PAGE 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM S-1
POST-EFFECTIVE AMENDMENT NUMBER 38 TO
REGISTRATION STATEMENT NUMBER 2-55252
SERIES D-1 INVESTMENT CERTIFICATE
(FORMERLY SINGLE-PAYMENT CERTIFICATES, SERIES D-1)
UNDER
THE SECURITIES ACT OF 1933
IDS CERTIFICATE COMPANY
(IDS Certificate Company effective April 1984)
(Exact name of registrant as specified in charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
6725
(Primary Standard Industrial Classification Code Number)
41-6009975
(I.R.S. Employer Identification No.)
IDS Tower 10, Minneapolis, MN 55440, (612) 671-3131
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Bruce A Kohn, IDS Tower 10, Minneapolis MN 55440-0010, 612-671-2221
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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. Registrants' Rule
24f-2 Notice for its most recent fiscal year was filed on or about
February 21, 1996.
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PART I. CROSS REFERENCE SHEET FOR PROSPECTUS
PURSUANT TO RULE 404(c)
Item Caption
Number Prospectus
Item 1. Forepart of the
Registration Statement
and Outside Front Cover
Page of Prospectus.
Item 2. Inside Front and Available Information about
Outside Back Cover Pages IDSC.
of Prospectus.
Item 3. Summary Informa- Summary of Contents.
tion, Risk Factors
and Ratio of Earnings
to Fixed Charges.
Item 4. Use of Proceeds. How your money is used by
and protected; Investment
Policies.
Item 5. Determination of Not Applicable.
Offering Price.
Item 6. Dilution. Not Applicable.
Item 7. Selling Security Not Applicable.
Holders.
Item 8. Plan of Using the Series D-1
Distribution Investment Certificate;
How your certificate is
managed.
Item 9. Description of About the Series D-1
Securities to Be Investment Certificate;
Registered. Using the Series D-1
Investment Certificate.
Item 10. Interests of Not Applicable.
Named Experts and Counsel.
PAGE 3
PART I. CROSS REFERENCE SHEET FOR PROSPECTUS
PURSUANT TO RULE 404(c) (Continued)
Item Caption
Number Prospectus
Item 11. Information with Invested and guaranteed
Respect to the Registrant. by IDSC; Regulated by
Government; Relationship
between IDSC and IDS, Capital
structure and certificates
issued; Director and Officers.
Item 12. Disclosure of Directors and Officers also see
Commission Position on Item 17 in Part II.
Indemnification for
Securities Act Liabilities.
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IDS Series D-1 Investment Certificate
Prospectus/April 24, 1996
This prospectus describes the Series D-1 Investment Certificate
(Series D-1) issued by IDS Certificate Company (IDSC). The Series
D-1 certificate is offered only in connection with the IDS
Retirement Plan, the Career Distributors' Retirement Plan (CDRP),
the IDS DVP Retirement Plan, and the IDS Mutual Funds Profit
Sharing Plan of the IDS MUTUAL FUND GROUP(individually a "Plan" and
collectively the "Plans") and to affiliated companies of IDSC.
These Plans have been adopted for the exclusive benefit and
participation of eligible employees and personal financial advisors
of American Express Financial Corporation (AEFC) and its subsidiary
companies, and the IDS MUTUAL FUND GROUP.
IDSC offers persons who retire as full-time employees or as full-
time financial advisors or district managers of AEFC and its
subsidiary companies the opportunity to purchase the Series D-1
Certificate in Individual Retirement Accounts (IRAs).
IDSC guarantees a specific rate of interest for each calendar
quarter. IDSC also guarantees the principal of your certificate
(page 5).
The Series D-1 certificate matures 20 years from its issue date.
Its value at maturity will be equal to total contributions made
plus interest earned and less any withdrawals (i.e. surrenders)
(page 6).
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.
This certificate is backed by IDSC's investments on deposit rather
than guaranteed or insured by the government or someone else. See
"Invested and guaranteed by IDSC" and "Regulated by government"
under "How your money is used and protected."
The prospectus gives you facts about the Series D-1 certificate and
describes its terms and conditions. You should read it to decide
if this certificate is the right investment for you. Keep it with
your investment records for future reference.
IDS Certificate Company
IDS Tower 10
Minneapolis, MN 55440-0010
1-800-437-3463
1-800-846-4293 (TTY)
An American Express company
PAGE 5
Annual Interest Rates as of April 24, 1996
___________________________________________________________________
Simple Compound
Interest Effective
Rate Yield
5.46% 5.60%
___________________________________________________________________
These rates were in effect on the date of this prospectus. IDSC
reviews and may change its rates on new purchases each week. The
interest rate paid during the first calendar quarter the
certificate is owned will be that in effect on the date an
application or investment is accepted. IDSC guarantees that when
the rate for new purchases takes effect, the rate for the first
quarter will be within a specified range of the average 12-month
certificate of deposit rate then published in the most recent BANK
RATE MONITOR National IndexTM, N. Palm Beach, FL 33408 (page 8-9).
Interest rates for future calendar quarters are declared at the
discretion of IDSC and may be greater or less than the rates shown
here.
The Series D-1 certificate is backed 100 percent by our investments
on deposit instead of by federal insurance. There are no sales or
surrender charges. There is no minimum rate of interest. IDSC
does not have a distribution agreement or pay a distribution fee
with respect to this certificate.
AVAILABLE INFORMATION ABOUT IDSC
IDSC is subject to the reporting requirements of the Securities
Exchange Act of 1934. Reports and other information on IDSC are
filed with the Securities and Exchange Commission (SEC) and can be
inspected and copied at the public reference section of the SEC,
Washington, D.C. and also at the following regional offices:
Northeast Regional Office
7 World Trade Center
Suite 1300
New York, NY 10048
Midwest Regional Office
Northwestern Atrium Center
500 West Madison St.
Suite 1400
Chicago, IL 60611
Pacific Regional Office
5670 Wilshire Blvd.
11th Floor
Los Angeles, CA 90036
You can obtain copies from the Public Reference Section of the SEC,
450 5th Street, N.W., Washington, D.C. 20549 at prescribed rates.
PAGE 6
We are not responsible for any information about IDSC except for
the information in this prospectus, including any supplements, in
any reports filed with the SEC or in any supplemental sales
material we have authorized for use in the sale of this
certificate.
No person has authority to change the terms of this certificate or
to bind IDSC by any statement not in this prospectus.
We reserve the right to issue other securities with different
terms.
SUMMARY OF CONTENTS
Listed below is a summary of items you should consider in
evaluating the certificate. These items are discussed in more
detail elsewhere in the prospectus as indicated.
About the Series D-1 Investment Certificate
Investment Amounts and Interest Rates - The Series D-1 certificate
is purchased by the trustee or custodian (page 8) at the direction
of Plan participants or IRA owners using contributions to a Plan or
IRA or by affiliated companies of IDSC. IDSC will pay the trustee
or custodian at maturity the face amount plus earned interest.
Interest rates are declared each calendar quarter beginning on Jan.
1, April 1, July 1, and Oct. 1. The rate for the first calendar
quarter will be within a specified range of an average 12-month
certificate of deposit rate as published in the BANK RATE MONITOR
National IndexTM N. Palm Beach, FL 33408. Future interest rates
are at the discretion of IDSC (page 5).
Determining the Face Amount and Principal of the Series D-1
Investment Certificate - The face amount of the certificate is the
total amount invested. The principal is the total investment plus
interest compounded monthly over the 20-year life of the
certificate, less withdrawals (page 6).
Value at Maturity Will Exceed Face Amount - We guarantee the rate
of interest on the Series D-1 certificate for each calendar
quarter. Due to interest received, the value at maturity of a
certificate held to maturity will exceed the face amount of the
certificate (page 6).
Earning Interest - Interest accrues and is credited daily and will
be compounded at the end of each calendar month (page 6).
Using the Series D-1 Investment Certificate
Contributions to the Certificate - Instructions to Plan
participants on how to direct contributions to the Series D-1
certificate may be obtained through the appropriate Plan
Administrator or, for IRAs, from your financial advisor or your
local American Express Financial Advisors office or by writing to
American Express Financial Advisors Inc., IDS Tower 10,
Minneapolis, MN 55440-0534 or by calling 1-800-437-3463. The
PAGE 7
Series D-1 certificate is offered only to eligible participants in
connection with the IDS Retirement Plan, the CDRP, the IDS DVP
Retirement Plan, the IDS Mutual Funds Profit Sharing Plan, IRAs of
persons who retire as full-time AEFC employees, financial advisors
or district managers and to affiliated companies of IDSC (page 7).
Other IRAs or 401(k) Plan Accounts and Other Qualified Retirement
Accounts - When a participant takes a qualifying distribution from
a plan qualified under Internal Revenue Code 401(a), the
participant's Series D-1 certificate plan account may be rolled
over into an IRA or other qualified retirement plan account where
allowed by a Plan (page 7). The Career Distributors' Retirement
Plan is a nonqualified deferred compensation plan.
Receiving Cash - A participant in a Plan (other than CDRP) or an
IRA owner may receive cash after taking an "in kind" distribution
of his or her Series D-1 certificate plan account or IRA, subject
to federal tax laws and the terms of the payout options (page 8).
At Maturity - If the Series D-1 certificate is held to maturity
following an "in kind" distribution, a check for the principal will
be sent. Payout options also are available (page 9).
Transferring the Series D-1 Certificate Ownership - While the
Series D-1 certificate is not negotiable, under limited
circumstances it can, if eligible, be transferred to a qualified
plan or IRA trustee or custodian upon written request (page 10).
Giving Us Instructions - All instructions to us must be in proper
written form (page 10).
Income and Taxes
Tax Treatment of this Investment - Interest earned on the Series
D-1 certificate is generally not taxable until withdrawn (page 11).
How your money is used and protected
Invested and guaranteed by IDSC - IDSC, a wholly owned subsidiary
of AEFC, issues the Series D-1 certificate in the name of the
custodian of the IRA, trustee of a Plan or in the case of the CDRP
of AEFC, to AEFC as the sponsor of the plan or to an affiliated
company of IDSC. This section gives basic information about IDSC's
assets and income (page 11).
Regulated by Government - The Series D-1 certificate is a security
and is governed by federal and state law (page 12).
Backed by our investments - Our investments, mostly debt
securities, are on deposit (page 12).
PAGE 8
Investment Policies - We do not purchase securities on margin or
invest in commodities nor do we participate on a joint basis or
joint-and-several basis in any trading account in securities.
There are no restrictions on concentration of investments in
industries. We may lend securities and receive cash equal to the
market value of the securities as collateral. We also may purchase
securities on a "when-issued" basis (page 13).
Relationship Between IDSC and AEFC - AEFC is our parent company.
It, in turn, is owned by American Express Company (American
Express) (page 14).
Capital structure and certificates issued - (page 14).
Investment management and services - AEFC acts as investment
advisor for our certificates. The Investment Advisory and Services
Agreement governs AEFC's transactions on our behalf and the fees we
pay AEFC for investment advisory services. There is no
distribution fee charged (page 14).
Employment of Other American Express Affiliates - AEFC may employ
other American Express affiliates to perform certain transactions
for us (page 16).
Directors and officers - This section contains information about
our management and directors. (page 17-19).
ABOUT THE SERIES D-1 INVESTMENT CERTIFICATE
Investment Amounts and Interest Rates
The Series D-1 Certificate is a security purchased with single or
multiple payments. The amount that can be invested is determined
by the provisions of the Plans and applicable tax laws. A
participant's Plan investment is the dollar amount or its
equivalent percentage contributions directed to the participant's
Plan account. The interest rate applied to the investment is the
quarterly rate then in effect. Investments earn interest from the
date IDSC accepts each Plan contribution or IRA contribution.
Interest on the Series D-1 certificate is guaranteed for each
calendar quarter. The rate paid will not change during a quarter.
A calendar quarter begins each Jan. 1, April 1, July 1, or Oct. 1.
IDSC guarantees that when rates for new purchases take effect, the
rate will be within a range from 75 to 175 basis points above the
average interest rate then published for 12-month certificates of
deposit in the BANK RATE MONITOR National IndexTM, N. Palm Beach,
FL 33408. For example, if the rate published for a given week in
the BANK RATE MONITOR National IndexTM, N. Palm Beach, FL 33408 for
12-month certificates is 3.25 percent, IDSC's rate in effect for
new purchases would be between 4 percent and 5 percent.
Interest rates may differ for investments of more than $1 million
in one or more Series D-1 Certificates by any affiliated company of
IDSC. When rates for new purchases by any such company take
PAGE 9
effect, the rate will be within a range from 20 basis points below
to 80 basis points above the average interest rate then published
for 12-month certificates of deposit in the BANK RATE MONITOR
National IndexTM, N. Palm Beach, FL 33408.
The BANK RATE MONITOR National IndexTM, N. Palm Beach, FL 33408 is
an index of rates and annual effective yields offered on various
length certificates of deposit by large banks and thrifts in large
metropolitan areas. The frequency of compounding varies among the
banks and thrifts.
Certificates of deposit in the BANK RATE MONITOR National IndexTM,
N. Palm Beach, FL 33408 are government-insured fixed-rate time
deposits. The BANK RATE MONITOR National IndexTM, N. Palm Beach,
FL 33408 is published in the BANK RATE MONITOR, a weekly magazine
published in N. Palm Beach, FL, by Advertising News Service Inc.,
an independent national news organization that collects and
disseminates information about bank products and interest rates.
It is not affiliated with IDSC, AEFC, or any of their affiliates.
The publisher of the BANK RATE MONITOR distributes to national and
broadcast news media on a regular weekly basis its current index
rates for various terms of certificates of deposit of banks and
thrifts.
The BANK RATE MONITOR periodical may be available in your local
library. To obtain information on the current BANK RATE MONITOR
Top Market AverageTM rates, call the Client Service Organization at
the telephone numbers listed on the back cover between 8 a.m. and 6
p.m. your local time.
Interest is credited to the certificate daily. The rate in effect
on the day the contribution is accepted in Minneapolis will apply
to the certificate. The interest rate shown on the front of this
prospectus may or may not be in effect on the date a participant's
contribution is accepted.
Interest for future calendar quarters may be greater or less than
the rates for the first quarter. The then prevailing investment
climate, including 12-month average certificate of deposit
effective yields as reflected in the BANK RATE MONITOR National
IndexTM, N. Palm Beach, FL 33408, will be a primary consideration
in deciding future rates. Nevertheless, IDSC has complete
discretion as to what interest it will declare beyond the initial
quarter.
Any investments rolled over from the Series D-1 certificate to an
IRA or 401(k) plan account or other qualified retirement account
will be subject to the limits and provisions of that account or
plan and applicable tax laws.
Determining the Face Amount and Principal of the Series D-1
Investment Certificate
The face amount is the amount of the initial investment in the
Series D-1 certificate. At the beginning of each quarter, all
interest previously credited to a Series D-1 certificate and not
withdrawn will become part of its principal. For example: if the
initial investment in a certificate was $100,000, the face amount
PAGE 10
would be $100,000. If the certificate earns $1,000 in interest
during a quarter and it is not withdrawn, the principal for the
next quarter will be $101,000. Your principal is guaranteed by
IDSC.
Value at Maturity Will Exceed Face-Amount
The Series D-1 certificate matures in 20 years except as provided
in "receiving cash" under "Using the Series D-1 Investment
Certificate." A certificate held to maturity will have had
interest declared each quarter over its life. Interest once
declared for the quarter will not be reduced. The value at
maturity will exceed the face amount.
Earning Interest
Interest is accrued and credited daily on the Series D-1
certificate. If a withdrawal is made during a month, interest will
be paid to the date of the withdrawal. Interest is compounded at
the end of each calendar month. The amount of interest earned each
month is determined by applying the daily interest rate then in
effect to the daily balance of the Series D-1 certificate.
Interest is calculated on a 360-day year basis.
USING THE SERIES D-1 INVESTMENT CERTIFICATE
Contributions to the Series D-1 Investment Certificate
A contribution will be made to the Series D-1 Certificate by the
Plan sponsor as directed by the participant. Instructions to Plan
participants on how to direct Plan contributions to a Series D-1
certificate may be obtained from the appropriate Plan
Administrator. The amount of contributions made on behalf of a
participant or AEFC will be limited by the terms of the Plan and
applicable tax laws.
Any additional contributions in a Plan or IRA made on behalf of
participants or investors who already have a beneficial interest in
or related to an IDS Series D-1 Investment Certificate in the same
Plan or IRA will be added directly to that certificate, rather than
invested in a new certificate.
The Series D-1 certificate is offered only in connection with the
IDS Retirement Plan, the Career Distributors' Retirement Plan, the
IDS DVP Retirement Plan, the IDS Mutual Funds Profit Sharing Plan,
and the IRAs of persons who retire as full-time employees,
financial advisors or district managers of AEFC, its subsidiary
companies, and the IDS MUTUAL FUND GROUP and to affiliated
companies of IDSC. These Plans are for the exclusive benefit of
eligible employees and financial advisors of AEFC and its
subsidiary companies and the IDS MUTUAL FUND GROUP. Any Series D-1
certificate issued will be owned by and issued in the name of the
trustee or custodian of the IRA or Plan except that a certificate
issued in conjunction with CDRP will be issued in the name of AEFC.
PAGE 11
Participating employees and advisors have a beneficial interest in
or related to the applicable Series D-1 certificates but are not
the direct owners. The terms of a Plan, as interpreted by the
applicable Plan trustee, or AEFC in the case of CDRP, will
determine how a participant's individual account is administered.
These terms will likely differ in some aspects from those of the
Series D-1 certificate. The custodian or trustee may change the
ownership of any Series D-1 certificate issued to a participant in
a Plan in connection with an "in kind" distribution of benefits
from a Plan as described below. Any new custodian or trustee,
including any IRA custodian, will be responsible for contacting us
to change ownership.
Other IRAs or 401(k) Plan Accounts and Other Qualified Retirement
Accounts
Unless prohibited by your Plan, any Series D-1 certificate proceeds
distributed to an eligible participant in a qualifying
distribution, may be invested in an IRA or qualified retirement
plan. Transfer of proceeds of the Series D-1 certificate to an
IRA, or 401(k) plan account or other qualified retirement plan
account will be limited by Plan provisions and applicable federal
law. Federal tax laws may affect your ability to invest in certain
types of retirement accounts. You may wish to consult your tax
advisor or your local American Express Tax and Business Services
tax professional, where available, for further information.
In addition, under limited circumstances a Series D-1 certificate
may be transferred "in kind" to an IRA or qualified retirement
account. An "in kind" distribution will not reduce or extend the
certificate's maturity. If an "in kind" transfer is made, the
terms and conditions of the Series D-1 certificate apply to the IRA
or qualified retirement account as the holder of the certificate.
The terms of the Plan, as interpreted by the Plan trustee or
administrator, will determine how a participant's individual
account with the Plan is administered. These terms may differ from
the terms of the certificate. A Series D-1 certificate may only be
distributed "in kind" to an IRA or other qualified retirement
account. If you make a withdrawal from a qualified retirement plan
or IRA prior to age 59 1/2, you may be required to pay federal
early distribution penalty tax.
IDSC will withhold federal income taxes of 10% on IRA withdrawals
unless you tell us not to. IDSC is required to withhold federal
income taxes of 20% on most qualified plan distributions, unless
the distribution is directly rolled over to another qualified plan
or IRA. See your tax adviser to see how these rules apply to you
before you request a distribution from your plan or IRA.
Receiving Cash
The following sections briefly describe the limitations upon a
participant's ability to withdraw cash from the Series D-1
certificate. Any such withdrawal could take place after the
participant has taken an "in kind" distribution of the Series D-1
certificate.
PAGE 12
Federal Tax Limitations - The following briefly discusses certain
federal tax limitations on a participant's ability to take "in
kind" distributions. You may wish to consult your tax adviser or
your local American Express Tax and Business Services tax
professional, where available, for further information.
If a Series D-1 certificate is distributed to the beneficial owner
by the trustee or custodian of a plan qualified under Section
401(a) of the Internal Revenue Code of 1986 then, unless otherwise
elected by the trustee or custodian on a form satisfactory to IDSC:
1) the maturity date will be no later than the end of the taxable
year in which the later of the following occurs:
a) the beneficial owner attains age 70 1/2; or
b) distribution of the Series D-1 certificate is made to the
beneficial owner; and
2) the total value of the Series D-1 certificate will be paid out
in equal or substantially equal monthly, quarterly, semiannual
or annual payments over a specified period of time which does
not extend beyond the life expectancy (determined as of the
maturity date) or the joint and survivor life expectancy of
the beneficial owner and his/her spouse.
If the Series D-1 certificate is issued in connection with an
Individual Retirement Account (IRA) or other qualified Plan, (1)
the owner must elect a maturity date which is no later than the
taxable year in which he or she attains age 70 1/2, and (2) the
total value of the Series D-1 certificate will be paid out in equal
or substantially equal monthly, quarterly, semiannual or annual
payments over a specified period of time which does not extend
beyond the owner's life expectancy (determined as of the end of the
taxable year in which the owner attains age 70 1/2) or the joint
and survivor life expectancy of the owner and his/her spouse.
Except as noted above, each of the payout options described is
subject to the following general provisions governing payout
options.
'All election(s) must be made by written notice in a form
acceptable by IDSC. The election(s) will become effective on
the date(s) chosen.
'No election(s) can be made that will require IDSC to make any
payment later than 30 years from the date elected; and make
any term or periodic interest payment of less than $50.
'After the date of the elected payout option, the owner may
elect to receive all or part of the balance left under a
payout option. If done only in part, the balance may be left
under the elected option.
Payout Options - Any time after the issue date of the Series D-1
certificate if an "in kind" distribution has occurred, including at
the time of maturity, a payout option may be elected for all or any
part of a Plan investment. The payout options are described below.
PAGE 13
Payout options may be changed. The balance remaining in the
certificate will continue to accrue interest at the then current
rate; the amount transferred to an option will continue to accrue
interest at the then current option rate. The maturity date of the
balance will not be affected. Notwithstanding the provisions of
the payout options herein described, tax laws in effect at the time
a payout option is selected and plan provisions may limit the
availability of the option.
Withdrawals - Withdrawals can be made from the certificate. To do
so, a request must be submitted in a form acceptable to IDSC at the
address or phone number on the cover of this prospectus. If
proceeds from a full or partial surrender are received directly by
a participant and are not transferred to a trustee or custodian of
a qualified retirement plan, the participant may be penalized by
the IRS for this may be considered an early withdrawal.
Installment Payments - Installment payments of $50 or more may be
elected. The payment periods designated may be monthly, quarterly,
semiannually or annually over a period of more than two years but
less than thirty years, but also cannot exceed that permitted under
federal tax law. Payments will begin one payment period after the
effective date of the payout option. Depending on the size of the
payment selected, these payments may include both principal and
interest.
Periodic Interest Payments - Combined interest on the Series D-1
certificate may be paid in monthly, quarterly, semiannual or annual
payments of more than two years but less than thirty years provided
the payments are at least $50. The time period selected cannot
exceed that permitted under federal tax law.
Deferred Interest - At maturity or after any installment or
periodic interest payout plan has begun, all or part of the Series
D-1 certificate may be left with IDSC to continue to earn interest
for an additional period of years. The additional years elected
may not exceed the earlier of thirty years from the date of
maturity or date on which the participant reaches age 70 1/2.
At its option, IDSC may defer for not more than thirty days any
payment to which the participant may become entitled prior to the
Series D-1 certificate's maturity. IDSC will pay interest on the
amount deferred at the rate used in accumulating the reserves for
the Series D-1 certificate for any period of deferment. Any
payment by us also may be subject to other deferment as provided by
the rules, regulations or orders made by the Securities and
Exchange Commission.
At Maturity
If an "in kind" distribution has been taken, at the Series D-1
certificate's maturity, a check will be sent for the remaining
value of the certificate. Instead of receiving cash, the Deferred
Interest Option, or one of the payout options explained above may
be selected.
PAGE 14
Transferring Series D-1 Investment Certificate Ownership
When the Series D-1 certificate is owned by a trustee or custodian
of a Plan or IRA, the trustee or custodian may request a transfer
of the ownership of the Series D-1 certificate on the books of
IDSC. A transfer request must be in a form acceptable to the Plan
or the IRA custodian and to IDSC and received at IDSC's home
office.
Giving Us Instructions
We must receive proper notice in writing or by telephone of any
instructions regarding a certificate.
Proper written notice must:
'be addressed to our home office,
'include sufficient information for us to carry out the request,
and
'be signed and dated by all participant(s).
All amounts payable by us in connection with the Series D-1
certificate are payable at our home office unless we advise
otherwise.
To give us instructions by telephone, call the Client Service
Organization at the telephone numbers listed on the back cover
between 8 a.m. and 6 p.m. your local time.
INCOME AND TAXES
Tax Treatment of This Investment
Interest paid to the Series D-1 certificate is generally not
taxable until a participant begins to make withdrawals. For
further discussion of certain federal tax limitations, see page 9.
Rules regarding Plan distributions and other aspects of the Series
D-1 certificate are complicated. We recommend that participants
consult their own tax advisor or local American Express Tax and
Business Services tax professional, where available, to determine
how the rules may apply to their individual situation.
Withholding Taxes
According to federal tax laws, you must provide us with your
correct certified taxpayer identification number. This number is
your Social Security number. If you do not provide this number, we
may be required to withhold a portion of your interest income and
certain other payments, including distributions from a retirement
account or qualified plan. Be sure your correct taxpayer
identification number is provided.
If you supply an incorrect taxpayer identification number, the IRS
may assess a $50 penalty against you.
PAGE 15
How your money is used and protected
Invested and guaranteed by IDSC
The IDS Series D-1 Certificate is issued and guaranteed by IDSC, a
wholly owned subsidiary of AEFC. We are by far the largest issuer
of face amount certificates in the United States, with total assets
of more than $3.9 billion and a net worth in excess of $250 million
on Dec. 31, 1995.
We back our certificates by investing the money received and
keeping the invested assets on deposit. Our investments generate
interest and dividends, out of which we pay:
o interest to certificate holders
o various expenses, including taxes, fees to AEFC for advisory
and other services and distribution fees to American Express
Financial Advisors Inc.
For a review of significant events relating to our business, see
"Management's discussion and analysis of financial condition and
results of operations." Our certificates are not rated by a
national rating agency.
Most banks and thrifts offer investments known as certificates of
deposit that are similar to our certificates in many ways. Banks
and thrifts generally have federal deposit insurance for their
deposits and lend much of the deposited money to individuals,
businesses and other enterprises. Other financial institutions may
offer investments with comparable combinations of safety and return
on investment.
Regulated by government
Because the IDS Series D-1 Certificate is a security, its offer and
sale are subject to regulation under federal and state securities
laws. (It is a face amount certificate -- not a bank product, an
equity investment, a form of life insurance or an investment
trust.)
The federal Investment Company Act of 1940 requires us to keep
investments on deposit in a segregated custodial account to protect
all of our outstanding certificates. These investments back the
entire value of your certificate account. Their amortized cost
must exceed the required carrying value of the outstanding
certificates by at least $250,000. As of Dec. 31, 1995, the
amortized cost of these investments exceeded the required carrying
value of our outstanding certificates by more than $129 million.
Backed by our investments
Our investments are varied and of high quality. This was the
composition of our portfolio as of Dec. 31, 1995:
38% government agency bonds
34 corporate and other bonds
17 preferred stocks
6 mortgages
PAGE 16
3 municipal bonds
2 cash and cash equivalents
More than 96% of our securities portfolio (bonds and preferred
stocks) is rated investment grade. For additional information
regarding securities ratings, please refer to Note 3B in the
Financial Statements.
Most of our investments are on deposit with American Express Trust
Company (formerly IDS Trust Company), Minneapolis, although we also
maintain separate deposits as required by certain states. American
Express Trust Company is a wholly owned subsidiary of AEFC. Copies
of our Dec. 31, 1995 schedule of Investments in Securities of
Unaffiliated Issuers are available upon request. For comments
regarding the valuation, carrying values and unrealized
appreciation (depreciation) of investment securities, see Notes 1,
2 and 3 to the Financial Statements.
Investment policies
In deciding how to diversify the portfolio -- among what types of
investments in what amounts -- the officers and directors of IDSC
use their best judgment, subject to applicable law. The following
policies currently govern our investment decisions:
Purchasing securities on margin: We will not purchase any
securities on margin or participate on a joint basis or a joint-
and-several basis in any trading account in securities.
Commodities: We have not and do not intend to purchase or sell
commodities or commodity contracts.
Underwriting: We do not intend to engage in the public
distribution of securities issued by others. However, if we
purchase unregistered securities and later resell them, we may be
considered an underwriter under federal securities laws.
Borrowing money: From time to time we have established a line of
credit if management believed borrowing was necessary or desirable.
While a line of credit does not currently exist, it may be
established again in the future. We may pledge some of our assets
as security. We may occasionally use repurchase agreements as a
way to borrow money. Under these agreements, we sell debt
securities to our lender, and repurchase them at the sales price
plus an agreed-upon interest rate within a specified period of
time.
Real estate: We may invest directly in real estate, though we have
not generally done so in the past. We do invest in mortgage loans.
Lending securities: We may lend some of our securities to broker-
dealers and receive cash equal to the market value of the
securities as collateral. We invest this cash in short-term
securities. If the market value of the securities goes up, the
borrower pays us additional cash. During the course of the loan,
PAGE 17
the borrower makes cash payments to us equal to all interest,
dividends and other distributions paid on the loaned securities.
We will try to vote these securities if a major event affecting our
investment is under consideration.
When-issued securities: Most of our investments are in debt
securities, some of which are purchased on a when-issued basis. It
may take as long as 45 days or more before these securities are
issued and delivered to us. We generally do not pay for these
securities or start earning on them until delivery. We have
established procedures to ensure that sufficient cash is available
to meet when-issued commitments When-issued securities are subject
to market fluctuation and they may affect IDSC's investment
portfolio the same as owned securities.
Financials transactions: We buy or sell various types of options
contracts for hedging purposes or as a trading technique to
facilitate securities purchases or sales. We buy interest rate
caps for hedging purposes. These pay us a return if interest rates
rise above a specified level. IDSC may enter into other financial
transactions, including futures and other derivatives, for the
purpose of managing the interest rate exposures associated with
IDSC's assets or liabilities. Derivatives are financial
instruments whose performance is derived, at least in part, from
the performance of an underlying asset, security or index. A small
change in the value of the underlying asset, security or index may
cause a sizable gain or loss in the fair value of the derivative.
Illiquid securities: A security is illiquid if it cannot be sold
in the normal course of business within seven days at approximately
its current market value. Some investments cannot be resold to the
U.S. public because of their terms or government regulations. All
securities, however can be sold in private sales, and many may be
sold to other institutions and qualified buyers or on foreign
markets. IDSC's investment advisor will follow guidelines
established by the board and consider relevant factors such as the
nature of the security and the number of likely buyers when
determining whether a security is illiquid. No more than 15% of
IDSC's investment portfolio will be held in securities that are
illiquid. In valuing its investment portfolio to determine this
15% limit, IDSC will use statutory accounting under an SEC order.
This means that, for this purpose, the portfolio will be valued in
accordance with applicable Minnesota law governing investments of
life insurance companies, rather than generally accepted accounting
principles.
Restrictions: There are no restrictions on concentration of
investments in any particular industry or group of industries or on
rates of portfolio turnover.
How your certificate is managed
Relationship between IDSC and American Express Financial
Corporation
IDSC was originally organized as Investors Syndicate of America,
Inc., a Minnesota corporation, on Oct. 15, 1940, and began business
as an issuer of face amount investment certificates on Jan. 1,
PAGE 18
1941. The company became a Delaware corporation on Dec. 31, 1977,
and changed its name to IDS Certificate Company on April 2, 1984.
Before IDSC was created, AEFC, our parent company and organizer,
had issued similar certificates since 1894. IDSC and AEFC have
never failed to meet their certificate payments.
During its many years in operation, AEFC has become a leading
manager of investments in mortgages and securities. As of Dec. 31,
1995, AEFC managed investments, including its own, of more than
$129 billion. A wholly owned subsidiary, American Express
Financial Advisors provides a broad range of financial planning
services for individuals and businesses through its nationwide
network of more than 175 offices and more than 7800 financial
advisors. American Express Financial Advisors' financial planning
services are comprehensive, beginning with a detailed written
analysis that's tailored to your needs. Your analysis may address
one of all of these six essential areas: financial position,
protection planning, investment planning, income tax planning,
retirement planning and estate planning.
American Express Financial Advisors itself is a wholly owned
subsidiary of American Express, a financial services company with
executive offices at American Express Tower, World Financial
Center, New York, NY 10285.
American Express Financial Advisors Inc. is not a bank, and the
securities offered by it, such as face amount certificates issued
by IDSC, are not backed or guaranteed by any bank, nor are they
insured by the FDIC.
Capital structure and certificates issued
IDSC has authorized, issued and has outstanding 150,000 shares of
common stock, par value of $10 per share. AEFC owns all of the
outstanding shares.
As of Dec. 31, 1995, IDSC had issued (in face amount)
$13,074,792,382 of installment certificates and $14,769,642,620 of
single payment certificates.
Investment management and services
Under an Investment Advisory and Services Agreement, AEFC acts as
our investment advisor and is responsible for:
o providing investment research,
o making specific investment recommendations, and
o executing purchase and sale orders according to our policy of
obtaining the best price and execution.
All these activities are subject to direction and control by our
board of directors and officers. Our agreement with AEFC requires
annual renewal by our board, including a majority of directors who
are not interested persons of AEFC or IDSC as defined in the
federal Investment Company Act of 1940.
PAGE 19
For its services, we pay AEFC a monthly fee, equal on an annual
basis to a percentage of the total book value of certain assets
(included assets).
Advisory and services fee computation:
Percentage of total
Included assets book value
first $250 million 0.75%
next 250 million 0.65
next 250 million 0.55
next 250 million 0.50
any amount over 1 billion 0.45
Included assets are all assets of IDSC except mortgage loans, real
estate, and any other asset on which we pay an advisory or a
service fee.
Advisory and services fees for the past three years were:
Percentage of
Year Total fees included assets
1995 $16,472,458 0.50%
1994 $13,565,432 0.51%
1993 $15,036,091 0.50%
Estimated advisory and services fees for 1996 are $19,152,000.
Other expenses payable by IDSC: The Investment Advisory and
Services Agreement provides that we will pay:
o costs incurred by us in connection with real estate and
mortgages,
o taxes,
o depository and custodian fees,
o brokerage commissions,
o fees and expenses for services not covered by other agreements
and provided to us at our request, or by requirement, by
attorneys, auditors, examiners and professional consultants
who are not officers or employees of AEFC,
o fees and expenses of our directors who are not officers or
employees of AEFC,
o provision for certificate reserves (interest accrued on
certificate holder accounts), and
o expenses of customer settlements not attributable to any sales
function.
Distribution
IDSC does not have a distribution agreement or pay a distribution
fee for this certificate.
PAGE 20
Employment of other American Express affiliates
AEFC may employ another affiliate of American Express as executing
broker for our portfolio transactions only if:
o we receive prices and executions at least as favorable as those
offered by qualified independent brokers performing similar
services;
o the affiliate charges us commissions consistent with those
charged to comparable unaffiliated customers for similar
transactions; and
o the affiliate's employment is consistent with the terms of the
current Investment Advisory and Services Agreement and federal
securities laws.
Directors and officers
IDSC's directors, chairman, president and controller are elected
annually for a term of one year. The other executive officers are
appointed by the president.
We paid a total of $40,000 during 1995 to directors not employed by
IDS.
Board of directors
David R. Hubers*
Born in 1943. Director since 1987.
President and chief executive officer of AEFC since 1993. Senior
vice president and chief financial officer of AEFC from 1984 to
1993.
Charles W. Johnson
Born in 1929. Director since 1989.
Former vice president and group executive, Industrial Systems, with
Honeywell, Inc. Retired 1989.
Richard W. Kling*
Born in 1940. Director since 1996.
Chairman of the board of directors since 1996. Director of IDS
Life Insurance Company since 1984; president since 1994. Executive
vice president of Marketing and Products from 1988 to 1994. Senior
vice president of AEFC since 1994. Director of IDS Life Series
Fund, Inc. and member of the board of managers of IDS Life Variable
Annuity Funds A and B.
Edward Landes
Born in 1919. Director since 1984.
Development consultant. Former sales manager - Supplies Division
and district manager - Data Processing Division of IBM Corporation.
Retired 1983.
PAGE 21
John V. Luck Ph.D.
Born in 1926. Director since 1987.
Former senior vice president - Science and Technology with General
Mills, Inc. Employed with General Mills, Inc. since 1970. Retired
1987.
James A. Mitchell*
Born in 1941. Director since 1994.
Chairman of the board of directors from 1994 to 1996. Executive
vice president - marketing and products of AEFC since 1994. Senior
vice president - insurance operations of AEFC and president and
chief executive officer of IDS Life Insurance Company from 1986 to
1994.
Harrison Randolph
Born in 1916. Director since 1968.
Gordon H. Ritz
Born in 1926. Director since 1968.
President, Con Rad Broadcasting Corp. Director, Sunstar Foods and
Mid-America Publishing.
Stuart A. Sedlacek*
Born in 1957. Director since 1994.
President since 1994. Vice president - assured assets of AEFC
since 1994. Vice president and portfolio manager from 1988 to
1994. Executive vice president - assured assets of IDS Life
Insurance Company since 1994.
*"Interested Person" of IDSC as that term is defined in Investment
Company Act of 1940.
Executive officers
Stuart A. Sedlacek
Born in 1957. President since 1994.
Morris Goodwin Jr.
Born in 1951. Vice president and treasurer since 1989.
Vice president and corporate treasurer of AEFC since 1989. Chief
financial officer and treasurer of American Express Trust Company
from 1988 to 1989.
PAGE 22
Timothy S. Meehan
Born in 1957. Secretary since 1995.
Secretary of AEFC and American Express Financial Advisors Inc.
since 1995. Senior counsel to AEFC since 1995. Counsel from 1990
to 1995.
Lorraine R. Hart
Born in 1951. Vice president-investments since 1994.
Vice president - insurance investments of AEFC since 1989. Vice
president, investments of IDS Life Insurance Company since 1992.
Jay C. Hatlestad
Born in 1957. Vice president and controller of IDSC since 1994.
Manager of investment accounting of IDS Life Insurance Company from
1986 to 1994.
Bruce A. Kohn
Born in 1951. Vice president and general counsel since 1993.
Counsel to AEFC since 1992. Associate counsel from 1987 to 1992.
F. Dale Simmons
Born in 1937. Vice president - Real Estate Loan Management since
1993.
Vice president of AEFC since 1992. Senior portfolio manager of
AEFC since 1989. Assistant vice president from 1987 to 1992.
The officers and directors as a group beneficially own less than 1%
of the common stock of American Express Company.
IDSC has provisions in its bylaws relating to the indemnification
of its officers and directors against liability, as permitted by
law. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or
persons controlling the registrant pursuant to the foregoing
provisions, the registrant has been informed 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.
PAGE 23
Auditors
A firm of independent auditors audits our financial statements at
the close of each fiscal year (Dec. 31). Copies of our annual
financial statements (audited) and semiannual financial statements
(unaudited) are available to any certificate holder upon request.
Ernst & Young, LLP, Minneapolis, has audited the financial
statements for each of the years in the three-year period ended
Dec. 31, 1995. These statements are included in this prospectus.
Ernst & Young, LLP, is also the auditor for American Express, the
parent company of AEFC and IDSC.
PAGE 24
(Back cover of prospectus)
Quick telephone reference
Client Service Organization/Transaction Line
Withdrawals, transfers, inquiries
National/Minnesota: 800-437-3133
Mpls./St. Paul area: 612-671-3800
TTY Service
For the hearing impaired
800-846-4293
American Express Easy Access Line
Current rate information, account value, cash transactions
information (automated response, TouchtoneR phones only)
National/Minnesota: 800-272-4445
Mpls./St. Paul area: 612-671-1630
(AEFA LOGO)
IDS Series D-1 Investment Certificate
IDS Tower 10
Minneapolis, MN 55440-0010
PAGE 25
Summary of selected financial information
The following selected financial information has been derived from
the audited financial statements and should be read in conjunction
with those statements and the related notes to financial
statements. Also see Management's Discussion and Analysis of
Financial Condition and Results of Operations for additional
comments.
Year Ended Dec. 31, 1995 1994 1993 1992 1991
($ thousands)
Statement of Operations Data:
Investment income $256,913 $207,975 $236,859 $294,799 $351,970
Investment expenses 62,817 58,690 65,404 69,630 63,353
Net investment income before provision for
certificate reserves and income tax benefit 194,096 149,285 171,455 225,169 288,617
Net provision for certificate reserves 176,407 107,288 123,516 178,175 258,443
Net investment income before income taxes 17,689 41,997 47,939 46,994 30,174
Income tax benefit 9,097 2,663 3,365 11,666 20,537
Net investment income 26,786 44,660 51,304 58,660 50,711
Realized gain (loss) on investments - net:
Securities of unaffiliated issuers 452 (7,514) (9,870) (9,498) (129)
Other - unaffiliated (120) 1,638 (418) (500) (1,053)
Total gain (loss) on investments 332 (5,876) (10,288) (9,998) (1,182)
Income tax benefit (expense) (117) 2,047 4,617 - 402
Net realized gain (loss) on investments 215 (3,829) (5,671) (9,998) (780)
Net income - wholly owned subsidiary 373 241 120 3 139
Net income $27,374 $41,072 $45,753 $48,665 $50,070
Dividends declared:
Cash $- $40,200 $64,500 $83,750 $74,800
In-kind(a) - - - 64,558 25,466
Balance Sheet Data:
Total assets $3,912,131 $3,040,857 $2,951,405 $3,444,985 $3,971,583
Certificate loans 51,147 58,203 67,429 77,347 88,570
Certificate reserves 3,628,574 2,887,405 2,777,451 3,256,472 3,712,570
Stockholder's equity 250,307 141,852 161,138 179,885 223,820
IDS Certificate Company (IDSC) is 100% owned by American Express Financial Corporation (Parent).
(a) Consisted of an investment security at amortized cost in 1992 and a reduction in the note receivable from
Parent in 1991.
/TABLE
PAGE 26
Management's discussion and analysis of financial condition and
results of operations
Results of operations:
IDS Certificate Company's (IDSC) earnings are derived primarily
from the after-tax yield on invested assets less investment
expenses and interest credited on certificate reserve liabilities.
Changes in earnings' trends occur largely due to changes in the
rates of return on investments and the rates of interest credited
to certificate holder accounts and also, the mix of fully taxable
and tax-advantaged investments in the IDSC portfolio.
During the years 1992 and 1993, total assets and certificate
reserve liabilities decreased due to certificate maturities and
surrenders exceeding certificate sales. The excess of certificate
maturities and surrenders over certificate sales in 1992 and 1993
primarily reflected lower accrual rates declared by IDSC in those
years, which in turn, reflected lower interest rates available in
the marketplace.
During the years 1994 and 1995, total assets and certificate
reserves increased due to certificate sales exceeding certificate
maturities and surrenders. The excess of certificate sales over
certificate maturities and surrenders resulted primarily from
higher accrual rates declared by IDSC during the last six months of
1994 and the first six months of 1995, reflecting rising interest
rates in the marketplace. The increase in total assets in 1995
reflects also an increase of $81 million in net unrealized
appreciation on investment securities classified as available for
sale. The increase in total assets in 1994 was tempered by $23
million of net unrealized depreciation on investment securities
classified as available for sale, net of deferred taxes of $13
million.
1995 Compared to 1994:
Gross investment income increased 24% due primarily to a higher
average balance of invested assets and slightly higher investment
yields.
The 7.1% increase in investment expenses resulted primarily from
higher distribution fees due to higher sales of certificates that
provide for no deferral of those fees, and higher investment
advisory and services fee due to a higher asset base on which the
fee is calculated. These increases were partially offset by lower
amortization of the cost of options and interest rate caps. The
lower amortization of interest rate caps reflects the net of $1.7
million of accelerated amortization and $5.6 million higher
interest earned under the cap agreements.
Net provision for certificate reserves increased 65% reflecting a
higher average balance of certificate reserves and higher accrual
rates.
PAGE 27
The increase in income tax benefit resulted primarily from a
greater portion of net investment income before income tax benefit
being attributable to tax-advantaged income.
1994 Compared to 1993:
Gross investment income decreased 12% due primarily to a lower
average balance of invested assets and slightly lower investment
yields.
The 10% decrease in investment expenses resulted primarily from
lower amortization of the cost of interest rate caps and $2.3
million of interest earned under the cap agreements in 1994. Lower
amortization of deferred distribution fees, and lower investment
advisory and services fees due to a lower average asset base on
which the fee is calculated contributed also to the decrease in
investment expenses.
Net provision for certificate reserves decreased 13% reflecting
lower accrual rates during the first six months of the year and a
lower average balance of certificate reserves.
The decrease in income tax benefit resulted primarily from lower
tax-advantaged income.
Liquidity and cash flow:
IDSC's principal sources of cash are reserve payments from sales of
face-amount certificates and cash flows from investments. In turn,
IDSC's principal uses of cash are payments to certificate holders
for matured and surrendered certificates, purchase of investments
and payments of dividends to its Parent.
Certificate sales volume increased 38% in 1995, reflecting higher
accrual rates and clients' ongoing desire for safety of principal.
Sales of certificates totaled $1.5 billion compared to $1.1
billion in 1994 and $.6 billion during 1993. Certificate sales in
1995 benefitted also from a special introductory promotion of
IDSC's 11-month term Flexible Savings certificate.
The special promotion of the 11-month term Flexible Savings
certificate was offered from May 10, 1995 to July 3, 1995, and
applied only to sales of new certificate accounts during the
promotion period. Certificates sold during the promotion period
received a special interest rate of 7.0% for the 11-month term and
totaled $562 million.
IDSC, as an issuer of face-amount certificates, is affected
whenever there is a significant change in interest rates. In view
of the uncertainty in the investment markets and due to the
short-term repricing nature of certificate reserve liabilities,
IDSC continues to invest in securities that provide for more
immediate, periodic interest/principal payments, resulting in
improved liquidity. To accomplish this, IDSC continues to invest
much of its cash flow in mortgage-backed securities and
intermediate-term bonds.
PAGE 28
IDSC's investment program is designed to maintain an investment
portfolio that will produce the highest possible after-tax yield
within acceptable risk standards with additional emphasis on
liquidity. The program considers investment securities as
investments acquired to meet anticipated certificate holder
obligations.
Effective Jan.1, 1994, IDSC adopted Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities". Under the SFAS No.
115, debt securities that IDSC has both the positive intent and
ability to hold to maturity are carried at amortized cost. Debt
securities IDSC does not have the positive intent to hold to
maturity, as well as all marketable equity securities, are
classified as available for sale and carried at fair value. The
available-for-sale classification does not mean that IDSC expects
to sell these securities, but that under SFAS No. 115 positive
intent criteria, these securities are available to meet possible
liquidity needs should there be significant changes in market
interest rates or certificate holder demand. See notes 1 and 3 to
the financial statements for additional information relating to
SFAS No. 115.
At Dec. 31, 1995, securities classified as held to maturity and
carried at amortized cost were $1.0 billion. Securities
classified as available for sale and carried at fair value were
$2.4 billion. These securities, which comprise 90% of IDSC's total
invested assets, are well diversified. Of these securities, 97%
are of investment grade and, other than U.S. Government Agency
mortgage-backed securities, no one issuer represents more than 1%
of these securities. See note 3 to financial statements for
additional information on ratings and diversification.
During the year ended Dec. 31, 1995, investment securities,
primarily municipal bonds, with an amortized cost and fair value of
$112 million and $117 million, respectively, were reclassified from
held to maturity to available for sale. The reclassification was
made on Dec. 4, 1995, as a result of IDSC adopting the FASB Special
Report, "A Guide to Implementation of Statement 115 on Accounting
for Certain Investments in Debt and Equity Securities". There were
no other transfers of securities during the years 1995 and 1994.
Derivative financial instruments:
IDSC enters into transactions involving interest rate caps, and
purchased and written call options to manage its exposure to rising
interest rates. IDSC does not enter into such transactions for
trading purposes. There is a possibility that the value of these
instruments will change due to fluctuations in a factor from which
the instruments derive their values. IDSC is not subject to this
market risk because these instruments are largely used to hedge
such risks, and therefore, the cash flow and income effects of the
instruments are inverse to the effects of the underlying
transactions. See note 9 to financial statements for additional
information regarding derivative financial instruments.
PAGE 29
Capital contributions:
To maintain its regulatory capital requirements, IDSC received a
capital contribution from its Parent of $28.5 million in 1995.
Ratios:
The ratio of stockholder's equity, excluding net unrealized holding
gains and losses on investment securities, to total assets less
certificate loans and net unrealized holding gains and losses on
investment securities at Dec. 31, 1995 was 5.79% compared to 5.49%
in 1994. IDSC intends to manage this ratio to 5.0% in 1996, which
meets current regulatory requirements.
PAGE 30
Annual Financial Information
Report of Independent Auditors
The Board of Directors and Security Holders
IDS Certificate Company:
We have audited the accompanying balance sheets of IDS Certificate
Company, a wholly owned subsidiary of American Express Financial
Corporation, as of December 31, 1995 and 1994, and the related
statements of operations, stockholder's equity and cash flows for
each of the three years in the period ended December 31, 1995.
These financial statements are the responsibility of the management
of IDS Certificate Company. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. Our
procedures included confirmation of investments owned as of
December 31, 1995 and 1994 by correspondence with custodians and
brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of IDS
Certificate Company at December 31, 1995 and 1994, and the results
of its operations and its cash flows for each of the three years in
the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
As discussed in note 1 to the financial statements, IDS Certificate
Company changed its method of accounting for certain investments in
debt and equity securities in 1994.
ERNST & YOUNG LLP
Minneapolis, Minnesota
February 8, 1996
PAGE 31
IDS Certificate Company
Responsibility for Preparation of Financial Statements
The management of IDS Certificate Company (IDSC) is responsible for
the preparation and fair presentation of its financial statements.
The financial statements have been prepared in conformity with
generally accepted accounting principles appropriate in the
circumstances, and include amounts based on the best judgment of
management. IDSC's management is also responsible for the accuracy
and consistency of other financial information included in the
prospectus.
In recognition of its responsibility for the integrity and
objectivity of data in the financial statements, IDSC maintains a
system of internal control over financial reporting. The system
is designed to provide reasonable, but not absolute, assurance with
respect to the reliability of IDSC's financial statements. The
concept of reasonable assurance is based on the notion that the
cost of the internal control system should not exceed the benefits
derived.
The internal control system is founded on an ethical climate and
includes an organizational structure with clearly defined lines of
responsibility, policies and procedures, a Code of Conduct, and the
careful selection and training of employees. Internal auditors
monitor and assess the effectiveness of the internal control system
and report their findings to management throughout the year.
IDSC's independent auditors are engaged to express an opinion on
the year-end financial statements and, with the coordinated support
of the internal auditors, review the financial records and related
data and test the internal control system over financial reporting.
PAGE 32
Balance Sheets, Dec. 31,
Assets
Qualified Assets (note 2) 1995 1994
($ thousands)
Investments in unaffiliated issuers (notes 3, 4 and 10):
Cash and cash equivalents $56,873 $140,128
Held-to-maturity securities 1,002,905 1,245,793
Available-for-sale securities 2,408,491 1,226,674
First mortgage loans on real estate 233,394 253,968
Certificate loans - secured by certificate reserves 51,147 58,203
Investments in and advances to affiliates 5,655 5,399
Total investments 3,758,465 2,930,165
Receivables:
Dividends and interest 49,632 42,261
Investment securities sold 42,872 7,269
Total receivables 92,504 49,530
Other (notes 9 and 10) 32,778 25,094
Total qualified assets 3,883,747 3,004,789
Other Assets
Deferred distribution fees 28,286 27,142
Deferred federal income taxes (note 8) - 8,372
Other 98 554
Total other assets 28,384 36,068
Total assets $3,912,131 $3,040,857
See notes to financial statements.
PAGE 33
Balance Sheets, Dec. 31,
Liabilities and Stockholder's Equity
Liabilities 1995 1994
($ thousands)
Certificate Reserves (notes 5 and 10):
Installment certificates:
Reserves to mature $330,415 $335,712
Additional credits and accrued interest 21,555 19,698
Advance payments and accrued interest 1,394 1,634
Other 55 56
Fully paid certificates:
Reserves to mature 3,127,301 2,389,198
Additional credits and accrued interest 147,468 140,766
Due to unlocated certificate holders 386 341
Total certificate reserves 3,628,574 2,887,405
Accounts Payable and Accrued Liabilities:
Due to Parent (note 7A) 1,541 1,186
Due to Parent for federal income taxes 103 -
Due to affiliates (note 7B and 7C) 2,068 2,883
Payable for investment securities purchased - 1,362
Accounts payable, accrued expenses and other (notes 9 and 10) 12,249 6,169
Total accounts payable and accrued liabilities 15,961 11,600
Deferred federal income taxes (note 8) 17,289 -
Total liabilities 3,661,824 2,899,005
Stockholder's Equity (notes 5B, 5C, and 6):
Common stock, $10 par - authorized and issued 150,000 shares 1,500 1,500
Additional paid-in capital 168,844 140,344
Retained earnings:
Appropriated for predeclared additional credits/interest 18,878 18,398
Appropriated for additional interest on advance payments 50 50
Unappropriated 31,612 4,718
Unrealized holding gains (losses) on investment
securities - net (note 3A) 29,423 (23,158)
Total stockholder's equity 250,307 141,852
Total liabilities and stockholder's equity $3,912,131 $3,040,857
See notes to financial statements.
/TABLE
PAGE 34
Statements of Operations
Year ended Dec. 31, 1995 1994 1993
($ thousands)
Investment Income:
Interest income from investments:
Bonds and notes:
Unaffiliated issuers $181,902 $125,546 $140,991
Mortgage loans on real estate:
Unaffiliated 22,171 24,006 24,071
Affiliated 56 68 78
Certificate loans 2,963 3,342 3,882
Dividends 48,614 54,170 67,115
Other 1,207 843 722
Total investment income 256,913 207,975 236,859
Investment Expenses:
Parent and affiliated company fees (note 7):
Distribution 33,977 27,007 28,477
Investment advisory and services 16,472 13,565 15,036
Depositary 242 183 201
Options (note 9) 8,038 9,854 9,419
Interest rate caps (note 9) 3,725 7,608 11,667
Other 363 473 604
Total investment expenses 62,817 58,690 65,404
Net investment income before provision
for certificate reserves and income tax benefit $194,096 $149,285 $171,455
See notes to financial statements.
PAGE 35
Statements of Operations (continued)
Year ended Dec. 31, 1995 1994 1993
($ thousands)
Provision for Certificate Reserves (notes 5 and 9):
According to the terms of the certificates:
Provision for certificate reserves $11,009 $13,317 $20,555
Interest on additional credits 2,300 3,174 3,605
Interest on advance payments 73 61 90
Additional credits/interest authorized by IDSC:
On fully paid certificates 157,857 85,101 93,546
On installment certificates 6,288 6,741 6,704
Total provision before reserve recoveries 177,527 108,394 124,500
Reserve recoveries from terminations
prior to maturity (1,120) (1,106) (984)
Net provision for certificate reserves 176,407 107,288 123,516
Net investment income before income tax benefit 17,689 41,997 47,939
Income tax benefit (note 8) 9,097 2,663 3,365
Net investment income 26,786 44,660 51,304
Realized gain (loss) on investments - net:
Securities of unaffiliated issuers 452 (7,514) (9,870)
Other-unaffiliated (120) 1,638 (418)
Total gain (loss) on investments 332 (5,876) (10,288)
Income tax benefit (expense) (note 8):
Current 160 2,414 19,508
Deferred (277) (367) (14,891)
Total income tax benefit (expense) (117) 2,047 4,617
Net realized gain (loss) on investments 215 (3,829) (5,671)
Net income - wholly owned subsidiary 373 241 120
Net income $27,374 $41,072 $45,753
See notes to financial statements.
PAGE 36
Statements of Stockholder's Equity
Year ended Dec. 31, 1995 1994 1993
($ thousands)
Common Stock:
Balance at beginning and end of year $1,500 $1,500 $1,500
Additional Paid-in Capital:
Balance at beginning of year $140,344 $147,144 $166,144
Contribution from Parent 28,500 3,000 -
Cash dividends declared - (9,800) (19,000)
Balance at end of year $168,844 $140,344 $147,144
Retained Earnings:
Appropriated for predeclared additional credits/interest (note 5B):
Balance at beginning of year $18,398 $2,726 $2,804
Transferred from (to) unappropriated retained earnings 480 15,672 (78)
Balance at end of year $18,878 $18,398 $2,726
Appropriated for additional interest on advance payments (note 5C):
Balance at beginning of year $50 $25 $100
Transferred from (to) unappropriated retained earnings - 25 (75)
Balance at end of year $50 $50 $25
Unappropriated (note 6):
Balance at beginning of year $4,718 $9,743 $9,337
Net income 27,374 41,072 45,753
Transferred (to) from appropriated retained earnings (480) (15,697) 153
Cash dividends declared - (30,400) (45,500)
Balance at end of year $31,612 $4,718 $9,743
Unrealized holding gains and losses on investment securities -
net (notes 1 and 3A):
Balance at beginning of year ($23,158) $- $-
Adjustment due to initial application of SFAS 115 - 8,827 -
Change during year 52,581 (31,985) -
Balance at end of year $29,423 ($23,158) $-
Total stockholder's equity $250,307 $141,852 $161,138
See notes to financial statements.
PAGE 37
Statements of Cash Flows
Year ended Dec. 31, 1995 1994 1993
($ thousands)
Cash flows from operating activities:
Net income $27,374 $41,072 $45,753
Adjustments to reconcile net income to net
cash provided by operating activities:
Net income of wholly owned subsidiary (373) (241) (120)
Certificate reserves 176,407 107,288 123,516
Interest income added to certificate loans (1,902) (2,133) (2,454)
Amortization of premium/discount-net 19,232 22,114 27,494
Deferred federal income taxes (2,652) 4,263 11,446
Deferred distribution fees (1,144) (7,527) 1,935
Net (gain) loss on investments (332) 5,876 10,288
(Increase) decrease in dividends and interest receivable (7,371) (1,829) 10,009
(Increase) decrease in other assets 466 (466) 967
Increase (decrease) in other liabilities (1,549) (3,210) 4,979
Net cash provided by operating activities 208,156 165,207 233,813
Cash flows from investing activities:
Maturity and redemption of investments:
Held-to-maturity securities 315,766 350,411 641,778
Available-for-sale securities 325,521 173,547 -
Other investments 46,004 35,130 21,373
Sale of investments:
Held-to-maturity securities 22,305 3,164 329,942
Available-for-sale securities 48,372 267,808 -
Other investments 21 - 5,454
Certificate loan payments 6,061 7,508 8,991
Purchase of investments:
Held-to-maturity securities (208,140) (46,080) (498,841)
Available-for-sale securities (1,397,983) (830,826) -
Other investments (17,234) (9,208) (78,816)
Certificate loan fundings (7,776) (7,603) (10,275)
Investment in subsidiary - (450) (2,000)
Net cash (used in) provided by investing activities ($867,083) ($56,599) $417,606
See notes to financial statements.
PAGE 38
Statements of Cash Flows (continued)
Year ended Dec. 31, 1995 1994 1993
($ thousands)
Cash flows from financing activities:
Reserve payments by certificate holders $1,577,884 $1,185,762 $709,684
Proceeds from securities loaned to brokers - - 6,150
Proceeds from reverse repurchase agreements - - 72,800
Capital contribution from Parent 28,500 3,000 -
Certificate maturities and cash surrenders (1,030,712) (1,171,101) (1,312,260)
Payments to brokers upon return of securities loaned - - (7,793)
Payments under reverse repurchase agreements - - (72,800)
Dividends paid - (40,200) (64,500)
Net cash provided by (used in) financing activities 575,672 (22,539) (668,719)
Net increase (decrease) in cash and cash equivalents (83,255) 86,069 (17,300)
Cash and cash equivalents beginning of year 140,128 54,059 71,359
Cash and cash equivalents end of year $56,873 $140,128 $54,059
Supplemental disclosures including non-cash transactions:
Cash received for income taxes $6,854 $2,416 $26,606
Certificate maturities and surrenders through loan
reductions 10,673 11,454 13,656
See notes to financial statements.
PAGE 39
Notes to Financial Statements ($ in thousands unless indicated
otherwise)
1. Nature of business and summary of significant accounting
policies
Nature of business
IDS Certificate Company (IDSC) is a wholly owned subsidiary of
American Express Financial Corporation (Parent), which is a wholly
owned subsidiary of American Express Company. IDSC is registered
as an investment company under the Investment Company Act of 1940
("the 1940 Act") and is in the business of issuing face-amount
investment certificates. The certificates issued by IDSC are not
insured by any government agency. IDSC's certificates are sold
primarily by American Express Financial Advisors Inc.'s (an
affiliate) field force operating in 50 states, the District of
Columbia and Puerto Rico. IDSC's Parent acts as investment advisor
for IDSC.
IDSC currently offers eight types of certificates with specified
maturities ranging from four to twenty years. Within their
specified maturity, most certificates have interest rate terms of
one to thirty-six months. In addition, one type of certificate has
interest tied, in whole or in part, to any upward movement in a
broad-based stock market index. Except for two types of
certificates, all of the certificates are available as qualified
investments for Individual Retirement Accounts or 401(k) plans and
other qualified retirement plans.
IDSC's gross income is derived primarily from interest and
dividends generated by its investments. IDSC's net income is
determined by deducting from such gross income its provision for
certificate reserves, and other expenses, including taxes, the fee
paid to Parent for investment advisory and other services, and the
distribution fees paid to American Express Financial Advisors Inc.
Described below are certain accounting policies that are important
to an understanding of the accompanying financial statements.
Basis of financial statement presentation
The accompanying financial statements are presented in accordance
with generally accepted accounting principles. IDSC uses the
equity method of accounting for its wholly owned unconsolidated
subsidiary, which is the method prescribed by the Securities and
Exchange Commission (SEC) for issuers of face-amount certificates.
Certain amounts from prior years have been reclassified to conform
to the current year presentation.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities and the reported amounts of income and expenses during
the year then ended. Actual results could differ from those
estimates.
PAGE 40
Fair values of financial instruments
The fair values of financial instruments disclosed in the notes to
financial statements are estimates based upon current market
conditions and perceived risks, and require varying degrees of
management judgment.
Preferred stock dividend income
IDSC recognizes dividend income from cumulative redeemable
preferred stocks with fixed maturity amounts on an accrual basis
similar to that used for recognizing interest income on debt
securities.
Securities
Cash equivalents are carried at amortized cost, which approximates
fair value. IDSC has defined cash and cash equivalents as cash in
banks and highly liquid investments with a maturity of three months
or less at acquisition and are not interest rate sensitive.
Debt securities that IDSC has both the positive intent and ability
to hold to maturity are carried at amortized cost. Debt securities
IDSC does not have the positive intent to hold to maturity, as well
as all marketable equity securities, are classified as available
for sale and carried at fair value. Unrealized holding gains and
losses on securities classified as available for sale are carried,
net of deferred income taxes, as a separate component of
stockholder's equity.
The basis for determining cost in computing realized gains and
losses on securities is specific identification. When there is a
decline in value that is other than temporary, the securities are
carried at estimated realizable value with the amount of adjustment
included in income.
First mortgage loans on real estate
Mortgage loans are carried at amortized cost, less reserves for
losses, which is the basis for determining any realized gains or
losses.
Certificates
Investment certificates may be purchased either with a lump-sum
payment or by installment payments. Certificate holders are
entitled to receive at maturity a definite sum of money. Payments
from certificate holders are credited to investment certificate
reserves. Investment certificate reserves accumulate at specified
percentage rates. Reserves also are maintained for advance
payments made by certificate holders, accrued interest thereon, and
for additional credits and accrued interest thereon. On
certificates allowing for the deduction of a surrender charge, the
cash surrender values may be less than accumulated investment
certificate reserves prior to maturity dates. Cash surrender
values on certificates allowing for no surrender charge are equal
PAGE 41
to certificate reserves. The payment distribution, reserve
accumulation rates, cash surrender values, reserve values and other
matters are governed by the 1940 Act.
Deferred distribution fee expense
On certain series of certificates, distribution fees are deferred
and amortized over the estimated lives of the related certificates,
which is approximately 10 years. Upon surrender, unamortized
deferred distribution fees are charged against income.
Federal income taxes
IDSC's taxable income or loss is included in the consolidated
federal income tax return of American Express Company. IDSC
provides for income taxes on a separate return basis, except that,
under an agreement between Parent and American Express Company, tax
benefits are recognized for losses to the extent they can be used
in the consolidated return. It is the policy of Parent and its
subsidiaries that Parent will reimburse a subsidiary for any tax
benefits recorded.
2. Deposit of assets and maintenance of qualified assets
A) Under the provisions of its certificates and the 1940 Act, IDSC
was required to have qualified assets (as that term is defined in
Section 28(b) of the 1940 Act) in the amount of $3,619,188 and
$2,895,226 at Dec. 31, 1995 and 1994, respectively. IDSC had
qualified assets of $3,838,482 at Dec. 31, 1995 and $3,040,416 at
Dec. 31, 1994, excluding net unrealized appreciation on
available-for-sale securities of $45,265 at Dec. 31, 1995 and net
unrealized depreciation of $35,627 at Dec. 31, 1994.
Qualified assets are valued in accordance with such provisions of
Minnesota Statutes as are applicable to investments of life
insurance companies. Qualified assets for which no provision for
valuation is made in such statutes are valued in accordance with
rules, regulations or orders prescribed by the SEC. These values
are the same as financial statement carrying values, except for
debt securities classified as available for sale and all marketable
equity securities, which are carried at fair value in the financial
statements but are valued at amortized cost for qualified asset and
deposit maintenance purposes.
B) Pursuant to provisions of the certificates, the 1940 Act, the
central depositary agreement and to requirements of various states,
qualified assets of IDSC were deposited as follows:
PAGE 42
Dec. 31, 1995
Required
Deposits deposits Excess
Deposits to meet certificate
liability requirements:
States $414 $384 $30
Central Depositary 3,678,295 3,548,334 129,961
Total $3,678,709 $3,548,718 $129,991
Dec. 31, 1994
Required
Deposits deposits Excess
Deposits to meet certificate
liability requirements:
States $417 $388 $29
Central Depositary 2,939,538 2,817,716 121,822
Total $2,939,955 $2,818,104 $121,851
The assets on deposit at Dec. 31, 1995 and 1994 consisted of
securities having a deposit value of $3,435,074 and $2,659,676,
respectively; mortgage loans of $229,554 and $252,263,
respectively; and other assets of $14,081 and $28,016,
respectively. Mortgage loans on deposit include an affiliated
mortgage loan.
American Express Trust Company is the central depositary for IDSC.
See note 7C.
3. Investments in securities
A) Fair values of investments in securities represent market
prices and estimated fair values when quoted prices are not
available. Estimated fair values are determined by IDSC using
established procedures, involving review of market indexes, price
levels of current offerings and comparable issues, price estimates
and market data from independent brokers and financial files. The
procedures are reviewed annually. IDSC's vice president -
investments reports to the board of directors on an annual basis
regarding such pricing sources and procedures to provide assurance
that fair value is being achieved.
The following is a summary of securities held to maturity and
securities available for sale at Dec. 31, 1995 and Dec. 31, 1994.
PAGE 43
Dec. 31, 1995
Gross Gross
Amortized Fair unrealized unrealized
cost value gains losses
HELD TO MATURITY
U.S. Government and agencies obligations $415 $427 $12 $-
Mortgage-backed securities 54,477 55,708 1,234 3
Corporate debt securities 333,861 348,860 15,029 30
Stated maturity preferred stock 614,152 643,436 30,072 788
$1,002,905 $1,048,431 $46,347 $821
AVAILABLE FOR SALE
Mortgage-backed securities $1,321,051 $1,340,956 $21,349 $1,444
State and municipal obligations 101,399 105,680 4,281 -
Corporate debt securities 918,792 939,878 22,638 1,552
Stated maturity preferred stock 21,229 21,365 192 56
Common stock 755 612 - 143
$2,363,226 $2,408,491 $48,460 $3,195
Dec. 31, 1994
Gross Gross
Amortized Fair unrealized unrealized
cost value gains losses
HELD TO MATURITY
U.S. Government and agencies obligations $417 $417 $1 $1
Mortgage-backed securities 65,101 66,329 1,251 23
State and municipal obligations 145,205 150,856 5,659 8
Corporate debt securities 405,716 408,087 5,683 3,312
Foreign government bonds and obligations 10,048 10,065 17 -
Stated maturity preferred stock 619,306 616,655 10,201 12,852
$1,245,793 $1,252,409 $22,812 $16,196
AVAILABLE FOR SALE
Mortgage-backed securities $745,513 $724,276 $1,079 $22,316
Corporate debt securities 487,799 473,865 460 14,394
Stated maturity preferred stock 28,234 27,894 50 390
Common stock 755 639 - 116
$1,262,301 $1,226,674 $1,589 $37,216
The amortized cost and fair value of securities held to maturity
and available for sale, by contractual maturity, at Dec. 31, 1995,
are shown below. Cash flows will differ from contractual
maturities because issuers may have the right to call or prepay
obligations.
Amortized Fair
cost value
HELD TO MATURITY
Due within 1 year $94,577 $95,440
Due after 1 through 5 years 388,529 407,994
Due after 5 years through 10 years 269,579 283,685
Due after 10 years 195,743 205,604
948,428 992,723
Mortgage-backed securities 54,477 55,708
$1,002,905 $1,048,431
AVAILABLE FOR SALE
Due within 1 year $146,731 $148,072
Due after 1 through 5 years 746,470 765,480
Due after 5 years through 10 years 38,433 41,945
Due after 10 years 109,786 111,426
1,041,420 1,066,923
Mortgage-backed securities 1,321,051 1,340,956
Common stock 755 612
$2,363,226 $2,408,491
/TABLE
PAGE 44
During the years ended Dec. 31, 1995 and 1994, there were no
securities classified as trading securities.
The proceeds from sales of available-for-sale securities and the
gross realized gains and gross realized losses on those sales
during the years ended Dec. 31, 1995 and 1994, were as follows:
1995 1994
Proceeds $83,970 $265,008
Gross realized gains 36 363
Gross realized losses 1,854 10,140
Sales of held-to-maturity securities, due to significant credit
deterioration, during the years ended Dec. 31, 1995 and 1994, were
as follows:
1995 1994
Amortized cost $22,782 $3,158
Gross realized gains 2 5
Gross realized losses 479 -
During the year ended Dec. 31, 1995, securities with an amortized
cost and fair value of $111,967 and $116,882, respectively, were
reclassified from held to maturity to available for sale. The
reclassification was made on Dec. 4, 1995, as a result of IDSC
adopting the FASB Special Report, "A Guide to Implementation of
Statement 115 on Accounting for Certain Investments in Debt and
Equity Securities."
B) Investments in securities with fixed maturities comprised 90%
and 84% of IDSC's total invested assets at Dec. 31, 1995 and 1994,
respectively. Securities are rated by Moody's and Standard & Poors
(S&P), or by Parent's internal analysts, using criteria similar to
Moody's and S&P, when a public rating does not exist. A summary of
investments in securities with fixed maturities by rating of
investment is as follows:
Rating 1995 1994
Aaa/AAA 44% 36%
Aa/AA 2 5
Aa/A 2 3
A/A 23 25
A/BBB 6 3
Baa/BBB 20 24
Below investment grade 3 4
100% 100%
Of the securities rated Aaa/AAA, 92% at Dec. 31, 1995 and 88% at
Dec. 31, 1994 are U.S. Government Agency mortgage-backed securities
that are not rated by a public rating agency. Approximately 11% at
Dec. 31, 1995 and 17% at Dec. 31, 1994 of other securities with
fixed maturities are rated by Parent's internal analysts. At Dec.
PAGE 45
31, 1995 and 1994 no one issuer, other than U.S. Government Agency
mortgage-backed securities, is greater than 1% of IDSC's total
investment in securities with fixed maturities.
C) IDSC reserves freedom of action with respect to its acquisition
of restricted securities that offer advantageous and desirable
investment opportunities. In a private negotiation, IDSC may
purchase for its portfolio all or part of an issue of restricted
securities. Since IDSC would intend to purchase such securities
for investment and not for distribution, it would not be acting as
a distributor if such securities are resold by IDSC at a later
date.
The fair values of restricted securities are determined by the
board of directors using the procedures and factors described in
paragraph A of note 3.
In the event IDSC were to be deemed to be a distributor of the
restricted securities, it is possible that IDSC would be required
to bear the costs of registering those securities under the
Securities Act of 1933, although in most cases such costs would be
borne by the issuer of the restricted securities.
4. Investments in first mortgage loans on real estate
As of Jan. 1, 1995, IDSC adopted Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a
Loan" (SFAS No. 114), as amended by Statement of Financial
Accounting Standards No. 118, "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosures" (SFAS
No. 118). The adoption of the new rules did not have a material
impact on IDSC's results of operations or financial condition.
SFAS No. 114 applies to all loans except for smaller-balance
homogeneous loans that are collectively evaluated for impairment.
Impairment is measured as the excess of the loan's recorded
investment over its present value of expected principal and
interest payments discounted at the loan's effective interest rate,
or the fair value of collateral. The amount of the impairment is
recorded in a reserve for loss on mortgage loans.
Based on management's judgment as to the ultimate collectibility of
principal, interest payments received are either recognized as
income or applied to the recorded investment in the loan until it
has been recovered.
The reserve for loss on mortgage loans is maintained at a level
that management believes is appropriate to absorb estimated credit
losses in the mortgage loan portfolio. The level of the reserve
account is determined based on several factors, including
historical experience, expected future principal and interest
payments, estimated collateral values, and current and anticipated
economic and political conditions. Management regularly evaluates
the adequacy of the reserve for loss on mortgage loans.
At Dec. 31, 1995, IDSC's recorded investment in impaired mortgage
loans was $1,004 and the reserve for loss on that amount was $611.
PAGE 46
During 1995, the average recorded investment in impaired mortgage
loans was $1,052.
IDSC recognized $53 of interest income related to impaired mortgage
loans for the year ended Dec. 31, 1995.
There were no changes in the reserve for loss on mortgage loans of
$611 during the year ended Dec. 31, 1995.
At Dec. 31, 1995 and 1994, approximately 6% and 9%, respectively,
of IDSC's invested assets were first mortgage loans on real estate.
A summary of first mortgage loans by region and by type of real
estate is as follows:
Region 1995 1994
East North Central 22% 25%
South Atlantic 22 24
West North Central 19 18
Middle Atlantic 17 16
Mountain 9 6
West South Central 5 5
Pacific 3 3
New England 3 3
100% 100%
Property Type 1995 1994
Apartments 39% 41%
Retail/shopping centers 32 30
Industrial buildings 12 12
Office buildings 8 8
Retirement homes 1 1
Other 8 8
100% 100%
The carrying amounts and fair values of first mortgage loans on
real estate are as follows at Dec. 31. The fair values are
estimated using discounted cash flow analysis, using market
interest rates currently being offered for loans with similar terms
to borrowers of similar credit quality.
Dec. 31, 1995 Dec. 31, 1994
Carrying Fair Carrying Fair
amount value amount value
Commercial $234,005 $248,860 $254,531 $246,874
Residential - - 48 43
234,005 248,860 254,579 246,917
Reserve for losses (611) - (611) -
Net first mortgage loans on real estate $233,394 $248,860 $253,968 $246,917
At Dec. 31, 1995 and 1994, there were no commitments for fundings
of first mortgage loans. If there were any commitments, IDSC
employs policies and procedures to ensure the creditworthiness of
the borrowers and that funds will be available on the funding date.
IDSC's first mortgage loan fundings are restricted to 75% or less
of the market value of the real estate at the time of the loan
funding.
PAGE 47
5. Certificate reserves
Reserves maintained on outstanding certificates have been computed
in accordance with the provisions of the certificates and Section
28 of the 1940 Act. The average rates of accumulation on
certificate reserves at Dec. 31, 1995 and 1994 were:
1995
Average Average
Reserve gross additional
balance accumulation credit
at Dec. 31 rate rate
Installment certificates:
Reserves to mature:
With guaranteed rates $40,232 3.50% 1.35%
Without guaranteed rates (A) 290,183 - 3.23
Additional credits and accrued interest 21,555 3.13 -
Advance payments and accrued interest (C) 1,394 3.13 1.72
Other 55 - -
Fully paid certificates:
Reserves to mature:
With guaranteed rates 210,365 3.24 1.85
Without guaranteed rates (A) and (D) 2,916,936 - 5.70
Additional credits and accrued interest 147,468 3.26 -
Due to unlocated certificate holders 386 - -
$3,628,574
1994
Average Average
Reserve gross additional
balance accumulation credit
at Dec. 31 rate rate
Installment certificates:
Reserves to mature:
With guaranteed rates $49,278 3.49% 1.51%
Without guaranteed rates (A) 286,434 - 2.97
Additional credits and accrued interest 19,698 3.11 -
Advance payments and accrued interest 1,634 3.08 1.92
Other 56 - -
Fully paid certificates:
Reserves to mature:
With guaranteed rates 234,822 3.25 1.09
Without guaranteed rates (A) and (D) 2,154,376 - 4.81
Additional credits and accrued interest 140,766 3.35 -
Due to unlocated certificate holders 341 - -
$2,887,405
A) There is no minimum rate of accrual on these reserves.
Interest is declared periodically, quarterly or annually, in
accordance with the terms of the separate series of certificates.
B) On certain series of single payment certificates, additional
interest is predeclared for periods greater than one year. At Dec.
31, 1995, $18,878 of retained earnings had been appropriated for
the predeclared additional interest, which represents the
difference between certificate reserves on these series, calculated
on a statutory basis, and the reserves maintained per books.
C) Certain series of installment certificates guarantee accrual of
interest on advance payments at an average of 3.13%. IDSC has
increased the rate of accrual to 4.85% through April 30, 1997. An
appropriation of retained earnings amounting to $50 has been made,
which represents the estimated additional accrual that will result
from the increase granted by IDSC.
PAGE 48
D) IDS Stock Market Certificate enables the certificate holder to
participate in any relative rise in a major stock market index
without risking loss of principal. Generally the certificate has a
term of 12 months and may continue for up to 14 successive terms.
The reserve balance at Dec. 31, 1995 and 1994 was $211,093 and
$263,494, respectively.
E) The carrying amounts and fair values of certificate reserves
consisted of the following at Dec. 31, 1995 and 1994. Fair values
of certificate reserves with interest rate terms of one year or
less approximated the carrying values less any applicable surrender
charges.
The fair values for other certificate reserves are determined by a
discounted cash flow analysis using interest rates currently
offered for certificates with similar remaining terms, less any
applicable surrender charges.
1995 1994
Carrying Fair Carrying Fair
amount value amount value
Reserves with terms of one year or less $2,900,947 $2,899,542 $2,425,880 $2,415,970
Other 727,627 765,110 461,525 461,060
Total certificate reserves 3,628,574 3,664,652 2,887,405 2,877,030
Unapplied certificate transactions 1,545 1,545 2,671 2,671
Certificate loans and accrued interest (51,707) (51,707) (58,840) (58,840)
Total $3,578,412 $3,614,490 $2,831,236 $2,820,861
6. Dividend restriction
Certain series of installment certificates outstanding provide that
cash dividends may be paid by IDSC only in calendar years for which
additional credits of at least one-half of 1% on such series of
certificates have been authorized by IDSC. This restriction has
been removed for 1996 and 1997 by action of IDSC on additional
credits in excess of this requirement.
7. Fees paid to Parent and affiliated companies ($ not in
thousands)
A) The basis of computing fees paid or payable to Parent for
investment advisory and services is:
The investment advisory and services agreement with Parent provides
for a graduated scale of fees equal on an annual basis to 0.75% on
the first $250 million of total book value of assets of IDSC, 0.65%
on the next $250 million, 0.55% on the next $250 million, 0.50% on
the next $250 million and 0.45% on the amount in excess of $1
billion. The fee is payable monthly in an amount equal to
one-twelfth of each of the percentages set forth above. Excluded
from assets for purposes of this computation are first mortgage
loans, real estate and any other asset on which IDSC pays a service
fee.
B) The basis of computing fees paid or payable to American Express
Financial Advisors Inc. (an affiliate) for distribution services
is:
PAGE 49
Fees payable to American Express Financial Advisors Inc. on sales
of IDSC's certificates are based upon terms of agreements giving
American Express Financial Advisors Inc. the exclusive right to
distribute the certificates covered under the agreements. The
agreements provide for payment of fees over a period of time. The
aggregate fees payable under the agreements per $1,000 face amount
of installment certificates and $1,000 purchase price of single
payments, and a summary of the periods over which the fees are
payable, shown by series are:
Number of
certificate
years over
Aggregate fees payable which
subsequent
First Subsequent years' fees
Total year years are payable
Installment certificates(a) $30.00 $ 6.00 $24.00 4
Single-payment certificates 60.00 60.00 - -
Future Value certificates 50.00 50.00 - -
Fees on Cash Reserve and Flexible Savings (formerly Variable Term)
certificates are paid at a rate of 0.25% of the purchase price at
the time of issuance and 0.25% of the reserves maintained for these
certificates at the beginning of the second and subsequent quarters
from issue date.
Fees on the Investors Certificate are paid at an annualized rate of
1% of the reserves maintained for the certificates. Fees are paid
at the end of each term on certificates with a one, two or
three-month term. Fees are paid each quarter from date of issuance
on certificates with a six, 12, 24 or 36-month term.
Fees on the Stock Market Certificate are paid at a rate of 1.25% of
the purchase price on the first day of the certificate's term and
1.25% of the reserves maintained for these certificates at the
beginning of each subsequent term.
(a) At the end of the sixth through the 10th year, an additional
fee is payable of 0.5% of the daily average balance of the
certificate reserve maintained during the sixth through the 10th
year, respectively.
C) The basis of computing depositary fees paid or payable to
American Express Trust Company (an affiliate) is:
Maintenance charge per account 5 cents per $1,000 of assets on deposit
Transaction charge $20 per transaction
Security loan activity:
Depositary Trust Company
receive/deliver $20 per transaction
Physical receive/deliver $25 per transaction
Exchange collateral $15 per transaction
A transaction consists of the receipt or withdrawal of securities
and commercial paper and/or a change in the security position. The
charges are payable quarterly except for maintenance, which is an
annual fee.
PAGE 50
D) The basis for computing fees paid or payable to American
Express Bank Ltd. (an affiliate) for the distribution of the IDS
Special Deposits certificate on an annualized basis is:
1.25% of the reserves maintained for the certificates on an amount
from $100,000 to $249,000, 0.80% on an amount from $250,000 to
$499,000, 0.65% on an amount from $500,000 to $999,000 and
0.50% on an amount $1,000,000 or more. Fees are paid at the end of
each term on certificates with a one, two or three-month term.
Fees are paid at the end of each quarter from date of issuance on
certificates with a six, 12, 24 or 36-month term.
8. Income taxes
Income tax expense (benefit) as shown in the statement of
operations for the three years ended Dec. 31, consists of:
1995 1994 1993
Federal:
Current ($6,285) ($8,743) ($19,777)
Deferred (2,652) 3,933 11,446
(8,937) (4,810) (8,331)
State (43) 100 349
($8,980) ($4,710) ($7,982)
Income tax expense (benefit) differs from that computed by using
the U.S. Statutory rate of 35%. The principal causes of the
difference in each year are shown below:
1995 1994 1993
Federal tax expense at U.S. statutory rate $6,307 $12,642 $13,178
Tax-exempt interest (3,339) (4,205) (4,929)
Dividend exclusion (12,166) (13,862) (17,326)
Change in statutory rates - - (406)
Other, net 261 615 1,152
Federal tax benefit ($8,937) ($4,810) ($8,331)
Deferred income taxes result from the net tax effects of temporary
differences. Temporary differences are differences between the
tax bases of assets and liabilities and their reported amounts in
the financial statements that will result in differences between
income for tax purposes and income for financial statement purposes
in future years. Principal components of IDSC's deferred tax
assets and liabilities as of Dec. 31, are as follows.
1995 1994
Deferred tax assets:
Certificate reserves $10,312 $4,315
Investment unrealized losses - 12,470
Investments 348 1,390
Investment reserves 843 1,120
Purchased/written call options - 283
Total deferred tax assets $11,503 $19,578
PAGE 51
1995 1994
Deferred tax liabilities:
Investment unrealized gains $15,843 $-
Deferred distribution fees 9,900 9,500
Dividends receivable 892 1,000
Return of capital dividends 305 508
Purchased/written call options 1,623 -
Other, net 229 198
Total deferred tax liabilities 28,792 11,206
Net deferred tax assets (liabilities) ($17,289) $8,372
9. Derivative financial instruments
IDSC enters into transactions involving derivative financial
instruments as an end user (nontrading). IDSC uses these
instruments to manage its exposure to interest rate risk, including
hedging specific transactions. IDSC manages risks associated with
these instruments as described below.
Market risk is the possibility that the value of the derivative
financial instrument will change due to fluctuations in a factor
from which the instrument derives its value, primarily an interest
rate or a major market index. IDSC is not impacted by market risk
related to derivatives held because derivatives are largely used to
manage risk and, therefore, the cash flows and income effects of
the derivatives are inverse to the effects of the underlying hedged
transactions.
Credit exposure is the possibility that the counterparty will not
fulfill the terms of the contract. IDSC monitors credit exposure
related to derivative financial instruments through established
approval procedures, including setting concentration limits by
counterparty, reviewing credit ratings and requiring collateral
where appropriate. The majority of IDSC's counterparties to the
interest rate caps are rated A or better by nationally recognized
rating agencies. The counterparties to the call options are five
major broker/dealers.
The notional or contract amount of a derivative financial
instrument is generally used to calculate the cash flows that are
received or paid over the life of the agreement. Notional amounts
do not represent market risk or credit exposure and are not
recorded on the balance sheet.
Credit exposure related to derivative financial instruments is
measured by the replacement cost of those contracts at the balance
sheet date. The replacement cost represents the fair value of the
instrument, and is determined by market values, dealer quotes or
pricing models.
IDSC's holdings of derivative financial instruments were as follows
at Dec. 31, 1995 and 1994.
PAGE 52
1995
Notional Total
or contract Carrying Fair credit
amount value value exposure
Assets:
Interest rate caps $970,000 $3,362 $2,128 $2,128
Purchased call options 152,406 27,138 24,161 24,161
Total $1,122,406 $30,500 $26,289 $26,289
Liabilities:
Written call options $157,951 $9,333 $10,394 $-
1994
Notional Total
or contract Carrying Fair credit
amount value value exposure
Assets:
Interest rate caps $1,020,000 $14,946 $24,727 $24,727
Purchased call options 191,496 7,770 8,886 8,886
Total $1,211,496 $22,716 $33,613 $33,613
Liabilities:
Written call options $189,443 $2,070 $1,779 $-
The fair values of derivative financial instruments are based on
market values, dealer quotes or pricing models. The interest rate
caps expire on various dates from 1996 to 1997. The options expire
in 1996.
Interest rate caps and options are used to manage IDSC's exposure
to rising interest rates. These instruments are used primarily to
protect the margin between the interest rate earned on investments
and the interest rate accrued to related investment certificate
holders.
The interest rate caps are quarterly reset caps and IDSC earns
interest on the notional amount to the extent the London Interbank
Offering Rate exceeds the reference rates specified in the cap
agreements. These reference rates range from 4% to 9%. The cost
of these caps of $3,362 at Dec. 31, 1995 is being amortized over
the terms of the agreements on a straight line basis and is
included in other qualified assets. The amortization, net of any
interest earned, is included in investment expenses.
IDSC offers a series of certificates which pay interest based upon
the relative change in a major stock market index between the
beginning and end of the certificates' term. The certificate
holders have the option of participating in the full amount of
increase in the index during the term (subject to a specified
maximum) or a lesser percentage of the increase plus a guaranteed
minimum rate of interest. As a means of hedging its obligations
under the provisions of these certificates, IDSC purchases and
writes call options on the major market index. The options are
cash settlement options, that is, there is no underlying security
to deliver at the time the contract is closed out.
PAGE 53
The option contracts are less than one year in term. The premiums
paid or received on these index options are reported in other
qualified assets or other liabilities, as appropriate, and are
amortized into investment expenses over the life of the option.
The intrinsic value of these index options is also reported in
other qualified assets or other liabilities, as appropriate. The
unrealized gains and losses related to the changes in the intrinsic
value of these options are recognized currently in provision for
certificate reserves.
Following is a summary of open option contracts at Dec. 31, 1995
and 1994.
1995
Face Average Index at
amount strike price Dec. 31,1995
Purchased call options $152,406 539 616
Written call options 157,951 601 616
1994
Face Average Index at
amount strike price Dec. 31,1995
Purchased call options $191,496 460 459
Written call options 189,443 506 459
10. Fair values of financial instruments
IDSC is required to disclose fair value information for most on-
and off-balance sheet financial instruments for which it is
practical to estimate that value. The carrying value of certain
financial instruments such as trade receivables and payables
approximates the fair value. Non-financial instruments, such as
deferred distribution fees, are excluded from required disclosure.
IDSC's off-balance sheet intangible assets, such as IDSC's name and
future earnings of the core business are also excluded. IDSC's
management believes the value of these excluded assets is
significant. The fair value of IDSC, therefore, cannot be
estimated by aggregating the amounts presented.
A summary of fair values of financial instruments as of Dec. 31, is
as follows:
1995 1994
Carrying Fair Carrying Fair
value value value value
Financial assets
Cash equivalents (note 1) $68,943 $68,943 $152,912 $152,912
Investment securities (note 3) 3,411,396 3,456,922 2,472,467 2,479,083
First mortgage loans on real estate (note 4) 233,394 248,860 253,968 246,917
Derivative financial instruments (note 9) 30,500 26,289 22,716 33,613
Financial liabilities
Certificate reserves (note 5) 3,578,412 3,614,490 2,831,236 2,820,861
Derivative financial instruments (note 9) 9,333 10,394 2,070 1,779
PAGE 54
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item
Number
Item 13. Other Expenses of Issuance and Distribution.
The expenses in connection with the issuance and
distribution of the securities being registered are to be
borne by the registrant.
Item 14. Indemnification of Directors and Officers.
The By-Laws of IDS Certificate Company provide that it
shall indemnify any person who was or is a party or is
threatened to be made a party, by reason of the fact that
he was or is a director, officer, employee or agent of
the company, or is or was serving at the direction of the
company, or any predecessor corporation as a director,
officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, to
any threatened, pending or completed action, suit or
proceeding, wherever brought, to the fullest extent
permitted by the laws of the state of Delaware, as now
existing or hereafter amended.
The By-Laws further provide that indemnification
questions applicable to a corporation which has been
merged into the company relating to causes of action
arising prior to the date of such merger shall be
governed exclusively by the applicable laws of the state
of incorporation and by the by-laws of such merged
corporation then in effect. See also Item 17.
Item 15. Recent Sales of Unregistered Securities.
(a) Securities Sold
Period of sale Title of securities Amount sold
1992 IDS Special Deposits $29,753,590.00
1993 IDS Special Deposits 8,367,601.13
1994 IDS Special Deposits 18,013,424.38
1995 IDS Special Deposits 56,855,953.53
(b) Underwriters and other purchasers
IDS Special Deposits are marketed by American Express Bank Ltd.
(AEB), an affiliate of IDS Certificate Company, to private banking
clients of AEB in the United Kingdom.
(c) Consideration
All IDS Special Deposits were sold for cash. The aggregate
offering price was the same as the amount sold in the table above.
Aggregate marketing fees to AEB were $147,146.65 in 1992,
$153,318.21 in 1993, $88,686.14 in 1994, and $172,633.41 in 1995.
PAGE 55
(d) Exemption from registration claimed
IDS Special Deposits are marketed, pursuant to the exemption in
Regulation S under the Securities Act of 1933, by AEB in the United
Kingdom to persons who are not U.S. persons, as defined in
Regulation S.
Item 16. Exhibits and Financial Statement Schedules.
(a)The following exhibits to this Post-Effective
Amendment No. 38 to Registration Statement No. 2-
55252 are incorporated herein by reference or
attached hereto:
1. (a) Copy of Distribution Agreement dated
November 18, 1988, between Registrant and
IDS Financial Services Inc., filed
electronically as Exhibit 1(a) to the
Registration Statement for the American
Express International Investment
Certificate (now called the IDS Investors
Certificate), is incorporated herein by
reference.
(b) Copy of Distribution Agreement dated March
__, 1996, between Registrant and American
Express Service Corporation is filed
electronically herewith.
(c) Selling Agent Agreement dated
June 1, 1990, between American Express
Bank International and IDS Financial
Services Inc. for the IDS Investors and
IDS Stock Market Certificates, filed
electronically as Exhibit 1(c) to the
Post-Effective Amendment No. 5 to
Registration Statement No. 33-26844, is
incorporated herein by reference.
(d) Marketing Agreement dated October 10,
1991, between Registrant and American
Express Bank Ltd., filed electronically as
Exhibit 1(d) to Post-Effective Amendment
No. 31 to Registration Statement 2-55252,
is incorporated herein by reference.
(e) Amendment to the Selling Agent Agreement
dated December 12, 1994, between IDS
Financial Services Inc. and American
Express Bank International, filed
electronically as Exhibit 16(d) to Post-
Effective Amendment No. 13 to Registration
Statement No. 2-95577, is incorporated
herein by reference.
PAGE 56
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 16. (a) Continued
(f) Selling Agent Agreement dated December 31,
1994, between IDS Financial Services Inc.
and Coutts & Co. (USA) International,
filed electronically as Exhibit 16(e) to
Post-Effective Amendment No. 13 to
Registration Statement No. 2-95577, is
incorporated herein by reference.
(g) Consulting Agreement dated December 12,
1994, between IDS Financial Services Inc.
and American Express Bank International,
filed electronically as Exhibit 16(f) to
Post-Effective Amendment No. 13 to
Registration Statement No. 2-95577
incorporated herein by reference.
2. Not Applicable.
3. (a) Certificate of Incorporation, dated
December 31, 1977, filed electronically as
Exhibit 3(a) to Post-Effective Amendment
No. 10 to Registration Statement No. 2-
89507, is incorporated herein by
reference.
(b) Certificate of Amendment, dated April 2,
1984, filed electronically as Exhibit 3(b)
to Post-Effective Amendment No. 10 to
Registration Statement No. 2-89507, is
incorporated herein by reference.
(c) By-Laws, dated December 31, 1977, filed
electronically as Exhibit 3(c) to Post-
Effective Amendment No. 10 to Registration
Statement No. 2-89507, is incorporated
herein by reference.
4. Not Applicable.
5. Not Applicable.
6. through 9. -- None.
10.
(a) Investment Advisory and Services Agreement
between Registrant and IDS/American
Express Inc. dated January 12, 1984, filed
as Exhibit 10(a) to Registration Statement
No. 2-89507, is incorporated herein by
reference.
PAGE 57
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 16. (a) Continued
(b) Depositary and Custodial Agreement dated
September 30, 1985 between IDS Certificate
Company and IDS Trust Company, filed as
Exhibit 10(b) to Registrant's Post-
Effective Amendment No. 3 to Registration
Statement No. 2-89507, is incorporated
herein by reference.
(c) Loan Agreement between Registrant and
Investors Syndicate Development
Corporation, dated October 13, 1970, filed
electronically as Exhibit 10(c) to Post-
Effective Amendment No. 10 to Registration
Statement No. 2-89507, is incorporated
herein by reference.
(d) Agreement for the servicing of Residential
Mortgage Loans between ISA and Advance
Mortgage Company, Ltd. dated August 31,
1980, filed electronically as
Exhibit 10(d) to Post-Effective Amendment
No. 10 to Registration Statement No. 2-
89507, is incorporated herein by
reference.
(e) Agreement by and between Registrant and
Investors Diversified Services, Inc. (now
IDS Financial Services Inc.) providing
for the purchase by IDS of a block of
portfolio securities from Registrant,
filed as Exhibit 10.5 to the September 30,
1981 quarterly report on Form 10-Q of
Allegheny Corporation, is incorporated
herein by reference.
(f) Transfer Agent Agreements for the
servicing of the American Express Savings
Certificate, filed electronically as
Exhibit 10(g) to Pre-Effective Amendment
No. 1 to Registration Statement No. 33-
25385, are incorporated herein by
reference.
(g) Foreign Deposits Agreement dated November
21, 1990, between IDS Certificate Company
and IDS Bank & Trust, filed electronically
as Exhibit 10(h) to Post-Effective
Amendment No. 5 to Registration Statement
No. 33-26844, is incorporated herein by
reference.
PAGE 58
11 through 24. -- None.
25. (a) Officers' Power of Attorney, dated May 17,
1994, filed electronically as Exhibit
25(a) to Post-Effective Amendment No. 37
to Registration Statement No. 2-55252 is
incorporated herein by reference.
(b) Directors' Power of Attorney, dated May
13, 1994, filed electronically as Exhibit
25(b) to Post-Effective Amendment No. 37
to Registration Statement No. 2-55252 is
incorporated herein by reference.
26. through 28. -- None.
(b) The following financial statement schedules for
IDS Certificate Company are filed electronically:
I. Investments in Securities of Unaffiliated
Issuers December 31, 1995.
II. Investment in and Advances to Affiliates
and Income Thereon, December 31, 1995,
1994 and 1993.
III. Mortgage Loans on Real Estate and Interest
Earned on Mortgages - Year ended December
31, 1995.
V. Qualified Assets on Deposit - December 31,
1995.
VI. Certificate Reserves - Year ended December
31, 1995.
VII. Valuation and Qualifying Accounts - Years
ended December 31, 1995, 1994 and 1993.
Schedule III and Schedule VI for the year ended Dec. 31,
1994 are incorporated by reference to Post-Effective
Amendment No. 37 to Registration Statement No. 2-55252
for Series D-1 Investment Certificate. Schedule VI
(formerly Schedule XI) for the year ended Dec. 31, 1993,
is incorporated by reference to Post-Effective Amendment
No. 35 to Registration Statement No. 2-55252.
PAGE 59
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 17. Undertakings.
Without limiting or restricting any liability on the part
of the other, American Express Financial Advisors Inc.
(formerly, IDS Financial Services Inc.), as underwriter,
will assume any actionable civil liability which may
arise under the Federal Securities Act of 1933, the
Federal Securities Exchange Act of 1934 or the Federal
Investment Company Act of 1940, in addition to any such
liability arising at law or in equity, out of any untrue
statement of a material fact made by its agents in the
due course of their business in selling or offering for
sale, or soliciting applications for, securities issued
by the Company or any omission on the part of its agents
to state a material fact necessary in order to make the
statements so made, in the light of the circumstances in
which they were made, not misleading (no such untrue
statements or omissions, however, being admitted or
contemplated), but such liability shall be subject to the
conditions and limitations described in said Acts.
American Express Financial Advisors Inc. will also assume
any liability of the Company for any amount or amounts
which the Company legally may be compelled to pay to any
purchaser under said Acts because of any untrue
statements of a material fact, or any omission to state a
material fact, on the part of the agents of IDS Financial
Services Inc. to the extent of any actual loss to, or
expense of, the Company in connection therewith. The By-
Laws of the Registrant contain a provision relating to
Indemnification of Officers and Directors as permitted by
applicable law.
PAGE 60
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this amendment to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City
of Minneapolis and State of Minnesota, on the 20th day of March,
1996.
IDS CERTIFICATE COMPANY
By: /s/ Stuart A. Sedlacek
Stuart A. Sedlacek, President
Pursuant to the requirements of the Securities Act of 1933, this
amendment has been signed below by the following persons in the
capacities on the 20th day of March, 1996.
Signature Capacity
/s/ Stuart A. Sedlacek* ** President and Director
Stuart A. Sedlacek (Principal Executive
Officer)
/s/ Morris Goodwin* Vice President and Treasurer
Morris Goodwin (Principal Financial Officer)
/s/ Jay C. Hatlestad* Vice President and Controller
Jay C. Hatlestad (Principal Accounting Officer)
/s/ David R. Hubers** Director
David R. Hubers
/s/ Charles W. Johnson** Director
Charles W. Johnson
/s/ Edward Landes** Director
Edward Landes
Signatures continued on next page.
PAGE 61
Signatures continued from previous page.
Signature Capacity
/s/ John V. Luck** Director
John V. Luck
/s/ James A. Mitchell** Chairman of the Board
James A. Mitchell of Directors and Director
/s/ Harrison Randolph** Director
Harrison Randolph
/s/ Gordon H. Ritz** Director
Gordon H. Ritz
*Signed pursuant to Officers' Power of Attorney dated May 17, 1994,
filed electronically by:
_________________________.
Bruce A. Kohn
**Signed pursuant to Directors' Power of Attorney dated
May 13, 1994, filed electronically herewith by:
_________________________.
Bruce A. Kohn
PAGE 62
CONTENTS OF THIS POST-EFFECTIVE AMENDMENT NO. 38 TO
REGISTRATION STATEMENT NO. 2-55252
Cover Page
Cross-reference sheet
Prospectus
Auditor's Report
Financial Statements
Part II Information
Signatures