<PAGE>
PAGE 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 2 X
File No. 811-7307
INCOME TRUST
(Exact Name of Registrant as Specified in Charter)
IDS Tower 10, Minneapolis, MN 55440-0010
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: 612-671-2772
Eileen J. Newhouse
IDS Tower 10, Minneapolis, MN 55440-0010
(Name and Address of Agent for Service)
<PAGE>
PAGE 2
PART A
Item 1-3. Responses to Items 1 through 3 have been omitted
pursuant to Paragraph 4 of Instruction F of the
General Instructions to Form N-1A.
Item 4. General Description of Registrant.
Income Trust (the Trust) is an open-end management investment
company organized as a Massachusetts business trust on May 26,
1995. The Trust consists of three series: Government Income
Portfolio, Quality Income Portfolio and High Yield Portfolio
(individually, a Portfolio or collectively the Portfolios). The
Portfolios issue units of beneficial interest without any sales
charge. Units in the Portfolios are issued solely in private
placement transactions that do not involve any public offering
within the meaning of Section 4(2) of the Securities Act of 1933,
as amended (the 1933 Act). Investments in the Portfolios may be
made only by investment companies, common or commingled trust funds
or similar organizations or entities that are accredited investors
within the meaning of Regulation D under the 1933 Act. This
Registration Statement does not constitute an offer to sell, or the
solicitation of an offer to buy, any security within the meaning of
the 1933 Act. Organizations or entities that become holders of
units of beneficial interest of the Trust are referred to herein as
unitholders.
Goals and types of Portfolio investments and their risks
Government Income Portfolio seeks to provide unitholders with a
high level of current income and safety of principal consistent
with investment in government and government agency securities.
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 Portfolio seeks to provide unitholders with current
income and preservation of capital by investing in investment-grade
bonds. 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.
<PAGE>
PAGE 3
High Yield Portfolio seeks to provide unitholders with high current
income as its primary goal and, as its secondary goal, capital
growth. High Yield 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. High Yield
Portfolio also invests in government securities, investment-grade
bonds, convertible securities, common and preferred stocks,
derivative instruments and money market instruments.
Because investments involve risk, a Portfolio 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
Portfolio, which may not be changed unless authorized by a majority
of the outstanding voting securities.
Investment policies and risks
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
Government Income 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 U.S. government securities representing
part ownership of pools of mortgage loans.
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. The
investments are both U.S. and foreign. 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. Quality Income Portfolio may
invest up to 25% of its total assets in foreign investments.
High Yield Portfolio - High Yield 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, High Yield Portfolio
may invest in debt securities with lower ratings, including those
in default. High Yield 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. High Yield Portfolio may
invest up to 25% of its total assets in foreign investments.
<PAGE>
PAGE 4
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 Part B of this Registration
Statement.
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
bonds also fluctuates if the 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.
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.
<TABLE><CAPTION>
Rated Securities
Bond ratings and holdings for the calendar year
ending Dec. 31, 1995
S&P Rating Protection of
(or Moody's principal and Percent of
equivalent) interest net assets
Government Quality High
Income Income Yield
Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C>
AAA Highest quality 99.56% 51.65% 1.93%
AA High quality -- 7.58 0.50
A Upper medium grade -- 19.26 --
B Medium grade -- 15.87 0.35
BB Moderately speculative -- -- 22.46
B Speculative -- -- 50.33
CCC Highly speculative -- -- 6.56
CC Poor quality -- -- 0.91
C Lowest quality -- -- --
D In default -- -- --
Unrated Unrated securities -- 0.25 8.74
</TABLE><TABLE><CAPTION>
Unrated Securities
Bond ratings and holdings for the calendar year
ending Dec. 31, 1995
Percent of net assets in unrated securities
S&P Rating Protection of assessed by the Advisor to be of comparable
(or Moody's principal and quality
equivalent) interest
Government Quality High
Income Income Yield
Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C>
AAA Highest quality --% 0.25% --%
AA High quality -- -- --
A Upper medium grade -- -- --
BBB Medium grade -- -- 0.20
BB Moderately speculative -- -- --
B Speculative -- -- 3.79
CCC Highly speculative -- -- 3.44
CC Poor quality -- -- --
C Lowest quality -- -- --
D In default -- -- --
Unrated Unrated securities -- -- 1.31<PAGE>
PAGE 5
</TABLE>
(The information in the tables above relates to IDS Federal Income
Fund, IDS Selective Fund and IDS Extra Income Fund, funds that
transferred their assets to Government Income Portfolio, Quality
Income Portfolio and High Yield Portfolio, respectively, in June,
1996. See Description of corporate bond ratings for further
information.)
Government Income and Quality Income Portfolios do not invest in
securities below investment grade.
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
may have to sell securities to have sufficient cash to pay the
dividend.
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
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 PAGE
securities: Interest Only (IO) and Principal Only (PO). IOs <PAGE>
PAGE 6
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
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 may be purchased 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 <PAGE>
PAGE 7
currency is not made until the securities are received. As long as
a Portfolio holds foreign currencies or securities valued in
foreign currencies, the value of those assets 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 Part A or Part B of this
Registration Statement. For descriptions of these and any other
types of derivative instruments, see "Descriptions of derivative
instruments" and Part B of this Registration Statement.
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.
<PAGE>
PAGE 8
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 a majority of the
outstanding voting securities approve otherwise, loans may not
exceed 30% of a Portfolio's net assets.
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 and C. Ratings by Standard &
Poor's Corporation are AAA, AA, A, BBB, BB, B, CCC, CC, C and D.
The following is a compilation of the two agencies' rating
descriptions. For further information, see Part B of this
Registration Statement.
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.
<PAGE>
PAGE 9
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.
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.
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 Part B of this
Registration Statement.
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 <PAGE>
PAGE 10
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. The
non-mortgage related asset-backed securities do not have the
benefit of a security interest in the related collateral. 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.
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.
Item 5. Management of the Fund.
The Board
The Trust has a board of trustees (the Board). The Board has
primary responsibility for the overall management of the Trust. It
elects officers and retains service providers to carry out day-to-
day operations.
The Advisor
American Express Financial Corporation, a provider of financial
services since 1894 (the Advisor), has been retained to serve as
the investment manager for each Portfolio. The Advisor, located at
IDS Tower 10, Minneapolis, MN 55440-0010, is a wholly owned
subsidiary of American Express Company, a financial services
company with headquarters at American Express Tower, World PAGE
Financial Center, New York, NY 10285. <PAGE>
PAGE 11
Under the 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 board of
trustees).The Advisor is paid a fee for these services based on the
average daily net assets of each Portfolio, as follows:
Government Income Portfolio
High Yield Portfolio Quality Income Portfolio
Assets Annual rate at Assets Annual rate at
(billions) each asset level (billions) each asset level
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
Under the agreement, each Portfolio also pays taxes, brokerage
commissions and nonadvisory expenses. The Portfolios may pay
brokerage commissions to broker-dealer affiliates of the Advisor.
The Advisor also has been retained to provide transfer agent
services (handling unitholder accounts) and administrative
services.
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 the predecessor 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.
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 the
predecessor of Quality Income Portfolio since 1985. He also
manages the assets of World Income Portfolio, a separate portfolio
in the Preferred Master Trust Group since 1989, and IDS Life Global
Yield Fund since 1996.
High Yield Portfolio
Jack Utter joined the Advisor in 1962 and serves as senior
portfolio manager. He has managed the assets of the predecessor of
High Yield Portfolio since 1985. He also became manager of IDS
Life Income Advantage Fund in 1996.
Item 5A. Response to Item 5A has been omitted pursuant to
Paragraph 4 of Instruction F of the General
Instructions to Form N-1A.
<PAGE>
PAGE 12
Item 6. Capital Stock and Other Securities.
The Trust is an open-end, management investment company organized
as a Massachusetts business trust on May 26, 1995 and is registered
under the Investment Company Act of 1940, as amended (the 1940
Act). The Trust is authorized to issue an unlimited number of
units of beneficial interest. Each unit of the Trust has one vote,
and, when issued, is fully paid, non-assessable, and redeemable.
Units have cumulative voting rights when electing trustees.
Currently, the Trust has three series of units, the "Portfolios."
The assets and liabilities of each series are separate and distinct
from any other series. Additional series may be added in the
future by the board.
A unitholder's interest in the Trust cannot be transferred, but the
unitholder may withdraw all or any portion of its investment at any
time at net asset value. Under the terms of the Declaration of
Trust on file with the Secretary of State of the Commonwealth of
Massachusetts, all persons having any claim against a portfolio
shall look only to the assets of that portfolio for payment and no
unitholder, trustee, officer or agent shall be personally liable
therefor.
Each Portfolio is a partnership that is not subject to any federal
income tax. However, each unitholder in a Portfolio is taxable on
its share (as determined in accordance with the governing
instruments of the Trust) of the Portfolio's ordinary income and
capital gain pursuant to the rules governing the unitholders. The
determination of each unitholder's share will be made in accordance
with the Internal Revenue Code of 1986, as amended (the Code),
regulations promulgated thereunder and the Declaration of Trust.
The Portfolios' taxable year-ends are May 31. It is intended that
the Portfolios' assets, income and distributions will be managed to
satisfy the requirements of Subchapter M of the Code assuming that
a unitholder invests all its assets in the Portfolio.
There are tax issues that are relevant to unitholders who purchase
units with assets rather than cash. Such purchases will not be
taxable provided certain requirements are met. Unitholders are
advised to consult their own tax advisors about the tax
consequences of investing in a Portfolio.
Item 7. Purchase of Securities Being Offered.
The Portfolios' units are not registered under the 1933 Act and may
not be sold publicly. Instead, units are offered pursuant to
exemptions from that Act in private transactions.
Units are offered only to other investment companies and certain
institutional investors. All units are sold without a sales
charge. All investments in a Portfolio are credited to the
unitholder's account in the form of full and fractional units of
the Portfolio (rounded to the nearest 1/1000 of a unit). The
Portfolios do not issue stock certificates.
The minimum initial investment is $5,000,000 with no minimum on
subsequent investments.<PAGE>
PAGE 13
Net asset value (NAV) is the total value of the Portfolio's
investments and other assets less any liabilities. Each unit has a
value of $1.00. Each Portfolio is deemed to have outstanding the
number of units equal to its NAV and each unitholder is deemed to
hold the number of units equal to its proportionate investment in
the Portfolio. NAV 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).
American Express Financial Advisors Inc. (the Placement Agent), a
wholly owned subsidiary of the Advisor, serves as the Placement
Agent for the Trust. The Placement Agent is located at IDS Tower
10, Minneapolis, MN 55440-0010.
Item 8. Redemption or Repurchase.
Redemptions are processed on any date on which the Portfolio is
open for business and are effected at the Portfolio's net asset
value next determined after the Portfolio receives a redemption
request in good form.
Payment for redeemed units will be made promptly, but in no event
later than seven days after receipt of the redemption request in
good form. However, the right of redemption may be suspended or
the date of payment postponed in accordance with the rules under
the 1940 Act. Each Portfolio reserves the right upon 30-days'
written notice to redeem, at net asset value, the units of any
unitholder whose account has a value of less than $1,000,000 as a
result of voluntary redemptions. Redemptions are taxable events,
and the amount received upon redemption may be more or less than
the amount paid for the units depending upon the fluctuations in
the market value of the assets owned by the Portfolio.
Item 9. Pending Legal Proceedings.
Not Applicable.<PAGE>
PAGE 14
PART B
Item 10: Cover Page
Not applicable.
Item 11: Table of Contents
Not applicable.
Item 12: General Information and History
Not applicable.
Item 13: Investment Objectives and Policies
Please refer to Item 4 of Part A for the objectives of each
Portfolio.
Investment Policies applicable to Government Income Portfolio:
These are investment policies in addition to those presented in
Part A. The policies below are fundamental policies of a Portfolio
and may be changed only with unitholder approval. Unless holders
of a majority of the outstanding units agree to make the change,
the Portfolio will not:
'Act as an underwriter (sell securities for others). However,
under the securities laws, the Portfolio may be deemed to be an
underwriter when it purchases securities directly from the issuer
and later resells them.
'Borrow money or property, except as a temporary measure for
extraordinary or emergency purposes, in an amount not exceeding
one-third of the market value of its total assets (including
borrowings) less liabilities (other than borrowings) immediately
after the borrowing. The Portfolio has not borrowed in the past
and has no present intention to borrow.
'Make cash loans if the total commitment amount exceeds 5% of the
Fund's total assets.
'Purchase more than 10% of the outstanding voting securities of an
issuer.
'Invest more than 5% of its total assets in securities of any one
company, government or political subdivision thereof, except the
limitation will not apply to investments in securities issued by
the U.S. government, its agencies or instrumentalities, and except
that up to 25% of the Portfolio's total assets may be invested
without regard to this 5% limitation.
'Buy or sell real estate, unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent
the Portfolio from investing in securities or other instruments
backed by real estate or securities of companies engaged in the <PAGE>
PAGE 15
real estate business or real estate investment trusts. For
purposes of this policy, real estate includes real estate limited
partnerships.
'Buy or sell physical commodities unless acquired as a result of
ownership of securities or other instruments, except this shall not
prevent the 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.
'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. If the holdings
of all board members and officers of the Fund, the Portfolio and
the Advisor 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.
'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. 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 Advisor believes the opportunity for additional
income outweighs the risks.
'Issue senior securities, except this restriction shall not be
deemed to prohibit the Portfolio from borrowing from banks, using
options or futures contracts, lending its securities or entering
into repurchase agreements.
'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.
'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.
The policies below are non-fundamental and may be changed without
unitholder approval. Unless changed by the board, the Portfolio
will not:
<PAGE>
PAGE 16
'Buy on margin or sell short, except it may enter into interest
rate futures contracts.
'Pledge or mortgage its assets beyond 15% of total assets. If the
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 futures
contracts 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 5% of its net assets in warrants. Under one
state's law no more than 2% of the Portfolio's net assets may be
invested in warrants not listed on the New York or American Stock
Exchange.
'Invest more than 10% of its total assets in securities of
investment companies. The Portfolio has no current intention to
invest in securities of the investment companies.
'Invest in a company to control or manage it.
'Invest in exploration or development programs, such as oil, gas or
mineral leases.
'Invest more than 10% of its net assets in securities and
derivative instruments that are illiquid. For purposes of this
policy illiquid securities include some privately placed
securities, public securities and Rule 144A securities that for one
reason or another may no longer have a readily available market,
repurchase agreements with maturities greater than seven days, non-
negotiable fixed-time deposits and over-the-counter options.
In determining the liquidity of Rule 144A securities, which are
unregistered securities offered to qualified institutional buyers,
and interest-only and principal-only fixed mortgage-backed
securities (IO's and PO's) issued by the U.S. government or its
agencies and instrumentalities, the Advisor to the Portfolio, 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 Advisor to the Portfolio, under
guidelines established by the board, will evaluate relevant factors
such as the issuer and the size and nature of its commercial paper
programs, the willingness and ability of the issuer or dealer to
repurchase the paper, and the nature of the clearance and
settlement procedures for the paper.
The Portfolio may make contracts to purchase securities for a fixed
price at a future date beyond normal settlement time (when-issued
securities or forward commitments). Under normal market
conditions, the Portfolio does not intend to commit more than 5% of
<PAGE>
PAGE 17
its total assets to these practices. The Portfolio does not pay
for the securities or receive dividends or interest on them until
the contractual settlement date. The Portfolio will designate cash
or liquid high-grade debt securities at least equal in value to its
commitments to purchase the securities. When-issued securities or
forward commitments are subject to market fluctuations and they may
affect the Portfolio's total assets the same as owned securities.
The Portfolio may maintain a portion of its assets in cash and
cash-equivalent investments. The cash-equivalent investments the
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. The Portfolio also may purchase short-term
commercial paper rated P-2 or better by Moody's Investor Service,
Inc. (Moody's) or A-2 or better by Standard & Poor's Corporation
(S&P) or the equivalent and may use repurchase agreements with
broker-dealers registered under the Securities Exchange Act of 1934
and with commercial banks. A risk of a repurchase agreement is
that if the seller seeks the protection of the bankruptcy laws, the
Portfolio's ability to liquidate the security involved could be
impaired.
Investment Policies applicable to Quality Income Portfolio:
These are investment policies in addition to those presented in
Part A. The policies below are fundamental policies of a Portfolio
and may be changed only with unitholder approval. Unless holders
of a majority of the outstanding units agree to make the change,
the Portfolio will not:
'Act as an underwriter (sell securities for others). However,
under the securities laws, the Portfolio may be deemed to be an
underwriter when it purchases securities directly from the issuer
and later resells them.
'Borrow money or property, except as a temporary measure for
extraordinary or emergency purposes, in an amount not exceeding
one-third of the market value of its total assets (including
borrowings) less liabilities (other than borrowings) immediately
after the borrowing. The Portfolio has not borrowed in the past
and has no present intention to borrow.
'Make cash loans if the total commitment amount exceeds 5% of the
Portfolio's total assets.
'Concentrate in any one industry. According to the present
interpretation by the SEC, this means no more than 25% of the
Portfolio's total assets, based on current market value at time of
purchase, can be invested in any one industry.
'Purchase more than 10% of the outstanding voting securities of an
issuer.
<PAGE>
PAGE 18
'Invest more than 5% of its total assets in securities of any one
company, government or political subdivision thereof, except the
limitation will not apply to investments in securities issued by
the U.S. government, its agencies or instrumentalities, and except
that up to 25% of the Portfolio's total assets may be invested
without regard to this 5% limitation.
'Buy or sell real estate, unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent
the Portfolio from investing in securities or other instruments
backed by real estate or securities of companies engaged in the
real estate business or real estate investment trusts. For
purposes of this policy, real estate includes real estate limited
partnerships.
'Buy or sell physical commodities unless acquired as a result of
ownership of securities or other instruments, except this shall not
prevent the 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.
'Make a loan of any part of its assets to 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. If the holdings
of all board members and officers of the Fund, the Portfolio, and
the Advisor 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.
'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. 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 Advisor believes the opportunity for additional
income outweighs the risks.
'Issue senior securities, except this restriction shall not be
deemed to prohibit the Portfolio from borrowing from banks, using
options or futures contracts, lending its securities or entering
into repurchase agreements.
The policies below are non-fundamental and may be changed without
unitholder approval. Unless changed by the board, the Portfolio
will not:<PAGE>
PAGE 19
'Buy on margin or sell short, except it may enter into interest
rate futures contracts.
'Pledge or mortgage its assets beyond 15% of total assets. If the
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 futures
contracts 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 Portfolio has no current intention to
invest in securities of the investment companies.
'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 5% of its net assets in warrants. Under one
state's law no more than 2% of the Portfolio's net assets may be
invested in warrants not listed on the New York or American Stock
Exchange.
'Invest more than 10% of its net assets in securities and
derivative instruments that are illiquid. For purposes of this
policy illiquid securities include some privately placed
securities, public securities and Rule 144A securities that for one
reason or another may no longer have a readily available market,
repurchase agreements with maturities greater than seven days, non-
negotiable fixed-time deposits, and over-the-counter options.
In determining the liquidity of Rule 144A securities, which are
unregistered securities offered to qualified institutional buyers,
and interest-only and principal-only fixed mortgage-backed
securities (IOs and POs) issued by the United States government or
its agencies and instrumentalities, the Advisor to the Portfolio,
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 Advisor to the Portfolio, 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.
<PAGE>
PAGE 20
The Portfolio may make contracts to purchase securities for a fixed
price at a future date beyond normal settlement time (when-issued
securities or forward commitments). Under normal market
conditions, the Portfolio does not intend to commit more than 5% of
its total assets to these practices. The Portfolio does not pay
for the securities or receive dividends or interest on them until
the contractual settlement date. The Portfolio will designate cash
or liquid high-grade debt securities at least equal in value to its
commitments to purchase the securities. When-issued securities or
forward commitments are subject to market fluctuations and they may
affect the Portfolio's total assets the same as owned securities.
The Portfolio may maintain a portion of its assets in cash and
cash-equivalent investments. The cash-equivalent investments the
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 limitations on foreign investments
described in the prospectus. The Portfolio also may purchase
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 the seller seeks the
protection of the bankruptcy laws, the Portfolio's ability to
liquidate the security involved could be impaired.
Investment Policies applicable to High Yield Portfolio
These are investment policies in addition to those presented in
Part A. The policies below are fundamental policies of a Portfolio
and may be changed only with unitholder approval. Unless holders
of a majority of the outstanding units agree to make the change,
the Portfolio will not:
'Act as an underwriter (sell securities for others). However,
under the securities laws, the Portfolio may be deemed to be an
underwriter when it purchases securities directly from the issuer
and later resells them.
'Borrow money or property, except as a temporary measure for
extraordinary or emergency purposes, in an amount not exceeding
one-third of the market value of its total assets (including
borrowings) less liabilities (other than borrowings) immediately
after the borrowing. The Portfolio has not borrowed in the past
and has no present intention to borrow.
'Make cash loans if the total commitment amount exceeds 5% of the
Portfolio's total assets.
'Purchase more than 10% of the outstanding voting securities of an
issuer.
<PAGE>
PAGE 21
'Invest more than 5% of its total assets in securities of any one
company, government or political subdivision thereof, except the
limitation will not apply to investments in securities issued by
the U.S. government, its agencies or instrumentalities, and except
that up to 25% of the Portfolio's total assets may be invested
without regard to this 5% limitation.
'Buy or sell real estate, unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent
the Portfolio from investing in securities or other instruments
backed by real estate or securities of companies engaged in the
real estate business or real estate investment trusts. For
purposes of this policy, real estate includes real estate limited
partnerships.
'Buy or sell physical commodities unless acquired as a result of
ownership of securities or other instruments, except this shall not
prevent the 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.
'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. 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 Advisor believes the opportunity for additional
income outweighs the risks.
'Issue senior securities, except this restriction shall not be
deemed to prohibit the Portfolio from borrowing from banks, using
options and futures contracts, lending its securities, or entering
into repurchase agreements.
'Concentrate in any one industry. According to the present
interpretation by the 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.
The policies below are non-fundamental and may be changed without
unitholder approval. Unless changed by the board, the Portfolio
will not:
'Pledge or mortgage its assets beyond 15% of total assets. If the
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 futures
contracts are not deemed to be a pledge of assets.
<PAGE>
PAGE 22
'Invest more than 10% of its total assets in securities of
investment companies. The Portfolio has no current intention to
invest in securities of other investment companies.
'Invest in exploration or development programs, such as oil, gas or
mineral leases.
'Invest more than 5% of its total assets in securities of
companies, including any predecessors, that have a record of less
than three years continuous operations.
'Invest in a company to control or manage it.
'Buy on margin or sell short, except they may enter into interest
rate future contracts.
'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. If the holdings
of all board members and officers of the Fund, the Portfolio and
the Advisor 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.
'Invest more than 5% of its net assets in warrants. Under one
state's law no more than 2% of the Portfolio's net assets may be
invested in warrants not listed on the New York or American Stock
Exchange.
'Invest more than 10% of its 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,
loans and loan participations, repurchase agreements with
maturities greater than seven days, non-negotiable fixed-time
deposits and over-the-counter options.
'In determining the liquidity of Rule 144A securities, which are
unregistered securities offered to qualified institutional buyers,
and interest-only and principal-only fixed mortgage-backed
securities (IOs and POs) issued by the United States government or
its agencies and instrumentalities, the Advisor to the Portfolio,
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 Advisor to the Portfolio, 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.<PAGE>
PAGE 23
Loans, loan participations and interests in securitized loan pools
are interests in amounts owed by a corporate, governmental or other
borrower to a lender or consortium of lenders (typically banks,
insurance companies, investment banks, government agencies or
international agencies). Loans involve a risk of loss in case of
default or insolvency of the borrower and may offer less legal
protection to the fund in the event of fraud or misrepresentation.
In addition, loan participations involve a risk of insolvency of
the lender or other financial intermediary.
The Portfolio may make contracts to purchase securities for a fixed
price at a future date beyond normal settlement time (when-issued
securities or forward commitments). Under normal market
conditions, the Portfolio does not intend to commit more than 5% of
its total assets to these practices. The Portfolio does not pay
for the securities or receive dividends or interest on them until
the contractual settlement date. The Portfolio will designate cash
or liquid high-grade debt securities at least equal in value to its
commitments to purchase the securities. When-issued securities or
forward commitments are subject to market fluctuations and they may
affect the fund's total assets the same as owned securities.
The Portfolio may maintain a portion of its assets in cash and
cash-equivalent investments. The cash-equivalent investments the
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 the limitations on foreign
investments described in the prospectus. The Portfolio also may
purchase 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 the seller seeks the
protection of the bankruptcy laws, the Portfolio's ability to
liquidate the security involved could be impaired.
For a description of bond ratings, commercial paper rating, foreign
currency transactions, options and interest rate futures contracts
and mortgage-backed securities, see descriptions below.
DESCRIPTION OF BOND RATINGS FOR QUALITY INCOME PORTFOLIO
These ratings concern the quality of the issuing corporation. They
are not an opinion of the market value of the security. Such
ratings are opinions on whether the principal and interest will be
repaid when due. A security's rating may change which could affect
its price.
Ratings by Moody's Investors Service, Inc. are Aaa, Aa, A, Baa, Ba,
B, Caa, Ca, and C.
<PAGE>
PAGE 24
Bonds rated:
Aaa are judged to be of the best quality. They carry the smallest
degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the fundamentally
strong position of such issues.
Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risk
appear somewhat larger than the Aaa securities.
A possess many favorable investment attributes and are to be
considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to
impairment some time in the future.
Baa are considered as medium-grade obligations (i.e., they are
neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well.
Ba are judged to have speculative elements; their future cannot be
considered as well-assured. Often the protection of interest and
principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be
small.
Caa are of poor standing. Such issues may be in default or there
may be present elements of danger with respect to principal or
interest.
Ca represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked shortcomings.
C are the lowest rated class of bonds, and issues so rated can be
regarded as having extremely poor prospects of ever attaining any
real investment standing.
Ratings by Standard & Poor's Corporation are AAA, AA, A, BBB, BB,
B, CCC, CC, C and D.
<PAGE>
PAGE 25
AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only in small degree.
A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in
higher-rated categories.
BBB is regarded as having adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than in higher-rated
categories.
BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties
or exposure to adverse business, financial, or economic conditions
which could lead to inadequate capacity to meet timely interest and
principal payments. The BB rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied
BBB- rating.
B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions will likely
impair capacity or willingness to pay interest and repay principal.
The B rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied BB or BB- rating.
CCC has a currently identifiable vulnerability to default, and is
dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of
principal. In the event of adverse business, financial, or
economic conditions, it is not likely to have the capacity to pay
interest and repay principal. The CCC rating category is also used
for debt subordinated to senior debt that is assigned an actual or
implied B or B- rating.
CC typically is applied to debt subordinated to senior debt that is
assigned an actual or implied CCC rating.
C typically is applied to debt subordinated to senior debt that is
assigned an actual or implied CCC- rating. The C rating may be
used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued.
D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the due
date, even if the applicable grace period has not expired, unless
S&P believes that such payments will be made during such grace
period. The D rating also will be used upon the filing of a
bankruptcy petition if debt service payments are jeopardized.
<PAGE>
PAGE 26
Non-rated securities will be considered for investment when they
possess a risk comparable to that of rated securities consistent
with the Fund's objectives and policies. When assessing the risk
involved in each non-rated security, the Fund will consider the
financial condition of the issuer or the protection afforded by the
terms of the security.
DESCRIPTION OF COMMERCIAL PAPER RATINGS FOR GOVERNMENT INCOME
PORTFOLIO
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.
FOREIGN CURRENCY TRANSACTIONS FOR QUALITY INCOME PORTFOLIO AND HIGH
YIELD PORTFOLIO
Since investments in foreign countries usually involve currencies
of foreign countries, and since a 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.
<PAGE>
PAGE 27
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
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.
<PAGE>
PAGE 28
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.
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 its 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 <PAGE>
PAGE 29
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.
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 its portfolio. An
option writer could lose amounts substantially in excess of its
initial investments, due to the margin and collateral requirements
associated with such positions.
Options on foreign currencies are traded through financial
institutions acting as market-makers, although foreign currency
options also are traded on certain national securities exchanges,
such as the Philadelphia Stock Exchange and the Chicago Board
Options Exchange, subject to SEC regulation. In an over-the-
counter trading environment, many of the protections afforded to
exchange participants will not be available. For example, there
are no daily price fluctuation limits, and adverse market movements
could therefore continue to an unlimited extent over a period of
time. Although the purchaser of an option cannot lose more than
the amount of the premium plus related transaction costs, this
entire amount could be lost.
Foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the Options
Clearing Corporation (OCC), thereby reducing the risk of
counterparty default. Further, a liquid secondary market in
options traded on a national securities exchange may be more
readily available than in the over-the-counter market, potentially
permitting 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<PAGE>
PAGE 30
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.
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 Commodity
Futures Trading Commission (CFTC) limitations. All futures
contracts are aggregated for purposes of the percentage
limitations.
Currency futures and options on futures values can be expected to
correlate with exchange rates, but will not reflect other factors
that may affect the values of 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 the 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.
OPTIONS AND INTEREST RATE FUTURES CONTRACTS FOR GOVERNMENT INCOME
PORTFOLIO, QUALITY INCOME PORTFOLIO AND HIGH YIELD PORTFOLIO
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.
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 <PAGE>
PAGE 31
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 shareholders 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. Options are used as a trading technique to
take advantage of any disparity between the price of the underlying
security in the securities market and its price on the options
market. It is anticipated the trading 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.<PAGE>
PAGE 32
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 those
states. For example, California limits the writing of options to
50% of the assets of a Portfolio.
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, Chicago
Board Options 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.
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
purchase for the same aggregate amount of the specific type of <PAGE>
PAGE 33
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 a
Portfolio'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 a
Portfolio owns. If interest rates did increase, the value of the
debt securities in a 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
liquidity in the futures market than in the cash market, it might
be possible to accomplish the same result more easily and more <PAGE>
PAGE 34
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 the fund 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.
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
<PAGE>
PAGE 35
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 such option is a 1256
contract, a Portfolio will either mark these options to market or
will identify them as part of a mixed straddle and not treat them
as having been sold at the end of the year at market value.
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
on their primary exchange.
MORTGAGE-BACKED SECURITIES
A mortgage pass-through certificate is one that represents an
interest in a pool, or group, of mortgage loans assembled by the
Government National Mortgage Association (GNMA), Federal Home Loan
Mortgage Corporation (FHLMC), Federal National Mortgage Association
<PAGE>
PAGE 36
(FNMA) or non-governmental entities. In pass-through certificates,
both principal and interest payments, including prepayments, are
passed through to the holder of the certificate. Prepayments on
underlying mortgages result in a loss of anticipated interest, and
the actual yield (or total return) to the Fund, which is influenced
by both stated interest rates and market conditions, may be
different than the quoted yield on certificates. Some U.S.
government securities may be purchased on a when-issued basis,
which means that it may take as long as 45 days after the purchase
before the securities are delivered to the Fund.
Stripped Mortgage-Backed Securities. The Fund may invest in
stripped mortgage-backed securities. Generally, there are two
classes of stripped mortgage-backed securities: Interest Only (IO)
and Principal Only (PO). IOs entitle the holder to receive
distributions consisting of all or a portion of the interest on the
underlying pool of mortgage loans or mortgage-backed securities.
POs entitle the holder to receive distributions consisting of all
or a portion of the principal of the underlying pool of mortgage
loans or mortgage-backed securities. The cash flows and yields on
IOs and POs are extremely sensitive to the rate of principal
payments (including prepayments) on the underlying mortgage loans
or mortgage-backed securities. A rapid rate of principal payments
may adversely affect the yield to maturity of IOs. A slow rate of
principal payments may adversely affect the yield to maturity of
POs. On an IO, if prepayments of principal are greater than
anticipated, an investor may incur substantial losses. If
prepayments of principal are slower than anticipated, the yield on
a PO will be affected more severely than would be the case with a
traditional mortgage-backed security.
Mortgage-Backed Security Spread Options. The Fund may purchase
mortgage-backed security (MBS) put spread options and write covered
MBS call spread options. MBS spread options are based upon the
changes in the price spread between a specified mortgage-backed
security and a like-duration Treasury security. MBS spread options
are traded in the OTC market and are of short duration, typically
one to two months. The Fund would buy or sell covered MBS call
spread options in situations where mortgage-backed securities are
expected to underperform like-duration Treasury securities.
Portfolio turnover rates:
1995 1994
Government Income Portfolio 213% 304%
Quality Income Portfolio 26 30
High Yield Portfolio 70 74
For periods prior to the Portfolio's commencement of operations,
turnover rates are based on the turnover rates of the corresponding
IDS Funds (IDS Federal Income Fund, IDS Selective Fund and IDS
Extra Income Fund), which transferred all of their assets to the
Portfolios in June 1996. A high turnover rate (in excess of 100%)
results in higher fees and expenses.
<PAGE>
PAGE 37
Item 14: Management of the Fund
BOARD MEMBERS AND OFFICERS
The following is a list of the Trust's board members and officers,
who are also board members and officers of all other Trusts in the
Preferred Master Trust Group and all funds in the IDS MUTUAL FUND
GROUP. All units have cumulative voting rights with respect to the
election of board members and officers.
Trustees 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, the Interpublic Group of Companies, Inc.
(advertising) and FPL Group, Inc. (holding company for Florida
Power and Light).
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
<PAGE>
PAGE 38
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.
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).
William R. Pearce+*
Born in 1927.
901 S. Marquette Ave.
Minneapolis, MN
President of all of Trusts in the Preferred Master Trust Group
since April 1996 and 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 39
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.
Valspar Corporation
Suite 1700
Foshay Tower
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 of the Trust by reason of being an officer and
employee of the Trust.
**Interested person of the Trust by reason of being an officer,
board member, employee and/or shareholder of AEFC or American
Express.
The board also has appointed officers who are responsible for day-
to-day business decisions based on policies it has established.
In addition to Mr. Pearce, who is president, the Trust's other
officers are:
Leslie L. Ogg
Born in 1938.
901 S. Marquette Ave.
Minneapolis, MN
Vice president, general counsel and secretary of all Trusts in the
Preferred Master Trust Group and of all funds in the IDS MUTUAL
FUND GROUP.
Officers who are also officers and/or employees of AEFC.
Peter J. Anderson
Born in 1942.
IDS Tower 10
Minneapolis, MN
Vice president-investments of all Trusts in the Preferred Master
Trust Group and of all funds in the IDS MUTUAL FUND GROUP.
Director and senior vice president-investments of AEFC.
<PAGE>
PAGE 40
Melinda S. Urion
Born in 1953.
IDS Tower 10
Minneapolis, MN
Treasurer of all Trusts in the Preferred Master Trust Group and of
all funds in the IDS MUTUAL FUND GROUP. Director, senior vice
president and chief financial officer of AEFC. Director and
executive vice president and controller of IDS Life Insurance
Company.
Item 15: Control Persons and Principal Holder of Securities
Not applicable.
Item 16: Investment Advisory and Other Services
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:
Government Income Portfolio
High Yield Portfolio Quality Income Portfolio
Assets Annual rate at Assets Annual rate at
(billions) each asset level (billions) each asset level
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
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 current Agreement, each Portfolio also pays taxes,
brokerage commissions and nonadvisory expenses, which include
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; expenses
incurred in connection with lending Portfolio securities; and
expenses properly payable by the Portfolios, approved by the board.
Transfer Agency and Administration Agreement
The Trust, on behalf of each Portfolio, has a Transfer Agency and
Administration 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 unitholder
account administration agent functions in connection with the <PAGE>
PAGE 41
issuance, exchange and redemption or repurchase of the Portfolios'
units. The fee is determined by multiplying the number of
unitholder accounts at the end of the day by a rate of $1 per year
and dividing by the number of days in that year.
Placement Agency Agreement
Pursuant to a Placement Agency Agreement, American Express
Financial Advisors Inc. acts as placement agent of the units of the
Trust.
Custodian
The Trust's securities and cash for High Yield Portfolio and
Quality Income Portfolio are held by First Bank National
Association, 180 E. Fifth St. St. Paul, MN 55101-1631, through a
custodian agreement. The Trust's securities and cash for
Government Income Portfolio are held by American Express Trust
Company, 1200 Northstar Center West, 625 Marquette Ave.,
Minneapolis, MN 55402-2307, through a custodian agreement. The
custodian is permitted to deposit some or all of its securities in
central depository systems as allowed by federal law. For its
services, the 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 Portfolios' financial statements 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 Portfolios.
Item 17: Brokerage Allocations and Other Practices
PORTFOLIO TRANSACTIONS
Subject to policies set by the board, 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. In selecting broker-dealers to
execute transactions, the Advisor may consider the price of
security including commission or mark-up, the size and difficulty
of the order, the reliability, integrity, financial soundness and
general operation and execution capabilities of the broker, the
broker's expertise in particular markets, and research services
provided by the broker.
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 <PAGE>
PAGE 42
planned portfolio transactions for any of the Trusts in the
Preferred Master Trust Group. 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.
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 a
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 <PAGE>
PAGE 43
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
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 Trusts in the
Preferred Master Trust Group, their corresponding Funds 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 the 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 a 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 a 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 <PAGE>
PAGE 44
Advisors, a wholly-owned subsidiary of Sloan Financial Group. The
Advisor owns 100% of IDS Capital Holdings Inc. which in turn owns
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.
Item 18: Capital Stock and Other Securities
The information in response to this item is provided in addition to
information provided in Item 6 of Part A.
The Declaration of Trust dated May 26, 1995, a copy of which is on
file in the office of the Secretary of the Commonwealth of
Massachusetts, authorizes the issuance of units of beneficial
interest in the Trust without par value. Each unit of a Portfolio
has one vote and shares equally in dividends and distributions,
when and if declared by the board, and in each Portfolio's net
assets upon liquidation. All units, when issued, are fully paid
and non-assessable. There are no preemptive, conversion or
exchange rights.
The board may classify or reclassify any unissued units of the
Trust into units of any series by setting or changing in any one or
more respect, from time to time, prior to the issuance of such
units, the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, or qualifications, of
such units. Any such classification or reclassification will
comply with the provisions of the 1940 Act.
The overall management of the business of each Portfolio is vested
with the board members. The board members approve all significant
agreements between the Portfolios and persons or companies
furnishing services to the Portfolios. The day-to-day operations
of the Portfolios are delegated to the officers of the Trust
subject to the investment objective and policies of each Portfolio,
the general supervision of the board members and the applicable
laws of The Commonwealth of Massachusetts.
Generally, there will not be annual meetings of unitholders.
Unitholders may remove board members from office by votes cast at a
meeting of unitholders or by written consent.
Under Massachusetts law, unitholders could, under certain
circumstances, be held liable for the obligations of the Trust.
However, the Declaration of Trust disclaims unitholder liability
for acts or obligations of the Trust and requires that notice of
such disclaimer be given in each agreement, obligation or
instrument entered into or executed by the Trust. The Declaration
of Trust provides for indemnification out of the Trust property for
all loss and expense of any unitholder of the Trust held liable on
account of being or having been a unitholder. Thus, the risk of a
unitholder incurring financial loss on account of unitholder
liability is limited to circumstances in which the Trust would be <PAGE>
PAGE 45
unable to meet its obligations wherein the complaining party was
held not to be bound by the disclaimer.
The Declaration of Trust further provides that the board members
will not be liable for errors of judgment or mistakes of fact or
law. However, nothing in the Declaration of Trust protects a board
member against any liability to which the board member would
otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involving the
conduct of his or her office. The Declaration of Trust provides
for indemnification by the Trust of the board members and officers
of the Trust except with respect to any matter as to which any such
person did not act in good faith in the reasonable belief that his
action was in or not opposed to the best interests of the Trust.
Such person may not be indemnified against any liability to the
Trust or the Trust unitholders to which he or she would otherwise
be subjected by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his office. The Declaration of Trust also authorizes
the purchase of liability insurance on behalf of board members and
officers.
Item 19: Purchase, Redemption and Pricing of Securities Being
Offered
The information provided in response to this item is in addition to
the information provided in response to Items 7 and 8 in Part A.
REDEEMING UNITS
Unitholders have a right to redeem units at any time. For an
explanation of redemption procedures, please see Item 8 in Part A.
During an emergency, the board can suspend the computation of net
asset value, stop accepting payments for purchase of units or
suspend the duty of the Portfolios to redeem units 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 a Portfolio's securities is not reasonably practicable
or it is not reasonably practicable for a Portfolio to determine
the fair value of its net assets, or
'The SEC, under the provisions of the Investment Company Act of
1940 (the 1940 Act), as amended, declares a period of emergency to
exist.
Should a Portfolio stop selling units, the board members may make a
deduction from the value of the assets held by the Portfolio to
cover the cost of future liquidations of the assets so as to
distribute fairly these costs among all unitholders.
<PAGE>
PAGE 46
REDEMPTIONS BY A PORTFOLIO
A Portfolio reserves the right to redeem, involuntarily, the units
of any unitholder 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 units. Until further notice, it is the
policy of a Portfolio not to exercise this right with respect to
any unitholder whose account has a value of $1,000,000 or more. In
any event, before a Portfolio redeems such units and sends the
proceeds to the unitholder, it will notify the unitholder that the
value of the units in the account is less than the minimum amount
and allow the unitholder 30 days to make an additional investment
in an amount which will increase the value of the accounts to at
least $1,000,000.
REDEMPTIONS IN KIND
The Trust has elected to be governed by Rule 18f-1 under the 1940
Act, which obligates each Portfolio to redeem units in cash, with
respect to any one unitholder during any 90-day period, up to the
lesser of $250,000 or 1% of the net assets of a Portfolio at the
beginning of such period. Although redemptions in excess of this
limitation would normally be paid in cash, each Portfolio 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 unitholders
of the Trust as determined by the board. In such circumstances,
the securities distributed would be valued as set forth in Item 8
of Part A. Should a Portfolio distribute securities, a unitholder
may incur brokerage fees or other transaction costs in converting
the securities to cash.
Despite its right to redeem units through a redemption-in-kind,
each Portfolio does not expect to exercise this option unless a
Portfolio has an unusually low level of cash to meet redemptions
and/or is experiencing unusually strong demands for cash.
VALUING PORTFOLIO INTERESTS
The number of units held by each unitholder is equal to the value
in dollars of that unitholder's interest in a Portfolio. The
dollar value of a unitholder's interest in a Portfolio is
determined by multiplying the unitholder's proportionate interest
in a Portfolio by the net asset value of that Portfolio.
In determining net assets, the securities held by each Portfolio
are valued as follows as of the close of business of the New York
Stock Exchange (the 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 <PAGE>
PAGE 47
prices on the exchange where the security is primarily traded and,
if none exist, to the over-the-counter market.
'Securities included in the NASDAQ National Market System are
valued at the last-quoted sales price in this market.
'Securities included in the NASDAQ National Market System for which
a last-quoted sales price is not readily available, and other
securities traded over-the-counter but not included in the NASDAQ
National Market System are valued at the mean of the closing bid
and asked prices.
'Futures and options traded on major exchanges are valued at the
last-quoted sales price on their primary exchange.
'Foreign securities traded outside the United States are generally
valued as of the time their trading is complete, which is usually
different from the close of the Exchange. Foreign securities
quoted in foreign currencies are translated into U.S. dollars at
the current rate of exchange. Occasionally, events affecting the
value of such securities may occur between such times and the close
of the Exchange that will not be reflected in the computation of 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 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 Exchange, American Express Financial Advisors Inc. and each of
the Portfolios 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.
<PAGE>
PAGE 48
Item 20: Tax Status
The information in response to this item is provided in Item 6 of
Part A.
Item 21: Underwriters
The information in response to this item is provided in Item 7 of
Part A and Item 16 of Part B.
Item 22: Calculation of Performance Data
Not Applicable.
Item 23: Financial Statements
<PAGE>
PAGE 49
Independent Auditors' Report
The Board of Trustees and Interest Holder
Income Trust:
We have audited the statement of assets and liabilities of
Government Income Portfolio (a series within Income Trust) as of
April 15, 1996. This financial statement is the responsibility of
the Portfolio's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statement is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statement. Our procedures
included confirmation of cash in bank by correspondence with the
custodian. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to
above presents fairly, in all material respects, the financial
position of Government Income Portfolio at April 15, 1996, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
April 16, 1996
<PAGE>
PAGE 50
GOVERNMENT INCOME PORTFOLIO
(a series within Income Trust)
Statement of Assets and Liabilities
April 15, 1996
Assets:
Cash in bank $40,000
Net assets $40,000
See accompanying notes to financial statement.<PAGE>
PAGE 51
GOVERNMENT INCOME PORTFOLIO
(a series within Income Trust)
Notes to Statement of Assets and Liabilities
April 15, 1996
1. Organization
The Government Income Portfolio (Portfolio) is a series of Income
Trust (Trust) and is registered under the Investment Company Act of
1940 as a diversified, open-end management investment company. The
Portfolio seeks to provide unitholders with a high level of current
income and safety of principal consistent with investment in U.S.
government and government agency securities. The Declaration of
Trust permits the Trustees to issue non-transferable interests in
the Portfolio. For federal income tax purposes the Portfolio
qualifies as a partnership and each investor in the Portfolio is
treated as the owner of its proportionate share of the net assets,
income, expenses and realized and unrealized gains and losses of
the Portfolio. Accordingly, as a "pass-through" entity, the
Portfolio does not pay any income dividends or capital gain
distributions.
Strategist Government Income Fund, an affiliated registered
investment company, owns 100% of the interests in the Portfolio as
of April 15, 1996.
2. Federal Taxes
The Portfolio intends to comply with the requirements of the
Internal Revenue code applicable to partnerships.
3. Fees and Expenses
The Trust, on behalf of the Portfolio, has entered into an
Investment Management Services Agreement with American Express
Financial Corporation (AEFC) for managing its portfolio. Under this
agreement, AEFC determines which securities will be purchased, held
or sold. The management fee is a percentage of the Portfolio's
average daily net assets in reducing percentages from 0.520% to
0.395% annually. Under the Agreement, the Trust also pays taxes,
brokerage commissions and nonadvisory expenses, which include
custodian fees to be paid to an affiliate of AEFC; audit and
certain legal fees; fidelity bond premiums; registration fees for
units; Portfolio office expenses; consultants' fees; compensation
of trustees, officers and employees; corporate filing fees;
expenses incurred in connection with lending securities of the
Portfolio; and any other expenses properly payable by the Trust or
Portfolio, approved by the board.
Pursuant to a Placement Agency Agreement, American Express
Financial Advisors Inc. acts as placement agent of the units of the
Trust.
<PAGE>
PAGE 52
Independent Auditors' Report
The Board of Trustees and Interest Holder
Income Trust:
We have audited the statement of assets and liabilities of Quality
Income Portfolio (a series within Income Trust) as of April 15,
1996. This financial statement is the responsibility of the
Portfolio's management. Our responsibility is to express an opinion
on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statement is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statement. Our procedures
included confirmation of cash in bank by correspondence with the
custodian. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to
above presents fairly, in all material respects, the financial
position of Quality Income Portfolio at April 15, 1996, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
April 16, 1996
<PAGE>
PAGE 53
QUALITY INCOME PORTFOLIO
(a series within Income Trust)
Statement of Assets and Liabilities
April 15, 1996
Assets:
Cash in bank $30,000
Net assets $30,000
See accompanying notes to financial statement.<PAGE>
PAGE 54
QUALITY INCOME PORTFOLIO
(a series within Income Trust)
Notes to Statement of Assets and Liabilities
April 15, 1996
1. Organization
The Quality Income Portfolio (Portfolio) is a series of Income
Trust (Trust) and is registered under the Investment Company Act of
1940 as a diversified, open-end management investment company. The
Portfolio seeks to provide unitholders with current income and
preservation of capital by investing in investment-grade bonds.
The Declaration of Trust permits the Trustees to issue
non-transferable interests in the Portfolio. For federal income tax
purposes the Portfolio qualifies as a partnership and each investor
in the Portfolio is treated as the owner of its proportionate share
of the net assets, income, expenses and realized and unrealized
gains and losses of the Portfolio. Accordingly, as a "pass-through"
entity, the Portfolio does not pay any income dividends or capital
gain distributions.
Strategist Quality Income Fund, an affiliated registered investment
company, owns 100% of the interests in the Portfolio as of April
15, 1996.
2. Federal Taxes
The Portfolio intends to comply with the requirements of the
Internal Revenue code applicable to partnerships.
3. Fees and Expenses
The Trust, on behalf of the Portfolio, has entered into an
Investment Management Services Agreement with American Express
Financial Corporation (AEFC) for managing its portfolio. Under this
agreement, AEFC determines which securities will be purchased, held
or sold. The management fee is a percentage of the Portfolio's
average daily net assets in reducing percentages from 0.520% to
0.395% annually. Under the Agreement, the Trust also pays taxes,
brokerage commissions and nonadvisory expenses, which include
custodian fees; audit and certain legal fees; fidelity bond
premiums; registration fees for units; Portfolio office expenses;
consultants' fees; compensation of trustees, officers and
employees; corporate filing fees; expenses incurred in connection
with lending securities of the Portfolio; and any other expenses
properly payable by the Trust or Portfolio, approved by the board.
Pursuant to a Placement Agency Agreement, American Express
Financial Advisors Inc. acts as placement agent of the units of the
Trust.
<PAGE>
PAGE 55
Independent Auditors' Report
The Board of Trustees and Interest Holder
Income Trust:
We have audited the statement of assets and liabilities of High
Yield Portfolio (a series within Income Trust) as of April 15,
1996. This financial statement is the responsibility of the
Portfolio's management. Our responsibility is to express an opinion
on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statement is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statement. Our procedures
included confirmation of cash in bank by correspondence with the
custodian. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to
above presents fairly, in all material respects, the financial
position of High Yield Portfolio at April 15, 1996, in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
April 16, 1996
<PAGE>
PAGE 56
HIGH YIELD PORTFOLIO
(a series within Income Trust)
Statement of Assets and Liabilities
April 15, 1996
Assets:
Cash in bank $30,000
Net assets $30,000
See accompanying notes to financial statement.<PAGE>
PAGE 57
HIGH YIELD PORTFOLIO
(a series within Income Trust)
Notes to Statement of Assets and Liabilities
April 15, 1996
1. Organization
The High Yield Portfolio (Portfolio) is a series of Income Trust
(Trust) and is registered under the Investment Company Act of 1940
as a diversified, open-end management investment company. The
Portfolio seeks to provide unitholders a high current income with a
secondary goal of capital growth by investing in long-term
corporate bonds in the lower rating categories. The Declaration of
Trust permits the Trustees to issue non-transferable interests in
the Portfolio. For federal income tax purposes the Portfolio
qualifies as a partnership and each investor in the Portfolio is
treated as the owner of its proportionate share of the net assets,
income, expenses and realized and unrealized gains and losses of
the Portfolio. Accordingly, as a "pass-through" entity, the
Portfolio does not pay any income dividends or capital gain
distributions.
Strategist High Yield Fund, an affiliated registered investment
company, owns 100% of the interests in the Portfolio as of April
15, 1996.
2. Federal Taxes
The Portfolio intends to comply with the requirements of the
Internal Revenue code applicable to partnerships.
3. Fees and Expenses
The Trust, on behalf of the Portfolio, has entered into an
Investment Management Services Agreement with American Express
Financial Corporation (AEFC) for managing its portfolio. Under this
agreement, AEFC determines which securities will be purchased, held
or sold. The management fee is a percentage of the Portfolio's
average daily net assets in reducing percentages from 0.590% to
0.465% annually. Under the Agreement, the Trust also pays taxes,
brokerage commissions and nonadvisory expenses, which include
custodian fees; audit and certain legal fees; fidelity bond
premiums; registration fees for units; Portfolio office expenses;
consultants' fees; compensation of trustees, officers and
employees; corporate filing fees; expenses incurred in connection
with lending securities of the Portfolio; and any other expenses
properly payable by the Trustee or Portfolio, approved by the
board.
Pursuant to a Placement Agency Agreement, American Express
Financial Advisors Inc. acts as placement agent of the units of the
Trust.
<PAGE>
PAGE 58
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS:
Government Income Portfolio
o Independent Auditors' Report dated April 16, 1996
o Statement of Assets and Liabilities
o Notes to Statement of Assets and Liabilities
Quality Income Portfolio
o Independent Auditors' Report dated April 16, 1996
o Statement of Assets and Liabilities
o Notes to Statement of Assets and Liabilities
High Yield Portfolio
o Independent Auditors' Report dated April 16, 1996
o Statement of Assets and Liabilities
o Notes to Statement of Assets and Liabilities
(b) EXHIBITS:
1(a) Declaration of Trust filed electronically as Exhibit 1 to
Registrant's original Registration Statement (File No. 811
-7307).
1(b) Amended and Restated Declaration of Trust, dated March 7,
1996, is filed electronically herewith as Exhibit 1(b).
2. Form of By-laws is filed electronically herewith.
3. Not Applicable.
4. Not Applicable.
5. Form of Investment Management Services Agreement is filed
electronically herewith as Exhibit 5.
6. Form of Placement Agency Agreement is filed electronically
herewith as Exhibit 6.
7. Not Applicable.
8. Form of Custody Agreement is filed electronically herewith as
Exhibit 8.
9. Form of Transfer Agency and Administration Agreement is filed
electronically herewith as Exhibit 9.
10. An opinion and consent of counsel is filed electronically
herewith as Exhibit 10.
11. Independent Auditors Consent is filed electronically herewith
as Exhibit 11.
12. Not Applicable.
<PAGE>
PAGE 59
13. Subscription Agreement is filed electronically herewith as
Exhibit 13.
14. Not Applicable.
15. Not Applicable.
16. Not Applicable.
17. Financial Data Schedule is filed electronically herewith
as Exhibit 17.
18. Not Applicable.
19(a) Trustees Power of Attorney, dated April 11, 1996, is
filed electronically herewith as Exhibit 19(a).
19(b) Officers Power of Attorney, dated April 11, 1996, is filed
electronically herewith as Exhibit 19(b).
Item 25. Persons Controlled by or Under Common Control with
Registrant
None.
Item 26. Number of Holders of Securities
(1) (2)
Title of Class Number of Record Holders
Units of as of April 16, 1996
Beneficial Interest 1
Item 27. Indemnification
Reference is hereby made to Article 8 of Registrant's Declaration
of Trust.
<PAGE>
PAGE 60
<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:
Ronald G. Abrahamson, Vice President--Service Quality and Reengineering
<S> <C> <C>
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Service Quality
and Reengineering
Douglas A. Alger, Vice President--Total Compensation
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Total Compensation
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
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
<PAGE>
PAGE 2
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
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--Technology and Development
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Technology and
Development
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, 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
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
<PAGE>
PAGE 3
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
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 Insurance Agency of Nevada Inc. Vice President--North
Central Region
American Express Minnesota Foundation Director
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 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
Kenneth J. Ciak, Vice President and General Manager--IDS Property Casualty
AMEX Assurance Co. Director and President
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
Colleen Curran, 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 and Chief
Legal Counsel
Alan R. Dakay, Vice President--Institutional Products Group
American Centurion Life Assurance Co. IDS Tower 10 Director and Vice Chairman
Minneapolis, MN 55440 and President, Financial
Institutions Division
American Enterprise Life Insurance Co. Director and President
IDS Life Insurance Company Vice President -
Institutional Insurance
Marketing
American Express Financial Advisors Vice President -
Institutional Products
Group
Regenia David, Vice President--Systems Services
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Systems Services
<PAGE>
PAGE 4
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
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
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
American Express Insurance Agency of Nevada Inc. Director and Vice President
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 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
Robert G. Gilbert, Vice President--Real Estate
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Real Estate
<PAGE>
PAGE 5
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
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
Morris Goodwin Jr., Vice President and Corporate Treasurer
American Centurion Life Assurance Co. Vice President and
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 Insurance Agency of Nevada Inc. Vice President and
Treasurer
American Express Minnesota Foundation Vice President and
Treasurer
American Express Tax & Business Vice President and
Services Inc. Treasurer
American Partners Life Insurance Co. Vice President and
Treasurer
AMEX Assurance Co. Vice President and
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 Futures Corp. Director
IDS Futures III Corp. Director
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
<PAGE>
PAGE 6
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
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
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
National Computer Systems, Inc. 11000 Prairie Lakes Drive Director
Minneapolis, MN 55440
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
<PAGE>
PAGE 7
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
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
AMEX Assurance Co. 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. Director and Vice
President-Investments
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
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 Retirement 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 Chief
Services Inc. Minneapolis, MN 55440 Compliance Officer
American Express Financial Advisors Vice President-
Government and
Customer Relations
American Express Service Corporation Vice President and Chief
Compliance Officer
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 Executive Vice
President
<PAGE>
PAGE 8
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
AMEX Assurance Co. Director
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
James E. Kaare, Vice President--Marketing Promotions
American Express Financial Advisors IDS Tower 10 Vice President-Marketing
Minneapolis, MN 55440 Promotions
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
Richard W. Kling, Director and Senior Vice President--Risk Management Products
American Centurion Life Assurance Co. Director
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 Express Insurance Agency of Nevada Inc. Director and President
American Express Service Corporation Vice President
American Partners Life Insurance Co. Director and Chairman of
the Board
AMEX Assurance Co. Director and Chairman of
the Board
IDS Certificate Company 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 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<PAGE>
PAGE 9
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
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 Director and Chairman of
the Board 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
IDS Property Casualty Insurance Company Director
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
Edward Labenski, Jr., 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<PAGE>
PAGE 10
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
IDS Partnership Services Corporation Director and Vice President
IDS Realty Corporation Director and Vice President
Ryan R. Larson, Vice President--IPG Product Development
American Centurion Life Assurance Co. Director and
Vice President-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
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 Trust Company Director
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
Jonathan S. Linen, Director
Mary J. Malevich, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior 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
<PAGE>
PAGE 11
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
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
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 Service Corporation Senior Vice President
American Express Tax and Business Director
Services Inc.
AMEX Assurance Co. Director
IDS Certificate Company Director
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
<PAGE>
PAGE 12
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Pamela J. Moret, Vice President--Services
American Express Financial Advisors IDS Tower 10 Vice President-Services
Minneapolis, MN 55440
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
Mary Owens Neal, Vice President--Mature Market Segment
American Express Financial Advisors Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Mature Market Segment
Robert J. Neis, Vice President--Technology Services
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Technology Services
James R. Palmer, Vice President--Taxes
American Express Financial Advisors IDS Tower 10 Vice President-Taxes
Minneapolis, MN 55440
IDS Aircraft Services Corp. Vice President
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
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<PAGE>
PAGE 13
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
IDS Plan Services of California, Inc. Vice President and
Assistant Secretary
IDS Realty Corporation Vice President and
Assistant Secretary
James M. Punch, Vice President--Geographic Service Teams
American Express Financial Advisors IDS Tower 10 Vice President-Geographic
Minneapolis, MN 55440 Services Teams
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--Private Client Group
American Express Financial Advisors IDS Tower 10 Vice President-Private
Minneapolis, MN 55440 Client Group
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
IDS International, Inc. Director
IDS Fund Management Limited Director
Robert A. Rudell, Vice President--American Express Institutional Retirement 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
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 Insurance Agency of Nevada Inc. Vice President-
New England Region
IDS Insurance Agency of Alabama Inc. Vice President-
New England Region
IDS Insurance Agency of Arkansas Inc. Vice President-
New England Region
<PAGE>
PAGE 14
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
IDS Insurance Agency of Massachusetts 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 Centurion Life Assurance Co. Director and Chairman
and President
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
American Partners Life Insurance Co. Director and President
IDS Certificate Company Director and President
IDS Life Insurance Company Director and Executive
Vice President, Assured
Assets
Investors Syndicate Development Corp. Director and 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
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
AMEX Assurance Co. Vice President
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
<PAGE>
PAGE 15
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
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
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
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
<PAGE>
PAGE 16
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Melinda S. Urion, Director, Senior Vice President and Chief Financial Officer
American Enterprise Life IDS Tower 10 Vice President and
Insurance Company Minneapolis, MN 55440 Controller
American Express Financial Advisors Senior Vice President and
Chief Financial Officer
American Express Trust Company Director
American Partners Life Insurance Co. Director and Vice President
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
Norman Weaver Jr., Director and Senior Vice President--Field Management
American Express Financial Advisors IDS Tower 10 Senior Vice President--
Minneapolis, MN 55440 Field Management
American Express Insurance Agency of Nevada Inc. Vice President-Southeast
Region
IDS Insurance Agency of Alabama Inc. Vice President-Pacific
Region
IDS Insurance Agency of Arkansas Inc. Vice President-Pacific
Region
IDS Insurance Agency of Massachusetts Inc. Vice President-Pacific
Region
IDS Insurance Agency of New Mexico Inc. Vice President-Pacific
Region
IDS Insurance Agency of North Carolina Inc. Vice President-Pacific
Region
IDS Insurance Agency of Ohio Inc. Vice President-Pacific
Region
IDS Insurance Agency of Wyoming Inc. Vice President-Pacific
Region
Michael L. Weiner, Vice President--Tax Research and Audit
American Express Financial Advisors IDS Tower 10 Vice President-Tax Research
Minneapolis, MN 55440 and Audit
American Express Service Corporation Assistant Treasurer
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
<PAGE>
PAGE 17
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
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
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 Insurance Agency of Nevada Inc. Vice President-
North Region
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 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 18
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 Investments
Ward D. Armstrong Vice President- None
IDS Tower 10 Sales and Marketing,
Minneapolis, MN 55440 IDS Institutional
Retirement Services
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
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<PAGE>
PAGE 19
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
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 Technology and
Minneapolis, MN 55440 Development
Brent L. Bisson Group Vice President- None
Ste 900 E. Westside Twr 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
Walter K. Booker Group Vice President- None
Suite 200 New Jersey
3500 Market Street
Camp Hill, NJ 17011
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
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<PAGE>
PAGE 20
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
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
Colleen Curran Vice President and None
IDS Tower 10 Assistant General Counsel
Minneapolis, MN 55440
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
Scott M. DiGiammarino Group Vice President- None
Suite 500 Washington/Baltimore
8045 Leesburg Pike
Vienna, VA 22182
<PAGE>
PAGE 21
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
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 Board member
IDS Tower 10 Vice President-
Minneapolis MN 55440 Investment Operations
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
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
<PAGE>
PAGE 22
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 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
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 150 North Texas
801 E. Campbell Road
Richardson, TX 75081<PAGE>
PAGE 23
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 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 and
Chief Compliance Officer
David R. Hubers Chairman, Chief Board member
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 Promotions
Minneapolis, MN 55440
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
<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
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 Jr. 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
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
<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
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
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-Services None
IDS Tower 10
Minneapolis, MN 55440
Alan D. Morgenstern Group Vice President- None
Suite 200 Central California/
3500 Market Street Western Nevada
Camp Hill, NJ 17011
Barry J. Murphy Senior Vice President- None
IDS Tower 10 Client Service
Minneapolis, MN 55440
Mary Owens Neal Vice President- None
IDS Tower 10 Mature Market Segment
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
Robert J. Neis Vice President- None
IDS Tower 10 Technology Services
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 Mamaroneck 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
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
<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
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-Private None
IDS Tower 10 Client Group
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 Retirement
Services
John P. Ryan Vice President and None
IDS Tower 10 General Auditor
Minneapolis, MN 55440
Erven Samsel Senior Vice President- None
45 Braintree Hill Park Field Management
Suite 402
Braintree, MA 02184
Russell L. Scalfano Group Vice President- None
Suite 201 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
<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
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 President- 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
466 Westdale Mall Eastern Iowa Area
Cedar Rapids, IA 52404
Bridget Sperl Vice President- None
IDS Tower 10 Human Resources
Minneapolis, MN 55440 Management Services
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 Bren 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
<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
Neil G. Taylor Group Vice President- None
Suite 425 Seattle/Tacoma
101 Elliott Avenue West
Seattle, WA 98119
John R. Thomas Senior Vice President- Board member
IDS Tower 10 Information and
Minneapolis, MN 55440 Technology
Melinda S. Urion Senior Vice President Treasurer
IDS Tower 10 and Chief Financial
Minneapolis, MN 55440 Officer
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
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 Tax Research and Audit
Minneapolis, MN 55440
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
<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
Thomas L. White Group Vice President- None
Suite 200 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.
Item 32. Undertakings
(a) Not Applicable.
(b) Not Applicable.
(c) Not Applicable.
<PAGE>
PAGE 61
SIGNATURE
Pursuant to the requirement of the Investment Company Act of 1940,
the Registrant 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 18th day of April, 1996.
INCOME TRUST
By
Melinda S. Urion, Treasurer
By /s/ William R. Pearce **
William R. Pearce, President
Pursuant to the requirements of the Investment Company Act of 1940,
this Amendment to its Registration Statement has been signed below
by the following persons in the capacities indicated on the 18th
day of April, 1996.
Signatures Capacity
/s/ William R. Pearce* Trustee
William R. Pearce
/s/ Lynne V. Cheney* Trustee
Lynne V. Cheney
/s/ William H. Dudley* Trustee
William H. Dudley
/s/ Robert F. Froehlke* Trustee
Robert F. Froehlke
/s/ David R. Hubers* Trustee
David R. Hubers
/s/ Heinz F. Hutter* Trustee
Heinz F. Hutter
/s/ Anne P. Jones* Trustee
Anne P. Jones
/s/ Melvin R. Laird* Trustee
Melvin R. Laird<PAGE>
PAGE 62
Signatures Capacity
Trustee
Edson W. Spencer
/s/ John R. Thomas* Trustee
John R. Thomas
Trustee
Wheelock Whitney
/s/ C. Angus Wurtele* Trustee
C. Angus Wurtele
* Signed pursuant to Trustees Power of Attorney dated April 11,
1996, filed electronically herewith as Exhibit 19(a) by:
Leslie L. Ogg
** Signed pursuant to Officers Power of Attorney dated April 11,
1996, filed electronically herewith as Exhibit 19(b), by:
Leslie L. Ogg
<PAGE>
PAGE 1
INCOME TRUST
Registration Number 811-7307
EXHIBIT INDEX
Exhibit 1b. Amended and Restated Declaration of Trust
Exhibit 2. Form of Bylaws
Exhibit 5. Form of Investment management Services Agreement
Exhibit 6. Form of Placement Agent Agreement
Exhibit 8. Form of Custody Agreement
Exhibit 9. Form of Transfer Agency and Administration Agreement
Exhibit 10. Opinion and Consent of Counsel
Exhibit 11. Independent Auditor's Consent
Exhibit 13. Subscription Agreement
Exhibit 17. Financial Data Schedules
Exhibit 19a. Trustees Power of Attorney
Exhibit 19b. Officers' Power of Attorney
<PAGE>
PAGE 1
INCOME TRUST
AMENDED AND RESTATED DECLARATION OF TRUST
This DECLARATION OF TRUST made at Boston, Massachusetts the
24th day of May, 1995, and amended and restated this 7th day of
March, 1996, by the Trustees hereunder and by the Unitholders of
Units issued and to be issued hereunder as hereinafter provided.
WITNESSETH that
WHEREAS, this Trust has been formed to carry on the business
of an investment company; and
WHEREAS, the Trustees have agreed to manage, in accordance
with the provisions hereinafter set forth, all property coming into
their hands as trustees of a business trust formed under the laws
of The Commonwealth of Massachusetts;
NOW, THEREFORE, the Trustees hereby declare that they will
hold all cash, securities and other assets, which they may from
time to time acquire in any manner as Trustees hereunder, IN TRUST,
to manage and dispose of the same upon the following terms and
conditions for the benefit of the Unitholders from time to time of
Units in this Trust as hereinafter set forth.
ARTICLE I
Name and Definitions
Name
Section 1. This Trust shall be known as "Income Trust," and
the Trustees shall conduct the business of the Trust under that
name or any other name as they may from time to time determine.
Definitions
Section 2. Whenever used herein, unless otherwise required by
the context or specifically provided:
(a) "Trust" refers to the trust established by this Declaration of
Trust, as amended from time to time;
(b) "Trustees" refers to the Trustees of the Trust named herein or
elected in accordance with Article IV;
(c) "Units" means the equal proportionate transferable units of
ownership into which the beneficial interest in the Trust shall be
divided from time to time or, if more than one series or class of
Units is authorized by the Trustees, the equal proportionate units
into which each series or class of Units shall be divided from time
to time;
(d) "Unitholder" means a record owner of Units;
<PAGE>
PAGE 2
(e) "1940 Act" refers to the Investment Company Act of 1940 and the
Rules and Regulations thereunder, all as amended from time to time;
(f) "Affiliated Person", "Assignment", "Commission", "Interested
Person", and "Principal Underwriter" shall have the meanings given
them in the 1940 Act;
(g) "Majority Unitholder Vote" shall have the same meaning as "vote
of a majority of the outstanding voting securities" as defined in
the third sentence of Section 2(a)(42) of the 1940 Act.
(h) "Declaration of Trust" shall mean this Declaration of Trust as
amended or restated from time to time;
(i) "Bylaws" shall mean the Bylaws of the Trust as amended from
time to time;
(j) "Series" or "series of Units" refers to the one or more
separate investment portfolios of the Trust into which the assets
and liabilities of the Trust may be divided and the Units of the
Trust representing the beneficial interest of Unitholders in such
respective portfolios;
(k) "Class" or "class of Units" refers to the division of Units
representing any series into two or more classes as provided in
Article III, Section 1 hereof; and
(l) "Bankruptcy" shall mean, with respect to any Unitholder, any of
the following:
(i) filing a voluntary petition in bankruptcy or for
reorganization or for the adoption of an arrangement under the
Bankruptcy Code (as now or in the future amended) or an admission
seeking the relief therein provided;
(ii) making a general assignment for the benefit of creditors;
(iii) consenting to the appointment of a receiver for all or a
substantial part of such Unitholder's property;
(iv) in the case of the filing of an involuntary petition in
bankruptcy, an entry of an order for relief;
(v) the entry of a court order appointing a receiver or
trustee for all or a substantial part of such Unitholder's property
without its consent; or
(vi) the assumption of custody or sequestration by a court of
competent jurisdiction of all or substantially all of such
Unitholder's property.
ARTICLE II
Purpose of Trust
The purpose of the Trust shall be to engage in the business of
being an investment company, and, as such, to manage investments
primarily in securities, debt instruments, commodities, commodity
contracts and options thereon and other instruments and rights of a
financial character.<PAGE>
PAGE 3
ARTICLE III
Units
Division of Beneficial Unit
Section 1. The Units of the Trust shall be issued in one or
more series as the Trustees may, without Unitholder approval,
authorize. Each series shall be preferred over all other series in
respect of the assets allocated to that series within the meaning
of the 1940 Act and shall represent a separate investment portfolio
of the Trust. The beneficial interest in each series shall at all
times be divided into Units each of which shall, except as provided
in the following sentence, represent an equal proportionate
interest in the series with each other Unit of the same series,
none having priority or preference over another. The Trustees may,
without Unitholder approval, divide the Units of any series into
two or more classes, Units of each such class having such
preferences and special or relative rights and privileges
(including conversion rights, if any) as the Trustees may determine
and as shall be set forth in the Bylaws. The number of Units
authorized shall be unlimited. The Trustees may from time to time
divide or combine the Units of any series or class into a greater
or lesser number without thereby changing the proportionate
beneficial interest in the series or class.
Ownership of Units
Section 2. The ownership of Units shall be recorded on the books of
the Trust or a transfer or similar agent. No certificates
certifying the ownership of Units shall be issued except as the
Trustees may otherwise determine from time to time. The Trustees
may make such rules, not inconsistent with this Declaration of
Trust or the Bylaws, as they consider appropriate for the issuance
of Unit certificates, the transfer of Units and similar matters.
The record books of the Trust as kept by the Trust or any transfer
or similar agent, as the case may be, shall be conclusive as to who
are the Unitholders of each series and class and as to the number
of Units of each series and class held from time to time by each
Unitholder.
Investment in the Trust
Section 3. No person may become a Unitholder of the Trust
unless approved in advance by the Trustees. Thereafter, the
Trustees shall accept investments in the Trust from persons so
approved on such terms and for such consideration, which may
consist of cash or tangible or intangible property or a combination
thereof, as they or the Bylaws from time to time authorize.
All consideration received by the Trust from the issue or sale
of Units of each series, together with all income, earnings,
profits, and proceeds thereof, including any proceeds derived from
the sale, exchange or liquidation thereof, and any monies or
payments derived from any reinvestment of such proceeds in whatever
form the same may be, shall irrevocably belong to the series of
Units with respect to which the same were received by the Trust for
all purposes, subject only to the rights of creditors, and shall be
<PAGE>
PAGE 4
so handled upon the books of account of the Trust and are herein
referred to as "assets of" such series.
No Preemptive Rights
Section 4. Unitholders shall have no preemptive or other right
to subscribe to any additional Units or other securities issued by
the Trust.
Status of Units and Limitation of Personal Liability
Section 5. Units shall be deemed to be personal property and
shall have only the rights provided in this Declaration of Trust or
the Bylaws. Every Unitholder by virtue of having become a
Unitholder shall be held to have expressly assented and agreed to
the terms of this Declaration of Trust and the Bylaws. No
Unitholder as such shall have any power to act as agent or
otherwise bind the Trust except as specifically authorized by the
Trustees. Ownership of Units shall not entitle the Unitholder to
any title in or to the whole or any part of the Trust property or
right to call for a partition or division of the same or for an
accounting. No Unitholder shall, solely by reason of owning Units
or exercising the rights of a Unitholder, be treated as a partner
for purposes of any law imposing liability on parties for the
obligations of a partnership's enterprise or for the actions of any
partner of a partnership. Neither the Trust nor the Trustees, nor
any officer, employee or agent of the Trust, shall have any power
to bind personally any Unitholder, nor except as specifically
provided herein to call upon any Unitholder for the payment of any
sum of money or assessment whatsoever other than such as the
Unitholder may at any time personally agree to pay.
ARTICLE IV The Trustees
Election
Section 1. A Trustee may be elected either by the Trustees or
by the Unitholders. The number of Trustees shall be fixed from time
to time by the Trustees and, at or after the commencement of the
business of the Trust, shall be not less than three. Each Trustee
elected by the Trustees or the Unitholders shall serve until he or
she retires, resigns, is removed or dies or until the next meeting
of Unitholders called for the purpose of electing Trustees and
until the election and qualification of his or her successor. At
any meeting called for the purpose, a Trustee may be removed by
vote of the Unitholders holding two-thirds of the outstanding
Units. The initial Trustees, each of whom shall serve until the
first meeting of Unitholders at which Trustees are elected and
until his or her successor is elected and qualified, or until he or
she sooner dies, resigns or is removed, shall be John M. Loder and
such other persons as the Trustee or Trustees then in office shall,
prior to any sale of Units, appoint.
Effect of Death, Resignation, etc. of a Trustee
Section 2. The death, declination, resignation, retirement,
removal or incapacity of the Trustees, or any one of them, shall <PAGE>
PAGE 5
not operate to annul the Trust or to revoke any existing agency
created pursuant to the terms of this Declaration of Trust.
Powers
Section 3. Subject to the provisions of this Declaration of Trust,
the business of the Trust shall be managed by the Trustees, and
they shall have all powers necessary or convenient to carry out
that responsibility. Without limiting the foregoing, the Trustees
may adopt Bylaws not inconsistent with this Declaration of Trust
providing for the conduct of the business of the Trust and may
amend and repeal them to the extent that such Bylaws do not reserve
that right to the Unitholders; they may fill vacancies in or add to
their number, and may elect and remove such officers and appoint
and terminate such agents as they consider appropriate; they may
appoint, and terminate, any one or more committees consisting of
one or more Trustees or such other persons as they may designate,
including an executive committee which may, when the Trustees are
not in session, exercise some or all of the power and authority of
the Trustees as the Trustees may determine; they may employ one or
more custodians of the assets of the Trust and may authorize such
custodians to employ subcustodians and to deposit all or any part
of such assets in a system or systems for the central handling of
securities, retain one or more transfer agents or one or more
unitholder servicing agents, or both, provide for the distribution
of Units by the Trust, through one or more principal underwriters
or otherwise, set record dates for the determination of Unitholders
with respect to various matters, and in general delegate such
authority as they consider desirable to any officer of the Trust,
to any committee and to any agent or employee of the Trust or to
any such custodian or underwriter.
Without limiting the foregoing, the Trustees shall have power and
authority:
(a) To invest and reinvest cash, and to hold cash uninvested;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate, write
options on and lease any or all of the assets of the Trust;
(c) To vote or give assent, or exercise any rights of ownership,
with respect to stock or other securities or property; and to
execute and deliver proxies or powers of attorney to such person or
persons as the Trustees shall deem proper, granting to such person
or persons such power and discretion with relation to securities or
property as the Trustees shall deem proper;
(d) To exercise powers and rights of subscription or otherwise
which in any manner arise out of ownership of securities;
(e) To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form, or
in the name of the Trustees or of the Trust or in the name of a
custodian, subcustodian or other depositary or a nominee or
nominees or otherwise;
(f) Subject to the provisions of Article III, Section 3, to
allocate assets, liabilities, income and expenses of the Trust to a
<PAGE>
PAGE 6
particular series of Units or to apportion the same among two or
more series, provided that any liabilities or expenses incurred by
or arising in connection with a particular series of Units shall be
payable solely out of the assets of that series;
(g) To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or
issuer, any security of which is or was held in the Trust; to
consent to any contract, lease, mortgage, purchase or sale of
property by such corporation or issuer, and to pay calls or
subscriptions with respect to any security held in the Trust;
(h) To join other security holders in acting through a committee,
depositary, voting trustee or otherwise, and in that connection to
deposit any security with, or transfer any security to, any such
committee, depositary or trustee, and to delegate to them such
power and authority with relation to any security (whether or not
so deposited or transferred) as the Trustees shall deem proper, and
to agree to pay, and to pay, such portion of the expenses and
compensation of such committee, depositary or trustee as the
Trustees shall deem proper;
(i) To compromise, arbitrate or otherwise adjust claims in favor of
or against the Trust or any matter in controversy, including but
not limited to claims for taxes;
(j) To enter into joint ventures, general or limited partnerships
and any other combinations or associations;
(k) To borrow funds;
(l) To endorse or guarantee the payment of any notes or other
obligations of any person; to make contracts of guaranty or
suretyship, or otherwise assume liability for payment thereof; and
to mortgage and pledge the Trust property or any part thereof to
secure any of or all such obligations;
(m) To purchase and pay for entirely out of Trust property such
insurance as they may deem necessary or appropriate for the conduct
of the business, including, without limitation, insurance policies
insuring the assets of the Trust and payment of distributions and
principal on its portfolio investments, and insurance policies
insuring the Unitholders, Trustees, officers, employees, agents,
investment advisers or managers, principal underwriters or
independent contractors of the Trust individually against all
claims and liabilities of every nature arising by reason of
holding, being or having held any such office or position, or by
reason of any action alleged to have been taken or omitted by any
such person as Unitholder, Trustee, officer, employee, agent,
investment adviser or manager, principal underwriter or independent
contractor, including any action taken or omitted that may be
determined to constitute negligence, whether or not the Trust would
have the power to indemnify such person against such liability; and
(n) To pay pensions for faithful service, as deemed appropriate by
the Trustees, and to adopt, establish and carry out pension,
profit-sharing, share bonus, share purchase, savings, thrift and
other retirement, incentive and benefit plans, trusts and <PAGE>
PAGE 7
provisions, including the purchasing of life insurance and annuity
contracts as a means of providing such retirement and other
benefits, for any or all of the Trustees, officers, employees and
agents of the Trust.
The Trustees shall not in any way be bound or limited by any
present or future law or custom in regard to investments by
trustees. Except as otherwise provided herein or from time to time
in the Bylaws, any action to be taken by the Trustees may be taken
by a majority of the Trustees present at a meeting of the Trustees
(a quorum being present), within or without Massachusetts,
including any meeting held by means of a conference telephone or
other communications equipment by means of which all persons
participating in the meeting can hear each other at the same time
and participation by such means shall constitute presence in person
at a meeting, or by written consents of a majority of the Trustees
then in office.
Section 4. The Trustees are authorized to pay or to cause to
be paid, out of the assets of the Trust, all expenses, fees,
charges, taxes and liabilities incurred or arising in connection
with the Trust, or in connection with the management thereof,
including, but not limited to, the Trustees' compensation and such
expenses and charges for the services of the Trust's officers,
employees, investment adviser or manager, principal underwriter,
auditor, counsel, custodian, transfer agent, unitholder servicing
agent, and such other agents or independent contractors and such
other expenses and charges as the Trustees may deem necessary or
proper to incur, provided, however, that all expenses, fees,
charges, taxes and liabilities incurred by or arising in connection
with a particular series of Units shall be payable solely out of
the assets of that series.
Ownership of Assets of the Trust
Section 5. Title to all of the assets of each series of Units
and of the Trust shall at all times be considered as vested in the
Trustees.
Advisory, Management and Distribution
Section 6. Subject to a favorable Majority Unitholder Vote,
the Trustees may, at any time and from time to time, contract for
exclusive or nonexclusive investment advisory and/or investment
management services with any corporation, trust, association or
other organization (the "Manager"), every such contract to comply
with such requirements and restrictions as may be set forth in the
Bylaws; and any such contract may contain such other terms
interpretive of or in addition to said requirements and
restrictions as the Trustees may determine, including, without
limitation, authority to determine from time to time what
investments shall be purchased, held, sold or exchanged and what
portion, if any, of the assets of the Trust shall be held
uninvested and to make changes in the Trust's investments. The
Trustees may also, at any time and from time to time, contract with
the Manager or any other corporation, trust, association or other
organization, appointing it exclusive or nonexclusive distributor
or principal underwriter for the Trust, administrator of the non-<PAGE>
PAGE 8
investment affairs of the Trust, custodian for any or all of the
assets of the Trust, transfer or Unitholder servicing agent for the
Unitholders, or agent for other affairs of the Trust, every such
contract to comply with such requirements and restrictions as may
be set forth in the Bylaws; and any such contract may contain such
other terms interpretive of or in addition to said requirements and
restrictions as the Trustees may determine.
The fact that:
(i) any Unitholder, Trustee or officer of the Trust is a
Unitholder, director, officer, partner, trustee, employee, manager,
adviser, principal underwriter or distributor or agent of or for
any corporation, trust, association or other organization, or of or
for any parent or affiliate of any organization, with which an
advisory or management contract, or principal underwriter's or
distributor's contract, or administrator's contract, or custodian's
contract, or transfer, Unitholder servicing or other agency
contract may have been or may hereafter be made, or that any such
organization, or any parent or affiliate thereof, is a Unitholder
or has an interest in the Trust, or that
(ii) any corporation, trust, association or other organization with
which an investment advisory or investment management contract or
principal underwriter's or distributor's contract, or
administrator's contract, or custodian's contract or transfer,
Unitholder servicing or other agency contract may have been or may
hereafter be made also has an investment advisory or investment
management contract, or administrator's contract, or custodian's
contract or transfer, Unitholder servicing or other agency contract
with one or more other corporations, trusts, associations, or other
organizations, or has other business or interests
shall not affect the validity of any such contract or disqualify
any Unitholder, Trustee or officer of the Trust from voting upon or
executing the same or create any liability or accountability to the
Trust or its Unitholders.
ARTICLE V
Unitholders' Voting Powers and Meetings
Voting Powers
Section 1. Subject to the voting powers of one or more classes of
Units as set forth elsewhere in this Declaration of Trust or in the
Bylaws, the Unitholders shall have power to vote only (i) for the
election of Trustees as provided in Article IV, Section 1, (ii) for
the removal of Trustees as provided in Article IV, Section 1, (iii)
with respect to any Manager as provided in Article IV, Section 6,
(iv) with respect to any termination or continuation of this Trust
to the extent and as provided in Article IX, Section 4, (v) with
respect to any amendment of this Declaration of Trust to the extent
and as provided in Article IX, Section 7, (vi) to the same extent
as the shareholders of a Massachusetts business corporation as to
whether or not a court action, proceeding or claim should or should
not be brought or maintained derivatively or as a class action on
behalf of the Trust or the Unitholders, and (vii) with respect to
such additional matters relating to the Trust as may be required by
<PAGE>
PAGE 9
this Declaration of Trust, the Bylaws or any registration of the
Trust with the Securities and Exchange Commission (or any successor
agency) or any state, or as the Trustees may consider necessary or
desirable. Each whole or fractional Unit shall be entitled to one
vote for each dollar of net asset value thereof as to any maker on
which it is entitled to vote and to a proportionate fractional vote
for each fraction of a dollar of net asset value thereof. On any
matter submitted to a vote of Unitholders, all Units of the Trust
then entitled to vote shall, except as otherwise provided in the
Bylaws, be voted in the aggregate as a single class without regard
to series or classes of Units, except (1) when required by the 1940
Act or when the Trustees shall have determined that the matter
affects one or more series or classes of Units materially
differently, Units shall be voted by individual series or class;
and (2) when the Trustees have determined that the matter affects
only the interests of one or more series or classes, then only
Unitholders of such series or classes shall be entitled to vote
thereon. Unitholders shall be entitled to vote cumulatively in the
election of Trustees. Units may be voted in person or by proxy. A
proxy with respect to Units held in the name of two or more persons
shall be valid if executed by or on behalf of any one of them
unless at or prior to exercise of the proxy the Trust receives a
specific written notice to the contrary from any one of them. Any
proxy purporting to be executed by or on behalf of a Unitholder
shall be deemed valid unless challenged at or prior to its exercise
and the burden of proving invalidity shall rest on the challenger.
Until Units of any series or class are issued, the Trustees may
exercise all rights of Unitholders and may take any action required
by law, this Declaration of Trust or the Bylaws to be taken by
Unitholders as to such series or class.
Voting Power and Meetings
Section 2. Meetings of Unitholders of any or all series or
classes may be called by the Trustees from time to time for the
purpose of taking action upon any matter requiring the vote or
authority of the Unitholders of such series or classes as herein
provided or upon any other matter deemed by the Trustees to be
necessary or desirable. Written notice of any meeting of
Unitholders shall be given or caused to be given by the Trustees by
mailing such notice at least seven days before such meeting,
postage prepaid, stating the time, place and purpose of the
meeting, to each Unitholder entitled to vote at such meeting at the
Unitholder's address as it appears on the records of the Trust. If
the Trustees shall fail to call or give notice of any meeting of
Unitholders for a period of 30 days after written application by
Unitholders holding Units representing at least 10% of the
aggregate net asset value of the then outstanding Units of all
series and classes entitled to vote at such meeting requesting a
meeting to be called for a purpose requiring action by the
Unitholders as provided herein or in the Bylaws, then Unitholders
holding Units representing at least 10% of the aggregate net asset
value of the then outstanding Units of all series and classes
entitled to vote at such meeting may call and give notice of such
meeting, and thereupon the meeting shall be held in the manner
provided for herein in case of call thereof by the Trustees. Notice
of a meeting need not be given to any Unitholder if a written
waiver of notice, executed by him or her before or after the <PAGE>
PAGE 10
meeting, is filed with the records of the meeting, or to any
Unitholder who attends the meeting without protesting prior thereto
or at its commencement the lack of notice to him or her.
Quorum and Required Vote
Section 3. Units entitled to cast thirty percent of the total
number of votes entitled to be cast on a particular matter shall be
a quorum for the transaction of business on that matter at a
Unitholders' meeting, except that where any provision of law or of
this Declaration of Trust or the Bylaws requires that Unitholders
of any series or class shall vote as an individual series or class,
then Units entitled to cast thirty percent of the total number of
votes entitled to be cast by Unitholders of that series or class as
such entitled to vote shall be necessary to constitute a quorum for
the transaction of business by that series or class. Any lesser
number shall be sufficient for adjournments. Any adjourned session
or sessions may be held, within a reasonable time after the date
set for the original meeting, without the necessity of further
notice. Except when a larger vote is required by any provision of
law or of this Declaration of Trust or the Bylaws, a majority of
the votes cast shall decide any questions and a plurality shall
elect a Trustee, provided that where any provision of law or of
this Declaration of Trust or the Bylaws requires that the
Unitholders of any series or class shall vote as an individual
series or class then a majority of votes of that series or class
cast on the matter (or a plurality with respect to the election of
a Trustee) shall decide that matter insofar as that series or class
is concerned.
Action by Written Consent
Section 4. Any action taken by Unitholders may be taken
without a meeting if Unitholders entitled to cast a majority of the
total number of votes entitled to be cast on the matter (or such
larger proportion thereof as shall be required by any express
provision of this Declaration of Trust or the Bylaws) consent to
the action in writing and such written consents are filed with the
records of the meetings of Unitholders. Such consent shall be
treated for all purposes as a vote taken at a meeting of
Unitholders.
Additional Provisions
Section 5. The Bylaws may include further provisions, not
inconsistent with this Declaration of Trust, regarding Unitholders'
voting powers, the conduct of meetings and related matters.
ARTICLE VI
Allocations, Distributions, Redemptions and Repurchases
Allocations
Section 1. The Trustees shall allocate each item of income,
gain, loss, deduction and credit of the Trust, or if the Trust has
more than one series, of each series, among the Unitholders of the <PAGE>
PAGE 11
Trust or the particular series, as the case may be, in accordance
with the following procedures.
a. Ordinary income (other than income realized from the sale
or exchange, or deemed sale or exchange, of property), tax-exempt
income, deductions and credits shall be allocated each business day
among the Unitholders in proportion to their relative percentage
record ownership of the outstanding Units of the Trust or series,
as the case may be, measured as of the close of business on such
day (before taking into account any purchases or redemptions of
Units on such day).
b. For purposes of allocating gains and losses, an Unrealized
Gain/Loss Account shall be maintained with respect to each
Unitholder. The initial balance of a Unitholder's Unrealized
Gain/Loss Account shall be zero and shall thereafter be increased
or decreased on each business day (an "adjustment date") by the
following amount:
(i) the positive or negative difference between (a) the fair
market value of any property contributed to the Trust or series, as
the case may be, on the adjustment date and (b) the adjusted tax
basis of such property in the hands of the Trust or series
immediately after such contribution; plus
(ii) the product of (a) the Unitholder's percentage record
ownership of the outstanding Units of the Trust or series as
measured as of the close of business on the immediately preceding
adjustment date, after taking into account any purchases or
redemptions of Units on such preceding date, and (b) the positive
or negative difference between (x) the net asset value of the Trust
or series at the close of business on the adjustment date, before
taking into account purchases and redemptions of Unit on such date,
and (y) the sum of the net asset value of the Trust or series at
the close of business on the prior adjustment date, after taking
into account purchases and redemptions of Units on such prior date
and the ordinary income and tax-exempt income allocated the
Unitholders under paragraph (a) above on the adjustment date; plus
(iii) losses allocated to such Unitholder's Unrealized
Gain/Loss Account on the prior adjustment date; minus
(iv) gains allocated to such Unitholder's Unrealized Gain/Loss
Account on the prior adjustment date; and minus
(v) the positive or negative difference between (a) the fair
market value of any property distributed (whether or not in
redemption of any Unit) to such Unitholder on the adjustment date
and (b) the adjusted tax basis of such property in the hands of the
Trust or series immediately before such distribution.
In the event that a Unitholder withdraws from the Trust or series
and after such withdrawal there remains a positive or negative
balance in such Unitholder's Unrealized Gain/Loss Account, as
adjusted to take account of the allocation of gain and loss for
such day, such positive or negative amount will be added to the
Unrealized Gain/Loss Account of the remaining Unitholders in
proportion to their relative percentage ownership of the <PAGE>
PAGE 12
outstanding Units of the Trust or series, measured at the close of
business on such day after taking into account any purchases or
redemptions of Units on such day.
c. Gains and losses shall be allocated on each business day,
to the extent practical, in accordance with the Unitholders'
Unrealized Gain/Loss Accounts, as determined after the adjustments
to such account for the date of such allocation:
(i) Gains, which include all taxable income realized from the
sale or exchange or deemed sale or exchange of property, shall be
allocated to each Unitholder with a positive Unrealized Gain/Loss
Account, to the extent of such account and in the ratio that such
account bears to the positive Unrealized Gain/Loss Accounts of all
Unitholders, and thereafter to all Unitholders in proportion to
their interest in the Trust or series, as the case may be.
(ii) Losses shall be allocated to each Unitholder with a
negative Unrealized Gain/Loss Account to the extent of such account
and in the ratio that such account bears to the negative Unrealized
Gain/Loss Accounts of all Unitholders, and thereafter to all
Unitholders in proportion to their interest in the Trust or series,
as the case may be.
d. It is intended that the allocations of taxable income and
loss set forth in this section be recognized as having "substantial
economic effect" for federal income tax purposes within the meaning
of that term in Section 704(b) of the Internal Revenue Code and
applicable Treasury Regulations. In furtherance of the foregoing,
the Trustees, in consultation with the Trust's tax adviser, is
authorized to interpret and apply the tax allocation provisions
hereof as providing for a ''qualified income offset", "minimum gain
chargeback" and such other allocation principles as may be required
under Section 704 of the Internal Revenue Code and applicable
regulations; provided, however, that no such interpretation or
application shall affect the relative percentage record ownership
of any Unitholder or the amount a Unitholder is entitled to receive
upon any redemption of Units or upon the liquidation of the Trust
or series.
Distributions
Section 2. The Trustees may each year, or more frequently if they
so determine, distribute to the Unitholders out of the assets of
the Trust or, if the Trust has more than one series, out of the
assets of the particular series, such amounts as the Trustees may
determine. Any such distribution shall be made to the Unitholders
pro rata in proportion to the number of Units of the Trust or of
the relevant series, as the case may be, held by each of them. Such
distributions shall be made in cash, Units or other property, or a
combination thereof, as determined by the Trustees. Any such
distribution paid in Units will be paid at the net asset value
thereof as determined in accordance with the Bylaws.
Redemptions and Repurchases
Section 3. The Trust shall purchase such Units as are offered <PAGE>
PAGE 13
by any Unitholder for redemption, in accordance with such
procedures for redemption as the Trustees may from time to time
authorize; and the Trust will pay therefor the net asset value
thereof, as next determined in accordance with the Bylaws, less any
redemption charge fixed by the Trustees. Payment for said Units
shall be made by the Trust to the Unitholder within seven days
after the date on which such redemption request is made. The
obligation set forth in this Section 3 is subject to the provision
that, during any period when the New York Stock Exchange is closed
for other than customary weekends or holidays, or, if permitted by
rules of the Securities and Exchange Commission, during periods
when trading on such Exchange is restricted or during any emergency
which makes it impractical for the Trust to dispose of its
investments or to determine fairly the value of its net assets, or
during any other period permitted by order of the Securities and
Exchange Commission for the protection of investors, such
obligation may be suspended or postponed by the Trustees. The Trust
may also purchase or repurchase Units at a price not exceeding the
net asset value of such Units in effect when the purchase or
repurchase or any contract to purchase or repurchase is made.
Redemption at the Option of the Trust
Section 4. The Trust shall have the right at its option and at
any time to redeem Units of any Unitholder at the net asset value
thereof as determined in accordance with the Bylaws: (i) if at such
time such Unitholder owns fewer Units than, or Units having an
aggregate net asset value of less than, an amount determined from
time to time by the Trustees; or (ii) to the extent that such
Unitholder owns Units of a particular series of Units representing
a percentage equal to or in excess of such percentage of the
outstanding Units of that series as the Trustees may from time to
time establish, or of such aggregate net asset value as the
Trustees may from time to time establish; or (iii) to the extent
that such Unitholder owns Units of the Trust representing a
percentage equal to or in excess of such percentage of the
aggregate number of outstanding Units of the Trust as the Trustees
may from time to time establish, or of such aggregate net asset
value as the Trustees may from time to time establish.
ARTICLE VII
Compensation and Limitation of Liability of Trustees
Compensation
Section 1. The Trustees as such shall be entitled to
reasonable compensation from the Trust; they may fix the amount of
their compensation. Nothing herein shall in any way prevent the
employment of any Trustee for advisory, management, legal,
accounting, investment banking or other services and payment for
the same by the Trust.
Limitation of Liability
Section 2. The Trustees shall not be responsible or liable in
any event for any neglect or wrongdoing of any officer, agent,
employee, investment manager, investment adviser, administrator, <PAGE>
PAGE 14
custodian, transfer or Unitholder servicing agent or principal
underwriter of the Trust, nor shall any Trustee be responsible for
the act or omission of any other Trustee, but nothing herein
contained shall protect any Trustee against any liability to which
he or she would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his or her office.
Every note, bond, contract, instrument, certificate or
undertaking and every other act or thing whatsoever executed or
done by or on behalf of the Trust or the Trustees or any of them in
connection with the Trust shall be conclusively deemed to have been
executed or done only in or with respect to their or his or her
capacity as Trustees or Trustee, and such Trustees or Trustee shall
not be personally liable thereon.
ARTICLE VIII
Indemnification
Trustees, Officers, etc.
Section 1. The Trust shall indemnify each of its Trustees and
officers (including persons who serve at the Trust's request as
directors, officers or trustees of another organization in which
the Trust has any interest as a shareholder, creditor or otherwise)
(each such person being hereinafter referred to as a "Covered
Person") against all liabilities and expenses, including but not
limited to amounts paid in satisfaction of judgments, in compromise
or as fines and penalties, and counsel fees reasonably incurred by
any Covered Person in connection with the defense or disposition of
any action, suit or other proceeding, whether civil or criminal,
before any court or administrative or legislative body, in which
such Covered Person may be or may have been involved as a party or
otherwise or with which such Covered Person may be or may have been
threatened, while in office or thereafter, by reason of being or
having been such a Covered Person except with respect to any matter
as to which such Covered Person shall have been finally adjudicated
in any such action, suit or other proceeding (a) not to have acted
in good faith in the reasonable belief that such Covered Person's
action was in the best interest of the Trust or (b) to be liable to
the Trust or its Unitholders by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties
involved in the conduct of such Covered Person's office. Expenses,
including counsel fees so incurred by any such Covered Person (but
excluding amounts paid in satisfaction of judgments, in compromise
or as fines or penalties), shall be paid from time to time by the
Trust in advance of the final disposition of any such action, suit
or proceeding upon receipt of an undertaking by or on behalf of
such Covered Person to repay amounts so paid to the Trust if it is
ultimately determined that indemnification of such expenses is not
authorized under this Article, provided, however, that either (a)
such Covered Person shall have provided appropriate security for
such undertaking, (b) the Trust shall be insured against losses
arising from any such advance payments or (c) either a majority of
the disinterested Trustees acting on the matter (provided that a
majority of the disinterested Trustees then in office act on the
matter), or independent legal counsel in a written opinion, shall
have determined, based upon a review of readily available facts (as
<PAGE>
PAGE 15
opposed to a full trial type inquiry) that there is reason to
believe that such Covered Person would be found entitled to
indemnification under this Article.
Compromise Payment
Section 2. As to any matter disposed of (whether by a
compromise payment, pursuant to a consent decree or otherwise)
without an adjudication by a court, or by any other body before
which the proceeding was brought, that such Covered Person either
(a) did not act in good faith in the reasonable belief that his or
her action was in the best interests of the Trust or (b) is liable
to the Trust or its Unitholders by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office, indemnification shall
be provided if (a) approved as in the best interests of the Trust,
after notice that it involves such indemnification, by at least a
majority of the disinterested Trustees acting on the matter
(provided that a majority of the disinterested Trustees then in
office act on the matter) upon a determination, based upon a review
of readily available facts (as opposed to a full trial type
inquiry) that such Covered Person acted in good faith in the
reasonable belief that his or her action was in the best interests
of the Trust and is not liable to the Trust or its Unitholders by
reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or
her office, or (b) there has been obtained an opinion in writing of
independent legal counsel, based upon a review of readily available
facts (as opposed to a full trial type inquiry) to the effect that
such Covered Person appears to have acted in good faith in the
reasonable belief that his or her action was in the best interests
of the Trust and that such indemnification would not protect such
Covered Person against any liability to the Trust to which he or
she would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office. Any approval pursuant
to this Section shall not prevent the recovery from any Covered
Person of any amount paid to such Covered Person in accordance with
this Section as indemnification if such Covered Person is
subsequently adjudicated by a court of competent jurisdiction not
to have acted in good faith in the reasonable belief that such
Covered Person's action was in the best interests of the Trust or
to have been liable to the Trust or its Unitholders by reason of
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such Covered
Person' s office.
Indemnification Not Exclusive
Section 3. The right of indemnification hereby provided shall
not be exclusive of or affect any other rights to which such
Covered Person may be entitled. As used in this Article VIII, the
term "Covered Person" shall include such person's heirs, executors
and administrators and a "disinterested Trustee" is a Trustee who
is not an "interested person" of the Trust as defined in Section
2(a)(19) of the 1940 Act (or who has been exempted from being an
"interested person" by any rule, regulation or order of the
Securities and Exchange Commission) and against whom none of such <PAGE>
PAGE 16
actions, suits or other proceedings or another action, suit or
other proceeding on the same or similar grounds is then or has been
pending. Nothing contained in this Article shall affect any rights
to indemnification to which personnel of the Trust, other than
Trustees or officers, and other persons may be entitled by contract
or otherwise under law, nor the power of the Trust to purchase and
maintain liability insurance on behalf of any such person.
Unitholders
Section 4. In case any Unitholder or former Unitholder shall
be held to be personally liable solely by reason of his or her
being or having been a Unitholder or having exercised any rights of
a Unitholder provided for in this Declaration of Trust and not
because of his or her other acts or omissions or for some other
reason, the Unitholder or former Unitholder (or his or her heirs,
executors, administrators or other legal representative or, in the
case of a corporation or other entity, its corporate or other
general successor) shall be entitled to be held harmless from and
indemnified against all loss and expense arising from such
liability, but, if the Trust has more than one series, only out of
the assets of the particular series of which he or she is or was a
Unitholder.
ARTICLE IX
Miscellaneous
Trustees, Unitholders, etc. Not Personally Liable; Notice
Section 1. A11 persons extending credit to, contracting with
or having any claim against the Trust or a particular series of
Units shall look only to the assets of the Trust or the assets of
that particular series of Units for payment under such credit,
contract or claim, and neither the Unitholders nor the Trustees,
nor any of the Trust's officers, employees or agents, whether past,
present or future, shall be personally liable therefor. Nothing in
this Declaration of Trust shall protect any Trustee against any
liability to which such Trustee would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of the
office of Trustee.
Every note, bond, contract, instrument, certificate or undertaking
made or issued by the Trustees or by any officer or officers shall
give notice that this Declaration of Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts and shall
recite that the same was executed or made by or on behalf of the
Trust or by them as Trustee or Trustees or as officer or officers
and not individually and that the obligations of such instrument
are not binding upon any of them or the Unitholders individually
but are binding only upon the assets and property of the Trust, and
may contain such further recital as he or she or they may deem
appropriate, but the omission thereof shall not operate to bind any
Trustee or Trustees or officer or officers or Unitholder or
Unitholders individually.
<PAGE>
PAGE 17
Trustee's Good Faith Action, Expert Advice, No Bond or Surety
Section 2. The exercise by the Trustees of their powers and
discretions hereunder shall be binding upon everyone interested. A
Trustee shall be liable for his or her own willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee, and for nothing
else. The Trustees may take advice of counsel or other experts with
respect to the meaning and operation of this Declaration of Trust,
and shall be under no liability for any act or omission in
accordance with such advice or for failing to follow such advice.
The Trustees shall not be required to give any bond as such, nor
any surety if a bond is required.
Liability of Third Persons Dealing with Trustee
Section 3. No person dealing with the Trustees shall be bound
to make any inquiry concerning the validity of any transaction made
or to be made by the Trustees or to see to the application of any
payments made or property transferred to the Trust or upon its
order.
Duration and Termination of Trust
Section 4. The Trust and each series shall continue without
limitation of time, except that: (i) the Trust may be terminated by
vote of Unitholders holding Units entitled to cast at least two-
thirds of the total number of votes entitled to be cast by all
Unitholders of the Trust, (ii) any series may be terminated by vote
of Unitholders holding Units entitled to cast at least two-thirds
of the total number of votes entitled to be cast by all Unitholders
of that series, as such, (iii) the Trust or any series may be
terminated by the Trustees by written notice to the Unitholders and
(iv) the Trust shall be terminated by the Bankruptcy or death of a
Unitholder of the Trust (if there is only one series), or any
series shall be terminated by the Bankruptcy or death of any
Unitholder of that series (if there is more than one series), in
either case effective 90 days after such death or Bankruptcy,
unless the Trustees and Unitholders, by vote of Unitholders holding
Units entitled to be cast at least two-thirds of the total number
of votes entitled to be cast by all Unitholders of the Trust or the
relevant series, as the case may be, approve the continuance of the
Trust or such series, as the case may be. The Units of a Unitholder
whose Bankruptcy or death requires the Trustees and Unitholders to
vote to continue the Trust or the series, as the case may be, shall
be deemed not to be outstanding for the purposes of such vote. Upon
termination of the Trust or of any one or more series of Units,
after paying or otherwise providing for all charges, taxes,
expenses and liabilities, whether due or accrued or anticipated, of
the Trust or of the particular series as may be determined by the
Trustees, the Trust shall, in accordance with such procedures as
the Trustees consider appropriate, reduce the remaining assets to
distributable form in cash or Units or other property, or any
combination thereof, and distribute the proceeds to the
Unitholders of the Trust or of the relevant series, as the case may
be, ratably according to the number of Units of the Trust or of the
relevant series, as the case may be, held by the several
Unitholders thereof on the date of termination, except to the <PAGE>
PAGE 18
extent otherwise required or permitted by the preferences and
special or relative rights and privileges of any classes of Units,
provided that any distribution to the Unitholders of a particular
class of Units shall be made to such Unitholders pro rata in
proportion to the number of Units of such class held by each of
them.
Filing and Copies, References, Headings
Section 5. The original or a copy of this instrument and of
each amendment hereto shall be kept at the office of the Trust
where it may be inspected by any Unitholder. A copy of this
instrument and of each amendment hereto shall be filed by the Trust
with the Secretary of State of The Commonwealth of Massachusetts
and with the Boston City Clerk, as well as any other governmental
office where such filing may from time to time be required. Anyone
dealing with the Trust may rely on a certificate by an officer of
the Trust as to whether or not any such amendments have been made
and as to any matters in connection with the Trust hereunder, and,
with the same effect as if it were the original, may rely on a copy
certified by an officer of the Trust to be a copy of this
instrument or of any such amendments. In this instrument and in any
such amendment, references to this instrument and all expressions
like "herein", "hereof" and "hereunder" shall be deemed to refer to
this instrument as amended or affected by any such amendments.
Headings are placed herein for convenience of reference only and
shall not be taken as a part hereof or control or affect the
meaning, construction or effect of this instrument. This instrument
may be executed in any number of counterparts each of which shall
be deemed an original.
Applicable Law
Section 6. This Declaration of Trust is made in The
Commonwealth of Massachusetts, and it is created under and is to be
governed by and construed and administered according to the laws of
said Commonwealth.
Amendments
Section 7. This Declaration of Trust may be amended at any time by
an instrument in writing signed by a majority of the then Trustees
when authorized to do so by vote of Unitholders holding Units
entitled to cast a majority of the votes entitled to be cast by all
Unitholders of the Trust, except that an amendment which in the
determination of the Trustees shall affect the Unitholders of one
or more series or classes of Units but not the Unitholders of all
outstanding series and classes shall be authorized by vote of the
Unitholders holding Units entitled to cast a majority of the votes
entitled to be cast by all Unitholders of each series and class
affected and no vote of Unitholders of a series or class not
affected shall be required. Amendments having the purpose of
changing the name of the Trust or of supplying any omission, curing
any ambiguity or curing, correcting or supplementing any defective
or inconsistent provision contained herein shall not require
authorization by Unitholder vote.
<PAGE>
PAGE 19
IN WITNESS WHEREOF, each of the undersigned has hereunto set
his hand and seal for himself and his assigns, as of the day and
year first above written.
David Hubers
American Express Financial Advisors
IDS Tower 10
Minneapolis, Minnesota 55440
William H. Dudley
American Express Financial Advisors
IDS Tower 10
Minneapolis, Minnesota 55440
THE STATE OF MINNESOTA
Hennepin County, Minneapolis
Then personally appeared the above named trustees and
acknowledged the foregoing instrument to be their free act and
deed, before me,
_________________________
Notary Public
My Commission Expires:
<PAGE>
PAGE 1
BYLAWS
OF
INCOME TRUST
These ARTICLES are the BYLAWS of Income Trust, a trust with
transferable units established under the laws of The Commonwealth
of Massachusetts (the "Trust"), pursuant to an Agreement and
Declaration of Trust of the Trust (the "Declaration") made the 24th
day of May, 1995, and filed in the office of the Secretary of the
Commonwealth. These Bylaws have been adopted by the Trustees
pursuant to the authority granted by Article IV Section 3 of the
Declaration.
All words and terms capitalized in these Bylaws, unless otherwise
defined herein, shall have the same meanings as they have in the
Declaration.
ARTICLE I
UNITHOLDERS AND UNITHOLDERS' MEETINGS
SECTION 1.1. Meetings. A meeting of the Unitholders of the Trust
shall be held whenever called by the Trustees and whenever election
of a Trustee or Trustees by Unitholders is required by the
provisions of the 1940 Act. If a meeting of Unitholders has not
been held during the immediately preceding fifteen (15) months for
the purpose of electing Trustees, a Unitholder or Unitholders
holding three percent (3%) or more of the voting power of all Units
entitled to vote may demand a meeting of Unitholders for the
purpose of electing Trustees by written notice of demand given to
the Trustees. Within thirty (30) days after receipt of such demand,
the Trustees shall call and give notice of a meeting of Unitholders
for the purpose of electing Trustees. If the Trustees shall fail to
call such meeting or give notice thereof, then the Unitholder or
Unitholders making the demand may call and give notice of such
meeting at the expense of the Trust. The Trustees shall promptly
call and give notice of a meeting of Unitholders for the purpose of
voting upon removal of any Trustee of the Trust when requested to
do so in writing by Unitholders holding not less than ten percent
(10%) of the Units then outstanding. If the Trustees shall fail to
call or give notice of any meeting of Unitholders for a period of
thirty (30) days after written application by Unitholders holding
at least ten percent (10%) of the Units then outstanding requesting
that a meeting be called for any purpose requiring action by the
Unitholders as provided in the Declaration or in these Bylaws, then
Unitholders holding at least ten percent (10%) of the Units then
outstanding may call and give notice of such meeting. Notice of
Unitholders' meetings shall be given as provided in the
Declaration.
SECTION 1.2. Presiding Officer; Secretary. The President shall
preside at each Unitholders' meeting as chairman of the meeting, or
in the absence of the President, the Trustees present at the
meeting shall elect one of their number as chairman of the meeting.
The Trustees shall appoint a secretary to serve as the secretary
for the meeting and to record the minutes thereof. <PAGE>
PAGE 2
SECTION 1.3. Authority of Chairman of Meeting to Interpret
Declaration and Bylaws. At any Unitholders' meeting the chairman of
the meeting shall be empowered to determine the construction or
interpretation of the Declaration or these Bylaws, or any part
thereof or hereof, and his ruling shall be final.
SECTION 1.4. Voting. Unitholders may vote by proxy and the form of
any such proxy may be prescribed from time to time by the Trustees.
At all meetings of the Unitholders, votes shall be taken by ballot
for all matters which may be binding upon the Trustees pursuant to
Article V Section 1 of the Declaration. On other matters, votes of
Unitholders need not be taken by ballot unless otherwise provided
for by the Declaration or by vote of the Trustees, or as required
by the Act or the Regulations, but the chairman of the meeting may
in his discretion authorize any matter to be voted upon by ballot.
SECTION 1.5. Inspectors. At any meeting of Unitholders, the
Trustees before or at the meeting may appoint one or more
Inspectors of Election or Balloting to supervise the voting at such
meeting or any adjournment thereof. If Inspectors are not so
appointed, the chairman of the meeting may, and on the request of
any Unitholder present or represented and entitled to vote shall,
appoint one or more Inspectors for such purpose. Each Inspector,
before entering upon the discharge of his duties, shall take and
sign an oath faithfully to execute the duties of Inspector of
Election or Balloting, as the case may be, at such meeting with
strict impartiality and according to the best of his ability. If
appointed, 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 1.6. Unitholders' Action in Writing. Nothing in this
Article I shall limit the power of the Unitholders to take any
action by means of written instruments without a meeting, as
permitted by Article V Section 4 of the Declaration.
ARTICLE II
TRUSTEES AND TRUSTEES' MEETINGS
SECTION 2.1. Number of Trustees. There shall initially be one (1)
Trustee, and the number of Trustees shall thereafter be such
number, authorized by the Declaration, as from time to time shall
be fixed by a vote adopted by a Majority of the Trustees.
SECTION 2.2. Meetings of Trustees. An organizational meeting shall
be held as soon as convenient to a Majority of the Trustees after
the final adjournment of each meeting of Unitholders at which
Trustees are elected, and no notice shall be required. Other
regular and special meetings of the Trustees may be held at any
time and at any place when called by the President or by any two
(2) Trustees; provided, that notice of the time, place and purposes
thereof is given to each Trustee in accordance with Section 2.3
hereof.
SECTION 2.3. Notice of Meetings. Notice of any regular or special
meeting of the Trustees shall be sufficient if sent by mail<PAGE>
PAGE 3
at least five (5) days, or if given by telephone, telegraph, or in
person at least one (1) day, before the meeting. Notice of a
meeting may be waived by any Trustee by written waiver of notice,
executed by him before or after the meeting, and such waiver shall
be filed with the records of the meeting. Attendance by a Trustee
at a meeting shall constitute a waiver of notice, except where a
Trustee attends a meeting for the purpose of protesting prior
thereto or at its commencement the lack of notice.
SECTION 2.4. Quorum: Presiding Officer. At any meeting of the
Trustees, a Majority of the Trustees shall constitute a quorum. Any
meeting may be adjourned from time to time by a majority of the
votes cast upon the question, whether or not a quorum is present,
and the meeting may be held as adjourned without further notice.
Unless the Trustees shall otherwise elect, generally or in a
particular case, the President shall preside at each meeting of the
Trustees as chairman of the meeting.
SECTION 2.5. Participation by Telephone. One or more of the
Trustees may participate in a meeting thereof or of any Committee
of the Trustees by means of a conference telephone or similar
communications equipment allowing all persons participating in the
meeting to hear each other at the same time. Participation by such
means shall constitute presence in person at a meeting.
SECTION 2.6. Location of Meetings. Trustees' meetings may be held
at any place, within or without Massachusetts.
SECTION 2.7. Votes. Voting at Trustees' meetings may be conducted
orally, by show of hands, or, if requested by any Trustee, by
written ballot. The results of all voting shall be recorded by the
secretary of the meeting in the minute book.
SECTION 2.8. Rulings of Chairman. All other rules of conduct
adopted and used at any Trustees' meeting shall be determined by
the chairman of such meeting, whose ruling on all procedural
matters shall be final.
SECTION 2.9. Trustees' Action in Writing. Nothing in this Article
II shall limit the power of the Trustees to take action by means of
a written consent, signed by a majority of the Trustees.
SECTION 2.10. Resignations. Any Trustee may resign at any time by
written instrument signed by him and delivered to the President or
to a meeting of the Trustees. Such resignation shall be effective
upon receipt unless specified to be effective at some other time.
ARTICLE III
OFFICERS
SECTION 3.1. Officers of the Trust. The officers of the Trust
shall consist of a President, a Treasurer and such other officers
as the Trustees may designate. Any person may hold more than one
office.
<PAGE>
PAGE 4
SECTION 3.2. Time and Terms of Election. The President and the
Treasurer shall be elected by the Trustees at their first meeting
and shall hold office until their successors shall have been duly
elected and qualified, and may be removed at any meeting by the
affirmative vote of a Majority of the Trustees. All other officers
of the Trust may be elected or appointed at any meeting of the
Trustees. Such officers shall hold office for any term, or
indefinitely, as determined by the Trustees, and shall be subject
to removal, with or without cause, at any time by the Trustees.
SECTION 3.3. Resignation and Removal. Any officer may resign at
any time by giving written notice to the Trustees. Such resignation
shall take effect at the time specified therein, and, unless
otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective. If the office of any
officer or agent becomes vacant by reason of death, resignation,
retirement, disqualification, removal from office or otherwise, the
Trustees may choose a successor, who shall hold office for the
unexpired term in respect of which such vacancy occurred. Except to
the extent expressly provided in a written agreement with the
Trust, no officer resigning or removed shall have any right to any
compensation for any period following such resignation or removal,
or any right to damage on account of such removal.
SECTION 3.4. Fidelity Bond. The Trustees may, in their discretion,
direct any officer appointed by them to furnish at the expense of
the Trust a fidelity bond approved by the Trustees, in such amount
as the Trustees may prescribe.
SECTION 3.5. President. The President shall be the chief executive
officer of the Trust and shall have general charge of the
operations of the Trust and such other powers and duties as the
Trustees may prescribe.
SECTION 3.6. Treasurer. The Treasurer shall be the chief financial
officer of the Trust, and shall have the custody of the Trust's
funds and Securities, and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Trust and
shall deposit all moneys, and other valuable effects in the name
and to the credit of the Trust, in such depositories as may be
designated by the Trustees, taking proper vouchers for such
disbursements, and shall have such other duties and powers as may
be prescribed from time to time by the Trustees.
SECTION 3.7. Execution of Deeds, etc. Except as the Trustees may
generally or in particular cases otherwise authorize or direct, all
deeds, leases, transfers, contracts, proposals, bonds, notes,
checks, drafts and other obligations made, accepted or endorsed by
the Trust shall be signed or endorsed on behalf of the Trust by the
President, the Treasurer or such officers as the Trustees may
designate.
SECTION 3.8. Power to Vote Securities. Unless otherwise ordered by
the Trustees, the Treasurer shall have full power and authority on
behalf of the Trust to give proxies for, and/or to attend and to
act and to vote at, any meeting of stockholders of any corporation
in which the Trust may hold stock, and at any such <PAGE>
PAGE 5
meeting the Treasurer or his proxy shall possess and may exercise
any and all rights and powers incident to the ownership of such
stock which, as the owner thereof, the Trust might have possessed
and exercised if present. The Trustees, by resolution from time to
time, or, in the absence thereof, the Treasurer, may confer like
powers upon any other person or persons as attorneys and proxies of
the Trust.
ARTICLE IV
COMMITTEES
SECTION 4.1. Power of Trustees to Designate Committees. The
Trustees, by vote of a Majority of the Trustees, may elect an
Executive Committee and any other Committees and may delegate
thereto some or all of their powers except those which by law, by
the Declaration or by these Bylaws may not be delegated; provided,
that the Executive Committee shall not be empowered to elect the
President or the Treasurer, to amend the Bylaws, to exercise the
powers of the Trustees under this Section 4.1 or under Section 4.3
hereof, or to perform any act for which the action of a Majority of
the Trustees is required by law, by the Declaration or by these
Bylaws. The members of any Committee shall serve at the pleasure of
the Trustees.
SECTION 4.2. Rules for Conduct of Committee Affairs; Quorum.
Except as otherwise provided by the Trustees, each Committee
elected or appointed pursuant to this Article IV may adopt such
standing rules and regulations for the conduct of its affairs as it
may deem desirable, subject to review and approval of such rules
and regulations by the Trustees at the next succeeding meeting of
the Trustees, but in the absence of any such action or any contrary
provisions by the Trustees, the business of each Committee shall be
conducted, so far as practicable, in the same manner as provided
herein and in the Declaration for the Trustees. The quorum for any
Committee is two (2) members regardless of the number of members
serving on the Committee.
SECTION 4.3. Trustees May Alter Abolish. etc., Committees. The
Trustees may at any time alter or abolish any Committee, change the
membership of any Committee, or revoke, rescind or modify any
action of any Committee or the authority of any Committee with
respect to any matter or class of matters; provided, that no such
action shall impair the rights of any third parties.
SECTION 4.4. Minutes: Review by Trustees. Any Committee to which
the Trustees delegate any of their powers or duties may, but need
not, keep records of its meetings and shall report its actions to
the Trustees.
ARTICLE V
SEAL
The seal of the Trust shall bear the word "Massachusetts,"
together with the name of the Trust, the words "Trust Seal," and
the year of its organization, but, unless otherwise required by the<PAGE>
PAGE 6
Trustees, the seal shall not be necessary to be placed on, and its
absence shall not impair the validity of, any document, instrument
or other paper executed and delivered by or on behalf of the Trust.
ARTICLE VI
UNITS
SECTION 6.1. Issuance of Units. The Trustees may issue Units
either in certificated or uncertificated form, they may issue
certificates to the holders of Units which were originally issued
in uncertificated form, and if they have issued Units in
certificated form, they may at any time discontinue the issuance of
Unit certificates and may, by written notice to such Unitholders
require the surrender of their Unit certificates to the Trust for
cancellation, which surrender and cancellation shall not affect the
ownership of Units.
SECTION 6.2. Uncertificated Units. For Units without certificates,
the Trust or the Transfer Agent may either issue receipts therefor
or may keep accounts upon the books of the Trust for the record
holders of such Units, who shall in either case be deemed, for all
purposes hereunder, to be the holders of such Units as if they had
received certificates therefor and shall be held to have expressly
assented and agreed to the terms hereof and of the Declaration.
SECTION 6.3. Certificates. For Units for which the Trustees shall
issue certificates, each Unitholder of such Units shall be entitled
to a certificate stating the number of Units owned by him in such
form as shall be prescribed from time to time by the Trustees. Such
certificate shall be signed by such officers and agents as shall,
from time to time, be designated by the Trustees. The signatures of
such officers or agents may be facsimiles. In case any officer who
has signed or whose facsimile signature has been placed on such
certificate shall cease to be such officer before such certificate
is issued, it may be issued by the Trust with the same effect as if
he were such officer at the time of its issue.
SECTION 6.4. Lost, Stolen, etc., Certificates. If any certificate
for certificated Units shall be lost, stolen, destroyed or
mutilated, the Trustees may authorize the issuance of a new
certificate of the same tenor and for the same number of Units in
lieu thereof. The Trustees shall require the surrender of any
mutilated certificate in respect of which a new certificate is
issued, and may, in their discretion, before the issuance of a new
certificate, require the owner of a lost, stolen or destroyed
certificate, or the owner's legal representative, to make an
affidavit or affirmation setting forth such facts as to the loss,
theft or destruction as they deem necessary, and to give the Trust
a bond in such reasonable sum as the Trustees direct, in order to
indemnify the Trust.
SECTION 6.5. Record Transfer of Pledged Units. A pledgee of Units
pledged as collateral security shall be entitled to a new
certificate in his name as pledgee, in the case of certificated
Units, or to be registered as the holder in pledge of such Units in<PAGE>
PAGE 7
the case of uncertificated Units; provided, that the instrument of
pledge substantially describes the debt or duty that is intended to
be secured thereby. Any such new certificate shall express on its
face that it is held as collateral security, and the name of the
pledgor shall be stated thereon, and any such registration of
uncertificated Units shall be in a form which indicates that the
registered holder holds such Units in pledge. After such issue or
registration, and unless and until such pledge is released, such
pledgee and his successors and assigns shall alone be entitled to
the rights of a Unitholder, and entitled to vote such Units.
ARTICLE VII
CUSTODIAN
The Trust shall at all times employ a bank or trust company having
a capital, surplus and undivided profits of at least Two Million
Dollars ($2,000,000) as Custodian of the capital assets of the
Trust. The Custodian shall be compensated for its services by the
Trust upon such basis as shall be agreed upon from time to time
between the Trust and the Custodian.
ARTICLE VIII
AMENDMENTS
SECTION 8.1. Bylaws Subject to Amendment. These Bylaws may be
altered, amended or repealed, in whole or in part, at any time by
vote of the holders of a majority of the Units issued, outstanding
and entitled to vote. The Trustees, by vote of a Majority of the
Trustees, may alter, amend or repeal these Bylaws, in whole or in
part, including Bylaws adopted by the Unitholders, except with
respect to any provision hereof which by law, the Declaration or
these Bylaws requires action by the Unitholders; provided, that no
later than the time of giving notice of the meeting of Unitholders
next following the alteration, amendment or repeal of these Bylaws,
in whole or in part, notice thereof, stating the substance of such
action shall be given to all Unitholders entitled to vote. Bylaws
adopted by the Trustees may be altered, amended or repealed by the
Unitholders.
SECTION 8.2. Notice of Proposal to Amend Bylaws Required. No
proposal to amend or repeal these Bylaws or to adopt new Bylaws
shall be acted upon at a meeting unless either (i) such proposal is
stated in the notice or in the waiver of notice, as the case may
be, of the meeting of the Trustees or Unitholders at which such
action is taken, or (ii) all of the Trustees or Unitholders, as the
case may be, are present at such meeting and all agree to consider
such proposal without protesting the lack of notice.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Fiscal Year. The fiscal year of the Trust shall begin
on the first day of June in each year and end on the thirty-first
day of May following.
<PAGE>
PAGE 8
SECTION 9.2. Discontinuation of Sale of Units. If the sale of
Units issued by the Trust shall at any time be discontinued, the
Trustees may in their discretion, pursuant to resolution, deduct
from the value of the assets of the Trust an amount equal to the
brokerage commissions, transfer taxes, and charges, if any, which
would be payable on the sale of Securities if they were then being
sold.
SECTION 9.3. Business Day. A business day for the Trust shall be
each day the New York Stock Exchange is open for business.
ARTICLE X
INDEMNIFICATION
SECTION 10.1. 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 Trust by reason of the
former or present capacity as a Trustee or officer of the Trust or
who, while a Trustee or officer of the Trust, is or was serving at
the request of the Trust or whose duties as a Trustee 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 Trust to the full extent authorized by the laws of
The Commonwealth of Massachusetts, 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 Trust to provide broader
indemnification rights than the law permitted the Trust 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 Trustee or officer and shall inure to the
benefit of the person's heirs, executors and administrators
provided, however, in an action brought against the Trust to
enforce rights to indemnification, the Trustee or officer shall be
indemnified only if the action was authorized by the Board of
Trustees of the Trust. The right to indemnification conferred by
this Section shall be a contract right and shall include the right
to be paid by the Trust in advance of the final disposition of a
proceeding for expenses incurred in connection therewith provided,
however, such payment of expenses shall be made only upon receipt
of a written undertaking by the Trustee or officer to repay all
amounts so paid if it is ultimately determined that the Trustee or
officer is not entitled to indemnification.
SECTION 10.2. Each person who upon written request to the Trust
has not received payment within thirty days may at any time
thereafter bring suit against the Trust to recover any unpaid
amount and, to the extent successful, in whole or in part, shall be<PAGE>
PAGE 9
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 Trust shall have the
burden of proof to overcome the presumption that the Trustee or
officer is not so entitled. Neither the determination by the Trust,
whether by the Board of Trustees, special legal counsel or by
Unitholder, nor the failure of the Trust to have made any
determination shall be a defense or create the presumption that the
Trustee or officer is not entitled to indemnification.
SECTION 10.3. 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 Agreement and Declaration of
Trust, bylaw, agreement, vote of Unitholders or otherwise and
notwithstanding any provisions in this Article X, the Trust 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 Trustee 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.
* * *
<PAGE>
PAGE 1
INVESTMENT MANAGEMENT SERVICES AGREEMENT
AGREEMENT made the ____ day of _____, 1996, by and between Income
Trust (the "Trust"), a Massachusetts business trust, on behalf of
its underlying series portfolios, Government Income Portfolio,
Quality Income Portfolio, High Yield Portfolio (individually, a
Portfolio and collectively the "Portfolio"), and American Express
Financial Corporation (the "Advisor"), a Delaware corporation.
Part One: INVESTMENT MANAGEMENT AND OTHER SERVICES
(1) The Trust hereby retains the Advisor, and the Advisor hereby
agrees, for the period of this Agreement and under the terms and
conditions hereinafter set forth, to furnish the Portfolios
continuously with suggested investment planning; to determine,
consistent with the Portfolios' investment objectives and policies,
which securities in the Advisor's discretion shall be purchased,
held or sold and to execute or cause the execution of purchase or
sell orders; to prepare and make available to the Portfolios all
necessary research and statistical data in connection therewith; to
furnish all services of whatever nature required in connection with
the management of the Portfolios as provided under this Agreement;
and to pay such expenses as may be provided for in Part Three;
subject always to the direction and control of the Board of
Trustees (the "Board"), the Executive Committee and the authorized
officers of the Trust. The Advisor agrees to maintain an adequate
organization of competent persons to provide the services and to
perform the functions herein mentioned. The Advisor agrees to meet
with any persons at such times as the Board deems appropriate for
the purpose of reviewing the Advisor's performance under this
Agreement.
(2) The Advisor agrees that the investment planning and
investment decisions will be in accordance with general investment
policies of the Portfolios as disclosed to the Advisor from time to
time by the Portfolios and as set forth in their prospectuses and
registration statements filed with the United States Securities and
Exchange Commission (the "SEC").
(3) The Advisor agrees that it will maintain all required
records, memoranda, instructions or authorizations relating to the
acquisition or disposition of securities for the Portfolios.
(4) The Trust agrees that it will furnish to the Advisor any
information that the latter may reasonably request with respect to
the services performed or to be performed by the Advisor under this
Agreement.
(5) The Advisor is authorized to select the brokers or dealers
that will execute the purchases and sales of portfolio securities
for the Portfolios and is directed to use its best efforts to
obtain the best available price and most favorable execution,
except as prescribed herein. Subject to prior authorization by the
Board of appropriate policies and procedures, and subject to
termination at any time by the Board, the Advisor may also be
authorized to effect individual securities transactions at
commission rates in excess of the minimum commission rates<PAGE>
PAGE 2
available, to the extent authorized by law, if the Advisor
determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of
either that particular transaction or the Advisor's overall
responsibilities with respect to the Portfolios and other funds for
which it acts as investment advisor.
(6) It is understood and agreed that in furnishing the
Portfolios with the services as herein provided, neither the
Advisor nor any officer, director or agent thereof shall be held
liable to the Trust, a Portfolio or its creditors or unitholders
for errors of judgment or for anything except willful misfeasance,
bad faith, or gross negligence in the performance of its duties, or
reckless disregard of its obligations and duties under the terms of
this Agreement. It is further understood and agreed that the
Advisor may rely upon information furnished to it reasonably
believed to be accurate and reliable.
Part Two: COMPENSATION TO INVESTMENT MANAGER
(1) The Trust agrees to pay to the Advisor, and the Advisor
covenants and agrees to accept from each Portfolio in full payment
for the services furnished, a fee for each calendar day of each
year equal to the total of 1/365th (1/366th in each leap year) of
the amount computed as shown below. The computation shall be made
for each day on the basis of net assets as of the close of business
of the full business day two (2) business days prior to the day for
which the computation is being made. In the case of the suspension
of the computation of net asset value, the asset charge for each
day during such suspension shall be computed as of the close of
business on the last full business day on which the net assets were
computed. Net assets as of the close of a full business day shall
include all transactions in shares of the Portfolio recorded on the
books of the Portfolio for that day.
The asset charge shall be based on the net assets of each
Portfolio as set forth in the following table.
<TABLE><CAPTION>
Asset Charge
Assets Annual Rate at Assets Annual Rate at
(Billions) Each Asset Level (Billions) Each Asset Level
Government Income Portfolio High Yield Portfolio
Quality Income Portfolio
<S> <C> <C> <C>
First $1 0.520% First $1 0.590%
Next $1 0.495 Next $1 0.565
Next $1 0.470 Next $1 0.540
Next $3 0.445 Next $3 0.515
Next $3 0.420 Next $3 0.490
Over $9 0.395 Over $9 0.465
</TABLE>
<PAGE>
PAGE 3
(2) The fee shall be paid on a monthly basis and, in the event
of the termination of this Agreement, the fee accrued shall be
prorated on the basis of the number of days that this Agreement is
in effect during the month with respect to which such payment is
made.
(3) The fee provided for hereunder shall be paid in cash by the
Portfolios to the Advisor within five business days after the last
day of each month.
Part Three: ALLOCATION OF EXPENSES
(1) The Trust agrees to pay:
(a) Fees payable to the Advisor for its services under the
terms of this Agreement.
(b) Taxes.
(c) Brokerage commissions and charges in connection with the
purchase and sale of assets.
(d) Custodian fees and charges.
(e) Fees and charges of its independent certified public
accountants for services the Trust or Portfolios request.
(f) Premium on the bond required by Rule 17g-1 under the
Investment Company Act of 1940.
(g) Fees and expenses of attorneys (i) it employs in matters
not involving the assertion of a claim by a third party against the
Trust, its trustees and officers, (ii) it employs in conjunction
with a claim asserted by the Board against the Advisor except that
the Advisor shall reimburse the Trust for such fees and expenses if
it is ultimately determined by a court of competent jurisdiction,
or the Advisor agrees, that it is liable in whole or in part to the
Trust, and (iii) it employs to assert a claim against a third
party.
(h) Fees paid for the qualification and registration for public
sale of the securities of the Portfolios under the laws of the
United States and of the several states in which such securities
shall be offered for sale.
(i) Fees of consultants employed by the Trust or Portfolios.
(j) Trustees, officers and employees expenses which shall
include fees, salaries, memberships, dues, travel, seminars,
pension, profit sharing, and all other benefits paid to or provided
for trustees, officers and employees, trustees and officers
liability insurance, errors and omissions liability insurance,
worker's compensation insurance and other expenses applicable to
the trustees, officers and employees, except the Trust will not pay
any fees or expenses of any person who is an officer or employee of
the Advisor or its affiliates.
<PAGE>
PAGE 4
(k) Filing fees and charges incurred by the Trust in connection
with filing any amendment to its agreement or declaration of Trust,
or incurred in filing any other document with the State of
Massachusetts or its political subdivisions.
(l) Organizational expenses of the Trust.
(m) Expenses incurred in connection with lending portfolio
securities of the Portfolios.
(n) Expenses properly payable by the Trust or Portfolios,
approved by the Board.
(2) The Advisor agrees to pay all expenses associated with the
services it provides under the terms of this Agreement.
Part Four: MISCELLANEOUS
(1) The Advisor shall be deemed to be an independent contractor
and, except as expressly provided or authorized in this Agreement,
shall have no authority to act for or represent the Trust or
Portfolios.
(2) A "full business day" shall be as defined in the By-laws.
(3) The Trust and each Portfolio recognize that the Advisor now
renders and may continue to render investment advice and other
services to other investment companies and persons which may or may
not have investment policies and investments similar to those of
the Portfolios and that the Advisor manages its own investments
and/or those of its subsidiaries. The Advisor shall be free to
render such investment advice and other services and the Trust and
each Portfolio hereby consent thereto.
(4) Neither this Agreement nor any transaction made pursuant
hereto shall be invalidated or in any way affected by the fact that
trustees, officers, agents and/or unitholders of the Trust are or
may be interested in the Advisor or any successor or assignee
thereof, as directors, officers, stockholders or otherwise; that
directors, officers, stockholders or agents of the Advisor are or
may be interested in the Trust or Portfolios as trustees, officers,
unitholders, or otherwise; or that the Advisor or any successor or
assignee, is or may be interested in the Portfolios as unitholder
or otherwise, provided, however, that neither the Advisor nor any
officer, trustee or employee thereof or of the Trust, shall sell to
or buy from the Portfolios any property or security other than
units issued by the Portfolios, except in accordance with
applicable regulations or orders of the SEC.
(5) Any notice under this Agreement shall be given in writing,
addressed, and delivered, or mailed postpaid, to the party to this
Agreement entitled to receive such, at such party's principal place
of business in Minneapolis, Minnesota, or to such other address as
either party may designate in writing mailed to the other.
<PAGE>
PAGE 5
(6) The Advisor agrees that no officer, director or employee of
the Advisor will deal for or on behalf of the Trust or Portfolios
with himself as principal or agent, or with any corporation or
partnership in which he may have a financial interest, except that
this shall not prohibit:
(a) Officers, directors or employees of the Advisor from having
a financial interest in the Portfolios or in the Advisor.
(b) The purchase of securities for the Portfolios, or the sale
of securities owned by the Portfolios, through a security broker or
dealer, one or more of whose partners, officers, directors or
employees is an officer, director or employee of the Advisor
provided such transactions are handled in the capacity of broker
only and provided commissions charged do not exceed customary
brokerage charges for such services.
(c) Transactions with the Portfolios by a broker-dealer
affiliate of the Advisor as may be allowed by rule or order of the
SEC, and if made pursuant to procedures adopted by the Board.
(7) The Advisor agrees that, except as herein otherwise
expressly provided or as may be permitted consistent with the use
of a broker-dealer affiliate of the Advisor under applicable
provisions of the federal securities laws, neither it nor any of
its officers, directors or employees shall at any time during the
period of this Agreement, make, accept or receive, directly or
indirectly, any fees, profits or emoluments of any character in
connection with the purchase or sale of securities (except shares
issued by the Portfolios) or other assets by or for the Trust or
Portfolios.
Part Five: RENEWAL AND TERMINATION
(1) This Agreement shall continue in effect for each Portfolio
until ______, 1998, or until a new agreement is approved by a vote
of the majority of the outstanding units of each Portfolio and by
vote of the Trust's Board, including the vote required by (b) of
this paragraph, and if no new agreement is so approved, this
Agreement shall continue from year to year thereafter unless and
until terminated by either party as hereinafter provided, except
that such continuance shall be specifically approved at least
annually (a) by the Board or by a vote of the majority of the
outstanding units of the relevant Portfolios and (b) by the vote of
a majority of the trustees who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval. As used in this
paragraph, the term "interested person" shall have the same meaning
as set forth in the Investment Company Act of 1940, as amended (the
"1940 Act").
(2) This Agreement may be terminated by either the Trust on
behalf of a Portfolio or the Advisor at any time by giving the
other party 60 days' written notice of such intention to terminate,
provided that any termination shall be made without the payment of
any penalty, and provided further that termination may be effected
either by the Board or by a vote of the majority of the outstanding
<PAGE>
PAGE 6
voting units of the Portfolio. The vote of the majority of the
outstanding voting units of a Portfolio for the purpose of this
Part Five shall be the vote at a unitholders' regular meeting, or a
special meeting duly called for the purpose, of 67% or more of the
Portfolio's shares present at such meeting if the holders of more
than 50% of the outstanding voting units are present or represented
by proxy, or more than 50% of the outstanding voting units of the
Portfolio, whichever is less.
(3) This Agreement shall terminate in the event of its
assignment, the term "assignment" for this purpose having the same
meaning as set forth in the 1940 Act.
<PAGE>
PAGE 7
IN WITNESS THEREOF, the parties hereto have executed the
foregoing Agreement as of the day and year first above written.
INCOME TRUST
Government Income Portfolio
Quality Income Portfolio
High Yield Portfolio
By
Vice President
AMERICAN EXPRESS FINANCIAL CORPORATION
By
Vice President
<PAGE>
PAGE 1
PLACEMENT AGENT AGREEMENT
THIS AGREEMENT dated , 1996 between Income Trust, a
Massachusetts business trust (the "Trust"), on behalf of its
underlying series portfolios and American Express Financial
Advisors Inc., a Delaware Corporation, the placement agent (the
"Placement Agent") of units in the Trust ("Trust Units").
Part One: SERVICES AS PLACEMENT AGENT
(1) Placement Agent will act as placement agent of the Trust
Units covered by the Trust's registration statement then in effect
under the Investment Company Act of 1940 (the "1940 Act"). Under
this Agreement, neither the Placement Agent nor its employees or
any of its agents will make any offer or sale of Trust Units in a
manner which would require the Trust Units to be registered under
the Securities Act of 1933, as amended (the "1933 Act").
(2) The Placement Agent will act as placement agent for each
class of units issued and to be issued by the Trust during the
period of this agreement and agrees to offer for sale those units
as long as those units remain available for sale, unless the
Placement Agent is unable or unwilling to make such offer for sale
or sales or solicitations therefor legally because of any federal,
state, provincial or governmental law, rule or agency or for any
financial reason.
(3) Nothing in this Agreement requires the Trust to accept any
offer to purchase any Trust units; all offers are subject to
approval by the Board of Trustees (the "Board").
(4) The Trust represents to the Placement Agent that all
registration statements filed by the Trust with the Commission
under the Investment Company Act of 1940 with respect to Trust
units have been and will be prepared in conformity with the
requirements of the Investment Company Act of 1940 and the rules
and regulations of the Commission.
(5) The Trust agrees to make prompt and reasonable effort to
do any and all things necessary, in the opinion of the Placement
Agent, to have and to keep the Trust and the units properly
registered or qualified in all appropriate jurisdictions.
(6) The Trust agrees that it will furnish the Placement Agent
with information with respect to the affairs and accounts of the
Trust, and in such form, as the Placement Agent may from time to
time reasonably require and further agrees that the Placement
Agent, at all reasonable times, shall be permitted to inspect the
books and records of the Trust.
(7) The Placement Agent and the Trust agree to use their best
efforts to conform with all applicable state and federal laws and
regulations relating to any rights or obligations under the terms
of this agreement.
<PAGE>
PAGE 2
Part Two: ALLOCATION OF EXPENSES
Except as provided by any other agreements between the parties, the
Placement Agent covenants and agrees that during the period of this
agreement it will pay or cause or be paid all expenses incurred by
the Placement Agent or any of its affiliates, in the offering for
sale or sale of each class of the Trust's units.
Part Three: MISCELLANEOUS
(1) The Placement Agent shall be deemed to be an independent
contractor and, except as expressly provided or authorized in this
agreement, shall have no authority to act for or represent the
Trust.
(2) The Placement Agent shall be free to render to others
services similar to those rendered under this agreement.
(3) Neither this agreement nor any transaction pursuant hereto
shall be invalidated or in any way affected by the fact that
trustees, officers, agents and/or unitholders of the Trust are or
may be interested in the Placement Agent as trustees, officers,
unitholders or otherwise; that directors, officers, shareholders or
agents of the Placement Agent are or may be interested in the Trust
as trustees, officers, or otherwise; or that the Placement Agent is
or may be interested in the Trust as unitholder or otherwise;
provided, however, that neither the Placement Agent nor any officer
or director of the Placement Agent or any officers or trustees of
the Trust shall sell to or buy from the Trust any property or
security other than a security issued by the Trust, except in
accordance with a rule, regulation or order of the Securities and
Exchange Commission.
(4) Any notice under this agreement shall be given in writing,
addressed and delivered, or mailed postpaid, to the parties to this
agreement at each company's principal place of business in
Minneapolis, Minnesota, or to such other address as either party
may designate in writing mailed to the other.
(5) The Placement Agent agrees that no officer, director or
employee of the Placement Agent will deal for or on behalf of the
Trust with himself or herself as principal or agent, or with any
corporation or partnership in which he or she may have a financial
interest, except that this shall not prohibit:
(a) Officers, directors and employees of the Placement Agent
from having a financial interest in the Trust or in the Placement
Agent.
(b) The purchase of securities for the Trust, or the sale of
securities owned by the Trust, through a security broker or dealer,
one or more of whose partners, officers, directors or employees is
an officer, director or employee of the Placement Agent provided
such transactions are handled in the capacity of broker only and
provided commissions charged do not exceed customary brokerage
charges for such services.
<PAGE>
PAGE 3
(c) Transactions with the Trust by a broker-dealer affiliate of
the Placement Agent if allowed by rule or order of the Securities
and Exchange Commission and if made pursuant to procedures adopted
by the Trust's Board of Trustees (the "Board").
(7) The Placement Agent agrees that, except as otherwise provided
in this agreement, or as may be permitted consistent with the use
of a broker-dealer affiliate of the Placement Agent under
applicable provisions of the federal securities laws, neither it
nor any of its officers, directors or employees shall at any time
during the period of this agreement make, accept or receive,
directly or indirectly, any fees, profits or emoluments of any
character in connection with the purchase or sale of securities
(except securities issued by the Trust) or other assets by or for
the Trust.
(8) A copy of the Declaration of Trust, dated May 24, 1995,
together with all amendments, is on file in the office of the
Secretary of State of the Commonwealth of Massachusetts. The
execution and delivery of this Agreement have been authorized by
the Trustees and the Agreement has been signed by an authorized
officer of the Trust. It is expressly agreed that the obligations
of the Trust under this Agreement shall not be binding upon any of
the Trustees, unitholders, nominees, officers, agents or employees
of the Trust, personally, but bind only the assets and property of
the Trust, as provided in the Declaration of Trust.
Part Five: TERMINATION
(1) This agreement shall continue from year to year unless and
until terminated by the Placement Agent or the Trust, except that
such continuance shall be specifically approved at least annually
by a vote of a majority of the Board of Trustees who are not
parties to this agreement or interested persons of any such party,
cast in person at a meeting called for the purpose of voting on
such approval, and by a majority of the Board of Trustees or by
vote of a majority of the outstanding voting securities of the
Trust. As used in this paragraph, the terms "interested person"
and "vote of a majority of the outstanding voting securities" shall
have the meaning as set forth in the Investment Company Act of
1940, as amended.
(2) This agreement may be terminated by either party at any time
by giving the other party sixty (60) days written notice of such
intention to terminate.
(3) This agreement shall terminate in the event of its
assignment, the term "assignment" for this purpose having the same
meaning as set forth in the Investment Company Act of 1940, as
amended.
<PAGE>
PAGE 4
IN WITNESS WHEREOF, The parties hereto have executed the foregoing
agreement on the date and year first above written.
INCOME TRUST
Government Income Portfolio
Quality Income Portfolio
High Yield Portfolio
By _____________________________________
Vice President
AMERICAN EXPRESS FINANCIAL ADVISORS INC.
By _____________________________________
Vice President
<PAGE>
PAGE 1
CUSTODIAN AGREEMENT
THIS CUSTODIAN AGREEMENT dated ________, 1996, between Income
Trust, a Massachusetts business trust, (the "Trust"), on behalf of
its underlying Portfolio, Government Income Portfolio, and American
Express Trust Company, a corporation organized under the laws of
the State of Minnesota with its principal place of business at
Minneapolis, Minnesota (the "Custodian").
WHEREAS, the Trust desires that its securities and cash be
hereafter held and administered by Custodian pursuant to the terms
of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein
made, the Trust and the Custodian agree as follows:
Section 1. Definitions
The word "securities" as used herein shall be construed to include,
without being limited to, units, stocks, treasury stocks, including
any stocks of this Trust, notes, bonds, debentures, evidences of
indebtedness, options to buy or sell stocks or stock indexes,
certificates of interest or participation in any profit-sharing
agreements, collateral trust certificates, preorganization
certificates or subscriptions, transferable units, investment
contracts, voting trust certificates, certificates of deposit for a
security, fractional or undivided interests in oil, gas or other
mineral rights, or any certificates of interest or participation
in, temporary or interim certificates for, receipts for, guarantees
of, or warrants or rights to subscribe to or purchase any of the
foregoing, acceptances and other obligations and any evidence of
any right or interest in or to any cash, property or assets and any
interest or instrument commonly known as a security. In addition,
for the purpose of this Custodian Agreement, the word "securities"
also shall include other instruments in which the Trust may invest
including currency forward contracts and commodities such as
interest rate or index futures contracts, margin deposits on such
contracts or options on such contracts.
The words "custodian order" shall mean a request or direction,
including a computer printout, directed to the Custodian and signed
in the name of the Trust by any two individuals designated in the
current certified list referred to in Section 2.
The word "facsimile" shall mean an exact copy or likeness which is
electronically transmitted for instant reproduction.
Section 2. Names, Titles and Signatures of Authorized Persons
The Trust will certify to the Custodian the names and signatures of
its present officers and other designated persons authorized on
behalf of the Trust to direct the Custodian by custodian order as
herein before defined. The Trust agrees that whenever any change
occurs in this list it will file with the Custodian a copy of a<PAGE>
PAGE 2
resolution certified by the Secretary or an Assistant Secretary of
the Trust as having been duly adopted by the Board of Trustees (the
"Board") or the Executive Committee of the Board designating those
persons currently authorized on behalf of the Trust to direct the
Custodian by custodian order, as herein before defined, and upon
such filing (to be accompanied by the filing of specimen signatures
of the designated persons) the persons so designated in said
resolution shall constitute the current certified list. The
Custodian is authorized to rely and act upon the names and
signatures of the individuals as they appear in the most recent
certified list from the Trust which has been delivered to the
Custodian as herein above provided.
Section 3. Use of Subcustodians
The Custodian may make arrangements, where appropriate, with other
banks having not less than two million dollars aggregate capital,
surplus and undivided profits for the custody of securities. Any
such bank selected by the Custodian to act as subcustodian shall be
deemed to be the agent of the Custodian.
The Custodian also may enter into arrangements for the custody of
securities entrusted to its care through foreign branches of United
States banks; through foreign banks, banking institutions or trust
companies; through foreign subsidiaries of United States banks or
bank holding companies, or through foreign securities depositories
or clearing agencies (hereinafter also called, collectively, the
"Foreign Subcustodian" or indirectly through an agent, established
under the first paragraph of this section, if and to the extent
permitted by Section 17(f) of the Investment Company Act of 1940
and the rules promulgated by the Securities and Exchange Commission
thereunder, any order issued by the Securities and Exchange
Commission, or any "no-action" letter received from the staff of
the Securities and Exchange Commission. To the extent the existing
provisions of the Custodian Agreement are consistent with the
requirements of such Section, rules, order or no-action letter,
they shall apply to all such foreign custodianships. To the extent
such provisions are inconsistent with or additional requirements
are established by such Section, rules, order or no-action letter,
the requirements of such Section, rules, order or no-action letter
will prevail and the parties will adhere to such requirements;
provided, however, in the absence of notification from the Trust of
any changes or additions to such requirements, the Custodian shall
have no duty or responsibility to inquire as to any such changes or
additions.
Section 4. Receipt and Disbursement of Money
(1) The Custodian shall open and maintain a separate account or
accounts in the name of the Trust or cause its agent to open and
maintain such account or accounts subject only to checks, drafts or
directives by the Custodian pursuant to the terms of this
Agreement. The Custodian or its agent shall hold in such account
or accounts, subject to the provisions hereof, all cash received by<PAGE>
PAGE 3
it from or for the account of the Trust. The Custodian or its
agent shall make payments of cash to or for the account of the
Trust from such cash only:
(a) for the purchase of securities for the portfolio of the Trust
upon the receipt of such securities by the Custodian or its
agent unless otherwise instructed on behalf of the Trust;
(b) for the purchase or redemption of units of capital stock of
the Trust;
(c) for the payment of interest, dividends, taxes, management
fees, or operating expenses (including, without limitation
thereto, fees for legal, accounting and auditing services);
(d) for payment of distribution fees, commissions, or redemption
fees, if any;
(e) for payments in connection with the conversion, exchange or
surrender of securities owned or subscribed to by the Trust
held by or to be delivered to the Custodian;
(f) for payments in connection with the return of securities
loaned by the Trust upon receipt of such securities or the
reduction of collateral upon receipt of proper notice;
(g) for payments for other proper corporate purposes;
(h) or upon the termination of this Agreement.
Before making any such payment for the purposes permitted under the
terms of items (a), (b), (c), (d), (e), (f) or (g) of paragraph (1)
of this section, the Custodian shall receive and may rely upon a
custodian order directing such payment and stating that the payment
is for such a purpose permitted under these items (a), (b), (c),
(d), (e), (f) or (g) and that in respect to item (g), a copy of a
resolution of the Board or of the Executive Committee of the Board
signed by an officer of the Trust and certified by its Secretary or
an Assistant Secretary, specifying the amount of such payment,
setting forth the purpose to be a proper corporate purpose, and
naming the person or persons to whom such payment is made.
Notwithstanding the above, for the purposes permitted under items
(a) or (f) of paragraph (1) of this section, the Custodian may rely
upon a facsimile order.
(2) The Custodian is hereby appointed the attorney-in-fact of the
Trust to endorse and collect all checks, drafts or other orders for
the payment of money received by the Custodian for the account of
the Trust and drawn on or to the order of the Trust and to deposit
same to the account of the Trust pursuant to this Agreement.
<PAGE>
PAGE 4
Section 5. Receipt of Securities
Except as permitted by the second paragraph of this section, the
Custodian or its agent shall hold in a separate account or
accounts, and physically segregated at all times from those of any
other persons, firms or corporations, pursuant to the provisions
hereof, all securities received by it for the account of the Trust.
The Custodian shall record and maintain a record of all certificate
numbers. Securities so received shall be held in the name of the
Trust, in the name of an exclusive nominee duly appointed by the
Custodian or in bearer form, as appropriate.
Subject to such rules, regulations or guidelines as the Securities
and Exchange Commission may adopt, the Custodian may deposit all or
any part of the securities owned by the Trust in a securities
depository which includes any system for the central handling of
securities established by a national securities exchange or a
national securities association registered with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, or
such other person as may be permitted by the Commission, pursuant
to which system all securities of any particular class or series of
any issuer deposited within the system are treated as fungible and
may be transferred or pledged by bookkeeping entry without physical
delivery of such securities.
All securities are to be held or disposed of by the Custodian for,
and subject at all times to the instructions of, the Trust pursuant
to the terms of this Agreement. The Custodian shall have no power
or authority to assign, hypothecate, pledge or otherwise dispose of
any such securities, except pursuant to the directive of the Trust
and only for the account of the Trust as set forth in Section 6 of
this Agreement.
Section 6. Transfer Exchange, Delivery, etc. of Securities
The Custodian shall have sole power to release or deliver any
securities of the Trust held by it pursuant to this Agreement. The
Custodian agrees to transfer, exchange or deliver securities held
by it or its agent hereunder only:
(a) for sales of such securities for the account of the Trust,
upon receipt of payment therefor;
(b) when such securities are called, redeemed, retired or
otherwise become payable;
(c) for examination upon the sale of any such securities in
accordance with "street delivery" custom which would include
delivery against interim receipts or other proper delivery
receipts;
(d) in exchange for or upon conversion into other securities
alone or other securities and cash whether pursuant to any
plan of
(e) merger, consolidation, reorganization, recapitalization or
readjustment, or otherwise;<PAGE>
PAGE 5
(f) for the purpose of exchanging interim receipts or temporary
certificates for permanent certificates;
(g) upon conversion of such securities pursuant to their terms
into other securities;
(h) upon exercise of subscription, purchase or other similar
rights represented by such securities; for loans of such
securities by the Trust receipt of collateral; or
(i) for other proper corporate purposes.
As to any deliveries made by the Custodian pursuant to items (a),
(b), (c), (d), (e), (f), (g) and (h), securities or cash received
in exchange therefore shall be delivered to the Custodian, its
agent, or to a securities depository. Before making any such
transfer, exchange or delivery, the Custodian shall receive a
custodian order or a facsimile from the Trust requesting such
transfer, exchange or delivery and stating that it is for a purpose
permitted under Section 6 (whenever a facsimile is utilized, the
Trust will also deliver an original signed custodian order) and, in
respect to item (i), a copy of a resolution of the Board or of the
Executive Committee of the Board signed by an officer of the Trust
and certified by its Secretary or an Assistant Secretary,
specifying the securities, setting forth the purpose for which such
payment, transfer, exchange or delivery is to be made, declaring
such purpose to be a proper corporate purpose, and naming the
person or persons to whom such transfer, exchange or delivery of
such securities shall be made.
Section 7. Custodian's Acts Without Instructions
Unless and until the Custodian receives a contrary custodian order
from the Trust, the Custodian shall or shall cause its agent to:
(a) present for payment all coupons and other income items held
by the Custodian or its agent for the account of the Trust
which call for payment upon presentation and hold all cash
received by it upon such payment for the account of the
Trust;
(b) present for payment all securities held by it or its agent
which mature or when called, redeemed, retired or otherwise
become payable;
(c) ascertain all stock dividends, rights and similar securities
to be issued with respect to any securities held by the
Custodian or its agent hereunder, and to collect and hold for
the account of the Trust all such securities; and
(d) ascertain all interest and cash dividends to be paid to
security holders with respect to any securities held by the
Custodian or its agent, and to collect and hold such interest
and cash dividends for the account of the Trust.
<PAGE>
PAGE 6
Section 8. Voting and Other Action
Neither the Custodian nor any nominee of the Custodian shall vote
any of the securities held hereunder by or for the account of the
Trust. The Custodian shall promptly deliver to the Trust all
notices, proxies and proxy soliciting materials with relation to
such securities, such proxies to be executed by the registered
holder of such securities (if registered otherwise than in the name
of the Trust), but without indicating the manner in which such
proxies are to be voted.
Custodian shall transmit promptly to the Trust all written
information (including, without limitation, pendency of calls and
maturities of securities and expirations of rights in connection
therewith) received by the Custodian from issuers of the securities
being held for the Trust. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Trust all
written information received by the Custodian from issuers of the
securities whose tender or exchange is sought and from the party
(or his agents) making the tender or exchange offer.
Section 9. Transfer Taxes
The Trust shall pay or reimburse the Custodian for any transfer
taxes payable upon transfers of securities made hereunder,
including transfers resulting from the termination of this
Agreement. The Custodian shall execute such certificates in
connection with securities delivered to it under this Agreement as
may be required, under any applicable law or regulation, to exempt
from taxation any transfers and/or deliveries of any such
securities which may be entitled to such exemption.
Section 10. Custodian's Reports
The Custodian shall furnish the Trust as of the close of business
each day a statement showing all transactions and entries for the
account of the Trust. The books and records of the Custodian
pertaining to its actions as Custodian under this Agreement and
securities held hereunder by the Custodian shall be open to
inspection and audit by officers of the Trust, internal auditors
employed by the Trust's investment advisor, and independent
auditors employed by the Trust. The Custodian shall furnish the
Trust in such form as may reasonably be requested by the Trust a
report, including a list of the securities held by it in custody
for the account of the Trust, identification of any subcustodian,
and identification of such securities held by such subcustodian, as
of the close of business of the last business day of each month,
which shall be certified by a duly authorized officer of the
Custodian. It is further understood that additional reports may
from time to time be requested by the Trust. Should any report
ever be filed with any governmental authority pertaining to lost or
stolen securities, the Custodian will concurrently provide the
Trust with a copy of that report.
<PAGE>
PAGE 7
The Custodian also shall furnish such reports on its systems of
internal accounting control as the Trust may reasonably request
from time to time.
Section 11. Concerning Custodian
For its services hereunder the Custodian shall be paid such
compensation at such times as may from time to time be agreed on in
writing by the parties hereto in a Custodian Fee Agreement.
The Custodian shall not be liable for any action taken in good
faith upon any custodian order or facsimile herein described or
certified copy of any resolution of the Board or of the Executive
Committee of the Board, and may rely on the genuineness of any such
document which it may in good faith believe to have been validly
executed.
The Trust agrees to indemnify and hold harmless Custodian and its
nominee from all taxes, charges, expenses, assessments, claims and
liabilities (including counsel fees) incurred or assessed against
it or its nominee in connection with the performance of this
Agreement, except such as may arise from the Custodian's or its
nominee's own negligent action, negligent failure to act or willful
misconduct. Custodian is authorized to charge any account of the
Trust for such items. In the event of any advance of cash for any
purpose made by Custodian resulting from orders or instructions of
the Trust, or in the event that Custodian or its nominee shall
incur or be assessed any taxes, charges, expenses, assessments,
claims or liabilities in connection with the performance of this
Agreement, except such as may arise from its or its nominee's own
negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the Trust shall be
security therefor.
The Custodian shall maintain a standard of care equivalent to that
which would be required of a bailee for hire and shall not be
liable for any loss or damage to the Trust resulting from
participation in a securities depository unless such loss or damage
arises by reason of any negligence, misfeasance, or willful
misconduct of officers or employees of the Custodian, or from its
failure to enforce effectively such rights as it may have against
any securities depository or from use of an agent, unless such loss
or damage arises by reason of any negligence, misfeasance, or
willful misconduct of officers or employees of the Custodian, or
from its failure to enforce effectively such rights as it may have
against any agent.
Section 12. Termination and Amendment of Agreement
The Trust and the Custodian mutually may agree from time to time in
writing to amend, to add to, or to delete from any provision of
this Agreement.
<PAGE>
PAGE 8
The Custodian may terminate this Agreement by giving the Trust
ninety days' written notice of such termination by registered mail
addressed to the Trust at its principal place of business.
The Trust may terminate this Agreement at any time by written
notice thereof delivered, together with a copy of the resolution of
the Board authorizing such termination and certified by the
Secretary of the Trust, by registered mail to the Custodian.
Upon such termination of this Agreement, assets of the Trust held
by the Custodian shall be delivered by the Custodian to a successor
custodian, if one has been appointed by the Trust, upon receipt by
the Custodian of a copy of the resolution of the Board certified by
the Secretary, showing appointment of the successor custodian, and
provided that such successor custodian is a bank or trust company,
organized under the laws of the United States or of any State of
the United States, having not less than two million dollars
aggregate capital, surplus and undivided profits. Upon the
termination of this Agreement as a part of the transfer of assets,
either to a successor custodian or otherwise, the Custodian will
deliver securities held by it hereunder, when so authorized and
directed by resolution of the Board, to a duly appointed agent of
the successor custodian or to the appropriate transfer agents for
transfer of registration and delivery as directed. Delivery of
assets on termination of this Agreement shall be effected in a
reasonable, expeditious and orderly manner; and in order to
accomplish an orderly transition from the Custodian to the
successor custodian, the Custodian shall continue to act as such
under this Agreement as to assets in its possession or control.
Termination as to each security shall become effective upon
delivery to the successor custodian, its agent, or to a transfer
agent for a specific security for the account of the successor
custodian, and such delivery shall constitute effective delivery by
the Custodian to the successor under this Agreement.
In addition to the means of termination herein before authorized,
this Agreement may be terminated at any time by the vote of a
majority of the outstanding units of the Trust and after written
notice of such action to the Custodian.
Section 13. Limitations of Liability of the Trustees and
Unitholders of Trust
A copy of the Declaration of Trust, dated May 24, 1995, together
with all amendments, is on file in the office of the Secretary of
State of the Commonwealth of Massachusetts. The execution and
delivery of this Agreement have been authorized by the Trustees and
the Agreement has been signed by an authorized officer of the
Trust. It is expressly agreed that the obligations of the Trust
under this Agreement shall not be binding upon any of the Trustees,
unitholders, nominees, officers, agents or employees of the Trust,
personally, but bind only the assets and property of the Trust, as
provided in the Declaration of Trust.
Section 14. General
Nothing expressed or mentioned in or to be implied from any
provision of this Agreement is intended to, or shall be construed <PAGE>
PAGE 9
to give any person or corporation other than the parties hereto,
any legal or equitable right, remedy or claim under or in respect
of this Agreement, or any covenant, condition or provision herein
contained, this Agreement and all of the covenants, conditions and
provisions hereof being intended to be and being for the sole and
exclusive benefit of the parties hereto and their respective
successors and assigns.
This Agreement shall be governed by the laws of the State of
Minnesota.
This Agreement supersedes all prior agreements between the parties.
INCOME TRUST
Government Income Portfolio
By:
Vice President
AMERICAN EXPRESS TRUST COMPANY
By:
Vice President
<PAGE>
PAGE 10
CUSTODIAN AGREEMENT
THIS CUSTODIAN AGREEMENT dated _______, 19__, between Income Trust,
a Massachusetts business trust, (the "Trust"), on behalf of its
underlying Portfolio, Quality Income Portfolio and First National
Bank of Minneapolis, a corporation organized under the laws of the
United States of America with its principal place of business at
Minneapolis, Minnesota (hereinafter also called the "Custodian").
WHEREAS, the Trust desires that its securities and cash be
hereafter held and administered by Custodian pursuant to the terms
of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein
made, the Trust and the Custodian agree as follows:
Section l. Definitions
The word "securities" as used herein shall be construed to include,
without being limited to, shares, stocks, treasury stocks,
including any stocks of this Trust, notes, bonds, debentures,
evidences of indebtedness, options to buy or sell stocks or stock
indexes, certificates of interest or participation in any profit-
sharing agreements, collateral trust certificates, preorganization
certificates or subscriptions, transferable shares, investment
contracts, voting trust certificates, certificates of deposit for a
security, fractional or undivided interests in oil, gas or other
mineral rights, or any certificates of interest or participation
in, temporary or interim certificates for, receipts for, guarantees
of, or warrants or rights to subscribe to or purchase any of the
foregoing, acceptances and other obligations and any evidence of
any right or interest in or to any cash, property or assets and any
interest or instrument commonly known as a security. In addition,
for the purpose of this Agreement, the word "securities" also shall
include other instruments in which the Trust may invest including
currency forward contracts and commodities such as interest rate or
index futures contracts, margin deposits on such contracts or
options on such contracts.
The words "custodian order" shall mean a request or direction,
including a computer printout, directed to the Custodian and
signed in the name of the Trust by any two individuals designated
in the current certified list referred to in Section 2.
The word "facsimile" shall mean an exact copy or likeness which is
electronically transmitted for instant reproduction.
Section 2. Names, Titles and Signatures of Authorized Persons
The Trust will certify to the Custodian the names and signatures of
its present officers and other designated persons authorized on
behalf of the Trust to direct the Custodian by custodian order as
hereinbefore defined. The Trust agrees that whenever any change<PAGE>
PAGE 11
occurs in this list it will file with the Custodian a copy of a
resolution certified by the Secretary or an Assistant Secretary of
the Trust as having been duly adopted by the Board of Directors or
the Executive Committee of the Board of Directors of the Trust
designating those persons currently authorized on behalf of the
Trust to direct the Custodian by custodian order, as hereinbefore
defined, and upon such filing (to be accompanied by the filing of
specimen signatures of the designated persons) the persons so
designated in said resolution shall constitute the current
certified list. The Custodian is authorized to rely and act upon
the names and signatures of the individuals as they appear in the
most recent certified list from the Trust which has been delivered
to the Custodian as hereinabove provided.
Section 3. Use of Subcustodians
The Custodian may make arrangements, where appropriate, with other
banks having not less than two million dollars aggregate capital,
surplus and undivided profits for the custody of securities and
cash.
The Custodian also may enter into arrangements for the custody of
"Foreign Securities" and cash entrusted to its care through
"Eligible Foreign Custodian," as those terms are defined by Rule
17f-5 under the Investment Company Act of 1940 (the "Act"), or such
other entity as permitted by the Securities and Exchange Commission
(the "SEC") (such Eligible Foreign Custodians, collectively,
"Foreign Custodial Agents") provided, if required by the SEC, that
the Board has given its prior approval to the use of, and
Custodian's contract with, each Foreign Custodial Agent by
resolution, and a certified copy of such resolution has been
provided to the Custodian. To the extent the provisions of this
Agreement are consistent with the requirements of the Act, rules,
orders or no-action letters of the SEC, they shall apply to all
such foreign custodianships. To the extent such provisions are
inconsistent with or additional requirements are established by the
Act or such rules, orders or no-action letters, the requirements of
the Act or such rules, orders or no-action letters will prevail and
the parties will adhere to such requirements; provided, however, in
the absence of notification from the Trust of any changes or
additions to such requirements, the Custodian shall have no duty or
responsibility to inquire as to any such changes or additions.
All subcustodians of the Custodian (such subcustodians,
collectively, the "Subcustodians"), including all Foreign Custodial
Agents, shall be subject to the instructions of the Custodian and
not to those of the Trust and shall act solely as agent of the
Custodian.
Section 4. Receipt and Disbursement of Money
(1) The Custodian shall open and maintain a separate account or
accounts in the name of the Trust and cause any Subcustodians to
open and maintain such account or accounts, subject only to checks,
drafts or directives by the Custodian or such Subcustodian pursuant<PAGE>
PAGE 12
to the terms of this Agreement. The Custodian or such Subcustodian
shall hold in such account or accounts, subject to the provisions
hereof, all cash received by it from or for the account of the
Trust. The Custodian or such Subcustodian shall make payments of
cash to or for the account of the Trust from such cash only:
(a) for the purchase of securities for the portfolio
of the Trust upon the receipt of such securities
by the Custodian or such Subcustodian;
(b) for the purchase or redemption of shares of
capital stock of the Trust;
(c) for the payment of interest, dividends, taxes,
management fees, or operating expenses
(including, without limitation thereto, fees for
legal, accounting and auditing services);
(d) for payment of distribution fees, commissions, or
redemption fees, if any;
(e) for payments in connection with the conversion,
exchange or surrender of securities owned or
subscribed to by the Trust held by or to be
delivered to the Custodian;
(f) for payments in connection with the return of
securities loaned by the Trust upon receipt of
such securities or the reduction of collateral
upon receipt of proper notice;
(g) for payments for other proper corporate purposes;
or
(h) upon the termination of this Agreement.
Before making any such payment for the purposes permitted under the
terms of items (a), (b), (c), (d), (e), (f) or (g) of paragraph (1)
of this section, the Custodian shall receive and may rely upon a
custodian order directing such payment and stating that the payment
is for such a purpose permitted under these items (a), (b), (c),
(d), (e), (f) or (g) and that in respect to item (g), a copy of a
resolution of the Board of Directors or of the Executive Committee
of the Board of Directors of the Trust signed by an officer of the
Trust and certified by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting forth the purpose to
be a proper corporate purpose, and naming the person or persons to
whom such payment is made. Notwithstanding the above, for the
purposes permitted under items (a) or (f) of paragraph (1) of this
section, the Custodian may rely upon a facsimile order.
(2) The Custodian is hereby appointed the attorney-in-fact of the
Trust to endorse and collect all checks, drafts or other orders for
the payment of money received by the Custodian for the account of
the Trust and drawn on or to the order of the Trust and to deposit
same to the account of the Trust pursuant to this Agreement.
<PAGE>
PAGE 13
(3) Subject to the prior authorization provisions of Section 3 of
this Agreement, the Trust authorizes the Custodian to establish and
maintain in each country or other jurisdiction in which the
principal trading market for any Foreign Securities is located, or
in which any Foreign Securities are to be presented for payment, an
account or accounts which may include nostro accounts with
Custodian branches and omnibus accounts of Custodian at Foreign
Custodial Agents for receipt of cash in such currencies as directed
by custodian order. For purposes of this Agreement, cash so held
in any such account shall be evidenced by separate book entries
maintained by Custodian and shall be deemed to be cash held by
Custodian. Cash received or credited by Custodian or any Custodian
branch or any Foreign Custodial Agent in a currency other than
United States dollars shall be maintained in such currency and
shall not be converted or remitted except in accordance with the
custodian order, except as permitted by Section 7.
Section 5. Receipt of Securities
Except as permitted by the second paragraph of this section, the
Custodian shall, and shall cause any Subcustodians to, hold in a
separate account or accounts, and physically segregated at all
times from those of any other persons, firms or corporations,
pursuant to the provisions hereof, all securities and cash received
for the account of the Trust. The Custodian shall, and shall cause
any Subcustodians to, record and maintain a record of all
certificate numbers. Securities so received shall be held in the
name of the Trust, in the name of an exclusive nominee duly
appointed by the Custodian or such Subcustodian, or in bearer form,
as appropriate.
Subject to such rules, regulations or guidelines as the SEC may
adopt, the Custodian may deposit all or any part of the securities
owned by the Trust in a securities depository which includes any
system for the central handling of securities established by a
national securities exchange or a national securities association
registered with the SEC under the Securities Exchange Act of 1934,
or such other person as may be permitted by the SEC, pursuant to
which system all securities of any particular class or series of
any issuer deposited within the system are treated as fungible and
may be transferred or pledged by bookkeeping entry without physical
delivery of such securities.
All securities are to be held or disposed of by the Custodian for,
and subject at all times to the instructions of, the Trust pursuant
to the terms of this Agreement. The Custodian shall have no power
or authority to assign, hypothecate, pledge or otherwise dispose of
any such securities, except pursuant to the directive of the Trust
and only for the account of the Trust as set forth in Section 6 of
this Agreement.
<PAGE>
PAGE 14
Section 6. Transfer Exchange, Delivery, etc. of Securities
The Custodian shall have sole power to release or deliver any
securities of the Trust held by it pursuant to this Agreement. The
Custodian agrees to transfer, exchange or deliver securities held
by it or any Subcustodian only:
(a) for sales of such securities for the account of the Trust,
upon receipt of payment therefor;
(b) when such securities are called, redeemed, retired or
otherwise become payable;
(c) for examination upon the sale of any such securities in
accordance with "street delivery" custom which would include
delivery against interim receipts or other proper delivery
receipts;
(d) in exchange for or upon conversion into other securities alone
or other securities and cash whether pursuant to any plan of
merger, consolidation, reorganization, recapitalization or
readjustment, or otherwise;
(e) for the purpose of exchanging interim receipts or temporary
certificates for permanent certificates;
(f) upon conversion of such securities pursuant to their terms
into other securities;
(g) upon exercise of subscription, purchase or other similar
rights represented by such securities;
(h) for loans of such securities by the Trust upon receipt of
collateral; or
(i) for other proper corporate purposes.
As to any deliveries made by the Custodian pursuant to items (a),
(b), (c), (d), (e), (f), (g) and (h), securities or cash received
in exchange therefore shall be delivered to the Custodian, a
Subcustodian, or to a securities depository. Before making any
such transfer, exchange or delivery, the Custodian shall receive a
custodian order or a facsimile from the Trust requesting such
transfer, exchange or delivery and stating that it is for a purpose
permitted under this section (whenever a facsimile is utilized, the
Trust will also deliver an original signed custodian order) and, in
respect to item (i), a copy of a resolution of the Board of
Directors or of the Executive Committee of the Board of Directors
of the Trust signed by an officer of the Trust and certified by its
Secretary or an Assistant Secretary, specifying the securities,
setting forth the purpose for which such payment, transfer,
exchange or delivery is to be made, declaring such <PAGE>
PAGE 15
purpose to be a proper corporate purpose, and naming the person or
persons to whom such transfer, exchange or delivery of such
securities shall be made.
Section 7. Custodian's Acts Without Instructions
Unless and until the Custodian receives a contrary custodian order
from the Trust, the Custodian shall or shall cause a Subcustodian
to:
(a) present for payment all coupons and other income items held by
the Custodian or such Subcustodian for the account of the
Trust which call for payment upon presentation and hold all
cash received by it upon such payment for the account of the
Trust;
(b) present for payment all securities held by it or such
Subcustodian which mature or when called, redeemed, retired or
otherwise become payable;
(c) ascertain all stock dividends, rights and similar securities
to be issued with respect to any securities other than Foreign
Securities;
(d) collect and hold for the account of the Trust all stock
dividends, rights and similar securities issued with respect
to any securities;
(e) ascertain all interest and cash dividends to be paid to
security holders with respect to any securities other than
Foreign Securities;
(f) collect and hold all interest and cash dividends for the
account of the Trust;
(g) present for exchange securities converted pursuant to their
terms into other securities;
(h) exchange interim receipts or temporary securities for
definitive securities;
(i) execute in the name of the Trust such ownership and other
certificates as may be required to obtain payments in respect
thereto, provided that the Trust shall have furnished to the
Custodian or such Subcustodian any information necessary in
connection with such certificates; and
(j) convert interest and dividends received with respect to
Foreign Securities into United States dollars whenever it is
practicable to do so through customary banking channels,
including the Custodian's own banking facilities.
<PAGE>
PAGE 16
Section 8. Settlement Procedures
Settlement procedures for transactions in Foreign Securities,
including receipts and payments of cash held in any nostro account
or omnibus account, shall be carried out in accordance with
instructions in the operational manual provided by the Custodian
(the "Operational Manual"). It is understood that such settlement
procedures may vary, as provided in the Operational Manual, from
securities market to securities market, to reflect particular
settlement practices in such markets.
With respect to any transaction involving Foreign Securities, the
Custodian or any Subcustodian in its discretion may cause the Trust
to be credited on the contractual settlement date with proceeds of
any sale or exchange of Foreign Securities and to be debited on the
contractual settlement date for the cost of Foreign Securities
purchased or acquired. The Custodian may reverse any such credit
or debit if the transaction with respect to which such credit or
debit was made fails to settle within a reasonable period,
determined by the Custodian in its discretion, after the
contractual settlement date except that if any Foreign Securities
delivered pursuant to this section are returned by the recipient
thereof, the Custodian may cause any such credits and debits to be
reversed at any time. With respect to any transactions as to which
the Custodian does not determine so to credit or debit the Trust,
the proceeds from the sale or exchange of Foreign Securities will
be credited and the cost of such Foreign Securities purchased or
acquired will be debited on the date such proceeds or Foreign
Securities are received by the Custodian.
Notwithstanding the preceding paragraph, settlement, payment and
delivery for Foreign Securities may be effected in accordance with
the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market
in which the transaction occurs, including, without limitation,
delivering Foreign Securities to the purchaser thereof or to a
dealer therefor against a receipt with the exception of receiving
later payment for such Foreign Securities from such purchaser or
dealer.
Section 9. Records
The Custodian hereby agrees that it shall create, maintain, and
retain all records relating to its activities and obligations under
this Agreement in such manner as will meet their obligations under
this Agreement and the obligations of the Trust under the Act,
particularly Section 31 thereof and Rules 31a-1 and 31a-2
thereunder and Section 17(f) thereof and the rules thereunder, and
applicable federal, state and foreign tax laws and other laws or
administrative rules or procedures, in each case as currently in
effect, which may be applicable to the Trust. All records so
maintained in connection with the performance of its duties under
this Agreement shall remain the property of the Trust and, in <PAGE>
PAGE 17
the event of termination of this Agreement, shall be delivered in
accordance with the provisions of this Agreement.
(a) With respect to securities and cash held by the Custodian's
branches, such securities and cash may be placed in an omnibus
account for the customers of the Custodian, and the Custodian
shall maintain separate book entry records for each such
omnibus account.
(b) With respect to securities and cash deposited by the Custodian
with a Foreign Custodial Agent, the Custodian shall indemnify
on its books as belonging to the Trust the securities and cash
shown on the Custodian's account on the books of such Foreign
Custodial Agent.
(c) With respect to securities and cash deposited with a
securities depository or clearing agency, incorporated or
organized under the laws of a country other than the United
States, which operates the central system for handling of
securities or equivalent book-entries in that country or which
operates a transnational system for the central handling or
securities or equivalent book-entries (on "Eligible Foreign
Securities Depository"), the Custodian shall cause the
securities and cash shown on the account on the books of the
Eligible Foreign Securities Depository to be identified as
belonging to the Custodian as agent for the Trust.
The Custodian hereby agrees that the books and records of the
Custodian (including any Custodian branch) pertaining to its
actions under this Agreement shall be open to the physical, on-
premises inspection and audit by the independent accountant (the
"Accountant") employed by, or other representatives of, the Trust,
and, upon the request of the Accountant, confirmation of the
contents of those records shall be provided by the Custodian. The
Custodian shall use its best efforts to cause any Foreign Custodial
Agent to afford access to the Accountant to the books and records
of such Foreign Custodial Agent with respect to securities and cash
held by such Foreign Custodial Agent for the Trust. the Custodian
also agrees to furnish the Accountant with such reports of the
Custodian's (including any Custodian branches') auditors as they
relate to the services provided under this Agreement and as are
necessary for the Accountant to conduct its examination of the
books and records pertaining to affairs of the Trust, and the
Custodian shall use its best efforts to obtain and furnish similar
reports of any Foreign Custodial Agent holding securities and cash
for the Trust.
Section 10. Registration of Securities
Securities which are ordinarily held in registered form may be
registered in the name of the Custodian's nominee or, as to any
securities in the physical possession of an entity other than the
Custodian, in the name of such entity's nominee. The Trust <PAGE>
PAGE 18
agrees to hold any such nominee harmless from any liability as a
holder of record of such securities. The Custodian may without
notice to the Trust cause any such securities to cease to be
registered in the name of any such nominee and to be registered in
the name of the Trust. In the event that any security registered
in the name of the Custodian's nominee or held by any Subcustodians
and registered in the name of such Subcustodian's nominee is called
for partial redemption by the issuer of such security, the
Custodian may allot, or cause to be allotted, the called portion to
the respective beneficial holders of such class of security in any
manner the Custodian deems to be fair and equitable.
Section 11. Transfer Taxes
The Trust shall pay or reimburse the Custodian and any Subcustodian
for any transfer taxes payable upon transfers of securities made
hereunder, including transfers resulting from the termination of
this Agreement. The Custodian shall, and shall use its best
efforts to cause any Subcustodian to, execute such certificates in
connection with securities delivered to it under this Agreement as
may be required, under any applicable law or regulation, to exempt
from taxation any transfers and/or deliveries of any such
securities which may be entitled to such exemption.
Section 12. Voting and Other Action
Neither the Custodian or any Subcustodian nor any nominee of the
Custodian or such Subcustodian shall vote any of the securities
held hereunder by or for the account of the Trust. The Custodian
shall, and shall use its best efforts to cause any Subcustodian to,
promptly deliver to the Trust all notices, proxies and proxy
soliciting materials with relation to such securities, such proxies
to be executed by the registered holder of such securities (if
registered otherwise than in the name of the Trust), but without
indicating the manner in which such proxies are to be voted.
The Custodian shall, and shall use its best efforts to cause any
Subcustodian to, transmit promptly to the Trust all written
information (including, without limitation, pendency of calls and
maturities of securities and expirations of rights in connection
therewith) received by the Custodian or such Subcustodian from
issuers of the securities being held for the Trust. With respect
to tender or exchange offers, the Custodian shall, and shall use
its best efforts to cause any Subcustodian to, transmit promptly to
the Trust all written information received by the Custodian or such
Subcustodian from issuers of the securities whose tender or
exchange is sought and from the party (or his agents) making the
tender or exchange offer.
<PAGE>
PAGE 19
Section 13. Custodian's Reports
The Custodian shall furnish the Trust as of the close of business
each day a statement showing all transactions and entries for the
account of the Trust. The books and records of the Custodian
pertaining to its actions as Custodian under this Agreement and
securities held hereunder by the Custodian shall be open to
inspection and audit by officers of the Trust, internal auditors
employed by the Trust's investment adviser, and independent
auditors employed by the Trust. The Custodian shall furnish the
Trust in such form as may reasonably be requested by the Trust a
report, including a list of the securities held by it in custody
for the account of the Trust, identification of any subcustodian,
and identification of such securities held by such subcustodian, as
of the close of business of the last business day of each month,
which shall be certified by a duly authorized officer of the
Custodian. It is further understood that additional reports may
from time to time be requested by the Trust. Should any report
ever be filed with any governmental authority pertaining to lost or
stolen securities, the Custodian will concurrently provide the
Trust with a copy of that report.
The Custodian also shall furnish such reports on its systems of
internal accounting control as the Trust may reasonably request
from time to time.
Section 14. Security Interest, Liens and Transfers of Beneficial
Ownership
The securities and cash held by the Custodian hereunder shall not
be subject to any right, change, security interest, lien or claim
of any kind in favor of the Custodian or its creditors, except a
claim of payment for their safe custody or administration, and
beneficial ownership of such securities and cash shall be freely
transferable without the payment of money or value other than for
safe custody or administration. Any agreement the Custodian shall
enter into with any Subcustodian, including any Foreign Custodial
Agent, shall contain a provision which is substantially identical
to the foregoing.
In the event that there shall be asserted any attachment or lien on
or against any securities or cash held in any omnibus account or
nostro account referred to in this Agreement which results from any
claim against the Custodian (including any branch) or any such
account, which is not directly related to transactions in
securities or cash for the Trust, the Custodian will use its best
efforts promptly to discharge such attachment or lien. If the
Custodian shall not have discharged such attachment or lien within
five business days, it shall notify the Trust of the existence of
the attachment or lien. If the attachment or lien is not
discharged on the date required for delivery or payment with
respect to any securities or cash in accordance with the provisions
of the Operation Manual:<PAGE>
PAGE 20
(a) in the case of such securities, at the option of the Trust,
the Custodian shall either immediately transfer to the Trust a
like amount of such securities (provided the same shall be
reasonably available) or immediately transfer an amount in
United States dollars equal to the market value of such
securities, valued in accordance with such procedures as may
be mutually agreed to by the parties thereto;
(b) in the case of cash, the Custodian shall immediately transfer
to the Trust an equal amount of cash in United States dollars.
Section 15. Compensation
For its services hereunder the Custodian shall be paid such
compensation and out-of-pocket or incidental expenses at such times
as may from time to time be agreed on in writing by the parties
hereto in a Custodian Fee Agreement.
Section 16. Standard of Care
The Custodian shall not be liable for any action taken in good
faith upon any custodian order or facsimile herein described or
certified copy of any resolution of the Board of Directors or of
the Executive Committee of the Board of Directors of the Trust, and
may rely on the genuineness of any such document which it may in
good faith believe to have been validly executed.
The Trust agrees to indemnify and hold harmless the Custodian, any
Subcustodian, or any nominee thereof from all taxes, charges,
expenses, assessments, claims and liabilities (including counsel
fees) incurred or assessed against any such entity in connection
with the performance of this Agreement, except such as may arise
from such entity's own negligent action, negligent failure to act
or willful misconduct. The Custodian is authorized to charge any
account of the Trust for such items. In the event of any advance
of cash for any purpose made by the Custodian resulting from orders
or instructions of the Trust, or in the event that the Custodian or
any nominee thereof shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with the
performance of this Agreement, except such as may arise from such
entity's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the
Trust shall be security therefor.
The Custodian shall maintain a standard of care equivalent to that
which would be required of a bailee for hire and shall not be
liable for any loss or damage to the Trust resulting from
participation in a securities depository unless such loss or damage
arises by reason of any negligence, misfeasance, or willful
misconduct of officers or employees of the Custodian, or from its <PAGE>
PAGE 21
failure to enforce effectively such rights as it may have against
any securities depository or from use of a Subcustodian, unless
such loss or damage arises by reason of any negligence, mis-
feasance, or willful misconduct of officers or employees of the
Custodian, or from its failure to enforce effectively such rights
as it may have against such Subcustodian. Anything in the
foregoing to the contrary notwithstanding, the Custodian shall
exercise, in the performance of its obligations undertaken or
reasonably assumed with respect to this Agreement, including the
recommendation to the Board of Foreign Custodial Agents, reasonable
care, for which the Custodian shall be responsible to the same
extent as if it were performing such duties directly and holding
such securities and cash in Minnesota, United States of America.
The Custodian shall be indemnified and held harmless by the Trust
from and against any loss or liability for any action taken or
omitted to be taken hereunder in good faith upon custodian order
and may rely on the genuineness of all such orders and documents as
it in good faith believes to have been validly executed. The
Custodian shall be responsible for the securities and cash held by
or deposited with any Subcustodian to the same extent as if such
securities and cash were directly held by or deposited with the
Custodian. The Custodian hereby agrees that it shall indemnify and
hold the Trust harmless from and against any loss which shall occur
as a result of the failure of a foreign Custodial Agent holding the
securities and cash to exercise reasonable care with respect to the
safekeeping of such securities and cash to the extent that the
Custodian would be required to indemnify and hold the Trust
harmless if the Custodian were itself holding such securities and
cash in Minnesota. It is also understood that the Custodian shall
not have liability for loss except by reason of the Custodian's
negligence, fraud or willful misconduct, or by reason of
negligence, fraud or willful misconduct of any Subcustodian holding
such securities or cash for the Trust.
The Custodian warrants that the established procedures to be
followed by any Subcustodian, in the opinion of the Custodian after
due inquiry, afford protection for such securities and cash at
least equal to that afforded by the Custodian's established
procedures with respect to similar securities and cash held by the
Custodian (including its securities depositories) in Minnesota.
However, the Custodian shall have no liability for any loss or
liability occasioned by delay in the actual receipt by it or any
Subcustodian of notice of any payment, redemption, or other
transaction regarding securities unless such delay is a result of
its own negligence, fraud, or willful misconduct.
The Custodian shall not be responsible for any loss of the Trust,
or to take any action with respect to any attachment or lien on any
omnibus account or nostro account, except as provided in Section 14
of this Agreement, in such loss, attachment or lien arises by
reason of any cause or circumstances beyond the control of the
Custodian, including acts of civil or military <PAGE>
PAGE 22
authority, expropriation, national emergency, acts of God,
insurrection, war, riots, or failure of transportation,
communication or power supply, or the failure of any person, firm
or corporation (other than the Custodian or any Subcustodian acting
on behalf of the Custodian) to perform any obligation if such
failure results in any such loss.
Section 17. Insurance
The Custodian represents and warrants that it presently maintains
and shall maintain for the duration of this Agreement a bankers'
blanket bond (the "Bond") which provides standard fidelity and non-
negligent loss coverage with respect to securities and cash which
may be held by the Custodian and securities and cash which may be
held by any Subcustodian which may be utilized by the Custodian
pursuant to this Agreement. The Custodian agrees that, if at any
time the Custodian for any reason discontinues such coverage, it
shall immediately notify the Trust in writing. The Custodian
represents that only the named insured on the Bond, which includes
the Custodian but not any of its customers, is directly protected
against loss. The Custodian represents that while it might resist
a claim of one of its customers to recover for a loss not covered
by the Bond, as a practical matter, where a claim is brought and a
loss is possibly covered by the Bond, the Custodian would give
notice of the claim to its insurer, and the insurer would normally
determine whether to defend the claim against the Custodian or to
pay the claim on behalf of the Custodian.
The Custodian also represents that it does not intend to obtain any
insurance for the benefit of the Trust which protects against the
imposition of the proceeds of sale of any securities or against
confiscation, expropriation or nationalization of any securities or
the assets of the issuer of such securities by a government or any
foreign country in which the issuer of such securities is organized
or in which securities are held for safekeeping either by the
Custodian or any Subcustodian in such country. The Custodian
represents that it has discussed the availability of expropriation
insurance with the Trust. The Custodian also represents that it
has advised the Trust as to its understanding of the position of
the Staff of the SEC that any investment company investing in
securities of foreign issuers has the responsibility for reviewing
the possibility of the imposition of exchange control restrictions
which would affect the liquidity of such investment company's
assets and the possibility of exposure to political risk, including
the appropriateness of insuring against such risk. The Custodian
represents that the Trust has acknowledged that it has the
responsibility to review the possibility of such risks and what, if
any, action should be taken.
Section 18. Termination and Amendment of Agreement
The Trust and the Custodian mutually may agree from time to time in
writing to amend, to add to, or to delete from any provision of
this Agreement.
<PAGE>
PAGE 23
The Custodian may terminate this Agreement by giving the Trust
ninety days' written notice of such termination by registered mail
addressed to the Trust at its principal place of business.
The Trust may terminate this Agreement at any time by written
notice thereof delivered, together with a copy of the resolution of
the Board of Directors authorizing such termination and certified
by the Secretary of the Trust, by registered mail to the Custodian.
Upon such termination of this Agreement, assets of the Trust held
by the Custodian shall be delivered by the Custodian to a successor
custodian, if one has been appointed by the Trust, upon receipt by
the Custodian of a copy of the resolution of the Board of Directors
of the Trust certified by the Secretary, showing appointment of the
successor custodian, and provided that such successor custodian is
a bank or trust company, organized under the laws of the United
States or of any State of the United States, having not less than
two million dollars aggregate capital, surplus and undivided
profits. Upon the termination of this Agreement as a part of the
transfer of assets, either to a successor custodian or otherwise,
the Custodian will deliver securities held by it hereunder, when so
authorized and directed by resolution of the Board of Directors of
the Trust, to a duly appointed agent of the successor custodian or
to the appropriate transfer agents for transfer of registration and
delivery as directed. Delivery of assets on termination of this
Agreement shall be effected in a reasonable, expeditious and
orderly manner; and in order to accomplish an orderly transition
from the Custodian to the successor custodian, the Custodian shall
continue to act as such under this Agreement as to assets in its
possession or control. Termination as to each security shall
become effective upon delivery to the successor custodian, its
agent, or to a transfer agent for a specific security for the
account of the successor custodian, and such delivery shall
constitute effective delivery by the Custodian to the successor
under this Agreement.
In addition to the means of termination hereinbefore authorized,
this Agreement may be terminated at any time by the vote of a
majority of the outstanding shares of the Trust and after written
notice of such action to the Custodian.
Section 19. Limitations of Liability of the trustees and
Unitholders of Trust
A copy of the Declaration of Trust, dated May 24, 1995, together
with all amendments, is on file in the office of the Secretary of
State of the Commonwealth of Massachusetts. The execution and
delivery of this Agreement have been authorized by the Trustees and
the Agreement has been signed by an authorized officer of the
Trust. It is expressly agreed that the obligations of the Trust
under this Agreement shall not be binding upon any of the Trustees,
unitholders, nominees, officers, agents or employees of the Trust,
personally, but bind only the assets and property of the Trust, as
provided in the Declaration of Trust.
<PAGE>
PAGE 24
Section 20. General
Nothing expressed or mentioned in or to be implied from any
provision of this Agreement is intended to, or shall be construed
to give any person or corporation other than the parties hereto,
any legal or equitable right, remedy or claim under or in respect
of this Agreement, or any covenant, condition or provision herein
contained, this Agreement and all of the covenants, conditions and
provisions hereof being intended to be and being for the sole and
exclusive benefit of the parties hereto and their respective
successors and assigns.
This Agreement shall be governed by the laws of the State of
Minnesota.
Attest: INCOME TRUST
Quality Income Portfolio
______________________________ By _______________________________
Leslie L. Ogg
Secretary Vice President
FIRST NATIONAL BANK OF MINNEAPOLIS
By ________________________________
By ________________________________
<PAGE>
PAGE 25
CUSTODIAN AGREEMENT
THIS CUSTODIAN AGREEMENT dated _______, 19__, between Income Trust,
a Massachusetts business trust, (the "Trust"), on behalf of its
underlying Portfolio, High Yield Portfolio and First National Bank
of Minneapolis, a corporation organized under the laws of the
United States of America with its principal place of business at
Minneapolis, Minnesota (hereinafter also called the "Custodian").
WHEREAS, the Trust desires that its securities and cash be
hereafter held and administered by Custodian pursuant to the terms
of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein
made, the Trust and the Custodian agree as follows:
Section l. Definitions
The word "securities" as used herein shall be construed to include,
without being limited to, shares, stocks, treasury stocks,
including any stocks of this Trust, notes, bonds, debentures,
evidences of indebtedness, options to buy or sell stocks or stock
indexes, certificates of interest or participation in any profit-
sharing agreements, collateral trust certificates, preorganization
certificates or subscriptions, transferable shares, investment
contracts, voting trust certificates, certificates of deposit for a
security, fractional or undivided interests in oil, gas or other
mineral rights, or any certificates of interest or participation
in, temporary or interim certificates for, receipts for, guarantees
of, or warrants or rights to subscribe to or purchase any of the
foregoing, acceptances and other obligations and any evidence of
any right or interest in or to any cash, property or assets and any
interest or instrument commonly known as a security. In addition,
for the purpose of this Agreement, the word "securities" also shall
include other instruments in which the Trust may invest including
currency forward contracts and commodities such as interest rate or
index futures contracts, margin deposits on such contracts or
options on such contracts.
The words "custodian order" shall mean a request or direction,
including a computer printout, directed to the Custodian and
signed in the name of the Trust by any two individuals designated
in the current certified list referred to in Section 2.
The word "facsimile" shall mean an exact copy or likeness which is
electronically transmitted for instant reproduction.
Section 2. Names, Titles and Signatures of Authorized Persons
The Trust will certify to the Custodian the names and signatures of
its present officers and other designated persons authorized on
behalf of the Trust to direct the Custodian by custodian order as
hereinbefore defined. The Trust agrees that whenever any change
occurs in this list it will file with the Custodian a copy of a<PAGE>
PAGE 26
resolution certified by the Secretary or an Assistant Secretary of
the Trust as having been duly adopted by the Board of Directors or
the Executive Committee of the Board of Directors of the Trust
designating those persons currently authorized on behalf of the
Trust to direct the Custodian by custodian order, as hereinbefore
defined, and upon such filing (to be accompanied by the filing of
specimen signatures of the designated persons) the persons so
designated in said resolution shall constitute the current
certified list. The Custodian is authorized to rely and act upon
the names and signatures of the individuals as they appear in the
most recent certified list from the Trust which has been delivered
to the Custodian as hereinabove provided.
Section 3. Use of Subcustodians
The Custodian may make arrangements, where appropriate, with other
banks having not less than two million dollars aggregate capital,
surplus and undivided profits for the custody of securities and
cash.
The Custodian also may enter into arrangements for the custody of
"Foreign Securities" and cash entrusted to its care through
"Eligible Foreign Custodian," as those terms are defined by Rule
17f-5 under the Investment Company Act of 1940 (the "Act"), or such
other entity as permitted by the Securities and Exchange Commission
(the "SEC") (such Eligible Foreign Custodians, collectively,
"Foreign Custodial Agents") provided, if required by the SEC, that
the Board has given its prior approval to the use of, and
Custodian's contract with, each Foreign Custodial Agent by
resolution, and a certified copy of such resolution has been
provided to the Custodian. To the extent the provisions of this
Agreement are consistent with the requirements of the Act, rules,
orders or no-action letters of the SEC, they shall apply to all
such foreign custodianships. To the extent such provisions are
inconsistent with or additional requirements are established by the
Act or such rules, orders or no-action letters, the requirements of
the Act or such rules, orders or no-action letters will prevail and
the parties will adhere to such requirements; provided, however, in
the absence of notification from the Trust of any changes or
additions to such requirements, the Custodian shall have no duty or
responsibility to inquire as to any such changes or additions.
All subcustodians of the Custodian (such subcustodians,
collectively, the "Subcustodians"), including all Foreign Custodial
Agents, shall be subject to the instructions of the Custodian and
not to those of the Trust and shall act solely as agent of the
Custodian.
Section 4. Receipt and Disbursement of Money
(1) The Custodian shall open and maintain a separate account or
accounts in the name of the Trust and cause any Subcustodians to
open and maintain such account or accounts, subject only to checks,
drafts or directives by the Custodian or such Subcustodian pursuant
to the terms of this Agreement. The Custodian or such Subcustodian
shall hold in such account or accounts, subject to the provisions
hereof, all cash received by it from or for the account <PAGE>
PAGE 27
of the Trust. The Custodian or such Subcustodian shall make
payments of cash to or for the account of the Trust from such cash
only:
(a) for the purchase of securities for
the portfolio of the Trust upon the
receipt of such securities by the
Custodian or such Subcustodian;
(b) for the purchase or redemption of
shares of capital stock of the
Trust;
(c) for the payment of interest,
dividends, taxes, management fees,
or operating expenses (including,
without limitation thereto, fees for
legal, accounting and auditing
services);
(d) for payment of distribution fees,
commissions, or redemption fees, if
any;
(e) for payments in connection with the
conversion, exchange or surrender of
securities owned or subscribed to by
the Trust held by or to be delivered
to the Custodian;
(f) for payments in connection with the
return of securities loaned by the
Trust upon receipt of such
securities or the reduction of
collateral upon receipt of proper
notice;
(g) for payments for other proper
corporate purposes; or
(h) upon the termination of this
Agreement.
Before making any such payment for the purposes permitted under the
terms of items (a), (b), (c), (d), (e), (f) or (g) of paragraph (1)
of this section, the Custodian shall receive and may rely upon a
custodian order directing such payment and stating that the payment
is for such a purpose permitted under these items (a), (b), (c),
(d), (e), (f) or (g) and that in respect to item (g), a copy of a
resolution of the Board of Directors or of the Executive Committee
of the Board of Directors of the Trust signed by an officer of the
Trust and certified by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting forth the purpose to
be a proper corporate purpose, and naming the person or persons to
whom such payment is made. Notwithstanding the above, for the
purposes permitted under items (a) or (f) of paragraph (1) of this
section, the Custodian may rely upon a facsimile order.
<PAGE>
PAGE 28
(2) The Custodian is hereby appointed the attorney-in-fact of the
Trust to endorse and collect all checks, drafts or other orders for
the payment of money received by the Custodian for the account of
the Trust and drawn on or to the order of the Trust and to deposit
same to the account of the Trust pursuant to this Agreement.
(3) Subject to the prior authorization provisions of Section 3 of
this Agreement, the Trust authorizes the Custodian to establish and
maintain in each country or other jurisdiction in which the
principal trading market for any Foreign Securities is located, or
in which any Foreign Securities are to be presented for payment, an
account or accounts which may include nostro accounts with
Custodian branches and omnibus accounts of Custodian at Foreign
Custodial Agents for receipt of cash in such currencies as directed
by custodian order. For purposes of this Agreement, cash so held
in any such account shall be evidenced by separate book entries
maintained by Custodian and shall be deemed to be cash held by
Custodian. Cash received or credited by Custodian or any Custodian
branch or any Foreign Custodial Agent in a currency other than
United States dollars shall be maintained in such currency and
shall not be converted or remitted except in accordance with the
custodian order, except as permitted by Section 7.
Section 5. Receipt of Securities
Except as permitted by the second paragraph of this section, the
Custodian shall, and shall cause any Subcustodians to, hold in a
separate account or accounts, and physically segregated at all
times from those of any other persons, firms or corporations,
pursuant to the provisions hereof, all securities and cash received
for the account of the Trust. The Custodian shall, and shall cause
any Subcustodians to, record and maintain a record of all
certificate numbers. Securities so received shall be held in the
name of the Trust, in the name of an exclusive nominee duly
appointed by the Custodian or such Subcustodian, or in bearer form,
as appropriate.
Subject to such rules, regulations or guidelines as the SEC may
adopt, the Custodian may deposit all or any part of the securities
owned by the Trust in a securities depository which includes any
system for the central handling of securities established by a
national securities exchange or a national securities association
registered with the SEC under the Securities Exchange Act of 1934,
or such other person as may be permitted by the SEC, pursuant to
which system all securities of any particular class or series of
any issuer deposited within the system are treated as fungible and
may be transferred or pledged by bookkeeping entry without physical
delivery of such securities.
All securities are to be held or disposed of by the Custodian for,
and subject at all times to the instructions of, the Trust pursuant
to the terms of this Agreement. The Custodian shall have no power
or authority to assign, hypothecate, pledge or otherwise dispose of
any such securities, except pursuant to the directive of the Trust
and only for the account of the Trust as set forth in Section 6 of
this Agreement.
<PAGE>
PAGE 29
Section 6. Transfer Exchange, Delivery, etc. of Securities
The Custodian shall have sole power to release or deliver any
securities of the Trust held by it pursuant to this Agreement. The
Custodian agrees to transfer, exchange or deliver securities held
by it or any Subcustodian only:
(a) for sales of such securities for the account of the Trust,
upon receipt of payment therefor;
(b) when such securities are called, redeemed, retired or
otherwise become payable;
(c) for examination upon the sale of any such securities in
accordance with "street delivery" custom which would include
delivery against interim receipts or other proper delivery
receipts;
(d) in exchange for or upon conversion into other securities alone
or other securities and cash whether pursuant to any plan of
merger, consolidation, reorganization, recapitalization or
readjustment, or otherwise;
(e) for the purpose of exchanging interim receipts or temporary
certificates for permanent certificates;
(f) upon conversion of such securities pursuant to their terms
into other securities;
(g) upon exercise of subscription, purchase or other similar
rights represented by such securities;
(h) for loans of such securities by the Trust upon receipt of
collateral; or
(i) for other proper corporate purposes.
As to any deliveries made by the Custodian pursuant to items (a),
(b), (c), (d), (e), (f), (g) and (h), securities or cash received
in exchange therefore shall be delivered to the Custodian, a
Subcustodian, or to a securities depository. Before making any
such transfer, exchange or delivery, the Custodian shall receive a
custodian order or a facsimile from the Trust requesting such
transfer, exchange or delivery and stating that it is for a purpose
permitted under this section (whenever a facsimile is utilized, the
Trust will also deliver an original signed custodian order) and, in
respect to item (i), a copy of a resolution of the Board of
Directors or of the Executive Committee of the Board of Directors
of the Trust signed by an officer of the Trust and certified by its
Secretary or an Assistant Secretary, specifying the securities,
setting forth the purpose for which such payment, transfer,
exchange or delivery is to be made, declaring such <PAGE>
PAGE 30
purpose to be a proper corporate purpose, and naming the person or
persons to whom such transfer, exchange or delivery of such
securities shall be made.
Section 7. Custodian's Acts Without Instructions
Unless and until the Custodian receives a contrary custodian order
from the Trust, the Custodian shall or shall cause a Subcustodian
to:
(a) present for payment all coupons and other income items held by
the Custodian or such Subcustodian for the account of the
Trust which call for payment upon presentation and hold all
cash received by it upon such payment for the account of the
Trust;
(b) present for payment all securities held by it or such
Subcustodian which mature or when called, redeemed, retired or
otherwise become payable;
(c) ascertain all stock dividends, rights and similar securities
to be issued with respect to any securities other than Foreign
Securities;
(d) collect and hold for the account of the Trust all stock
dividends, rights and similar securities issued with respect
to any securities;
(e) ascertain all interest and cash dividends to be paid to
security holders with respect to any securities other than
Foreign Securities;
(f) collect and hold all interest and cash dividends for the
account of the Trust;
(g) present for exchange securities converted pursuant to their
terms into other securities;
(h) exchange interim receipts or temporary securities for
definitive securities;
(i) execute in the name of the Trust such ownership and other
certificates as may be required to obtain payments in respect
thereto, provided that the Trust shall have furnished to the
Custodian or such Subcustodian any information necessary in
connection with such certificates; and
(j) convert interest and dividends received with respect to
Foreign Securities into United States dollars whenever it is
practicable to do so through customary banking channels,
including the Custodian's own banking facilities.
<PAGE>
PAGE 31
Section 8. Settlement Procedures
Settlement procedures for transactions in Foreign Securities,
including receipts and payments of cash held in any nostro account
or omnibus account, shall be carried out in accordance with
instructions in the operational manual provided by the Custodian
(the "Operational Manual"). It is understood that such settlement
procedures may vary, as provided in the Operational Manual, from
securities market to securities market, to reflect particular
settlement practices in such markets.
With respect to any transaction involving Foreign Securities, the
Custodian or any Subcustodian in its discretion may cause the Trust
to be credited on the contractual settlement date with proceeds of
any sale or exchange of Foreign Securities and to be debited on the
contractual settlement date for the cost of Foreign Securities
purchased or acquired. The Custodian may reverse any such credit
or debit if the transaction with respect to which such credit or
debit was made fails to settle within a reasonable period,
determined by the Custodian in its discretion, after the
contractual settlement date except that if any Foreign Securities
delivered pursuant to this section are returned by the recipient
thereof, the Custodian may cause any such credits and debits to be
reversed at any time. With respect to any transactions as to which
the Custodian does not determine so to credit or debit the Trust,
the proceeds from the sale or exchange of Foreign Securities will
be credited and the cost of such Foreign Securities purchased or
acquired will be debited on the date such proceeds or Foreign
Securities are received by the Custodian.
Notwithstanding the preceding paragraph, settlement, payment and
delivery for Foreign Securities may be effected in accordance with
the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market
in which the transaction occurs, including, without limitation,
delivering Foreign Securities to the purchaser thereof or to a
dealer therefor against a receipt with the exception of receiving
later payment for such Foreign Securities from such purchaser or
dealer.
Section 9. Records
The Custodian hereby agrees that it shall create, maintain, and
retain all records relating to its activities and obligations under
this Agreement in such manner as will meet their obligations under
this Agreement and the obligations of the Trust under the Act,
particularly Section 31 thereof and Rules 31a-1 and 31a-2
thereunder and Section 17(f) thereof and the rules thereunder, and
applicable federal, state and foreign tax laws and other laws or
administrative rules or procedures, in each case as currently in
effect, which may be applicable to the Trust. All records so
maintained in connection with the performance of its duties under
this Agreement shall remain the property of the Trust and, in <PAGE>
PAGE 32
the event of termination of this Agreement, shall be delivered in
accordance with the provisions of this Agreement.
(a) With respect to securities and cash held by the Custodian's
branches, such securities and cash may be placed in an omnibus
account for the customers of the Custodian, and the Custodian
shall maintain separate book entry records for each such
omnibus account.
(b) With respect to securities and cash deposited by the Custodian
with a Foreign Custodial Agent, the Custodian shall indemnify
on its books as belonging to the Trust the securities and cash
shown on the Custodian's account on the books of such Foreign
Custodial Agent.
(c) With respect to securities and cash deposited with a
securities depository or clearing agency, incorporated or
organized under the laws of a country other than the United
States, which operates the central system for handling of
securities or equivalent book-entries in that country or which
operates a transnational system for the central handling or
securities or equivalent book-entries (on "Eligible Foreign
Securities Depository"), the Custodian shall cause the
securities and cash shown on the account on the books of the
Eligible Foreign Securities Depository to be identified as
belonging to the Custodian as agent for the Trust.
The Custodian hereby agrees that the books and records of the
Custodian (including any Custodian branch) pertaining to its
actions under this Agreement shall be open to the physical, on-
premises inspection and audit by the independent accountant (the
"Accountant") employed by, or other representatives of, the Trust,
and, upon the request of the Accountant, confirmation of the
contents of those records shall be provided by the Custodian. The
Custodian shall use its best efforts to cause any Foreign Custodial
Agent to afford access to the Accountant to the books and records
of such Foreign Custodial Agent with respect to securities and cash
held by such Foreign Custodial Agent for the Trust. the Custodian
also agrees to furnish the Accountant with such reports of the
Custodian's (including any Custodian branches') auditors as they
relate to the services provided under this Agreement and as are
necessary for the Accountant to conduct its examination of the
books and records pertaining to affairs of the Trust, and the
Custodian shall use its best efforts to obtain and furnish similar
reports of any Foreign Custodial Agent holding securities and cash
for the Trust.
Section 10. Registration of Securities
Securities which are ordinarily held in registered form may be
registered in the name of the Custodian's nominee or, as to any
securities in the physical possession of an entity other than the
Custodian, in the name of such entity's nominee. The Trust <PAGE>
PAGE 33
agrees to hold any such nominee harmless from any liability as a
holder of record of such securities. The Custodian may without
notice to the Trust cause any such securities to cease to be
registered in the name of any such nominee and to be registered in
the name of the Trust. In the event that any security registered
in the name of the Custodian's nominee or held by any Subcustodians
and registered in the name of such Subcustodian's nominee is called
for partial redemption by the issuer of such security, the
Custodian may allot, or cause to be allotted, the called portion to
the respective beneficial holders of such class of security in any
manner the Custodian deems to be fair and equitable.
Section 11. Transfer Taxes
The Trust shall pay or reimburse the Custodian and any Subcustodian
for any transfer taxes payable upon transfers of securities made
hereunder, including transfers resulting from the termination of
this Agreement. The Custodian shall, and shall use its best
efforts to cause any Subcustodian to, execute such certificates in
connection with securities delivered to it under this Agreement as
may be required, under any applicable law or regulation, to exempt
from taxation any transfers and/or deliveries of any such
securities which may be entitled to such exemption.
Section 12. Voting and Other Action
Neither the Custodian or any Subcustodian nor any nominee of the
Custodian or such Subcustodian shall vote any of the securities
held hereunder by or for the account of the Trust. The Custodian
shall, and shall use its best efforts to cause any Subcustodian to,
promptly deliver to the Trust all notices, proxies and proxy
soliciting materials with relation to such securities, such proxies
to be executed by the registered holder of such securities (if
registered otherwise than in the name of the Trust), but without
indicating the manner in which such proxies are to be voted.
The Custodian shall, and shall use its best efforts to cause any
Subcustodian to, transmit promptly to the Trust all written
information (including, without limitation, pendency of calls and
maturities of securities and expirations of rights in connection
therewith) received by the Custodian or such Subcustodian from
issuers of the securities being held for the Trust. With respect
to tender or exchange offers, the Custodian shall, and shall use
its best efforts to cause any Subcustodian to, transmit promptly to
the Trust all written information received by the Custodian or such
Subcustodian from issuers of the securities whose tender or
exchange is sought and from the party (or his agents) making the
tender or exchange offer.
<PAGE>
PAGE 34
Section 13. Custodian's Reports
The Custodian shall furnish the Trust as of the close of business
each day a statement showing all transactions and entries for the
account of the Trust. The books and records of the Custodian
pertaining to its actions as Custodian under this Agreement and
securities held hereunder by the Custodian shall be open to
inspection and audit by officers of the Trust, internal auditors
employed by the Trust's investment adviser, and independent
auditors employed by the Trust. The Custodian shall furnish the
Trust in such form as may reasonably be requested by the Trust a
report, including a list of the securities held by it in custody
for the account of the Trust, identification of any subcustodian,
and identification of such securities held by such subcustodian, as
of the close of business of the last business day of each month,
which shall be certified by a duly authorized officer of the
Custodian. It is further understood that additional reports may
from time to time be requested by the Trust. Should any report
ever be filed with any governmental authority pertaining to lost or
stolen securities, the Custodian will concurrently provide the
Trust with a copy of that report.
The Custodian also shall furnish such reports on its systems of
internal accounting control as the Trust may reasonably request
from time to time.
Section 14. Security Interest, Liens and Transfers of Beneficial
Ownership
The securities and cash held by the Custodian hereunder shall not
be subject to any right, change, security interest, lien or claim
of any kind in favor of the Custodian or its creditors, except a
claim of payment for their safe custody or administration, and
beneficial ownership of such securities and cash shall be freely
transferable without the payment of money or value other than for
safe custody or administration. Any agreement the Custodian shall
enter into with any Subcustodian, including any Foreign Custodial
Agent, shall contain a provision which is substantially identical
to the foregoing.
In the event that there shall be asserted any attachment or lien on
or against any securities or cash held in any omnibus account or
nostro account referred to in this Agreement which results from any
claim against the Custodian (including any branch) or any such
account, which is not directly related to transactions in
securities or cash for the Trust, the Custodian will use its best
efforts promptly to discharge such attachment or lien. If the
Custodian shall not have discharged such attachment or lien within
five business days, it shall notify the Trust of the existence of
the attachment or lien. If the attachment or lien is not
discharged on the date required for delivery or payment with
respect to any securities or cash in accordance with the provisions
of the Operation Manual:<PAGE>
PAGE 35
(a) in the case of such securities, at the option of the Trust,
the Custodian shall either immediately transfer to the Trust a
like amount of such securities (provided the same shall be
reasonably available) or immediately transfer an amount in
United States dollars equal to the market value of such
securities, valued in accordance with such procedures as may
be mutually agreed to by the parties thereto;
(b) in the case of cash, the Custodian shall immediately transfer
to the Trust an equal amount of cash in United States dollars.
Section 15. Compensation
For its services hereunder the Custodian shall be paid such
compensation and out-of-pocket or incidental expenses at such times
as may from time to time be agreed on in writing by the parties
hereto in a Custodian Fee Agreement.
Section 16. Standard of Care
The Custodian shall not be liable for any action taken in good
faith upon any custodian order or facsimile herein described or
certified copy of any resolution of the Board of Directors or of
the Executive Committee of the Board of Directors of the Trust, and
may rely on the genuineness of any such document which it may in
good faith believe to have been validly executed.
The Trust agrees to indemnify and hold harmless the Custodian, any
Subcustodian, or any nominee thereof from all taxes, charges,
expenses, assessments, claims and liabilities (including counsel
fees) incurred or assessed against any such entity in connection
with the performance of this Agreement, except such as may arise
from such entity's own negligent action, negligent failure to act
or willful misconduct. The Custodian is authorized to charge any
account of the Trust for such items. In the event of any advance
of cash for any purpose made by the Custodian resulting from orders
or instructions of the Trust, or in the event that the Custodian or
any nominee thereof shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with the
performance of this Agreement, except such as may arise from such
entity's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the
Trust shall be security therefor.
The Custodian shall maintain a standard of care equivalent to that
which would be required of a bailee for hire and shall not be
liable for any loss or damage to the Trust resulting from
participation in a securities depository unless such loss or damage
arises by reason of any negligence, misfeasance, or willful
misconduct of officers or employees of the Custodian, or from its <PAGE>
PAGE 36
failure to enforce effectively such rights as it may have against
any securities depository or from use of a Subcustodian, unless
such loss or damage arises by reason of any negligence, mis-
feasance, or willful misconduct of officers or employees of the
Custodian, or from its failure to enforce effectively such rights
as it may have against such Subcustodian. Anything in the
foregoing to the contrary notwithstanding, the Custodian shall
exercise, in the performance of its obligations undertaken or
reasonably assumed with respect to this Agreement, including the
recommendation to the Board of Foreign Custodial Agents, reasonable
care, for which the Custodian shall be responsible to the same
extent as if it were performing such duties directly and holding
such securities and cash in Minnesota, United States of America.
The Custodian shall be indemnified and held harmless by the Trust
from and against any loss or liability for any action taken or
omitted to be taken hereunder in good faith upon custodian order
and may rely on the genuineness of all such orders and documents as
it in good faith believes to have been validly executed. The
Custodian shall be responsible for the securities and cash held by
or deposited with any Subcustodian to the same extent as if such
securities and cash were directly held by or deposited with the
Custodian. The Custodian hereby agrees that it shall indemnify and
hold the Trust harmless from and against any loss which shall occur
as a result of the failure of a foreign Custodial Agent holding the
securities and cash to exercise reasonable care with respect to the
safekeeping of such securities and cash to the extent that the
Custodian would be required to indemnify and hold the Trust
harmless if the Custodian were itself holding such securities and
cash in Minnesota. It is also understood that the Custodian shall
not have liability for loss except by reason of the Custodian's
negligence, fraud or willful misconduct, or by reason of
negligence, fraud or willful misconduct of any Subcustodian holding
such securities or cash for the Trust.
The Custodian warrants that the established procedures to be
followed by any Subcustodian, in the opinion of the Custodian after
due inquiry, afford protection for such securities and cash at
least equal to that afforded by the Custodian's established
procedures with respect to similar securities and cash held by the
Custodian (including its securities depositories) in Minnesota.
However, the Custodian shall have no liability for any loss or
liability occasioned by delay in the actual receipt by it or any
Subcustodian of notice of any payment, redemption, or other
transaction regarding securities unless such delay is a result of
its own negligence, fraud, or willful misconduct.
The Custodian shall not be responsible for any loss of the Trust,
or to take any action with respect to any attachment or lien on any
omnibus account or nostro account, except as provided in Section 14
of this Agreement, in such loss, attachment or lien arises by
reason of any cause or circumstances beyond the control of the
Custodian, including acts of civil or military <PAGE>
PAGE 37
authority, expropriation, national emergency, acts of God,
insurrection, war, riots, or failure of transportation,
communication or power supply, or the failure of any person, firm
or corporation (other than the Custodian or any Subcustodian acting
on behalf of the Custodian) to perform any obligation if such
failure results in any such loss.
Section 17. Insurance
The Custodian represents and warrants that it presently maintains
and shall maintain for the duration of this Agreement a bankers'
blanket bond (the "Bond") which provides standard fidelity and non-
negligent loss coverage with respect to securities and cash which
may be held by the Custodian and securities and cash which may be
held by any Subcustodian which may be utilized by the Custodian
pursuant to this Agreement. The Custodian agrees that, if at any
time the Custodian for any reason discontinues such coverage, it
shall immediately notify the Trust in writing. The Custodian
represents that only the named insured on the Bond, which includes
the Custodian but not any of its customers, is directly protected
against loss. The Custodian represents that while it might resist
a claim of one of its customers to recover for a loss not covered
by the Bond, as a practical matter, where a claim is brought and a
loss is possibly covered by the Bond, the Custodian would give
notice of the claim to its insurer, and the insurer would normally
determine whether to defend the claim against the Custodian or to
pay the claim on behalf of the Custodian.
The Custodian also represents that it does not intend to obtain any
insurance for the benefit of the Trust which protects against the
imposition of the proceeds of sale of any securities or against
confiscation, expropriation or nationalization of any securities or
the assets of the issuer of such securities by a government or any
foreign country in which the issuer of such securities is organized
or in which securities are held for safekeeping either by the
Custodian or any Subcustodian in such country. The Custodian
represents that it has discussed the availability of expropriation
insurance with the Trust. The Custodian also represents that it
has advised the Trust as to its understanding of the position of
the Staff of the SEC that any investment company investing in
securities of foreign issuers has the responsibility for reviewing
the possibility of the imposition of exchange control restrictions
which would affect the liquidity of such investment company's
assets and the possibility of exposure to political risk, including
the appropriateness of insuring against such risk. The Custodian
represents that the Trust has acknowledged that it has the
responsibility to review the possibility of such risks and what, if
any, action should be taken.
Section 18. Termination and Amendment of Agreement
The Trust and the Custodian mutually may agree from time to time in
writing to amend, to add to, or to delete from any provision of
this Agreement.
<PAGE>
PAGE 38
The Custodian may terminate this Agreement by giving the Trust
ninety days' written notice of such termination by registered mail
addressed to the Trust at its principal place of business.
The Trust may terminate this Agreement at any time by written
notice thereof delivered, together with a copy of the resolution of
the Board of Directors authorizing such termination and certified
by the Secretary of the Trust, by registered mail to the Custodian.
Upon such termination of this Agreement, assets of the Trust held
by the Custodian shall be delivered by the Custodian to a successor
custodian, if one has been appointed by the Trust, upon receipt by
the Custodian of a copy of the resolution of the Board of Directors
of the Trust certified by the Secretary, showing appointment of the
successor custodian, and provided that such successor custodian is
a bank or trust company, organized under the laws of the United
States or of any State of the United States, having not less than
two million dollars aggregate capital, surplus and undivided
profits. Upon the termination of this Agreement as a part of the
transfer of assets, either to a successor custodian or otherwise,
the Custodian will deliver securities held by it hereunder, when so
authorized and directed by resolution of the Board of Directors of
the Trust, to a duly appointed agent of the successor custodian or
to the appropriate transfer agents for transfer of registration and
delivery as directed. Delivery of assets on termination of this
Agreement shall be effected in a reasonable, expeditious and
orderly manner; and in order to accomplish an orderly transition
from the Custodian to the successor custodian, the Custodian shall
continue to act as such under this Agreement as to assets in its
possession or control. Termination as to each security shall
become effective upon delivery to the successor custodian, its
agent, or to a transfer agent for a specific security for the
account of the successor custodian, and such delivery shall
constitute effective delivery by the Custodian to the successor
under this Agreement.
In addition to the means of termination hereinbefore authorized,
this Agreement may be terminated at any time by the vote of a
majority of the outstanding shares of the Trust and after written
notice of such action to the Custodian.
Section 19. Limitations of Liability of the trustees and
Unitholders of Trust
A copy of the Declaration of Trust, dated May 24, 1995, together
with all amendments, is on file in the office of the Secretary of
State of the Commonwealth of Massachusetts. The execution and
delivery of this Agreement have been authorized by the Trustees and
the Agreement has been signed by an authorized officer of the
Trust. It is expressly agreed that the obligations of the Trust
under this Agreement shall not be binding upon any of the Trustees,
unitholders, nominees, officers, agents or employees of the Trust,
personally, but bind only the assets and property of the Trust, as
provided in the Declaration of Trust.
<PAGE>
PAGE 39
Section 20. General
Nothing expressed or mentioned in or to be implied from any
provision of this Agreement is intended to, or shall be construed
to give any person or corporation other than the parties hereto,
any legal or equitable right, remedy or claim under or in respect
of this Agreement, or any covenant, condition or provision herein
contained, this Agreement and all of the covenants, conditions and
provisions hereof being intended to be and being for the sole and
exclusive benefit of the parties hereto and their respective
successors and assigns.
This Agreement shall be governed by the laws of the State of
Minnesota.
Attest: INCOME TRUST
High Yield Portfolio
______________________________ By _______________________________
Leslie L. Ogg
Secretary Vice President
FIRST NATIONAL BANK OF MINNEAPOLIS
By ________________________________
By ________________________________
<PAGE>
PAGE 1
TRANSFER AGENCY AND ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT dated as of ________, 1996, between Income Trust, a
Massachusetts business trust, (the "Trust"), on behalf of its
underlying series portfolios, and American Express Financial
Corporation (the "Transfer Agent"), a Delaware corporation.
In consideration of the mutual promises set forth below, the Trust
and the Transfer Agent agree as follows:
1. Appointment of the Transfer Agent. The Trust hereby appoints the
Transfer Agent, as transfer agent for its units and as
administrator for the Trust, and the Transfer Agent accepts such
appointment and agrees to perform the duties set forth below.
2. Compensation. The Trust will compensate the Transfer Agent for
the performance of its obligations as set forth in Schedule A.
Schedule A does not include out-of-pocket disbursements of the
Transfer Agent for which the Transfer Agent shall be entitled to
bill the Trust separately.
The Transfer Agent will bill the Trust annually. The fee provided
for hereunder shall be paid in cash by the Trust to the Transfer
Agent within five (5) business days after the last day of each
calendar year.
Out-of-pocket disbursements shall include, but shall not be limited
to, the items specified in Schedule B. Reimbursement by the Trust
for expenses incurred by the Transfer Agent in any month shall be
made as soon as practicable after the receipt of an itemized bill
from the Transfer Agent.
Any compensation jointly agreed to hereunder may be adjusted from
time to time by attaching to this Agreement a revised Schedule A,
dated and signed by an officer of each party.
3. Documents. The Trust will furnish from time to time such
certificates, documents or opinions as the Transfer Agent deems to
be appropriate or necessary for the proper performance of its
duties.
4. Representations of the Trust and the Transfer Agent.
(a) The Trust represents to the Transfer Agent that all outstanding
units are validly issued, fully paid and non-assessable by the
Trust. When units are hereafter issued in accordance with the
terms of the Trust's Declaration of Trust and its Registration
Statement, such units shall be validly issued, fully paid and
non-assessable by the Trust.
(b) The Transfer Agent represents that it is registered under
Section 17A(c) of the Securities Exchange Act of 1934. The
Transfer Agent agrees to maintain the necessary facilities,
equipment and personnel to perform its duties and obligations under
this agreement and to comply with all applicable laws.
<PAGE>
PAGE 2
5. Duties of the Transfer Agent. The Transfer Agent shall be
responsible, separately and through its subsidiaries or affiliates,
for the following functions:
(a) Sale of Trust Units.
(1) On receipt of payment, wired instructions and payment, or
payment identified as being for the account of a unitholder, the
Transfer Agent will deposit the payment, prepare and present the
necessary report to the Custodian and record the purchase of units
in a timely fashion in accordance with the terms of the prospectus.
All units shall be held in book entry form and no certificate shall
be issued unless the Trust is permitted to do so by the prospectus
and the purchaser so requests.
(2) On receipt of notice that payment was dishonored, the Transfer
Agent shall stop redemptions of all units owned by the purchaser
related to that payment and take such other action as it deems
appropriate.
(b) Redemption of Trust Units. On receipt of instructions to redeem
units in accordance with the terms of the Trust's Registration
Statement, the Transfer Agent will record the redemption of units
of the Trust, prepare and present the necessary report to the
Custodian and pay the proceeds of the redemption to the unitholder,
an authorized agent or legal representative upon the receipt of the
monies from the Custodian.
(c) Transfer or Other Change Pertaining to Trust Units. On receipt
of instructions or forms acceptable to the Transfer Agent to
transfer the units to the name of a new owner, change the name or
address of the present owner or take other legal action, the
Transfer Agent will take such action as is requested.
(d) Right to Seek Assurance. The Transfer Agent may refuse to
transfer, exchange or redeem units of the Trust or take any action
requested by a unitholder until it is satisfied that the requested
transaction or action is legally authorized or until it is
satisfied there is no basis for any claims adverse to the
transaction or action. It may rely on the provisions of the
Uniform Act for the Simplification of Fiduciary Security Transfers
or the Uniform Commercial Code. The Trust shall indemnify the
Transfer Agent for any act done or omitted to be done in reliance
on such laws or for refusing to transfer, exchange or redeem units
or taking any requested action if it acts on a good faith belief
that the transaction or action is illegal or unauthorized.
(e) Unitholder Records, Reports and Services.
(1) The Transfer Agent shall maintain all unitholder accounts,
which shall contain all required tax, legally imposed and
regulatory information; shall provide unitholders, and file with
federal and state agencies, all required tax and other reports
pertaining to unitholder accounts; shall prepare unitholder mailing
lists; shall cause to be delivered all required prospectuses,
annual reports, semiannual reports, statements of additional <PAGE>
PAGE 3
information (upon request), proxies and other mailings to
unitholders; and shall cause proxies to be tabulated.
(2) The Transfer Agent shall respond to all valid inquiries related
to its duties under this Agreement.
(3) The Transfer Agent shall create and maintain all records in
accordance with all applicable laws, rules and regulations,
including, but not limited to, the records required by Section
31(a) of the Investment Company Act of 1940.
(f) Distributions. The Transfer Agent shall prepare and present the
necessary report to the Custodian and shall cause to be prepared
and transmitted the payment of income dividends and capital gains
distributions or cause to be recorded the investment of such
dividends and distributions in additional units of the Trust or as
directed by instructions or forms acceptable to the Transfer Agent.
(g) Confirmations and Statements. The Transfer Agent shall confirm
each transaction through periodic reports as may be legally
permitted.
(h) Reports to the Trust. The Transfer Agent will provide reports
pertaining to the services provided under this Agreement as the
Trust may request to ascertain the quality and level of services
being provided or as required by law.
(i) Administrative Services. The Transfer Agent will provide all
administrative, accounting, clerical, statistical, correspondence,
corporate and all other services of whatever nature required in
connection with the administration of the Trust.
(j) Other Duties. The Transfer Agent may perform other duties for
additional compensation if agreed to in writing by the parties to
this Agreement.
6. Ownership of Records. The Transfer Agent agrees that all records
prepared or maintained by it relating to the services to be
performed by it under the terms of this Agreement are the property
of the Trust and may be inspected by the Trust or any person
retained by the Trust at reasonable times.
7. Action by Board of Trustees (the "Board") and Opinion of the
Trust's Counsel. The Transfer Agent may rely on resolutions of the
Board or the Executive Committee of the Board and on opinion of
counsel for the Trust.
8. Duty of Care. It is understood and agreed that, in furnishing
the Trust with the services as herein provided, neither the
Transfer Agent, nor any officer, trustee or agent thereof shall be
held liable for any loss arising out of or in connection with their
actions under this Agreement so long as they act in good faith and
with due diligence, and are not negligent or guilty of any willful
misconduct. It is further understood and agreed that the Transfer
Agent may rely upon information furnished to it reasonably believed
to be accurate and reliable. In the event the Transfer Agent is <PAGE>
PAGE 4
unable to perform its obligations under the terms of this Agreement
because of an act of God, strike or equipment or transmission
failure reasonably beyond its control, the Transfer Agent shall not
be liable for any damages resulting from such failure.
9. Term and Termination. This Agreement shall become effective on
the date first set forth above (the "Effective Date") and shall
continue in effect from year to year thereafter as the parties may
mutually agree; provided that either party may terminate this
Agreement by giving the other party notice in writing specifying
the date of such termination, which shall be not less than 60 days
after the date of receipt of such notice. In the event such notice
is given by the Trust, it shall be accompanied by a vote of the
Board, certified by the Secretary, electing to terminate this
Agreement and designating a successor transfer agent or transfer
agents. Upon such termination and at the expense of the Trust, the
Transfer Agent will deliver to such successor a certified list of
unitholders of the Trust (with name, address and taxpayer
identification or Social Security number), a historical record of
the account of each unitholder and the status thereof, and all
other relevant books, records, correspondence, and other data
established or maintained by the Transfer Agent under this
Agreement in the form reasonably acceptable to the Trust, and will
cooperate in the transfer of such duties and responsibilities,
including provisions for assistance from the Transfer Agent's
personnel in the establishment of books, records and other data by
such successor or successors.
10. Amendment. This Agreement may not be amended or modified in any
manner except by a written agreement executed by both parties.
11. Subcontracting. The Trust agrees that the Transfer Agent may
subcontract for certain of the services described under this
Agreement with the understanding that there shall be no diminution
in the quality or level of the services and that the Transfer Agent
remains fully responsible for the services. Except for
out-of-pocket expenses identified in Schedule B, the Transfer Agent
shall bear the cost of subcontracting such services, unless
otherwise agreed by the parties.
12. Limitations of Liability of the Trustees and Unitholders of
Trust
A copy of the Declaration of Trust, dated May 24, 1995, together
with all amendments, is on file in the office of the Secretary of
State of the Commonwealth of Massachusetts. The execution and
delivery of this Agreement have been authorized by the Trustees and
the Agreement has been signed by an authorized officer of the
Trust. It is expressly agreed that the obligations of the Trust
under this Agreement shall not be binding upon any of the Trustees,
unitholders, nominees, officers, agents or employees of the Trust,
personally, but bind only the assets and property of the Trust, as
provided in the Declaration of Trust.
<PAGE>
PAGE 5
13. Miscellaneous.
(a) This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable
without the written consent of the other party.
(b) This Agreement shall be governed by the laws of the State of
Minnesota.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers as of the day and year
written above.
INCOME TRUST
Government Income Portfolio
Quality Income Portfolio
High Yield Portfolio
By:
[title]
AMERICAN EXPRESS FINANCIAL CORPORATION
By:
[title]
<PAGE>
PAGE 6
Schedule A
INCOME TRUST
FEE
Effective the ____ day of _____, 1996 the annual fee for
services under this agreement is $1 per year for each Portfolio.
<PAGE>
PAGE 7
Schedule B
OUT-OF-POCKET EXPENSES
The Trust shall reimburse the Transfer Agent monthly for the
following out-of-pocket expenses:
o typesetting, printing, paper, envelopes, postage and return
postage for proxy soliciting material, and proxy tabulation costs
o printing, paper, envelopes and postage for dividend notices,
dividend checks, records of account, purchase confirmations,
exchange confirmations and exchange prospectuses, redemption
confirmations, redemption checks, confirmations on changes of
address and any other communication required to be sent to
unitholders
o typesetting, printing, paper, envelopes and postage for
prospectuses, annual and semiannual reports, statements of
additional information, supplements for prospectuses and statements
of additional information and other required mailings to
unitholders
o stop orders
o outgoing wire charges
o other expenses incurred at the request or with the consent of the
Trust.
<PAGE>
PAGE 1
April 16, 1996
Income Trust
IDS Tower 10
Minneapolis, Minnesota 55440-0010
Board Members:
I have examined the Amended and Restated Declaration of Trust and
the By-Laws of the Trust and all necessary certificates, permits,
minute books, documents and records of the Trust, and the
applicable statutes of the State of Massachusetts, and it is my
opinion:
(a) That the Trust is a business trust duly organized and
existing under the laws of the State of Massachusetts.
(b) That all such authorized units are, under the laws of the
State of Massachusetts, redeemable as provided in the
Declaration of Trust of the Trust and upon redemption shall
have the status of authorized and unissued units;
(c) That units when sold at not less than their par value and in
accordance with applicable federal and state securities laws
were legally issued, fully paid and nonassessable.
I hereby consent that the foregoing opinion may be used in
connection with issuing units of the Trust.
Very truly yours,
Leslie L. Ogg
Attorney at Law
901 S. Marquette Ave. Suite 2810
Minneapolis, Minnesota 55402-3268
<PAGE>
PAGE 1
Independent Auditors' Consent
The Board of Trustees and Interest Holder
Income Trust:
We consent to the use of our report included herein and the
reference to our Firm under the heading "INDEPENDENT AUDITORS" in
Part B of the Registration Statement.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
April 16, 1996
<PAGE>
PAGE 1
SUBSCRIPTION AGREEMENT
April 16, 1996
Income Trust
IDS Tower 10
Minneapolis, Minnesota 55440
Dear Trustees:
The Income Trust (the "Trust") proposes to issue and sell in
private placements, units of beneficial interest (the "Units") in
certain series of Units (each a "Portfolio" and together, the
"Portfolios") pursuant to a registration statement on Form N-1A
filed with the Securities and Exchange Commission (the "SEC"). The
Trust currently consists of three Portfolios as follows:
High Yield Portfolio
Government Income Portfolio
Quality Income Portfolio
In order to provide the Trust with a net worth of at least
$100,000, we hereby offer to purchase $100,000 worth of Units,
divided between the Portfolios.
We represent and warrant to the Trust that the Units are being
acquired by us for investment and not with a view to the resale or
further distribution thereof and that we have no present intention
to redeem the Units.
Please confirm that the foregoing correctly sets forth our
agreement with the Trust.
Sincerely,
STRATEGIST INCOME FUND, INC.
By__________________________________________
William H. Dudley
President
Confirmed, as of the date first above mentioned.
INCOME TRUST
By______________________________________________
Leslie L. Ogg
Vice President and General Counsel
[ARTICLE] 6
[SERIES]
[NUMBER] 1
[NAME] GOVERMENT INCOME PORTFOLIO
<TABLE>
<S> <C>
[PERIOD-TYPE] OTHER
[FISCAL-YEAR-END] MAY-31-1996
[PERIOD-END] APR-15-1996
[INVESTMENTS-AT-COST] 0
[INVESTMENTS-AT-VALUE] 0
[RECEIVABLES] 0
[ASSETS-OTHER] 40000
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 40000
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 0
[TOTAL-LIABILITIES] 0
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 0
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 0
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 0
[OTHER-INCOME] 0
[EXPENSES-NET] 0
[NET-INVESTMENT-INCOME] 0
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 0
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 0
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 0
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 0
[AVERAGE-NET-ASSETS] 0
[PER-SHARE-NAV-BEGIN] 0
[PER-SHARE-NII] 0
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 0
[EXPENSE-RATIO] 0
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[SERIES]
[NUMBER] 3
[NAME] QUALITY INCOME PORTFOLIO
<TABLE>
<S> <C>
[PERIOD-TYPE] OTHER
[FISCAL-YEAR-END] MAY-31-1996
[PERIOD-END] APR-15-1996
[INVESTMENTS-AT-COST] 0
[INVESTMENTS-AT-VALUE] 0
[RECEIVABLES] 0
[ASSETS-OTHER] 30000
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 30000
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 0
[TOTAL-LIABILITIES] 0
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 0
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 0
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 0
[OTHER-INCOME] 0
[EXPENSES-NET] 0
[NET-INVESTMENT-INCOME] 0
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 0
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 0
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 0
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 0
[AVERAGE-NET-ASSETS] 0
[PER-SHARE-NAV-BEGIN] 0
[PER-SHARE-NII] 0
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 0
[EXPENSE-RATIO] 0
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[SERIES]
[NUMBER] 2
[NAME] HIGH YIELD PORTFOLIO
<TABLE>
<S> <C>
[PERIOD-TYPE] OTHER
[FISCAL-YEAR-END] MAY-31-1996
[PERIOD-END] APR-15-1996
[INVESTMENTS-AT-COST] 0
[INVESTMENTS-AT-VALUE] 0
[RECEIVABLES] 0
[ASSETS-OTHER] 30000
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 30000
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 0
[TOTAL-LIABILITIES] 0
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 0
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 0
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 0
[OTHER-INCOME] 0
[EXPENSES-NET] 0
[NET-INVESTMENT-INCOME] 0
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 0
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 0
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 0
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 0
[AVERAGE-NET-ASSETS] 0
[PER-SHARE-NAV-BEGIN] 0
[PER-SHARE-NII] 0
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 0
[EXPENSE-RATIO] 0
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
PAGE 1
TRUSTEES POWER OF ATTORNEY
City of Minneapolis
State of Minnesota
Each of the undersigned, as trustees of the below listed
open-end, diversified investment companies that previously have
filed registration statements and amendments thereto pursuant to
the requirements of the Investment Company Act of 1940 with the
Securities and Exchange Commission:
Growth Trust
Growth and Income Trust
Income Trust
Tax-Free Income Trust
World Trust
hereby constitutes and appoints William R. Pearce and Leslie L. Ogg
or either one of them, as her or his attorney-in-fact and agent, to
sign for her or him in her or his name, place and stead any and all
further amendments to said registration statements filed pursuant
to said Act and any rules and regulations thereunder, and to file
such amendments with all exhibits thereto and other documents in
connection therewith with the Securities and Exchange Commission,
granting to either of them the full power and authority to do and
perform each and every act required and necessary to be done in
connection therewith.
Dated the 11th day of April, 1996.
/s/ Lynne V. Cheney /s/ Melvin R. Laird
Lynne V. Cheney Melvin R. Laird
/s/ William H. Dudley /s/ William R. Pearce
William H. Dudley William R. Pearce
/s/ Robert F. Froehlke
Robert F. Froehlke Edson W. Spencer
/s/ David R. Hubers /s/ John R. Thomas
David R. Hubers John R. Thomas
/s/ Heinz F. Hutter
Heinz F. Hutter Wheelock Whitney
/s/ Anne P. Jones /s/ C. Angus Wurtele
Anne P. Jones C. Angus Wurtele
<PAGE>
PAGE 1
OFFICERS' POWER OF ATTORNEY
City of Minneapolis
State of Minnesota
Each of the undersigned, as officers of the below listed
open-end, diversified investment companies that previously have
filed registration statements and amendments thereto pursuant to
the requirements of the Investment Company Act of 1940 with the
Securities and Exchange Commission:
Growth Trust
Growth and Income Trust
Income Trust
Tax-Free Income Trust
World Trust
hereby constitutes and appoints William R. Pearce and Leslie L. Ogg
or either one of them, as her or his attorney-in-fact and agent, to
sign for her or him in her or his name, place and stead, as an
officer, any and all further amendments to said registration
statements filed pursuant to said Act and any rules and regulations
thereunder, and to file such amendments with all exhibits thereto
and other documents in connection therewith with the Securities and
Exchange Commission, granting to either of them the full power and
authority to do and perform each and every act required and
necessary to be done in connection therewith.
Dated the 11th day of April, 1996.
/s/ William R. Pearce
William R. Pearce
/s/ Melinda S. Urion
Melinda S. Urion
