-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, ZAvI3fwMmsXiu2fnWeWQyTRR6zxzBXnZ9UFDHUGaerQ3/V4kwMh0svUSiXp9XQ2F 8DQQagh1ig5v6Fd7heUAZg== 0000912057-95-001088.txt : 19950302 0000912057-95-001088.hdr.sgml : 19950302 ACCESSION NUMBER: 0000912057-95-001088 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 19950228 EFFECTIVENESS DATE: 19950228 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: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 002-51586 FILM NUMBER: 95516147 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 485BPOS 1 485BPOS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Pre-Effective Amendment No. __ Post-Effective Amendment No. 43 (File Number 2-51586) /X/ and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 29 (File Number 811-2503) /X/ ------------------------ IDS BOND FUND, INC. IDS Tower 10, Minneapolis, Minnesota 55402-0010 Leslie L. Ogg 901 Marquette Ave. S., Suite 2810 Minneapolis, Minnesota 55402-3268 (612) 330-9283 ------------------------ APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: It is proposed that this filing will become effective (check appropriate box) / / immediately upon filing pursuant to paragraph (b) /X/ on March 20, 1995 pursuant to paragraph (b) / / 60 days after filing pursuant to paragraph (a)(i) / / on (date) pursuant to paragraph (a)(i) / / 75 days after filing pursuant to paragraph (a)(ii) / / on (date) pursuant to paragraph (a)(ii) of rule 485 If appropriate, check the following box: /X/ This Post-Effective Amendment designates a new effective date for a previously filed Post-Effective Amendment. ------------------------ REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OR AMOUNT OF SECURITIES UNDER THE SECURITIES ACT OF 1933 PURSUANT TO SECTION 24-F OF THE INVESTMENT COMPANY ACT OF 1940. REGISTRANTS' RULE 24F-2 NOTICE FOR ITS MOST RECENT FISCAL YEAR WAS FILED ON OR ABOUT OCTOBER 19, 1994. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CROSS REFERENCE SHEET SHOWING LOCATION IN THE PROSPECTUS OF THE INFORMATION CALLED FOR THE ITEMS ENUMERATED IN PARTS A AND B OF FORM N-1A. Negative answers omitted from prospectus are so indicated.
PART A - ---------------------------------------------------------------------------------------------------------------------- ITEM NO. SECTION IN PROSPECTUS - ---------------- ---------------------------------------------------------------------------------------------------- 1 Cover page of prospectus 2 The fund in brief; Sales charge and fund expenses 3(a) Financial highlights (b) NA (c) Performance (d) Financial highlights 4(a) The fund in brief; Investment policies and risks; How the fund is organized (b) Investment policies and risks (c) Investment policies and risks 5(a) Directors and officers; Directors and officers of the fund (listing) (b) How the fund is organized; About American Express Financial Corporation (b)(i) About American Express Financial Corporation -- General information (b)(ii) Investment manager and transfer agent (b)(iii) Investment manager and transfer agent (c) Portfolio manager (d) The fund in brief (e) Investment manager and transfer agent (f) Distributor (g) Investment manager and transfer agent 5A(a) * (b) * 6(a) Shares; Voting rights (b) NA (c) NA (d) Voting rights (e) Cover page; Special shareholder services (f) Dividends and capital gain distributions; Reinvestments (g) Taxes 7(a) Distributor (b) Key terms; Valuing assets (c) How to buy, exchange or sell shares (d) How to buy shares (e) NA (f) Distributor 8(a) How to sell shares (b) NA (c) How to buy shares: Three ways to invest (d) How to buy, exchange or sell shares: Redemption policies -- "Important..." 9 None
PART B - ---------------------------------------------------------------------------------------------------------------------- ITEM NO. SECTION IN SAI - ---------------- ---------------------------------------------------------------------------------------------------- 10 Cover page of SAI 11 Table of Contents 12 NA 13(a) Additional Investment Policies; all appendices except Dollar-Cost Averaging (b) Additional Investment Policies (c) Additional Investment Policies (d) Portfolio Transactions 14(a) Directors and officers of the fund;** Directors and Officers (b) Directors and Officers (c) Directors and Officers 15(a) NA (b) NA (c) Directors and Officers 16(a)(i) How the fund is organized; About American Express Financial Corporation** (a)(ii) Agreements: Investment Management Services Agreement, Plan and Agreement of Distribution (a)(iii) Agreements: Investment Management Services Agreement (b) Agreements: Investment Management Services Agreement (c) NA (d) Agreements: Administrative Services Agreement, Shareholder Service Agreement (e) NA (f) Agreements: Distribution Agreement (g) NA (h) Custodian; Independent Auditors (i) Agreements: Transfer Agency Agreement; Custodian 17(a) Portfolio Transactions (b) Brokerage Commissions Paid to Brokers Affiliated with American Express Financial Corporation (c) Portfolio Transactions (d) Portfolio Transactions (e) Portfolio Transactions 18(a) Shares and Voting rights** (b) NA 19(a) Investing in the Fund (b) Valuing Fund Shares; Investing in the Fund (c) NA 20 Taxes 21(a) Agreements: Distribution Agreement (b) Agreements: Distribution Agreement (c) NA 22(a) Performance Information (for money market funds only) (b) Performance Information (for all funds except money market funds) 23 Financial Statements - ------------------------ *Designates information is located in annual report. **Designates page number in prospectus.
This prospectus IDS contains facts that can BOND help you decide if the FUND fund is the right investment for you. PROSPECTUS Read it before you OCT. 31, 1994 AS invest and keep it for REVISED MARCH 20, 1995 future reference. [GRAPHIC] Additional facts about the fund are in a THE GOAL OF IDS Statement of Additional BOND FUND, INC. IS TO Information (SAI), PROVIDE SHAREHOLDERS filed with the WITH A HIGH LEVEL OF Securities and Exchange CURRENT INCOME WHILE Commission. The SAI, ATTEMPTING TO CONSERVE dated Oct. 31, 1994 as THE VALUE OF THE revised March 20, 1995, INVESTMENT AND TO is incorporated here by CONTINUE A HIGH LEVEL reference. For a free OF INCOME FOR THE copy, contact American LONGEST PERIOD OF TIME. Express Shareholder THE FUND INVESTS Service. PRIMARILY IN CORPORATE BONDS AND OTHER DEBT THESE SECURITIES HAVE SECURITIES. NOT BEEN APPROVED OR DISAPPROVED BY THE American Express SECURITIES AND EXCHANGE Shareholder Service COMMISSION OR ANY STATE P.O. Box 534 SECURITIES COMMISSION, Minneapolis, MN NOR HAS THE SECURITIES 55440-0534 AND EXCHANGE COMMISSION 612-671-3733 OR ANY STATE SECURITIES TTY: 800-846-4852 COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK, AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. - ------------------------------------------ TABLE OF CONTENTS - ------------------------------------------ THE FUND IN BRIEF Goal 3P Types of fund investments 3P Manager and distributor 3P Portfolio manager 3P Alternative sales arrangements 4P - ------------------------------------------ SALES CHARGE AND FUND EXPENSES - ------------------------------------------ PERFORMANCE Financial highlights 7P Total returns 8P Yield 9P Key terms 10P - ------------------------------------------ INVESTMENT POLICIES AND RISKS Facts about investments and their risks 11P Alternative investment option 16P Valuing assets 16P - ------------------------------------------ HOW TO BUY, EXCHANGE OR SELL SHARES Alternative sales arrangements 17P How to buy shares 20P How to exchange shares 23P How to sell shares 23P Reductions and waivers of the sales charge 28P - ------------------------------------------ SPECIAL SHAREHOLDER SERVICES Services 32P Quick telephone reference 32P - ------------------------------------------ DISTRIBUTIONS AND TAXES Dividend and capital gain distributions 33P Reinvestments 34P Taxes 35P - ------------------------------------------ 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 A: Description of corporate bond ratings 44P B: Descriptions of derivative instruments 46P 2P ---------------------------------------------------------- The fund in brief GOAL IDS Bond Fund seeks 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. Because any investment involves risk, achieving this goal cannot be guaranteed. Only shareholders can change the goal. TYPES OF FUND INVESTMENTS The fund is a diversified mutual fund that invests primarily in bonds and other debt securities issued by U.S. and foreign corporations and governments. At least half of the fund's net assets must be in bonds rated "investment grade." The fund also invests in lower-quality debt securities, convertible securities, stocks, derivative instruments and money market instruments. Some of fund's investments may be considered speculative and involve additional investment risks. MANAGER AND DISTRIBUTOR The fund is managed by American Express Financial Corporation, a provider of financial services since 1894. American Express Financial Corporation currently manages more than $37 billion in assets for the IDS MUTUAL FUND GROUP. Shares of the fund are sold through American Express Financial Advisors Inc., a wholly owned subsidiary of American Express Financial Corporation. PORTFOLIO MANAGER Frederick Quirsfeld joined American Express Financial Corporation in 1985 and serves as vice president and senior portfolio manager. He has managed this fund since 1985. 3P - --------------------------------------------------------------------------- The fund in brief ALTERNATIVE SALES ARRANGEMENTS The fund offers its shares in three classes. Class A shares are subject to a sales charge at the time of purchase. Class B shares are subject to a contingent deferred sales charge (CDSC) on redemptions made within six years of purchase and an annual distribution (12b-1) fee. Class Y shares are sold without a sales charge to qualifying institutional investors. Other differences between the classes include the fees paid by each class. The fund offers these alternatives so you may choose the method of purchasing shares that is most beneficial given the amount of purchase, length of time you expect to hold the shares and other circumstances. 4P ---------------------------------------------------------- Sales charge and fund expenses When you buy Class A shares, you pay a maximum sales charge of 5% of the public offering price. This charge can be reduced, depending on your total investments in IDS funds. See "Reductions of the sales charge." No sales charge applies at the time of purchase of Class B shares, although Class B shares may be subject to a CDSC on redemptions made within 6 years and are subject to annual distribution (12b-1) fees. Class Y shares are sold without a sales charge to qualifying institutional investors. Shareholder transaction expenses are incurred directly by an investor on the purchase or redemption of fund shares. Fund operating expenses are paid out of fund assets for each class of shares. Operating expenses are reflected in the fund's daily share price and dividends, and are not charged directly to shareholder accounts. ------------------------------------------------------------- SHAREHOLDER TRANSACTION EXPENSES
CLASS A CLASS B CLASS Y Maximum sales charge on purchases (as a percentage of offering price)............... 5% 0% 0% Maximum deferred sales charge imposed on redemptions (as a percentage of original purchase price)............... 0% 5% 0% -----------------------------------------------------------
------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES* (% OF AVERAGE DAILY NET ASSETS):
CLASS A CLASS B CLASS Y ----------------------------------------------------------- Management fee............... .50% .50% .50% ----------------------------------------------------------- 12b-1 fee.................... .00% .75% .00% ----------------------------------------------------------- Other expenses**............. .34% .35% .17% ----------------------------------------------------------- Total........................ .84% 1.60% .67% * Expenses for Class A are based on actual expenses for the last fiscal year, restated to reflect current fees. Expenses for Class B and Class Y are estimated based on the restated expenses for Class A, except that the 12b-1 fee and transfer agent fee (under other expenses) for Class B are based on agreements for that class. ** Other expenses include an administrative services fee, a shareholder services fee, a transfer agent fee and other non-advisory expenses.
5P - --------------------------------------------------------------------------- Sales charge and fund expenses EXAMPLE: Suppose for each year for the next 10 years, fund expenses are as above and annual return is 5%. If you sold your shares at the end of the following years, for each $1,000 invested, you would pay total expenses of:
1 year 3 years 5 years 10 years** ------------------------------------------------------------------------ Class A...................... $ 58 $ 75 $ 94 $ 149 ------------------------------------------------------------------------ Class B...................... $ 66 $ 91 $ 107 $ 170 ------------------------------------------------------------------------ Class B*..................... $ 16 $ 51 $ 87 $ 170 ------------------------------------------------------------------------ Class Y...................... $ 7 $ 21 $ 37 $ 84 *Assuming Class B shares are not redeemed at the end of the period. **Based on conversion of Class B shares to Class A shares after 8 years.
THIS EXAMPLE DOES NOT REPRESENT ACTUAL EXPENSES, PAST OR FUTURE. ACTUAL EXPENSES MAY BE HIGHER OR LOWER THAN THOSE SHOWN. Because Class B pays annual distribution (12b-1) fees, long-term shareholders of Class B may indirectly pay an equivalent of more than a 6.25% sales charge, the maximum permitted by the National Association of Securities Dealers. 6P ---------------------------------------------------------- Performance FINANCIAL HIGHLIGHTS FISCAL YEAR ENDED AUG. 31, - -------------------------------------------------------------- PER SHARE INCOME AND CAPITAL CHANGES*
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 ------------------------------------------------------------------------------------------------------------ Net asset value, $ 5.48 $ 5.11 $ 4.74 $ 4.39 $ 4.74 $ 4.60 $ 4.72 $ 5.28 $ 4.83 $ 4.52 beginning of year INCOME FROM INVESTMENT OPERATIONS: ------------------------------------------------------------------------------------------------------------ Net investment .41 .40 .40 .41 .40 .42 .44 .46 .51 .56 income ------------------------------------------------------------------------------------------------------------ Net gains (losses) (.51) .38 .37 .33 (.36) .15 (.12) (.31) .63 .31 on securities (both realized and unrealized) ------------------------------------------------------------------------------------------------------------ Total from (.10) .78 .77 .74 .04 .57 .32 .15 1.14 .87 investment operations LESS DISTRIBUTIONS: ------------------------------------------------------------------------------------------------------------ Dividends from net (.41) (.41) (.40) (.39) (.39) (.43) (.44) (.46) (.51) (.56) investment income ------------------------------------------------------------------------------------------------------------ Distributions from (.06) -- -- -- -- -- -- (.25) (.18) -- realized gains ------------------------------------------------------------------------------------------------------------ Total distributions (.47) (.41) (.40) (.39) (.39) (.43) (.44) (.71) (.69) (.56) ------------------------------------------------------------------------------------------------------------ Net asset value, end $ 4.91 $ 5.48 $ 5.11 $ 4.74 $ 4.39 $ 4.74 $ 4.60 $ 4.72 $ 5.28 $ 4.83 of year
- -------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 ------------------------------------------------------------------------------------------------------------ Net assets, end of $2,249 $2,490 $2,174 $1,902 $1,730 $1,811 $1,733 $1,813 $1,799 $1,362 year (in millions) ------------------------------------------------------------------------------------------------------------ Ratio of expenses to .68% .70% .72% .77% .77% .75% .73% .75% .62% .62% average daily net assets ------------------------------------------------------------------------------------------------------------ Ratio of net income 7.71% 7.78% 8.29% 9.03% 8.83% 9.04% 9.45% 8.83% 9.94% 12.07% to average daily net assets ------------------------------------------------------------------------------------------------------------ Portfolio turnover 40% 60% 64% 74% 81% 97% 76% 73% 135% 164% rate (excluding short-term securities) ------------------------------------------------------------------------------------------------------------ Total return** (2.0%) 15.8% 16.9% 17.6% 0.9% 13.0% 7.2% 2.6% 24.6% 20.1% * For a share outstanding throughout the year. Rounded to the nearest cent. ** Total return does not reflect payment of a sales charge.
The information in this table has been audited by KPMG Peat Marwick LLP, independent auditors. The independent auditors' report and additional information about the performance of the fund are contained in the fund's annual report which, if not included with this prospectus, may be obtained without charge. Information on Class B and Class Y shares is not included because no shares of those classes were outstanding for the periods shown. 7P - --------------------------------------------------------------------------- Performance TOTAL RETURNS ------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS AS OF AUG. 31, 1994
1 YEAR 5 YEARS 10 YEARS PURCHASE MADE AGO AGO AGO Bond: ------------------------------------------------------------ Class A -6.9% +8.4% +10.8% ------------------------------------------------------------ Lehman Aggregate Bond Index -1.5% +8.8% +11.2%
------------------------------------------------------------- CUMULATIVE TOTAL RETURNS AS OF AUG. 31, 1994
10 1 YEAR 5 YEARS YEARS PURCHASE MADE AGO AGO AGO Bond: ----------------------------------------------------------- Class A -6.9% +49.5% +178.0% ----------------------------------------------------------- Lehman Aggregate Bond Index -1.5% +52.4% +188.1%
These examples show total returns from hypothetical investments in Class A shares of the fund. These returns are compared to those of a popular index for the same periods. No shares for Class B and Class Y were outstanding during the periods presented. For purposes of calculation, information about the fund assumes: - a sales charge of 5% for Class A shares - no adjustments for taxes an investor may have paid on the reinvested income and capital gains - a period of widely fluctuating securities prices. Returns shown should not be considered a representation of the fund's future performance. The fund invests primarily in corporate bonds and other debt securities that may be different from those in the index. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. 8P - -------------------------------------------------------------------------------- Lehman Aggregate Bond Index is made up of a representative list of government and corporate bonds as well as asset-backed and mortgage-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 the fund. YIELD The fund's annualized yield for the 30-day period ended Aug. 31, 1994, was 7.48%. The fund calculates this 30-day annualized yield by dividing: - net investment income per share deemed earned during a 30-day period by - the public offering price per share on the last day of the period, and - converting the result to a yearly equivalent figure. THIS YIELD CALCULATION DOES NOT INCLUDE ANY CONTINGENT DEFERRED SALES CHARGE, RANGING FROM 5% TO 0% ON CLASS B SHARES, WHICH WOULD REDUCE THE YIELD QUOTED. The fund's yield varies from day to day, mainly because share values and offering prices (which are calculated daily) vary in response to changes in interest rates. Net investment income normally changes much less in the short run. Thus, when interest rates rise and share values fall, yield tends to rise. When interest rates fall, yield tends to follow. Past yields should not be considered an indicator of future yields. 9P - --------------------------------------------------------------------------- Performance ------------------------------------------------------------- KEY TERMS NET ASSET VALUE (NAV) Value of a single fund share. For each class, it is the total market value of all of a fund's investments and other assets attributable to that class, less any liabilities attributable to that class, divided by the number of shares of that class outstanding. When you buy shares, you pay the NAV plus any applicable sales charge. When you sell shares, the price you receive is the NAV minus any applicable sales charge. The NAV usually changes daily,and is calculated at the close of business, normally 3 p.m. Central time, each business day (any day the New York Stock Exchange is open). NAV generally declines as interest rates increase and rises as interest rates decline. PUBLIC OFFERING PRICE Price at which you buy shares. It is the NAV plus the sales charge for Class A. It is the NAV for Class B and Class Y. NAVs and public offering prices of IDS funds are listed each day in major newspapers and financial publications for classes of funds large enough to be listed. INVESTMENT INCOME Dividends and interest earned on securities held by the fund. CAPITAL GAINS OR LOSSES Increase or decrease in value of the securities the fund holds. Gains or losses are realized when securities that have increased or decreased in value are sold. A fund also may have unrealized gains or losses when securities increase or decrease in value but are not sold. DISTRIBUTIONS Payments to shareholders of two types: investment income (dividends) and realized net long-term capital gains (capital gains distributions). TOTAL RETURN Sum of all of your returns for a given period, assuming you reinvest all distributions. Calculated by taking the total value of shares you own at the end of the period (including shares acquired by reinvestment), less the price of shares you purchased at the beginning of the period. AVERAGE ANNUAL TOTAL RETURN The annually compounded rate of return over a given time period (usually two or more years) -- total return for the period converted to an equivalent annual figure. YIELD Net investment income earned per share for a specified time period, divided by the offering price at the end of the period. 10P ---------------------------------------------------------- Investment policies and risks The fund primarily invests in bonds and other debt securities issued by U.S. and foreign corporations and governments. At least 50% of the fund's net assets will be invested in investment grade corporate bonds (bonds that independent rating agencies rate in one of their top four grades), unrated corporate bonds the portfolio manager believes have investment grade quality, and government bonds. Under normal market conditions, 65% of the fund's total assets will be in bonds. The fund also invests in lower-rated debt securities, convertible securities, preferred stocks, common stocks, derivative instruments and money market instruments. The various types of investments the portfolio manager uses to achieve investment performance are described in more detail in the next section and in the SAI. FACTS ABOUT INVESTMENTS AND THEIR RISKS INVESTMENT-GRADE BONDS: The price of an investment-grade bond fluctuates as interest rates change or if its credit rating is upgraded or downgraded. DEBT SECURITIES BELOW INVESTMENT GRADE: The price of these bonds may react more to the ability of a company to pay interest and principal when due than to changes in interest rates. They have greater price fluctuations, are more likely to experience a default, and sometimes are referred to as "junk bonds." Reduced market liquidity for these bonds may occasionally make it more difficult to value them. In valuing bonds the fund relies both on independent rating agencies and the investment manager's credit analysis. Securities that are subsequently downgraded in quality may continue to be held and will be sold only when the fund's investment manager believes it is advantageous to do so. 11P - --------------------------------------------------------------------------- Investment policies and risks ------------------------------------------------------------- BOND RATINGS AND HOLDINGS FOR FISCAL 1994
AMERICAN EXPRESS FINANCIAL S&P RATING CORPORATION'S (OR MOODY'S PROTECTION ASSESSMENT PERCENT OF OR FITCH'S OF PRINCIPAL OF UNRATED NET ASSETS EQUIVALENT) AND INTEREST SECURITIES -------------------------------------------------------- Highest 10.72% AAA quality 0.24% -------------------------------------------------------- 13.26 AA High quality 0.03 -------------------------------------------------------- Upper medium 23.66 A grade 0.19 -------------------------------------------------------- 22.33 BBB Medium grade 0.13 -------------------------------------------------------- Moderately 15.33 BB speculative 0.05 -------------------------------------------------------- 8.40 B Speculative 1.06 -------------------------------------------------------- Highly 0.23 CCC speculative 0.04 -------------------------------------------------------- -- CC Poor quality -- -------------------------------------------------------- Lowest 0.04 C quality -- -------------------------------------------------------- -- D In default 0.07 -------------------------------------------------------- Unrated 1.91 Unrated securities 0.10
(See the Appendix to this prospectus describing corporate bond ratings for further information.) DEBT SECURITIES SOLD AT A DEEP DISCOUNT: Some bonds are sold at deep discounts because they do not pay interest until maturity. They include zero coupon bonds and PIK (pay-in-kind) bonds. To comply with tax laws, the fund has to recognize a computed amount of interest income and pay dividends to shareholders even though no cash has been received. In some instances, the fund may have to sell securities to have sufficient cash to pay the dividends. CONVERTIBLE SECURITIES: These securities generally are preferred stocks or bonds that can be exchanged for other securities, usually common stock, at prestated prices. When the trading price of the common stock makes the exchange likely, the convertible securities trade more like common stock. PREFERRED STOCKS: If a company earns a profit, it generally must pay its preferred stockholders a dividend at a pre-established rate. COMMON STOCKS: Stock prices are subject to market fluctuations. Stocks of smaller companies may be subject to more abrupt or erratic price movements than stocks of larger, established companies or the stock market as a whole. 12P - -------------------------------------------------------------------------------- FOREIGN INVESTMENTS: Securities of foreign companies and governments may be traded in the United States, but often they are traded only on foreign markets. Frequently, there is less information about foreign companies and less government supervision of foreign markets. Foreign investments are subject to political and economic risks of the countries in which the investments are made, including the possibility of seizure or nationalization of companies, imposition of withholding taxes on income, establishment of exchange controls or adoption of other restrictions that might affect an investment adversely. If an investment is made in a foreign market, the local currency must be purchased. This is done by using a forward contract in which the price of the foreign currency in U.S. dollars is established on the date the trade is made, but delivery of the currency is not made until the securities are received. As long as the fund holds foreign currencies or securities valued in foreign currencies, the price of a fund share will be affected by changes in the value of the currencies relative to the U.S. dollar. Because of the limited trading volume in some foreign markets, efforts to buy or sell a security may change the price of the security, and it may be difficult to complete the transaction. The fund may invest up to 25% of its total assets in foreign investments. 13P - --------------------------------------------------------------------------- Investment policies and risks DERIVATIVE INSTRUMENTS: The portfolio manager may use derivative instruments in addition to securities to achieve investment performance. Derivative instruments include futures, options and forward contracts. Such instruments may be used to maintain cash reserves while remaining fully invested, to offset anticipated declines in values of investments, to facilitate trading, to reduce transaction costs, or to pursue higher investment returns. Derivative instruments are characterized by requiring little or no initial payment and a daily change in price based on or derived from a security, a currency, a group of securities or currencies, or an index. A number of strategies or combination of instruments can be used to achieve the desired investment performance characteristics. A small change in the value of the underlying security, currency or index will cause a sizable gain or loss in the price of the derivative instrument. Derivative instruments allow the portfolio manager to change the investment performance characteristics very quickly and at lower costs. Risks include losses of premiums, rapid changes in prices, defaults by other parties, and inability to close such instruments. The fund will use derivative instruments only to achieve the same investment performance characteristics it could achieve by directly holding those securities and currencies permitted under the investment policies. The fund will designate cash or appropriate liquid assets to cover its portfolio obligations. No more than 5% of the fund's net assets can be used at any one time for good faith deposits on futures and premiums for options on futures that do not offset existing investment positions. For further information, see the Appendix to this prospectus describing derivative instruments. 14P - -------------------------------------------------------------------------------- SECURITIES AND DERIVATIVE INSTRUMENTS THAT ARE ILLIQUID: Illiquid means the security or derivative instrument cannot be sold quickly in the normal course of business. Some investments cannot be resold to the U.S. public because of their terms or government regulations. All securities and derivative instruments, however, can be sold in private sales, and many may be sold to other institutions and qualified buyers or on foreign markets. The portfolio manager will follow guidelines established by the board of directors and consider relevant factors such as the nature of the security and the number of likely buyers when determining whether a security is illiquid. No more than 10% of the fund's net assets will be held in securities and derivative instruments that are illiquid. MONEY MARKET INSTRUMENTS: Short-term debt securities rated in the top two grades are used to meet daily cash needs and at various times to hold assets until better investment opportunities arise. Generally less than 25% of the fund's total assets are in these money market instruments. However, for temporary defensive purposes these investments could exceed that amount for a limited period of time. The investment policies described above may be changed by the board of directors. LENDING PORTFOLIO SECURITIES: The fund may lend its securities to earn income so long as borrowers provide collateral equal to the market value of the loans. The risks are that borrowers will not provide collateral when required or return securities when due. Unless shareholders approve otherwise, loans may not exceed 30% of the fund's net assets. 15P - --------------------------------------------------------------------------- Investment policies and risks ALTERNATIVE INVESTMENT OPTION In the future, the board of the fund may determine for operating efficiencies to use a master/feeder structure. Under that structure, the fund's investment portfolio would be managed by another investment company with the same goal as the fund, rather than investing directly in a portfolio of securities. VALUING ASSETS - Securities (except bonds) and assets with available market values are valued on that basis. - Securities maturing in 60 days or less are valued at amortized cost. - Bonds and assets without readily available market values are valued according to methods selected in good faith by the board of directors. 16P ---------------------------------------------------------- How to buy, exchange or sell shares ALTERNATIVE SALES ARRANGEMENTS The fund offers three different classes of shares -- Class A, Class B and Class Y. The primary differences among the classes are in the sales charge structures and in their ongoing expenses. These differences are summarized in the table below. You may choose the class that best suits your circumstances and objectives.
SERVICE FEE SALES CHARGE AND DISTRIBUTION (AS A % OF AVERAGE (12B-1) FEE DAILY NET ASSETS) OTHER INFORMATION ---------------------------------------------------------- Class A Maximum initial sales charge Service fee of 0.175% Initial sales charge waived or of 5% reduced for certain purchases ---------------------------------------------------------- Class B No initial sales charge; Service fee of 0.175% Shares convert to Class A distribution fee of 0.75% of after 8 years; CDSC waived in daily net assets; maximum CDSC certain circumstances of 5% declines of 0% after 6 years ---------------------------------------------------------- Class Y None None Available only to certain qualifying institutional investors
CONVERSION OF CLASS B SHARES TO CLASS A SHARES -- Eight calendar years after Class B shares are purchased, Class B shares will convert to Class A shares and will no longer be subject to a distribution fee. Current holdings of Class B shares will convert beginning in 1996. The conversion will be on the basis of relative net asset values of the two classes, without the imposition of any sales charge. Class B shares purchased through reinvested dividends and distributions will convert to Class A shares in a pro-rata portion as the Class B shares purchased other than through reinvestment. 17P - --------------------------------------------------------------------------- How to buy, exchange or sell shares CONSIDERATIONS IN DETERMINING WHETHER TO PURCHASE CLASS A OR CLASS B SHARES -- You should consider the information below in determining whether to purchase Class A or Class B shares. SALES CHARGES ON PURCHASE OR REDEMPTION IF YOU PURCHASE CLASS A SHARES IF YOU PURCHASE CLASS B SHARES - - You will not have all of your purchase - All of your money is invested in price invested. Part of your purchase shares of stock. However, you price will go to pay the sales charge. will pay a sales charge if you You will not pay a sales charge when redeem your shares within 6 years you redeem your shares. of purchase. - - You will be able to take advantage of - No reductions of the sales charge reductions in the sales charge. If are available for large your investments in IDS funds total purchases. $250,000 or more, you are better off paying the reduced sales charge in Class A than paying the higher fees in Class B. If you qualify for a waiver of the sales charge, you should purchase Class A shares. - - The sales charges and distribution fee are structured so that you will have approximately the same total return at the end of 8 years regardless of which class you chose. ONGOING EXPENSES - - Your shares will have a lower expense - The distribution and transfer ratio than Class B shares because agent fees for Class B will cause Class A does not pay a distribution your shares to have a higher fee and the transfer agent fee for expense ratio and to pay lower Class A is lower than the fee for dividends than Class A shares. Class B. As a result, Class A shares After 8 years, Class B shares will pay higher dividends than Class B will convert to Class A shares shares. and will no longer be subject to higher fees. You should consider how long you plan to hold your shares and whether the accumulated higher fees and CDSC on Class B shares prior to conversion would be less than the initial sales charge on Class A shares. Also consider to what extent the difference would be offset by the lower expenses on Class A shares. To help you in this analysis, the Example in the "Sales charge and fund expenses" section of the prospectus illustrates the charges applicable to each class of shares. 18P - -------------------------------------------------------------------------------- CLASS Y SHARES -- Class Y shares are offered to certain institutional investors. Class Y shares are sold without a front-end sales charge or a CDSC and are not subject to either a service fee or a distribution fee. The following investors are eligible to purchase Class Y shares: - Qualified employee benefit plans* if the plan: -- uses a daily transfer recordkeeping service offering participants daily access to IDS funds and has -- at least $10 million in plan assets or -- 500 or more participants; or -- does not use daily transfer recordkeeping and has -- at least $3 million invested in funds of the IDS MUTUAL FUND GROUP or -- 500 or more participants. - Trust companies or similar institutions, and charitable organizations that meet the definition in Section 501(c)(3) of the Internal Revenue Code.* These must have at least $10 million invested in funds of the IDS MUTUAL FUND GROUP. - Nonqualified deferred compensation plans* whose participants are included in a qualified employee benefit plan described above. * Eligibility must be determined in advance by American Express Financial Advisors. To do so, contact your financial advisor. Financial advisors may receive different compensation for selling Class A, Class B and Class Y shares. 19P - --------------------------------------------------------------------------- How to buy, exchange or sell shares HOW TO BUY SHARES If you're investing in this fund for the first time, you'll need to set up an account. Your financial advisor will help you fill out and submit an application. Once your account is set up, you can choose among several convenient ways to invest. IMPORTANT: When opening an account, you must provide your correct Taxpayer Identification Number (Social Security or Employer Identification number). See "Distributions and taxes." When you buy shares for a new or existing account, the price you pay per share is determined at the close of business on the day your investment is received and accepted at the Minneapolis headquarters. 20P - -------------------------------------------------------------------------------- PURCHASE POLICIES: - Investments must be received and accepted in the Minneapolis headquarters on a business day before 3 p.m. Central time to be included in your account that day and to receive that day's share price. Otherwise your purchase will be processed the next business day and you will pay the next day's share price. - The minimums allowed for investment may change from time to time. - Wire orders can be accepted only on days when your bank, American Express Financial Corporation, the fund and Norwest Bank Minneapolis are open for business. - Wire purchases are completed when wired payment is received and the fund accepts the purchase. - American Express Financial Corporation and the fund are not responsible for any delays that occur in wiring funds, including delays in processing by the bank. - You must pay any fee the bank charges for wiring. - The fund reserves the right to reject any application for any reason. - If your application does not specify which class of share you are purchasing, it will be assumed that you are investing in Class A shares. 21P - -------------------------------------------------------------------------------- How to buy, exchange or sell shares THREE WAYS TO INVEST - -------------------------------------------------------------- - -- 1 BY REGULAR Send your check and application MINIMUM AMOUNTS ACCOUNT (or your name and account number Initial investment: $2,000 if you have an established Additional investments: $100 account) to: Account balances: $300 * American Express Qualified retirement Financial Advisors Inc. accounts: none P.O. Box 74 Minneapolis, MN 55440-0074 Your financial advisor will help you with this process. - -------------------------------------------------------------- - -- 2 BY Contact your financial advisor to MINIMUM AMOUNTS SCHEDULED set up one of the following Initial investment: $100 INVESTMENT scheduled plans: Additional investments: $100 /mo PLAN - automatic payroll deduction Account balances: none - bank authorization (on active plans of - direct deposit of Social monthly payments) Security check - other plan approved by the fund - -------------------------------------------------------------- - -- 3 BY WIRE If you have an established If this information is not account, you may wire money to: included, the order may be Norwest Bank Minneapolis rejected and all money received Routing No. 091000019 by the fund, less any costs the Minneapolis, MN fund or American Express Attn: Domestic Wire Dept. Financial Corporation incurs, Give these instructions: will be returned promptly. Credit IDS Account #00-30-015 for MINIMUM AMOUNTS personal account # (your account Each wire investment: $1,000 number) for (your name). *If your account balance falls below $300, you will be asked in writing to bring it up to $300 or establish a scheduled investment plan. If you don't do so within 30 days, your shares can be redeemed and the proceeds mailed to you. 22P - -------------------------------------------------------------------------------- HOW TO EXCHANGE SHARES You can exchange your shares of the fund at no charge for shares of the same class of any other publicly offered fund in the IDS MUTUAL FUND GROUP available in your state. Exchanges into IDS Tax-Free Money Fund must be made from Class A shares. For complete information, including fees and expenses, read the prospectus carefully before exchanging into a new fund. If your exchange request arrives at the Minneapolis headquarters before the close of business, your shares will be redeemed at the net asset value set for that day. The proceeds will be used to purchase new fund shares the same day. Otherwise, your exchange will take place the next business day at that day's net asset value. For tax purposes, an exchange represents a sale and purchase and may result in a gain or loss. However, you cannot create a tax loss (or reduce a taxable gain) by exchanging from the fund within 91 days of your purchase. For further explanation, see the SAI. HOW TO SELL SHARES You can sell (redeem) your shares at any time. American Express Shareholder Service will mail payment within seven days after receiving your request. When you sell shares, the amount you receive may be more or less than the amount you invested. Your shares will be redeemed at net asset value, minus any applicable sales charge, at the close of business on the day your request is accepted at the Minneapolis headquarters. If your request arrives after the close of business, the price per share will be the net asset value, minus any applicable sales charge, at the close of business on the next business day. A redemption is a taxable transaction. If the fund's net asset value when you sell shares is more or less than the cost of your shares, you will have a gain or loss, which can affect your tax liability. Redeeming shares held in an IRA or qualified retirement account may subject you to certain federal taxes, penalties and reporting requirements. Consult your tax advisor. 23P - --------------------------------------------------------------------------- How to buy, exchange or sell shares TWO WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES - -------------------------------------------------------------- - -- 1 BY LETTER Include in your letter: REGULAR MAIL: - the name of the fund(s) American Express Shareholder - the class of shares to be Service exchanged or redeemed Attn: Redemptions - your account number(s) (for P.O. Box 534 exchanges, both funds must be Minneapolis, MN 55440-0534 registered in the same EXPRESS MAIL: ownership) American Express Shareholder - your Taxpayer Identification Service Number (TIN) Attn: Redemptions - the dollar amount or number 733 Marquette Ave. of shares you want to Minneapolis, MN 55402 exchange or sell - signature of all registered account owners - for redemptions, indicate how you want your sales proceeds delivered to you - any paper certificates of shares you hold - -------------------------------------------------------------- - -- 2 BY PHONE - The fund and American Express American Express Shareholder American Financial Corporation will Service. Each registered owner Express honor any telephone exchange must sign the request. Telephone or redemption request - American Express Financial Transaction believed to be authentic and Corporation answers phone Service: will use reasonable requests promptly, but you 800-437-3133 procedures to confirm that may experience delays when or they are. This includes call volume is high. If you 612-671-3800 asking identifying questions are unable to get through, and tape recording calls. So use mail procedure as an long as reasonable procedures alternative. are followed, neither the - Phone privileges may be fund nor American Express modified or discontinued at Financial Corporation will be any time. liable for any loss resulting MINIMUM AMOUNT from fraudulent requests. Redemption: $100 - Phone exchange and redemption MAXIMUM AMOUNT privileges automatically Redemption: $50,000 apply to all accounts except custodial, corporate or qualified retirement accounts unless you request these privileges NOT apply by writing 24P - -------------------------------------------------------------------------------- EXCHANGE POLICIES: - You may make up to three exchanges within any 30-day period, with each limited to $300,000. These limits do not apply to scheduled exchange programs and certain employee benefit plans or other arrangements through which one shareholder represents the interests of several. Exceptions may be allowed with pre-approval of the fund. - Exchanges must be made into the same class in the new fund. - If your exchange creates a new account, it must satisfy the minimum investment amount for new purchases. - Once we receive your exchange request, you cannot cancel it. - Shares of the new fund may not be used on the same day for another exchange. - If your shares are pledged as collateral, the exchange will be delayed until written approval is obtained from the secured party. - American Express Financial Corporation and the fund reserve the right to reject any exchange, limit the amount, or modify or discontinue the exchange privilege, to prevent abuse or adverse effects on the fund and its shareholders. For example, if exchanges are too numerous or too large, they may disrupt the fund's investment strategies or increase its costs. 25P - --------------------------------------------------------------------------- How to buy, exchange or sell shares REDEMPTION POLICIES: - A "change of mind" option allows you to change your mind after requesting a redemption and to use all or part of the proceeds to buy new shares in the same account at the net asset value, rather than the offering price on the date of a new purchase. If you reinvest in this manner, any CDSC you paid on the amount you are reinvesting also will be reinvested in the fund. To take advantage of this option, send a written request within 30 days of the date your redemption request was received. Include your account number and mention this option. This privilege may be limited or withdrawn at any time, and it may have tax consequences. - A telephone redemption request will not be allowed within 30 days of a phoned-in address change. IMPORTANT: If you request a redemption of shares you recently purchased by a check or money order that is not guaranteed, the fund will wait for your check to clear. Please expect a minimum of 10 days from the date of purchase before a check is mailed to you. (A check may be mailed earlier if your bank provides evidence satisfactory to the fund and American Express Financial Corporation that your check has cleared.) 26P - -------------------------------------------------------------------------------- THREE WAYS TO RECEIVE PAYMENT WHEN YOU SELL SHARES - -------------------------------------------------------------- - -- 1 BY REGULAR - Mailed to the address on record. OR EXPRESS - Payable to names listed on the account. MAIL NOTE: The express mail delivery charges you pay will vary depending on the courier you select. - -------------------------------------------------------------- - -- 2 BY WIRE - Minimum wire redemption: $1,000. - Request that money be wired to your bank. - Bank account must be in the same ownership as the IDS fund account. NOTE: Pre-authorization required. For instructions, contact your financial advisor or American Express Shareholder Service. - -------------------------------------------------------------- - -- 3 BY - Minimum payment: $50. SCHEDULED - Contact your financial advisor or American Express Shareholder PAYOUT Service to set up regular payments to you on a monthly, PLAN bimonthly, quarterly, semiannual or annual basis. - Buying new shares while under a payout plan may be disadvantageous because of the sales charges. 27P - --------------------------------------------------------------------------- How to buy, exchange or sell shares REDUCTIONS AND WAIVERS OF THE SALES CHARGE CLASS A -- INITIAL SALES CHARGE ALTERNATIVE On purchases of Class A shares, you pay a 5% sales charge on the first $50,000 of your total investment and less on investments after the first $50,000: ------------------------------------------------------------- TOTAL INVESTMENT SALES CHARGE AS A PERCENT OF:*
PUBLIC OFFERING NET AMOUNT PRICE INVESTED ---------------------------------------------------------------------------------- Up to $50,000 5.0% 5.26% ---------------------------------------------------------------------------------- Next $50,000 4.5 4.71 ---------------------------------------------------------------------------------- Next $400,000 3.8 3.95 ---------------------------------------------------------------------------------- Next $500,000 2.0 2.04 ---------------------------------------------------------------------------------- More than $1,000,000 0.0 0.00 *To calculate the actual sales charge on an investment greater than $50,000, amounts for each applicable increment must be totaled. See the SAI.
REDUCTIONS OF THE SALES CHARGE ON CLASS A SHARES Your sales charge may be reduced, depending on the totals of: - the amount you are investing in this fund now, - the amount of your existing investment in this fund, if any, and - the amount you and your immediate family (spouse or unmarried children under 21) are investing or have in other funds in the IDS MUTUAL FUND GROUP that carry a sales charge. Other policies that affect your sales charge: - IDS Tax-Free Money Fund and Class A shares of IDS Cash Management Fund do not carry sales charges. However, you may count investments in these funds if you acquired shares in them by exchanging shares from IDS funds that carry sales charges. - IRA purchases or other employee benefit plan purchases made through a payroll deduction plan or through a plan sponsored by an employer, association of employers, employee organization or other similar entity, may be added together to reduce sales charges for all shares purchased through that plan. For more details, see the SAI. 28P - -------------------------------------------------------------------------------- WAIVERS OF THE SALES CHARGE FOR CLASS A SHARES Sales charges do not apply to: - Current or retired trustees, directors, officers or employees of the fund or American Express Financial Corporation or its subsidiaries, their spouses and unmarried children under 21. - Current or retired American Express financial advisors, their spouses and unmarried children under 21. - Qualified employee benefit plans* using a daily transfer recordkeeping system offering participants daily access to IDS funds. (Participants in certain qualified plans for which the initial sales charge is waived may be subject to a deferred sales charge of up to 4% on certain redemptions. For more information, see the SAI.) - Shareholders who have at least $1 million invested in funds of the IDS MUTUAL FUND GROUP. If the investment is redeemed in the first year after purchase, a CDSC of 1% will be charged on the redemption. - Purchases made within 30 days after a redemption of shares (up to the amount redeemed): -- of a product distributed by American Express Financial Advisors in a qualified plan subject to a deferred sales charge or -- in a qualified plan where American Express Trust Company acts as trustee or recordkeeper. Send the fund a written request along with your payment, indicating the amount of the redemption and the date on which it occurred. - Purchases made with dividend or capital gain distributions from another fund in the IDS MUTUAL FUND GROUP that has a sales charge. * Eligibility must be determined in advance by American Express Financial Advisors. To do so, contact your financial advisor. 29P - --------------------------------------------------------------------------- How to buy, exchange or sell shares CLASS B -- CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE Where a CDSC is imposed on a redemption, it is based on the amount of the redemption and the number of calendar years, including the year of purchase, between purchase and redemption. The following table shows the declining scale of percentages that apply to redemptions during each year after a purchase:
IF A REDEMPTION THE PERCENTAGE IS MADE RATE FOR THE DURING THE CDSC IS: ----------------------------------------------------------------- First year 5% ----------------------------------------------------------------- Second year 4% ----------------------------------------------------------------- Third year 4% ----------------------------------------------------------------- Fourth year 3% ----------------------------------------------------------------- Fifth year 2% ----------------------------------------------------------------- Sixth year 1% ----------------------------------------------------------------- Seventh year 0%
If the amount you are redeeming reduces the current net asset value of your investment in Class B shares below the total dollar amount of all your purchase payments during the last 6 years (including the year in which your redemption is made), the CDSC is based on the lower of the redeemed purchase payments or market value. The following example illustrates how the CDSC is applied. Assume you had invested $10,000 in Class B shares and that your investment had appreciated in value to $12,000 after 15 months, including reinvested dividend and capital gain distributions. You could redeem any amount up to $2,000 without paying a CDSC ($12,000 current value less $10,000 purchase amount). If you redeemed $2,500, the CDSC would apply only to the $500 that represented part of your original purchase price. The CDSC rate would be 4% because a redemption after 15 months would take place during the second year after purchase. 30P - -------------------------------------------------------------------------------- Because the CDSC is imposed only on redemptions that reduce the total of your purchase payments, you never have to pay a CDSC on any amount you redeem that represents appreciation in the value of your shares, income earned by your shares or capital gains. In addition, when determining the rate of any CDSC, your redemption will be made from the oldest purchase payment you made. Of course, once a purchase payment is considered to have been redeemed, the next amount redeemed is the next oldest purchase payment. By redeeming the oldest purchase payments first, lower CDSCs are imposed than would otherwise be the case. WAIVERS OF THE SALES CHARGE FOR CLASS B SHARES The CDSC on Class B shares will be waived on redemptions of shares: - In the event of the shareholder's death, - Purchased by any trustee, director, officer or employee of a fund or American Express Financial Corporation or its subsidiaries, - Purchased by any American Express financial advisor, - Held in a trusteed employee benefit plan, - Held in IRAs or certain qualified plans for which American Express Trust Company acts as custodian, such as Keogh plans, tax-sheltered custodial accounts or corporate pension plans, provided that the shareholder is: -- at least 59 1/2 years old, and -- taking a retirement distribution (if the redemption is part of a transfer to an IRA or qualified plan in a product distributed by American Express Financial Advisors, or a custodian-to-custodian transfer to a product not distributed by American Express Financial Advisors, the CDSC will not be waived), or -- redeeming under an approved substantially equal periodic payment arrangement. 31P ---------------------------------------------------------- Special shareholder services SERVICES To help you track and evaluate the performance of your investments, American Express Financial Corporation provides these services: QUARTERLY STATEMENTS listing all of your holdings and transactions during the previous three months. YEARLY TAX STATEMENTS featuring average-cost-basis reporting of capital gains or losses if you redeem your shares along with distribution information -- which simplifies tax calculations. A PERSONALIZED MUTUAL FUND PROGRESS REPORT detailing returns on your initial investment and cash-flow activity in your account. It calculates a total return to reflect your individual history in owning fund shares. This report is available from your financial advisor. ------------------------------------------------------------- QUICK TELEPHONE REFERENCE AMERICAN Redemptions and exchanges, National/Minnesota: EXPRESS dividend payments or 800-437-3133 TELEPHONE reinvestments and Mpls./St. Paul area: TRANSACTION automatic payment arrangements 671-3800 SERVICE ---------------------------------------------------- AMERICAN Fund performance, objectives and 612-671-3733 EXPRESS account inquiries SHAREHOLDER SERVICE ---------------------------------------------------- TTY SERVICE For the hearing impaired 800-846-4852 ---------------------------------------------------- AMERICAN Automated account information National/Minnesota: EXPRESS (TouchTone-Registered Trademark- 800-272-4445 INFOLINE phones only), including current Mpls./St. Paul area: fund prices and performance, 671-1630 account values and recent account transactions ---------------------------------------------------- 32P ---------------------------------------------------------- Distributions and taxes The fund distributes to shareholders investment income and net capital gains. It does so to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. Dividend and capital gains distributions will have tax consequences you should know about. DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS The fund distributes its net investment income (dividends and interest earned on securities held by the fund, less operating expenses) to shareholders of record monthly. Short-term capital gains distributed are included in net investment income. Net realized capital gains, if any, from selling securities are distributed at the end of the calendar year. Before they're distributed, net capital gains are included in the value of each share. After they're distributed, the value of each share drops by the per-share amount of the distribution. (If your distributions are reinvested, the total value of your holdings will not change.) Dividends paid by each class will be calculated at the same time, in the same manner and in the same amount, except the expenses attributable solely to Class A, Class B and Class Y will be paid exclusively by that class. Class B shareholders will receive lower per share dividends than Class A and Class Y shareholders because expenses for Class B are higher than for Class A or Class Y. Class A shareholders will receive lower per share dividends than Class Y shareholders because expenses for Class A are higher than for Class Y. 33P - --------------------------------------------------------------------------- Distributions and taxes REINVESTMENTS Dividends and capital gain distributions are automatically reinvested in additional shares in the same class of the fund, unless: - you request the fund in writing or by phone to pay distributions to you in cash, or - you direct the fund to invest your distributions in any publicly available IDS fund for which you've previously opened an account. You pay no sales charge on shares purchased through reinvestment from this fund into any IDS fund. The reinvestment price is the net asset value at close of business on the day the distribution is paid. (Your quarterly statement will confirm the amount invested and the number of shares purchased.) If you choose cash distributions, you will receive only those declared after your request has been processed. If the U.S. Postal Service cannot deliver the checks for the cash distributions, we will reinvest the checks into your account at the then-current net asset value and make future distributions in the form of additional shares. 34P - -------------------------------------------------------------------------------- TAXES Distributions are subject to federal income tax and also may be subject to state and local taxes. Distributions are taxable in the year the fund pays them regardless of whether you take them in cash or reinvest them. Each January, you will receive a statement showing the kinds and total amount of all distributions you received during the previous year. You must report all distributions on your tax returns, even if they are reinvested in additional shares. "Buying a dividend" creates a tax liability. This means buying shares shortly before a capital gain distribution. You pay the full pre-distribution price for the shares, then receive a portion of your investment back as a distribution, which is taxable. Redemptions and exchanges subject you to a tax on any capital gain. If you sell shares for more than their cost, the difference is a capital gain. Your gain may be either short term (for shares held for one year or less) or long term (for shares held for more than one year). 35P - --------------------------------------------------------------------------- Distributions and taxes YOUR TAXPAYER IDENTIFICATION NUMBER (TIN) IS IMPORTANT. As with any financial account you open, you must list your current and correct Taxpayer Identification Number (TIN) -- either your Social Security or Employer Identification number. The TIN must be certified under penalties of perjury on your application when you open an account at American Express Financial Corporation. If you don't provide the TIN, or the TIN you report is incorrect, you could be subject to backup withholding of 31% of taxable distributions and proceeds from certain sales and exchanges. You also could be subject to further penalties, such as: - a $50 penalty for each failure to supply your correct TIN - a civil penalty of $500 if you make a false statement that results in no backup withholding - criminal penalties for falsifying information You also could be subject to backup withholding because you failed to report interest or dividends on your tax return as required. 36P - -------------------------------------------------------------------------------- ------------------------------------------------------------- HOW TO DETERMINE THE CORRECT TIN FOR THIS TYPE OF ACCOUNT: USE THE SOCIAL SECURITY OR EMPLOYER IDENTIFICATION NUMBER OF: ---------------------------------------------------- Individual or joint The individual or first account person listed on the account ---------------------------------------------------- Custodian account of a The minor minor (Uniform Gifts/Transfers to Minors Act) ---------------------------------------------------- A living trust The grantor-trustee (the person who puts the money into the trust) ---------------------------------------------------- An irrevocable trust, The legal entity (not the pension trust or estate personal representative or trustee, unless no legal entity is designated in the account title) ---------------------------------------------------- Sole proprietorship or The owner or partnership partnership ---------------------------------------------------- Corporate The corporation ---------------------------------------------------- Association, club or The organization tax-exempt organization ---------------------------------------------------- For details on TIN requirements, ask your financial advisor or local American Express Financial Advisors office for Federal Form W-9, "Request for Taxpayer Identification Number and Certification." IMPORTANT: This information is a brief and selective summary of certain federal tax rules that apply to this fund. Tax matters are highly individual and complex, and you should consult a qualified tax advisor about your personal situation. 37P ---------------------------------------------------------- How the fund is organized The fund is a diversified, open-end management investment company, as defined in the Investment Company Act of 1940. Originally incorporated on June 27, 1974 in Nevada, the fund changed its state of incorporation on June 13, 1986 by merging into a Minnesota corporation incorporated on April 7, 1986. The fund headquarters are at 901 S. Marquette Ave., Suite 2810, Minneapolis, MN 55402-3268. SHARES The fund is owned by its shareholders. The fund issues shares in three classes -- Class A, Class B and Class Y. Each class has different sales arrangements and bears different expenses. Each class represents interests in the assets of the fund. Par value is 1 cent per share. Both full and fractional shares can be issued. The fund no longer issues stock certificates. VOTING RIGHTS As a shareholder, you have voting rights over the fund's management and fundamental policies. You are entitled to one vote for each share you own. Each class has exclusive voting rights with respect to the provisions of the fund's distribution plan that pertain to a particular class and other matters for which separate class voting is appropriate under applicable law. SHAREHOLDER MEETINGS The fund does not hold annual shareholder meetings. However, the directors may call meetings at their discretion, or on demand by holders of 10% or more of the outstanding shares, to elect or remove directors. DIRECTORS AND OFFICERS Shareholders elect a board of directors that oversees the operations of the fund and chooses its officers. Its officers are responsible for day-to-day business decisions based on policies set by the board. The board has named an executive committee that has authority to act on its behalf between meetings. The directors also serve on the boards of all of the other funds in the IDS MUTUAL FUND GROUP, except for Mr. Dudley, who is a director of all publicly offered funds. 38P - -------------------------------------------------------------------------------- - ------------------------------------------------------------------ DIRECTORS AND OFFICERS OF THE FUND President and WILLIAM R. PEARCE interested director President of all funds in the IDS MUTUAL FUND GROUP. - ------------------------------------------------------------------ Independent LYNNE V. CHENEY directors Distinguished fellow, American Enterprise Institute for Public Policy Research. ROBERT F. FROEHLKE Former president of all funds in the IDS MUTUAL FUND GROUP. HEINZ F. HUTTER Former president and chief operating officer, Cargill, Inc. ANNE P. JONES Attorney and telecommunications consultant. DONALD M. KENDALL Former chairman and chief executive officer, PepsiCo, Inc. MELVIN R. LAIRD Senior counsellor for national and international affairs, The Reader's Digest Association, Inc. LEWIS W. LEHR Former chairman and chief executive officer, Minnesota Mining and Manufacturing Company (3M). EDSON W. SPENCER Former chairman and chief executive officer, Honeywell, Inc. WHEELOCK WHITNEY Chairman, Whitney Management Company. C. ANGUS WURTELE Chairman of the board and chief executive officer, The Valspar Corporation. - ------------------------------------------------------------------ Interested directors WILLIAM H. DUDLEY who are officers Executive vice president, American Express Financial and/or employees Corporation. of American Express DAVID R. HUBERS Financial President and chief executive officer, American Express Corporation Financial Corporation. JOHN R. THOMAS Senior vice president, American Express Financial Corporation. - ------------------------------------------------------------------ Other officer LESLIE L. OGG Vice president of all funds in the IDS MUTUAL FUND GROUP and general counsel and treasurer of the publicly offered funds. Refer to the SAI for the directors' and officers' biographies. 39P - --------------------------------------------------------------------------- How the fund is organized INVESTMENT MANAGER AND TRANSFER AGENT The fund pays American Express Financial Corporation for managing its portfolio, providing administrative services and serving as transfer agent (handling shareholder accounts). Under its Investment Management Services Agreement, American Express Financial Corporation determines which securities will be purchased, held or sold (subject to the direction and control of the fund's board of directors). Effective March 1995, the fund pays American Express Financial Corporation a fee for these services based on the average daily net assets of the fund, as follows:
ASSETS ANNUAL RATE (BILLIONS) AT EACH ASSET VALUE ---------------------------------------- First $ 1.0 0.520% ---------------------------------------- Next 1.0 0.495 ---------------------------------------- Next 1.0 0.470 ---------------------------------------- Next 3.0 0.445 ---------------------------------------- Next 3.0 0.420 ---------------------------------------- Over 9.0 0.395
For the fiscal year ended Aug. 31, 1994, under a prior agreement, the fund paid American Express Financial Corporation a total investment management fee of 0.53% of its average daily net assets. Under the Agreement, the fund also pays taxes, brokerage commissions and nonadvisory expenses. Under an Administrative Services Agreement, the fund pays American Express Financial Corporation for administration and accounting services at an annual rate of 0.05% decreasing in gradual percentages to 0.025% as assets increase. In addition, under a separate Transfer Agency Agreement, American Express Financial Corporation maintains shareholder accounts and records. The fund pays American Express Financial Corporation an annual fee per shareholder account for this service as follows: - Class A $15.50 - Class B $16.50 - Class Y $15.50 40P - -------------------------------------------------------------------------------- DISTRIBUTOR The fund sells shares through American Express Financial Advisors, a wholly owned subsidiary of American Express Financial Corporation, under a Distribution Agreement. Financial advisors representing American Express Financial Advisors provide information to investors about individual investment programs, the fund and its operations, new account applications, exchange and redemption requests. The cost of these services is paid partially by the fund's sales charge. Portions of sales charges may be paid to securities dealers who have sold the fund's shares, or to banks and other financial institutions. The proceeds paid to others range from 0.8% to 4% of the fund's offering price depending on the monthly sales volume. For Class B shares, to help defray costs not covered by sales charges, including costs for marketing, sales administration, training, overhead, direct marketing programs, advertising and related functions, the fund pays American Express Financial Advisors a distribution fee, also known as a 12b-1 fee. This fee is paid under a Plan and Agreement of Distribution that follows the terms of Rule 12b-1 of the Investment Company Act of 1940. Under this Agreement, the fund pays a distribution fee at an annual rate of 0.75% of the fund's average daily net assets attributable to Class B shares for distribution-related services. The total 12b-1 fee paid by the fund under a prior agreement for the fiscal year ended Aug. 31, 1994 was 0.03% of its average daily net assets. This fee will not cover all of the costs incurred by American Express Financial Advisors. 41P - --------------------------------------------------------------------------- How the fund is organized Under a Shareholder Service Agreement, the fund also 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. Total expenses paid by the fund in the fiscal year ended Aug. 31, 1994 were 0.68% of its average daily net assets. Total fees and expenses (excluding taxes and brokerage commissions) cannot exceed the most restrictive applicable state expense limitation. 42P ---------------------------------------------------------- About American Express Financial Corporation GENERAL INFORMATION The American Express Financial Corporation family of companies offers not only mutual funds but also insurance, annuities, investment certificates and a broad range of financial management services. Besides managing investments for all publicly offered funds in the IDS MUTUAL FUND GROUP, American Express Financial Corporation also manages investments for itself and its subsidiaries, IDS Certificate Company and IDS Life Insurance Company. Total assets under management on Aug. 31, 1994 were more than $105 billion. American Express Financial Advisors serves individuals and businesses through its nationwide network of more than 175 offices and more than 7,800 advisors. Other American Express Financial Corporation subsidiaries provide investment management and related services for pension, profit sharing, employee savings and endowment funds of businesses and institutions. American Express Financial Corporation is located at IDS Tower 10, Minneapolis, MN 55440-0010. It is a wholly owned subsidiary of American Express Company, a financial services company with headquarters at American Express Tower, World Financial Center, New York, NY 10285. The fund may pay brokerage commissions to broker-dealer affiliates of American Express and American Express Financial Corporation. 43P ---------------------------------------------------------- Appendix A ------------------------------------------------------------- DESCRIPTION OF CORPORATE BOND RATINGS Bond ratings concern the quality of the issuing corporation. They are not an opinion of the market value of the security. Such ratings are opinions on whether the principal and interest will be repaid when due. A security's rating may change which could affect its price. Ratings by Moody's Investors Service, Inc. are Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C and D. Ratings by Standard & Poor's Corporation are AAA, AA, A, BBB, BB, B, CCC, CC, C and D. AAA/AAA Judged to be of the best quality and carry the smallest degree of investment risk. Interest and principal are secure. AA/AA Judged to be high-grade although margins of protection for interest and principal may not be quite as good as Aaa or AAA rated securities. A Considered upper-medium grade. Protection for interest and principal is deemed adequate but may be susceptible to future impairment. BAA/BBB Considered medium-grade obligations. Protection for interest and principal is adequate over the short-term; however, these obligations may have certain speculative characteristics. BA/BB Considered to have speculative elements. The protection of interest and principal payments may be very moderate. B Lack characteristics of the desirable investments. There may be small assurance over any long period of time of the payment of interest and principal. CAA/CCC Are of poor standing. Such issues may be in default or there may be risk with respect to principal or interest. CA/CC Represent obligations that are highly speculative. Such issues are often in default or have other marked shortcomings. C Are obligations with a higher degree of speculation. These securities have major risk exposures to default. D Are in payment default. The D rating is used when interest payments or principal payments are not made on the due date. 44P - -------------------------------------------------------------------------------- NON-RATED SECURITIES will be considered for investment when they possess a risk comparable to that of rated securities consistent with the fund's objectives and policies. When assessing the risk involved in each non-rated security, the fund will consider the financial condition of the issuer or the protection afforded by the terms of the security. DEFINITIONS OF ZERO-COUPON AND PAY-IN-KIND SECURITIES A ZERO-COUPON SECURITY is a security that is sold at a deep discount from its face value and makes no periodic interest payments. The buyer of such a security receives a rate of return by gradual appreciation of the security, which is redeemed at face value on the maturity date. A PAY-IN-KIND SECURITY is a security in which the issuer has the option to make interest payments in cash or in additional securities. The securities issued as interest usually have the same terms, including maturity date, as the pay-in-kind securities. 45P ---------------------------------------------------------- Appendix B ------------------------------------------------------------- DESCRIPTIONS OF DERIVATIVE INSTRUMENTS What follows are brief descriptions of derivative instruments the fund may use. At various times the fund may use some or all of these instruments and is not limited to these instruments. It may use other similar types of instruments if they are consistent with the fund's investment goal and policies. For more information on these instruments, see the Statement of Additional Information. OPTIONS AND FUTURES CONTRACTS. An option is an agreement to buy or sell an instrument at a set price during a certain period of time. A futures contract is an agreement to buy and sell an instrument for a set price on a future date. The fund may buy and sell options and futures contracts to manage its exposure to changing interest rates, security prices and currency exchange rates. Options and futures may be used to hedge the fund's investments against price fluctuations or to increase market exposure. ASSET-BACKED AND MORTGAGE-BACKED SECURITIES. Asset-backed and mortgage-backed securities include interests in pools of consumer loans or mortgages, such as collateralized mortgage obligations and stripped mortgage-backed securities. Interest and principal payments depend on payment of the underlying loans or mortgages. The value of these securities may also be affected by changes in interest rates, the market's perception of the issuers and the creditworthiness of the parties involved. Stripped mortgage-backed securities include interest only (IO) and principal only (PO) securities. Cash flows and yields on IOs and POs are extremely sensitive to the rate of principal payments on the underlying mortgage loans or mortgage-backed securities. INDEXED SECURITIES. The value of indexed securities is linked to currencies, interest rates, commodities, indexes or other financial indicators. Most indexed securities are short- to intermediate-term fixed income securities whose values at maturity or interest rates rise or fall according to the change in one or more specified underlying instruments. Indexed securities may be more volatile than the underlying instrument itself. 46P - -------------------------------------------------------------------------------- INVERSE FLOATERS. Inverse floaters are created using the interest payment on securities. A portion of the interest received is paid to holders of instruments based on current interest rates for short-term securities. The remainder, minus a servicing fee, is paid to holders of inverse floaters. Inverse floaters are extremely sensitive to changes in interest rates. STRUCTURED PRODUCTS. Structured products are over-the-counter financial instruments created specifically to meet the needs of one or a small number of investors. The instrument may consist of a warrant, an option or a forward contract embedded in a note or any of a wide variety of debt, equity and/or currency combinations. Risks of structured products include the inability to close such instruments, rapid changes in the market and defaults by other parties. 47P STATEMENT OF ADDITIONAL INFORMATION FOR IDS BOND FUND October 31, 1994 as revised March 20, 1995 This Statement of Additional Information (SAI) is not a prospectus. It should be read together with the prospectus and the financial statements contained in the Annual Report which may be obtained from your American Express financial advisor or by writing to American Express Shareholder Service, P.O. Box 534, Minneapolis, MN 55440-0534. This SAI is dated October 31, 1994 as revised March 20, 1995, and it is to be used with the prospectus dated October 31, 1994 as revised March 20, 1995, and the Annual Report for the fiscal year ended August 31, 1994. -1- TABLE OF CONTENTS Goal and Investment Policies.........................See Prospectus Additional Investment Policies................................p. Portfolio Transactions........................................p. Brokerage Commissions Paid to Brokers Affiliated with American Express Financial Corporation.......................p. Performance Information.......................................p. Valuing Fund Shares...........................................p. Investing in the Fund.........................................p. Redeeming Shares..............................................p. Pay-out Plans.................................................p. Exchanges.....................................................p. Taxes.........................................................p. Agreements....................................................p. Directors and Officers........................................p. Custodian.....................................................p. Independent Auditors..........................................p. Financial Statements..............................See Annual Report Prospectus....................................................p. Appendix A: Foreign Currency Transactions....................p. Appendix B: Options and Interest Rate Futures Contracts; and Additional Information on Investment Policies.........................................p. Appendix C: Mortgage-Backed Securities.......................p. Appendix D: Dollar-Cost Averaging............................p. -2- ADDITIONAL INVESTMENT POLICIES These are investment policies in addition to those presented in the prospectus. Unless holders of a majority of the outstanding shares agree to make the change the fund will not: 'Act as an underwriter (sell securities for others). However, under the securities laws, the fund may be deemed to be an underwriter when it purchases securities directly from the issuer and later resells them. 'Borrow money or property, except as a temporary measure for extraordinary or emergency purposes, in an amount not exceeding one-third of the market value of its total assets (including borrowings) less liabilities (other than borrowings) immediately after the borrowing. The fund has not borrowed in the past and has no present intention to borrow. 'Make cash loans if the total commitment amount exceeds 5% of the fund's total assets. 'Concentrate in any one industry. According to the present interpretation by the Securities and Exchange Commission (SEC), this means no more than 25% of the fund's total assets, based on current market value at time of purchase, can be invested in any one industry. 'Purchase more than 10% of the outstanding voting securities of an issuer. 'Invest more than 5% of its total assets, at market value, in securities of any one company, government or political subdivision thereof, except the limitation will not apply to investments in securities issued by the U.S. government, its agencies or instrumentalities, and except that up to 25% of the fund's total assets may be invested without regard to this limitation. 'Buy or sell real estate, unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the fund from investing in securities or other instruments backed by real estate or securities of companies engaged in the real estate business. For purposes of this policy, real estate includes real estate limited partnerships. 'Buy or sell physical commodities unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the fund from buying or selling options and futures contracts or from investing in securities or other instruments backed by, or whose value is derived from, physical commodities. 'Purchase securities of an issuer if the directors and officers of the fund and of American Express Financial Corporation hold more than a certain percentage of the issuer's outstanding securities. If the holdings of all directors and officers of the fund and of American Express Financial Corporation who own more than 0.5% of an issuer's securities are added together, and if in total they own more than 5%, the fund will not purchase securities of that issuer. -3- 'Lend portfolio securities in excess of 30% of its net assets. This policy may not be changed without shareholder approval. The current policy of the fund's board of directors is to make these loans, either long- or short-term, to broker-dealers. In making such loans the fund gets the market price in cash, U.S. government securities, letters of credit or such other collateral as may be permitted by regulatory agencies and approved by the board of directors. If the market price of the loaned securities goes up, the fund will get additional collateral on a daily basis. The risks are that the borrower may not provide additional collateral when required or return the securities when due. During the existence of the loan, the fund receives cash payments equivalent to all interest or other distributions paid on the loaned securities. A loan will not be made unless the investment manager believes the opportunity for additional income outweighs the risks. Unless changed by the board of directors the fund will not: Buy on margin or sell short, but it may make margin payments in connection with transactions in stock index futures contracts. 'Pledge or mortgage its assets beyond 15% of total assets, buy securities on margin, sell short or purchase commodity contracts, except the fund may enter into futures contracts. If the fund were ever to pledge or mortgage its assets, valuation of all of its assets would continue to be based on market values. 'Invest more than 5% of its total assets, at cost, in securities of companies, including any predecessors, that have a record of less than three years continuous operations. 'Invest more than 10% of its total assets in securities of investment companies. 'Invest in a company to control or manage it. 'Enter into an interest rate futures contract, if immediately after such a commitment, the sum of the then aggregate futures market prices of financial instruments required to be delivered under open futures contract sales and the aggregate purchase prices under open futures contract purchases would exceed 30% of the market value of the fund's total assets. 'Invest in exploration or development programs for oil, gas or minerals. 'Invest more than 5% of its net assets in warrants. Under one state's law no more than 2% of the fund's net assets may be invested in warrants not listed on an exchange. 'Invest more than 10% of the fund's net assets in securities and derivative instruments that are illiquid. For purposes of this policy illiquid securities include some privately placed -4- securities, public securities and Rule 144A securities that for one reason or another may no longer have readily available markets, loans and loan participations, repurchase agreements with maturities greater than seven days, non-negotiable fixed-time deposits and over-the-counter options. In determining the liquidity of Rule 144A securities, which are unregistered securities offered to qualified institutional buyers, and interest-only and principal-only fixed mortgage-backed securities (IOs and POs) issued by the United States government or its agencies and instrumentalities, the investment manager, under guidelines established by the board of directors, will consider any relevant factors including the frequency of trades, the number of dealers willing to purchase or sell the security and the nature of marketplace trades. In determining the liquidity of commercial paper issued in transactions not involving a public offering under Section 4(2) of the Securities Act of 1933, the investment manager, under guidelines established by the board of directors, will evaluate relevant factors such as the issuer and the size and nature of its commercial paper programs, the willingness and ability of the issuer or dealer to repurchase the paper, and the nature of the clearance and settlement procedures for the paper. Loans, loan participations and interests in securitized loan pools are interests in amounts owed by a corporate, governmental or other borrower to a lender or consortium of lenders (typically banks, insurance companies, investment banks, government agencies or international agencies). Loans involve a risk of loss in case of default or insolvency of the borrower and may offer less legal protection to the fund in the event of fraud or misrepresentation. In addition, loan participations involve a risk of insolvency of the lender or other financial intermediary. The fund may maintain a portion of its assets in cash and cash- equivalent investments. The cash-equivalent investments the fund may use are short-term U.S. and Canadian government securities and negotiable certificates of deposit, non-negotiable fixed-time deposits, bankers' acceptances and letters of credit of banks or savings and loan associations having capital, surplus and undivided profits (as of the date of its most recently published annual financial statements) in excess of $100 million (or the equivalent in the instance of a foreign branch of a U.S. bank) at the date of investment. Any cash-equivalent investments in foreign securities will be subject to the limitations on foreign investments described in the prospectus. The fund also may purchase short-term corporate notes and obligations rated in the top two classifications by Moody's or S&P or the equivalent and may use repurchase agreements with broker-dealers registered under the Securities Exchange Act of 1934 and with commercial banks. A risk of a repurchase agreement is that if the seller seeks the protection of the bankruptcy laws, the fund's ability to liquidate the security involved could be impaired. Notwithstanding any of the fund's other investment policies, the fund may invest its assets in an open-end management investment company having substantially the same investment objectives, -5- policies and restrictions as the fund for the purpose of having those assets managed as part of a combined pool. For a discussion about foreign currency transactions, see Appendix A. For a discussion on options and interest rate futures contracts and additional information on investment policies, see Appendix B. For a discussion on mortgage-backed securities, see Appendix C. PORTFOLIO TRANSACTIONS Subject to policies set by the board of directors, American Express Financial Corporation is authorized to determine, consistent with the fund's investment goal and policies, which securities will be purchased, held or sold. In determining where the buy and sell orders are to be placed, American Express Financial Corporation has been directed to use its best efforts to obtain the best available price and most favorable execution except where otherwise authorized by the board of directors. Normally, the fund's securities are traded on a principal rather than an agency basis. In other words, American Express Financial Corporation will trade directly with the issuer or with a dealer who buys or sells for its own account, rather than acting on behalf of another client. American Express Financial Corporation does not pay the dealer commissions. Instead, the dealer's profit, if any, is the difference, or spread, between the dealer's purchase and sale price for the security. Each investment decision made for the fund is made independently from any decision made for another fund in the IDS MUTUAL FUND GROUP or other account advised by American Express Financial Corporation or any of its subsidiaries. When the fund buys or sells the same security as another fund or account, American Express Financial Corporation carries out the purchase or sale in a way the fund agrees in advance is fair. Although sharing in large transactions may adversely affect the price or volume purchased or sold by the fund, the fund hopes to gain an overall advantage in execution. On occasion, it may be desirable to compensate a broker for research services or for brokerage services by paying a commission that might not otherwise be charged or a commission in excess of the amount another broker might charge. The board of directors has adopted a policy authorizing American Express Financial Corporation to do so to the extent authorized by law, if American Express Financial Corporation determines, in good faith, that such commission is reasonable in relation to the value of the brokerage or research services provided by a broker or dealer, viewed either in the light of that transaction or American Express Financial Corporation's overall responsibilities to the funds in the IDS MUTUAL FUND GROUP and other funds for which it acts as investment advisor. Research provided by brokers supplements American Express Financial Corporation's own research activities. Such services include economic data on, and analysis of, U.S. and foreign economies; information on specific industries; information about specific companies, including earnings estimates; purchase recommendations for stocks and bonds; portfolio strategy services; political, economic, business and industry trend assessments; historical statistical information; market data services providing information on specific issues and prices; and technical analysis of various aspects of the securities markets, -6- including technical charts. Research services may take the form of written reports, computer software or personal contact by telephone or at seminars or other meetings. American Express Financial Corporation has obtained, and in the future may obtain, computer hardware from brokers, including but not limited to personal computers that will be used exclusively for investment decision-making purposes, which include the research, portfolio management and trading functions and other services to the extent permitted under an interpretation by the Securities and Exchange Commission. When paying a commission that might not otherwise be charged or a commission in excess of the amount another broker might charge, AEFC must follow procedures authorized by the board of directors. To date, three procedures have been authorized. One procedure permits American Express Financial Corporation to direct an order to buy or sell a security traded on a national securities exchange to a specific broker for research services it has provided. The second procedure permits American Express Financial Corporation, in order to obtain research, to direct an order on an agency basis to buy or sell a security traded in the over-the-counter market to a firm that does not make a market in that security. The commission paid generally includes compensation for research services. The third procedure permits American Express Financial Corporation, in order to obtain research and brokerage services, to cause the fund to pay a commission in excess of the amount another broker might have charged. American Express Financial Corporation has advised the fund it is necessary to do business with a number of brokerage firms on a continuing basis to obtain such services as the handling of large orders, the willingness of a broker to risk its own money by taking a position in a security, and the specialized handling of a particular group of securities that only certain brokers may be able to offer. As a result of this arrangement, some portfolio transactions may not be effected at the lowest commission, but American Express Financial Corporation believes it may obtain better overall execution. American Express Financial Corporation has assured the fund that under all three procedures the amount of commission paid will be reasonable and competitive in relation to the value of the brokerage services performed or research provided. All other transactions shall be placed on the basis of obtaining the best available price and the most favorable execution. In so doing, if in the professional opinion of the person responsible for selecting the broker or dealer, several firms can execute the transaction on the same basis, consideration will be given by such person to those firms offering research services. Such services may be used by American Express Financial Corporation in providing advice to all the funds in the IDS MUTUAL FUND GROUP even though it is not possible to relate the benefits to any particular fund or account. Each investment decision made for the fund is made independently from any decision made for another fund in the IDS MUTUAL FUND GROUP or other account advised by American Express Financial Corporation or any of its subsidiaries. When the fund buys or sells the same security as another fund or account, American Express Financial Corporation carries out the purchase or sale in a way the fund agrees in advance is fair. Although sharing in large transactions may adversely affect the price or volume purchased or sold by the fund, the fund hopes to gain an overall advantage in execution. American Express Financial Corporation has assured the fund it will continue to seek ways to reduce brokerage costs. -7- On a periodic basis, American Express Financial Corporation makes a comprehensive review of the broker-dealers and the overall reasonableness of their commissions. The review evaluates execution, operational efficiency and research services. The fund paid total brokerage commissions of $59,965 for the fiscal year ended August 31, 1994, $32,198 for fiscal year 1993, and $226,382 for fiscal year 1992. Substantially all firms through whom transactions were executed provide research services. No transactions were directed to brokers because of research services they provided to the fund. On August 31, 1994, at the end of the fiscal year, the fund held securities of its regular brokers or dealers or of the parent of those brokers or dealers that derived more than 15% of gross revenue from securities-related activities as presented below:
Value of Securities Owned at End of Name of Issuer Fiscal Year - -------------- ------------------- Bank America $14,700,000 Bankers Trust $ 9,912,500 Goldman Sachs Group $ 9,337,500 Merrill Lynch & Co. Inc. $11,444,182 Nations Bank $10,950,000
The portfolio turnover rate was 40% in the fiscal year ended August 31, 1994, and 60% in fiscal year 1993. BROKERAGE COMMISSIONS PAID TO BROKERS AFFILIATED WITH AMERICAN EXPRESS FINANCIAL CORPORATION Affiliates of American Express Company (American Express) (of which American Express Financial Corporation is a wholly owned subsidiary) may engage in brokerage and other securities transactions on behalf of the fund according to procedures adopted by the fund's board of directors and to the extent consistent with applicable provisions of the federal securities laws. American Express Financial Corporation will use an American Express affiliate only if (i) American Express Financial Corporation determines that the fund will receive prices and executions at least as favorable as those offered by qualified independent brokers performing similar brokerage and other services for the fund and (ii) the affiliate charges the fund commission rates consistent with those the affiliate charges comparable unaffiliated customers in similar transactions and if such use is consistent with terms of the Investment Management Services Agreement. American Express Financial Corporation may direct brokerage to compensate an affiliate. American Express Financial Corporation will receive research on South Africa from New Africa Advisers a wholly-owned subsidiary of Sloan Financial Group. American Express Financial Corporation owns 100% of IDS Capital Holdings Inc. which in turn owns 40% of Sloan Financial Group. New Africa Advisers will send research to American Express Financial Corporation and in turn American Express Financial Corporation will direct trades to a particular broker. The broker will have an agreement to pay New Africa Advisers. All transactions will be on a best execution basis. Compensation received will be reasonable for the services rendered. No brokerage commissions were paid to brokers affiliated with American Express Financial Corporation for the three most recent fiscal years. -8- PERFORMANCE INFORMATION The fund may quote various performance figures to illustrate past performance. Average annual total return and current yield quotations used by the fund are based on standardized methods of computing performance as required by the SEC. An explanation of these and any other methods used by the fund to compute performance follows below. AVERAGE ANNUAL TOTAL RETURN The fund may calculate average annual total return for a class for certain periods by finding the average annual compounded rates of return over the period that would equate the initial amount invested to the ending redeemable value, according to the following formula: P(1+T)n = ERV where: P = a hypothetical initial payment of $1,000 T = average annual total return n = number of years ERV = ending redeemable value of a hypothetical $1,000 payment, made at the beginning of a period, at the end of the period (or fractional portion thereof) AGGREGATE TOTAL RETURN The fund may calculate aggregate total return for a class for certain periods representing the cumulative change in the value of an investment in the fund over a specified period of time according to the following formula: ERV - P ------- P where: P = a hypothetical initial payment of $1,000 ERV = ending redeemable value of a hypothetical $1,000 payment, made at the beginning of a period, at the end of the period (or fractional portion thereof) ANNUALIZED YIELD The fund may calculate an annualized yield for a class by dividing the net investment income per share deemed earned during a period by the net asset value per share on the last day of the period and annualizing the results. Yield is calculated according to the following formula: Yield = 2[(a-b + 1)6 - 1] --- cd where: a = dividends and interest earned during the period b = expenses accrued for the period (net of reimbursements) -9- c = the average daily number of shares outstanding during the period that were entitled to receive dividends d = the maximum offering price per share on the last day of the period The fund's annualized yield was 7.48 for the 30-day period ended August 31, 1994. The fund's yield, calculated as described above according to the formula prescribed by the SEC, is a hypothetical return based on market value yield to maturity for the fund's securities. It is not necessarily indicative of the amount which was or may be paid to the fund's shareholders. Actual amounts paid to fund shareholders are reflected in the distribution yield. DISTRIBUTION YIELD Distribution yield is calculated according to the following formula: D divided by POP F equals DY --- ---- 31 31 where: D = sum of dividends for 31-day period POP = sum of public offering price for 31-day period F = annualizing factor DY = distribution yield The fund's distribution yield was 7.56% for the 31-day period ended August 31, 1994. In its sales material and other communications, the fund may quote, compare or refer to rankings, yields or returns as published by independent statistical services or publishers and publications such as The Bank Rate Monitor National Index, Barron's, Business Week, Donoghue's Money Market Fund Report, Financial Services Week, Financial Times, Financial World, Forbes, Fortune, Global Investor, Institutional Investor, Investor's Daily, Kiplinger's Personal Finance, Lipper Analytical Services, Money, Mutual Fund Forecaster, Newsweek, The New York Times, Personal Investor, Stanger Report, Sylvia Porter's Personal Finance, USA Today, U.S. News and World Report, The Wall Street Journal and Wiesenberger Investment Companies Service. VALUING FUND SHARES The value of an individual share for each class is determined by using the net asset value before shareholder transactions for the day. On September 1, 1994, the first business day following the end of the fiscal year, the computation looked like this:
Net assets before Shares outstanding Net asset value shareholder transactions at end of previous day of one share ------------------------------------------------------------------------------------- Class A* $2,247,168,573 divided by 458,346,766 equals $4.90 *Shares of Class B and Class Y were not outstanding on that date.
-10- In determining net assets before shareholder transactions, the fund's portfolio securities are valued as follows as of the close of business of the New York Stock Exchange: 'Securities, except bonds other than convertibles, traded on a securities exchange for which a last-quoted sales price is readily available are valued at the last-quoted sales price on the exchange where such security is primarily traded. 'Securities traded on a securities exchange for which a last-quoted sales price is not readily available are valued at the mean of the closing bid and asked prices, looking first to the bid and asked prices on the exchange where the security is primarily traded and, if none exist, to the over-the-counter market. 'Securities included in the NASDAQ National Market System are valued at the last-quoted sales price in this market. 'Securities included in the NASDAQ National Market System for which a last-quoted sales price is not readily available, and other securities traded over-the-counter but not included in the NASDAQ National Market System are valued at the mean of the closing bid and asked prices. 'Futures and options traded on major exchanges are valued at the last-quoted sales price on their primary exchange. 'Foreign securities traded outside the United States are generally valued as of the time their trading is complete, which is usually different from the close of the New York Stock Exchange (the "Exchange"). Foreign securities quoted in foreign currencies are translated into U.S. dollars at the current rate of exchange. Occasionally, events affecting the value of such securities may occur between such times and the close of the Exchange that will not be reflected in the computation of the fund's net asset value. If events materially affecting the value of such securities occur during such period, these securities will be valued at their fair value according to procedures decided upon in good faith by the fund's board of directors (the "board"). 'Short-term securities maturing more than 60 days from the valuation date are valued at the readily available market price or approximate market value based on current interest rates. Short- term securities maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value determined by systematically increasing the carrying value of a security if acquired at a discount, or reducing the carrying value if acquired at a premium, so that the carrying value is equal to maturity value on the maturity date. 'Securities without a readily available market price, bonds other than convertibles and other assets are valued at fair value as determined in good faith by the board. The board is responsible for selecting methods it believes provide fair value. When -11- possible, bonds are valued by a pricing service independent from the fund. If a valuation of a bond is not available from a pricing service, the bond will be valued by a dealer knowledgeable about the bond if such a dealer is available. The New York Stock Exchange, American Express Financial Corporation and the fund will be closed on the following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. INVESTING IN THE FUND Sales Charge Shares of the fund are sold at the public offering price determined at the close of business on the day an application is accepted. The public offering price is the net asset value of one share plus a sales charge, if applicable. For Class B and Class Y, there is no initial sales charge so the public offering price is the same as the net asset value. For Class A, the public offering price for an investment of less than $50,000, made September 1, 1994, was determined by dividing the net asset value of one share, $4.90, by 0.95 (1.00-0.05 for a maximum 5% sales charge) for a public offering price of $5.16. The sales charge is paid to American Express Financial Advisors by the person buying the shares. Class A - Calculation of the Sales Charge Sales charges are determined as follows:
Within each increment, sales charge as a percentage of: ---------------------------------------- Public Net Amount of Investment Offering Price Amount Invested - -------------------- -------------- --------------- First $ 50,000 5.0% 5.26% Next 50,000 4.5 4.71 Next 400,000 3.8 3.95 Next 500,000 2.0 2.04 More than 1,000,000 0.0 0.00
Sales charges on an investment greater than $50,000 are calculated for each increment separately and then totaled. The resulting total sales charge, expressed as a percentage of the public offering price and of the net amount invested, will vary depending on the proportion of the investment at different sales charge levels. For example, compare an investment of $60,000 with an investment of $85,000. The $60,000 investment is composed of $50,000 that incurs a sales charge of $2,500 (5.0% x $50,000) and $10,000 that incurs a sales charge of $450 (4.5% x $10,000). The total sales charge of $2,950 is 4.92% of the public offering price and 5.17% of the net amount invested. -12- In the case of the $85,000 investment, the first $50,000 also incurs a sales charge of $2,500 (5.0% x $50,000) and $35,000 incurs a sales charge of $1,575 (4.5% x $35,000). The total sales charge of $4,075 is 4.79% of the public offering price and 5.04% of the net amount invested. The following table shows the range of sales charges as a percentage of the public offering price and of the net amount invested on total investments at each applicable level.
On total investment, sales charge as a percentage of ------------------------------------------- Public Net Offering Price Amount Invested -------------- --------------- Amount of Investment ranges from: - -------------------- ------------------------------------------- First $ 50,000 5.00% 5.26% More than 50,000 to 100,000 5.00-4.50 5.26-4.71 More than 100,000 to 500,000 4.50-3.80 4.71-3.95 More than 500,000 to 1,000,000 3.80-2.00 3.95-2.04 More than 1,000,000 0.00 0.00
The initial sales charge is waived for certain qualified plans that meet the requirements described in the prospectus. Participants in these qualified plans may be subject to a deferred sales charge on certain redemptions. The deferred sales charge on certain redemptions will be waived if the redemption is a result of a participant's death, disability, retirement, attaining age 59 1/2, loans or hardship withdrawals. The deferred sales charge varies depending on the number of participants in the qualified plan and total plan assets as follows: Deferred Sales Charge Number of Participants Total Plan Assets 1-99 100 or more - ----------------- ---- ----------- Less than $1 million 4% 0% $1 million or more 0% 0% _________________________________________________________ Class A - Reducing the Sales Charge Sales charges are based on the total amount of your investments in the fund. The amount of all prior investments plus any new purchase is referred to as your "total amount invested." For example, suppose you have made an investment of $20,000 and later decide to invest $40,000 more. Your total amount invested would be $60,000. As a result, $10,000 of your $40,000 investment qualifies for the lower 4.5% sales charge that applies to investments of more than $50,000 to $100,000. The total amount invested includes any shares held in the fund in the name of a member of your immediate family (spouse and unmarried children under 21). For instance, if your spouse already has -13- invested $20,000 and you want to invest $40,000, your total amount invested will be $60,000 and therefore you will pay the lower charge of 4.5% on $10,000 of the $40,000. Until a spouse remarries, the sales charge is waived for spouses and unmarried children under 21 of deceased trustees, directors, officers or employees of the fund or American Express Financial Corporation or its subsidiaries and deceased advisors. The total amount invested also includes any investment you or your immediate family already have in the other publicly offered funds in the IDS MUTUAL FUND GROUP where the investment is subject to a sales charge. For example, suppose you already have an investment of $25,000 in IDS Growth Fund and $5,000 in this fund. If you invest $40,000 more in this fund, your total amount invested in the funds will be $70,000 and therefore $20,000 of your $40,000 investment will incur a 4.5% sales charge. Finally, Individual Retirement Account (IRA) purchases, or other employee benefit plan purchases made through a payroll deduction plan or through a plan sponsored by an employer, association of employers, employee organization or other similar entity, may be added together to reduce sales charges for shares purchased through that plan. Class A - Letter of Intent You can reduce the sales charges in Class A by filing a letter-of- intent stating that you intend to invest $1 million over a period of 13 months. The agreement can start at any time and will remain in effect for 13 months. Your investment will be charged normal sales charges until you have invested $1 million. At that time, the sales charges previously paid will be reversed. If you do not invest $1 million by the end of 13 months, there is no penalty, you'll just miss out on the sales charge adjustment. A letter-of- intent is not an option (absolute right) to buy shares. Here's an example. You file a letter-of-intent to invest $1 million and make an investment of $100,000 at that time. You pay the normal 5% sales charge on the first $50,000 and 4.5% sales charge on the next $50,000 of this investment. Let's say you make a second investment of $900,000 (bringing the total up to $1 million) one month before the 13-month period is up. What sales charge do you pay? American Express Financial Corporation makes an adjustment on your last purchase so that there's no sales charge on the total $1 million investment, just as if you had invested $1 million all at once. Systematic Investment Programs After you make your initial investment of $2,000 or more, you can arrange to make additional payments of $100 or more on a regular basis. These minimums do not apply to all systematic investment programs. You decide how often to make payments - monthly, quarterly or semiannually. You are not obligated to make any payments. You can omit payments or discontinue the investment program altogether. The fund also can change the program or end it -14- at any time. If there is no obligation, why do it? Putting money aside is an important part of financial planning. With a systematic investment program, you have a goal to work for. How does this work? Your regular investment amount will purchase more shares when the net asset value per share decreases, and fewer shares when the net asset value per share increases. Each purchase is a separate transaction. After each purchase your new shares will be added to your account. Shares bought through these programs are exactly the same as any other fund shares. They can be bought and sold at any time. A systematic investment program is not an option or an absolute right to buy shares. The systematic investment program itself cannot ensure a profit, nor can it protect against a loss in a declining market. If you decide to discontinue the program and redeem your shares when their net asset value is less than what you paid for them, you will incur a loss. For a discussion on dollar-cost averaging, see Appendix D. Automatic Directed Dividends Dividends, including capital gain distributions, paid by another fund in the IDS MUTUAL FUND GROUP subject to a sales charge, may be used to automatically purchase shares in the same class of this fund without paying a sales charge. Dividends may be directed to existing accounts only. Dividends declared by a fund are exchanged to this fund the following day. Dividends can be exchanged into one fund but cannot be split to make purchases in two or more funds. Automatic directed dividends are available between accounts of any ownership EXCEPT: 'Between a non-custodial account and an IRA, or 401(k) plan account or other qualified retirement account of which American Express Trust Company acts as custodian; 'Between two American Express Trust Company custodial accounts with different owners (for example, you may not exchange dividends from your IRA to the IRA of your spouse); 'Between different kinds of custodial accounts with the same ownership (for example, you may not exchange dividends from your IRA to your 401(k) plan account, although you may exchange dividends from one IRA to another IRA). Dividends may be directed from accounts established under the Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) only into other UGMA or UTMA accounts with identical ownership. The fund's investment goal is described in its prospectus along with other information, including fees and expense ratios. Before exchanging dividends into another fund, you should read its prospectus. You will receive a confirmation that the automatic directed dividend service has been set up for your account. -15- REDEEMING SHARES You have a right to redeem your shares at any time. For an explanation of redemption procedures, please see the prospectus. DURING AN EMERGENCY, the board can suspend the computation of net asset value, stop accepting payments for purchase of shares or suspend the duty of the fund to redeem shares for more than seven days. Such emergency situations would occur if: 'The New York Stock Exchange closes for reasons other than the usual weekend and holiday closings or trading on the Exchange is restricted, or 'Disposal of the fund's securities is not reasonably practicable or it is not reasonably practicable for the fund to determine the fair value of its net assets, or 'The SEC, under the provisions of the Investment Company Act of 1940, as amended, declares a period of emergency to exist. Should the fund stop selling shares, the board may make a deduction from the value of the assets held by the fund to cover the cost of future liquidations of the assets so as to distribute fairly these costs among all shareholders. PAY-OUT PLANS You can use any of several pay-out plans to redeem your investment in regular installments. If you redeem Class B shares you may be subject to a contingent deferred sales charge as discussed in the prospectus. While the plans differ on how the pay-out is figured, they all are based on the redemption of your investment. Net investment income dividends and any capital gain distributions will automatically be reinvested, unless you elect to receive them in cash. If you are redeeming a tax-qualified plan account for which American Express Trust Company acts as custodian, you can elect to receive your dividends and other distributions in cash when permitted by law. If you redeem an IRA or a qualified retirement account, certain restrictions, federal tax penalties and special federal income tax reporting requirements may apply. You should consult your tax advisor about this complex area of the tax law. Applications for a systematic investment in a class of the fund subject to a sales charge normally will not be accepted while a pay-out plan for any of those funds is in effect. Occasional investments, however, may be accepted. To start any of these plans, please write or call American Express Shareholder Service, P.O. Box 534, Minneapolis, MN 55440-0534, 612- 671-3733. Your authorization must be received in the Minneapolis headquarters at least five days before the date you want your payments to begin. The initial payment must be at least $50. Payments will be made on a monthly, bimonthly, quarterly, semiannual or annual basis. Your choice is effective until you change or cancel it. -16- The following pay-out plans are designed to take care of the needs of most shareholders in a way American Express Financial Corporation can handle efficiently and at a reasonable cost. If you need a more irregular schedule of payments, it may be necessary for you to make a series of individual redemptions, in which case you'll have to send in a separate redemption request for each pay-out. The fund reserves the right to change or stop any pay-out plan and to stop making such plans available. Plan #1: Pay-out for a fixed period of time If you choose this plan, a varying number of shares will be redeemed at regular intervals during the time period you choose. This plan is designed to end in complete redemption of all shares in your account by the end of the fixed period. Plan #2: Redemption of a fixed number of shares If you choose this plan, a fixed number of shares will be redeemed for each payment and that amount will be sent to you. The length of time these payments continue is based on the number of shares in your account. Plan #3: Redemption of a fixed dollar amount If you decide on a fixed dollar amount, whatever number of shares is necessary to make the payment will be redeemed in regular installments until the account is closed. Plan #4: Redemption of a percentage of net asset value Payments are made based on a fixed percentage of the net asset value of the shares in the account computed on the day of each payment. Percentages range from 0.25% to 0.75%. For example, if you are on this plan and arrange to take 0.5% each month, you will get $50 if the value of your account is $10,000 on the payment date. EXCHANGES If you buy shares in the fund and then exchange into another fund, it is considered a sale and subsequent purchase of shares. Under the tax laws, if this exchange is done within 91 days, any sales charge waived on Class A shares on a subsequent purchase of shares applies to the new shares acquired in the exchange. Therefore, you cannot create a tax loss or reduce a tax gain attributable to the sales charge when exchanging shares within 91 days. Retirement Accounts If you have a nonqualified investment in the fund and you wish to move part or all of those shares to an IRA or qualified retirement account in the fund, you can do so without paying a sales charge. However, this type of exchange is considered a sale of shares and may result in a gain or loss for tax purposes. In addition, this type of exchange may result in an excess contribution under IRA or qualified plan regulations if the amount exchanged plus the amount of the initial sales charge applied to the amount exchanged exceeds -17- annual contribution limitations. For example: If you were to exchange $2,000 in Class A shares from a nonqualified account to an IRA without considering the 5% ($100) initial sales charge applicable to that $2,000, you may be deemed to have exceeded current IRA annual contribution limitations. You should consult your tax advisor for further details about this complex subject. It is unlikely that the board of directors will authorize a distribution of any net realized capital gains until the available capital loss carryover has been offset or has expired except as required by Internal Revenue Service rules. TAXES Net investment income dividends received should be treated as dividend income for federal income tax purposes. Corporate shareholders are generally entitled to a deduction equal to 70% of that portion of the fund's dividend that is attributable to dividends the fund received from domestic (U.S.) securities. For the fiscal year ended August 31, 1994, 0.98% of the fund's dividends qualified for the corporate deduction. Capital gain distributions received by individual and corporate shareholders, if any, should be treated as long-term capital gains regardless of how long they owned their shares. Short-term capital gains earned by the fund are paid to shareholders as part of their ordinary income dividend and are taxable. You may be able to defer taxes on current income from a fund by investing through an IRA, 401(k) plan account or other qualified retirement account. If you move all or part of a non-qualified investment in the fund to a qualified account, this type of exchange is considered a sale of shares. You pay no sales charge, but the exchange may result in a gain or loss for tax purposes, or excess contributions under IRA or qualified plan regulations. Under federal tax law, by the end of a calendar year the fund must declare and pay dividends representing 98% of ordinary income for that calendar year and 98% of net capital gains (both long-term and short-term) for the 12-month period ending Oct. 31 of that calendar year. The fund is subject to an excise tax equal to 4% of the excess, if any, of the amount required to be distributed over the amount actually distributed. The fund intends to comply with federal tax law and avoid any excise tax. The fund may be subject to U.S. taxes resulting from holdings in a passive foreign investment company (PFIC). A foreign corporation is a PFIC when 75% or more of its gross income for the taxable year is passive income or if 50% or more of the average value of its assets consists of assets that produce or could produce passive income. This is a brief summary that relates to federal income taxation only. Shareholders should consult their tax advisor as to the application of federal, state and local income tax laws to fund distributions. -18- AGREEMENTS Investment Management Services Agreement The fund has an Investment Management Services Agreement with American Express Financial Corporation. For its services, American Express Financial Corporation is paid a fee based on the following schedule:
Assets Annual rate at (billions) each asset level - ---------- ---------------- First $1.0 0.520% Next 1.0 0.495 Next 1.0 0.470 Next 3.0 0.445 Next 3.0 0.420 Over 9.0 0.395
In March 1995, the daily rate applied to the fund's assets is expected to be approximately 0.50% on an annual basis. The fee is calculated for each calendar day on the basis of net assets as of the close of business two business days prior to the day for which the calculation is made. The management fee is paid monthly. Under a prior agreement, the total amount paid was $12,577,197 for the fiscal year ended August 31, 1994, $12,276,571 for fiscal year 1993, and $11,427,881 for fiscal year 1992. Under the current Agreement, the fund also pays taxes, brokerage commissions and nonadvisory expenses, that include custodian fees; audit and certain legal fees; fidelity bond premiums; registration fees for shares; fund office expenses; consultants' fees; compensation of directors, officers and employees; corporate filing fees; organizational expenses; expenses incurred in connection with lending portfolio securities of the fund; and expenses properly payable by the fund, approved by the board of directors. Under a prior agreement, the fund paid nonadvisory expenses of $858,165 for the fiscal year ended August 31, 1994, $950,443 for fiscal year 1993, and $653,058 for fiscal year 1992. Administrative Services Agreement The fund has an Administrative Services Agreement with American Express Financial Corporation. Under this agreement, the fund pays American Express Financial Corporation for providing administration and accounting services. The fee is calculated as follows:
Assets Annual rate (billions) each asset level ---------- ---------------- First $1.0 0.050% Next 1.0 0.045 Next 1.0 0.040 Next 3.0 0.035 Next 3.0 0.030 Over 9.0 0.025
-19- Transfer Agency Agreement The fund has a Transfer Agency Agreement with American Express Financial Corporation. This agreement governs American Express Financial Corporation's responsibility for administering and/or performing transfer agent functions, for acting as service agent in connection with dividend and distribution functions and for performing shareholder account administration agent functions in connection with the issuance, exchange and redemption or repurchase of the fund's shares. Under the agreement, American Express Financial Corporation will earn a fee from the fund determined by multiplying the number of shareholder accounts at the end of the day by a rate determined for each class and dividing by the number of days in the year. The rate for Class A and for Class Y is $15.50 per year. The rate for Class B is $16.50 per year. The fees paid to American Express Financial Corporation may be changed from time to time upon agreement of the parties without shareholder approval. The fund paid fees of $2,030,671 for the fiscal year ended August 31, 1994. Distribution Agreement Under a Distribution Agreement, sales charges deducted for distributing fund shares are paid to American Express Financial Advisors daily. These charges amounted to $9,286,207 for the fiscal year ended August 31, 1994. After paying commissions to personal financial planners, and other expenses, the amount retained was $3,244,957. The amounts were $11,711,232 and $4,102,286 for fiscal year 1993, and $9,964,281 and $3,492,066 for fiscal year 1992. Additional information about commissions and compensation for the fiscal year ended August 31, 1994, is contained in the following table:
(1) (2) (3) (4) (5) Net Compensation Name of Underwriting on Redemption Principal Discounts and and Brokerage Other Underwriter Commissions Repurchases Commissions Compensation - ----------- ------------- ------------- ----------- ------------ American Express Financial Corporation None None None* $796,190** American Express Financial Advisors $9,286,207 None None None *For further information see "Brokerage Commissions Paid to Brokers Affiliated with American Express Financial Corporation." **Distribution fees paid pursuant to the Plan and Supplemental Agreement of Distribution.
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. -20- Plan and Agreement of Distribution For Class B shares, to help American Express Financial Advisors defray the cost of distribution and servicing, not covered by the sales charges received under the Distribution Agreement, the fund and American Express Financial Advisors entered into a Plan and Agreement of Distribution (Plan). These costs cover almost all aspects of distributing the fund's shares except compensation to the sales force. A substantial portion of the costs are not specifically identified to any one fund in the IDS MUTUAL FUND GROUP. Under the Plan, American Express Financial Advisors is paid a fee at an annual rate of 0.75% of the fund's average daily net assets attributable to Class B shares. The Plan must be approved annually by the board, including a majority of the disinterested directors, if it is to continue for more than a year. At least quarterly, the board must review written reports concerning the amounts expended under the Plan and the purposes for which such expenditures were made. The Plan and any agreement related to it may be terminated at any time by vote of a majority of directors who are not interested persons of the fund and have no direct or indirect financial interest in the operation of the Plan or in any agreement related to the Plan, or by vote of a majority of the outstanding voting securities of the fund or by American Express Financial Advisors. The Plan (or any agreement related to it) will terminate in the event of its assignment, as that term is defined in the Investment Company Act of 1940, as amended. The Plan may not be amended to increase the amount to be spent for distribution without shareholder approval, and all material amendments to the Plan must be approved by a majority of the directors, including a majority of the directors who are not interested persons of the fund and who do not have a financial interest in the operation of the Plan or any agreement related to it. The selection and nomination of disinterested directors is the responsibility of the other disinterested directors. No interested person of the fund, and no director who is not an interested person, has any direct or indirect financial interest in the operation of the Plan or any related agreement. Total fees and nonadvisory expenses cannot exceed the most restrictive applicable state limitation. Currently, the most restrictive applicable state expense limitation, subject to exclusion of certain expenses, is 2.5% of the first $30 million of the fund's average daily net assets, 2% of the next $70 million and 1.5% of average daily net assets over $100 million, on an annual basis. At the end of each month, if the fees and expenses of the fund exceed this limitation for the fund's fiscal year in progress, American Express Financial Corporation will assume all expenses in excess of the limitation. American Express Financial Corporation then may bill the fund for such expenses in subsequent months up to the end of that fiscal year, but not after that date. No interest charges are assessed by American Express Financial Corporation for expenses it assumes. -21- DIRECTORS AND OFFICERS The following is a list of the fund's directors who, except for Mr. Dudley, also are directors of all other funds in the IDS MUTUAL FUND GROUP. Mr. Dudley is a director of all publicly offered funds. All shares have cumulative voting rights when voting on the election of directors. LYNNE V. CHENEY+' Born in 1941. American Enterprise Institute for Public Policy Research (AEI) 1150 17th St., N.W. Washington, D.C. Distinguished Fellow AEI. Former Chair of National Endowment of the Humanities. Director, The Reader's Digest Association Inc., Lockheed Corp., and the Interpublic Group of Companies, Inc. (advertising). WILLIAM H. DUDLEY+** Born in 1932. 2900 IDS Tower Minneapolis, MN Executive vice president and director of American Express Financial Corporation. ROBERT F. FROEHLKE+ Born in 1922. 1201 Yale Place Minneapolis, MN Former president of all funds in the IDS MUTUAL FUND GROUP. Director, the ICI Mutual Insurance Co., Institute for Defense Analyses, Marshall Erdman and Associates, Inc. (architectural engineering) and Public Oversight Board of the American Institute of Certified Public Accountants. DAVID R. HUBERS** Born in 1943. 2900 IDS Tower Minneapolis, MN President, chief executive officer and director of American Express Financial Corporation. Previously, senior vice president, finance and chief financial officer of American Express Financial Corporation. HEINZ F. HUTTER+ Born in 1929. P.O. Box 5724 Minneapolis, MN President and chief operating officer, Cargill, Incorporated (commodity merchants and processors) from February 1991 to September 1994. Executive vice president from 1981 to February 1991. -22- ANNE P. JONES+ Born in 1935. 5716 Bent Branch Rd. Bethesda, MD Attorney and telecommunications consultant. Former partner, law firm of Sutherland, Asbill & Brennan. Director, Motorola, Inc. and C-Cor Electronics, Inc. DONALD M. KENDALL' Born in 1921. PepsiCo, Inc. Purchase, NY Former chairman and chief executive officer, PepsiCo, Inc. MELVIN R. LAIRD+ Born in 1922. Reader's Digest Association, Inc. 1730 Rhode Island Ave., N.W. Washington, D.C. Senior counsellor for national and international affairs, The Reader's Digest Association, Inc. Chairman of the board, COMSAT Corporation, former nine-term congressman, secretary of defense and presidential counsellor. Director, Martin Marietta Corp., Metropolitan Life Insurance Co., The Reader's Digest Association, Inc., Science Applications International Corp., Wallace Reader's Digest Funds and Public Oversight Board (SEC Practice Section, American Institute of Certified Public Accountants). LEWIS W. LEHR' Born in 1921. 3050 Minnesota World Trade Center 30 E. Seventh St. St. Paul, MN Former chairman of the board and chief executive officer, Minnesota Mining and Manufacturing Company (3M). Director, Jack Eckerd Corporation (drugstores). Advisory Director, Peregrine Inc. (microelectronics). WILLIAM R. PEARCE+* Born in 1927. 901 S. Marquette Ave. Minneapolis, MN President of all funds in the IDS MUTUAL FUND GROUP since June 1993. Former vice chairman of the board, Cargill, Incorporated (commodity merchants and processors). EDSON W. SPENCER Born in 1926. 4900 IDS Center 80 S. 8th St. Minneapolis, MN President, Spencer Associates Inc. (consulting). Chairman of the board, Mayo Foundation (healthcare). Former chairman of the board and chief executive officer, Honeywell Inc. Director, Boise Cascade Corporation (forest products) and CBS Inc. Member of International Advisory Councils, Robert Bosch (Germany) and NEC (Japan). -23- JOHN R. THOMAS** Born in 1937. 2900 IDS Tower Minneapolis, MN Senior vice president and director of American Express Financial Corporation. WHEELOCK WHITNEY+ Born in 1926. 1900 Foshay Tower 821 Marquette Ave. Minneapolis, MN Chairman, Whitney Management Company (manages family assets). C. ANGUS WURTELE Born in 1934. 1101 S. 3rd St. Minneapolis, MN Chairman of the board and chief executive officer, The Valspar Corporation (paints). Director, Bemis Corporation (packaging), Donaldson Company (air cleaners & mufflers) and General Mills, Inc. (consumer foods). + Member of executive committee. ' Member of joint audit committee. * Interested person by reason of being an officer and employee of the fund. **Interested person by reason of being an officer, director, employee and/or shareholder of American Express Financial Corporation or American Express. The board also has appointed officers who are responsible for day- to-day business decisions based on policies it has established. Besides Mr. Pearce, who is president, the fund's other officer is: LESLIE L. OGG 901 S. Marquette Ave. Minneapolis, MN Vice president of all funds in the IDS MUTUAL FUND GROUP and general counsel and treasurer of the publicly offered funds. Members who are not officers of the fund or officers or directors of American Express Financial Corporation receive an annual base fee of $2,750. They receive a fee for all board and committee meetings they attend. The fee is shared equally among each fund in the IDS MUTUAL FUND GROUP holding concurrent meetings. The fees are $500 for Board, Executive, Audit and Investment Review committees, $750 for Personnel with out-of-state members receiving an additional $500 if an extra day of travel is required. The Chair of Contracts receives an additional $5,000. In addition members who retire after age 70 or earlier for health reasons receive monthly retirement benefits of 1/2 of the base fee on the date they retire divided by 12 for each month of service up to 120 months. During the fiscal year that ended August 31, 1994, the members of the board, for attending up to 49 meetings, received the following compensation, in total, from all funds in the IDS MUTUAL FUND GROUP.
Board compensation Aggregate Retirement Estimated Total Cash compensation benefits annual compensation from the accrued as benefit on from the IDS Board member fund fund expenses retirement MUTUAL FUND GROUP - ------------------------------------------------------------------------------------ Lynne V. Cheney $2,032 $ 273 $1,875 $36,600 (part of year) Robert F. Froehlke 4,140 4,216 1,875 76,400 Anne P. Jones 3,995 1,028 1,875 70,300 Donald M. Kendall 3,940 2,242 1,875 68,000 Melvin R. Laird 4,014 3,259 1,875 71,100 Lewis W. Lehr 4,024 4,430 1,828 71,500 William R. Pearce -- 1,747 1,875 -- (part of year) Edson W. Spencer 4,005 2,101 1,000 70,700 Wheelock Whitney 4,086 1,940 1,875 74,100
-24- On August 31, 1994, the fund's directors and officers as a group owned less than 1% of the outstanding shares. During the fiscal year ended August 31, 1994, no director or officer earned more than $60,000 from this fund. All directors and officers as a group earned $76,647, including $24,776 of retirement plan expense, from this fund. CUSTODIAN The fund's securities and cash are held by First Bank National Association, 180 E. Fifth St., St. Paul, MN 55101-1631, through a custodian agreement. The custodian is permitted to deposit some or all of its securities in central depository systems as allowed by federal law. INDEPENDENT AUDITORS The financial statements contained in the Annual Report to shareholders, for the fiscal year ended August 31, 1994, were audited by independent auditors, KPMG Peat Marwick LLP, 4200 Norwest Center, 90 S. Seventh St., Minneapolis, MN 55402-3900. The independent auditors also provide other accounting and tax- related services as requested by the fund. FINANCIAL STATEMENTS The Independent Auditors' Report and the Financial Statements, including Notes to the Financial Statements and the Schedule of Investments in Securities, contained in the 1994 Annual Report to shareholders, pursuant to Section 30(d) of the Investment Company Act of 1940, as amended, are hereby incorporated in this SAI by reference. No other portion of the Annual Report however, is incorporated by reference. PROSPECTUS The prospectus for IDS Bond Fund dated October 31, 1994 as revised March 20, 1994, is hereby incorporated in this SAI by reference. -25- APPENDIX A FOREIGN CURRENCY TRANSACTIONS Since investments in foreign countries usually involve currencies of foreign countries, and since the fund may hold cash and cash- equivalent investments in foreign currencies, the value of the fund's assets as measured in U.S. dollars may be affected favorably or unfavorably by changes in currency exchange rates and exchange control regulations. Also, the fund may incur costs in connection with conversions between various currencies. SPOT RATES AND FORWARD CONTRACTS. The fund conducts its foreign currency exchange transactions either at the spot (cash) rate prevailing in the foreign currency exchange market or by entering into forward currency exchange contracts (forward contracts) as a hedge against fluctuations in future foreign exchange rates. A forward contract involves an obligation to buy or sell a specific currency at a future date, which may be any fixed number of days from the contract date, at a price set at the time of the contract. These contracts are traded in the interbank market conducted directly between currency traders (usually large commercial banks) and their customers. A forward contract generally has no deposit requirements. No commissions are charged at any stage for trades. The fund may enter into forward contracts to settle a security transaction or handle dividend and interest collection. When the fund enters into a contract for the purchase or sale of a security denominated in a foreign currency or has been notified of a dividend or interest payment, it may desire to lock in the price of the security or the amount of the payment in dollars. By entering into a forward contract, the fund will be able to protect itself against a possible loss resulting from an adverse change in the relationship between different currencies from the date the security is purchased or sold to the date on which payment is made or received or when the dividend or interest is actually received. The fund also may enter into forward contracts when management of the fund believes the currency of a particular foreign country may suffer a substantial decline against another currency. It may enter into a forward contract to sell, for a fixed amount of dollars, the amount of foreign currency approximating the value of some or all of the fund's portfolio securities denominated in such foreign currency. The precise matching of forward contract amounts and the value of securities involved generally will not be possible since the future value of such securities in foreign currencies more than likely will change between the date the forward contract is entered into and the date it matures. The projection of short- term currency market movements is extremely difficult and successful execution of a short-term hedging strategy is highly uncertain. The fund will not enter into such forward contracts or maintain a net exposure to such contracts when consummating the contracts would obligate the fund to deliver an amount of foreign currency in excess of the value of the fund's portfolio securities or other assets denominated in that currency. -26- The fund will designate cash or securities in an amount equal to the value of the fund's total assets committed to consummating forward contracts entered into under the second circumstance set forth above. If the value of the securities declines, additional cash or securities will be designated on a daily basis so that the value of the cash or securities will equal the amount of the fund's commitments on such contracts. At maturity of a forward contract, the fund may either sell the portfolio security and make delivery of the foreign currency or retain the security and terminate its contractual obligation to deliver the foreign currency by purchasing an offsetting contract with the same currency trader obligating it to buy, on the same maturity date, the same amount of foreign currency. If the fund retains the portfolio security and engages in an offsetting transaction, the fund will incur a gain or a loss (as described below) to the extent there has been movement in forward contract prices. If the fund engages in an offsetting transaction, it may subsequently enter into a new forward contract to sell the foreign currency. Should forward prices decline between the date the fund enters into a forward contract for selling foreign currency and the date it enters into an offsetting contract for purchasing the foreign currency, the fund will realize a gain to the extent that the price of the currency it has agreed to sell exceeds the price of the currency it has agreed to buy. Should forward prices increase, the fund will suffer a loss to the extent the price of the currency it has agreed to buy exceeds the price of the currency it has agreed to sell. It is impossible to forecast what the market value of portfolio securities will be at the expiration of a contract. Accordingly, it may be necessary for the fund to buy additional foreign currency on the spot market (and bear the expense of such purchase) if the market value of the security is less than the amount of foreign currency the fund is obligated to deliver and a decision is made to sell the security and make delivery of the foreign currency. Conversely, it may be necessary to sell on the spot market some of the foreign currency received on the sale of the portfolio security if its market value exceeds the amount of foreign currency the fund is obligated to deliver. The fund's dealing in forward contracts will be limited to the transactions described above. This method of protecting the value of the fund's portfolio securities against a decline in the value of a currency does not eliminate fluctuations in the underlying prices of the securities. It simply establishes a rate of exchange that can be achieved at some point in time. Although such forward contracts tend to minimize the risk of loss due to a decline in value of hedged currency, they tend to limit any potential gain that might result should the value of such currency increase. Although the fund values its assets each business day in terms of U.S. dollars, it does not intend to convert its foreign currencies into U.S. dollars on a daily basis. It will do so from time to time, and shareholders should be aware of currency conversion costs. Although foreign exchange dealers do not charge a fee for conversion, they do realize a profit based on the difference -27- (spread) between the prices at which they are buying and selling various currencies. Thus, a dealer may offer to sell a foreign currency to the fund at one rate, while offering a lesser rate of exchange should the fund desire to resell that currency to the dealer. OPTIONS ON FOREIGN CURRENCIES. The fund may buy put and write covered call options on foreign currencies for hedging purposes. For example, a decline in the dollar value of a foreign currency in which portfolio securities are denominated will reduce the dollar value of such securities, even if their value in the foreign currency remains constant. In order to protect against such diminutions in the value of portfolio securities, the fund may buy put options on the foreign currency. If the value of the currency does decline, the fund will have the right to sell such currency for a fixed amount in dollars and will thereby offset, in whole or in part, the adverse effect on its portfolio which otherwise would have resulted. As in the case of other types of options, however, the benefit to the fund derived from purchases of foreign currency options will be reduced by the amount of the premium and related transaction costs. In addition, where currency exchange rates do not move in the direction or to the extent anticipated, the fund could sustain losses on transactions in foreign currency options which would require it to forego a portion or all of the benefits of advantageous changes in such rates. The fund may write options on foreign currencies for the same types of hedging purposes. For example, when the fund anticipates a decline in the dollar value of foreign-denominated securities due to adverse fluctuations in exchange rates, it could, instead of purchasing a put option, write a call option on the relevant currency. If the expected decline occurs, the option will most likely not be exercised and the diminution in value of portfolio securities will be fully or partially offset by the amount of the premium received. As in the case of other types of options, however, the writing of a foreign currency option will constitute only a partial hedge up to the amount of the premium, and only if rates move in the expected direction. If this does not occur, the option may be exercised and the fund would be required to buy or sell the underlying currency at a loss which may not be offset by the amount of the premium. Through the writing of options on foreign currencies, the fund also may be required to forego all or a portion of the benefits which might otherwise have been obtained from favorable movements on exchange rates. All options written on foreign currencies will be covered. An option written on foreign currencies is covered if the fund holds currency sufficient to cover the option or has an absolute and immediate right to acquire that currency without additional cash consideration upon conversion of assets denominated in that currency or exchange of other currency held in its portfolio. An -28- option writer could lose amounts substantially in excess of its initial investments, due to the margin and collateral requirements associated with such positions. Options on foreign currencies are traded through financial institutions acting as market-makers, although foreign currency options also are traded on certain national securities exchanges, such as the Philadelphia Stock Exchange and the Chicago Board Options Exchange, subject to SEC regulation. In an over-the- counter trading environment, many of the protections afforded to exchange participants will not be available. For example, there are no daily price fluctuation limits, and adverse market movements could therefore continue to an unlimited extent over a period of time. Although the purchaser of an option cannot lose more than the amount of the premium plus related transaction costs, this entire amount could be lost. Foreign currency option positions entered into on a national securities exchange are cleared and guaranteed by the OCC, thereby reducing the risk of counterparty default. Further, a liquid secondary market in options traded on a national securities exchange may be more readily available than in the over-the-counter market, potentially permitting the fund to liquidate open positions at a profit prior to exercise or expiration, or to limit losses in the event of adverse market movements. The purchase and sale of exchange-traded foreign currency options, however, is subject to the risks of availability of a liquid secondary market described above, as well as the risks regarding adverse market movements, margining of options written, the nature of the foreign currency market, possible intervention by governmental authorities and the effects of other political and economic events. In addition, exchange-traded options on foreign currencies involve certain risks not presented by the over-the- counter market. For example, exercise and settlement of such options must be made exclusively through the OCC, which has established banking relationships in certain foreign countries for the purpose. As a result, the OCC may, if it determines that foreign governmental restrictions or taxes would prevent the orderly settlement of foreign currency option exercises, or would result in undue burdens on OCC or its clearing member, impose special procedures on exercise and settlement, such as technical changes in the mechanics of delivery of currency, the fixing of dollar settlement prices or prohibitions on exercise. FOREIGN CURRENCY FUTURES AND RELATED OPTIONS. The fund may enter into currency futures contracts to sell currencies. It also may buy put and write covered call options on currency futures. Currency futures contracts are similar to currency forward contracts, except that they are traded on exchanges (and have margin requirements) and are standardized as to contract size and delivery date. Most currency futures call for payment of delivery in U.S. dollars. The fund may use currency futures for the same purposes as currency forward contracts, subject to CFTC limitations, including the limitation on the percentage of assets -29- that may be used, described in the prospectus. All futures contracts are aggregated for purposes of the percentage limitations. Currency futures and options on futures values can be expected to correlate with exchange rates, but will not reflect other factors that may affect the values of the fund's investments. A currency hedge, for example, should protect a Yen-denominated bond against a decline in the Yen, but will not protect the fund against price decline if the issuer's creditworthiness deteriorates. Because the value of the fund's investments denominated in foreign currency will change in response to many factors other than exchange rates, it may not be possible to match the amount of a forward contract to the value of the fund's investments denominated in that currency over time. The fund will not use leverage in its currency options and futures strategies. The fund will hold securities or other options or futures positions whose values are expected to offset its obligations. The fund will not enter into an option or futures position that exposes the fund to an obligation to another party unless it owns either (i) an offsetting position in securities or (ii) cash, receivables and short-term debt securities with a value sufficient to cover its potential obligations. -30- APPENDIX B OPTIONS AND INTEREST RATE FUTURES CONTRACTS AND ADDITIONAL INFORMATION ON INVESTMENT POLICIES The fund may buy or write options traded on any U.S. or foreign exchange or in the over-the-counter market. The fund may enter into 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. Options in the over-the-counter market will be purchased only when the investment manager believes a liquid secondary market exists for the options and only from dealers and institutions the investment manager believes present a minimal credit risk. Some options are exercisable only on a specific date. In that case, or if a liquid secondary market does not exist, the fund could be required to buy or sell securities at disadvantageous prices, thereby incurring losses. OPTIONS. An option is a contract. A person who buys a call option for a security has the right to buy the security at a set price for the length of the contract. A person who sells a call option is called a writer. The writer of a call option agrees to sell the security at the set price when the buyer wants to exercise the option, no matter what the market price of the security is at that time. A person who buys a put option has the right to sell a security at a set price for the length of the contract. A person who writes a put option agrees to buy the security at the set price if the purchaser wants to exercise the option, no matter what the market price of the security is at that time. An option is covered if the writer owns the security (in the case of a call) or sets aside the cash (in the case of a put) that would be required upon exercise. The price paid by the buyer for an option is called a premium. In addition the buyer generally pays a broker a commission. The writer receives a premium, less a commission, at the time the option is written. The cash received is retained by the writer whether or not the option is exercised. A writer of a call option may have to sell the security for a below-market price if the market price rises above the exercise price. A writer of a put option may have to pay an above-market price for the security if its market price decreases below the exercise price. Options can be used to produce incremental earnings, protect gains and facilitate buying and selling securities for investment purposes. The use of options and futures contracts may benefit the fund and its shareholders by improving the fund's liquidity and by helping to stabilize the value of its net assets. BUYING OPTIONS. Put and call options may be used as a trading technique to facilitate buying and selling securities for investment reasons. They also may be used for investment. Options are used as a trading technique to take advantage of any disparity between the price of the underlying security in the securities market and its price on the options market. It is anticipated the -31- trading technique will be utilized only to effect a transaction when the price of the security plus the option price will be as good or better than the price at which the security could be bought or sold directly. When the option is purchased, the fund pays a premium and a commission. It then pays a second commission on the purchase or sale of the underlying security when the option is exercised. For record-keeping and tax purposes, the price obtained on the purchase of the underlying security will be the combination of the exercise price, the premium and both commissions. When using options as a trading technique, commissions on the option will be set as if only the underlying securities were traded. Put and call options also may be held by the fund for investment purposes. Options permit the fund to experience the change in the value of a security with a relatively small initial cash investment. The risk the fund assumes when it buys an option is the loss of the premium. To be beneficial to the fund, the price of the underlying security must change within the time set by the option contract. Furthermore, the change must be sufficient to cover the premium paid, the commissions paid both in the acquisition of the option and in a closing transaction or in the exercise of the option and subsequent sale (in the case of a call) or purchase (in the case of a put) of the underlying security. Even then the price change in the underlying security does not ensure a profit since prices in the option market may not reflect such a change. WRITING COVERED OPTIONS. The fund will write covered options when it feels it is appropriate and will follow these guidelines: 'Underlying securities will continue to be bought or sold solely on the basis of investment considerations consistent with the fund's goal. 'All options written by the fund will be covered. For covered call options if a decision is made to sell the security, the fund will attempt to terminate the option contract through a closing purchase transaction. 'The fund will write options only as permitted under federal or state laws or regulations, such as those that limit the amount of total assets subject to the options. While no limit has been set by the fund, it will conform to the requirements of those states. For example, California limits the writing of options to 50% of the assets of a fund. Net premiums on call options closed or premiums on expired call options are treated as short-term capital gains. Since the fund is taxed as a regulated investment company under the Internal Revenue Code, any gains on options and other securities held less than three months must be limited to less than 30% of its annual gross income. If a covered call option is exercised, the security is sold by the fund. The fund will recognize a capital gain or loss based upon the difference between the proceeds and the security's basis. -32- Options on many securities are listed on options exchanges. If the fund writes listed options, it will follow the rules of the options exchange. Options are valued at the close of the New York Stock Exchange. An option listed on a national exchange, CBOE or NASDAQ will be valued at the last quoted sales price or, if such a price is not readily available, at the mean of the last bid and asked prices. FUTURES CONTRACTS. A futures contract is an agreement between two parties to buy and sell a security for a set price on a future date. They have been established by boards of trade which have been designated contracts markets by the Commodity Futures Trading Commission (CFTC). Futures contracts trade on these markets in a manner similar to the way a stock trades on a stock exchange, and the boards of trade, through their clearing corporations, guarantee performance of the contracts. Currently, there are futures contracts based on such debt securities as long-term U.S. Treasury bonds, Treasury notes, GNMA modified pass-through mortgage-backed securities, three-month U.S. Treasury bills and bank certificates of deposit. While futures contracts based on debt securities do provide for the delivery and acceptance of securities, such deliveries and acceptances are very seldom made. Generally, the futures contract is terminated by entering into an offsetting transaction. An offsetting transaction for a futures contract sale is effected by the fund entering into a futures contract purchase for the same aggregate amount of the specific type of financial instrument and same delivery date. If the price in the sale exceeds the price in the offsetting purchase, the fund immediately is paid the difference and realizes a gain. If the offsetting purchase price exceeds the sale price, the fund pays the difference and realizes a loss. Similarly, closing out a futures contract purchase is effected by the fund entering into a futures contract sale. If the offsetting sale price exceeds the purchase price, the fund realizes a gain, and if the offsetting sale price is less than the purchase price, the fund realizes a loss. At the time a futures contract is made, a good-faith deposit called initial margin is set up within a segregated account at the fund's custodian bank. The initial margin deposit is approximately 1.5% of a contract's face value. Daily thereafter, the futures contract is valued and the payment of variation margin is required so that each day the fund would pay out cash in an amount equal to any decline in the contract's value or receive cash equal to any increase. At the time a futures contract is closed out, a nominal commission is paid, which is generally lower than the commission on a comparable transaction in the cash markets. The purpose of a futures contract, in the case of a portfolio holding long-term debt securities, is to gain the benefit of changes in interest rates without actually buying or selling long- term debt securities. For example, if the fund owned long-term bonds and interest rates were expected to increase, it might enter into futures contracts to sell securities which would have much the same effect as selling some of the long-term bonds it owned. Futures contracts are based on types of debt securities referred to above, which have historically reacted to an increase or decline in interest rates in a fashion similar to the debt securities the fund -33- owns. If interest rates did increase, the value of the debt securities in the portfolio would decline, but the value of the fund's futures contracts would increase at approximately the same rate, thereby keeping the net asset value of the fund from declining as much as it otherwise would have. If, on the other hand, the fund held cash reserves and interest rates were expected to decline, the fund might enter into interest rate futures contracts for the purchase of securities. If short-term rates were higher than long-term rates, the ability to continue holding these cash reserves would have a very beneficial impact on the fund's earnings. Even if short-term rates were not higher, the fund would still benefit from the income earned by holding these short-term investments. At the same time, by entering into futures contracts for the purchase of securities, the fund could take advantage of the anticipated rise in the value of long-term bonds without actually buying them until the market had stabilized. At that time, the futures contracts could be liquidated and the fund's cash reserves could then be used to buy long-term bonds on the cash market. The fund could accomplish similar results by selling bonds with long maturities and investing in bonds with short maturities when interest rates are expected to increase or by buying bonds with long maturities and selling bonds with short maturities when interest rates are expected to decline. But by using futures contracts as an investment tool, given the greater liquidity in the futures market than in the cash market, it might be possible to accomplish the same result more easily and more quickly. Successful use of futures contracts depends on the investment manager's ability to predict the future direction of interest rates. If the investment manager's prediction is incorrect, the fund would have been better off had it not entered into futures contracts. OPTIONS ON FUTURES CONTRACTS. Options give the holder a right to buy or sell futures contracts in the future. Unlike a futures contract, which requires the parties to the contract to buy and sell a security on a set date, an option on a futures contract merely entitles its holder to decide on or before a future date (within nine months of the date of issue) whether to enter into such a contract. If the holder decides not to enter into the contract, all that is lost is the amount (premium) paid for the option. Furthermore, because the value of the option is fixed at the point of sale, there are no daily payments of cash to reflect the change in the value of the underlying contract. However, since an option gives the buyer the right to enter into a contract at a set price for a fixed period of time, its value does change daily and that change is reflected in the net asset value of the fund. RISKS. There are risks in engaging in each of the management tools described above. The risk the fund assumes when it buys an option is the loss of the premium paid for the option. Purchasing options also limits the use of monies that might otherwise be available for long-term investments. The risk involved in writing options on futures contracts the fund owns, or on securities held in its portfolio, is that there could be an increase in the market value of such contracts or securities. If that occurred, the option would be exercised and the asset sold -34- at a lower price than the cash market price. To some extent, the risk of not realizing a gain could be reduced by entering into a closing transaction. The fund could enter into a closing transaction by purchasing an option with the same terms as the one it had previously sold. The cost to close the option and terminate the fund's obligation, however, might be more or less than the premium received when it originally wrote the option. Furthermore, the fund might not be able to close the option because of insufficient activity in the options market. A risk in employing futures contracts to protect against the price volatility of portfolio securities is that the prices of securities subject to futures contracts may not correlate perfectly with the behavior of the cash prices of the fund's portfolio securities. The correlation may be distorted because the futures market is dominated by short-term traders seeking to profit from the difference between a contract or security price and their cost of borrowed funds. Such distortions are generally minor and would diminish as the contract approached maturity. Another risk is that the fund's investment manager could be incorrect in anticipating as to the direction or extent of various interest rate movements or the time span within which the movements take place. For example, if the fund sold futures contracts for the sale of securities in anticipation of an increase in interest rates, and interest rates declined instead, the fund would lose money on the sale. TAX TREATMENT. As permitted under federal income tax laws, the fund intends to identify futures contracts as mixed straddles and not mark them to market, that is, not treat them as having been sold at the end of the year at market value. Such an election may result in the fund being required to defer recognizing losses incurred by entering into futures contracts and losses on underlying securities identified as being hedged against. Federal income-tax treatment of gains or losses from transactions in options on futures contracts and indexes is presently unclear, although the fund's tax advisors currently believe marking to market is not required. Depending on developments, and although no assurance is given, the fund may seek Internal Revenue Service (IRS) rulings clarifying questions concerning such treatment. Certain provisions of the Internal Revenue Code may also limit the fund's ability to engage in futures contracts and related options transactions. For example, at the close of each quarter of the fund's taxable year, at least 50% of the value of its assets must consist of cash, government securities and other securities, subject to certain diversification requirements. Less than 30% of its gross income must be derived from sales of securities held less than three months. The IRS has ruled publicly that an exchange-traded call option is a security for purposes of the 50%-of-assets test and that its issuer is the issuer of the underlying security, not the writer of the option, for purposes of the diversification requirements. In order to avoid realizing a gain within the three-month period, the fund may be required to defer closing out a contract beyond the time -35- when it might otherwise be advantageous to do so. The fund also may be restricted in purchasing put options for the purpose of hedging underlying securities because of applying the short sale holding period rules with respect to such underlying securities. Accounting for futures contracts will be according to generally accepted accounting principles. Initial margin deposits will be recognized as assets due from a broker (the fund's agent in acquiring the futures position). During the period the futures contract is open, changes in value of the contract will be recognized as unrealized gains or losses by marking to market on a daily basis to reflect the market value of the contract at the end of each day's trading. Variation margin payments will be made or received depending upon whether gains or losses are incurred. All contracts and options will be valued at the last-quoted sales price on their primary exchange. WHEN-ISSUED SECURITIES The fund may purchase some securities in advance of when they are issued. Price and rate of interest are set on the date the commitments are given but no payment is made or interest earned until the date the securities are issued, usually within two months, but other terms may be negotiated. The commitment requires the fund to buy the security when it is issued so the commitment is valued daily the same way as owning a security would be valued. The fund designates cash or liquid high-grade debt securities to at least equal the amount of its commitment. Under normal market conditions, the fund does not intend to commit more than 5% of its total assets to these practices. The fund may sell the commitment just like it can sell a security. Frequently, the fund has the opportunity to sell the commitment back to the institution. INVERSE FLOATERS The Fund may invest in securities called "inverse floaters." Inverse floaters are created by underwriters using the interest payments on securities. A portion of the interest received is paid to holders of instruments based on current interest rates for short-term securities. What is left over, less a servicing fee, is paid to holders of the inverse floaters. As interest rates go down, the holders of the inverse floaters receive more income and an increase in the price for the inverse floaters. As interest rates go up, the holders of the inverse floaters receive less income and a decrease in the price for the inverse floaters. -36- APPENDIX C MORTGAGE-BACKED SECURITIES A mortgage pass through certificate is one that represents an interest in a pool, or group, of mortgage loans assembled by the Government National Mortgage Association (GNMA), Federal Home Loan Mortgage Corporation (FHLMC), Federal National Mortgage Association (FNMA) or non-governmental entities. In pass-through certificates, both principal and interest payments, including prepayments, are passed through to the holder of the certificate. Prepayments on underlying mortgages result in a loss of anticipated interest, and the actual yield (or total return) to the fund, which is influenced by both stated interest rates and market conditions, may be different than the quoted yield on certificates. Some U.S. government securities may be purchased on a "when-issued" basis, which means that it may take as long as 45 days after the purchase before the securities are delivered to the fund. STRIPPED MORTGAGE-BACKED SECURITIES. The fund may invest in stripped mortgage-backed securities. Generally, there are two classes of stripped mortgage-backed securities: Interest Only (IO) and Principal Only (PO). IOs entitle the holder to receive distributions consisting of all or a portion of the interest on the underlying pool of mortgage loans or mortgage-backed securities. POs entitle the holder to receive distributions consisting of all or a portion of the principal of the underlying pool of mortgage loans or mortgage-backed securities. The cash flows and yields on IOs and POs are extremely sensitive to the rate of principal payments (including prepayments) on the underlying mortgage loans or mortgage-backed securities. A rapid rate of principal payments may adversely affect the yield to maturity of IOs. A slow rate of principal payments may adversely affect the yield to maturity of POs. If prepayments of principal are greater than anticipated, an investor may incur substantial losses. If prepayments of principal are slower than anticipated, the yield on a PO will be affected more severely than would be the case with a traditional mortgage- backed security. MORTGAGE-BACKED SECURITY SPREAD OPTIONS. The fund may purchase mortgage-backed security (MBS) put spread options and write covered MBS call spread options. MBS spread options are based upon the changes in the price spread between a specified mortgage-backed security and a like-duration Treasury security. MBS spread options are traded in the OTC market and are of short duration, typically one to two months. The fund would buy or sell covered MBS call spread options in situations where mortgage-backed securities are expected to under perform like-duration Treasury securities. -37- APPENDIX D DOLLAR-COST AVERAGING A technique that works well for many investors is one that eliminates random buy and sell decisions. One such system is dollar-cost averaging. Dollar-cost averaging involves building a portfolio through the investment of fixed amounts of money on a regular basis regardless of the price or market condition. This may enable an investor to smooth out the effects of the volatility of the financial markets. By using this strategy, more shares will be purchased when the price is low and less when the price is high. As the accompanying chart illustrates, dollar-cost averaging tends to keep the average price paid for the shares lower than the average market price of shares purchased, although there is no guarantee. While this does not ensure a profit and does not protect against a loss if the market declines, it is an effective way for many shareholders who can continue investing through changing market conditions to accumulate shares in a fund to meet long term goals.
DOLLAR-COST AVERAGING - ------------------------------------------------------------------- REGULAR MARKET PRICE SHARES INVESTMENT OF A SHARE ACQUIRED - ------------------------------------------------------------------- $100 $ 6.00 16.7 100 4.00 25.0 100 4.00 25.0 100 6.00 16.7 100 5.00 20.0 ---- ------ ----- $500 $25.00 103.4
AVERAGE MARKET PRICE OF A SHARE OVER 5 PERIODS: $5.00 ($25.00 DIVIDED BY 5). THE AVERAGE PRICE YOU PAID FOR EACH SHARE: $4.84 ($500 DIVIDED BY 103.4). -38- 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, 1994, 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, 1994, and the financial highlights for each of the years in the ten-year period ended August 31, 1994. 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, 1994, 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, 1994, and the financial highlights for the periods stated in the first paragraph above, in conformity with generally accepted accounting principles. /s/ KPMG Peat Marwick LLP KPMG Peat Marwick LLP Minneapolis, Minnesota October 7, 1994
Financial statements Statement of assets and liabilities IDS Bond Fund, Inc. Aug. 31, 1994 _____________________________________________________________________________________________________________ Assets _____________________________________________________________________________________________________________ Investments in securities, at value (Note 1) (identified cost $2,266,569,898) $2,212,381,765 Cash in bank on demand deposit 7,601,514 Receivable for investment securities sold 2,251,760 Dividends and accrued interest receivable 41,878,586 _____________________________________________________________________________________________________________ Total assets 2,264,113,625 _____________________________________________________________________________________________________________ Liabilities _____________________________________________________________________________________________________________ Dividends payable to shareholders 2,393,890 Payable for investment securities purchased 10,437,813 Payable upon return of securities loaned (Note 5) 820,000 Accrued investment management and services fee 1,062,185 Accrued distribution fee 72,928 Accrued transfer agency fee 187,665 Other accrued expenses 465,960 _____________________________________________________________________________________________________________ Total liabilities 15,440,441 _____________________________________________________________________________________________________________ Net assets applicable to outstanding capital stock $2,248,673,184 _____________________________________________________________________________________________________________ Represented by _____________________________________________________________________________________________________________ Capital stock -- authorized 10,000,000,000 shares of $.01 par value; outstanding 458,346,766 shares $ 4,583,468 Additional paid-in capital 2,250,003,939 Undistributed net investment income 1,179,366 Accumulated net realized gain (Note 1) 47,094,544 Unrealized depreciation (54,188,133) _____________________________________________________________________________________________________________ Total -- representing net assets applicable to outstanding capital stock $2,248,673,184 _____________________________________________________________________________________________________________ Net asset value per share of outstanding capital stock $ 4.91 _____________________________________________________________________________________________________________
See accompanying notes to financial statements.
Financial statements Statement of operations IDS Bond Fund, Inc. Year ended Aug. 31, 1994 _____________________________________________________________________________________________________________ Investment income _____________________________________________________________________________________________________________ Income: Interest $198,702,343 Dividends (net of foreign taxes withheld of $3,485) 1,828,425 _____________________________________________________________________________________________________________ Total income 200,530,768 _____________________________________________________________________________________________________________ Expenses (Note 2): Investment management and services fee 12,577,197 Distribution fee 796,190 Transfer agency fee 2,030,671 Compensation of directors 56,140 Compensation of officers 19,071 Custodian fees 196,497 Postage 325,223 Registration fees 99,669 Reports to shareholders 56,753 Audit fees 35,000 Administrative 36,730 Other 33,082 _____________________________________________________________________________________________________________ Total expenses 16,262,223 _____________________________________________________________________________________________________________ Investment income -- net 184,268,545 _____________________________________________________________________________________________________________ Realized and unrealized gain (loss) -- net _____________________________________________________________________________________________________________ Net realized gain on security and foreign currency transactions (including gain of $3,928 from foreign currency transactions)(Note 3) 44,917,771 Net realized gain on closed interest rate futures contracts 384,800 Net realized gain on closed option contracts written (Note 6) 238,688 _____________________________________________________________________________________________________________ Net realized gain on investments and foreign currency 45,541,259 Net change in unrealized appreciation or depreciation (279,119,373) _____________________________________________________________________________________________________________ Net loss on investments and foreign currency (233,578,114) _____________________________________________________________________________________________________________ Net decrease in net assets resulting from operations $ (49,309,569) _____________________________________________________________________________________________________________
See accompanying notes to financial statements.
Financial statements Statements of changes in net assets IDS Bond Fund, Inc. Year ended Aug. 31, _____________________________________________________________________________________________________________ Operations and distributions 1994 1993 _____________________________________________________________________________________________________________ Investment income -- net $ 184,268,545 $ 177,611,397 Net realized gain on investments and foreign currency 45,541,259 78,037,378 Net change in unrealized appreciation or depreciation (279,119,373) 86,596,891 _____________________________________________________________________________________________________________ Net increase (decrease) in net assets resulting from operations (49,309,569) 342,245,666 _____________________________________________________________________________________________________________ Distributions to shareholders from: Net investment income (184,867,231) (179,157,233) Net realized gains on investments (27,971,600) -- Excess distribution of realized gain (Note 1) (29,043) (241,965) _____________________________________________________________________________________________________________ Total distributions (212,867,874) (179,399,198) _____________________________________________________________________________________________________________ Capital share transactions _____________________________________________________________________________________________________________ Proceeds from sales of 62,340,332 and 64,846,401 shares (Note 2) 323,953,867 337,676,782 Net asset value of 26,592,240 and 20,971,898 shares issued in reinvestment of distributions 138,748,551 109,048,762 Payments for redemptions of 85,276,606 and 56,531,733 shares (441,905,072) (293,623,694) _____________________________________________________________________________________________________________ Increase in net assets from capital share transactions representing net addition of 3,655,966 and 29,286,566 shares 20,797,346 153,101,850 _____________________________________________________________________________________________________________ Total increase (decrease) in net assets (241,380,097) 315,948,318 Net assets at beginning of year 2,490,053,281 2,174,104,963 _____________________________________________________________________________________________________________ Net assets at end of year (including undistributed net investment income of $1,179,366 and $1,778,052) $2,248,673,184 $2,490,053,281 _____________________________________________________________________________________________________________ See accompanying notes to financial statements.
Notes to financial statements IDS Bond Fund, Inc. ______________________________________________________________________________ 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. 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. Options 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 able to enter into a closing transaction if a liquid secondary market does not exist. Notes to financial statements IDS Bond Fund, Inc. ______________________________________________________________________________ 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. Notes to financial statements IDS Bond Fund, Inc. ______________________________________________________________________________ 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. Securities purchased on a when-issued basis Delivery and payement for securities that have been purchase by the fund on a forward-commitment or when- issued basis can take place one month or more after the transaction date. During this period, such securities are subject to market fluctuations, and they may effect the fund's gross assets the same as owned securities. As of Aug. 31, 1994 the fund had entered into outstanding when-issued or forward commitments of $10, 437,813. Notes to financial statements IDS Bond Fund, Inc. ______________________________________________________________________________ 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. 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 and interest income, including level-yield amortization of premium and discount is accrued daily. Notes to financial statements IDS Bond Fund, Inc. ______________________________________________________________________________ 2. Expenses and sales charges Under terms of an agreement dated Nov. 14, 1991, the fund pays IDS Financial Corporation (IDS) a fee for managing its investments, record-keeping and other specified services. The fee is 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. The fund also pays IDS 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 is reduced by earnings on monies pending shareholder redemptions. IDS will assume and pay any expenses (except taxes and brokerage commissions) that exceed the most restrictive applicable state expense limitation. Sales charges by IDS Financial Services Inc. for distributing fund shares were $9,286,207 for the year ended Aug. 31, 1994. 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 $24,776 for the year ended Aug. 31, 1994. ______________________________________________________________________________ 3. Securities transactions Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $913,108,478 and $1,076,717,521, respectively, for the year ended Aug. 31, 1994. Realized gains and losses are determined on an identified cost basis. Notes to financial statements IDS Bond Fund, Inc. ______________________________________________________________________________ 4. Illiquid securities At Aug. 31, 1994 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, 1994 was $5,614,697 which represents 0.2% 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, 1994, securities valued at $820,000 were on loan to brokers. For collateral, the fund received $820,000 in cash. Income from securities lending amounted to $83,386, for the year ended Aug. 31, 1994. 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. Option contracts written The number of contracts and premium amounts associated with call options written is as follows: Year ended Aug. 31, 1994 Contracts Premium ___________________________________________________ Balance Aug. 31, 1993 -- $ -- Opened 500 238,688 Expired (500) (238,688) ___________________________________________________ Balance Aug. 31, 1994 -- $ -- ______________________________________________________________________________ 7. Financial highlights "Financial highlights" showing per share data and selected ratio information is presented on page 5 of the prospectus.
Investments in securities IDS Bond Fund, Inc. (Percentages represent value of Aug. 31, 1994 investments compared to net assets) _____________________________________________________________________________________________________________________________ Bonds (87.0%) _____________________________________________________________________________________________________________________________ Issuer Coupon Maturity Principal Value(a) rate year amount _____________________________________________________________________________________________________________________________ U.S. government obligation (0.5%) Govt Trust Certs Israel 9.25 % 1994-01 $11,100,000 $ 12,126,750 _____________________________________________________________________________________________________________________________ Mortgage-backed securities (9.4%) Federal Home Loan Bank Notes 8.00 2014 10,000,000 9,962,500 Federal Home Loan Mtge Corp Collateralized Mtge Obligation 7.00 2022 10,000,000 8,681,250 Collateralized Mtge Obligation 8.50 2022 10,000,000 10,171,900 Inverse Floater 6.011 2000 4,928,962 (b) 3,923,146 Federal Natl Mtge Assn 6.00 1994-24 50,500,000 44,881,875 6.50 1994-24 96,767,117 89,494,467 8.50 1994-23 9,483,293 9,664,068 9.00 1994-09 5,210 5,414 9.00 1994-24 10,000,000 (c) 10,382,800 Collateralized Mtge Obligation Inverse Floater 4.256 2023 450,569 (b) 180,228 Collateralized Mtge Obligation Trust Series Z 7.00 2019 16,300,663 (d) 14,469,284 Prudential Bache Collateralized Mtge Obligation Trust 7.965 2019 9,022,717 8,701,058 ______________ Total 210,517,990 ______________________________________________________________________________________________________________________________ Financial (10.0%) Banks and savings & loans (5.0%) BankAmerica Sub Nts 7.50 2002 15,000,000 14,700,000 Bankers Trust Sub Deb 7.50 2002 10,000,000 9,912,500 Barclays NA Capital 9.75 2021 10,000,000 11,112,500 Citicorp Sub Secured Nts 8.00 2003 20,000,000 20,175,000 Continental Bank 7.875 2003 6,000,000 5,985,000 CoreStates Capital Gtd Sub Nts 9.375 2003 10,000,000 10,975,000 See accompanying notes to investment in securities. Investments in securities IDS Bond Fund, Inc. (Percentages represent value of Aug. 31, 1994 investments compared to net assets) _____________________________________________________________________________________________________________________________ Bonds (continued) _____________________________________________________________________________________________________________________________ Issuer Coupon Maturity Principal Value(a) rate year amount _____________________________________________________________________________________________________________________________ Marine Midland Banks Sub Cap Nts 8.625% 1997 $ 6,000,000 $ 6,187,500 Meridian Bancorp Sub Deb 7.875 2002 10,400,000 10,270,000 NationsBank Sub Nts 6.50 2003 12,000,000 10,950,000 Southbury Finance 7.75 1999 12,000,000 12,120,000 ______________ Total 112,387,500 _____________________________________________________________________________________________________________________________ Financial services (2.6%) Camden Property Trust 7.33 2001 2,000,000 1,985,000 Corporate Property Investors 7.05 2003 5,000,000 (e) 4,662,500 7.18 2013 5,000,000 (e) 4,600,000 Developers Dividend Realty 7.00 1999 2,500,000 2,465,625 First Union Sr Nts 8.875 2003 7,000,000 5,993,750 General Electric Capital Reset Nt 8.65 1996 14,750,000 (f) 15,303,125 Goldman Sachs 7.125 2003 10,000,000 (e) 9,337,500 Liberty Property Trust Cv 8.00 2001 2,000,000 2,017,500 Malan Realty Investors Cv 9.50 2004 3,500,000 3,360,000 Property Trust Amer 7.50 2014 10,000,000 9,087,500 ______________ Total 58,812,500 _____________________________________________________________________________________________________________________________ Insurance (2.4%) Americo Life Sr Sub Nts 9.25 2005 5,000,000 4,418,750 General Amer Life 7.625 2024 5,000,000 (e) 4,475,000 Leucadia Natl 7.75 2013 7,780,000 6,875,575 Cv 5.25 2003 4,900,000 4,312,000 Sr Sub Nts 10.375 2002 5,250,000 5,558,438 NAC Re Cv 5.25 2002 3,000,000 (e) 2,568,750 See accompanying notes to investments in securities. Investments in securities IDS Bond Fund, Inc. (Percentages represent value of Aug. 31, 1994 investments compared to net assets) _____________________________________________________________________________________________________________________________ Bonds (continued) _____________________________________________________________________________________________________________________________ Issuer Coupon Maturity Principal Value(a) rate year amount _____________________________________________________________________________________________________________________________ Nationwide Mutual 7.50 % 2024 $ 4,000,000 (e) $ 3,495,000 New England Mutual Credit Sensitive Nts 7.875 2024 10,000,000 (e) 8,525,000 Principal Mutual 8.00 2044 10,000,000 (e) 8,887,500 Re Capital Cv 5.50 2000 2,000,000 1,902,500 USF & G Zero Coupon Cv 4.50 2009 3,900,000 (g) 1,930,500 USLICO Cv 8.50 2014 1,200,000 1,233,000 ______________ Total 54,182,013 _____________________________________________________________________________________________________________________________ Industrial (37.4%) Aerospace & defense (1.9%) Allied Zero Coupon 9.57 1996 5,000,000 (g) 4,575,000 Allison Engine Acquisition Sr Sub Nts 10.00 2003 2,000,000 1,915,000 Boeing 8.75 2031 15,000,000 15,918,750 Fairchild Inds Sr Secured Nts 12.25 1999 5,000,000 4,856,250 Rohr Industries Cv 7.75 2004 2,500,000 2,975,000 Sequa Sr Sub Nt 9.375 2003 3,000,000 2,748,750 United Technologies 8.875 2019 10,000,000 10,637,500 ______________ Total 43,626,250 _____________________________________________________________________________________________________________________________ Airlines (2.2%) AMR 9.50 2001 5,000,000 5,212,500 9.75 2000 7,400,000 7,871,750 9.75 2021 2,000,000 1,945,000 9.80 2021 10,000,000 9,775,000 10.00 2021 2,000,000 1,992,500 Delta Air Lines 10.125 2010 10,000,000 10,000,000 10.375 2022 3,700,000 3,750,875 United Air Lines 10.02 2014 10,000,000 9,648,700 ______________ Total 50,196,325 _____________________________________________________________________________________________________________________________ See accompanying notes to investments in securities. Investments in securities IDS Bond Fund, Inc. (Percentages represent value of Aug. 31, 1994 investments compared to net assets) _____________________________________________________________________________________________________________________________ Bonds (continued) _____________________________________________________________________________________________________________________________ Issuer Coupon Maturity Principal Value(a) rate year amount _____________________________________________________________________________________________________________________________ Automotive & related (3.2%) Auburn Hills Trust Gtd Exchangeable Certs 12.375% 2020 $ 7,000,000 $ 9,590,000 Chrysler Financial Sr Reset Nts 10.34 2008 10,000,000 (f) 10,550,000 Clevite Inds Sub Deb 12.375 2001 5,000,000 (h) 3,000,000 Exide 10.75 2002 6,000,000 6,292,500 Ford Motor 8.875 2022 20,000,000 21,300,000 General Motors 9.625 2000 20,000,000 21,900,000 ______________ Total 72,632,500 _____________________________________________________________________________________________________________________________ Beverages & tobacco (0.9%) Dr. Pepper/Seven-Up Zero Coupon 11.50 1997 4,929,000 (g) 3,967,845 RJR Nabisco SF Deb 8.375 2017 15,250,000 13,839,375 ______________ Total 17,807,220 _____________________________________________________________________________________________________________________________ Building materials (2.0%) Building Material Zero Coupon 11.75 2004 6,000,000 (e,g) 3,172,500 Emhart SF Deb 9.25 2016 6,025,000 6,228,344 Georgia-Pacific Credit Sensitive Deb 9.95 2002 7,000,000 7,857,500 Nortek Sr Sub Nts 9.875 2004 5,000,000 4,568,750 NVR Sr Nts 11.00 2003 5,000,000 4,775,000 Owens-Corning Fiberglas 9.375 2012 4,900,000 5,083,750 Pulte Sr Nts 7.00 2003 7,700,000 6,978,125 Southdown Sr Sub Nts 14.00 2001 4,000,000 4,530,000 Toll Cv 4.75 2004 2,500,000 1,975,000 ______________ Total 45,168,969 _____________________________________________________________________________________________________________________________ See accompanying notes to investments in securities. Investments in securities IDS Bond Fund, Inc. (Percentages represent value of Aug. 31, 1994 investments compared to net assets) _____________________________________________________________________________________________________________________________ Bonds (continued) _____________________________________________________________________________________________________________________________ Issuer Coupon Maturity Principal Value(a) rate year amount _____________________________________________________________________________________________________________________________ Chemicals (1.3%) General Chemical Sr Sub Nts 9.25 % 2003 $ 7,000,000 $ 6,518,750 Goodrich (BF) 9.625 2001 7,000,000 7,385,000 Huntsman 1st Mtge 11.00 2004 5,750,000 5,994,375 Praxair 8.70 2022 5,000,000 5,093,750 Uniroyal Chemical Sr Nts 10.50 2002 4,900,000 4,961,250 ______________ Total 29,953,125 _____________________________________________________________________________________________________________________________ Communications equipment (0.7%) Comcast Cellular Zero Coupon 9.45 2000 10,000,000 (g) 6,087,500 Dial Call Zero Coupon 12.25 1999 5,000,000 (g) 3,075,000 NEXTEL Communications Zero Coupon Sr Nt 9.75 1999 10,000,000 (g) 5,350,000 ______________ Total 14,512,500 _____________________________________________________________________________________________________________________________ Computers & office equipment (0.4%) Conner Peripherals Cv 6.50 2002 5,000,000 4,087,500 Data General SF Deb 8.375 2002 4,700,000 4,124,250 ______________ Total 8,211,750 _____________________________________________________________________________________________________________________________ Electronics (0.5%) Berg Electronics 11.375 2003 5,000,000 5,025,000 Reliance Electric 6.80 2003 6,000,000 5,617,500 ______________ Total 10,642,500 _____________________________________________________________________________________________________________________________ Energy (2.8%) Atlantic Richfield 9.125 2011 9,000,000 9,731,250 Cross Timbers Oil Cv 5.25 2003 1,000,000 840,000 Oryx Energy 9.50 1999 4,000,000 3,960,000 See accompanying notes to investments in securities. Investments in securities IDS Bond Fund, Inc. (Percentages represent value of Aug. 31, 1994 investments compared to net assets) _____________________________________________________________________________________________________________________________ Bonds (continued) _____________________________________________________________________________________________________________________________ Issuer Coupon Maturity Principal Value(a) rate year amount _____________________________________________________________________________________________________________________________ PDV Amer 7.875% 2003 $10,000,000 $ 8,300,000 Texaco Capital Gtd Deb 8.625 2032 10,000,000 10,575,000 Triton Energy Zero Coupon 9.75 1996 5,000,000 (g) 3,781,250 USX 8.50 2023 8,250,000 7,755,000 9.375 2022 17,500,000 18,003,125 ______________ Total 62,945,625 _____________________________________________________________________________________________________________________________ Energy equipment & services (0.4%) McDermott 9.375 2002 4,000,000 4,325,000 OPI Intl Gtd Sr Nts 12.875 2002 5,000,000 5,718,750 ______________ Total 10,043,750 _____________________________________________________________________________________________________________________________ Food (0.3%) Specialty Foods Sr Nt 10.25 2001 7,500,000 (e) 6,675,000 _____________________________________________________________________________________________________________________________ Health care (0.7%) Alza Zero Coupon 5.25 2014 7,000,000 (g) 2,607,500 Chiron Cv 1.90 2000 2,500,000 1,937,500 Healthtrust Sub Deb 8.75 2005 4,000,000 3,680,000 Sub Nts 10.75 2002 7,000,000 7,297,500 ______________ Total 15,522,500 _____________________________________________________________________________________________________________________________ Health care services (1.1%) Amer Medical Intl Sr Nts 11.00 2000 7,000,000 7,428,750 Charter Medical Sr Sub 11.25 2004 5,000,000 (e) 5,175,000 Foundation Health Sr Nts 7.75 2003 5,650,000 5,431,062 Hillhaven Sr Sub Nts 10.125 2001 7,000,000 7,026,250 ______________ Total 25,061,062 _____________________________________________________________________________________________________________________________ See accompanying notes to investments in securities. Investments in securities IDS Bond Fund, Inc. (Percentages represent value of Aug. 31, 1994 investments compared to net assets) _____________________________________________________________________________________________________________________________ Bonds (continued) _____________________________________________________________________________________________________________________________ Issuer Coupon Maturity Principal Value(a) rate year amount _____________________________________________________________________________________________________________________________ Industrial equipment & services (0.5%) Amer Standard Sr Deb 11.375% 2004 $ 7,000,000 $ 7,420,000 Mascotech Cv 4.50 2003 5,000,000 3,656,250 ______________ Total 11,076,250 _____________________________________________________________________________________________________________________________ Leisure time & entertainment (2.1%) Bally's Grand 1st Mtge 10.375 2003 5,000,000 4,325,000 Bally's Park Place Funding 1st Mtge 9.25 2004 5,000,000 4,200,000 Bell Sports 4.25 2000 2,500,000 1,812,500 Caesars World Sr Sub Nts 8.875 2002 6,000,000 5,857,500 Disney (Walt) Sr Deb 7.55 2093 10,000,000 8,950,000 GB Property Funding 1st Mtge 10.875 2004 5,000,000 3,875,000 Kloster Cruise Sr Secured Nts 13.00 2003 7,000,000 7,105,000 MGM Grand Hotel Finance 1st Mtge 11.75 1999 10,000,000 10,637,500 ______________ Total 46,762,500 _____________________________________________________________________________________________________________________________ Media (4.0%) Ackerley Communication Sr Secured Nts 10.75 2003 4,000,000 (e) 3,840,000 Adelphia Communications Sr Deb 11.875 2004 4,000,000 3,940,000 Sr Nts 12.50 2002 6,000,000 5,992,500 Cablevision Systems Sr Sub Deb 10.75 2004 4,000,000 4,095,000 Comcast Cv 1.125 2007 5,000,000 2,143,750 Continental Cablevision Sr Deb 8.875 2005 5,000,000 4,600,000 Dimac Direct 12.00 2003 4,000,000 4,200,000 News Amer Holdings 7.50 2000 5,000,000 4,875,000 8.875 2023 7,000,000 6,755,000 9.125 1999 5,000,000 5,187,500 See accompanying notes to investments in securities. Investments in securities IDS Bond Fund, Inc. (Percentages represent value of Aug. 31, 1994 investments compared to net assets) _____________________________________________________________________________________________________________________________ Bonds (continued) _____________________________________________________________________________________________________________________________ Issuer Coupon Maturity Principal Value(a) rate year amount _____________________________________________________________________________________________________________________________ Outdoor Systems Sr Nts 10.75 % 2003 $ 4,000,000 $ 3,780,000 Panamsat Sr Nts 9.75 2000 3,000,000 3,003,750 Robin Media Group 11.125 1997 5,000,000 4,843,750 Time Warner Zero Coupon Cv 6.59 2012 6,650,000 (g) 2,053,187 Time Warner Entertainment 8.375 2003 25,000,000 22,125,000 Turner Broadcasting Sr Nts 8.375 2013 10,000,000 8,600,000 ______________ Total 90,034,437 _____________________________________________________________________________________________________________________________ Metals (0.7%) Kaiser Aluminum & Chemical Sr Nts 9.875 2002 4,000,000 3,730,000 Magma Copper Sr Sub Nts 12.00 2001 10,000,000 11,050,000 ______________ Total 14,780,000 _____________________________________________________________________________________________________________________________ Multi-industry conglomerates (1.3%) Albany Intl Cv 5.25 2002 4,250,000 3,750,625 Boc Group Sr Nts 8.73 1996 6,000,000 (e) 6,249,000 Coltec Inds Sr Nts 9.75 2000 7,000,000 7,070,000 Mark IV Inds Sr Sub Nts 8.75 2003 8,000,000 7,470,000 Talley Inds Zero Coupon Sr Disc Deb 12.25 1998 1,500,000 (g) 811,875 Talley Mfg & Technology Sr Nts 10.75 2003 4,000,000 3,745,000 ______________ Total 29,096,500 _____________________________________________________________________________________________________________________________ See accompanying notes to investments in securities. Investments in securities IDS Bond Fund, Inc. (Percentages represent value of Aug. 31, 1994 investments compared to net assets) _____________________________________________________________________________________________________________________________ Bonds (continued) _____________________________________________________________________________________________________________________________ Issuer Coupon Maturity Principal Value(a) rate year amount _____________________________________________________________________________________________________________________________ Paper & packaging (5.0%) Container Corp Amer Sr Nts 9.75 % 2003 $ 5,000,000 $ 4,825,000 Sr Nts 10.50 2002 5,000,000 5,125,000 Sub Deb 14.00 2001 5,000,000 5,512,500 Crown Packaging Zero Coupon Sr Sub Nts 12.25 2000 5,000,000 (g) 2,487,500 Federal Paper Board 10.00 2011 10,000,000 11,062,500 Fort Howard 11.00 2002 9,489,694 9,632,040 Sr Sub Nts 9.00 2006 2,500,000 2,168,750 Gaylord Container Sr Nts 11.50 2001 5,000,000 5,106,250 Intl Paper 5.125 2012 9,000,000 6,525,000 Malette Sr Sub Nt 12.25 2004 4,000,000 4,055,000 Owens-Illinois Sr Deb 11.00 2003 15,000,000 16,050,000 Plastic Containers Sr Sec Nts 10.75 2001 4,000,000 4,025,000 Pope & Talbot 8.375 2013 8,000,000 7,550,000 Repap Wisconsin Sr Sec Nts 9.25 2002 3,500,000 3,049,375 Riverwood Intl Cv 6.75 2003 2,500,000 (e) 2,784,375 Sr Nts 10.75 2000 7,000,000 7,306,250 Scotia Pacific Holding 7.95 2015 4,724,825 4,506,302 Silgan Sr Sub Deb 11.75 2002 7,000,000 7,227,500 Stone Container Sr Nt 12.625 1998 3,000,000 3,142,500 ______________ Total 112,140,842 _____________________________________________________________________________________________________________________________ Restaurants & lodging (0.5%) Family Restaurant Sr Nts 9.75 2002 2,700,000 2,416,500 Hammons (John Q) Hotel 1st Mtge 8.875 2004 7,000,000 6,221,250 Trump Taj Mahal Pay-in-Kind -- 1999 5,081,340 3,607,751 ______________ Total 12,245,501 _____________________________________________________________________________________________________________________________ See accompanying notes to investments in securities. Investments in securities IDS Bond Fund, Inc. (Percentages represent value of Aug. 31, 1994 investments compared to net assets) _____________________________________________________________________________________________________________________________ Bonds (continued) _____________________________________________________________________________________________________________________________ Issuer Coupon Maturity Principal Value(a) rate year amount _____________________________________________________________________________________________________________________________ Retail (3.2%) Eckerd (Jack) Sr Sub Nts 9.25 % 2004 $ 3,000,000 $ 2,966,250 Sub Deb 11.125 2001 3,205,000 3,293,137 Eye Care Center 12.00 2003 5,000,000 4,350,000 Food 4 Less Supermarkets Zero Coupon 15.25 1997 5,000,000 (g) 3,593,750 General Host Sr Nts 11.50 2002 3,250,000 3,010,312 Grand Union Sr Nts 11.25 2000 10,000,000 9,300,000 Grand Union Capital Zero Coupon 15.00 1999 10,000,000 (g) 2,000,000 Kroger Sr Sub Deb 9.875 2002 3,750,000 3,862,500 Levitz Furniture Sr Nts 12.375 1997 5,000,000 5,306,250 Musicland Group Sr Sub Nts 9.00 2003 4,000,000 3,765,000 Pathmark Stores Sr Sub Nts 9.625 2003 5,000,000 4,500,000 Penn Traffic Sr Nts 8.625 2003 5,000,000 4,600,000 Sr Sub Nts 9.625 2005 7,000,000 6,475,000 Purity Supreme 11.75 1999 4,000,000 3,680,000 Ralphs Grocery Sr Sub Nts 10.25 2002 7,000,000 6,973,750 Super Rite Foods Sr Sub Nts 10.625 2002 5,000,000 4,987,500 ______________ Total 72,663,449 _____________________________________________________________________________________________________________________________ Soaps & cosmetics (0.5%) Revlon Consumer Products Sr Sub Nts 10.50 2003 5,000,000 4,112,500 Sweetheart Cup Sr Sub Nts 9.625 2000 6,500,000 6,231,875 ______________ Total 10,344,375 _____________________________________________________________________________________________________________________________ Textiles & apparel (0.7%) Dominion Textiles Sr Nt 8.875 2003 7,000,000 6,492,500 See accompanying notes to investments in securities. Investments in securities IDS Bond Fund, Inc. (Percentages represent value of Aug. 31, 1994 investments compared to net assets) _____________________________________________________________________________________________________________________________ Bonds (continued) _____________________________________________________________________________________________________________________________ Issuer Coupon Maturity Principal Value(a) rate year amount _____________________________________________________________________________________________________________________________ Synthetic Inds Sr Sub Deb 12.75 % 2002 $ 4,700,000 $ 5,081,875 WestPoint Stevens Sr Nts 8.75 2001 5,000,000 4,631,250 ______________ Total 16,205,625 _____________________________________________________________________________________________________________________________ Miscellaneous (0.5%) ECM Funding LP 11.918 2002 3,032,807 (i) 3,336,088 EIP Funding 10.25 2012 4,000,000 3,935,000 Kinderkare Learning Center 10.375 2001 3,000,000 3,007,500 ______________ Total 10,278,588 _____________________________________________________________________________________________________________________________ Transportation (--%) Interpool Cv 5.25 2018 500,000 381,250 _____________________________________________________________________________________________________________________________ Utilities (16.6%) Electric (9.9%) Arizona Public Service 1st Mtge 8.00 2025 5,800,000 5,263,500 1st Mtge 8.75 2024 6,000,000 5,887,500 Sale Lease-Backed Obligation 8.00 2015 8,956,000 8,463,420 Cajun Electric Power Cooperative Mtge Trust 8.92 2019 5,000,000 5,456,250 Commonwealth Edison 1st Mtge 8.00 2023 10,000,000 9,012,500 1st Mtge 8.375 2023 10,000,000 9,350,000 1st Mtge 9.75 2020 10,000,000 10,275,000 EUA Power Pay-in-Kind -- 1992 2,766,300 (h) 276,630 Pay-in-Kind -- 1993 5,000,000 (h) 500,000 First Palo Verde Funding 10.15 2016 6,000,000 5,827,500 10.30 2014 4,500,000 4,365,000 Long Island Lighting 9.00 2022 13,000,000 11,131,250 Gen Ref Mtge 9.625 2024 25,770,000 24,578,138 Louisiana Power & Light 1st Mtge 10.125 2020 3,500,000 3,753,750 Louisiana Power & Light Waterford Sale Lease-Backed Obligation 10.30 2005 4,998,000 5,266,642 10.67 2017 12,000,000 12,465,000 See accompanying notes to investments in securities. Investments in securities IDS Bond Fund, Inc. (Percentages represent value of Aug. 31, 1994 investments compared to net assets) _____________________________________________________________________________________________________________________________ Bonds (continued) _____________________________________________________________________________________________________________________________ Issuer Coupon Maturity Principal Value(a) rate year amount _____________________________________________________________________________________________________________________________ Midland Cogeneration Venture 11.75 % 2005 $ 7,900,000 $ 8,048,125 Sub Secured Sale Lease-Backed Obligation 10.33 2002 7,033,383 6,857,548 Lease-Backed Obligation 10.33 2002 1,893,357 (e) 1,846,023 North Atlantic Energy 1st Mtge 9.05 2002 7,000,000 6,842,500 Pacific Gas & Electric 1st Ref 8.25 2022 10,000,000 9,737,500 RGS Funding Sale Lease-Backed Obligation 9.82 2022 9,942,468 10,700,581 San Diego Gas & Electric 1st Mtge 9.625 2020 10,800,000 12,325,500 Sithe Independant Funding 8.50 2007 7,500,000 7,293,750 9.00 2013 2,700,000 2,686,500 Texas-New Mexico Power 1st Mtge 9.25 2000 3,000,000 3,003,750 Secured Deb 10.75 2003 5,000,000 5,031,250 Texas Utilities Electric 1st Collateral Trust 9.75 2021 5,000,000 5,331,250 1st Mtge 7.625 2025 10,000,000 8,925,000 Secured Facility Bond 9.45 2005 4,236,000 4,617,240 Tucson Electric Power 1st Mtge 8.50 2009 7,000,000 7,262,500 ______________ Total 222,381,097 ______________________________________________________________________________________________________________________________ Gas (4.1%) Coastal Sr Deb 9.75 2003 16,900,000 18,125,250 Sr Nts 10.375 2000 12,000,000 13,335,000 Equitable Resources 7.50 1999 5,000,000 5,043,750 Questar Pipeline 9.375 2021 5,000,000 5,418,750 Southern California Gas 1st Mtge 7.375 2023 6,900,000 6,149,625 Southwest Gas 9.75 2002 7,900,000 8,107,375 Tenneco 9.00 2012 9,000,000 9,461,250 Tennessee Gas Pipeline 6.00 2011 3,000,000 2,268,750 Texas Gas Transmission 9.625 1997 10,000,000 10,275,000 Transco Energy 9.875 2020 4,800,000 4,740,000 Transcontinental Gas Pipline 8.875 2002 9,000,000 9,067,500 ______________ Total 91,992,250 _____________________________________________________________________________________________________________________________ See accompanying notes to investments in securities. Investments in securities IDS Bond Fund, Inc. (Percentages represent value of Aug. 31, 1994 investments compared to net assets) _____________________________________________________________________________________________________________________________ Bonds (continued) _____________________________________________________________________________________________________________________________ Issuer Coupon Maturity Principal Value(a) rate year amount _____________________________________________________________________________________________________________________________ Telephone & other (2.6%) Ameritech Capital Funding Gtd Deb 9.10 % 2016 $12,000,000 $ 13,185,000 GTE 10.25 2020 7,000,000 8,155,000 New York Tel 9.375 2031 15,000,000 15,693,750 Pacific Bell 6.625 2034 10,000,000 8,062,500 7.375 2043 10,000,000 8,887,500 U S WEST Communications 8.875 2031 5,000,000 5,187,500 ______________ Total 59,171,250 _____________________________________________________________________________________________________________________________ Foreign (13.1%)(j) ABN Amro (U.S. Dollar) 7.75 2023 9,000,000 8,460,000 Agnico Eagle Mines (U.S. Dollar) Cv 3.50 2004 2,900,000 2,450,500 Austria Republic Euro (U.S. Dollar) 10.00 1998 5,000,000 5,462,500 Avenor (U.S. Dollar) 9.375 2004 6,000,000 5,677,500 Bacnotan Consolidated Inds (U.S. Dollar) Cv 5.50 2004 2,500,000 (e) 2,437,500 Banca Italy N.Y. (U.S. Dollar) 8.25 2007 6,200,000 6,192,250 Banco de Galicia (U.S. Dollar) Cv 7.00 2002 2,500,000 2,612,500 Banco Nacional de Comercia (U.S. Dollar) 7.25 2004 9,000,000 7,751,250 Dart Kraft Euro (U.S. Dollar) 7.75 1998 8,000,000 8,160,000 Doman Inds (U.S. Dollar) 8.75 2004 5,000,000 4,425,000 Ford Capital (U.S. Dollar) 9.50 2010 18,350,000 20,391,438 Goldlions Euro (U.S. Dollar) 4.875 1999 2,750,000 (e) 2,158,750 Govt of Canada (Canadian Dollar) 5.30 2003 12,400,000 8,230,748 (Canadian Dollar) 7.66 2001 10,000,000 7,956,500 Govt of Sweden (Swedish Krona) 10.25 2003 71,000,000 8,681,880 Guang Dong Enterprise (U.S. Dollar) 8.75 2003 10,000,000 (e) 9,600,000 Hanson Inds (British Pound) Cv 9.50 2006 4,000,000 6,810,320 See accompanying notes to investments in securities. Investments in securities IDS Bond Fund, Inc. (Percentages represent value of Aug. 31, 1994 investments compared to net assets) _____________________________________________________________________________________________________________________________ Bonds (continued) _____________________________________________________________________________________________________________________________ Issuer Coupon Maturity Principal Value(a) rate year amount _____________________________________________________________________________________________________________________________ Henderson Capital Intl Euro (U.S. Dollar) 4.00 % 1996 $ 2,500,000 (e) $ 2,381,250 Hydro-Quebec Euro (Canadian Dollar) 10.875 2001 12,500,000 9,869,000 Inco Limited (U.S. Dollar) Cv 5.75 2004 2,500,000 2,778,125 Indorayon (U.S. Dollar) Sr Nts 9.125 2000 4,000,000 3,460,000 Korea Electric Power (U.S. Dollar) 6.375 2003 3,100,000 2,712,500 (U.S. Dollar) 7.750 2013 4,000,000 3,550,000 Lend Lease Euro (U.S. Dollar) Cv 4.75 2003 2,000,000 (e) 2,280,000 Methanex (U.S. Dollar) 8.875 2001 4,000,000 3,945,000 Mexican/United States Govt Euro (U.S. Dollar) 5.44 2019 6,000,000 5,197,500 (U.S. Dollar) 6.25 2019 5,000,000 3,350,000 Noranda Forest (U.S. Dollar) 7.50 2003 7,000,000 6,746,250 Petroleos Mexicanos (U.S. Dollar) 8.625 2023 5,000,000 (e) 4,275,000 Philippine Long Distance Telephone (U.S. Dollar) 10.625 2004 2,500,000 2,509,375 Province of Quebec (U.S. Dollar) 11.00 2015 16,000,000 18,800,000 PT Indah Kiat Pulp & Paper (U.S. Dollar) 11.875 2002 4,000,000 4,030,000 Qantas Air (U.S. Dollar) 7.50 2003 10,000,000 (e) 9,375,000 Republic of Argentina (U.S. Dollar) 4.25 2023 8,000,000 4,200,000 Republic of Brazil (U.S. Dollar) 4.00 2014 3,000,000 1,612,500 Republic of Columbia (U.S. Dollar) 7.25 2004 9,750,000 8,689,687 Roche Holdings (U.S. Dollar) 2.75 2000 15,000,000 11,896,800 Rogers Cable System (Canadian Dollar) 9.65 2014 3,700,000 2,321,010 Rogers Cantel Mobile (U.S. Dollar) Sr Sec Gtd Nts 10.75 2001 8,000,000 8,390,000 Rogers Communication (U.S. Dollar) Cv 2.00 2005 6,500,000 4,192,500 See accompanying notes to investments in securities. Investments in securities IDS Bond Fund, Inc. (Percentages represent value of Aug. 31, 1994 investments compared to net assets) _____________________________________________________________________________________________________________________________ Bonds (continued) _____________________________________________________________________________________________________________________________ Issuer Coupon Maturity Principal Value(a) rate year amount _____________________________________________________________________________________________________________________________ Scotland Bank (U.S. Dollar) 8.80% 2004 $17,000,000 (e) $ 17,871,250 Tarkett Intl (U.S. Dollar) 9.00 2002 5,000,000 4,625,000 Tjiwi Kimia (U.S. Dollar) 13.25 2001 5,000,000 5,237,500 U.K. Treasury (British Pound) 8.00 2003 6,300,000 9,328,725 United Engineers Malaysia (U.S. Dollar) Cv 2.00 2004 3,750,000 (e) 3,590,625 Venezuela (U.S. Dollar) 6.75 2020 3,000,000 1,462,500 WMC Finance (U.S. Dollar) 7.25 2013 10,000,000 8,800,000 ______________ Total 294,935,733 _____________________________________________________________________________________________________________________________ Total bonds (Cost: $2,001,098,591) $1,955,515,476 _____________________________________________________________________________________________________________________________ Preferred stocks and other (2.3%) _____________________________________________________________________________________________________________________________ Issuer Shares Value(a) _____________________________________________________________________________________________________________________________ ABN Amro Holdings 6% Cv 68,500 $ 2,298,107 Atlantic Richfield 9% Cm Cv 200,000 6,200,000 Capital Gaming Intl Warrants 25,000 26,250 Celcaribe 32,500 (e,n) 2,705,625 Citicorp 1.217% Cm Cv 148,000 2,886,000 Crown Package Warrants 5,000 175,000 EUA Power Contingent Interest Certificates 5,000 (h,k) -- Envirodyne 242,372 (h) 1,211,860 Common Eye Care Center Warrants 5,000 50,000 First Chicago 2.875% Cm Cv 75,000 3,937,500 See accompanying notes to investments in securities. Investments in securities IDS Bond Fund, Inc. (Percentages represent value of Aug. 31, 1994 investments compared to net assets) _____________________________________________________________________________________________________________________________ Preferred stocks and other (continued) _____________________________________________________________________________________________________________________________ Issuer Shares Value(a) _____________________________________________________________________________________________________________________________ First Madison Bank 11.50% Cv 50,000 $ 5,181,250 Foodmaker Warrants 5,000 86,250 MascoTech 6% Cv 5,000 81,250 Merry Land & Investment 1.75% Cm Cv 61,600 1,624,700 Natl Health Investors 8.50% Cv 60,000 1,507,500 Occidental Petroleum 3.875% Cm Cv 55,000 (e) 2,970,000 Pittston Minerals Group Cv 40,000 (e,l) 1,740,000 Property Tr Amer 1.75% Cv 75,350 1,827,238 Public Service of New Hampshire 10.60% Cm 240,500 6,173,635 Purity Supreme Warrants 13,862 (i) 277 Snyder Oil 6% Cv 175,000 4,484,375 Sonoco Products 2.25% Cv 69,400 3,487,350 Southdown Warrants 40,000 (i) 220,000 Supermarket General $3.52 Pay-in-Kind Cv 120,972 3,024,300 Thermadyne Inds Common 120,000 (h,k) -- Thermadyne Holdings Common 6,693 (h) 78,956 Triangle Wire Cable Common 211,111 (h,i) 2,058,332 Webcraft Technology Common 32,502 (h) 331 WestFed Holdings Non-Voting Common 13,019 (h,k) -- Pay-in-Kind Cm Sr 42,753 (h,i,k) -- ____________________________________________________________________________________________________________________________ Total preferred stocks and other (Cost: $62,640,853) $ 54,036,086 _____________________________________________________________________________________________________________________________ See accompanying notes to investments in securities Investments in securities IDS Bond Fund, Inc. (Percentages represent value of Aug. 31, 1994 investments compared to net assets) _____________________________________________________________________________________________________________________________ Short-term securities (9.0%) _____________________________________________________________________________________________________________________________ Issuer Annualized Amount Value(a) yield on payable date of at purchase maturity _____________________________________________________________________________________________________________________________ U.S. government agencies (1.6%) Federal Home Loan Bank Disc Note 09-23-94 4.65% $ 4,800,000 $ 4,786,419 Federal Home Loan Mtge Corp Disc Note 09-01-94 4.31 11,000,000 11,000,000 Federal Natl Mtge Assn Disc Note 09-29-94 4.65 9,900,000 9,864,349 10-04-94 4.72 3,300,000 3,285,782 Student Loan Marketing Assn Disc Note 09-26-94 4.64 7,900,000 7,874,654 ______________ Total 36,811,204 _____________________________________________________________________________________________________________________________ Commercial paper (7.4%) Amer General 09-22-94 4.51 1,700,000 1,695,317 Ameritech Capital Funding 09-07-94 4.38 6,400,000 (m) 6,395,349 Amgen 09-09-94 4.60 2,600,000 2,597,360 Bayshore Fuel 09-14-94 4.50 4,700,000 4,692,396 BBV Finance (Delaware) 09-15-94 4.77 8,600,000 8,584,114 Corporate Asset Funding 09-02-94 4.40 7,500,000 7,499,087 CPC Intl 09-27-94 4.73 7,700,000 (m) 7,673,807 Dresdner U.S. Finance 09-16-94 4.60 4,500,000 4,491,412 Fleet Funding 09-15-94 4.42 7,300,000 (m) 7,287,509 09-27-94 4.75 1,500,000 (m) 1,494,876 General Mills 09-13-94 4.50 10,900,000 10,883,723 Merrill Lynch 10-03-94 4.83 6,300,000 6,273,120 10-13-94 4.80 5,200,000 5,171,062 Metlife Funding 10-04-94 4.75 12,000,000 11,947,970 Mobile Australia Finance (Delaware) 09-06-94 4.47 7,300,000 (m) 7,295,488 See accompanying notes to investments in securities. Investments in securities IDS Bond Fund, Inc. (Percentages represent value of Aug. 31, 1994 investments compared to net assets) _____________________________________________________________________________________________________________________________ Short-term securities (continued) _____________________________________________________________________________________________________________________________ Issuer Annualized Amount Value(a) yield on payable date of at purchase maturity _____________________________________________________________________________________________________________________________ Natl Australia Funding (Delaware) 09-26-94 4.75% $ 4,700,000 $ 4,684,562 Nestle Capital 09-19-94 4.62 6,000,000 5,986,200 10-03-94 4.74 7,300,000 7,269,372 Paribas Finance 09-08-94 4.46 8,000,000 7,993,093 Penney (JC) Funding 09-16-94 4.57 5,900,000 5,888,815 PepsiCo 09-29-94 4.72 7,125,000 (m) 7,098,954 Quaker Oats 09-22-94 4.77 5,400,000 (m) 5,385,038 09-27-94 4.74 1,300,000 (m) 1,295,568 Sandoz 09-14-94 4.57 800,000 798,686 Southwestern Bell Capital 09-12-94 4.42 6,000,000 (m) 5,991,933 09-19-94 4.46 1,000,000 (m) 997,785 Toyota Motor Credit 09-16-94 4.64 7,700,000 7,685,178 09-28-94 4.72 11,000,000 10,961,225 ______________ Total 166,018,999 _____________________________________________________________________________________________________________________________ Total short-term securities (Cost: $202,830,454) $ 202,830,203 _____________________________________________________________________________________________________________________________ Total investments in securities (Cost: $2,266,569,898)(o) $2,212,381,765 _____________________________________________________________________________________________________________________________ See accompanying notes to investments in securities.
Investments in securities IDS Bond Fund, Inc. Aug. 31, 1994 ________________________________________________________________________________ Notes to investments in securities ________________________________________________________________________________ (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Inverse floaters represent securities that pay interest at a rate that increases (decreases) with a decline (increase) in the LIBOR (London InterBank Offering Rate) Index. Sudden increases or decreases in market value may occur because of interest rate changes. Interest rate disclosed is the rate in effect on Aug. 31, 1994. (c) At Aug. 31, 1994 the cost of securities purchased on a when-issued basis was $10,437,813. (d) This security is a collateralized mortgage obligation whose payment of principal has been deferred until payment of previous series within the trust have been paid off. Sudden increases or decreases in market value may occur because of interest rate changes. (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 based on current market indexes, rate shown is the effective rate on Aug. 31, 1994. (g) For zero coupon bonds, the interest rate disclosed represents the annualized effective yield on the date of acquisition. (h) Presently non-income producing. For long-term debt securities, items identified are in default as to payment of interest and/or principal. (i) Identifies issues considered to be illiquid (see Note 4 to the financial statements). Information concerning such security holdings at Aug. 31, 1994, is as follows:
Acquisition Security date Cost _______________________________________________________________________________________________ ECM Funding LP 11.918% 2002 04-13-92 $3,032,807 Purity Supreme Warrants 07-29-92 -- Southdown Warrants 10-30-91 120,000 Triangle Wire Cable Common 01-13-92 5,000,045 WestFed Holdings Pay-in-Kind Cm Sr 09-18-91 20,700 Pay-in-Kind Cm Sr 12-18-91 10,545 Pay-in-Kind Cm Sr 03-20-92 10,755 Pay-in-Kind Cm Sr 06-19-92 10,950 Pay-in-Kind Cm Sr 09-15-92 7,440 Pay-in-Kind Cm Sr 12-18-92 7,580 Pay-in-Kind Cm Sr 03-08-93 7,720 Pay-in-Kind Cm Sr 06-11-93 2,358
Investments in securities IDS Bond Fund, Inc. Aug. 31, 1994 ________________________________________________________________________________ Notes to investments in securities (continued) ________________________________________________________________________________ (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) Security is partially or fully on loan. See Note 5 to the financial statements. (m) 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. (n) Each Celcaribe Unit represents note trust certificates and common stock certificates. On or before Dec. 31, 1994, the units will be split into a separately valued bond and common stock. (o) At Aug. 31, 1994, the cost of securities for federal income tax purposes was $2,263,824,622 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 51,500,137 Unrealized depreciation (102,942,994) _______________________________________________________________________________________ Net unrealized depreciation $(51,442,857) _______________________________________________________________________________________
PART C. OTHER INFORMATION ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS (a) FINANCIAL STATEMENTS: List of financial statements filed as part of this Post-Effective Amendment to the Registration Statement: - Independent Auditors' Report dated October 7, 1994 - Statement of Assets and Liabilities, August 31, 1994 - Statement of Operations, Year ended August 31, 1994 - Statement of Changes in Net Assets, for the two-year period ended August 31, 1993 and August 31, 1994 - Notes to Financial Statements - Investments in Securities, August 31, 1994 - Notes to Investments in Securities (b) EXHIBITS: 1. Copy of Articles of Incorporation, as amended October 14, 1988, filed electronically as Exhibit 1 to Registrant's Post-Effective Amendment No. 28 to Registration Statement No. 2-51586, is incorporated herein by reference. 2. Copy of By-laws, as amended January 12, 1989, filed electronically as Exhibit 2 to Registrant's Post-Effective Amendment No. 30 to Registration Statement No. 2-51586, is incorporated herein by reference. 3. Not Applicable. 4. Copy of Stock certificate, filed as Exhibit 4 to Registrant's Amendment Number One to Registration Statement No. 2-51586 dated October 29, 1974, is incorporated herein by reference. 5. Form of Investment Management Services Agreement between Registrant and American Express Financial Corporation, dated March 20, 1995, is filed electronically herewith. 6. Form of Distribution Agreement between Registrant and American Express Financial Advisors Inc., dated March 20, 1995, is filed electronically herewith. 7. All employees are eligible to participate in a profit sharing plan. Entry into the plan is Jan. 1 or July 1. The Registrant contributes each year an amount up to 15 percent of their annual salaries, the maximum deductible amount permitted under Section 404(a) of the Internal Revenue Code. 8. Form of Custodian Agreement between Registrant and American Express Trust Company, dated March 20, 1995, is filed electronically herewith. 9a. Copy of Plan and Agreement of Merger, dated April 10, 1986, filed electronically as Exhibit 9 to Registrant's Post-Effective Amendment No. 24 to Registration Statement No. 2-51586, is incorporated herein by reference. 9b. Form of Transfer Agency Agreement between Registrant and American Express Financial Corporation, dated March 20, 1995, is filed electronically herewith. 9c. Copy of License Agreement dated Jan. 25, 1988, between IDS Financial Corporation and Registrant, filed as Exhibit 9c to Registrant's Post-Effective Amendment No. 35 to Registration Statement No. 2-51586, is herein incorporated by reference. 9d. Form of Shareholder Service Agreement between Registrant and American Express Financial Advisors Inc., dated March 20, 1995, is filed electronically herewith. 9e. Form of Administrative Services Agreement between Registrant and American Express Financial Corporation, dated March 20, 1995, is filed electronically herewith. 9f. Copy of Agreement and Plan of Reorganization, dated September 8, 1994, between IDS Strategy Fund, Inc. and IDS Bond Fund, Inc., filed electronically as Exhibit 4 on Registrant's Pre-Effective Amendment No. 1, on Form N-14, is incorporated herein by reference.
II-1 10. Not Applicable. 11. Independent Auditors' Consent is filed electronically herewith. 12. None 13. Not applicable. 14. Forms of Keogh, IRA and other retirement plans, filed as Exhibits 14(a) through 14(g) to IDS Government Securities Money Fund, Inc., Post-Effective Amendment No. 1 to Registration Statement No. 2-75165 on August 26, 1982, are incorporated herein by reference. 15. Form of Plan and Agreement of Distribution between Registrant and American Express Financial Advisors Inc., dated March 20, 1995, is filed electronically herewith. 16. Form of Schedule for computation of each performance quotation provided in the Registration Statement in response to Item 22(b), filed as Exhibit 16 to Registrant's Post-Effective Amendment No. 32 to Registration Statement No. 2-51586, is herein incorporated by reference. 17. Financial Data Schedule is filed electronically herewith. 18a. Directors' Power of Attorney dated November 10, 1994 to sign Amendments to this Registration Statement, filed electronically as Exhibit 18(a) to Registrant's Post-Effective Amendment No. 42, is incorporated herein by reference. 18b. Officers' Power of Attorney dated June 1, 1993 to sign Amendments to this Registration Statement filed electronically as Exhibit 17(b) to Registrant's Post-Effective Amendment No. 38 is herein incorporated by reference.
ITEM 25. PERSON CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT: None. ITEM 26. NUMBER OF HOLDERS OF SECURITIES (1) (2)
NUMBER OF RECORD AS OF JANUARY 23, TITLE OF CLASS 1995 - -------------- ------------- Common Stock 120,998
II-2 Item 27. Indemnification The Articles of Incorporation of the registrant provide that the Fund shall indemnify any person who was or is a party or is threatened to be made a party, by reason of the fact that she or he is or was a director, officer, employee or agent of the Fund, or is or was serving at the request of the Fund as a director, officer, employee or agent of another company, partnership, joint venture, trust or other enterprise, to any threatened, pending or completed action, suit or proceeding, wherever brought, and the Fund may purchase liability insurance and advance legal expenses, all to the fullest extent permitted by the laws of the State of Minnesota, as now existing or hereafter amended. The By-laws of the registrant provide that present or former directors or officers of the Fund made or threatened to be made a party to or involved (including as a witness) in an actual or threatened action, suit or proceeding shall be indemnified by the Fund to the full extent authorized by the Minnesota Business Corporation Act, all as more fully set forth in the By-laws filed as an exhibit to this registration statement. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Any indemnification hereunder shall not be exclusive of any other rights of indemnification to which the directors, officers, employees or agents might otherwise be entitled. No indemnification shall be made in violation of the Investment Company Act of 1940. PAGE 1
Item 28. Business and Other Connections of Investment Adviser (American Express Financial Corporation) Directors and officers of American Express Financial Corporation who are directors and/or officers of one or more other companies: Ronald G. Abrahamson, Vice President--Service Quality and Reengineering American Express Financial Advisors IDS Tower 10 Vice President-Field Minneapolis, MN 55440 Service Quality and Reengineering American Express Service Corporation Vice President Douglas A. Alger, Vice President--Total Compensation American Express Financial Advisors IDS Tower 10 Vice President- Minneapolis, MN 55440 Total Compensation Jerome R. Amundson, Vice President and Controller--Investment Accounting American Express Financial Advisors IDS Tower 10 Vice President and Minneapolis, MN 55440 Controller-Investment Accounting Peter J. Anderson, Director and Senior Vice President--Investments American Express Financial Advisors IDS Tower 10 Senior Vice President- Minneapolis, MN 55440 Investments IDS Advisory Group Inc. Director and Chairman of the Board IDS Capital Holdings Inc. Director and President IDS Fund Management Limited Director IDS International, Inc. Director, Chairman of the Board and Executive Vice President IDS Securities Corporation Executive Vice President- Investments NCM Capital Management Group, Inc. 2 Mutual Plaza Director 501 Willard Street Durham, NC 27701 Ward D. Armstrong, Vice President-Sales and Marketing, American Express Institutional Services American Express Financial Advisors IDS Tower 10 Vice President-Sales and Minneapolis, MN 55440 Marketing, American Express Institutional Services Kent L. Ashton, Vice President--Financial Education Services American Express Financial Advisors IDS Tower 10 Vice President-Financial Minneapolis, MN 55440 Education Services PAGE 2 Item 28. Business and Other Connections of Investment Adviser (American Express Financial Corporation)(cont'd) Joseph M. Barsky III, Vice President--Senior Portfolio Manager American Express Financial Advisors IDS Tower 10 Vice President-Senior Minneapolis, MN 55440 Portfolio Manager IDS Advisory Group Inc. Vice President Robert C. Basten, Vice President--Tax and Business Services American Express Financial Advisors IDS Tower 10 Vice President-Tax Minneapolis, MN 55440 and Business Services American Express Tax & Business Director, President and Services Inc. Chief Executive Officer Timothy V. Bechtold, Vice President--Insurance Product Development American Express Financial Advisors IDS Tower 10 Vice President-Insurance Minneapolis, MN 55440 Product Development IDS Life Insurance Company Vice President-Insurance Product Development Carl E. Beihl, Vice President--Strategic Technology Planning American Express Financial Advisors IDS Tower 10 Vice President- Minneapolis, MN 55440 Strategic Technology Planning Alan F. Bignall, Vice President--Financial Planning Systems American Express Financial Advisors IDS Tower 10 Vice President- Minneapolis, MN 55440 Financial Planning Systems American Express Service Corporation Vice President John C. Boeder, Vice President--Mature Market Group American Express Financial Advisors IDS Tower 10 Vice President- Minneapolis, MN 55440 Mature Market Group IDS Life Insurance Company of New York Box 5144 Director Albany, NY 12205 Karl J. Breyer, Director and Senior Vice President--Corporate Affairs and General Counsel American Express Financial Advisors IDS Tower 10 Senior Vice President- Minneapolis, MN 55440 Corporate Affairs and Special Counsel American Express Minnesota Foundation Director IDS Aircraft Services Corporation Director and President PAGE 3 Item 28. Business and Other Connections of Investment Adviser (American Express Financial Corporation)(cont'd) Harold E. Burke, Vice President and Assistant General Counsel American Express Financial Advisors IDS Tower 10 Vice President and Minneapolis, MN 55440 Assistant General Counsel American Express Service Corporation Vice President Daniel J. Candura, Vice President--Marketing Support American Express Financial Advisors IDS Tower 10 Vice President-Marketing Minneapolis, MN 55440 Support Cynthia M. Carlson, Vice President--American Express Securities Services American Enterprise Investment IDS Tower 10 Director, President and Services Inc. Minneapolis, MN 55440 Chief Executive Officer American Express Financial Advisors Vice President-IDS Securities Services Orison Y. Chaffee III, Vice President--Field Real Estate American Express Financial Advisors IDS Tower 10 Vice President-Field Minneapolis, MN 55440 Real Estate James E. Choat, Director and Senior Vice President--Field Management American Express Financial Advisors IDS Tower 10 Senior Vice President- Minneapolis, MN 55440 Field Management American Express Minnesota Foundation Director American Express Service Corporation Vice President IDS Insurance Agency of Alabama Inc. Vice President--North Central Region IDS Insurance Agency of Arkansas Inc. Vice President--North Central Region IDS Insurance Agency of Massachusetts Inc. Vice President--North Central Region IDS Insurance Agency of Nevada Inc. Vice President--North Central Region IDS Insurance Agency of New Mexico Inc. Vice President--North Central Region IDS Insurance Agency of North Carolina Inc. Vice President--North Central Region IDS Insurance Agency of Ohio Inc. Vice President--North Central Region IDS Insurance Agency of Wyoming Inc. Vice President-- North Central Region IDS Property Casualty Insurance Co. Director PAGE 4 Item 28. Business and Other Connections of Investment Adviser (American Express Financial Corporation)(cont'd) Kenneth J. Ciak, Vice President and General Manager--IDS Property Casualty American Express Financial Advisors IDS Tower 10 Vice President and General Minneapolis, MN 55440 Manager-IDS Property Casualty IDS Property Casualty Insurance Co. I WEG Blvd. Director and President DePere, Wisconsin 54115 Alan R. Dakay, Vice President--Institutional Insurance Marketing American Enterprise Life Insurance Co. IDS Tower 10 Director and President Minneapolis, MN 55440 American Express Financial Advisors Vice President - Institutional Insurance Marketing American Partners Life Insurance Co. Director and President IDS Life Insurance Company Vice President - Institutional Insurance Marketing Regenia David, Vice President--Systems Services American Express Financial Advisors IDS Tower 10 Vice President- Minneapolis, MN 55440 Systems Services William H. Dudley, Director and Executive Vice President--Investment Operations American Express Financial Advisors IDS Tower 10 Director and Executive Minneapolis, MN 55440 Vice President- Investment Operations IDS Advisory Group Inc. Director IDS Capital Holdings Inc. Director IDS Futures Corporation Director IDS Futures III Corporation Director IDS International, Inc. Director IDS Securities Corporation Director, Chairman of the Board, President and Chief Executive Officer Roger S. Edgar, Director and Senior Vice President--Information Systems American Express Financial Advisors IDS Tower 10 Senior Vice President- Minneapolis, MN 55440 Information Systems PAGE 5 Item 28. Business and Other Connections of Investment Adviser (American Express Financial Corporation)(cont'd) Gordon L. Eid, Director, Senior Vice President and Deputy General Counsel American Express Financial Advisors IDS Tower 10 Senior Vice President and Minneapolis, MN 55440 General Counsel IDS Insurance Agency of Alabama Inc. Director and Vice President IDS Insurance Agency of Arkansas Inc. Director and Vice President IDS Insurance Agency of Massachusetts Inc. Director and Vice President IDS Insurance Agency of Nevada Inc. Director and Vice President IDS Insurance Agency of New Mexico Inc. Director and Vice President IDS Insurance Agency of North Carolina Inc. Director and Vice President IDS Insurance Agency of Ohio Inc. Director and Vice President IDS Insurance Agency of Wyoming Inc. Director and Vice President IDS Real Estate Services, Inc. Vice President Investors Syndicate Development Corp. Director Robert M. Elconin, Vice President--Government Relations American Express Financial Advisors IDS Tower 10 Vice President- Minneapolis, MN 55440 Government Relations IDS Life Insurance Company Vice President Mark A. Ernst, Vice President--Retail Services American Enterprise Investment IDS Tower 10 Director Services Inc. Minneapolis, MN 55440 American Express Financial Advisors Vice President- Retail Services American Express Tax & Business Director and Chairman of Services Inc. the Board Gordon M. Fines, Vice President--Mutual Fund Equity Investments American Express Financial Advisors IDS Tower 10 Vice President- Minneapolis, MN 55440 Mutual Fund Equity Investments IDS Advisory Group Inc. Executive Vice President IDS International, Inc. Vice President and Portfolio Manager PAGE 6 Item 28. Business and Other Connections of Investment Adviser (American Express Financial Corporation)(cont'd) Louis C. Fornetti, Director, Senior Vice President and Chief Financial Officer American Enterprise Investment IDS Tower 10 Vice President Services Inc. Minneapolis, MN 55440 American Express Financial Advisors Senior Vice President and Chief Financial Officer American Express Tax & Business Director Services Inc. American Express Trust Company Director IDS Cable Corporation Director IDS Cable II Corporation Director IDS Capital Holdings Inc. Senior Vice President IDS Certificate Company Vice President IDS Insurance Agency of Alabama Inc. Vice President IDS Insurance Agency of Arkansas Inc. Vice President IDS Insurance Agency of Massachusetts Inc. Vice President IDS Insurance Agency of Nevada Inc. Vice President IDS Insurance Agency of New Mexico Inc. Vice President IDS Insurance Agency of North Carolina Inc. Vice President IDS Insurance Agency of Ohio Inc. Vice President IDS Insurance Agency of Wyoming Inc. Vice President IDS Life Insurance Company Director IDS Life Series Fund, Inc. Vice President IDS Life Variable Annuity Funds A&B Vice President IDS Property Casualty Insurance Co. Director and Vice President IDS Real Estate Services, Inc. Vice President IDS Sales Support Inc. Director IDS Securities Corporation Vice President Investors Syndicate Development Corp. Vice President Robert G. Gilbert, Vice President--Real Estate American Express Financial Advisors IDS Tower 10 Vice President- Minneapolis, MN 55440 Real Estate John J. Golden, Vice President--Field Compensation Development American Express Financial Advisors IDS Tower 10 Vice President-Field Minneapolis, MN 55440 Compensation Development Harvey Golub, Director American Express Company American Express Tower Chairman and Chief World Financial Center Executive Officer New York, New York 10285 American Express Travel Chairman and Chief Related Services Company, Inc. Executive Officer National Computer Systems, Inc. 11000 Prairie Lakes Drive Director Minneapolis, MN 55440 PAGE 7 Item 28. Business and Other Connections of Investment Adviser (American Express Financial Corporation)(cont'd) Morris Goodwin Jr., Vice President and Corporate Treasurer American Enterprise Investment IDS Tower 10 Vice President and Services Inc. Minneapolis, MN 55440 Treasurer American Enterprise Life Insurance Vice President and Company Treasurer American Express Financial Advisors Vice President and Corporate Treasurer American Express Minnesota Foundation Director, Vice President and Treasurer American Express Service Corporation Vice President and Treasurer American Express Tax & Business Vice President and Services Inc. Treasurer IDS Advisory Group Inc. Vice President and Treasurer IDS Aircraft Services Corporation Vice President and Treasurer IDS Cable Corporation Vice President and Treasurer IDS Cable II Corporation Vice President and Treasurer IDS Capital Holdings Inc. Vice President and Treasurer IDS Certificate Company Vice President and Treasurer IDS Deposit Corp. Director, President and Treasurer IDS Insurance Agency of Alabama Inc. Vice President and Treasurer IDS Insurance Agency of Arkansas Inc. Vice President and Treasurer IDS Insurance Agency of Massachusetts Inc. Vice President and Treasurer IDS Insurance Agency of Nevada Inc. Vice President and Treasurer IDS Insurance Agency of New Mexico Inc. Vice President and Treasurer IDS Insurance Agency of North Carolina Inc. Vice President and Treasurer IDS Insurance Agency of Ohio Inc. Vice President and Treasurer IDS Insurance Agency of Wyoming Inc. Vice President and Treasurer IDS International, Inc. Vice President and Treasurer IDS Life Insurance Company Vice President and Treasurer IDS Life Series Fund, Inc. Vice President and Treasurer PAGE 8 Item 28. Business and Other Connections of Investment Adviser (American Express Financial Corporation)(cont'd) IDS Life Variable Annuity Funds A&B Vice President and Treasurer IDS Management Corporation Vice President and Treasurer IDS Partnership Services Corporation Vice President and Treasurer IDS Plan Services of California, Inc. Vice President and Treasurer IDS Property Casualty Insurance Co. Vice President and Treasurer IDS Real Estate Services, Inc Vice President and Treasurer IDS Realty Corporation Vice President and Treasurer IDS Sales Support Inc. Director, Vice President and Treasurer IDS Securities Corporation Vice President and Treasurer Investors Syndicate Development Corp. Vice President and Treasurer NCM Capital Management Group, Inc. 2 Mutual Plaza Director 501 Willard Street Durham, NC 27701 Sloan Financial Group, Inc. Director Suzanne Graf, Vice President--Systems Services American Express Financial Advisors IDS Tower 10 Vice President- Minneapolis, MN 55440 Systems Services David A. Hammer, Vice President and Marketing Controller American Express Financial Advisors IDS Tower 10 Vice President and Minneapolis, MN 55440 Marketing Controller IDS Plan Services of California, Inc. Director and Vice President Lorraine R. Hart, Vice President--Insurance Investments American Enterprise Life IDS Tower 10 Vice President-Investments Insurance Company Minneapolis, MN 55440 American Express Financial Advisors Vice President-Insurance Investments American Partners Life Insurance Co. Director and Vice President-Investments IDS Certificate Company Vice President-Investments IDS Life Insurance Company Vice President-Investments IDS Property Casualty Insurance Company Vice President-Investment Officer Investors Syndicate Development Corp. Vice President-Investments PAGE 9 Item 28. Business and Other Connections of Investment Adviser (American Express Financial Corporation)(cont'd) Scott A. Hawkinson, Vice President--Assured Assets Product Development and Management American Express Financial Advisors IDS Tower 10 Vice President-Assured Minneapolis, MN 55440 Assets Product Development & Management Raymond E. Hirsch, Vice President--Senior Portfolio Manager American Express Financial Advisors IDS Tower 10 Vice President-Senior Minneapolis, MN 55440 Portfolio Manager IDS Advisory Group Inc. Vice President James G. Hirsh, Vice President and Assistant General Counsel American Express Financial Advisors IDS Tower 10 Vice President and Minneapolis, MN 55440 Assistant General Counsel IDS Securities Corporation Director, Vice President and General Counsel Darryl G. Horsman, Vice President--Product Development and Technology, American Express Institutional Services American Express Trust Company IDS Tower 10 Vice President Minneapolis, MN 55440 Kevin P. Howe, Vice President--Government and Customer Relations and Chief Compliance Officer American Enterprise Investment IDS Tower 10 Vice President and Services Inc. Minneapolis, MN 55440 Compliance Officer American Express Financial Advisors Vice President- Government and Customer Relations American Express Service Corporation Vice President IDS Securities Corporation Vice President and Chief Compliance Officer David R. Hubers, Director, President and Chief Executive Officer American Express Financial Advisors IDS Tower 10 Chairman, Chief Executive Minneapolis, MN 55440 Officer and President American Express Service Corporation Director and President IDS Aircraft Services Corporation Director IDS Certificate Company Director IDS Life Insurance Company Director IDS Plan Services of California, Inc. Director and President IDS Property Casualty Insurance Co. Director Marietta L. Johns, Director and Senior Vice President--Field Management American Express Financial Advisors IDS Tower 10 Senior Vice President- Minneapolis, MN 55440 Field Management PAGE 10 Item 28. Business and Other Connections of Investment Adviser (American Express Financial Corporation)(cont'd) Douglas R. Jordal, Vice President--Taxes American Express Financial Advisors IDS Tower 10 Vice President-Taxes Minneapolis, MN 55440 IDS Aircraft Services Corporation Vice President Craig A. Junkins, Vice President--IDS 1994 Implementation Planning and Financial Planning Development American Express Financial Advisors IDS Tower 10 Vice President-IDS 1994 Minneapolis, MN 55440 Implementation Planning and Financial Planning Development American Express Service Corporation Vice President James E. Kaarre, Vice President--Marketing Information American Express Financial Advisors IDS Tower 10 Vice President- Minneapolis, MN 55440 Marketing Information Linda B. Keene, Vice President--Market Development American Express Financial Advisors IDS Tower 10 Vice President- Minneapolis, MN 55440 Market Development G. Michael Kennedy, Vice President--Investment Services and Investment Research American Express Financial Advisors IDS Tower 10 Vice President-Investment Minneapolis, MN 55440 Services and Investment Research Susan D. Kinder, Director and Senior Vice President--Human Resources American Express Financial Advisors IDS Tower 10 Senior Vice President- Minneapolis, MN 55440 Human Resources American Express Minnesota Foundation Director American Express Service Corporation Vice President PAGE 11 Item 28. Business and Other Connections of Investment Adviser (American Express Financial Corporation)(cont'd) Richard W. Kling, Director and Senior Vice President--Risk Management Products American Enterprise Life Insurance Co. IDS Tower 10 Director and Chairman of Minneapolis, MN 55440 the Board American Express Financial Advisors Senior Vice President- Risk Management Products American Partners Life Insurance Co. Director and Chairman of the Board IDS Insurance Agency of Alabama Inc. Director and President IDS Insurance Agency of Arkansas Inc. Director and President IDS Insurance Agency of Massachusetts Inc. Director and President IDS Insurance Agency of Nevada Inc. Director and President IDS Insurance Agency of New Mexico Inc. Director and President IDS Insurance Agency of North Carolina Inc. Director and President IDS Insurance Agency of Ohio Inc. Director and President IDS Insurance Agency of Wyoming Inc. Director and President IDS Life Insurance Company Director and President IDS Life Series Fund, Inc. Director and President IDS Life Variable Annuity Funds A&B Member of Board of Managers, Chairman of the Board and President IDS Property Casualty Insurance Co. Director and Chairman of the Board IDS Life Insurance Company P.O. Box 5144 Director, Chairman of the of New York Albany, NY 12205 Board and President Harold D. Knutson, Vice President--System Services American Express Financial Advisors IDS Tower 10 Vice President-- Minneapolis, MN 55440 System Services Paul F. Kolkman, Vice President--Actuarial Finance American Express Financial Advisors IDS Tower 10 Vice President- Minneapolis, MN 55440 Actuarial Finance IDS Life Insurance Company Director and Executive Vice President IDS Life Series Fund, Inc. Vice President and Chief Actuary Claire Kolmodin, Vice President--Service Quality American Express Financial Advisors IDS Tower 10 Vice President- Minneapolis, MN 55440 Service Quality Steven C. Kumagai, Director and Senior Vice President--Field Management and Business Systems American Express Financial Advisors IDS Tower 10 Director and Senior Vice Minneapolis, MN 55440 President-Field Management and Business Systems American Express Service Corporation Vice President PAGE 12 Item 28. Business and Other Connections of Investment Adviser (American Express Financial Corporation)(cont'd) Edward Labenski, Vice President--Senior Portfolio Manager American Express Financial Advisors IDS Tower 10 Vice President- Minneapolis, MN 55440 Senior Portfolio Manager IDS Advisory Group Inc. Senior Vice President Kurt A. Larson, Vice President--Senior Portfolio Manager American Express Financial Advisors IDS Tower 10 Vice President- Minneapolis, MN 55440 Senior Portfolio Manager Lori J. Larson, Vice President--Variable Assets Product Development American Express Financial Advisors IDS Tower 10 Vice President-Variable Minneapolis, MN 55440 Assets Product Development IDS Cable Corporation Director and Vice President IDS Cable II Corporation Director and Vice President IDS Futures Brokerage Group Assistant Vice President- General Manager/Director IDS Futures Corporation Director and Vice President IDS Futures III Corporation Director and Vice President IDS Management Corporation Director and Vice President IDS Partnership Services Corporation Director and Vice President IDS Realty Corporation Director and Vice President Ryan R. Larson, Vice President--IPG Product Development American Express Financial Advisors IDS Tower 10 Vice President- Minneapolis, MN 55440 IPG Product Development IDS Life Insurance Company Vice President- Annuity Product Development Daniel E. Laufenberg, Vice President and Chief U.S. Economist American Express Financial Advisors IDS Tower 10 Vice President and Minneapolis, MN 55440 Chief U.S. Economist Richard J. Lazarchic, Vice President--Senior Portfolio Manager American Express Financial Advisors IDS Tower 10 Vice President-Senior Minneapolis, MN 55440 Portfolio Manager PAGE 13 Item 28. Business and Other Connections of Investment Adviser (American Express Financial Corporation)(cont'd) Peter A. Lefferts, Director, Senior Vice President and Chief Marketing Officer American Express Financial Advisors IDS Tower 10 Senior Vice President and Minneapolis, MN 55440 Chief Marketing Officer American Express Trust Company Director and Chairman of the Board IDS Life Insurance Company Director and Executive Vice President-Marketing IDS Plan Services of California, Inc. Director Investors Syndicate Development Corp. Director Douglas A. Lennick, Director and Executive Vice President--Private Client Group American Express Financial Advisors IDS Tower 10 Director and Executive Minneapolis, MN 55440 Vice President-Private Client Group American Express Service Corporation Vice President Mary J. Malevich, Vice President--Senior Portfolio Manager American Express Financial Advisors IDS Tower 10 Vice President- Minneapolis, MN 55440 Senior Portfolio Manager IDS International, Inc. Vice President and Portfolio Manager Fred A. Mandell, Vice President--Field Marketing Readiness American Express Financial Advisors IDS Tower 10 Vice President-Field Minneapolis, MN 55440 Marketing Readiness William J. McKinney, Vice President--Field Management Support American Express Financial Advisors IDS Tower 10 Vice President-Field Minneapolis, MN 55440 Management Support Thomas W. Medcalf, Vice President--Senior Portfolio Manager American Express Financial Advisors IDS Tower 10 Vice President-Senior Minneapolis, MN 55440 Portfolio Manager William C. Melton, Vice President-International Research and Chief International Economist American Express Financial Advisors IDS Tower 10 Vice President- Minneapolis, MN 55440 International Research and Chief International Economist PAGE 14 Item 28. Business and Other Connections of Investment Adviser (American Express Financial Corporation)(cont'd) Janis E. Miller, Vice President--Variable Assets American Express Financial Advisors IDS Tower 10 Vice President- Minneapolis, MN 55440 Variable Assets IDS Cable Corporation Director and President IDS Cable II Corporation Director and President IDS Futures Corporation Director and President IDS Futures III Corporation Director and President IDS Life Insurance Company Director and Executive Vice President-Variable Assets IDS Life Series Fund, Inc. Director IDS Life Variable Annuity Funds A&B Director IDS Management Corporation Director and President IDS Partnership Services Corporation Director and President IDS Realty Corporation Director and President IDS Life Insurance Company of New York Box 5144 Executive Vice President Albany, NY 12205 James A. Mitchell, Director and Executive Vice President--Marketing and Products American Enterprise Investment IDS Tower 10 Director Services Inc. Minneapolis, MN 55440 American Express Financial Advisors Executive Vice President- Marketing and Products IDS Certificate Company Director and Chairman of the Board IDS Life Insurance Company Director, Chairman of the Board and Chief Executive Officer IDS Plan Services of California, Inc. Director IDS Property Casualty Insurance Co. Director Pamela J. Moret, Vice President--Corporate Communications American Express Financial Advisors IDS Tower 10 Vice President- Minneapolis, MN 55440 Corporate Communications American Express Minnesota Foundation Director and President Barry J. Murphy, Director and Senior Vice President--Client Service American Express Financial Advisors IDS Tower 10 Senior Vice President- Minneapolis, MN 55440 Client Service IDS Life Insurance Company Director and Executive Vice President-Client Service PAGE 15 Item 28. Business and Other Connections of Investment Adviser (American Express Financial Corporation)(cont'd) Robert J. Neis, Vice President--Information Systems Operations American Express Financial Advisors IDS Tower 10 Vice President- Minneapolis, MN 55440 Information Systems Operations James R. Palmer, Vice President--Insurance Operations American Express Financial Advisors IDS Tower 10 Vice President- Minneapolis, MN 55440 Insurance Operations IDS Life Insurance Company Vice President-Taxes Carla P. Pavone, Vice President--Specialty Service Teams and Emerging Business American Express Financial Advisors IDS Tower 10 Vice President-Specialty Minneapolis, MN 55440 Service Teams and Emerging Business Judith A. Pennington, Vice President--Field Technology American Express Financial Advisors IDS Tower 10 Vice President- Minneapolis, MN 55440 Field Technology George M. Perry, Vice President--Corporate Strategy and Development American Express Financial Advisors IDS Tower 10 Vice President- Minneapolis, MN 55440 Corporate Strategy and Development IDS Property Casualty Insurance Co. Director Susan B. Plimpton, Vice President--Segmentation Development and Support American Express Financial Advisors IDS Tower 10 Vice President-- Minneapolis, MN 55440 Segmentation Development and Support Ronald W. Powell, Vice President and Assistant General Counsel American Express Financial Advisors IDS Tower 10 Vice President and Minneapolis, MN 55440 Assistant General Counsel IDS Cable Corporation Vice President and Assistant Secretary IDS Cable II Corporation Vice President and Assistant Secretary IDS Management Corporation Vice President and Assistant Secretary IDS Partnership Services Corporation Vice President and Assistant Secretary IDS Plan Services of California, Inc. Vice President and Assistant Secretary IDS Realty Corporation Vice President and Assistant Secretary PAGE 16 Item 28. Business and Other Connections of Investment Adviser (American Express Financial Corporation)(cont'd) James M. Punch, Vice President--TransAction Services American Express Financial Advisors IDS Tower 10 Vice President-Trans Minneapolis, MN 55440 Action Services Frederick C. Quirsfeld, Vice President--Taxable Mutual Fund Investments American Express Financial Advisors IDS Tower 10 Vice President-- Minneapolis, MN 55440 Taxable Mutual Fund Investments IDS Advisory Group Inc. Vice President ReBecca K. Roloff, Vice President--1994 Program Director American Express Financial Advisors IDS Tower 10 Vice President-1994 Minneapolis, MN 55440 Program Director Stephen W. Roszell, Vice President--Advisory Institutional Marketing American Express Financial Advisors IDS Tower 10 Vice President-Advisory Minneapolis, MN 55440 Institutional Marketing IDS Advisory Group Inc. President and Chief Executive Officer Robert A. Rudell, Vice President--American Express Institutional Services American Express Financial Advisors IDS Tower 10 Vice President-American Minneapolis, MN 55440 Express Institutional Services American Express Trust Company Director IDS Sales Support Inc. Director and President John P. Ryan, Vice President and General Auditor American Express Financial Advisors IDS Tower 10 Vice President and General Minneapolis, MN 55440 Auditor PAGE 17 Item 28. Business and Other Connections of Investment Adviser (American Express Financial Corporation)(cont'd) Erven A. Samsel, Director and Senior Vice President--Field Management American Express Financial Advisors IDS Tower 10 Senior Vice President- Minneapolis, MN 55440 Field Management American Express Service Corporation Vice President IDS Insurance Agency of Alabama Inc. Vice President- New England Region IDS Insurance Agency of Arkansas Inc. Vice President- New England Region IDS Insurance Agency of Massachusetts Inc. Vice President- New England Region IDS Insurance Agency of Nevada Inc. Vice President- New England Region IDS Insurance Agency of New Mexico Inc. Vice President- New England Region IDS Insurance Agency of North Carolina Inc. Vice President- New England Region IDS Insurance Agency of Ohio Inc. Vice President- New England Region IDS Insurance Agency of Wyoming Inc. Vice President- New England Region Stuart A. Sedlacek, Vice President--Assured Assets American Enterprise Life Insurance Co. IDS Tower 10 Director and Executive Minneapolis, MN 55440 Vice President, Assured Assets American Express Financial Advisors Vice President- Assured Assets IDS Certificate Company Director and President IDS Life Insurance Company Director and Executive Vice President, Assured Assets Investors Syndicate Development Corp. Chairman of the Board and President Donald K. Shanks, Vice President--Property Casualty American Express Financial Advisors IDS Tower 10 Vice President- Minneapolis, MN 55440 Property Casualty IDS Property Casualty Insurance Co. Senior Vice President PAGE 18 Item 28. Business and Other Connections of Investment Adviser (American Express Financial Corporation)(cont'd) F. Dale Simmons, Vice President--Senior Portfolio Manager, Insurance Investments American Enterprise Life Insurance Co. IDS Tower 10 Vice President-Real Minneapolis, MN 55440 Estate Loan Management American Express Financial Advisors Vice President-Senior Portfolio Manager Insurance Investments American Partners Life Insurance Co. Vice President-Real Estate Loan Management IDS Certificate Company Vice President-Real Estate Loan Management IDS Life Insurance Company Vice President-Real Estate Loan Management IDS Partnership Services Corporation Vice President IDS Real Estate Services Inc. Director and Vice President IDS Realty Corporation Vice President IDS Life Insurance Company of New York Box 5144 Vice President and Albany, NY 12205 Assistant Treasurer Judy P. Skoglund, Vice President--Human Resources and Organization Development American Express Financial Advisors IDS Tower 10 Vice President-Human Minneapolis, MN 55440 Resources and Organization Development Ben C. Smith, Vice President--Workplace Marketing American Express Financial Advisors IDS Tower 10 Vice President- Minneapolis, MN 55440 Workplace Marketing William A. Smith, Vice President and Controller--Private Client Group American Express Financial Advisors IDS Tower 10 Vice President and Minneapolis, MN 55440 Controller-Private Client Group Bridget Sperl, Vice President--Human Resources Management Services American Express Financial Advisors IDS Tower 10 Vice President-Human Minneapolis, MN 55440 Resources Management Services Jeffrey E. Stiefler, Director American Express Company American Express Tower Director and President World Financial Center New York, NY 10285 PAGE 19 Item 28. Business and Other Connections of Investment Adviser (American Express Financial Corporation)(cont'd) William A. Stoltzmann, Vice President and Assistant General Counsel American Express Financial Advisors IDS Tower 10 Vice President and Minneapolis, MN 55440 Assistant General Counsel American Partners Life Insurance Co. Director, Vice President, General Counsel and Secretary IDS Life Insurance Company Vice President, General Counsel and Secretary IDS Life Series Fund, Inc. General Counsel and Assistant Secretary IDS Life Variable Annuity Funds A&B General Counsel and Assistant Secretary American Enterprise Life Insurance P.O. Box 534 Director, Vice President, Company Minneapolis, MN 55440 General Counsel and Secretary James J. Strauss, Vice President--Corporate Planning and Analysis American Express Financial Advisors IDS Tower 10 Vice President- Minneapolis, MN 55440 Corporate Planning and Analysis Jeffrey J. Stremcha, Vice President--Information Resource Management/ISD American Express Financial Advisors IDS Tower 10 Vice President-Information Minneapolis, MN 55440 Resource Management/ISD Fenton R. Talbott, Director ACUMA Ltd. ACUMA House President and Chief The Glanty, Egham Executive Officer Surrey TW 20 9 AT UK PAGE 20 Item 28. Business and Other Connections of Investment Adviser (American Express Financial Corporation)(cont'd) John R. Thomas, Director and Senior Vice President--Information and Technology American Express Financial Advisors IDS Tower 10 Senior Vice President- Minneapolis, MN 55440 Information and Technology IDS Bond Fund, Inc. Director IDS California Tax-Exempt Trust Trustee IDS Discovery Fund, Inc. Director IDS Equity Select Fund, Inc. Director IDS Extra Income Fund, Inc. Director IDS Federal Income Fund, Inc. Director IDS Global Series, Inc. Director IDS Growth Fund, Inc. Director IDS High Yield Tax-Exempt Fund, Inc. Director IDS Investment Series, Inc. Director IDS Managed Retirement Fund, Inc. Director IDS Market Advantage Series, Inc. Director IDS Money Market Series, Inc. Director IDS New Dimensions Fund, Inc. Director IDS Precious Metals Fund, Inc. Director IDS Progressive Fund, Inc. Director IDS Selective Fund, Inc. Director IDS Special Tax-Exempt Series Trust Trustee IDS Stock Fund, Inc. Director IDS Strategy Fund, Inc. Director IDS Tax-Exempt Bond Fund, Inc. Director IDS Tax-Free Money Fund, Inc. Director IDS Utilities Income Fund, Inc. Director Melinda S. Urion, Vice President and Corporate Controller American Enterprise Life IDS Tower 10 Vice President and Insurance Company Minneapolis, MN 55440 Controller American Express Financial Advisors Vice President and Corporate Controller American Partners Life Insurance Co. Director, Vice President, Controller and Treasurer IDS Life Insurance Company Director, Executive Vice President and Controller IDS Life Series Fund, Inc. Vice President and Controller Wesley W. Wadman, Vice President--Senior Portfolio Manager American Express Financial Advisors IDS Tower 10 Vice President- Minneapolis, MN 55440 Senior Portfolio Manager IDS Advisory Group Inc. Executive Vice President IDS Fund Management Limited Director and Chairman IDS International, Inc. Senior Vice President PAGE 21 Item 28. Business and Other Connections of Investment Adviser (American Express Financial Corporation)(cont'd) Norman Weaver, Jr., Director and Senior Vice President--Field Management American Express Financial Advisors IDS Tower 10 Senior Vice President- Minneapolis, MN 55440 Field Management American Express Service Corporation Vice President IDS Insurance Agency of Alabama Inc. Vice President- Pacific Region IDS Insurance Agency of Arkansas Inc. Vice President- Pacific Region IDS Insurance Agency of Massachusetts Inc. Vice President- Pacific Region IDS Insurance Agency of Nevada Inc. Vice President- Pacific Region IDS Insurance Agency of New Mexico Inc. Vice President- Pacific Region IDS Insurance Agency of North Carolina Inc. Vice President- Pacific Region IDS Insurance Agency of Ohio Inc. Vice President- Pacific Region IDS Insurance Agency of Wyoming Inc. Vice President- Pacific Region Michael L. Weiner, Vice President--Corporate Tax Operations American Express Financial Advisors IDS Tower 10 Vice President-Corporate Minneapolis, MN 55440 Tax Operations IDS Capital Holdings Inc. Vice President IDS Futures Brokerage Group Vice President IDS Futures Corporation Vice President, Treasurer and Secretary IDS Futures III Corporation Vice President, Treasurer and Secretary Lawrence J. Welte, Vice President--Investment Administration American Express Financial Advisors IDS Tower 10 Vice President- Minneapolis, MN 55440 Investment Administration IDS Securities Corporation Director, Executive Vice President and Chief Operating Officer Jeffry F. Welter, Vice President--Equity and Fixed Income Trading American Express Financial Advisors IDS Tower 10 Vice President-Equity Minneapolis, MN 55440 and Fixed Income Trading PAGE 22 Item 28. Business and Other Connections of Investment Adviser (American Express Financial Corporation)(cont'd) William N. Westhoff, Director, Senior Vice President and Global Chief Investment Officer American Enterprise Life Insurance IDS Tower 10 Director Company Minneapolis, MN 55440 American Express Financial Advisors Senior Vice President and Global Chief Investment Officer IDS International, Inc. Director IDS Partnership Services Corporation Director and Vice President IDS Real Estate Services Inc. Director, Chairman of the Board and President IDS Realty Corporation Director and Vice President Investors Syndicate Development Corp. Director Edwin M. Wistrand, Vice President and Assistant General Counsel American Express Financial Advisors IDS Tower 10 Vice President and Minneapolis, MN 55440 Assistant General Counsel Michael R. Woodward, Director and Senior Vice President--Field Management American Express Financial Advisors IDS Tower 10 Senior Vice President- Minneapolis, MN 55440 Field Management American Express Service Corporation Vice President IDS Insurance Agency of Alabama Inc. Vice President- North Region IDS Insurance Agency of Arkansas Inc. Vice President- North Region IDS Insurance Agency of Massachusetts Inc. Vice President- North Region IDS Insurance Agency of Nevada Inc. Vice President- North Region IDS Insurance Agency of New Mexico Inc. Vice President- North Region IDS Insurance Agency of North Carolina Inc. Vice President- North Region IDS Insurance Agency of Ohio Inc. Vice President- North Region IDS Insurance Agency of Wyoming Inc. Vice President- North Region IDS Life Insurance Company Box 5144 Director of New York Albany, NY 12205
PAGE 23 Item 29. Principal Underwriters. (a) American Express Financial Advisors acts as principal underwriter for the following investment companies: IDS Bond Fund, Inc.; IDS California Tax-Exempt Trust; IDS Discovery Fund, Inc.; IDS Equity Select Fund, Inc.; IDS Extra Income Fund, Inc.; IDS Federal Income Fund, Inc.; IDS Global Series, Inc.; IDS Growth Fund, Inc.; IDS High Yield Tax-Exempt Fund, Inc.; IDS International Fund, Inc.; IDS Investment Series, Inc.; IDS Managed Retirement Fund, Inc.; IDS Market Advantage Series, Inc.; IDS Money Market Series, Inc.; IDS New Dimensions Fund, Inc.; IDS Precious Metals Fund, Inc.; IDS Progressive Fund, Inc.; IDS Selective Fund, Inc.; IDS Special Tax-Exempt Series Trust; IDS Stock Fund, Inc.; IDS Strategy Fund, Inc.; IDS Tax-Exempt Bond Fund, Inc.; IDS Tax-Free Money Fund, Inc.; IDS Utilities Income Fund, Inc. and IDS Certificate Company. (b) As to each director, officer or partner of the principal underwriter: Positions and Name and Principal Position and Offices Offices with Business Address with Underwriter Registrant Ronald G. Abrahamson Vice President- None IDS Tower 10 Service Quality and Minneapolis, MN 55440 Reengineering Douglas A. Alger Vice President-Total None IDS Tower 10 Compensation Minneapolis, MN 55440 Jerome R. Amundson Vice President and None IDS Tower 10 Controller-Investment Minneapolis, MN 55440 Accounting Peter J. Anderson Senior Vice President- None IDS Tower 10 Investments Minneapolis, MN 55440 Ward D. Armstrong Vice President- None IDS Tower 10 Sales and Marketing, Minneapolis, MN 55440 American Express Institutional Services Alvan D. Arthur Group Vice President- None IDS Tower 10 Central California/ Minneapolis, MN 55440 Western Nevada Kent L. Ashton Vice President- None IDS Tower 10 Financial Education Minneapolis, MN 55440 Services PAGE 24 Item 29(b). (Continued) Positions and Name and Principal Position and Offices Offices with Business Address with Underwriter Registrant Joseph M. Barsky III Vice President-Senior None IDS Tower 10 Portfolio Manager Minneapolis, MN 55440 Robert C. Basten Vice President-Tax None IDS Tower 10 and Business Services Minneapolis, MN 55440 Timothy V. Bechtold Vice President-Insurance None IDS Tower 10 Product Development Minneapolis, MN 55440 John D. Begley Group Vice Presdient- None Olentangy Valley Center Ohio/Indiana Suite 300 7870 Olentangy River Rd. Columbus, OH 43235 Carl E. Beihl Vice President- None IDS Tower 10 Strategic Technology Minneapolis, MN 55440 Planning Jack A. Benjamin Group Vice President- None Greater Pennsylvania Alan F. Bignall Vice President- None IDS Tower 10 Financial Planning Minneapolis, MN 55440 Systems Brent L. Bisson Group Vice President- None Seafirst Financial Los Angeles Metro Center, Suite 1730 601 W. Riverside Ave. Spokane, WA 99201 John C. Boeder Vice President- None IDS Tower 10 Mature Market Group Minneapolis, MN 55440 Bruce J. Bordelon Group Vice President- None Gulf States Charles R. Branch Group Vice President- None Northwest Karl J. Breyer Senior Vice President- None IDS Tower 10 Corporate Affairs and Minneapolis, MN 55440 Special Counsel Harold E. Burke Vice President None IDS Tower 10 and Assistant Minneapolis, MN 55440 General Counsel PAGE 25 Item 29(b). (Continued) Positions and Name and Principal Position and Offices Offices with Business Address with Underwriter Registrant Daniel J. Candura Vice President- None IDS Tower 10 Marketing Support Minneapolis, MN 55440 Cynthia M. Carlson Vice President- None IDS Tower 10 American Express Minneapolis, MN 55440 Securities Services Orison Y. Chaffee III Vice President-Field None IDS Tower 10 Real Estate Minneapolis, MN 55440 James E. Choat Senior Vice President- None Suite 124 Field Management 6210 Campbell Rd. Dallas, TX 75248 Kenneth J. Ciak Vice President and None IDS Property Casualty General Manager- 1400 Lombardi Avenue IDS Property Casualty Green Bay, WI 54304 Roger C. Corea Group Vice President- None 345 Woodcliff Drive Upstate New York Fairport, NY 14450 Henry J. Cormier Group Vice President- None Connecticut John M. Crawford Group Vice President- None Arkansas/Springfield/Memphis Kevin F. Crowe Group Vice President- None IDS Tower 10 Carolinas/Eastern Georgia Minneapolis, MN 55440 Alan R. Dakay Vice President- None IDS Tower 10 Institutional Insurance Minneapolis, MN 55440 Marketing Regenia David Vice President- None Systems Services Scott M. Digiammarino Group Vice President- None Washington/Baltimore Bradford L. Drew Group Vice President- None Eastern Florida PAGE 26 Item 29(b). (Continued) Positions and Name and Principal Position and Offices Offices with Business Address with Underwriter Registrant William H. Dudley Director and Executive Director/ IDS Tower 10 Vice President- Trustee Minneapolis MN 55440 Investment Operations Roger S. Edgar Senior Vice President- None IDS Tower 10 Information Systems Minneapolis, MN 55440 Gordon L. Eid Senior Vice President None IDS Tower 10 and General Counsel Minneapolis, MN 55440 Robert M. Elconin Vice President- None IDS Tower 10 Government Relations Minneapolis, MN 55440 Mark A. Ernst Vice President- None IDS Tower 10 Retail Services Minneapolis, MN 55440 Joseph Evanovich Jr. Group Vice President- None Nebraska/Iowa/Dakotas Louise P. Evenson Group Vice President- None San Francisco Bay Area Gordon M. Fines Vice President- None IDS Tower 10 Mutual Fund Equity Minneapolis MN 55440 Investments Louis C. Fornetti Senior Vice President None IDS Tower 10 and Chief Financial Minneapolis, MN 55440 Officer Douglas L. Forsberg Group Vice President- None IDS Tower 10 Portland/Eugene Minneapolis, MN 55440 William P. Fritz Group Vice President- None Northern Missouri Carl W. Gans Group Vice President- None IDS Tower 10 Twin City Metro Minneapolis, MN 55440 Bruce M. Gaurino Group Vice President- None Hawaii PAGE 27 Item 29(b). (Continued) Positions and Name and Principal Position and Offices Offices with Business Address with Underwriter Registrant Robert G. Gilbert Vice President- None IDS Tower 10 Real Estate Minneapolis, MN 55440 John J. Golden Vice President- None IDS Tower 10 Field Compensation Minneapolis, MN 55440 Development Morris Goodwin Jr. Vice President and None IDS Tower 10 Corporate Treasurer Minneapolis, MN 55440 Suzanne Graf Vice President- None IDS Tower 10 Systems Services Minneapolis, MN 55440 Bruce M. Guarino Group Vice President- None Hawaii David A. Hammer Vice President None IDS Tower 10 and Marketing Minneapolis, MN 55440 Controller Teresa A. Hanratty Group Vice President- None Northern New England John R. Hantz Group Vice President- None Detroit Metro Robert L. Harden Group Vice President- None Suite 403 Boston Metro 8500 Leesburg Pike Vienna, VA 22180 Lorraine R. Hart Vice President- None IDS Tower 10 Insurance Investments Minneapolis, MN 55440 Scott A. Hawkinson Vice President-Assured None IDS Tower 10 Assets Product Development Minneapolis, MN 55440 and Management Brian M. Heath Group Vice President- None IDS Tower 10 North Texas Minneapolis, MN 55440 Raymond E. Hirsch Vice President-Senior None IDS Tower 10 Portfolio Manager Minneapolis, MN 55440 PAGE 28 Item 29(b). (Continued) Positions and Name and Principal Position and Offices Offices with Business Address with Underwriter Registrant James G. Hirsh Vice President and None IDS Tower 10 Assistant General Minneapolis, MN 55440 Counsel David J. Hockenberry Group Vice President- None Eastern Tennessee Kevin P. Howe Vice President- None IDS Tower 10 Government and Minneapolis, MN 55440 Customer Relations David R. Hubers Chairman, Chief None IDS Tower 10 Executive Officer and Minneapolis, MN 55440 President Marietta L. Johns Senior Vice President- None IDS Tower 10 Field Management Minneapolis, MN 55440 Douglas R. Jordal Vice President-Taxes None IDS Tower 10 Minneapolis, MN 55440 Craig A. Junkins Vice President - IDS 1994 None IDS Tower 10 Implementation Planning Minneapolis, MN 55440 and Financial Planning Development James E. Kaarre Vice President- None IDS Tower 10 Marketing Information Minneapolis, MN 55440 Linda B. Keene Vice President- None Market Development G. Michael Kennedy Vice President-Investment None IDS Tower 10 Services and Investment Minneapolis, MN 55440 Research Susan D. Kinder Senior Vice President- None IDS Tower 10 Human Resources Minneapolis, MN 55440 Richard W. Kling Senior Vice President- None IDS Tower 10 Risk Management Products Minneapolis, MN 55440 PAGE 29 Item 29(b). (Continued) Positions and Name and Principal Position and Offices Offices with Business Address with Underwriter Registrant Harold D. Knutson Vice President- None IDS Tower 10 System Services Minneapolis, MN 55440 Paul F. Kolkman Vice President- None IDS Tower 10 Actuarial Finance Minneapolis, MN 55440 Claire Kolmodin Vice President- None IDS Tower 10 Service Quality Minneapolis, MN 55440 David S. Kreager Group Vice President- None IDS Tower 10 Greater Michigan Minneapolis, MN 55440 Steven C. Kumagai Director and Senior None IDS Tower 10 Vice President-Field Minneapolis, MN 55440 Management and Business Systems Mitre Kutanovski Group Vice President- None IDS Tower 10 Chicago Metro Minneapolis, MN 55440 Edward Labenski Vice President- None IDS Tower 10 Senior Portfolio Minneapolis, MN 55440 Manager Kurt A. Larson Vice President- None IDS Tower 10 Senior Portfolio Minneapolis, MN 55440 Manager Lori J. Larson Vice President- None IDS Tower 10 Variable Assets Product Minneapolis, MN 55440 Development Ryan R. Larson Vice President- None IDS Tower 10 IPG Product Development Minneapolis, MN 55440 Daniel E. Laufenberg Vice President and None IDS Tower 10 Chief U.S. Economist Minneapolis, MN 55440 Richard J. Lazarchic Vice President- None IDS Tower 10 Senior Portfolio MInneapolis, MN 55440 Manager Peter A. Lefferts Senior Vice President and None IDS Tower 10 Chief Marketing Officer Minneapolis, MN 55440 PAGE 30 Item 29(b). (Continued) Positions and Name and Principal Position and Offices Offices with Business Address with Underwriter Registrant Douglas A. Lennick Director and Executive None IDS Tower 10 Vice President-Private Minneapolis, MN 55440 Client Group Mary J. Malevich Vice President- None IDS Tower 10 Senior Portfolio Minneapolis, MN 55440 Manager Fred A. Mandell Vice President- None IDS Tower 10 Field Marketing Readiness Minneapolis, MN 55440 Daniel E. Martin Group Vice President- None Pittsburgh Metro William J. McKinney Vice President- None IDS Tower 10 Field Management Minneapolis, MN 55440 Support Thomas W. Medcalf Vice President- None IDS Tower 10 Senior Portfolio Manager Minneapolis, MN 55440 William C. Melton Vice President- None IDS Tower 10 International Research Minneapolis, MN 55440 and Chief International Economist Janis E. Miller Vice President- None IDS Tower 10 Variable Assets Minneapolis, MN 55440 James A. Mitchell Executive Vice President- None IDS Tower 10 Marketing and Products Minneapolis, MN 55440 John P. Moraites Group Vice President- None Kansas/Oklahoma Pamela J. Moret Vice President- None IDS Tower 10 Corporate Communications Minneapolis, MN 55440 Barry J. Murphy Senior Vice President- None IDS Tower 10 Client Service Minneapolis, MN 55440 Robert J. Neis Vice President- None IDS Tower 10 Information Systems Minneapolis, MN 55440 Operations PAGE 31 Item 29(b). (Continued) Positions and Name and Principal Position and Offices Offices with Business Address with Underwriter Registrant Ronald E. Newton Group Vice President- None Rhode Island/Central Massachusetts Thomas V. Nicolosi Group Vice President- None New York Metro Area Vernon F. Palen Region Vice President- None Suite D-222 Rocky Mountain Region 7100 E. Lincoln Drive Scottsdale, AZ 85253 James R. Palmer Vice President- None IDS Tower 10 Insurance Operations Minneapolis, MN 55440 Carla P. Pavone Vice President- None IDS Tower 10 Specialty Service Teams Minneapolis, MN 55440 and Emerging Business Judith A. Pennington Vice President- None IDS Tower 10 Field Technology Minneapolis, MN 55440 George M. Perry Vice President- None IDS Tower 10 Corporate Strategy Minneapolis, MN 55440 and Development Susan B. Plimpton Vice President- None IDS Tower 10 Segmentation Development Minneapolis, MN 55440 and Support Larry M. Post Group Vice President- None Philadelphia Metro Ronald W. Powell Vice President and None IDS Tower 10 Assistant General Minneapolis, MN 55440 Counsel James M. Punch Vice President- None IDS Tower 10 TransAction Services Minneapolis, MN 55440 Frederick C. Quirsfeld Vice President-Taxable None IDS Tower 10 Mutual Fund Investments Minneapolis, MN 55440 R. Daniel Richardson Group Vice President- None Southern Texas PAGE 32 Item 29(b). (Continued) Positions and Name and Principal Position and Offices Offices with Business Address with Underwriter Registrant Roger B. Rogos Group Vice President- None Suite 15, Parkside Pl. Western Florida 945 Boardman-Canfield Rd Youngstown, Ohio 44512 ReBecca K. Roloff Vice President-1994 None IDS Tower 10 Program Director Minneapolis, MN 55440 Stephen W. Roszell Vice President- None IDS Tower 10 Advisory Institutional Minneapolis, MN 55440 Marketing Max G. Roth Group Vice President- None Wisconsin/Upper Michigan Robert A. Rudell Vice President- None IDS Tower 10 American Express Minneapolis, MN 55440 Institutional Services John P. Ryan Vice President and None IDS Tower 10 General Auditor Minneapolis, MN 55440 Erven A. Samsel Senior Vice President- None 45 Braintree Hill Park Field Management Braintree, MA 02184 Russell L. Scalfano Group Vice President- None Illinois/Indiana/Kentucky William G. Scholz Group Vice President- None Arizona/Las Vegas Stuart A. Sedlacek Vice President- None IDS Tower 10 Assured Assets Minneapolis, MN 55440 Donald K. Shanks Vice President- None IDS Tower 10 Property Casualty Minneapolis, MN 55440 F. Dale Simmons Vice President-Senior None IDS Tower 10 Portfolio Manager, Minneapolis, MN 55440 Insurance Investments Judy P. Skoglund Vice President- None IDS Tower 10 Human Resources and Minneapolis, MN 55440 Organization Development PAGE 33 Item 29(b). (Continued) Positions and Name and Principal Position and Offices Offices with Business Address with Underwriter Registrant Julian W. Sloter Group Vice Presidnet- None 9040 Roswell Rd. Orlando/Jacksonville River Ridge-Suite 600 Atlanta, GA 30350 Ben C. Smith Vice President- None IDS Tower 10 Workplace Marketing Minneapolis, MN 55440 William A. Smith Vice President and None IDS Tower 10 Controller-Private Minneapolis, MN 55440 Client Group James B. Solberg Group Vice President- None IDS Tower 10 Eastern Iowa Area Minneapolis, MN 55440 Bridget Sperl Vice President- None IDS Tower 10 Human Resources Minneapolis, MN 55440 Management Services Paul J. Stanislaw Group Vice President- None Southern California Lois A. Stilwell Group Vice President- None IDS Tower 10 Outstate Minnesota Area/ Minneapolis, MN 55440 North Dakota/Western Wisconsin William A. Stoltzmann Vice President and None IDS Tower 10 Assistant General Minneapolis, MN 55440 Counsel James J. Strauss Vice President- None IDS Tower 10 Corporate Planning Minneapolis, MN 55440 and Analysis Jeffrey J. Stremcha Vice President-Information None IDS Tower 10 Resource Management/ISD Minneapolis, MN 55440 Neil G. Taylor Group Vice President- None IDS Tower 10 Seattle/Tacoma Minneapolis, MN 55440 John R. Thomas Senior Vice President- Director/ IDS Tower 10 Information and Trustee Minneapolis, MN 55440 Technology Melinda S. Urion Vice President and None IDS Tower 10 Corporate Controller Minneapolis, MN 55440 PAGE 34 Item 29(b). (Continued) Positions and Name and Principal Position and Offices Offices with Business Address with Underwriter Registrant Peter S. Velardi Group Vice President- None Atlanta/Birmingham Charles F. Wachendorfer Group Vice President- None Denver/Salt Lake City/ Albuquerque Wesley W. Wadman Vice President- None IDS Tower 10 Senior Portfolio Minneapolis, MN 55440 Manager Norman Weaver Jr. Senior Vice President- None Suite 215 Field Management 1501 Westcliff Drive Newport Beach, CA 92660 Michael L. Weiner Vice President- None IDS Tower 10 Corporate Tax Minneapolis, MN 55440 Operations Lawrence J. Welte Vice President- None IDS Tower 10 Investment Administration Minneapolis, MN 55440 Jeffry M. Welter Vice President- None IDS Tower 10 Equity and Fixed Income Minneapolis, MN 55440 Trading William N. Westhoff Senior Vice President and None IDS Tower 10 Global Chief Investment Minneapolis, MN 55440 Officer Thomas L. White Group Vice President- None Cleveland Metro Eric S. Williams Group Vice President- None Virginia Edwin M. Wistrand Vice President and None IDS Tower 10 Assistant General Minneapolis, MN 55440 Counsel Michael R. Woodward Senior Vice President- None Suite 815 Field Management 8585 Broadway Merrillville, IN 46410 PAGE 35 Item 29(c). Not applicable. Item 30. Location of Accounts and Records IDS Financial Corporation IDS Tower 10 Minneapolis, MN 55440 Item 31. Management Services Not Applicable. Item 32. Undertakings (a) Not Applicable. (b) Not Applicable. (c) The Registrant undertakes to furnish each person to whom a prospectus is delivered with a copy of the Registrant's latest annual report to shareholders, upon request and without charge. SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant, IDS Bond Fund, Inc., certifies that it meets the requirements for the effectiveness of this Amendment to its Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis and State of Minnesota on the 27th day of February, 1995. IDS BOND FUND, INC. By /s/ WILLIAM R. PEARCE** ------------------------------------ William R. Pearce, PRESIDENT Pursuant to the requirements of the Securities Act of 1933, this Amendment to its Registration Statement has been signed below by the following persons in the capacities indicated on the 27th day of February, 1995. SIGNATURE CAPACITY - ----------------------------------- ------------------------- /s/ WILLIAM R. PEARCE** President and Principal - ----------------------------------- Executive Officer and William R. Pearce Director Treasurer, Principal /s/ LESLIE L. OGG** Financial Officer, and - ----------------------------------- Principal Accounting Leslie L. Ogg Officer /s/ LYNNE V. CHENEY* - ----------------------------------- Director Lynne V. Cheney /s/ WILLIAM H. DUDLEY* - ----------------------------------- Director William H. Dudley /s/ ROBERT F. FROEHLKE* - ----------------------------------- Director Robert F. Froehlke /s/ DAVID R. HUBERS* - ----------------------------------- Director David R. Hubers /s/ HEINZ F. HUTTER* - ----------------------------------- Director Heinz F. Hutter II-3 SIGNATURE CAPACITY - ----------------------------------- ------------------------- /s/ ANNE P. JONES* - ----------------------------------- Director Anne P. Jones /s/ DONALD M. KENDALL* - ----------------------------------- Director Donald M. Kendall /s/ MELVIN R. LAIRD* - ----------------------------------- Director Melvin R. Laird /s/ LEWIS W. LEHR* - ----------------------------------- Director Lewis W. Lehr /s/ EDSON W. SPENCER* - ----------------------------------- Director Edson W. Spencer /s/ JOHN R. THOMAS* - ----------------------------------- Director John R. Thomas /s/ WHEELOCK WHITNEY* - ----------------------------------- Director Wheelock Whitney /s/ C. ANGUS WURTELE* - ----------------------------------- Director C. Angus Wurtele *Signed pursuant to Directors' Power of Attorney, dated November 10, 1994, filed electronically as Exhibit 18(a) to Registrant's Post-Effective Amendment No. 42, by: /s/ LESLIE L. OGG - ------------------------------------------- Leslie L. Ogg **Signed pursuant to Officers' Power of Attorney dated June 1, 1993, filed electronically as Exhibit 18(b) to Registrant's Post-Effective Amendment No. 38 by: /s/ LESLIE L. OGG - ------------------------------------------- Leslie L. Ogg II-4 CONTENTS OF THIS POST-EFFECTIVE AMENDMENT NO. 43 TO REGISTRATION STATEMENT NO. 2-51586 This post-effective amendment contains the following papers and documents: The facing sheet. Cross reference sheet. Part A. The prospectus. Part B. Statement of Additional Information. Financial Statements. Part C. Other information. Exhibits. The signatures. EX-99 2 EXHIBIT INDEX EXHIBIT INDEX IDS Bond Fund, Inc. Registration Number 2-51586/811-2503 Exhibit 5: Form of Investment Management Services Agreement between Registrant and American Express Financial Corporation, dated March 20, 1995. Exhibit 6: Form of Distribution Agreement between Registrant and American Express Financial Advisors Inc., dated March 20, 1995. Exhibit 8: Form of Custodian Agreement between Registrant and American Express Trust Company, dated March 20, 1995. Exhibit 9b: Form of Transfer Agency Agreement between Registrant and American Express Financial Corporation, dated March 20, 1995. Exhibit 9d: Form of Shareholder Service Agreement between Registrant and American Express Financial Advisors Inc., dated March 20, 1995. Exhibit 9e: Form of Administrative Services Agreement between Registrant and American Express Financial Corporation, dated March 20, 1995. Exhibit 11: Independent Auditors' Consent. Exhibit 15: Form of Plan and Agreement of Distribution between Registrant and American Express Financial Advisors Inc., dated March 20, 1995. Exhibit 17: Financial Data Schedule.
EX-99.5-IMSAGR 3 5 FORM OF INVESTMENT MANAGEMENT SERVICES AGREEMENT FORM OF INVESTMENT MANAGEMENT SERVICES AGREEMENT AGREEMENT made the 20th day of March, 1995, by and between IDS Bond Fund, Inc. (the "Fund"), a Minnesota corporation, and American Express Financial Corporation, a Delaware corporation. PART ONE: INVESTMENT MANAGEMENT AND OTHER SERVICES (1) The Fund hereby retains American Express Financial Corporation, and American Express Financial Corporation hereby agrees, for the period of this Agreement and under the terms and conditions hereinafter set forth, to furnish the Fund continuously with suggested investment planning; to determine, consistent with the Fund's investment objectives and policies, which securities in American Express Financial Corporation's discretion shall be purchased, held or sold and to execute or cause the execution of purchase or sell orders; to prepare and make available to the Fund all necessary research and statistical data in connection therewith; to furnish all services of whatever nature required in connection with the management of the Fund as provided under this Agreement; and to pay such expenses as may be provided for in Part Three; subject always to the direction and control of the Board of Directors (the "Board"), the Executive Committee and the authorized officers of the Fund. American Express Financial Corporation agrees to maintain an adequate organization of competent persons to provide the services and to perform the functions herein mentioned. American Express Financial Corporation agrees to meet with any persons at such times as the Board deems appropriate for the purpose of reviewing American Express Financial Corporation's performance under this Agreement. (2) American Express Financial Corporation agrees that the investment planning and investment decisions will be in accordance with general investment policies of the Fund as disclosed to American Express Financial Corporation from time to time by the Fund and as set forth in its prospectuses and registration statements filed with the United States Securities and Exchange Commission (the "SEC"). (3) American Express Financial Corporation agrees that it will maintain all required records, memoranda, instructions or authorizations relating to the acquisition or disposition of securities for the Fund. (4) The Fund agrees that it will furnish to American Express Financial Corporation any information that the latter may reasonably request with respect to the services performed or to be performed by American Express Financial Corporation under this Agreement. (5) American Express Financial Corporation is authorized to select the brokers or dealers that will execute the purchases and sales of portfolio securities for the Fund and is directed to use its best efforts to obtain the best available price and most favorable execution, except as prescribed herein. Subject to prior authorization by the Fund's Board of appropriate policies and procedures, and subject to termination at any time by the Board, American Express Financial Corporation may also be authorized to effect individual securities transactions at commission rates in excess of the minimum commission rates available, to the extent authorized by law, if American Express Financial Corporation determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer, viewed in terms of either that particular transaction or American Express Financial Corporation's overall responsibilities with respect to the Fund and other funds for which it acts as investment adviser. (6) It is understood and agreed that in furnishing the Fund with the services as herein provided, neither American Express Financial Corporation, nor any officer, director or agent thereof shall be held liable to the Fund or its creditors or shareholders for errors of judgment or for anything except willful misfeasance, bad faith, or gross negligence in the performance of its duties, or reckless disregard of its obligations and duties under the terms of this Agreement. It is further understood and agreed that American Express Financial Corporation may rely upon information furnished to it reasonably believed to be accurate and reliable. PART TWO: COMPENSATION TO INVESTMENT MANAGER (1) The Fund agrees to pay to American Express Financial Corporation, and American Express Financial Corporation covenants and agrees to accept from the Fund in full payment for the services furnished, a fee for each calendar day of each year equal to the total of 1/365th (1/366th in each leap year) of the amount computed as shown below. The computation shall be made for each day on the basis of net assets as of the close of business of the full business day two (2) business days prior to the day for which the computation is being made. In the case of the suspension of the computation of net asset value, the asset charge for each day during such suspension shall be computed as of the close of business on the last full business day on which the net assets were computed. Net assets as of the close of a full business day shall include all transactions in shares of the Fund recorded on the books of the Fund for that day. The asset charge shall be based on the net assets of the Fund as set forth in the following table. ASSET CHARGE
Assets Annual Rate at (Billions) Each Asset Level ----------- ---------------- First $1 0.520% Next $1 0.495 Next $1 0.470 Next $3 0.445 Next $3 0.420 Over $9 0.395
(2) The fee shall be paid on a monthly basis and, in the event of the termination of this Agreement, the fee accrued shall be prorated on the basis of the number of days that this Agreement is in effect during the month with respect to which such payment is made. (3) The fee provided for hereunder shall be paid in cash by the Fund to American Express Financial Corporation within five business days after the last day of each month. PART THREE: ALLOCATION OF EXPENSES (1) The Fund agrees to pay: (a) Fees payable to American Express Financial Corporation for its services under the terms of this Agreement. (b) Taxes. (c) Brokerage commissions and charges in connection with the purchase and sale of assets. (d) Custodian fees and charges. (e) Fees and charges of its independent certified public accountants for services the Fund requests. (f) Premium on the bond required by Rule 17g-1 under the Investment Company Act of 1940. (g) Fees and expenses of attorneys (i) it employs in matters not involving the assertion of a claim by a third party against the Fund, its directors and officers, (ii) it employs in conjunction with a claim asserted by the Board against American Express Financial Corporation, except that American Express Financial Corporation shall reimburse the Fund for such fees and expenses if it is ultimately determined by a court of competent jurisdiction, or American Express Financial Corporation agrees, that it is liable in whole or in part to the Fund, and (iii) it employs to assert a claim against a third party. (h) Fees paid for the qualification and registration for public sale of the securities of the Fund under the laws of the United States and of the several states in which such securities shall be offered for sale. (i) Fees of consultants employed by the Fund. (j) Directors, officers and employees expenses which shall include fees, salaries, memberships, dues, travel, seminars, pension, profit sharing, and all other benefits paid to or provided for directors, officers and employees, directors and officers liability insurance, errors and omissions liability insurance, worker's compensation insurance and other expenses applicable to the directors, officers and employees, except the Fund will not pay any fees or expenses of any person who is an officer or employee of American Express Financial Corporation or its affiliates. (k) Filing fees and charges incurred by the Fund in connection with filing any amendment to its articles of incorporation, or incurred in filing any other document with the State of Minnesota or its political subdivisions. (l) Organizational expenses of the Fund. (m) Expenses incurred in connection with lending portfolio securities of the Fund. (n) Expenses properly payable by the Fund, approved by the Board. (2) American Express Financial Corporation agrees to pay all expenses associated with the services it provides under the terms of this Agreement. Further, American Express Financial Corporation agrees that if, at the end of any month, the expenses of the Fund under this Agreement and any other agreement between the Fund and American Express Financial Corporation, but excluding those expenses set forth in (1)(b) and (1)(c) of this Part Three, exceed the most restrictive applicable state expenses limitation, the Fund shall not pay those expenses set forth in (1)(a) and (d) through (n) of this Part Three to the extent necessary to keep the Fund's expenses from exceeding the limitation, it being understood that American Express Financial Corporation will assume all unpaid expenses and bill the Fund for them in subsequent months but in no event can the accumulation of unpaid expenses or billing be carried past the end of the Fund's fiscal year. PART FOUR: MISCELLANEOUS (1) American Express Financial Corporation shall be deemed to be an independent contractor and, except as expressly provided or authorized in this Agreement, shall have no authority to act for or represent the Fund. (2) A "full business day" shall be as defined in the By-laws. (3) The Fund recognizes that American Express Financial Corporation now renders and may continue to render investment advice and other services to other investment companies and persons which may or may not have investment policies and investments similar to those of the Fund and that American Express Financial Corporation manages its own investments and/or those of its subsidiaries. American Express Financial Corporation shall be free to render such investment advice and other services and the Fund hereby consents thereto. (4) Neither this Agreement nor any transaction had pursuant hereto shall be invalidated or in any way affected by the fact that directors, officers, agents and/or shareholders of the Fund are or may be interested in American Express Financial Corporation or any successor or assignee thereof, as directors, officers, stockholders or otherwise; that directors, officers, stockholders or agents of American Express Financial Corporation are or may be interested in the Fund as directors, officers, shareholders, or otherwise; or that American Express Financial Corporation or any successor or assignee, is or may be interested in the Fund as shareholder or otherwise, provided, however, that neither American Express Financial Corporation, nor any officer, director or employee thereof or of the Fund, shall sell to or buy from the Fund any property or security other than shares issued by the Fund, except in accordance with applicable regulations or orders of the SEC. (5) Any notice under this Agreement shall be given in writing, addressed, and delivered, or mailed postpaid, to the party to this Agreement entitled to receive such, at such party's principal place of business in Minneapolis, Minnesota, or to such other address as either party may designate in writing mailed to the other. (6) American Express Financial Corporation agrees that no officer, director or employee of American Express Financial Corporation will deal for or on behalf of the Fund with himself as principal or agent, or with any corporation or partnership in which he may have a financial interest, except that this shall not prohibit: (a) Officers, directors or employees of American Express Financial Corporation from having a financial interest in the Fund or in American Express Financial Corporation. (b) The purchase of securities for the Fund, or the sale of securities owned by the Fund, through a security broker or dealer, one or more of whose partners, officers, directors or employees is an officer, director or employee of American Express Financial Corporation, provided such transactions are handled in the capacity of broker only and provided commissions charged do not exceed customary brokerage charges for such services. (c) Transactions with the Fund by a broker-dealer affiliate of American Express Financial Corporation as may be allowed by rule or order of the SEC, and if made pursuant to procedures adopted by the Fund's Board. (7) American Express Financial Corporation agrees that, except as herein otherwise expressly provided or as may be permitted consistent with the use of a broker-dealer affiliate of American Express Financial Corporation under applicable provisions of the federal securities laws, neither it nor any of its officers, directors or employees shall at any time during the period of this Agreement, make, accept or receive, directly or indirectly, any fees, profits or emoluments of any character in connection with the purchase or sale of securities (except shares issued by the Fund) or other assets by or for the Fund. PART FIVE: RENEWAL AND TERMINATION (1) This Agreement shall continue in effect until March 19, 1997, or until a new agreement is approved by a vote of the majority of the outstanding shares of the Fund and by vote of the Fund's Board, including the vote required by (b) of this paragraph, and if no new agreement is so approved, this Agreement shall continue from year to year thereafter unless and until terminated by either party as hereinafter provided, except that such continuance shall be specifically approved at least annually (a) by the Board of the Fund or by a vote of the majority of the outstanding shares of the Fund and (b) by the vote of a majority of the directors who are not parties to this Agreement or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval. As used in this paragraph, the term "interested person" shall have the same meaning as set forth in the Investment Company Act of 1940, as amended (the "1940 Act"). (2) This Agreement may be terminated by either the Fund or American Express Financial Corporation at any time by giving the other party 60 days' written notice of such intention to terminate, provided that any termination shall be made without the payment of any penalty, and provided further that termination may be effected either by the Board of the Fund or by a vote of the majority of the outstanding voting shares of the Fund. The vote of the majority of the outstanding voting shares of the Fund for the purpose of this Part Five shall be the vote at a shareholders' regular meeting, or a special meeting duly called for the purpose, of 67% or more of the Fund's shares present at such meeting if the holders of more than 50% of the outstanding voting shares are present or represented by proxy, or more than 50% of the outstanding voting shares of the Fund, whichever is less. (3) This Agreement shall terminate in the event of its assignment, the term "assignment" for this purpose having the same meaning as set forth in the 1940 Act. IN WITNESS THEREOF, the parties hereto have executed the foregoing Agreement as of the day and year first above written. IDS BOND FUND, INC. By: ----------------------------- Leslie L. Ogg, Vice President AMERICAN EXPRESS FINANCIAL CORPORATION By: ----------------------------- EX-99.6-DISTAGR 4 6 FORM OF DISTRIBUTION AGREEMENT DISTRIBUTION AGREEMENT Agreement made as of the 20th day of March, 1995, by and between IDS Bond Fund, Inc. (the "Fund"), a Minnesota corporation, for and on behalf of each class of the Fund and American Express Financial Advisors Inc., a Delaware corporation. Part One: DISTRIBUTION OF SECURITIES (1) The Fund covenants and agrees that, during the term of this agreement and any renewal or extension, American Express Financial Advisors shall have the exclusive right to act as principal underwriter for the Fund and to offer for sale and to distribute either directly or through any affiliate any and all shares of each class of capital stock issued or to be issued by the Fund. (2) American Express Financial Advisors hereby covenants and agrees to act as the principal underwriter of each class of capital shares issued and to be issued by the Fund during the period of this agreement and agrees during such period to offer for sale such shares as long as such shares remain available for sale, unless American Express Financial Advisors is unable or unwilling to make such offer for sale or sales or solicitations therefor legally because of any federal, state, provincial or governmental law, rule or agency or for any financial reason. (3) With respect to the offering for sale and sale of shares of each class to be issued by the Fund, it is mutually understood and agreed that such shares are to be sold on the following terms: (a) All sales shall be made by means of an application, and every application shall be subject to acceptance or rejection by the Fund at its principal place of business. Shares are to be sold for cash, payable at the time the application and payment for such shares are received at the principal place of business of the Fund. (b) No shares shall be sold at less than the asset value (computed in the manner provided by the currently effective prospectus or Statement of Additional Information and the Investment Company Act of 1940, and rules thereunder). The number of shares or fractional shares to be acquired by each applicant shall be determined by dividing the amount of each accepted application by the public offering price of one share of the capital stock of the appropriate class as of the close of business on the day when the application, together with payment, is received by the Fund at its principal place of business. The computation as to the number of shares and fractional shares shall be carried to three decimal points of one share with the computation being carried to the nearest 1/lOOOth of a share. If the day of receipt of the application and payment is not a full business day, then the asset value of the share for use in such computation shall be determined as of the close of business on the next succeeding full business day. In the event of a period of emergency, the computation of the asset value for the purpose of determining the number of shares or fractional shares to be acquired by the applicant may be deferred until the close of business on the first full business day following the termination of the period of emergency. A period of emergency shall have the definition given thereto in the Investment Company Act of 1940, and rules thereunder. (4) The Fund agrees to make prompt and reasonable effort to do any and all things necessary, in the opinion of American Express Financial Advisors, to have and to keep the Fund and the shares properly registered or qualified in all appropriate jurisdictions and, as to shares, in such amounts as American Express Financial Advisors may from time to time designate in order that the Fund's shares may be offered or sold in such jurisdictions. (5) The Fund agrees that it will furnish American Express Financial Advisors with information with respect to the affairs and accounts of the Fund, and in such form, as American Express Financial Advisors may from time to time reasonably require and further agrees that American Express Financial Advisors, at all reasonable times, shall be permitted to inspect the books and records of the Fund. (6) American Express Financial Advisors or its agents may prepare or cause to be prepared from time to time circulars, sales literature, broadcast material, publicity data and other advertising material to be used in the sales of shares issued by the Fund, including material which may be deemed to be a prospectus under rules promulgated by the Securities and Exchange Commission (each separate promotional piece is referred to as an "Item of Soliciting Material"). At its option, American Express Financial Advisors may submit any Item of Soliciting Material to the Fund for its prior approval. Unless a particular Item of Soliciting Material is approved in writing by the Fund prior to its use, American Express Financial Advisors agrees to indemnify the Fund and its directors and officers against any and all claims, demands, liabilities and expenses which the Fund or such persons may incur arising out of or based upon the use of any Item of Soliciting Material. The term "expenses" includes amounts paid in satisfaction of judgments or in settlements. The foregoing right of indemnification shall be in addition to any other rights to which the Fund or any director or officer may be entitled as a matter of law. Notwithstanding the foregoing, such indemnification shall not be deemed to abrogate or diminish in any way any right or claim American Express Financial Advisors may have against the Fund or its officers or directors in connection with the Fund's registration statement, prospectus, Statement of Additional Information or other information furnished by or caused to be furnished by the Fund. (7) American Express Financial Advisors agrees to submit to the Fund each application for shares immediately after the receipt of such application and payment therefor by American Express Financial Advisors at its principal place or business. (8) American Express Financial Advisors agrees to cause to be delivered to each person submitting an application a prospectus or circular to be furnished by the Fund in the form required by the applicable federal laws or by the acts or statutes of any applicable state, province or country. (9) The Fund shall have the right to extend to shareholders of each class the right to use the proceeds of any cash dividend paid by the Fund to that shareholder to purchase shares of the same class at the net asset value at the close of business upon the day of purchase, to the extent set forth in the currently effective prospectus or Statement of Additional Information. (10) Shares of each class issued by the Fund may be offered and sold at their asset value to the shareholders of the same class of other funds in the IDS MUTUAL FUND GROUP who wish to exchange their investments in shares of the other funds in the IDS MUTUAL FUND GROUP to investments in shares of the Fund, to the extent set forth in the currently effective prospectus or Statement of Additional Information, such asset value to be computed as of the close of business on the day of sale of such shares of the Fund. (11) American Express Financial Advisors and the Fund agree to use their best efforts to conform with all applicable state and federal laws and regulations relating to any rights or obligations under the term of this agreement. Part Two: ALLOCATION OF EXPENSES Except as provided by any other agreements between the parties, American Express Financial Advisors covenants and agrees that during the period of this agreement it will pay or cause or be paid all expenses incurred by American Express Financial Advisors, or any of its affiliates, in the offering for sale or sale of each class of the Fund's shares. Part Three: COMPENSATION (1) It is covenanted and agreed that American Express Financial Advisors shall be paid: (i) for a class of shares imposing a front-end sales charge, by the purchasers of Fund shares in an amount equal to the difference between the total amount received upon each sale of shares issued by the Fund and the asset value of such shares at the time of such sale; and (ii) for a class of shares imposing a deferred sales charge, by owners of Fund shares at the time the sales charge is imposed in an amount equal to any deferred sales charge, as described in the Fund's prospectus. Such sums as are received by the Fund shall be received as Agent for American Express Financial Advisors and shall be remitted to American Express Financial Advisors daily as soon as practicable after receipt. (2) The asset value of any share of each class of the Fund shall be determined in the manner provided by the classes currently effective prospectus and Statement of Additional Information and the Investment Company Act of 1940, and rules thereunder. Part Four: MISCELLANEOUS (1) American Express Financial Advisors shall be deemed to be an independent contractor and, except as expressly provided or authorized in this agreement, shall have no authority to act for or represent the Fund. (2) American Express Financial Advisors shall be free to render to others services similar to those rendered under this agreement. (3) Neither this agreement nor any transaction had pursuant hereto shall be invalidated or in any way affected by the fact that directors, officers, agents and/or shareholders of the Fund are or may be interested in American Express Financial Advisors as directors, officers, shareholders or otherwise; that directors, officers, shareholders or agents of American Express Financial Advisors are or may be interested in the Fund as directors, officers, shareholders or otherwise; or that American Express Financial Advisors is or may be interested in the Fund as shareholder or otherwise, provided, however, that neither American Express Financial Advisors nor any officer or director of American Express Financial Advisors or any officers or directors of the Fund shall sell to or buy from the Fund any property or security other than a security issued by the Fund, except in accordance with a rule, regulation or order of the federal Securities and Exchange Commission. (4) For the purposes of this agreement, a "business day" shall have the same meaning as is given to the term in the By-laws of the Fund. (5) Any notice under this agreement shall be given in writing, addressed and delivered, or mailed postpaid, to the parties to this agreement at each company's principal place of business in Minneapolis, Minnesota, or to such other address as either party may designate in writing mailed to the other. (6) American Express Financial Advisors agrees that no officer, director or employee of American Express Financial Advisors will deal for or on behalf of the Fund with himself as principal or agent, or with any corporation or partnership in which he may have a financial interest, except that this shall not prohibit: (a) Officers, directors and employees of American Express Financial Advisors from having a financial interest in the Fund or in American Express Financial Advisors. (b) The purchase of securities for the Fund, or the sale of securities owned by the Fund, through a security broker or dealer, one or more of whose partners, officers, directors or employees is an officer, director or employee of American Express Financial Advisors, provided such transactions are handled in the capacity of broker only and provided commissions charged do not exceed customary brokerage charges for such services. (c) Transactions with the Fund by a broker-dealer affiliate of American Express Financial Advisors if allowed by rule or order of the Securities and Exchange Commission and if made pursuant to procedures adopted by the Fund's Board of Directors. (7) American Express Financial Advisors agrees that, except as otherwise provided in this agreement, or as may be permitted consistent with the use of a broker-dealer affiliate of American Express Financial Advisors under applicable provisions of the federal securities laws, neither it nor any of its officers, directors or employees shall at any time during the period of this agreement make, accept or receive, directly or indirectly, any fees, profits or emoluments of any character in connection with the purchase or sale of securities (except securities issued by the Fund) or other assets by or for the Fund. Part Five: TERMINATION (1) This agreement shall continue from year to year unless and until terminated by American Express Financial Advisors or the Fund, except that such continuance shall be specifically approved at least annually by a vote of a majority of the Board of Directors who are not parties to this agreement or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval, and by a majority of the Board of Directors or by vote of a majority of the outstanding voting securities of the Fund. As used in this paragraph, the term "interested person" shall have the meaning as set forth in the Investment Company Act of 1940, as amended. (2) This agreement may be terminated by American Express Financial Advisors or the Fund at any time by giving the other party sixty (60) days written notice of such intention to terminate. (3) This agreement shall terminate in the event of its assignment, the term "assignment" for this purpose having the same meaning as set forth in the Investment Company Act of 1940, as amended. IN WITNESS WHEREOF, The parties hereto have executed the foregoing agreement on the date and year first above written. IDS BOND FUND, INC. By _____________________________________ Leslie L. Ogg Vice President AMERICAN EXPRESS FINANCIAL ADVISORS INC. By ____________________________________ Vice President EX-99.8-CUSTAR 5 8 FORM OF CUSTODIAN AGREEMENT CUSTODIAN AGREEMENT THIS CUSTODIAN AGREEMENT dated March 20, 1995, between IDS Bond Fund, Inc., a Minnesota Corporation (the "Corporation") and American Express Trust Company, a corporation organized under the laws of the State of Minnesota with its principal place of business at Minneapolis, Minnesota (the "Custodian"). WHEREAS, the Corporation desires that its securities and cash be hereafter held and administered by Custodian pursuant to the terms of this Agreement. NOW, THEREFORE, in consideration of the mutual agreements herein made, the Corporation and the Custodian agree as follows: SECTION 1. DEFINITIONS The word "securities" as used herein shall be construed to include, without being limited to, shares, stocks, treasury stocks, including any stocks of this Corporation, notes, bonds, debentures, evidences of indebtedness, options to buy or sell stocks or stock indexes, certificates of interest or participation in any profit- sharing agreements, collateral trust certificates, preorganization certificates or subscriptions, transferable shares, investment contracts, voting trust certificates, certificates of deposit for a security, fractional or undivided interests in oil, gas or other mineral rights, or any certificates of interest or participation in, temporary or interim certificates for, receipts for, guarantees of, or warrants or rights to subscribe to or purchase any of the foregoing, acceptances and other obligations and any evidence of any right or interest in or to any cash, property or assets and any interest or instrument commonly known as a security. In addition, for the purpose of this Custodian Agreement, the word "securities" also shall include other instruments in which the Corporation may invest including currency forward contracts and commodities such as interest rate or index futures contracts, margin deposits on such contracts or options on such contracts. The words "custodian order" shall mean a request or direction, including a computer printout, directed to the Custodian and signed in the name of the Corporation by any two individuals designated in the current certified list referred to in Section 2. The word "facsimile" shall mean an exact copy or likeness which is electronically transmitted for instant reproduction. SECTION 2. NAMES, TITLES AND SIGNATURES OF AUTHORIZED PERSONS The Corporation will certify to the Custodian the names and signatures of its present officers and other designated persons authorized on behalf of the Corporation to direct the Custodian by custodian order as herein before defined. The Corporation agrees that whenever any change occurs in this list it will file with the Custodian a copy of a resolution certified by the Secretary or an Assistant Secretary of the Corporation as having been duly adopted by the Board of Directors or the Executive Committee of the Board of Directors of the Corporation designating those persons currently authorized on behalf of the Corporation to direct the Custodian by custodian order, as herein before defined, and upon such filing (to be accompanied by the filing of specimen signatures of the designated persons) the persons so designated in said resolution shall constitute the current certified list. The Custodian is authorized to rely and act upon the names and signatures of the individuals as they appear in the most recent certified list from the Corporation which has been delivered to the Custodian as herein above provided. SECTION 3. USE OF SUBCUSTODIANS The Custodian may make arrangements, where appropriate, with other banks having not less than two million dollars aggregate capital, surplus and undivided profits for the custody of securities. Any such bank selected by the Custodian to act as subcustodian shall be deemed to be the agent of the Custodian. The Custodian also may enter into arrangements for the custody of securities entrusted to its care through foreign branches of United States banks; through foreign banks, banking institutions or trust companies; through foreign subsidiaries of United States banks or bank holding companies, or through foreign securities depositories or clearing agencies (hereinafter also called, collectively, the "Foreign Subcustodian" or indirectly through an agent, established under the first paragraph of this section, if and to the extent permitted by Section 17(f) of the Investment Company Act of 1940 and the rules promulgated by the Securities and Exchange Commission thereunder, any order issued by the Securities and Exchange Commission, or any "no-action" letter received from the staff of the Securities and Exchange Commission. To the extent the existing provisions of the Custodian Agreement are consistent with the requirements of such Section, rules, order or no-action letter, they shall apply to all such foreign custodianships. To the extent such provisions are inconsistent with or additional requirements are established by such Section, rules, order or no-action letter, the requirements of such Section, rules, order or no-action letter will prevail and the parties will adhere to such requirements; provided, however, in the absence of notification from the Corporation of any changes or additions to such requirements, the Custodian shall have no duty or responsibility to inquire as to any such changes or additions. SECTION 4. RECEIPT AND DISBURSEMENT OF MONEY (1) The Custodian shall open and maintain a separate account or accounts in the name of the Corporation or cause its agent to open and maintain such account or accounts subject only to checks, drafts or directives by the Custodian pursuant to the terms of this Agreement. The Custodian or its agent shall hold in such account or accounts, subject to the provisions hereof, all cash received by it from or for the account of the Corporation. The Custodian or its agent shall make payments of cash to or for the account of the Corporation from such cash only: (a) for the purchase of securities for the portfolio of the Corporation upon the receipt of such securities by the Custodian or its agent unless otherwise instructed on behalf of the Corporation; (b) for the purchase or redemption of shares of capital stock of the Corporation; (c) for the payment of interest, dividends, taxes, management fees, or operating expenses (including, without limitation thereto, fees for legal, accounting and auditing services); (d) for payment of distribution fees, commissions, or redemption fees, if any; (e) for payments in connection with the conversion, exchange or surrender of securities owned or subscribed to by the Corporation held by or to be delivered to the Custodian; (f) for payments in connection with the return of securities loaned by the Corporation upon receipt of such securities or the reduction of collateral upon receipt of proper notice; (g) for payments for other proper corporate purposes; (h) or upon the termination of this Agreement. Before making any such payment for the purposes permitted under the terms of items (a), (b), (c), (d), (e), (f) or (g) of paragraph (1) of this section, the Custodian shall receive and may rely upon a custodian order directing such payment and stating that the payment is for such a purpose permitted under these items (a), (b), (c), (d), (e), (f) or (g) and that in respect to item (g), a copy of a resolution of the Board of Directors or of the Executive Committee of the Board of Directors of the Corporation signed by an officer of the Corporation and certified by its Secretary or an Assistant Secretary, specifying the amount of such payment, setting forth the purpose to be a proper corporate purpose, and naming the person or persons to whom such payment is made. Notwithstanding the above, for the purposes permitted under items (a) or (f) of paragraph (1) of this section, the Custodian may rely upon a facsimile order. (2) The Custodian is hereby appointed the attorney-in-fact of the Corporation to endorse and collect all checks, drafts or other orders for the payment of money received by the Custodian for the account of the Corporation and drawn on or to the order of the Corporation and to deposit same to the account of the Corporation pursuant to this Agreement. SECTION 5. RECEIPT OF SECURITIES Except as permitted by the second paragraph of this section, the Custodian or its agent shall hold in a separate account or accounts, and physically segregated at all times from those of any other persons, firms or corporations, pursuant to the provisions hereof, all securities received by it for the account of the Corporation. The Custodian shall record and maintain a record of all certificate numbers. Securities so received shall be held in the name of the Corporation, in the name of an exclusive nominee duly appointed by the Custodian or in bearer form, as appropriate. Subject to such rules, regulations or guidelines as the Securities and Exchange Commission may adopt, the Custodian may deposit all or any part of the securities owned by the Corporation in a securities depository which includes any system for the central handling of securities established by a national securities exchange or a national securities association registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934, or such other person as may be permitted by the Commission, pursuant to which system all securities of any particular class or series of any issuer deposited within the system are treated as fungible and may be transferred or pledged by bookkeeping entry without physical delivery of such securities. All securities are to be held or disposed of by the Custodian for, and subject at all times to the instructions of, the Corporation pursuant to the terms of this Agreement. The Custodian shall have no power or authority to assign, hypothecate, pledge or otherwise dispose of any such securities, except pursuant to the directive of the Corporation and only for the account of the Corporation as set forth in Section 6 of this Agreement. SECTION 6. TRANSFER EXCHANGE, DELIVERY, ETC. OF SECURITIES The Custodian shall have sole power to release or deliver any securities of the Corporation held by it pursuant to this Agreement. The Custodian agrees to transfer, exchange or deliver securities held by it or its agent hereunder only: (a) for sales of such securities for the account of the Corporation, upon receipt of payment therefor; (b) when such securities are called, redeemed, retired or otherwise become payable; (c) for examination upon the sale of any such securities in accordance with "street delivery" custom which would include delivery against interim receipts or other proper delivery receipts; (d) in exchange for or upon conversion into other securities alone or other securities and cash whether pursuant to any plan of (e) merger, consolidation, reorganization, recapitalization or readjustment, or otherwise; (f) for the purpose of exchanging interim receipts or temporary certificates for permanent certificates; (g) upon conversion of such securities pursuant to their terms into other securities; (h) upon exercise of subscription, purchase or other similar rights represented by such securities; for loans of such securities by the Corporation upon receipt of collateral; or (i) for other proper corporate purposes. As to any deliveries made by the Custodian pursuant to items (a), (b), (c), (d), (e), (f), (g) and (h), securities or cash received in exchange therefore shall be delivered to the Custodian, its agent, or to a securities depository. Before making any such transfer, exchange or delivery, the Custodian shall receive a custodian order or a facsimile from the Corporation requesting such transfer, exchange or delivery and stating that it is for a purpose permitted under Section 6 (whenever a facsimile is utilized, the Corporation will also deliver an original signed custodian order) and, in respect to item (i), a copy of a resolution of the Board of Directors or of the Executive Committee of the Board of Directors of the Corporation signed by an officer of the Corporation and certified by its Secretary or an Assistant Secretary, specifying the securities, setting forth the purpose for which such payment, transfer, exchange or delivery is to be made, declaring such purpose to be a proper corporate purpose, and naming the person or persons to whom such transfer, exchange or delivery of such securities shall be made. SECTION 7. CUSTODIAN'S ACTS WITHOUT INSTRUCTIONS Unless and until the Custodian receives a contrary custodian order from the Corporation, the Custodian shall or shall cause its agent to: (a) present for payment all coupons and other income items held by the Custodian or its agent for the account of the Corporation which call for payment upon presentation and hold all cash received by it upon such payment for the account of the Corporation; (b) present for payment all securities held by it or its agent which mature or when called, redeemed, retired or otherwise become payable; (c) ascertain all stock dividends, rights and similar securities to be issued with respect to any securities held by the Custodian or its agent hereunder, and to collect and hold for the account of the Corporation all such securities; and (d) ascertain all interest and cash dividends to be paid to security holders with respect to any securities held by the Custodian or its agent, and to collect and hold such interest and cash dividends for the account of the Corporation. SECTION 8. VOTING AND OTHER ACTION Neither the Custodian nor any nominee of the Custodian shall vote any of the securities held hereunder by or for the account of the Corporation. The Custodian shall promptly deliver to the Corporation all notices, proxies and proxy soliciting materials with relation to such securities, such proxies to be executed by the registered holder of such securities (if registered otherwise than in the name of the Corporation), but without indicating the manner in which such proxies are to be voted. Custodian shall transmit promptly to the Corporation all written information (including, without limitation, pendency of calls and maturities of securities and expirations of rights in connection therewith) received by the Custodian from issuers of the securities being held for the Corporation. With respect to tender or exchange offers, the Custodian shall transmit promptly to the Corporation all written information received by the Custodian from issuers of the securities whose tender or exchange is sought and from the party (or his agents) making the tender or exchange offer. SECTION 9. TRANSFER TAXES The Corporation shall pay or reimburse the Custodian for any transfer taxes payable upon transfers of securities made hereunder, including transfers resulting from the termination of this Agreement. The Custodian shall execute such certificates in connection with securities delivered to it under this Agreement as may be required, under any applicable law or regulation, to exempt from taxation any transfers and/or deliveries of any such securities which may be entitled to such exemption. SECTION 10. CUSTODIAN'S REPORTS The Custodian shall furnish the Corporation as of the close of business each day a statement showing all transactions and entries for the account of the Corporation. The books and records of the Custodian pertaining to its actions as Custodian under this Agreement and securities held hereunder by the Custodian shall be open to inspection and audit by officers of the Corporation, internal auditors employed by the Corporation's investment adviser, and independent auditors employed by the Corporation. The Custodian shall furnish the Corporation in such form as may reasonably be requested by the Corporation a report, including a list of the securities held by it in custody for the account of the Corporation, identification of any subcustodian, and identification of such securities held by such subcustodian, as of the close of business of the last business day of each month, which shall be certified by a duly authorized officer of the Custodian. It is further understood that additional reports may from time to time be requested by the Corporation. Should any report ever be filed with any governmental authority pertaining to lost or stolen securities, the Custodian will concurrently provide the Corporation with a copy of that report. The Custodian also shall furnish such reports on its systems of internal accounting control as the Corporation may reasonably request from time to time. SECTION 11. CONCERNING CUSTODIAN For its services hereunder the Custodian shall be paid such compensation at such times as may from time to time be agreed on in writing by the parties hereto in a Custodian Fee Agreement. The Custodian shall not be liable for any action taken in good faith upon any custodian order or facsimile herein described or certified copy of any resolution of the Board of Directors or of the Executive Committee of the Board of Directors of the Corporation, and may rely on the genuineness of any such document which it may in good faith believe to have been validly executed. The Corporation agrees to indemnify and hold harmless Custodian and its nominee from all taxes, charges, expenses, assessments, claims and liabilities (including counsel fees) incurred or assessed against it or its nominee in connection with the performance of this Agreement, except such as may arise from the Custodian's or its nominee's own negligent action, negligent failure to act or willful misconduct. Custodian is authorized to charge any account of the Corporation for such items. In the event of any advance of cash for any purpose made by Custodian resulting from orders or instructions of the Corporation, or in the event that Custodian or its nominee shall incur or be assessed any taxes, charges, expenses, assessments, claims or liabilities in connection with the performance of this Agreement, except such as may arise from its or its nominee's own negligent action, negligent failure to act or willful misconduct, any property at any time held for the account of the Corporation shall be security therefor. The Custodian shall maintain a standard of care equivalent to that which would be required of a bailee for hire and shall not be liable for any loss or damage to the Corporation resulting from participation in a securities depository unless such loss or damage arises by reason of any negligence, misfeasance, or willful misconduct of officers or employees of the Custodian, or from its failure to enforce effectively such rights as it may have against any securities depository or from use of an agent, unless such loss or damage arises by reason of any negligence, misfeasance, or willful misconduct of officers or employees of the Custodian, or from its failure to enforce effectively such rights as it may have against any agent. SECTION 12. TERMINATION AND AMENDMENT OF AGREEMENT The Corporation and the Custodian mutually may agree from time to time in writing to amend, to add to, or to delete from any provision of this Agreement. The Custodian may terminate this Agreement by giving the Corporation ninety days' written notice of such termination by registered mail addressed to the Corporation at its principal place of business. The Corporation may terminate this Agreement at any time by written notice thereof delivered, together with a copy of the resolution of the Board of Directors authorizing such termination and certified by the Secretary of the Corporation, by registered mail to the Custodian. Upon such termination of this Agreement, assets of the Corporation held by the Custodian shall be delivered by the Custodian to a successor custodian, if one has been appointed by the Corporation, upon receipt by the Custodian of a copy of the resolution of the Board of Directors of the Corporation certified by the Secretary, showing appointment of the successor custodian, and provided that such successor custodian is a bank or trust company, organized under the laws of the United States or of any State of the United States, having not less than two million dollars aggregate capital, surplus and undivided profits. Upon the termination of this Agreement as a part of the transfer of assets, either to a successor custodian or otherwise, the Custodian will deliver securities held by it hereunder, when so authorized and directed by resolution of the Board of Directors of the Corporation, to a duly appointed agent of the successor custodian or to the appropriate transfer agents for transfer of registration and delivery as directed. Delivery of assets on termination of this Agreement shall be effected in a reasonable, expeditious and orderly manner; and in order to accomplish an orderly transition from the Custodian to the successor custodian, the Custodian shall continue to act as such under this Agreement as to assets in its possession or control. Termination as to each security shall become effective upon delivery to the successor custodian, its agent, or to a transfer agent for a specific security for the account of the successor custodian, and such delivery shall constitute effective delivery by the Custodian to the successor under this Agreement. In addition to the means of termination herein before authorized, this Agreement may be terminated at any time by the vote of a majority of the outstanding shares of the Corporation and after written notice of such action to the Custodian. SECTION 13. GENERAL Nothing expressed or mentioned in or to be implied from any provision of this Agreement is intended to, or shall be construed to give any person or corporation other than the parties hereto, any legal or equitable right, remedy or claim under or in respect of this Agreement, or any covenant, condition or provision herein contained, this Agreement and all of the covenants, conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of the parties hereto and their respective successors and assigns. This Agreement shall be governed by the laws of the State of Minnesota. This Agreement supersedes all prior agreements between the parties. IDS BOND FUND, INC. By: __________________________ Leslie L. Ogg Vice President AMERICAN EXPRESS TRUST COMPANY By: __________________________ Vice President EX-99.9B-TAAGR 6 9(B) FORM OF TRANSFER AGENCY AGREEMENT TRANSFER AGENCY AGREEMENT AGREEMENT dated as of March 20, 1995, between IDS Bond Fund, Inc. (the "Fund"), a Minnesota corporation, and American Express Financial Corporation (the "Transfer Agent"), a Delaware corporation. In consideration of the mutual promises set forth below, the Fund and the Transfer Agent agree as follows: 1. Appointment of the Transfer Agent. The Fund hereby appoints the Transfer Agent, as transfer agent for its shares and as shareholder servicing agent for the Fund, and the Transfer Agent accepts such appointment and agrees to perform the duties set forth below. 2. Compensation. The Fund will compensate the Transfer Agent for the performance of its obligations as set forth in Schedule A. Schedule A does not include out-of-pocket disbursements of the Transfer Agent for which the Transfer Agent shall be entitled to bill the Fund separately. The Transfer Agent will bill the Fund monthly. The fee provided for hereunder shall be paid in cash by the Fund to American Express Financial Corporation within five (5) business days after the last day of each month. Out-of-pocket disbursements shall include, but shall not be limited to, the items specified in Schedule B. Reimbursement by the Fund for expenses incurred by the Transfer Agent in any month shall be made as soon as practicable after the receipt of an itemized bill from the Transfer Agent. Any compensation jointly agreed to hereunder may be adjusted from time to time by attaching to this Agreement a revised Schedule A, dated and signed by an officer of each party. 3. Documents. The Fund will furnish from time to time such certificates, documents or opinions as the Transfer Agent deems to be appropriate or necessary for the proper performance of its duties. 4. Representations of the Fund and the Transfer Agent. (a) The Fund represents to the Transfer Agent that all outstanding shares are validly issued, fully paid and non-assessable by the Fund. When shares are hereafter issued in accordance with the terms of the Fund's Articles of Incorporation and its prospectus, such shares shall be validly issued, fully paid and non-assessable by the Fund. (b) The Transfer Agent represents that it is registered under Section 17A(c) of the Securities Exchange Act of 1934. The Transfer Agent agrees to maintain the necessary facilities, equipment and personnel to perform its duties and obligations under this agreement and to comply with all applicable laws. 5. Duties of the Transfer Agent. The Transfer Agent shall be responsible, separately and through its subsidiaries or affiliates, for the following functions: (a) Sale of Fund Shares. (1) On receipt of an application and payment, wired instructions and payment, or payment identified as being for the account of a shareholder, the Transfer Agent will deposit the payment, prepare and present the necessary report to the Custodian and record the purchase of shares in a timely fashion in accordance with the terms of the prospectus. All shares shall be held in book entry form and no certificate shall be issued unless the Fund is permitted to do so by the prospectus and the purchaser so requests. (2) On receipt of notice that payment was dishonored, the Transfer Agent shall stop redemptions of all shares owned by the purchaser related to that payment, place a stop payment on any checks that have been issued to redeem shares of the purchaser and take such other action as it deems appropriate. (b) Redemption of Fund Shares. On receipt of instructions to redeem shares in accordance with the terms of the Fund's prospectus, the Transfer Agent will record the redemption of shares of the Fund, prepare and present the necessary report to the Custodian and pay the proceeds of the redemption to the shareholder, an authorized agent or legal representative upon the receipt of the monies from the Custodian. (c) Transfer or Other Change Pertaining to Fund Shares. On receipt of instructions or forms acceptable to the Transfer Agent to transfer the shares to the name of a new owner, change the name or address of the present owner or take other legal action, the Transfer Agent will take such action as is requested. (d) Exchange of Fund Shares. On receipt of instructions to exchange the shares of the Fund for the shares of another fund in the IDS MUTUAL FUND GROUP or other American Express Financial Corporation product in accordance with the terms of the prospectus, the Transfer Agent will process the exchange in the same manner as a redemption and sale of shares. (e) Right to Seek Assurance. The Transfer Agent may refuse to transfer, exchange or redeem shares of the Fund or take any action requested by a shareholder until it is satisfied that the requested transaction or action is legally authorized or until it is satisfied there is no basis for any claims adverse to the transaction or action. It may rely on the provisions of the Uniform Act for the Simplification of Fiduciary Security Transfers or the Uniform Commercial Code. The Fund shall indemnify the Transfer Agent for any act done or omitted to be done in reliance on such laws or for refusing to transfer, exchange or redeem shares or taking any requested action if it acts on a good faith belief that the transaction or action is illegal or unauthorized. (f) Shareholder Records, Reports and Services. (1) The Transfer Agent shall maintain all shareholder accounts, which shall contain all required tax, legally imposed and regulatory information; shall provide shareholders, and file with federal and state agencies, all required tax and other reports pertaining to shareholder accounts; shall prepare shareholder mailing lists; shall cause to be printed and mailed all required prospectuses, annual reports, semiannual reports, statements of additional information (upon request), proxies and other mailings to shareholders; and shall cause proxies to be tabulated. (2) The Transfer Agent shall respond to all valid inquiries related to its duties under this Agreement. (3) The Transfer Agent shall create and maintain all records in accordance with all applicable laws, rules and regulations, including, but not limited to, the records required by Section 31(a) of the Investment Company Act of 1940. (g) Dividends and Distributions. The Transfer Agent shall prepare and present the necessary report to the Custodian and shall cause to be prepared and transmitted the payment of income dividends and capital gains distributions or cause to be recorded the investment of such dividends and distributions in additional shares of the Fund or as directed by instructions or forms acceptable to the Transfer Agent. (h) Confirmations and Statements. The Transfer Agent shall confirm each transaction either at the time of the transaction or through periodic reports as may be legally permitted. (i) Lost or Stolen Checks. The Transfer Agent will replace lost or stolen checks issued to shareholders upon receipt of proper notification and will maintain any stop payment orders against the lost or stolen checks as it is economically desirable to do. (j) Reports to Fund. The Transfer Agent will provide reports pertaining to the services provided under this Agreement as the Fund may request to ascertain the quality and level of services being provided or as required by law. (k) Other Duties. The Transfer Agent may perform other duties for additional compensation if agreed to in writing by the parties to this Agreement. 6. Ownership and Confidentiality of Records. The Transfer Agent agrees that all records prepared or maintained by it relating to the services to be performed by it under the terms of this Agreement are the property of the Fund and may be inspected by the Fund or any person retained by the Fund at reasonable times. The Fund and Transfer Agent agree to protect the confidentiality of those records. 7. Action by Board and Opinion of Fund's Counsel. The Transfer Agent may rely on resolutions of the Board of Directors or the Executive Committee of the Board of Directors and on opinion of counsel for the Fund. 8. Duty of Care. It is understood and agreed that, in furnishing the Fund with the services as herein provided, neither the Transfer Agent, nor any officer, director or agent thereof shall be held liable for any loss arising out of or in connection with their actions under this Agreement so long as they act in good faith and with due diligence, and are not negligent or guilty of any willful misconduct. It is further understood and agreed that the Transfer Agent may rely upon information furnished to it reasonably believed to be accurate and reliable. In the event the Transfer Agent is unable to perform its obligations under the terms of this Agreement because of an act of God, strike or equipment or transmission failure reasonably beyond its control, the Transfer Agent shall not be liable for any damages resulting from such failure. 9. Term and Termination. This Agreement shall become effective on the date first set forth above (the "Effective Date") and shall continue in effect from year to year thereafter as the parties may mutually agree; provided that either party may terminate this Agreement by giving the other party notice in writing specifying the date of such termination, which shall be not less than 60 days after the date of receipt of such notice. In the event such notice is given by the Fund, it shall be accompanied by a vote of the Board of Directors, certified by the Secretary, electing to terminate this Agreement and designating a successor transfer agent or transfer agents. Upon such termination and at the expense of the Fund, the Transfer Agent will deliver to such successor a certified list of shareholders of the Fund (with name, address and taxpayer identification or Social Security number), a historical record of the account of each shareholder and the status thereof, and all other relevant books, records, correspondence, and other data established or maintained by the Transfer Agent under this Agreement in the form reasonably acceptable to the Fund, and will cooperate in the transfer of such duties and responsibilities, including provisions for assistance from the Transfer Agent's personnel in the establishment of books, records and other data by such successor or successors. 10. Amendment. This Agreement may not be amended or modified in any manner except by a written agreement executed by both parties. 11. Subcontracting. The Fund agrees that the Transfer Agent may subcontract for certain of the services described under this Agreement with the understanding that there shall be no diminution in the quality or level of the services and that the Transfer Agent remains fully responsible for the services. Except for out-of-pocket expenses identified in Schedule B, the Transfer Agent shall bear the cost of subcontracting such services, unless otherwise agreed by the parties. 12. Miscellaneous. (a) This Agreement shall extend to and shall be binding upon the parties hereto, and their respective successors and assigns; provided, however, that this Agreement shall not be assignable without the written consent of the other party. (b) This Agreement shall be governed by the laws of the State of Minnesota. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers as of the day and year written above. IDS BOND FUND, INC. By: _________________________________ Leslie L. Ogg Vice President AMERICAN EXPRESS FINANCIAL CORPORATION By: __________________________________ Vice President Schedule A IDS BOND FUND, INC. TRANSFER AGENT FEE Effective the 20th day of March, 1995, the Annual Per Account Fee accrued daily and payable monthly is revised as follows: CLASS FEE ----- --- A $ 15.50 B 16.50 Y 15.50 Schedule B OUT-OF-POCKET EXPENSES The Fund shall reimburse the Transfer Agent monthly for the following out-of-pocket expenses: - - typesetting, printing, paper, envelopes, postage and return postage for proxy soliciting material, and proxy tabulation costs - - printing, paper, envelopes and postage for dividend notices, dividend checks, records of account, purchase confirmations, exchange confirmations and exchange prospectuses, redemption confirmations, redemption checks, confirmations on changes of address and any other communication required to be sent to shareholders - - typesetting, printing, paper, envelopes and postage for prospectuses, annual and semiannual reports, statements of additional information, supplements for prospectuses and statements of additional information and other required mailings to shareholders - - stop orders - - outgoing wire charges - - other expenses incurred at the request or with the consent of the Fund EX-99.9D-SSAGR 7 9(D) FORM OF SHAREHOLDER SERVICE AGREEMENT SHAREHOLDER SERVICE AGREEMENT This agreement is between IDS Bond Fund, Inc. (the "Fund") and American Express Financial Advisors Inc., the principal underwriter of the Fund, for services to be provided to shareholders by personal financial advisors and other servicing agents. It is effective on the first day the Fund offers multiple classes of shares. American Express Financial Advisors represents that shareholders consider their financial advisor or servicing agent a significant factor in their satisfaction with their investment and, to help retain financial advisors or servicing agents, it is necessary for the Fund to pay annual servicing fees to financial advisors and other servicing agents. American Express Financial Advisors represents that fees paid to financial advisors will be used by financial advisors to help shareholders thoughtfully consider their investment goals and objectively monitor how well the goals are being achieved. As principal underwriter, American Express Financial Advisors will use its best efforts to assure that other distributors provide comparable services to shareholders for the servicing fees received. American Express Financial Advisors agrees to monitor the services provided by financial advisors and servicing agents, to measure the level and quality of services provided, to provide training and support to financial advisors and servicing agents and to devise methods for rewarding financial advisors and servicing agents who achieve an exemplary level and quality of services. The Fund agrees to pay American Express financial advisors and other servicing agents 0.15 percent of the net asset value for each shareholder account assigned to a financial advisor or servicing agent that holds either Class A or Class B shares. In addition, the Fund agrees to pay American Express Financial Advisors' costs to monitor, measure, train and support services provided by financial advisors or servicing agents up to 0.025 percent of the net asset value for each shareholder account assigned to a financial advisor or servicing agent that holds either Class A or Class B shares. The Fund agrees to pay American Express Financial Advisors in cash within five (5) business days after the last day of each month. American Express Financial Advisors agrees to provide the Fund, prior to the beginning of the calendar year, a budget covering its expected costs to monitor, measure, train and support services and a quarterly report of its actual expenditures. American Express Financial Advisors agrees to meet with representatives of the Fund at their request to provide information as may be reasonably necessary to evaluate its performance under the terms of this agreement. American Express Financial Advisors agrees that if, at the end of any month, the expenses of the Fund, including fees under this agreement and any other agreement between the Fund and American Express Financial Advisors or American Express Financial Corporation, but excluding taxes, brokerage commissions and charges in connection with the purchase and sale of assets exceed the most restrictive applicable state expense limitation for the Fund's current fiscal year, the Fund shall not pay fees and expenses under this agreement to the extent necessary to keep the Fund's expenses from exceeding the limitation, it being understood that American Express Financial Advisors will assume all unpaid expenses and bill the Fund for them in subsequent months but in no event can the accumulation of unpaid expenses or billing be carried past the end of the Fund's fiscal year. This agreement shall continue in effect for a period of more than one year so long as it is reapproved at least annually at a meeting called for the purpose of voting on the agreement by a vote, in person, of the members of the Board who are not interested persons of the Fund and have no financial interest in the operation of the agreement, and of all the members of the Board. This agreement may be terminated at any time without payment of any penalty by a vote of a majority of the members of the Board who are not interested persons of the Fund and have no financial interest in the operation of the agreement or by American Express Financial Advisors. The agreement will terminate automatically in the event of its assignment as that term is defined in the Investment Company Act of 1940. This agreement may be amended at any time provided the amendment is approved in the same manner the agreement was initially approved and the amendment is agreed to by American Express Financial Advisors. Approved this 20th day of March, 1995. IDS BOND FUND, INC. __________________________________ Leslie L. Ogg Vice President AMERICAN EXPRESS FINANCIAL ADVISORS INC. __________________________________ Vice President EX-99.9E-ASAGR 8 9(E) FORM OF ADMINISTRATIVE SERVICES AGREEMENT ADMINISTRATIVE SERVICES AGREEMENT AGREEMENT made the 20th day of March, 1995, by and between IDS Bond Fund, Inc. (the "Fund"), a Minnesota corporation, and American Express Financial Corporation, a Delaware corporation. PART ONE: SERVICES (1) The Fund hereby retains American Express Financial Corporation, and American Express Financial Corporation hereby agrees, for the period of this Agreement and under the terms and conditions hereinafter set forth, to furnish the Fund continuously with all administrative, accounting, clerical, statistical, correspondence, corporate and all other services of whatever nature required in connection with the administration of the Fund as provided under this Agreement; and to pay such expenses as may be provided for in Part Three hereof; subject always to the direction and control of the Board of Directors, the Executive Committee and the authorized officers of the Fund. American Express Financial Corporation agrees to maintain an adequate organization of competent persons to provide the services and to perform the functions herein mentioned. American Express Financial Corporation agrees to meet with any persons at such times as the Board of Directors deems appropriate for the purpose of reviewing American Express Financial Corporation's performance under this Agreement. (2) The Fund agrees that it will furnish to American Express Financial Corporation any information that the latter may reasonably request with respect to the services performed or to be performed by American Express Financial Corporation under this Agreement. (3) It is understood and agreed that in furnishing the Fund with the services as herein provided, neither American Express Financial Corporation, nor any officer, director or agent thereof shall be held liable to the Fund or its creditors or shareholders for errors of judgment or for anything except willful misfeasance, bad faith, or gross negligence in the performance of its duties, or reckless disregard of its obligations and duties under the terms of this Agreement. It is further understood and agreed that American Express Financial Corporation may rely upon information furnished to it reasonably believed to be accurate and reliable. PART TWO: COMPENSATION FOR SERVICES (1) The Fund agrees to pay to American Express Financial Corporation, and American Express Financial Corporation covenants and agrees to accept from the Fund in full payment for the services furnished, based on the net assets of the Fund as set forth in the following table: Assets Annual Rate At (Billions) Each Asset Level ---------- ---------------- First $1 0.050% Next 1 0.045 Next 1 0.040 Next 3 0.035 Next 3 0.030 Over 9 0.025 The administrative fee for each calendar day of each year shall be equal to 1/365th (1/366th in each leap year) of the total amount computed. The computation shall be made for each such day on the basis of net assets as of the close of business of the full business day two (2) business days prior to the day for which the computation is being made. In the case of the suspension of the computation of net asset value, the administrative fee for each day during such suspension shall be computed as of the close of business on the last full business day on which the net assets were computed. As used herein, "net assets" as of the close of a full business day shall include all transactions in shares of the Fund recorded on the books of the Fund for that day. (2) The administrative fee shall be paid on a monthly basis and, in the event of the termination of this Agreement, the administrative fee accrued shall be prorated on the basis of the number of days that this Agreement is in effect during the month with respect to which such payment is made. (3) The administrative fee provided for hereunder shall be paid in cash by the Fund to American Express Financial Corporation within five (5) business days after the last day of each month. PART THREE: ALLOCATION OF EXPENSES (1) The Fund agrees to pay: (a) Administrative fees payable to American Express Financial Corporation for its services under the terms of this Agreement. (b) Taxes. (c) Fees and charges of its independent certified public accountants for services the Fund requests. (d) Fees and expenses of attorneys (i) it employs in matters not involving the assertion of a claim by a third party against the Fund, its directors and officers, (ii) it employs in conjunction with a claim asserted by the Board of Directors against American Express Financial Corporation, except that American Express Financial Corporation shall reimburse the Fund for such fees and expenses if it is ultimately determined by a court of competent jurisdiction, or American Express Financial Corporation agrees, that it is liable in whole or in part to the Fund, and (iii) it employs to assert a claim against a third party. (e) Fees paid for the qualification and registration for public sale of the securities of the Fund under the laws of the United States and of the several states in which such securities shall be offered for sale. (f) Office expenses which shall include a charge for occupancy, insurance on the premises, furniture and equipment, telephone, telegraph, electronic information services, books, periodicals, published services, and office supplies used by the Fund, equal to the cost of such incurred by American Express Financial Corporation. (g) Fees of consultants employed by the Fund. (h) Directors, officers and employees expenses which shall include fees, salaries, memberships, dues, travel, seminars, pension, profit sharing, and all other benefits paid to or provided for directors, officers and employees, directors and officers liability insurance, errors and omissions liability insurance, worker's compensation insurance and other expenses applicable to the directors, officers and employees, except the Fund will not pay any fees or expenses of any person who is an officer or employee of American Express Financial Corporation or its affiliates. (i) Filing fees and charges incurred by the Fund in connection with filing any amendment to its articles of incorporation, or incurred in filing any other document with the State of Minnesota or its political subdivisions. (j) Organizational expenses of the Fund. (k) One-half of the Investment Company Institute membership dues charged jointly to the IDS MUTUAL FUND GROUP and American Express Financial Corporation. (l) Expenses properly payable by the Fund, approved by the Board of Directors. (2) American Express Financial Corporation agrees to pay all expenses associated with the services it provides under the terms of this Agreement. Further, American Express Financial Corporation agrees that if, at the end of any month, the expenses of the Fund under this Agreement and any other agreement between the Fund and American Express Financial Corporation, but excluding those expenses set forth in (1)(b) of this Part Three, exceed the most restrictive applicable state expenses limitation, the Fund shall not pay those expenses set forth in (1)(a) and (c) through (m) of this Part Three to the extent necessary to keep the Fund's expenses from exceeding the limitation, it being understood that American Express Financial Corporation will assume all unpaid expenses and bill the Fund for them in subsequent months but in no event can the accumulation of unpaid expenses or billing be carried past the end of the Fund's fiscal year. PART FOUR: MISCELLANEOUS (1) American Express Financial Corporation shall be deemed to be an independent contractor and, except as expressly provided or authorized in this Agreement, shall have no authority to act for or represent the Fund. (2) A "full business day" shall be as defined in the By-laws. (3) The Fund recognizes that American Express Financial Corporation now renders and may continue to render investment advice and other services to other investment companies and persons which may or may not have investment policies and investments similar to those of the Fund and that American Express Financial Corporation manages its own investments and/or those of its subsidiaries. American Express Financial Corporation shall be free to render such investment advice and other services and the Fund hereby consents thereto. (4) Neither this Agreement nor any transaction had pursuant hereto shall be invalidated or in anyway affected by the fact that directors, officers, agents and/or shareholders of the Fund are or may be interested in American Express Financial Corporation or any successor or assignee thereof, as directors, officers, stockholders or otherwise; that directors, officers, stockholders or agents of American Express Financial Corporation are or may be interested in the Fund as directors, officers, shareholders, or otherwise; or that American Express Financial Corporation or any successor or assignee, is or may be interested in the Fund as shareholder or otherwise, provided, however, that neither American Express Financial Corporation, nor any officer, director or employee thereof or of the Fund, shall sell to or buy from the Fund any property or security other than shares issued by the Fund, except in accordance with applicable regulations or orders of the United States Securities and Exchange Commission. (5) Any notice under this Agreement shall be given in writing, addressed, and delivered, or mailed postpaid, to the party to this Agreement entitled to receive such, at such party's principal place of business in Minneapolis, Minnesota, or to such other address as either party may designate in writing mailed to the other. (6) American Express Financial Corporation agrees that no officer, director or employee of American Express Financial Corporation will deal for or on behalf of the Fund with himself as principal or agent, or with any corporation or partnership in which he may have a financial interest, except that this shall not prohibit officers, directors or employees of American Express Financial Corporation from having a financial interest in the Fund or in American Express Financial Corporation. (7) The Fund agrees that American Express Financial Corporation may subcontract for certain of the services described under this Agreement with the understanding that there shall be no diminution in the quality or level of the services and that American Express Financial Corporation remains fully responsible for the services. (8) This Agreement shall extend to and shall be binding upon the parties hereto, and their respective successors and assigns; provided, however, that this Agreement shall not be assignable without the written consent of the other party. This Agreement shall be governed by the laws of the State of Minnesota. PART FIVE: RENEWAL AND TERMINATION (1) This Agreement shall become effective on the date first set forth above (the "Effective Date") and shall continue in effect from year to year thereafter as the parties may mutually agree; provided that either party may terminate this Agreement by giving the other party notice in writing specifying the date of such termination, which shall be not less than 60 days after the date of receipt of such notice. (2) This Agreement may not be amended or modified in any manner except by a written agreement executed by both parties. IN WITNESS THEREOF, the parties hereto have executed the foregoing Agreement as of the day and year first above written. BOND FUND, INC. By: __________________________________ Leslie L. Ogg Vice President AMERICAN EXPRESS FINANCIAL CORPORATION By: __________________________________ Vice President EX-99.11-AUDCON 9 11 INDEPENDENT AUDITORS' CONSENT INDEPENDENT AUDITORS' CONSENT ______________________________________________________________________________ The Board of Directors and Shareholders IDS Bond Fund, Inc.: We consent to the use of our report incorporated herein by reference and to the references to our Firm under the headings "Financial Highlights" in Part A and "INDEPENDENT AUDITORS" in Part B of the Registration Statement. /s/ KPMG Peat Marwick LLP KPMG Peat Marwick Minneapolis, Minnesota February 27, 1995 EX-99.15-PADIST 10 15 FORM OF PLAN AND AGREEMENT OF DISTRIBUTION PLAN AND AGREEMENT OF DISTRIBUTION This plan and agreement is between IDS Bond Fund, Inc. (the "Fund") and American Express Financial Advisors Inc., the principal underwriter of the Fund, for distribution services to the Fund. It is effective on the first day the Fund offers multiple classes of shares. The plan and agreement has been approved by members of the Board of Directors (the "Board") of the Fund who are not interested persons of the Fund and have no direct or indirect financial interest in the operation of the plan or any related agreement, and all of the members of the Board, in person, at a meeting called for the purpose of voting on the plan and agreement. The plan and agreement provides that: 1. The Fund will reimburse American Express Financial Advisors for all sales and promotional expenses attributable to the sale of Class B shares, including sales commissions, business and employee expenses charged to distribution of Class B shares, and corporate overhead appropriately allocated to the sale of Class B shares. 2. The amount of the reimbursement shall be equal on an annual basis to 0.75% of the average daily net assets of the Fund attributable to Class B shares. The amount so determined shall be paid to American Express Financial Advisors in cash within five (5) business days after the last day of each month. American Express Financial Advisors agrees that if, at the end of any month, the expenses of the Fund, including fees under this agreement and any other agreement between the Fund and American Express Financial Advisors or American Express Financial Corporation, but excluding taxes, brokerage commissions and charges in connection with the purchase and sale of assets exceed the most restrictive applicable state expense limitation for the Fund's current fiscal year, the Fund shall not pay fees and expenses under this agreement to the extent necessary to keep the Fund's expenses from exceeding the limitation, it being understood that American Express Financial Advisors will assume all unpaid expenses and bill the Fund for them in subsequent months, but in no event can the accumulation of unpaid expenses or billing be carried past the end of the Fund's fiscal year. 3. For each purchase of Class B shares, after eight years the Class B shares will be converted to Class A shares and those assets will no longer be included in determining the reimbursement amount. 4. The Fund understands that if a shareholder redeems Class B shares before they are converted to Class A shares, American Express Financial Advisors will impose a sales charge directly on the redemption proceeds to cover those expenses it has previously incurred on the sale of those shares. 5. American Express Financial Advisors agrees to provide at least quarterly an analysis of distribution expenses and to meet with representatives of the Fund as reasonably requested to provide additional information. 6. The plan and agreement shall continue in effect for a period of more than one year provided it is reapproved at least annually in the same manner in which it was initially approved. 7. The plan and agreement may not be amended to increase materially the amount that may be paid by the Fund without the approval of a least a majority of the outstanding shares of Class B. Any other amendment must be approved in the manner in which the plan and agreement was initially approved. 8. This agreement may be terminated at any time without payment of any penalty by a vote of a majority of the members of the Board who are not interested persons of the Fund and have no financial interest in the operation of the plan and agreement, or by vote of a majority of the outstanding Class B shares, or by American Express Financial Advisors. The plan and agreement will terminate automatically in the event of its assignment as that term is defined in the Investment Company Act of 1940. Approved this 20th day of March, 1995. IDS BOND FUND, INC. __________________________________ Leslie L. Ogg Vice President AMERICAN EXPRESS FINANCIAL ADVISORS INC. __________________________________ Vice President EX-99.17-FDS 11 17 FINANCIAL DATA SCHEDULE [ARTICLE] 6 [PERIOD-TYPE] YEAR [FISCAL-YEAR-END] AUG-31-1994 [PERIOD-END] AUG-31-1994 [INVESTMENTS-AT-COST] 2266569898 [INVESTMENTS-AT-VALUE] 2212381765 [RECEIVABLES] 44130346 [ASSETS-OTHER] 7601514 [OTHER-ITEMS-ASSETS] 0 [TOTAL-ASSETS] 2264113625 [PAYABLE-FOR-SECURITIES] 10437813 [SENIOR-LONG-TERM-DEBT] 0 [OTHER-ITEMS-LIABILITIES] 5002628 [TOTAL-LIABILITIES] 15440441 [SENIOR-EQUITY] 0 [PAID-IN-CAPITAL-COMMON] 2254587407 [SHARES-COMMON-STOCK] 458346766 [SHARES-COMMON-PRIOR] 454690800 [ACCUMULATED-NII-CURRENT] 1179366 [OVERDISTRIBUTION-NII] 0 [ACCUMULATED-NET-GAINS] 47094544 [OVERDISTRIBUTION-GAINS] 0 [ACCUM-APPREC-OR-DEPREC] (54188133) [NET-ASSETS] 2248673184 [DIVIDEND-INCOME] 1828425 [INTEREST-INCOME] 198702343 [OTHER-INCOME] 0 [EXPENSES-NET] 16262223 [NET-INVESTMENT-INCOME] 184268545 [REALIZED-GAINS-CURRENT] 45541259 [APPREC-INCREASE-CURRENT] (279119373) [NET-CHANGE-FROM-OPS] (49309569) [EQUALIZATION] 0 [DISTRIBUTIONS-OF-INCOME] (184896274) [DISTRIBUTIONS-OF-GAINS] (27971600) [DISTRIBUTIONS-OTHER] 0 [NUMBER-OF-SHARES-SOLD] 62340332 [NUMBER-OF-SHARES-REDEEMED] (85276606) [SHARES-REINVESTED] 26592240 [NET-CHANGE-IN-ASSETS] (241380097) [ACCUMULATED-NII-PRIOR] (177611397) [ACCUMULATED-GAINS-PRIOR] 78037378 [OVERDISTRIB-NII-PRIOR] 0 [OVERDIST-NET-GAINS-PRIOR] 0 [GROSS-ADVISORY-FEES] 12577197 [INTEREST-EXPENSE] 0 [GROSS-EXPENSE] 16262223 [AVERAGE-NET-ASSETS] 2389647160 [PER-SHARE-NAV-BEGIN] 5.48 [PER-SHARE-NII] .41 [PER-SHARE-GAIN-APPREC] (.51) [PER-SHARE-DIVIDEND] (.41) [PER-SHARE-DISTRIBUTIONS] (.06) [RETURNS-OF-CAPITAL] 0 [PER-SHARE-NAV-END] 4.91 [EXPENSE-RATIO] .68 [AVG-DEBT-OUTSTANDING] 0 [AVG-DEBT-PER-SHARE] 0
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