personal situation.
How the Funds and Portfolios are organized
Each Fund is a series of Express Direct Income Fund, Inc., a
diversified, open-end management investment company, as defined in
the Investment Company Act of 1940. The Company was incorporated
on May 25, 1995 in Minnesota. The Company's headquarters are at
IDS Tower 10, Minneapolis, MN 55440-0010.
Shares
Each Fund is owned by its shareholders. All shares issued by a
Fund are of the same class -- capital stock. Par value is 1 cent
per share. Both full and fractional shares can be issued.
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.
Shareholder meetings
The Company does not hold annual shareholder meetings. However,
the directors may call meetings at their discretion, or on demand
by holders of 10% or more of the Company's outstanding shares, to
elect or remove directors.
Special considerations regarding master/feeder structure
An investor in a Fund should be aware that a Fund, unlike mutual
funds which directly acquire and manage their own portfolios of
securities, seeks to achieve its investment objective by investing
its assets in interests in the Portfolio of the Trust with an
identical investment objective. This arrangement is commonly known<PAGE>
PAGE 27
as a master/feeder structure. The Trust is a separate investment
company. Therefore, a Fund's interest in securities owned by the
Portfolio is indirect. The board has considered the advantages and
disadvantages of investing the assets of each Fund in the
corresponding Portfolio and believes that this approach will be in
the best interests of the Funds and their shareholders by
positioning the Funds to realize certain economies of scale
inherent in managing a larger asset base. Until recently, the
Advisor sponsored and advised traditionally structured funds that
invest directly in a portfolio of securities and retain their own
investment manager. Funds which invest all their assets in
interests in a separate investment company are a relatively new
development in the mutual fund industry and may be subject to
additional regulations and risks.
The investment objectives, policies and restrictions of the
Portfolios are described under the captions "Goals and types of
Fund investments and their risks" and "Investment policies and
risks."
In addition to selling an interest to a Fund, a Portfolio may sell
interests to other affiliated and non-affiliated mutual funds and
to institutional investors. Such investors will invest in the
Portfolio on the same terms and conditions and will pay a
proportionate share of the Portfolio's expenses. However, the
other investors investing in a Portfolio are not required to sell
their shares at the same public offering price as a Fund due to
variations in sales commissions and other operating expenses.
Therefore, investors in a Fund should be aware that these
differences may result in differences in returns experienced by
investors in the different funds that invest in the same Portfolio.
Information regarding other funds or pooled investment entities
which invest in Portfolios of the Trust may be obtained by
contacting _________________ at ________________.
A Fund may withdraw (completely redeem) all its assets from a
Portfolio at any time if the board determines that it is in the
best interest of the Fund to do so. In the event a Fund withdraws
all of its assets from a Portfolio, the board would consider what
action might be taken, including investing all assets of the Fund
in another pooled investment entity or retaining an investment
advisor to manage the Fund's assets in accordance with its
investment objective. The investment objective of each Fund and
its corresponding Portfolio can only be changed with the approval
of holders of outstanding voting securities. If the objective of a
Portfolio changes and shareholders of the corresponding Fund do not
approve a parallel change in the Fund's investment objective, the
Company would seek an alternative investment vehicle for that Fund
or retain an investment advisor on its behalf.
Investors in a Fund should be aware that smaller funds investing in
a Portfolio may be adversely affected by the actions of larger
funds investing in the Portfolio. For example, if a large fund
withdraws from a Portfolio, the remaining funds may experience
higher prorated operating expenses, thereby producing lower
returns. Additionally, the Portfolio may become less diverse,
resulting in increased Portfolio risk, and experience decreasing <PAGE>
PAGE 28
economies of scale. Institutional investors in a Portfolio that
have a greater pro rata ownership than a Fund could have effective
voting control over the operation of the Portfolio. Certain
changes in the Portfolio's fundamental objectives, policies and
restrictions could require a Fund to redeem its interest in a
Portfolio. Any such withdrawal could result in a distribution of
in-kind portfolio securities (as opposed to cash distribution). If
securities are distributed, the Fund could incur brokerage, tax or
other changes in converting the securities to cash. In addition, a
distribution in kind may result in a less diversified portfolio of
investments or adversely affect the liquidity of a Fund.
Wherever a Fund as an investor in a Portfolio is requested to vote
on matters pertaining to the Portfolio, the Fund will hold a
meeting of Fund shareholders and will vote its interests in the
Portfolio for or against such matters proportionately to the
instructions to vote for or against such matters received from Fund
shareholders. A Fund will vote shares for which it receives no
voting instructions in the same proportion as the shares for which
it receives voting instructions. See "Sales charge and Fund
expenses" for a complete description of the management and other
expenses associated with a Fund's investment in a corresponding
Portfolio.
Board members and officers
Shareholders of the Company elect a board of directors who oversees
the operations of the Funds and chooses the Company's officers.
The Company's officers are responsible for day-to-day business
decisions based on policies set by the board. Information about
the board members and officers of both the Company and the Trust is
found in the SAI under the caption "Board Members and Officers."
Investment manager
The Trust, on behalf of each Portfolio, pays the Advisor for
managing the assets of each Portfolio. Under its Investment
Management Services Agreement, the Advisor determines which
securities will be purchased, held or sold by each Portfolio
(subject to the direction and control of the Trust's board of
trustees). The Advisor is paid a fee for these services based on
the average daily net assets of each Portfolio, as follows:
<TABLE><CAPTION>
Government Income Portfolio
Aggressive Income Portfolio Quality Income Portfolio
Assets Annual rate at Assets Annual rate at
(billions) each asset level (billions) each asset level
<S> <C> <S> <C>
First $1.0 0.590% First $1.0 0.520%
Next 1.0 0.565 Next 1.0 0.495
Next 1.0 0.540 Next 1.0 0.470
Next 3.0 0.515 Next 3.0 0.445
Next 3.0 0.490 Next 3.0 0.420
Next 9.0 0.465 Over 9.0 0.395
</TABLE>
Under the agreement, each Portfolio also pays taxes, brokerage
commissions and nonadvisory expenses.
<PAGE>
PAGE 29
Administrator and transfer agent
Under an Administrative Services Agreement, each Fund pays the
Advisor for administration and accounting services at an annual
rate of 0.05% decreasing in gradual percentages to 0.025% as assets
increase.
In addition, under a separate Transfer Agency Agreement, the
Advisor maintains shareholder accounts and records for the Funds.
Each Fund pays an annual fee of $_____ per shareholder account for
this service.
Distributor
The Funds sell shares through the Distributor under a Distribution
Agreement. Financial consultants representing the Distributor
provide information to investors about individual investment
programs, the Funds and their operations, new account applications,
exchange and redemption requests. The Funds reserve the right to
sell shares through other broker/dealers.
To help defray costs, including costs for marketing, sales
administration, training, overhead, advertising and related
functions, the Funds pay the Distributor a distribution fee, also
known as a 12b-1 fee. This fee is paid under a Plan and Agreement
of Distribution that follows the terms of Rule 12b-1 of the
Investment Company Act of 1940. Under this Agreement, each Fund
pays a distribution fee at an annual rate of [0.__%] of the Fund's
average daily net assets for distribution-related services. This
fee will not cover all of the costs incurred by the Distributor.
Total fees and expenses (excluding taxes and brokerage commissions)
cannot exceed the most restrictive applicable state expense
limitation.
About the Advisor
The Advisor is located at IDS Tower 10, Minneapolis, MN 55440-0010.
It is a wholly owned subsidiary of American Express Company, a
financial services company with headquarters at American Express
Tower, World Financial Center, New York, NY 10285. The Portfolios
may pay brokerage commissions to broker-dealer affiliates of
American Express.
<PAGE>
PAGE 30
Appendix A
Description of corporate bond ratings
Bond ratings concern the quality of the issuing corporation. They
are not an opinion of the market value of the security. Such
ratings are opinions on whether the principal and interest will be
repaid when due. A security's rating may change, which could
affect its price. Ratings by Moody's Investors Service, Inc. are
Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C and D. Ratings by Standard &
Poor's Corporation are AAA, AA, A, BBB, BB, B, CCC, CC, C and D.
Aaa/AAA - Judged to be of the best quality and carry the smallest
degree of investment risk. Interest and principal are secure.
Aa/AA - Judged to be high-grade although margins of protection for
interest and principal may not be quite as good as Aaa or AAA rated
securities.
A - Considered upper-medium grade. Protection for interest and
principal is deemed adequate but may be susceptible to future
impairment.
Baa/BBB - Considered medium-grade obligations. Protection for
interest and principal is adequate over the short-term; however,
these obligations may have certain speculative characteristics.
Ba/BB - Considered to have speculative elements. The protection of
interest and principal payments may be very moderate.
B - Lack characteristics of more desirable investments. There may
be small assurance over any long period of time of the payment of
interest and principal.
Caa/CCC - Are of poor standing. Such issues may be in default or
there may be risk with respect to principal or interest.
Ca/CC - Represent obligations that are highly speculative. Such
issues are often in default or have other marked shortcomings.
C - Are obligations with a higher degree of speculation. These
securities have major risk exposures to default.
D - Are in payment default. The D rating is used when interest
payments or principal payments are not made on the due date.
Non-rated securities will be considered for investment when they
possess a risk comparable to that of rated securities consistent
with the Portfolio's objectives and policies. When assessing the
risk involved in each non-rated security, the Portfolio will
consider the financial condition of the issuer or the protection
afforded by the terms of the security.<PAGE>
PAGE 31
Definitions of zero-coupon and pay-in-kind securities
A zero-coupon security is a security that is sold at a deep
discount from its face value and makes no periodic interest
payments. The buyer of such a security receives a rate of return
by gradual appreciation of the security, which is redeemed at face
value on the maturity date.
A pay-in-kind security is a security in which the issuer has the
option to make interest payments in cash or in additional
securities. The securities issued as interest usually have the
same terms, including maturity date, as the pay-in-kind securities.
<PAGE>
PAGE 32
Appendix B
Descriptions of derivative instruments
What follows are brief descriptions of derivative instruments a
Portfolio may use. At various times a Portfolio 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 Portfolio'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 and sell an instrument
for a set price on a future date. A Portfolio 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 a Portfolio's investments
against price fluctuations or to increase market exposure.
Asset-backed and mortgage-backed securities. Asset-backed
securities include interests in pools of assets such as motor
vehicle installment sale contracts, installment loan contracts,
leases on various types of real and personal property, receivables
from revolving credit (credit card) agreements or other categories
of receivables. Mortgage-backed securities include collateralized
mortgage obligations and stripped mortgage-backed securities.
Interest and principal payments depend on payment of the underlying
loans or mortgages. The value of these securities may also be
affected by changes in interest rates, the market's perception of
the issuers and the creditworthiness of the parties involved.
Stripped mortgage-backed securities include interest only (IO) and
principal only (PO) securities. Cash flows and yields on IOs and
POs are extremely sensitive to the rate of principal payments on
the underlying mortgage loans or mortgage-backed securities.
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.
Inverse floaters. Inverse floaters are created by underwriters
using the interest payment on securities. A portion of the
interest received is paid to holders of instruments based on
current interest rates for short-term securities. The remainder,
minus a servicing fee, is paid to holders of inverse floaters. As
interest rates go down, the holders of the inverse floaters receive
more income and an increase in the price for the inverse floaters.
As interest rates go up, the holders of the inverse floaters
receive less income and a decrease in the price for the inverse
floaters.
<PAGE>
PAGE 33
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>
PAGE 34
STATEMENT OF ADDITIONAL INFORMATION
FOR
EXPRESS DIRECT INCOME FUND, INC.
_________, 1995
This Statement of Additional Information (SAI) is not a prospectus.
It should be read together with the Funds' prospectus, which may be
obtained by calling American Express Financial Services Direct,
1-800-AXP-SERV (TTY: 1-800-710-5260) or by writing to P.O. Box
59196, Minneapolis, MN 55459-0196.
This SAI is dated _______, 199_, and it is to be used with the
Funds' prospectus dated _______, 199_.
<PAGE>
PAGE 35
TABLE OF CONTENTS
Goals and Investment Policies........................See Prospectus
Additional Investment Policies................................p.
Portfolio Transactions........................................p.
Brokerage Commissions Paid to Brokers Affiliated
with the Advisor..............................................p.
Performance Information.......................................p.
Valuing Fund Shares...........................................p.
Investing in the Funds........................................p.
Redeeming Shares..............................................p.
Pay-out Plans.................................................p.
Exchanges.....................................................p.
Taxes.........................................................p.
Agreements....................................................p.
Board Members and Officers....................................p.
Custodian.....................................................p.
Independent Auditors..........................................p.
Prospectus....................................................p.
Appendix A: Description of Commercial Paper Ratings..........p.
Appendix B: Foreign Currency Transactions....................p.
Appendix C: Options and Interest Rate Futures Contracts......p.
<PAGE>
PAGE 36
ADDITIONAL INVESTMENT POLICIES
Express Direct Income Fund, Inc. (the Company) is a series mutual
fund with three series of capital stock representing interests in
Express Direct Government Income Fund (Government Income Fund),
Express Direct Quality Income Fund (Quality Income Fund) and
Express Direct Aggressive Income Fund (Aggressive Income Fund).
(Government Income Fund, Quality Income Fund, and Aggressive Income
Fund are collectively referred to herein as the Funds.) Each Fund
is a diversified mutual fund with its own goals and investment
policies. Each of the Funds seeks to achieve its goals by
investing all of its assets in a corresponding series (each a
Portfolio) of Income Trust (the Trust), a separate investment
company, rather than by directly investing in and managing its own
portfolio of securities.
Fundamental investment policies adopted by a Fund or Portfolio
cannot be changed without the approval of a majority of the
outstanding voting securities of the Fund or Portfolio, as defined
in the Investment Company Act of 1940. Whenever a Fund is
requested to vote on a change in the investment restrictions of the
corresponding Portfolio, the Company will hold a meeting of Fund
shareholders and will cast the Fund's vote as instructed by the
shareholders.
Notwithstanding any of the Fund's other investment policies, a 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.
Fundamental Investment Policies applicable to all Portfolios:
These are investment policies in addition to those presented in the
prospectus. The policies below are fundamental policies that apply
both to the Funds and their corresponding Portfolios and may be
changed only with shareholder/unitholder approval. Unless holders
of a majority of the outstanding voting securities agree to make
the change, each Portfolio will not:
'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 a Portfolio's total assets may be invested
without regard to this limitation.
'Purchase more than 10% of the outstanding voting securities of an
issuer.
'Buy or sell real estate, unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent a
Portfolio from investing in securities or other instruments backed
by real estate or securities of companies engaged in the real<PAGE>
PAGE 37
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 a Portfolio from buying or selling options and futures
contracts or from investing in securities or other instruments
backed by, or whose value is derived from, physical commodities.
'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 Portfolios have not borrowed in the past
and have no present intention to borrow.
'Make cash loans, if the total commitment amount exceeds 5% of the
Portfolio's total assets.
'Lend portfolio securities in excess of 30% of its net assets. The
current policy of the board is to make these loans, either long- or
short-term, to broker-dealers. In making such loans the Portfolio
gets the market price in cash, U.S. government securities, letters
of credit or such other collateral as may be permitted by
regulatory agencies and approved by the board of trustees. If the
market price of the loaned securities goes up, the Portfolio will
get additional collateral on a daily basis. The risks are that the
borrower may not provide additional collateral when required or
return the securities when due. During the existence of the loan,
the Portfolio 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.
'Issue senior securities, except that this restriction shall not be
deemed to prohibit the Portfolio from borrowing money from banks,
lending its securities, or entering into repurchase agreements or
options or futures contracts.
'Concentrate in any one industry. According to the present
interpretation by the Securities and Exchange Commission (SEC),
this means no more than 25% of the Portfolio's total assets, based
on current market value at the time of purchase, can be invested in
any one industry.
'Act as an underwriter (sell securities for others). However,
under the securities laws, a Portfolio may be deemed to be an
underwriter when it purchases restricted securities directly from
the issuer and later resells them.
<PAGE>
PAGE 38
Fundamental Policies Applicable to Government Income Portfolio and
Quality Income Portfolio:
Each Portfolio will not:
'Make a loan of any part of its assets to American Express
Financial Corporation (the Advisor), to the board members and
officers of the Advisor or to its own board members and officers.
'Purchase securities of an issuer if the board members and officers
of the Fund, the Portfolio and the Advisor hold more than a certain
percentage of the issuer's outstanding securities. The holdings of
all board members and officers who own more than 0.5% of an
issuer's securities are added together and if in total they own
more than 5%, the Portfolio will not purchase securities of that
issuer.
Fundamental Policies Applicable to Government Income Portfolio:
Government Income Portfolio will not:
'Buy any property or security (other than securities issued by the
Portfolio) from any board member or officer of the Advisor or the
Portfolio, nor will the Portfolio sell any property or security to
them.
Non-Fundamental Policies applicable to all Portfolios:
The policies below are non-fundamental policies that apply both to
the Funds and their corresponding Portfolios and may be changed
without shareholder/unitholder approval. Unless changed by the
board, each Portfolio will not:
'Invest more than 5% of its net assets in warrants. Under one
state's law, no more than 2% of a Portfolio's net assets may be
invested in warrants not listed on the New York or American Stock
Exchange.
'Pledge or mortgage its assets beyond 15% of total assets. If a
Portfolio were ever to do so, valuation of the pledged or mortgaged
assets would be based on market values. For purposes of this
restriction, 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 more than 10% of its total assets in securities of
investment companies. The Portfolios have no current intention to
invest in securities of other investment companies.
'Buy on margin or sell short, except they may enter into interest
rate future contracts.<PAGE>
PAGE 39
'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 the Portfolio'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,
loans and loan participations (for Quality Income Portfolio and
Aggressive Income Portfolio only), non-negotiable fixed-time
deposits and over-the-counter options. For purposes of complying
with Ohio law, the Portfolio will not invest more than 15% of its
total assets in a combination of illiquid securities, 144A
securities and securities of companies, including any predecessor,
that has a record of less than three years continuous operations.
In determining the liquidity of Rule 144A securities, which are
unregistered securities offered to qualified institutional buyers,
the investment advisor to the Portfolios, 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.
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 advisor to the
Portfolios, 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.
Each Portfolio may maintain a portion of its assets in cash and
cash-equivalent investments. The cash-equivalent investments a
Portfolio may use are short-term U.S. and Canadian government
securities and negotiable certificates of deposit, non-negotiable
fixed-time deposits, bankers' acceptances and letters of credit of
banks or savings and loan associations having capital, surplus and
undivided profits (as of the date of its most recently published
annual financial statements) in excess of $100 million (or the
equivalent in the instance of a foreign branch of a U.S. bank) at
the date of investment. Any cash-equivalent investments in foreign
securities will be subject to any limitations on foreign
investments described in the prospectus. A Portfolio also may
purchase short-term commercial paper rated P-2 or better by Moody's
or A-2 or better by S&P (in the case of Quality Income Portfolio
and Aggressive Income Portfolio, short-term corporate notes and
obligations rated in the top two classifications by Moody's or 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<PAGE>
PAGE 40
the seller seeks the protection of the bankruptcy laws, the
Portfolio's ability to liquidate the security involved could be
impaired.
Non-Fundamental Policy Applicable to Government Income Portfolio:
Government Income Portfolio will not:
'Invest in a company if the Portfolio's investments would result in
the total holdings of all Portfolios in the Trust Group of
Portfolios being in excess of 15% of that Trust's issued units.
Non-Fundamental Policy Applicable to Aggressive Income Portfolio:
Aggressive Income Portfolio will not:
'Purchase securities of an issuer if the board members and officers
of the Fund, the Portfolio and the Advisor hold more than a certain
percentage of the issuer's outstanding securities. The holdings of
all board members and officers who own more than 0.5% of an
issuer's securities are added together and if in total they own
more than 5%, the Portfolio will not purchase securities of that
issuer.
For a description of commercial paper ratings, see Appendix A. For
a discussion on foreign currency transactions, see Appendix B. For
a discussion on options and interest rate futures contracts, see
Appendix C.
PORTFOLIO TRANSACTIONS
Subject to policies set by the board of the Trust, the Advisor is
authorized to determine, consistent with each Portfolio'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, the Advisor has been directed to use its best efforts to
obtain the best available price and most favorable execution except
where otherwise authorized by the board.
The Advisor 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 Express Direct
Group of Funds. The Advisor carefully monitors compliance with its
Code of Ethics.
Normally, a Portfolio's securities are traded on a principal rather
than an agency basis. In other words, the Advisor will trade
directly with the issuer or with a dealer who buys or sells for its
own account, rather than acting on behalf of another client. The
Advisor does not pay the dealer commissions. Instead, the dealer's
profit, if any, is the difference, or spread, between the dealer's
purchase and sale price for the security. <PAGE>
PAGE 41
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 the Advisor to do so to the extent authorized by
law, if the Advisor 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 the Advisor's overall responsibilities to
the portfolios advised by the Advisor.
Research provided by brokers supplements the Advisor'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. The Advisor has obtained, and in
the future may obtain, computer hardware from brokers, including
but not limited to personal computers that will be used exclusively
for investment decision-making purposes, which include the
research, portfolio management and trading functions and other
services to the extent permitted under an interpretation by the
SEC.
When paying a commission that might not otherwise be charged or a
commission in excess of the amount another broker might charge, the
Advisor must follow procedures authorized by the board. To date,
three procedures have been authorized. One procedure permits the
Advisor 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 the
Advisor, 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 the Advisor, in
order to obtain research and brokerage services, to cause the
Portfolio to pay a commission in excess of the amount another
broker might have charged. The Advisor has advised the Trust 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 the
<PAGE>
PAGE 42
Advisor believes it may obtain better overall execution. The
Advisor has assured the Trust 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 the Advisor in providing advice to the funds in the
Express Direct Group of Funds and their corresponding Portfolios
and other accounts advised by the Advisor, even though it is not
possible to relate the benefits to any particular fund, Portfolio
or account.
Each investment decision made for a Portfolio is made independently
from any decision made for other portfolios or accounts advised by
the Advisor or any of its subsidiaries. When a Portfolio buys or
sells the same security as another portfolio or account, the
Advisor carries out the purchase or sale in a way the Trust agrees
in advance is fair. Although sharing in large transactions may
adversely affect the price or volume purchased or sold by a
Portfolio, a Portfolio hopes to gain an overall advantage in
execution. The Advisor has assured the Trust it will continue to
seek ways to reduce brokerage costs.
On a periodic basis, the Advisor makes a comprehensive review of
the broker-dealers it uses and the overall reasonableness of their
commissions. The review evaluates execution, operational
efficiency and research services.
BROKERAGE COMMISSIONS PAID TO BROKERS AFFILIATED WITH THE ADVISOR
Affiliates of American Express Company (American Express) (of which
the Advisor is a wholly owned subsidiary) may engage in brokerage
and other securities transactions on behalf of the Portfolios
according to procedures adopted by the Trust's board and to the
extent consistent with applicable provisions of the federal
securities laws. The Advisor will use an American Express
affiliate only if (i) the Advisor determines that the Portfolio
will receive prices and executions at least as favorable as those
offered by qualified independent brokers performing similar
brokerage and other services for the Portfolio and (ii) the
affiliate charges the Portfolio 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.
The Advisor may direct brokerage to compensate an affiliate. The
Advisor will receive research on South Africa from New Africa
Advisors, a wholly-owned subsidiary of Sloan Financial Group. The
Advisor owns 100% of IDS Capital Holdings Inc. which in turn owns<PAGE>
PAGE 43
40% of Sloan Financial Group. New Africa Advisors will send
research to the Advisor and in turn the Advisor will direct trades
to a particular broker. The broker will have an agreement to pay
New Africa Advisors. All transactions will be on a best execution
basis. Compensation received will be reasonable for the services
rendered.
PERFORMANCE INFORMATION
Each Fund may quote various performance figures to illustrate past
performance. Average annual total return and current yield
quotations used by the Funds are based on standardized methods of
computing performance as required by the SEC.
Average annual total return
Each Fund may calculate average annual total return for certain
periods by finding the average annual compounded rates of return
over the period that would equate the initial amount invested to
the ending redeemable value, according to the following formula:
P(1+T)n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment, made at the beginning of a period, at the
end of the period (or fractional portion thereof)
Aggregate total return
Each Fund may calculate aggregate total return for certain periods
representing the cumulative change in the value of an investment in
each 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
Each Fund may calculate an annualized yield 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:
<PAGE>
PAGE 44
Yield = 2[(a-b + 1)6 - 1]
cd
where: a = dividends and interest earned during the period
b = aggregate 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
Each 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 each corresponding Portfolio's
securities. It is not necessarily indicative of the amount which
was or may be paid to each Fund's shareholders. Actual amounts
paid to each Fund's shareholders are reflected in the distribution
yield.
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
In its sales material and other communications, a 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, 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.
On _________, IDS Federal Income Fund, IDS Selective Fund and IDS
Extra Income Fund (the IDS Funds), three open-end investment
companies managed by the Advisor, transferred all of their
respective assets, totaling $___ billion, to Government Income
Portfolio, Quality Income Portfolio and Aggressive Income
Portfolio, respectively, in exchange for interests therein. Also
on ___________, Government Income Fund, Quality Income Fund and
Aggressive Income Fund transferred all of their respective assets
<PAGE>
PAGE 45
to the corresponding Portfolio of the Trust in connection with the
commencement of their operations.
On March 20, 1995, the IDS Funds converted to a multiple class
structure pursuant to which three classes of shares are offered:
Class A, Class B and Class Y. Class A shares are sold with a 5%
sales charge, a 0.175% service fee and no 12b-1 fee.
Performance quoted by the Funds is based on the performance and
yield of the corresponding IDS Fund prior to March 20, 1995 and to
Class A shares of the corresponding IDS Fund from March 20, 1995
through _____________, adjusted for differences in sales load.
The historical performance has not been adjusted for any difference
between the estimated aggregate fees and expenses of the funds and
historical fees and expenses of the IDS Funds.
Portfolio turnover rates for the following calendar years were:
<TABLE><CAPTION>
199_ 199_
<S> <C> <C>
Government Income Portfolio % %
Quality Income Portfolio
Aggressive Income Portfolio
</TABLE>
Turnover rates are based on the turnover rates of the corresponding
IDS Funds for periods prior to ________ (the Funds' commencement of
operations).
VALUING FUND SHARES
The value of an individual share is determined by using the net
asset value before shareholder transactions for the day and
dividing that figure by the number of shares outstanding at the end
of the previous day.
In determining net assets before shareholder transactions, the
securities held by each Fund's corresponding Portfolio are valued
as follows as of the close of business of the New York Stock
Exchange:
'Securities, except bonds other than convertibles, 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.
'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.
<PAGE>
PAGE 46
'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 New York Stock 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 New York Stock Exchange that will not be
reflected in the computation of a Portfolio'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
Trust's 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, bonds other
than convertibles 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 Trust. 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 New York Stock Exchange, the Advisor and each of the Funds will
be closed on the following holidays: New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
INVESTING IN THE FUNDS
Each Fund's minimum initial investment requirement is $2,000
($1,000 for Custodial Accounts, Individual Retirement Accounts and
certain other retirement plans). Subsequent investments of $100 or<PAGE>
PAGE 47
more may be made. These minimum investment requirements may be
changed at any time and are not applicable to certain types of
investors. The Funds may waive the minimums for purchases by
directors, officers or employees of the Company or the Advisor.
The Securities Investor Protection Corporation (SIPC) will provide
account protection, in an amount up to $500,000, for securities,
including Fund shares (up to $100,000 protection for cash), held in
an Investment Management Account maintained with American Express
Financial Advisors Inc. Of course, SIPC account protection does
not protect shareholders from share price fluctuations.
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 Funds to redeem shares for more than seven
days. Such emergency situations would occur if:
'The New York Stock Exchange closes for reasons other than the
usual weekend and holiday closings or trading on the Exchange is
restricted, or
'Disposal of the Fund's securities is not reasonably practicable or
it is not reasonably practicable for a 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, declares a period of emergency to exist, or
'The board of the Trust determines to suspend the computation of
net asset value for the corresponding Portfolio, stop accepting
payments for purchase of the Portfolio's interests or suspend the
duty of the Portfolio to redeem interests for more than seven days.
Should a Fund stop selling shares, the board members 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.
Redemptions by the Fund
The Fund reserves the right to redeem, involuntarily, the shares of
any shareholder whose account has a value of less than a minimum
amount but only where the value of such account has been reduced by
voluntary redemption of shares. Until further notice, it is the
policy of a Fund not to exercise this right with respect to any
shareholder whose account has a value of $1,000 or more. In any
event, before a Fund redeems such shares and sends the proceeds to
the shareholder, it will notify the shareholder that the value of
the shares in the account is less than the minimum amount and allow
the shareholder 30 days to make an additional investment in an<PAGE>
PAGE 48
amount which will increase the value of the accounts to at least
$1,000, before the redemption is processed.
Redemptions in Kind
The Company has elected to be governed by Rule 18f-1 under the
Investment Company Act, which obligates each 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 a
Fund at the beginning of such period. Although redemptions in
excess of this limitation would normally be paid in cash, each Fund
reserves the right to make payments in whole or in part in
securities or other assets in case of an emergency, or if the
payment of redemption in cash would be detrimental to the existing
shareholders of a Fund as determined by the board. In such
circumstances, the securities distributed would be valued as set
forth in the Prospectus. Should a Fund distribute securities, a
shareholder may incur brokerage fees or other transaction costs in
converting the securities to cash.
Despite its right to redeem shares through a redemption-in-kind,
each Fund does not expect to exercise this option unless a Fund has
an unusually low level of cash to meet redemptions and/or is
experiencing unusually strong demands for cash.
PAY-OUT PLANS
You can use any of several pay-out plans to redeem your investment
in regular installments at no extra cost. 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.
To start any of these plans, please submit an authorization form
supplied by American Express Financial Services Direct. For a
copy, write or call American Express Financial Services Direct, 1-
800-AXP-SERV (TTY: 1-800-710-5260), P.O. Box 59196, Minneapolis,
MN 55459-0196. 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. If you need a more irregular schedule of
payments, it may be necessary for you to make a series of<PAGE>
PAGE 49
individual redemptions, in which case you will have to send in a
separate redemption request for each pay-out. The Funds reserve
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 net asset value at regular intervals during the time
period you choose. This plan is designed to end in complete re-
demption 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
at net asset value 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.
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 your account with the Fund 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
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.
Capital gain distributions, if any, received by individual and
corporate shareholders, should be treated as long-term capital
gains regardless of how long they owned their shares. Short-term
capital gains earned by the Fund are paid to shareholders as part
of their ordinary income dividend and are taxable as ordinary
income, not capital gain.
Under federal tax law, by the end of a calendar year a 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. A Fund is subject to an excise tax equal to 4% of the<PAGE>
PAGE 50
excess, if any, of the amount required to be distributed over the
amount actually distributed. Each Fund intends to comply with
federal tax law and avoid any excise tax.
Quality Income Fund and Aggressive Income 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 Trust, on behalf of each Portfolio, has an Investment
Management Services Agreement with the Advisor. For its services,
the Advisor is paid a fee from the assets of each Portfolio, based
upon the following schedule:
<TABLE><CAPTION>
Government Income Portfolio
Aggressive Income Portfolio Quality Income Portfolio
Assets Annual rate at Assets Annual rate at
(billions) each asset level (billions) each asset level
<S> <C> <C> <C>
First $1.0 0.590% First $1.0 0.520%
Next 1.0 0.565 Next 1.0 0.495
Next 1.0 0.540 Next 1.0 0.470
Next 3.0 0.515 Next 3.0 0.445
Next 3.0 0.490 Next 3.0 0.420
Over 9.0 0.465 Over 9.0 0.395
</TABLE>
The fee is calculated for each calendar day on the basis of net
assets as the close of business two days prior to the day for which
the calculation is made. The management fee is paid monthly.
Under the Agreement, each Portfolio also pays taxes, brokerage
commissions and nonadvisory expenses, including custodian fees;
audit and certain legal fees; fidelity bond premiums; registration
fees for units; Portfolio office expenses; consultants' fees;
compensation of board members, officers and employees; corporate
filing fees; organizational expenses; and expenses incurred in
connection with lending portfolio securities; and expenses properly
payable by the Portfolios, approved by the board.
Administrative Services Agreement
The Company, on behalf of each Fund, has an Administrative Services
Agreement with the Advisor. Under this agreement, each Fund pays
the Advisor for providing administration and accounting services. <PAGE>
PAGE 51
The fee is payable from the assets of each Fund and is calculated
as follows:
Aggressive Income Fund
Government Fund
Quality Income Fund
Fund assets Annual rate at
(billions) each asset level
First $1 0.050%
Next 1 0.045%
Next 1 0.040%
Next 3 0.035%
Next 3 0.030%
Next 9 0.025%
Under the agreement, each Fund also pays taxes; audit and certain
legal fees; registration fees for shares; Fund office expenses;
consultant's fees; compensation of board members, officers and
employees; corporate filing fees; organizational expenses; and
expenses properly payable by each Fund approved by the board of
directors.
Transfer Agency Agreement
The Company, on behalf of each Fund, has a Transfer Agency
Agreement with the Advisor. This agreement governs the
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. The
fee is determined by multiplying the number of shareholder accounts
at the end of the day by a rate of _______ per year and dividing by
the number of days in the year.
Placement Agency Agreement
Pursuant to a Placement Agency Agreement, the Distributor acts as
placement agent of the interests of the Trust.
Plan and Agreement of Distribution/Distribution Agreement
To help the Distributor defray the cost of distribution and
servicing, the Company and the Distributor entered into a Plan and
Agreement of Distribution (Plan). These costs cover almost all
aspects of distributing Fund shares. Under the Plan, the
Distributor is paid a fee determined by ___________.
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 the expenditures were made. The Plan and
any agreement related to it may be terminated at any time by vote<PAGE>
PAGE 52
of a majority of board members who are not interested persons of
the Company and have no direct or indirect financial interest in
the operation of the Plan or in any agreement related to the Plan,
by vote of a majority of the outstanding voting securities of the
Company or by the Distributor. The Plan (or any agreement related
to it) shall terminate in the event of its assignment, as that term
is defined in the Investment Company Act of 1940, as amended. 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 Company 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 such disinterested board
members is the responsibility of such disinterested board members.
No interested person of the Company, and 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.
Total fees and expenses
Total fees and nonadvisory expenses cannot exceed the most
restrictive applicable state limitation. Currently, the most
restrictive applicable state expense limitation, subject to
exclusion of certain expenses, is 2.5% of the first $30 million of
each fund's average daily net assets, 2% of the next $70 million
and 1.5% of average daily net assets over $100 million, on an
annual basis. At the end of each month, if the fees and expenses
of a Fund exceed this limitation for each Fund's fiscal year in
progress, the Advisor will assume all expenses in excess of the
limitation. The Advisor then may bill each Fund for such expenses
in subsequent months up to the end of that fiscal year, but not
after that date. No interest charges are assessed by the Advisor
for expenses it assumes.
BOARD MEMBERS AND OFFICERS
The following is a list of the Company's board members who also are
board members of all other funds in the Express Direct Mutual Fund
Group.
Directors and officers
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 FPL Group, Inc. (holding company for Florida
Power and Light), and the Interpublic Group of Companies, Inc.
(advertising).<PAGE>
PAGE 53
William H. Dudley+**
Born in 1932.
2900 IDS Tower
Minneapolis, MN
Executive vice president and director of AEFC.
Robert F. Froehlke+
Born in 1922.
1201 Yale Place
Minneapolis, MN
Former president of all funds in the IDS MUTUAL FUND GROUP.
Director, the ICI Mutual Insurance Co., Institute for Defense
Analyses, Marshall Erdman and Associates, Inc. (architectural
engineering) and Public Oversight Board of the American Institute
of Certified Public Accountants.
David R. Hubers**
Born in 1943.
2900 IDS Tower
Minneapolis, MN
President, chief executive officer and director of AEFC.
Previously, senior vice president, finance and chief financial
officer of AEFC.
Heinz F. Hutter+
Born in 1929.
P.O. Box 5724
Minneapolis, MN
President and chief operating officer, Cargill, Incorporated
(commodity merchants and processors) from February 1991 to
September 1994. Executive vice president from 1981 to February
1991.
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. and
C-Cor Electronics, Inc.
Donald M. Kendall'
Born in 1921.
PepsiCo, Inc.
Purchase, NY
Former chairman and chief executive officer, PepsiCo, Inc.
<PAGE>
PAGE 54
Melvin R. Laird+
Born in 1922.
Reader's Digest Association, Inc.
1730 Rhode Island Ave., N.W.
Washington, D.C.
Senior counsellor for national and international affairs, The
Reader's Digest Association, Inc. Chairman of the board, COMSAT
Corporation, former nine-term congressman, secretary of defense and
presidential counsellor. Director, Martin Marietta Corp.,
Metropolitan Life Insurance Co., The Reader's Digest Association,
Inc., Science Applications International Corp., Wallace Reader's
Digest Funds and Public Oversight Board (SEC Practice Section,
American Institute of Certified Public Accountants).
Lewis W. Lehr'
Born in 1921.
3050 Minnesota World Trade Center
30 E. Seventh St.
St. Paul, MN
Former chairman of the board and chief executive officer, Minnesota
Mining and Manufacturing Company (3M). Director, Jack Eckerd
Corporation (drugstores). Advisory Director, Peregrine Inc.
(microelectronics).
William R. Pearce+*
Born in 1927.
901 S. Marquette Ave.
Minneapolis, MN
President of all funds in the IDS MUTUAL FUND GROUP since June
1993. Former vice chairman of the board, Cargill, Incorporated
(commodity merchants and processors).
Edson W. Spencer
Born in 1926.
4900 IDS Center
80 S. 8th St.
Minneapolis, MN
President, Spencer Associates Inc. (consulting). Chairman of the
board, Mayo Foundation (healthcare). Former chairman of the board
and chief executive officer, Honeywell Inc. Director, Boise
Cascade Corporation (forest products) and CBS Inc. Member of
International Advisory Councils, Robert Bosch (Germany) and NEC
(Japan).
John R. Thomas**
Born in 1937.
2900 IDS Tower
Minneapolis, MN
Senior vice president and director of AEFC.
<PAGE>
PAGE 55
Wheelock Whitney+
Born in 1926.
1900 Foshay Tower
821 Marquette Ave.
Minneapolis, MN
Chairman, Whitney Management Company (manages family assets).
C. Angus Wurtele
Born in 1934.
1101 S. 3rd St.
Minneapolis, MN
Chairman of the board and 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.
Officers who also are officers and/or employees of AEFC.
Peter J. Anderson
Born in 1942.
IDS Tower 10
Minneapolis, MN
Vice president-investments of all funds in the IDS MUTUAL FUND
GROUP. Director and senior vice president-investments of AEFC.
Melinda S. Urion
Born in 1953.
IDS Tower 10
Minneapolis, MN
Treasurer of all funds in the IDS MUTUAL FUND GROUP. Vice
president and corporate controller of AEFC. Director and executive
vice president and controller of IDS Life Insurance Company.
Besides Mr. Pearce, who is president, the fund's other officer is:
Leslie L. Ogg
Born in 1938.
901 S. Marquette Ave.
Minneapolis, MN
Vice president, general counsel and secretary of all funds in the
IDS MUTUAL FUND GROUP.
<PAGE>
PAGE 56
Trustees and officers
[to be provided]
The board also has appointed officers who are responsible for day-
to-day business decisions based on policies it has established.
<TABLE><CAPTION>
The following is an estimate of compensation expected to be paid to the Company's board members for the
fiscal year ending _______________, 1996:
Compensation Table
Pension or
Retirement Total Compensation
Aggregate Benefits Accrued Estimated Annual from the Express
Compensation as Part of Fund Benefits Open Direct Group of
Board Members from the Company Expenses Retirement Funds
<S> <C> <C> <C>
</TABLE>
[On _________________, the Company's board members and officers as
a group owned less than 1% of the outstanding shares. During the
fiscal year ended ________________, no board member or officer
earned more than $60,000 from this Fund. All board members and
officers as a group earned $____________, including $___________ of
retirement plan expense, from this Fund.]
CUSTODIAN
The Trust'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. Each
Fund also retains the custodian pursuant to 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 Portfolios pay the custodian a maintenance charge per
portfolio and a charge per transaction in addition to reimbursing
the custodian's out-of-pocket expenses.
INDEPENDENT AUDITORS
[The Funds' and corresponding Portfolios' financial statements to
be contained in its Annual Report to shareholders at the end of the
fiscal year will be 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 funds.
PROSPECTUS
The prospectus dated _____________________, is hereby incorporated
in this SAI by reference.
<PAGE>
PAGE 57
APPENDIX A
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Commercial paper rated Prime-1 (P-1) by Moody's or A-1 by S&P
indicates that the degree of safety regarding timely repayment is
either overwhelming or very strong.
Commercial paper rated P-2 or A-2 indicates that capacity for
timely payment on issues with this designation is strong.
<PAGE>
PAGE 58
APPENDIX B
FOREIGN CURRENCY TRANSACTIONS
Since investments in foreign countries usually involve currencies
of foreign countries, and since each Portfolio may hold cash and
cash-equivalent investments in foreign currencies, the value of a
Portfolio's assets as measured in U.S. dollars may be affected
favorably or unfavorably by changes in currency exchange rates and
exchange control regulations. Also, a Portfolio may incur costs in
connection with conversions between various currencies.
Spot Rates and Forward Contracts. A Portfolio conducts its foreign
currency exchange transactions either at the spot (cash) rate
prevailing in the foreign currency exchange market or by entering
into forward currency exchange contracts (forward contracts) as a
hedge against fluctuations in future foreign exchange rates. A
forward contract involves an obligation to buy or sell a specific
currency at a future date, which may be any fixed number of days
from the contract date, at a price set at the time of the contract.
These contracts are traded in the interbank market conducted
directly between currency traders (usually large commercial banks)
and their customers. A forward contract generally has no deposit
requirements. No commissions are charged at any stage for trades.
A Portfolio may enter into forward contracts to settle a security
transaction or handle dividend and interest collection. When a
Portfolio enters into a contract for the purchase or sale of a
security denominated in a foreign currency or has been notified of
a dividend or interest payment, it may desire to lock in the price
of the security or the amount of the payment in dollars. By
entering into a forward contract, a Portfolio will be able to
protect itself against a possible loss resulting from an adverse
change in the relationship between different currencies from the
date the security is purchased or sold to the date on which payment
is made or received or when the dividend or interest is actually
received.
A Portfolio also may enter into forward contracts when management
of a Portfolio believes the currency of a particular foreign
country may suffer a substantial decline against another currency.
It may enter into a forward contract to sell, for a fixed amount of
dollars, the amount of foreign currency approximating the value of
some or all of a Portfolio'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. A
Portfolio will not enter into such forward contracts or maintain a
net exposure to such contracts when consummating the contracts
would obligate a Portfolio to deliver an amount of foreign currency<PAGE>
PAGE 59
in excess of the value of a Portfolio's securities or other assets
denominated in that currency.
A Portfolio will designate cash or securities in an amount equal to
the value of a Portfolio's total assets committed to consummating
forward contracts entered into under the second circumstance set
forth above. If the value of the securities declines, additional
cash or securities will be designated on a daily basis so that the
value of the cash or securities will equal the amount of a
Portfolio's commitments on such contracts.
At maturity of a forward contract, a Portfolio 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 a Portfolio retains a security and engages in an offsetting
transaction, a Portfolio will incur a gain or a loss (as described
below) to the extent there has been movement in forward contract
prices. If a Portfolio engages in an offsetting transaction, it
may subsequently enter into a new forward contract to sell the
foreign currency. Should forward prices decline between the date a
Portfolio enters into a forward contract for selling foreign
currency and the date it enters into an offsetting contract for
purchasing the foreign currency, a Portfolio will realize a gain to
the extent that the price of the currency it has agreed to sell
exceeds the price of the currency it has agreed to buy. Should
forward prices increase, a Portfolio will suffer a loss to the
extent the price of the currency it has agreed to buy exceeds the
price of the currency it has agreed to sell.
It is impossible to forecast what the market value of securities
will be at the expiration of a contract. Accordingly, it may be
necessary for a Portfolio to buy additional foreign currency on the
spot market (and bear the expense of such purchase) if the market
value of the security is less than the amount of foreign currency a
Portfolio is obligated to deliver and a decision is made to sell
the security and make delivery of the foreign currency.
Conversely, it may be necessary to sell on the spot market some of
the foreign currency received on the sale of the security if its
market value exceeds the amount of foreign currency a Portfolio is
obligated to deliver.
A Portfolio's dealing in forward contracts will be limited to the
transactions described above. This method of protecting the value
of 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.
<PAGE>
PAGE 60
Although a Portfolio values its assets each business day in terms
of U.S. dollars, it does not intend to convert its foreign
currencies into U.S. dollars on a daily basis. It will do so from
time to time, and unitholders should be aware of currency
conversion costs. Although foreign exchange dealers do not charge
a fee for conversion, they do realize a profit based on the
difference (spread) between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a
foreign currency to a Portfolio at one rate, while offering a
lesser rate of exchange should a Portfolio desire to resell that
currency to the dealer.
Options on Foreign Currencies. A Portfolio may buy put and write
covered call options on foreign currencies for hedging purposes.
For example, a decline in the dollar value of a foreign currency in
which 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, a Portfolio may buy put options on the
foreign currency. If the value of the currency does decline, a
Portfolio will have the right to sell such currency for a fixed
amount in dollars and will thereby offset, in whole or in part, the
adverse effect on a Portfolio which otherwise would have resulted.
As in the case of other types of options, however, the benefit to a
Portfolio derived from purchases of foreign currency options will
be reduced by the amount of the premium and related transaction
costs. In addition, where currency exchange rates do not move in
the direction or to the extent anticipated, a Portfolio could
sustain losses on transactions in foreign currency options which
would require it to forego a portion or all of the benefits of
advantageous changes in such rates.
A Portfolio may write options on foreign currencies for the same
types of hedging purposes. For example, when a Portfolio
anticipates a decline in the dollar value of foreign-denominated
securities due to adverse fluctuations in exchange rates, it could,
instead of purchasing a put option, write a call option on the
relevant currency. If the expected decline occurs, the option will
most likely not be exercised and the diminution in value of
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
a Portfolio 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, a
Portfolio also may be required to forego all or a portion of the
benefits which might otherwise have been obtained from favorable
movements on exchange rates.<PAGE>
PAGE 61
All options written on foreign currencies will be covered. An
option written on foreign currencies is covered if a Portfolio
holds currency sufficient to cover the option or has an absolute
and immediate right to acquire that currency without additional
cash consideration upon conversion of assets denominated in that
currency or exchange of other currency held in a Portfolio. An
option writer could lose amounts substantially in excess of its
initial investments, due to the margin and collateral requirements
associated with such positions.
Options on foreign currencies are traded through financial
institutions acting as market-makers, although foreign currency
options also are traded on certain national securities exchanges,
such as the Philadelphia Stock Exchange and the Chicago Board
Options Exchange, subject to SEC regulation. In an over-the-
counter trading environment, many of the protections afforded to
exchange participants will not be available. For example, there
are no daily price fluctuation limits, and adverse market movements
could therefore continue to an unlimited extent over a period of
time. Although the purchaser of an option cannot lose more than
the amount of the premium plus related transaction costs, this
entire amount could be lost.
Foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the OCC, thereby
reducing the risk of counterparty default. Further, a liquid
secondary market in options traded on a national securities
exchange may be more readily available than in the over-the-counter
market, potentially permitting a Portfolio to liquidate open
positions at a profit prior to exercise or expiration, or to limit
losses in the event of adverse market movements.
The purchase and sale of exchange-traded foreign currency options,
however, is subject to the risks of availability of a liquid
secondary market described above, as well as the risks regarding
adverse market movements, margining of options written, the nature
of the foreign currency market, possible intervention by
governmental authorities and the effects of other political and
economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-
counter market. For example, exercise and settlement of such
options must be made exclusively through the OCC, which has
established banking relationships in certain foreign countries for
the purpose. As a result, the OCC may, if it determines that
foreign governmental restrictions or taxes would prevent the
orderly settlement of foreign currency option exercises, or would
result in undue burdens on OCC or its clearing member, impose
special procedures on exercise and settlement, such as technical
changes in the mechanics of delivery of currency, the fixing of
dollar settlement prices or prohibitions on exercise.
Foreign Currency Futures and Related Options. A Portfolio may
enter into currency futures contracts to sell currencies. It also
may buy put and write covered call options on currency futures. <PAGE>
PAGE 62
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. A Portfolio may use currency futures for the same
purposes as currency forward contracts, subject to CFTC
limitations, including the limitation on the percentage of assets
that may be used, described in the prospectus. All futures
contracts are aggregated for purposes of the percentage
limitations.
Currency futures and options on futures values can be expected to
correlate with exchange rates, but will not reflect other factors
that may affect the values of a Portfolio's investments. A
currency hedge, for example, should protect a Yen-denominated bond
against a decline in the Yen, but will not protect a Portfolio
against price decline if the issuer's creditworthiness
deteriorates. Because the value of a Portfolio's investments
denominated in foreign currency will change in response to many
factors other than exchange rates, it may not be possible to match
the amount of a forward contract to the value of a Portfolio's
investments denominated in that currency over time.
A Portfolio will hold securities or other options or futures
positions whose values are expected to offset its obligations. A
Portfolio will not enter into an option or futures position that
exposes a Portfolio to an obligation to another party unless it
owns either (i) an offsetting position in securities or (ii) cash,
receivables and short-term debt securities with a value sufficient
to cover its potential obligations.
<PAGE>
PAGE 63
APPENDIX C
OPTIONS AND INTEREST RATE FUTURES CONTRACTS
A Portfolio may buy or write options traded on any U.S. exchange or
in the over-the-counter market. A Portfolio may enter into
interest rate futures contracts traded on any U.S. exchange. A
Portfolio also may buy or write put and call options on these
futures. Options in the over-the-counter market will be purchased
only when the investment manager believes a liquid secondary market
exists for the options and only from dealers and institutions the
investment manager believes present a minimal credit risk. Some
options are exercisable only on a specific date. In that case, or
if a liquid secondary market does not exist, a Portfolio could be
required to buy or sell securities at disadvantageous prices,
thereby incurring losses. A Portfolio will not purchase options or
write covered put options if the value of the underlying assets
exceeds 10% of the value of its net assets.
OPTIONS. An option is a contract. A person who buys a call option
for a security has the right to buy the security at a set price for
the length of the contract. A person who sells a call option is
called a writer. The writer of a call option agrees to sell the
security at the set price when the buyer wants to exercise the
option, no matter what the market price of the security is at that
time. A person who buys a put option has the right to sell a
security at a set price for the length of the contract. A person
who writes a put option agrees to buy the security at the set price
if the purchaser wants to exercise the option, no matter what the
market price of the security is at that time. An option is covered
if the writer owns the security (in the case of a call) or sets
aside the cash (in the case of a put) that would be required upon
exercise.
The price paid by the buyer for an option is called a premium. In
addition the buyer generally pays a broker a commission. The
writer receives a premium, less a commission, at the time the
option is written. The cash received is retained by the writer
whether or not the option is exercised. A writer of a call option
may have to sell the security for a below-market price if the
market price rises above the exercise price. A writer of a put
option may have to pay an above-market price for the security if
its market price decreases below the exercise price.
Options can be used to produce incremental earnings, protect gains
and facilitate buying and selling securities for investment
purposes. The use of options and futures contracts may benefit a
Portfolio and its unitholders by improving a Portfolio's liquidity
and by helping to stabilize the value of its net assets.
Buying options. Put and call options may be used as a trading
technique to facilitate buying and selling securities for
investment reasons. They also may be used for investment. Options
are used as a trading technique to take advantage of any disparity<PAGE>
PAGE 64
between the price of the underlying security in the securities
market and its price on the options market. It is anticipated the
trading technique will be utilized only to effect a transaction
when the price of the security plus the option price will be as
good or better than the price at which the security could be bought
or sold directly. When the option is purchased, a Portfolio pays a
premium and a commission. It then pays a second commission on the
purchase or sale of the underlying security when the option is
exercised. For record keeping and tax purposes, the price obtained
on the purchase of the underlying security will be the combination
of the exercise price, the premium and both commissions. When
using options as a trading technique, commissions on the option
will be set as if only the underlying securities were traded.
Put and call options also may be held by a Portfolio for investment
purposes. Options permit a Portfolio to experience the change in
the value of a security with a relatively small initial cash
investment. The risk a Portfolio assumes when it buys an option is
the loss of the premium. To be beneficial to a Portfolio, the
price of the underlying security must change within the time set by
the option contract. Furthermore, the change must be sufficient to
cover the premium paid, the commissions paid both in the
acquisition of the option and in a closing transaction or in the
exercise of the option and subsequent sale (in the case of a call)
or purchase (in the case of a put) of the underlying security.
Even then the price change in the underlying security does not
ensure a profit since prices in the option market may not reflect
such a change.
Writing covered options. A Portfolio will write covered options
when it feels it is appropriate and will follow these guidelines:
'Underlying securities will continue to be bought or sold solely on
the basis of investment considerations consistent with a
Portfolio's goal.
'All options written by a Portfolio will be covered. For covered
call options if a decision is made to sell the security, a
Portfolio will attempt to terminate the option contract through a
closing purchase transaction.
'A Portfolio will write options only as permitted under federal or
state laws or regulations, such as those that limit the amount of
total assets subject to the options. While no limit has been set
by a Portfolio, it will conform to the requirements of certain
states. For example, California limits the writing of options to
50% of the assets of a Portfolio. Some regulations also affect the
Custodian. When a covered call option is written, the Custodian
segregates the underlying securities and issues a receipt. There
are certain rules regarding banks issuing such receipts that may
restrict the amount of covered call options written.
<PAGE>
PAGE 65
Net premiums on call options closed or premiums on expired call
options are treated as short-term capital gains. Since a Portfolio
is taxed as a regulated investment company under the Internal
Revenue Code, any gains on options and other securities held less
than three months must be limited to less than 30% of its annual
gross income.
If a covered call option is exercised, the security is sold by the
Portfolio. A Portfolio will recognize a capital gain or loss based
upon the difference between the proceeds and the security's basis.
Options on many securities are listed on options exchanges. If a
Portfolio writes listed options, it will follow the rules of the
options exchange. Options are valued at the close of the New York
Stock Exchange. An option listed on a national exchange, CBOE or
NASDAQ will be valued at the last quoted sales price or, if such a
price is not readily available, at the mean of the last bid and
asked prices.
Options on Government National Mortgage Association (GNMA)
certificates and certain other securities are not actively traded
on any exchange, but may be entered into directly with a dealer.
When a Portfolio writes such an option, the Custodian will
segregate assets as appropriate to cover the option. However,
since the remaining principal balance of GNMA certificates declines
each month as a result of mortgage payments, a Portfolio may find
that the GNMA certificates it holds as cover no longer have a
sufficient remaining principal balance for this purpose. A GNMA
certificate held by a Portfolio also may cease to represent cover
for the option if the GNMA coupon rate at which new pools are
originated under the FHA/VA loan ceiling in effect at any given
time is reduced. If either event should occur, a Portfolio will
either enter into a closing purchase transaction or replace
certificates with certificates that represent cover. When a
Portfolio closes its position or replaces certificates, it may
realize an unanticipated loss and incur transaction costs.
FUTURES CONTRACTS. A futures contract is an agreement between two
parties to buy and sell a security for a set price on a future
date. They have been established by boards of trade which have
been designated contracts markets by the Commodity Futures Trading
Commission (CFTC). Futures contracts trade on these markets in a
manner similar to the way a stock trades on a stock exchange, and
the boards of trade, through their clearing corporations, guarantee
performance of the contracts. Currently, there are futures
contracts based on such debt securities as long-term U.S. Treasury
bonds, Treasury notes, GNMA modified pass-through mortgage-backed
securities, three-month U.S. Treasury bills and bank certificates
of deposit. While futures contracts based on debt securities do
provide for the delivery and acceptance of securities, such
deliveries and acceptances are very seldom made. Generally, the
futures contract is terminated by entering into an offsetting
transaction. An offsetting transaction for a futures contract sale
is effected by a Portfolio entering into a futures contract<PAGE>
PAGE 66
purchase for the same aggregate amount of the specific type of
financial instrument and same delivery date. If the price in the
sale exceeds the price in the offsetting purchase, a Portfolio
immediately is paid the difference and realizes a gain. If the
offsetting purchase price exceeds the sale price, a Portfolio pays
the difference and realizes a loss. Similarly, closing out a
futures contract purchase is effected by a Portfolio entering into
a futures contract sale. If the offsetting sale price exceeds the
purchase price, a Portfolio realizes a gain, and if the offsetting
sale price is less than the purchase price, a Portfolio realizes a
loss. At the time a futures contract is made, a good-faith deposit
called initial margin is set up within a segregated account at the
fund's custodian bank. The initial margin deposit is approximately
1.5% of a contract's face value. Daily thereafter, the futures
contract is valued and the payment of variation margin is required
so that each day a Portfolio would pay out cash in an amount equal
to any decline in the contract's value or receive cash equal to any
increase. At the time a futures contract is closed out, a nominal
commission is paid, which is generally lower than the commission on
a comparable transaction in the cash markets.
The purpose of a futures contract, in the case of a Portfolio
holding long-term debt securities, is to gain the benefit of
changes in interest rates without actually buying or selling long-
term debt securities. For example, if a Portfolio owned long-term
bonds and interest rates were expected to increase, it might enter
into futures contracts to sell securities which would have much the
same effect as selling some of the long-term bonds it owned.
Futures contracts are based on types of debt securities referred to
above, which have historically reacted to an increase or decline in
interest rates in a fashion similar to the debt securities the fund
owns. If interest rates did increase, the value of the debt
securities in the Portfolio would decline, but the value of a
Portfolio's futures contracts would increase at approximately the
same rate, thereby keeping the net asset value of a Portfolio from
declining as much as it otherwise would have. If, on the other
hand, a Portfolio held cash reserves and interest rates were
expected to decline, a Portfolio might enter into interest rate
futures contracts for the purchase of securities. If short-term
rates were higher than long-term rates, the ability to continue
holding these cash reserves would have a very beneficial impact on
a Portfolio's earnings. Even if short-term rates were not higher,
a Portfolio would still benefit from the income earned by holding
these short-term investments. At the same time, by entering into
futures contracts for the purchase of securities, a Portfolio could
take advantage of the anticipated rise in the value of long-term
bonds without actually buying them until the market had stabilized.
At that time, the futures contracts could be liquidated and a
Portfolio's cash reserves could then be used to buy long-term bonds
on the cash market. A Portfolio could accomplish similar results
by selling bonds with long maturities and investing in bonds with
short maturities when interest rates are expected to increase or by
buying bonds with long maturities and selling bonds with short
maturities when interest rates are expected to decline. But by
using futures contracts as an investment tool, given the greater<PAGE>
PAGE 67
liquidity in the futures market than in the cash market, it might
be possible to accomplish the same result more easily and more
quickly. Successful use of futures contracts depends on the
investment manager's ability to predict the future direction of
interest rates. If the investment manager's prediction is
incorrect, a Portfolio would have been better off had it not
entered into futures contracts.
OPTIONS ON FUTURES CONTRACTS. Options give the holder a right to
buy or sell futures contracts in the future. Unlike a futures
contract, which requires the parties to the contract to buy and
sell a security on a set date, an option on a futures contract
merely entitles its holder to decide on or before a future date
(within nine months of the date of issue) whether to enter into
such a contract. If the holder decides not to enter into the
contract, all that is lost is the amount (premium) paid for the
option. Furthermore, because the value of the option is fixed at
the point of sale, there are no daily payments of cash to reflect
the change in the value of the underlying contract. However, since
an option gives the buyer the right to enter into a contract at a
set price for a fixed period of time, its value does change daily
and that change is reflected in the net asset value of a Portfolio.
RISKS. There are risks in engaging in each of the management tools
described above. The risk a Portfolio assumes when it buys an
option is the loss of the premium paid for the option. Purchasing
options also limits the use of monies that might otherwise be
available for long-term investments.
The risk involved in writing options on futures contracts or on
securities held in a 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. A Portfolio could enter into a closing transaction by
purchasing an option with the same terms as the one it had
previously sold. The cost to close the option and terminate a
Portfolio's obligation, however, might be more or less than the
premium received when it originally wrote the option. Furthermore,
a Portfolio might not be able to close the option because of
insufficient activity in the options market.
A risk in employing futures contracts to protect against the price
volatility of Portfolio securities is that the prices of securities
subject to futures contracts may not correlate perfectly with the
behavior of the cash prices of a Portfolio's securities. The
correlation may be distorted because the futures market is
dominated by short-term traders seeking to profit from the
difference between a contract or security price and their cost of
borrowed funds. Such distortions are generally minor and would
diminish as the contract approached maturity.
<PAGE>
PAGE 68
Another risk is that a Portfolio's investment manager could be
incorrect in anticipating as to the direction or extent of various
interest rate movements or the time span within which the movements
take place. For example, if a Portfolio sold futures contracts for
the sale of securities in anticipation of an increase in interest
rates, and interest rates declined instead, a Portfolio would lose
money on the sale.
TAX TREATMENT. As permitted under federal income tax laws, each
Portfolio intends to identify futures contracts as mixed straddles
and not mark them to market, that is, not treat them as having been
sold at the end of the year at market value. Such an election may
result in a Portfolio being required to defer recognizing losses
incurred by entering into futures contracts and losses on
underlying securities identified as being hedged against.
Federal income tax treatment of gains or losses from transactions
in options on futures contracts and indexes will depend on whether
such option is a section 1256 contract. If the option is a non-
equity option contract, the Portfolio 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 a Portfolio's ability to engage in futures
contracts and related options transactions. For example, at the
close of each quarter of a Portfolio'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. Less than 30% of its gross income must be derived
from sales of securities held less than three months.
The IRS has ruled publicly that an exchange-traded call option is a
security for purposes of the 50%-of-assets test and that its issuer
is the issuer of the underlying security, not the writer of the
option, for purposes of the diversification requirements. In order
to avoid realizing a gain within the three-month period, a
Portfolio may be required to defer closing out a contract beyond
the time when it might otherwise be advantageous to do so. A
Portfolio also may be restricted in purchasing put options for the
purpose of hedging underlying securities because of applying the
short sale holding period rules with respect to such underlying
securities.
Accounting for futures contracts will be according to generally
accepted accounting principles. Initial margin deposits will be
recognized as assets due from a broker (a Portfolio's agent in
acquiring the futures position). During the period the futures
contract is open, changes in value of the contract will be
recognized as unrealized gains or losses by marking to market on a
daily basis to reflect the market value of the contract at the end
of each day's trading. Variation margin payments will be made or
received depending upon whether gains or losses are incurred. All
contracts and options will be valued at the last-quoted sales price
<PAGE>
PAGE 69
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS:
Not Applicable.
(b) EXHIBITS:
1. Articles of Incorporation, dated May 24, 1995, filed
electronically as Exhibit No. 1 to Registration Statement No. 33-
60323, is incorporated herein by reference.
2. Form of By-laws is filed electronically herewith as
Exhibit 2.
3. Not Applicable.
4. Not Applicable.
5. Not Applicable.
6. Form of Distribution Agreement to be filed by amendment.
7. Not Applicable.
8. Form of Custodian Agreement filed electronically as Exhibit
No. 8 to Registration Statement No. 33-60323, is incorporated
herein by reference.
9.(a) Form of Transfer Agency Agreement to be filed by amendment.
9.(b) Form of Administrative Services Agreement to be filed by
amendment.
10. An opinion and consent of counsel to be filed by amendment.
11. Not Applicable.
12. Not Applicable.
13. Not Applicable.
14. Not Applicable.
15. Form of Plan and Supplemental Agreement of Distribution to be
filed by amendment.
16. Not Applicable.
17. Not Applicable.
18. Not Applicable.
Item 25. Persons Controlled by or Under Common Control with
Registrant
None.<PAGE>
PAGE 70
Item 26. Number of Holders of Securities
(1) (2)
Number of Record
Holders as of
Title of Class Sept. 15, 1995
Common Stock 0
$.01 par value
Item 27. Indemnification
Reference is hereby made to Article IV of Registrant's Articles of
Incorporation filed electronically as Exhibit 1 to Registration
Statement No. 33-60323, and Article X of Registrant's By-laws filed
electronically herewith as Exhibit 2.
<PAGE>
PAGE 71
<PAGE>
PAGE 1
American Express Financial Corporation is the investment advisor of
the Portfolios of the Trust.
<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>
Ronald G. Abrahamson, Vice President--Service Quality and Reengineering
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Service Quality
and Reengineering
American Express Service Corporation Vice President
Douglas A. Alger, Vice President--Total Compensation
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Total Compensation
Jerome R. Amundson, Vice President--Investment Accounting
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Investment Accounting
Peter J. Anderson, Director and Senior Vice President--Investments
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Investments
IDS Advisory Group Inc. Director and Chairman
of the Board
IDS Capital Holdings Inc. Director and President
IDS International, Inc. Director, Chairman of the
Board and Executive Vice
President
IDS Securities Corporation Executive Vice President-
Investments
NCM Capital Management Group, Inc. 2 Mutual Plaza Director
501 Willard Street
Durham, NC 27701
Ward D. Armstrong, Vice President-Sales and Marketing, American Express Institutional Services
American Express Financial Advisors IDS Tower 10 Vice President-Sales and
Minneapolis, MN 55440 Marketing, American
Express Institutional
Services
<PAGE>
PAGE 2
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Joseph M. Barsky III, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager
IDS Advisory Group Inc. Vice President
Robert C. Basten, Vice President--Tax and Business Services
American Express Financial Advisors IDS Tower 10 Vice President-Tax
Minneapolis, MN 55440 and Business Services
American Express Tax & Business Director, President and
Services Inc. Chief Executive Officer
Timothy V. Bechtold, Vice President--Risk Management Products
American Express Financial Advisors IDS Tower 10 Vice President-Risk
Minneapolis, MN 55440 Management Products
IDS Life Insurance Company Vice President-Risk
Management Products
Carl E. Beihl, Vice President--Strategic Technology Planning
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Strategic Technology
Planning
Alan F. Bignall, Vice President--Financial Planning Systems
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Financial Planning
Systems
American Express Service Corporation Vice President
John C. Boeder, Vice President--Mature Market Group
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Mature Market Group
IDS Life Insurance Company of New York Box 5144 Director
Albany, NY 12205
Karl J. Breyer, Director and Senior Vice President--Corporate Affairs and General Counsel
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Corporate Affairs and
Special Counsel
American Express Minnesota Foundation Director
IDS Aircraft Services Corporation Director and President
<PAGE>
PAGE 3
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Harold E. Burke, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
American Express Service Corporation Vice President
Daniel J. Candura, Vice President--Marketing Support
American Express Financial Advisors IDS Tower 10 Vice President-Marketing
Minneapolis, MN 55440 Support
Cynthia M. Carlson, Vice President--American Express Securities Services
American Enterprise Investment IDS Tower 10 Director, President and
Services Inc. Minneapolis, MN 55440 Chief Executive Officer
American Express Financial Advisors Vice President-American
Express Securities Services
Orison Y. Chaffee III, Vice President--Field Real Estate
American Express Financial Advisors IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Real Estate
James E. Choat, Director and Senior Vice President--Field Management
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Field Management
American Express Minnesota Foundation Director
American Express Service Corporation Vice President
IDS Insurance Agency of Alabama Inc. Vice President--North
Central Region
IDS Insurance Agency of Arkansas Inc. Vice President--North
Central Region
IDS Insurance Agency of Massachusetts Inc. Vice President--North
Central Region
IDS Insurance Agency of Nevada Inc. Vice President--North
Central Region
IDS Insurance Agency of New Mexico Inc. Vice President--North
Central Region
IDS Insurance Agency of North Carolina Inc. Vice President--North
Central Region
IDS Insurance Agency of Ohio Inc. Vice President--North
Central Region
IDS Insurance Agency of Wyoming Inc. Vice President-- North
Central Region
IDS Property Casualty Insurance Co. Director
<PAGE>
PAGE 4
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Kenneth J. Ciak, Vice President and General Manager--IDS Property Casualty
American Express Financial Advisors IDS Tower 10 Vice President and General
Minneapolis, MN 55440 Manager-IDS Property
Casualty
IDS Property Casualty Insurance Co. I WEG Blvd. Director and President
DePere, Wisconsin 54115
Alan R. Dakay, Vice President--Institutional Products Group
American Enterprise Life Insurance Co. IDS Tower 10 Director and President
Minneapolis, MN 55440
American Express Financial Advisors Vice President -
Institutional Products
Group
American Partners Life Insurance Co. Director and President
IDS Life Insurance Company Vice President -
Institutional Insurance
Marketing
Regenia David, Vice President--Systems Services
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Systems Services
William H. Dudley, Director and Executive Vice President--Investment Operations
American Express Financial Advisors IDS Tower 10 Director and Executive
Minneapolis, MN 55440 Vice President-
Investment Operations
IDS Advisory Group Inc. Director
IDS Capital Holdings Inc. Director
IDS Futures Corporation Director
IDS Futures III Corporation Director
IDS International, Inc. Director
IDS Securities Corporation Director, Chairman of the
Board, President and
Chief Executive Officer
Roger S. Edgar, Director, Senior Vice President and Technology Advisor
American Express Financial Advisors IDS Tower 10 Senior Vice President and
Minneapolis, MN 55440 Technology Advisor
<PAGE>
PAGE 5
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Gordon L. Eid, Director, Senior Vice President and Deputy General Counsel
American Express Financial Advisors IDS Tower 10 Senior Vice President and
Minneapolis, MN 55440 General Counsel
IDS Insurance Agency of Alabama Inc. Director and Vice President
IDS Insurance Agency of Arkansas Inc. Director and Vice President
IDS Insurance Agency of Massachusetts Inc. Director and Vice President
IDS Insurance Agency of Nevada Inc. Director and Vice President
IDS Insurance Agency of New Mexico Inc. Director and Vice President
IDS Insurance Agency of North Carolina Inc. Director and Vice President
IDS Insurance Agency of Ohio Inc. Director and Vice President
IDS Insurance Agency of Wyoming Inc. Director and Vice President
IDS Real Estate Services, Inc. Vice President
Investors Syndicate Development Corp. Director
Robert M. Elconin, Vice President--Government Relations
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Government Relations
IDS Life Insurance Company Vice President
Mark A. Ernst, Vice President--Retail Services
American Enterprise Investment IDS Tower 10 Director
Services Inc. Minneapolis, MN 55440
American Express Financial Advisors Vice President-
Retail Services
American Express Tax & Business Director and Chairman of
Services Inc. the Board
Gordon M. Fines, Vice President--Mutual Fund Equity Investments
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Mutual Fund Equity
Investments
IDS Advisory Group Inc. Executive Vice President
IDS International, Inc. Vice President and
Portfolio Manager
<PAGE>
PAGE 6
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Louis C. Fornetti, Director, Senior Vice President and Chief Financial Officer
American Enterprise Investment IDS Tower 10 Vice President
Services Inc. Minneapolis, MN 55440
American Express Financial Advisors Senior Vice President and
Chief Financial Officer
American Express Tax & Business Director
Services Inc.
American Express Trust Company Director
IDS Cable Corporation Director
IDS Cable II Corporation Director
IDS Capital Holdings Inc. Senior Vice President
IDS Certificate Company Vice President
IDS Insurance Agency of Alabama Inc. Vice President
IDS Insurance Agency of Arkansas Inc. Vice President
IDS Insurance Agency of Massachusetts Inc. Vice President
IDS Insurance Agency of Nevada Inc. Vice President
IDS Insurance Agency of New Mexico Inc. Vice President
IDS Insurance Agency of North Carolina Inc. Vice President
IDS Insurance Agency of Ohio Inc. Vice President
IDS Insurance Agency of Wyoming Inc. Vice President
IDS Life Insurance Company Director
IDS Life Series Fund, Inc. Vice President
IDS Life Variable Annuity Funds A&B Vice President
IDS Property Casualty Insurance Co. Director and Vice President
IDS Real Estate Services, Inc. Vice President
IDS Sales Support Inc. Director
IDS Securities Corporation Vice President
Investors Syndicate Development Corp. Vice President
Robert G. Gilbert, Vice President--Real Estate
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Real Estate
John J. Golden, Vice President--Field Compensation Development
American Express Financial Advisors IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Compensation Development
Harvey Golub, Director
American Express Company American Express Tower Chairman and Chief
World Financial Center Executive Officer
New York, New York 10285
American Express Travel Chairman and Chief
Related Services Company, Inc. Executive Officer
National Computer Systems, Inc. 11000 Prairie Lakes Drive Director
Minneapolis, MN 55440
<PAGE>
PAGE 7
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Morris Goodwin Jr., Vice President and Corporate Treasurer
American Enterprise Investment IDS Tower 10 Vice President and
Services Inc. Minneapolis, MN 55440 Treasurer
American Enterprise Life Insurance Vice President and
Company Treasurer
American Express Financial Advisors Vice President and
Corporate Treasurer
American Express Minnesota Foundation Director, Vice President
and Treasurer
American Express Service Corporation Vice President and
Treasurer
American Express Tax & Business Vice President and
Services Inc. Treasurer
IDS Advisory Group Inc. Vice President and
Treasurer
IDS Aircraft Services Corporation Vice President and
Treasurer
IDS Cable Corporation Director, Vice President
and Treasurer
IDS Cable II Corporation Director, Vice President
and Treasurer
IDS Capital Holdings Inc. Vice President and
Treasurer
IDS Certificate Company Vice President and
Treasurer
IDS Deposit Corp. Director, President
and Treasurer
IDS Insurance Agency of Alabama Inc. Vice President and
Treasurer
IDS Insurance Agency of Arkansas Inc. Vice President and
Treasurer
IDS Insurance Agency of Massachusetts Inc. Vice President and
Treasurer
IDS Insurance Agency of Nevada Inc. Vice President and
Treasurer
IDS Insurance Agency of New Mexico Inc. Vice President and
Treasurer
IDS Insurance Agency of North Carolina Inc. Vice President and
Treasurer
IDS Insurance Agency of Ohio Inc. Vice President and
Treasurer
IDS Insurance Agency of Wyoming Inc. Vice President and
Treasurer
IDS International, Inc. Vice President and
Treasurer
IDS Life Insurance Company Vice President and
Treasurer
IDS Life Series Fund, Inc. Vice President and
Treasurer
<PAGE>
PAGE 8
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
IDS Life Variable Annuity Funds A&B Vice President and
Treasurer
IDS Management Corporation Director, Vice President
and Treasurer
IDS Partnership Services Corporation Director, Vice President
and Treasurer
IDS Plan Services of California, Inc. Vice President and
Treasurer
IDS Property Casualty Insurance Co. Vice President and
Treasurer
IDS Real Estate Services, Inc Vice President and
Treasurer
IDS Realty Corporation Director, Vice President
and Treasurer
IDS Sales Support Inc. Director, Vice President
and Treasurer
IDS Securities Corporation Vice President and
Treasurer
Investors Syndicate Development Corp. Vice President and
Treasurer
NCM Capital Management Group, Inc. 2 Mutual Plaza Director
501 Willard Street
Durham, NC 27701
Sloan Financial Group, Inc. Director
Suzanne Graf, Vice President--Systems Services
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Systems Services
David A. Hammer, Vice President and Marketing Controller
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Marketing Controller
IDS Plan Services of California, Inc. Director and Vice President
Lorraine R. Hart, Vice President--Insurance Investments
American Enterprise Life IDS Tower 10 Vice President-Investments
Insurance Company Minneapolis, MN 55440
American Express Financial Advisors Vice President-Insurance
Investments
American Partners Life Insurance Co. Director and Vice
President-Investments
IDS Certificate Company Vice President-Investments
IDS Life Insurance Company Vice President-Investments
IDS Life Series Fund, Inc. Vice President-Investments
IDS Life Variable Annuity Funds A and B Vice President-Investments
IDS Property Casualty Insurance Company Vice President-Investment
Officer
Investors Syndicate Development Corp. Vice President-Investments
<PAGE>
PAGE 9
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Scott A. Hawkinson, Vice President--Assured Assets Product Development and Management
American Express Financial Advisors IDS Tower 10 Vice President-Assured
Minneapolis, MN 55440 Assets Product
Development & Management
Raymond E. Hirsch, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager
James G. Hirsh, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
IDS Securities Corporation Director, Vice President
and General Counsel
Darryl G. Horsman, Vice President--Product Development and Technology, American Express
Institutional Services
American Express Trust Company IDS Tower 10 Director and President
Minneapolis, MN 55440
Kevin P. Howe, Vice President--Government and Customer Relations and Chief Compliance Officer
American Enterprise Investment IDS Tower 10 Vice President and
Services Inc. Minneapolis, MN 55440 Compliance Officer
American Express Financial Advisors Vice President-
Government and
Customer Relations
American Express Service Corporation Vice President
IDS Securities Corporation Vice President and Chief
Compliance Officer
David R. Hubers, Director, President and Chief Executive Officer
American Express Financial Advisors IDS Tower 10 Chairman, Chief Executive
Minneapolis, MN 55440 Officer and President
American Express Service Corporation Director and President
IDS Aircraft Services Corporation Director
IDS Certificate Company Director
IDS Life Insurance Company Director
IDS Plan Services of California, Inc. Director and President
IDS Property Casualty Insurance Co. Director
Marietta L. Johns, Director and Senior Vice President--Field Management
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Field Management
<PAGE>
PAGE 10
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Douglas R. Jordal, Vice President--Taxes
American Express Financial Advisors IDS Tower 10 Vice President-Taxes
Minneapolis, MN 55440
IDS Aircraft Services Corporation Vice President
James E. Kaarre, Vice President--Marketing Information
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Marketing Information
Linda B. Keene, Vice President--Market Development
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Market Development
G. Michael Kennedy, Vice President--Investment Services and Investment Research
American Express Financial Advisors IDS Tower 10 Vice President-Investment
Minneapolis, MN 55440 Services and Investment
Research
Susan D. Kinder, Director and Senior Vice President--Human Resources
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Human Resources
American Express Minnesota Foundation Director
American Express Service Corporation Vice President
<PAGE>
PAGE 11
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Richard W. Kling, Director and Senior Vice President--Risk Management Products
American Enterprise Life Insurance Co. IDS Tower 10 Director and Chairman of
Minneapolis, MN 55440 the Board
American Express Financial Advisors Senior Vice President-
Risk Management Products
American Partners Life Insurance Co. Director and Chairman of
the Board
IDS Insurance Agency of Alabama Inc. Director and President
IDS Insurance Agency of Arkansas Inc. Director and President
IDS Insurance Agency of Massachusetts Inc. Director and President
IDS Insurance Agency of Nevada Inc. Director and President
IDS Insurance Agency of New Mexico Inc. Director and President
IDS Insurance Agency of North Carolina Inc. Director and President
IDS Insurance Agency of Ohio Inc. Director and President
IDS Insurance Agency of Wyoming Inc. Director and President
IDS Life Insurance Company Director and President
IDS Life Series Fund, Inc. Director and President
IDS Life Variable Annuity Funds A and B Chairman of the Board of
Managers and President
IDS Property Casualty Insurance Co. Director and Chairman of
the Board
IDS Life Insurance Company P.O. Box 5144 Director, Chairman of the
of New York Albany, NY 12205 Board and President
Paul F. Kolkman, Vice President--Actuarial Finance
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Actuarial Finance
IDS Life Insurance Company Director and Executive
Vice President
IDS Life Series Fund, Inc. Vice President and Chief
Actuary
Claire Kolmodin, Vice President--Service Quality
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Service Quality
Steven C. Kumagai, Director and Senior Vice President--Field Management and Business Systems
American Express Financial Advisors IDS Tower 10 Director and Senior Vice
Minneapolis, MN 55440 President-Field
Management and Business
Systems
American Express Service Corporation Vice President
<PAGE>
PAGE 12
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Edward Labenski, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio
Manager
IDS Advisory Group Inc. Senior Vice President
Kurt A. Larson, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio Manager
Lori J. Larson, Vice President--Variable Assets Product Development
American Express Financial Advisors IDS Tower 10 Vice President-Variable
Minneapolis, MN 55440 Assets Product
Development
IDS Cable Corporation Director and Vice President
IDS Cable II Corporation Director and Vice President
IDS Futures Brokerage Group Assistant Vice President-
General Manager/Director
IDS Futures Corporation Director and Vice President
IDS Futures III Corporation Director and Vice President
IDS Management Corporation Director and Vice President
IDS Partnership Services Corporation Director and Vice President
IDS Realty Corporation Director and Vice President
Ryan R. Larson, Vice President--IPG Product Development
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 IPG Product Development
IDS Life Insurance Company Vice President-
Annuity Product
Development
Daniel E. Laufenberg, Vice President and Chief U.S. Economist
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Chief U.S. Economist
Richard J. Lazarchic, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager
<PAGE>
PAGE 13
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Peter A. Lefferts, Director and Senior Vice President--Corporate Strategy and Development
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Corporate Strategy and
Development
American Express Service Corporation Director
American Express Trust Company Director
IDS Life Insurance Company Director and Executive
Vice President-Marketing
IDS Plan Services of California, Inc. Director
Investors Syndicate Development Corp. Director
Douglas A. Lennick, Director and Executive Vice President--Private Client Group
American Express Financial Advisors IDS Tower 10 Director and Executive
Minneapolis, MN 55440 Vice President-Private
Client Group
American Express Service Corporation Vice President
Mary J. Malevich, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio
Manager
IDS International, Inc. Vice President and
Portfolio Manager
Fred A. Mandell, Vice President--Field Marketing Readiness
American Express Financial Advisors IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Marketing Readiness
William J. McKinney, Vice President--Field Management Support
American Express Financial Advisors IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Management Support
Thomas W. Medcalf, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager
William C. Melton, Vice President-International Research and Chief International Economist
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 International Research
and Chief International
Economist
<PAGE>
PAGE 14
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Janis E. Miller, Vice President--Variable Assets
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Variable Assets
IDS Cable Corporation Director and President
IDS Cable II Corporation Director and President
IDS Futures Corporation Director and President
IDS Futures III Corporation Director and President
IDS Life Insurance Company Director and Executive
Vice President-Variable
Assets
IDS Life Series Fund, Inc. Director
IDS Life Variable Annuity Funds A&B Director
IDS Management Corporation Director and President
IDS Partnership Services Corporation Director and President
IDS Realty Corporation Director and President
IDS Life Insurance Company of New York Box 5144 Executive Vice President
Albany, NY 12205
James A. Mitchell, Director and Executive Vice President--Marketing and Products
American Enterprise Investment IDS Tower 10 Director
Services Inc. Minneapolis, MN 55440
American Express Financial Advisors Executive Vice President-
Marketing and Products
American Express Tax and Business Director
Services Inc.
IDS Certificate Company Director and Chairman of
the Board
IDS Life Insurance Company Director, Chairman of
the Board and Chief
Executive Officer
IDS Plan Services of California, Inc. Director
IDS Property Casualty Insurance Co. Director
Pamela J. Moret, Vice President--Corporate Communications
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Corporate Communications
American Express Minnesota Foundation Director and President
Barry J. Murphy, Director and Senior Vice President--Client Service
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Client Service
IDS Life Insurance Company Director and Executive
Vice President-Client
Service
<PAGE>
PAGE 15
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Robert J. Neis, Vice President--Information Systems Operations
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Information Systems
Operations
James R. Palmer, Vice President--Insurance Operations
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Insurance Operations
IDS Life Insurance Company Vice President-Taxes
Carla P. Pavone, Vice President--Specialty Service Teams and Emerging Business
American Express Financial Advisors IDS Tower 10 Vice President-Specialty
Minneapolis, MN 55440 Service Teams and
Emerging Business
George M. Perry, Vice President--Corporate Strategy and Development
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Corporate Strategy
and Development
IDS Property Casualty Insurance Co. Director
Susan B. Plimpton, Vice President--Segmentation Development and Support
American Express Financial Advisors IDS Tower 10 Vice President--
Minneapolis, MN 55440 Segmentation Development
and Support
Ronald W. Powell, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
IDS Cable Corporation Vice President and
Assistant Secretary
IDS Cable II Corporation Vice President and
Assistant Secretary
IDS Management Corporation Vice President and
Assistant Secretary
IDS Partnership Services Corporation Vice President and
Assistant Secretary
IDS Plan Services of California, Inc. Vice President and
Assistant Secretary
IDS Realty Corporation Vice President and
Assistant Secretary
<PAGE>
PAGE 16
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
James M. Punch, Vice President--TransAction Services
American Express Financial Advisors IDS Tower 10 Vice President-Trans
Minneapolis, MN 55440 Action Services
Frederick C. Quirsfeld, Vice President--Taxable Mutual Fund Investments
American Express Financial Advisors IDS Tower 10 Vice President--
Minneapolis, MN 55440 Taxable Mutual Fund
Investments
IDS Advisory Group Inc. Vice President
ReBecca K. Roloff, Vice President--1994 Program Director
American Express Financial Advisors IDS Tower 10 Vice President-1994
Minneapolis, MN 55440 Program Director
Stephen W. Roszell, Vice President--Advisory Institutional Marketing
American Express Financial Advisors IDS Tower 10 Vice President-Advisory
Minneapolis, MN 55440 Institutional Marketing
IDS Advisory Group Inc. President and Chief
Executive Officer
Robert A. Rudell, Vice President--American Express Institutional Services
American Express Financial Advisors IDS Tower 10 Vice President-American
Minneapolis, MN 55440 Express Institutional
Services
American Express Trust Company Director and Chairman of
the Board
IDS Sales Support Inc. Director and President
John P. Ryan, Vice President and General Auditor
American Express Financial Advisors IDS Tower 10 Vice President and General
Minneapolis, MN 55440 Auditor
<PAGE>
PAGE 17
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Erven A. Samsel, Director and Senior Vice President--Field Management
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Field Management
American Express Service Corporation Vice President
IDS Insurance Agency of Alabama Inc. Vice President-
New England Region
IDS Insurance Agency of Arkansas Inc. Vice President-
New England Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
New England Region
IDS Insurance Agency of Nevada Inc. Vice President-
New England Region
IDS Insurance Agency of New Mexico Inc. Vice President-
New England Region
IDS Insurance Agency of North Carolina Inc. Vice President-
New England Region
IDS Insurance Agency of Ohio Inc. Vice President-
New England Region
IDS Insurance Agency of Wyoming Inc. Vice President-
New England Region
Stuart A. Sedlacek, Vice President--Assured Assets
American Enterprise Life Insurance Co. IDS Tower 10 Director and Executive
Minneapolis, MN 55440 Vice President, Assured
Assets
American Express Financial Advisors Vice President-
Assured Assets
IDS Certificate Company Director and President
IDS Life Insurance Company Director and Executive
Vice President, Assured
Assets
Investors Syndicate Development Corp. Chairman of the Board
and President
Donald K. Shanks, Vice President--Property Casualty
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Property Casualty
IDS Property Casualty Insurance Co. Senior Vice President
<PAGE>
PAGE 18
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
F. Dale Simmons, Vice President--Senior Portfolio Manager, Insurance Investments
American Enterprise Life Insurance Co. IDS Tower 10 Vice President-Real
Minneapolis, MN 55440 Estate Loan Management
American Express Financial Advisors Vice President-Senior
Portfolio Manager,
Insurance Investments
American Partners Life Insurance Co. Vice President-Real
Estate Loan Management
IDS Certificate Company Vice President-Real
Estate Loan Management
IDS Life Insurance Company Vice President-Real
Estate Loan Management
IDS Partnership Services Corporation Vice President
IDS Real Estate Services Inc. Director and Vice President
IDS Realty Corporation Vice President
IDS Life Insurance Company of New York Box 5144 Vice President and
Albany, NY 12205 Assistant Treasurer
Judy P. Skoglund, Vice President--Human Resources and Organization Development
American Express Financial Advisors IDS Tower 10 Vice President-Human
Minneapolis, MN 55440 Resources and
Organization Development
Ben C. Smith, Vice President--Workplace Marketing
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Workplace Marketing
William A. Smith, Vice President and Controller--Private Client Group
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Controller-Private
Client Group
Bridget Sperl, Vice President--Human Resources Management Services
American Express Financial Advisors IDS Tower 10 Vice President-Human
Minneapolis, MN 55440 Resources Management
Services
Jeffrey E. Stiefler, Director
American Express Company American Express Tower Director and President
World Financial Center
New York, NY 10285
<PAGE>
PAGE 19
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
William A. Stoltzmann, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
American Partners Life Insurance Co. Director, Vice President,
General Counsel and
Secretary
IDS Life Insurance Company Vice President, General
Counsel and Secretary
American Enterprise Life Insurance P.O. Box 534 Director, Vice President,
Company Minneapolis, MN 55440 General Counsel
and Secretary
James J. Strauss, Vice President--Corporate Planning and Analysis
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Corporate Planning and
Analysis
Jeffrey J. Stremcha, Vice President--Information Resource Management/ISD
American Express Financial Advisors IDS Tower 10 Vice President-Information
Minneapolis, MN 55440 Resource Management/ISD
Fenton R. Talbott, Director
ACUMA Ltd. ACUMA House President and Chief
The Glanty, Egham Executive Officer
Surrey TW 20 9 AT
UK
<PAGE>
PAGE 20
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
John R. Thomas, Director and Senior Vice President--Information and Technology
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Information and
Technology
IDS Bond Fund, Inc. Director
IDS California Tax-Exempt Trust Trustee
IDS Discovery Fund, Inc. Director
IDS Equity Select Fund, Inc. Director
IDS Extra Income Fund, Inc. Director
IDS Federal Income Fund, Inc. Director
IDS Global Series, Inc. Director
IDS Growth Fund, Inc. Director
IDS High Yield Tax-Exempt Fund, Inc. Director
IDS Investment Series, Inc. Director
IDS Managed Retirement Fund, Inc. Director
IDS Market Advantage Series, Inc. Director
IDS Money Market Series, Inc. Director
IDS New Dimensions Fund, Inc. Director
IDS Precious Metals Fund, Inc. Director
IDS Progressive Fund, Inc. Director
IDS Selective Fund, Inc. Director
IDS Special Tax-Exempt Series Trust Trustee
IDS Stock Fund, Inc. Director
IDS Strategy Fund, Inc. Director
IDS Tax-Exempt Bond Fund, Inc. Director
IDS Tax-Free Money Fund, Inc. Director
IDS Utilities Income Fund, Inc. Director
Melinda S. Urion, Vice President and Corporate Controller
American Enterprise Life IDS Tower 10 Vice President and
Insurance Company Minneapolis, MN 55440 Controller
American Express Financial Advisors Vice President and
Corporate Controller
American Partners Life Insurance Co. Director, Vice President,
Controller and Treasurer
IDS Life Insurance Company Director, Executive Vice
President and Controller
IDS Life Series Fund, Inc. Vice President and
Controller
Wesley W. Wadman, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio Manager
IDS Advisory Group Inc. Executive Vice President
IDS Fund Management Limited Director and Vice Chairman
IDS International, Inc. Senior Vice President
<PAGE>
PAGE 21
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Michael L. Weiner, Vice President--Corporate Tax Operations
American Express Financial Advisors IDS Tower 10 Vice President-Corporate
Minneapolis, MN 55440 Tax Operations
IDS Capital Holdings Inc. Vice President
IDS Futures Brokerage Group Vice President
IDS Futures Corporation Vice President, Treasurer
and Secretary
IDS Futures III Corporation Vice President, Treasurer
and Secretary
Lawrence J. Welte, Vice President--Investment Administration
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Investment Administration
IDS Securities Corporation Director, Executive Vice
President and Chief
Operating Officer
Jeffry F. Welter, Vice President--Equity and Fixed Income Trading
American Express Financial Advisors IDS Tower 10 Vice President-Equity
Minneapolis, MN 55440 and Fixed Income Trading
William N. Westhoff, Director, Senior Vice President and Global Chief Investment Officer
American Enterprise Life Insurance IDS Tower 10 Director
Company Minneapolis, MN 55440
American Express Financial Advisors Senior Vice President and
Global Chief Investment
Officer
IDS Fund Management Limited Director
IDS International, Inc. Director
IDS Partnership Services Corporation Director and Vice President
IDS Real Estate Services Inc. Director, Chairman of the
Board and President
IDS Realty Corporation Director and Vice President
Investors Syndicate Development Corp. Director
<PAGE>
PAGE 22
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Edwin M. Wistrand, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
Michael R. Woodward, Director and Senior Vice President--Field Management
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Field Management
American Express Service Corporation Vice President
IDS Insurance Agency of Alabama Inc. Vice President-
North Region
IDS Insurance Agency of Arkansas Inc. Vice President-
North Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
North Region
IDS Insurance Agency of Nevada Inc. Vice President-
North Region
IDS Insurance Agency of New Mexico Inc. Vice President-
North Region
IDS Insurance Agency of North Carolina Inc. Vice President-
North Region
IDS Insurance Agency of Ohio Inc. Vice President-
North Region
IDS Insurance Agency of Wyoming Inc. Vice President-
North Region
IDS Life Insurance Company Box 5144 Director
of New York Albany, NY 12205
</TABLE>
<PAGE>
PAGE 23
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. and IDS
Certificate Company.
(b) As to each director, officer or partner of the principal
underwriter:
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Ronald G. Abrahamson Vice President- None
IDS Tower 10 Service Quality and
Minneapolis, MN 55440 Reengineering
Douglas A. Alger Vice President-Total None
IDS Tower 10 Compensation
Minneapolis, MN 55440
Peter J. Anderson Senior Vice President- Vice
IDS Tower 10 Investments President
Minneapolis, MN 55440
Ward D. Armstrong Vice President- None
IDS Tower 10 Sales and Marketing,
Minneapolis, MN 55440 American Express
Institutional Services
Alvan D. Arthur Group Vice President- None
IDS Tower 10 Central California/
Minneapolis, MN 55440 Western Nevada
Joseph M. Barsky III Vice President-Senior None
IDS Tower 10 Portfolio Manager
Minneapolis, MN 55440
Robert C. Basten Vice President-Tax None
IDS Tower 10 and Business Services
Minneapolis, MN 55440
<PAGE>
PAGE 24
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Timothy V. Bechtold Vice President-Risk None
IDS Tower 10 Management Products
Minneapolis, MN 55440
John D. Begley Group Vice President- None
Suite 100 Ohio/Indiana
7760 Olentangy River Rd.
Columbus, OH 43235
Carl E. Beihl Vice President- None
IDS Tower 10 Strategic Technology
Minneapolis, MN 55440 Planning
Jack A. Benjamin Group Vice President- None
Suite 200 Greater Pennsylvania
3500 Market Street
Camp Hill, PA 17011
Alan F. Bignall Vice President- None
IDS Tower 10 Financial Planning
Minneapolis, MN 55440 Systems
Brent L. Bisson Group Vice President- None
Ste 900 e Westside Tower Los Angeles Metro
11835 West Olympic Blvd.
Los Angeles, CA 90064
John C. Boeder Vice President- None
IDS Tower 10 Mature Market Group
Minneapolis, MN 55440
Bruce J. Bordelon Group Vice President- None
Galleria One Suite 1900 Gulf States
Galleria Blvd.
Metairie, LA 70001
Charles R. Branch Group Vice President- None
Suite 200 Northwest
West 111 North River Dr
Spokane, WA 99201
Karl J. Breyer Senior Vice President- None
IDS Tower 10 Corporate Affairs and
Minneapolis, MN 55440 Special Counsel
Harold E. Burke Vice President None
IDS Tower 10 and Assistant
Minneapolis, MN 55440 General Counsel
<PAGE>
PAGE 25
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Daniel J. Candura Vice President- None
IDS Tower 10 Marketing Support
Minneapolis, MN 55440
Cynthia M. Carlson Vice President- None
IDS Tower 10 American Express
Minneapolis, MN 55440 Securities Services
Orison Y. Chaffee III Vice President-Field None
IDS Tower 10 Real Estate
Minneapolis, MN 55440
James E. Choat Senior Vice President- None
IDS Tower 10 Field Management
Minneapolis, MN 55440
Kenneth J. Ciak Vice President and None
IDS Property Casualty General Manager-
1400 Lombardi Avenue IDS Property Casualty
Green Bay, WI 54304
Roger C. Corea Group Vice President- None
290 Woodcliff Drive Upstate New York
Fairport, NY 14450
Henry J. Cormier Group Vice President- None
Commerce Center One Connecticut
333 East River Drive
East Hartford, CT 06108
John M. Crawford Group Vice President- None
Suite 200 Arkansas/Springfield/Memphis
10800 Financial Ctr Pkwy
Little Rock, AR 72211
Kevin F. Crowe Group Vice President- None
Suite 312 Carolinas/Eastern Georgia
7300 Carmel Executive Pk
Charlotte, NC 28226
Alan R. Dakay Vice President- None
IDS Tower 10 Institutional Products
Minneapolis, MN 55440 Group
Regenia David Vice President- None
IDS Tower 10 Systems Services
Minneapolis, MN 55440
<PAGE>
PAGE 26
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Scott M. Digiammarino Group Vice President- None
Suite 500 Washington/Baltimore
8045 Leesburg Pike
Vienna, VA 22182
Bradford L. Drew Group Vice President- None
Two Datran Center Eastern Florida
Penthouse One B
9130 S. Dadeland Blvd.
Miami, FL 33156
William H. Dudley Director and Executive Director
IDS Tower 10 Vice President-
Minneapolis MN 55440 Investment Operations
Roger S. Edgar Senior Vice President None
IDS Tower 10 and Technology Advisor
Minneapolis, MN 55440
Gordon L. Eid Senior Vice President None
IDS Tower 10 and General Counsel
Minneapolis, MN 55440
Robert M. Elconin Vice President- None
IDS Tower 10 Government Relations
Minneapolis, MN 55440
Mark A. Ernst Vice President- None
IDS Tower 10 Retail Services
Minneapolis, MN 55440
Joseph Evanovich Jr. Group Vice President- None
One Old Mill Nebraska/Iowa/Dakotas
101 South 108th Avenue
Omaha, NE 68154
Louise P. Evenson Group Vice President- None
Suite 200 San Francisco Bay Area
1333 N. California Blvd.
Walnut Creek, CA 94596
Gordon M. Fines Vice President- None
IDS Tower 10 Mutual Fund Equity
Minneapolis MN 55440 Investments
Louis C. Fornetti Senior Vice President None
IDS Tower 10 and Chief Financial
Minneapolis, MN 55440 Officer
<PAGE>
PAGE 27
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Douglas L. Forsberg Group Vice President- None
Suite 100 Portland/Eugene
7931 N. E. Halsey
Portland, OR 97213
William P. Fritz Group Vice President- None
Suite 160 Northern Missouri
12855 Flushing Meadows Dr
St. Louis, MO 63131
Carl W. Gans Group Vice President- None
8500 Tower Suite 1770 Twin City Metro
8500 Normandale Lake Blvd.
Bloomington, MN 55437
Robert G. Gilbert Vice President- None
IDS Tower 10 Real Estate
Minneapolis, MN 55440
John J. Golden Vice President- None
IDS Tower 10 Field Compensation
Minneapolis, MN 55440 Development
Morris Goodwin Jr. Vice President and None
IDS Tower 10 Corporate Treasurer
Minneapolis, MN 55440
Suzanne Graf Vice President- None
IDS Tower 10 Systems Services
Minneapolis, MN 55440
Bruce M. Guarino Group Vice President- None
Suite 1736 Hawaii
1585 Kapiolani Blvd.
Honolulu, HI 96814
David A. Hammer Vice President None
IDS Tower 10 and Marketing
Minneapolis, MN 55440 Controller
Teresa A. Hanratty Group Vice President- None
Suites 6&7 Northern New England
169 South River Road
Bedford, NH 03110
John R. Hantz Group Vice President- None
Suite 107 Detroit Metro
17177 N. Laurel Park
Livonia, MI 48154
<PAGE>
PAGE 28
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Robert L. Harden Group Vice President- None
Two Constitution Plaza Boston Metro
Boston, MA 02129
Lorraine R. Hart Vice President- None
IDS Tower 10 Insurance Investments
Minneapolis, MN 55440
Scott A. Hawkinson Vice President-Assured None
IDS Tower 10 Assets Product Development
Minneapolis, MN 55440 and Management
Brian M. Heath Group Vice President- None
Suite 250 North Texas
801 E. Campbell Road
Richardson, TX 75081
Raymond E. Hirsch Vice President-Senior None
IDS Tower 10 Portfolio Manager
Minneapolis, MN 55440
James G. Hirsh Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
David J. Hockenberry Group Vice President- None
30 Burton Hills Blvd. Eastern Tennessee
Suite 175
Nashville, TN 37215
Kevin P. Howe Vice President- None
IDS Tower 10 Government and
Minneapolis, MN 55440 Customer Relations
David R. Hubers Chairman, Chief Director
IDS Tower 10 Executive Officer and
Minneapolis, MN 55440 President
Marietta L. Johns Senior Vice President- None
IDS Tower 10 Field Management
Minneapolis, MN 55440
James E. Kaarre Vice President- None
IDS Tower 10 Marketing Information
Minneapolis, MN 55440
<PAGE>
PAGE 29
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Linda B. Keene Vice President- None
IDS Tower 10 Market Development
Minneapolis, MN 55440
G. Michael Kennedy Vice President-Investment None
IDS Tower 10 Services and Investment
Minneapolis, MN 55440 Research
Susan D. Kinder Senior Vice President- None
IDS Tower 10 Human Resources
Minneapolis, MN 55440
Richard W. Kling Senior Vice President- None
IDS Tower 10 Risk Management Products
Minneapolis, MN 55440
Paul F. Kolkman Vice President- None
IDS Tower 10 Actuarial Finance
Minneapolis, MN 55440
Claire Kolmodin Vice President- None
IDS Tower 10 Service Quality
Minneapolis, MN 55440
David S. Kreager Group Vice President- None
Ste 108 Trestle Bridge V Greater Michigan
5136 Lovers Lane
Kalamazoo, MI 49002
Steven C. Kumagai Director and Senior None
IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Management and Business
Systems
Mitre Kutanovski Group Vice President- None
Suite 680 Chicago Metro
8585 Broadway
Merrillville, IN 48410
Edward Labenski Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Kurt A. Larson Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Lori J. Larson Vice President- None
IDS Tower 10 Variable Assets Product
Minneapolis, MN 55440 Development
<PAGE>
PAGE 30
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Ryan R. Larson Vice President- None
IDS Tower 10 IPG Product Development
Minneapolis, MN 55440
Daniel E. Laufenberg Vice President and None
IDS Tower 10 Chief U.S. Economist
Minneapolis, MN 55440
Richard J. Lazarchic Vice President- None
IDS Tower 10 Senior Portfolio
MInneapolis, MN 55440 Manager
Peter A. Lefferts Senior Vice President- None
IDS Tower 10 Corporate Strategy and
Minneapolis, MN 55440 Development
Douglas A. Lennick Director and Executive None
IDS Tower 10 Vice President-Private
Minneapolis, MN 55440 Client Group
Mary J. Malevich Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Fred A. Mandell Vice President- None
IDS Tower 10 Field Marketing Readiness
Minneapolis, MN 55440
Daniel E. Martin Group Vice President- None
Suite 650 Pittsburgh Metro
5700 Corporate Drive
Pittsburgh, PA 15237
William J. McKinney Vice President- None
IDS Tower 10 Field Management
Minneapolis, MN 55440 Support
Thomas W. Medcalf Vice President- None
IDS Tower 10 Senior Portfolio Manager
Minneapolis, MN 55440
William C. Melton Vice President- None
IDS Tower 10 International Research
Minneapolis, MN 55440 and Chief International
Economist
Janis E. Miller Vice President- None
IDS Tower 10 Variable Assets
Minneapolis, MN 55440
<PAGE>
PAGE 31
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
James A. Mitchell Executive Vice President- None
IDS Tower 10 Marketing and Products
Minneapolis, MN 55440
John P. Moraites Group Vice President- None
Union Plaza Suite 900 Kansas/Oklahoma
3030 Northwest Expressway
Oklahoma City, OK 73112
Pamela J. Moret Vice President- None
IDS Tower 10 Corporate Communications
Minneapolis, MN 55440
Barry J. Murphy Senior Vice President- None
IDS Tower 10 Client Service
Minneapolis, MN 55440
Robert J. Neis Vice President- None
IDS Tower 10 Information Systems
Minneapolis, MN 55440 Operations
Ronald E. Newton Group Vice President- None
319 Southbridge St. Rhode Island/Central
Auburn, MA 01501 Massachusetts
Thomas V. Nicolosi Group Vice President- None
Suite 220 New York Metro Area
500 Mamaronick Avenue
Harrison, NY 10528
James R. Palmer Vice President- None
IDS Tower 10 Taxes
Minneapolis, MN 55440
Carla P. Pavone Vice President- None
IDS Tower 10 Specialty Service Teams
Minneapolis, MN 55440 and Emerging Business
Susan B. Plimpton Vice President- None
IDS Tower 10 Segmentation Development
Minneapolis, MN 55440 and Support
Larry M. Post Group Vice President- None
One Tower Bridge Philadelphia Metro
100 Front Street 8th Fl
West Conshohocken, PA 19428
<PAGE>
PAGE 32
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Ronald W. Powell Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
James M. Punch Vice President- None
IDS Tower 10 Geographical Service
Minneapolis, MN 55440 Teams
Frederick C. Quirsfeld Vice President-Taxable None
IDS Tower 10 Mutual Fund Investments
Minneapolis, MN 55440
R. Daniel Richardson Group Vice President- None
Suite 800 Southern Texas
Arboretum Plaza One
9442 Capital of Texas Hwy N.
Austin, TX 78759
Roger B. Rogos Group Vice President- None
One Sarasota Tower Western Florida
Suite 700
Two N. Tamiami Trail
Sarasota, FL 34236
ReBecca K. Roloff Vice President-1994 None
IDS Tower 10 Program Director
Minneapolis, MN 55440
Stephen W. Roszell Vice President- None
IDS Tower 10 Advisory Institutional
Minneapolis, MN 55440 Marketing
Max G. Roth Group Vice President- None
Suite 201 S IDS Ctr Wisconsin/Upper Michigan
1400 Lombardi Avenue
Green Bay, WI 54304
Robert A. Rudell Vice President- None
IDS Tower 10 American Express
Minneapolis, MN 55440 Institutional Services
John P. Ryan Vice President and None
IDS Tower 10 General Auditor
Minneapolis, MN 55440
<PAGE>
PAGE 33
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Russell L. Scalfano Group Vice President- None
Suite 201 Exec Pk East Illinois/Indiana/Kentucky
101 Plaza East Blvd.
Evansville, IN 47715
William G. Scholz Group Vice President- None
Suite 205 Arizona/Las Vegas
7333 E Doubletree Ranch Rd
Scottsdale, AZ 85258
Stuart A. Sedlacek Vice President- None
IDS Tower 10 Assured Assets
Minneapolis, MN 55440
Donald K. Shanks Vice President- None
IDS Tower 10 Property Casualty
Minneapolis, MN 55440
F. Dale Simmons Vice President-Senior None
IDS Tower 10 Portfolio Manager,
Minneapolis, MN 55440 Insurance Investments
Judy P. Skoglund Vice President- None
IDS Tower 10 Human Resources and
Minneapolis, MN 55440 Organization Development
Julian W. Sloter Group Vice Presidnet- None
Ste 1700 Orlando FinCtr Orlando/Jacksonville
800 North Magnolia Ave.
Orlando, FL 32803
Ben C. Smith Vice President- None
IDS Tower 10 Workplace Marketing
Minneapolis, MN 55440
William A. Smith Vice President and None
IDS Tower 10 Controller-Private
Minneapolis, MN 55440 Client Group
James B. Solberg Group Vice President- None
IDS Tower 10 Eastern Iowa Area
Minneapolis, MN 55440
Bridget Sperl Vice President- None
IDS Tower 10 Human Resources
Minneapolis, MN 55440 Management Services
<PAGE>
PAGE 34
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Paul J. Stanislaw Group Vice President- None
Suite 1100 Southern California
Two Park Plaza
Irvine, CA 92714
Lois A. Stilwell Group Vice President- None
Suite 433 Outstate Minnesota Area/
9900 East Brn Road North Dakota/Western Wisconsin
Minnetonka, MN 55343
William A. Stoltzmann Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
James J. Strauss Vice President- None
IDS Tower 10 Corporate Planning
Minneapolis, MN 55440 and Analysis
Jeffrey J. Stremcha Vice President-Information None
IDS Tower 10 Resource Management/ISD
Minneapolis, MN 55440
Neil G. Taylor Group Vice President- None
Suite 425 Seattle/Tacoma
101 Elliott Avenue West
Seattle, WA 98119
John R. Thomas Senior Vice President- Director
IDS Tower 10 Information and
Minneapolis, MN 55440 Technology
Melinda S. Urion Vice President and Treasurer
IDS Tower 10 Corporate Controller
Minneapolis, MN 55440
Peter S. Velardi Group Vice President- None
Suite 180 Atlanta/Birmingham
1200 Ashwood Parkway
Atlanta, GA 30338
Charles F. Wachendorfer Group Vice President- None
Suite 100 Denver/Salt Lake City/
Stanford Plaza II Albuquerque
7979 East Tufts Ave Pkwy
Denver, CO 80237
Wesley W. Wadman Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
<PAGE>
PAGE 35
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Norman Weaver Jr. Senior Vice President- None
1010 Main St Suite 2B Field Management
Huntington Beach, CA 92648
Michael L. Weiner Vice President- None
IDS Tower 10 Corporate Tax
Minneapolis, MN 55440 Operations
Lawrence J. Welte Vice President- None
IDS Tower 10 Investment Administration
Minneapolis, MN 55440
Jeffry M. Welter Vice President- None
IDS Tower 10 Equity and Fixed Income
Minneapolis, MN 55440 Trading
William N. Westhoff Senior Vice President and None
IDS Tower 10 Global Chief Investment
Minneapolis, MN 55440 Officer
Thomas L. White Group Vice President- None
Suite 200 Cambridge Ct Cleveland Metro
28601 Chagrin Blvd.
Woodmere, OH 44122
Eric S. Williams Group Vice President- None
Suite 250 Virginia
3951 Westerre Parkway
Richmond, VA 23233
Edwin M. Wistrand Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
Michael R. Woodward Senior Vice President- None
32 Ellicott St Ste 100 Field Management
Batavia, NY 14020
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.
<PAGE>
PAGE 36
Item 32. Undertakings
(a) Not Applicable.
(b) The Registrant undertakes to file a
post-effective amendment, using financial
statements which need not be certified, within
four to six months from the effective date of
Registrant's 1933 Act Registration Statement.
(c) Not applicable.
<PAGE>
PAGE 72
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, Express Direct
Income Fund, Inc., 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 15th day of September, 1995.
EXPRESS DIRECT INCOME FUND, INC.
By
William H. Dudley
President
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 and on the dates indicated.
Signature Title Date
By Treasurer, September 15, 1995
William H. Dudley Director
By Director September 15, 1995
David R. Hubers
<PAGE>
PAGE 73
Signatures
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, INCOME TRUST consents to the filing
of this Amendment to the Registration Statement signed on its
behalf by the undersigned, thereunto duly authorized, in the City
of Minneapolis and State of Minnesota on the 15th day of September,
1995.
INCOME TRUST
Government Income Portfolio
Quality Income Portfolio
Aggressive Income Portfolio
By:
William H. Dudley
President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.
Signature Title Date
By Trustee, September 15, 1995
William H. Dudley Treasurer
By Trustee September 15, 1995
David R. Hubers
<PAGE>
PAGE 74
CONTENTS OF THIS PRE-EFFECTIVE AMENDMENT NO. 1 TO REGISTRATION
STATEMENT NO. 33-60323
This Pre-Effective Amendment comprises the following papers and
documents:
The facing sheet.
Cross reference sheet.
Part A.
The prospectus.
Part B.
Statement of Additional Information.
Part C.
Other Information.
The signatures.
<PAGE>
PAGE 1
EXHIBIT INDEX
EXPRESS DIRECT INCOME FUND, INC.
Registration Number 33-60323/811-7305
EXHIBIT INDEX
Exhibit 2: Form of By-Laws.
<PAGE>
PAGE 1
BY-LAWS
OF
EXPRESS DIRECT INCOME FUND, INC.
ARTICLE I
Corporate Seal
The corporate seal shall bear the inscription "Express Direct
Income Fund, Inc., Minnesota, Incorporated 1995".
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.
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
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.
<PAGE>
PAGE 2
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.
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.
<PAGE>
PAGE 3
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
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.
<PAGE>
PAGE 4
ARTICLE V
Capital Stock
Shares of capital stock shall be uncertificated.
ARTICLE VI
Transfers
1/12/89
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 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.
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 <PAGE>
PAGE 5
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 June in each year and end on the thirty-first day of
May 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 is 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 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 judgments, 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 disposition of a
proceeding for expenses incurred in connection therewith provided, <PAGE>
PAGE 6
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 notwith-
standing 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.
