-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BclNrxGPI2vGGonsDclBhJpUSJCC3BeN2TJhJp+LdpxAMRdRm9KhZwDebmn8qUG8 MvyOpwd7CfaAJkpscj5sdg== 0000820027-95-000525.txt : 19951101 0000820027-95-000525.hdr.sgml : 19951101 ACCESSION NUMBER: 0000820027-95-000525 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950831 FILED AS OF DATE: 19951031 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: IDS BOND FUND INC CENTRAL INDEX KEY: 0000049697 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 411237361 STATE OF INCORPORATION: MN FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-02503 FILM NUMBER: 95585946 BUSINESS ADDRESS: STREET 1: IDS TOWER 10 STREET 2: T33/52 CITY: MINNEAPOLIS STATE: MN ZIP: 55440 BUSINESS PHONE: 6126712772 MAIL ADDRESS: STREET 1: 80 SOUTH 8TH STREET STREET 2: T33/52 CITY: MINNEAPOLIS STATE: MN ZIP: 55440 N-30D 1 IDS BOND FUND, INC. PAGE 1 IDS BOND FUND 1995 annual report (prospectus enclosed) (icon of) column The goal of IDS Bond Fund, Inc. is to provide shareholders with a high level of current income while attempting to conserve the value of the investment and to continue a high level of income for the longest period of time. The Fund invests primarily in corporate bonds and other debt securities. (This annual report includes a prospectus that describes in detail the Fund's objective, investment policies, risks, sales charges, fees and other matters of interest. Please read the prospectus carefully before you invest or send money.) Distributed by American Express Financial Advisors Inc. PAGE 2 (icon of) column Striking a balance among bonds A bond is like an I.O.U. But with a bond, it's a corporation or the government--the bond issuer--that promises to pay the money back. In return for lending money to the issuer, bond investors get paid interest, which varies by bond quality. (The lower the quality, the higher the interest.) Bond Fund invests largely in high-quality bonds, but includes some lower-quality and even some foreign bonds seeking to boost the return. The portfolio manager shifts this mix, as well as the balance between corporate and government bonds, as investment conditions dictate. In doing so, the Fund seeks to maximize the long-term return potential for investors. PAGE 3 Contents (Icon of) One open book inside of another. The purpose of this annual report is to tell investors how the Fund performed. The prospectus, which is bound into the middle of this annual report, describes the Fund in detail. 1995 annual report From the president 4 From the portfolio manager 4 Ten largest holdings 6 Making the most of your Fund 7 Long-term performance 8 Independent auditors' report 9 Financial statements 10 Notes to financial statements 13 Investments in securities 21 IDS mutual funds 35 Federal income tax information 38 1995 prospectus The Fund in brief Goal 3p Types of Fund investments and their risks 3p Manager and distributor 3p Portfolio manager 3p Alternative purchase arrangements 3p Sales charge and fund expenses 4p Performance Financial highlights 6p Total returns 7p Yield 9p Investment policies and risks Facts about investments and their risks 10p Alternative investment option 14p Valuing Fund shares 15p How to purchase, exchange or redeem shares Alternative purchase arrangements 16p How to purchase shares 19p How to exchange shares 22p How to redeem shares 22p Reductions and waivers of the sales charge 27p Special shareholder services Services 32p Quick telephone reference 32p PAGE 4 Distributions and taxes Dividend and capital gain distributions 33p Reinvestments 34p Taxes 35p How to determine the correct TIN 37p How the Fund is organized Shares 38p Voting rights 38p Shareholder meetings 38p Directors and officers 38p Investment manager and transfer agent 40p Distributor 41p About American Express Financial Corporation General information 43p Appendices Description of corporate bond ratings 44p Descriptions of derivative instruments 46p PAGE 5 To our shareholders (Photo of) William R. Pearce, President of the Fund (Photo of) Fred Quirsfeld, Portfolio manager From the president As I indicated in the Fund's previous reports, new agreements between the Fund and American Express Financial Corporation (AEFC) were approved by shareholders in November 1994. The new agreements became effective when the Fund began offering multiple classes of shares on March 20, 1995. The advantage of offering more than a single class of shares is that investors may choose how they wish to pay sales charges. A portion of these charges compensates your American Express financial advisor (formerly called your IDS planner), who is committed to providing you with outstanding services. Adding new classes of mutual fund shares does make the presentation of financial information in this report more complex. However, we will continue our effort to make the reports easier to read and understand. Meanwhile, your American Express financial advisor is available to answer your questions. William R. Pearce From the portfolio manager An improving bond market and an emphasis on corporate bonds keyed a strong performance by IDS Bond Fund during the recent fiscal year (September 1994 through August 1995). As is always the case for bond mutual funds, the biggest influence on the Fund's performance during the past 12 months was the interest-rate trend. In February 1994, the Federal Reserve began raising short-term interest rates to rein in economic growth and thereby head off a potential spike in the inflation rate. Long- term rates took their cue from the Fed's actions and began a dramatic climb that didn't end until late last year. Because rising rates drive down bond values, the Fund's performance was negatively affected for the first two months of the fiscal year. Rally begins The turnaround for the bond market and the Fund began in November 1994. With inflation fears easing somewhat, long-term interest rates began to decline, even as the Fed continued to nudge short- term rates higher. The Fed's final rate hike came last February. By that time, the positive market momentum had already turned into a powerful rally that continued well into the summer of this year. In fact, in July the Fed actually reversed its policy by taking short-term rates down a notch--a reflection of the Fed's recognition that its previous increases had achieved the desired effect of slowing down the economy and easing upward pressures on inflation. PAGE 6 In addition to the favorable market trend, the Fund also benefited from my decision late in 1994 to switch from a relatively defensive portfolio structure to a more aggressive one. This adjustment included reducing cash reserves and putting that money to work in bonds, and lengthening the duration of the portfolio. (Duration is related to the average maturity of the bonds in the portfolio and indicates a portfolio's sensitivity to interest-rate changes. When rates are falling, it pays to have a longer duration.) As rates soon declined, the Fund was therefore very well-positioned to capitalize on that developing trend. Successful sectors Looking at market sectors, I kept a substantial exposure to corporate bonds, including both investment grade and below- investment-grade issues. For the most part, both were very good performers during the fiscal year. On the foreign front, the Fund's small amount of holdings in emerging markets suffered in late 1994, but rebounded quite nicely this year to give it overall positive performance. Also of note, throughout the fiscal year I undertook a general upgrading of portfolio quality, evidenced by a reduction in corporate bond holdings and an increase in U.S. Treasury and mortgage-backed securities. As we head into a new fiscal year, it appears that professional bond investors have become more comfortable with the investment climate that the Fund has embraced for some time: slow-to-moderate economic growth and a modest rate of inflation. As unlikely as others may have thought it, the Federal Reserve appears to have negotiated the desired "soft landing" for the economy. If that scenario continues to play out, I expect long-term interest rates to fall somewhat lower by early next year. That, in turn, would very likely allow bonds, especially below-investment-grade bonds of domestic corporations and bonds issued by companies in emerging foreign markets, to enjoy good performance in the months ahead. I have structured the portfolio for such an environment and look forward to what I believe will be a rewarding period. Fred Quirsfeld Class A 12-month performance (All figures per share) Net asset value (NAV) Aug. 31, 1995 $5.05 Aug. 31, 1994 $4.91 Increase $0.14 Distributions Sept. 1, 1994-Aug. 31, 1995 From income $0.37 From capital gains $0.10 Total distributions $0.47 Total return** +13.7%*** PAGE 7 Class B March 20, 1995-Aug. 31, 1995 (All figures per share) Net asset value (NAV) Aug. 31, 1995 $5.05 Aug. 31, 1994 $4.79 Increase $0.26 Distributions March 20, 1995*-Aug. 31, 1995 From income $0.17 From capital gains $ -- Total distributions $0.17 Total return** +9.0%*** Class Y March 20, 1995-Aug. 31, 1995 (All figures per share) Net asset value (NAV) Aug. 31, 1995 $5.05 March 20, 1995* $4.79 Increase $0.26 Distributions March 20, 1995*-Aug. 31, 1995 From income $0.19 From capital gains $ -- Total distributions $0.19 Total return** +9.4%*** * Inception date. ** The prospectus discusses the effects of sales charges, if any, on the various classes. ***The total return is a hypothetical investment in the Fund with all distributions reinvested. PAGE 8
IDS Bond Fund, Inc. Your Fund's ten largest holdings (Pie chart) The ten holdings listed here make up 7.04% of the Fund's net assets _____________________________________________________________________________________ Percent Value (of Fund's net assets) (as of Aug. 31, 1995) _____________________________________________________________________________________ Long Island Lighting .93% $ 29,935,479 9.625% General Refunding Mortgage 2024 New York Telephone .83 26,717,075 9.375% 2031 Viacom International .80 25,642,500 8% 2006 Scotland Bank .70 22,401,580 8.80% 2004 Ford Capital .69 22,084,409 9.50% 2010 Argentina .67 21,721,563 7.312 2005 Poland .61 19,580,000 3.250 2014 USX .61 19,524,400 9.375% 2022 San Diego Gas & Electric .60 19,200,228 9.625% 2020 Province of Quebec .60 19,177,440 11% 2015 Excludes U.S. Treasury and government agency holdings that total 28% of the fund's net assets.
PAGE 9 Making the most of your fund Average annual total return (as of Aug. 31, 1995) Class A 1 year 5 years 10 years +7.96% +10.98% +10.15% Total returns for Class A, Class B and Class Y for the period from March 20, 1995 to Aug. 31, 1995 were +4.21%, +4.27% and +9.69%, respectively. March 20, 1995 was the inception date for Class B and Class Y. Total return for Class A is shown for comparative purposes. The performance of Class B and Class Y will vary from the performance of Class A based on differences in sales charges and fees. Your investment and return values fluctuate so that your shares, when redeemed, may be worth more or less than the original cost. Figures for Class A reflect the deduction of the maximum 5% sales charge. This was a period of widely fluctuating security prices. Past performance is no guarantee of future results. Build your assets systematically To keep your assets growing steadily, one of the best ways to invest in the Fund is by dollar-cost averaging -- a time-tested strategy that can make market fluctuations work for you. To dollar-cost average, simply invest a fixed amount of money regularly. You'll automatically buy more shares when the Fund's share price is low, fewer shares when it is high. This does not ensure a profit or avoid a loss if the market declines. But, if you can continue to invest regularly through changing market conditions, it can be an effective way to accumulate shares to meet your long-term goals. How dollar-cost averaging works Month Amount Per-share Number of shares purchased invested market price Jan $100 $20 5.00 Feb 100 18 5.56 Mar 100 17 5.88 Apr 100 15 6.67 May 100 16 6.25 June 100 18 5.56 July 100 17 5.88 Aug 100 19 5.26 Sept 100 21 4.76 Oct 100 20 5.00 (footnotes to table) By investing an equal number of dollars each month... (arrow in table pointing to April) you automatically buy more shares when the per share market price is low PAGE 10 (arrow in table pointing to September) and fewer shares when the per share market price is high. You have paid an average price of only $17.91 per share over the 10 months, while the average market price actually was $18.10. Three ways to benefit from a mutual fund: o your shares increase in value when the Fund's investments do well o you receive capital gains when the gains on investments sold by the Fund exceed losses o you receive income when the Fund's stock dividends, interest and short-term gains exceed its expenses. All three make up your total return. And you potentially can increase your investment if, like most investors, you reinvest your dividends and capital gain distributions to buy additional shares of the Fund or another fund. Class A* How your $10,000 has grown in IDS Bond Fund Average annual total return (as of Aug. 31, 1995) 1 year 5 years 10 years +7.96% +10.98% +10.15% $26,298 Bond Fund Lehman Aggregate Bond Index $9,500 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 *The graph above is for Class A only. Class B and Class Y are not shown. Total returns for Class A, Class B and Class Y for the period from March 20, 1995 to Aug. 31, 1995 were +4.21%, +4.27% and +9.69%, respectively. March 20, 1995 was the inception date for Class B and Class Y. Total return for Class A is shown for comparative purposes. The performance of Class B and Class Y will vary from the performance of Class A based on differences in sales charges and fees. Assumes: Holding period from 8/31/85 to 8/31/95. Returns do not reflect taxes payable on distributions. Also see "Performance" in the Fund's current prospectus. Reinvestment of all income and capital gain distributions for the Fund, with a value of $16,356. The Lehman Aggregate Bond Index is made up of a representative list of government and corporate bonds as well as asset-backed securities. The index is frequently used as a general measure of bond market performance. However, the securities used to create the index may not be representative of the bonds held in Bond Fund. PAGE 11 On the graph above you can see how the Fund's total return compared to a widely cited performance measure, the Lehman Aggregate Bond Index. In comparing Bond Fund with this index, you should take into account the fact that the Fund's performance reflects the maximum sales charge of 5%, while such charges are not reflected in the performance of the index. If you were actually to buy either individual bonds or bond mutual funds, any sales charges that you pay would reduce your total return as well. Your investment and return values fluctuate so that your shares, when redeemed, may be worth more or less than the original cost. Average annual total return figures reflect the deduction of the maximum sales charge as discussed in the prospectus. This was a period of widely fluctuating security prices. Past performance is no guarantee of future results. PAGE 12 Independent auditors' report The board of directors and shareholders IDS Bond Fund, Inc.: We have audited the accompanying statement of assets and liabilities, including the schedule of investments in securities, of IDS Bond Fund, Inc. as of August 31, 1995, and the related statement of operations for the year then ended and the statements of changes in net assets for each of the years in the two-year period ended August 31, 1995, and the financial highlights for each of the years in the ten-year period ended August 31, 1995. These financial statements and the financial highlights are the responsibility of fund management. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Investment securities held in custody are confirmed to us by the custodian. As to securities purchased and sold but not received or delivered, and securities on loan, we request confirmations from brokers, and where replies are not received, we carry out other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of IDS Bond Fund, Inc. at August 31, 1995, and the results of its operations for the year then ended and the changes in its net assets for each of the years in the two-year period ended August 31, 1995, and the financial highlights for the periods stated in the first paragraph above, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Minneapolis, Minnesota October 6, 1995 PAGE 13
Financial statements Statement of assets and liabilities IDS Bond Fund, Inc. Aug. 31, 1995 _____________________________________________________________________________________________________________ Assets _____________________________________________________________________________________________________________ Investments in securities, at value (Note 1) (identified cost $3,050,010,532) $3,161,989,118 Receivable for investment securities sold 2,123,458 Dividends and accrued interest receivable 56,545,044 U.S. government securities held as collateral (Note 5) 57,168,751 _____________________________________________________________________________________________________________ Total assets 3,277,826,371 _____________________________________________________________________________________________________________ Liabilities _____________________________________________________________________________________________________________ Disbursements in excess of cash on demand deposit 636,834 Dividends payable to shareholders 3,802,152 Payable for investment securities purchased 3,344,469 Payable upon return of securities loaned (Note 5) 59,981,451 Accrued investment management services fee 86,107 Accrued distribution fee 31,969 Accrued service fee 30,017 Accrued transfer agency fee 15,495 Accrued administrative services fee 7,770 Other accrued expenses 501,873 _____________________________________________________________________________________________________________ Total liabilities 68,438,137 _____________________________________________________________________________________________________________ Net assets applicable to outstanding capital stock $3,209,388,234 _____________________________________________________________________________________________________________ Represented by _____________________________________________________________________________________________________________ Capital stock -- authorized 10,000,000,000 shares of $.01 par value; $ 6,350,641 Additional paid-in capital 3,136,564,177 Undistributed net investment income 301,819 Accumulated net realized loss (Notes 1 and 8) (45,806,989) Unrealized appreciation 111,978,586 _____________________________________________________________________________________________________________ Total -- representing net assets applicable to outstanding capital stock $3,209,388,234 _____________________________________________________________________________________________________________ Net assets applicable to outstanding shares: Class A $2,363,303,961 Class B $ 782,166,654 Class Y $ 63,917,619 Net asset value per share of outstanding capital stock: Class A shares 467,638,036 $ 5.05 Class B shares 154,782,761 $ 5.05 Class Y shares 12,643,387 $ 5.06 See accompanying notes to financial statements. PAGE 14 Financial statements Statement of operations IDS Bond Fund, Inc. Year ended Aug. 31, 1995 _____________________________________________________________________________________________________________ Investment income _____________________________________________________________________________________________________________ Income: Interest $218,364,218 Dividends (net of foreign taxes withheld of $35,402) 2,682,191 _____________________________________________________________________________________________________________ Total income 221,046,409 _____________________________________________________________________________________________________________ Expenses (Note 2): Investment management services fee 13,073,299 Distribution fee Class A 435,932 Class B 2,478,540 Transfer agency fee 2,584,747 Incremental transfer agency fee -- Class B 34,183 Service fee Class A 1,801,808 Class B 575,211 Administrative services fee 618,745 Compensation of directors 29,489 Compensation of officers 26,660 Custodian fees 166,980 Postage 333,456 Registration fees 352,142 Reports to shareholders 103,200 Audit fees 38,500 Administrative 16,575 Other 26,509 _____________________________________________________________________________________________________________ Total expenses 22,695,976 _____________________________________________________________________________________________________________ Investment income -- net 198,350,433 _____________________________________________________________________________________________________________ Realized and unrealized gain (loss) -- net _____________________________________________________________________________________________________________ Net realized loss on security and foreign currency transactions (including loss of $226,344 from foreign currency transactions)(Note 3) (29,480,476) Net realized gain on closed interest rate futures contracts 39,875 _____________________________________________________________________________________________________________ Net realized loss on investments and foreign currency (29,440,601) Net change in unrealized appreciation or depreciation 182,633,301 _____________________________________________________________________________________________________________ Net gain on investments and foreign currency 153,192,700 _____________________________________________________________________________________________________________ Net increase in net assets resulting from operations $351,543,133 _____________________________________________________________________________________________________________ See accompanying notes to financial statements. /TABLE PAGE 15
Financial statements Statements of changes in net assets IDS Bond Fund, Inc. Year ended Aug. 31, _____________________________________________________________________________________________________________ Operations and distributions 1995 1994 _____________________________________________________________________________________________________________ Investment income -- net $ 198,350,433 $ 184,268,545 Net realized gain (loss) on investments and foreign currency (29,440,601) 45,541,259 Net change in unrealized appreciation or depreciation 182,633,301 (279,119,373) _____________________________________________________________________________________________________________ Net increase (decrease) in net assets resulting from operations 351,543,133 (49,309,569) _____________________________________________________________________________________________________________ Distributions to shareholders from: Net investment income Class A (172,502,967) (184,867,231) Class B (22,840,548) -- Class Y (2,210,213) -- Net realized gain Class A (44,353,816) (27,971,600) Excess distribution of realized gain (Note 1) Class A -- (29,043) _____________________________________________________________________________________________________________ Total distributions (241,907,544) (212,867,874) _____________________________________________________________________________________________________________ Capital share transactions (Note 6) _____________________________________________________________________________________________________________ Proceeds from sales Class A shares (Note 2) 340,793,447 323,953,867 Class B shares 125,204,756 -- Class Y shares 69,208,436 -- Fund merger (Note 7) Class A shares 4,455,838 -- Class B shares 667,109,887 -- Reinvestment of distributions at net asset value Class A shares 143,593,478 138,748,551 Class B shares 19,534,420 -- Class Y shares 2,033,460 -- Payments for redemptions Class A shares (442,588,203) (441,905,072) Class B shares (Note 2) (67,847,577) -- Class Y shares (10,418,481) -- _____________________________________________________________________________________________________________ Increase in net assets from capital share transactions 851,079,461 20,797,346 _____________________________________________________________________________________________________________ Total increase (decrease) in net assets 960,715,050 (241,380,097) Net assets at beginning of year 2,248,673,184 2,490,053,281 _____________________________________________________________________________________________________________ Net assets at end of year (including undistributed net investment income of $301,819 and $1,179,366) $3,209,388,234 $2,248,673,184 _____________________________________________________________________________________________________________ See accompanying notes to financial statements.
PAGE 16 IDS Bond Fund, Inc. Notes to financial statements ___________________________________________________________________ 1. Summary of significant accounting policies The Fund is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. The Fund offers Class A, Class B and Class Y shares. Class A shares are sold with a front-end sales charge. Class B shares, which the Fund began offering on March 20, 1995, may be subject to a contingent deferred sales charge. Class B shares automatically convert to Class A after eight years. Class Y shares, which the Fund also began offering on March 20, 1995, have no sales charge and are offered only to qualifying institutional investors. All classes of shares have identical voting, dividend, liquidation and other rights, and the same terms and conditions, except that the level of distribution fee, transfer agency fee and service fee (class specific expenses) differs among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. Significant accounting policies followed by the Fund are summarized below: Valuation of securities All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price; securities for which market quotations are not readily available, including illiquid securities, are valued at fair value according to methods selected in good faith by the board of directors. Determination of fair value involves, among other things, reference to market indexes, matrixes and data from independent brokers. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. Option transactions In order to produce incremental earnings, protect gains, and facilitate buying and selling of securities for investment purposes, the Fund may buy or write options traded on any U.S. or foreign exchange or in the over-the-counter market where the completion of the obligation is dependent upon the credit standing of the other party. The Fund also may buy and sell put and call options and write covered call options on portfolio securities and may write cash-secured put options. The risk in writing a call option is that the Fund gives up the opportunity of profit if the market price of the security increases. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of not being PAGE 17 able to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Fund will realize a gain or loss upon expiration or closing of the option transaction. When options on debt securities or futures are exercised, the Fund will realize a gain or loss. When other options are exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. Futures transactions In order to gain exposure to or protect itself from changes in the market, the Fund may buy and sell interest rate futures contracts traded on any U.S. or foreign exchange. The Fund also may buy or write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility that there may be an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Fund is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. Foreign currency translations and foreign currency contracts Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars at the closing rate of exchange. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the statement of operations, net realized gains or losses from foreign currency transactions may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement dates on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. The Fund may enter into forward foreign currency exchange contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Fund is subject to the credit risk that the other party will not complete the obligations of the contract. PAGE 18 Federal taxes Since the Fund's policy is to comply with all sections of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income to shareholders, no provision for income or excise taxes is required. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of the deferral of losses on certain futures contracts, the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes, and losses deferred due to "wash sale" transactions. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. The effect on dividend distributions of certain book-to- tax differences is presented as "excess distributions" in the statement of changes in net assets. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. On the statement of assets and liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been decreased by $1,674,252, accumulated net realized loss has been decreased by $1,670,248, resulting in a reclassification adjustment to increase additional paid-in capital by $4,004. Dividends to shareholders Dividends from net investment income, declared daily and payable monthly, are reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the last income dividend of the calendar year. Other Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date. For U.S. dollar denominated bonds, interest income includes level-yield amortization of premium and discount. For foreign bonds, except for original issue discount, the Fund does not amortize premium and discount. Interest income, including level-yield amortization of premium and discount, is accrued daily. PAGE 19 2. Expenses and sales charges Under terms of a prior agreement that ended March 19,1995, the Fund paid AEFC a fee for managing its investments, recordkeeping and other specified services. The fee was a percentage of the Fund's average daily net assets consisting of a group asset charge in reducing percentages from 0.46% to 0.32% annually on the combined net assets of all non-money market Funds in the IDS MUTUAL FUND GROUP and an individual annual asset charge of 0.13% of average daily net assets. Also under the terms of a prior agreement, the Fund paid AEFC a distribution fee at an annual rate of $6 per shareholder account and a transfer agency fee at an annual rate of $15.50 per shareholder account. The transfer agency fee was reduced by earnings on monies pending shareholder redemptions. Effective March 20, 1995, when the Fund began offering multiple classes of shares, the Fund entered into agreements with AEFC for managing its portfolio, providing administrative services and serving as transfer agent as follows: Under its Investment Management Services Agreement, AEFC determines which securities will be purchased, held or sold. The management fee is a percentage of the Fund's average daily net assets in reducing percentages from 0.52% to 0.395% annually. Under an Administrative Services Agreement, the Fund pays AEFC for administration and accounting services at a percentage of the Fund's average daily net assets in reducing percentages from 0.05% to 0.025% annually. Under a separate Transfer Agency Agreement, AEFC maintains shareholder accounts and records. The Fund pays AEFC an annual fee per shareholder account for this service as follows: o Class A $15.50 o Class B $16.50 o Class Y $15.50 Also effective March 20, 1995, the Fund entered into agreements with American Express Financial Advisors Inc. for distribution and shareholder servicing- related services as follows: Under a Plan and Agreement of Distribution, the Fund pays a distribution fee at an annual rate of 0.75% of the Fund's average daily net assets attributable to Class B shares for distribution-related services. Under a Shareholder Service Agreement, the Fund pays a fee for service provided to shareholders by financial advisors and other servicing agents. The fee is calculated at a rate of 0.175% of the Fund's average daily net assets attributable to Class A and Class B shares. AEFC will assume and pay any expenses (except taxes and brokerage commissions) that exceed the most restrictive applicable state expense limitation. Sales charges by American Express Financial Advisors Inc. for distributing Fund shares were $7,548,342 for Class A and $252,528 for Class B for the year ended Aug. 31, 1995. PAGE 20 The Fund has a retirement plan for its independent directors. Upon retirement, directors receive monthly payments equal to one-half of the retainer fee for as many months as they served as directors up to 120 months. There are no death benefits. The plan is not funded but the Fund recognizes the cost of payments during the time the directors serve on the board. The retirement plan expense amounted to $22,390 for the year ended Aug. 31, 1995. ___________________________________________________________________ 3. Securities transactions Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $1,384,878,657 (including $625,480,515 that was acquired in the Fund merger as described in Note 7) and $1,021,928,936 respectively, for the year ended Aug. 31, 1995. Realized gains and losses are determined on an identified cost basis. ___________________________________________________________________ 4. Illiquid securities At Aug. 31, 1995, investments in securities included issues that are illiquid. The Fund currently limits investments in illiquid securities to 10% of the net assets, at market value, at the time of purchase. The aggregate value of such securities at Aug. 31, 1995 was $11,097,097, representing 0.35% of net assets. Pursuant to guidelines adopted by the fund's board of directors, certain unregistered securities are determined to be liquid and are not included within the 10% limitation specified above. ___________________________________________________________________ 5. Lending of portfolio securities At Aug. 31, 1995, securities valued at $57,927,184 were on loan to brokers. For collateral, the Fund received $2,812,700 in cash and U.S. government securities valued at $7,168,751. Income from securities lending amounted to $117,125 for the year ended Aug. 31, 1995. The risks to the Fund of securities lending are that the borrower may not provide additional collateral when required or return the securities when due. ___________________________________________________________________ 6. Capital share transactions Transactions in shares of capital stock for the periods indicated are as follows:
Period ended Aug. 31, 1995 Year ended 08/31/94 Class A Class B* Class Y* Class A __________________________________________________________________________ Sold 70,297,518 25,211,637 14,357,265 62,340,332 Fund Merger 930,821 139,358,656 -- -- Issued for reinvested 29,953,783 3,918,832 407,713 26,592,240 distributions Redeemed (91,890,852) (13,706,364) (2,121,591) (85,276,606) ___________________________________________________________________________ Net increase 9,291,270 154,782,761 12,643,387 3,655,966 ___________________________________________________________________________ *Inception date was March 20, 1995. /TABLE PAGE 21 7. Fund merger As of the close of business on March 17, 1995, IDS Bond Fund acquired the assets and assumed the identified liabilities of IDS Strategy - Income Fund. The aggregate net assets of IDS Bond Fund immediately before the aquisition was $2,217,255,191. The merger was accomplished by a tax-free exchange of 115,800,789 shares of IDS Strategy - Income Fund valued at $671,565,725. In exchange for the IDS Strategy - Income Fund shares and assets, IDS Bond Fund issued the following number of shares: Class A 930,821 Class B 139,358,656 IDS Strategy - Income Fund's net assets at that date were as follows, which include the following amounts of capital stock, unrealized depreciation, and accumulated net realized loss that was combined with IDS Bond Fund.
Total net Capital stock Unrealized Accumulated net assets depreciation realized loss _________________________________________________________________________________________ Class A $ 4,455,838 $ 4,702,952 $ (109,256) $ (137,858) Class B 667,109,887 704,106,719 (16,357,326) (20,639,506) ______________________________________________________________________________
8. Capital loss carryover For federal income tax purposes, the Fund had a capital loss carryover of $48,456,703 at Aug. 31, 1995, that if not offset by subsequent capital gains, will expire in 2003 through 2004. The carryover includes $21,076,538 acquired in connection with the IDS Strategy - Income Fund merger (Note 7). There is no limitation on the ability to utilize these losses, however, if not offset by subsequent capital gains, they will expire in 2002. It is unlikely the board of directors will authorize a distribution of any net realized gains until the available capital loss carryover has been offset or expires. ___________________________________________________________________ 9. Financial highlights "Financial highlights" showing per share data and selected information is presented on page 6 of the prospectus. PAGE 22
Investments in securities IDS Bond Fund, Inc. (Percentages represent value of Aug. 31, 1995 investments compared to net assets) _____________________________________________________________________________________________________________________________ Bonds (93.5%) _____________________________________________________________________________________________________________________________ Issuer Coupon Maturity Principal Value(a) rate year amount _____________________________________________________________________________________________________________________________ U.S. government obligations (14.3%) U.S. Treasury 6.25% 2023 $100,000,000 $ 93,865,000 6.375 1999 2,000,000 2,023,020 6.375 2002 17,300,000(b) 17,468,156 6.75 1997 10,000,000(b) 10,153,000 7.125 1999 56,500,000(b) 58,662,820 7.25 2022 25,000,000 26,476,750 7.50 2016 15,975,000 17,332,236 7.50 2024 6,500,000(b) 7,135,050 7.875 2004 12,000,000 13,267,920 8.875 2017 117,000,000 145,094,040 Govt Trust Certs Israel 9.25 2001 11,100,000 12,092,340 Resolution Funding Corp 8.125 2019 40,925,000 46,823,520 Zero Coupon 8.68 1999 11,500,000(g) 9,244,045 ______________ Total 459,637,897 _________________________________________________________________________________________________________________________________ Mortgage-backed securities (14.5%) Federal Home Loan Bank 7.32 1997 6,000,000 6,007,440 Federal Home Loan Mtge Corp 6.50 2007 1,094,444 1,079,264 8.00 2017-24 20,760,137 21,207,704 Collateralized Mtge Obligation 7.00 2022 22,000,000 21,124,080 8.50 2022 17,000,000 18,243,380 Inverse Floater 2.90 2023 7,640,693(c) 3,999,215 6.012 2023 4,000,000(c) 2,660,920 6.37 2023 9,000,000(c) 5,625,000 8.269 2023 5,665,564(c) 4,441,576 Trust Series Z 8.25 2024 9,532,238(d) 9,535,479 Federal Natl Mtge Assn 6.00 2024 68,093,558 63,901,719 6.50 2008-24 194,278,965 188,120,305 8.00 2025 11,704,143 11,956,484 8.50 2023-24 29,503,748 30,499,498 9.00 2009-24 17,300,454 18,057,349 Collateralized Mtge Obligation 5.00 2024 9,961,155 8,793,708 Inverse Floater 5.39 2023 1,936,228(c) 1,540,095 6.11 2023 1,855,845(c) 1,504,311 Trust Series Z 6.00 2024 5,496,856(d) 4,078,942 7.00 2019 17,581,000(d) 16,849,455 See accompanying notes to investments in securities PAGE 23 Govt Natl Mtge Assn 8.00 2024 4,755,731 4,882,044 9.00 2025 10,311,875 10,840,358 Prudential Bache Collateralized Mtge Obligation Trust 7.965 2019 9,364,489 9,415,900 ______________ Total 464,364,226 ______________________________________________________________________________________________________________________________ Financial (8.0%) Banks and savings & loans (2.9%) BankAmerica Sub Nts 7.50 2002 18,000,000 18,647,820 Barclays NA Capital 9.75 2021 13,600,000 15,890,240 CoreStates Capital Gtd Sub Nts 9.375 2003 14,300,000 16,365,921 Fleet/Norstar Financial Group Sub Nts 9.00 2001 4,000,000 4,429,800 Meridian Bancorp Sub Deb 7.875 2002 10,400,000 11,012,040 NationsBank Sub Nts 6.50 2003 12,000,000 11,666,760 Society Sub Nts 8.125 2002 3,000,000 3,257,280 Standard Credit Card 8.625 2002 12,000,000 12,406,875 ______________ Total 93,676,736 _____________________________________________________________________________________________________________________________ Financial services (2.9%) Camden Property Trust 7.33 2001 3,000,000 2,936,250 Corporate Property Investors 7.18 2013 7,000,000(e) 6,571,110 Developers Diversified Realty Cv Sub Deb 7.00 1999 3,500,000 3,548,125 First Union REIT Sub Nts 8.875 2003 10,000,000 8,900,000 General Electric Capital Reset Nt 8.65 1996 16,035,000(f) 16,300,860 Lehman Brothers Holdings 8.875 2002 10,000,000 10,807,500 Liberty Property Trust Cv 8.00 2001 2,500,000 2,537,500 Malan Realty Investors REIT Cv Sub Deb 9.50 2004 4,500,000 3,988,125 Olympic Financial Sr Nts 13.00 2000 6,100,000 6,443,125 Property Trust Amer REIT 7.50 2014 15,000,000 13,892,850 Salomon 8.91 1998 9,800,000 10,175,438 Saul (BF) REIT 11.625 2002 6,800,000 6,358,000 ______________ Total 92,458,883 _____________________________________________________________________________________________________________________________ Insurance (2.2%) Aetna Life & Casualty 7.25 2023 15,000,000 13,626,450 Americo Life Sr Sub Nts 9.25 2005 5,900,000 5,450,125 Berkley (WR) 8.70 2022 3,000,000 3,270,750 General Amer Life 7.625 2024 8,000,000(e) 7,265,440 HoraceMann Educators Cv 6.50 1999 1,600,000 1,628,000 Leucadia Natl 7.75 2013 11,780,000 11,191,000 NAC Re Cv 5.25 2002 4,000,000(e) 3,950,000 PAGE 24 NACOLAH Holding Sr Nts 9.50 2003 5,000,000 4,700,000 Nationwide Mutual 7.50 2024 8,000,000(e) 7,452,000 Nationwide Trust Credit Sensitive Nts 9.875 2025 3,500,000(e) 3,901,345 Principal Mutual 8.00 2044 10,000,000(e) 9,367,600 ______________ Total 71,802,710 _____________________________________________________________________________________________________________________________ Industrial (29.5%) Aerospace & defense (1.6%) Alliant Techsystems Sr Sub Nts 11.75 2003 5,000,000 5,437,500 Allied Zero Coupon 9.57 1996 5,000,000(g) 4,889,800 Boeing 8.75 2031 15,000,000 17,644,350 Fairchild Inds Sr Secured Nts 12.25 1999 8,000,000 8,150,000 Sequa Sr Sub Nts 9.375 2003 3,000,000 2,793,750 United Technologies 8.875 2019 10,000,000 11,672,900 ______________ Total 50,588,300 _____________________________________________________________________________________________________________________________ Airlines (1.4%) AMR 9.80 2021 10,000,000 11,411,700 Delta Air Lines 10.125 2010 10,000,000 11,465,700 10.375 2022 3,700,000 4,440,000 Reno Air Cv 9.00 2002 2,000,000(e) 1,990,000 United Air Lines 10.67 2004 14,400,000 16,735,968 ______________ Total 46,043,368 _____________________________________________________________________________________________________________________________ Automotive & related (0.7%) Chrysler Financial 13.25 1999 290,000 354,856 Exide 10.75 2002 6,000,000 6,367,500 General Motors Acceptance 7.625 1998 10,000,000 10,276,600 Penda Sr Nts 10.75 2004 4,500,000 4,010,625 _____________ Total 21,009,581 _____________________________________________________________________________________________________________________________ Building materials (1.6%) Emhart SF Deb 9.25 2016 6,025,000 6,228,344 Georgia-Pacific 8.125 2023 10,000,000 9,981,500 Owens-Corning Fiberglas 9.375 2012 6,900,000 7,806,660 Pulte Sr Nts 7.00 2003 7,700,000 7,343,875 Schuller Intl Group Sr Nts 10.875 2004 7,500,000 8,268,750 Southdown Sr Sub Nts 14.00 2001 4,000,000 4,510,000 Tarkett 9.00 2002 7,000,000 7,087,500 ______________ Total 51,226,629 PAGE 25 Chemicals (1.6%) General Chemical Sr Sub Nts 9.25 2003 7,000,000 6,965,000 G-I Holdings Zero Coupon Sr Disc Nts 10.59 1998 10,000,000(g) 7,275,000 Goodrich (BF) 9.625 2001 10,000,000 11,306,600 Grace (WR) 8.00 2004 10,420,000 10,871,394 Harris Chemical North Amer Zero Coupon Sr Nts 11.37 1996 5,000,000(g) 4,493,750 Huntsman 1st Mtge 11.00 2004 5,750,000 6,317,812 Sifto Canada Sr Sub Nt 8.50 2000 3,000,000 2,835,000 ______________ Total 50,064,556 _____________________________________________________________________________________________________________________________ Communications equipment (0.6%) CenCall Communications Zero Coupon 16.49 1999 10,250,000(g) 5,317,187 Comcast Cellular Zero Coupon 9.45 2000 14,000,000(g) 10,447,500 U.S. Cellular Zero Coupon Cv 6.00 2015 6,600,000(g) 2,334,750 ______________ Total 18,099,437 _____________________________________________________________________________________________________________________________ Computers & office equipment (0.5%) Anacomp 12.25 1997 2,400,000(i) 2,376,000 Conner Peripherals Cv 6.50 2002 7,000,000 6,090,000 Data General SF Deb 8.375 2002 6,700,000 6,231,000 ______________ Total 14,697,000 _____________________________________________________________________________________________________________________________ Electronics (0.4%) Berg Electronics 11.375 2003 7,000,000 7,385,000 Reliance Electric 6.80 2003 6,000,000 6,041,460 ______________ Total 13,426,460 _____________________________________________________________________________________________________________________________ Energy (2.5%) Atlantic Richfield 9.125 2011 9,000,000 10,573,380 Mesa Capital 12.75 1998 5,000,000(f) 4,625,000 Oryx Energy 9.50 1999 4,000,000 4,255,000 Parker & Parsley Petroleum Sr Nt 8.25 2007 9,500,000 9,679,645 PDV Amer 7.875 2003 15,000,000 13,706,100 Texaco Capital Gtd Deb 7.50 2043 3,000,000 2,969,190 Gtd Deb 8.625 2032 10,000,000 11,566,800 Triton Energy Zero Coupon Sr Nts 9.75 1996 5,000,000(g) 4,525,000 USX 9.375 2022 17,500,000 19,524,400 ______________ Total 81,424,515 PAGE 26 Energy equipment & services (0.4%) McDermott 9.375 2002 5,900,000 6,643,695 OPI Intl Gtd Sr Nts 12.875 2002 5,000,000 5,643,750 ______________ Total 12,287,445 _____________________________________________________________________________________________________________________________ Food (0.2%) Specialty Foods Sr Nt 10.25 2001 7,500,000(e) 7,546,875 _____________________________________________________________________________________________________________________________ Health care (0.1%) Chiron Cv 1.90 2000 2,600,000 2,346,500 _____________________________________________________________________________________________________________________________ Health care services (1.6%) Charter Medical Sr Sub Nts 11.25 2004 7,500,000 8,100,000 Columbia/HCA Healthcare 6.91 2005 7,000,000 6,930,560 7.69 2025 4,000,000 4,036,760 Foundation Health Sr Nts 7.75 2003 8,400,000 8,554,560 GranCare Cv 6.50 2003 1,000,000 947,500 Hillhaven Sr Sub Nts 10.125 2001 7,000,000 7,621,250 Tenet Healthcare Sr Sub Nts 10.125 2005 15,000,000 15,787,500 _____________ Total 51,978,130 _____________________________________________________________________________________________________________________________ Industrial equipment & services (0.1%) Mascotech Cv 4.50 2003 6,500,000 4,858,750 _____________________________________________________________________________________________________________________________ Leisure time & entertainment (0.8%) Bally's Park Place Funding 1st Mtge 9.25 2004 3,000,000 2,823,750 Caesars World Sr Sub Nts 8.875 2002 6,000,000 6,337,500 MGM Grand Hotel Finance 1st Mtge 11.75 1999 10,000,000 10,687,500 Premier Parks Sr Nt 12.00 2003 5,000,000 5,050,000 ______________ Total 24,898,750 _____________________________________________________________________________________________________________________________ Media (5.4%) Ackerley Communications Sr Secured Nts 10.75 2003 4,000,000(e) 4,205,000 Adelphia Communications Sr Deb 11.875 2004 7,000,000 7,043,750 Sr Nts 12.50 2002 3,000,000 3,093,750 Amer Media Operations 11.625 2004 2,500,000 2,571,875 Benedek Broadcasting Sr Nt 11.875 2005 5,625,000(e) 5,941,406 Cablevision Systems Sr Sub Deb 9.875 2013 3,000,000 3,270,000 Sr Sub Deb 10.75 2004 4,000,000 4,265,000 PAGE 27 Continental Cablevision Sr Deb 8.875 2005 5,000,000 5,031,250 Sr Sub Deb 11.00 2007 2,500,000 2,762,500 Cox Communications 7.625 2025 7,000,000 6,905,570 News Amer Holdings 8.875 2023 17,000,000 18,678,750 News Corp 10.15 2010 3,869,240(e) 4,410,934 Outdoor Systems Sr Nts 10.75 2003 7,800,000 7,536,750 Panamsat Sr Nts 9.75 2000 3,000,000 3,120,000 Paramount Communications Sub Deb 7.00 2003 5,000,000 4,762,650 Plitt Theatres 10.875 2004 7,500,000 7,331,250 Robin Media Group 11.125 1997 7,000,000 6,763,750 Scandinavian Broadcasting Cv Sub Deb 7.25 2005 6,000,000 6,525,000 Tele-Communications Sr Deb 7.875 2013 3,000,000 2,857,740 Sr Deb 9.80 2012 8,000,000 8,994,000 Sr Deb 9.875 2022 10,000,000 11,335,900 Time Warner Zero Coupon Cv 6.59 2012 8,550,000(g) 2,885,625 Turner Broadcasting Sr Nts 8.375 2013 10,000,000 9,662,500 Universal Outdoor Sr Nt 11.00 2003 5,000,000 4,906,250 Viacom Sr Nts 7.75 2005 3,000,000 3,063,750 Sub Deb 8.00 2006 26,300,000 25,642,500 ______________ Total 173,567,450 _____________________________________________________________________________________________________________________________ Metals (0.6%) Magma Copper Sr Sub Nts 12.00 2001 10,000,000 11,062,500 Sahaviriya Steel Inds Cv 3.50 2005 4,000,000(e) 4,040,000 Santa Fe Pacific Gold Sr Deb 8.375 2005 5,000,000 4,956,250 _____________ Total 20,058,750 _____________________________________________________________________________________________________________________________ Multi-industry conglomerates (0.9%) Boc Group Sr Nts 8.73 1996 6,000,000(e) 6,013,200 Coltec Inds Sr Nts 9.75 2000 5,000,000 5,231,250 Mark IV Inds Sr Sub Nts 8.75 2003 8,000,000 8,200,000 Talley Inds Zero Coupon Sr Disc Deb 12.25 1998 3,500,000(g) 2,450,000 Talley Mfg & Technology Sr Nts 10.75 2003 7,000,000 7,000,000 ______________ Total 28,894,450 PAGE 28 Paper & packaging (3.8%) Container Corp Amer Sr Nts 9.75 2003 7,000,000 7,113,750 Federal Paper Board 10.00 2011 11,900,000 14,421,015 Fort Howard 11.00 2002 9,366,182 9,717,414 Gaylord Container Zero Coupon Sr Sub Deb 3.10 1996 8,000,000(g) 8,000,000 Intl Paper 5.125 2012 9,000,000 7,204,230 Owens-Illinois Sr Deb 11.00 2003 10,000,000 10,950,000 Sr Sub Nts 9.75 2004 5,000,000(b) 5,118,750 Plastic Containers Sr Secured Nts 10.75 2001 6,000,000 6,157,500 Pope & Talbot 8.375 2013 11,000,000 10,283,570 Riverwood Intl Sr Nts 10.75 2000 7,000,000 7,630,000 Sappi BVI Finance Cv 7.50 2002 4,250,000(e) 4,382,812 Scotia Pacific Holding 7.95 2015 4,548,481 4,647,501 Silgan Sr Sub Nts 11.75 2002 10,000,000 10,562,500 Stone Container 1st Mtge 10.75 2002 5,300,000 5,538,500 Sr Nts 12.625 1998 3,000,000 3,300,000 Warren (SD) Sr Nts 12.00 2004 5,000,000 5,581,250 ______________ Total 120,608,792 _____________________________________________________________________________________________________________________________ Restaurants & lodging (0.8%) Flagstar Sr Nts 10.875 2002 8,000,000 7,370,000 Hammons (John Q) Hotel 1st Mtge 8.875 2004 7,000,000 6,632,500 Santa Fe Hotel 1st Mtge 11.00 2002 5,500,000 4,400,000 Trump Taj Mahal Pay-in-Kind -- 1999 10,290,714(m) 8,644,200 ______________ Total 27,046,700 _____________________________________________________________________________________________________________________________ Retail (2.1%) Dairy Mart Convenience Stores Sr Sub Nts 10.25 2004 7,750,000(b) 6,519,687 Eye Care Center 12.00 2003 9,000,000(e) 7,650,000 Grand Union Sr Nt 12.00 2004 7,000,000 6,685,000 Kash n' Karry Food Stores Pay-in-Kind -- 2003 7,740,980(m) 7,818,390 Pathmark Stores Sr Sub Nts 9.625 2003 5,000,000 5,000,000 Penn Traffic Sr Sub Nts 9.625 2005 10,000,000 8,100,000 Pep Boys-Manny,Mo,Jack Cv 4.00 1999 2,500,000 2,350,000 Pueblo Xtra Intl Sr Nts 9.50 2003 7,000,000 6,720,000 PAGE 29 Ralphs Grocery Sr Sub Nts 10.45 2004 4,600,000 4,508,000 Service Merchandise Sr Nts 8.375 2001 4,300,000 4,063,500 Super Rite Foods Sr Sub Nts 10.625 2002 5,000,000 5,425,000 Wal-Mart Stores 8.875 2011 3,500,000 4,007,885 ______________ Total 68,847,462 _____________________________________________________________________________________________________________________________ Soaps & cosmetics (0.7%) Coty Sr Sub Nts 10.25 2005 7,500,000 7,771,875 Revlon Consumer Products Sr Sub Nts 9.375 2001 7,000,000 6,947,500 Sweetheart Cup Sr Sub Nts 9.625 2000 6,500,000 6,418,750 ______________ Total 21,138,125 _____________________________________________________________________________________________________________________________ Textiles & apparel (0.5%) Dominion Textiles Sr Nts 8.875 2003 7,500,000 7,471,875 WestPoint Stevens Sr Nts 8.75 2001 7,500,000 7,415,625 ______________ Total 14,887,500 _____________________________________________________________________________________________________________________________ Miscellaneous (0.6%) BellSouth Telecommunications 6.50 2005 7,200,000 7,096,968 ECM Funding LP 11.918 2002 3,030,093(i) 3,333,102 EIP Funding 10.25 2012 7,000,000 6,921,250 Samsonite Sr Sub NTs 11.125 2005 3,000,000(e) 3,063,750 ______________ Total 20,415,070 _____________________________________________________________________________________________________________________________ Utilities (14.7%) Electric (9.8%) Appalachian Power 8.50 2022 5,000,000 5,409,800 Arizona Public Service 1st Mtge 8.00 2025 5,800,000 5,878,474 1st Mtge 8.75 2024 9,000,000 9,686,880 Sale Lease-Backed Obligation 8.00 2015 12,556,000 12,479,659 Cajun Electric Power Cooperative Mtge Trust 8.92 2019 5,000,000 5,479,200 California Energy Ltd Resource Sr Secured Nts 9.875 2003 5,000,000 5,056,250 Cleveland Electric Illum 1st Mtge 9.50 2005 14,000,000 14,261,940 Commonwealth Edison 1st Mtge 8.375 2023 5,000,000 5,223,900 1st Mtge 9.75 2020 10,000,000 11,333,900 1st Mtge 9.875 2020 4,000,000 4,609,880 Consumers Power 1st Mtge 7.375 2023 10,000,000 9,475,200 First Palo Verde Funding 10.15 2016 6,000,000 6,130,920 10.30 2014 4,500,000(b) 4,604,850 PAGE 30 Gulf States Utilities 1st Mtge 8.70 2024 6,000,000 6,362,940 Long Island Lighting Gen Ref Mtge 9.625 2024 28,888,000 29,935,479 Gen Ref Mtge 9.75 2021 15,500,000 16,330,645 Louisiana Power & Light 1st Mtge 10.125 2020 3,500,000 3,728,130 Louisiana Power & Light Waterford Sale Lease-Backed Obligation 10.67 2017 7,500,000 7,994,250 Midland Cogeneration Venture 11.75 2005 9,900,000 10,308,375 Sub Secured Sale Lease-Backed Obligation 10.33 2002 12,529,036 12,951,891 North Atlantic Energy 1st Mtge 9.05 2002 6,606,000 6,903,270 Pacific Gas & Electric 1st Ref 7.25 2026 14,000,000 13,482,280 Pennsylvania Power & Light 1st Mtge 9.25 2019 900,000 967,626 RGS Funding Sale Lease-Backed Obligation 9.82 2022 9,941,259 12,049,502 Salton Sea Sr Nt 7.84 2010 10,000,000(e) 9,937,800 San Diego Gas & Electric 1st Mtge 9.625 2020 16,925,000 19,200,228 Sithe Independant Funding 8.50 2007 7,500,000 8,073,525 9.00 2013 4,700,000 5,063,498 Texas-New Mexico Power 1st Mtge 9.25 2000 6,000,000 6,255,000 1st Mtge 10.00 2017 2,939,000 3,049,213 Secured Deb 10.75 2003 5,000,000 5,318,750 Texas Utilities Electric 1st Collateral Trust 7.375 2025 3,000,000 2,859,300 1st Collateral Trust 9.75 2021 9,900,000 11,483,505 1st Mtge 7.625 2025 10,000,000 9,819,500 Secured Facility Bond 9.45 2005 4,185,000 4,827,816 Tucson Electric Power 1st Mtge 8.50 2009 7,000,000 6,746,250 ______________ Total 313,279,626 ______________________________________________________________________________________________________________________________ Gas (2.3%) Coastal Sr Deb 10.25 2004 13,000,000 15,546,440 Equitable Resources 7.50 1999 5,000,000 5,155,750 Questar Pipeline 9.375 2021 8,000,000 9,103,760 Southern California Gas 1st Mtge 7.375 2023 6,900,000 6,800,019 Southwest Gas 9.75 2002 7,900,000 8,940,983 Tenneco 9.00 2012 9,000,000 10,121,580 Tennessee Gas Pipeline 6.00 2011 3,600,000 2,971,548 Transco Energy 9.875 2020 4,800,000 5,814,000 9.375 2001 4,000,000 4,455,000 TransTexas Gas Sr Secured Nts 11.50 2002 5,000,000 5,262,500 ______________ Total 74,171,580 PAGE 31 Telephone & other (2.6%) Ameritech Capital Funding Gtd Deb 9.10 2016 16,000,000 18,895,840 GTE 10.25 2020 7,000,000 8,112,370 Intermedia Communications 13.50 2005 1,200,000(e) 1,226,550 New York Tel 9.375 2031 23,665,000 26,717,075 Pacific Bell 6.625 2034 10,000,000 8,875,100 7.125 2026 10,200,000 9,946,020 7.375 2043 10,000,000 9,786,100 ______________ Total 83,559,055 _____________________________________________________________________________________________________________________________ Foreign (12.5%)(j) ABN Amro (U.S. Dollar) 7.75 2023 9,000,000 9,122,130 Aegon Euro (U.S. Dollar) Cv 4.75 2004 2,275,000 2,752,750 Argentina Euro (U.S. Dollar) 7.312 2005 35,500,000 21,721,563 Argentina Republic (U.S. Dollar) 5.00 2023 15,000,000 7,078,125 Banca Italy N.Y. (U.S. Dollar) 8.25 2007 9,200,000 9,580,144 Bank of China (U.S. Dollar) 8.25 2014 10,000,000 9,228,400 Brazil C Bonds (U.S. Dollar) 4.00 2014 14,305,500 7,108,045 Brazil Disc ZL (U.S. Dollar) 7.25 2024 15,000,000(f) 8,596,875 Carter Holt Harvey (U.S. Dollar) 7.625 2002 5,000,000 5,224,000 (U.S. Dollar) 8.875 2004 10,500,000 11,835,915 Celcaribe (U.S. Dollar) Zero Coupon 2.14 2004 2,870,000(e,g) 2,482,550 (U.S. Dollar) Zero Coupon 24.37 2004 3,250,000(e,g) 2,161,250 Doman Inds (U.S. Dollar) 8.75 2004 8,000,000 7,770,000 Ford Capital (U.S. Dollar) 9.125 1998 4,000,000 4,264,479 (U.S. Dollar) 9.50 2010 18,350,000 22,084,409 Groupe Videotron (U.S. Dollar) 10.625 2005 5,000,000 5,275,000 Guang Dong Enterprise (U.S. Dollar) 8.75 2003 14,000,000(e) 12,611,200 Helsinki City (U.S. Dollar) Sr Nts 9.25 2007 4,900,000(i) 4,965,170 Hydro-Quebec Euro (Canadian Dollar) 9.40 2021 2,400,000 2,824,488 (Canadian Dollar) 10.875 2021 6,000,000 5,005,062 Korea Electric Power (U.S. Dollar) 8.00 2002 2,800,000 2,972,676 (U.S. Dollar) 7.75 2013 8,900,000 8,993,005 Legrand (U.S. Dollar) 8.50 2025 7,000,000 7,761,110 MacMillan Bole Delaware (U.S. Dollar) 8.50 2004 3,000,000 3,249,210 Mexican Cetes Treasury Bill (Mexican Peso) Zero Coupon 45.94 1996 17,281,150(g) 2,329,309 PAGE 32 Petronas (U.S. Dollar) 7.75 2015 10,000,000(e) 10,203,700 Philippine Long Distance Telephone (U.S. Dollar) 10.625 2004 4,000,000 4,280,000 Placer Dome (U.S. Dollar) 7.125 2003 5,000,000 5,023,850 Poland Discount Euro (U.S. Dollar) 7.125 2024 5,750,000 4,377,188 Poland Euro (U.S. Dollar) 3.25 2014 32,000,000(f) 19,580,000 Province of Quebec (U.S. Dollar) 11.00 2015 16,000,000 19,177,440 PT Indah Kiat Pulp & Paper (U.S. Dollar) 11.875 2002 7,000,000 7,218,750 Qantas Air (U.S. Dollar) 7.50 2003 14,000,000 13,989,500 Quno (U.S. Dollar) Sr Nts 9.125 2005 7,000,000 6,930,000 Repap New Brunswick (U.S. Dollar) 9.875 2000 7,000,000 7,096,250 Republic of Austria Euro (U.S. Dollar) 10.00 1998 5,000,000 5,425,855 Republic of Brazil (U.S. Dollar) 5.312 2012 22,300,000 11,777,188 Republic of Brazil Euro (U.S. Dollar) 4.25 2024 16,000,000 7,270,000 Republic of Columbia (U.S. Dollar) 7.25 2004 14,750,000 13,502,888 Rogers Cable System (Canadian Dollar) 9.65 2014 3,700,000 2,307,849 Rogers Cantel Mobile (U.S. Dollar) Sr Sec Gtd Nts 10.75 2001 11,000,000 11,398,750 Rogers Communications (U.S. Dollar) Zero Coupon Cv 5.50 2013 6,000,000(g) 2,047,500 Scotland Bank (U.S. Dollar) 8.80 2004 20,500,000(e) 22,401,580 Telekom Malaysia (U.S. Dollar) 7.875 2025 15,000,000(e) 15,428,550 Tjiwi Kimia (U.S. Dollar) 13.25 2001 6,500,000 6,995,625 United Mexican States (U.S. Dollar) 6.25 2019 10,750,000 6,523,906 (U.S. Dollar) 5.437 2019 3,000,000(f) 2,133,750 WMC Finance (U.S. Dollar) 7.25 2013 10,000,000 9,898,900 ______________ Total 401,985,884 _____________________________________________________________________________________________________________________________ Total bonds (Cost: $2,873,258,721) 3,043,723,758 $3,000,897,192 _____________________________________________________________________________________________________________________________
PAGE 33
Stocks and other (1.3%) _____________________________________________________________________________________________________________________________ Issuer Shares Value(a) _____________________________________________________________________________________________________________________________ ABN Amro Holdings 6% Cv Preferred 95,900 $ 3,504,761 Amer Life Holdings $2.16 Cm Preferred 120,000 2,955,000 Celcaribe Common 528,450(e,h) 686,985 Crown Package Warrants 5,000 100,000 EUA Power Contingent Interest Certificates 5,000(h,i,k) -- EnviroSource 7.25% Cv Preferred 30,000(h) 3,900,000 First Chicago 2.875% Cm Cv Preferred 100,000 6,050,000 First Nationwide Bank 11.50% Cm Preferred 80,000 8,600,000 Great Bay Power Common 75,552(h) 623,304 Intermedia Warrants 1,200 12,300 Kash n' Karry Food Stores Common 150,570(h) 3,952,463 Natl Health Investors 8.50% Cv Preferred 83,000 2,209,875 Pullman Common Series B 182,094(h) 1,456,752 Purity Supreme Warrants 13,862(i) 277 Security Pacific Cv Preferred 136,500 3,241,875 Supermarket General $3.52 Pay-in-Kind Cv Preferred 120,972(h,m) 3,508,188 Thermadyne Holdings Common 6,693(h) 121,729 Thermadyne Inds Common Cl B 120,000(h,i,k) -- Triangle Wire Cable Common 211,111(h,i) 422,222 Webcraft Technology Common 32,502(h,i) 325 WestFed Holdings Non-Voting Common Cl B 13,019(h,i,k) -- Pay-in-Kind Cm Sr Preferred 42,753(h,i,k,m) -- _____________________________________________________________________________________________________________________________ Total stocks and other (Cost: $57,004,691) 2,154,178 $ 41,346,056 _____________________________________________________________________________________________________________________________
PAGE 34
Short-term securities (3.7%) _____________________________________________________________________________________________________________________________ Issuer Annualized Amount Value(a) yield on payable date of at purchase maturity _____________________________________________________________________________________________________________________________ U.S. government agencies (0.4%) Federal Home Loan Mtge Corp Disc Notes 09-20-95 5.69% $ 6,650,000 $ 6,630,135 09-20-95 5.70 3,200,000 3,190,424 Federal Natl Mtge Assn Disc Note 09-05-95 5.68 2,800,000 2,798,242 ______________ Total 12,618,801 _____________________________________________________________________________________________________________________________ Commercial paper (3.3%) AIG Funding 09-13-95 5.80 3,200,000 3,193,845 Alabama Power 09-19-95 5.77 5,600,000 5,583,956 Albertson's 09-14-95 5.77 7,000,000 6,985,516 Campbell Soup 10-20-95 5.76 5,000,000(l) 4,959,959 Ciesco 09-14-95 5.76 600,000 598,761 09-19-95 5.78 4,600,000(l) 4,586,775 CIT Group Holdings 10-10-95 5.79 1,000,000 993,770 Corporate Asset Funding 10-03-95 5.76 500,000 497,458 Intel 09-05-95 5.77 17,200,000 17,189,030 Lincoln Natl 09-12-95 5.77 2,000,000(l) 1,996,492 Metlife Funding 09-12-95 5.75 9,200,000 9,183,920 Morgan Stanley 09-07-95 5.77 5,200,000 5,195,017 Motorola 09-12-95 5.77 5,200,000 5,190,896 Natl Detroit Canada 09-22-95 5.77 1,000,000 996,652 Pacific Mutual Life 09-06-95 5.77 8,600,000 8,593,144 Penney (JC) Funding 09-11-95 5.77 3,900,000 3,893,792 SAFECO Credit 09-14-95 5.80 2,300,000 2,295,208 Southern California Gas 10-05-95 5.76 8,500,000(l) 8,454,081 Toyota Motor 09-29-95 5.75 6,600,000 6,570,637 PAGE 35 USAA Capital 10-03-95 5.74 4,200,000 4,178,683 USL Capital 09-12-95 5.77 6,000,000 5,989,477 ______________ Total 107,127,069 _____________________________________________________________________________________________________________________________ Total short-term securities (Cost: $119,747,120) 120,050,000 $ 119,745,870 _____________________________________________________________________________________________________________________________ Total investments in securities (Cost: $3,050,010,532)(n) 3,165,927,936 $3,161,989,118 _____________________________________________________________________________________________________________________________ Notes to investments in securities _____________________________________________________________________________________________________________________________ (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Security is partially or fully on loan. See Note 5 to the financial statements. (c) Inverse floaters represent securities that pay interest at a rate that increases (decreases) in the same magnitude as, or in a multiple of, a decline (increase) in the LIBOR (London InterBank Offed Rate) Index. Interest rate disclosed is the rate in effect on Aug. 31, 1995. Inverse floaters in the aggregate represent 0.6% of the fund's net assets as of Aug. 31, 1995. (d) This security is a collateralized mortgage obligation that pays no interest or principal during its initial accrual period until payment of a previous series within the trust have been paid off. Interest is accrued at an effective yield. (e) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security has been determined to be liquid under guidelines established by the board of directors. (f) Interest rate varies to reflect current market conditions; rate shown is the effective rate on Aug. 31, 1995. (g) For zero coupon bonds, the interest rate disclosed represents the annualized effective yield on the date of acquisition. (h) Presently non-income producing. (i) Identifies issues considered to be illiquid (see Note 4 to the financial statements). Information concerning such security holdings at Aug. 31, 1995, is as follows: Acquisition Security date Cost _______________________________________________________________________________________________ Anacomp 12.25% 1997 08-21-92 $2,523,000 ECM Funding LP 11.918% 2002 04-13-92 3,030,093 EUA Power Contingent Interest Certificates 05-25-90 -- Helsinki City Sr Nts 9.25% 2007 02-07-95 4,900,000 Purity Supreme Warrants 07-29-92 -- Thermadyne Inds Common Cl B 01-11-89 86,400 Triangle Wire Cable Common 01-13-92 5,000,045 Webcraft Technology Common 12-22-86 16,875 WestFed Holdings Non-Voting Common Cl B 09-30-88 393 Pay-in-Kind Cm Sr 09-03-88 3,012,900 Pay-in-Kind Cm Sr 01-01-89 thru 12-26-89 293,330 Pay-in-Kind Cm Sr 03-15-90 thru 12-26-90 145,590 Pay-in-Kind Cm Sr 04-01-91 thru 12-18-91 98,395 Pay-in-Kind Cm Sr 03-20-92 thru 12-18-92 36,725 Pay-in-Kind Cm Sr 03-18-93 thur 06-11-93 10,078 PAGE 36 (j) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated in the currency indicated. (k) Presently negligible market value. (l) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the board of directors. (m) Pay-in-kind securities are securities 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. (n) At Aug. 31, 1995, the cost of securities for federal income tax purposes was $3,047,374,560 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $162,989,262 Unrealized depreciation (48,374,704) ___________________________________________________________________________________ Net unrealized appreciation $114,614,558 ___________________________________________________________________________________
PAGE 37 IDS mutual funds Cash equivalent investments These money market funds have three main goals: conservation of capital, constant liquidity and the highest possible current income consistent with these objectives. Very limited risk. IDS Cash Management Fund Invests in such money market securities as high quality commercial paper, bankers' acceptances, certificates of deposits (CDs) and other bank securities. (icon of) piggy bank IDS Tax-Free Money Fund Invests primarily in short-term bonds and notes issued by state and local governments to seek high current income exempt from federal income taxes. (icon of) shield with piggy bank enclosed Income investments The funds in this group invest their assets primarily in corporate bonds or government securities to seek interest income. Secondary objective is capital growth. Risk varies by bond quality. IDS Global Bond Fund Invests primarily in debt securities of U.S. and foreign issuers to seek high total return through income and growth of capital. (icon of) globe IDS Extra Income Fund Invests mainly in long-term, high-yielding corporate fixed-income securities in the lower rated, higher risk bond categories to seek high current income. Secondary objective is capital growth. (icon of) cornucopia IDS Bond Fund Invests mainly in corporate bonds, at least 50% in the higher rated, lower risk bond categories, or the equivalent, and in government bonds. (icon of) greek column PAGE 38 IDS Selective Fund Invests in high-quality corporate bonds and other highly rated debt instruments including government securities and short-term investments. Seeks current income and preservation of capital. (icon of) skyline IDS Federal Income Fund Invests primarily in securities issued or guaranteed as to the timely payment of principal and interest by the U.S. government, its agencies and instrumentalities. Seeks a high level of current income and safety of principal consistent with its type of investments. (icon of) federal building Tax-exempt income investments These funds provide tax-free income by investing in municipal bonds. The income is generally free from federal income tax. Risk varies by bond quality. IDS High Yield Tax-Exempt Fund Invests primarily in medium- and lower-quality municipal bonds and notes. Lower-quality securities generally involve greater risk of principal and income. (icon of) shield with basket of apples enclosed IDS State Tax-Exempt Funds (CA, MA, MI, MN, NY, OH) Invests primarily in high- and medium-grade municipal securities to provide income to residents of each respective state that is exempt from federal, state and local income taxes. (New York is the only state that is exempt at the local level.) (icon of) shield with U.S. enclosed IDS Tax-Exempt Bond Fund Invests mainly in bonds and notes of state or local government units, with at least 75% in the four highest rated, lowest risk bond categories. (icon of) shield with Greek column IDS Insured Tax-Exempt Fund Invests primarily in municipal securities that are insured as to the timely payment of principal and interest. The insurance feature minimizes credit risk of the fund but does not guarantee the market value of the fund's shares. (icon of) shield with eagle head PAGE 39 Growth and income investments These funds focus on securities of medium to large, well- established companies that offer long-term growth of capital and reasonable income from dividends and interest. Moderate risk. IDS International Fund Invests primarily in common stocks of foreign companies that offer potential for superior growth. The fund may invest up to 20% of its assets in the U.S. market. (icon of) three flags IDS Managed Retirement Fund Invests in a combination of common stocks, fixed-income investments and money market securities to seek a maximum total return through a combination of growth of capital and current income. (icon of) bird in a nest IDS Equity Select Fund Invests primarily in a combination of moderate growth stocks, higher-yielding equities and bonds. Seeks growth of capital and income. (icon of) three apple trees IDS Blue Chip Advantage Fund Invests in selected stocks from a major market index. Securities purchased are those recommended by our research analysts as the best from each industry represented on the index. Offers potential for long-term growth as well as dividend income. (icon of) ribbon IDS Stock Fund Invests in common stock of companies representing many sectors of the economy. Seeks current income and growth of capital. (icon of) building with columns IDS Equity Value Fund Invests primarily in undervalued common stocks that offer potential for growth of capital and income. (icon of) three growing flowers PAGE 40 IDS Utilities Income Fund Invests primarily in the stocks of public utility companies to seek high current income and growth of income and capital with reduced volatility. (icon of) electrical cord IDS Diversified Equity Income Fund Invests primarily in high-yielding common stocks to seek high current income and, secondarily, to benefit from the growth potential offered by stock investments. (icon of) four puzzle pieces IDS Mutual Invests in a balance between common stocks and senior securities (preferred stocks and bonds). Seeks a balance of growth of capital and current income. (icon of) scale of justice Growth investments Funds in this group seek capital growth, primarily from common stocks. They are high risk mutual funds with a potential for high reward. IDS Discovery Fund Invests in small- and medium-size, growth-oriented companies emphasizing technological innovation and productivity enhancement. Buys and holds larger growth-oriented stocks. (icon of) ship IDS Strategy Aggressive Fund Invests primarily in common stocks of companies that are selected for their potential for above-average growth. Above-average means that their growth potential is better, in the opinion of the portfolio's investment manager, than the Standard & Poor's Corporation (S&P) 500 Stock Index. (icon of) chess piece IDS Growth Fund Invests primarily in companies that have above-average potential for long-term growth as a result of new management, marketing opportunities or technological superiority. (icon of) flower PAGE 41 IDS Global Growth Fund Invests in stocks of companies throughout the world that are positioned to meet market needs in a changing world economy. These companies offer above-average potential for long-term growth. (icon of) world IDS New Dimensions Fund Invests primarily in companies with significant growth potential due to superiority in technology, marketing or management. The fund frequently changes its industry mix. (icon of) dimension IDS Progressive Fund Invests primarily in undervalued common stocks. The fund holds stocks for the long term with the goal of capital growth. (icon of) shooting star Specialty growth investment This fund aggressively seeks capital growth as a hedge against inflation. IDS Precious Metals Fund Invests primarily in the securities of foreign or domestic companies that explore for, mine and process or distribute gold and other precious metals. This is the most aggressive and most speculative IDS mutual fund. (icon of) cart of precious gems For more complete information about any of these funds, including charges and expenses, you can obtain a prospectus by contacting your financial advisor or writing to American Express Shareholder Service, P.O. Box 534, Minneapolis, MN 55440-0534. Read it carefully before you invest or send money. PAGE 42 Federal income tax information IDS Bond Fund, Inc. __________________________________________________________________ The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. Some of the dividends listed below were reported to you on Form 1099-DIV, Dividends and Distributions, last January. Dividends paid to you since the end of last year will be reported to you on a tax statement sent next January. Shareholders should consult a tax advisor on how to report distributions for state and local purposes. IDS Bond Fund, Inc. Fiscal year ended Aug. 31, 1995 Class A Income distributions taxable as dividend income, 1.26% qualifying for deduction by corporations. Payable date Per share Sept. 26, 1994 $0.03250 Oct. 26, 1994 0.03270 Nov. 28, 1994 0.03250 Dec. 28, 1994 0.03250 Jan. 25, 1995 0.03000 Feb. 23, 1995 0.02800 March 27, 1995 0.02918 April 26, 1995 0.03069 May 25, 1995 0.03068 June 26, 1995 0.03078 July 26, 1995 0.03273 Aug. 25, 1995 0.03374 Total $0.37600 Capital gain distribution taxable for long-term capital gain. Payable date Per share Dec. 28, 1994 $0.09834 Total distributions $0.47434 PAGE 43 Class B Income distributions taxable as dividend income, 1.26% qualifying for deduction by corporations. March 27, 1995 0.02838 April 26, 1995 0.02767 May 25, 1995 0.02770 June 26, 1995 0.02741 July 26, 1995 0.02956 Aug. 25, 1995 0.03062 Total distributions $0.17134 Class Y Income distributions taxable as dividend income, 1.26% qualifying for deduction by corporations. March 27, 1995 0.02936 April 26, 1995 0.03138 May 25, 1995 0.03137 June 26, 1995 0.03156 July 26, 1995 0.03346 Aug. 25, 1995 0.03446 Total distributions $0.19159 PAGE 44 Quick telephone reference American Express Telephone Transaction Service Redemptions and exchanges, dividend payments or reinvestments and automatic payment arrangements National/Minnesota: 800-437-3133 Mpls./St. Paul area: 671-3800 American Express Shareholder Service Fund performance, objectives and account inquiries 612-671-3733 TTY Service For the hearing impaired 800-846-4852 American Express Infoline Automated account information (TouchToneR phones only), including current fund prices and performance, account values and recent account transactions National/Minnesota: 800-272-4445 Mpls./St. Paul area: 671-1630 AMERICAN EXPRESS FINANCIAL ADVISORS IDS BOND FUND IDS Tower 10 Minneapolis, MN 55440-0010 PAGE 45 STATEMENT OF DIFFERENCES Difference Description 1) The layout is different 1) Some of the layout in the throughout the annual report. annual report to shareholders is in two columns. 2) Headings. 2) The headings in the annual report and prospectus are placed in blue strip at the top of the page. 3) There are pictures, icons 3) Each picture, icon and and graphs throughout the graph is described in annual report and prospectus. parentheses. 4) Footnotes for charts and 4) The footnotes for each graphs are described at chart or graph are typed the left margin. below the description of the chart or graph. -----END PRIVACY-ENHANCED MESSAGE-----