-----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, jTxIG2OKWMyBqBxHs+3XI91NvD74xPAvFXE+uIwE1uc+ps0Xxwo2bAedLEmUUHsV Qt2ShYDiHF8FA47ApzR8hA== 0000912057-94-004301.txt : 19941227 0000912057-94-004301.hdr.sgml : 19941227 ACCESSION NUMBER: 0000912057-94-004301 CONFORMED SUBMISSION TYPE: 485APOS PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19941223 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: IDS SELECTIVE FUND INC CENTRAL INDEX KEY: 0000052407 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 410839316 STATE OF INCORPORATION: MN FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 485APOS SEC ACT: 1933 Act SEC FILE NUMBER: 002-10700 FILM NUMBER: 94566012 BUSINESS ADDRESS: STREET 1: 80 SOUTH 8TH STREET STREET 2: T33/52 CITY: MINNEAPOLIS STATE: MN ZIP: 55440 BUSINESS PHONE: 6123722772 FORMER COMPANY: FORMER CONFORMED NAME: INVESTORS SELECTIVE FUND INC DATE OF NAME CHANGE: 19841002 485APOS 1 485APOS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Post-Effective Amendment No. 79 File No. 2-10700) /X/ and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 29 (File No. 811-499) /X/ ------------------------ IDS SELECTIVE FUND IDS Tower 10, Minneapolis, MN 55440 Leslie L. Ogg 901 S. Marquette Avenue, Suite 2810, Minneapolis, MN 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) / / on (date) pursuant to paragraph (b) / / 60 days after filing pursuant to paragraph (a)(i) /X/ on Mar. 3, 1995 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: / / this post-effective amendment designates a new effective date for a previously filed post-effective amendment. ------------------------ THE 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. REGISTRANT'S RULE 24F-2 NOTICE FOR ITS MOST RECENT FISCAL YEAR ENDED NOVEMBER 30, 1994 WILL BE FILED ON OR ABOUT JAN. 27, 1995. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CROSS REFERENCE SHEET SHOWING LOCATION IN THE PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION OF THE INFORMATION CALLED FOR BY THE ITEMS ENUMERATED IN PARTS A AND B OF FORM N-1A. Negative answers omitted from prospectus are so indicated.
PART A - --------------------------------------- Page Number in Item No. Prospectus - ---------------- --------------------- 1 3 2 5;5-6 3(a) 6-7 (b) NA (c) 6-8 (d) 6-7 4(a) 5;8-11;23-26 (b) 8-11 (c) 8-11 5(a) 23; 23-24 (b) 23-26;26 (b)(i) 26 (b)(ii) 24-25 (b)(iii) 24-25 (c) 5 (d) 5 (e) 24-25 (f) 25-26 (g) 24-25 5A(a) * (b) * 6(a) 23;23 (b) NA (c) NA (d) 23 (e) 3;20 (f) 21;21 (g) 21-22 7(a) 25-26 (b) 8-10;11 (c) 11-20 (d) 14 (e) NA (f) 25-26 8(a) 15-17 (b) NA (c) 14 (d) 17 9 None PART B - --------------------------------------- Page Number in Statement of Additional Item No. Information - ---------------- --------------------- 10 27 11 28 12 NA 13(a) 29-31;52-65 (b) 29-31 (c) 30-31 (d) 33 14(a) 23-24**;47-50 (b) 47-50 (c) 50 15(a) NA (b) NA (c) 50 16(a)(i) 23-26**;26** (a)(ii) 44-45;46-47 (a)(iii) 44 (b) 44-45;46-47 (c) NA (d) None (e) NA (f) 45-46;46-47 (g) NA (h) 50;50 (i) 45;50 17(a) 31-33 (b) 33-34 (c) 31-33 (d) 32 (e) 33 18(a) 23 (b) NA 19(a) 37-41 (b) 36-37;37-41 (c) NA 20 43-44 21(a) 45 (b) 46 (c) NA 22(a) NA (b) 34-35 23 50
*Designates information is in annual report. **Designates page number in prospectus. IDS SELECTIVE FUND PROSPECTUS MARCH 3, 1995 The goals of IDS Selective Fund, Inc. are current income and the preservation of capital by investing in investment-grade bonds. This prospectus contains facts that can help you decide if the fund is the right investment for you. Read it before you invest and keep it for future reference. Additional facts about the fund are in a Statement of Additional Information (SAI), filed with the Securities and Exchange Commission. The SAI, dated March 3, 1995, is incorporated here by reference. For a free copy, contact American Express Shareholder Service. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK, AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. American Express Shareholder Service P.O. Box 534 Minneapolis, MN 55440-0534 612-671-3733 TTY: 800-846-4852 1 TABLE OF CONTENTS THE FUND IN BRIEF.......................................... Goals.................................................... Types of fund investments................................ Manager and distributor.................................. Portfolio manager........................................ Alternative sales arrangements........................... SALES CHARGE AND FUND EXPENSES............................. Sales charge............................................. Operating expenses....................................... PERFORMANCE................................................ Financial highlights..................................... Total returns............................................ Yield.................................................... Key terms................................................ INVESTMENT POLICIES AND RISKS.............................. Facts about investments and their risks.................. Alternative investment option............................ Valuing assets........................................... HOW TO BUY, EXCHANGE OR SELL SHARES........................ Alternative sales arrangements........................... How to buy shares........................................ How to exchange shares................................... How to sell shares....................................... Reductions of the sales charge........................... Waivers of the sales charge.............................. SPECIAL SHAREHOLDER SERVICES............................... Services................................................. Quick telephone reference................................ DISTRIBUTIONS AND TAXES.................................... Dividend and capital gain distributions.................. Reinvestments............................................ Taxes.................................................... HOW THE FUND IS ORGANIZED.................................. Shares................................................... Voting rights............................................ Shareholder meetings..................................... Directors and officers................................... Investment manager and transfer agent.................... Distributor.............................................. ABOUT AEFC................................................. General information......................................
2 THE FUND IN BRIEF GOALS IDS Selective Fund seeks to provide shareholders with current income and preservation of capital by investing in investment-grade bonds. Because any investment involves risk, achieving these goals cannot be guaranteed. Only shareholders can change the goals. TYPES OF FUND INVESTMENTS The fund is a diversified mutual fund that invests at least 90% of its net assets in the four highest investment grades of corporate debt securities, certain unrated debt securities the portfolio manager believes have the same investment qualities, government securities, derivative instruments and money market securities. Other investments may include common and preferred stocks and convertible securities. The investments are both U.S. and foreign. Some of the fund's investments may be considered speculative and involve additional investment risks. MANAGER AND DISTRIBUTOR The fund is managed by American Express Financial Corporation (AEFC), a provider of financial services since 1894. AEFC currently manages more than $38 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 AEFC. PORTFOLIO MANAGER Ray Goodner joined AEFC in 1977 and serves as vice president and senior portfolio manager. He began his career in portfolio management in 1980. He has managed this fund since 1985. Since 1989 he also has served as portfolio manager of IDS Global Bond Fund. 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 6 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. SALES CHARGE AND FUND EXPENSES SALES CHARGE 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. 3 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 percent of original purchase price).......... 0% 5% 0%
OPERATING EXPENSES The fund pays certain expenses out of its assets for each class of shares. The expenses are reflected in the fund's daily share price and dividends, and are not charged directly to shareholder accounts. The following chart gives a projection of these expenses -- based on historical expenses. ANNUAL FUND OPERATING EXPENSES (% of average daily net assets):
Class A Class B Class Y ----------- ----------- ----------- Management fee...................................... 0.00% 0.00% 0.00% 12b-1 fee........................................... 0.00% 0.00% 0.00% Other expenses...................................... 0.00% 0.00% 0.00% Total............................................... 0.00% 0.00% 0.00%
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 for Class B is based on the Plan and Agreement of Distribution for that class. 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......................... $ $ $ $ Class B......................... $ $ $ $ Class B*........................ $ $ $ $ Class Y......................... $ $ $ $ *Assuming Class B shares are not redeemed at the end of the period. **Assuming 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. PERFORMANCE FINANCIAL HIGHLIGHTS 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. 4 TOTAL RETURNS
AVERAGE ANNUAL TOTAL RETURNS as of Nov. 30, 1994 - ---------------------------------------------------------------------------------- 1 year 5 years 10 years Purchase made ago ago ago - ------------------------------------------------ --------- --------- ---------- Selective: Class A....................................... -9.49 +6.76 +9.64 Lehman Aggregate Bond Index..................... -3.65 +7.43 +9.98 CUMULATIVE TOTAL RETURNS as of Nov. 30, 1994 - ---------------------------------------------------------------------------------- 1 year 5 years 10 years Purchase made ago ago ago - ------------------------------------------------ --------- --------- ---------- Selective: Class A....................................... -9.49 +38.67 +150.97 Lehman Aggregate Bond Index..................... -3.65 +43.09 +158.92
These examples show total returns from hypothetical investments in Class A shares of the fund. No shares for Class B and Class Y were outstanding during the periods presented. These returns are compared to those of a popular index for the same periods. 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. 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 Nov. 30, 1994, was ____%. 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 5 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. 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. 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. INVESTMENT POLICIES AND RISKS The fund invests in the four highest investment grades of marketable corporate debt securities, certain unrated debt securities the portfolio manager 6 believes have the same investment qualities, government securities, derivative instruments and money market instruments. Under normal market conditions, at least 90% of the fund's net assets will be in these investments. The remaining 10% of the fund's net assets may be invested in common and preferred stocks and convertible securities. The investments are both U.S. and foreign. 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 DEBT SECURITIES: The price of an investment-grade bond fluctuates as interest rates change or if its credit rating is upgraded or downgraded. The fund does not invest in securities considered by the portfolio manager to have investment qualities lower than investment grade. Securities that are subsequently downgraded in quality may continue to be held by the fund and will be sold only if the fund's portfolio manager believes it is advantageous to do so. COMMON STOCKS: Common stocks are subject to market fluctuations. Stocks of larger, established companies that pay dividends may be less volatile than the stock market as a whole. PREFERRED STOCKS: If a company earns a profit, it generally must pay its preferred stockholders a dividend at a pre-established rate. CONVERTIBLE SECURITIES: These securities generally are preferred stocks or bonds that can be exchanged for other securities, usually common stock, at prestated prices. When the trading price of the common stock makes the exchange likely, the convertible securities trade more like common stock. FOREIGN INVESTMENTS: Securities of foreign companies and governments may be traded in the United States, but often they are traded only on foreign markets. Frequently, there is less information about foreign companies and less government supervision of foreign markets. Foreign investments are subject to political and economic risks of the countries in which the investments are made, including the possibility of seizure or nationalization of companies, imposition of withholding taxes on income, establishment of exchange controls or adoption of other restrictions that might affect an investment adversely. If an investment is made in a foreign market, the local currency 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. 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 7 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 options and futures appendix in the SAI. 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. 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. 8 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. HOW TO BUY, EXCHANGE OR SELL SHARES HOW TO BUY 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.
Sales charge and Service fee distribution (12b-1) (as a % of average fee daily net assets) Other information ----------------------- -------------------- ----------------------- Class A Maximum initial sales Service fee of Initial sales charge charge of 5% 0.175% waived or reduced for certain purchases Class B No initial sales Service fee of Shares convert to Class charge; distribution 0.175% A after 8 years; CDSC fee of 0.75% of daily waived in certain net assets; maximum circumstances CDSC of 5% declines to 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 were originally purchased, Class B shares will convert to Class A shares and will no longer be subject to a distribution fee. 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. 9 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.
If you purchase Class A shares If you purchase Class B shares - --------------------------------------- --------------------------------------- SALES CHARGES ON PURCHASE OR REDEMPTION - - You will not have all of your - All of your money is invested in purchase price invested. Part of shares of stock. However, you will your purchase price will go to pay pay a sales charge if you redeem the sales charge. You will not pay a your shares within 6 years of sales charge when you redeem your purchase. shares. - - You will be able to take advantage - No reductions of the sales charge of reductions in the sales charge. are available for large purchases. If your investments in IDS funds total $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 - The distribution and transfer agent expense ratio than Class B shares fees for Class B will cause your because Class A does not pay a shares to have a higher expense distribution fee and the transfer ratio and to pay lower dividends agent fee for Class A is lower than than Class A shares. After 8 years, the fee for Class B. As a result, Class B shares will convert to Class Class A shares will pay higher A shares and will no longer be dividends than Class B shares. 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. 10 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. 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 AEFC. To do so, contact your financial advisor. Financial advisors may receive different compensation for selling Class A, Class B and Class Y 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 AEFC with 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. 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. 11 - - Wire orders can be accepted only on days when your bank, AEFC 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. - - AEFC 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 shares you are purchasing, it will be assumed that you are investing in Class A shares. THREE WAYS TO INVEST 1 Send your check and application MINIMUM AMOUNTS BY REGULAR (or your name and account number Initial investment: $2,000 ACCOUNT if you have an established Additional investments: $100 account) to: Account balances: $300* American Express Financial Qualified retirement Advisors Inc. accounts: none P.O. Box 74 Minneapolis, MN 55440-0074 Your financial advisor will help you with this process. 2 Contact your financial advisor MINIMUM AMOUNTS BY SCHEDULED to 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 monthly - direct deposit of payments) Social Security check - other plan approved by the fund 3 If you have an established If this information is not BY WIRE 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 AEFC will be returned Attn: Domestic Wire Dept. promptly. Give these instructions: MINIMUM AMOUNTS Credit IDS Account #00-30-015 Each wire investment: $1,000 for personal account # (your account number) for (your name). *If your account balance falls below $300, AEFC will ask you 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.
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. 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 12 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. TWO WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES 1 Include in your letter: BY LETTER - the name of the fund(s) - the class of shares to be redeemed - your account number(s) (for exchanges, both funds must be registered in the same ownership) - your Taxpayer Identification Number (TIN) - the dollar amount or number of shares you want to 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 REGULAR MAIL: American Express Shareholder Service Attn: Redemptions P.O. Box 534 Minneapolis, MN 55440-0534 EXPRESS MAIL: American Express Shareholder Service Attn: Redemptions 733 Marquette Ave. Minneapolis, MN 55402
13 2 - The fund and AEFC will honor any telephone BY PHONE exchange or redemption request believed to be American Express Telephone authentic and will use reasonable procedures to Transaction Service: confirm that they are. This includes asking 800-437-3133 or identifying questions and tape recording calls. 612-671-3800 So long as reasonable procedures are followed, neither the fund nor AEFC will be liable for any loss resulting from fraudulent requests. - Phone exchange and redemption privileges automatically apply to all accounts except custodial, corporate or qualified retirement accounts unless you request these privileges NOT apply by writing American Express Shareholder Service. Each registered owner must sign the request. - AEFC answers phone requests promptly, but you may experience delays when call volume is high. If you are unable to get through, use mail procedure as an alternative. - Phone privileges may be modified or discontinued at any time. MINIMUM AMOUNT Redemption: $100 MAXIMUM AMOUNT Redemption: $50,000
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. - - AEFC 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. 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. 14 - - 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 AEFC mails a check to you. (A check may be mailed earlier if your bank provides evidence satisfactory to the fund and AEFC that your check has cleared.) THREE WAYS TO RECEIVE PAYMENT WHEN YOU SELL SHARES 1 - Mailed to the address on record. BY REGULAR OR EXPRESS MAIL - Payable to names listed on the account. NOTE: The express mail delivery charges you pay will vary depending on the courier you select. 2 - Minimum wire redemption: $1,000. BY WIRE - 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 - Minimum payment: $50. BY SCHEDULED PAYOUT PLAN - Contact your financial advisor or American Express Shareholder Service to set up regular payments to you on a monthly, bimonthly, quarterly, semiannual or annual basis. - Buying new shares while under a payout plan may be disadvantageous because of the sales charges.
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:
Sales charge as a percent of:* --------------------------- Public offering Net amount Total investment 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: 15 - - 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. 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 AEFC 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 AEFC. To do so, contact your financial advisor. 16 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 is made The percentage rate during the for 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. 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 AEFC or its subsidiaries, - - Purchased by any American Express financial advisor, - - Held in a trusteed employee benefit plan, 17 - - Held in IRAs or certain qualified plans for which AEFC 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. SPECIAL SHAREHOLDER SERVICES SERVICES To help you track and evaluate the performance of your investments, AEFC 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 EXPRESS TELEPHONE TRANSACTION SERVICE Redemptions and exchanges, dividend payments or reinvestments and automatic payment arrangements National/Minnesota: 800-437-3133 Mpls./St. Paul area: 671-3800 AMERICAN EXPRESS SHAREHOLDER SERVICE Fund performance, objectives and account inquiries 612-671-3733 TTY SERVICE For the hearing impaired 800-846-4852 AMERICAN EXPRESS INFOLINE Automated account information (TouchTone-R- phones only), including current fund prices and performance, account values and recent account transactions National/Minnesota: 800-272-4445 Mpls./St. Paul area: 671-1630 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. 18 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. 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. 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, AEFC sends you 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. 19 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). 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 AEFC. If you don't provide the TIN to AEFC, 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. HOW TO DETERMINE THE CORRECT TIN
Use the Social Security or Employer For this type of account: Identification number of: - --------------------------------------- --------------------------------------- Individual or joint account The individual or first person listed on the account Custodian account of a minor (Uniform The minor Gifts/Transfers to Minors Act) A living trust The grantor-trustee (the person who puts the money into the trust) An irrevocable trust, pension trust or The legal entity (not the personal estate representative or trustee, unless no legal entity is designated in the account title) Sole proprietorship or partnership The owner or partnership Corporate The corporation Association, club or tax-exempt The organization 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. 20 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 Feb. 10, 1945 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. DIRECTORS AND OFFICERS OF THE FUND PRESIDENT AND INTERESTED DIRECTOR WILLIAM R. PEARCE President of all funds in the IDS MUTUAL FUND GROUP. INDEPENDENT DIRECTORS LYNNE V. CHENEY Distinguished fellow, American Enterprise Institute for Public Policy Research. ROBERT F. FROEHLKE Former president of all funds in the IDS MUTUAL FUND GROUP. 21 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 WHO ARE OFFICERS AND/OR EMPLOYEES OF AEFC WILLIAM H. DUDLEY Executive vice president, AEFC. DAVID R. HUBERS President and chief executive officer, AEFC. JOHN R. THOMAS Senior vice president, AEFC. 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. INVESTMENT MANAGER AND TRANSFER AGENT The fund pays AEFC for managing its portfolio, providing administrative services and serving as transfer agent (handling shareholder accounts). Under its Investment Management Services Agreement, AEFC determines which securities will be purchased, held or sold (subject to the direction and 22 control of the fund's board of directors). Effective March 3, 1995, the fund pays AEFC a fee for these services based on the average daily net assets of the fund, as follows:
Annual rate Assets at each asset (billions) level - ----------- ------------------ First $1.0 0.520% Next1.0 0.495 Next1.0 0.470 Next3.0 0.445 Next3.0 0.420 Over9.0 0.395
For the fiscal year ended Nov. 30, 1994, under a prior agreement, the fund paid AEFC a total investment management fee of 0.52% 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 AEFC 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, AEFC maintains shareholder accounts and records. The fund pays AEFC an annual fee per shareholder account for this service as follows: - - Class A $15.50 - - Class B $16.50 - - Class Y $15.50 DISTRIBUTOR The fund sells shares through American Express Financial Advisors, a wholly owned subsidiary of AEFC, 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 Nov. 30, 1994 was 0.04% of its average daily net assets. This fee will not cover all of the costs incurred by American Express Financial Advisors. 23 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 Nov. 30, 1994 were 0.72% of its average daily net assets. Total fees and expenses (excluding taxes and brokerage commissions) cannot exceed the most restrictive applicable state expense limitation. ABOUT AEFC GENERAL INFORMATION The AEFC 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, AEFC also manages investments for itself and its subsidiaries, IDS Certificate Company and IDS Life Insurance Company. Total assets under management on Nov. 30, 1994 were more than $__ 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 AEFC subsidiaries provide investment management and related services for pension, profit sharing, employee savings and endowment funds of businesses and institutions. AEFC 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 AEFC. 24 STATEMENT OF ADDITIONAL INFORMATION FOR IDS SELECTIVE FUND March 3, 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 March 3, 1995, and it is to be used with the prospectus dated March 3, 1995, and the Annual Report for the fiscal year ended Nov. 30, 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 AEFC . . . . . p. Performance Information. . . . . . . . . . . . . . . . . . . . . . . p. Valuing Fund Shares. . . . . . . . . . . . . . . . . . . . . . . . . p. Investing in the Fund. . . . . . . . . . . . . . . . . . . . . . . . p. Redeeming Shares . . . . . . . . . . . . . . . . . . . . . . . . . . p. Pay-out Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . p. Exchanges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p. Capital Loss Carryover . . . . . . . . . . . . . . . . . . . . . . . p. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p. Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p. Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . p. Principal Holders of Securities. . . . . . . . . . . . . . . . . . . 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: Description of Corporate Bond Ratings . . . . . . . . . p. Appendix E: 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. '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. 'Make a loan of any part of its assets to American Express Financial Corporation (AEFC), to the directors and officers of AEFC or to its own directors and officers. 'Purchase securities of an issuer if the directors and officers of the fund and of American Express Financial Corporation (AEFC) 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 AEFC who own more than 0.5% of an issuer's securities -3- are added together, and if in total they own more than 5%, the fund will not purchase securities of that issuer. '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, except it may enter into interest rate futures contracts. 'Pledge or mortgage its assets beyond 30% of the cost of total assets. If the fund were ever to do so, valuation of the pledged or mortgaged assets would be based on market values. For purposes of this restriction, collateral arrangements for margin deposits on interest rate futures contracts are not deemed to be a pledge of assets. '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 in securities of investment companies except by purchases in the open market where the dealer's or sponsor's profit is the regular commission. 'Invest in a company to control or manage it. 'Invest in exploration or development programs, such as oil, gas or mineral programs. '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 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. -4- 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. 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, 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 transaction, 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. For a description of corporate bond ratings, see Appendix D. PORTFOLIO TRANSACTIONS 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 -5- permits AEFC 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 AEFC, 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 AEFC, in order to obtain research and brokerage services, to cause a fund to pay a commission in excess of the amount another broker might have charged. AEFC has advised the funds that 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 AEFC believes it may obtain better overall execution. AEFC has assured the funds 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 to those firms offering research services. Research services may be used by AEFC 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 a fund is made independently from any decision made for another fund in the IDS MUTUAL FUND GROUP or other account advised by AEFC or any AEFC subsidiary. When a fund buys or sells the same security as another fund or account, AEFC 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. AEFC has assured the funds it will continue to seek ways to reduce brokerage costs. On a periodic basis, AEFC 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 $_________ for the fiscal year ended Nov. 30, 1994, $7,120 for fiscal year 1993, and $96,633 for fiscal year 1992. Substantially all firms through whom transactions were executed provide research services. [In fiscal year 1994, transactions amounting to $_____, on which $____ in commissions were imputed or paid, were specifically directed to firms.] -6- [No transactions were directed to brokers because of research services they provided to the fund.] The fund acquired no securities of its regular brokers or dealers or of the parents of those brokers or dealers that derived more than 15% of gross revenue from securities-related activities during the fiscal year ended November 30, 1994. On November 30, 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 - -------------- ------------------- The portfolio turnover rate was _____% in the fiscal year ended Nov. 30, 1994, and 30% in fiscal year 1993. [The variation in turnover rates can be attributed to:] BROKERAGE COMMISSIONS PAID TO BROKERS AFFILIATED WITH AEFC Affiliates of American Express Company (American Express) (of which AEFC 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. AEFC will use an American Express affiliate only if (i) AEFC 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. No brokerage commissions were paid to brokers affiliated with AEFC for the three most recent fiscal years. Information about brokerage commissions paid by the fund for the last three fiscal years to brokers affiliated with AEFC is contained in the following table:
For the Fiscal Year Ended Nov. 30, 1994 1993 1992 --------------------------------------------- ----------- ----------- Aggregate Percent of Aggregate Aggregate Dollar Aggregate Dollar Dollar Dollar Amount of Percent of Amount of Amount of Amount of Nature Commissions Aggregate Transactions Commissions Commissions of Paid to Brokerage Involving Payment Paid to Paid to Broker Affiliation Broker Commissions of Commissions Broker Broker ------ ----------- ----------- ----------- ----------------- ----------- ----------- $ % % -0- -0-
(1) Until May 31, 1994, under common control with AEFC as a subsidiary of American Express. As of May 31, 1994 is no longer a subsidiary of American Express. -7- (2) Under common control with AEFC as an indirect subsidiary of American Express. (3) Wholly owned subsidiary of AEFC. (4) Under common control with AEFC as an indirect subsidiary of American Express until July 30, 1993. (5) Under common control with AEFC as a subsidiary of American Express until July 30, 1993. 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. -8- 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) 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 ____% for the 30-day period ended Nov. 30, 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 --- ----- 30 30 where: D = sum of dividends for 30-day period POP = sum of public offering price for 30-day period F = annualizing factor DY = distribution yield The fund's distribution yield was ____% for the 30-day period ended Nov. 30, 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. -9- 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 December 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* $ divided by equals $ *Shares of Class B and Class Y were not outstanding on that date.
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 -10- amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value determined by systematically increasing the carrying value of a security if acquired at a discount, or reducing the carrying value if acquired at a premium, so that the carrying value is equal to maturity value on the maturity date. 'Securities without a readily available market price, bonds other than convertibles and other assets are valued at fair value as determined in good faith by the board. The board is responsible for selecting methods it believes provide fair value. When possible, bonds are valued by a pricing service independent from the 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, AEFC 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 Dec. 1, 1994, was determined by dividing the net asset value of one share, $______, by 0.95 (1.00-0.05 for a maximum 5% sales charge) for a public offering price of $_____. 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
-11- 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. 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 4.50-3.75 4.71-3.90 More than 500,000 to 1,000,000 3.75-2.00 3.90-2.04 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% - ---------------------------------------------------------
-12- 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 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 AEFC 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 -13- charge do you pay? AEFC 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 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 E. 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). -14- 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. 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 of directors (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 (the "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. -15- 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. The following pay-out plans are designed to take care of the needs of most shareholders in a way AEFC 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 -16- 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 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. CAPITAL LOSS CARRYOVER For federal income tax purposes, the fund had a capital loss carryover of $___________ at _______________, 19__, that will expire as follows: 199 199 ---- ---- 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 Nov. 30, 1994, __% of the fund's net investment income 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. Under federal tax law and an election made by the fund under federal tax regulations, 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 -17- 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. The fund has no current intention to invest in PFICs. This is a brief summary that relates to federal income taxation only. Shareholders should consult their tax advisor as to the application of federal, state and local income tax laws to fund distributions. AGREEMENTS Investment Management Services Agreement The fund has an Investment Management Services Agreement with AEFC. For its services, AEFC 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 On March 3, 1995, the daily rate applied to the fund's assets is expected to be approximately 0.___% 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 $___________ for the fiscal year ended Nov. 30, 1994, $8,932,798 for fiscal year 1993, and $8,159,007 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 -18- prior agreement, the fund paid nonadvisory expenses of $________ for the fiscal year ended Nov. 30, 1994, $778,877 for fiscal year 1993, and $654,094 for fiscal year 1992. Administrative Services Agreement The fund has an Administrative Services Agreement with AEFC. Under this agreement, the fund pays AEFC for providing administration and accounting services. The fee is calculated as follows: Assets Annual rate (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 Transfer Agency Agreement The fund has a Transfer Agency Agreement with AEFC. This agreement governs AEFC'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, AEFC 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 AEFC may be changed from time to time upon agreement of the parties without shareholder approval. The fund paid fees of $____________ for the fiscal year ended Nov. 30, 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 $_________ for the fiscal year ended Nov. 30, 1994. After paying commissions to personal financial planners, and other expenses, the amount retained was $_________. The amounts were $7,381,370 and $2,611,931 for fiscal year 1993, and $7,205,702 and $2,577,031 for fiscal year 1992. -19- Additional information about commissions and compensation for the fiscal year ended Nov. 30, 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 - ----------- ------------- ----------- ----------- ------------ AEFC None None $______* $_________** American Express Financial Advisors $________ None None None *For further information see "Brokerage Commissions Paid to Brokers Affiliated with AEFC. **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. 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 of directors (the "directors"), including a majority of the disinterested directors, if it is to continue for more than a year. At least quarterly, the directors 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 -20- 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, AEFC will assume all expenses in excess of the limitation. AEFC 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 AEFC for expenses it assumes. 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+' 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+** 2900 IDS Tower Minneapolis, MN Executive vice president and director of AEFC. ROBERT F. FROEHLKE+ 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. (architectual engineering) and Public Oversight Board of the American Institute of Certified Public Accountants. -21- DAVID R. HUBERS** 2900 IDS Tower Minneapolis, MN President, chief executive officer and director of AEFC. Previously, senior vice president, finance and chief financial officer of AEFC. HEINZ F. HUTTER+ 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. ANNE P. JONES+ 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' PepsiCo, Inc. Purchase, NY Former chairman and chief executive officer, PepsiCo, Inc. MELVIN R. LAIRD+ 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' 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). -22- WILLIAM R. PEARCE+* 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 4900 IDS Center 80 S. 8th St. Minneapolis, MN President, Spencer Associates Inc. (consulting). Chairman of the board, Mayo Foundation (healthcare). Former chairman of the board and chief executive officer, Honeywell Inc. Director, Boise Cascade Corporation (forest products) and CBS Inc. Member of International Advisory Councils, Robert Bosch (Germany) and NEC (Japan). JOHN R. THOMAS** 2900 IDS Tower Minneapolis, MN Senior vice president and director of AEFC. WHEELOCK WHITNEY+ 1900 Foshay Tower 821 Marquette Ave. Minneapolis, MN Chairman, Whitney Management Company (manages family assets). C. ANGUS WURTELE 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 AEFC or American Express. The board also has appointed officers who are responsible for day-to-day business decisions based on policies it has established. Besides Mr. Pearce, who is president, the fund's other officer is: -23- 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. During the fiscal year that ended Nov. 30, 1994, the members of the board, for attending up to __ 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 - -------------------------------------------------------------------------------- $ $ $ $ On Nov. 30, 1994, the fund's directors and officers as a group owned less than 1% of the outstanding shares. During the fiscal year ended Nov. 30, 1994, no director or officer earned more than $60,000 from this fund. All directors and officers as a group earned $_______, including $______ of retirement plan expense, from this fund. PRINCIPAL HOLDERS OF SECURITIES As of Nov. 30, 1994, ________ held ____ % of fund shares. 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 Nov. 30, 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. -24- PROSPECTUS The prospectus for IDS Selective Fund dated March 3, 1995 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 -27- conversion, they do realize a profit based on the difference (spread) between the prices at which they are buying and selling various currencies. Thus, a dealer may offer to sell a foreign currency to 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 -29- limitations, including the limitation on the percentage of assets 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. Under normal market conditions, the fund will invest no more than ___% of its net assets in derivatives. 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. -33- 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 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. -34- 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 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 advisers 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. -35- 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 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 DESCRIPTION OF CORPORATE BOND RATINGS BOND RATINGS The 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. Bonds rated Aaa and AAA are judged to be of the best quality and carry the smallest degree of investment risk. Capacity to pay interest and repay principal is extremely strong. Prices are responsive only to interest rate fluctuations. Bonds rated Aa and AA also are 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. Long-term risk may appear greater than the Aaa or AAA group. Prices are primarily responsive to interest rate fluctuations. Bonds rated A are considered upper-medium grade. Protection for interest and principal is deemed adequate but susceptible to future impairment. The market prices of such obligations move primarily with interest rate fluctuations but also with changing economic or trade conditions. Bonds rated Baa and BBB are considered medium-grade obligations. Protection for interest and principal is adequate over the short-term; however, these obligations have certain speculative characteristics. They are susceptible to changing economic conditions and require constant review. Such bonds are more responsive to business and trade conditions than to interest rate fluctuations. Bonds rated Ba and BB are considered to have speculative elements. Their future cannot be considered well assured. The protection of interest and principal payments may be very moderate and not well safeguarded during future good and bad times. Uncertainty of position characterizes these bonds. Bonds rated B or lower lack characteristics of the desirable investments. There may be small assurance over any long period of time of the payment of interest and principal or of the maintenance of other contract terms. Some of these bonds are of poor standing and may be in default or have other marked short-comings. Bonds rated Caa and CCC are of poor standing. Such issues may be in default or there may be elements of danger with respect to principal or interest. -38- Bonds rated Ca and CC represent obligations that are highly speculative. Such issues are often in default or have other marked shortcomings. Bonds rated C are obligations with a higher degree of speculation. These securities have major risk exposures to default. Bonds rated D are in payment default. The D rating is used when interest payments or principal payments are not made on the due date. -39- APPENDIX E 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).
-40- PART C. OTHER INFORMATION ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS (a) FINANCIAL STATEMENTS: Registrant's semi-annual report to shareholders filed electronically pursuant to Section 270.30d-1 on or about July 21, 1994 is herein incorporated by reference. (b) EXHIBITS: 1. Articles of Incorporation, as amended October 17, 1988, filed electronically as Exhibit 1 to Registrant's Post-Effective Amendment No. 69 to Registration Statement No. 2-10700, is incorporated herein by reference. 2. By-laws, as amended January 12, 1989, filed electronically as Exhibit 2 to Registrant's Post-Effective Amendment No. 69 to Registration Statement No. 2-10700, is incorporated herein by reference. 3. Not Applicable. 4. Stock certificate, filed as Exhibit 3 to Registrant's Form N-1Q for the calendar quarter ended September 30, 1979, is incorporated herein by reference. 5. Investment Management and Services Agreement between Registrant and IDS Financial Corporation dated November 14, 1991, filed electronically as Exhibit 5 to Post-Effective Amendment No. 73 to Registrant's Registration Statement No. 2-10700, is incorporated herein by reference. 6. Distribution Agreement between Registrant and IDS Financial Services, Inc. dated January 1, 1987, filed as Exhibit 6 to Registrant's Post-Effective Amendment No. 64 to Registration Statement No. 2-10700, is incorporated herein by reference. 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. Custodian Agreement, dated July 23, 1986, between Registrant and First National Bank of Minneapolis and Amendment to the Custodian Agreement, dated August 5, 1987, filed electronically as Exhibit 8 to Registrant's Post-Effective Amendment No. 69 to Registration Statement No. 2-10700, is incorporated herein by reference. 9.(a) Plan and Agreement of Merger dated April 10, 1986, filed as Exhibit 9 to Registrant's Post-Effective Amendment No. 62 to Registration Statement No. 2-10700, is incorporated herein by reference. (b) Transfer Agency Agreement between the Registrant and IDS Financial Corporation dated November 14, 1991, filed electronically as Exhibit 9(b) to Post-Effective Amendment No. 73 to Registrant's Registration Statement No. 2-10700, is incorporated herein by reference. (c) Copy of License Agreement, dated January 25, 1988, between IDS Financial Corporation and Registrant, filed electronically as Exhibit 9(c) to Registrant's Post Effective Amendment No. 69 to Registration Statement No. 2-10700, is incorporated herein by reference. 10. Not Applicable. 11. Not Applicable. 12. None. 13. Not Applicable. 14. Forms of Keogh, IRA and other retirement plans, filed as Exhibits 14(a) through 14(n) to IDS Growth Fund, Inc., Post Effective Amendment No. 34 to Registration Statement No. 2-38355, are incorporated herein by reference.
II-1 15. Plan and Supplemental Agreement of Distribution between Registrant and IDS Financial Services Inc. dated January 1, 1987, filed as Exhibit 15 to Registrant's Post-Effective Amendment No. 64 to Registration Statement No. 2-10700, is incorporated herein by reference. 16. Copy of Schedule for computation of each performance quotation provided in the Registration Statement in response to Item 22(b), filed as Exhibit 16 to Post-Effective Amendment No. 75 to Registrant's Registration Statement No. 2-10700, is incorporated herein by reference. 17. Not applicable. 18.(a) Directors' Power of Attorney to sign Amendments to this Registration Statement, dated Nov. 10, 1994, filed electronically herewith. (b) Officers' Power of Attorney to sign Amendments to this Registration Statement, dated June 1, 1993, filed concurrently as Exhibit 17(b) to Post-Effective Amendment No. 76 to Registration Statement No. 2-10700, is incorporated herein by reference.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT None. ITEM 26. NUMBER OF HOLDERS OF SECURITIES
(1) (2) Number of Record Holders as of Title of Class Dec. 5, 1994 - -------------- -------------- Common Stock 81,086
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 28a. Business and Other Connections of Investment Adviser (IDS Financial Corporation) Directors and officers of IDS Financial Corporation who are directors and/or officers of one or more other companies: Ronald G. Abrahamson, Vice President--Field Administration American Express Service Corporation IDS Tower 10 Vice President Minneapolis, MN 55440 IDS Financial Services Inc. Vice President-Field Administration Douglas A. Alger, Vice President--Total Compensation IDS Financial Services Inc. IDS Tower 10 Vice President- Minneapolis, MN 55440 Total Compensation Jerome R. Amundson, Vice President and Controller--Mutual Funds Operations IDS Financial Services Inc. IDS Tower 10 Vice President and Minneapolis, MN 55440 Controller-Mutual Funds Operations Peter J. Anderson, Director and Senior Vice President--Investments IDS Advisory Group Inc. IDS Tower 10 Director and Chairman Minneapolis, MN 55440 of the Board IDS Capital Holdings Inc. Director and President IDS Financial Services Inc. Senior Vice President- Investments 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, IDS Institutional Retirement Services IDS Financial Services Inc. IDS Tower 10 Vice President-Sales and Minneapolis, MN 55440 Marketing, IDS Institutional Retirement Services Alvan D. Arthur, Region Vice President--Pacific Northwest Region American Express Service Corporation IDS Tower 10 Vice President IDS Financial Services Inc. Minneapolis, MN 55440 Region Vice President- Pacific Northwest Region PAGE 2 Item 28a. Business and Other Connections of Investment Adviser (IDS Financial Corporation)(cont'd) Kent L. Ashton, Vice President--Financial Education Services IDS Financial Services Inc. IDS Tower 10 Vice President-Financial Minneapolis, MN 55440 Education Services Joseph M. Barsky III, Vice President--Senior Portfolio Manager IDS Advisory Group Inc. IDS Tower 10 Vice President Minneapolis, MN 55440 IDS Financial Services Inc. Vice President-Senior Portfolio Manager Robert C. Basten, Vice President--Tax and Business Services IDS Financial Services Inc. IDS Tower 10 Vice President-Tax Minneapolis, MN 55440 and Business Services Timothy V. Bechtold, Vice President--Insurance Product Development IDS Financial Services Inc. IDS Tower 10 Vice President-Insurance Minneapolis, MN 55440 Product Development IDS Life Insurance Company Vice President-Insurance Product Development John D. Begley, Region Vice President--Mid-Central Region American Express Service Corporation IDS Tower 10 Vice President Minneapolis, MN 55440 IDS Financial Services Inc. Region Vice President- Mid-Central Region IDS Insurance Agency of Alabama Inc. Vice President-Mid-Central Region IDS Insurance Agency of Arkansas Inc. Vice President-Mid-Central Region IDS Insurance Agency of Massachusetts Inc. Vice President-Mid-Central Region IDS Insurance Agency of Nevada Inc. Vice President-Mid-Central Region IDS Insurance Agency of New Mexico Inc. Vice President-Mid-Central Region IDS Insurance Agency of North Carolina Inc. Vice President-Mid-Central Region IDS Insurance Agency of Ohio Inc. Vice President-Mid-Central Region IDS Insurance Agency of Wyoming Inc. Vice President-Mid-Central Region Carl E. Beihl, Vice President--Strategic Technology Planning IDS Financial Services Inc. IDS Tower 10 Vice President- Minneapolis, MN 55440 Strategic Technology Planning PAGE 3 Item 28a. Business and Other Connections of Investment Adviser (IDS Financial Corporation)(cont'd) Alan F. Bignall, Vice President--Financial Planning Systems American Express Service Corporation IDS Tower 10 Vice President Minneapolis, MN 55440 IDS Financial Services Inc. Vice President- Financial Planning Systems Brent L. Bisson, Region Vice President--Northwest Region American Express Service Corporation IDS Tower 10 Vice President Minneapolis, MN 55440 IDS Financial Services Inc. Region Vice President- Northwest Region IDS Insurance Agency of Alabama Inc. Vice President- Northwest Region IDS Insurance Agency of Arkansas Inc. Vice President- Northwest Region IDS Insurance Agency of Massachusetts Inc. Vice President- Northwest Region IDS Insurance Agency of Nevada, Inc. Vice President- Northwest Region IDS Insurance Agency of New Mexico Inc. Vice President- Northwest Region IDS Insurance Agency of North Carolina Inc. Vice President- Northwest Region IDS Insurance Agency of Ohio Inc. Vice President- Northwest Region IDS Insurance Agency of Wyoming Inc. Vice President- Northwest Region John C. Boeder, Vice President--Mature Market Group IDS Financial Services Inc. IDS Tower 10 Vice President- Minneapolis, MN 55440 Mature Market Group IDS Life Insurance Company of New York Box 5144 Director Albany, NY 12205 Karl J. Breyer, Director, Senior Vice President--Corporate Affairs and General Counsel American Express Minnesota Foundation IDS Tower 10 Director Minneapolis, MN 55440 IDS Aircraft Services Corporation Director and President IDS Financial Services Inc. Senior Vice President- Corporate Affairs and Special Counsel Harold E. Burke, Vice President and Assistant General Counsel American Express Service Corporation IDS Tower 10 Vice President IDS Financial Services Inc. Minneapolis, MN 55440 Vice President and Assistant General Counsel PAGE 4 Item 28a. Business and Other Connections of Investment Adviser (IDS Financial Corporation)(cont'd) Daniel J. Candura, Vice President--Marketing Support IDS Financial Services Inc. IDS Tower 10 Vice President-Marketing Minneapolis, MN 55440 Support Cynthia M. Carlson, Vice President--IDS Securities Services American Enterprise Investment IDS Tower 10 Director, President and Services Inc. Minneapolis, MN 55440 Chief Executive Officer IDS Financial Services Inc. Vice President-IDS Securities Services Orison Y. Chaffee III, Vice President--Field Real Estate IDS Financial Services Inc. IDS Tower 10 Vice President-Field Minneapolis, MN 55440 Real Estate James E. Choat, Director and Senior Vice President--Field Management American Express Minnesota Foundation IDS Tower 10 Director American Express Service Corporation Minneapolis, MN 55440 Vice President IDS Financial Services Inc. Senior Vice President- Field Management 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 Kenneth J. Ciak, Vice President and General Manager--IDS Property Casualty IDS Financial Services Inc. 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 PAGE 5 Item 28a. Business and Other Connections of Investment Adviser (IDS Financial Corporation)(cont'd) Roger C. Corea, Region Vice President--Northeast Region American Express Service Corporation IDS Tower 10 Vice President Minneapolis, MN 55440 IDS Financial Services Inc. Region Vice President- Northeast Region IDS Insurance Agency of Alabama Inc. Vice President - Northeast Region IDS Insurance Agency of Arkansas Inc. Vice President - Northeast Region IDS Insurance Agency of Massachusetts Inc. Vice President - Northeast Region IDS Insurance Agency of Nevada Inc. Vice President - Northeast Region IDS Insurance Agency of New Mexico Inc. Vice President - Northeast Region IDS Insurance Agency of North Carolina Inc. Vice President - Northeast Region IDS Insurance Agency of Ohio, Inc. Vice President - Northeast Region IDS Insurance Agency of Wyoming Inc. Vice President - Northeast Region IDS Life Insurance Co. of New York Box 5144 Director Albany, NY 12205 Kevin F. Crowe, Region Vice President--Atlantic Region American Express Service Corporation IDS Tower 10 Vice President Minneapolis, MN 55440 IDS Financial Services Inc. Region Vice President - Atlantic Region Alan R. Dakay, Vice President--Institutional Insurance Marketing American Enterprise Life Insurance Co. IDS Tower 10 Director and President Minneapolis, MN 55440 American Partners Life Insurance Co. Director and President IDS Financial Services Inc. Vice President - Institutional Insurance Marketing IDS Life Insurance Company Vice President - Institutional Insurance Marketing William F. Darland, Region Vice President--South Central Region American Express Service Corporation IDS Tower 10 Vice President Minneapolis, MN 55440 IDS Financial Services Inc. Region Vice President- South Central Region IDS Insurance Agency of Alabama Inc. Vice President- South Central Region IDS Insurance Agency of Arkansas Inc. Vice President - South Central Region PAGE 6 Item 28a. Business and Other Connections of Investment Adviser (IDS Financial Corporation)(cont'd) IDS Insurance Agency of Massachusetts Inc. Vice President- South Central Region IDS Insurance Agency of Nevada Inc. Vice President- South Central Region IDS Insurance Agency of New Mexico Inc. Vice President- South Central Region IDS Insurance Agency of North Carolina Inc. Vice President- South Central Region IDS Insurance Agency of Ohio Inc. Vice President- South Central Region IDS Insurance Agency of Wyoming Inc. Vice President- South Central Region William H. Dudley, Director and Executive Vice President--Investment Operations IDS Advisory Group Inc. IDS Tower 10 Director Minneapolis, MN 55440 IDS Capital Holdings Inc. Director IDS Financial Services Inc. Director and Executive Vice President- Investment Operations 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 IDS Financial Services Inc. IDS Tower 10 Senior Vice President- Minneapolis, MN 55440 Information Systems Gordon L. Eid, Director, Senior Vice President and Deputy General Counsel IDS Financial Services Inc. IDS Tower 10 Senior Vice President and 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 IDS Financial Services Inc. IDS Tower 10 Vice President- Minneapolis, MN 55440 Government Relations IDS Life Insurance Company Vice President PAGE 7 Item 28a. Business and Other Connections of Investment Adviser (IDS Financial Corporation)(cont'd) Mark A. Ernst, Vice President--Retail Services American Enterprise Investment IDS Tower 10 Director Services Inc. Minneapolis, MN 55440 IDS Financial Services Inc. Vice President- Retail Services Gordon M. Fines, Vice President--Mutual Fund Equity Investments IDS Advisory Group Inc. IDS Tower 10 Executive Vice President Minneapolis, MN 55440 IDS Financial Services Inc. Vice President- Mutual Fund Equity Investments IDS International Inc. Vice President and Portfolio Manager Louis C. Fornetti, Director, Senior Vice President and Chief Financial Officer American Enterprise Investment IDS Tower 10 Vice President Services Inc. Minneapolis, MN 55440 IDS Cable Corporation Director IDS Cable II Corporation Director IDS Capital Holdings Inc. Senior Vice President IDS Certificate Company Vice President IDS Financial Services Inc. Senior Vice President and Chief Financial Officer 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 IDS Trust Company Director Investors Syndicate Development Corp. Vice President Douglas L. Forsberg, Vice President--Securities Services IDS Financial Services Inc. IDS Tower 10 Vice President- Minneapolis, MN 55440 Securities Services PAGE 8 Item 28a. Business and Other Connections of Investment Adviser (IDS Financial Corporation)(cont'd) Carl W. Gans, Region Vice President--North Central Region American Express Service Corporation IDS Tower 10 Vice President Minneapolis, MN 55440 IDS Financial Services Inc. Region Vice President- North Central Region Robert G. Gilbert, Vice President--Real Estate IDS Financial Services Inc. IDS Tower 10 Vice President- Minneapolis, MN 55440 Real Estate John J. Golden, Vice President--Field Compensation Development IDS Financial Services Inc. 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 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 Co. Vice President and Treasurer American Express Minnesota Foundation Director, Vice President and Treasurer American Express Service Corporation Vice President and 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 Financial Services Inc. Vice President and Corporate Treasurer PAGE 9 Item 28a. Business and Other Connections of Investment Adviser (IDS Financial Corporation)(cont'd) 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 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 IDS Financial Services Inc. IDS Tower 10 Vice President- Minneapolis, MN 55440 Systems Services PAGE 10 Item 28a. Business and Other Connections of Investment Adviser (IDS Financial Corporation)(cont'd) David A. Hammer, Vice President and Marketing Controller IDS Financial Services Inc. IDS Tower 10 Vice President and Minneapolis, MN 55440 Marketing Controller IDS Plan Services of California, Inc. Director and Vice President Robert L. Harden, Region Vice President--Mid-Atlantic Region American Express Service Corporation IDS Tower 10 Vice President Minneapolis, MN 55440 IDS Financial Services Inc. Region Vice President- Mid Atlantic Region IDS Insurance Agency of Alabama Inc. Vice President- Mid Atlantic Region IDS Insurance Agency of Arkansas Inc. Vice President- Mid Atlantic Region IDS Insurance Agency of Massachusetts Inc. Vice President- Mid Atlantic Region IDS Insurance Agency of Nevada Inc. Vice President- Mid Atlantic Region IDS Insurance Agency of New Mexico Inc. Vice President- Mid Atlantic Region IDS Insurance Agency of North Carolina Inc. Vice President- Mid Atlantic Region IDS Insurance Agency of Ohio Inc. Vice President- Mid Atlantic Region IDS Insurance Agency of Wyoming Inc. Vice President- Mid Atlantic Region Lorraine R. Hart, Vice President--Insurance Investments American Enterprise Life IDS Tower 10 Vice President-Investments Insurance Company Minneapolis, MN 55440 American Partners Life Insurance Co. Director and Vice President-Investments IDS Certificate Company Vice President-Investments IDS Financial Services Inc. Vice President-Insurance Investments IDS Life Insurance Company Vice President-Investments Investors Syndicate Development Corp. Vice President-Investments Mark S. Hays, Vice President--Senior Portfolio Manager, IDS International IDS Financial Services Inc. IDS Tower 10 Vice President-Senior Minneapolis, MN 55440 Portfolio Manager, IDS International IDS Fund Management Limited Director IDS International, Inc. Senior Vice President PAGE 11 Item 28a. Business and Other Connections of Investment Adviser (IDS Financial Corporation)(cont'd) Brian M. Heath, Region Vice President--Southwest Region American Express Service Corporation IDS Tower 10 Vice President Minneapolis, MN 55440 IDS Financial Services Inc. Region Vice President- Southwest Region IDS Insurance Agency of Alabama Inc. Vice President- Southwest Region IDS Insurance Agency of Arkansas Inc. Vice President- Southwest Region IDS Insurance Agency of Massachusetts Inc. Vice President- Southwest Region IDS Insurance Agency of Nevada Inc. Vice President- Southwest Region IDS Insurance Agency of New Mexico Inc. Vice President- Southwest Region IDS Insurance Agency of North Carolina Inc. Vice President- Southwest Region IDS Insurance Agency of Ohio Inc. Vice President- Southwest Region IDS Insurance Agency of Texas Inc. Director and President IDS Insurance Agency of Wyoming Inc. Vice President- Southwest Region Raymond E. Hirsch, Vice President--Senior Portfolio Manager IDS Advisory Group Inc. IDS Tower 10 Vice President IDS Financial Services Inc. Minneapolis, MN 55440 Vice President-Senior Portfolio Manager James G. Hirsh, Vice President and Assistant General Counsel IDS Financial Services Inc. IDS Tower 10 Vice President and Minneapolis, MN 55440 Assistant General Counsel IDS Securities Corporation Director, Vice President and General Counsel Paul C. Hopkins, Vice President--Senior Portfolio Manager-IDS International IDS Financial Services Inc. IDS Tower 10 Vice President-Senior Minneapolis, MN 55440 Portfolio Manager-IDS International IDS International, Inc. Senior Vice President 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 Service Corporation Vice President IDS Financial Services Inc. Vice President- Government and Customer Relations IDS Securities Corporation Vice President and Chief Compliance Officer PAGE 12 Item 28a. Business and Other Connections of Investment Adviser (IDS Financial Corporation)(cont'd) David R. Hubers, Director, President and Chief Executive Officer American Express Service Corporation IDS Tower 10 Director and President Minneapolis, MN 55440 IDS Aircraft Services Corporation Director IDS Certificate Company Director IDS Financial Services Inc. Chairman, Chief Executive Officer and President 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 IDS Financial Services Inc. IDS Tower 10 Senior Vice President- Minneapolis, MN 55440 Field Management Douglas R. Jordal, Vice President--Taxes IDS Aircraft Services Corporation IDS Tower 10 Vice President Minneapolis, MN 55440 IDS Financial Services Inc. Vice President-Taxes Craig A. Junkins, Vice President--IDS 1994 Implementation Planning and Financial Planning Development American Express Service Corporation IDS Tower 10 Vice President Minneapolis, MN 55440 IDS Financial Services Inc. Vice President-IDS 1994 Implementation Planning and Financial Planning Development James E. Kaarre, Vice President--Marketing Information IDS Financial Services Inc. IDS Tower 10 Vice President- Minneapolis, MN 55440 Marketing Information G. Michael Kennedy, Vice President--Investment Services and Investment Research IDS Financial Services Inc. 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 Minnesota Foundation IDS Tower 10 Director Minneapolis, MN 55440 American Express Service Corporation Vice President IDS Financial Services Inc. Senior Vice President- Human Resources PAGE 13 Item 28a. Business and Other Connections of Investment Adviser (IDS 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 Partners Life Insurance Co. Director and Chairman of the Board IDS Financial Services Inc. Senior Vice President- Risk Management Products 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 IDS Financial Services Inc. IDS Tower 10 Vice President-- Minneapolis, MN 55440 System Services Paul F. Kolkman, Vice President--Actuarial Finance IDS Financial Services Inc. 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 IDS Financial Services Inc. IDS Tower 10 Vice President- Minneapolis, MN 55440 Service Quality David S. Kreager, Vice President--Field Management Development IDS Financial Services Inc. IDS Tower 10 Vice President-Field Minneapolis, MN 55440 Management Development Christopher R. Kudrna, Vice President--Systems and Technology Development IDS Financial Services Inc. IDS Tower 10 Vice President-Systems and Minneapolis, MN 55440 Technology Development PAGE 14 Item 28a. Business and Other Connections of Investment Adviser (IDS Financial Corporation)(cont'd) Steven C. Kumagai, Director and Senior Vice President--Field Management and Business Systems American Express Service Corporation IDS Tower 10 Vice President Minneapolis, MN 55440 IDS Financial Services Inc. Director and Senior Vice President-Field Management and Business Systems Mitre Kutanovski, Region Vice President--Midwest Region American Express Service Corporation IDS Tower 10 Vice President Minneapolis, MN 55440 IDS Financial Services Inc. Region Vice President- Midwest Region Edward Labenski, Vice President--Senior Portfolio Manager IDS Advisory Group Inc. IDS Tower 10 Senior Vice President Minneapolis, MN 55440 IDS Financial Services Inc. Vice President- Senior Portfolio Manager Peter L. Lamaison, Vice President--IDS International Division IDS Financial Services Inc. IDS Tower 10 Vice President- Minneapolis, MN 55440 IDS International Division IDS Fund Management Limited Director and Chairman of the Board IDS International, Inc. Director, President and Chief Executive Officer Kurt A. Larson, Vice President--Senior Portfolio Manager IDS Financial Services Inc. IDS Tower 10 Vice President- Minneapolis, MN 55440 Senior Portfolio Manager Ryan R. Larson, Vice President--IPG Product Development IDS Financial Services Inc. 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 IDS Financial Services Inc. IDS Tower 10 Vice President and Minneapolis, MN 55440 Chief U.S. Economist PAGE 15 Item 28a. Business and Other Connections of Investment Adviser (IDS Financial Corporation)(cont'd) Peter A. Lefferts, Director, Senior Vice President and Chief Marketing Officer IDS Financial Services Inc. IDS Tower 10 Senior Vice President and Minneapolis, MN 55440 Chief Marketing Officer IDS Life Insurance Company Director and Executive Vice President-Marketing IDS Plan Services of California, Inc. Director IDS Trust Company Director and Chairman of the Board Investors Syndicate Development Corp. Director Douglas A. Lennick, Director and Executive Vice President--Private Client Group American Express Service Corporation IDS Tower 10 Vice President Minneapolis, MN 55440 IDS Financial Services Inc. Director and Executive Vice President-Private Client Group Mary J. Malevich, Vice President--Senior Portfolio Manager IDS Financial Services Inc. 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 IDS Financial Services Inc. IDS Tower 10 Vice President-Field Minneapolis, MN 55440 Marketing Readiness William J. McKinney, Vice President--Field Management Support IDS Financial Services Inc. IDS Tower 10 Vice President-Field Minneapolis, MN 55440 Management Support Thomas W. Medcalf, Vice President--Senior Portfolio Manager IDS Financial Services Inc. IDS Tower 10 Vice President-Senior Minneapolis, MN 55440 Portfolio Manager William C. Melton, Vice President-International Research and Chief International Economist IDS Financial Services Inc. IDS Tower 10 Vice President- Minneapolis, MN 55440 International Research and Chief International Economist PAGE 16 Item 28a. Business and Other Connections of Investment Adviser (IDS Financial Corporation)(cont'd) Janis E. Miller, Vice President--Variable Assets IDS Cable Corporation IDS Tower 10 Director and President Minneapolis, MN 55440 IDS Cable II Corporation Director and President IDS Financial Services Inc. Vice President- Variable Assets 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 Variable Annuity Funds A&B Director IDS Life Series Fund, Inc. 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 IDS Certificate Company Director and Chairman of the Board IDS Financial Services Inc. Executive Vice President- Marketing and Products 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 Minnesota Foundation IDS Tower 10 Director and President Minneapolis, MN 55440 IDS Financial Services Inc. Vice President- Corporate Communications Barry J. Murphy, Director and Senior Vice President--Client Service IDS Financial Services Inc. IDS Tower 10 Senior Vice President- Minneapolis, MN 55440 Client Service IDS Life Insurance Company Director and Executive Vice President-Client Service Robert J. Neis, Vice President--Information Systems Operations IDS Financial Services Inc. IDS Tower 10 Vice President- Minneapolis, MN 55440 Information Systems Operations PAGE 17 Item 28a. Business and Other Connections of Investment Adviser (IDS Financial Corporation)(cont'd) Vernon F. Palen, Region Vice President--Rocky Mountain Region American Express Service Corporation IDS Tower 10 Vice President Minneapolis, MN 55440 IDS Financial Services Inc. Region Vice President- Rocky Mountain Region IDS Insurance Agency of Alabama Inc. Vice President- Rocky Mountain Region IDS Insurance Agency of Arkansas Inc. Vice President- Rocky Mountain Region IDS Insurance Agency of Massachusetts Inc. Vice President- Rocky Mountain Region IDS Insurance Agency of Nevada Inc. Vice President- Rocky Mountain Region IDS Insurance Agency of New Mexico Inc. Vice President- Rocky Mountain Region IDS Insurance Agency of North Carolina Inc. Vice President- Rocky Mountain Region IDS Insurance Agency of Ohio Inc. Vice President- Rocky Mountain Region IDS Insurance Agency of Wyoming Inc. Vice President- Rocky Mountain Region James R. Palmer, Vice President--Insurance Operations IDS Financial Services Inc. IDS Tower 10 Vice President- Minneapolis, MN 55440 Insurance Operations IDS Life Insurance Company Vice President-Taxes Judith A. Pennington, Vice President--Field Technology IDS Financial Services Inc. IDS Tower 10 Vice President- Minneapolis, MN 55440 Field Technology George M. Perry, Vice President--Corporate Strategy and Development IDS Financial Services Inc. 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 IDS Financial Services Inc. IDS Tower 10 Vice President-- Minneapolis, MN 55440 Segmentation Development and Support PAGE 18 Item 28a. Business and Other Connections of Investment Adviser (IDS Financial Corporation)(cont'd) Ronald W. Powell, Vice President and Assistant General Counsel IDS Cable Corporation IDS Tower 10 Vice President and Minneapolis, MN 55440 Assistant Secretary IDS Cable II Corporation Vice President and Assistant Secretary IDS Financial Services Inc. Vice President and Assistant General Counsel 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 James M. Punch, Vice President--TransAction Services IDS Financial Services Inc. Vice President-Trans Action Services Frederick C. Quirsfeld, Vice President--Taxable Mutual Fund Investments IDS Advisory Group Inc. IDS Tower 10 Vice President Minneapolis, MN 55440 IDS Financial Services Inc. Vice President-- Taxable Mutual Fund Investments Roger B. Rogos, Region Vice President--Great Lakes Region American Express Service Corporation IDS Tower 10 Vice President Minneapolis, MN 55440 IDS Financial Services Inc. Region Vice President- Great Lakes Region IDS Insurance Agency of Alabama Inc. Vice President- Great Lakes Region IDS Insurance Agency of Arkansas Inc. Vice President- Great Lakes Region IDS Insurance Agency of Massachusetts Inc. Vice President- Great Lakes Region IDS Insurance Agency of Nevada Inc. Vice President- Great Lakes Region IDS Insurance Agency of New Mexico Inc. Vice President- Great Lakes Region IDS Insurance Agency of North Carolina Inc. Vice President- Great Lakes Region IDS Insurance Agency of Ohio Inc. Vice President- Great Lakes Region IDS Insurance Agency of Wyoming Inc. Vice President- Great Lakes Region PAGE 19 Item 28a. Business and Other Connections of Investment Adviser (IDS Financial Corporation)(cont'd) ReBecca K. Roloff, Vice President--1994 Program Director IDS Financial Services Inc. IDS Tower 10 Vice President-1994 Minneapolis, MN 55440 Program Director Stephen W. Roszell, Vice President--Advisory Institutional Marketing IDS Advisory Group Inc. IDS Tower 10 President and Chief Minneapolis, MN 55440 Executive Officer IDS Financial Services Inc. Vice President-Advisory Institutional Marketing Robert A. Rudell, Vice President--IDS Institutional Retirement Services IDS Financial Services Inc. IDS Tower 10 Vice President-IDS Minneapolis, MN 55440 Institutional Retirement Services IDS Sales Support Inc. Director and President IDS Trust Company Director John P. Ryan, Vice President and General Auditor IDS Financial Services Inc. IDS Tower 10 Vice President and General Minneapolis, MN 55440 Auditor Erven A. Samsel, Director and Senior Vice President--Field Management American Express Service Corporation IDS Tower 10 Vice President Minneapolis, MN 55440 IDS Financial Services Inc. Senior Vice President- Field Management 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 PAGE 20 Item 28a. Business and Other Connections of Investment Adviser (IDS Financial Corporation)(cont'd) R. Reed Saunders, Director and Senior Vice President--Corporate Strategy and Development American Express Service Corporation IDS Tower 10 Director and Vice Minneapolis, MN 55440 President IDS Financial Services Inc. Director and Senior Vice President-Corporate Strategy and Development IDS Property Casualty Insurance Co. Director 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 IDS Certificate Company Director and President IDS Financial Services Inc. Vice President- Assured Assets 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 IDS Financial Services Inc. IDS Tower 10 Vice President- Minneapolis, MN 55440 Property Casualty IDS Property Casualty Insurance Co. Senior Vice President F. Dale Simmons, Vice President--Senior Portfolio Manager, Insurance Investments American Enterprise Life Insurance Co. IDS Tower 10 Vice President-Real Minneapolis, MN 55440 Estate Loan Management American Partners Life Insurance Co. Vice President-Real Estate Loan Management IDS Certificate Company Vice President-Real Estate Loan Management IDS Financial Services Inc. Vice President-Senior Portfolio Manager Insurance Investments 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 IDS Financial Services Inc. IDS Tower 10 Vice President-Human Minneapolis, MN 55440 Resources and Organization Development PAGE 21 Item 28a. Business and Other Connections of Investment Adviser (IDS Financial Corporation)(cont'd) Julian W. Sloter, Region Vice President--Southeast Region American Express Service Corporation IDS Tower 10 Vice President Minneapolis, MN 55440 IDS Financial Services Inc. Region Vice President- Southeast Region IDS Insurance Agency of Alabama Inc. Vice President- Southeast Region IDS Insurance Agency of Arkansas Inc. Vice President- Southeast Region IDS Insurance Agency of Massachusetts Inc. Vice President- Southeast Region IDS Insurance Agency of Nevada Inc. Vice President- Southeast Region IDS Insurance Agency of New Mexico Inc. Vice President- Southeast Region IDS Insurance Agency of North Carolina Inc. Vice President- Southeast Region IDS Insurance Agency of Ohio Inc. Vice President- Southeast Region IDS Insurance Agency of Wyoming Inc. Vice President- Southeast Region Ben C. Smith, Vice President--Workplace Marketing IDS Financial Services Inc. IDS Tower 10 Vice President- Minneapolis, MN 55440 Workplace Marketing William A. Smith, Vice President and Controller--Private Client Group IDS Financial Services Inc. IDS Tower 10 Vice President and Minneapolis, MN 55440 Controller-Private Client Group James B. Solberg, Vice President--Advanced Financial Planning IDS Financial Services Inc. IDS Tower 10 Vice President- Minneapolis, MN 55440 Advanced Financial Planning Bridget Sperl, Vice President--Human Resources Management Services IDS Financial Services Inc. 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 22 Item 28a. Business and Other Connections of Investment Adviser (IDS Financial Corporation)(cont'd) Lois A. Stilwell, Vice President--Planner Training and Development IDS Financial Services Inc. IDS Tower 10 Vice President- Minneapolis, MN 55440 Planner Training and Development William A. Stoltzmann, Vice President and Assistant General Counsel American Partners Life Insurance Co. IDS Tower 10 Director, Vice President, Minneapolis, MN 55440 General Counsel and Secretary IDS Financial Services Inc. Vice President and Assistant General Counsel 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 IDS Financial Services Inc. IDS Tower 10 Vice President- Minneapolis, MN 55440 Corporate Planning and Analysis Jeffrey J. Stremcha, Vice President--Information Resource Management/ISD IDS Financial Services Inc. 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 Neil G. Taylor, Vice President--Field Business Systems IDS Financial Services Inc. IDS Tower 10 Vice President- Minneapolis, MN 55440 Field Business Systems PAGE 23 Item 28a. Business and Other Connections of Investment Adviser (IDS Financial Corporation)(cont'd) John R. Thomas, Director and Senior Vice President--Information and Technology IDS Bond Fund, Inc. IDS Tower 10 Director Minneapolis, MN 55440 IDS California Tax-Exempt Trust Trustee IDS Discovery Fund, Inc. Director IDS Equity Plus Fund, Inc. Director IDS Extra Income Fund, Inc. Director IDS Federal Income Fund, Inc. Director IDS Financial Services Inc. Senior Vice President- Information and Technology 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 Partners Life Insurance Co. Director, Vice President, Controller and Treasurer IDS Financial Services Inc. Vice President and Corporate Controller 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 IDS Advisory Group Inc. IDS Tower 10 Executive Vice President Minneapolis, MN 55440 IDS Financial Services Inc. Vice President- Senior Portfolio Manager IDS Fund Management Limited Director IDS International, Inc. Senior Vice President PAGE 24 Item 28a. Business and Other Connections of Investment Adviser (IDS Financial Corporation)(cont'd) Norman Weaver, Jr., Director and Senior Vice President--Field Management American Express Service Corporation IDS Tower 10 Vice President Minneapolis, MN 55440 IDS Financial Services Inc. Senior Vice President- Field Management 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 IDS Capital Holdings Inc. IDS Tower 10 Vice President Minneapolis, MN 55440 IDS Financial Services Inc. Vice President-Corporate Tax Operations IDS Futures III Corporation Vice President, Treasurer and Secretary IDS Futures Brokerage Group Vice President IDS Futures Corporation Vice President, Treasurer and Secretary Lawrence J. Welte, Vice President--Investment Administration IDS Financial Services Inc. IDS Tower 10 Vice President- Minneapolis, MN 55440 Investment Administration IDS Securities Corporation Director, Executive Vice President and Chief Operating Officer William N. Westhoff, Director and Senior Vice President--Fixed Income Management American Enterprise Life Insurance IDS Tower 10 Director Company Minneapolis, MN 55440 IDS Financial Services Inc. Senior Vice President- Fixed Income Management IDS Partnership Services Corporation Director and Vice President IDS Real Estate Services Inc. Director, Chairman of the Board and President IDS Realty Corporation Director and Vice President Investors Syndicate Development Corp. Director PAGE 25 Item 28a. Business and Other Connections of Investment Adviser (IDS Financial Corporation)(cont'd) Edwin M. Wistrand, Vice President and Assistant General Counsel IDS Financial Services Inc. IDS Tower 10 Vice President and Minneapolis, MN 55440 Assistant General Counsel Michael R. Woodward, Director and Senior Vice President--Field Management American Express Service Corporation IDS Tower 10 Vice President Minneapolis, MN 55440 IDS Financial Services Inc. Senior Vice President- Field Management 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 26 Item 29. Principal Underwriters. (a) IDS Financial Services Inc. acts as principal underwriter for the following investment companies: IDS Bond Fund, Inc.; IDS California Tax-Exempt Trust; IDS Discovery Fund, Inc.; IDS Equity Plus 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 Field Administration Minneapolis, MN 55440 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-Mutual Funds Minneapolis, MN 55440 Operations 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 IDS Institutional Retirement Services Alvan D. Arthur Region Vice President- None IDS Tower 10 Pacific Northwest Region Minneapolis, MN 55440 Kent L. Ashton Vice President- None IDS Tower 10 Financial Education Minneapolis, MN 55440 Services PAGE 27 Item 29. (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 Region Vice President- None Olentangy Valley Center Mid-Central Region Suite 300 7870 Olentangy River Rd. Columbus, OH 43235 Carl E. Beihl Vice President- None IDS Tower 10 Strategic Technology Minneapolis, MN 55440 Planning Alan F. Bignall Vice President- None IDS Tower 10 Financial Planning Minneapolis, MN 55440 Systems Brent L. Bisson Region Vice President- None Seafirst Financial Northwest Region 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 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 Daniel J. Candura Vice President- None IDS Tower 10 Marketing Support Minneapolis, MN 55440 Cynthia M. Carlson Vice President-IDS None IDS Tower 10 Securities Services Minneapolis, MN 55440 PAGE 28 Item 29. (continued) Orison Y. Chaffee III Vice President-Field None IDS Tower 10 Real Estate Minneapolis, MN 55440 Positions and Name and Principal Position and Offices Offices with Business Address with Underwriter Registrant 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 Region Vice President- None 345 Woodcliff Drive Northeast Region Fairport, NY 14450 Kevin F. Crowe Region Vice President- None IDS Tower 10 Atlantic Region Minneapolis, MN 55440 Alan R. Dakay Vice President- None IDS Tower 10 Institutional Insurance Minneapolis, MN 55440 Marketing William F. Darland Region Vice President- None Suite 108C South Central Region 301 Sovereign Court Manchester, MO 63011 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 PAGE 29 Item 29. (Continued) Positions and Name and Principal Position and Offices Offices with Business Address with Underwriter Registrant 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 Vice President- None IDS Tower 10 Securities Services Minneapolis, MN 55440 Carl W. Gans Region Vice President- None IDS Tower 10 North Central Region Minneapolis, MN 55440 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 David A. Hammer Vice President None IDS Tower 10 and Marketing Minneapolis, MN 55440 Controller Robert L. Harden Region Vice President- None Suite 403 Mid-Atlantic Region 8500 Leesburg Pike Vienna, VA 22180 Lorraine R. Hart Vice President- None IDS Tower 10 Insurance Investments Minneapolis, MN 55440 Mark S. Hays Vice President-Senior None IDS Tower 10 Portfolio Manager, IDS Minneapolis, MN 55440 International Brian M. Heath Region Vice President- None IDS Tower 10 Southwest Region Minneapolis, MN 55440 PAGE 30 Item 29. (Continued) Positions and Name and Principal Position and Offices Offices with Business Address with Underwriter Registrant Raymond E. Hirsch Vice President-Senior None IDS Tower 10 Portfolio Manager Minneapolis, MN 55440 James G. Hirsh Vice President and None IDS Tower 10 Assistant General Minneapolis, MN 55440 Counsel Paul C. Hopkins Vice President- None IDS Tower 10 Senior Portfolio Manager, Minneapolis, MN 55440 IDS International 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 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 Harold D. Knutson Vice President- None IDS Tower 10 System Services Minneapolis, MN 55440 PAGE 31 Item 29. (Continued) Positions and Name and Principal Position and Offices Offices with Business Address with Underwriter Registrant 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 Vice President-Field None IDS Tower 10 Management Development Minneapolis, MN 55440 Christopher R. Kudrna Vice President- None IDS Tower 10 Systems and Technology Minneapolis, MN 55440 Development Steven C. Kumagai Director and Senior None IDS Tower 10 Vice President-Field Minneapolis, MN 55440 Management and Business Systems Mitre Kutanovski Region Vice President- None IDS Tower 10 Midwest Region Minneapolis, MN 55440 Edward Labenski Vice President- None IDS Tower 10 Senior Portfolio Minneapolis, MN 55440 Manager Peter L. Lamaison Vice President- None One Broadgate IDS International London, England Division Kurt A. Larson Vice President- None IDS Tower 10 Senior Portfolio Minneapolis, MN 55440 Manager 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 Peter A. Lefferts Senior Vice President and None IDS Tower 10 Chief Marketing Officer Minneapolis, MN 55440 Douglas A. Lennick Director and Executive None IDS Tower 10 Vice President-Private Minneapolis, MN 55440 Client Group PAGE 32 Item 29. (Continued) Positions and Name and Principal Position and Offices Offices with Business Address with Underwriter Registrant 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 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 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 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 Judith A. Pennington Vice President- None IDS Tower 10 Field Technology Minneapolis, MN 55440 PAGE 33 Item 29. (Continued) Positions and Name and Principal Position and Offices Offices with Business Address with Underwriter Registrant 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 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 Roger B. Rogos Region Vice President- None Suite 15, Parkside Place Great Lakes Region 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 Robert A. Rudell Vice President- None IDS Tower 10 IDS Institutional Minneapolis, MN 55440 Retirement 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 R. Reed Saunders Director and Senior None IDS Tower 10 Vice President-Corporate Minneapolis, MN 55440 Strategy and Development Stuart A. Sedlacek Vice President- None IDS Tower 10 Assured Assets Minneapolis, MN 55440 PAGE 34 Item 29. (Continued) Positions and Name and Principal Position and Offices Offices with Business Address with Underwriter Registrant Donald K. Shanks Vice President- None IDS Tower 10 Property Casualty Minneapolis, MN 55440 F. Dale Simmons Vice President-Senior None IDS Tower 10 Portfolio Manager, Minneapolis, MN 55440 Insurance Investments Judy P. Skoglund Vice President- None IDS Tower 10 Human Resources and Minneapolis, MN 55440 Organization Development Julian W. Sloter Region Vice President- None 9040 Roswell Rd. Southeast Region 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 Vice President- None IDS Tower 10 Advanced Financial Minneapolis, MN 55440 Planning Bridget Sperl Vice President- None IDS Tower 10 Human Resources Minneapolis, MN 55440 Management Services Lois A. Stilwell Vice President- None IDS Tower 10 Planner Training and Minneapolis, MN 55440 Development 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 Vice President- None IDS Tower 10 Field Business Systems Minneapolis, MN 55440 PAGE 35 Item 29. (Continued) Positions and Name and Principal Position and Offices Offices with Business Address with Underwriter Registrant 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 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 William N. Westhoff Senior Vice President- None IDS Tower 10 Fixed Income Management Minneapolis, MN 55440 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 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. PAGE 36 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 Selective Fund 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 22nd day of December, 1994. IDS SELECTIVE FUND By /s/ WILLIAM R. PEARCE** ------------------------------------ William R. Pearce, PRESIDENT Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statement has been signed below by the following persons in the capacities indicated on the 22nd day of December, 1994. Signature Capacity - ----------------------------------- ------------------------- /s/ WILLIAM R. PEARCE** President, 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 Nov. 10, 1994, filed electronically herewith as Exhibit 18(a) by: /s/ LESLIE L. OGG - ------------------------------------------- Leslie L. Ogg **Signed pursuant to Officers' Power of Attorney dated June 1, 1993, filed as Exhibit 17(b) to Registrant's Post-Effective Amendment No. 76 to Registration Statement No. 2-10700 by: /s/ LESLIE L. OGG - ------------------------------------------- Leslie L. Ogg II-4 CONTENTS OF THIS POST-EFFECTIVE AMENDMENT NO. 79 TO REGISTRATION STATEMENT NO. 2-10700 This Post-Effective Amendment comprises the following papers and documents: The facing sheet. The cross-reference page. Part A. The prospectus. Part B. Statement of Additional Information. Part C. Other information. Exhibits. The signatures. EX-99 2 EXHIBIT INDEX PAGE 1 IDS Selective Fund, Inc. Registration Number 2-10700/811-499 EXHIBIT INDEX Exhibit 18(a) Directors' Power of Attorney, dated Nov. 10, 1994 EX-99.18ADIRPOA 3 DIRECTORS' POWER OF ATTORNEY Exhibit 18(a) DIRECTORS/TRUSTEES POWER OF ATTORNEY City of Minneapolis State of Minnesota Each of the undersigned, as directors and trustees of the below listed open-end, diversified investment companies that previously have filed registration statements and amendments thereto pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940 with the Securities and Exchange Commission: 1933 Act 1940 Act Reg. Number Reg. Number ----------- ----------- IDS Bond Fund, Inc. 2-51586 811-2503 IDS California Tax-Exempt Trust 33-5103 811-4646 IDS Discovery Fund, Inc. 2-72174 811-3178 IDS Equity Select Fund, Inc. 2-13188 811-772 IDS Extra Income Fund, Inc. 2-86637 811-3848 IDS Federal Income Fund, Inc. 2-96512 811-4260 IDS Global Series, Inc. 33-25824 811-5696 IDS Growth Fund, Inc. 2-38355 811-2111 IDS High Yield Tax-Exempt Fund, Inc. 2-63552 811-2901 IDS International Fund, Inc. 2-92309 811-4075 IDS Investment Series, Inc. 2-11328 811-54 IDS Managed Retirement Fund, Inc. 2-93801 811-4133 IDS Market Advantage Series, Inc. 33-30770 811-5897 IDS Money Market Series, Inc. 2-54516 811-2591 IDS New Dimensions Fund, Inc. 2-28529 811-1629 IDS Precious Metals Fund, Inc. 2-93745 811-4132 IDS Progressive Fund, Inc. 2-30059 811-1714 IDS Selective Fund, Inc. 2-10700 811-499 IDS Special Tax-Exempt Series Trust 33-5102 811-4647 IDS Stock Fund, Inc. 2-11358 811-498 IDS Strategy Fund, Inc. 2-89288 811-3956 IDS Tax-Exempt Bond Fund, Inc. 2-57328 811-2686 IDS Tax-Free Money Fund, Inc. 2-66868 811-3003 IDS Utilities Income Fund, Inc. 33-20872 811-5522 hereby constitutes and appoints William R. Pearce and Leslie L. Ogg or either one of them, as her or his attorney-in-fact and agent, to sign for her or him in her or his name, place and stead any and all further amendments to said registration statements filed pursuant to said Acts and any rules and regulations thereunder, and to file such amendments with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting to either of them the full power and authority to do and perform each and every act required and necessary to be done in connection therewith. Dated the 10th day of November, 1994. /s/ Lynne V. Cheney /s/ Melvin R. Laird - -------------------------- ---------------------------- Lynne V. Cheney Melvin R. Laird /s/ William H. Dudley /s/ Lewis W. Lehr - -------------------------- ---------------------------- William H. Dudley Lewis W. Lehr /s/ Robert F. Froehlke /s/ William R. Pearce - -------------------------- ---------------------------- Robert F. Froehlke William R. Pearce /s/ David R. Hubers /s/ Edson W. Spencer - -------------------------- ---------------------------- David R. Hubers Edson W. Spencer /s/ Heinz F. Hutter /s/ John R. Thomas - -------------------------- ---------------------------- Heinz F. Hutter John R. Thomas /s/ Anne P. Jones /s/ Wheelock Whitney - -------------------------- ---------------------------- Anne P. Jones Wheelock Whitney /s/ Donald M. Kendall /s/ C. Angus Wurtele - -------------------------- ---------------------------- Donald M. Kendall C. Angus Wurtele -----END PRIVACY-ENHANCED MESSAGE-----