<PAGE>
PAGE 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No.
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No.
EXPRESS DIRECT TAX-FREE FUND, INC.
IDS Tower 10, Minneapolis, Minnesota 55440-0010
Eileen J. Newhouse - IDS Tower 10, Minneapolis, Minnesota
55440-0010
(612) 671-2772
Approximate Date of Proposed Public Offering:
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay the effective date until
the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of
1933 or until the Registration Statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a),
shall determine.
The Registrant is registering an indefinite number or amount of
securities under the Securities Act of 1933 pursuant to Rule 24f of
the Investment Company Act of 1940.
Tax-Free Income Trust has also executed this Registration
Statement.<PAGE>
PAGE 2
Cross reference sheet for the Fund showing the location in its
prospectus and the Statement of Additional Information of the
information called for by the items enumerated in Parts A and B of
Form N-1A.
Negative answers omitted from prospectus are so indicated.
<TABLE><CAPTION>
PART A PART B
Section Section in
Item No. in Prospectus Item No. Statement of Additional Information
<S> <C> <C> <C>
1 Cover page of prospectus 10 Cover page of SAI
2(a) The Funds in brief; Sales charge and Fund 11 Table of Contents
expenses
(b) The Funds in brief; Sales charge and Fund 12 NA
expenses
(c) The Funds in brief; Sales charge and Fund 13(a) Additional Investment Policies; all
expenses appendices except Dollar-Cost Averaging
(b) Additional Investment Policies
3(a) NA (c) Additional Investment Policies
(b) NA (d) Portfolio Transactions
(c) Performance
(d) NA 14(a) Board Members and Officers
(b) Board Members and Officers
4(a) The Funds in brief; Investment policies (c) Board Members and Officers
and risks; How the Funds and Portfolios
are organized 15(a) NA
(b) Investment policies and risks (b) NA
(c) Investment policies and risks (c) Board Members and Officers
5(a) Board members and officers 16(a)(i) How the Funds and Portfolios are organized*;
About the Advisor
(b)(i) Manager and distributor; About the Advisor (a)(ii) Agreements: Investment Management Services
(b)(ii) Investment manager; Administrator and Agreement, Plan and Supplemental
transfer agent Agreement of Distribution/Distribution Agreement
(b)(iii) Investment manager (a)(iii) NA
(c) Portfolio managers (b) NA
(d) Administrator and transfer agent (c) NA
(e) Administrator and transfer agent (d) Agreements: Administrative Services Agreement
(f) Investment manager; Administrator and (e) NA
transfer agent; Distributor (f) Agreements: Plan and Supplemental Agreement of
(g) About the Advisor Distribution/Distribution Agreement
(g) NA
5A(a) NA (h) Custodian; Independent Auditors
(b) NA (i) Agreements: Transfer Agency Agreement; Custodian
6(a) Shares; Voting rights 17(a) NA
(b) NA (b) Brokerage Commissions Paid to Brokers Affiliated
(c) NA with American Express Financial Corporation
(d) NA (c) Portfolio Transactions
(e) Cover page; Special shareholder services (d) Portfolio Transactions
(f) Dividends and capital gains distributions; (e) Portfolio Transactions
Reinvestments
(g) Taxes 18(a) Shares; Voting rights*
(h) Special considerations regarding master/ (b) NA
feeder structure
7(a) Distributor 19(a) Investing in the Fund
(b) Valuing Fund shares (b) Valuing Fund shares*; Investing in the Funds;
(c) NA Redeeming Shares
(d) How to purchase shares (c) Redeeming Shares
(e) NA
(f) Distributor 20 Taxes
8(a) How to redeem shares; Special considerations 21(a) Agreements: Plan and Supplemental Agreement of
regarding master/feeder structure Distribution/Distribution Agreement, Placement
(b) NA Agency Agreement
(c) How to purchase, exchange or redeem shares:
Other important information (b) Agreements: Pland and Supplemental Agreement of
(d) How to purchase, exchange or redeem shares: Distribution/Distribution Agreement, Placement
How to redeem shares Agency Agreement
9 None 22(a) NA
(b) Performance Information (for all funds except
money market funds)
23 NA
*Designates page number in prospectus.
/TABLE
<PAGE>
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Express Direct Aggressive Tax-Free Income Fund
Prospectus
_______, 1995
Express Direct Aggressive Tax-Free Income Fund, a series of Express
Direct Tax-Free Fund, Inc., is a diversified mutual fund whose goal
is to provide high yield generally exempt from federal income
taxes.
The Fund, unlike most funds that invest directly in securities,
seeks to achieve its objective by investing all of its assets in a
Portfolio of Tax-Free Income Trust, which is a separate investment
company. This arrangement is commonly known as a master/feeder
structure. The Portfolio in which the Fund invests has the same
investment objective, policies and restrictions as the Fund.
This prospectus contains facts that can help you decide if the Fund
is the right investment for you. Read it before you invest and
keep it for future reference.
Additional facts about the Fund are in a Statement of Additional
Information (SAI), filed with the Securities and Exchange
Commission. The SAI, dated _______, 199_, is incorporated here by
reference. For a free copy, contact American Express Financial
Services Direct.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND SHARES ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY. INVESTMENTS IN THE FUND
INVOLVE INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
American Express Financial Services Direct
P.O. Box 59196
Minneapolis, MN
55459-0196
1-800-AXP-SERV
TTY: 1-800-710-5260
<PAGE>
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Table of contents
The Fund in brief
Goal and types of Fund investments and their risks
Manager and distributor
Portfolio manager
Sales charges and Fund expenses
Performance
Total returns
Yield
Investment policies and risks
Facts about investments and their risks
Valuing Fund shares
How to purchase, exchange or redeem shares
How to purchase shares
How to exchange shares
How to redeem shares
Systematic purchase plans
Other important information
Special shareholder services
Services
Quick telephone reference
Distributions and taxes
Dividend and capital gain distributions
Reinvestments
Taxes
How to determine the correct TIN
How the Fund and Portfolio are organized
Shares
Voting rights
Shareholder meetings
Special considerations regarding master/feeder structure
Board members and officers
Investment manager
Administrator and transfer agent
Distributor
About the Advisor
Appendices
Appendix A: Description of bond ratings
Appendix B: 1995 Federal tax-exempt and taxable equivalent yield
calculation
Appendix C: Descriptions of derivative instruments
<PAGE>
PAGE 5
The Fund in brief
Express Direct Aggressive Tax-Free Income Fund (the Fund) is a
diversified mutual fund that seeks to achieve its goal by investing
all of its assets in Aggressive Tax-Free Income Portfolio (the
Portfolio) of Tax-Free Income Trust (the Trust) rather than by
directly investing in and managing its own portfolio of securities.
The Fund is a series of Express Direct Tax-Free Fund, Inc. (the
Company).
Goal and types of Fund investments and their risks
The Fund seeks to provide shareholders with a high yield generally
exempt from federal income taxes. It does so by investing all of
its assets in the Portfolio, which has the same investment
objective as the Fund. The Portfolio is a diversified mutual fund
that usually invests in medium- and lower-quality bonds and notes
issued by or on behalf of state and local governmental units whose
interest generally is exempt from federal income tax. The
Portfolio also may invest in derivative instruments and money
market instruments.
Because investments involve risk, the Fund cannot guarantee
achieving its goal. Some of the Portfolio's investments may be
considered speculative and involve additional investment risks.
The foregoing investment goal is a fundamental policy of the Fund
and Portfolio, which may not be changed unless authorized by a
majority of the outstanding voting securities of the Fund or of the
Portfolio, as the case may be. However, the Fund may withdraw its
assets from the Portfolio at any time if the board of directors of
the Company determines that it is in the best interests of the Fund
to do so. In such event, the Company would consider what action
should be taken, including whether to retain an investment advisor
to manage the Fund's assets directly or to reinvest all of the
Fund's assets in another pooled investment entity.
Manager and distributor
The Portfolio is managed by American Express Financial Corporation
(the Advisor), a provider of financial services since 1894. The
Advisor currently manages more than $__ billion in assets. Shares
of the Fund are sold through American Express Financial Advisors
Inc. (the Distributor), a wholly owned subsidiary of the Advisor.
Portfolio manager
Kurt Larson joined the Advisor in 1961 and serves as vice president
and senior portfolio manager. He has managed the assets of
Aggressive Tax-Free Income Portfolio since 1979.
Sales charge and Fund expenses
The purpose of the following table and example is to summarize the
aggregate expenses of the Fund and its Portfolio and to assist
investors in understanding the various costs and expenses that
investors in the Fund may bear directly or indirectly. The
Company's board of directors believes that, over time, the <PAGE>
PAGE 6
aggregate per share expenses of the Fund and its Portfolio should
be approximately equal to (and may be less than) the per share
expenses the Fund would have if the Company retained its own
investment advisor and the assets of the Fund were
invested directly in the type of securities held by the Portfolio.
The percentages indicated as "Management fee" and "Other expenses"
are based on both the Fund's and Portfolio's projected fees and
expenses for the current fiscal year ending Nov. 30, 1996. For
additional information concerning Fund and Portfolio expenses, see
"How the Fund and Portfolio are Organized."
Shareholder transaction expenses
Maximum sales charge on purchases*
(as a percentage of offering price) 0%
Annual Fund and allocated Portfolio operating expenses
(% of average daily net assets):
Management fee** %
12b-1 fee %
Other expenses*** %
Total %
*The Fund imposes a 0.75% redemption fee for shares redeemed or
exchanged within 180 days of their purchase date. This fee
reimburses the Fund for brokerage fees and other costs incurred.
This fee also helps assure that long-term shareholders are not
unfairly bearing the costs associated with frequent traders.
**The management fee is paid by the Trust on behalf of the
Portfolio.
***Other expenses include an administrative services fee, a
transfer agency fee and other nonadvisory expenses.
Example: Suppose for each year for the next 10 years, Fund
expenses are as above and annual return is 5%. If you sold your
shares at the end of the following years, for each $1,000 invested,
you would pay total expenses of:
1 year $
3 years $
The table and example do not represent actual expenses, past or
future. Actual expenses may be higher or lower than those shown.
Because the Fund pays annual distribution (12b-1) fees, long-term
shareholders may indirectly pay an equivalent of more than a __%
sales charge, the maximum permitted by the National Association of
Securities Dealers.
<PAGE>
PAGE 7
Performance
Total return is the sum of all of your returns for a given period,
assuming you reinvest all distributions. It is calculated by
taking the total value of shares you own at the end of the period
(including shares acquired by reinvestment), less the price of
shares you purchased at the beginning of the period.
Average annual total return is the annually compounded rate of
return over a given time period (usually two or more years). It is
the total return for the period converted to an equivalent annual
figure.
Total returns
Average annual total returns as of __________________
Purchase 1 year 5 years 10 years
made ago ago ago
Aggressive Tax-Free
Income Fund
Lehman Brothers
Municipal Bond Index
Cumulative total returns as of _____________________
Purchase 1 year 5 years 10 years
made ago ago ago
Aggressive Tax-Free
Income Fund
Lehman Brothers
Municipal Bond Index
On _________, 1996, IDS High Yield Tax-Exempt Fund transferred all
of its assets to the Portfolio. The performance information in the
foregoing tables represents performance of IDS High Yield Tax-
Exempt Fund prior to March 20, 1995 and of Class A shares of IDS
High Yield Tax-Exempt Fund from March 20, 1995 through
____________, 1996, in each case adjusted to reflect the absence of
sales charges on shares of the Fund sold through this prospectus.
The historical performance has not been adjusted for any difference
between the estimated aggregate fees and expenses of the Fund and
historical fees and expenses of IDS High Yield Tax-Exempt Fund.
These examples show total returns from hypothetical investments in
the Fund. These returns are compared to those of a popular index
for the same periods.
For purposes of calculation, information about the Fund makes no
adjustments for taxes an investor may have paid on the reinvested
income and capital gains, and covers a period of widely fluctuating
securities prices. Returns shown should not be considered a
representation of the Fund's future performance.
<PAGE>
PAGE 8
Lehman Brothers Municipal Bond Index is made up of a representative
list of general obligation, revenue, insured and pre-refunded
bonds. The index is frequently used as a general measure of tax-
exempt bond market performance. However, the securities used to
create the index may not be representative of the bonds held in the
Portfolio. The index reflects reinvestment of all distributions
and changes in market prices, but excludes brokerage commissions or
other fees.
Yield
Yield is the net investment income earned per share for a specified
time period, divided by the net asset value at the end of the
period. From time to time the Fund may advertise its 30-day
annualized yield. The Fund calculates the 30-day annualized yield
by dividing:
o net investment income per share deemed earned during a 30-day
period by
o the net asset value per share on the last day of the period,
and
o converting the result to a yearly equivalent figure.
The Fund also may calculate a tax equivalent yield by dividing the
tax-exempt portion of its yield by one minus a stated income tax
rate. A tax equivalent yield demonstrates the taxable yield
necessary to produce an after-tax yield equivalent to that of a
fund that invests in exempt obligations.
The Fund's yield varies from day to day, mainly because share
values and offering prices (which are calculated daily) vary in
response to changes in interest rates. Net investment income
normally changes much less in the short run. Thus, when interest
rates rise and share values fall, yield tends to rise. When
interest rates fall, yield tends to follow. Past yields should not
be considered an indicator of future yields.
Investment policies and risks
Unlike mutual funds which directly acquire and manage their own
portfolio of securities, the Fund seeks to achieve its investment
objective by investing all of its assets in a Portfolio of the
Trust, which is a separate investment company. The Portfolio in
which the Fund invests has the same investment objectives, policies
and restrictions as the Fund. The board of directors of the
Company believes that by investing all of its assets in the
Portfolio, the Fund will be in a position to realize directly or
indirectly certain economies of scale inherent in managing a larger
asset base, although there is no assurance this will occur. The
policies described below apply both to the Fund and the Portfolio.
Under normal market conditions, the Portfolio will invest at least
80% of its net assets in bonds and notes issued by or on behalf of
state and local governmental units whose interest is exempt from
federal income tax (according to the opinion of counsel for the<PAGE>
PAGE 9
issuer) and is not subject to the alternative minimum tax. This
policy cannot be changed without approval of a majority of the
outstanding voting securities. Other investments include
derivative instruments, money market instruments and bonds subject
to the alternative minimum tax computation.
The various types of investments described above that the portfolio
manager uses to achieve investment performance are explained in
more detail in the next section and in the SAI.
Facts about investments and their risks
Bonds and notes exempt from federal income taxes: The price of
bonds generally falls as interest rates increase, and rises as
interest rates decrease. The price of bonds or notes also
fluctuates if the credit rating is upgraded or downgraded. The
price of bonds or notes below investment grade may react more to
the ability of a company to pay interest or 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.
The Portfolio usually invests in medium- and lower-quality notes
rated A, BBB or BB by Standard & Poor's Corporation, Moody's
Investors Service, Inc. or Fitch Investors Services, Inc., or in
securities the portfolio manager believes have similar qualities
even though they are not rated or have been given a lower rating by
a rating agency. The Portfolio invests in higher-quality bonds and
notes when the difference in yield between higher- and lower-
quality securities does not warrant the increase in risk or there
is not an adequate supply of lower-quality securities. Securities
that are subsequently downgraded in quality may continue to be held
by the Portfolio and will be sold only when the investment manager
believes it is advantageous to do so.
<TABLE><CAPTION>
Aggressive Tax-Free Income Portfolio
Bond ratings and holdings for the calendar year ending Dec. 31,
1995
S&P Rating Percent of
(or Moody's Protection of net assets in
Percent of or Fitch's principal and unrated securities
net assets equivalent) interest assessed by the Advisor
<S> <C> <C> <C>
% AAA Highest quality %
AA High quality
A Upper medium grade
BBB Medium grade
BB Moderately speculative
B Speculative
CCC Highly speculative
CC Poor quality
C Lowest quality
D In default
Unrated Unrated securities
</TABLE>
(The information in the table above relates to IDS High Yield Tax-
Exempt Fund, a fund that transferred its assets to Aggressive Tax-
Free Income Portfolio on _______________, 1996. See Appendix to<PAGE>
PAGE 10
this prospectus describing bond ratings for further information.)
Bonds 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, the 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, the Portfolio may have
to sell securities to have sufficient cash to pay the dividends.
Concentration: The Portfolio may invest more than 25% of its total
assets in industrial revenue bonds, but it does not intend to
invest more than 25% of its total assets in industrial revenue
bonds issued for companies in the same industry or state. As the
similarity in issuers increases, the potential for fluctuation in
the net asset value also increases.
Derivative instruments: The 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. The 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 Portfolio will designate cash or appropriate liquid
assets to cover its portfolio obligations. The use of derivative
instruments may produce taxable income. No more than 5% of the
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. The Portfolio is not limited
as to the percentage of its assets that may be invested in
permissible investments, including derivatives, except as otherwise
explicitly provided in this prospectus or the SAI. For
descriptions of these and other types of derivative instruments,
see the Appendix to this prospectus and the SAI.
Securities and 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, <PAGE>
PAGE 11
can be sold in private sales, and many may be sold to other
institutions and qualified buyers or on foreign markets. The
portfolio manager will follow guidelines established by the board
and consider relevant factors such as the nature of the security
and the number of likely buyers when determining whether a security
is illiquid.
No more than 10% of the Portfolio's net assets will be held in
securities and derivative instruments that are illiquid.
Money market instruments: Short-term tax-exempt 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. Under extraordinary conditions
where, in the opinion of the portfolio manager, appropriate short-
term tax-exempt securities are not available, the Portfolio is
authorized to make certain taxable investments as described in the
SAI.
The investment policies described above may be changed by the
board.
Lending portfolio securities: The 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 the Portfolio's net assets.
Valuing Fund shares
The net asset value (NAV) is the value of a single Fund share. It
is the total value of the Fund's investments in the corresponding
Portfolio and other assets, less any liabilities, divided by the
number of shares outstanding. The NAV is the price at which you
purchase Fund shares and the price you receive when you sell your
shares. It usually changes from day to day, and is calculated at
the close of business, normally 3 p.m. Central time, each business
day (any day the New York Stock Exchange is open). NAV generally
declines as interest rates increase and rises as interest rates
decline.
To establish the net assets, all securities are valued as of the
close of each business day. In valuing assets:
o Securities (except bonds) and assets with available market
values are valued on that basis.
o Securities maturing in 60 days or less are valued at
amortized cost.
o Bonds and assets without readily available market values are
valued according to methods selected in good faith by the
board of trustees.
<PAGE>
PAGE 12
How to purchase, exchange or redeem shares
How to purchase shares
Purchasing shares through an AEFA account. You may purchase shares
of the Fund exclusively through an Investment Management Account
maintained with American Express Financial Advisors (AEFA). Payment
for shares must be made directly to AEFA.
If you already have an AEFA account, you may buy shares in the Fund
as described below and need not open a new account.
If you do not have an AEFA account, complete an AEFA Account
Application (available by calling 1-800-AXP-SERV) and mail the
application to American Express Financial Services Direct, P.O. Box
59196, Minneapolis, MN 55459-0196. Corporations and other
organizations should contact AEFA to determine which additional
forms may be necessary to open an AEFA account.
You may deposit money into your AEFA account by check, wire or many
other forms of electronic funds transfer (securities may also be
deposited). All deposit checks should be made payable to AEFA. If
you would like to wire funds into your existing AEFA account,
please contact AEFA at 1-800-AXP-SERV for instructions.
Minimum Fund investment requirements. Your initial investment in
the Fund may be as low as $2,000 ($1,000 for custodial accounts,
Individual Retirement Accounts and certain other retirement plans).
The minimum subsequent investment is $100. These requirements may
be reduced or waived as described in the SAI.
When and at what price shares will be purchased. You must have
money available in your AEFA account in order to purchase Fund
shares. If your request and payment (including money transmitted
by wire) are received and accepted by AEFA before 2 p.m. Central
time, your money will be invested at the net asset value determined
as of the close of business (normally 3 p.m. Central time) that
day. If your request and payment are received after that time,
your request will not be accepted or your payment invested until
the next business day. (See "Valuing Fund shares.")
Methods of purchasing shares. AEFA offers you three convenient
ways to purchase shares of the Fund. You may choose the one that
works best for you. AEFA will send you confirmation of your
purchase request.
By phone:
You may use money in your AEFA account to make initial and
subsequent purchases. To place your order, call 1-800-AXP-
SERV.
<PAGE>
PAGE 13
By mail:
Written purchase requests (along with any checks) should be
mailed to American Express Financial Services Direct, P.O.
Box 59196, Minneapolis, MN 55459-0196, and should contain
the following information:
o your AEFA account number (or an AEFA Account
Application)
o the name of the Fund and the dollar amount of shares
you would like purchased
Your check should be made out to AEFA. It will be deposited
into your AEFA account and used, as necessary, to cover your
purchase request.
By systematic purchase:
Once you have opened an AEFA account, you may authorize AEFA
to automatically purchase shares on your behalf at intervals
and in amounts selected by you. (See "Systematic Purchase
Plans")
Other purchase information. The Fund reserves the right, in its
sole discretion and without prior notice to shareholders, to
withdraw or suspend all or any part of the offering made by this
prospectus, to reject purchase requests or to change the minimum
investment requirements. All requests to purchase shares of the
Fund are subject to acceptance by the Fund and AEFA and are not
binding until confirmed or accepted in writing. AEFA will charge a
$15 service fee against an investor's AEFA account if his or her
investment check is returned because of insufficient or uncollected
funds or a stop payment order.
How to exchange shares
The exchange privilege allows you to exchange your investment in
the Fund at no charge for shares of other funds in the Express
Direct Group of Funds available in your state. For complete
information, including fees and expenses, read the prospectus
carefully before exchanging into a new fund. Any exchange will
involve the redemption of Fund shares and the purchase of shares in
another fund on the basis of the net asset value per share of each
fund. An exchange may result in a gain or loss and is a taxable
event for federal income tax purposes. When exchanging into
another fund you must meet that fund's minimum investment
requirements. The Fund reserves the right to modify, terminate or
limit the exchange privilege. The current limit is four exchanges
per calendar year. AEFA and the Fund reserve the right to reject
any exchange, limit the amount or modify or discontinue the
exchange privilege, to prevent abuse or adverse effects on the Fund
and its shareholders.
<PAGE>
PAGE 14
How to redeem shares
The price at which shares will be redeemed. Shares will be
redeemed at the net asset value per share next determined after
receipt by AEFA of proper redemption instructions, as described
below.
The Fund imposes a 0.75% redemption fee for shares redeemed or
exchanged within 180 days of their purchase date. This fee
reimburses the Fund for brokerage fees and other costs incurred.
This fee also helps assure that long-term shareholders are not
unfairly bearing the costs associated with frequent traders.
Payment of redemption proceeds. Payment for redeemed shares will
be credited directly to your AEFA account no later than seven days
after AEFA receives your redemption instructions in proper form.
Redemption proceeds will be held there or mailed to you depending
on the account standing instructions you selected.
If you recently purchased shares by check, your redemption proceeds
may be held in your AEFA account until your check clears (which may
take up to 10 days from the purchase date) before a check is mailed
to you.
A redemption is a taxable transaction. If the Fund's net asset
value when you sell shares is more or less than the cost of your
shares, you will have a gain or loss, which can affect your tax
liability. Redeeming shares held in an IRA or qualified retirement
account may subject you to certain federal taxes, penalties and
reporting requirements. Consult your tax advisor.
Methods of exchanging or redeeming shares
By phone:
You may exchange between any of the Express Direct Funds or redeem
your shares by calling 1-800-AXP-SERV. Telephone exchanges or
redemptions may be difficult to implement during periods of drastic
economic or market changes. If you experience difficulties in
exchanging or redeeming shares by telephone, you can mail your
exchange or redemption requests as described below.
To properly process your telephone exchange or redemption request
we will need the following information:
o your AEFA account number and your name (for exchanges, both
funds must be registered in the same ownership)
o the name of the fund from which you wish to exchange or
redeem shares
o the dollar amount or number of shares you want to exchange or
redeem
o the name of the fund into which shares are to be exchanged,
if applicable
<PAGE>
PAGE 15
Telephone exchange or redemption requests received before 2 p.m.
(Central time) on any business day, once the caller's identity and
account ownership have been verified by AEFA, will be processed at
the net asset value determined as of the close of business
(normally 3 p.m. Central time) that day.
By mail:
You may also request an exchange or redemption by writing to
American Express Financial Services Direct, P.O. Box 59196,
Minneapolis, MN 55459-0196. Once an exchange or redemption request
is mailed it is irrevocable and cannot be modified or canceled.
To properly process your mailed exchange or redemption request, we
will need a letter from you that contains the following
information:
o your AEFA account number
o the name of the fund from which you wish to exchange or
redeem shares
o the dollar amount or number of shares you want to exchange or
redeem
o the name of the fund into which shares are to be exchanged,
if applicable, and
o a signature of at least one of the AEFA account holders in
the exact form specified on the account
Telephone transactions. You may make purchase, redemption and
exchange requests by mail or by calling 1-800-AXP-SERV where
trained representatives are available to answer questions about the
Fund and your account. The privilege to initiate transactions by
telephone is automatically available through your AEFA account.
The Fund will honor any telephone transaction believed to be
authentic and will use reasonable procedures to confirm that
instructions communicated by telephone are genuine. This includes
asking identifying questions and tape recording calls. If these
procedures are not followed, the Fund may be liable for losses due
to unauthorized or fraudulent instructions. Telephone privileges
may be modified or discontinued at any time.
Systematic purchase plans
AEFA offers a Systematic Purchase Plan (SPP) that allows you to
make periodic investments in Express Direct Funds automatically and
conveniently. A SPP can be used as a dollar cost averaging program
and saves you time and expense associated with writing checks or
wiring funds.
Investment minimums: You can make automatic investments in any
amount, from $100 to $50,000.
Investment methods: Automatic investments are made from your AEFA
account and you may select from several different investment
methods to make automatic investment(s):
<PAGE>
PAGE 16
a) Using uninvested cash in your AEFA account: If you elect to
use this option to make your automatic investments,
uninvested cash in your AEFA account will be used to make the
investment and, if necessary, shares of your Money Market
Fund will be redeemed to cover the balance of the purchase.
b) Using bank authorization or direct deposit: Bank
authorizations (transfers from a bank checking or savings
account) and direct deposit (automatic deposit of all or a
portion of a payroll or government check) are two of the
investment method options that are available through SPP.
Money is transferred into your AEFA account and automatic
investments can be made using these amounts.
If you elect to use bank authorizations and/or direct deposit for
your automatic investments, you will select two dates: a transfer
date (when the money is transferred into your AEFA account) and
your investment date. The automatic investment date selected may
be the same day of your bank authorization or direct deposit. AEFA
recommends that your investment date be on or close to the
transfer/deposit date to minimize uninvested cash in your AEFA
account.
If you make changes to your bank authorization or direct deposit
date, it may also be necessary to change your automatic investment
date to coincide with the new transfer/deposit date.
Investment frequency: You can select the frequency of your
automatic investments (twice monthly, monthly or quarterly) and
choose either the 5th or the 20th of the month for your automatic
investment dates. Quarterly investments are made on the date
selected in the first month of each quarter (January, April, July
and October).
Changing instructions to an already established plan: If you want
to change the fund(s) selected for your SPP you may do so by
calling 1-800-AXP-SERV, or by sending written instructions clearly
outlining the changes to American Express Financial Services
Direct, P.O. Box 59196, Minneapolis, MN 55459-0196. Written
notification must include the following:
o The funds with SPP that you want to cancel
o The newly selected fund(s) in which you want to begin
making automatic investments and the amount to be
invested in each fund
o The investment frequency and investment dates for your
new automatic investments
Information on changing bank authorization and direct deposit
instructions is included in the Systematic Purchase Plan Terms and
Conditions brochure which you will receive after enrolling in SPP.
<PAGE>
PAGE 17
Terminating your SPP. If you wish to terminate your SPP, you may
call 1-800-AXP-SERV, or send written instructions to American
Express Financial Services Direct, P.O. Box 59196, Minneapolis, MN
55459-0196.
Terminating bank authorizations and direct deposit. If you wish to
terminate your bank authorizations, you may do so at any time by
notifying AEFA in writing. You must notify your employer or
government agency to cancel direct deposit. Your bank
authorization and/or direct deposit will not automatically
terminate when you cancel your SPP.
IMPORTANT: If you are canceling your bank authorizations and/or
direct deposit and you wish to cancel your SPP, you must also
provide instructions stating that AEFA should cancel your SPP. You
may notify AEFA by sending written instructions to the address
above or telephoning 1-800-AXP-SERV. Your systematic investments
will continue using AEFA account assets if AEFA does not receive
notification to terminate your systematic investments as well.
To avoid procedural difficulties, AEFA should receive instructions
to change or terminate your SPP or bank authorizations at least 10
days prior to your scheduled investment date.
Additional information. This information is only a summary of the
Systematic Purchase Plan Terms and Conditions brochure that you
will receive if you choose to enroll in SPP. Please read it
carefully and keep it for future reference.
Other important information
Minimum balance and account requirements. The Fund reserves the
right to redeem your shares if, as a result of redemptions, the
aggregate value of your holdings in the Fund drops below $1,000
($500 in the case of custodial accounts, IRAs and other retirement
plans). You will be notified in writing 30 days before the Fund
takes such action to allow you to increase your holdings to the
minimum level. If you close your AEFA account, the Fund will
automatically redeem your shares.
Wire transfers to your bank. Funds can be wired from your AEFA
account to your bank account. Call AEFA for additional information
on wire transfers. A $15 service fee will be charged against your
AEFA account for each wire sent.
No person has been authorized to give any information or to make
any representations not contained in this prospectus in connection
with the offering being made by this prospectus and, if given or
made, such information or representation must not be relied upon as
having been authorized by the Fund or its Distributor. This
prospectus does not constitute an offering by the Fund or by the
Distributor in any jurisdiction in which such offering may not be
lawfully made.
<PAGE>
PAGE 18
Special shareholder services
Services
To help you track and evaluate the performance of your investments,
AEFA provides these services:
Quarterly statements listing all of your holdings and transactions
during the previous three months.
Yearly tax statements featuring average-cost-basis reporting of
capital gains or losses if you redeem your shares along with
distribution information - which simplifies tax calculations.
Quick telephone reference
American Express Financial Services Direct Team
Fund performance, objectives and account inquiries, redemptions and
exchanges, dividend payments or reinvestments and automatic payment
arrangements
1-800-AXP-SERV
TTY Service
For the hearing impaired
1-800-710-5260
Distributions and taxes
As a shareholder you are entitled to your share of the Fund's net
income and any gains realized on its investments. The Fund
distributes dividends and capital gain distributions to qualify as
a regulated investment company and to avoid paying corporate income
and excise taxes. Dividend and capital gain distributions will
have tax consequences you should know about.
Dividend and capital gain distributions
Investment income is allocated to the Fund by the Portfolio, less
direct and allocated expenses. The Fund's net realized capital
gains or losses, if any, consist of the net realized capital gains
or losses allocated to the Fund from the Portfolio. The Fund's
income from dividends and interest, and any net realized short-term
gain, are distributed to you monthly as dividends. The Fund will
offset any net realized capital gains by any available capital loss
carryovers. The net realized capital gains, if any, are
distributed at the end of the calendar year as capital gain
distributions. Before they're distributed, net long term capital
gains are included in the value of each share. After they're
distributed, the value of each share drops by the per-share amount
of the distribution. (If your distributions are reinvested, the
total value of your holdings will not change.) Short-term capital
gains earned by the Fund are paid to shareholders as part of their
ordinary income dividend and are taxable as ordinary income.
<PAGE>
PAGE 19
Reinvestments
Dividends and capital gain distributions are automatically
reinvested in additional shares of the Fund, unless you request the
Fund in writing or by phone to pay distributions to you in cash.
The reinvestment price is the net asset value at close of business
on the day the distribution is paid. (Your quarterly statement
will confirm the amount invested and the number of shares
purchased.)
If you choose cash distributions, you will receive only those
declared after your request has been processed.
Taxes
The Fund has requested a Private Letter Ruling from the Internal
Revenue Service asking that for purposes of the Internal Revenue
Code the Fund be regarded as directly holding its allocable share
of the income and gain realized by the Portfolio. There is no
assurance that this request will be granted.
Dividends distributed from interest earned on tax-exempt securities
(exempt-interest dividends) are exempt from federal income taxes
but may be subject to state and local taxes. Dividends distributed
from other income earned and capital gain distributions are not
exempt from federal income taxes. Distributions are taxable in the
year the Fund pays them regardless of whether you take them in cash
or reinvest them.
Interest on certain private activity bonds is a preference item for
purposes of the individual and corporate alternative minimum taxes.
To the extent the Fund earns such income, it will flow through to
its shareholders and may be taxable to those shareholders who are
subject to the alternative minimum tax.
Because interest on municipal bonds and notes is tax-exempt for
federal income tax purposes, any interest on borrowed money used
directly or indirectly to purchase Fund shares is not deductible on
your federal income tax return. You should consult a tax advisor
regarding its deductibility for state and local income tax
purposes.
Each January, you will receive a tax statement showing the kinds
and total amount of all distributions you received during the
previous year. You must report distributions on your tax returns,
even if they are reinvested in additional shares.
Buying a dividend creates a tax liability. This means buying
shares shortly before a capital gain distribution. You pay the
full pre-distribution price for the shares, then receive a portion
of your investment back as a distribution, which is taxable.
Redemptions and exchanges subject you to a tax on any capital gain.
If you sell shares for more than their cost, the difference is a
capital gain. Your gain may be either short term (for shares held
for one year or less) or long term (for shares held for more than
one year).<PAGE>
PAGE 20
Your Taxpayer Identification Number (TIN) is important. As with
any financial account you open, you must list your current and
correct Taxpayer Identification Number (TIN) -- either your Social
Security or Employer Identification number. The TIN must be
certified under penalties of perjury on your application when you
open an account.
If you don't provide the TIN, or the TIN you report is incorrect,
you could be subject to backup withholding of 31% of taxable
distributions and proceeds from certain sales and exchanges. You
also could be subject to further penalties, such as:
o a $50 penalty for each failure to supply your correct TIN
o a civil penalty of $500 if you make a false statement that
results in no backup withholding
o criminal penalties for falsifying information
You also could be subject to backup withholding because you failed
to report interest or dividends on your tax return as required.
How to determine the correct TIN
Use the Social Security or
For this type of account: Employer Identification number
of:
Individual or joint account The individual or individuals
listed on the account
Custodian account of a minor The minor
(Uniform Gifts/Transfers to
Minors Act)
A living trust The grantor-trustee (the person
who puts the money into the
trust)
An irrevocable trust, pension The legal entity (not the
trust or estate personal representative or
trustee, unless no legal entity
is designated in the account
title)
Sole proprietorship or The owner or partnership
partnership
Corporate The corporation
Association, club or The organization
tax-exempt organization
For details on TIN requirements, call 1-800-AXP-SERV for federal
Form W-9, "Request for Taxpayer Identification Number and
Certification."
<PAGE>
PAGE 21
Important: This information is a brief and selective summary of
certain federal tax rules that apply to the Fund. Tax matters are
highly individual and complex, and you should consult a qualified
tax advisor about your personal situation.
How the Fund and Portfolio are organized
The Fund is a series of Express Direct Tax-Free Fund, Inc., an
open-end management investment company, as defined in the
Investment Company Act of 1940. The Company was incorporated on
Sept. 1, 1995 in Minnesota. The Company's headquarters are at IDS
Tower 10, Minneapolis, MN 55440-0010.
Shares
The Fund is owned by its shareholders. All shares issued by the
Fund are of the same class -- capital stock. Par value is 1 cent
per share. Both full and fractional shares can be issued.
Voting rights
As a shareholder, you have voting rights over the Fund's management
and fundamental policies. You are entitled to one vote for each
share you own. Shares of the Fund have cumulative voting rights.
Shareholder meetings
The Company does not hold annual shareholder meetings. However,
the directors may call meetings at their discretion, or on demand
by holders of 10% or more of the Company's outstanding shares, to
elect or remove directors.
Special considerations regarding master/feeder structure
An investor in the Fund should be aware that the Fund, unlike
mutual funds which directly acquire and manage their own portfolios
of securities, seeks to achieve its investment objective by
investing its assets in the Portfolio of the Trust with an
identical investment objective. This arrangement is commonly known
as a master/feeder structure. The Trust is a separate investment
company. Therefore, the Fund's interest in securities owned by the
Portfolio is indirect. The board has considered the advantages and
disadvantages of investing the assets of the Fund in the Portfolio
and believes that this approach will be in the best interests of
the Fund and its shareholders by positioning the Fund to realize
certain economies of scale inherent in managing a larger asset
base. Until recently, the Advisor sponsored and advised only
traditionally structured funds that invest directly in a portfolio
of securities and retain their own investment manager. Funds that
invest all their assets in interests in a separate investment
company are a relatively new development in the mutual fund
industry and may be subject to additional regulations and risks.
The investment objective, policies and restrictions of the
Portfolio are described under the captions "Goal and types of Fund
investments and their risks" and "Investment policies and risks."
<PAGE>
PAGE 22
In addition to selling an interest to the Fund, the Portfolio may
sell interests to other affiliated and non-affiliated mutual funds
and to institutional investors. Such investors will invest in the
Portfolio on the same terms and conditions and will pay a
proportionate share of the Portfolio's expenses. However, the
other investors investing in the Portfolio are not required to sell
their shares at the same price as the Fund due to variations in
sales commissions and other operating expenses. Therefore,
investors in the Fund should be aware that these differences may
result in differences in returns experienced by investors in the
different funds that invest in the same Portfolio. Information
regarding other funds or pooled investment entities that invest in
the Portfolio of the Trust may be obtained by contacting
_________________ at ________________.
The Fund may withdraw (completely redeem) all its assets from the
Portfolio at any time if the board determines that it is in the
best interest of the Fund to do so. In the event the Fund
withdraws all of its assets from the Portfolio, the board would
consider what action might be taken, including investing all assets
of the Fund in another pooled investment entity or retaining an
investment advisor to manage the Fund's assets in accordance with
its investment objective. The investment objective of the Fund and
the Portfolio can only be changed with the approval of holders of
outstanding voting securities. If the objective of the Portfolio
changes and shareholders of the Fund do not approve a parallel
change in the Fund's investment objective, the Company would seek
an alternative investment vehicle for that Fund or retain an
investment advisor on its behalf.
Investors in the Fund should be aware that smaller funds investing
in the Portfolio may be adversely affected by the actions of larger
funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may experience
higher prorated operating expenses, thereby producing lower
returns. Additionally, the Portfolio may become less diverse,
resulting in increased portfolio risk, and experience decreasing
economies of scale. Institutional investors in the Portfolio that
have a greater pro rata ownership than the Fund could have
effective voting control over the operation of the Portfolio.
Certain changes in the Portfolio's fundamental objectives, policies
and restrictions could require the Fund to redeem its interest in
the Portfolio. Any such withdrawal could result in a distribution
of in-kind portfolio securities (as opposed to cash distribution).
If securities are distributed, the Fund could incur brokerage, tax
or other charges in converting the securities to cash. In
addition, a distribution in kind may result in a less diversified
portfolio of investments or adversely affect the liquidity of the
Fund.
Wherever the Fund as an investor in the Portfolio is requested to
vote on matters pertaining to the Portfolio, the Fund will hold a
meeting of Fund shareholders and will vote its interests in the
Portfolio for or against such matters proportionately to the
instructions to vote for or against such matters received from Fund
shareholders. The Fund will vote shares for which it receives no
<PAGE>
PAGE 23
voting instructions in the same proportion as the shares for which
it receives voting instructions. See "Sales charge and Fund
expenses" for a complete description of the management and other
expenses associated with the Fund's investment in the Portfolio.
Board members and officers
Shareholders of the Company elect a board of directors who oversees
the operations of the Fund and chooses the Company's officers. The
Company's officers are responsible for day-to-day business
decisions based on policies set by the board. Since the Trust and
Company share common members of the board, the board members have
adopted written procedures reasonably appropriate to deal with
potential conflicts of interest up to and including creating a
separate board. Information about the board members and officers
of both the Company and the Trust is found in the SAI under the
caption "Board Members and Officers."
Investment manager
The Trust, on behalf of the Portfolio, pays the Advisor for
managing the assets of the Portfolio. Under its Investment
Management Services Agreement, the Advisor determines which
securities will be purchased, held or sold by the 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 the Portfolio, as follows:
Assets Annual rate at
(billions) each asset level
First $1.0 0.490%
Next 1.0 0.465
Next 1.0 0.440
Next 3.0 0.415
Next 3.0 0.390
Over 9.0 0.360
Under the agreement, the Portfolio also pays taxes, brokerage
commissions and nonadvisory expenses.
Administrator and transfer agent
Under an Administrative Services Agreement, the Fund pays the
Advisor for administration and accounting services at an annual
rate of 0.04% decreasing in gradual percentages to 0.02% as assets
increase.
In addition, under a separate Transfer Agency Agreement, the
Advisor maintains shareholder accounts and records for the Fund.
The Fund pays an annual fee of $_____ per shareholder account for
this service.
Distributor
The Fund sells shares through the Distributor under a Distribution
Agreement. Financial consultants representing the Distributor
provide information to investors about individual investment
<PAGE>
PAGE 24
programs, the Fund and its operations, new account applications,
exchange and redemption requests. The Fund reserves the right to
sell shares through other broker/dealers.
To help defray costs, including costs for marketing, sales
administration, training, overhead, advertising and related
functions, the Funds pay the Distributor a distribution fee, also
known as a 12b-1 fee. This fee is paid under a Plan and Agreement
of Distribution that follows the terms of Rule 12b-1 of the
Investment Company Act of 1940. Under this Agreement, the Fund
pays a distribution fee at an annual rate of [0.__%] of the Fund's
average daily net assets for distribution-related services. This
fee will not cover all of the costs incurred by the Distributor.
Total fees and expenses (excluding taxes and brokerage commissions)
cannot exceed the most restrictive applicable state expense
limitation.
About the Advisor
The Advisor is located at IDS Tower 10, Minneapolis, MN 55440-0010.
It is a wholly owned subsidiary of American Express Company, a
financial services company with headquarters at American Express
Tower, World Financial Center, New York, NY 10285. The Portfolio
may pay brokerage commissions to broker-dealer affiliates of the
Advisor.
<PAGE>
PAGE 25
Appendix A
Description of bond ratings
Bond ratings concern the quality of the issuing state or local
governmental unit. 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 the SAI.
Aaa/AAA - Judged to be of the best quality and carry the smallest
degree of investment risk. Interest and principal are secure.
Aa/AA - Judged to be high-grade although margins of protection for
interest and principal may not be quite as good as Aaa or AAA rated
securities.
A - Considered upper-medium grade. Protection for interest and
principal is deemed adequate but may be susceptible to future
impairment.
Baa/BBB - Considered medium-grade obligations. Protection for
interest and principal is adequate over the short-term; however,
these obligations may have certain speculative characteristics.
Ba/BB - Considered to have speculative elements. The protection of
interest and principal payments may be very moderate.
B - Lack characteristics of more desirable investments. There may
be small assurance over any long period of time of the payment of
interest and principal.
Caa/CCC - Are of poor standing. Such issues may be in default or
there may be risk with respect to principal or interest.
Ca/CC - Represent obligations that are highly speculative. Such
issues are often in default or have other marked shortcomings.
C - Are obligations with a higher degree of speculation. These
securities have major risk exposures to default.
D - Are in payment default. The D rating is used when interest
payments or principal payments are not made on the due date.
Non-rated securities will be considered for investment when they
possess a risk comparable to that of rated securities consistent
with the Portfolio's objectives and policies. When assessing the
risk involved in each non-rated security, the Portfolio will
consider the financial condition of the issuer or the protection
afforded by the terms of the security.
<PAGE>
PAGE 26
Definitions of zero-coupon and pay-in-kind securities
A zero-coupon security is a security that is sold at a deep
discount from its face value and makes no periodic interest
payments. The buyer of such a security receives a rate of return
by gradual appreciation of the security, which is redeemed at face
value on the maturity date.
A pay-in-kind security is a security in which the issuer has the
option to make interest payments in cash or in additional
securities. The securities issued as interest usually have the
same terms, including maturity date, as the pay-in-kind securities.
<PAGE>
PAGE 27
Appendix B
1995 Federal Tax-Exempt and Taxable Equivalent Yield Calculation
These tables will help you determine your federal taxable yield
equivalents for given rates of tax-exempt income.
[Federal tax tables to be inserted here in typeset by Accounting.]
<PAGE>
PAGE 28
Appendix C
Descriptions of derivative instruments
What follows are brief descriptions of derivative instruments the
Portfolio may use. At various times the Portfolio may use some or
all of these instruments and is not limited to these instruments.
It may use other similar types of instruments if they are
consistent with the Portfolio's investment goal and policies. For
more information on these instruments, see the SAI.
Options and futures contracts. An option is an agreement to buy or
sell an instrument at a set price during a certain period of time.
A futures contract is an agreement to buy and sell an instrument
for a set price on a future date. The 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 the Portfolio's
investments against price fluctuations or to increase market
exposure.
Asset-backed and mortgage-backed securities. Asset-backed
securities include interests in pools of assets such as motor
vehicle installment sale contracts, installment loan contracts,
leases on various types of real and personal property, receivables
from revolving credit (credit card) agreements or other categories
of receivables. Mortgage-backed securities include collateralized
mortgage obligations and stripped mortgage-backed securities.
Interest and principal payments depend on payment of the underlying
loans or mortgages. The value of these securities may also be
affected by changes in interest rates, the market's perception of
the issuers and the creditworthiness of the parties involved. 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.<PAGE>
PAGE 29
Structured products. Structured products are over-the-counter
financial instruments created specifically to meet the needs of one
or a small number of investors. The instrument may consist of a
warrant, an option or a forward contract embedded in a note or any
of a wide variety of debt, equity and/or currency combinations.
Risks of structured products include the inability to close such
instruments, rapid changes in the market and defaults by other
parties.
<PAGE>
PAGE 30
STATEMENT OF ADDITIONAL INFORMATION
FOR
EXPRESS DIRECT TAX-FREE FUND, INC.
_________, 1995
This Statement of Additional Information (SAI) is not a prospectus.
It should be read together with the Fund's prospectus which may be
obtained by calling American Express Financial Services Direct,
1-800-AXP-SERV (TTY: 1-800-710-5260) or by writing to P.O. Box
59196, Minneapolis, MN 55459-0196.
This SAI is dated _______, 199_, and it is to be used with the
Fund's prospectus dated _______, 199_.
<PAGE>
PAGE 31
TABLE OF CONTENTS
Goal and Investment Policies.........................See Prospectus
Additional Investment Policies................................p.
Portfolio Transactions........................................p.
Brokerage Commissions Paid to Brokers Affiliated
with the Advisor..............................................p.
Performance Information.......................................p.
Valuing Fund Shares...........................................p.
Investing in the Funds........................................p.
Redeeming Shares..............................................p.
Pay-out Plans.................................................p.
Taxes.........................................................p.
Agreements....................................................p.
Board Members and Officers....................................p.
Custodian.....................................................p.
Independent Auditors..........................................p.
Prospectus....................................................p.
Appendix A: Description of Short-Term Securities.............p.
Appendix B: Options and Interest Rate Futures Contracts......p.
<PAGE>
PAGE 32
ADDITIONAL INVESTMENT POLICIES
Express Direct Tax-Free Fund, Inc. (the Company) is a series mutual
fund with one series of capital stock representing interests in
Express Direct Aggressive Tax-Free Income Fund (the Fund). The
Fund is a diversified mutual fund with its own goals and investment
policies. The Fund seeks to achieve its goals by investing all of
its assets in a corresponding series portfolio (the Portfolio) of
Tax-Free Income Trust (the Trust), a separate investment company,
rather than by directly investing in and managing its own portfolio
of securities.
Fundamental investment policies adopted by the Fund or Portfolio
cannot be changed without the approval of a majority of the
outstanding voting securities of the Fund or Portfolio, as defined
in the Investment Company Act of 1940. Whenever the Fund is
requested to vote on a change in the investment policies of the
corresponding Portfolio, the Company will hold a meeting of Fund
shareholders and will cast the Fund's vote as instructed by the
shareholders.
Notwithstanding any of the Fund's other investment policies, the
Fund may invest its assets in an open-end management investment
company having substantially the same investment objectives,
policies and restrictions as the Fund for the purpose of having
those assets managed as part of a combined pool.
Investment Policies applicable to the Portfolio:
These are investment policies in addition to those presented in the
prospectus. The policies below are fundamental policies that apply
both to the Fund and its corresponding Portfolio and may be changed
only with shareholder/unitholder approval. Unless holders of a
majority of the outstanding voting securities 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 restricted 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.
'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<PAGE>
PAGE 33
that up to 25% of the Portfolio's total assets may be invested
without regard to this 5% limitation. For purposes of this policy,
the terms of a municipal security determine the issuer.
'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 investment manager believes the opportunity for
additional income outweighs the risks.
The policies below are non-fundamental policies that apply both to
the Fund and its corresponding Portfolio and may be changed without
shareholder/unitholder approval. Unless changed by the board, the
Portfolio will not:
'Buy on margin or sell short, but it may enter into interest rate
future 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 a
futures contract are not deemed to be a pledge of assets.
'Invest more than 5% of its total assets in securities whose issuer
or guarantor of principal and interest has been in operation for
less than three years.
<PAGE>
PAGE 34
'Invest in voting securities, securities of investment companies or
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 the Portfolio's net assets in securities
and derivative instruments that are illiquid. In determining the
liquidity of municipal lease obligations, American Express
Financial Corporation (the Advisor), under guidelines established
by the board, will consider the essential nature of the leased
property, the likelihood that the municipality will continue
appropriating funding for the leased property, and other relevant
factors related to the general credit quality of the municipality
and the marketability of the municipal lease obligation. For
purposes of complying with Ohio law, the Portfolio will not invest
more than 15% of its total assets in a combination of illiquid
securities, 144A securities and securities of companies, including
any predecessor, that has a record of less than three years
continuous operations.
The Portfolio may invest up to 20% of its net assets in certain
taxable investments for temporary defensive purposes. It may
purchase short-term U.S. and Canadian government securities. It
may invest in bank obligations including negotiable certificates of
deposit, non-negotiable fixed time deposits, bankers' acceptances
and letters of credit. The issuing bank or savings and loan
generally must have 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 may purchase short-term corporate notes and
obligations rated in the top two classifications by Moody's or S&P
or the equivalent. It also may use repurchase agreements with
broker-dealers registered under the Securities Exchange Act of 1934
and with commercial banks. Repurchase agreements involve
investments in debt securities where the seller (broker-dealer or
bank) agrees to repurchase the securities from the Portfolio at
cost plus an agreed-to interest rate within a specified time. 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, and it might
subsequently incur a loss if the value of the security declines or
if the other party to a repurchase agreement defaults on its
obligation.
The Portfolio may invest in commercial paper issued in transactions
not involving a public offering under Section 4(2) of the
Securities Act of 1933 (4(2) paper). In determining the liquidity<PAGE>
PAGE 35
of 4(2) paper, the Advisor, 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.
For a description of short-term securities, see Appendix A. For a
discussion on options and interest rate futures contracts, see
Appendix B.
PORTFOLIO TRANSACTIONS
Subject to policies set by the board of the Trust, the Advisor is
authorized to determine, consistent with the Portfolio's investment
goal and policies, which securities will be purchased, held or
sold. In determining where the buy and sell orders are to be
placed, the Advisor has been directed to use its best efforts to
obtain the best available price and most favorable execution except
where otherwise authorized by the board.
The Advisor has a strict Code of Ethics that prohibits its
affiliated personnel from engaging in personal investment
activities that compete with or attempt to take advantage of
planned portfolio transactions for any of the Trusts in the Trust
Group of Funds. The Advisor carefully monitors compliance with its
Code of Ethics.
Normally, the 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<PAGE>
PAGE 36
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
Securities and Exchange Commission (SEC).
When paying a commission that might not otherwise be charged or a
commission in excess of the amount another broker might charge, the
Advisor must follow procedures authorized by the board. To date,
three procedures have been authorized. One procedure permits the
Advisor to direct an order to buy or sell a security traded on a
national securities exchange to a specific broker for research
services it has provided. The second procedure permits the
Advisor, in order to obtain research, to direct an order on an
agency basis to buy or sell a security traded in the over-the-
counter market to a firm that does not make a market in that
security. The commission paid generally includes compensation for
research services. The third procedure permits the Advisor, in
order to obtain research and brokerage services, to cause the
Portfolio to pay a commission in excess of the amount another
broker might have charged. The Advisor has advised the Trust it is
necessary to do business with a number of brokerage firms on a
continuing basis to obtain such services as the handling of large
orders, the willingness of a broker to risk its own money by taking
a position in a security, and the specialized handling of a
particular group of securities that only certain brokers may be
able to offer. As a result of this arrangement, some Portfolio
transactions may not be effected at the lowest commission, but the
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 all the Trusts in
the Trust Group of Funds, 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 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<PAGE>
PAGE 37
in advance is fair. Although sharing in large transactions may
adversely affect the price or volume purchased or sold by the
Portfolio, the 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 Portfolio
according to procedures adopted by the Trust's board and to the
extent consistent with applicable provisions of the federal
securities laws. The Advisor will use an American Express
affiliate only if (i) the Advisor determines that the Portfolio
will receive prices and executions at least as favorable as those
offered by qualified independent brokers performing similar
brokerage and other services for the Portfolio and (ii) the
affiliate charges the Portfolio commission rates consistent with
those the affiliate charges comparable unaffiliated customers in
similar transactions and if such use is consistent with terms of
the Investment Management Services Agreement.
The Advisor may direct brokerage to compensate an affiliate. The
Advisor will receive research on South Africa from New Africa
Advisors, a wholly-owned subsidiary of Sloan Financial Group. The
Advisor owns 100% of IDS Capital Holdings Inc. which in turn owns
40% of Sloan Financial Group. New Africa Advisors will send
research to the Advisor and in turn the Advisor will direct trades
to a particular broker. The broker will have an agreement to pay
New Africa Advisors. All transactions will be on a best execution
basis. Compensation received will be reasonable for the services
rendered.
PERFORMANCE INFORMATION
The Fund may quote various performance figures to illustrate past
performance. Average annual total return and current yield
quotations used by the Fund are based on standardized methods of
computing performance as required by the SEC. An explanation of
the methods used by the Fund to compute performance follows.
Average annual total return
The Fund may calculate average annual total return for certain
periods by finding the average annual compounded rates of return
over the period that would equate the initial amount invested to
the ending redeemable value, according to the following formula:
P(1+T)n = ERV<PAGE>
PAGE 38
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment, made at the beginning of a period, at the
end of the period (or fractional portion thereof)
Aggregate total return
The Fund may calculate aggregate total return for certain periods
representing the cumulative change in the value of an investment in
the Fund over a specified period of time according to the following
formula:
ERV - P
P
where: P = a hypothetical initial payment of $1,000
ERV = ending redeemable value of a hypothetical $1,000
payment, made at the beginning of a period, at the
end of the period (or fractional portion thereof)
Annualized yield
The Fund may calculate an annualized yield by dividing the net
investment income per share deemed earned during a period by the
net asset value per share on the last day of the period and
annualizing the results.
Yield is calculated according to the following formula:
Yield = 2[(a-b + 1)6 - 1]
cd
where: a = dividends and interest earned during the period
b = aggregate expenses accrued for the period (net of
reimbursements)
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends
d = the maximum offering price per share on the last
day of the period
The Fund's yield, calculated as described above according to the
formula prescribed by the SEC, is a hypothetical return based on
market value yield to maturity for the Portfolio's securities. It
is not necessarily indicative of the amount which was or may be
paid to the Fund's shareholders. Actual amounts paid to the Fund's
shareholders are reflected in the distribution yield.
Distribution yield
Distribution yield is calculated according to the following
formula:
<PAGE>
PAGE 39
D divided by POP F equals DY
30 30
where: D = sum of dividends for 30-day period
POP = sum of public offering price for 30-day period
F = annualizing factor
DY = distribution yield
Tax-Equivalent Yield
Tax-equivalent yield is calculated by dividing that portion of the
yield (as calculated above) which is tax-exempt by one minus a
stated income tax rate and adding the result to that portion, if
any, of the yield that is not tax-exempt. The following table
shows the Fund's tax-equivalent yield, based on federal but not
state tax rates, for the 30-day period ended ________, 19__.
Marginal
Income Tax Tax-Equivalent Yield
Bracket Distribution Annualized
15.0% % %
28.0% % %
33.0% % %
In its sales material and other communications, the Fund may quote,
compare or refer to rankings, yields or returns as published by
independent statistical services or publishers and publications
such as The Bank Rate Monitor National Index, Barron's, Business
Week, Donoghue's Money Market Fund Report, Financial Services Week,
Financial Times, Financial World, Forbes, Fortune, Global Investor,
Institutional Investor, Investor's Daily, Kiplinger's Personal
Finance, Lipper Analytical Services, Money, Mutual Fund Forecaster,
Newsweek, The New York Times, Personal Investor, Stanger Report,
Sylvia Porter's Personal Finance, USA Today, U.S. News and World
Report, The Wall Street Journal and Wiesenberger Investment
Companies Service.
On _________, IDS High Yield Tax-Exempt Fund (the IDS Fund), an
open-end investment company managed by the Advisor, transferred all
of its assets, totaling $___ billion, to the Portfolio in exchange
for units therein. Also on ___________, the Fund transferred all
of its assets to the Portfolio in connection with the commencement
of its operations.
On March 20, 1995, the IDS Fund converted to a multiple class
structure pursuant to which three classes of shares are offered:
Class A, Class B and Class Y. Class A shares are sold with a 5%
sales charge, a 0.175% service fee and no 12b-1 fee.
Performance quoted by the Fund is based on the performance and
yield of the IDS Fund prior to March 20, 1995 and to Class A shares<PAGE>
PAGE 40
of the IDS Fund from March 20, 1995 through _____________, adjusted
for differences in sales charge.
The historical performance has not been adjusted for any difference
between the estimated aggregate fees and expenses of the Fund and
historical fees and expenses of the IDS Fund.
The Portfolio turnover rate for the Fund was ___% in calendar year
1995, and ___% in calendar year 1994. Turnover rates are based on
the turnover rate of the IDS Fund, which transferred all of its
assets to the Portfolio on ____________, for periods prior to _____
(the Fund's commencement of operations). A high turnover rate (in
excess of 100%) results in higher fees and expenses.
VALUING FUND SHARES
The value of an individual share is determined by using the net
asset value before shareholder transactions for the day and
dividing that figure by the number of shares outstanding at the end
of the previous day.
In determining net assets before shareholder transactions, the
securities held by the Fund's corresponding Portfolio are valued as
follows as of the close of business of the New York Stock Exchange:
'Securities, except bonds other than convertibles, traded on a
securities exchange for which a last-quoted sales price is readily
available are valued at the last-quoted sales price on the exchange
where such security is primarily traded.
'Securities traded on a securities exchange for which a last-quoted
sales price is not readily available are valued at the mean of the
closing bid and asked prices, looking first to the bid and asked
prices on the exchange where the security is primarily traded and,
if none exist, to the over-the-counter market.
'Securities included in the NASDAQ National Market System are
valued at the last-quoted sales price in this market.
'Securities included in the NASDAQ National Market System for which
a last-quoted sales price is not readily available, and other
securities traded over-the-counter but not included in the NASDAQ
National Market System are valued at the mean of the closing bid
and asked prices.
'Futures and options traded on major exchanges are valued at the
last-quoted sales price on their primary exchange.
'Foreign securities traded outside the United States are generally
valued as of the time their trading is complete, which is usually
different from the close of the New York Stock Exchange. Foreign
securities quoted in foreign currencies are translated into U.S.
dollars at the current rate of exchange. Occasionally, events
affecting the value of such securities may occur between such times<PAGE>
PAGE 41
and the close of the New York Stock Exchange that will not be
reflected in the computation of the Portfolio's net asset value.
If events materially affecting the value of such securities occur
during such period, these securities will be valued at their fair
value according to procedures decided upon in good faith by the
Trust's board.
'Short-term securities maturing more than 60 days from the
valuation date are valued at the readily available market price or
approximate market value based on current interest rates. Short-
term securities maturing in 60 days or less that originally had
maturities of more than 60 days at acquisition date are valued at
amortized cost using the market value on the 61st day before
maturity. Short-term securities maturing in 60 days or less at
acquisition date are valued at amortized cost. Amortized cost is
an approximation of market value determined by systematically
increasing the carrying value of a security if acquired at a
discount, or reducing the carrying value if acquired at a premium,
so that the carrying value is equal to maturity value on the
maturity date.
'Securities without a readily available market price, bonds other
than convertibles and other assets are valued at fair value as
determined in good faith by the board. The board is responsible
for selecting methods it believes provide fair value. When
possible, bonds are valued by a pricing service independent from
the Trust. If a valuation of a bond is not available from a
pricing service, the bond will be valued by a dealer knowledgeable
about the bond if such a dealer is available.
The New York Stock Exchange, the Advisor and the Fund will be
closed on the following holidays: New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
INVESTING IN THE FUND
The Fund's minimum initial investment requirement is $2,000 ($1,000
for Custodial Accounts, Individual Retirement Accounts and certain
other retirement plans). Subsequent investments of $100 or more
may be made. These minimum investment requirements may be changed
at any time and are not applicable to certain types of investors.
The Securities Investor Protection Corporation (SIPC) will provide
account protection, in an amount up to $500,000, for securities,
including Fund shares (up to $100,000 protection for cash), held in
an Investment Management Account maintained with American Express
Financial Advisors Inc. Of course, SIPC account protection does
not protect shareholders from share price fluctuations.<PAGE>
PAGE 42
REDEEMING SHARES
You have a right to redeem your shares at any time. For an
explanation of redemption procedures, please see the prospectus.
During an emergency, the board can suspend the computation of net
asset value, stop accepting payments for purchase of shares or
suspend the duty of the Fund to redeem shares for more than seven
days. Such emergency situations would occur if:
'The New York Stock Exchange closes for reasons other than the
usual weekend and holiday closings or trading on the Exchange is
restricted, or
'Disposal of the Fund's securities is not reasonably practicable or
it is not reasonably practicable for a Fund to determine the fair
value of its net assets, or
'The SEC, under the provisions of the Investment Company Act of
1940 (the 1940 Act), as amended, declares a period of emergency to
exist.
Should the Fund stop selling shares, the board members may make a
deduction from the value of the assets held by the Fund to cover
the cost of future liquidations of the assets so as to distribute
fairly these costs among all shareholders.
Redemptions by the Fund
The Fund reserves the right to redeem, involuntarily, the shares of
any shareholder whose account has a value of less than a minimum
amount but only where the value of such account has been reduced by
voluntary redemption of shares. Until further notice, it is the
policy of the Fund not to exercise this right with respect to any
shareholder whose account has a value of $1,000 or more. In any
event, before the Fund redeems such shares and sends the proceeds
to the shareholder, it will notify the shareholder that the value
of the shares in the account is less than the minimum amount and
allow the shareholder 30 days to make an additional investment in
an amount which will increase the value of the accounts to at least
$1,000.
Redemptions in Kind
The Company has elected to be governed by Rule 18f-1 under the
Investment Company Act, which obligates the Fund to redeem shares
in cash, with respect to any one shareholder during any 90-day
period, up to the lesser of $250,000 or 1% of the net assets of the
Fund at the beginning of such period. Although redemptions in
excess of this limitation would normally be paid in cash, the Fund
reserves the right to make payments in whole or in part in
securities or other assets in case of an emergency, or if the
payment of such redemption in cash would be detrimental to the
existing shareholders of the Fund as determined by the board. In
such circumstances, the securities distributed would be valued as<PAGE>
PAGE 43
set forth in the Prospectus. Should the Fund distribute
securities, a shareholder may incur brokerage fees or other
transaction costs in converting the securities to cash.
PAY-OUT PLANS
You can use any of several pay-out plans to redeem your investment
in regular installments at no extra cost. While the plans differ
on how the pay-out is figured, they all are based on the redemption
of your investment. Net investment income dividends and any
capital gain distributions will automatically be reinvested, unless
you elect to receive them in cash. If you are redeeming a tax-
qualified plan account for which American Express Trust Company
acts as custodian, you can elect to receive your dividends and
other distributions in cash when permitted by law. If you redeem
an IRA or a qualified retirement account, certain restrictions,
federal tax penalties and special federal income tax reporting
requirements may apply. You should consult your tax advisor about
this complex area of the tax law.
To start any of these plans, please submit an authorization form
supplied by American Express Financial Services Direct. For a
copy, write or call American Express Financial Services Direct,
1-800-AXP-SERV (TTY: 1-800-710-5260), P.O. Box 59196, Minneapolis,
MN 55459-0196. Your authorization must be received in the
Minneapolis headquarters at least five days before the date you
want your payments to begin. The initial payment must be at least
$50. Payments will be made on a monthly, bimonthly, quarterly,
semiannual or annual basis. Your choice is effective until you
change or cancel it.
The following pay-out plans are designed to take care of the needs
of most shareholders. If you need a more irregular schedule of
payments, it may be necessary for you to make a series of
individual redemptions, in which case you will have to send in a
separate redemption request for each pay-out. The Fund reserves
the right to change or stop any pay-out plan and to stop making
such plans available.
Plan #1: Pay-out for a fixed period of time
If you choose this plan, a varying number of shares will be
redeemed at net asset value at regular intervals during the time
period you choose. This plan is designed to end in complete
redemption of all shares in your account with the Fund by the end
of the fixed period.
Plan #2: Redemption of a fixed number of shares
If you choose this plan, a fixed number of shares will be redeemed
at net asset value for each payment and that amount will be sent to
you. The length of time these payments continue is based on the
number of shares in your account with the Fund.
<PAGE>
PAGE 44
Plan #3: Redemption of a fixed dollar amount
If you decide on a fixed dollar amount, whatever number of shares
is necessary to make the payment will be redeemed in regular
installments until your account with the Fund is closed.
Plan #4: Redemption of a percentage of net asset value
Payments are made based on a fixed percentage of the net asset
value of the shares in the account computed on the day of each
payment. Percentages range from 0.25% to 0.75%. For example, if
you are on this plan and arrange to take 0.5% each month, you will
get $50 if the value of your account with the Fund is $10,000 on
the payment date.
TAXES
All distributions of net investment income during the year will
have the same percentage designated as tax-exempt. This annual
percentage is expected to be substantially the same as the
percentage of tax-exempt income actually earned during any
particular distribution period. For the fiscal year ended
________, 19__, __% of the income distribution was designated as
exempt from federal income taxes.
Capital gain distributions, if any, received by individual and
corporate shareholders, should be treated as long-term capital
gains regardless of how long they owned their shares. Short-term
capital gains earned by the Fund are paid to shareholders as part
of their ordinary income dividend and are taxable as ordinary
income, not capital gain.
If you are a "substantial user" (or related person) of facilities
financed by industrial development bonds, you should consult your
tax advisor before investing. The income from such bonds may not
be tax-exempt for you.
Interest on private activity bonds generally issued after August
1986 is a preference item for purposes of the individual and
corporate alternative minimum taxes. "Private-activity" (non-
governmental purpose) municipal bonds include industrial revenue
bonds, student-loan bonds and multi- and single-family housing
bonds. An exception is made for private activity bonds issued for
qualified--501(c)(3)--organizations, including non-profit colleges,
universities and hospitals. These bonds will continue to be tax-
exempt and will not be subject to the alternative minimum tax for
individuals. To the extent a fund earns income subject to the
alternative minimum tax, it will flow through to that fund's
shareholders and may subject some shareholders, depending on their
tax status, to the alternative minimum tax. The Fund reports the
percentage of its income earned from these bonds to shareholders
with their other tax information.
<PAGE>
PAGE 45
State law determines whether interest income on a particular
municipal bond is tax-exempt for state tax purposes. It also
determines the tax treatment of those bonds when earned by a mutual
fund and paid to the fund's shareholders. The Fund will tell you
the percentage of interest income from municipal bonds it received
during the year on a state-by-state basis. Your tax advisor should
help you report this income for state tax purposes.
Under federal tax law, by the end of a calendar year the Fund must
declare and pay dividends representing 98% of ordinary income for
that calendar year and 98% of net capital gains (both long-term and
short-term) for the 12-month period ending Nov. 30 of that calendar
year. The Fund is subject to an excise tax equal to 4% of the
excess, if any, of the amount required to be distributed over the
amount actually distributed. The Fund intends to comply with
federal tax law and avoid any excise tax.
This is a brief summary that relates to federal income taxation
only. Shareholders should consult their tax advisor as to the
application of federal, state and local income tax laws to Fund
distributions.
AGREEMENTS
Investment Management Services Agreement
The Trust, on behalf of the Portfolio, has an Investment Management
Services Agreement with the Advisor. For its services, the Advisor
is paid a fee from the assets of the Portfolio, based upon the
following schedule:
Assets Annual rate at
(billions) each asset level
First $1.0 0.490%
Next 1.0 0.465
Next 1.0 0.440
Next 3.0 0.415
Next 3.0 0.390
Over 9.0 0.360
The fee is calculated for each calendar day on the basis of net
assets as the close of business two days prior to the day for which
the calculation is made. The management fee is paid monthly.
Under the Agreement, the Portfolio also pays taxes, brokerage
commissions and nonadvisory expenses, including custodian fees;
audit and certain legal fees; fidelity bond premiums; registration
fees for units; Portfolio office expenses; consultants' fees;
compensation of board members, officers and employees; corporate
filing fees; organizational expenses; expenses incurred in
connection with lending portfolio securities; and expenses properly
payable by the Portfolios, approved by the board.
<PAGE>
PAGE 46
Administrative Services Agreement
The Company, on behalf of the Fund, has an Administrative Services
Agreement with the Advisor. Under this agreement, the Fund pays
the Advisor for providing administration and accounting services.
The fee is payable from the assets of the Fund and is calculated as
follows:
Fund assets Annual rate at
(billions) each asset level
First $1 0.040%
Next 1 0.035%
Next 1 0.030%
Next 3 0.025%
Next 3 0.020%
Next 9 0.020%
Under the agreement, the Fund also pays taxes; audit and certain
legal fees; registration fees for shares; Fund office expenses;
consultant's fees; compensation of board members, officers and
employees; corporate filing fees; organizational expenses; and
expenses properly payable by the Fund approved by the board of
directors.
Transfer Agency Agreement
The Company, on behalf of the Fund, has a Transfer Agency Agreement
with the Advisor. This agreement governs the responsibility for
administering and/or performing transfer agent functions, for
acting as service agent in connection with dividend and
distribution functions and for performing shareholder account
administration agent functions in connection with the issuance,
exchange and redemption or repurchase of the Fund's shares. The
fee is determined by multiplying the number of shareholder accounts
at the end of the day by a rate of _______ per year and dividing by
the number of days in the year.
Placement Agency Agreement
Pursuant to a Placement Agency Agreement, the Distributor acts as
placement agent of the units of the Trust.
Plan and Agreement of Distribution/Distribution Agreement
To help the Distributor defray the costs of distribution and
servicing, the Company and the Distributor have entered into a Plan
and Agreement of Distribution (Plan). These costs cover almost all
aspects of distributing Fund shares. Under the Plan, the
Distributor is paid a fee determined by ___________.
The Plan must be approved annually by the board, including a
majority of the disinterested board members, if it is to continue
for more than a year. At least quarterly, the board must review<PAGE>
PAGE 47
written reports concerning the amounts expended under the Plan and
the purposes for which the expenditures were made. The Plan and
any agreement related to it may be terminated at any time by vote
of a majority of board members who are not interested persons of
the Company and have no direct or indirect financial interest in
the operation of the Plan or in any agreement related to the Plan,
by vote of a majority of the outstanding voting securities of the
Fund or by the Distributor. The Plan (or any agreement related to
it) shall terminate in the event of its assignment, as that term is
defined in the Investment Company Act of 1940, as amended. The
Plan may not be amended to increase the amount to be spent for
distribution without shareholder approval, and all material
amendments to the Plan must be approved by a majority of the board
members, including a majority of the board members who are not
interested persons of the Company and who do not have a financial
interest in the operation of the Plan or any agreement related to
it. The selection and nomination of such disinterested board
members is the responsibility of such disinterested board members.
No board member who is not an interested person has any direct or
indirect financial interest in the operation of the Plan or any
related agreement.
Total fees and expenses
Total fees and nonadvisory expenses cannot exceed the most
restrictive applicable state limitation. Currently, the most
restrictive applicable state expense limitation, subject to
exclusion of certain expenses, is 2.5% of the first $30 million of
the Fund's average daily net assets, 2% of the next $70 million and
1.5% of average daily net assets over $100 million, on an annual
basis. At the end of each month, if the fees and expenses of the
Fund exceed this limitation for the Fund's fiscal year in progress,
the Advisor will assume all expenses in excess of the limitation.
The Advisor then may bill the Fund for such expenses in subsequent
months up to the end of that fiscal year, but not after that date.
No interest charges are assessed by the Advisor for expenses it
assumes.
BOARD MEMBERS AND OFFICERS
The following is a list of the Company's board members and
officers, who are also board members and officers of all other
funds in the Express Direct Mutual Fund Group. All shares of the
Fund have cumulative voting rights with respect to the election of
board members.
Directors and officers
[to be provided]
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<PAGE>
PAGE 48
Trust Group of Funds and all funds in the IDS MUTUAL FUND GROUP.
All units have cumulative voting rights with respect to the
election of board members.
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, and FPL Group, Inc. (holding company for Florida
Power Light), and the Interpublic Group of Companies, Inc.
(advertising).
William H. Dudley+**
Born in 1932.
2900 IDS Tower
Minneapolis, MN
Executive vice president and director of AEFC.
Robert F. Froehlke+
Born in 1922.
1201 Yale Place
Minneapolis, MN
Former president of all funds in the IDS MUTUAL FUND GROUP.
Director, the ICI Mutual Insurance Co., Institute for Defense
Analyses, Marshall Erdman and Associates, Inc. (architectural
engineering) and Public Oversight Board of the American Institute
of Certified Public Accountants.
David R. Hubers**
Born in 1943.
2900 IDS Tower
Minneapolis, MN
President, chief executive officer and director of AEFC.
Previously, senior vice president, finance and chief financial
officer of AEFC.
Heinz F. Hutter+
Born in 1929.
P.O. Box 5724
Minneapolis, MN
President and chief operating officer, Cargill, Incorporated
(commodity merchants and processors) from February 1991 to
September 1994. Executive vice president from 1981 to February
1991.<PAGE>
PAGE 49
Anne P. Jones+
Born in 1935.
5716 Bent Branch Rd.
Bethesda, MD
Attorney and telecommunications consultant. Former partner, law
firm of Sutherland, Asbill & Brennan. Director, Motorola, Inc. and
C-Cor Electronics, Inc.
Donald M. Kendall'
Born in 1921.
PepsiCo, Inc.
Purchase, NY
Former chairman and chief executive officer, PepsiCo, Inc.
Melvin R. Laird+
Born in 1922.
Reader's Digest Association, Inc.
1730 Rhode Island Ave., N.W.
Washington, D.C.
Senior counsellor for national and international affairs, The
Reader's Digest Association, Inc. Chairman of the board, COMSAT
Corporation, former nine-term congressman, secretary of defense and
presidential counsellor. Director, Martin Marietta Corp.,
Metropolitan Life Insurance Co., The Reader's Digest Association,
Inc., Science Applications International Corp., Wallace Reader's
Digest Funds and Public Oversight Board (SEC Practice Section,
American Institute of Certified Public Accountants).
Lewis W. Lehr'
Born in 1921.
3050 Minnesota World Trade Center
30 E. Seventh St.
St. Paul, MN
Former chairman of the board and chief executive officer, Minnesota
Mining and Manufacturing Company (3M). Director, Jack Eckerd
Corporation (drugstores). Advisory Director, Peregrine Inc.
(microelectronics).
William R. Pearce+*
Born in 1927.
901 S. Marquette Ave.
Minneapolis, MN
President of all the Trusts in the Trust Group of Funds since
__________ 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).
<PAGE>
PAGE 50
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.
Wheelock Whitney+
Born in 1926.
1900 Foshay Tower
821 Marquette Ave.
Minneapolis, MN
Chairman, Whitney Management Company (manages family assets).
C. Angus Wurtele
Born in 1934.
1101 S. 3rd St.
Minneapolis, MN
Chairman of the board and chief executive officer, The Valspar
Corporation (paints). Director, Bemis Corporation (packaging),
Donaldson Company (air cleaners & mufflers) and General Mills, Inc.
(consumer foods).
+ Member of executive committee.
' Member of joint audit committee.
* Interested person 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:
<PAGE>
PAGE 51
Leslie L. Ogg
Born in 1938.
901 S. Marquette Ave.
Minneapolis, MN
Vice president, general counsel and secretary of all Trusts in the
Trust Group of Funds and of all funds in the IDS MUTUAL FUND GROUP.
Officers who also are officers and/or employees of AEFC:
Peter J. Anderson
Born in 1942.
IDS Tower 10
Minneapolis, MN
Vice president-investments of all Trusts in the Trust Group of
Funds and of all funds in the IDS MUTUAL FUND GROUP. Director and
senior vice president-investments of AEFC.
Melinda S. Urion
Born in 1953.
IDS Tower 10
Minneapolis, MN
Treasurer of all Trusts in the Trust Group of Funds and of all
funds in the IDS MUTUAL FUND GROUP. Vice president and corporate
controller of AEFC. Director and executive vice president and
controller of IDS Life Insurance Company.
<TABLE><CAPTION>
The following is an estimate of compensation expected to be paid to the Company's board members for the
fiscal year ending _______________, 1996:
Compensation Table
Pension or
Retirement
Aggregate Benefits Accrued
Compensation as Part of the Estimated Annual Total Compensation
from the Company Company and the Benefits upon from the
Board Members and the Trust Trust Retirement Fund Complex*
<S> <C> <C> <C>
*"Fund complex" comprises ________.
</TABLE>
[On _________________, the Company's board members and officers as
a group owned less than 1% of the outstanding shares of the Fund.
During the fiscal year ended ________________, no board member or
officer earned more than $60,000 from the Company and its
corresponding Trust. All board members and officers as a group
earned $____________, including $___________ of retirement plan
benefits, from the Company.]
CUSTODIAN
The Trust's securities and cash are held by American Express Trust
Company, 1200 Northstar Center West, 625 Marquette Ave.,<PAGE>
PAGE 52
Minneapolis, MN 55402-2307, through a custodian agreement. The
Fund also retains the custodian pursuant to a custodian agreement.
The custodian is permitted to deposit some or all of its securities
in central depository systems as allowed by federal law. For its
services, the Portfolio pays the custodian a maintenance charge and
a charge per transaction in addition to reimbursing the custodian's
out-of-pocket expenses.
INDEPENDENT AUDITORS
The Fund's and corresponding Portfolio's financial statements to be
contained in its Annual Report to shareholders at the end of the
fiscal year will be audited by independent auditors, KPMG Peat
Marwick LLP, 4200 Norwest Center, 90 S. Seventh St., Minneapolis,
MN 55402-3900. The independent auditors also provide other
accounting and tax-related services as requested by the Fund.
PROSPECTUS
The prospectus dated _____________________, is hereby incorporated
in this SAI by reference.
<PAGE>
PAGE 53
APPENDIX A
DESCRIPTION OF SHORT-TERM SECURITIES
Short-term Tax-exempt Securities
A portion of the Portfolio's assets are in cash and short-term
securities for day-to-day operating purposes. The investments will
usually be in short-term municipal bonds and notes. These include:
(1) Tax anticipation notes sold to finance working capital needs
of municipalities in anticipation of receiving taxes on a future
date.
(2) Bond anticipation notes sold on an interim basis in
anticipation of a municipality issuing a longer term bond in the
future.
(3) Revenue anticipation notes issued in anticipation of revenues
from sources other than taxes, such as federal revenues available
under the Federal Revenue Sharing Program.
(4) Tax and revenue anticipation notes issued in anticipation of
revenues from taxes and other sources of revenue, except bond
placements.
(5) Construction loan notes insured by the Federal Housing
Administration which remain outstanding until permanent financing
by the Federal National Mortgage Association (FNMA) or the
Government National Mortgage Association (GNMA) at the end of the
project construction period.
(6) Tax-exempt commercial paper with a stated maturity of 365
days or less issued by agencies of state and local governments to
finance seasonal working capital needs or as short-term financing
in anticipation of longer-term financing.
(7) Project notes issued by local housing authorities to finance
urban renewal and public housing projects. These notes are
guaranteed by the full faith and credit of the U.S. government.
(8) Variable rate demand notes, on which the yield is adjusted at
periodic intervals not exceeding 31 days and on which the principal
must be repaid in not less than seven days' notice, are considered
short-term regardless of the stated maturity.
Short-term Taxable Securities and Repurchase Agreements
Depending on market conditions, a portion of the Portfolio's
investments may be in short-term taxable securities. These
include:
(1) Obligations of the U.S. government, its agencies and
instrumentalities resulting principally from lending programs of
the U.S. government;<PAGE>
PAGE 54
(2) U.S. Treasury bills with maturities up to one year. The
difference between the purchase price and the maturity value or
resale price is the interest income to the Portfolio;
(3) Certificates of deposit or receipts with fixed interest rates
issued by banks in exchange for deposit of funds;
(4) Bankers' acceptances arising from short-term credit
arrangements designed to enable business to obtain funds to finance
commercial transactions;
(5) Letters of credit which are short-term notes issued in bearer
form with a bank letter of credit obligating the bank to pay the
bearer the amount of the note;
(6) Commercial paper rated in the two highest grades by Standard
& Poor's or Moody's. Commercial paper is generally defined as
unsecured short-term notes issued in bearer form by large well-
known corporations and finance companies. These ratings reflect a
review of management, economic evaluation of the industry
competition, liquidity, long-term debt and ten-year earning trends.
Standard & Poor's rating A-1 indicates that the degree of safety
regarding timely payment is either overwhelming or very strong.
Standard & Poor's ratings A-2 indicates that capacity for timely
payment on issues with this designation is strong.
Moody's rating Prime-1 (P-1) indicates a superior capacity for
repayment of short-term promissory obligations.
Moody's rating Prime-2 (P-2) indicates a strong capacity for
repayment of short-term promissory obligations.
(7) Repurchase agreements involving acquisition of securities by
the Portfolio with a concurrent agreement by the seller, usually a
bank or securities dealer, to reacquire the securities at cost plus
interest within a specified time. From this investment, the
Portfolio receives a fixed rate of return that is insulated from
market rate changes while it holds the security.
<PAGE>
PAGE 55
APPENDIX B
OPTIONS AND INTEREST RATE FUTURES CONTRACTS
The Portfolio may buy or write options traded on any U.S. or
foreign exchange or in the over-the-counter market. The Portfolio
may enter into interest rate futures contracts traded on any U.S.
or foreign exchange. The 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, the 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
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 the
Portfolio and its unitholders by improving the 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<PAGE>
PAGE 56
the security could be bought or sold directly. When the option is
purchased, the 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 the Portfolio for
investment purposes. Options permit the Portfolio to experience
the change in the value of a security with a relatively small
initial cash investment. The risk the Portfolio assumes when it
buys an option is the loss of the premium. To be beneficial to the
Portfolio, the price of the underlying security must change within
the time set by the option contract. Furthermore, the change must
be sufficient to cover the premium paid, the commissions paid both
in the acquisition of the option and in a closing transaction or in
the exercise of the option and subsequent sale (in the case of a
call) or purchase (in the case of a put) of the underlying
security. Even then the price change in the underlying security
does not ensure a profit since prices in the option market may not
reflect such a change.
Writing covered options. The 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 the
Portfolio's goal.
'All options written by the Portfolio will be covered. For covered
call options if a decision is made to sell the security, the
Portfolio will attempt to terminate the option contract through a
closing purchase transaction.
'The 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 the Portfolio, it will conform to the requirements of
certain states. For example, California limits the writing of
options to 50% of the assets of a portfolio.
Net premiums on call options closed or premiums on expired call
options are treated as short-term capital gains. Since the
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. The 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 the
Portfolio writes listed options, it will follow the rules of the<PAGE>
PAGE 57
options exchange. Options are valued at the close of the New York
Stock Exchange. An option listed on a national exchange, CBOE or
NASDAQ will be valued at the last quoted sales price or, if such a
price is not readily available, at the mean of the last bid and
asked prices.
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 the Portfolio entering into a futures contract
purchase for the same aggregate amount of the specific type of
financial instrument and same delivery date. If the price in the
sale exceeds the price in the offsetting purchase, the Portfolio
immediately is paid the difference and realizes a gain. If the
offsetting purchase price exceeds the sale price, the Portfolio
pays the difference and realizes a loss. Similarly, closing out a
futures contract purchase is effected by the Portfolio entering
into a futures contract sale. If the offsetting sale price
exceeds the purchase price, the Portfolio realizes a gain, and if
the offsetting sale price is less than the purchase price, the
Portfolio realizes a loss. At the time a futures contract is made,
a good-faith deposit called initial margin is set up within a
segregated account at the 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 the 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 the 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.
<PAGE>
PAGE 58
Futures contracts are based on types of debt securities referred to
above, which have historically reacted to an increase or decline in
interest rates in a fashion similar to the debt securities the
Portfolio owns. If interest rates did increase, the value of the
debt securities in the portfolio would decline, but the value of
the Portfolio's futures contracts would increase at approximately
the same rate, thereby keeping the net asset value of the Portfolio
from declining as much as it otherwise would have. If, on the
other hand, the Portfolio held cash reserves and interest rates
were expected to decline, the 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 the Portfolio's earnings. Even if short-term rates were
not higher, the 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,
the 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 the Portfolio's cash reserves could then be used
to buy long-term bonds on the cash market. The 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 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, the 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 the
Portfolio.
RISKS. There are risks in engaging in each of the management tools
described above. The risk the Portfolio assumes when it buys an
option is the loss of the premium paid for the option. Purchasing
options also limits the use of monies that might otherwise be
available for long-term investments.
<PAGE>
PAGE 59
The risk involved in writing options on futures contracts the
Portfolio owns, or on securities held in its portfolio, is that
there could be an increase in the market value of such contracts or
securities. If that occurred, the option would be exercised and
the asset sold at a lower price than the cash market price. To
some extent, the risk of not realizing a gain could be reduced by
entering into a closing transaction. The 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 the Portfolio's obligation, however, might be
more or less than the premium received when it originally wrote the
option. Furthermore, the 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 the 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 the 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 the Portfolio sold futures contracts
for the sale of securities in anticipation of an increase in
interest rates, and interest rates declined instead, the Portfolio
would lose money on the sale.
TAX TREATMENT. As permitted under federal income tax laws, the
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 the Portfolio being required to defer recognizing losses
incurred by entering into futures contracts and losses on
underlying securities identified as being hedged against.
Federal income-tax treatment of gains or losses from transactions
in options on futures contracts and indexes will depend on whether
such option is a section 1256 contract. If the option is a non-
equity option, the Portfolio will either make a 1256(d) election
and treat the option as a mixed straddle or mark to market the
option at fiscal year end and treat the gain/loss as 40% short-term
and 60% long-term. Certain provisions of the Internal Revenue Code
may also limit the Portfolio's ability to engage in futures
contracts and related options transactions. For example, at the
close of each quarter of the 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.
<PAGE>
PAGE 60
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, the
Portfolio may be required to defer closing out a contract beyond
the time when it might otherwise be advantageous to do so. The
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 (the 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.
<PAGE>
PAGE 61
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS:
Not Applicable.
(b) EXHIBITS:
1. Articles of Incorporation, dated Sept. 1, 1995, are filed
electronically herewith as Exhibit 1.
2. Form of By-laws is filed electronically herewith as
Exhibit 2.
3. Not Applicable.
4. Not Applicable.
5. Not Applicable.
6. Form of Distribution Agreement to be filed by amendment.
7. Not Applicable.
8. Form of Custodian Agreement is filed electronically herewith
as Exhibit 8.
9.(a) Form of Transfer Agency Agreement to be filed by amendment.
9.(b) Form of Administrative Services Agreement is filed
electronically herewith as Exhibit 9(b).
10. An opinion and consent of counsel to be filed by amendment.
11. Not Applicable.
12. Not Applicable.
13. Not Applicable.
14. Not Applicable.
15. Form of Plan and Agreement of Distribution to be filed by
amendment.
16. Not Applicable.
17. Not Applicable.
18. Not Applicable.
Item 25. Persons Controlled by or Under Common Control with
Registrant
None.
<PAGE>
PAGE 62
Item 26. Number of Holders of Securities
(1) (2)
Number of Record
Holders as of
Title of Class Oct. 31, 1995
Common Stock 0
$.01 par value
Item 27. Indemnification
Reference is hereby made to Article IV of Registrant's Articles of
Incorporation filed electronically herewith as Exhibit 1 and
Article X of Registrant's By-laws filed electronically herewith as
Exhibit 2.
<PAGE>
PAGE 63
<PAGE>
PAGE 1
American Express Financial Corporation is the investment advisor of
the Portfolios of the Trust.
<TABLE><CAPTION>
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)
Directors and officers of American Express Financial Corporation who are directors and/or
officers of one or more other companies:
<S> <C> <C>
Ronald G. Abrahamson, Vice President--Service Quality and Reengineering
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Service Quality
and Reengineering
American Express Service Corporation Vice President
Douglas A. Alger, Vice President--Total Compensation
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Total Compensation
Jerome R. Amundson, Vice President--Investment Accounting
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Investment Accounting
Peter J. Anderson, Director and Senior Vice President--Investments
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Investments
IDS Advisory Group Inc. Director and Chairman
of the Board
IDS Capital Holdings Inc. Director and President
IDS International, Inc. Director, Chairman of the
Board and Executive Vice
President
IDS Securities Corporation Executive Vice President-
Investments
NCM Capital Management Group, Inc. 2 Mutual Plaza Director
501 Willard Street
Durham, NC 27701
Ward D. Armstrong, Vice President-Sales and Marketing, American Express Institutional Services
American Express Financial Advisors IDS Tower 10 Vice President-Sales and
Minneapolis, MN 55440 Marketing, American
Express Institutional
Services
<PAGE>
PAGE 2
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Joseph M. Barsky III, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager
IDS Advisory Group Inc. Vice President
Robert C. Basten, Vice President--Tax and Business Services
American Express Financial Advisors IDS Tower 10 Vice President-Tax
Minneapolis, MN 55440 and Business Services
American Express Tax & Business Director, President and
Services Inc. Chief Executive Officer
Timothy V. Bechtold, Vice President--Risk Management Products
American Express Financial Advisors IDS Tower 10 Vice President-Risk
Minneapolis, MN 55440 Management Products
IDS Life Insurance Company Vice President-Risk
Management Products
Carl E. Beihl, Vice President--Strategic Technology Planning
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Strategic Technology
Planning
Alan F. Bignall, Vice President--Financial Planning Systems
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Financial Planning
Systems
American Express Service Corporation Vice President
John C. Boeder, Vice President--Mature Market Group
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Mature Market Group
IDS Life Insurance Company of New York Box 5144 Director
Albany, NY 12205
Karl J. Breyer, Director and Senior Vice President--Corporate Affairs and General Counsel
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Corporate Affairs and
Special Counsel
American Express Minnesota Foundation Director
IDS Aircraft Services Corporation Director and President
<PAGE>
PAGE 3
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Harold E. Burke, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
American Express Service Corporation Vice President
Daniel J. Candura, Vice President--Marketing Support
American Express Financial Advisors IDS Tower 10 Vice President-Marketing
Minneapolis, MN 55440 Support
Cynthia M. Carlson, Vice President--American Express Securities Services
American Enterprise Investment IDS Tower 10 Director, President and
Services Inc. Minneapolis, MN 55440 Chief Executive Officer
American Express Financial Advisors Vice President-American
Express Securities Services
Orison Y. Chaffee III, Vice President--Field Real Estate
American Express Financial Advisors IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Real Estate
James E. Choat, Director and Senior Vice President--Field Management
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Field Management
American Express Minnesota Foundation Director
American Express Service Corporation Vice President
IDS Insurance Agency of Alabama Inc. Vice President--North
Central Region
IDS Insurance Agency of Arkansas Inc. Vice President--North
Central Region
IDS Insurance Agency of Massachusetts Inc. Vice President--North
Central Region
IDS Insurance Agency of Nevada Inc. Vice President--North
Central Region
IDS Insurance Agency of New Mexico Inc. Vice President--North
Central Region
IDS Insurance Agency of North Carolina Inc. Vice President--North
Central Region
IDS Insurance Agency of Ohio Inc. Vice President--North
Central Region
IDS Insurance Agency of Wyoming Inc. Vice President-- North
Central Region
IDS Property Casualty Insurance Co. Director
<PAGE>
PAGE 4
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Kenneth J. Ciak, Vice President and General Manager--IDS Property Casualty
American Express Financial Advisors IDS Tower 10 Vice President and General
Minneapolis, MN 55440 Manager-IDS Property
Casualty
IDS Property Casualty Insurance Co. I WEG Blvd. Director and President
DePere, Wisconsin 54115
Alan R. Dakay, Vice President--Institutional Products Group
American Enterprise Life Insurance Co. IDS Tower 10 Director and President
Minneapolis, MN 55440
American Express Financial Advisors Vice President -
Institutional Products
Group
American Partners Life Insurance Co. Director and President
IDS Life Insurance Company Vice President -
Institutional Insurance
Marketing
Regenia David, Vice President--Systems Services
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Systems Services
William H. Dudley, Director and Executive Vice President--Investment Operations
American Express Financial Advisors IDS Tower 10 Director and Executive
Minneapolis, MN 55440 Vice President-
Investment Operations
IDS Advisory Group Inc. Director
IDS Capital Holdings Inc. Director
IDS Futures Corporation Director
IDS Futures III Corporation Director
IDS International, Inc. Director
IDS Securities Corporation Director, Chairman of the
Board, President and
Chief Executive Officer
Roger S. Edgar, Director, Senior Vice President and Technology Advisor
American Express Financial Advisors IDS Tower 10 Senior Vice President and
Minneapolis, MN 55440 Technology Advisor
<PAGE>
PAGE 5
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Gordon L. Eid, Director, Senior Vice President and Deputy General Counsel
American Express Financial Advisors IDS Tower 10 Senior Vice President and
Minneapolis, MN 55440 General Counsel
IDS Insurance Agency of Alabama Inc. Director and Vice President
IDS Insurance Agency of Arkansas Inc. Director and Vice President
IDS Insurance Agency of Massachusetts Inc. Director and Vice President
IDS Insurance Agency of Nevada Inc. Director and Vice President
IDS Insurance Agency of New Mexico Inc. Director and Vice President
IDS Insurance Agency of North Carolina Inc. Director and Vice President
IDS Insurance Agency of Ohio Inc. Director and Vice President
IDS Insurance Agency of Wyoming Inc. Director and Vice President
IDS Real Estate Services, Inc. Vice President
Investors Syndicate Development Corp. Director
Robert M. Elconin, Vice President--Government Relations
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Government Relations
IDS Life Insurance Company Vice President
Mark A. Ernst, Vice President--Retail Services
American Enterprise Investment IDS Tower 10 Director
Services Inc. Minneapolis, MN 55440
American Express Financial Advisors Vice President-
Retail Services
American Express Tax & Business Director and Chairman of
Services Inc. the Board
Gordon M. Fines, Vice President--Mutual Fund Equity Investments
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Mutual Fund Equity
Investments
IDS Advisory Group Inc. Executive Vice President
IDS International, Inc. Vice President and
Portfolio Manager
<PAGE>
PAGE 6
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Louis C. Fornetti, Director, Senior Vice President and Chief Financial Officer
American Enterprise Investment IDS Tower 10 Vice President
Services Inc. Minneapolis, MN 55440
American Express Financial Advisors Senior Vice President and
Chief Financial Officer
American Express Tax & Business Director
Services Inc.
American Express Trust Company Director
IDS Cable Corporation Director
IDS Cable II Corporation Director
IDS Capital Holdings Inc. Senior Vice President
IDS Certificate Company Vice President
IDS Insurance Agency of Alabama Inc. Vice President
IDS Insurance Agency of Arkansas Inc. Vice President
IDS Insurance Agency of Massachusetts Inc. Vice President
IDS Insurance Agency of Nevada Inc. Vice President
IDS Insurance Agency of New Mexico Inc. Vice President
IDS Insurance Agency of North Carolina Inc. Vice President
IDS Insurance Agency of Ohio Inc. Vice President
IDS Insurance Agency of Wyoming Inc. Vice President
IDS Life Insurance Company Director
IDS Life Series Fund, Inc. Vice President
IDS Life Variable Annuity Funds A&B Vice President
IDS Property Casualty Insurance Co. Director and Vice President
IDS Real Estate Services, Inc. Vice President
IDS Sales Support Inc. Director
IDS Securities Corporation Vice President
Investors Syndicate Development Corp. Vice President
Robert G. Gilbert, Vice President--Real Estate
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Real Estate
John J. Golden, Vice President--Field Compensation Development
American Express Financial Advisors IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Compensation Development
Harvey Golub, Director
American Express Company American Express Tower Chairman and Chief
World Financial Center Executive Officer
New York, New York 10285
American Express Travel Chairman and Chief
Related Services Company, Inc. Executive Officer
National Computer Systems, Inc. 11000 Prairie Lakes Drive Director
Minneapolis, MN 55440
<PAGE>
PAGE 7
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Morris Goodwin Jr., Vice President and Corporate Treasurer
American Enterprise Investment IDS Tower 10 Vice President and
Services Inc. Minneapolis, MN 55440 Treasurer
American Enterprise Life Insurance Vice President and
Company Treasurer
American Express Financial Advisors Vice President and
Corporate Treasurer
American Express Minnesota Foundation Director, Vice President
and Treasurer
American Express Service Corporation Vice President and
Treasurer
American Express Tax & Business Vice President and
Services Inc. Treasurer
IDS Advisory Group Inc. Vice President and
Treasurer
IDS Aircraft Services Corporation Vice President and
Treasurer
IDS Cable Corporation Director, Vice President
and Treasurer
IDS Cable II Corporation Director, Vice President
and Treasurer
IDS Capital Holdings Inc. Vice President and
Treasurer
IDS Certificate Company Vice President and
Treasurer
IDS Deposit Corp. Director, President
and Treasurer
IDS Insurance Agency of Alabama Inc. Vice President and
Treasurer
IDS Insurance Agency of Arkansas Inc. Vice President and
Treasurer
IDS Insurance Agency of Massachusetts Inc. Vice President and
Treasurer
IDS Insurance Agency of Nevada Inc. Vice President and
Treasurer
IDS Insurance Agency of New Mexico Inc. Vice President and
Treasurer
IDS Insurance Agency of North Carolina Inc. Vice President and
Treasurer
IDS Insurance Agency of Ohio Inc. Vice President and
Treasurer
IDS Insurance Agency of Wyoming Inc. Vice President and
Treasurer
IDS International, Inc. Vice President and
Treasurer
IDS Life Insurance Company Vice President and
Treasurer
IDS Life Series Fund, Inc. Vice President and
Treasurer
<PAGE>
PAGE 8
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
IDS Life Variable Annuity Funds A&B Vice President and
Treasurer
IDS Management Corporation Director, Vice President
and Treasurer
IDS Partnership Services Corporation Director, Vice President
and Treasurer
IDS Plan Services of California, Inc. Vice President and
Treasurer
IDS Property Casualty Insurance Co. Vice President and
Treasurer
IDS Real Estate Services, Inc Vice President and
Treasurer
IDS Realty Corporation Director, Vice President
and Treasurer
IDS Sales Support Inc. Director, Vice President
and Treasurer
IDS Securities Corporation Vice President and
Treasurer
Investors Syndicate Development Corp. Vice President and
Treasurer
NCM Capital Management Group, Inc. 2 Mutual Plaza Director
501 Willard Street
Durham, NC 27701
Sloan Financial Group, Inc. Director
Suzanne Graf, Vice President--Systems Services
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Systems Services
David A. Hammer, Vice President and Marketing Controller
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Marketing Controller
IDS Plan Services of California, Inc. Director and Vice President
Lorraine R. Hart, Vice President--Insurance Investments
American Enterprise Life IDS Tower 10 Vice President-Investments
Insurance Company Minneapolis, MN 55440
American Express Financial Advisors Vice President-Insurance
Investments
American Partners Life Insurance Co. Director and Vice
President-Investments
IDS Certificate Company Vice President-Investments
IDS Life Insurance Company Vice President-Investments
IDS Life Series Fund, Inc. Vice President-Investments
IDS Life Variable Annuity Funds A and B Vice President-Investments
IDS Property Casualty Insurance Company Vice President-Investment
Officer
Investors Syndicate Development Corp. Vice President-Investments
<PAGE>
PAGE 9
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Scott A. Hawkinson, Vice President--Assured Assets Product Development and Management
American Express Financial Advisors IDS Tower 10 Vice President-Assured
Minneapolis, MN 55440 Assets Product
Development & Management
Raymond E. Hirsch, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager
James G. Hirsh, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
IDS Securities Corporation Director, Vice President
and General Counsel
Darryl G. Horsman, Vice President--Product Development and Technology, American Express
Institutional Services
American Express Trust Company IDS Tower 10 Director and President
Minneapolis, MN 55440
Kevin P. Howe, Vice President--Government and Customer Relations and Chief Compliance Officer
American Enterprise Investment IDS Tower 10 Vice President and
Services Inc. Minneapolis, MN 55440 Compliance Officer
American Express Financial Advisors Vice President-
Government and
Customer Relations
American Express Service Corporation Vice President
IDS Securities Corporation Vice President and Chief
Compliance Officer
David R. Hubers, Director, President and Chief Executive Officer
American Express Financial Advisors IDS Tower 10 Chairman, Chief Executive
Minneapolis, MN 55440 Officer and President
American Express Service Corporation Director and President
IDS Aircraft Services Corporation Director
IDS Certificate Company Director
IDS Life Insurance Company Director
IDS Plan Services of California, Inc. Director and President
IDS Property Casualty Insurance Co. Director
Marietta L. Johns, Director and Senior Vice President--Field Management
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Field Management
<PAGE>
PAGE 10
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Douglas R. Jordal, Vice President--Taxes
American Express Financial Advisors IDS Tower 10 Vice President-Taxes
Minneapolis, MN 55440
IDS Aircraft Services Corporation Vice President
James E. Kaarre, Vice President--Marketing Information
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Marketing Information
Linda B. Keene, Vice President--Market Development
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Market Development
G. Michael Kennedy, Vice President--Investment Services and Investment Research
American Express Financial Advisors IDS Tower 10 Vice President-Investment
Minneapolis, MN 55440 Services and Investment
Research
Susan D. Kinder, Director and Senior Vice President--Human Resources
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Human Resources
American Express Minnesota Foundation Director
American Express Service Corporation Vice President
<PAGE>
PAGE 11
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Richard W. Kling, Director and Senior Vice President--Risk Management Products
American Enterprise Life Insurance Co. IDS Tower 10 Director and Chairman of
Minneapolis, MN 55440 the Board
American Express Financial Advisors Senior Vice President-
Risk Management Products
American Partners Life Insurance Co. Director and Chairman of
the Board
IDS Insurance Agency of Alabama Inc. Director and President
IDS Insurance Agency of Arkansas Inc. Director and President
IDS Insurance Agency of Massachusetts Inc. Director and President
IDS Insurance Agency of Nevada Inc. Director and President
IDS Insurance Agency of New Mexico Inc. Director and President
IDS Insurance Agency of North Carolina Inc. Director and President
IDS Insurance Agency of Ohio Inc. Director and President
IDS Insurance Agency of Wyoming Inc. Director and President
IDS Life Insurance Company Director and President
IDS Life Series Fund, Inc. Director and President
IDS Life Variable Annuity Funds A and B Chairman of the Board of
Managers and President
IDS Property Casualty Insurance Co. Director and Chairman of
the Board
IDS Life Insurance Company P.O. Box 5144 Director, Chairman of the
of New York Albany, NY 12205 Board and President
Paul F. Kolkman, Vice President--Actuarial Finance
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Actuarial Finance
IDS Life Insurance Company Director and Executive
Vice President
IDS Life Series Fund, Inc. Vice President and Chief
Actuary
Claire Kolmodin, Vice President--Service Quality
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Service Quality
Steven C. Kumagai, Director and Senior Vice President--Field Management and Business Systems
American Express Financial Advisors IDS Tower 10 Director and Senior Vice
Minneapolis, MN 55440 President-Field
Management and Business
Systems
American Express Service Corporation Vice President
<PAGE>
PAGE 12
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Edward Labenski, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio
Manager
IDS Advisory Group Inc. Senior Vice President
Kurt A. Larson, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio Manager
Lori J. Larson, Vice President--Variable Assets Product Development
American Express Financial Advisors IDS Tower 10 Vice President-Variable
Minneapolis, MN 55440 Assets Product
Development
IDS Cable Corporation Director and Vice President
IDS Cable II Corporation Director and Vice President
IDS Futures Brokerage Group Assistant Vice President-
General Manager/Director
IDS Futures Corporation Director and Vice President
IDS Futures III Corporation Director and Vice President
IDS Management Corporation Director and Vice President
IDS Partnership Services Corporation Director and Vice President
IDS Realty Corporation Director and Vice President
Ryan R. Larson, Vice President--IPG Product Development
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 IPG Product Development
IDS Life Insurance Company Vice President-
Annuity Product
Development
Daniel E. Laufenberg, Vice President and Chief U.S. Economist
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Chief U.S. Economist
Richard J. Lazarchic, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager
<PAGE>
PAGE 13
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Peter A. Lefferts, Director and Senior Vice President--Corporate Strategy and Development
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Corporate Strategy and
Development
American Express Service Corporation Director
American Express Trust Company Director
IDS Life Insurance Company Director and Executive
Vice President-Marketing
IDS Plan Services of California, Inc. Director
Investors Syndicate Development Corp. Director
Douglas A. Lennick, Director and Executive Vice President--Private Client Group
American Express Financial Advisors IDS Tower 10 Director and Executive
Minneapolis, MN 55440 Vice President-Private
Client Group
American Express Service Corporation Vice President
Mary J. Malevich, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio
Manager
IDS International, Inc. Vice President and
Portfolio Manager
Fred A. Mandell, Vice President--Field Marketing Readiness
American Express Financial Advisors IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Marketing Readiness
William J. McKinney, Vice President--Field Management Support
American Express Financial Advisors IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Management Support
Thomas W. Medcalf, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager
William C. Melton, Vice President-International Research and Chief International Economist
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 International Research
and Chief International
Economist
<PAGE>
PAGE 14
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Janis E. Miller, Vice President--Variable Assets
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Variable Assets
IDS Cable Corporation Director and President
IDS Cable II Corporation Director and President
IDS Futures Corporation Director and President
IDS Futures III Corporation Director and President
IDS Life Insurance Company Director and Executive
Vice President-Variable
Assets
IDS Life Series Fund, Inc. Director
IDS Life Variable Annuity Funds A&B Director
IDS Management Corporation Director and President
IDS Partnership Services Corporation Director and President
IDS Realty Corporation Director and President
IDS Life Insurance Company of New York Box 5144 Executive Vice President
Albany, NY 12205
James A. Mitchell, Director and Executive Vice President--Marketing and Products
American Enterprise Investment IDS Tower 10 Director
Services Inc. Minneapolis, MN 55440
American Express Financial Advisors Executive Vice President-
Marketing and Products
American Express Tax and Business Director
Services Inc.
IDS Certificate Company Director and Chairman of
the Board
IDS Life Insurance Company Director, Chairman of
the Board and Chief
Executive Officer
IDS Plan Services of California, Inc. Director
IDS Property Casualty Insurance Co. Director
Pamela J. Moret, Vice President--Corporate Communications
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Corporate Communications
American Express Minnesota Foundation Director and President
Barry J. Murphy, Director and Senior Vice President--Client Service
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Client Service
IDS Life Insurance Company Director and Executive
Vice President-Client
Service
<PAGE>
PAGE 15
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Robert J. Neis, Vice President--Information Systems Operations
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Information Systems
Operations
James R. Palmer, Vice President--Insurance Operations
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Insurance Operations
IDS Life Insurance Company Vice President-Taxes
Carla P. Pavone, Vice President--Specialty Service Teams and Emerging Business
American Express Financial Advisors IDS Tower 10 Vice President-Specialty
Minneapolis, MN 55440 Service Teams and
Emerging Business
George M. Perry, Vice President--Corporate Strategy and Development
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Corporate Strategy
and Development
IDS Property Casualty Insurance Co. Director
Susan B. Plimpton, Vice President--Segmentation Development and Support
American Express Financial Advisors IDS Tower 10 Vice President--
Minneapolis, MN 55440 Segmentation Development
and Support
Ronald W. Powell, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
IDS Cable Corporation Vice President and
Assistant Secretary
IDS Cable II Corporation Vice President and
Assistant Secretary
IDS Management Corporation Vice President and
Assistant Secretary
IDS Partnership Services Corporation Vice President and
Assistant Secretary
IDS Plan Services of California, Inc. Vice President and
Assistant Secretary
IDS Realty Corporation Vice President and
Assistant Secretary
<PAGE>
PAGE 16
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
James M. Punch, Vice President--TransAction Services
American Express Financial Advisors IDS Tower 10 Vice President-Trans
Minneapolis, MN 55440 Action Services
Frederick C. Quirsfeld, Vice President--Taxable Mutual Fund Investments
American Express Financial Advisors IDS Tower 10 Vice President--
Minneapolis, MN 55440 Taxable Mutual Fund
Investments
IDS Advisory Group Inc. Vice President
ReBecca K. Roloff, Vice President--1994 Program Director
American Express Financial Advisors IDS Tower 10 Vice President-1994
Minneapolis, MN 55440 Program Director
Stephen W. Roszell, Vice President--Advisory Institutional Marketing
American Express Financial Advisors IDS Tower 10 Vice President-Advisory
Minneapolis, MN 55440 Institutional Marketing
IDS Advisory Group Inc. President and Chief
Executive Officer
Robert A. Rudell, Vice President--American Express Institutional Services
American Express Financial Advisors IDS Tower 10 Vice President-American
Minneapolis, MN 55440 Express Institutional
Services
American Express Trust Company Director and Chairman of
the Board
IDS Sales Support Inc. Director and President
John P. Ryan, Vice President and General Auditor
American Express Financial Advisors IDS Tower 10 Vice President and General
Minneapolis, MN 55440 Auditor
<PAGE>
PAGE 17
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Erven A. Samsel, Director and Senior Vice President--Field Management
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Field Management
American Express Service Corporation Vice President
IDS Insurance Agency of Alabama Inc. Vice President-
New England Region
IDS Insurance Agency of Arkansas Inc. Vice President-
New England Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
New England Region
IDS Insurance Agency of Nevada Inc. Vice President-
New England Region
IDS Insurance Agency of New Mexico Inc. Vice President-
New England Region
IDS Insurance Agency of North Carolina Inc. Vice President-
New England Region
IDS Insurance Agency of Ohio Inc. Vice President-
New England Region
IDS Insurance Agency of Wyoming Inc. Vice President-
New England Region
Stuart A. Sedlacek, Vice President--Assured Assets
American Enterprise Life Insurance Co. IDS Tower 10 Director and Executive
Minneapolis, MN 55440 Vice President, Assured
Assets
American Express Financial Advisors Vice President-
Assured Assets
IDS Certificate Company Director and President
IDS Life Insurance Company Director and Executive
Vice President, Assured
Assets
Investors Syndicate Development Corp. Chairman of the Board
and President
Donald K. Shanks, Vice President--Property Casualty
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Property Casualty
IDS Property Casualty Insurance Co. Senior Vice President
<PAGE>
PAGE 18
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
F. Dale Simmons, Vice President--Senior Portfolio Manager, Insurance Investments
American Enterprise Life Insurance Co. IDS Tower 10 Vice President-Real
Minneapolis, MN 55440 Estate Loan Management
American Express Financial Advisors Vice President-Senior
Portfolio Manager,
Insurance Investments
American Partners Life Insurance Co. Vice President-Real
Estate Loan Management
IDS Certificate Company Vice President-Real
Estate Loan Management
IDS Life Insurance Company Vice President-Real
Estate Loan Management
IDS Partnership Services Corporation Vice President
IDS Real Estate Services Inc. Director and Vice President
IDS Realty Corporation Vice President
IDS Life Insurance Company of New York Box 5144 Vice President and
Albany, NY 12205 Assistant Treasurer
Judy P. Skoglund, Vice President--Human Resources and Organization Development
American Express Financial Advisors IDS Tower 10 Vice President-Human
Minneapolis, MN 55440 Resources and
Organization Development
Ben C. Smith, Vice President--Workplace Marketing
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Workplace Marketing
William A. Smith, Vice President and Controller--Private Client Group
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Controller-Private
Client Group
Bridget Sperl, Vice President--Human Resources Management Services
American Express Financial Advisors IDS Tower 10 Vice President-Human
Minneapolis, MN 55440 Resources Management
Services
Jeffrey E. Stiefler, Director
American Express Company American Express Tower Director and President
World Financial Center
New York, NY 10285
<PAGE>
PAGE 19
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
William A. Stoltzmann, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
American Partners Life Insurance Co. Director, Vice President,
General Counsel and
Secretary
IDS Life Insurance Company Vice President, General
Counsel and Secretary
American Enterprise Life Insurance P.O. Box 534 Director, Vice President,
Company Minneapolis, MN 55440 General Counsel
and Secretary
James J. Strauss, Vice President--Corporate Planning and Analysis
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Corporate Planning and
Analysis
Jeffrey J. Stremcha, Vice President--Information Resource Management/ISD
American Express Financial Advisors IDS Tower 10 Vice President-Information
Minneapolis, MN 55440 Resource Management/ISD
Fenton R. Talbott, Director
ACUMA Ltd. ACUMA House President and Chief
The Glanty, Egham Executive Officer
Surrey TW 20 9 AT
UK
<PAGE>
PAGE 20
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
John R. Thomas, Director and Senior Vice President--Information and Technology
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Information and
Technology
IDS Bond Fund, Inc. Director
IDS California Tax-Exempt Trust Trustee
IDS Discovery Fund, Inc. Director
IDS Equity Select Fund, Inc. Director
IDS Extra Income Fund, Inc. Director
IDS Federal Income Fund, Inc. Director
IDS Global Series, Inc. Director
IDS Growth Fund, Inc. Director
IDS High Yield Tax-Exempt Fund, Inc. Director
IDS Investment Series, Inc. Director
IDS Managed Retirement Fund, Inc. Director
IDS Market Advantage Series, Inc. Director
IDS Money Market Series, Inc. Director
IDS New Dimensions Fund, Inc. Director
IDS Precious Metals Fund, Inc. Director
IDS Progressive Fund, Inc. Director
IDS Selective Fund, Inc. Director
IDS Special Tax-Exempt Series Trust Trustee
IDS Stock Fund, Inc. Director
IDS Strategy Fund, Inc. Director
IDS Tax-Exempt Bond Fund, Inc. Director
IDS Tax-Free Money Fund, Inc. Director
IDS Utilities Income Fund, Inc. Director
Melinda S. Urion, Vice President and Corporate Controller
American Enterprise Life IDS Tower 10 Vice President and
Insurance Company Minneapolis, MN 55440 Controller
American Express Financial Advisors Vice President and
Corporate Controller
American Partners Life Insurance Co. Director, Vice President,
Controller and Treasurer
IDS Life Insurance Company Director, Executive Vice
President and Controller
IDS Life Series Fund, Inc. Vice President and
Controller
Wesley W. Wadman, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio Manager
IDS Advisory Group Inc. Executive Vice President
IDS Fund Management Limited Director and Vice Chairman
IDS International, Inc. Senior Vice President
<PAGE>
PAGE 21
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Michael L. Weiner, Vice President--Corporate Tax Operations
American Express Financial Advisors IDS Tower 10 Vice President-Corporate
Minneapolis, MN 55440 Tax Operations
IDS Capital Holdings Inc. Vice President
IDS Futures Brokerage Group Vice President
IDS Futures Corporation Vice President, Treasurer
and Secretary
IDS Futures III Corporation Vice President, Treasurer
and Secretary
Lawrence J. Welte, Vice President--Investment Administration
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Investment Administration
IDS Securities Corporation Director, Executive Vice
President and Chief
Operating Officer
Jeffry F. Welter, Vice President--Equity and Fixed Income Trading
American Express Financial Advisors IDS Tower 10 Vice President-Equity
Minneapolis, MN 55440 and Fixed Income Trading
William N. Westhoff, Director, Senior Vice President and Global Chief Investment Officer
American Enterprise Life Insurance IDS Tower 10 Director
Company Minneapolis, MN 55440
American Express Financial Advisors Senior Vice President and
Global Chief Investment
Officer
IDS Fund Management Limited Director
IDS International, Inc. Director
IDS Partnership Services Corporation Director and Vice President
IDS Real Estate Services Inc. Director, Chairman of the
Board and President
IDS Realty Corporation Director and Vice President
Investors Syndicate Development Corp. Director
<PAGE>
PAGE 22
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Edwin M. Wistrand, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
Michael R. Woodward, Director and Senior Vice President--Field Management
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Field Management
American Express Service Corporation Vice President
IDS Insurance Agency of Alabama Inc. Vice President-
North Region
IDS Insurance Agency of Arkansas Inc. Vice President-
North Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
North Region
IDS Insurance Agency of Nevada Inc. Vice President-
North Region
IDS Insurance Agency of New Mexico Inc. Vice President-
North Region
IDS Insurance Agency of North Carolina Inc. Vice President-
North Region
IDS Insurance Agency of Ohio Inc. Vice President-
North Region
IDS Insurance Agency of Wyoming Inc. Vice President-
North Region
IDS Life Insurance Company Box 5144 Director
of New York Albany, NY 12205
</TABLE>
<PAGE>
PAGE 23
Item 29. Principal Underwriters.
(a) American Express Financial Advisors acts as principal
underwriter for the following investment companies:
IDS Bond Fund, Inc.; IDS California Tax-Exempt Trust; IDS
Discovery Fund, Inc.; IDS Equity Select Fund, Inc.; IDS Extra
Income Fund, Inc.; IDS Federal Income Fund, Inc.; IDS Global
Series, Inc.; IDS Growth Fund, Inc.; IDS High Yield Tax-Exempt
Fund, Inc.; IDS International Fund, Inc.; IDS Investment
Series, Inc.; IDS Managed Retirement Fund, Inc.; IDS Market
Advantage Series, Inc.; IDS Money Market Series, Inc.; IDS New
Dimensions Fund, Inc.; IDS Precious Metals Fund, Inc.; IDS
Progressive Fund, Inc.; IDS Selective Fund, Inc.; IDS Special
Tax-Exempt Series Trust; IDS Stock Fund, Inc.; IDS Strategy
Fund, Inc.; IDS Tax-Exempt Bond Fund, Inc.; IDS Tax-Free Money
Fund, Inc.; IDS Utilities Income Fund, Inc. and IDS
Certificate Company.
(b) As to each director, officer or partner of the principal
underwriter:
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Ronald G. Abrahamson Vice President- None
IDS Tower 10 Service Quality and
Minneapolis, MN 55440 Reengineering
Douglas A. Alger Vice President-Total None
IDS Tower 10 Compensation
Minneapolis, MN 55440
Peter J. Anderson Senior Vice President- Vice
IDS Tower 10 Investments President
Minneapolis, MN 55440
Ward D. Armstrong Vice President- None
IDS Tower 10 Sales and Marketing,
Minneapolis, MN 55440 American Express
Institutional Services
Alvan D. Arthur Group Vice President- None
IDS Tower 10 Central California/
Minneapolis, MN 55440 Western Nevada
Joseph M. Barsky III Vice President-Senior None
IDS Tower 10 Portfolio Manager
Minneapolis, MN 55440
Robert C. Basten Vice President-Tax None
IDS Tower 10 and Business Services
Minneapolis, MN 55440
<PAGE>
PAGE 24
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Timothy V. Bechtold Vice President-Risk None
IDS Tower 10 Management Products
Minneapolis, MN 55440
John D. Begley Group Vice President- None
Suite 100 Ohio/Indiana
7760 Olentangy River Rd.
Columbus, OH 43235
Carl E. Beihl Vice President- None
IDS Tower 10 Strategic Technology
Minneapolis, MN 55440 Planning
Jack A. Benjamin Group Vice President- None
Suite 200 Greater Pennsylvania
3500 Market Street
Camp Hill, PA 17011
Alan F. Bignall Vice President- None
IDS Tower 10 Financial Planning
Minneapolis, MN 55440 Systems
Brent L. Bisson Group Vice President- None
Ste 900 e Westside Tower Los Angeles Metro
11835 West Olympic Blvd.
Los Angeles, CA 90064
John C. Boeder Vice President- None
IDS Tower 10 Mature Market Group
Minneapolis, MN 55440
Bruce J. Bordelon Group Vice President- None
Galleria One Suite 1900 Gulf States
Galleria Blvd.
Metairie, LA 70001
Charles R. Branch Group Vice President- None
Suite 200 Northwest
West 111 North River Dr
Spokane, WA 99201
Karl J. Breyer Senior Vice President- None
IDS Tower 10 Corporate Affairs and
Minneapolis, MN 55440 Special Counsel
Harold E. Burke Vice President None
IDS Tower 10 and Assistant
Minneapolis, MN 55440 General Counsel
<PAGE>
PAGE 25
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Daniel J. Candura Vice President- None
IDS Tower 10 Marketing Support
Minneapolis, MN 55440
Cynthia M. Carlson Vice President- None
IDS Tower 10 American Express
Minneapolis, MN 55440 Securities Services
Orison Y. Chaffee III Vice President-Field None
IDS Tower 10 Real Estate
Minneapolis, MN 55440
James E. Choat Senior Vice President- None
IDS Tower 10 Field Management
Minneapolis, MN 55440
Kenneth J. Ciak Vice President and None
IDS Property Casualty General Manager-
1400 Lombardi Avenue IDS Property Casualty
Green Bay, WI 54304
Roger C. Corea Group Vice President- None
290 Woodcliff Drive Upstate New York
Fairport, NY 14450
Henry J. Cormier Group Vice President- None
Commerce Center One Connecticut
333 East River Drive
East Hartford, CT 06108
John M. Crawford Group Vice President- None
Suite 200 Arkansas/Springfield/Memphis
10800 Financial Ctr Pkwy
Little Rock, AR 72211
Kevin F. Crowe Group Vice President- None
Suite 312 Carolinas/Eastern Georgia
7300 Carmel Executive Pk
Charlotte, NC 28226
Alan R. Dakay Vice President- None
IDS Tower 10 Institutional Products
Minneapolis, MN 55440 Group
Regenia David Vice President- None
IDS Tower 10 Systems Services
Minneapolis, MN 55440
<PAGE>
PAGE 26
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Scott M. Digiammarino Group Vice President- None
Suite 500 Washington/Baltimore
8045 Leesburg Pike
Vienna, VA 22182
Bradford L. Drew Group Vice President- None
Two Datran Center Eastern Florida
Penthouse One B
9130 S. Dadeland Blvd.
Miami, FL 33156
William H. Dudley Director and Executive Director
IDS Tower 10 Vice President-
Minneapolis MN 55440 Investment Operations
Roger S. Edgar Senior Vice President None
IDS Tower 10 and Technology Advisor
Minneapolis, MN 55440
Gordon L. Eid Senior Vice President None
IDS Tower 10 and General Counsel
Minneapolis, MN 55440
Robert M. Elconin Vice President- None
IDS Tower 10 Government Relations
Minneapolis, MN 55440
Mark A. Ernst Vice President- None
IDS Tower 10 Retail Services
Minneapolis, MN 55440
Joseph Evanovich Jr. Group Vice President- None
One Old Mill Nebraska/Iowa/Dakotas
101 South 108th Avenue
Omaha, NE 68154
Louise P. Evenson Group Vice President- None
Suite 200 San Francisco Bay Area
1333 N. California Blvd.
Walnut Creek, CA 94596
Gordon M. Fines Vice President- None
IDS Tower 10 Mutual Fund Equity
Minneapolis MN 55440 Investments
Louis C. Fornetti Senior Vice President None
IDS Tower 10 and Chief Financial
Minneapolis, MN 55440 Officer
<PAGE>
PAGE 27
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Douglas L. Forsberg Group Vice President- None
Suite 100 Portland/Eugene
7931 N. E. Halsey
Portland, OR 97213
William P. Fritz Group Vice President- None
Suite 160 Northern Missouri
12855 Flushing Meadows Dr
St. Louis, MO 63131
Carl W. Gans Group Vice President- None
8500 Tower Suite 1770 Twin City Metro
8500 Normandale Lake Blvd.
Bloomington, MN 55437
Robert G. Gilbert Vice President- None
IDS Tower 10 Real Estate
Minneapolis, MN 55440
John J. Golden Vice President- None
IDS Tower 10 Field Compensation
Minneapolis, MN 55440 Development
Morris Goodwin Jr. Vice President and None
IDS Tower 10 Corporate Treasurer
Minneapolis, MN 55440
Suzanne Graf Vice President- None
IDS Tower 10 Systems Services
Minneapolis, MN 55440
Bruce M. Guarino Group Vice President- None
Suite 1736 Hawaii
1585 Kapiolani Blvd.
Honolulu, HI 96814
David A. Hammer Vice President None
IDS Tower 10 and Marketing
Minneapolis, MN 55440 Controller
Teresa A. Hanratty Group Vice President- None
Suites 6&7 Northern New England
169 South River Road
Bedford, NH 03110
John R. Hantz Group Vice President- None
Suite 107 Detroit Metro
17177 N. Laurel Park
Livonia, MI 48154
<PAGE>
PAGE 28
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Robert L. Harden Group Vice President- None
Two Constitution Plaza Boston Metro
Boston, MA 02129
Lorraine R. Hart Vice President- None
IDS Tower 10 Insurance Investments
Minneapolis, MN 55440
Scott A. Hawkinson Vice President-Assured None
IDS Tower 10 Assets Product Development
Minneapolis, MN 55440 and Management
Brian M. Heath Group Vice President- None
Suite 250 North Texas
801 E. Campbell Road
Richardson, TX 75081
Raymond E. Hirsch Vice President-Senior None
IDS Tower 10 Portfolio Manager
Minneapolis, MN 55440
James G. Hirsh Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
David J. Hockenberry Group Vice President- None
30 Burton Hills Blvd. Eastern Tennessee
Suite 175
Nashville, TN 37215
Kevin P. Howe Vice President- None
IDS Tower 10 Government and
Minneapolis, MN 55440 Customer Relations
David R. Hubers Chairman, Chief Director
IDS Tower 10 Executive Officer and
Minneapolis, MN 55440 President
Marietta L. Johns Senior Vice President- None
IDS Tower 10 Field Management
Minneapolis, MN 55440
James E. Kaarre Vice President- None
IDS Tower 10 Marketing Information
Minneapolis, MN 55440
<PAGE>
PAGE 29
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Linda B. Keene Vice President- None
IDS Tower 10 Market Development
Minneapolis, MN 55440
G. Michael Kennedy Vice President-Investment None
IDS Tower 10 Services and Investment
Minneapolis, MN 55440 Research
Susan D. Kinder Senior Vice President- None
IDS Tower 10 Human Resources
Minneapolis, MN 55440
Richard W. Kling Senior Vice President- None
IDS Tower 10 Risk Management Products
Minneapolis, MN 55440
Paul F. Kolkman Vice President- None
IDS Tower 10 Actuarial Finance
Minneapolis, MN 55440
Claire Kolmodin Vice President- None
IDS Tower 10 Service Quality
Minneapolis, MN 55440
David S. Kreager Group Vice President- None
Ste 108 Trestle Bridge V Greater Michigan
5136 Lovers Lane
Kalamazoo, MI 49002
Steven C. Kumagai Director and Senior None
IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Management and Business
Systems
Mitre Kutanovski Group Vice President- None
Suite 680 Chicago Metro
8585 Broadway
Merrillville, IN 48410
Edward Labenski Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Kurt A. Larson Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Lori J. Larson Vice President- None
IDS Tower 10 Variable Assets Product
Minneapolis, MN 55440 Development
<PAGE>
PAGE 30
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Ryan R. Larson Vice President- None
IDS Tower 10 IPG Product Development
Minneapolis, MN 55440
Daniel E. Laufenberg Vice President and None
IDS Tower 10 Chief U.S. Economist
Minneapolis, MN 55440
Richard J. Lazarchic Vice President- None
IDS Tower 10 Senior Portfolio
MInneapolis, MN 55440 Manager
Peter A. Lefferts Senior Vice President- None
IDS Tower 10 Corporate Strategy and
Minneapolis, MN 55440 Development
Douglas A. Lennick Director and Executive None
IDS Tower 10 Vice President-Private
Minneapolis, MN 55440 Client Group
Mary J. Malevich Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Fred A. Mandell Vice President- None
IDS Tower 10 Field Marketing Readiness
Minneapolis, MN 55440
Daniel E. Martin Group Vice President- None
Suite 650 Pittsburgh Metro
5700 Corporate Drive
Pittsburgh, PA 15237
William J. McKinney Vice President- None
IDS Tower 10 Field Management
Minneapolis, MN 55440 Support
Thomas W. Medcalf Vice President- None
IDS Tower 10 Senior Portfolio Manager
Minneapolis, MN 55440
William C. Melton Vice President- None
IDS Tower 10 International Research
Minneapolis, MN 55440 and Chief International
Economist
Janis E. Miller Vice President- None
IDS Tower 10 Variable Assets
Minneapolis, MN 55440
<PAGE>
PAGE 31
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
James A. Mitchell Executive Vice President- None
IDS Tower 10 Marketing and Products
Minneapolis, MN 55440
John P. Moraites Group Vice President- None
Union Plaza Suite 900 Kansas/Oklahoma
3030 Northwest Expressway
Oklahoma City, OK 73112
Pamela J. Moret Vice President- None
IDS Tower 10 Corporate Communications
Minneapolis, MN 55440
Barry J. Murphy Senior Vice President- None
IDS Tower 10 Client Service
Minneapolis, MN 55440
Robert J. Neis Vice President- None
IDS Tower 10 Information Systems
Minneapolis, MN 55440 Operations
Ronald E. Newton Group Vice President- None
319 Southbridge St. Rhode Island/Central
Auburn, MA 01501 Massachusetts
Thomas V. Nicolosi Group Vice President- None
Suite 220 New York Metro Area
500 Mamaronick Avenue
Harrison, NY 10528
James R. Palmer Vice President- None
IDS Tower 10 Taxes
Minneapolis, MN 55440
Carla P. Pavone Vice President- None
IDS Tower 10 Specialty Service Teams
Minneapolis, MN 55440 and Emerging Business
Susan B. Plimpton Vice President- None
IDS Tower 10 Segmentation Development
Minneapolis, MN 55440 and Support
Larry M. Post Group Vice President- None
One Tower Bridge Philadelphia Metro
100 Front Street 8th Fl
West Conshohocken, PA 19428
<PAGE>
PAGE 32
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Ronald W. Powell Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
James M. Punch Vice President- None
IDS Tower 10 Geographical Service
Minneapolis, MN 55440 Teams
Frederick C. Quirsfeld Vice President-Taxable None
IDS Tower 10 Mutual Fund Investments
Minneapolis, MN 55440
R. Daniel Richardson Group Vice President- None
Suite 800 Southern Texas
Arboretum Plaza One
9442 Capital of Texas Hwy N.
Austin, TX 78759
Roger B. Rogos Group Vice President- None
One Sarasota Tower Western Florida
Suite 700
Two N. Tamiami Trail
Sarasota, FL 34236
ReBecca K. Roloff Vice President-1994 None
IDS Tower 10 Program Director
Minneapolis, MN 55440
Stephen W. Roszell Vice President- None
IDS Tower 10 Advisory Institutional
Minneapolis, MN 55440 Marketing
Max G. Roth Group Vice President- None
Suite 201 S IDS Ctr Wisconsin/Upper Michigan
1400 Lombardi Avenue
Green Bay, WI 54304
Robert A. Rudell Vice President- None
IDS Tower 10 American Express
Minneapolis, MN 55440 Institutional Services
John P. Ryan Vice President and None
IDS Tower 10 General Auditor
Minneapolis, MN 55440
<PAGE>
PAGE 33
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Russell L. Scalfano Group Vice President- None
Suite 201 Exec Pk East Illinois/Indiana/Kentucky
101 Plaza East Blvd.
Evansville, IN 47715
William G. Scholz Group Vice President- None
Suite 205 Arizona/Las Vegas
7333 E Doubletree Ranch Rd
Scottsdale, AZ 85258
Stuart A. Sedlacek Vice President- None
IDS Tower 10 Assured Assets
Minneapolis, MN 55440
Donald K. Shanks Vice President- None
IDS Tower 10 Property Casualty
Minneapolis, MN 55440
F. Dale Simmons Vice President-Senior None
IDS Tower 10 Portfolio Manager,
Minneapolis, MN 55440 Insurance Investments
Judy P. Skoglund Vice President- None
IDS Tower 10 Human Resources and
Minneapolis, MN 55440 Organization Development
Julian W. Sloter Group Vice Presidnet- None
Ste 1700 Orlando FinCtr Orlando/Jacksonville
800 North Magnolia Ave.
Orlando, FL 32803
Ben C. Smith Vice President- None
IDS Tower 10 Workplace Marketing
Minneapolis, MN 55440
William A. Smith Vice President and None
IDS Tower 10 Controller-Private
Minneapolis, MN 55440 Client Group
James B. Solberg Group Vice President- None
IDS Tower 10 Eastern Iowa Area
Minneapolis, MN 55440
Bridget Sperl Vice President- None
IDS Tower 10 Human Resources
Minneapolis, MN 55440 Management Services
<PAGE>
PAGE 34
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Paul J. Stanislaw Group Vice President- None
Suite 1100 Southern California
Two Park Plaza
Irvine, CA 92714
Lois A. Stilwell Group Vice President- None
Suite 433 Outstate Minnesota Area/
9900 East Brn Road North Dakota/Western Wisconsin
Minnetonka, MN 55343
William A. Stoltzmann Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
James J. Strauss Vice President- None
IDS Tower 10 Corporate Planning
Minneapolis, MN 55440 and Analysis
Jeffrey J. Stremcha Vice President-Information None
IDS Tower 10 Resource Management/ISD
Minneapolis, MN 55440
Neil G. Taylor Group Vice President- None
Suite 425 Seattle/Tacoma
101 Elliott Avenue West
Seattle, WA 98119
John R. Thomas Senior Vice President- Director
IDS Tower 10 Information and
Minneapolis, MN 55440 Technology
Melinda S. Urion Vice President and Treasurer
IDS Tower 10 Corporate Controller
Minneapolis, MN 55440
Peter S. Velardi Group Vice President- None
Suite 180 Atlanta/Birmingham
1200 Ashwood Parkway
Atlanta, GA 30338
Charles F. Wachendorfer Group Vice President- None
Suite 100 Denver/Salt Lake City/
Stanford Plaza II Albuquerque
7979 East Tufts Ave Pkwy
Denver, CO 80237
Wesley W. Wadman Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
<PAGE>
PAGE 35
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Norman Weaver Jr. Senior Vice President- None
1010 Main St Suite 2B Field Management
Huntington Beach, CA 92648
Michael L. Weiner Vice President- None
IDS Tower 10 Corporate Tax
Minneapolis, MN 55440 Operations
Lawrence J. Welte Vice President- None
IDS Tower 10 Investment Administration
Minneapolis, MN 55440
Jeffry M. Welter Vice President- None
IDS Tower 10 Equity and Fixed Income
Minneapolis, MN 55440 Trading
William N. Westhoff Senior Vice President and None
IDS Tower 10 Global Chief Investment
Minneapolis, MN 55440 Officer
Thomas L. White Group Vice President- None
Suite 200 Cambridge Ct Cleveland Metro
28601 Chagrin Blvd.
Woodmere, OH 44122
Eric S. Williams Group Vice President- None
Suite 250 Virginia
3951 Westerre Parkway
Richmond, VA 23233
Edwin M. Wistrand Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
Michael R. Woodward Senior Vice President- None
32 Ellicott St Ste 100 Field Management
Batavia, NY 14020
Item 29(c). Not applicable.
Item 30. Location of Accounts and Records
American Express Financial Corporation
IDS Tower 10
Minneapolis, MN 55440
Item 31. Management Services
Not Applicable.
<PAGE>
PAGE 36
Item 32. Undertakings
(a) Not Applicable.
(b) The Registrant undertakes to file a
post-effective amendment, using financial
statements which need not be certified, within
four to six months from the effective date of
Registrant's 1933 Act Registration Statement.
(c) Not applicable.
<PAGE>
PAGE 64
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, Express Direct Tax-
Free Fund, Inc., has duly caused this 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 1st day of
November, 1995.
EXPRESS DIRECT TAX-FREE FUND, INC.
By
William H. Dudley
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
Signature Title Date
By Director, November 1, 1995
William H. Dudley Treasurer
By Director November 1, 1995
James A. Mitchell
<PAGE>
PAGE 65
Signatures
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, TAX-FREE INCOME TRUST consents to
the filing of this Registration Statement signed on its behalf by
the undersigned, thereunto duly authorized, in the City of
Minneapolis and State of Minnesota on the 1st day of November,
1995.
TAX-FREE INCOME TRUST
By:
William H. Dudley
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
Signature Title Date
By Trustee, November 1, 1995
William H. Dudley Treasurer
By Trustee November 1, 1995
David R. Hubers
<PAGE>
PAGE 66
CONTENTS OF THIS REGISTRATION STATEMENT
This Registration Statement comprises the following papers and
documents:
The facing sheet.
Cross reference sheet.
Part A.
The prospectus.
Part B.
Statement of Additional Information.
Part C.
Other Information.
The signatures.
<PAGE>
PAGE 1
EXPRESS DIRECT TAX-FREE FUND, INC.
EXHIBIT INDEX
Exhibit 1: Articles of Incorporation, dated September 1,
1995.
Exhibit 2: Forms of By-laws.
Exhibit 8: Form of Custodian Agreement.
Exhibit 9(b): Form of Administrative Services Agreement.
<PAGE>
PAGE 1
ARTICLES OF INCORPORATION
OF
EXPRESS DIRECT TAX-FREE FUND, INC.
ARTICLE I - NAME
The name of this corporation (the "Fund") is:
EXPRESS DIRECT TAX-FREE FUND, INC.
ARTICLE II - LOCATION
The location of the registered office of the Fund is 80 South
Eighth Street, Minneapolis, Minnesota (mailing address: IDS Tower
10, Minneapolis, Minnesota 55440). Principal places of business as
well as branch offices may hereafter be established at such other
place or places, either within or without the State of Minnesota,
as may from time to time be determined by the Board of Directors.
ARTICLE III - CAPITALIZATION
Section 1. The amount of the total authorized Capital Stock
of the Fund shall be $200,000,000, consisting of 20,000,000,000
shares of the par value of one cent ($.01) per share. Of these
shares, 3,000,000,000 shares may be issued in the series of shares
hereby designated "Express Direct Aggressive Tax-Free Income Fund."
The designation of any series may be changed at any time by the
Board of Directors (the "Board") without the approval of
shareholders. The balance of 17,000,000,000 shares may be issued
in such classes or series with such designations, preferences and
relative, participating, optional or other special rights, or
qualifications, limitations or restrictions thereof, as shall be
stated and expressed in a resolution or resolutions providing for
the issuance of such class or series of stock as may be adopted
from time to time by the Fund's Board pursuant to the authority
hereby vested in said Board. Each class or series of shares which
the Board may establish, as provided herein, may, if the Board
shall so determine by resolution, evidence an interest in a
separate and distinct portion of the Fund's assets, which may take
the form of a separate portfolio of investment securities and cash.
Authority to establish such separate portfolios is hereby vested in
the Board.
Each Series of shares established in these Articles shall
have the following rights and preferences:
<PAGE>
PAGE 2
(a) Each series of shares shall evidence an interest in a
separate portfolio of investment securities and cash.
(b) All monies received by the Fund for the issuance and
sale of shares of a series, together with all assets,
income, earnings, profits and proceeds derived
therefrom, shall be the assets solely of the series to
which the shares relate and any monies received not
specifically identified as belonging to a series shall
be allocated between or among all series of the Fund in
proportion to the respective net assets of the series
or as the Board shall determine.
(c) All liabilities and expenses incurred on behalf of a
series shall be charged against the assets of that
series and be solely the obligations of that series to
which they relate and all liabilities and expenses of
the Fund not specifically pertaining to a series shall
be charged against all series in proportion to the
respective net assets of each series or as the Board
determines.
(d) Dividends and distributions shall be determined and
paid by each series out of the assets, earnings or
surplus of that series in an amount solely at the
discretion of the Board as permitted by Minnesota law.
(e) In the event of liquidation or dissolution of the Fund,
holders of shares of a series shall have priority and
shall be entitled to the assets belonging to that
series.
(f) Each series shall have those rights and preferences set
forth in its registration statement, declared effective
by the Securities and Exchange Commission, and as
required under the provisions of the Investment Company
Act of 1940, as amended, and all rules and regulations
promulgated thereunder.
Section 2. At all meetings of the shareholders, each
shareholder of record entitled to vote thereat shall be entitled to
one vote (and a fractional vote for and equal to each fractional
share) for each share (or fractional share) of stock standing in
her or his name and entitled to vote at such meetings.
Section 3. No shareholder of the Fund shall have any
preemptive rights or cumulative voting rights.
Section 4. No share of stock issued by the Fund shall be
sold or exchanged by or on behalf of the Fund for any amount or
value less than the net asset value thereof as of the close of
business on the day upon which application and payment or payment
for such share is received and accepted by the Fund, and if the day
upon which payment is so received shall not be a business day, then
as of the close of business on the next succeeding business day.
Shares of stock shall be deemed outstanding when issued. The stock
of this Fund, after the par value thereof has been paid, shall not<PAGE>
PAGE 3
be subject to assessment to pay the debts of the Fund, and no stock
issued as fully paid shall be assessable, nor shall the private
property of any shareholder be subject to the payment of corporate
debts to any extent whatever.
Section 5. The registered holder of a share of the Capital
Stock of the Fund may require the Fund to redeem the same by
delivering to the Fund at its designated principal place of
business a request for redemption in a form satisfactory to the
Board, and the Fund, upon receipt of such request, promptly shall
pay out of the appropriate assets of the Fund as determined by the
Board pursuant to the authority vested in it by Section 1 of this
Article, to or upon the order of the registered holder, the
redemption price as hereinafter defined. In all cases,
(a) Shares of each class or series shall be redeemed at the
net asset value thereof.
(b) All rights with respect to shares submitted for
redemption as provided hereunder, except the right to
receive the net asset value thereof, shall cease and
terminate as of the close of business on the day upon
which a request for redemption meeting the requirements
of the first paragraph of this Section 5 is received.
All shares redeemed by the Fund shall, upon redemption,
have the status of authorized and unissued shares, and
shall not be deemed to be treasury shares.
Section 6. The Board or any duly authorized committee
thereof or any officer or officers of the Fund duly authorized by
such Board or Committee may suspend the computation of net asset
value for the purpose of issuing shares or defer payment of the
redemption price for such period, after receipt of such request and
surrender of the certificate or evidence of ownership, as may be
permitted by applicable law, and may suspend sales or defer
redemption during a "period of emergency" as defined in the
Investment Company Act of 1940.
ARTICLE IV - DIRECTORS
Section 1. The number of directors of the Fund shall
initially be two. The names of the director who shall hold office
until the first meeting of shareholders or until their successors
are duly chosen and qualified are William H. Dudley and James A.
Mitchell.
Section 2. The directors, of which there shall be not less
than two nor more than fifteen, shall be elected at the first
meeting of the shareholders for an indefinite term and thereafter
at each regular meeting of shareholders, to hold office for an
indefinite term until the next regular meeting of shareholders, but
in any event, they shall hold office until their successors are
elected and qualify. The number of directors may be increased or
decreased from time to time by action of the Board. If there be a
vacancy on the Board by reason of death, resignation or otherwise,
such vacancy may be filled for the unexpired term by a majority
vote of the remaining directors, though less than a quorum. The
election and qualification of a director or directors to fill any<PAGE>
PAGE 4
such vacancy or vacancies shall be in conformity with the
requirements of the Investment Company Act of 1940, as amended.
Section 3. In furtherance and not in limitation of the
powers conferred by these Articles, the Board is expressly
authorized:
(a) To issue and dispose of and to enter into contracts for
the distribution, sale, exchange, purchase and resale
of the authorized securities of the Fund.
(b) To enter into a contract or contracts with any person,
firm, corporation, association or trust selected by it
to act as trustee or custodian for any of the assets of
the Fund pursuant to such terms and conditions and for
such compensation as the Board shall determine.
(c) To enter into a contract or contracts wherein and
whereby a responsible person, entity, partnership,
association or corporation is designated and employed
as the investment manager or adviser for the Fund to
manage the assets of the Fund by counseling with and
advising the Fund in connection with the formulation of
an investment program designed to accomplish the Fund's
investment objectives, by determining what securities
and other investments shall be purchased or sold, by
causing the execution of purchase and sell orders, by
determining what portion of the assets shall be held
uninvested, by recommending the purchase and/or sale of
assets and by advising the Fund with respect to the
general and specific policies and transactions to be
followed in the purchasing, owning and handling of
securities and other assets and the disposition
thereof. Such management or advisory activities shall
be subject always to the power of the Board of the Fund
to have full control over the affairs of the Fund and
to review periodically each portfolio of the Fund to
see that it is managed in the long-term interests of
the Fund's shareholders and in accordance with its
investment objectives.
(d) To declare and pay dividends in its discretion at any
time and from time to time to the extent and from such
sources as permitted by the laws of the State of
Minnesota.
Section 4. Any determination made in good faith by or
pursuant to the direction of the Board as to the amount of the
assets, debts, obligations or liabilities of the Fund, as to the
price or closing bid and asked prices, as to the value of any
security or asset of the Fund, or as to any other matters relating
to the issue, sale, redemption, liquidation, purchase and/or
acquisition or disposition of securities of the Fund, shall be
final and conclusive, and shall be binding upon the Fund and all
holders of securities issued by it, past, present and future, and
securities of the Fund shall be issued and sold on the condition<PAGE>
PAGE 5
and understanding that any and all such determinations shall be
binding as aforesaid.
Section 5. The Fund shall indemnify any person who was or is
a party or is threatened to be made a party, by reason of the fact
that she or he is or was a director, officer, employee or agent of
the Fund, or is or was serving at the request of the Fund as a
director, officer, employee or agent of another company,
partnership, joint venture, trust or other enterprise, to any
threatened, pending or completed action, suit or proceeding,
wherever brought, and the Fund may purchase liability insurance and
advance legal expenses, all to the fullest extent permitted by the
laws of the State of Minnesota, as now existing or hereafter
amended. Any indemnification hereunder shall not be exclusive of
any other rights of indemnification to which the directors,
officers, employees or agents might otherwise be entitled. No
indemnification shall be made in violation of the Investment
Company Act of 1940.
Section 6. To the full extent permitted by the laws of the
State of Minnesota, as now existing or hereafter amended, no
director of the Fund shall be liable to the Fund or to its
shareholders for monetary damages for breach of fiduciary duty as a
director but such limit on liability shall be permitted only to the
extent allowable under the provisions of the Investment Company Act
of 1940.
ARTICLE V - INCORPORATOR
The name and post office address of the incorporator is as
follows:
Name Post Office Address
Eileen J. Newhouse IDS Tower 10
Minneapolis, Minnesota 55440
ARTICLE VI - MEETINGS AND LOCATION OF BOOKS
The shareholders and directors shall have power to hold their
meetings, and to keep the books of the Fund (subject to the
provisions of the laws of the State of Minnesota) outside the State
of Minnesota at such places as may from time to time be designated
by the By-Laws or by resolution of the Directors.
ARTICLE VII - WRITTEN ACTION BY BOARD OF DIRECTORS
An action required or permitted to be taken by the Board of
the Fund may be taken by written action signed by that number of
directors that would be required to take the same action at a
meeting of the Board at which all directors are present.
ARTICLE VIII - AMENDMENTS
These Articles of Incorporation, or any provision hereof, may
be amended, altered, changed or repealed in the manner prescribed
by the laws of the State of Minnesota.<PAGE>
PAGE 6
IN WITNESS WHEREOF, I have subscribed my name this day of
August, 1995.
Incorporator
STATE OF MINNESOTA
SS:
COUNTY OF HENNEPIN
The foregoing was acknowledged before me this day of August,
1995 by Eileen J. Newhouse
<PAGE>
PAGE 1
BY-LAWS
OF
EXPRESS DIRECT TAX-FREE FUND, INC.
ARTICLE I
Corporate Seal
The corporate seal shall bear the inscription "Express Direct
Tax-Free Fund, Inc., Minnesota, Incorporated 1995".
ARTICLE II
Meeting of Shareholders
Section 1. No regular meeting of shareholders need be held,
however, a majority of directors present at a duly held meeting may
call a regular meeting of shareholders by fixing the date, time and
place for a meeting. A regular meeting of the shareholders shall
include an election of directors. No meeting shall be considered a
regular meeting unless specifically designated as such in the
notice of meeting. Regular meetings may be held no more frequently
than once per year.
Section 2. The holders of at least ten percent (10%) of the
shares outstanding and entitled to vote, present in person or by
proxy, shall constitute a quorum, but the holders of a smaller
amount may adjourn from time to time without further notice, other
than by notice at the time, until a quorum is secured at any such
adjourned meeting. In case a quorum is not present, the meeting
may be adjourned from time to time without notice other than by
notice at the meeting. At any adjourned meeting at which a quorum
may be present, any business may be transacted which might have
been transacted at the meeting as originally called.
Section 3. At each meeting of the shareholders, the polls
may be opened and closed, the proxies and ballots may be received
and taken in charge, and all questions touching the qualification
of
voters, the validity of proxies, and acceptances or rejections of
votes may be decided by two (2) inspectors of election. Inspectors
may be appointed by the Board of Directors before or at the
meeting. If no such appointment shall have been made or if any
inspector be absent or fails to act, the presiding officer at the
meeting shall appoint a person or persons to fill such vacancy.
Inspectors shall take charge of the polls and, when the vote is
completed, shall make a certificate of the result of the vote taken
and of such other facts as may be required by law.
Section 4. Special meetings of the shareholders may be
called at any time as provided for by the laws of the State of
Minnesota.
<PAGE>
PAGE 2
Section 5. Shareholders shall take action by the affirmative
vote of the holders of a majority of the voting power of the shares
present and entitled to vote except where a larger portion is
otherwise required.
ARTICLE III
Directors
Section 1. An organizational meeting of the Board of
Directors shall be held as soon as convenient to a majority of the
directors, after the final adjournment of each regular meeting of
the shareholders, and no notice shall be required. Other meetings
of the Board of Directors may be previously scheduled or called by
the President or any two directors. Notice of specially called
meetings shall be sufficient if given to each director at least
five days prior thereto by mail or one day prior thereto by
telephone, telegraph or in person, unless such notice period is
waived by each director.
Section 2. The Board of Directors shall fix and change, as
it may from time to time determine, by majority vote, the
compensation to be paid the directors, officers and all employees
appointed by the Board of Directors.
Section 3. A director may give advance written consent or
opposition to a proposal to be acted on at a Board meeting. If the
director is not present at the meeting, consent or opposition to a
proposal does not constitute presence for purposes of determining
the existence of a quorum, but consent or opposition shall be
counted as a vote in favor of or against the proposal and shall be
entered in the minutes of the meeting, if the proposal acted on at
the meeting is substantially the same or has substantially the same
effect as the proposal to which the director has consented or
objected.
Section 4. A majority of the directors shall constitute a
quorum, but a smaller number may adjourn from time to time without
notice, other than by announcement at the meeting, until a quorum
is secured; and, likewise, in case a quorum is present, the meeting
may be adjourned from time to time without notice other than by
announcement at the meeting. At any adjourned meeting at which a
quorum may be present, any business may be transacted which might
have been transacted at the meeting as originally called.
Section 5. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate an Executive Committee
of two or more directors, which may meet at stated times or on
notice to all by any of their number during intervals between
meetings of the Board. The Executive Committee shall advise with
and aid the officers of the Fund in all matters concerning its
interests and the management of its business, and generally perform
such duties and exercise such powers as may be delegated to it from
time to time by the Board of Directors. Vacancies in the
membership of such Executive Committee shall be filled by the Board
of Directors.
<PAGE>
PAGE 3
Section 6. From time to time the Board of Directors may, by
resolution passed by a majority of the whole Board, appoint any
other committee or committees for any purpose or purposes, which
committee or committees shall have such powers as shall be
specified in the resolution of appointment.
Section 7. The quorum for such committee established by the
Board of Directors is two members regardless of the number of
members serving on the committee.
Section 8. Any action required or permitted to be taken at
any meeting of the Board of Directors or of a duly appointed
committee of the Board of Directors may be taken in any manner
permitted by law.
ARTICLE IV
Officers
Section 1. The Fund shall have a President who shall serve
as the chief executive officer, a Treasurer who shall serve as the
chief financial officer, and may have such other officers as the
Board of Directors may choose from time to time.
Section 2. The Treasurer shall be the chief financial
officer of the Fund, shall keep or cause to be kept full and
accurate accounts of receipts and disbursements in books belonging
to the Fund, and shall perform such other duties as the Board of
Directors may from time to time prescribe or require.
Section 3. Any person designated by the Board of Directors
as a Vice President shall be vested with all the powers and
required to perform all the duties of the President in the
President's absence or disability, shall at all times be vested
with the same power as the President to sign and deliver in the
name of the Fund any deeds, mortgages, bonds, contracts or other
instruments pertaining to the business of the Fund, and shall
perform such other duties as may be prescribed by the Board of
Directors.
Section 4. Any person designed by the Board of Directors as
Secretary shall attend all meetings of the shareholders of the
Fund, the Board of Directors, and such other meetings as may be
designated by the Board of Directors. The Secretary shall record
all of the proceedings of such meetings in a book or books to be
kept for that purpose; shall have custody of the seal, stock
certificate books and minute books of the Fund; may affix the seal
of the Fund to any instrument and perform such additional duties as
shall be assigned by the Board of Directors.
Section 5. The officers of the Fund shall hold office until
their successors are chosen and qualify in their stead. Any
officer chosen and appointed by the Board of Directors may be
removed either with or without cause at any time by the Board of
Directors.
<PAGE>
PAGE 4
ARTICLE V
Capital Stock
Shares of capital stock shall be uncertificated.
ARTICLE VI
Transfers
1/12/89
Section 1. Shares of stock of the Fund shall be transferred
on the books of the Fund at the request of the holder thereof in
person or of her or his duly authorized attorney upon surrender of
the certificate or certificates therefor, if any, or in their
absence by a request for transfer in a form acceptable to the Fund
that may include the request be in writing, and be signed by the
registered holder or by his duly authorized attorney in the manner
specified by the Fund. No transfer or assignment of shares shall
affect the right of the Fund to pay any dividend due upon the
shares, or to treat the holder of record as the holder in fact,
until such transfer or assignment is registered on the books of the
Fund and the Fund shall be entitled to treat the holder of record
of any of its shares as the holder in fact thereof and accordingly
shall not be bound to recognize any equitable or other claim to, or
interest in, such shares on the part of any person whether or not
it shall have express or other notice thereof, save as may be
expressly provided by law.
Section 2. The Board of Directors shall have power and
authority from time to time to appoint one or more transfer agents
and/or clerks and registrars for the securities issued by the Fund
and to make such rules and regulations as it may deem expedient
concerning the issue, transfer and registration of such securities.
Section 3. If any security issued by the Fund be lost,
stolen, mutilated or destroyed, the security may be transferred
upon giving of a satisfactory bond of indemnity in an amount which,
in the judgment of the Board of Directors, is sufficient to
indemnify the Fund against any claim that may result therefrom.
ARTICLE VII
Definitions
For all purposes of the Articles of Incorporation and these
By-Laws, the term "business day" shall be defined as a day with
respect to which the New York Stock Exchange is open for business.
ARTICLE VIII
Custodian or Trustee Agreements
The Fund shall enter into a custodian or trustee agreement
with a bank or trust company having aggregate capital, surplus and
undivided profits of not less than $2,000,000 for the custody of
the Fund's securities and other assets. All securities and cash
assets owned or acquired by the Fund shall be held by such
custodian or trustee pursuant to the terms of such agreement and <PAGE>
PAGE 5
the Fund shall deposit or cause to be deposited with such custodian
or trustee all such securities and cash assets. The agreement
between the Fund and the custodian or trustee may be terminated at
any time by a vote of a majority of the outstanding shares of the
Fund.
ARTICLE IX
Miscellaneous
Section 1. The fiscal year of the Fund shall begin on the
first day of December in each year and end on the thirtieth day of
November following.
Section 2. If the sale of shares issued by the Fund shall at
any time be discontinued, the Board of Directors may in its
discretion, pursuant to resolution, deduct from the value of the
assets an amount equal to the brokerage commissions, transfer
taxes, and charges, if any, which would be payable on the sale of
such securities if they were then being sold.
ARTICLE X
Indemnification
Section 1. Each person made or threatened to be made a party
to or is involved (including, without limitation, as a witness) in
any actual or threatened action, suit or proceeding whether civil,
criminal, administrative, arbitration, or investigative, including
a proceeding by or in the right of the Fund by reason of the former
or present capacity as a director or officer of the Fund or who,
while a director or officer of the Fund, is or was serving at the
request of the Fund or whose duties as a director or officer
involve or involved service as a director, officer, partner,
trustee or agent of another organization or employee benefit plan,
whether the basis of any proceeding is alleged action in an
official capacity or in any capacity while serving as a director,
officer, partner, trustee or agent, shall be indemnified and held
harmless by the Fund to the full extent authorized by the Minnesota
Business Corporation Act, as the same or may hereafter be amended
(but, in the case of any such amendment, only to the extent that
such amendment permits the Fund to provide broader indemnification
rights than the law permitted the Fund to provide prior to such
amendment, or by any other applicable law as then in effect,
against judgments, penalties, fines including, without limitation,
excise taxes assessed against the person with respect to an
employee benefit plan, settlements and reasonable expenses,
including attorneys' fees and disbursements, incurred in connection
therewith and such indemnification shall continue as to any person
who has ceased to be a director or officer and shall inure to the
benefit of the person's heirs, executors and administrators
provided, however, in an action brought against the Fund to enforce
rights to indemnification, the director or officer shall be
indemnified only if the action was authorized by the Board of
Directors of the Fund. The right to indemnification conferred by
this Section shall be a contract right and shall include the right
to be paid by the Fund in advance of the final disposition of a
proceeding for expenses incurred in connection therewith provided, <PAGE>
PAGE 6
however, such payment of expenses shall be made only upon receipt
of a written undertaking by the director or officer to repay all
amounts so paid if it is ultimately determined that the director or
officer is not entitled to indemnification.
Section 2. Each person who upon written request to the Fund
has not received payment within thirty days may at any time
thereafter bring suit against the Fund to recover any unpaid amount
and, to the extent successful, in whole or in part, shall be
entitled to be paid the expenses of prosecuting such suit. Each
person shall be presumed to be entitled to indemnification upon
filing a written request for payment and the Fund shall have the
burden of proof to overcome the presumption that the director or
officer is not so entitled. Neither the determination by the Fund,
whether by the Board of Directors, special legal counsel or by
shareholder, nor the failure of the Fund to have made any
determination shall be a defense or create the presumption that the
director or officer is not entitled to indemnification.
Section 3. The right to indemnification and to the payment
of expenses prior to any final determination shall not be exclusive
of any other right which any person may have or hereinafter acquire
under any statute, provision of the Articles of Incorporation, by-
law, agreement, vote of shareholders or otherwise and notwith-
standing any provisions in this Article X, the Fund is not
obligated to make any payment with respect to any claim for which
payment is required to be made to or on behalf of the director or
officer under any insurance policy, except with respect to any
excess beyond the amount of required payment under such insurance
and no indemnification will be made in violation of the provisions
of the Investment Company Act of 1940.
<PAGE>
PAGE 1
CUSTODIAN AGREEMENT
THIS CUSTODIAN AGREEMENT dated ________, 1995, between Express
Direct Tax-Free Fund, Inc. (the Company), a Minnesota Corporation,
on behalf of its underlying series funds, 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 Company 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 Company and the Custodian agree as follows:
Section 1. 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 Company, 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 Custodian Agreement, the word "securities"
also shall include other instruments in which the Company 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 Company 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 Company will certify to the Custodian the names and signatures
of its present officers and other designated persons authorized on
behalf of the Company to direct the Custodian by custodian order as
herein before defined. The Company 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 Company as having been duly adopted by the board of directors
(the "board") or the Executive Committee of the board designating
those persons currently authorized on behalf of the Company 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 Company 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 Company
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 Company 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 Company. The Custodian or its
agent shall make payments of cash to or for the account of the
Company from such cash only:
(a) for the purchase of securities for the portfolio of the
Company upon the receipt of such securities by the Custodian
or its agent unless otherwise instructed on behalf of the
Company;
(b) for the purchase or redemption of shares of capital stock of
the Company;
(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 Company
held by or to be delivered to the Custodian;
(f) for payments in connection with the return of securities
loaned by the Company 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 Company 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
Company to endorse and collect all checks, drafts or other orders
for the payment of money received by the Custodian for the account
of the Company and drawn on or to the order of the Company and to
deposit same to the account of the Company 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
Company. The Custodian shall record and maintain a record of all
certificate numbers. Securities so received shall be held in the
name of the Company, 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 Company 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 Company
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 Company and only for the account of the Company 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 Company 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 Company,
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 Company 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 Company requesting such
transfer, exchange or delivery and stating that it is for a purpose
permitted under Section 6 (whenever a facsimile is utilized, the
Company 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
Company 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 Company, 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 Company
which call for payment upon presentation and hold all cash
received by it upon such payment for the account of the
Company;
(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 Company 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 Company.
<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
Company. The Custodian shall promptly deliver to the Company 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 Company), but without indicating the manner in which such
proxies are to be voted.
Custodian shall transmit promptly to the Company 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 Company. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Company 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 Company 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 Company as of the close of business
each day a statement showing all transactions and entries for the
account of the Company. 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 Company, internal auditors
employed by the Company's investment advisor, and independent
auditors employed by the Company. The Custodian shall furnish the
Company in such form as may reasonably be requested by the Company
a report, including a list of the securities held by it in custody
for the account of the Company, 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 Company. Should any report
ever be filed with any governmental authority pertaining to lost or
stolen securities, the Custodian will concurrently provide the
Company 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 Company 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 Company 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
Company for such items. In the event of any advance of cash for
any purpose made by Custodian resulting from orders or instructions
of the Company, 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 Company 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 Company 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 Company 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 Company
ninety days' written notice of such termination by registered mail
addressed to the Company at its principal place of business.
The Company 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 Company, by registered mail to the Custodian.
Upon such termination of this Agreement, assets of the Company held
by the Custodian shall be delivered by the Custodian to a successor
custodian, if one has been appointed by the Company, 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 shares of the Company and after written
notice of such action to the Custodian.
Section 13. 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.
<PAGE>
PAGE 9
This Agreement shall be governed by the laws of the State of
Minnesota.
This Agreement supersedes all prior agreements between the parties.
EXPRESS DIRECT TAX-FREE FUND, INC.
Express Direct Aggressive Tax-Free Income Fund
By:
Vice President
AMERICAN EXPRESS TRUST COMPANY
By:
Vice President
<PAGE>
PAGE 1
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT made the __ day of ____, 1995, by and between Express
Direct Tax-Free Fund, Inc. (the "Company"), a Minnesota
corporation, on behalf of its underlying series funds, and American
Express Financial Corporation (the "Corporation"), a Delaware
corporation.
Part One: SERVICES
(1) The Company hereby retains the Corporation, and the Corporation
hereby agrees, for the period of this Agreement and under the terms
and conditions hereinafter set forth, to furnish the Company
continuously with all administrative, accounting, clerical,
statistical, correspondence, corporate and all other services of
whatever nature required in connection with the administration of
the Company as provided under this Agreement; and to pay such
expenses as may be provided for in Part Three hereof; subject
always to the direction and control of the Board of Directors (the
"Board"), the Executive Committee and the authorized officers of
the Company. The Corporation agrees to maintain an adequate
organization of competent persons to provide the services and to
perform the functions herein mentioned. The Corporation agrees to
meet with any persons at such times as the Board deems appropriate
for the purpose of reviewing the Corporation's performance under
this Agreement.
(2) The Company agrees that it will furnish to the Corporation any
information that the latter may reasonably request with respect to
the services performed or to be performed by the Corporation under
this Agreement.
(3) It is understood and agreed that in furnishing the Company with
the services as herein provided, neither the Corporation, nor any
officer, director or agent thereof shall be held liable to the
Company or its creditors or shareholders 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 Corporation may rely
upon information furnished to it reasonably believed to be accurate
and reliable.
Part Two: COMPENSATION FOR SERVICES
(1) The Company agrees to pay to the Corporation, and the
Corporation covenants and agrees to accept from the Company in full
payment for the services furnished, based on the net assets of the
Company as set forth in the following table:
<PAGE>
PAGE 2
Assets Annual rate at
(billions) each asset level
Express Direct Aggressive Tax-Free Income Fund
First $1 0.040%
Next 1 0.035
Next 1 0.030
Next 3 0.025
Next 3 0.020
Over 9 0.020
The administrative fee for each calendar day of each year shall be
equal to 1/365th (1/366th in each leap year) on the total amount
computed. The computation shall be made for each such day on the
basis of net assets as of the close of business on 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 administrative fee 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. As used herein, "net assets" as of the close of a full
business day shall include all transactions in shares of the
Company recorded on the books of the Company for that day.
(2) The administrative fee shall be paid on a monthly basis and, in
the event of the termination of this Agreement, the administrative
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 administrative fee provided for hereunder shall be paid in
cash by the Company to the Corporation within five (5) business
days after the last day of each month.
Part Three: ALLOCATION OF EXPENSES
(1) The Company agrees to pay:
(a) Administrative fees payable to the Corporation for its services
under the terms of this Agreement.
(b) Taxes.
(c) Fees and charges of its independent certified public
accountants for services the Company requests.
(d) Fees and expenses of attorneys for services the company
requests.<PAGE>
PAGE 3
(e) Fees paid for the qualification and registration for public
sale of the securities of the Company under the laws of the United
States and of the several states in which such securities shall be
offered for sale.
(f) Office expenses which shall include a charge for occupancy,
insurance on the premises, furniture and equipment, telephone,
telegraph, electronic information services, books, periodicals,
published services, and office supplies used by the Company, equal
to the cost of such incurred by American Express Financial
Corporation.
(g) Fees of consultants employed by the Company.
(h) Directors, 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
directors, officers and employees, directors and officers liability
insurance, errors and omissions liability insurance, worker's
compensation insurance and other expenses applicable to the
directors, officers and employees, except the Company will not pay
any fees or expenses of any person who is an officer or employee of
the Corporation or its affiliates.
(i) Filing fees and charges incurred by the Company in connection
with filing any amendment to its articles of incorporation, or
incurred in filing any other document with the State of Minnesota
or its political subdivisions.
(j) Organizational expenses of the Company.
(k) One-half of the Investment Company Institute membership dues
charged jointly to the [Express Direct Group of Funds] and the
Corporation.
(l) Expenses properly payable by the Company, approved by the
Board.
(2) The Corporation agrees to pay all expenses associated with the
services it provides under the terms of this Agreement. Further,
the Corporation agrees that if, at the end of any month, the
expenses of the Company under this Agreement and any other
agreement between the Company and the Corporation, but excluding
those expenses set forth in (1)(b) of this Part Three, exceed the
most restrictive applicable state expenses limitation, the Company
shall not pay those expenses set forth in (1)(a) and (c) through
(m) of this Part Three to the extent necessary to keep the
Company's expenses from exceeding the limitation, it being
understood that the Corporation will assume all unpaid expenses and
bill the Company for them in subsequent months but in no event can
the accumulation of unpaid expenses or billing be carried past the
end of the Company's fiscal year.
<PAGE>
PAGE 4
Part Four: MISCELLANEOUS
(1) The Corporation 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 Company.
(2) A "full business day" shall be as defined in the By-laws.
(3) The Company recognizes that the Corporation 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 Company
and that the Corporation manages its own investments and/or those
of its subsidiaries. The Corporation shall be free to render such
investment advice and other services and the Company hereby
consents thereto.
(4) Neither this Agreement nor any transaction had pursuant hereto
shall be invalidated or in anyway affected by the fact that
directors, officers, agents and/or shareholders of the Company are
or may be interested in the Corporation or any successor or
assignee thereof, as directors, officers, stockholders or
otherwise; that directors, officers, stockholders or agents of the
Corporation are or may be interested in the Company as directors,
officers, shareholders, or otherwise; or that the Corporation or
any successor or assignee, is or may be interested in the Company
as shareholder or otherwise, provided, however, that neither the
Corporation, nor any officer, director or employee thereof or of
the Corporation, shall sell to or buy from the Company any property
or security other than shares issued by the Company, except in
accordance with applicable regulations or orders of the United
States Securities and Exchange Commission.
(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.
(6) The Corporation agrees that no officer, director or employee of
the Corporation will deal for or on behalf of the Company 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 officers, directors or employees of the
Corporation from having a financial interest in the Company or in
the Corporation.
(7) The Company agrees that the Corporation 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 Corporation remains fully
responsible for the services.<PAGE>
PAGE 5
(8) 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. This Agreement
shall be governed by the laws of the State of Minnesota.
Part Five: RENEWAL AND TERMINATION
(1) 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.
(2) This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties.
IN WITNESS THEREOF, the parties hereto have executed the foregoing
Agreement as of the day and year first above written.
EXPRESS DIRECT TAX-FREE FUND, INC.
Express Direct Aggressive Tax-Free Income Fund
By:
[Title]
AMERICAN EXPRESS FINANCIAL CORPORATION
By:
[Title]
