-----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, FrC94e1flL9GG+ueXA7X5SbSGSWFv6kr2kmLtYs1VC7IrxwWW9UXYffe3tB8NYxR pBUEkoWYGFVJeTxxf0IXuQ== 0000820027-97-000773.txt : 19971106 0000820027-97-000773.hdr.sgml : 19971106 ACCESSION NUMBER: 0000820027-97-000773 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970831 FILED AS OF DATE: 19971105 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: SEC FILE NUMBER: 811-02503 FILM NUMBER: 97707794 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 1997 ANNUAL REPORT IDS Bond Fund (prospectus enclosed) (icon of) Greek 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.) AMERICAN EXPRESS Financial Advisors Distributed by American Express Financial Advisors Inc. (icon of) Greek 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. 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. 1997 annual report From the president 4 From the portfolio manager 4 The Fund's ten largest holdings 6 Making the most of the Fund 7 The Fund's long-term performance 8 Independent auditors' report 9 Financial statements 10 Notes to financial statements 13 Investments in securities 26 IDS mutual funds 42 Federal income tax information 46 1997 prospectus The Fund in brief 3p Goal 3p Investment policies and risks 3p Manager and distributor 3p Portfolio manager 3p Alternative purchase arrangements 3p Sales charge and Fund expenses 4p Performance 6p Financial highlights 6p Total returns 8p Yield 10p Investment policies and risks 11p Facts about investments and their risks 11p Alternative investment option 15p Valuing Fund shares 16p How to purchase, exchange or redeem shares 17p Alternative purchase arrangements 17p How to purchase shares 20p How to exchange shares 23p How to redeem shares 23p Reductions and waivers of the sales charge 28p Special shareholder services 33p Services 33p Quick telephone reference 33p Distributions and taxes 34p Dividend and capital gain distributions 34p Reinvestments 35p Taxes 35p How to determine the correct TIN 37p How the Fund is organized 38p Shares 38p Voting rights 38p Shareholder meetings 38p Board members and officers 38p Investment manager 40p Administrator and transfer agent 40p Distributor 41p About American Express Financial Corporation 43p General information 43p Appendices 44p Description of corporate bond ratings 44p Descriptions of derivative instruments 46p (This annual report is not part of the prospectus.) To our shareholders (picture of) William R. Pearce President of the Fund (picture of) Fred Quirsfeld Portfolio manager From the president If you're an experienced investor, you know that the past two years have been unusually strong ones in many financial markets. Perhaps just as important, you also know that history shows that bull markets don't last forever. Though they're often unpredictable, declines -- whether they're brief or long-lasting, moderate or substantial -- are always a possibility. That fact reinforces the need for investors to periodically review their long-term goals and examine whether their investment program remains on track to achieving them. Your quarterly investment statements are one part of that monitoring process. The other is a meeting with your American Express financial advisor. That becomes even more important if there's a major change in your financial situation or in the financial markets. William R. Pearce (This annual report is not part of the prospectus.) From the portfolio manager The U.S. bond market experienced considerable volatility during the past 12 months. Fortunately, the ups exceeded the downs, enabling the Fund to generate a double-digit total return of 12.1% for investors in Class A shares from September 1996 through August 1997. After several months of lackluster performance, the bond market encountered a much more favorable environment when the period began last fall. Supported by unthreatening reports on wage rates and inflation, as well as expected results in the presidential and congressional elections, the outlook soon turned positive. As a result, buyers came back into the market, sending long-term interest rates lower and bond prices higher throughout the fall. A summer recovery The winter and early spring were a different story, though, as stronger-than-expected economic growth fanned inflation fears and sent long-term interest rates higher. But once again investors were subsequently reassured by more reports of low inflation, which spawned increased buying, a downturn in interest rates and, ultimately, a rebound in bond prices through much of the summer. The Fund's performance pattern basically tracked that of the broad bond market -- two surges sandwiched around a slump. Because I expected the market to be volatile, I structured the portfolio with an essentially neutral duration (a function of the average maturity of the securities in the portfolio that determines how sensitive the portfolio is to changes in long-term interest rates). Ultimately, this helped temper fluctuations in the Fund's net asset value during interest-rate swings. In addition, I maintained a high level of cash reserves in late winter and early spring to cushion the Fund in the event of a sustained interest-rate rise. As it turned out, rates came back down, so I gradually reduced the cash level. A mix of investments Consistent with my investment style, the portfolio remained diversified among types of fixed-income securities of varying quality. While the majority of investments were in investment-grade, or high-quality bonds, including those issued by corporations and the federal government and its agencies, about a quarter were in high-yield and emerging market issues, which are considered to be below investment grade. The latter two groups performed especially well during the past 12 months, while also enhancing the Fund's yield. Although I don't see any major threats to the bond market on the horizon, I won't be surprised if inflation picks up a bit in the new fiscal year, prompting the Federal Reserve Board to nudge short-term interest rates somewhat higher. Any negative effect on the bond market would probably be modest and relatively brief, however. Therefore, at this writing (mid-September), I am staying with a neutral duration and focusing on maintaining the Fund's dividend, which I expect to provide most of the return in the current fiscal year. Fred Quirsfeld (This annual report is not part of the prospectus.) Class A 12-month performance (All figures per share) Net asset value (NAV) Aug. 31, 1997 $ 5.22 Aug. 31, 1996 $ 4.99 Increase $ 0.23 Distributions Sept. 1, 1996 - Aug. 31, 1997 From income $ 0.35 From capital gains $ -- Total distributions $ 0.35 Total return* +12.1%** Class B 12-month performance (All figures per share) Net asset value (NAV) Aug. 31, 1997 $ 5.22 Aug. 31, 1996 $ 4.99 Increase $ 0.23 Distributions Sept. 1, 1996 - Aug. 31, 1997 From income $ 0.31 From capital gains $ -- Total distributions $ 0.31 Total return* +11.2%** Class Y 12-months performance (All figures per share) Net asset value (NAV) Aug. 31, 1997 $ 5.22 Aug. 31, 1996 $ 4.99 Increase $ 0.23 Distributions Sept. 1, 1996 - Aug. 31, 1997 From income $ 0.36 From capital gains $ -- Total distributions $ 0.36 Total return* +12.2%** * The prospectus discusses the effect of sales charges, if any, on the various classes. ** The total return is a hypothetical investment in the Fund with all distributions reinvested. (This annual report is not part of the prospectus.) The Fund's ten largest holdings (icon of) pie chart The ten holdings listed here make up 6.84% of the Fund's net assets Percent Value (of Fund's net assets) (as of Aug. 31, 1997) Virgina Electric Power .94% $34,542,900 6.75% 2007 Viacom Intl .80 29,471,625 8.00% 2006 Connecticut Light & Power .79 28,947,800 7.75% 2002 New York Telephone .73 26,798,483 9.375% 2031 Tenet Healthcare .66 24,145,000 10.125% 2005 Scotland Bank .61 22,325,935 8.80% 2004 Ford Capital .59 21,708,784 9.50% 2010 Salomon .58 21,220,290 7.00% 1999 Long Island Lighting .57 21,177,818 9.625% 2024 Cleveland Electric Illuminating .57 20,843,785 7.67% 2004 Excludes U.S. Treasury and government agency holdings. (This annual report is not part of the prospectus.) Making the most of the Fund Build your assets systematically 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 XXXXX Feb 100 18 5.56 XXXXXx March 100 17 5.88 XXXXXx April 100 15 6.67 XXXXXXx May 100 16 6.25 XXXXXXx June 100 18 5.56 XXXXXx July 100 17 5.88 XXXXXx Aug 100 19 5.26 XXXXXx Sept 100 21 4.76 XXXXx Oct 100 20 5.00 XXXXX (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... (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. (This annual report is not part of the prospectus.) The Fund's long-term performance 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. How your $10,000 has grown in IDS Bond Fund $24,377 Bond Fund Class A $20,000 Lehman Aggregate Bond Index $10,000 $9,500 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 Assumes: oHolding period from 9/1/87 to 8/31/97. oReturns do not reflect taxes payable on distributions. oReinvestment of all income and capital gain distributions for the Fund, with a value of $13,865. Also see "Performance" in the Fund's current prospectus. 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. Average annual total return (as of Aug. 31, 1997) 1 year Since inception 5 years 10 years Class A +6.45% --% +7.74% +9.31% Class B +7.21% +9.04%* --% --% Class Y +12.21% +11.50%* --% --% *Inception date was March 20, 1995. 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 (Class A) 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. 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 impact of the applicable sales charge up to a maximum of 5%. This was a period of widely fluctuating security prices. Past performance is no guarantee of future results. (This annual report is not part of the prospectus.) The financial statements contained in Post-Effective Amendment #47 to Registration Statement No. 2-51586 filed on or about October 28, 1997 are incorporated herein by reference. IDS mutual funds Global/International funds Funds in this group seek capital growth and/or income by investing primarily in foreign securities. Foreign investments may be subject to currency fluctuations and political and economic risks of the countries in which the investments are made. They are high risk mutual funds with a potential for high reward. IDS Emerging Markets Fund Invests in a Portfolio comprised primarily of stocks of companies in developing countries throughout the world that are believed to offer growth potential. Seeks to provide long-term growth of capital. (icon of) world with countries IDS Global Growth Fund Invests in a Portfolio comprised primarily of stocks of companies throughout the world that are positioned to meet market needs in a changing world economy. These companies offer above-average potential for long-term growth. (icon of) world 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 Global Balanced Fund Invests in stocks and bonds in, for the most part, major markets throughout the world, including the U.S. Seeks to provide a balance of growth of capital and current income. (icon of) scale of globes IDS Global Bond Fund Invests in a Portfolio comprised primarily of debt securities of U.S. and foreign issuers to seek high total return through income and growth of capital. (icon of) globe Growth funds Funds in this group seek capital growth, primarily from common stocks. They are high risk mutual funds with a potential for high reward. IDS Precious Metals Fund Invests primarily in the securities of foreign or domestic companies that explore for, mine and process or distribute gold and other precious metals. A highly aggressive and speculative fund that seeks long-term growth of capital. (icon of) cart of precious gems 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 Small Company Index Fund Invests in all or a representative group of the equity securities comprising the S&P SmallCap 600 Index, as it strives to provide long-term capital appreciation. (icon of) building 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 Research Opportunities Fund Invests in a Portfolio comprised primarily of equity securities of companies included in the S&P 500 Index that are believed to have strong growth potential. The Portfolio is managed using a research methodology by the Research Department of AEFC. Goal is long-term appreciation. (icon of) magnifying glass (This annual report is not part of the prospectus.) IDS Growth Fund Invests in a Portfolio comprised primarily of companies that have above-average potential for long-term growth as a result of new management, marketing opportunities or technological superiority. (icon of) trees IDS New Dimensions Fund Invests in a Portfolio comprised primarily of companies with significant growth potential due to superiority in technology, marketing or management. The Fund frequently changes its industry mix. (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 Growth & income funds These funds focus on securities of medium to large, well-established companies that offer long-term growth of capital and reasonable income from dividends and interest. Foreign investments may be subject to currency fluctuations and political and economic risks of the countries in which the investments are made. IDS Equity Select Fund Invests primarily in a combination of moderate growth stocks, higher-yielding equities and bonds. Seeks growth of capital and income. (icon of) three pine 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 Managed Allocation Fund Invests in a Portfolio comprised primarily of U.S. equity securities, U.S. and foreign debt securities, foreign equity securities and money market instruments. The Fund provides diversification among these major investment categories and has a target mix that represents the way the Fund's investments will be allocated over the long term. Seeks maximum total return. (icon of) gyroscope IDS Stock Fund Invests in a Portfolio comprised primarily of common stock of companies representing many sectors of the economy. Seeks current income and growth of capital. (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 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) light bulb IDS Diversified Equity Income Fund Invests in a Portfolio comprised primarily in high-yielding common stocks to seek high current income and, secondarily, to benefit from the growth potential offered by stock investments. (icon of) two puzzle pieces IDS Mutual Invests in a Portfolio which seeks to balance between common stocks and senior securities (preferred stocks and bonds). Seeks a balance of growth of capital and current income. (icon of) scale of justice (This annual report is not part of the prospectus.) Income funds The funds in this group invest their assets primarily in corporate bonds or government securities to seek interest income. Secondary objective is capital growth. Risk varies by bond quality. IDS Extra Income Fund Invests in a Portfolio comprised mainly of long-term, high-yielding corporate fixed-income securities in the lower rated, higher risk bond categories to seek high current income. Secondary objective is capital growth. (icon of) two coins 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 IDS Selective Fund Invests in a Portfolio comprised primarily of high-quality corporate bonds and other highly rated debt instruments including government securities and short-term investments. Seeks current income and preservation of capital. (icon of) skyline IDS Federal Income Fund Invests in a Portfolio comprised primarily of securities issued or guaranteed as to the timely payment of principal and interest by the U.S. government, its agencies and instrumentalities. Seeks a high level of current income and safety of principal consistent with its type of investments. (icon of) shield with eagle head Tax-exempt income funds These funds provide tax-free income by investing in municipal bonds. The income is generally free from federal income tax, but a portion of the income may be subject to state and local taxes. Risk varies by bond quality. IDS Tax-Exempt Bond Fund Invests mainly in bonds and notes of state or local government units, with at least 75% in the four highest rated, lowest risk bond categories. (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 star 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 High Yield Tax-Exempt Fund Invests in a Portfolio comprised primarily of medium- and lower-quality municipal bonds and notes. Lower-quality securities generally involve greater risk of principal and income. (icon of) shield with basket of apples enclosed IDS Intermediate Tax-Exempt Fund Invests in mainly investment-grade bonds and other debt securities with intermediate-term maturities issued by state and local government units. Goal is to seek a high level of current income exempt from federal taxes. (icon of) shield with tree enclosed (This annual report is not part of the prospectus.) Money market funds These money market funds have three main goals: conservation of capital, constant liquidity and the highest possible current income consistent with these objectives. An investment in these funds is neither insured nor guaranteed by the U.S. government, and there can be no assurance that these funds will be able to maintain a stable net asset value of $1.00 per share. Very limited risk. IDS Cash Management Fund Invests in such money market securities as high quality commercial paper, bankers' acceptances, certificates of deposit (CDs) and other bank securities. (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 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. (This annual report is not part of the prospectus.) Federal income tax information 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, 1997 Class A Income distributions taxable as dividend income, 0.85% qualifying for deduction by corporations. Payable date Per share Sept. 25, 1996 $0.03174 Oct. 28, 1996 0.03067 Nov. 26, 1996 0.02978 Dec. 26, 1996 0.02828 Jan. 29, 1997 0.02938 Feb. 26, 1997 0.03024 March 26, 1997 0.02873 April 28, 1997 0.02935 May 28, 1997 0.02878 June 26, 1997 0.02778 July 25, 1997 0.02678 Aug. 27, 1997 0.02888 Total distributions $0.35039 (This annual report is not part of the prospectus.) Class B Income distributions taxable as dividend income, 0.85% qualifying for deduction by corporations. Payable date Per share Sept. 25, 1996 $0.02862 Oct. 28, 1996 0.02718 Nov. 26, 1996 0.02667 Dec. 26, 1996 0.02506 Jan. 29, 1997 0.02575 Feb. 26, 1997 0.02722 March 26, 1997 0.02574 April 28, 1997 0.02587 May 28, 1997 0.02559 June 26, 1997 0.02467 July 25, 1997 0.02360 Aug. 27, 1997 0.02528 Total distributions $0.31125 Class Y Income distributions taxable as dividend income, 0.85% qualifying for deduction by corporations. Payable date Per share Sept. 25, 1996 $0.03244 Oct. 28, 1996 0.03145 Nov. 26, 1996 0.03048 Dec. 26, 1996 0.02901 Jan. 29, 1997 0.03021 Feb. 26, 1997 0.03092 March 26, 1997 0.02941 April 28, 1997 0.03014 May 28, 1997 0.02923 June 26, 1997 0.02810 July 25, 1997 0.02706 Aug. 27, 1997 0.02923 Total distributions $0.35768 (This annual report is not part of the prospectus.) Quick telephone reference American Express Redemptions and exchanges, National/Minnesota Financial Advisors dividend payments or 800-437-3133 Telephone Transaction reinvestments and automatic Service payment arrangements Mpls./St. Paul area: 671-3800 TTY Service For the hearing impaired 800-846-4852 American Express Automated account information 800-862-7919 Financial Advisors (TouchTone(R) phones only), Easy Access Line including current fund prices and performance, account values and recent account transactions AMERICAN EXPRESS Financial Advisors IDS Bond Fund IDS Tower 10 Minneapolis, MN 55440-0010 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 are placed in a 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. 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-----